<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, 1995
-----------------
[ ] 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 File Number
----------------------
1-956
Duquesne Light Company
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(Exact name of registrant as specified in its charter)
Pennsylvania 25-0451600
------------ ----------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
411 Seventh Avenue
Pittsburgh, Pennsylvania 15219
Formerly:
One Oxford Centre, 301 Grant Street
Pittsburgh, Pennsylvania 15279
-------------------------------
(Address of principal executive offices)(Zip Code)
Registrant's telephone number, including area code: (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 21, 1996.
[X] 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:
<TABLE>
<CAPTION>
Name of each exchange
Registrant Title of each class on which registered
- -------------- ------------------------------ -----------------------
<S> <C> <C>
Duquesne Light Preferred Stock (par value $50) New York Stock Exchange
Company
</TABLE>
<TABLE>
<CAPTION>
Involuntary
Series Liquidation Value
------ -----------------
<S> <C>
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
</TABLE>
Sinking Fund Debentures, due March 1, 2010 (5%) New York Stock Exchange
<PAGE>
TABLE OF CONTENTS
PART I Page
----
ITEM 1. BUSINESS
General 1
Results of Operations 1
Liquidity and Capital Resources 5
Rate Matters 6
Property Plant & Equipment (PP&E) 7
Employees 10
Electric Utility Operations 10
Fossil Fuel 11
Nuclear Fuel 11
Nuclear Decommissioning 12
Nuclear Insurance 13
Spent Nuclear Fuel Disposal 13
Uranium Enrichment Decontamination and
Decommissioning Fund 14
Environmental Matters 14
Outlook 15
Other 17
Executive Officers of the Registrant 18
ITEM 2. PROPERTIES 20
ITEM 3. LEGAL PROCEEDINGS 21
ITEM 4. SUBMISSION OF MATTERS TO A
VOTE OF SECURITY HOLDERS 21
PART II
ITEM 5. MARKET FOR REGISTRANT'S
COMMON EQUITY AND RELATED
SHAREHOLDER MATTERS 21
ITEM 6. SELECTED FINANCIAL DATA 22
ITEM 7. MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS 22
ITEM 8. CONSOLIDATED FINANCIAL
STATEMENTS AND SUPPLEMENTARY
DATA 22
ITEM 9. CHANGES IN AND DISAGREEMENTS
WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL
DISCLOSURE 22
PART III
ITEM 10. DIRECTORS AND EXECUTIVE
OFFICERS OF THE REGISTRANT 22
ITEM 11. EXECUTIVE COMPENSATION 22
ITEM 12. SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND
MANAGEMENT 22
ITEM 13. CERTAIN RELATIONSHIPS AND
RELATED TRANSACTIONS 23
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT
SCHEDULES AND REPORTS ON
FORM 8-K 23
SCHEDULE II 35
SIGNATURES 36
GLOSSARY 37
REPORT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS 38
FINANCIAL STATEMENTS 39
SELECTED FINANCIAL DATA 63
<PAGE>
PART I
ITEM 1. BUSINESS.
General
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Part I of this Annual Report, Form 10-K (Report) should be read in conjunction
with Duquesne's audited consolidated financial statements, which are set forth
on pages 38 through 62 in Part IV of this Report. Explanations of certain
financial and operating terms used in this Report are set forth in a glossary on
page 37 of this Report.
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. Duquesne has one wholly owned subsidiary,
Monongahela Light and Power, also a Pennsylvania corporation, which currently
holds energy related lease investments.
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 in southwestern Pennsylvania. 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), as well as to regulation by the Federal Energy
Regulatory Commission (FERC) under the Federal Power Act with respect to rates
for interstate sales, transmission of electric power, accounting and other
matters.
Duquesne's operations are also 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 (BV Unit 1), Beaver Valley Unit 2 (BV Unit 2) and Perry
Unit 1. Duquesne is also subject to the accounting and reporting requirements of
the United States Securities and Exchange Commission.
Duquesne's consolidated financial statements report 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,
Duquesne's consolidated financial statements reflect regulatory assets and
liabilities 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 electric utility customers through the ratemaking process.
Duquesne's operations currently satisfy the SFAS No. 71 criteria. However,
a company's utility operations or a portion of such operations could cease to
meet these criteria for various reasons, including a change in the PUC or the
FERC regulations. Should Duquesne's operations cease to meet the SFAS No. 71
criteria, Duquesne would be required to write off any regulatory assets or
liabilities for those operations that no longer meet these requirements.
Management will continue to evaluate significant changes in the regulatory and
competitive environment in order to assess Duquesne's overall consistency with
the criteria of SFAS No. 71.
Results of Operations
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Seasonality
Sales of electricity to customers by Duquesne tend to increase during the
warmer summer and colder winter seasons because of greater customer use of
electricity for cooling and heating.
1
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In the near term, weather conditions and the overall level of business
activity in Duquesne's service territory are expected to continue to be the
primary factors affecting sales of electricity to customers. In the long-term,
Duquesne's electric sales may also be affected by increased competition in the
electric utility industry. (See "Competition" discussion on page 15.)
Sales of Electricity to Customers
Operating revenues are derived from Duquesne's sales of electricity to
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 electric utility assets and to provide a return on such
investment. Sales to Duquesne's 20 largest customers accounted for 14.2 percent
and 14.6 percent of customer revenues in 1995 and 1994, respectively. Sales to
USX Corporation, Duquesne's largest customer, accounted for 3.7 percent and 3.8
percent of total 1995 and 1994 customer revenues, respectively. Total kilowatt-
hour (KWH) sales to customers in 1995 increased 2.5 percent when compared to KWH
sales to customers in 1994. In response to extreme 1995 summer and winter
temperatures, residential and commercial KWH sales increased 4.9 percent and 3.0
percent, respectively. Industrial sales volume in 1995 declined when compared to
the prior year because of temporary production facility outages experienced by
some of Duquesne's large industrial customers. The severe weather conditions in
1995 also resulted in higher residential KWH sales volume when compared to 1993.
Components of Change in Operating Revenues from the Prior Year
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<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
(Amounts in Millions of Dollars)
- -------------------------------------------------------------------------------
Revenues from Sales of Electricity:
Net customer revenues $ 7.8 $ 6.0
Utilities (2.3) 7.6
- -------------------------------------------------------------------------------
Revenues from total sales of electricity 5.5 13.6
- -------------------------------------------------------------------------------
Other operating revenues 5.7 (5.7)
- -------------------------------------------------------------------------------
Total Operating Revenues $11.2 $ 7.9
===============================================================================
</TABLE>
Customer revenues fluctuate as a result of changes in sales volume and
changes in fuel and other energy costs.
Net customer revenues in 1995 when compared to 1994 increased by $7.8
million, or 0.7 percent. The change is the net result of higher sales, partially
offset by lower energy costs per megawatt hour (MWH), the benefits of which are
passed through to the customers in the form of lower rates. The significantly
hotter summer temperatures in 1995 resulted in increased sales of electricity to
residential customers in particular. Revenues attributable to electric sales to
residential customers in 1995 exceeded 1994 residential revenues by $13.2
million, or 3.3 percent. Net customer revenues also increased $6.0 million, or
0.6 percent, in 1994 when compared to 1993. The 1994 variation represented
higher sales to commercial and industrial customers, driven in part by an
expanded customer base.
Net customer revenues for 1994 and 1993 include phase-in deferrals that
represented 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.
During this phase-in period, the rate increase was recognized in operating
revenues. (See "1987 Rate Case" discussion in Note F to the consolidated
financial statements on page 48.)
Sales to Other Utilities
Short-term sales to other utilities are regulated by the FERC and are made
at market rates. Short-term power sales to other utilities in 1995, 1994 and
1993 were 2,974,797 KWH, 3,212,110 KWH and 2,820,920
2
<PAGE>
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.
Revenues from sales to other utilities were $56.0 million, $58.3 million and
$50.7 million in 1995, 1994 and 1993, respectively. Sales to other utilities
were less prevalent in 1995 than in 1994 because severe weather conditions
resulted in greater sales to Duquesne's customers. (See "Sales of Electricity to
Customers" discussion on page 2.) Increased customer sales reduce power
available to sell to other utilities. Future levels of short-term sales to other
utilities will be affected by the resolution of Duquesne's proposed sale of its
ownership interest in the Ft. Martin Power Station and by the outcome of
Duquesne's FERC filings requesting firm transmission access. (See "Sale of Ft.
Martin" and "Transmission Access" discussions on pages 9 and 16, respectively.)
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 to the
PUC review. This revenue adjustment also 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
$15.5 million in 1995, $16.6 million in 1994 and $12.1 million in 1993. Included
in a petition currently before the PUC, Duquesne proposes a five-year annual $5
million credit to the ECR to compensate Duquesne's customers for the lost
profits from any reduced short-term power sales caused by the sale of its
ownership interest in the Ft. Martin Power Station. (See "Energy Cost Rate
Adjustment Clause (ECR)" and "Sale of Ft. Martin" discussions on pages 6 and 9,
respectively.)
Other Operating Revenues
Duquesne's non-KWH revenues comprise other operating revenues in Duquesne's
statement of consolidated income. Other operating revenues are primarily
comprised of revenues from joint owners of BV Unit 1 and BV Unit 2 for their
shares of the administrative and general costs of operating these units. Other
operating revenues, therefore, fluctuate depending on the timing of scheduled
refueling and maintenance outages at Beaver Valley Power Station (BVPS) when
significant costs are incurred. Both BV Unit 1 and BV Unit 2 underwent refueling
outages in 1995 and in 1993. There were no refueling outages in 1994;
accordingly, other operating revenues increased $5.7 million in 1995, when
compared to the prior year. Conversely, other operating revenues decreased $5.7
million in 1994 when compared to 1993.
Operating Expenses
Total operating expenses increased $6.5 million in 1995 when compared to
1994. Total operating expenses increased from 1993 to 1994 by $8.9 million. Fuel
and purchased power expense fluctuations generally 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>
1995 1994
<S> <C> <C>
(Amounts in Millions of Dollars)
- -------------------------------------------------------------------------------
Average unit cost of fuel $ (2.3) $(3.4)
Generation mix (5.2) (5.5)
Generation volume (6.4) 7.6
Purchased power 1.7 7.7
- -------------------------------------------------------------------------------
Total Energy Expense $(12.2) $ 6.4
===============================================================================
</TABLE>
The average unit cost of fuel is based on fuel costs divided by generation.
The average unit cost of fuel decreased in 1995 when compared to 1994 and 1993
largely because of lower nuclear fuel costs.
3
<PAGE>
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
1995, Duquesne had more nuclear station outages, resulting in less nuclear
generation and more fossil fuel and purchased power expense.
Generation volume during 1995 decreased 2.7 percent when compared to 1994
due to more generating station outages. Overall nuclear generation increased in
1995 due to strong performances at the nuclear units. (See "Beaver Valley Power
Station (BVPS)" and "Perry Unit 1" discussions on page 9.) Major outages at coal
stations, including an extended forced outage at the Ft. Martin Power Station,
resulted in reduced coal generation which more than offset the increased nuclear
generation. During 1994, generation increased 3.4 percent from 1993 due to fewer
generating station outages.
Purchased power volume increased in 1995 when compared to 1994 primarily
due to generating station outages during periods of extreme weather conditions.
Purchased power volume increased in 1994 when compared to 1993 primarily due to
the performance of Perry Unit 1.
Other operating expense continued to decrease in 1995. The $7.8 million
decrease from 1994 to 1995 and the $18.9 million decrease from 1993 to 1994, are
largely attributable to cost reduction measures instituted by Duquesne.
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
between refueling outages (generally 18 months). Influenced by extreme weather
conditions and the timing of outages at both fossil and nuclear stations,
maintenance costs incurred by Duquesne in 1995 exceeded the prior year by $2.0
million. During 1994 and 1993, amortization of deferred nuclear refueling outage
expense increased, reflecting the higher costs of refueling outages. Offsetting
this increase in 1994 was a decrease in transmission and distribution line
maintenance expense.
Duquesne changed, as of January 1, 1993, its method of accounting for
maintenance costs during scheduled major fossil generating station outages.
Under the new accounting policy, Duquesne accrues, over the periods between
outages, anticipated expenses for 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 expense increased $25.9 million in 1995,
primarily due to the change in Duquesne's composite depreciation rate from 3.0
percent to 3.5 percent effective January 1, 1995. Depreciation and amortization
expense increased $12.3 million in 1994 when compared to the prior year due to
increases in depreciable property and nuclear decommissioning expense.
As part of Duquesne's plan to optimize generation capacity, a petition
pending before the PUC proposes an annual increase in depreciation and
amortization expense related to Duquesne's nuclear power investment of $25
million for three years. Consistent with the 1995 increase in the composite
depreciation rate, Duquesne is not seeking a rate increase to recover these
additional costs. (See "Sale of Ft. Martin" discussion on page 9.)
Taxes other than income taxes were lower in 1993 compared to 1995 and 1994,
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.
Income taxes were lower in 1993, when compared to 1995 and 1994, because of
a favorable settlement with the Internal Revenue Service (related to Duquesne's
1988 federal income tax return and DQE's 1989 consolidated federal income tax
return). The remaining fluctuations result from changes in taxable income.
During 1994 the statutory Pennsylvania income tax rate was reduced from 12.25
percent to 9.99 percent.
4
<PAGE>
This resulted in a net decrease of $80.5 million in deferred tax liabilities and
a corresponding reduction in the regulatory receivable.
Other Income and Deductions
Other income and deductions decreased $4.9 million in 1995 when compared to
1994 primarily due to increases in income taxes related to other income. The
$5.4 million decrease in other income and deductions from 1993 to 1994 reflects
the favorable corporate federal income tax settlements recorded in 1993 offset
that year by a $15.2 million long-term power sale write-off.
Capital Expenditures
Duquesne spent approximately $78.7 million in 1995, $94.3 million in 1994
and $100.6 million in 1993 for construction. These amounts were expended to
improve and/or expand electric production, transmission and distribution
systems. Duquesne's capital expenditures for construction focus on extending
service to new customers, providing for the replacement of utility property and
modifying facilities consistent with the most current environmental and safety
regulations. Duquesne estimates that it will spend, excluding the allowance for
funds used during construction (AFC) and nuclear fuel, approximately $90
million, $90 million and $100 million for construction during 1996, 1997 and
1998, respectively. Approximately $5 million of capital expenditures for
reliability enhancements to the simple cycle units located at Brunot Island (BI)
contemplated in Duquesne's petition before the PUC are excluded from these
estimates. (See "Sale of Ft. Martin" discussion on page 9.) Duquesne expects
that funds generated from operations will continue to be sufficient to finance a
large part of its capital needs.
Investing
Duquesne's long-term investments consist of Duquesne's holdings of DQE
common stock, investments in affordable housing, leasehold and other
investments, and Duquesne's nuclear decommissioning trusts. Investing activities
increased in 1995, after staying relatively constant in 1994 when compared to
1993. Duquesne invested $5.4 million and $5.3 million in affordable housing
funds during 1995 and 1994, respectively. In addition, Duquesne invested $57.5
million in other leases and investments during 1995.
Liquidity and Capital Resources
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Financing
Duquesne expects to meet its current obligations and debt maturities
through the year 2000 with funds generated from operations and through new
financings. At December 31, 1995, Duquesne was in compliance with all of its
debt covenants.
Duquesne's 1947 first mortgage bond indenture was retired in the third
quarter of 1995 following the maturity of the last bond series issued under the
indenture. All of Duquesne's First Collateral Trust Bonds have been issued under
a new mortgage indenture that was established in April 1992 (the 1992
Indenture). All First Collateral Trust Bonds became first mortgage bonds when
the 1947 mortgage indenture was retired. The 1992 Indenture includes more
flexible provisions and eliminates conventions such as mandatory sinking funds
and formula-derived maintenance and replacement clauses.
On September 1, 1995, Duquesne redeemed all of its outstanding shares of
$7.20 Preferred Stock for $29.9 million. On August 29, 1995, Duquesne
repurchased $7 million of its 8-3/8% First Collateral Trust Bonds maturing in
2024.
In May 1996, $50.0 million of First Collateral Trust Bonds will mature.
Duquesne expects to retire these bonds with internally generated funds or to
refinance the bonds.
5
<PAGE>
Short-Term Borrowings
At December 31, 1995, Duquesne had an extendible revolving credit
agreements with a group of banks totaling $150 million. This facility expires in
October 1996. Interest rates on this credit agreement vary. Commitment fees are
based on the unborrowed amount of the commitments. The credit facility contains
a two-year repayment period for any amount outstanding at the expiration of the
revolving credit period. At December 31, 1995 and 1994, there were no short-term
borrowings outstanding.
Interest Charges
Duquesne achieved a $3.8 million and a $9.1 million reduction in interest
charges in 1995 and 1994, respectively, primarily due to the retirement of long-
term debt. Duquesne's interest on long-term debt and dividends on preferred and
preference stock declined to $100.7 million in 1995 from $107.1 million in 1994
and $117.7 million in 1993. Interest expense in 1996 will be influenced by
fluctuations in short-term rates and any new financing.
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. At December 31, 1995, Duquesne had sold $7
million of receivables to the unaffiliated corporation. Duquesne had no
receivables sold at December 31, 1994. The accounts receivable sales agreement,
which expires in June 1996, is one of many sources of funds available to
Duquesne. Duquesne may attempt to extend the agreement, or to replace the
facility with a similar one or to eliminate it upon expiration.
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, 1995, the amount of nuclear fuel financed by Duquesne under this
arrangement totaled approximately $40.8 million. Duquesne plans to continue
leasing nuclear fuel to fulfill its requirements at least through September
1998, 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 rates charged for
sales to other electric utilities are regulated by the FERC. These rates are
designed to recover Duquesne's operating expenses, investment in utility assets,
and to provide a return on those investments. Sales to other utilities are made
at market rates. At this time, Duquesne has no pending base rate case and has no
immediate plans to file a base rate case. In Duquesne's petition currently
before the PUC for the sale of its ownership interest in the Ft. Martin Power
Station, Duquesne proposes to freeze its base rates for a five-year period. (See
"Sale of Ft. Martin" discussion on page 9.)
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
6
<PAGE>
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 ECR 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. The PUC
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 "Deferred Coal Costs" and "Warwick Mine Costs" discussions in
Note F to the consolidated financial statements on pages 49 and 50,
respectively.)
Over- or under-recoveries from customers are recorded on the consolidated
balance sheet as payable to, or receivable from, customers. At December 31,
1995, $5.8 million was payable to customers and shown as other current
liabilities. At December 31, 1994, $5.9 million was receivable from customers
and shown as other current assets.
Deferred Rate Synchronization Costs
In 1987, the PUC approved Duquesne's petition to defer initial operating
and other costs of Perry Unit 1 and BV 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 Duquesne's
customers. At December 31, 1995, 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 and 1995, the PUC permitted other Pennsylvania electric utilities rate
recovery of such costs.
Property, Plant and Equipment (PP&E)
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Investment in PP&E and Accumulated Depreciation
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, 1995 and 1994, are as follows:
PP&E and Related Accumulated Depreciation at December 31
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(Amounts in Thousands of Dollars)
1995 1994
--------------------------------------------------------------------------------------------
Accumulated Net Accumulated Net
Investment Depreciation Investment Investment Depreciation Investment
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Electric Production $2,501,974 $ 885,389 $1,616,585 $2,474,032 $ 796,338 $1,677,694
Electric Transmission 296,953 110,242 186,711 295,512 105,217 190,295
Electric Distribution 1,143,111 347,399 795,712 1,119,247 323,922 795,325
Electric General 314,844 141,133 173,711 305,335 123,766 181,569
Property Held for Future Use 216,633 94,283 122,350 216,206 94,283 121,923
Property Held Under Capital Lease 133,381 74,874 58,507 161,775 91,376 70,399
Other 45,114 19,787 25,327 46,859 15,545 31,314
- ------------------------------------------------------------------------------------------------------------------------------------
Total $4,652,010 $1,673,107 $2,978,903 $4,618,966 $1,550,447 $3,068,519
====================================================================================================================================
</TABLE>
7
<PAGE>
Joint Interests in Generating Units
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 that include
provisions for coordinated maintenance responsibilities, limited and qualified
mutual back-up in the event of outages and certain capacity and energy
transactions.
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.
In September 1995, Duquesne served a demand for arbitration on CEI seeking,
among other things, a partition of Eastlake Unit 5 through a sale of Duquesne's
interest therein and a termination of its operating agreement with CEI for that
unit. The demand alleges, among other things, the improper allocation by CEI of
fuel and related costs between itself and Duquesne; the mismanagement by CEI of
the closing of the Saginaw Mine, which historically supplied coal to the unit;
and the concealment by CEI of information. In October 1995, CEI filed its own
arbitration demand and asserted counterclaims seeking Duquesne's alleged share
of costs relating to the unit. A panel of arbitrators has been appointed.
Duquesne has a joint interest in the following nuclear power stations with
the following companies:
<TABLE>
<CAPTION>
Beaver Valley
---------------------- Perry
Unit 1 Unit 2 Unit 1
------- -------- ------
<S> <C> <C> <C>
Duquesne * 47.50% * 13.74% (c) 13.74%
Ohio Edison Company 35.00% 41.88% 30.00%
Pennsylvania Power Company (a) 17.50% - 5.24%
CEI (b) - 24.47% * 31.11%
Toledo Edison Company (b) - 19.91% 19.91%
</TABLE>
*Denotes Operator
(a) Subsidiary of Ohio Edison Company
(b) Subsidiary of Centerior Energy Corporation
(c) In 1987, Duquesne sold and subsequently leased back its 13.74 percent
interest in BV 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. (See "Property, Plant
and Equipment," Note B to the consolidated financial statements on page 46.)
Duquesne has a joint interest in the following fossil plants with the
following companies:
<TABLE>
<CAPTION>
Bruce Mansfield Ft.
Sammis ----------------------------- Eastlake 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% - -
Pennsylvania Power Company (a) 20.80% * 4.20% * 6.80% * 6.28% - -
CEI (b) - 6.50% 28.60% 24.47% *68.80% -
Toledo Edison Company (b) - - 17.30% 19.91% - -
Potomac Edison Company (c) - - - - - 25.00%
Monongahela Power Company (c) - - - - - * 25.00%
</TABLE>
*Denotes Operator
(a) Subsidiary of Ohio Edison Company
(b) Subsidiary of Centerior Energy Corporation
(c) Subsidiary of, and currently known as, Allegheny Power System
8
<PAGE>
Beaver Valley Power Station
BVPS continues to demonstrate excellence in operating performance. During
1995, BV Unit 1 and BV Unit 2 both underwent scheduled refueling outages, which
were completed in the shortest duration in both the units' history. Further
exemplifying BVPS' accomplishments, both refueling outages were completed under
budgeted cost. In spite of these scheduled refueling outages, the combined
capacity factor for the units averaged 80 percent during 1995. Capacity factor
is a key production measure and indicates how well the plant operated based on
its design capacity. It is the ratio of the power actually generated by a
facility to the facility's rated capacity during a given period of time. Also,
BV Unit 2 achieved an unplanned capability loss factor of 0.7 percent, which is
significantly better than the industry standard of 4.0 percent. This factor
measures how much power production was lost due to unplanned outages.
In addition to optimizing generation and cost efficiency, BVPS management
continues to emphasize safety in operations. During 1995, BVPS employees
achieved the milestone of more than three million hours worked without incurring
a single lost time accident.
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. Perry Unit 1 experienced
improved performance during 1995, a year without a refueling outage, and
achieved a capacity factor of 87.5 percent. CEI has submitted to the NRC an
action plan, called the Perry Course of Action (PCA). CEI management continues
to represent to Duquesne that the PCA is on schedule and will be an effective
program to ensure that Perry Unit 1 is in conformance with applicable industry
standards. The PCA is scheduled to be completed by the end of Perry Unit 1's
fifth refueling outage, presently scheduled for the spring of 1996. Duquesne
cannot predict the effectiveness of the PCA. Duquesne will continue to monitor
closely this situation.
Sale of Ft. Martin
On November 29, 1995, Duquesne and AYP Capital, Inc., an unregulated
subsidiary of the Allegheny Power System (APS), entered into an agreement for
the sale of Duquesne's 50 percent ownership interest in Unit 1 of the Ft. Martin
Power Station, for the sum of $169 million. The agreement is subject to all
necessary regulatory approvals. On December 20, 1995, Duquesne filed a Petition
for Declaratory Order with the PUC requesting approval for the sale in
conjunction with a six-point plan to be financed in part by the proceeds of the
Ft. Martin transaction.
Under the plan, Duquesne offers to freeze its base rates for a period of
five years. If approved, the rate freeze is expected to produce a 14 percent
reduction in the real price of electricity based on an average annual inflation
rate of 2.7 percent. In addition, Duquesne proposes to record a one-time
reduction of approximately $130 million in the value of Duquesne's nuclear plant
investment. Duquesne also proposes to use the proceeds from the sale to finance
reliability enhancements to the simple cycle units located at BI, to retire debt
and to reduce equity. The BI simple cycle units will provide 135 megawatts (MW)
of summer peaking capacity and 168 MW of winter peaking capacity and permit
Duquesne to achieve greater operational flexibility in meeting peak system
demands. The plan also proposes an annual increase of $25 million for three
years in depreciation and amortization expense related to Duquesne's nuclear
investment, as well as additional annual contributions to its nuclear plant
decommissioning funds of $5 million for five years, without any increase in
existing electric rates. Lastly, Duquesne proposes a five-year annual $5 million
credit to the ECR to compensate Duquesne's customers for the lost profits from
any reduced short-term power sales foregone by the sale of its ownership
interest in the Ft. Martin Power Station. (See "Energy Cost Rate Adjustment
Clause (ECR)" discussion on page 6.)
The PUC is currently reviewing Duquesne's petition.
9
<PAGE>
Property Held for Future Use
In 1986, the PUC approved Duquesne's request to remove Phillips Power
Station (Phillips) and a portion of BI from service and from rate base. Duquesne
expects to recover its net investment in these plants through future electricity
sales. Duquesne believes its investment in these plants will be necessary in
order to meet future business needs outlined in Duquesne's plans for optimizing
generation resources. (See "Generation Resource Optimization" discussion on page
17.) 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. A portion of the BI
combustion turbine capacity currently held for future use may be returned to
service pending the outcome of the sale of Duquesne's ownership interest in Ft.
Martin. (See "Sale of Ft. Martin" discussion on page 9.) At December 31, 1995,
Duquesne's net investment in Phillips and BI held for future use was $77.4
million and $44.9 million, respectively.
Employees
- --------------------------------------------------------------------------------
At December 31, 1995, Duquesne had 3,515 employees, including 1,178
employees at Duquesne-operated BVPS. The International Brotherhood of Electrical
Workers (IBEW) union represents 2,086 of Duquesne's employees. The current
collective bargaining agreement with the IBEW expires on September 30, 1998.
Electric Utility Operations
- --------------------------------------------------------------------------------
Approximately 69 percent of the electric energy generated by Duquesne's
system during 1995 was produced by its coal-fired generating capacity and
approximately 31 percent was produced by its nuclear generating capacity.
Duquesne normally experiences its peak loads in the summer. The 1995 customer
system peak of 2,666 MW, the highest system peak in Duquesne's history, occurred
on August 16, 1995.
Duquesne's fossil plants operated at 76 percent availability in 1995 and 85
percent availability in 1994. Duquesne's nuclear plants operated at 83 percent
availability in 1995 and 75 percent in 1994. The timing and duration of
scheduled maintenance and refueling outages, as well as the duration of forced
outages, affect the availability of power stations.
Duquesne determines the need for and timing of generation resource
additions based on maintaining an adequate level of resources in reserve above
the projected weather normalized annual peak demand. In addition, capacity
resources throughout the region can supplement Duquesne's in-service generation
resources, if required, through Duquesne's substantial transmission import
capability, currently in excess of 4,000 MW. The North American Electric
Reliability Council, of which Duquesne is a member, uses "capacity margin" to
report generating capability when compared to customer demand. Capacity margin
is one of the criteria used by Duquesne in assessing the need for future
resources. Duquesne's capacity margin in 1995 was 11.7 percent. The capacity
portfolio reflected in Duquesne's capacity margin includes in-service generating
capacity, plus 21 MW capacity provided by non-utility generation contracts, plus
a portion of the capacity from property held for future use available to meet
customer needs during peaking or emergency conditions. The customer peak demand
reflected in Duquesne's capacity margin is based on the actual peak demand
experienced during the extraordinarily hot 1995 summer weather conditions, less
97 MW of interruptible load resources available from Duquesne's interruptible
customers, but not actually interrupted during the peak period.
The successful resolution of Duquesne's proposed sale of its ownership
interest in Ft. Martin will reduce in-service capacity by 276 MW. Duquesne
expects to replace Ft. Martin capacity by(1) utilizing the 168 MW oil-fired
combustion turbines at the BI combined cycle facility, which is property held
for future use, and (2) acquiring seasonal peaking capacity from power
marketplace resources, as required. These additional resources ensure that
adequate capacity will be available to enable Duquesne to continue to maintain
the expected level of power generation reliability.
10
<PAGE>
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 1995, approximately 2.6 million tons of coal were
consumed at Duquesne's two wholly owned coal-fired stations, Cheswick Power
Station (Cheswick) and Elrama Power Station (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 and
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 produced 1.1 million tons of coal in 1995. The Warwick Mine coal
reserves include both high and low sulfur coal; the sulfur content averages in
the mid-range at 1.7 percent to 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 Warwick coal in the open market. These royalties are credited to
Duquesne's ECR. 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, 1995, its economically
recoverable coal reserves at Warwick Mine were 9.0 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. At December 31, 1995, Duquesne's net investment in the
mine was $14.9 million. The current estimated liability, including final site
reclamation, mine water treatment and certain labor liabilities, for mine
closing is $34.1 million, and Duquesne has recorded a liability on the
consolidated balance sheet of approximately $15.9 million toward these costs.
(See "Warwick Mine Costs" discussion in Note F to the consolidated financial
statements on page 50.)
During 1995, 56 percent of Duquesne's coal supplies were provided by
contracts including Warwick Mine, with the remainder satisfied through purchases
on the spot market. Duquesne had four long-term contracts in effect at December
31, 1995, 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 from 1996
through 2002. At December 31, 1995, Duquesne's wholly owned and jointly owned
generating units had on hand an average coal supply of 45 days.
The PUC has established two market price coal cost standards. One applies
only to coal delivered at the Bruce Mansfield Power Station (Bruce Mansfield).
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. 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 extends through March 2000. The
unrecovered cost of Bruce Mansfield coal was $8.4 million and the unrecovered
cost of the remainder of the system-wide coal was $4.4 million at December 31,
1995. 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 $38.86, $39.12 and $40.08 in 1995,
1994 and 1993, respectively. The cost of coal, which falls within the market
price limitations, is recovered from Duquesne's customers through the ECR. (See
"Rate Matters" discussion on page 6, and also see "Deferred Coal Costs"
discussion in Note F to the consolidated financial statements on page 49.)
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) converting uranium concentrates to uranium hex-
11
<PAGE>
afluoride, (3) enriching the uranium hexafluoride, (4) fabricating fuel
assemblies, (5) utilizing the nuclear fuel in the generating station reactor and
(6) storing and disposing 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 1996.
Enrichment services are supplied under a 1984 United States Enrichment
Corporation Utility Services Contract entered into for a period of 30 years by
Duquesne for joint interests in Perry Unit 1, BV Unit 1 and BV Unit 2. Under the
terms and conditions of this contract, Duquesne is committed to 100 percent of
its enrichment needs through 1998 and 70 percent in 1999; Duquesne has
terminated, at zero cost, all of its enrichment services requirements for fiscal
years 2000 through 2005 and continues to review the need for further services on
an annual basis. Fuel fabrication contracts are in place to supply reload
requirements for the next two cycles for BV Unit 1, the next two cycles for BV
Unit 2 and the next sixteen cycles for Perry Unit 1. Duquesne will be required
to make arrangements for uranium supply and related services as existing
commitments expire.
Each utility company is responsible for financing its proportionate share
of the costs of nuclear fuel for each nuclear unit in which it has an ownership
or leasehold interest. (See "Nuclear Fuel Leasing" discussion on page 6.)
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 $1.7 million. The actual
nuclear fuel costs to be financed and amortized during the period 1996 through
1998 will be influenced by such factors as changes in interest rates; lengths of
the respective fuel cycles; reload cycle design; and changes in nuclear material
costs 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 BV Unit 1, BV Unit 2 and Perry
Unit 1 under the fuel lease arrangement are charged to fuel expense based on the
quantity of energy generated. Nuclear fuel costs for these units averaged .750,
.903 and .918 cents per KWH, inclusive of charges associated with spent fuel, in
1995, 1994 and 1993, respectively. Duquesne is recovering from its customers the
costs associated with the ultimate disposal of spent fuel.
Nuclear Decommissioning
- --------------------------------------------------------------------------------
The PUC ruled that recovery of the decommissioning costs for BV Unit 1
could begin in 1977, and that recovery for BV Unit 2 and Perry Unit 1 could
begin in 1988. Duquesne expects to decommission BV Unit 1, BV Unit 2 and Perry
Unit 1 no earlier than the expiration of each plant's operating license, 2016,
2027 and 2026, respectively. BV Unit 1 is expected to be placed in safe storage
until the expiration of the BV Unit 2 operating license, at which time the units
may be decommissioned together.
