Filed Pursuant to Rule 424(b)(5)
Registration No. 33-61845
PROSPECTUS SUPPLEMENT
(To Prospectus Dated August 23, 1995)
(ALABAMA POWER LOGO)
<TABLE>
<S> <C>
1,520,000 SHARES 6,480,000 SHARES
5.83% CLASS A PREFERRED STOCK 5.20% CLASS A PREFERRED STOCK
CUMULATIVE, PAR VALUE $1 PER SHARE CUMULATIVE, PAR VALUE $1 PER SHARE
(STATED CAPITAL $25 PER SHARE) (STATED CAPITAL $25 PER SHARE)
</TABLE>
---------------------------
This Prospectus Supplement of Alabama Power Company ("ALABAMA") relates to
1,520,000 shares of 5.83% Class A Preferred Stock, Cumulative, Par Value $1 Per
Share (Stated Capital $25 Per Share) (the "Old Money Preferred Stock") and
6,480,000 shares of 5.20% Class A Preferred Stock, Cumulative, Par Value $1 Per
Share (Stated Capital $25 Per Share) (the "New Money Preferred Stock" and,
together with the Old Money Preferred Stock, the "new Stock").
ALABAMA shall have the right to redeem the new Stock of each series, in
whole or in part, without premium, from time to time, on or after August 19,
2008, upon not less than 30 nor more than 60 days' notice, at a redemption price
equal to 100% of the stated capital plus accrued dividends to the redemption
date.
The Class A Preferred Stock ranks on a parity as to dividends and assets
with ALABAMA's Preferred Stock (par value $100 per share).
The amount of dividends payable in respect of the New Money Preferred Stock
will be adjusted in the event of certain amendments to the Internal Revenue Code
of 1986, as amended, in respect of the dividends-received deduction. See
"Certain Terms of the New Stock -- Dividend Rights."
ALABAMA will be allowed a partial federal income tax deduction for the
dividends paid on the Old Money Preferred Stock and, therefore, corporate
holders of the Old Money Preferred Stock will be subject to the limited
deduction for dividends received provided for in Section 244(a) of the Internal
Revenue Code of 1986, as amended. See "Certain Terms of the New Stock -- Federal
Income Tax Effect on Dividends" herein.
Application will be made to list the new Stock of each series on the New
York Stock Exchange (the "NYSE"). Listing will be subject to meeting the
requirements of the NYSE, including those relating to distribution.
---------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
PRICE TO UNDERWRITING DISCOUNTS PROCEEDS TO
PUBLIC(1) AND COMMISSIONS(2) ALABAMA(3)
<S> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------
Per Share of new Stock........................ $25.00 $.50 $24.50
- -------------------------------------------------------------------------------------------------------------------------
Total......................................... $200,000,000 $4,000,000 $196,000,000
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Plus accrued dividends, if any, from the date of original issue.
(2) ALABAMA has agreed to indemnify the Underwriter against certain liabilities,
including liabilities under the Securities Act of 1933, as amended. See
"Underwriting."
(3) Before deducting expenses payable by ALABAMA estimated at $386,000.
---------------------------
The new Stock is offered, subject to prior sale, when, as and if accepted
by the Underwriter and subject to approval of certain legal matters by Dewey
Ballantine LLP, counsel for the Underwriter. It is expected that delivery of the
new Stock will be made on or about August 19, 1998 at the offices of Lehman
Brothers Inc. or through the facilities of The Depository Trust Company against
payment therefor in immediately available funds.
---------------------------
LEHMAN BROTHERS
August 10, 1998
<PAGE>
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE NEW STOCK OFFERED
HEREBY, INCLUDING OVER-ALLOTMENT, STABILIZING TRANSACTIONS AND PURCHASING NEW
STOCK TO COVER SHORT POSITIONS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE
"UNDERWRITING" HEREIN.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents have been filed with the Securities and Exchange
Commission (the "Commission") pursuant to the Securities Exchange Act of 1934,
as amended (the "1934 Act"), and are incorporated herein by reference and made a
part of this Prospectus Supplement and the accompanying Prospectus:
(a) ALABAMA's Annual Report on Form 10-K for the fiscal year ended December
31, 1997;
(b) ALABAMA's Quarterly Report on Form 10-Q for the quarter ended March 31,
1998; and
(c) ALABAMA's Current Reports on Form 8-K dated February 11, 1998, February
20, 1998, April 17, 1998 and August 5, 1998.
All documents filed by ALABAMA with the Commission pursuant to Section
13(a), 13(c), 14 or 15(d) of the 1934 Act subsequent to the date of this
Prospectus Supplement and prior to the termination of this offering shall be
deemed to be incorporated herein by reference and made a part of this Prospectus
Supplement from the date of filing of such documents. Any statement contained in
a document incorporated or deemed to be incorporated by reference herein shall
be deemed to be modified or superseded for purposes of this Prospectus
Supplement to the extent that a statement contained herein or in any other
subsequently filed document which also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus Supplement.