Based on site-specific studies finalized in 1992 for BV Unit 2, and in 1994
for BV 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 BV Unit
1, $35 million for BV 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. In collaboration with Duquesne and several other Pennsylvania utilities,
the PUC Office of Special Assistants is evaluating various decommissioning
issues, including funding methods. Duquesne expects that any action relating to
any forthcoming PUC report will result in further increases in annual
contributions to its decommissioning trusts. Consistent with these anticipated
future PUC actions, Duquesne's petition before the PUC for the sale of its
ownership interest in the Ft. Martin Power Station provides for additional
annual contributions to its nuclear decommissioning funds of $5 million for five
years without any increase in existing electric rates. (See "Sale of Ft. Martin"
discussion on page 9.)
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 decommis-
12
<PAGE>
sioning funds are deposited in external, segregated trust accounts. The funds
are invested in a portfolio of municipal bonds, certificates of deposit and
United States government securities having a weighted average duration of four
to seven years. Trust fund earnings increase the fund balance and the recorded
liability. The market value of the aggregate trust fund balances at December 31,
1995, totaled approximately $28.5 million. On Duquesne's consolidated balance
sheet, the decommissioning trusts have been reflected in other long-term
investments, and the related liability has been recorded as other non-current
liabilities.
Nuclear Insurance
- --------------------------------------------------------------------------------
All of the companies with an interest in BV Unit 1, BV Unit 2 and Perry
Unit 1 maintain nuclear property insurance, which provides coverage for property
damage, decommissioning and decontamination liabilities. Duquesne's share of
this program provides for $1.2 billion of insurance coverage for its net
investment of $407.8 million in the BVPS and $565.5 million in Perry Unit 1,
plus its interest in BV Unit 2 with lease commitments of $405.2 million, at
December 31, 1995. The lease commitments of $405.2 million represent the net
present value of future lease payments discounted at 10.94 percent, the return
currently authorized Duquesne by the PUC. 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 insurance company, 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 $10.9 million.
The Price-Anderson Amendments to the Atomic Energy Act of 1954 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 on its
ownership or leasehold interests in three nuclear generating units, 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
may 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.
Duquesne carries extra expense insurance which would pay 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 in a limited
amount for a limited period of time. The coverage provides for 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, with no coverage thereafter. The amount and duration of actual extra
expense could substantially exceed insurance coverage. NEIL also provides this
insurance. If NEIL's reserves are inadequate to cover claims at any United
States nuclear site covered by that insurer, Duquesne could be assessed
retrospective premiums totaling a maximum of $3.5 million.
Spent Nuclear Fuel Disposal
- --------------------------------------------------------------------------------
The Nuclear Waste Policy Act of 1982 established a policy for handling and
disposing of spent nuclear fuel and a policy requiring the established final
repository to accept spent fuel. Electric utility companies have entered into
contracts with the DOE for the permanent disposal of spent nuclear fuel and
high-level radioactive waste in compliance with this legislation. The DOE has
indicated that its repository under these contracts will not be available for
acceptance of spent fuel before 2010 at the earliest. Existing on-site spent
fuel storage capacities at BV Unit 1, BV Unit 2 and Perry Unit 1 are expected to
be sufficient until 2016, 2010 and 2011, respectively.
13
<PAGE>
Uranium Enrichment Decontamination and Decommissioning Fund
- --------------------------------------------------------------------------------
Nuclear reactor licensees in the United States are assessed annually for
the decontamination and decommissioning of DOE uranium 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 (NEPA)
and are to be paid by such utilities over a 15-year period. At December 31,
1995, Duquesne's liability for contributions is approximately $9.9 million
(subject to an inflation adjustment). Contributions, when made, are recovered
from electric utility customers through the ECR.
Environmental Matters
- --------------------------------------------------------------------------------
The Comprehensive Environmental Response, Compensation and Liability Act of
1980 and the Superfund Amendments and Reauthorization Act of 1986 (Superfund)
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. Duquesne
has reached agreements to make minimal financial payments related to two of the
three sites in order to resolve any associated liability. If Duquesne is
ultimately determined to be a responsible party with respect to the remaining
site, it could be liable for all or a portion of the cleanup costs. However,
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) 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 this matter
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, which
established the Emission Allowance Trading System. Allowances are issued by the
EPA to fossil-fired stations with generating capability of more than 25 MW that
were in existence as of the passage of the 1990 amendments. Allowances are part
of an innovative 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 to offset their emissions.
Although Duquesne has satisfied all of the Phase I requirements of the
Clean Air Act, Phase II requires significant additional reductions of SO\\2\\
and oxides of nitrogen (NO\\X\\) by the year 2000. Duquesne currently has 662 MW
of nuclear capacity, 1,187 MW of coal capacity equipped with SO\\2\\ emission
reducing equipment (including 300 MW of property held for future use at
Phillips) as well as 757 MW 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 considering a combination of compliance methods that include
fuel switching; increased use of, and improvements in, SO\\2\\ emission reducing
equipment; low NO\\X\\ burner technology; and the purchase of emission
allowances. Flue gas conditioning and post combustion NO\\X\\ reduction
technologies may also be employed if economically justified. In addition,
Duquesne is examining and developing innovative emissions technologies designed
to reduce costs. Duquesne 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 were
required at Cheswick, 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 mid-1995 at Cheswick, Elrama and Bruce
Mansfield. Duquesne achieved such reductions using innovative combustion system
modifications and low NO\\X\\ burner technology. 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 and the PUC approval of the sale
of Duquesne's interest in the Ft. Martin Power Station. (See "Sale of Ft.
Martin" discussion on page 9.)
Duquesne has developed, patented and installed low NO\\X\\ burner
technology for the Elrama boilers. These cost-effective NO\\X\\ reduction
systems installed on the Elrama roof fired boilers was specified as the
benchmark for the industry for this class of boilers in the EPA's pending Group
II rulemaking. Duquesne is also currently evaluating additional low cost,
developmental NO\\X\\ reduction technologies at Cheswick and
14
<PAGE>
Elrama. An Artificial Neural Network control system enhancement, co-sponsored by
the Electric Power Research Institute and Duquesne, will be demonstrated at
Cheswick. The Gas Research Institute and Duquesne are sponsoring a targeted
natural gas reburn demonstration at Elrama. Both demonstrations will be
completed in 1996.
As required by Title V of the Clean Air Act Amendments, Duquesne has filed
comprehensive air operating permit applications for Cheswick, Elrama, BI and
Phillips during the last half of 1995. Duquesne also filed its Title IV Phase II
Clean Air Act compliance plan with the PUC on December 27, 1995.
Duquesne is closely monitoring other potential future air quality programs
and air emission control requirements, including additional NO\\X\\ control
requirements that were recommended for fossil fuel plants by the Ozone Transport
Commission and the potential for more stringent ambient air quality and emission
standards for SO\\2\\ particulates, and other by-products of coal combustion. 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 Protection (DEP)
issued Residual Waste Management Regulations governing the generation and
management of non-hazardous residual waste, such as coal ash. Duquesne is
assessing the sites which it utilizes and has developed compliance strategies
under review by the DEP. Capital compliance costs of $3.0 million were incurred
by Duquesne in 1995 to comply with these DEP regulations; on the basis of
information currently available, an additional $2.5 million will be incurred in
1996. The expected additional capital cost of compliance through the year 2000
is estimated, based on current information, to be approximately $25 million.
This estimate is subject to the results of ground water assessments and DEP
final approval of compliance plans.
Duquesne is involved in various other 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
The electric utility industry is undergoing fundamental change in response
to the open transmission access and increased availability of energy
alternatives fostered by NEPA which has served to increase competition in the
industry. Previously captive customers are seeking freedom to choose alternative
suppliers of energy. These competitive pressures require utilities to offer
competitive pricing and terms to retain customers and to develop new markets for
the optimal utilization of their generation capacity.
At the national level, NEPA was designed to encourage competition among
electric utility companies, improve energy resource planning and to encourage
the development of alternative sources of energy. NEPA authorizes the FERC to
require electric utilities to provide wholesale suppliers of electric energy
with nondiscriminatory access to the utility's wholesale transmission system. In
response to this mandate, the FERC has issued a Notice of Proposed Rulemaking
(NOPR) on Open Access Nondiscriminatory Transmission Services and a supplemental
NOPR on the Recovery of Stranded Costs. The NOPR on open access transmission
would define the terms under which independent power producers, neighboring
utilities and others could gain access to a utility's transmission grid to
deliver power to customers. The supplemental NOPR on stranded costs would
address the issue of recovery of a utility's unrecovered costs that were
incurred to provide service to customers that subsequently leave a utility's
system in favor of another supplier. A final order is expected in mid-1996 on
both NOPRs. Also, in January 1996, the FERC announced its plans to reconsider
its public utility merger guidelines. The FERC actions are expected to have a
significant impact on competition in the electric utility industry.
In Pennsylvania, the PUC currently is conducting an investigation
concerning regulatory reform and has indicated an intention to issue a report to
the governor and the Pennsylvania General Assembly by June 1996. The PUC staff
issued an interim report in August 1995 that recommended that retail wheeling
not be
15
<PAGE>
implemented at that time because of concerns that retail wheeling would benefit
large industrials at the expense of smaller customers and utility shareholders,
who would absorb the costs of stranded investments, and that service reliability
could be impaired. The report concludes that performance-based ratemaking,
wholesale competition and utility cost cutting could provide the benefits of
retail wheeling without the attendant disruptions.
Duquesne is aware of the foregoing federal and state regulatory and
business uncertainties, and is attempting to position itself to operate in a
more competitive environment. Its current rate structure allows some flexibility
in setting rates to retain its customer base and attract new business.
Furthermore, as discussed below, open access transmission offers Duquesne the
opportunity to sell power on a market basis to customers outside of its service
territory.
Duquesne has proposals before both the FERC and the PUC that address
specific issues relating to its competitive position. Because of Duquesne's
current electric generating configuration, some of its baseload capacity is used
less than optimally. Two options Duquesne is currently considering to align its
generating capabilities more closely with customer demand are discussed in
"Transmission Access" below and "Generation Resource Optimization" on page 17.
First, through open transmission access, Duquesne is seeking to increase its
level of fixed demand through the negotiation of long-term power sale contracts
to customers outside its service territory. Second, Duquesne proposes to change
its generation profile through the sale of its interest in the Ft. Martin Power
Station.
As part of its petition currently before the PUC with respect to the sale
of its interest in Ft. Martin, Duquesne has proposed, among other concessions, a
five-year freeze on base rates and a five-year annual $5 million credit to the
ECR (which would otherwise remain unaffected by the freeze) to compensate
Duquesne's electric utility customers for short-term power sales foregone by the
sale of its interest in the plant. (See "Sale of Ft. Martin" discussion on page
9.) Although Duquesne believes a rate freeze will enable it to maintain and
expand its existing customer base, if the rate freeze is implemented, Duquesne
could face the risk of reduced rates of return if unforeseen costs arise and if
revenues from sales prove inadequate to fund those costs.
Finally, as noted above, open access transmission requirements implicitly
create the potential for stranded costs. To address these issues, Duquesne has
implemented, and will continue to evaluate, the accelerated depreciation of its
generating assets as one method to guard against the competitive risks of
stranded investments. (See "Operating Expenses" discussion on page 4.) At
present, the FERC and the PUC appear supportive of stranded cost recovery;
however, implementation details for recovery of stranded costs are extremely
vague and far from decided. The petition for the sale of Duquesne's ownership
interest in the Ft. Martin Power Station currently before the PUC proposes to
further increase depreciation and amortization expense related to Duquesne's
nuclear power investment by $75 million over a three-year period. This petition
also proposes to record a one-time write-down in the value of Duquesne's nuclear
plant investment of approximately $130 million and to increase by $5 million the
annual contribution to Duquesne's nuclear plant decommissioning funds, for a
total of $25 million in contributions over the next five years. (See "Sale of
Ft. Martin" discussion on page 9.) These current and proposed accelerated
investment cost recovery measures will be absorbed by Duquesne without an
increase in base rates.
Duquesne believes that these and similar initiatives will strengthen its
position to succeed in a more competitive environment by eliminating the need to
charge its electric utility customers in the future for these currently
recognized expenses. At this time, however, there is no assurance as to the
extent to which Company initiatives can or will ultimately eliminate regulatory
and other uncertainties associated with increased competition.
Transmission Access
In March 1994, Duquesne submitted, pursuant to the Federal Power Act, two
separate "good faith" requests for transmission service with APS and the
Pennsylvania-New Jersey-Maryland Interconnection Association (PJM Companies),
respectively. Each request is based on 20-year firm service with flexible
delivery points for 300 MW of transfer capability over the APS and PJM Companies
transmission networks, which
16
<PAGE>
together extend 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. In May 1995, the FERC issued
proposed orders instructing APS and the PJM Companies to provide transmission
service to Duquesne and directing the parties to negotiate specific rates, terms
and conditions. Duquesne was unable to agree to terms for transmission service
with either APS or the PJM Companies. Briefs were filed with the FERC outlining
the areas of disagreement among the companies. The matter is now pending before
the FERC. Duquesne cannot predict the final outcome of these proceedings.
Generation Resource Optimization
Duquesne's plans for optimizing generation resources are designed to reduce
underutilized generating capacity, promote competition in the wholesale
marketplace, maintain stable prices and meet customer-specified levels of
service reliability. Duquesne is committed to explore firm energy sales to
wholesale customers, system power sales, system power sales with specific unit
back-up, unit power sales, generating asset sales and any other approach to
efficiently managing capacity and energy.
The proposed sale of Duquesne's ownership interest in the Ft. Martin Power
Station demonstrates Duquesne's ongoing efforts to optimize the utilization of
generation resources. (See "Sale of Ft. Martin" discussion on page 9.) The sale
is expected to reduce power production costs by employing a cost-effective
source of peaking capacity through enhanced reliability of the simple cycle
units at BI. Implementation of the proposed plan will better align Duquesne's
generating capabilities with its native load requirements.
Customer Service Guarantees
Duquesne's commitment to provide reliable, quality service to its customers
is characterized by its customer service guarantees. On March 6, 1995, Duquesne
became the first Pennsylvania regulated utility, and the third in the United
States, to offer its residential customers guarantees of its commitment to
courteous, reliable and efficient service. Duquesne offers a $25 credit to a
customer's account if Duquesne fails to provide accurate billings; to meet
punctual service appointments; to extend prompt, courteous and professional
service; or to connect new services within one day of the date requested by the
customer.
Customer Advanced Reliability System
In January 1996, Duquesne announced its Customer Advanced Reliability
System, a new communications service that will provide its customers with
superior levels of service reliability, security and convenience. Duquesne has
signed a long-term, full service contract with Itron, Inc. (Itron), a leading
supplier of energy information and communication solutions to the electric
utility industry. Over the next two years, Itron will install, operate and
maintain a communications network that will provide Duquesne with an electronic
link to its 580,000 customers.
The Customer Advanced Reliability System is designed to respond to customer
needs on the basis of immediate information about the status of power delivery
at individual homes and businesses. This electronic communications service is
another major element in Duquesne's multi-step plan to make Duquesne's
operations more competitive and efficient.
Other
- --------------------------------------------------------------------------------
Financial Accounting Pronouncement
The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 121, Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to be Disposed Of (SFAS No. 121),
17
<PAGE>
in March 1995. This statement is effective for years beginning after December
15, 1995. Duquesne anticipates adopting this standard on January 1, 1996, and
does not expect that it will have a material impact on its financial position or
results of operations, based on the current regulatory structure in which it
operates. As competitive factors influence pricing in the utility industry, this
opinion may change in the future. The general requirements of SFAS No. 121 apply
to non-current assets and require impairment to be considered whenever evidence
suggests that it is no longer probable that future cash flows in an amount at
least equal to the asset will result.
Retirement Plan Measurement Assumptions
Duquesne decreased the discount rate used to determine the projected
benefit obligation on Duquesne's retirement plans at December 31, 1995, to 7.0
percent. The assumed change in future compensation levels was also decreased to
reflect current market and economic conditions. The effects of these changes on
Duquesne's retirement plan obligations are reflected in the amounts shown in
"Employee Benefits," Note M to the consolidated financial statements on page 56.
The resulting change in related expenses for subsequent years is not expected to
be material.
------------------------------
Except for historical information contained herein, the matters discussed in
this Annual Report on Form 10-K, are forward-looking statements that involve
risks and uncertainties including, but not limited to, economic, competitive,
governmental and technological factors affecting Duquesne's operations, markets,
products, services and prices, and other factors discussed in Duquesne's filings
with the Securities and Exchange Commission.
Executive Officers of the Registrant
- --------------------------------------------------------------------------------
Set forth below are the names, ages as of March 1, 1996, 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 51 Chairman of the Board since September 1987 and
Chief Executive Officer since January 1986.
President from January 1986 to February 1995.
David D. Marshall 43 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 February 1992, and Vice President-
Corporate Development from August 1987 to
February 1992.
Gary L. Schwass 50 Senior Vice President since February 1995 and Chief
Financial Officer since July 1989. Vice President-
Finance from May 1988 to February 1995.
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
Name Age Office
---- --- ------
<S> <C> <C>
James E. Cross 49 Senior Vice President - Nuclear since February 1995.
Vice President - Nuclear from September 1994 to
February 1995. Formerly Vice President, Thermal
Operations, and Chief Nuclear Officer of Portland
General Electric from May 1993 to September 1994;
Vice President and Chief Nuclear Officer of
Portland General Electric from December 1991 to
May 1993; and Vice President, Nuclear, of Portland
General Electric from May 1990 to December 1991.
Dianna L. Green 49 Senior Vice President - Customer Operations since
April 1995. Senior Vice President - Administration
from February 1995 to April 1995. Vice President -
Administrative Services from August 1988 to
February 1995.
Roger D. Beck 59 Vice President - Customer Services since April 1995.
Vice President - Marketing and Customer Services
from August 1986 to April 1995.
Gary R. Brandenberger 58 Vice President - Power Supply since August 1986.
William J. DeLeo 45 Vice President - Marketing and Corporate Performance
since April 1995. Vice President - Corporate
Performance and Information Services from
January 1991 to April 1995.
Victor A. Roque 49 Vice President since April 1995 and General Counsel since
November 1994. Previously Vice President, General
Counsel and Secretary for Orange and Rockland
Utilities from April 1989 to November 1994.
Donald J. Clayton 41 Treasurer since January 1995. Assistant Treasurer from
May 1990 to January 1995 and Manager, Valuation and
Property Records, from August 1985 to May 1990.
Morgan K. O'Brien 35 Controller and Principal Accounting Officer since October
1995. Assistant Controller from December 1993 to
October 1995. Manager, Corporate Taxes, from
September 1991 to December 1993. Previously
Assistant Vice President - Corporate Taxes at PNC
Financial Corporation from 1990 to September 1991.
</TABLE>
19
<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 Unit 2, which is leased.
<TABLE>
<CAPTION>
Duquesne's
Share of Net Plant Output
Capacity Year Ended
(Megawatts) December 31, 1995
Name and Location Type Summer Winter (Megawatt-hours)
- ----------------- ---- ------ ------ -------------------
<S> <C> <C> <C> <C>
Cheswick Coal
Springdale, Pa. 562 570 3,431,410
Ft. Martin Unit 1 (1) Coal
Maidsville, W. Va. 276 276 1,054,790
Elrama Coal
Elrama, Pa. 474 487 2,411,635
Sammis Unit 7 (1) Coal
Stratton, Ohio 187 187 1,008,249
Eastlake Unit 5 (1) Coal
Eastlake, Ohio 186 186 896,065
Beaver Valley Unit 1 (1) Nuclear
Shippingport, Pa. 385 385 2,598,215
Beaver Valley Unit 2 (1) Nuclear
Shippingport, Pa. 113 113 856,249
Perry Unit 1 (1) Nuclear
North Perry, Ohio 161 164 1,255,429
Bruce Mansfield Unit 1 (1) Coal
Shippingport, Pa. 228 228 1,047,989
Bruce Mansfield Unit 2 (1) Coal
Shippingport, Pa. 62 62 168,360
Bruce Mansfield Unit 3 (1) Coal
Shippingport, Pa. 110 110 310,341
Brunot Island Oil
Brunot Island, Pa. 54 66 (858)
----- ----- ----------
Total 2,798 2,834 15,037,874
----------
Property held for future use:
Brunot Island Oil 204 240
Phillips Coal 300 310
----- -----
Total 3,302 3,384
----- -----
</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 25 transmission substations (including interests in common in
the step-up transformers at Fort Martin Unit 1; Sammis Unit 7; Eastlake Unit 5;
Bruce Mansfield Unit 1; Beaver Valley Unit 1; Beaver Valley Unit 2; Perry Unit
1; Bruce Mansfield Unit 2; and Bruce Mansfield Unit 3) and 562 distribution
substations. Duquesne has 714 circuit-miles of transmission lines, comprising
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.
20
<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. BUSINESS. "Fossil Fuel" discussion on page 11.)
Duquesne's 1947 mortgage bond indenture was retired in the third quarter of
1995 following the maturity of the last bond series issued under the indenture.
All First Collateral Trust Bonds have been issued under a new mortgage indenture
that was established in April 1992 (the 1992 Indenture). The 1992 Indenture
includes more flexible provisions and eliminates conventions such as mandatory
sinking funds and formula-derived maintenance and replacement clauses.
Additional information relating to Item 2. PROPERTIES, is set forth in Note
B, "Property, Plant and Equipment," of the consolidated financial statements for
year ended December 31, 1995, on page 46. The information is incorporated here
by reference.
ITEM 3. LEGAL PROCEEDINGS.
Rate-Related Legal Proceedings, Property, Plant and Equipment-Related Legal
Proceedings and Environmental Legal Proceedings
- ---------------------------------------------------------------------------
Eastlake Unit 5
In October 1995, CEI commenced an action (Action) in the Common Pleas Court
of Lake County, Ohio, seeking to enjoin Duquesne from seeking a partition of the
Unit, through arbitration or otherwise, on the basis of a waiver of partition
contained in the deed to the Unit. It is Duquesne's position that the deed
covenant is unenforceable by CEI due to CEI's bad faith conduct toward Duquesne.
Duquesne removed the Action to the United States District Court for the Northern
District of Ohio, where it is now pending, and then, brought a motion requesting
that all claims in dispute between the parties (including its arbitration
claims) be heard by the Court or, alternatively, that the Court stay the Action
and compel arbitration of all claims and filed an answer and counterclaims.
This motion and nine other motions are pending before the Court. Until order of
the federal court is issued on this issue, both the arbitration and the federal
litigation are proceeding.
Proceedings involving Duquesne's rates are reported in Item 1. BUSINESS
"Rate Matters." Proceedings involving Property, Plant and Equipment are
reported in Item 1. BUSINESS "Property, Plant and Equipment." Proceedings
involving environmental matters are reported in Item 1. BUSINESS "Environmental
Matters."
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHARE-HOLDER MATTERS.
Duquesne's common stock is not publicly traded. Effective July 7, 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,
Duquesne's shareholders received DQE common stock in exchange for their shares
of Duquesne common stock, which were cancelled. DQE owns all of Duquesne's
outstanding common stock, which consists of 10 shares. As such, this item is
not applicable to Duquesne because all its common equity is held solely by DQE.
During 1995 and 1994, Duquesne declared quarterly dividends on its common stock
totaling $144 million each year.
21
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA.
Selected financial data for Duquesne for each year of the six-year period
ended December 31, 1995, 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. 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, 1995 and 1994, and the related Statements of Consolidated
Income, Retained Earnings and Cash Flows for each of the three years in the
period ended December 31, 1995, together with the Independent Auditors' Report
dated January 30, 1996, are set forth in pages 38 to 62 of this Report. The
consolidated 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.
All directors of DQE are also directors of Duquesne. Information relating
to DQE's and Duquesne's board of directors is set forth on page 20 of the 1995
DQE Annual Report to Shareholders filed here as part of this Report in Exhibit
99.2. The information is incorporated here by reference. 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."
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
21, 1996. 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.
22
<PAGE>
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 information is set forth here on pages 38 through 62:
Report of Independent Certified Public Accountants.
Statement of Consolidated Income for the Three Years Ended December
31, 1995.
Consolidated Balance Sheet, December 31, 1995 and 1994.
Statement of Consolidated Cash Flows for the Three Years Ended
December 31, 1995.
Statement of Consolidated Retained Earnings for the Three Years
Ended December 31, 1995.
Notes to Consolidated Financial Statements.
(a)(2) The following financial statement schedule and the related Report of
Independent Certified Public Accountants (See page 38.) are filed here as a part
of this Report:
Schedule for the Three Years Ended December 31, 1995:
II- Valuation and Qualifying Accounts.
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 are set forth in the Exhibit List on pages 24 through 34
and incorporated here by reference. Documents other than those designated as
being filed here are incorporated here by reference. Previously filed 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. 1-10290. Documents incorporated by reference to a
Duquesne Light Company Annual Report on Form 10-K, Quarterly Report on Form 10-Q
or a Current Report on Form 8-K are at Securities and Exchange Commission File
No. 1-956. The Exhibits include the management contracts and compensatory plans
or arrangements required to be filed as exhibits to this Form 10-K by Item
601(d)(10)(iii), of Regulation S-K.
(b) Reports on Form 8-K filed during the twelve months ended December 31,
1995:
(1) May 22, 1995 - The following event was reported:
Item 5. Federal Energy Regulatory Commission responded favorably
to Section 211 applications filed by Duquesne Light
Company for transmission service from the Pennsylvania-New
Jersey-Maryland Power Pool and Allegheny Power System by
issuing proposed orders requiring the provision of firm
transmission service at comparable prices.
No financial statements were filed with this report.
23
<PAGE>
(2) December 4, 1995 - The following event was reported:
Item 5. On November 29, 1995, Duquesne Light Company announced it
will seek approval from the Pennsylvania Public Utility
Commission for a five-year freeze on base rates, the sale of
Duquesne's interest in the Fort Martin Power Station, the
accelerated depreciation of Duquesne's investment in its
nuclear power plants and the return to service of three units
at the Brunot Island Power Station. In addition, Duquesne
reiterated its proposal for the inclusion of all Pennsylvania
electric utilities in a region wide independent transmission
organization, and reaffirmed its commitment to the highest
levels of guaranteed customer service.
No financial statements were filed with this report.
EXHIBITS INDEX
<TABLE>
<CAPTION>
Exhibit Method of
No. Description Filing
- -------- ------------------------------------------------------ ----------------------------
<S> <C> <C>
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 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.
4.2 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.
4.3 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.
4.4 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.
</TABLE>
24
<PAGE>
<TABLE>
<CAPTION>
Exhibit Method of
No. Description Filing
- ------- ------------------------------------------------- -------------------------------
<S> <C> <C>
Supplemental Indenture No. 8 and Supplemental Exhibit 4.6 to the Form 10-K
Indenture No. 9. Annual Report of Duquesne Light
Company for the year ended
December 31, 1994.
Supplemental Indenture No. 10 through Supplemental Filed here.
Indenture No. 12.
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 of September Exhibit 5.9 to Registration
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 companies Annual Report of Duquesne
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.
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.
</TABLE>
25
<PAGE>
<TABLE>
<CAPTION>
Exhibit Method of
No. Description Filing
- ------- ------------------------------------------------- -------------------------------
<S> <C> <C>
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.
10.17 Fort Martin Power Station Asset Purchase Agreement Filed here.
dated as of November 28, 1995.
Agreements relating to the Sale and Leaseback
of Beaver Valley Unit No. 2:
10.18 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 with ended September 30, 1987.
the sale and leaseback of its interest in Beaver Valley Unit
No. 2.
</TABLE>
26
<PAGE>
<TABLE>
<CAPTION>
Exhibit Method of
No. Description Filing
- ------- ------------------------------------------------- -------------------------------
<S> <C> <C>
10.19 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.
x10.20 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.
y10.21 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.
x10.22 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.
y10.23 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.
x10.24 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.
y10.25 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.
x10.26 Amendment No. 3 dated as of October 13, 1994 to Exhibit 10.25 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, 1987 ended December 31, 1994.
with the limited partnership Owner Participant named
therein, Lessor, and Duquesne Light Company, Lessee.
</TABLE>
27
<PAGE>
<TABLE>
<CAPTION>
Exhibit Method of
No. Description Filing
- ------- ------------------------------------------------- -------------------------------
<S> <C> <C>
y10.27 Amendment No. 3 dated as of October 13, 1994 to Exhibit 10.26 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, 1987 ended December 31, 1994.
with the corporate Owner Participant named therein,
Lessor, and Duquesne Light Company, Lessee.
x10.28 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.
y10.29 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.
x10.30 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.
y10.31 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.
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.
x10.32 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.
</TABLE>
28
<PAGE>
<TABLE>
<CAPTION>
Exhibit Method of
No. Description Filing
- ------- ------------------------------------------------- -------------------------------
<S> <C> <C>
y10.33 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.
x10.34 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.
y10.35 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.
x10.36 Amendment No. 4 dated as of October 13, 1994 to Exhibit 10.35 to the Form 10-K
Participation Agreement dated as of September 15, 1987 Annual Report of Duquesne
among the limited partnership Owner Participant named Light Company for the year
therein, DQU Funding Corporation, as Funding Corp, ended December 31, 1994.
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.
y10.37 Amendment No. 4 dated as of October 13, 1994 to Exhibit 10.36 to the Form 10-K
Participation Agreement dated as of September 15, 1987 Annual Report of Duquesne
among the corporate Owner Participant named therein, Light Company for the year
DQU Funding Corporation, as Funding Corp, DQU II ended December 31, 1994.
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.
z10.38 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.
</TABLE>
29
<PAGE>
<TABLE>
<CAPTION>
Exhibit Method of
No. Description Filing
- ------- -------------------------------------------------------- -------------------------------
<S> <C> <C>
z10.39 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.
z10.40 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.
z10.41 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.
z10.42 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.
z10.43 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.
z10.44 Amendment No. 2 dated as of October 13, 1994 to Tax Exhibit 10.43 to the Form 10-K
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, 1994.
z10.45 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.
x10.46 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.
</TABLE>
30
<PAGE>
<TABLE>
<CAPTION>
Exhibit Method of
No. Description Filing
- ------- -------------------------------------------------------- -------------------------------
<S> <C> <C>
y10.47 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.
x10.48 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 15, Light Company for the year
1987 between The First National Bank of Boston, as Owner ended December 31, 1987.
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.
y10.49 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 15, Light Company for the year
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.
x10.50 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 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 limited partnership Owner
Participant named therein, and The Bank of New York,
as Indenture Trustee.
y10.51 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.
10.52 Reimbursement Agreement dated as of October 1, 1994 Exhibit 10.51 to the Form 10-K
among Duquesne Light Company, Swiss Bank Annual Report of Duquesne
Corporation, New York Branch, as LOC Bank, Union Light Company for the year
Bank, as Administrating Bank, Swiss Bank ended December 31, 1994.
Corporation, New York Branch, as Administrating Bank
and The Participating Banks Named Therein.
10.53 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.
</TABLE>
31
<PAGE>
<TABLE>
<CAPTION>
Exhibit Method of
No. Description Filing
- ------- -------------------------------------------------------- -------------------------------
<S> <C> <C>
10.54 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.
x10.55 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, DQU II 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.
y10.56 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, DQU II 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.
x10.57 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, 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, 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.
y10.58 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, 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, 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>
32
<PAGE>
<TABLE>
<CAPTION>
Exhibit Method of
No. Description Filing
- ------- -------------------------------------------------------- -------------------------------
<S> <C> <C>
Other Agreements:
*10.59 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.
*10.60 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.
*10.61 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.
*10.62 Duquesne Light Company Outside Directors' Filed here.
Retirement Plan, as amended to date.
*10.63 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.
*10.64 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.
*10.65 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.
*10.66 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.
*10.67 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.
*10.68 First Amendment dated as of June 27, 1995 to Filed here.
Employment Agreement dated as of August 30, 1994
between DQE, Duquesne Light Company and
David D. Marshall.
*10.69 Employment Agreement dated as of August 30, 1994 Duquesne Light Company
between DQE, Duquesne Light Company and Exhibit 10.10 to the Form 10-K
Gary L. Schwass. Annual Report of DQE for the
year ended December 31, 1994.
*10.70 Employment Agreement dated as of August 30, 1994 Exhibit 10.68 to the Form 10-K
between Duquesne Light Company and Dianna L. Annual Report of DQE for the
Green. year ended December 31, 1994.
</TABLE>
33
<PAGE>
<TABLE>
<CAPTION>
Exhibit Method of
No. Description Filing
- ------- -------------------------------------------------------- -------------------------------
<S> <C> <C>
*10.71 First Amendment dated as of June 27, 1995 to Filed here.
Employment Agreement dated as of August 30, 1994
between Duquesne Light Company and Dianna L.
Green.
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 Financial Data Schedule. Filed here.
99.1 Executive Compensation of Duquesne Light Company Filed here.
Executive Officers for 1995 and Security Ownership
of Duquesne Light Company Directors and
Executive Officers as of February 21, 1996.
99.2 Directors of DQE and Duquesne Light Company, Filed here.
Page 20, 1995 DQE Annual Report to Shareholders.
</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.
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 Duquesne's stock as of
February 21, 1996, subject to payment in advance of the cost of reproducing
the exhibits requested.
34
<PAGE>
SCHEDULE II
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
For the Years Ended December 31, 1995, 1994 and 1993
(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, 1995
Reserve Deducted from the Asset
to which it applies:
Allowance for uncollectible accounts $15,021 $13,430 $3,567(A) $14,099(B) $17,919
------- ------- ------ ------- -------
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
------- ------- ------ ------- -------
Notes: (A) Recovery of accounts previously written off.
(B) Accounts receivable written off.
</TABLE>
35
<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 26, 1996 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 26, 1996
- ------------------------ Officer and Director
Wesley W. von Schack
/s/ David D. Marshall President and Chief Operating Officer and March 26, 1996
- ------------------------ Director
David D. Marshall
/s/ Gary L. Schwass Senior Vice President and Chief Financial March 26, 1996
- ------------------------ Officer
Gary L. Schwass
/s/ Morgan K. O'Brien Controller and Principal March 26, 1996
- ------------------------ Accounting Officer
Morgan K. O'Brien
/s/ Daniel Berg Director March 26, 1996
- ------------------------
Daniel Berg
/s/ Doreen E. Boyce Director March 26, 1996
- ------------------------
Doreen E. Boyce
Director March 26, 1996
- ------------------------
Robert P. Bozzone
/s/ Sigo Falk Director March 26, 1996
- ------------------------
Sigo Falk
/s/ William H. Knoell Director March 26, 1996
- ------------------------
William H. Knoell
/s/ Robert Mehrabian Director March 26, 1996
- ------------------------
Robert Mehrabian
/s/ Thomas J. Murrin Director March 26, 1996
- ------------------------
Thomas J. Murrin
/s/ Robert B. Pease Director March 26, 1996
- ------------------------
Robert B. Pease
Director March 26, 1996
- ------------------------
Eric W. Springer
</TABLE>
36
<PAGE>
Glossary of Terms
Following are explanations of certain financial and operating terms used in
this Report and unique in the utility 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.
Baseload
- --------------------------------------------------------------------------------
The amount of electric power delivered or needed at the lowest point of demand
during the day.
Construction Work In Progress (CWIP)
- --------------------------------------------------------------------------------
This amount represents 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, Duquesne 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)
- --------------------------------------------------------------------------------
Duquesne 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.
Federal Energy Regulatory Commission (FERC)
- --------------------------------------------------------------------------------
The FERC is an independent five-member commission within the United States
Department of Energy. Among its many responsibilities, the FERC sets rates and
charges for the wholesale transportation and sale of natural gas and
electricity, and licenses hydroelectric power projects.
Interruptible Customer
- --------------------------------------------------------------------------------
Interruptible customers receive a discount in exchange for allowing temporary
interruptions in their service during Duquesne's peak load periods or during
emergency conditions.
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 Duquesne 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 the FERC will allow recovery of these
costs through the ratemaking process.
Retail or Wholesale Access
- --------------------------------------------------------------------------------
The ability of customers to contract for electrical energy from competing
generating suppliers.
Stranded Cost
- --------------------------------------------------------------------------------
Stranded costs include any prudent utility investment, commitments or expenses
not yet recovered, made during a period when there was an obligation or
authorization to provide service at a regulated price, that are no longer
necessary or economical due to a change in statute or regulatory policy which
allows others to compete for the utility's customers. For example, Duquesne
recently refinanced its long-term debt. Refinancing costs will be recovered and
amortized for accounting purposes over the term of the debt, unless regulatory
changes prevent future recovery, and result in "stranded costs."
Wheeling
- --------------------------------------------------------------------------------
An electric operation wherein transmission facilities of one system are used
to transmit power of another system.
37
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Directors and Stockholder of Duquesne Light Company:
We have audited the accompanying consolidated balance sheet of Duquesne
Light Company and its subsidiary (Duquesne) as of December 31, 1995 and 1994,
and the related consolidated statements of income, retained earnings, and cash
flows for each of the three years in the period ended December 31, 1995. Our
audits also included the financial statement schedule listed in Item 14. These
financial statements and financial statement schedule are the responsibility of
Duquesne's management. Our responsibility is to express an opinion on these
financial statements and financial statement schedule 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 as of December 31,
1995 and 1994, and the results of their operations and their cash flows for each
of the three years in the period ended December 31, 1995 in conformity with
generally accepted accounting principles. Also, in our opinion, such financial
statement schedule, when considered in relation to the basic consolidated
financial statements taken as a whole, presents fairly in all material respects
the information set forth therein.
As discussed in Note A to the consolidated financial statements, effective
January 1, 1993, Duquesne changed its method of accounting for income taxes to
conform with Statement of Financial Accounting Standards No. 109, and Duquesne
changed its method of accounting for maintenance costs during scheduled major
fossil station outages.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Pittsburgh, Pennsylvania
January 30, 1996
38
<PAGE>
<TABLE>
<CAPTION>
DUQUESNE LIGHT COMPANY (Thousands of Dollars)
STATEMENT OF CONSOLIDATED INCOME Year Ended December 31,
- -------------------------------- -----------------------
1995 1994 1993
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating Revenues:
Sales of Electricity:
Customers - net $1,088,737 $1,109,752 $1,175,287
Phase-in deferrals - (28,810) (100,315)
- --------------------------------------------------------------------------------
Net customer revenues 1,088,737 1,080,942 1,074,972
Utilities 55,963 58,295 50,669
- --------------------------------------------------------------------------------
Total Sales of Electricity 1,144,700 1,139,237 1,125,641
Other 35,084 29,387 35,044
- --------------------------------------------------------------------------------
Total Operating Revenues 1,179,784 1,168,624 1,160,685
- --------------------------------------------------------------------------------
Operating Expenses:
Fuel 208,546 222,420 223,699
Purchased power 23,422 21,715 14,032
Other operating 260,541 268,303 287,166
Maintenance 81,516 79,488 80,292
Depreciation and amortization 189,146 163,219 150,925
Taxes other than income taxes 86,349 85,839 70,404
Income taxes 88,665 90,740 96,270
- --------------------------------------------------------------------------------
Total Operating Expenses 938,185 931,724 922,788
- --------------------------------------------------------------------------------
Operating Income 241,599 236,900 237,897
- --------------------------------------------------------------------------------
Other Income and (Deductions):
Allowance for equity funds used during
construction 721 1,295 869
Long-term power sale write-off - - (15,225)
Carrying charges on deferred revenues - 30 1,801
Income taxes (4,229) 6,549 19,033
Other - net 10,205 3,729 10,552
- --------------------------------------------------------------------------------
Total Other Income and (Deductions) 6,697 11,603 17,030
- --------------------------------------------------------------------------------
Income Before Interest Charges 248,296 248,503 254,927
- --------------------------------------------------------------------------------
Interest Charges:
Interest on long-term debt 95,391 101,027 108,479
Other interest 2,599 1,095 2,387
Allowance for borrowed funds used
during construction (764) (1,068) (726)
- --------------------------------------------------------------------------------
Total Interest Charges 97,226 101,054 110,140
- --------------------------------------------------------------------------------
Income Before Cumulative Effect on
Prior Years of
Changes in Accounting Principles 151,070 147,449 144,787
Adoption of SFAS No. 109 - Income Taxes - - 8,000
Accounting for maintenance costs - net - - (5,425)
- --------------------------------------------------------------------------------
Net Income 151,070 147,449 147,362
Dividends on Preferred and Preference
Stock 5,320 6,046 9,188
- --------------------------------------------------------------------------------
Earnings for Common Stock $ 145,750 $ 141,403 $ 138,174
================================================================================
</TABLE>
See notes to consolidated financial statements.
39
<PAGE>
<TABLE>
<CAPTION>
DUQUESNE LIGHT COMPANY (Thousands of Dollars)
CONSOLIDATED BALANCE SHEET As of December 31,
- -------------------------- ------------------
ASSETS 1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C>
Property, Plant and Equipment:
Electric plant in service $ 4,262,670 $ 4,196,690
Construction work in progress 38,133 43,763
Property held under capital leases 133,381 161,775
Property held for future use 216,633 216,206
Other 1,193 532
- --------------------------------------------------------------------------------
Total 4,652,010 4,618,966
Less accumulated depreciation and
amortization (1,673,107) (1,550,447)
- --------------------------------------------------------------------------------
Property, Plant and Equipment - Net 2,978,903 3,068,519
- --------------------------------------------------------------------------------
Long-Term Investments:
Investment in DQE Common Stock 66,757 43,057
Other investments 102,648 31,212
- --------------------------------------------------------------------------------
Total Long-Term Investments 169,405 74,269
- --------------------------------------------------------------------------------
Current Assets:
Cash and temporary cash investments
(at cost which approximates market) 2,490 15,904
- --------------------------------------------------------------------------------
Receivables:
Electric customer accounts receivable 103,821 96,157
Other utility receivables 22,441 26,008
Other receivables 11,842 25,171
Less: Allowance for uncollectible
accounts (17,920) (15,021)
- --------------------------------------------------------------------------------
Receivables less allowance for
uncollectible accounts 120,184 132,315
Less: Receivables sold (7,000) -
- --------------------------------------------------------------------------------
Total Receivables 113,184 132,315
- --------------------------------------------------------------------------------
Materials and supplies (generally at
average cost):
Coal 25,454 30,484
- --------------------------------------------------------------------------------
Operating and construction 53,298 58,262
- --------------------------------------------------------------------------------
Other current assets 7,955 15,795
- --------------------------------------------------------------------------------
Total Current Assets 202,381 252,760
- --------------------------------------------------------------------------------
Other Non-Current Assets:
Regulatory assets 671,928 710,763
Other 45,048 43,556
- --------------------------------------------------------------------------------
Total Other Non-Current Assets 716,976 754,319
- --------------------------------------------------------------------------------
Total Assets $ 4,067,665 $ 4,149,867
================================================================================
</TABLE>
See notes to consolidated financial statements.
40
<PAGE>
<TABLE>
<CAPTION>
DUQUESNE LIGHT COMPANY (Thousands of Dollars)
CONSOLIDATED BALANCE SHEET As of December 31,
- -------------------------- ------------------------
CAPITALIZATION AND LIABILITIES 1995 1994
- ------------------------------------------------------------------------------------------
<S> <C> <C>
Capitalization:
Common stock (authorized - 90,000,000 shares, issued and
outstanding - 10 shares) $ -- $ --
Capital surplus 837,265 823,193
Retained earnings 294,069 292,319
- ------------------------------------------------------------------------------------------
Total common stockholder's equity 1,131,334 1,115,512
- ------------------------------------------------------------------------------------------
Non-redeemable preferred stock 63,608 90,340
Non-redeemable preference stock 29,615 29,857
- ------------------------------------------------------------------------------------------
Total preferred and preference stock before deferred ESOP
benefit (involuntary liquidation values of $93,086 and
$120,060 exceed par by $28,781 and $43,882, respectively) 93,223 120,197
Deferred employee stock ownership plan (ESOP) benefit (22,257) (24,852)
- ------------------------------------------------------------------------------------------
Total preferred and preference stock 70,966 95,345
- ------------------------------------------------------------------------------------------
Long-term debt 1,322,531 1,368,930
- ------------------------------------------------------------------------------------------
Total Capitalization 2,524,831 2,579,787
- ------------------------------------------------------------------------------------------
Obligations Under Capital Leases 34,546 41,106
- ------------------------------------------------------------------------------------------
Current Liabilities:
Current maturities and sinking fund requirements 71,051 85,691
Accounts payable 76,435 60,654
Accrued liabilities 53,930 81,035
Dividends declared 37,015 35,469
Other 9,191 5,722
- ------------------------------------------------------------------------------------------
Total Current Liabilities 247,622 268,571
- ------------------------------------------------------------------------------------------
Non-Current Liabilities:
Deferred income taxes-net 805,996 991,149
Deferred investment tax credits 115,760 123,591
Deferred income 162,916 -
Other 175,994 145,663
- ------------------------------------------------------------------------------------------
Total Non-Current Liabilities 1,260,666 1,260,403
- ------------------------------------------------------------------------------------------
Commitments and Contingencies
- ------------------------------------------------------------------------------------------
Total Capitalization and Liabilities $4,067,665 $4,149,867
=========================================================================================
</TABLE>
41
<PAGE>
<TABLE>
<CAPTION>
DUQUESNE LIGHT COMPANY (Thousands of Dollars)
STATEMENT OF CONSOLIDATED CASH FLOWS Year Ended December 31,
- ------------------------------------ -----------------------
1995 1994 1993
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash Flows From Operating Activities:
Net income $ 151,070 $ 147,449 $ 147,362
Principal non-cash charges (credits) to net income:
Depreciation and amortization 189,146 156,519 150,125
Capital lease, nuclear fuel and other amortization 32,670 36,940 32,428
Deferred income taxes and investment tax credits - net (41,411) (29,705) (44,420)
Allowance for equity funds used during construction (721) (1,295) (869)
Phase-in plan revenues and related carrying charges -- 28,621 99,375
Changes in working capital other than cash 30,656 (36,884) (96,799)
Other - net 36,004 49,499 19,505
- ---------------------------------------------------------------------------------------------------------
Net Cash Provided from Operating Activities 397,414 351,144 306,707
- ---------------------------------------------------------------------------------------------------------
Cash Flows Used By Investing Activities:
Construction expenditures (78,656) (94,315) (100,628)
Long-term investments (62,854) (5,317) --
Allowance for borrowed funds used during construction (764) (1,068) (726)
Other - net (3,770) 3,145 (12,317)
- ---------------------------------------------------------------------------------------------------------
Net Cash Used by Investing Activities (146,044) (97,555) (113,671)
- ---------------------------------------------------------------------------------------------------------
Cash Flows Used In Financing Activities:
Sale of bonds -- 114,110 740,500
(Decrease) increase in notes payable -- (10,990) 10,990
Dividends on capital stock (150,059) (151,059) (154,204)
Reductions of long-term obligations:
Preferred and preference stock (29,732) (39,958) (187)
Long-term debt (56,114) (114,835) (735,048)
Other obligations (26,373) (33,522) (27,751)
Premium on reacquired debt (1,731) (5,033) (31,702)
Other - net (775) 3,602 (1,790)
- ---------------------------------------------------------------------------------------------------------
Net Cash Used In Financing Activities (264,784) (237,685) (199,192)
- ---------------------------------------------------------------------------------------------------------
Net (decrease) increase in cash and temporary cash
investments (13,414) 15,904 (6,156)
Cash and temporary cash investments at beginning of year 15,904 -- 6,156
- ---------------------------------------------------------------------------------------------------------
Cash and temporary cash investments at end of year $ 2,490 $ 15,904 $ --
=========================================================================================================
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid during the year for:
Interest (net of amount capitalized) $ 95,521 $ 102,944 $ 124,692
- ---------------------------------------------------------------------------------------------------------
Income taxes $ 115,504 $ 111,614 $ 133,303
- ---------------------------------------------------------------------------------------------------------
Non-cash investing and financing
activities:
Capital lease obligations recorded $ 14,961 $ 16,909 $ 11,811
Contribution of DQE Common Stock from parent company $ -- $ 19,531 $ --
Preferred stock issued in conjunction with long-term investments $ 3,000 $ -- $ --
=========================================================================================================
</TABLE>
See notes to consolidated financial statements.
42
<PAGE>
<TABLE>
<CAPTION>
DUQUESNE LIGHT COMPANY (Thousands of Dollars)
STATEMENT OF CONSOLIDATED RETAINED EARNINGS Year Ended December 31,
1995 1994 1993
<S> <C> <C> <C>
Balance, January 1 $292,319 $294,916 $300,742
Net Income for the Year 151,070 147,449 147,362
- -------------------------------------------------------------------------------------------
Total 443,389 442,365 448,104
- -------------------------------------------------------------------------------------------
Cash dividends declared:
Preferred stock 3,870 4,592 4,740
Preference stock (net of tax benefit of 1,450 1,454 4,448
ESOP dividend)
Common stock 144,000 144,000 144,000
- -------------------------------------------------------------------------------------------
Total Cash Dividends Declared 149,320 150,046 153,188
- -------------------------------------------------------------------------------------------
Balance, December 31 $294,069 $292,319 $294,916
===========================================================================================
</TABLE>
See notes to consolidated financial statements.
A. Summary of Significant Accounting Policies
Notes to Consolidated Financial Statements
Consolidation
- --------------------------------------------------------------------------------
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. Duquesne has one wholly owned subsidiary,
Monongahela Light and Power, also a Pennsylvania corporation, which makes
long-term lease investments.
All material intercompany balances and transactions have been eliminated in
the preparation of the consolidated financial statements of Duquesne.
Basis of Accounting
- --------------------------------------------------------------------------------
Duquesne is subject to the accounting and reporting requirements of the
Securities and Exchange Commission (SEC). In addition, Duquesne's 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 "Rate Matters," Note F, on page
48.)
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements. The
reported amounts of revenues and expenses during the reporting period may also
be affected by the estimates and assumptions management is required to make.
Actual results could differ from those estimates.
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. Deferred revenues are associated
with Duquesne's 1987 rate case. (See "Energy Cost Rate Adjustment Clause (ECR)"
discussion on page 44 and "1987 Rate Case" discussion, Note F, on page 48).
43
<PAGE>
Duquesne's Electric 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 in southwestern Pennsylvania. 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.
Net Customer Revenues for the Year ended December 31
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
1995 1994 1993
(Amounts in Thousands of Dollars)
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------
Sales of Electricity:
Customers $1,102,167 $1,121,642 $1,192,381
Provision for doubtful accounts (13,430) (11,890) (17,094)
- ---------------------------------------------------------------------------------------------------------
Customers - net 1,088,737 1,109,752 1,175,287
Phase-in deferrals - (28,810) (100,315)
- ---------------------------------------------------------------------------------------------------------
Net Customer Revenues $1,088,737 $1,080,942 $1,074,972
=========================================================================================================
</TABLE>
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.
The PUC 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 "Deferred Coal Costs" and "Warwick Mine Costs" discussions,
Note F, on pages 49 and 50, respectively.)
Over- or under-recoveries from customers are recorded in the consolidated
balance sheet as payable to, or receivable from, customers. At December 31,
1995, $5.8 million was payable to customers and shown as other current
liabilities. At December 31, 1994, $5.9 million was receivable from customers
and shown as other current assets.
Maintenance
- --------------------------------------------------------------------------------
Incremental maintenance expense incurred for refueling outages at Duquesne's
nuclear units is deferred for amortization over the period between refueling
outages (generally 18 months). 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 periods between outages, anticipated expenses for scheduled major
fossil generating station outages. Maintenance costs incurred for non-major
scheduled outages and for forced outages are 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.
44
<PAGE>
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 remaining
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 of
municipal bonds, certificates of deposit and United States 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,
1995, totaled approximately $28.5 million. On Duquesne's consolidated balance
sheet, the decommissioning trusts have been reflected in other investments, and
the related liability has been recorded as other non-current liabilities. (See
"Nuclear Decommissioning" discussion, Note N, on page 59.)
Depreciation and amortization expense increased $25.9 million primarily due to
the change in Duquesne's composite depreciation rate from 3.0 percent to 3.5
percent effective January 1, 1995.
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 resulted in a net decrease of $80.5 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 "Rate Matters,"
Note F, and "Income Taxes," Note K, on pages 48 and 54, respectively.)
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. 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 electric utility property generally were deferred. Such credits are
subsequently reflected, over the lives of the related assets, as reductions to
tax expense.
45
<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 AFC.
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 8.7 percent in
1995, 9.0 percent in 1994 and 9.6 percent in 1993.
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
accumulated depreciation and amortization.
Substantially all of Duquesne's properties are subject to a first mortgage
lien.
Other Current Assets and Long-Term Investments
- --------------------------------------------------------------------------------
Duquesne's other current assets and long-term investments include certain
investments in 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.
Financial Accounting Pronouncement
- --------------------------------------------------------------------------------
The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 121, Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to be Disposed Of (SFAS No. 121) in March 1995. This
statement is effective for years beginning after December 15, 1995. Duquesne
anticipates adopting this standard on January 1, 1996, and does not expect that
it will have a material impact on its financial position or results of
operations, based on the current regulatory structure in which it operates. As
competitive factors influence pricing in the utility industry, this opinion may
change in the future. The general requirements of SFAS No. 121 apply to non-
current assets and require impairment to be considered whenever evidence
suggests that it is no longer probable that future cash flows in an amount at
least equal to the asset will result.
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
Reclassifications
- --------------------------------------------------------------------------------
The 1994 and 1993 consolidated financial statements have been reclassified to
conform with accounting presentations adopted during 1995.
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.
46
<PAGE>
Generating Units at December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Utility Fuel
Unit Megawatts Plant Source
Summer Winter (Millions of Dollars)
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cheswick 562 570 $ 118.7 Coal
Elrama (a) 474 487 98.1 Coal
Ft. Martin Unit 1 (b) 276 276 36.4 Coal
Eastlake Unit 5 186 186 42.7 Coal
Sammis Unit 7 187 187 53.1 Coal
Bruce Mansfield Unit 1 (a) 228 228 66.2 Coal
Bruce Mansfield Unit 2 (a) 62 62 19.1 Coal
Bruce Mansfield Unit 3 (a) 110 110 52.1 Coal
Beaver Valley Unit 1 (c) 385 385 234.0 Nuclear
Beaver Valley Unit 2 (d)(e) 113 113 14.4 Nuclear
Beaver Valley Common Facilities 159.4
Perry Unit 1 (f) 161 164 565.5 Nuclear
Brunot Island 54 66 7.1 Fuel Oil
- ------------------------------------------------------------------------------------------------------
Total 2,798 2,834 1,466.8
Property held for future use:
Brunot Island (g) 204 240 44.9 Fuel Oil
Phillips (a) 300 310 77.4 Coal
- ------------------------------------------------------------------------------------------------------
Total Generating Units 3,302 3,384 $1,589.1
======================================================================================================
</TABLE>
(a) The unit is equipped with flue gas desulfurization equipment.
(b) See "Sale of Ft. Martin" discussion below.
(c) The Nuclear Regulatory Commission (NRC) has granted a license to operate
through January 2016.
(d) On October 2, 1987, Duquesne sold its 13.74 percent interest in Beaver
Valley Unit 2 (BV 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.
(e) The NRC has granted a license to operate through May 2027.
(f) The NRC has granted a license to operate through March 2026.
(g) Combustion turbine capacity held for future use representing 135 megawatts
summer and 168 megawatts winter may be returned to service pending outcome
of the sale of Ft. Martin. (See "Sale of Ft. Martin" discussion below.)
Sale of Ft. Martin
- --------------------------------------------------------------------------------
In December 1995, Duquesne filed a Petition for Declaratory Order with the PUC
requesting approval for the sale of its ownership interest in the Ft. Martin
Power Station and for a six-point plan to be financed in part by the proceeds of
the Ft. Martin transaction. Under the plan, Duquesne offers to freeze its base
rates for a period of five years. In addition, Duquesne proposes to record a
one-time reduction of approximately $130 million in the value of Duquesne's
nuclear plant investment. Duquesne also proposes to use the proceeds from the
sale to finance reliability enhancements to the simple cycle units located at
Brunot Island (BI), to retire debt and to reduce equity. The plan also proposes
an annual increase of $25 million for three years in depreciation and
amortization expense to Duquesne's nuclear investment, as well as additional
annual contributions to its nuclear plant decommissioning funds of $5 million
for five years, without any increase in existing electric rates. Lastly,
Duquesne proposes a five-year annual $5 million credit to the ECR to compensate
Duquesne's customers for the lost profits from any reduced short-term power
sales foregone by the sale of its ownership interest in the Ft. Martin Power
Station. (See "Energy Cost Rate Adjustment Clause (ECR)" discussion, Note A, on
page 44.) The PUC is currently reviewing Duquesne's petition.
At December 31, 1995 and 1994, the fair market value of Duquesne's investment
in DQE common stock was $66.8 million and $43.1 million, respectively. At
December 31, 1995 and 1994, the cost of Duquesne's investment in DQE common
stock was $43.9 million and $45.9 million, respectively.
47
<PAGE>
C. Long-Term Investments
Duquesne makes equity investments in affordable housing. At December 31, 1995,
Duquesne had investments in seven affordable housing funds.
Deferred income primarily relates to Duquesne's leasehold investments.
Deferred amounts will be recognized as income over the lives of the underlying
leasehold investments over periods generally not exceeding five years.
Duquesne's other investments are primarily in assets of nuclear
decommissioning trusts and marketable securities. In accordance with SFAS No.
115, these investments are classified as available-for-sale and are stated at
market value. The amount of unrealized holding gains related to marketable
securities at December 31, 1995, is $22.8 million ($13.4 million net of tax).
There were no material unrealized gains or losses on investments at December 31,
1994.
D. 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. At December 31, 1995, Duquesne had sold $7
million of receivables to the unaffiliated corporation. Duquesne had no
receivables sold at December 31, 1994. The accounts receivable sales agreement,
which expires in June 1996, is one of many sources of funds available to
Duquesne. Duquesne may attempt to extend the agreement, or to replace the
facility with a similar one or to eliminate it upon expiration.
E. Changes in Working Capital Other than Cash
Changes in Working Capital Other than Cash
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1995 1994 1993
(Amounts in Thousands of Dollars)
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Receivables $ 19,131 $ 6,708 $(87,671)
Materials and supplies 9,994 2,932 13,635
Other current assets 7,840 (6,929) 3,636
Accounts payable 15,781 (23,816) (6,022)
Other current liabilities (22,090) (15,779) (20,377)
- ----------------------------------------------------------------------------------------------------
Total $ 30,656 $(36,884) $(96,799)
====================================================================================================
</TABLE>
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 consolidated statement of income as phase-in
deferrals. Phase-in deferrals were recorded on the consolidated 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. In Duquesne's petition currently before the PUC
for the sale of its ownership interest in the Ft. Martin Power Station, Duquesne
proposes to freeze its base rates for a five-year period. (See "Sale of Ft.
Martin" discussion, Note B, on page 47.)
Regulatory Assets
- --------------------------------------------------------------------------------
As a result of the application of SFAS No. 71, Duquesne records regulatory
assets on its consolidated balance sheet. 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 customers
through the ratemaking process.
48
<PAGE>
Duquesne's operations currently satisfy the SFAS No. 71 criteria. However, a
company's electric utility operations or a portion of such operations could
cease to meet these criteria for various reasons, including a change in the PUC
or the FERC regulations. Should Duquesne's operations cease to meet the SFAS No.
71 criteria, Duquesne would be required to write off any regulatory assets or
liabilities for those operations that no longer meet these requirements.
Management will continue to evaluate significant changes in the regulatory and
competitive environment in order to assess Duquesne's overall consistency with
the criteria of SFAS No. 71.
Regulatory Assets at December 31
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1995 1994
(Amounts in Thousands of Dollars)
- ------------------------------------------------------------------------------------------
<S> <C> <C>
Regulatory tax receivable (Note K) $414,543 $428,043
Unamortized debt costs (Note I)(a) 98,776 103,454
Deferred rate synchronization costs (below) 51,149 51,149
Beaver Valley Unit 2 (BV Unit 2)
sale/leaseback premium (Note L)(b) 31,564 33,414
Deferred employee costs (c) 31,218 31,012
Extraordinary property loss (below) 8,300 22,394
Deferred nuclear maintenance outage
costs (Note A) 6,776 11,406
DOE decontamination and decommissioning
receivable (Note N) 10,687 10,932
Deferred coal costs (below) 12,753 10,677
Other 6,162 8,282
- ------------------------------------------------------------------------------------------
Total Regulatory Assets $671,928 $710,763
==========================================================================================
</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 BV 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 1987, the PUC approved Duquesne's petition to defer initial operating and
other costs of Perry Unit 1 and BV 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 Duquesne's customers.
Duquesne is not earning a return on the deferred costs. Duquesne believes that
these deferred costs are recoverable. In 1990 and 1995, the PUC permitted other
Pennsylvania electric utilities rate recovery of 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 of its investment in the unit.
Deferred Coal Costs
- --------------------------------------------------------------------------------
The PUC has established two market price coal cost standards. One applies only
to coal delivered at the Bruce Mansfield Power Station (Bruce Mansfield). 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
49
<PAGE>
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.
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. In
December 1995, Duquesne exercised the second option to extend the standard
through March 2000. The unrecovered cost of coal used at Bruce Mansfield
amounted to $8.4 million and $7.3 million and the unrecovered cost of coal used
throughout the system amounted to $4.4 million and $3.4 million at December 31,
1995 and 1994, respectively. Duquesne believes that all deferred coal costs will
be recovered.
Warwick Mine Costs
- --------------------------------------------------------------------------------
The 1990 joint petition for settlement (See preceding discussion 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 to 2.5 percent) coal. More than 60 percent of the coal mined at
Warwick Mine currently is used by Duquesne. Duquesne receives a royalty on sales
of Warwick coal in the open market. These royalties are credited to Duquesne's
ECR. 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,
1995, Duquesne's net investment in the mine was $14.9 million. The current
estimated liability, including final site reclamation, mine water treatment and
certain labor liabilities, for mine closing is $34.1 million and Duquesne has
recorded a liability on the consolidated balance sheet of approximately $15.9
million toward these costs.
Property Held for Future Use
- --------------------------------------------------------------------------------
In 1986, the PUC approved Duquesne's request to remove Phillips Power Station
(Phillips) and a portion of BI from service and from rate base. Duquesne expects
to recover its net investment in these plants through future electricity sales.
Duquesne believes its investment in these plants will be necessary in order to
meet future business needs outlined in Duquesne's plans for optimizing
generation resources. 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. A
portion of the BI combustion turbine capacity currently held for future use may
be returned to service pending the outcome of the sale of Duquesne's ownership
interest in Ft. Martin. (See "Sale of Ft. Martin" discussion, Note B, on page
47.) At December 31, 1995, Duquesne's net investment in Phillips and BI held for
future use was $77.4 million and $44.9 million, respectively.
50
<PAGE>
G. Common Stock and Capital Surplus
Common Stock and Capital Surplus
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Capital Surplus 1995 1994 1993
Year Ended December 31, (Amounts in Thousands of Dollars)
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Capital Surplus $ - $ - $ -
Premium on common stock 837,539 823,886 807,593
Capital stock expense (274) (693) (1,838)
- ------------------------------------------------------------------------------------------------
Total Capital Surplus $837,265 $823,193 $805,755
================================================================================================
</TABLE>
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, DQE may not be
able to pay dividends to its common shareholders. No part of the retained
earnings of Duquesne was restricted at December 31, 1995.
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, 1995, 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, 1995, Duquesne had
made all dividend payments. Preferred and preference dividends were $5.3
million, $6.0 million and $9.2 million in 1995, 1994 and 1993, respectively.
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 "Employee Benefits," Note M, on page 56.) 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 and one half shares of DQE common stock. At December 31, 1995, $22.3 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 $2.1 million for 1995, $2.3 million for 1994 and $2.1 million for
1993. These cash contributions were the difference between the ESOP debt service
and the amount of dividends on ESOP shares (approximately $2.3 million in 1995,
$2.4 million in 1994 and $2.3 million in 1993). As shares of preference stock
are allocated to the accounts of participants in
51
<PAGE>
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) plans of $2.3 million in 1995, $1.8 million in
1994 and $1.7 million in 1993.
Outstanding preferred and preference stock is generally callable, on notice of
not less than thirty days, at stated prices plus accrued dividends. On September
1, 1995, Duquesne called for redemption of all of its outstanding shares of
$7.20 preferred stock. On January 14, 1994, Duquesne called for redemption of
all of its outstanding shares of $2.10 and $7.50 preference stock. None of the
remaining Duquesne preferred or preference stock issues has mandatory purchase
requirements.
Preferred and Preference Stock at December 31
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(Shares and Amounts in Thousands)
-----------------------------------------------------
1995 1994 1993
Call Price -----------------------------------------------------
Per Share Shares Amount Shares Amount Shares Amount
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Preferred Stock Series:
3.75% (a) (b) (c) $ 51.00 148 $ 7,407 148 $ 7,407 148 $ 7,407
4.00% (a) (b) (c) 51.50 550 27,486 550 27,486 550 27,486
4.10% (a) (b) (c) 51.75 120 6,012 120 6,012 120 6,012
4.15% (a) (b) (c) 51.73 132 6,643 132 6,643 132 6,643
4.20% (a) (b) (c) 51.71 100 5,021 100 5,021 100 5,021
$2.10 (a) (b) (c) 51.84 159 8,039 159 8,039 159 8,039
$7.20 (a) (c) (d) - - - 298 29,732 319 31,915
9.00% (e) - - 3,000 - - - -
- --------------------------------------------------------------------------------------------------------------------
Total Preferred Stock 1,209 63,608 1,507 90,340 1,528 92,523
- --------------------------------------------------------------------------------------------------------------------
Preference Stock Series: (f)
$2.10 (c) (g) - - - - - 1,175 29,383
$7.50 (d) (h) - - - - - 84 8,392
Plan Series A (c) (i) 37.18 834 29,615 841 29,857 844 29,956
- --------------------------------------------------------------------------------------------------------------------
Total Preference Stock 834 29,615 841 29,857 2,103 67,731
- --------------------------------------------------------------------------------------------------------------------
Deferred ESOP benefit (22,257) (24,852) (27,126)
- --------------------------------------------------------------------------------------------------------------------
Total Preferred and Preference Stock $ 70,966 $ 95,345 $133,128
====================================================================================================================
</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) 500 authorized shares; 10 issued $300,000 par value; involuntary liquidation
value $300,000 per share; redeemable beginning August 2000
(f) Preference stock: 8,000,000 authorized shares; $1 par value; cumulative
(g) $25 per share involuntary liquidation value
(h) Redeemable
(i) $35.50 per share involuntary liquidation value
I. Long-Term Debt
Duquesne's 1947 first mortgage bond indenture was retired in the third quarter
of 1995 following the maturity of the last bond series issued under the
indenture. All of Duquesne's First Collateral Trust Bonds have been issued under
a new mortgage indenture that was established in April 1992 (the 1992
Indenture). All First Collateral Trust Bonds became first mortgage bonds when
the 1947 mortgage indenture was retired. The 1992 Indenture includes more
flexible provisions and eliminates conventions such as mandatory sinking funds
and formula-derived maintenance and replacement clauses.