ALABAMA WILL PROVIDE WITHOUT CHARGE TO EACH PERSON TO WHOM THIS PROSPECTUS
SUPPLEMENT IS DELIVERED, ON THE WRITTEN OR ORAL REQUEST OF ANY SUCH PERSON, A
COPY OF ANY OR ALL DOCUMENTS INCORPORATED HEREIN BY REFERENCE (OTHER THAN THE
EXHIBITS TO SUCH DOCUMENTS UNLESS SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED BY
REFERENCE). SUCH REQUESTS SHOULD BE DIRECTED TO WILLIAM B. HUTCHINS, III,
EXECUTIVE VICE PRESIDENT, CHIEF FINANCIAL OFFICER AND TREASURER, ALABAMA POWER
COMPANY, 600 NORTH 18TH STREET, BIRMINGHAM, ALABAMA 35291, TELEPHONE: (205)
257-2905.
S-2
<PAGE>
SELECTED FINANCIAL INFORMATION
The following material, which is presented herein solely to furnish limited
introductory information regarding ALABAMA, has been selected from, or is based
upon, the detailed information and financial statements appearing in the
documents incorporated herein by reference or elsewhere in this Prospectus
Supplement, is qualified in its entirety by reference thereto and, therefore,
should be read together therewith.
<TABLE>
<CAPTION>
12 MONTHS
YEAR ENDED DECEMBER 31, ENDED
-------------------------------------------------------------- JUNE 30,
1993 1994(2) 1995 1996 1997 1998(1)
---------- ---------- ---------- ---------- ---------- -----------
(UNAUDITED)
(THOUSANDS, EXCEPT RATIOS)
<S> <C> <C> <C> <C> <C> <C>
Operating Revenues........ $3,007,609 $2,935,142 $3,024,774 $3,120,775 $3,149,111 $3,296,000
Income Before Interest
Charges................. 606,093 592,540 625,850 625,354 643,142 723,400
Net Income After Dividends
on Preferred Stock...... 346,494 356,338 360,894 371,490 375,939 415,786
Ratio of Earnings to Fixed
Charges(3).............. 3.45 3.75 3.45 3.57 3.31 3.19
Ratio of Earnings to Fixed
Charges Plus Preferred
Dividend Requirements
(Pre-Income Tax
Basis)(4)............... 2.90 3.16 2.96 3.05 3.06 3.03
</TABLE>
<TABLE>
<CAPTION>
CAPITALIZATION
AS OF MARCH 31, 1998
-------------------------------
ACTUAL AS ADJUSTED(5)
---------- ------------------
(THOUSANDS, EXCEPT PERCENTAGES)
<S> <C> <C> <C>
Common Stock Equity......................................... $2,724,177 $2,754,177 44.2%
Cumulative Preferred Stock.................................. 255,512 417,512 6.7
Company Obligated Mandatorily Redeemable Preferred
Securities of Subsidiary Trusts Holding Company Junior
Subordinated Notes........................................ 297,000 297,000 4.8
Senior Notes................................................ 393,800 808,800 13.0
Other Long-Term Debt........................................ 2,149,726 1,951,726 31.3
---------- ---------- -----
Total, excluding amounts due within one year...... $5,820,215 $6,229,215 100.0%
========== ========== =====
</TABLE>
- ---------------
(1) See "Recent Results of Operations" herein.
(2) "Operating Revenues" for the year ended December 31, 1994, include an
adjustment due to a change in the estimating procedure for unbilled
kilowatt-hours and associated revenues.
(3) This ratio is computed as follows: (i) "Earnings" have been calculated by
adding to "Income Before Interest Charges" all income taxes deducted
therefrom and the debt portion of allowance for funds used during
construction, and (ii) "Fixed Charges" consist of "Net Interest Charges"
plus the debt portion of allowance for funds used during construction.
(4) In computing this ratio, "Preferred Dividend Requirements" represent the
before tax earnings necessary to pay such dividends, computed at the
effective tax rates for the applicable periods.
(5) Reflects (i) contributions to capital from The Southern Company in April
1998 in the amount of $30,000,000; (ii) the issuance in April 1998 of
$190,000,000 aggregate principal amount of Series C 7% Senior Notes due
March 31, 2048; (iii) the proposed issuance in August 1998 of $225,000,000
aggregate principal amount of Series D Senior Insured Quarterly Notes due
September 30, 2018; (iv) the proposed redemption in September 1998 of the
outstanding $198,000,000 aggregate principal amount of First Mortgage Bonds,
8 1/2% Series due May 1, 2022; (v) the proposed redemption in September 1998
of the outstanding 1,520,000 shares ($38,000,000 aggregate stated capital)
of 6.80% Preferred Stock; and (vi) the issuance of the new Stock.
S-3
<PAGE>
USE OF PROCEEDS
The proceeds from the sale of the new Stock will be applied by ALABAMA to
the redemption in September 1998 of 1,520,000 shares ($38,000,000 aggregate
stated capital) of its 6.80% Preferred Stock and to repay a portion of its
outstanding short-term indebtedness, which aggregated approximately $294,886,000
as of August 10, 1998. Such redemption is subject to ALABAMA's closing the sale
of the new Stock.
RECENT RESULTS OF OPERATIONS
For the twelve months ended June 30, 1998, the unaudited amounts of
"Operating Revenues," "Income Before Interest Charges" and "Net Income After
Dividends on Preferred Stock" were $3,296,000,000, $723,400,000 and
$415,786,000, respectively. In the opinion of the management of ALABAMA, the
above amounts for the twelve months ended June 30, 1998 reflect all adjustments
(which were only normal recurring adjustments) necessary to present fairly the
results of operations for such period. The "Ratio of Earnings to Fixed Charges"
and the "Ratio of Earnings to Fixed Charges Plus Preferred Dividend Requirements
(Pre-Income Tax Basis)" for the twelve months ended June 30, 1998 were 3.19 and
3.03, respectively.