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 these bonds. For certain of the pollution
control notes, there is an annual commitment fee
52
<PAGE>
for an irrevocable letter of credit. Under certain circumstances, the letter of
credit is available for the payment of interest on, or redemption of, all or 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.
Long-Term Debt at December 31
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Outstanding
Interest (Amounts in Thousands of Dollars)
Rate Maturity 1995 1994
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
First Collateral Trust Bonds/first
mortgage bonds 4.75%-8.75% 1996-2025 $ 903,000 (a) $ 950,400 (b)
Pollution control notes (c) (d) 2003-2030 417,985 417,051
Sinking fund debentures 5% 2010 5,703 5,817
Miscellaneous - 152
Less unamortized debt discount and
premium - net (4,157) (4,490)
- --------------------------------------------------------------------------------------------------------------------------
Total Long-Term Debt $ 1,322,531 $1,368,930
==========================================================================================================================
</TABLE>
(a) Excludes $50.0 million in 1995 related to a current maturity on May 15,
1996.
(b) Excludes $9.6 million in 1994 related to sinking fund requirements on the
underlying first mortgage bonds and $49.0 million related to the maturity
on June 1, 1995, of the last first mortgage bonds issued under the 1947
indenture.
(c) Excludes $0.9 million in 1994 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 3.9 percent in 1995 and 4.3 percent in 1994.
At December 31, 1995, sinking fund requirements (related solely to the sinking
fund debentures) and maturities of long-term debt outstanding for the next five
years were: $50.4 million in 1996; $50.7 million in 1997, $75.7 million in 1998,
$75.8 million in 1999 and $100.8 million in 2000.
Total interest costs incurred were $103.3 million in 1995, $107.7 million in
1994 and $117.0 million in 1993. Interest costs attributable to long-term debt
and other interest were $98.0 million, $102.1 million and $110.9 million in
1995, 1994 and 1993, respectively. Interest costs incurred also include $5.3
million, $5.6 million and $6.1 million attributable to capital leases in 1995,
1994 and 1993, respectively. Of these amounts, $1.8 million in 1995, $2.0
million in 1994 and $2.0 million in 1993 were capitalized as AFC. Debt discount
or premium and related issuance expenses are amortized over the lives of the
applicable issues.
During 1994, Duquesne's BV 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 collateralized lease bonds
($409 million at December 31, 1995) would become direct obligations of Duquesne.
At December 31, 1995 and 1994, Duquesne was in compliance with all of its debt
covenants. At December 31, 1995, 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 $1,401.4
million. The principal amount included in Duquesne's consolidated balance sheet
is $1,376.7 million.
53
<PAGE>
J. Short-Term Borrowing and Revolving Credit Arrangements
At December 31, 1995, Duquesne had an extendible revolving credit agreement
with a group of banks totaling $150 million. This facility expires in October
1996. Interest rates on this credit agreement vary. Commitment fees are based on
the unborrowed amount of the commitments. The credit facility contains a two-
year repayment period for any amount outstanding at the expiration of the
revolving credit period. At December 31, 1995 and 1994, there were no short-term
borrowings outstanding.
K. Income Taxes
Duquesne's federal income tax returns have been audited by the Internal
Revenue Service (IRS) for the tax years through 1989. The tax years 1990 through
1995 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 "Income
Taxes," Note A, on page 45. 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.
Deferred Tax Liabilities
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1995 1994
(Amounts in Thousands of Dollars)
- -----------------------------------------------------------------------------------------------------
At December 31, deferred tax assets (liabilities) were:
<S> <C> <C>
Investment tax credits unamortized $ 48,033 $ 51,282
Gain on sale/leaseback of BV Unit 2 64,124 67,120
Tax benefit - long-term investments 164,582 -
Other 41,509 52,037
- -----------------------------------------------------------------------------------------------------
Deferred tax assets 318,248 170,439
- -----------------------------------------------------------------------------------------------------
Property depreciation (871,539) (880,342)
Regulatory asset (172,008) (177,610)
Loss on reacquired debt unamortized (35,340) (38,066)
Other (45,357) (65,570)
- -----------------------------------------------------------------------------------------------------
Deferred tax liabilities (1,124,244) (1,161,588)
- -----------------------------------------------------------------------------------------------------
Net Deferred Tax Liabilities $ (805,996) $ (991,149)
=====================================================================================================
</TABLE>
Income Taxes
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1995 1994 1993
(Amounts in Thousands of Dollars)
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Included in operating expenses:
Currently payable: Federal $100,491 $ 90,335 $100,521
State 29,585 33,071 37,718
Deferred - net: Federal (28,381) (20,058) (28,129)
State (5,778) (7,232) (8,441)
Investment tax credits deferred - net (7,252) (5,376) (5,399)
- -----------------------------------------------------------------------------------------------------
Total Included in Operating Expenses 88,665 90,740 96,270
- -----------------------------------------------------------------------------------------------------
Included in other income and deductions:
Currently payable: Federal 4,979 (6,139) (17,557)
State (751) 335 (1,220)
Deferred - net: Federal 442 (99) 251
State 137 (39) 100
Investment tax credits (578) (607) (607)
- -----------------------------------------------------------------------------------------------------
Total Included in Other Income and Deductions 4,229 (6,549) (19,033)
- -----------------------------------------------------------------------------------------------------
Total Income Tax Expense $ 92,894 $ 84,191 $ 77,237
=====================================================================================================
</TABLE>
54
<PAGE>
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.
Income Tax Expense Reconciliation
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1995 1994 1993
(Amounts in Thousands of Dollars)
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------
Computed federal income tax at statutory rate $ 85,301 $ 81,074 $ 77,708
Increase (decrease) in taxes resulting from:
Tax audit settlement - - (15,000)
State income taxes, net of federal income tax benefit 15,076 16,988 18,302
Amortization of deferred investment tax credits (7,831) (5,983) (6,006)
Revenue requirement adjustment to regulatory taxes - (12,178) -
Other - net 348 4,290 2,233
- -----------------------------------------------------------------------------------------------------
Total Income Tax Expense $ 92,894 $ 84,191 $ 77,237
=====================================================================================================
</TABLE>
L. Leases
Duquesne 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
- -----------------------------------------------------------------------------------------------------
1995 1994
(Amounts in Thousands of Dollars)
<S> <C> <C>
- -----------------------------------------------------------------------------------------------------
Nuclear fuel $112,573 $139,763
Electric plant 20,808 22,012
- -----------------------------------------------------------------------------------------------------
Total 133,381 161,775
Less accumulated amortization (74,874) (91,376)
- -----------------------------------------------------------------------------------------------------
Property Held Under Capital Leases - Net (a) $ 58,507 $ 70,399
=====================================================================================================
</TABLE>
(a) Includes $2,910 in 1995 and $3,201 in 1994 of capital leases with associated
obligations retired.
In 1987, Duquesne sold and leased back its 13.74 percent interest in BV 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 BV Unit 2. In
accordance with the BV Unit 2 lease agreement, Duquesne paid the premiums of
approximately $36.4 million as a supplemental rent payment to the lessors. This
amount was deferred and is being amortized over the remaining lease term. At
December 31, 1995, the deferred balance was approximately $31.6 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.
55
<PAGE>
<TABLE>
<CAPTION>
Summary of Rental Payments
- -----------------------------------------------------------------------------------------------------
1995 1994 1993
(Amounts in Thousands of Dollars)
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating leases $57,617 $56,437 $57,398
Amortization of capital leases 26,705 33,596 28,758
Interest on capital leases 4,332 4,996 5,382
- -----------------------------------------------------------------------------------------------------
Total Rental Payments $88,654 $95,029 $91,538
=====================================================================================================
</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 BV Unit 2 and certain of the corporate offices. Future payments due to
Duquesne, as of December 31, 1995, under subleases of certain corporate office
space are approximately $4.4 million in 1996, $4.5 million in 1997 and $23.1
million thereafter.
<TABLE>
<CAPTION>
Future Minimum Lease Payments
- -----------------------------------------------------------------------------------------------------
Operating Leases Capital Leases
Year Ended December 31, (Amounts in Thousands of Dollars)
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
1996 $ 58,095 $ 24,392
1997 57,870 13,862
1998 57,621 8,801
1999 57,206 5,130
2000 57,164 3,705
2001 and thereafter 902,097 20,946
- -----------------------------------------------------------------------------------------------------
Total Minimum Lease Payments $1,190,053 76,836
- -----------------------------------------------------------------------------------------------------
Less amount representing interest (21,239)
- -----------------------------------------------------------------------------------------------------
Present value of minimum lease payments for capital leases $ 55,597 (a)
=====================================================================================================
</TABLE>
(a) Includes current obligations of $21.1 million at December 31, 1995.
M. 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 of 1974 (ERISA) but not to exceed the maximum tax deductible
amount for the year. Pension costs charged to expense or construction were $6.1
million for 1995, $8.9 million for 1994 and $9.8 million for 1993.
56
<PAGE>
Funded Status of the Retirement Plans and Amounts Recognized on the
Consolidated Balance Sheet at December 31
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
1995 1994
(Amounts in Thousands of Dollars)
- ------------------------------------------------------------------------------------
<S> <C> <C>
Actuarial present value of benefits rendered to date:
Vested benefits $378,344 $314,933
Non-vested benefits 19,110 17,282
- ------------------------------------------------------------------------------------
Accumulated benefits obligations based
on compensation to date 397,454 332,215
Additional benefits based on estimated
future salary levels 53,757 59,318
- ------------------------------------------------------------------------------------
Projected benefits obligation 451,211 391,533
Fair market value of plan assets 490,870 412,724
- ------------------------------------------------------------------------------------
Projected benefits obligation under
plan assets $ 39,659 $ 21,191
====================================================================================
Unrecognized net gain $124,794 $ 95,691
Unrecognized prior service cost (37,535) (30,365)
Unrecognized net transition liability (15,665) (17,477)
Net pension liability per consolidated
balance sheet (31,935) (26,658)
- ------------------------------------------------------------------------------------
Total $ 39,659 $ 21,191
====================================================================================
Assumed rate of return on plan assets 8.00% 8.00%
- ------------------------------------------------------------------------------------
Discount rate used to determine 7.00% 8.00%
projected benefits obligation
- ------------------------------------------------------------------------------------
Assumed change in compensation levels 5.00% 5.50%
- ------------------------------------------------------------------------------------
</TABLE>
Pension assets consist primarily of common stocks, United States obligations
and corporate debt securities.
Components of Net Pension Cost
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
1995 1994 1993
(Amounts in Thousands of Dollars)
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost (benefits earned during the year) $ 9,953 $ 12,482 $ 11,657
Interest on projected benefits obligation 30,063 28,221 27,423
Return on plan assets (99,246) 1,967 (41,725)
Net amortization and deferrals 65,316 (33,783) 12,454
- -----------------------------------------------------------------------------------------------------
Net Pension Cost $ 6,086 $ 8,887 $ 9,809
=====================================================================================================
</TABLE>
Retirement Savings Plan and Other Benefit Options
- --------------------------------------------------------------------------------
Duquesne sponsors separate 401(k) retirement plans for its management and
bargaining unit 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 six percent of an employee's eligible salary. Duquesne's 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 1995 incentive target for management 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
"Preferred and Preference Stock," Note H, on page 51.)
The 401(k) Retirement Savings Plan for IBEW Represented Employees provides
that beginning in 1995, Duquesne will match employee contributions to a 401(k)
account up to a maximum of four percent of an employee's eligible salary.
Duquesne's match consists of a $.25 base match per eli-
57
<PAGE>
gible contribution dollar and an additional $.25 incentive match per eligible
contribution dollar, if certain non-occupational illness and injury targets are
met. In 1995, these incentive targets were not met by Duquesne's union-
represented employees.
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 6.9 million shares of DQE's common stock at
prices equal to the fair market value of such stock on the dates the options
were granted. At December 31, 1995, approximately 2.6 million of these shares
were available for future grants.
On April 19, 1995, DQE's board of directors declared a three-for-two stock
split for shareholders of record on May 1, 1995. One additional share of common
stock was issued for every two shares outstanding as of the record date.
The following information is restated to reflect the 1995 stock split. As of
December 31, 1995, 1994 and 1993, respectively, active grants totaled 2,159,000;
2,118,000; and 1,763,000 shares. Exercise prices of these options ranged from
$8.2084 to $27.625 at December 31, 1995, and from $8.2084 to $23.0833 at
December 31, 1994 and December 31, 1993. Expiration dates of these grants ranged
from 1997 to 2005 at December 31, 1995; from 1997 to 2004 at December 31, 1994;
and from 1997 to 2003 at December 31, 1993. As of December 31, 1995, 1994 and
1993, respectively, stock appreciation rights (SARs) had been granted in
connection with 1,202,000; 1,190,000 and 1,193,000 of the options outstanding.
During 1995, 367,000 SARs were exercised; 133,000 options were exercised at
prices ranging from $8.2084 to $21.6667 and 28,000 options were cancelled.
During 1994, 1,254,000 SARs were exercised; 339,000 options were exercised at
prices ranging from $8.2084 to $18.9167; and 80,000 options were cancelled.
During 1993, 1,122,000 SARs were exercised; 227,000 options were exercised at
prices ranging from $8.2084 to $18.9167; and 78,000 options were cancelled. Of
the active grants at December 31, 1995, 1994 and 1993, respectively, 929,000;
918,000; and 867,000 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 this standard prospectively and has elected to amortize the transition
liability over 20 years.
Components of Postretirement Cost
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
1995 1994
(Amounts in Thousands of Dollars)
<S> <C> <C>
- ---------------------------------------------------------------------------------------
Service cost (benefits earned during the period) $ 1,315 $ 1,631
Interest cost on accumulated benefit obligation 2,340 2,294
Amortization of the transition obligation
over twenty years 1,700 1,700
Other (582) -
- ---------------------------------------------------------------------------------------
Total Postretirement Cost $ 4,773 $ 5,625
=======================================================================================
</TABLE>
58
<PAGE>
Funded Status of Postretirement Plan and Amounts Recognized on the
Consolidated Balance Sheet at December 31
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
1995 1994
(Amounts in Thousands of Dollars)
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
Actuarial present value of benefits:
Retirees $ 7,359 $ 6,292
Fully eligible active plan participants 3,187 3,074
Other active plan participants 21,935 20,543
- ------------------------------------------------------------------------------------------------
Accumulated postretirement benefit obligation 32,481 29,909
Fair market value of plan assets - -
- ------------------------------------------------------------------------------------------------
Accumulated benefit obligation in excess of plan assets $(32,481) $(29,909)
================================================================================================
Unrecognized net actuarial gains $ 8,427 $ 9,481
Unrecognized net transition liability (28,898) (30,598)
Postretirement liability per consolidated balance sheet (12,010) (8,792)
- ------------------------------------------------------------------------------------------------
Total $(32,481) $(29,909)
================================================================================================
Discount rate used to determine projected benefit obligation 7.00% 8.00%
- ------------------------------------------------------------------------------------------------
Health care cost trend rates:
For year beginning January 1 8.80% 8.60%
Ultimate rate 5.50% 6.50%
Year ultimate rate is reached 2000 1999
- ------------------------------------------------------------------------------------------------
Effect of a one percent increase in health care cost trend rates:
On accumulated projected benefit obligation $ 3,228 $ 3,137
On aggregate of annual service and interest costs $ 435 $ 465
- ------------------------------------------------------------------------------------------------
</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.
N. Commitments and Contingencies
Construction
- --------------------------------------------------------------------------------
Duquesne estimates that it will spend, excluding AFC and nuclear fuel,
approximately $90 million, $90 million and $100 million on construction during
1996, 1997 and 1998, respectively. Approximately $5 million of capital
expenditures for the reliability enhancements to the simple cycle units located
at BI contemplated in Duquesne's petition before the PUC are excluded from these
estimates. (See "Sale of Ft. Martin" discussion, Note B, on page 47.)
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 (BV Unit 1) could begin in 1977, and that
recovery for BV Unit 2 and Perry Unit 1 could begin in 1988. Duquesne expects to
decommission BV Unit 1, BV Unit 2 and Perry Unit 1 no earlier than the
expiration of each plant's operating license, 2016, 2027 and 2026, respectively.
BV Unit 1 will be placed in safe storage until the expiration of the BV Unit 2
operating license, at which time the units may be decommissioned together.
59
<PAGE>
Based on site-specific studies finalized in 1992 for BV Unit 2, and in 1994
for BV 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 BV Unit
1, $35 million for BV 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. In collaboration with Duquesne and several other Pennsylvania utilities,
the PUC Office of Special Assistants is evaluating various decommissioning
issues, including funding methods. Duquesne expects that any action relating to
any forthcoming PUC report will result in further increases in annual
contributions to its decommissioning trusts. Consistent with these anticipated
future PUC actions, Duquesne's petition before the PUC for the sale of its
ownership interest in the Ft. Martin Power Station provides for additional
annual contributions to its nuclear decommissioning funds of $5 million for five
years without any increase in existing electric utility rates. (See "Sale of Ft.
Martin" discussion, Note B, on page 47.)
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 of
municipal bonds, certificates of deposit and United States government securities
having a weighted average duration of four to seven years. Trust fund earnings
increase the fund balance and the recorded liability. The market value of the
aggregate trust fund balances at December 31, 1995, totaled approximately $28.5
million. On Duquesne's consolidated balance sheet, the decommissioning trusts
have been reflected in other long-term investments, and the related liability
has been recorded as other non-current liabilities.
Nuclear Insurance. All of the companies with an interest in BV Unit 1, BV
Unit 2 and Perry Unit 1 maintain nuclear property insurance, which provides
coverage for property damage, decommissioning and decontamination liabilities.
Duquesne's share of this program provides for $1.2 billion of insurance coverage
for its net investment of $407.8 million in the Beaver Valley Power Station
(BVPS) and $565.5 million in Perry Unit 1, plus its interest in BV Unit 2 with
lease commitments of $405.2 million, at December 31, 1995. The lease commitments
of $405.2 million represent the net present value of future lease payments
discounted at 10.94 percent, the return currently authorized Duquesne by the
PUC. 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 insurance company, 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 $10.9 million.
The Price-Anderson Amendments to the Atomic Energy Act of 1954 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 on its
ownership or leasehold interests in three nuclear generating units, 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
may 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.
60
<PAGE>
Duquesne carries extra expense insurance which would pay 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 in a limited
amount for a limited period of time. The coverage provides for 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 with no coverage thereafter. The amount and duration of actual extra
expense could substantially exceed insurance coverage. NEIL also provides this
insurance. If NEIL's reserves are inadequate to cover claims at any United
States nuclear site covered by that insurer, Duquesne could be assessed
retrospective premiums totaling a maximum of $3.5 million.
Beaver Valley Power Station Steam Generators. BVPS' units are equipped with
steam generators designed and built by Westinghouse Electric Corporation
(Westinghouse). Similar to other Westinghouse nuclear plants, stress corrosion
cracking (SCC) has occurred in the steam generator tubes of BV Unit 1. BV Unit
2, which was placed in service eleven years after BV Unit 1, has not yet
exhibited the degree of steam generator tube SCC experienced at BV Unit 1. It
is, however, too early in the life of BV Unit 2 to determine the extent to which
steam generator tube SCC may become a problem.
Duquesne has undertaken certain measures, such as increased inspections and
tube plugging, to minimize the operational impact and to reduce susceptibility
to steam generator tube SCC. Although Duquesne has taken these steps to allay
the effects of steam generator tube SCC, the inherent potential for future SCC
in steam generator tubes of the Westinghouse design still exists. Material
acceleration in SCC could lead to loss of plant efficiency, significant repairs
or possible replacement of BV Unit 1's steam generators. Total replacement cost
of BV Unit 1 steam generators is currently estimated at approximately $125
million. Duquesne would be responsible for $59 million of this total, which
includes the cost of equipment removal and replacement, but excludes replacement
power costs. The earliest that BV Unit 1's steam generators could be replaced is
1999.
Duquesne continues to explore all viable means of mitigating steam generator
tube SCC, including new repair technologies. Both units will undergo 100 percent
tube inspection during scheduled refueling outages in 1996. Duquesne will
continue to monitor and evaluate the condition of the BVPS steam generators.
Spent Nuclear Fuel Disposal. The Nuclear Waste Policy Act of 1982 established
a policy for handling and disposing of spent nuclear fuel and a policy requiring
the established final repository to accept spent fuel. Electric utility
companies have entered into contracts with the DOE for the permanent disposal of
spent nuclear fuel and high-level radioactive waste in compliance with this
legislation. The DOE has indicated that its repository under these contracts
will not be available for acceptance of spent fuel before 2010 at the earliest.
Existing on-site spent fuel storage capacities at BV Unit 1, BV Unit 2 and Perry
Unit 1 are expected to be sufficient until 2016, 2010 and 2011, respectively.
Uranium Enrichment Decontamination and Decommissioning Fund. Nuclear reactor
licensees in the United States are assessed annually for the decontamination and
decommissioning of DOE uranium 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 (NEPA) and are to be paid by such
utilities over a 15-year period. At December 31, 1995, Duquesne's liability for
contributions is approximately $9.9 million (subject to an inflation
adjustment). Contributions, when made, are recovered from customers through the
ECR.
61
<PAGE>
Guarantees
- --------------------------------------------------------------------------------
Duquesne and the owners of Bruce Mansfield have guaranteed certain debt and
lease obligations related to a coal supply contract for the Bruce Mansfield
plant. At December 31, 1995, Duquesne's share of these guarantees was $25.4
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 "Deferred Coal Costs" discussion, Note F, on page 49.) The
minimum future payments to be made by Duquesne solely in relation to these
obligations are $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 $28.9 million in 1995, $23.3 million
in 1994 and $26.5 million in 1993.
Residual Waste Management Regulations
- --------------------------------------------------------------------------------
In 1992, the Pennsylvania Department of Environmental Protection (DEP) issued
Residual Waste Management Regulations governing the generation and management of
non-hazardous residual waste, such as coal ash. Duquesne is assessing the sites
which it utilizes and has developed compliance strategies under review by the
DEP. Capital compliance costs of $3.0 million were incurred by Duquesne in 1995
to comply with these DEP regulations; on the basis of information currently
available, an additional $2.5 million will be incurred in 1996. The expected
additional capital cost of compliance through the year 2000 is estimated, based
on current information, to be approximately $25 million. This estimate is
subject to the results of ground water assessments and DEP 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.
O. Quarterly Financial Information (Unaudited)
Summary of Selected Quarterly Financial Data (Thousands of Dollars)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
[The quarterly data reflect seasonal weather variations in Duquesne's service territory.]
- ---------------------------------------------------------------------------------------------------------
1995 First Quarter Second Quarter Third Quarter Fourth Quarter
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operating Revenues (a) $286,616 $274,669 $337,156 $281,343
Operating Income (a) 57,542 55,705 76,001 52,351
Net Income 33,371 32,441 52,787 32,471
- ---------------------------------------------------------------------------------------------------------
1994
- ---------------------------------------------------------------------------------------------------------
Operating Revenues (a) $293,145 $281,054 $319,781 $274,644
Operating Income (a) 60,345 54,373 71,670 50,512
Net Income 35,492 30,556 44,876 36,525
=========================================================================================================
</TABLE>
(a) Restated to conform with presentations adopted during 1995.
------------------
Except for historical information contained herein, the matters discussed in
this Annual Report on Form 10-K are forward-looking statements that involve
risks and uncertainties including, but not limited to, economic, competitive,
governmental and technological factors affecting Duquesne's operations, markets,
products, services and prices, and other factors discussed in Duquesne's filings
with the Securities and Exchange Commission.
62
<PAGE>
SELECTED FINANCIAL DATA
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Amounts in Thousands of Dollars 1995 1994 1993 1992 1991 1990
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT ITEMS
Total operating revenues $1,179,784 $1,168,624 $1,160,685 $1,150,380 $1,173,105 $1,115,360
Operating income $ 241,599 $ 236,900 $ 237,897 $ 257,119 $ 268,666 $ 269,396
Net income $ 151,070 $ 147,449 $ 147,362 $ 149,768 $ 143,133 $ 135,456
Earnings for common stock $ 145,750 $ 141,403 $ 138,174 $ 140,357 $ 132,332 $ 121,410
- -----------------------------------------------------------------------------------------------------------------
BALANCE SHEET ITEMS
Property, plant and equipment-net $2,978,903 $3,068,519 $3,123,948 $3,018,641 $3,037,454 $3,042,920
Total assets $4,067,665 $4,149,867 $4,388,103 $3,718,092 $3,802,626 $3,794,313
- -----------------------------------------------------------------------------------------------------------------
Capitalization:
Common stockholder's equity $1,131,334 $1,115,512 $1,100,671 $1,107,609 $1,064,104 $1,035,059
Non-redeemable preferred and
preference stock 70,966 95,345 124,736 123,430 121,906 151,346
Redeemable preferred and
preference stock -- -- 8,392 8,579 15,437 37,747
Long-term debt 1,322,531 1,368,930 1,416,705 1,413,001 1,420,726 1,501,295
- -----------------------------------------------------------------------------------------------------------------
Total capitalization $2,524,831 $2,579,787 $2,650,504 $2,652,619 $2,622,173 $2,725,447
=================================================================================================================
</TABLE>
63
<PAGE>
EXHIBIT 4.4I
CONFORMED COPY
--------------
- --------------------------------------------------------------------------------
DUQUESNE LIGHT COMPANY
TO
MELLON BANK, N.A.
Trustee
---------------------
Supplemental Indenture No. 10
Dated March 22, 1995
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. 10, dated March 22, 1995, 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. 10 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. 10.
NOW, THEREFORE, THIS SUPPLEMENTAL INDENTURE NO. 10 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. 10 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. 10;
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. 10 is a supplement to the Mortgage. As supplemented by this Supplemental
Indenture No. 10, the Mortgage is in all respects ratified, approved and
confirmed, and the Mortgage and this Supplemental Indenture No. 10 shall
together constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have caused this Supplemental Indenture No. 10
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
Senior Vice President
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/ Kent Christman
- --------------------------------
Authorized Officer
- 4 -
<PAGE>
COMMONWEALTH OF PENNSYLVANIA )
) ss.:
COUNTY OF ALLEGHENY )
On the 22nd day of March, 1995, before me personally came Gary L.
Schwass, to me known, who, being by me duly sworn, did depose and say that he is
the Senior Vice President 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 22nd day of March, 1995, 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/ Judith A. Hyde
-----------------------------
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/ Kent Christman
--------------------------------------------
Authorized Signatory of Mellon Bank, N.A.
March 22, 1995
- 6 -
<PAGE>
RECORDING INFORMATION
Allegheny County, Pennsylvania
Office of Recorder of Deeds
Recorded March 24, 1995
Mortgage Book Volume 14817, page 129
Beaver County, Pennsylvania
Office of Recorder of Deeds
Recorded March 24, 1995
Mortgage Book Volume 1360, page 654
Greene County, Pennsylvania
Office of Recorder of Deeds
Recorded March 24, 1995
Mortgage Book Volume 139, page 795
Washington County, Pennsylvania
Office of Recorder of Deeds
Recorded March 24, 1995
Mortgage Book Volume 2665, page 189
Westmoreland County, Pennsylvania
Office of Recorder of Deeds
Recorded March 24, 1995
Mortgage Book Volume 3545, page 622
Belmont County, Ohio
Office of Recorder
Received March 30, 1995
Recorded March 31, 1995
Mortgage Book Volume 632, page 823
Columbiana County, Ohio
Office of Recorder
Recorded March 30, 1995
Official Records Volume 470, page 924
Jefferson County, Ohio
Office of Recorder
Received March 30, 1995
Recorded March 31, 1995
Official Records Volume 160, page 453
- 7 -
<PAGE>
Lake County, Ohio
Office of Recorder
Recorded March 31, 1995
Official Records Volume 1102 page 333
Monroe County, Ohio
Office of Recorder
Received March 30, 1995
Recorded March 30, 1995
Official Records Volume 12, page 103
Hancock County, West Virginia
Office of Clerk of County Commission
Recorded March 30, 1995
Deed of Trust Book 325, page 407
Monongalia County, West Virginia
Office of Clerk of County Commission
Recorded March 24, 1995
Deed of Trust Book 774, page 10
- 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 Pennsylvania Power
Company, The Cleveland Electric Illuminating Company, Ohio Edison Company
and The Toledo Edison Company in a parcel of land situate in the Borough
of Shippingport. Conveyed by Phillip Assini and Olga Assini, husband and
wife, to Duquesne Light Company, et al. Deed dated October 6, 1994.
Deed Book Volume 1618, page 0578. Tax parcel I.D. No. 50-181-0217.
(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 Frank Ambrose and Norma J. Ambrose, husband and
wife, to Duquesne Light Company, et al. Deed dated December 20, 1994.
Deed Book Volume 1628, page 0582. Tax parcel I.D. No. 62-190-0120.
(Bruce Mansfield Power Station)
(009)
A-1
<PAGE>
Exhibit 4.4II
CONFORMED COPY
=======================================================================
DUQUESNE LIGHT COMPANY
TO
MELLON BANK, N.A.
TRUSTEE
--------------------
SUPPLEMENTAL INDENTURE NO. 11
Dated as of June 1, 1995
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, Series I,
limited in aggregate principal amount to $923,000,000
=======================================================================
<PAGE>
SUPPLEMENTAL INDENTURE No. 11, dated as of June 1, 1995, 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. 11 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.
The Company desires to establish a series of Securities to be
designated "First Collateral Trust Bonds, Series I" to be limited in
aggregate principal amount (except as contemplated in Section 301(b) of
the Original Indenture) to $923,000,000, such series of Securities to be
hereinafter sometimes called "Series No. 8."
The Company has duly authorized the execution and delivery of this
Supplemental Indenture No. 11 to establish the Securities of Series No.
8 and has duly authorized the issuance of such Securities; and all acts
necessary to make this Supplemental Indenture No. 11 a valid agreement
of the Company, and to make the Securities of Series No. 8 valid
obligations of the Company, have been performed.
NOW, THEREFORE, THIS SUPPLEMENTAL INDENTURE NO. 11 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
<PAGE>
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 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. 11 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. 11;
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;
<PAGE>
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 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
EIGHTH SERIES OF SECURITIES
There is hereby created a series of Securities designated "First
Collateral Trust Bonds, Series I" and limited in aggregate principal
amount (except as contemplated in Section 301(b) of the Original
Indenture) to $923,000,000. The form and terms of the Securities of
Series No. 8 shall be established in an Officer's Certificate.
ARTICLE TWO
MISCELLANEOUS PROVISIONS
This Supplemental Indenture No. 11 is a supplement to the Mortgage.
As supplemented by this Supplemental Indenture No. 11, the Mortgage is
in all respects ratified, approved and confirmed, and the Mortgage and
this Supplemental Indenture No. 11 shall together constitute one and the
same instrument.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Supplemental Indenture No. 11 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
By: /s/ Gary L. Schwass
------------------------------
Senior Vice President
and Chief Financial Officer
Attest:
/s/ Diane S. Eismont
------------------------
Secretary
MELLON BANK, N.A., Trustee
By: /s/ J.H. McAnulty
-----------------------------
Vice President
Attest:
/s/ Kent Christman
------------------------
Authorized Officer
<PAGE>
COMMONWEALTH OF PENNSYLVANIA )
) ss.:
COUNTY OF ALLEGHENY )
On the 16th day of June, 1995, before me personally came Gary
L. Schwass, to me known, who, being by me duly sworn, did depose and say
that he is the Senior Vice President 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 19th day of June, 1995, 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/ Judith A. Hyde
------------------------------
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/ Kent Christman
-----------------------------------------
Authorized Signatory of Mellon Bank, N.A.
June 16, 1995
<PAGE>
Schedule A
Supplemental Securities of Series
Indenture No. Dated as of Series No. Designation
------------ ----------- ------------- ------------
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,
Pollution 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,
Pollution Control
Series F
7 August 1, 1993 6 First Collateral
Trust Bonds,
Pollution Control
Series G
8 March 21, 1994 None None
9 October 1, 1994 7 First Collateral
Trust Bonds,
Pollution Control
Series H
10 March 22, 1995 None None
(table con't)
Principal Amount
Supplemental
Indenture No. Authorized Issued(1) Outstanding(1)
------------- ---------- --------- --------------
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
9 $75,500,000 $75,500,000 $75,500,000
10 None None None
--------------------------
(1) As of June 1, 1995
<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 Mary Kathryn
McNary, a single woman, to Duquesne Light Company, et al. Deed
dated March 14, 1995. Deed Book Volume 1640, page 437. Tax
Parcel I.D. Nos. 62-180-0111-002 and 62-180-0111-003. (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 Ann A. Hobbs, a
single woman, to Duquesne Light Company, et al. Deed dated March
30, 1995. Deed Book Volume 1643, page 740. Tax Parcel I.D. No.
62-190-0104. (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 Mary E. Walker and
Ralph James Walker, her husband, to Duquesne Light Company, et
al. Deed dated March 28, 1995. Deed Book Volume 1643, page 745.
Tax Parcel I.D. No. 62-190-0104. (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 Richard L. Hobbs
and Diana G. Harris Hobbs, husband and wife, to Duquesne Light
Company, et al. Deed dated April 4, 1995. Deed Book Volume
1643, page 750. Tax Parcel I.D. No. 62-190-0104. (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 James R. Palmer
and Barbara R. Palmer, husband and wife, to Duquesne Light
Company, et al. Deed dated April 3, 1995. Deed Book Volume
1643, page 755. Tax Parcel I.D. No. 62-190-0104. (Bruce
Mansfield Power Station)
<PAGE>
RECORDING INFORMATION
Allegheny County, Pennsylvania
Office of Recorder of Deeds
Recorded June 21, 1995
Mortgage Book Volume 14998, page 578
Beaver County, Pennsylvania
Office of Recorder of Deeds
Recorded June 20, 1995
Mortgage Book Volume 1373, page 167
Greene County, Pennsylvania
Office of Recorder of Deeds
Recorded June 20, 1995
Mortgage Book Volume 142, page 936
Washington County, Pennsylvania
Office of Recorder of Deeds
Recorded June 20, 1995
Mortgage Book Volume 2706, page 126
Westmoreland County, Pennsylvania
Office of Recorder of Deeds
Recorded June 20, 1995
Mortgage Book Volume 3591, page 546
Belmont County, Ohio
Office of Recorder
Received June 20, 1995
Recorded June 21, 1995
Mortgage Book Volume 639, page 185
Columbiana County, Ohio
Office of Recorder
Recorded June 20, 1995
Official Records Volume 482, page 310
Jefferson County, Ohio
Office of Recorder
Received June 20, 1995
Recorded June 21, 1995
Official Records Volume 166, page 802
Lake County, Ohio
Office of Recorder
Recorded June 21, 1995
Official Records Volume 1128, page 464
Monroe County, Ohio
Office of Recorder
Received June 20, 1995
Recorded June 20, 1995
Official Records Volume 14, page 122
Hancock County, West Virginia
Office of Clerk of County Commission
Recorded June 21, 1995
Deed of Trust Book 327, page 625
<PAGE>
Monongalia County, West Virginia
Office of Clerk of County Commission
Recorded June 21, 1995
Deed of Trust Book 782, page 464
<PAGE>
Exhibit 4.4III
CONFORMED COPY
=======================================================================
DUQUESNE LIGHT COMPANY
TO
MELLON BANK, N.A.
TRUSTEE
--------------------------
SUPPLEMENTAL INDENTURE NO. 12
Dated as of September 1, 1995
Supplemental to the Indenture of Mortgage
and Deed of Trust dated as of April 1, 1992
Establishing a series of Securities designated
First Mortgage Bonds, Series J,
limited in aggregate principal amount to $685,000,000
=======================================================================
<PAGE>
SUPPLEMENTAL INDENTURE NO. 12, dated as of September 1, 1995,
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. 12 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.
The Company desires to establish a series of Securities to be
designated "First Mortgage Bonds, Series J" to be limited in aggregate
principal amount (except as contemplated in Section 301(b) of the
Original Indenture) to $685,000,000, such series of Securities to be
hereinafter sometimes called "Series No. 9."
The Company has duly authorized the execution and delivery of this
Supplemental Indenture No. 12 to establish the Securities of Series No.
9 and has duly authorized the issuance of such Securities; and all acts
necessary to make this Supplemental Indenture No. 12 a valid agreement
of the Company, and to make the Securities of Series No. 9 valid
obligations of the Company, have been performed.
NOW, THEREFORE, THIS SUPPLEMENTAL INDENTURE NO. 12 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
<PAGE>
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
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. 12 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. 12;
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 and subject also, as to
any property acquired by the Company after the date of execution and
<PAGE>
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 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
NINTH SERIES OF SECURITIES
There is hereby created a series of Securities designated "First
Mortgage Bonds, Series J" and limited in aggregate principal amount
(except as contemplated in Section 301(b) of the Original Indenture) to
$685,000,000. The form and terms of the Securities of Series No. 9
shall be established in or pursuant to an Officer's Certificate.
ARTICLE TWO
MISCELLANEOUS PROVISIONS
This Supplemental Indenture No. 12 is a supplement to the Mortgage.
As supplemented by this Supplemental Indenture No. 12, the Mortgage is
in all respects ratified, approved and confirmed, and the Mortgage and
this Supplemental Indenture No. 12 shall together constitute one and the
same instrument.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Supplemental Indenture No. 12 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
By: /s/ Gary L. Schwass
----------------------------
Senior Vice President
and Chief Financial Officer
Attest:
/s/ Joan S. Senchyshyn
----------------------------
Secretary
MELLON BANK, N.A., Trustee
By: /s/ J. H. McAnulty
----------------------------
Vice President
Attest:
/s/ Kent Christman
---------------------------
Authorized Officer
<PAGE>
COMMONWEALTH OF PENNSYLVANIA )
) ss.:
COUNTY OF ALLEGHENY )
On the 11th day of September, 1995, before me personally came
Gary L. Schwass, to me known, who, being by me duly sworn, did depose
and say that he is the Senior Vice President 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 11th day of September, 1995, 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/ Judith A. Hyde
-----------------------------
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/ Kent Christman
-----------------------------------------
Authorized Signatory of Mellon Bank, N.A.
September 11, 1995
<PAGE>
SCHEDULE A
Supplemental Securities of Series
Indenture No. Dated as of Series No. Designation
------------ ----------- ------------ ------------
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,
Pollution 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,
Pollution Control
Series F
7 August 1, 1993 6 First Collateral
Trust Bonds,
Pollution Control
Series G
8 March 21, 1994 None None
9 October 1, 1994 7 First Collateral
Trust Bonds,
Pollution Control
Series H
10 March 22, 1995 None None
11 June 1, 1995 8 First Collateral
Trust Bonds,
Series I
(table con't)
Princial Amount
Supplemental
Indenture No. Authorized Issued(1) Outstanding(1)
------------- ---------- --------- --------------
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
9 $75,500,000 $75,500,000 $75,500,000
10 None None None
11 $923,000,000 $923,000,000 $90,000,000
--------------------------
(1) As of June 1, 1995
<PAGE>
SCHEDULE B
NONE
<PAGE>
RECORDING INFORMATION
Allegheny County, Pennsylvania
Office of Recorder of Deeds
Recorded September 11, 1995
Mortgage Book Volume 15174, page 234
Beaver County, Pennsylvania
Office of Recorder of Deeds
Recorded September 11, 1995
Mortgage Book Volume 1386, page 419
Greene County, Pennsylvania
Office of Recorder of Deeds
Recorded September 12, 1995
Mortgage Book Volume 146, page 131
Washington County, Pennsylvania
Office of Recorder of Deeds
Recorded September 12, 1995
Mortgage Book Volume 2754, page 76
Westmoreland County, Pennsylvania
Office of Recorder of Deeds
Recorded September 12, 1995
Mortgage Book Volume 3641, page 314
Belmont County, Ohio
Office of Recorder
Received September 11, 1995
Recorded September 12, 1995
Mortgage Book Volume 643, page 172
Columbiana County, Ohio
Office of Recorder
Recorded September 12, 1995
Official Records Volume 494, page 287
Jefferson County, Ohio
Office of Recorder
Received September 11, 1995
Recorded September 12, 1995
Official Records Volume 173, page 814
Lake County, Ohio
Office of Recorder
Recorded September 12, 1995
Official Records Volume 1156, page 547
Monroe County, Ohio
Office of Recorder
Received September 11, 1995
Recorded September 11, 1995
Official Records Volume 15, page 759
<PAGE>
Hancock County, West Virginia
Office of Clerk of County Commission
Recorded September 11, 1995
Deed of Trust Book 330, page 112
Monongalia County, West Virginia
Office of Clerk of County Commission
Recorded September 12, 1995
Deed of Trust Book 790, page 345
<PAGE>
EXHIBIT 10.17
--------------------------------------------
FORT MARTIN POWER STATION
ASSET PURCHASE AGREEMENT
BETWEEN
DUQUESNE LIGHT COMPANY
AND
AYP CAPITAL, INC.
--------------------------------------------
Dated as of November 28, 1995
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I DEFINITIONS................................................................ 2
ARTICLE II PURCHASED ASSETS........................................................... 5
Section 2.1 Purchased Assets.................................................... 5
ARTICLE III PURCHASE PRICE............................................................. 5
Section 3.1 Purchase Price...................................................... 5
Section 3.2 Payment of Purchase Price........................................... 5
Section 3.3 Assumption of Liabilities by Buyer.................................. 6
Section 3.4 Liabilities Not Assumed by Buyer.................................... 6
ARTICLE IV CLOSING.................................................................... 7
Section 4.1 Closing Date and Time............................................... 7
Section 4.2 Deliveries at the Closing........................................... 7
ARTICLE V REPRESENTATIONS AND WARRANTIES OF SELLER................................... 8
Section 5.1 Organization and Standing........................................... 8
Section 5.2 Authority........................................................... 9
Section 5.3 Title to Purchased Assets........................................... 9
Section 5.4 Compliance with Applicable Laws..................................... 9
Section 5.5 Taxes, Etc.......................................................... 12
Section 5.6 Agreements, Plans, Arrangements, Etc................................ 13
Section 5.7 Litigation.......................................................... 13
Section 5.8 Insurance Policies.................................................. 14
Section 5.9 Brokers............................................................. 14
Section 5.10 Copies of Documents................................................. 15
Section 5.11 Supplements to Disclosure Schedule.................................. 15
ARTICLE VI REPRESENTATIONS AND WARRANTIES OF BUYER.................................... 16
Section 6.1 Organization and Standing........................................... 16
Section 6.2 Authority........................................................... 16
Section 6.3 Compliance with Applicable Laws..................................... 17
Section 6.4 Brokers............................................................. 18
Section 6.5 As Is............................................................... 18
Section 6.6 Supplements to the Disclosure Schedule.............................. 19
ARTICLE VII COVENANTS.................................................................. 19
Section 7.1 Certain Covenants of Seller Prior to
Closing........................................................... 19
Section 7.2 Access to Properties, Books and Records............................. 20
Section 7.3 Seller's Permits Consents and
Governmental and Regulatory Approvals............................. 21
Section 7.4 Seller's Taxes...................................................... 22
Section 7.5 Buyer's Permits, Consents and
Governmental and Regulatory Approvals............................. 22
Section 7.6 Seller's Best Efforts............................................... 22
Section 7.7 Buyer's Best Efforts................................................ 23
Section 7.8 Notification of Breach.............................................. 23
Section 7.9 Further Encumbrances................................................ 23
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
-----------------
Page
----
<S> <C>
ARTICLE VIII CONDITIONS TO OBLIGATIONS OF SELLER........................................ 23
Section 8.1 Compliance with Agreement........................................... 24
Section 8.2 Representations and Warranties...................................... 24
Section 8.3 Certificate of Buyer................................................ 24
Section 8.4 Consents and Approvals.............................................. 24
Section 8.5 Opinion of Counsel.................................................. 25
Section 8.6 Adverse Proceedings................................................. 25
ARTICLE IX CONDITIONS TO OBLIGATIONS OF BUYER......................................... 25
Section 9.1 Compliance with Agreement........................................... 25
Section 9.2 Representations and Warranties...................................... 26
Section 9.3 Certificate of Buyer................................................ 26
Section 9.4 Consents and Approvals.............................................. 26
Section 9.5 Opinion of Counsel.................................................. 26
Section 9.6 Adverse Proceedings................................................. 27
ARTICLE X TERMINATION................................................................ 27
Section 10.1 Termination......................................................... 27
ARTICLE XI INDEMNIFICATION............................................................ 29
Section 11.1 Indemnification by Buyer............................................ 29
Section 11.2 Indemnification by Seller........................................... 29
Section 11.3 Procedure for Indemnification with
Respect to Third-Party Claims..................................... 30
ARTICLE XII GENERAL PROVISIONS......................................................... 31
Section 12.1 Notices............................................................. 31
Section 12.2 Entire Agreement.................................................... 32
Section 12.3 Severability........................................................ 32
Section 12.4 Waivers and Amendments; Non-Contractual
Remedies; Preservation of Remedies................................ 33
Section 12.5 Governing Law....................................................... 33
Section 12.6 Survival of Representations and
Warranties........................................................ 33
Section 12.7 Binding Effect; Assignment.......................................... 34
Section 12.8 No Third Party Beneficiaries........................................ 34
Section 12.9 Counterparts........................................................ 35
Section 12.10 Exhibits and Schedules.............................................. 35
Section 12.11 Headings............................................................ 35
Section 12.12 Expenses............................................................ 35
Section 12.13 Further Action...................................................... 36
</TABLE>
-ii-
<PAGE>
Exhibits
Exhibit A Assumption Agreement
Exhibit B Deed
Exhibit C Form of Bill of Sale
Exhibit D Opinion of Seller's Counsel
Exhibit E Opinion of Buyer's Counsel
Exhibit E-1 Opinion of Buyer's Corporate Counsel
Schedules
Schedule A-1 Description of Unit No. 1
Schedule A-2 Description of Unit No. 1 Site
Disclosure Schedule
Seller
Section 2.1 Purchased Assets
Section 3.3 Assumed Liabilities
Section 5.4(b) Consents; Compliance with Applicable Laws
Section 5.4(c) Environmental
Section 5.4(d) Permits
Section 5.6 Contracts
Section 5.7 Litigation
Section 5.8 Insurance
Buyer
Section 6.3(d) Required Regulatory Approvals
Section 6.3(d) Litigation
-iii-
<PAGE>
ASSET PURCHASE AGREEMENT, dated as of November 28, 1995 (the
"Agreement") by and between DUQUESNE LIGHT COMPANY, a Pennsylvania corporation
("Duquesne" or "Seller") and AYP CAPITAL, INC., a Delaware corporation (together
with any majority owned subsidiary to which Buyer may assign its rights
hereunder, collectively, "Buyer").
W I T N E S S E T H:
-------------------
WHEREAS, Duquesne is a public utility company engaged in the
generation, transmission, distribution and sale of electric energy in and around
Pittsburgh, Pennsylvania, and is a wholly owned subsidiary of DQE;
WHEREAS, Buyer is a wholly-owned subsidiary of Allegheny Power System,
Inc.;
WHEREAS, Duquesne is the owner of a 50% undivided interest in Unit No.
1 of the Fort Martin Power Station, a steam-electric generating unit located on
the Monongahela River between Morgantown, West Virginia and Point Marion,
Pennsylvania (as hereinafter more specifically defined, "Unit No. 1");
WHEREAS, the Seller wishes to sell and transfer to Buyer and Buyer
wishes to purchase and acquire all of Seller's ownership interest in Unit No. 1.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements herein contained, the parties hereto agree as follows:
<PAGE>
ARTICLE I
DEFINITIONS
All capitalized terms used herein and not otherwise defined shall have
the respective meanings set forth below:
"Assumed Liabilities" shall have the meaning given to that term in
-------------------
Section 3.3, hereof.
"Closing" and "Closing Date" shall have the meanings given to those
------- ------------
terms in Section 4.1 hereof.
"Contract" means any contract, agreement, purchase order, lease,
--------
indenture, mortgage, loan agreement, commitment, undertaking or arrangement of
any kind.
"Encumbrances" means all liens, encumbrances, security interests,
------------
pledges, licenses, easements, rights-of-way, covenants, conditions,
restrictions, options and other claims, interests or rights whatsoever.
"FERC" means the Federal Energy Regulatory Commission or any successor
----
agency thereto.
"Governmental Authority" shall mean any federal, state, local or
----------------------
foreign court or governmental or regulatory agency, authority or body.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act
-------
of 1976.
"Insurance Requirements" means (a) property insurance covering
----------------------
physical loss or damage to the Purchased Assets in amounts not less than the
actual replacement value from time to time of Unit No. 1 and any items of
personal property comprising the Purchased Assets and (b) public liability
insurance covering
-2-
<PAGE>
personal injury, bodily injury, death and property damage liability for claims
arising out of the ownership, maintenance, condition or use of the Purchased
Assets, in each case with reputable insurance carriers, in such form and amounts
and with such deductible, self-retention and other coverage provisions as are
consistent with prudent utility practice and usual for similar companies engaged
in such activities and owning and operating like properties.
"Losses" shall mean any and all liabilities, losses, damages, expenses
------
or diminutions in value of any kind or character (whether or not known or
asserted prior to the date hereof or the Closing Date), including, without
limitation, interest on any amount payable to a third party as a result of the
foregoing, liabilities on account of Taxes and fees required to be paid to
Governmental Authorities (including interest and penalties thereon) and any
legal or other expenses reasonably incurred in connection with investigating or
defending any claims or actions, whether or not resulting in any liability.
"Operating Agreement" means the Fort Martin Construction and Operating
-------------------
Agreement, dated April 30, 1965, by and among Duquesne, Monongahela Power
Company and The Potomac Edison Company with respect to the operation and
maintenance of Unit No. 1.
"PaPUC" means Pennsylvania Public Utility Commission or any successor
-----
agency thereto.
"Permit" means any permit, license, approval, consent, order or
------
authorization of any Governmental Authority.
-3-
<PAGE>
"Permitted Encumbrances" means (a) liens imposed by law in the
----------------------
ordinary course of business securing obligations which are not overdue, or, if
overdue, are being contested in good faith by appropriate proceedings, (b) liens
upon leases and contracts included in the Purchased Assets or upon property
subject to such leases and contracts granted by lessors or parties to such
contracts other than Seller, (c) mechanics', carriers', workers', repairmen's or
other like liens arising or incurred in the ordinary course of business, (d)
purchase money liens arising out of the purchase of products or services in the
ordinary course of business and consistent with past practices, (e) liens
securing Assumed Liabilities, and (f) other liens or encumbrances which in the
aggregate do not have a material adverse effect on the Purchased Assets, taken
as a whole.
"Purchase Price" shall have the meaning given to that term in Section
--------------
3.1 hereof.
"Purchased Assets" shall have the meaning given that term in Section
----------------
2.1 hereof.
"Retained Liabilities" shall have the meaning given to that term in
--------------------
Section 3.4 hereof.
"Taxes" shall have the meaning given to that term in Section 5.5
-----
hereof.
"Transmission Agreement" means the Transmission Agreement, dated March
----------------------
15, 1967 among Seller, Monongahela Power Company and West Penn Power Company.
"Unit No. 1" means the coal-fired steam-electric generating station
----------
located on the Unit No. 1 Site, together with
-4-
<PAGE>
the Unit No. 1 Site and all facilities, fixtures and structures and tangible or
intangible personal property used or to be used therewith or related thereto and
located on the Unit No. 1 Site, including but not limited to, the assets
described on Schedule A-I hereto.
"Unit No. 1 Site" means that parcel of real estate fully described on
---------------
Schedule A-2 hereto.
ARTICLE II
PURCHASED ASSETS
Section 2.1 Purchased Assets. Subject to the terms and
----------------
conditions hereof, at the Closing, for the Purchase Price provided in Section
3.1 hereof, Seller shall sell, convey, assign, transfer and deliver to Buyer,
and Buyer shall purchase all of Seller's right, title and interest in and to
Unit No. 1, including but not limited to, the assets and properties set forth in
Schedule 2.1 of the Disclosure Schedule attached hereto and made a part hereof
(the "Disclosure Schedule") (collectively, the "Purchased Assets").
ARTICLE III
PURCHASE PRICE
Section 3.1 Purchase Price. The aggregate Purchase Price to be
--------------
paid by Buyer for the Purchased Assets shall be equal to (a) $169,000,000.00
(the "Purchase Price") and (b) the assumption of liabilities as provided in
Section 3.3 hereof.
Section 3.2 Payment of Purchase Price. At the Closing, Buyer
-------------------------
shall pay the Purchase Price in cash by wire
-5-
<PAGE>
transfer of immediately available funds to such account or accounts as may be
designated by Seller in writing delivered to Buyer no less than two business
days prior to the Closing.
Section 3.3 Assumption of Liabilities by Buyer. At the Closing,
----------------------------------
Buyer shall execute and deliver to Seller an assumption agreement, substantially
in the form and on the terms of the Assumption Agreement attached hereto as
Exhibit A pursuant to which Buyer shall assume and agree to pay when due, to the
extent the same are unpaid, unperformed or undischarged on the Closing Date and
to perform and discharge, all expenses, exposures, obligations (contractual or
otherwise) or liabilities of Seller relating to the Purchased Assets (whether
absolute or contingent, liquidated or unliquidated, known or unknown, or
otherwise and whether or not required to be set out on a balance sheet) (a)
incurred, or arising from the ownership or operation of the Purchased Assets,
after the Closing or (b) incurred, or arising from the ownership or operation of
the Purchased Assets, prior to the Closing and specifically set forth in
Schedule 3.3 of the Disclosure Schedule (collectively, the "Assumed
Liabilities").
Section 3.4 Liabilities Not Assumed by Buyer. Notwithstanding
--------------------------------
anything to the contrary contained in this Agreement, except for the Assumed
Liabilities, Buyer shall not assume or become responsible for, and Seller shall
retain, any and all liabilities, expenses, exposures or obligations of any kind
of the Seller including any such liabilities, expenses,
-6-
<PAGE>
exposures or obligations that may give rise to Permitted Encumbrances,
(collectively, the "Retained Liabilities").
ARTICLE IV
CLOSING
Section 4.1 Closing Date and Time. Subject to the terms and
---------------------
conditions hereof, the Closing shall take place at the offices of LeBoeuf, Lamb,
Greene & MacRae, L.L.P., 125 West 55th Street, New York, New York 10019,
commencing at 10:00 a.m., local time, on 5th business day after the last of the
conditions contained in Articles 8 and 9 hereof has been satisfied or waived,
other than such conditions that by their terms must be satisfied on the date of
the Closing. At the Closing, Buyer and Seller shall deliver, or cause to be
delivered, to the other party, such certificates, receipts, or other documents
or instruments, in addition to those specifically provided for herein, as may
reasonably be requested by such other party. The date of the Closing is
referred to herein as the "Closing Date."
Section 4.2 Deliveries at the Closing. (a) At the Closing,
-------------------------
Seller shall deliver to Buyer (i) a West Virginia deed, in recordable form and
substantially in the form of Exhibit B attached hereto conveying to Buyer good
and marketable title free and clear of all Encumbrances whatsoever (other than
Permitted Encumbrances), (ii) one or more bills of sale in substantially the
form of Exhibit C attached hereto and transferring to Buyer good title to the
personal property portion of the Purchased Assets, free and clear of all
Encumbrances, (iii) an appropriate assignment or other instrument transferring
to Buyer the West
-7-
<PAGE>
Virginia Certificate of Public Convenience and Necessity relating to the
Purchased Assets and (iv) appropriate assignments or other instruments
transferring to Buyer each of the Operating Agreement and the Transmission
Agreement (v) such other executed instruments and documents, in form and
substance reasonably satisfactory to Buyer, as are required by the terms of this
Agreement to be delivered by Seller at the Closing or are necessary in the
reasonable discretion of Buyer in order effectively to vest in Buyer title to
all of the Purchased Assets.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to Buyer as follows:
Section 5.1 Organization and Standing. Seller is a corporation
-------------------------
duly organized, validly existing and in good standing under the laws of the
Commonwealth of Pennsylvania and has the requisite corporate power and authority
to own, lease and operate its properties and to carry on its business as such
business is now being conducted. Seller is duly qualified or licensed to do
business and in good standing in each jurisdiction in which the property owned,
operated or leased by it or the nature of the business conducted by it makes
such qualification or licensing necessary, except for such failures to be
qualified or to be in good standing, if any, which when taken together with all
such failures of Seller do not have a material adverse effect on the
-8-
<PAGE>
Seller and do not have an adverse effect on Seller's ability to enter into and
perform its obligations under this Agreement.
Section 5.2 Authority. Seller has all requisite corporate power
---------
and authority to execute and deliver this Agreement, to perform its respective
obligations hereunder and to consummate the transactions contemplated hereby.
The execution, delivery and performance of this Agreement by Seller and the
consummation of the transactions contemplated hereby have been duly and validly
authorized by all necessary corporate action on the part of Seller. This
Agreement has been duly executed and delivered by Seller and constitutes the
legal, valid and binding obligation of Seller, enforceable against Seller in
accordance with its terms.
Section 5.3 Title to Purchased Assets. On the Closing Date,
-------------------------
Seller will convey to Buyer good and marketable title to the Purchased Assets,
free and clear of any and all Encumbrances other than Permitted Encumbrances.
Section 5.4 Compliance with Applicable Laws.
-------------------------------
(a) Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will (with or without
notice or the passage of time, or both): (i) violate any provision of the
Articles of Incorporation or By-Laws of Seller; (ii) violate or result in a
default or breach under any material contract, agreement, indenture, mortgage or
other instrument to which Seller is a party or by which its properties or assets
are bound or subject; or (iii) subject to the obtaining of the required
regulatory
-9-
<PAGE>
approvals as set forth in Section 5.4(a) of the Disclosure Schedule, violate any
statute, law, judgment, decree, order, permit, license, regulation or rule of
any Governmental Authority to which Seller or any of its properties or assets,
including, without limitation, the Purchased Assets, are bound or subject.
(b) Except as set forth in Section 5.4(b) of the Disclosure Schedule,
to Seller's knowledge no Permit, consent, approval, order or authorization of,
or registration, declaration or filing with, any Governmental Authority is
required on the part of Seller in connection with the execution and delivery of
this Agreement or the consummation of the transactions contemplated hereby.
Except for violations (i) relating to the condition of the Purchased Assets or
the operation by Monongahela Power Company of Unit No. 1 and (ii) not known to
Seller, Seller is not in violation of any statute, law, judgment, decree, order,
permit, license, regulation or rule of any Governmental Authority or body
relating to or affecting the ownership, use or operation of the Purchased
Assets, other than such violations as would not, individually or in the
aggregate, give rise to material liability, adversely affect or interfere with
the ownership, use or operation of the Purchased Assets or adversely affect the
ability of Seller to execute and deliver this Agreement and consummate the
transactions contemplated hereby.
(c) Except as described in Section 5.4(c) of the Disclosure Schedule,
to Seller's knowledge, there has been no (i) storage, generation, manufacture,
refinement, transportation, production, treatment or disposal of Hazardous
Materials by
-10-
<PAGE>
Seller or, to the best knowledge of Seller, any other person, at Unit No. 1, or
at any location to which has been sent such Hazardous Materials of any kind,
directly or indirectly, in violation of any applicable law, statute, ordinance,
rule, regulation, order, judgment, decree, permit or license, or which would
require any remedial action, under any law, statute, ordinance, rule,
regulation, order, judgment, decree, permit or license regulating the disposal
of hazardous substances, or (ii) spill, discharge, leak, emission, ejection,
escape, dumping or any other release of any kind by Seller or, to Seller's best
knowledge, any other persons of any Hazardous Materials on or onto the Unit No.
1 Site or any adjacent property, or into the environment surrounding such site
of any Hazardous Materials. "Hazardous Materials" shall mean "hazardous
substances" as defined in the Comprehensive Environmental Response, Compensation
and Liability Act, as amended, "regulated substances" within the meaning of
Section 9001(2) of the Resource Conservation Recovery Act, as amended,
"hazardous waste" as defined in either the West Virginia Hazardous Waste
Management Act or the Pennsylvania Solid Waste Management Act, or any other
contaminants which, to Seller's best knowledge after due inquiry, are the
subject of liability under applicable West Virginia or Pennsylvania law relating
to protection of the environment.
(d) Except for Permits (y) relating to the operation of Unit No. 1 by
Monongahela Power Company and (z) not known to Seller, (i) Section 5.4(d) of the
Disclosure Schedule sets forth all Permits required to permit Seller to execute
and deliver this
-11-
<PAGE>
Agreement and consummate the transactions contemplated hereby or necessary for
the ownership and operation of the Purchased Assets, including, but not limited
to, Unit No. 1, for its intended purpose; (ii) except as set forth in Section
5.4(d) of the Disclosure Schedule, all of such Permits have been duly and
validly obtained, are in full force and effect and are sufficient for their
intended purposes; and (iii) each such Permit heretofore obtained will, if and
to the extent required for the ownership and operation of the Purchased Assets,
including, but not limited to, Unit No. 1, following the Closing, remain in full
force and effect from and after the Closing. Seller is not aware of any
threatened suspension or cancellation of any Permits.
Section 5.5 Taxes, Etc. Seller has and will have on or prior to
----------
the Closing Date properly prepared, executed and timely filed or caused to be
timely filed all federal, state, local and foreign tax returns for taxes,
assessments, fees and other governmental charges ("Taxes") applicable to it, the
nonpayment of which might result in an Encumbrance other than Permitted
Encumbrances on any Purchased Asset, and has paid and will have paid all such
taxes, assessments, fees, water and sewer rents and charges and other
governmental charges shown on said returns or by assessment or otherwise
required to be paid by it or on account of its properties and assets as of or
prior to the Closing Date. All of such returns are complete and accurate in all
respects and have been prepared in accordance with all applicable legal
requirements.
-12-
<PAGE>
Section 5.6 Agreements, Plans, Arrangements, Etc.
------------------------------------
Other than Contracts entered into by Monongahela Power Company,
operator of Unit No. 1, and the Contracts set forth in Section 5.6 of the
Disclosure Schedule, Seller is not party to any Contracts providing for the
acquisition by Seller of goods, services, materials or supplies in an amount of
$1,000,000 or more or obligating Seller to perform thereunder for a term of more
than five years and which in any way affects or relates to the Purchased Assets,
including, but not limited to, Unit No. 1.
Section 5.7 Litigation. Except as set forth in Section 5.7 of
----------
the Disclosure Schedule, to Seller's knowledge there is no claim, action, suit,
proceeding, arbitration, investigation or hearing or notice of hearing pending
or threatened before any Governmental Authority or private arbitration tribunal
against or relating to or affecting any of the Purchased Assets, whether on
account of the past or present use thereof, or the transactions contemplated by
this Agreement or otherwise. Except as disclosed in Section 5.7 of the
Disclosure Schedule, no facts are known to Seller which in Seller's reasonable
judgment would reasonably be expected to give rise to any such claim, action,
suit, proceeding, arbitration, investigation or hearing. Seller has not waived
any statute of limitations or other affirmative defense with respect to any of
the Contracts referred to above. Except as set forth in Section 5.7 of the
Disclosure Schedule, to the Seller's knowledge there is no continuing order,
injunction or decree of any Governmental Authority to which Seller is a party
relating to any
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<PAGE>
of the Purchased Assets, or to which any of the Purchased Assets is subject.
Section 5.8 Insurance Policies. Section 5.8 of the Disclosure
------------------
Schedule contains a list of all insurance policies and indemnity and surety
bonds maintained by Seller relating to the Purchased Assets or which, to
Seller's knowledge, are in effect with respect to the Purchased Assets. All
such insurance policies and bonds maintained by Seller are in full force and
effect and, to Seller's knowledge, all such policies and bonds not maintained by
Seller are also in full force and effect. Except as set forth in said Section
5.8, Seller has not received any notice of cancellation or material amendment of
any such insurance policy or bond and Seller is not in default under any such
policy or bond. No coverage under any such policies or bonds maintained by
Seller or, to Seller's knowledge, such policies and bonds not maintained by
Seller, is being disputed. All material claims under any such policies or bonds
maintained by Seller or, to Seller's knowledge, such policies and bonds not
maintained by Seller, have been filed in a timely fashion.
Section 5.9 Brokers. Neither Seller nor any officer, director
-------
or employee has employed any finder, broker, investment banker or similar agent
or other intermediary on behalf of Seller or incurred any brokerage, finders' or
investment banking fees or commissions in connection with the negotiation or
consummation of the transactions contemplated hereby.
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Section 5.10 Copies of Documents. (a) Seller has delivered to
-------------------
Buyer true and complete copies of each document required to be listed or
referred to in the Disclosure Schedule as of the date hereof and (b) Seller will
deliver to Buyer as soon as available and, in any event not later than 30 days
prior to the Closing Date, true and complete copies of each document required to
be listed or referred to in any amendment or supplement to the Disclosure
Schedule made pursuant to Section 5.11 hereof, in each case appropriately
identified with reference to the applicable section of the Disclosure Schedule.
Section 5.11 Supplements to Disclosure Schedule. The parties
----------------------------------
recognize that a substantial period of time will elapse between the execution
and delivery of this Agreement and the Closing Date. Accordingly, Seller may
from time to time supplement, amend or modify, as appropriate, the Disclosure
Schedule (a) to the extent necessary to reflect the due performance by Seller of
its covenants and agreements hereunder, (b) with respect to developments
occurring subsequent to the date hereof which, individually or in the aggregate,
do not materially change Seller's representations and warranties hereunder or
materially increase Buyer's liabilities or obligations with respect to its
acquisition of the Purchased Assets or (c) to the extent that Buyer shall give
its prior consent.