CERTAIN TERMS OF THE NEW STOCK
The following description of certain terms of the new Stock offered hereby
supplements, and should be read together with, the statements under "Description
of New Stock" in the accompanying Prospectus.
Dividend Rights: Dividends on the new Stock of each series will be payable
at the rate shown in its title, on the first days of January, April, July and
October in each year (each a "Dividend Payment Date"). Dividends on the new
Stock of each series will be cumulative from the date of original issue and the
first dividend will be payable on October 1, 1998.
If, prior to 18 months after the date of the original issuance of the New
Money Preferred Stock, one or more amendments to the Internal Revenue Code of
1986, as amended (the "Code"), are enacted that reduce the percentage of the
dividends-received deduction for certain corporations (currently 70%) as
specified in Section 243(a)(1) of the Code or any successor provision (the
"Dividends-Received Percentage"), certain adjustments may be made in respect of
the dividends payable by ALABAMA on the New Money Preferred Stock, and Post
Declaration Date Dividends and Retroactive Dividends (as such terms are defined
below) may become payable on the New Money Preferred Stock, as described below.
The amount of each dividend payable (if declared) per share of New Money
Preferred Stock for dividend payments made on or after the effective date of
such change in the Code will be adjusted by multiplying the amount of the
dividend payable described above (before adjustment) by the following fraction
(the "DRD Formula"), and rounding the result to the nearest cent (with one-half
cent rounded up):
1-.35(1-.70)
---------------------
1-.35(1-DRP)
For the purposes of the DRD Formula, "DRP" means the Dividends-Received
Percentage (expressed as a decimal) applicable to the dividend in question;
provided, however, that if the Dividends-Received Percentage applicable to the
dividend in question shall be less than 50%, then the DRP shall equal .50. No
amendment to the Code, other than a change in the percentage of the
dividends-received deduction set forth in Section 243(a)(1) of the Code or any
successor provision thereto, will give rise to an adjustment. Notwithstanding
the foregoing provisions, if, with respect to any such amendment, ALABAMA
receives either an unqualified opinion of nationally recognized independent tax
counsel selected by ALABAMA or a private letter ruling or similar form of
authorization from the Internal Revenue Service ("IRS") to the effect that such
amendment does not apply to a dividend payable on the New Money Preferred Stock,
then such amendment will not result in the adjustment provided for pursuant to
the DRD Formula with respect to such dividend. The opinion referenced in the
previous sentence shall be based upon the legislation amending or establishing
the DRP or upon a published pronouncement of the IRS addressing such
legislation.
S-4
<PAGE>
Notwithstanding the foregoing, if any such amendment to the Code is enacted
after the dividend payable on a Dividend Payment Date has been declared, the
amount of the dividend payable on such Dividend Payment Date will not be
increased; instead, additional dividends (the "Post Declaration Date Dividends")
equal to the excess, if any, of (x) the product of the dividend paid by ALABAMA
on such Dividend Payment Date and the DRD Formula (where the DRP used in the DRD
Formula would be equal to the greater of the Dividend-Received Percentage
applicable to the dividend in question and .50) over (y) the dividend paid by
ALABAMA on such Dividend Payment Date, will be payable (if declared) to holders
of New Money Preferred Stock on the record date applicable to the next
succeeding Dividend Payment Date or, if the New Money Preferred Stock is called
for redemption prior to such record date, to holders of New Money Preferred
Stock on the applicable redemption date, as the case may be, in addition to any
other amounts payable on such date. Notwithstanding the foregoing provisions,
if, with respect to any such amendment, ALABAMA receives either an unqualified
opinion of nationally recognized independent tax counsel selected by ALABAMA or
a private letter ruling or similar form of authorization from the IRS to the
effect that such amendment does not apply to a dividend so payable on the New
Money Preferred Stock, then such amendment will not result in the payment of
Post Declaration Date Dividends. The opinion referenced in the previous sentence
shall be based upon the legislation amending or establishing the DRP or upon a
published pronouncement of the IRS addressing such legislation.
If any such amendment to the Code is enacted and the reduction in the
Dividends-Received Percentage retroactively applies to a Dividend Payment Date
as to which ALABAMA previously paid dividends on the New Money Preferred Stock
(each, an "Affected Dividend Payment Date"), ALABAMA will pay (if declared)
additional dividends (the "Retroactive Dividends") to holders of New Money
Preferred Stock on the record date applicable to the next succeeding Dividend
Payment Date (or, if such amendment is enacted after the dividend payable on
such Dividend Payment Date has been declared, to holders of New Money Preferred
Stock on the record date following the date of enactment) or, if the New Money
Preferred Stock is called for redemption prior to such record date, to holders
of New Money Preferred Stock on the applicable redemption date, as the case may
be, in an amount equal to the excess of (x) the product of the dividend paid by
ALABAMA on each Affected Dividend Payment Date and the DRD Formula (where the
DRP used in the DRD Formula would be equal to the greater of the
Dividends-Received Percentage and .50 applied to each Affected Dividend Payment
Date) over (y) the sum of the dividends paid by ALABAMA on each Affected
Dividend Payment Date. ALABAMA will only make one payment of Retroactive
Dividends for any such amendment. Notwithstanding the foregoing provisions, if,
with respect to any such amendment, ALABAMA receives either an unqualified
opinion of nationally recognized independent tax counsel selected by ALABAMA or
a private letter ruling or similar form of authorization from the IRS to the
effect that such amendment does not apply to a dividend payable on an Affected
Dividend Payment Date for the New Money Preferred Stock, then such amendment
will not result in the payment of Retroactive Dividends with respect to such
Affected Dividend Payment Date. The opinion referenced in the previous sentence
shall be based upon the legislation amending or establishing the DRP or upon a
published pronouncement of the IRS addressing such legislation.