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ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller as follows:
Section 6.1 Organization and Standing. Buyer is a corporation
-------------------------
duly incorporated, validly existing and in good standing under the laws of the
State of Delaware and has the requisite corporate power and authority to own,
lease and operate its properties and carry on its business as currently being
conducted. Buyer is duly qualified or licensed to do business and in good
standing in each jurisdiction in which the property owned, operated or leased by
it or the nature of the business conducted by it makes such qualification or
licensing necessary, except for such failures to be qualified or to be in good
standing, if any, which when taken together with all such failures of Buyer do
not have a material adverse effect on Buyer.
Section 6.2 Authority. Buyer has all requisite corporate power
---------
and authority to execute and deliver this Agreement, to perform its respective
obligations hereunder and to consummate the transactions contemplated hereby by
Buyer. The execution, delivery and performance of this Agreement by Buyer and
the consummation of the transactions contemplated hereby have been duly and
validly authorized by all necessary corporate action on the part of Buyer. The
Agreement has been duly executed and delivered by Buyer and constitutes the
legal, valid and binding obligation of Buyer, enforceable against Buyer in
accordance with its terms.
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Section 6.3 Compliance with Applicable Laws.
-------------------------------
(a) Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will (with or without
notice or the passage of time, or both): (i) violate any provision of the
Articles of Incorporation or By-Laws of Buyer, (ii) violate or result in a
default or breach under any material contract, agreement, indenture, mortgage or
other instrument to which Buyer is a party or by which its properties or assets
are bound or subject, or (iii) subject to the obtaining of the required
regulatory approvals as set forth in Section 6.3(a) of the Disclosure Schedule
delivered in connection with the execution and delivery hereof, violate any
statute, law, judgment, decree, order, permit, license, regulation or rule of
any Governmental Authority to which Buyer or any of its properties or assets is
subject.
(b) Except as set forth in Section 6.3(a) of the Disclosure Schedule,
no consent, approval, order or authorization of or registration, declaration or
filing with, any Governmental Authority is required on the part of Buyer in
connection with the execution and delivery of this Agreement or the consummation
of the transactions contemplated hereby.
(c) Buyer is not in default under any material instrument, agreement,
indenture or other contract which default would have a material adverse effect
on Buyer's ability to consummate the transactions contemplated hereby.
(d) Except as set forth in Section 6.3(d) of the Disclosure Schedule,
there is no claim, action, suit, proceeding,
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arbitration, investigation or hearing or notice of hearing pending or threatened
before any court or Governmental Authority or private arbitration tribunal, to
which Buyer is a party which would materially adversely affect Buyer's ability
to consummate its purchase of the Purchased Assets as contemplated hereby.
Section 6.4 Brokers. Except for New Harbor Inc., whose fees
-------
will be paid by Buyer, neither Buyer nor any officer, director or employee of
Buyer has employed any finder, broker, investment banker or similar agent or
other intermediary on behalf of Buyer or incurred on behalf of Buyer any
liability for any brokerage, finders' or investment banking fees or commissions,
in connection with the negotiation or consummation of the transactions
contemplated hereby.
Section 6.5 As Is. Buyer agrees and acknowledges that,
-----
notwithstanding any other provision of this Agreement, it is acquiring and shall
accept the Purchased Assets "As Is" and "Where Is," in their present condition
(including, without limitation, their environmental condition), and subject to
wear, tear, natural deterioration, and all hazards, vandalism, casualty or
catastrophe and changes (if any) made or that may be made by Seller or any of
its agents, consultants or other representatives in accordance with the terms
hereof or with Buyer's approval, and any other changes that are not material;
provided, however, that Buyer's agreement set forth in this Section 6.5 shall
- -------- -------
not affect Seller's retention of Retained Liabilities as herein provided,
including without limitation environmental liabilities, liabilities for the
creation or release of hazardous substances,
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or Seller's liability in connection with the caustic induction incident that
occurred at Unit No. 1 in January, 1995.
Section 6.6 Supplements to the Disclosure Schedule. The parties
--------------------------------------
recognize that a substantial period of time will elapse between the execution
and delivery of this Agreement and the Closing Date. Accordingly, during such
period, Buyer may from time to time supplement, amend or modify its Disclosure
Schedule (a) with respect to developments occurring subsequent to the date
hereof which, individually or in the aggregate, do not materially change its
representations or warranties hereunder or materially increase Seller's
liabilities or obligations with respect to its sale to Buyer of the Purchased
Assets or (b) to the extent Seller shall give its prior consent.
ARTICLE VII
COVENANTS
Section 7.1 Certain Covenants of Seller Prior to Closing. From
--------------------------------------------
the date hereof through the Closing Date, Seller shall (a) conduct its business
in respect of the Purchased Assets in the usual, regular and ordinary course,
consistent with good utility practice, and will use reasonable efforts to
preserve intact the Purchased Assets, (b) not amend or propose to amend its
articles of incorporation or bylaws in any manner that would require further
authorization or approval by its board of directors or shareholders for the
consummation of the transactions contemplated hereby or which would place any
material restraints or material additional requirements on Seller
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in connection with the transactions contemplated hereby, and (c) not sell,
lease, encumber or otherwise dispose of, or agree to sell, lease, encumber or
otherwise dispose of, any of the Purchased Assets, and make reasonable efforts,
given its level of control and access to information regarding Unit No. 1 and
the other Purchased Assets, to
(x) maintain all properties necessary for the performance of its
obligations under this Agreement, whether owned or leased, in such condition as
is necessary to perform its obligations hereunder;
(y) duly comply in all material respects with all laws, statutes,
rules, regulations, orders, permits, judgments, decrees and licenses applicable
to the Purchased Assets; and
(z) continuously maintain third-party liability insurance in
accordance with the Insurance Requirements.
Section 7.2 Access to Properties, Books and Records.
---------------------------------------
Seller shall, at Buyer's request, afford or cause to be afforded to
the agents, attorneys, accountants and other authorized representatives of
Buyer, reasonable access during normal business hours to all employees,
properties, books and records relating to the Purchased Assets, and shall permit
such persons to make copies of such books and records. In particular, Seller
shall afford the Buyer and its authorized representatives reasonable access to
the real and tangible personal property included in the Purchased Assets for the
purpose of conducting investigations and examinations thereof, except where
contrary to law or contract and for ascertaining the condition thereof.
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Seller shall cooperate with Buyer and issue any consents and authorizations
reasonably requested by Buyer in connection with Buyer's examination of records
of Governmental Authorities pertaining to the real and personal property
included in the Purchased Assets. Buyer will treat, and shall cause all of its
agents, attorneys, accountants and other authorized representatives to treat,
all information obtained pursuant to this Section 7.2 designated as confidential
in accordance with Section 12.2 hereof.
Section 7.3 Seller's Permits Consents and Governmental and
----------------------------------------------
Regulatory Approvals. Seller will proceed promptly and diligently in seeking
- --------------------
and will use its reasonable best efforts to obtain on or before the Closing Date
all Permits necessary to the consummation by Seller of the transactions
contemplated by this Agreement including, without limitation, (a) all required
filings under the HSR Act and shall use its reasonable efforts, in good faith,
promptly to provide any additional information or documentating material that
may be requested by either the Federal Trade Commission or the Antitrust
Division of the Department of Justice pursuant to the HSR Act, except to the
extent that such request, in the opinion of Seller's counsel, is improper and
(b) any Permit, consent, approval, order, qualification or waiver as may be
necessary or desirable to permit the Closing and the consummation of the
transactions hereunder pursuant to the public utility or other laws or
regulations of the United States of America, the PaPUC or any other
jurisdiction, in each case to the extent applicable.
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<PAGE>
Section 7.4 Seller's Taxes. Seller will properly prepare,
--------------
execute and timely file or cause to be timely filed all federal, state, local
and foreign tax returns required to be filed by Seller in respect of Taxes
constituting Retained Liabilities and timely pay all such Taxes.
Section 7.5 Buyer's Permits, Consents and Governmental and
----------------------------------------------
Regulatory Approvals. Buyer will proceed promptly and diligently in seeking and
- --------------------
will use its reasonable best efforts to obtain on or before the Closing Date all
Permits necessary to the consummation by Buyer of the transactions contemplated
by this Agreement including, without limitation, (a) all required filings under
the HSR Act and shall use its reasonable efforts, in good faith, promptly to
provide any additional information or documentating material that may be
requested by either the Federal Trade Commission or the Antitrust Division of
the Department of Justice pursuant to the HSR Act, except to the extent that
such request, in the opinion of Buyer's counsel, is improper and (b) any Permit,
consent, approval, order, qualification or waiver as may be necessary or
desirable to permit the Closing and the consummation of the transactions
hereunder pursuant to the public utility or other laws or regulations of the
United States of America, the State of Pennsylvania or any other jurisdiction,
in each case to the extent applicable.
Section 7.6 Seller's Best Efforts. Without limiting any of its
---------------------
other obligations hereunder, Seller shall use its
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<PAGE>
reasonable best efforts to cause the satisfaction of the conditions to the
obligations of Buyer hereunder.
Section 7.7 Buyer's Best Efforts. Without limiting any of its
--------------------
other obligations hereunder, Buyer shall use its reasonable best efforts to
cause the satisfaction of the conditions to the obligations of Seller hereunder.
Section 7.8 Notification of Breach. Seller and Buyer each
----------------------
covenant and agree to provide written notification to each other promptly after
learning of any breach, violation or inaccuracy of any representation, warranty,
covenant or agreement made by them hereunder or upon the occurrence of any
termination event.
Section 7.9 Further Encumbrances. Seller will not grant, assign
--------------------
or convey any right or interest in any of the Purchased Assets or liens,
Encumbrances, leases, occupancy agreements, licenses or other interests in any
of the Purchased Assets without the express, prior written consent of Buyer and
any such Encumbrance granted absent such consent shall not be a permitted
Encumbrance hereunder.
ARTICLE VIII
CONDITIONS TO OBLIGATIONS OF SELLER
The obligations of Seller to sell Purchased Assets
hereunder are subject to the fulfillment by Buyer or waiver by Seller, on or
before the Closing Date, of each of the following conditions:
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Section 8.1 Compliance with Agreement. Buyer shall have
-------------------------
performed in all material respects all obligations which it is required to
perform on or before the Closing Date under this Agreement.
Section 8.2 Representations and Warranties. The representations
------------------------------
and warranties made by Buyer herein shall be true and correct in all material
respects on and as of the Closing Date as though such representations and
warranties were made on and as of such date, except that any such
representations and warranties that are given as of a particular date or period
prior to the date hereof shall be true as of such date or period.
Section 8.3 Certificate of Buyer. On the Closing Date, Buyer
--------------------
shall have delivered to Seller a certificate, duly executed by an executive
officer of Buyer, as to the fulfillment of the conditions set forth in Sections
8.1 and 8.2 hereof.
Section 8.4 Consents and Approvals. All authorizations,
----------------------
consents, approvals, filings and registrations of or with Governmental
Authorities required to be obtained or made by Buyer or Seller prior to the
consummation of the transactions contemplated hereby, including without
limitation, those authorizations, consents, approvals, filings and registrations
specifically referred to in Sections 5.4(a) and 6.3(a) of the Disclosure
Schedule, shall have been obtained, approved or permitted to go into effect and
shall be in effect on terms that are not materially adverse to Seller, and the
waiting period under the HSR Act, if applicable, shall have expired or been
terminated.
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<PAGE>
Section 8.5 Opinion of Counsel. Seller shall have received the
------------------
written opinions of Jones, Day, Reavis & Pogue and corporate counsel for Buyer,
each dated and delivered as of the Closing Date to the effect set forth in
Exhibits D and D-1 hereto.
Section 8.6 Adverse Proceedings. No preliminary or permanent
-------------------
injunction or other order or decree by any federal or state court which prevents
the consummation of the transactions contemplated by this Agreement shall have
been issued and remain in effect (Seller agrees to use its reasonable best
efforts to have any such injunction, order or decree lifted) and no statute,
rule or regulation shall have been enacted by any state or federal government or
governmental agency in the United States which prohibits the consummation of the
transactions contemplated by this Agreement.
ARTICLE IX
CONDITIONS TO OBLIGATIONS OF BUYER
The obligations of Buyer to purchase the Purchased Assets and assume
liabilities hereunder are subject to the fulfillment by Seller or waiver by
Buyer of each of the following conditions:
Section 9.1 Compliance with Agreement. Seller shall have
-------------------------
performed in all material respects all obligations which it is required to
perform on or before the Closing Date under this Agreement.
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<PAGE>
Section 9.2 Representations and Warranties. The representations
------------------------------
and warranties made by Seller herein shall be true and correct in all material
respects on and as of the Closing Date as though such representations and
warranties were made on and as of such date, except that any such
representations and warranties that are given as of a particular date or period
prior to the date hereof shall be true as of such date or period.
Section 9.3 Certificate of Buyer. On the Closing Date, Seller
--------------------
shall have delivered to Buyer a certificate, duly executed by an executive
officer of Seller, as to the fulfillment of the conditions set forth in Sections
9.1 and 9.2 hereof.
Section 9.4 Consents and Approvals. All authorizations,
----------------------
consents, approvals, filings and registrations of or with Governmental
Authorities required to be obtained or made by Seller or Buyer prior to the
consummation of the transactions contemplated hereby, including without
limitation, those authorizations, consents, approvals, filings and registrations
specifically referred to in Sections 5.4(a) and 6.3(a) of the Disclosure
Schedule, shall have been obtained, approved or permitted to go into effect and
shall be in effect on terms that are not materially adverse to Buyer (assuming
for purposes of determining materiality that Buyer had already acquired the
Purchased Assets), and the waiting period under the HSR Act, if applicable,
shall have expired or been terminated.
Section 9.5 Opinion of Counsel. Buyer shall have received the
------------------
written opinion of Larry R. Crayne, Esq., counsel
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<PAGE>
for Seller, dated and delivered as of the Closing Date to the effect set forth
in Exhibit E hereto.
Section 9.6 Adverse Proceedings. No preliminary or permanent
-------------------
injunction or other order or decree by any federal or state court which prevents
the consummation of the transactions contemplated by this Agreement shall have
been issued and remain in effect (Buyer agrees to use its reasonable best
efforts to have any such injunction, order or decree lifted) and no statute,
rule or regulation shall have been enacted, by any state or federal government
or governmental agency in the United States which prohibits the consummation of
the transactions contemplated by this Agreement. Notwithstanding anything to
the contrary set forth in this Agreement, in no event will Buyer or any of its
affiliates be required by the terms hereof to divest any assets which are, in
the commercially reasonable judgment of Buyer or its parent, material to the
Allegheny Power System in terms of either dollar amount or their significance to
the operation of Buyer (assuming for purposes of determining materiality that
Buyer had already acquired the Purchased Assets) or any of Monongahela Power
Company, The Potomac Edison Company or West Penn Power Company.
ARTICLE X
TERMINATION
Section 10.1 Termination. This Agreement may be terminated:
-----------
(a) by mutual written consent of Buyer and Seller; or
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(b) by Buyer or Seller if the required governmental or regulatory
approvals shall not have been obtained by December 31, 1996; or
(c) by Buyer, if Seller shall have breached any of its obligations
hereunder in any material respect and such breach shall not have been cured
within 30 calendar days following the delivery of written notice to Seller of
such breach; or
(d) by Seller, if Buyer shall have breached any of its obligations
hereunder in any material respect and such breach shall not have been cured
within 30 days following the delivery of written notice to Buyer of such breach;
or
(e) by either Buyer or Seller, by written notice to the other party if
the Closing shall not have occurred on or prior to December 31, 1996; provided,
--------
however, that the right to terminate this Agreement under this Section shall not
- -------
be available to any party whose failure to fulfill or perform any obligation
under this Agreement has been the cause of, or resulted in, the failure of the
Closing to occur on or before such date; and provided, further, if either Buyer
or Seller shall decide to terminate this Agreement pursuant to this Section
10.1, such party shall promptly give written notice to the other party to this
Agreement of such decision. In the event of a termination pursuant to this
Section 10.1, the parties hereto shall be released from all liabilities and
obligations arising under this Agreement (except for provisions relating to
confidentiality and payment of expenses) with respect to the
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<PAGE>
matters contemplated by this Agreement, other than for damages to the extent
arising from a prior breach of this Agreement.
ARTICLE XI
INDEMNIFICATION
Section 11.1 Indemnification by Buyer. Buyer hereby agrees to
------------------------
indemnify, defend and hold harmless Seller and its affiliates, officers and
employees ("Seller's Indemnified Parties") from, against, for and in respect of
any and all Losses suffered, sustained, incurred or required to be paid by any
of Seller's Indemnified Parties that arose out of, resulted from or relate
primarily to (a) any Assumed Liabilities, (b) any untrue representation or
breach of warranty of Buyer in this Agreement, or (c) any default or
nonfulfillment or breach of any covenant or agreement on the part of Buyer under
this Agreement.
Section 11.2 Indemnification by Seller. Seller hereby agrees to
-------------------------
indemnify, defend and hold harmless Buyer and its affiliates, directors,
officers and employees ("Buyer's Indemnified Parties") from, against, for and in
respect of any and all Losses suffered, sustained, incurred or required to be
paid by any of Buyer's Indemnified Parties that arose out of, resulted from or
relate primarily to (a) any Retained Liabilities, (b) any untrue representation
or breach of warranty of Seller in this Agreement, or (c) any default or
nonfulfillment or breach of any covenant or agreement on the part of Seller
under this Agreement.
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Section 11.3 Procedure for Indemnification with Respect to Third-
---------------------------------------------------
Party Claims. The liabilities and obligations of the party hereto against which
- ------------
indemnification is sought hereunder (the "Indemnifying Party") with respect to
claims resulting from the assertion of liability or obligation by third parties
shall be subject to the following terms and conditions:
(a) Any Seller's Indemnified Party or Buyer's Indemnified Party
(collectively, the "Indemnified Parties") seeking indemnification hereunder
agrees to give prompt written notice to the Indemnifying Party of any claim
by a third party which might give rise to a claim based on the indemnity
agreements contained in Sections 11.1 and 11.2 hereof, stating the nature
and basis of said claim and the amount thereof, to the extent known. The
Indemnifying Party shall satisfy its obligation to indemnify the
Indemnified Party under this Section 11 within 30 days after receipt of the
foregoing notice unless the Indemnifying Party shall have elected to defend
in good faith such claim as provided in subsection (b) hereof.
(b) In the event the Indemnified Party shall notify the Indemnifying
Party of any claim pursuant to subsection (a) hereof, the Indemnifying
Party shall have the right to elect to defend such claim (including all
actions, suits, proceedings and all proceedings on appeal or for review
which counsel deem appropriate) with counsel reasonably satisfactory to the
Indemnified Party by written notice to the Indemnifying Party within 30
days after receipt of such
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<PAGE>
notice. The Indemnified Party shall make available to the Indemnifying
Party and its attorneys and accountants all books and records of the
Indemnified Party relating to such proceedings or litigation, and the
parties hereto agree to render to each other such assistance as they may
reasonably require of each other in order to ensure the proper and adequate
defense of any such action, suit or proceeding.
(c) So long as the Indemnifying Party is defending in good faith any
such claim, the Indemnified Party shall not compromise or settle such
claim, without the prior written consent of the Indemnifying Party.
ARTICLE XII
GENERAL PROVISIONS
Section 12.1 Notices. Any notice or other communication
-------
required or permitted hereunder shall be in writing and shall be delivered
personally, by recognized overnight mail or shall be sent by facsimile
transmission. Any such notice shall be deemed given when so delivered
personally or by overnight mail or sent by facsimile transmission (and confirmed
electronically or in writing to have been received) as follows:
(a) If to Seller:
Gary R. Brandenberger
Vice President, Power Supply Group
Duquesne Light Company
411 Seventh Avenue
Pittsburgh, PA 15219
Tel No. (412) 393-6270
Facsimile: (412) 393-6021
and
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<PAGE>
(b) If to Buyer:
Kenneth J. Blasko
Assistant Vice President
AYP Capital, Inc.
800 Cabin Hill Drive
Greensburg, PA 15601-1689
Tel. No. (412) 830-5941
Facsimile: (412) 830-5181
Any party may by notice given in accordance with this Section 12.1 to the other
parties designate another address or person for receipt of notice hereunder.
Section 12.2 Entire Agreement. This Agreement (including the
----------------
Exhibits, schedules, and the other documents and agreements referred to herein)
contains the entire agreement among all of the parties hereto with respect to
the acquisition of the Purchased Assets and supersedes all prior agreements and
understandings, written or oral, with respect thereto, including but not limited
to terms of the confidentiality agreement dated August 8, 1995 between Buyer and
Seller.
Section 12.3 Severability. If any word, phrase, sentence,
------------
paragraph, provision or section of this Agreement shall be held, declared,
pronounced or rendered invalid, void, unenforceable or inoperative for any
reason by any court of competent jurisdiction, Governmental Authority, statute
or otherwise, such holding, declaration, pronouncement or rendering shall not
adversely affect any other word, phrase, sentence, paragraph, provision or
section of this Agreement, which shall otherwise remain in full force and effect
and be enforced in accordance with its terms.
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Section 12.4 Waivers and Amendments; Non-Contractual Remedies;
-------------------------------------------------
Preservation of Remedies. This Agreement may be amended, superseded, cancelled,
- ------------------------
renewed or extended, and the terms hereof may be waived, only by a written
instrument signed by each of the parties, or in the case of waiver, by the party
waiving compliance. No delay on the part of any party in exercising any right,
power or privilege hereunder shall operate as a waiver thereof, nor shall any
waiver on the part of any party of any such right, power or privilege, preclude
any further exercise thereof or the exercise thereof of any other such right,
power or privilege. The rights and remedies of any party based upon, arising
out of or otherwise in respect of this Agreement shall in no way be limited by
any investigation of the facts relating thereto by any party or by the fact that
the act, omission, occurrence or other state of facts upon which any claim of
any such inaccuracy or breach is based may also be the subject matter of any
other representation, warranty, covenant or agreement contained in this
Agreement (or in any other agreement between the parties) as to which there is
no inaccuracy or breach.
Section 12.5 Governing Law. This Agreement shall be governed by
-------------
and construed in accordance with the laws of the Commonwealth of Pennsylvania
applicable to agreements made and to be performed entirely within such
jurisdiction without giving effect to principles of conflicts of law.
Section 12.6 Survival of Representations and Warranties. All
------------------------------------------
representations, warranties and covenants of the
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parties hereto contained in this Agreement or made pursuant hereto shall survive
the Closing hereunder and remain in full force and effect thereafter, for a
period ending on the first anniversary of the Closing Date, except for the
representations and warranties of Seller made in (a) Section 5.3, which shall
survive the Closing hereunder and remain in full force and effect thereafter and
(b) Section 5.5, which shall survive the Closing hereunder and remain in full
force and effect thereafter for the relevant statutes of limitations including
any extension or waiver thereof regarding the filing of tax returns and the
payment of Taxes.
Section 12.7 Binding Effect; Assignment. This Agreement shall
--------------------------
be binding upon and inure to the benefit of the parties and their respective
successors and assigns; provided, however, that neither this Agreement nor any
-------- -------
interest herein or hereunder shall be assignable by any party hereto without the
prior written consent of the other party hereto; provided, further, that Buyer
-----------------
may assign its rights hereunder to acquire any of the Purchased Assets to one or
more majority-owned subsidiaries of Buyer and that any such assignment shall not
release Buyer from any of its obligations hereunder.
Section 12.8 No Third Party Beneficiaries. Nothing in this
----------------------------
Agreement is intended or shall be construed to give any Person other than the
parties hereto, their respective successors and permitted assigns, any legal or
equitable right, remedy or claim under or in respect of this Agreement or any
provision contained herein.
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Section 12.9 Counterparts. This Agreement may be executed in
------------
one or more counterparts, each of which shall be deemed an original, but all of
which counterparts shall together constitute one and the same instrument. It
shall not be necessary that any one counterpart be signed by all of the parties
hereto as long as each of the parties hereto has signed at least one
counterpart.
Section 12.10 Exhibits and Schedules. The Disclosure schedule,
----------------------
Exhibits and any other information provided in connection herewith or pursuant
hereto are part of this Agreement as if fully set forth herein. Anything
disclosed pursuant to any one of the Schedules shall be deemed fully disclosed
with respect to all other Schedules. All references herein to Sections,
clauses, Exhibits and Schedules shall be deemed references to such parts of this
Agreement, unless the context shall otherwise require.
Section 12.11 Headings. The headings in this Agreement are for
--------
reference only and shall not affect the interpretation of this Agreement.
Section 12.12 Expenses. Except as otherwise provided herein,
--------
the parties hereto each shall bear their own expenses incurred in connection
with this Agreement and the transactions herein contemplated, whether or not
such transactions shall be consummated, including, without limitation, all fees
and disbursements of their respective legal counsel, investment and other
advisors, consultants and accountants.
-35-
<PAGE>
Section 12.13 Further Action. Seller and Buyer each agree to execute
--------------
and deliver such further documents, certificates, agreements and other writings
and to take such other actions as may be necessary or desirable, and not
inconsistent herewith, in order to consummate expeditiously the transactions
contemplated by this Agreement.
-36-
<PAGE>
IN WITNESS WHEREOF, each of Buyer and Seller has caused this Agreement
to be executed on its behalf by its duly authorized officer as of the date first
written above.
DUQUESNE LIGHT COMPANY
By: /s/ G. R. Brandenberger
--------------------------------
Name: G. R. Brandenberger
Title: Vice President, Power Supply
AYP CAPITAL, INC.
By: /s/ Klaus Bergman
--------------------------------
Name: Klaus Bergman
Title: Chief Executive Officer
-37-
<PAGE>
EXHIBIT A
FORM OF ASSUMPTION AGREEMENT
----------------------------
Assumption Agreement ("Assumption Agreement") made as of _________,
1995, among Duquesne Light Company, a Pennsylvania corporation ("Seller") and
AYP Capital, Inc., a Delaware corporation ("Buyer").
W I T N E S S E T H:
-------------------
WHEREAS, Seller and Buyer have entered into an Asset Purchase
Agreement dated as of November 28, 1995 (the "Agreement");
WHEREAS, Seller has agreed to sell, assign, convey, transfer and
deliver to Buyer all of its right, title and interest in and to the Purchased
Assets, and Buyer has agreed to assume, pay when due, perform and discharge
certain obligations or liabilities of Seller relating to the Purchased Assets,
as more fully described in Section 3.3 of the Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements contained herein and in the Agreement, Seller and Buyer
agree with one another as follows:
1. ASSUMPTION. Buyer hereby assumes and agrees in accordance with
----------
the terms of the Agreement to pay when due, and to perform and discharge, all of
the Assumed Liabilities.
2. LIABILITIES NOT ASSUMED. Notwithstanding anything herein to the
-----------------------
contrary, Buyer shall not assume or become liable for any, and Seller shall
retain and be responsible for all, of the Retained Liabilities.
3. EFFECTIVE DATE OF ASSUMPTION. This Assumption Agreement shall
----------------------------
take effect on the date hereof.
<PAGE>
4. SUCCESSORS. This Assumption Agreement shall be binding upon and
----------
inure to the benefit of the parties and their respective successors and assigns.
5. DEFINITIONS. For the purposes of this Assumption Agreement, all
-----------
capitalized terms used herein and not defined herein shall have the meanings
assigned to such terms in the Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Assumption
Agreement on the date first above written.
DUQUESNE LIGHT COMPANY
By:__________________________
Name:
Title:
AYP CAPITAL, INC.
By:__________________________
Name:
Title:
A-2
<PAGE>
EXHIBIT B
FORM OF DEED
------------
THIS DEED made the ______ day of ___________, in the year nineteen
hundred and _____________ (19__), between DUQUESNE LIGHT COMPANY, a Pennsylvania
corporation (the "Grantor"), and AYP CAPITAL, INC., a Delaware corporation (the
"Grantee")
W I T N E S S E T H:
-------------------
THAT in consideration of the sum of ___________________ and 00/100
($_______________) Dollars in hand paid, the receipt of which is hereby
acknowledged by the Grantor, the said Grantor does hereby grant and convey with
covenants of special warranty to the said Grantee and its successors and
assigns, all of Grantor's fifty percent (50%) undivided ownership interest in
those certain parcels of real property located in Cass District, Monongalia
County, West Virginia and more particularly bounded and described as follows:
Beginning at an iron pin on the eastern right of way line of the
Monongahela Railway Company, which iron pin is located at right angles to
and 35 feet distant from the established center line of said right of way
at Station 1927+89.33; thence with the following ten lines of the
Monongahela Railway Company eastern right of way line:
(1) N 54(degree) 13' E - 138.35 feet to a point of curve;
(2) a curve to the left whose radius is 2,899.93 feet for a distance
of 627.62 feet to a point of tangent;
(3) N 41(degree) 49' E - 1,877.19 feet to a point;
(4) S 48(degree) 11' E - 25.00 feet to a point;
(5) N 41(degree) 49' E - 636.00 feet to a point;
(6) N 38(degree) 11' W - 5.08 feet to a point;
(7) N 41(degree) 49' E - 248.00 feet to a point;
(8) N 48(degree) 11' W - 20.00 feet to a point;
(9) N 41(degree) 49' E - 718.01 feet to a point of curve; which
point is located at right angles to the
<PAGE>
established center line of said
right of way at Station 1885+50.90;
(10) a curve to the left whose radius is 5,764.65 feet for a distance
of 140.92 feet to a point in the Pennsylvania and West Virginia
state line, which point lies 44.20 feet from and east of an iron
pin in the center line of the presently located railroad and in
the Pennsylvania and West Virginia state line, which line is the
line between two stones, one on the east and one on the west of
said point and which stones established the state line and are
marked by date 1885;
thence with the Pennsylvania and West Virginia state line S 84(degree) 54' E -
616.60 feet to a point in the Monongahela River; thence with the Monongahela
River for the following thirteen lines:
(1) S 32(degree) 25' 40" W - 583.93 feet to a point;
(2) S 41(degree) 55' 40" W - 755.63 feet to a point;
(3) S 55(degree) 25' 40" W - 240.44 feet to a point;
(4) S 23(degree) 31' 30" W - 87.86 feet to a point;
(5) S 46(degree) 31' 50" W - 320.17 feet to a point;
(6) S 40(degree) 31' 50" W - 304.55 feet to a point;
(7) S 45(degree) 31' 50" W - 312.36 feet to a point;
(8) S 51(degree) 02' 00" W - 245.99 feet to a point;
(9) S 32(degree) 01' 50" W - 465.64 feet to a point;
(10) S 26(degree) 36' 20" W - 459.48 feet to a point;
(11) S 38(degree) 51' 20" W - 662.35 feet to a point;
(12) S 42(degree) 51' 20" W - 393.85 feet to a point;
(13) S 54(degree) 06' 20" W - 136.16 feet to a point;
thence, leaving the said river, with other lands of Monongahela Power Company
for the following five lines:
(1) N 35(degree) 47' W - 377.74 feet to an iron pin;
(2) S 54(degree) 13' W - 45.00 feet to an iron pin;
(3) N 35(degree) 47' W - 61.17 feet to an iron pin;
(4) N 54(degree) 13' E - 45.00 feet to an iron pin;
(5) N 35(degree) 47' W - 352.83 feet to an iron pin on the eastern
right of way line of the Monongahela Railway Company, the place
of beginning;
containing 63.228 acres;
Together with all and singular of the tenements, hereditaments and
appurtenances thereunto belonging or thereto or in anywise appertaining.
BEING the same property conveyed to Grantor by Mononghela Power
Company by deed dated April 30, 1965 and
B-2
<PAGE>
recorded in the Office of the Clerk of the County Commission of Monongalia
County Recorder of Deeds Office (the "Clerk's Office") in Deed Book 634
beginning at page 51 (the "Initial Deed").
THIS conveyance is made subject to (i) any lien for unpaid real
property taxes first due and payable in 1996 or any subsequent year which taxes
are assumed by and to be paid when due by Grantee and (ii) any and all
covenants, agreements, restrictions, easements, reservations, benefits and
burdens contained in said Initial Deed running with the land. The real property
conveyed hereby contains one or more underground storage tanks.
Grantor hereby represents and warrants that it is in compliance with
the Initial Deed and has performed fully, and is not in default of, its
obligations and agreements therein contained.
Grantor hereby declares that the total consideration paid for the real
property transferred hereby is the sum of $__________.
B-3
<PAGE>
WITNESS the following signatures and seals.
Attest: DUQUESNE LIGHT COMPANY
_______________________ By:________________________
Secretary Name:
(CORPORATE SEAL) Title:
ATTEST: AYP CAPITAL, INC.
_______________________ By:________________________
Secretary Name:
(CORPORATE SEAL) Title:
This instrument was prepared by _____________________, whose mailing
address is _________________________.
B-4
<PAGE>
COMMONWEALTH OF PENNSYLVANIA)
SS:
COUNTY OF __________________)
On this the ____ of ______________, 19____, before me, a Notary Public in
and for said State and County, the undersigned officer, personally appeared
____________________________, who acknowledged himself to be the
_________________________ of Duquesne Light Company, and that he as such
______________________ being authorized to do so, executed the foregoing
instrument for the purposes therein contained by signing the name of the
corporation by himself as ______________________.
In witness whereof, I hereunto set my hand and official seal.