Notwithstanding the foregoing, no adjustment in the dividends payable by
ALABAMA shall be made, and no Post Declaration Date Dividends or Retroactive
Dividends shall be payable by ALABAMA, in respect of the enactment of any
amendment to the Code 18 months or more after the date of original issuance of
the New Money Preferred Stock that reduces the Dividends-Received Percentage.
In the event that the amount of dividends payable per share of the New
Money Preferred Stock is adjusted pursuant to the DRD Formula and/or Post
Declaration Date Dividends or Retroactive Dividends are to be paid, ALABAMA will
give notice of each such adjustment and, if applicable, any Post Declaration
Date Dividends and Retroactive Dividends to the holders of New Money Preferred
Stock.
Unless the context otherwise requires, references to dividends on the New
Money Preferred Stock in this Prospectus Supplement and the accompanying
Prospectus means dividends as adjusted by the DRD Formula. ALABAMA's calculation
of the dividends payable, as so adjusted and as certified accurate as to
calculation and reasonable as to method by the independent certified public
accountants then regularly engaged by ALABAMA, shall be final and not subject to
review absent manifest error.
S-5
<PAGE>
Redemption Provisions: ALABAMA shall have the right to redeem the new
Stock of each series, in whole or in part, without premium, from time to time,
on or after August 19, 2008, upon not less than 30 nor more than 60 days'
notice, at a redemption price equal to 100% of the stated capital plus accrued
dividends to the redemption date.
Transfer Agent and Registrar: The new Stock of each series will be
transferable at the offices of Southern Company Services, Inc., 270 Peachtree
Street, N.W., Atlanta, Georgia 30303.
Restrictions on Common Stock Dividends: In December 1997, ALABAMA amended
its charter to eliminate the provisions restricting the payment of cash
dividends on ALABAMA's Common Stock as described in the accompanying Prospectus
under the caption "Description of New Stock -- Restrictions on Common Stock
Dividends."
Voting Rights: In December 1997, ALABAMA amended its charter to eliminate
the provisions giving the holders of Preferred Stock and Class A Preferred Stock
voting rights in connection with certain dispositions of property, mergers or
consolidations and the issuance by ALABAMA of unsecured debt in excess of
certain amounts, as described in the third paragraph under the caption
"Description of New Stock -- Voting Rights" in the accompanying Prospectus.
Sinking Fund: The holders of the new Stock will not be entitled to the
benefit of any sinking or purchase fund.
Federal Income Tax Effect on Dividends: The Old Money Preferred Stock will
be what is commonly referred to as "old money" preferred stock. ALABAMA will be
allowed a partial federal income tax deduction under Section 247(a) of the Code
with respect to dividends paid on the Old Money Preferred Stock. Accordingly,
corporate holders of the Old Money Preferred Stock will be subject to the
limited deduction for dividends received provided for in Section 244(a) of the
Code instead of the larger deduction provided for in Section 243(a) of the Code
which will apply to the New Money Preferred Stock. Corporations considering the
purchase of the Old Money Preferred Stock should consult their own tax advisors
concerning the tax effect of holding the Old Money Preferred Stock and the
applicability of Section 244(a) and other dividends received deduction
provisions of the Code to their particular situations.
UNDERWRITING
Lehman Brothers Inc. (the "Underwriter") has agreed, subject to the terms
and conditions of the Purchase Agreement, to purchase from ALABAMA the new
Stock. The Purchase Agreement provides that the Underwriter will be obligated to
purchase all of the new Stock if any shares are purchased.
ALABAMA has been advised by the Underwriter that it proposes to make a
public offering of the new Stock of each series at the public offering price set
forth on the cover page of this Prospectus Supplement; that the Underwriter may
allow to certain dealers a concession from the public offering price of $.25 per
share; that the Underwriter may allow and such dealers may reallow a concession
of $.15 per share to certain other dealers; and that after the initial public
offering, the public offering price and concessions may be changed.
ALABAMA has agreed to indemnify the Underwriter against certain civil
liabilities, including certain liabilities under the Securities Act of 1933, as
amended. The Underwriter has agreed to reimburse ALABAMA for certain expenses.
Prior to this offering, there has been no public market for the new Stock
of either series. The new Stock of each series is expected to be approved for
listing on the NYSE, subject to official notice of issuance. Trading of the new
Stock of each series on the NYSE is expected to commence within a 30-day period
after the initial delivery of the new Stock. The Underwriter has advised ALABAMA
that it intends to make a market in the new Stock of each series prior to the
commencement of trading on the NYSE. The Underwriter will have no obligation to
make a market in the new Stock of either series, however, and may cease market
making activities, if commenced, at any time.
S-6
<PAGE>
In order to facilitate the offering of the new Stock, the Underwriter may
engage in transactions that stabilize, maintain or otherwise affect the price of
the new Stock. Specifically, the Underwriter may over-allot in connection with
the offering, creating a short position in the new Stock for its own account. In
addition, to cover over-allotments or to stabilize the price of the new Stock,
the Underwriter may bid for, and purchase, new Stock in the open market. The
Underwriter may reclaim selling concessions allowed to a dealer for distributing
new Stock in the offering, if the Underwriter repurchases previously distributed
new Stock in transactions to cover short positions in stabilization transactions
or otherwise. Any of these activities may stabilize or maintain the market price
of the new Stock above independent market levels. The Underwriter is not
required to engage in these activities, and may end any of these activities at
any time.
The Underwriter engages in transactions with, and from time to time has
performed services for, ALABAMA and its affiliates in the ordinary course of
business.
LEGAL OPINIONS
The validity of the new Stock and certain matters relating thereto will be
passed upon on behalf of ALABAMA by Balch & Bingham LLP, Birmingham, Alabama,
and by Troutman Sanders LLP, Atlanta, Georgia. Certain legal matters will be
passed upon for the Underwriter by Dewey Ballantine LLP, New York, New York.
However, all matters of Alabama law will be passed upon only by Balch & Bingham
LLP.
EXPERTS
The financial statements and schedules of ALABAMA included in ALABAMA's
Annual Report on Form 10-K for the year ended December 31, 1997, incorporated by
reference herein, have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their reports with respect thereto, and are
incorporated herein in reliance upon the authority of said firm as experts in
accounting and auditing in giving said reports. With respect to ALABAMA's
unaudited interim financial information for the periods ended March 31, 1998 and
1997, included in ALABAMA's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1998 and incorporated by reference herein, Arthur Andersen LLP has
applied limited procedures in accordance with professional standards for review
of such information. However, their separate reports thereon state that they did
not audit and they do not express an opinion on such interim financial
information. Accordingly, the degree of reliance on their reports on such
information should be restricted in light of the limited nature of the review
procedures employed. In addition, the accountants are not subject to the
liability provisions of Section 11 of the Securities Act of 1933, as amended,
for their reports on the unaudited interim financial information because these
reports are not "reports" or "parts" of the registration statement prepared or
certified by the accountants within the meaning of Sections 7 and 11 of said
Act.
Statements as to matters of law and legal conclusions in ALABAMA's Annual
Report on Form 10-K for the year ended December 31, 1997, relating to titles to
property of ALABAMA under "Item 2 -- Properties -- Titles to Property", and
relating to ALABAMA under "Item 1 -- Business -- Regulation", "Item
1 -- Business -- Rate Matters" and "Item 1 -- Business -- Competition", have
been reviewed by Balch & Bingham LLP, general counsel for ALABAMA, and such
statements are made upon the authority of such firm as experts.
S-7
<PAGE>
PROSPECTUS
ALABAMA POWER COMPANY
A SUBSIDIARY OF THE SOUTHERN COMPANY
FIRST MORTGAGE BONDS
CLASS A PREFERRED STOCK
CUMULATIVE, PAR VALUE $1 PER SHARE
---------------------
Alabama Power Company ("ALABAMA") may sell its First Mortgage Bonds (the
"new First Mortgage Bonds") and Class A Preferred Stock, Cumulative, Par Value
$1 Per Share (the "new Class A Preferred Stock"), aggregating up to $442,000,000
in principal amount or stated capital, as the case may be, in one or more
transactions. See "Plan of Distribution."
An accompanying Prospectus Supplement (the "Prospectus Supplement") will
set forth the original principal amount, maturity date, interest rate
provisions, redemption provisions and other terms of each series of the new
First Mortgage Bonds and the number of shares, stated capital, dividend rate
provisions, redemption provisions and other terms of each series of the new
Class A Preferred Stock.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
---------------------
Dated August 23, 1995
<PAGE>
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS OR
ANY ACCOMPANYING PROSPECTUS SUPPLEMENT AND, IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS
PROSPECTUS AND ANY ACCOMPANYING PROSPECTUS SUPPLEMENT DO NOT CONSTITUTE AN OFFER
TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED
HEREBY OR THEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO
MAKE SUCH OFFER OR SOLICITATION IN SUCH JURISDICTION. NEITHER THE DELIVERY OF
THIS PROSPECTUS OR ANY ACCOMPANYING PROSPECTUS SUPPLEMENT NOR ANY SALE MADE
HEREUNDER OR THEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE THE IMPLICATION
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF ALABAMA SINCE THE RESPECTIVE
DATES OF THIS PROSPECTUS AND ANY SUCH PROSPECTUS SUPPLEMENT.
---------------------
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICES OF THE SECURITIES
HEREBY OFFERED OR OTHER SECURITIES OF ALABAMA AT LEVELS ABOVE THOSE WHICH MIGHT
OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE
NEW YORK STOCK EXCHANGE, IN THE OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
---------------------
ALABAMA is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports and other information with the Securities and Exchange
Commission ("SEC"). Such reports and other information can be inspected and
copied at the offices of the SEC at Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C.; 500 West Madison Street, Suite 1400, Chicago,
Ill.; and 13th Floor, Seven World Trade Center, New York, N.Y. Copies of this
material can also be obtained at prescribed rates from the Public Reference
Section of the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549. Certain
securities of ALABAMA are listed on the New York Stock Exchange, and reports and
other information concerning ALABAMA can be inspected at the office of such
Exchange.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, which have heretofore been filed by ALABAMA with
the SEC pursuant to the Exchange Act, are incorporated by reference in this
Prospectus and shall be deemed to be a part hereof:
1. Annual Report on Form 10-K for the year ended December 31, 1994.
2. Quarterly Reports on Form 10-Q for the quarters ended March 31,
1995 and June 30, 1995.