__________________________ (SEAL)
Notary Public
B-5
<PAGE>
EXHIBIT C
BILL OF SALE
------------
WHEREAS, Duquesne Light Company ("Seller") has agreed to sell, assign,
convey, transfer and deliver to AYP Capital, Inc. ("Buyer"), and Buyer has
agreed to purchase certain of Seller's assets, property rights and businesses
relating to the business and operation, of the Fort Martin Power Station Unit
No. 1, pursuant to the Asset Purchase Agreement dated as of November 28, 1995
between Buyer and Seller (the "Asset Purchase Agreement").
NOW, THEREFORE, in consideration of the premises, Seller does hereby
sell, assign, convey, transfer, deliver and confirm unto Buyer, its successors
and assigns forever all of Seller's right, title and interest in and to the
Purchased Assets (as defined in the Asset Purchase Agreement).
To have and to hold the same unto Buyer, its successors and assigns
forever; and
Seller warrants and represents to Buyer that the title conveyed is
good, its transfer is rightful and the Purchased Assets are, have been, or shall
be delivered free from any security interest or other liens or encumbrances,
except where required to be described in any one or more schedules to the Asset
Purchase Agreement.
IN WITNESS WHEREOF, this Bill of Sale has been duly executed and
delivered by a duly authorized officer of Seller as of __________________ ___,
1996.
DUQUESNE LIGHT COMPANY
BY:_______________________________
Name:
Title:
C-1
<PAGE>
EXHIBIT D
[FORM OF OPINION OF BUYER'S COUNSEL]
[Dated the Closing Date]
Duquesne Light Company
One Oxford Center
301 Centre Street
Pittsburgh, PA 15279
Gentlemen:
This opinion is furnished to you pursuant to Section 8.5 of the Fort
Martin Power Station Asset Purchase Agreement dated as of November 28, 1995, by
and among Duquesne Light Company, a Pennsylvania corporation and AYP Capital,
Inc., a Delaware corporation (the "Agreement"). Unless otherwise defined
herein, capitalized terms used herein and defined in the Agreement shall have
the same meanings herein as therein.
We have acted as counsel to Buyer in connection with the preparation,
execution and delivery of the Agreement and the purchase by Buyer of the
Purchased Assets as provided for therein. In connection with this opinion, we
have participated in the preparation or examined executed counterparts or
copies, certified or otherwise identified to our satisfaction, of the Agreement
and such other instruments, agreements, certificates and documents, and made
such further investigation and examination as we have deemed necessary as a
basis for this opinion. In such examination, we have assumed the genuineness of
all signatures (other than those of the Buyer), the authenticity of all
documents submitted to us as originals and the conformity
D-1
<PAGE>
Duquesne Light Company
, 1996
- -------------
Page 2
to the original documents of all documents submitted to us as copies. As to any
facts material to our opinion, we have, when relevant facts were not
independently established by us, relied upon the aforesaid instruments,
agreements, certificates and documents. In addition, we have assumed the due
execution and delivery, pursuant to due authorization, by Seller of the
Agreement. We are members of the Bar of the State of Pennsylvania and do not
purport to be experts in the laws of any jurisdiction other than the laws of the
State of Pennsylvania and of the United States, and the Delaware General
Corporation Law.
Based upon and subject to the foregoing, we are of the opinion that:
1. Buyer was duly organized and is validly existing as a corporation
and is in good standing under the laws of the State of Delaware and has full
corporate power and authority to execute and deliver the Agreement and
consummate the transactions contemplated thereby.
2. The execution, delivery and performance of the Agreement, and the
consummation of the transactions contemplated thereby, have been duly authorized
by the Board of Directors of Buyer and all other corporate action on the part of
Buyer necessary in connection with such execution, delivery and performance has
been duly and validly taken. The Agreement has been duly executed and delivered
on behalf of Buyer and
D-2
<PAGE>
Duquesne Light Company
, 1996
- -------------
Page 3
constitutes a valid and binding obligation of Buyer, enforceable against Buyer
in accordance with its terms, subject, as to enforcement, to the effect or
application of bankruptcy, insolvency, reorganization and other similar laws of
general applicability relating to or affecting creditors' rights generally,
general equitable principles, whether considered in a proceeding at law or in
equity, and public policies.
3. Neither the execution and delivery of the Agreement nor the
consummation of the transactions contemplated thereby violates any provision of
the certificate of incorporation or by-laws of Buyer or any law, regulation or
rule or, to the best of our knowledge after due inquiry, any judgment, decree,
order, permit or license of any federal, Pennsylvania or other state or local
court or governmental agency or body to which Buyer or any of its properties or
assets is bound or subject.
4. Except for the orders, consents or approvals set forth in Section
6.3(a) of the Disclosure Schedule to the Agreement [(as amended and revised)]
required to authorize the purchase of the Purchased Assets pursuant to the terms
of the Agreement, which orders, consents or approvals have been obtained and are
in full force and effect, no consent, approval, order or authorization of, or
registration, declaration or filing with, any Federal or Pennsylvania or West
Virginia state governmental authority or regulatory body is required on the part
of Buyer in
D-3
<PAGE>
Duquesne Light Company
, 1996
- -------------
Page 4
connection with the execution and delivery of the Agreement or the acquisition
of the Purchased Assets as contemplated thereby.
5. At your request, we hereby confirm that we are not acting as
counsel for Buyer in any pending litigation in which Buyer is a party, and we
have not had referred to us by Buyer for legal advice or legal representation
any matter that we believe might be deemed to be overtly threatened litigation
in which Buyer might become a party. The statement set forth in the previous
sentence is limited to those matters that Buyer has referred to us for legal
representation or about which any such Person has consulted us as counsel and
with respect to which we have given substantive attention subsequent to
_______________ but prior to _______________. We have identified those matters
by making inquiry of lawyers currently in our firm who, according to our
records, have been engaged in legal services on behalf of Buyer during that
period, and by examining certain current records that we maintain for our
internal operations. In that process we have not undertaken any independent
review of documents or records concerning such Persons that are in our
possession.
We are furnishing this opinion for you in connection with the closing
of the transaction occurring today. The opinion is solely for your benefit and
is not to be used, circulated,
D-4
<PAGE>
Duquesne Light Company
, 1996
- -------------
Page 5
quoted or otherwise referred to for any other purpose without our prior written
permission.
Very truly yours,
JONES, DAY, REAVIS & POGUE
D-5
<PAGE>
EXHIBIT D-1
[Letterhead of APSC]
[Dated the Closing Date]
Duquesne Light Company
One Oxford Center
301 Centre Street
Pittsburgh, PA 15279
Gentlemen:
I have acted as counsel to AYP Capital, Inc., an affiliate of
Allegheny Power Service Corporation ("APSC"), in connection with that certain
Fort Martin Power Station Asset Purchase Agreement dated as of November 28 1995,
by and among Duquesne Light Company, a Pennsylvania corporation and AYP Capital,
Inc., a Delaware corporation (the "Agreement"). Unless otherwise defined
herein, capitalized terms used herein and defined in the Agreement shall have
the same meanings herein as therein.
I am a member of the Bar of the State of Pennsylvania.
At your request, I have inquired of lawyers employed by APSC and its
affiliates responsible for administering claims and litigation against APSC and
its affiliates, including Buyer, and of certain officers of Buyer, and on the
basis of such inquiry am pleased to confirm that there is not pending or, to my
knowledge, threatened any claim, action, suit, proceeding, arbitration,
investigation, hearing or notice of hearing which seeks to make illegal, enjoin
or prevent the transactions contemplated by the Agreement.
Very truly yours,
D1-1
<PAGE>
EXHIBIT E
[FORM OF OPINION OF SELLER'S COUNSEL]
[Dated the Closing Date]
_____________________
_____________________
_____________________
Gentlemen:
This opinion is furnished to you pursuant to Section
9.5 of the Fort Martin Power Station Asset Purchase Agreement, dated as of
November 28, 1995, by and among Duquesne Light Company, a Pennsylvania
corporation, and AYP Capital, Inc., a Delaware corporation (the "Agreement").
The capitalized terms used herein and not defined herein shall have the
respective meanings set forth in the Agreement.
I have acted as counsel to Seller in connection with the preparation,
execution and delivery of the Agreement and the sale of the Purchased Assets by
Seller to AYP Capital, Inc. pursuant to the Agreement. As such counsel, I have
examined originals (or copies certified or otherwise identified to my
satisfaction) of the Agreement, the deed referred to in Section 4.2 of the
Agreement (the "Deed"), the bill[s] of sale referred to in Section 4.2 of the
Agreement (the "Bill[s] of Sale") and such other instruments, certified and
documents and have reviewed such questions of law as I have deemed necessary or
<PAGE>
- ------------------------
, 1996
- ------------------
Page 2
appropriate for the purpose of this opinion. In such examination, I have assumed
the genuineness of all signatures (other than those of the Seller), the
authenticity of all documents submitted to me as originals and the conformity to
the original documents of all documents submitted to me as copies. As to any
facts material to this opinion, I have, when relevant facts were not
independently established, relied upon the aforesaid instruments, certificates
and documents. In addition, I have assumed the due execution and delivery
pursuant to due authorization by Buyer of the Agreement.
Based upon the foregoing, I am of the opinion that:
1. Seller was duly organized and is validly existing as a
corporation and is in good standing under the laws of the Commonwealth of
Pennsylvania and the State of West Virginia and has full corporate power and
authority to execute and deliver the Agreement, the Deed, the Bill[s] of Sale
[and other instruments] and consummate the transactions contemplated thereby.
2. The execution, delivery and performance of the Agreement, the
Deed, the Bill[s] of Sale [and other instruments], and the consummation of the
transactions contemplated thereby, have been duly authorized by the Board of
Directors of Seller and all other corporate action on the part of Seller
necessary in connection with such execution, delivery and performance has been
duly and validly taken. The Agreement, the Deed and the Bill[s]
E-2
<PAGE>
- ------------------------
, 1996
- ------------------
Page 3
of Sale have each been duly executed and delivered on behalf of Seller and
constitute valid and binding obligations of Seller, enforceable against Seller
in accordance with their respective terms except as enforcement may be limited
by bankruptcy, insolvency, reorganization and other similar laws of general
applicability relating to or affecting creditors' rights generally and general
equitable principles, whether considered in a proceeding at law or in equity.
3. Neither the execution and delivery of the Agreement nor the
consummation of the transactions contemplated thereby violates any provision of
the Articles of Incorporation or By-Laws of Seller or any statute, law,
regulation or rule, or, to the best of our knowledge after due inquiry, any
judgment, decree, order, permit or license, of any Federal or Pennsylvania
or West Virginia state court or governmental agency or body to which Seller is
subject or by which any of its properties or assets, including, without
limitation, Unit No. 1, is bound or subject.
4. To the best of my knowledge after due inquiry, Seller is not in
violation of any statute, law, judgment, decree, order, permit, license,
regulation or rule of any Federal or Pennsylvania or West Virginia state court
or governmental agency or body relating to or affecting the ownership, use or
operation of Unit No. 1, other than such violations as would not,
E-3
<PAGE>
- ------------------------
, 1996
- ------------------
Page 4
individually or in the aggregate, give rise to material liability, materially
adversely affect or interfere with the ownership, use or operation of Unit No. l
or adversely affect the ability of Seller to execute and deliver the Agreement,
the Deed, the Bill[s] of Sale [and other instruments] and consummate the
transactions contemplated thereby.
5. Except for orders of the [PaPUC and the FERC] authorizing the
sale of the Purchased Assets pursuant to the terms of the Agreement, which
orders have been obtained and are in full force and effect, no consent,
approval, order or authorization of, or registration declaration or filing with,
any Federal or Pennsylvania or West Virginia state governmental authority or
regulatory body is required on the part of Seller in connection with the
execution and delivery of the Agreement, the Deed, the Bill[s] of Sale [or
other instruments] or the sale of the Purchased Assets to Buyer as
contemplated thereby.
6. There is no claim, action, suit, proceeding, arbitration,
investigation or hearing or notice of hearing pending or, to the best of our
knowledge after due inquiry, threatened, before any court or governmental or
administrative authority which seeks to make illegal, enjoin or prevent the
transactions contemplated by this Authority.
7. The Deed and the Bill[s] of Sale [and other instruments] are in
form sufficient to transfer to the Buyer all
E-4
<PAGE>
- ------------------------
, 1996
- ------------------
Page 5
of the Seller's right, title and interest to the Purchased Assets; provided,
however, that no opinion is expressed with respect to the existence, nature or
extent of the Seller's right, title and interest in the Purchased Assets.
I am a member of the Bar of the Commonwealth of Pennsylvania and I do
not express any opinion as to any law other than the laws of the Commonwealth of
Pennsylvania and the Federal law of the United States of America. With respect
to matters governed by the laws of the State of West Virginia, I have, with your
consent relied entirely upon the opinion of _______________, without independent
investigation.
I am furnishing this opinion for you in connection with the closing of
the transaction occurring today. The opinion is solely for your benefit and is
not to be used, circulated, quoted or otherwise referred to for any other
purpose without my written permission.
Very truly yours,
E-5
<PAGE>
SCHEDULE A-1
------------
Description of Fort Martin No. 1 Unit Equipment and Facilities
- --------------------------------------------------------------
The Fort Martin No. 1 Unit consists of equipment and facilities that
includes, but is not limited to:
1. Main Steam Generator - Tangentially fired, manufactured by
Combustion Engineering, Inc. with a maximum continuous rating of
4,000,000 lb/hr at a superheater outlet steam conditions of
1,010(degree)F, 3,810 psig and reheat outlet temperature of
1,010(degree)F.
2. Main Turbine - Tandem compound four flow reheat unit with a
capacity of 552,000 kw operating at 1,000(degree)F, 3,500 psig
main steam and 1,000(degree)F reheat steam conditions.
3. Generator - Hydrogen cooled generator with a water cooled stator
having a capacity of 640,000 kva.
4. All of the controls, related auxiliary equipment, and systems
specific to Unit 1 and certain equipment and systems common to
Units 1 and 2 including, but not limited to: auxiliary boilers,
water treating, coal handling, ash handling, storage and disposal
facilities, buildings, structures, transformers and switchgear,
all of which are necessary for the operation of No. 1 Unit.
5. A detailed list and description of all of these facilities and
equipment is contained in the
<PAGE>
continuous property records maintained by Monongahela Power
Company (the operating company), copies of which can be made
available to the Buyers for their inspection and are
incorporated herein by reference.
SCH A1-2
<PAGE>
Schedule A-2
------------
Description of Fort Martin Power Station Site
---------------------------------------------
The Fort Martin Power Station is located in Cass District, Monongalia
County, West Virginia, approximately ten miles north of Morgantown. The Fort
Martin Station site is described as follows:
All that certain tract or parcel of land situate in the District of
Cass, County of Monongalia, State of West Virginia, bounded and described as
follows, to wit:
Beginning at an iron pin on the eastern right of way line of the
Monongahela Railway Company, which iron pin is located at right angles to and 35
feet distant from the established center line of said right of way at Station
1927+89.33; thence with the following ten lines of the Monongahela Railway
Company eastern right of way line:
(1) N 54(degree) 13' E - 138.25 feet to a point of curve;
(2) a curve to the left whose radius is 2,899.93 feet for a distance
of 627.62 feet to a point of tangent;
(3) N 41(degree) 49' E - 1,877.19 feet to a point;
(4) S 48(degree) 11' E - 25.00 feet to a point;
(5) N 41(degree) 49' E - 636.00 feet to a point;
(6) N 38(degree) 11' W - 5.08 feet to a point;
(7) N 41(degree) 49' E - 248.00 feet to a point;
(8) N 48(degree) 11' W - 20.00 feet to a point;
<PAGE>
(9) N 41(degree) 49' E - 718.01 feet to a point of curve; which point
is located at right angles to the established center line of said
right of way at Station 1885+50.90;
(10) a curve to the left whose radius is 5,764.65 feet for a distance
of 140.92 feet to a point in the Pennsylvania and West Virginia
state line, which point lies 44.20 feet from and east of an iron
pin in the center line of the presently located railroad and in
the Pennsylvania and West Virginia state line, which line is the
line between two stones, one on the east and one on the west of
said point and which stones established the state line and are
marked by date 1885;
thence with the Pennsylvania and West Virginia state line S 84(degree) 54' E -
616.60 feet to a point in the Monongahela River; thence with the Monongahela
River for the following thirteen lines:
(1) S 32(degree) 25' 40" W - 583.93 feet to a point;
(2) S 41(degree) 55' 40" W - 755.63 feet to a point;
(3) S 55(degree) 25' 40" W - 240.44 feet to a point;
(4) S 23(degree) 31' 30" W - 87.86 feet to a point;
(5) S 46(degree) 31' 50" W - 320.17 feet to a point;
(6) S 40(degree) 31' 50" W - 304.55 feet to a point;
(7) S 45(degree) 31' 50" W - 312.36 feet to a point;
(8) S 51(degree) 02' 00" W - 245.99 feet to a point;
(9) S 32(degree) 01' 50" W - 465.64 feet to a point;
SCH A2-2
<PAGE>
(10) S 26(degree) 36' 20" W - 459.48 feet to a point;
(11) S 38(degree) 51' 20" W - 662.35 feet to a point;
(12) S 42(degree) 51' 20" W - 393.85 feet to a point;
(13) S 54(degree) 06' 20" W - 136.16 feet to a point;
thence, leaving the said river, with other lands of Monongahela Power Company
for the following five lines:
(1) N 35(degree) 47' W - 377.74 feet to an iron pin;
(2) N 54(degree) 13' W - 45.00 feet to an iron pin;
(3) N 35(degree) 47' W - 61.17 feet to an iron pin;
(4) N 54(degree) 13' W - 45.00 feet to an iron pin;
(5) N 35(degree) 47' W - 352.83 feet to an iron pin on the eastern
right of wayline of the Monongahela Railway Company, the place
of beginning;
containing 63.228 acres.
Said property is a part of the property, lying between the eastern right of
way line of the Monongahela Railway Company and the low water mark of the
Monongahela River, which was conveyed to Monongahela by the following mesne
conveyances: from the Christopher Coal Company by Deed dated July 22, 1963, of
record in the office of the Clerk of the County Court in Monongalia County in
Deed Book 614 at Page 447, by Corrective Indenture dated the 23rd day of August,
1963, of record in said Clerk's office in Deed Book 615, Page 562, and by Deed
dated November 16, 1964, of record in said Clerk's office in Deed Book 629 at
Page 191; from Charles Gibson, single, by Deed dated January 12, 1963, of record
in said Clerk's office in Deed
SCH A2-3
<PAGE>
Book 611, Page 243; and from Monongahela Railway Company by Deed dated October
12, 1964, of record in the office of said Clerk in Deed Book 629 at Page 64. It
is the intention of the parties that said property hereby conveyed shall include
all Monongahela's interests and rights in respect of said property to the low
water mark of the Monongahela River, namely the point to which the water receded
at its lowest state prior to the installation of locks and dams built by any
government agency in the improvement of navigation or in the aid to commerce
upon said River.
SCH A2-4
<PAGE>
Disclosure Schedule
-------------------
This Disclosure Schedule is delivered pursuant to the Fort Martin Power
Station Asset Purchase Agreement by and between Duquesne Light Company
("Seller") and AYP Capital, Inc. ("Buyer"). Although Seller has endeavored to
ensure the accuracy and completeness of the information contained in this
Disclosure Schedule, Seller is not the Operating Company of Unit No. 1 and does
not necessarily have access to all information regarding Unit No. 1.
Consequently, Seller shall not be liable for any inaccuracy and omission
relating to information not reasonably available to Seller.
Any item listed in one section of this Disclosure Schedule shall be deemed
to have been listed in each section for which such item is applicable.
Section 2.1--Purchased Assets.
1. All of the equipment and facilities as described on Schedule A-1 of
the Asset Purchase Agreement to which this Disclosure Schedule is
attached.
2. All of Seller's share of the fuel inventory including coal and No. 2
fuel oil in stock at the time of closing; provided, however, that the
-------- -------
quantity of coal included in the Purchased Assets shall be 150,000
tons (Seller's share of the standard inventory level).
3. All of Seller's share of the Materials and Supplies (M&S) inventory at
the time of closing; provided,
--------
<PAGE>
however, that the M&S inventory at the time of closing shall be $3.1
-------
million, determined on the basis of cost (Seller's share of the
standard inventory level).
4. All Emission Allowances (EA's), including but not limited to Phase I
and Phase II EA's, granted to Seller by the EPA under the 1992 Clean
Air Act Amendment or in which Seller has any right, title or interest
specifically associated with its share of the Fort Martin Unit No. 1,
including but not limited to the following:
Phase I - 20,248 EA's/year except for the year in which the
transfer of ownership occurs, the Buyer will receive
the number of EA's not consumed as of the date of the
transfer of ownership.
Phase II - 8,894 EA's/year (for years 2000-2009).8,951 EA's/year (for
year 2010 through the remainder of plant life).
These emission allowances may or may not be sufficient for the Buyer's
purposes depending upon, among other things, the capacity factor on
Buyer's share of Unit No. 1 and the sulfur content of future coal
supplies.
5. All of Seller's rights under the Fort Martin Construction and
Operating Agreement (the "Operating Agreement") among Seller,
Monongahela Power Company and
DS-2
<PAGE>
The Potomac Edison Company dated April 30, 1965, which Operating
Agreement shall be assigned to Buyer at the Closing.
6. Buyer shall not purchase and Seller shall retain all of Seller's
rights, title and interest in any recovery of insurance proceeds
relating to settlement of pending insurance claims relating to the
caustic induction incident at Unit No. 1 in January, 1995.
7. Buyer shall not purchase and Seller shall retain all liability and/or
rights to any refund by reason of any litigation involving the
application of the West Virginia Business and Occupation Tax for any
period prior to the Closing Date and payable by Seller for power
generated at Unit No. 1 prior to the Closing Date.
Section 3.3 --Assumed Liabilities.
None, except as provided below. Seller shall be responsible for (and,
if necessary, shall make appropriate post-closing payments to Buyer in
respect of) all expenses incurred by Seller arising from or related to
the operation or ownership of the Purchased Assets prior to the
Closing Date, without regard to (a) when such expenses are paid or
payable, (b) when or whether such expenses are or may be required to
be accrued or reflected on financial statements for
DS-3
<PAGE>
financial reporting purposes, or (c) the nature of the related assets,
goods or services or the times or time periods at or during which the
same are used or usable; provided, however, that Buyer shall assume
-------- -------
the liability for all special maintenance and capital costs associated
with the planned outage of Unit No. 1 in 1996. At Closing Buyer,
shall make payment to Seller for any costs Seller may have paid or
incurred with respect to such planned outage prior to Closing. Buyer
and Seller shall make appropriate post closing adjustments to
recognize any surplus or deficit from the amounts set forth herein in
Seller's portion of the coal inventory and materials and supplies at
the time of closing.
Section 5.4(a)--Violations of Articles, By-Laws or Contracts.
1. None, except as set forth in response to 5.4(b).
Section 5.4(b)--Consents; Compliance with Applicable Laws.
1. Required Consents and Approvals
(i) Approval, if required, under Section 1102(a)(3) of the
Pennsylvania Public Utility Code [66 Pa. C.S.A. (S) 1102(a)(3)]
(ii) Approval, if required, under (S) 521(a) of the Pennsylvania
Public Utility Code [66 Pa. C.S.A. (S) 521(a)]
DS-4
<PAGE>
(iii) Approval, if required, under Section 203 of the Federal Power
Act (16 U.S.C. (S) 824b) for the sale by Duquesne of a part
interest in the Fort Martin Station transmission facilities.
(iv) Approval, if required, from West Virginia for Seller to transfer
to Buyer its Certificate of Public Convenience and Necessity with
respect to Unit No. 1.
2. Fort Martin No. 1 Unit meets applicable standards as to particulates
and opacity with high-efficiency electrostatic precipitators and
cleaned coal. From time to time, excursions of opacity normal to
fossil fuel operations are experienced. The West Virginia Division of
Environmental Protection (WVDEP), Office of Air Quality (OAQ) issued
Notices of Violation (NOVs) for opacity exceedances for the fourth
quarter of 1993 and the first quarter of 1994 for Fort Martin. In
addition, Fort Martin has reported opacity exceedances for each
quarter thereafter.
Because of the stringent 10% opacity limit in West Virginia which led
to the above-mentioned NOV's, Monongahela and other West Virginia
electric utilities petitioned the OAQ in 1994 to revise the opacity
limit from 10% to 20% in order to be consistent with
DS-5
<PAGE>
surrounding states and the federal New Source Performance Standards
(NSPS). The OAQ on October 21, 1994 published a proposed revision to
Title 45, Regulation 2 to increase the opacity limit to 20%. The
final rule was submitted to the state legislature in West Virginia for
approval in early 1995. The proposed increase in the opacity limit
was rejected and the opacity limit remains at 10%. The plant
continues to have occasional opacity exceedances and there are
presently two (2) outstanding NOVs. Refurbishment of the
electrostatic precipitators is scheduled to be completed during a
planned major outage in 1996. The refurbishment may mitigate these
occasional opacity exceedances.
3. Under the National Pollutant Discharge Elimination System (NPDES), a
permit for the Fort Martin ash disposal site is in place. However,
the NPDES permit renewal for this disposal site contains what the
Operating Subsidiaries of Allegheny Power System (APS) believe are
overly stringent discharge limitations. The WVDEP has temporarily
stayed the stringent permit limitations while the Operating
Subsidiaries continue to work with WVDEP and EPA in order to
scientifically justify less stringent limits. Where this is not
possible, installation of waste water treatment
DS-6
<PAGE>
facilities may become necessary. The cost of such facilities, if
required, cannot be predicted by Duquesne or APS at this time.
4. Pursuant to the National Groundwater Protection Strategy, West
Virginia adopted a Groundwater Protection Act in 1991. This law
establishes a statewide antidegradation policy which could require
reconstruction of existing landfills and surface impoundments as well
as groundwater remediation at Fort Martin. Groundwater protection
standards were approved and implemented in 1993 (based on EPA drinking
water criteria) which established compliance limits. Pursuant to the
groundwater protection standards variance provision, on October 26,
1994 the APS Operating Subsidiaries jointly filed with American
Electric Power and Virginia Power, a Notice of Intent (NOI) to request
class or source variances from the groundwater standards for steam
electric operating facilities in West Virginia. Additionally, each of
the companies filed individual NOI's. Technical and socio-economic
justification to support the variance requests are being developed and
the costs shared by the Operating Subsidiaries under a contract with
EPRI. While the justification for the variance requests is being
developed, Fort Martin is protected from any
DS-7
<PAGE>
enforcement action. Because variance requests must ultimately be
approved by the West Virginia legislature, Duquesne or APS cannot
predict the outcome.
5. Under Title IV of the CAAA, Fort Martin No. 1 Unit is classified as a
Phase I Group 1 boiler (tangential fired). It is anticipated that no
plant modifications will be required to meet NOx requirements for
Phase I. For Phase II, the compliance strategy may require the
installation of Low NOx Burners.
6. Currently, Fort Martin No. 1 Unit is not impacted by Title I of the
CAAA.
Section 5.4(c)--Environmental.
None.
Section 5.4(d)--Permits.
1. The permits listed in Attachment I to this Disclosure Statement.
2. Additional permits and/or approvals as set forth in response to
5.4(b).
3. The current ash disposal site is estimated to have capacity to receive
ash resulting from coal combustion at Fort Martin for seven (7) years.
Engineering, permitting and construction of a new site to meet current
regulatory criteria must be completed prior to exhausting the capacity
of the current disposal site.
DS-8
<PAGE>
Section 5.6--Contracts
1. Trust Indenture between Seller and Mellon Bank, N.A. dated as of April
1, 1992 as shown in Attachment II to this Disclosure Statement.
Section 5.7--Litigation.
1. Richard Armstrong and Linda Armstrong, et al. v. the Duquesne Light
Company, et al. No. 93-C-54 (West Virginia).
2. Seller is one of the plaintiffs challenging the regulation promulgated
by West Virginia to establish the method used for calculating the
kilowatt hour tax which was in effect between August 11, 1989 and June
1, 1995. The plaintiffs filed a declaratory judgment action in the
Circuit Court of Kanawa County, West Virginia on March 29, 1990,
seeking a ruling that the regulations adopted by the State Tax
Commissioner to implement a tax upon the generation of electric power,
exceeded the Commissioner's statutory authority and was
unconstitutional. In calculating the tax imposed upon generators
under the statute, which was based upon the number of kilowatt hours
of electricity produced, the plaintiffs contended that the statutory
phrase "net generation available for sale" entitled them to deduct
electric power generated in West Virginia and consumed in the utility
business as well as electricity lost in the process of transmission
and distribution before
DS-9
<PAGE>
calculating the tax. The Commissioner contended that only electricity
consumed in the process of generation was deductible and that all
other generation was taxable, thereby increasing the taxes payable.
The plaintiffs paid the tax in accordance with the State's position
and filed claims for refunds. The Circuit Court of Kanawha County
ruled in favor of the position of the Commissioner and the plaintiffs
have appealed to the West Virginia Supreme Court of Appeals, where the
case is currently pending. If the Supreme Court of Appeals rules in
favor of the plaintiffs, the decision would likely be used as a
precedent in pursuing tax refund claims.
Section 5.8--Insurance.
1. The policies currently in effect are listed in Attachment III to this
Disclosure Statement.
2. Currently, there is one coverage dispute pending which is related to
caustic induction incident that occurred January 1995. Buyer will not
be obligated in any way by the outcome of this dispute.
Section 6.3(a) -- Buyer's Required Regulatory Consents and Approvals.
1. Securities and Exchange Commission (to increase investment authority
only)
2. Federal Energy Regulatory Commission (for hybrid EWG status and
authority to sell at market rates)
DS-10
<PAGE>
3. Hart-Scott-Rodino Antitrust Improvements Act
4. State public service/corporation commissions (for hybrid EWG status):
Pennsylvania, Ohio, West Virginia, Virginia and Maryland. A FERC
General Counsel's Opinion will be sought to determine if these
approvals may be limited to Pennsylvania only.
5. State affiliated interest statute approvals: Pennsylvania, West
Virginia and Virginia.
6. State of West Virginia Certificate of Public Convenience and
Necessity.
Section 6.3(d) -- Litigation.
None.
Any item listed in one section of this Disclosure Schedule shall be deemed
to have been listed in each and every section for which such item is applicable.
DS-11
<PAGE>
EXHIBIT 10.62
CONFORMED COPY
DUQUESNE LIGHT COMPANY
OUTSIDE DIRECTORS' RETIREMENT PLAN
<PAGE>
DUQUESNE LIGHT COMPANY
OUTSIDE DIRECTORS' RETIREMENT PLAN
Table of Contents
-----------------
Article Page
- ------- ----
I Purpose . . . . . . . . . . . . . . . . . . . . . . . . . 1
II Definitions . . . . . . . . . . . . . . . . . . . . . . 1
III Eligibility . . . . . . . . . . . . . . . . . . . . . . 2
IV Retirement Benefits . . . . . . . . . . . . . . . . . . . 2
V Deferred Compensation . . . . . . . . . . . . . . . . . 4
VI Status of Plan . . . . . . . . . . . . . . . . . . . . . 4
VII Rights Nonassignable . . . . . . . . . . . . . . . . . . 5
VIII Administration . . . . . . . . . . . . . . . . . . . . . 5
IX Termination . . . . . . . . . . . . . . . . . . . . . . . 6
X Amendment . . . . . . . . . . . . . . . . . . . . . . . . 6
XI Miscellaneous . . . . . . . . . . . . . . . . . . . . . 7
<PAGE>
DUQUESNE LIGHT COMPANY
OUTSIDE DIRECTORS' RETIREMENT PLAN
ARTICLE I
1.01 The purpose of this Retirement Plan is to provide directors of
Duquesne Light Company with payments after retirement in recognition of their
service to the Company and to assure that the overall compensation arrangements
for directors are adequate to attract and retain highly qualified individuals.
ARTICLE II
Definitions
-----------
2.01 "Board" or "Board of Directors" means the board of directors of the
Company.
2.02 "Company" means Duquesne Light Company.
2.03 "Director" means an individual serving on the Board of
Directors.
2.04 "Participant" means a director, former director, or the beneficiary
of a deceased director or former director, who is eligible for or entitled to
receive benefits under this Plan.
2.05 "Plan" means this Outside Directors' Retirement Plan.
2.06 "Retirement" means termination of service as a director for any
reason, including without limitation, death, resignation or not being re-
elected.
<PAGE>
ARTICLE III
Eligibility
-----------
3.01 Directors of the Company shall be eligible to participate in this
Plan as of the later of the effective date of the Plan, or the first day of
their first term as a director, except that a director who is a participant in
any tax qualified retirement plan of the Company (a "Qualified Director") will
not be eligible to participate until the effective date of his or her retirement
from the Company.
3.02 A director shall be eligible for benefits under this Plan upon
completion of five (5) years of service on the Board or, in the case of a
Qualified Director, upon completion of one (1) year of service on the Board
following his or her retirement from the Company.
ARTICLE IV
Retirement Benefits
-------------------
4.01 Participants shall be paid a monthly benefit following retirement
in accordance with the terms and conditions of this Plan.