3. Current Report on Form 8-K dated February 15, 1995.
All documents subsequently filed by ALABAMA with the SEC pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act prior to the termination
of the offering hereunder shall be deemed to be incorporated by reference in
this Prospectus and to be made a part hereof from their respective dates of
filing.
ALABAMA HEREBY UNDERTAKES TO PROVIDE WITHOUT CHARGE TO EACH PERSON TO WHOM
A COPY OF THIS PROSPECTUS HAS BEEN DELIVERED, ON THE WRITTEN OR ORAL REQUEST OF
ANY SUCH PERSON, A COPY OF ANY OR ALL OF THE DOCUMENTS REFERRED TO ABOVE WHICH
HAVE BEEN OR MAY BE INCORPORATED BY REFERENCE IN THIS PROSPECTUS, OTHER THAN
EXHIBITS TO SUCH DOCUMENTS. REQUESTS FOR SUCH COPIES SHOULD BE DIRECTED TO ART
P. BEATTIE, VICE PRESIDENT, SECRETARY AND TREASURER, ALABAMA POWER COMPANY, 600
NORTH 18TH STREET, BIRMINGHAM, ALABAMA 35291, (205) 250-2505.
2
<PAGE>
SELECTED INFORMATION
The following material, which is presented herein solely to furnish limited
introductory information regarding ALABAMA, has been selected from, or is based
upon, the detailed information and financial statements appearing in the
documents incorporated herein by reference or elsewhere in this Prospectus, is
qualified in its entirety by reference thereto and, therefore, should be read
together therewith.
ALABAMA POWER COMPANY
<TABLE>
<S> <C>
Business...................... Generation, transmission, distribution and sale of electric
energy
Service Area.................. Approximately 44,500 square miles comprising most of the
State of Alabama
Service Area Population
(1990 Census)............... Approximately 3,224,000
Customers at December 31,
1994........................ 1,211,270
Generating Capacity at
December 31, 1994
(kilowatts)................. 9,921,263
Sources of Generation during
1994 (kilowatt-hours)....... Coal (68%), Nuclear (23%), Hydro (9%), Oil and Gas (less
than 0.5%)
Sources of Generation
Estimated for 1995
(kilowatt-hours)............ Coal (74%), Nuclear (19%), Hydro (7%), Oil and Gas (less
than 0.5%)
</TABLE>
SELECTED FINANCIAL INFORMATION
<TABLE>
<CAPTION>
12 MONTHS
ENDED
YEAR ENDED DECEMBER 31, JULY 31,
-------------------------------------------------------------- 1995(1)
1990 1991 1992 1993 1994 (UNAUDITED)
---------- ---------- ---------- ---------- ---------- -----------
(THOUSANDS, EXCEPT RATIOS)
<S> <C> <C> <C> <C> <C> <C>
Operating Revenues(2)............. $2,722,424 $2,846,794 $2,846,840 $3,007,609 $2,935,142 $2,934,247
Income Before Interest Charges.... $ 576,576 $ 613,955 $ 605,673 $ 606,093 $ 592,540 $ 596,488
Net Income After Dividends on
Preferred Stock................. $ 312,803 $ 339,666 $ 338,555 $ 346,494 $ 356,338 $ 348,705
Ratio of Earnings to Fixed
Charges(3)...................... 3.10 3.30 3.41 3.45 3.75 3.55
Ratio of Earnings to Fixed Charges
Plus Preferred Dividend
Requirements (Pre-Income Tax
Basis)(4)....................... 2.53 2.71 2.79 2.90 3.16 3.01
</TABLE>
<TABLE>
<CAPTION>
CAPITALIZATION (UNAUDITED) AS OF
JUNE 30, 1995
---------------------------------
ACTUAL AS ADJUSTED(5)
---------- -------------------
(THOUSANDS, EXCEPT PERCENTAGES)
<S> <C> <C> <C>
Common Stock Equity........................................ $2,627,132 $2,627,132 44.5%
Cumulative Preferred Stock................................. 440,400 540,400 9.1
Long-Term Debt............................................. 2,396,604 2,738,604 46.4
---------- ---------- -----
Total, excluding amounts due within one year..... $5,464,136 $5,906,136 100.0%
========== ========== =====
</TABLE>
- ---------------
(1) See "Recent Results of Operations" herein.
(2) "Operating Revenues" for the year ended December 31, 1990 include amounts
relating to certain energy sales (including sales to affiliates) that
formerly were classified as purchased and interchanged power, net. Such
amounts were reclassified to "Operating Revenues" effective December 31,
1991 in accordance
3
<PAGE>
with accounting requirements of the Federal Energy Regulatory Commission.
"Operating Revenues" for the year ended December 31, 1994, and the twelve
months ended July 31, 1995, include an adjustment due to a change in the
estimating procedure for unbilled kilowatt-hours and associated revenues.
See note 3 to the financial statements of ALABAMA included in ALABAMA's
Annual Report on Form 10-K for the year ended December 31, 1994,
incorporated herein by reference.
(3) This ratio is computed as follows: (i) "Earnings" have been calculated by
adding to "Income Before Interest Charges" all income taxes deducted
therefrom and the debt portion of allowance for funds used during
construction; and (ii) "Fixed Charges" consist of "Net Interest Charges"
plus the debt portion of allowance for funds used during construction.
(4) In computing this ratio, "Preferred Dividend Requirements" represent the
before income tax earnings necessary to pay such dividends, computed at the
effective tax rates for the applicable periods.
(5) Reflects the sale of the new First Mortgage Bonds and new Class A Preferred
Stock, assuming amounts of $342,000,000 and $100,000,000, respectively, and
no corresponding redemptions or other retirements of outstanding
securities.
ALABAMA POWER COMPANY
ALABAMA is a corporation organized under the laws of the State of Alabama
on November 10, 1927, by the consolidation of a predecessor Alabama Power
Company, Gulf Electric Company and Houston Power Company. The predecessor
Alabama Power Company had a continuous existence since its incorporation in
1906. The principal executive offices of ALABAMA are located at 600 North 18th
Street, Birmingham, Alabama 35291, and the telephone number is (205) 250-1000.
ALABAMA is a wholly-owned subsidiary of The Southern Company, a holding
company registered under the Public Utility Holding Company Act of 1935. ALABAMA
is engaged, within the State of Alabama, in the generation and purchase of
electricity and the distribution and sale of such electricity at retail in over
1,000 communities (including Anniston, Birmingham, Gadsden, Mobile, Montgomery
and Tuscaloosa), and at wholesale to 15 municipally-owned electric distribution
systems, 11 of which are served indirectly through sales to the Alabama
Municipal Electric Authority, and two rural distributing cooperative
associations. ALABAMA also supplies steam service in downtown Birmingham.
ALABAMA owns coal reserves near its Gorgas Steam-Electric Generating Plant and
uses the output of coal from these reserves in its generating plants. It also
sells, and cooperates with dealers in promoting the sale of, electric
appliances.
ALABAMA and one of its affiliates, Georgia Power Company ("GEORGIA"), each
own 50% of the common stock of Southern Electric Generating Company ("SEGCO").
SEGCO owns generating units with an aggregate capacity of 1,019,680 kilowatts at
the Ernest C. Gaston Steam Plant ("Plant Gaston") on the Coosa River near
Wilsonville, Alabama. ALABAMA and GEORGIA are each entitled to one-half of the
capacity and energy of these units. ALABAMA acts as SEGCO's agent in the
operation of SEGCO's units and furnishes coal to SEGCO as fuel for its units.
SEGCO also owns three 230,000 volt transmission lines extending from Plant
Gaston to the Georgia state line.
USE OF PROCEEDS
Except as may be otherwise described in a Prospectus Supplement, the
proceeds from the sale of the new First Mortgage Bonds and new Class A Preferred
Stock will be used in connection with ALABAMA's ongoing construction program, to
pay scheduled maturities and/or refundings of its securities, to repay short-
term indebtedness to the extent outstanding and for other general corporate
purposes.
RECENT RESULTS OF OPERATIONS
For the twelve months ended July 31, 1995, the unaudited amounts of
"Operating Revenues", "Income Before Interest Charges", and "Net Income After
Dividends on Preferred Stock" were $2,934,247,000, $596,488,000 and
$348,705,000, respectively. In the opinion of the management of ALABAMA, the
above amounts for the twelve months ended July 31, 1995 reflect all adjustments
(which were only normal recurring
4
<PAGE>
adjustments, except as indicated in Note 2 to the Selected Financial Information
above) necessary to present fairly the results of operations for such period.
The "Ratio of Earnings to Fixed Charges" and the "Ratio of Earnings to Fixed
Charges Plus Preferred Dividend Requirements (Pre-Income Tax Basis)" for the
twelve months ended July 31, 1995 were 3.55 and 3.01, respectively.
DESCRIPTION OF NEW BONDS
The new First Mortgage Bonds may be issued and sold by ALABAMA in one or
more series. In the following description, references to the "new Bonds" and the
"new Supplemental Indenture" (as hereinafter defined) are to new First Mortgage
Bonds of the particular series referred to in the Prospectus Supplement and the
new Supplemental Indenture pursuant to which such series is issued.
General: The new Bonds are to be issued under the Indenture dated as of
January 1, 1942, between ALABAMA and Chemical Bank, as Trustee, as supplemented
by various supplemental indentures and as to be further supplemented by a
Supplemental Indenture to be dated as of the first day of the calendar month
during which the new Bonds are issued (the "new Supplemental Indenture"), all of
which are exhibits to the registration statement of which this Prospectus is a
part or incorporated by reference therein and are collectively referred to as
the "Mortgage". The statements herein concerning the new Bonds and the Mortgage
are an outline and do not purport to be complete descriptions thereof. They make
use of defined terms and are qualified in their entirety by express reference to
the cited sections and articles of the Mortgage.
The new Bonds will mature on the date shown in their title as set forth in
the Prospectus Supplement.
The new Bonds in definitive form will be issued only as registered bonds
without coupons in denominations of $1,000 or authorized multiples thereof or in
such other denominations as set forth in the Prospectus Supplement. New Bonds
will be exchangeable for a like aggregate principal amount of new Bonds of other
authorized denominations, and are transferable, at the principal corporate trust
office of the Trustee in New York City, or at such other office or agency of
ALABAMA as ALABAMA may from time to time designate, without payment of any
charge other than for any tax or taxes or other governmental charge.