4.02 A director's monthly benefit shall be equal to one-twelfth (1/12)
of the annual retainer in effect on the effective date of the director's
retirement from the Board, and shall continue for the number of months equal to
the director's total months of service on the Board prior to attaining the age
of 70 (excluding a Qualified Director's Service on the Board during his or her
employment with the Company), but in no event longer than 120 months. For
purposes of determining
<PAGE>
the annual retainer in effect on the effective date of a director's retirement,
any portion of such annual retainer that is payable in shares of DQE Common
Stock shall be valued based upon the purchase price paid by the Company in
connection with the most recent issuance of shares to the director, or if there
was no purchase of shares by the Company in connection with such issuance of
shares to the director, then such value shall be based on the average of the
high and low trading prices of DQE Common Stock on the date of such issuance of
shares as quoted in the New York Stock Exchange Composite Transactions listing
in The Wall Street Journal; and
4.03 Subject to Section 4.02, a director's months of service shall
include any period during which the director served on the Board prior to the
effective date of the Plan and any non-consecutive periods of service.
4.04 Meeting fees are not considered as a part of the retainer for
purposes of this Plan.
4.05 Payment of benefits under this Plan shall begin upon the later of:
(a) The first day of the month following the director's retirement
from the Board or
(b) a date elected by the director in writing on or before
December 31 of the year prior to the calendar year in which
the director retires.
<PAGE>
A director may make and/or change the election under this section at any
time prior to December 31 of the year prior to retirement. An election
pursuant to this section may be revoked prior to retirement.
4.06 Upon the death of a director, either before or after benefits
begin, the balance of such director's benefits under this Plan shall thereafter
be paid to such one or more beneficiaries as the director shall name in a
written beneficiary designation filed with the Corporate Secretary Unit of the
Company. If no beneficiary or beneficiaries are designated, the balance shall be
paid to the director's estate. Payments to a beneficiary under this Plan shall
be in the same amount and over the same term as payments to the deceased
director, except that a beneficiary may make a written election to receive a
lump sum distribution.
ARTICLE V
Deferred Compensation
---------------------
5.01 Benefits determined under this Plan will be based upon the
director's full retainer entitlement and shall not be reduced by any amount that
a director may elect to defer under the Directors' Deferred Compensation Plan.
ARTICLE VI
Status of Plan
--------------
6.01 This Plan is a nonqualified supplemental retirement plan. As such,
all payments from this Plan shall be made from the general assets of the
Company. This Plan shall not require the Company to set aside, segregate,
earmark, pay into
<PAGE>
trust or special account or otherwise restrict the use of its assets in the
operation of its business. A participant shall have no greater right or status
than an unsecured creditor of the Company with respect to any amounts owed to
any participant under this Plan.
ARTICLE VII
Rights Nonassignable
--------------------
7.01 All payments to persons entitled to benefits under this Plan shall
be made to such persons and shall not be transferable or otherwise assignable in
anticipation of payment of such benefits, in whole or in part, by the voluntary
or involuntary acts of any such persons or by operation of law. In addition,
such payments shall not be subject to garnishment, attachment or any other legal
process of creditors of such persons.
ARTICLE VIII
Administration
--------------
8.01 Full power and authority to construe, interpret and administer this
Plan shall be vested in the Compensation Committee of the Board which shall have
full power and authority to make each determination provided for in this Plan.
All determinations made by the Compensation Committee of the Board shall be
conclusive and binding upon the Company and each participant or former
participant.
<PAGE>
ARTICLE IX
Termination
-----------
9.01 The Board of Directors may terminate this Plan at any time. Upon
termination of the Plan, benefits shall be paid in accordance with Article IV to
any participant who is receiving benefits under Section 4.05 or 4.06 prior to
the date of termination of the Plan or to any director who has prior to the date
of termination:
(a) satisfied the eligibility requirements of Article III,
(b) retired from the Board of Directors of the Company, and
(c) has not begun to receive benefits under this Plan.
No other payments shall be made to any person under the Plan after the date
of termination, including but not limited to directors who meet the eligibility
requirements of Article III but who have not retired from the Board as of the
date of Plan termination.
ARTICLE X
Amendment
---------
10.01 Except as provided in Section 10.02 below, the Board of Directors
may, in its discretion, amend this Plan from time to time.
10.02 No amendment to the Plan may take away or reduce the benefit of
any participant who is, or but for an election of a later starting date under
Section 4.05(b), would be, receiving a benefit under the Plan at the time of the
amendment.
<PAGE>
ARTICLE XI
Miscellaneous
-------------
11.01 If the person to receive payment is adjudged or deemed to be
legally incompetent, the payments shall be made to the duly appointed guardian
of such incompetent, or they may be made to such person or persons who are
caring for or supporting such incompetent; and the receipt by such person or
persons shall be a complete acquittance for the payment of the benefit.
11.02 The expenses of administration of this Plan shall be borne by the
Company.
11.03 This Plan shall be construed, administered and enforced according
to the laws of the Commonwealth of Pennsylvania.
This amended and restated Plan is adopted and effective this 27th day of
June, 1995.
ATTEST: DUQUESNE LIGHT COMPANY:
/s/ Diane S. Eismont BY:/s/ Wesley W. von Schack
- ------------------------------- -------------------------
(Corporate Seal) Secretary Title: Chairman and Chief
Executive Officer
Originally effective April 18, 1989.
Revised March 27, 1990.
Revised June 27, 1995.
<PAGE>
Exhibit 10.68
CONFORMED COPY
FIRST AMENDMENT TO EMPLOYMENT AGREEMENT
This First Amendment To Employment Agreement ("Amendment") is
entered into as of the 27th day of June, 1995 by and between DQE, Inc.
(hereinafter called "DQE"), a Pennsylvania corporation, Duquesne Light Company
(hereinafter called the "Company" and together with DQE sometimes hereinafter
called the "Employers"), a Pennsylvania corporation and a wholly-owned
subsidiary of DQE,
a
n
d
David D. Marshall, an individual residing in Allegheny County,
Pennsylvania (hereinafter called the "Executive");
W I T N E S S E T H:
WHEREAS, the Employers and the Executive entered into that
certain Employment Agreement, dated as of August 30, 1994 (the "Employment
Agreement"); and
WHEREAS, the parties acknowledge that it is necessary and
appropriate to amend the Employment Agreement to in certain respects as
hereinafter set forth;
NOW THEREFORE, for valuable consideration, receipt of which is
hereby acknowledged, and intending to be legally bound hereby, the parties agree
as follows:
1. Position Titles. Paragraph 1(a) of the Employment Agreement
---------------
is amended and restated to read in its entirety as follows:
(a) Employment. DQE hereby offers to employ the
----------
Executive as the Executive Vice President of DQE, and the Company
hereby offers to employ the Executive as the President and Chief
Operating Officer of the Company, and the Executive hereby accepts
such employment with DQE and the Company, for the term set forth in
Paragraph 1(b).
2. Duties. Paragraph 2 of the Employment Agreement is amended
------
and restated to read in its entirety as follows:
2. Duties. During the period of employment as
------
provided in Paragraph 1(b) hereof, the Executive shall serve as
Executive Vice President of DQE and as President and Chief Operating
Officer of the Company and perform all duties
<PAGE>
consistent with such positions at the direction of the Chief Executive Officer
of DQE and the Company or such other person not below the rank of President as
such Chief Executive Officer may designate. The Executive shall devote his
entire time during reasonable business hours (reasonable sick leave and
vacations excepted) and best efforts to fulfill faithfully, responsibly and
satisfactorily his duties hereunder.
3. Effect of Amendment. Except as expressly modified hereunder,
-------------------
the Employment Agreement shall remain in full force and effect. The parties
acknowledge and agree that the changes in the position titles and duties of the
Executive reflected in Paragraphs 1 and 2 of this Amendment, and any associated
changes in the Executive's reporting or supervisory responsibilities, do not
constitute "Good Reason" for purposes of Paragraph 7(c)(iv) of the Employment
Agreement.
4. Headings. The headings of paragraphs herein are included
--------
solely for convenience of reference and shall not control the meanings or
interpretation of any provisions of this Amendment.
5. Merger. The Employment Agreement, as amended by this
------
Amendment, contains the entire understanding between the parties hereto and
supersedes any prior or contemporary contracts, agreements, understandings
and/or negotiations, whether oral or written.
6. Counterparts. This Amendment may be executed in two or more
------------
counterparts each of which shall be deemed to be an original, but all of which
together shall be deemed to be one and the same instrument.
2
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Amendment as of the day and year first above written.
Attest: DQE, INC.
/s/ Diane S. Eismont By /s/ Wesley W. von Schack
- ----------------------------------- ------------------------------------
Diane S. Eismont, Secretary Wesley W. von Schack,
Chairman, President and Chief
Executive Officer
Attest: DUQUESNE LIGHT COMPANY
/s/ Diane S. Eismont By /s/ Wesley W. von Schack
- ----------------------------------- ------------------------------------
Diane S. Eismont, Secretary Wesley W. von Schack,
Chairman and Chief
Executive Officer
EXECUTIVE
/s/ David D. Marshall
------------------------------------
David D. Marshall
3
<PAGE>
Exhibit 10.71
CONFORMED COPY
FIRST AMENDMENT TO EMPLOYMENT AGREEMENT
This First Amendment To Employment Agreement ("Amendment") is
entered into as of the 27th day of June, 1995 by and between Duquesne Light
Company (hereinafter called the "Company"), a Pennsylvania corporation and a
wholly-owned subsidiary of DQE, Inc.
a
n
d
Dianna L. Green, an individual residing in Allegheny County,
Pennsylvania (hereinafter called the "Executive");
W I T N E S S E T H:
WHEREAS, the Employers and the Executive entered into that
certain Employment Agreement, dated as of August 30, 1994 (the "Employment
Agreement"); and
WHEREAS, the parties acknowledge that it is necessary and
appropriate to amend the Employment Agreement to in certain respects as
hereinafter set forth;
NOW THEREFORE, for valuable consideration, receipt of which is
hereby acknowledged, and intending to be legally bound hereby, the parties
agree as follows:
1. Position Titles. Paragraph 1(a) of the Employment Agreement
---------------
is amended and restated to read in its entirety as follows:
(a) Employment. The Company hereby offers to employ the
----------
Executive as the Senior Vice President-Customer Operations of the
Company, and the Executive hereby accepts such employment with the
Company, for the term set forth in Paragraph 1(b).
2. Duties. Paragraph 2 of the Employment Agreement is amended
------
and restated to read in its entirety as follows:
2. Duties. During the period of employment as provided
------
in Paragraph 1(b) hereof, the Executive shall serve as Senior Vice
President-Customer Operations of the Company and perform all duties
consistent with such positions at the direction of the Chief
Executive Officer of the Company or such other person not below the
rank of President as such Chief Executive Officer may designate. The
Executive shall devote her entire time during reasonable business
hours (reasonable sick leave and
<PAGE>
vacations excepted) and best efforts to fulfill faithfully, responsibly and
satisfactorily her duties hereunder.
3. Effect of Amendment. Except as expressly modified hereunder,
-------------------
the Employment Agreement shall remain in full force and effect. The parties
acknowledge and agree that the changes in the position titles and duties of the
Executive reflected in Paragraphs 1 and 2 of this Amendment, and any associated
changes in the Executive's reporting or supervisory responsibilities, do not
constitute "Good Reason" for purposes of Paragraph 7(c)(iv) of the Employment
Agreement.
4. Headings. The headings of paragraphs herein are included
--------
solely for convenience of reference and shall not control the meanings or
interpretation of any provisions of this Amendment.
5. Merger. The Employment Agreement, as amended by this
------
Amendment, contains the entire understanding between the parties hereto and
supersedes any prior or contemporary contracts, agreements, understandings
and/or negotiations, whether oral or written.
6. Counterparts. This Amendment may be executed in two or more
------------
counterparts each of which shall be deemed to be an original, but all of which
together shall be deemed to be one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this
Amendment as of the day and year first above written.
Attest: DUQUESNE LIGHT COMPANY
/s/ Diane S. Eismont By /s/ Wesley W. von Schack
- ----------------------------------- ----------------------------
Diane S. Eismont, Secretary Wesley W. von Schack,
Chairman and Chief
Executive Officer
EXECUTIVE
/s/ Dianna L. Green
--------------------------------
Dianna L. Green
2
<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,
------------------------------------------------------------------------
1995 1994 1993 1992 1991
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
FIXED CHARGES:
Interest on long-term debt $ 89,139 $94,646 $102,938 $119,179 $127,606
Other interest 2,599 1,095 2,387 1,749 1,773
Amortization of debt discount, premium and
expense-net 6,252 6,381 5,541 4,223 3,892
Portion of lease payments representing an interest
factor 44,386 44,839 45,925 60,721 64,189
-------- -------- -------- -------- --------
Total Fixed Charges $142,376 $146,961 $156,791 $185,872 $197,460
-------- -------- -------- -------- --------
EARNINGS:
Income from continuing operations $151,070 $147,449 $144,787 $149,768 $143,133
Income taxes 92,894* 84,191* 77,237 110,993 104,067
Fixed charges as above 142,376 146,961 156,791 185,872 197,460
-------- -------- -------- -------- --------
Total Earnings $386,340 $378,601 $378,815 $446,633 $444,660
-------- -------- -------- -------- --------
RATIO OF EARNINGS TO FIXED CHARGES 2.71 2.58 2.42 2.40 2.25
---- ---- ---- ---- ----
</TABLE>
Duquesne's share of the fixed charges of an unaffiliated coal supplier,
which amounted to approximately $3.4 million for the twelve months ended
December 31, 1995, has been excluded from the ratio.
*Earnings related to income taxes reflect a $13.5 million decrease for the
twelve months ended December 31, 1995, and December 31, 1994, due to a
financial statement reclassification related to SFAS 109. The Ratio of
Earnings to Fixed Charges absent this reclassification equals 2.81 and 2.67 for
the twelve months ended December 31, 1995 and December 31, 1994, respectively.
<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 30, 1996, appearing in the Annual Report
on Form 10-K of Duquesne Light Company for the year ended December 31, 1995.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Pittsburgh, Pennsylvania
March 29, 1996
<TABLE> <S> <C>
<PAGE>
<ARTICLE> UT
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE AUDITED
CONSOLIDATED FINANCIAL STATEMENTS ON PAGES 39 THROUGH 43 OF FORM 10-K, ANNUAL
REPFORT FOR DUQUESNE LIGHT COMPANY FOR THE YEAR ENDED DECEMBER 31, 1995 AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 2,978,903
<OTHER-PROPERTY-AND-INVEST> 169,405
<TOTAL-CURRENT-ASSETS> 202,381
<TOTAL-DEFERRED-CHARGES> 671,928
<OTHER-ASSETS> 45,048
<TOTAL-ASSETS> 4,067,665
<COMMON> 0
<CAPITAL-SURPLUS-PAID-IN> 837,265
<RETAINED-EARNINGS> 294,069
<TOTAL-COMMON-STOCKHOLDERS-EQ> 1,131,334
0
70,966<F1>
<LONG-TERM-DEBT-NET> 1,322,531
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 71,051
0
<CAPITAL-LEASE-OBLIGATIONS> 34,546
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 1,437,237
<TOT-CAPITALIZATION-AND-LIAB> 4,067,665
<GROSS-OPERATING-REVENUE> 1,179,784
<INCOME-TAX-EXPENSE> 88,665
<OTHER-OPERATING-EXPENSES> 849,520
<TOTAL-OPERATING-EXPENSES> 938,185
<OPERATING-INCOME-LOSS> 241,599
<OTHER-INCOME-NET> 6,697
<INCOME-BEFORE-INTEREST-EXPEN> 248,296
<TOTAL-INTEREST-EXPENSE> 97,226
<NET-INCOME> 151,070
5,320
<EARNINGS-AVAILABLE-FOR-COMM> 145,750
<COMMON-STOCK-DIVIDENDS> 144,000
<TOTAL-INTEREST-ON-BONDS> 95,391
<CASH-FLOW-OPERATIONS> 397,414
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>Includes Preference Stock
</TABLE>
<PAGE>
EXHIBIT 99.1
EXECUTIVE COMPENSATION OF
DUQUESNE LIGHT COMPANY EXECUTIVE
OFFICERS FOR 1995 AND SECURITY OWNERSHIP
OF DUQUESNE LIGHT COMPANY DIRECTORS
AND EXECUTIVE OFFICERS AS OF FEBRUARY 21, 1996
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 Light Company
("Duquesne") for service during the periods indicated. Messrs. von Schack,
Marshall, Schwass, and Roque are executive officers of DQE and Duquesne. The
titles listed are those held for Duquesne, and the amounts shown for 1994 and
1995 are for service to Duquesne only. Total compensation amounts are shown in
the DQE Proxy Statement. This information is incorporated here by reference.
Ms. Green is an executive officer of Duquesne only, and the amounts shown are
for services in that capacity.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation
------------------------------------ ------------------------------------------
Awards Payouts
----------------------------- ----------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Other Other Securities All
Annual Restricted Underlying 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 1995 375,320 166,079 149,150 0 141,926 (4) 0 3,794
Chairman, President 1994 393,360 163,240 155,272 0 155,000 0 4,014
and CEO 1993 440,000 154,880 355,847 0 59,860 0 4,497
D. D. Marshall 1995 199,033 73,998 23,814 0 54,212 (4) 0 3,660
President & COO 1994 171,638 48,450 6,997 0 52,813 0 4,033
1993 185,000 52,250 26,687 0 21,203 0 4,497
G. L. Schwass 1995 184,817 67,174 51,724 0 52,493 (4) 0 3,794
Senior Vice Pres. 1994 171,638 57,000 19,073 0 52,813 0 3,739
and CFO 1993 185,000 57,000 39,395 0 26,091 0 4,497
D. L. Green 1995 184,000 51,900 44,268 0 28,954 0 4,460
Sr. Vice President 1994 166,333 49,500 16,319 0 35,469 0 4,482
1993 160,500 49,500 34,480 0 13,931 0 4,497
V. A. Roque (5) 1995 149,275 44,783 183,478 (6) 0 27,067 (4) 0 3,830
Vice President and
General Counsel
</TABLE>
(1) The amount of any bonus 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 each year 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
<PAGE>
Exhibit 99.1
requirements. Amounts of All Other Compensation shown are Company match
contributions during 1993, 1994, and 1995 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 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
1993 stock options granted, Messrs. von Schack and Marshall have lost 6,107
and 939 stock options, respectively. Of the amount of 1994 stock options
granted, Messrs. von Schack and Marshall have lost 3,988 and 2,673 stock
options, respectively. Of the amount of 1995 stock options granted,
Messrs. von Schack and Marshall have lost 1,524 and 347 stock options,
respectively.
(4) The 1995 option figures have been adjusted to reflect the three-for-two
stock split effective May 24, 1995.
(5) Mr. Roque joined the Company on November 1, 1994 as General Counsel and was
elected Vice President and General Counsel on April 19, 1995.
(6) Reimbursement for moving expenses, including sale of residence and income
taxes.
Supplemental Tables
The following tables provide information with respect to options to
purchase DQE Common Stock and tandem stock appreciation rights in 1995 under the
Plan.
Option grants in 1995 were structured to align 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 $30.75 per share to $46.125 per
share), stockholder value would increase an estimated $1,225,824,642, while the
value of the grants to the individuals listed below would increase an estimated
.67% ($8,215,571) of the total gain realized by all stockholders.
OPTION/SAR GRANTS IN LAST FISCAL YEAR/(6)/
Individual Grants
<TABLE>
<CAPTION>
(a) (b) (c) (d) (e) (f)
Number of % of Total
Securities Options/SARs Exercise Grant
Underlying Granted to or Base Date
Options/SARS Employees Price Expiration Present
Name Granted (#) in Fiscal Year ($/Sh)(4) Date Value ($)(5)
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
W. W. von Schack 77,951 (1) 16.0% 21.6667 03/28/05 188,643 *
63,975 (2) 13.1% 23.9375 06/27/05 165,695 *
D. D. Marshall 10,793 (3) 1.8% 21.7500 07/31/98 19,751 *
752 (3) 0.1% 21.7500 07/23/01 1,654 *
11,625 (3) 2.0% 27.3750 07/23/01 32,434 *
34,448 (1) 7.1% 21.6667 03/28/05 83,365 *
G. L. Schwass 3,039 (3) 0.5% 21.6250 07/31/98 5,561 *
8,897 (3) 1.5% 21.6250 07/23/01 19,395 *
13,256 (3) 2.3% 27.3750 07/23/01 36,454 *
31,004 (1) 6.3% 21.6667 03/28/05 75,030 *
D. L. Green 23,954 (1) 4.1% 21.6667 03/28/05 57,969 *
5,000 (2) 0.8% 24.0625 06/26/05 13,100 *
V. A. Roque 20,669 (1) 4.2% 21.6667 03/28/05 50,019 *
6,398 (2) 1.3% 21.6667 03/28/05 15,482 *
</TABLE>
2
<PAGE>
* 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) These grants represent performance stock options with tandem stock
appreciation rights. The Compensation Committee determined the number of
stock option/stock appreciation rights that will vest in 1996 based on 1995
performance. Fifty percent of the award vests immediately, although there
is a six-month holding period, 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 do not include dividend equivalents.
(2) These grants represent performance stock options with dividend equivalents
which are not presently exercisable. Awards are made over a three-year
period and are determined on the basis of individual achievement of
strategic goals and objectives.
(3) These grants represent stock-for-stock (reload) options received upon
exercise of stock options by the applicable officer electing to use
previously owned DQE stock to exercise the options under the terms of the
Plan. These reload options include tandem stock appreciation rights and
dividend equivalent accounts.
(4) 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 held for at
least six months.
(5) 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 28, 2005
($21.6667 exercise price); June 26, 2005 ($24.0625 exercise price); June
27, 2005 ($23.9375 exercise price); July 31, 1998 ($21.6250 and $21.7500
exercise prices); July 23, 2001 ($21.7500, $27.3750 [D. D. Marshall],
$21.6250, and $27.3750 [G. L. Schwass] exercise prices) was calculated
assuming an option life of 10.0; 10.0; 10.0, 3.5; 3.5; 6.5; 5.7; 6.5; and
5.7 years, respectively; 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 (7.14%; 6.11%, 6.14%;
7.42%; 7.34%; 7.45%, 5.84%, 7.51%, and 5.76%, respectively); a quarterly
dividend of $0.30 as of the option grant date (split adjusted for grants
prior to May 24, 1995), with an expected growth rate of 4.5% per year as
estimated by "Value Line"; and an expected stock price volatility over the
same length of time as the option life, as reported on the grant date
(17.85%; 18.13%; 18.13%, 12.03%; 12.03%; 13.47%; 12.64%; 13.47%; and 12.83%
per month, respectively). No adjustments to the grant date present values
have been made with respect to exercise restrictions, cancellation, or
early exercise.
(6) All grants have been adjusted to reflect the DQE three-for-two stock split
effective May 24, 1995.
3
<PAGE>
Aggregated Option/SAR Exercises in Last Fiscal Year
and Fiscal Year-End Option/SAR Values
<TABLE>
<CAPTION>
(a) (b) (c) (d) (e)
Number of Value of
Securities Unexercised
Underlying Unexercised in-the-Money
Number of Options/SARs at Options/SARs at
Securities Fiscal Year-End (#)(6) Year-End ($)(7)
Underlying Value ----------------------- ------------------
Options/SARs Realized Exercisable/ Exercisable/
Name Exercised (#) ($)(5) Unexercisable Unexercisable
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
W. W. von Schack 55,313 (1) 657,992 419,265 / 59,601 4,901,739 / 603,922
D. D. Marshall 22,300 (2) 280,302 73,435 / 29,618 815,276 / 221,943
49,214 (3) 307,458
G. L. Schwass 23,581 (2) 225,243 132,585 / 33,754 1,425,169 / 252,036
36,654 (1) 398,320
D. L. Green 35,136 (1) 215,273 83,897 / 17,300 1,127,638 / 174,301
V. A. Roque 0 0 3,938 / 0 42,333 / 0
</TABLE>
(1) Stock appreciation rights exercised for stock and cash.
(2) Stock options exercised for stock by tendering shares of previously-owned
DQE Common Stock.
(3) Stock appreciation rights exercised for cash.
(4) Stock options exercised for stock by tendering cash.
(5) 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.
(6) The numbers set forth do not include options/SARs previously granted
(including those granted in 1995) but not yet earned. The number to be
earned will be based on individual performance and could range from zero to
the following numbers for the named officers, respectively: 248,885
($2,200,384); 73,097 ($712,960); 77,135 ($749,639); 48,454 ($454,142); and
42,793 ($407,138). These options may be earned by the officer over future
periods from one to three years as established with each option grant.
(7) Represents the difference between the exercise price of the options or SARs
and the fair market value of DQE Common Stock at December 29, 1995.
4
<PAGE>
Retirement Plan
The following table illustrates the estimated annual benefits payable at
the normal retirement age of 65 to management employees in the specified
earnings classifications and years of service shown:
PENSION PLAN TABLE
<TABLE>
<CAPTION>
Highest
Consecutive
Five-Year Years of Service
Average ------------------------------------------------------------------------
Compensation 5 10 15 20 25 30 35
- ------------ --------- ---------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
$125,000 $10,000 $ 21,000 $ 31,000 $ 41,000 $ 51,000 $ 59,000 $ 65,000
$150,000 $13,000 $ 25,000 $ 38,000 $ 50,000 $ 63,000 $ 72,000 $ 80,000
$175,000 $15,000 $ 30,000 $ 44,000 $ 59,000 $ 74,000 $ 85,000 $ 94,000
$200,000 $17,000 $ 34,000 $ 51,000 $ 68,000 $ 85,000 $ 98,000 $108,000
$300,000 $26,000 $ 52,000 $ 78,000 $104,000 $130,000 $150,000 $165,000
$400,000 $35,000 $ 70,000 $105,000 $140,000 $175,000 $201,000 $221,000
$500,000 $44,000 $ 88,000 $132,000 $176,000 $220,000 $253,000 $278,000
$600,000 $53,000 $106,000 $159,000 $212,000 $265,000 $304,000 $334,000
$700,000 $62,000 $124,000 $186,000 $248,000 $310,000 $356,000 $391,000
$800,000 $71,000 $142,000 $213,000 $284,000 $355,000 $408,000 $448,000
$900,000 $80,000 $160,000 $240,000 $320,000 $400,000 $459,000 $504,000
$950,000 $85,000 $169,000 $254,000 $338,000 $423,000 $485,000 $532,000
</TABLE>
Compensation utilized for pension formula purposes includes salary and
bonus reported in columns (c) and (d) of the Summary Compensation Table and
stock option compensation prior to March 1, 1994. 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 if commenced prior to age 60 or
upon election 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 also subject to offset by other retirement plans
under certain conditions.
The credited years of service for Messrs. von Schack, Marshall, and Schwass
are 30, 18, and 20, respectively. Ms. Green had 15 years of credited service
and current five-year covered compensation of $205,499. Mr. Roque had 2 years
of credited service and current covered compensation from date of hire on
November 1, 1994 of $175,000.
Employment Agreements
DQE and Duquesne entered into a four-year employment agreement with Mr. von
Schack and three-year agreements with Messrs. Schwass and Marshall. Duquesne
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 officer 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. Schwass and Marshall; 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.
5
<PAGE>
If any of the officers 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 officer 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.
Beneficial Ownership of Stock
The following list shows all equity securities of DQE (Common Stock only)
and Duquesne (Preferred and Preference Stock only), beneficially owned by all
directors and executive officers of Duquesne as a group (20 persons) as of
February 21, 1996, including shares owned by officers and directors jointly with
other persons:
<TABLE>
<CAPTION>
Shares Shares
Beneficially Outstanding
Title of Class Owned February 21, 1996
- ----------------------- ------------ -----------------
<S> <C> <C>
Common Stock........... 112,896 109,679,154
Preference Stock....... 4,178 834,429
Preferred Stock........ 0 1,209,419
</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 as of February 21, 1996.
6
<PAGE>
The following list shows all equity securities of DQE and Duquesne
beneficially owned, directly or indirectly, by each director and by each
executive officer named in the Summary Compensation Table as of February 21,
1996:
<TABLE>
<CAPTION>
Total Shares of Shares of
Shares of Common Stock/ Duquesne Light
Common Nature of Co. Preference
Stock Ownership(1) Stock, Plan Series A (7)
----------- ------------------------ ------------------------
<S> <C> <C> <C>
Daniel Berg........... 2,385 735 VP, IP
1,650 Joint, SVP, SIP
Doreen E. Boyce....... 1,570 1,570 VP, IP
Robert P. Bozzone..... 12,900 (2) 5,900 VP, IP
7,000 VP, IP
Sigo Falk............. 3,516 (3) 2,016 VP, IP
1,500 SVP, SIP
William H. Knoell..... 2,685 (4) 1,650 VP, IP
1,035 SVP, SIP
David D. Marshall..... 10,287 (5) 10,287 Joint, SVP, SIP 539
Robert Mehrabian...... 1,655 (6) 155 VP, IP
1,500 SVP, SIP
Thomas J. Murrin...... 900 150 VP, IP
750 Joint, SVP, SIP
Robert B. Pease....... 1,516 1,346 VP, IP
170 Joint, SVP, SIP
Eric W. Springer...... 2,414 2,414 VP, IP
Wesley W. von Schack.. 27,708 (5) 27,708 VP, IP 543
Gary L. Schwass....... 14,072 (5) 14,072 VP, IP 541
Dianna L. Green....... 14,088 (5) 14,088 VP, IP 543
Victor A. Roque....... 342 342 VP, IP 107
</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) 7,000 of these shares are held by a foundation established for charitable
purposes, for which Mr. Bozzone is the trustee but not an income
beneficiary.
(3) 1,500 of these shares are held by a trust in which Mr. Falk is an income
beneficiary but not a trustee.
(4) 1,035 of these shares are held by a trust in which Mr. Knoell is a trustee
and the income beneficiary.
(5) The amounts shown as owned by Messrs. von Schack, Marshall, and Schwass,
Ms. Green and Mr. Roque do not include shares of Common Stock which they
have the right to acquire within 60 days of February 21, 1996 through the
exercise of stock options granted under the Long-Term Incentive Plan in the
following amounts: 249,047; 76,796; 42,677; 54,102; and 3,938;
respectively, and all executive officers as a group: 582,662 shares.
(6) 1,500 of these shares are held by a Keogh trust in which Dr. Mehrabian is
the sole trustee; he and his spouse are the beneficiaries.
(7) The preference shares are held by the ESOP trustee for DQE'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.
7
<PAGE>
Directors' Fees and Plans
Directors who are not employees receive an annual Board retainer of $15,000
in cash for service to DQE and its affiliates, payable in twelve monthly
installments, and 150 shares of DQE Common Stock. Each director also receives a
fee of $1,000 for each Board and committee meeting attended. Directors who are
employees of Duquesne or any of its affiliates receive no fees for their
services as directors.
Each director under the age of 72 who is not an employee 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 and Robert Mehrabian elected to participate in the Plan for 1995.
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 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 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 five hundred
thousand dollars each to one or more qualifying charitable organizations
recommended by each of the two directors and reviewed and approved by the
Employment and Community Relations Committee. 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
and Falk. No member of the Compensation Committee was at any time during 1995
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.
8
<PAGE>
EXHIBIT 99.2
Board of Directors
(All Terms 3 Years)
Daniel Berg
66. 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
Engineers.
Doreen E. Boyce
61. Term expires 1998 (2, 5). President of the Buhl Foundation (supports
educational and community programs). Directorships include Microbac
Laboratories, Inc. and Dollar Bank, Federal Savings Bank. Trustee of Franklin &
Marshall College.
Robert P. Bozzone
62. 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
61. Term expires 1996 (2, 3, 4). Management of personal investments.
Chairman of Maurice Falk Medical Fund and Chatham College Board of Trustees.
Directorships include the Historical Society of Western Pennsylvania and the
Allegheny Land Trust.
William H. Knoell
71. 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.
David D. Marshall
43. Term expires 1998 (5, 6). Executive Vice President of DQE; President and
Chief Operating Officer of Duquesne Light. Directorships include Southwestern
Pennsylvania Industrial Resource Center (economic development). Trustee, Vice
President and Secretary of Penn's Southwest Association (economic development).
Robert Mehrabian
54. Term expires 1998 (1, 5, 6). 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), and Mellon Bank Corporation.
Thomas J. Murrin
66. 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. Member of the
Executive Committee of the U.S. Council on Competitiveness and Chairman of the
District Export Council.
Robert B. Pease
70. Term expires 1996 (1, 5). Senior Vice President, National Development
Corporation (real estate); Executive Director, Allegheny Conference on
Community Development, 1968-91. Directorships include Regional Industrial
Development Corporation of Southwestern Pennsylvania.
Eric W. Springer
66. Term expires 1996 (1, 4). Partner of Horty, Springer and Mattern, P.C.
(attorneys-at-law). Directorships include Presbyterian University Hospital.
Past president of the Allegheny County Bar Association.
Wesley W. von Schack
51. Term expires 1996 (3, 4, 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., the Pittsburgh
branch of the Federal Reserve Bank of Cleveland; Chairman, the Regional
Industrial Development Corporation of Southwestern Pennsylvania, and the
Pittsburgh Cultural Trust. Also a life trustee of Carnegie Mellon University.
DQE/Duquesne Light Committees:
1. Audit
2. Compensation
3. Finance
4. Nominating
Duquesne Light Committees:
5. Employment and
Community Relations
6. Nuclear Review
20 DQE 1995 Annual Report