Any proposed listing of the new Bonds on a securities exchange will be
described in the Prospectus Supplement.
Except as otherwise may be indicated in the Prospectus Supplement, there
are no provisions of the Mortgage which are specifically intended to afford
holders of the new Bonds protection in the event of a highly leveraged
transaction involving ALABAMA.
Interest Rate Provisions: The Prospectus Supplement will set forth the
interest rate provisions of the new Bonds, including payment dates, the record
dates and the rate or rates, or the method of determining the rate or rates
(which may involve periodic interest rate settings through remarketing or
auction procedures or pursuant to one or more formulae, as described in the
Prospectus Supplement).
Redemption Provisions: The redemption provisions applicable to the new
Bonds will be described in the Prospectus Supplement.
Priority and Security: The new Bonds will rank equally as to security with
the bonds of other series presently outstanding under the Mortgage, which is a
direct first lien on substantially all of ALABAMA's fixed property and
franchises, used or useful in its public utility business, subject only to
excepted encumbrances, as defined in the Mortgage (Section 1.02).
The Mortgage permits, within certain limitations specified in Section 7.05,
the acquisition of property subject to prior liens. Under certain conditions
specified in Section 7.14, additional indebtedness secured by such prior liens
may be issued to the extent of 60% of the cost to ALABAMA or the fair value at
date of acquisition, whichever is less, of the net property additions made by
ALABAMA to the property subject to such prior lien.
Improvement Fund Requirement: Pursuant to the new Supplemental Indenture
and similar provisions of the supplemental indentures creating other series of
bonds currently outstanding under the Mortgage (other
5
<PAGE>
than nine series of bonds aggregating $459,340,000 in principal amount issued
and outstanding as of June 30, 1995 as collateral security for certain
obligations), the annual improvement fund requirement applicable to the new
Bonds and the bonds of each such other series, which must be satisfied on or
before June 1 in each year, is equal to 1% of the principal amount of bonds
authenticated of each such series prior to January 1 of that year (less bonds of
such series retired directly or indirectly as a result of the release of
property). The improvement fund requirements may be satisfied in cash or in
principal amount of bonds authenticated under the Mortgage or to the extent of
60% of the cost or fair value, whichever is less, of unfunded net property
additions. Any cash so deposited is to be used by the Trustee for the redemption
at their then special redemption prices or other retirement of bonds of such
series as may be designated by ALABAMA (subject to such limitation, if any, as
to the new Bonds as set forth in the Prospectus Supplement and except as to
limitations which have been or may be established in the supplemental indentures
creating other series of bonds) or may be withdrawn by ALABAMA against the
deposit of bonds or to the extent of 60% of unfunded net property additions.
Replacement Requirement: By Section 4 of the Supplemental Indenture dated
as of October 1, 1981, ALABAMA is required to certify to the Trustee unfunded
net property additions or to deposit with the Trustee cash or bonds in an amount
equal to the amount by which annual expenditures for renewals and replacements
are less than 2.25% of the average annual amount of depreciable mortgaged
property or such revised percentage as shall be authorized or approved by the
SEC, or any successor commission, under the Public Utility Holding Company Act
of 1935. Any available replacement credit may be carried forward and deposited
cash or bonds may be withdrawn, used or applied in accordance with the
provisions of said section.
Any limitation on the right of ALABAMA to redeem new Bonds through the
operation of the replacement provisions of the Mortgage will be described in the
Prospectus Supplement.
The Mortgage (Section 7.16) provides for an examination of the mortgaged
property by an independent engineer at least once every five years. ALABAMA
covenants to make good any maintenance deficiency shown by the certificate of
such engineer and to record retirements as called for thereby.
Issuance of Additional Bonds: Additional bonds may be issued under the
Mortgage (a) under Article IV to the extent of 60% of the cost or fair value at
date of acquisition, whichever is less, of unfunded net property additions, as
defined in the Mortgage (Sections 1.08 through 1.11, as amended), or (b) under
Article V against the retirement of other bonds theretofore outstanding under
the Mortgage, or (c) under Article VI against the deposit of cash equal to the
principal amount of bonds to be issued. Such additional bonds, however, may be
issued, except in certain cases when issued under Article V, only if, for a
period of twelve consecutive calendar months within the fifteen preceding
calendar months, the net earnings of ALABAMA, as defined in the Mortgage
(Section 1.03, as amended), shall have been at least twice the interest
requirements for one year on all bonds outstanding, including the additional
bonds applied for and all outstanding prior lien bonds and other indebtedness of
the character described in the Mortgage. Such net earnings are computed, in
effect, after making certain deductions including (i) all operating expenses
other than income and excess profits taxes and (ii) the amount, if any, by which
the aggregate charges to expense or income to provide for depreciation are less
than 2.25% of the average amount of depreciable mortgaged property. Under this
provision, no amount is included in interest requirements on account of
$167,950,000 principal amount of first mortgage bonds (out of a total of
$459,340,000 principal amount) issued and outstanding as of June 30, 1995, as
collateral for certain obligations for which such bonds are pledged as security.
No interest is payable on any such bonds unless and until default occurs on such
obligations.
Cash deposited as the basis for the issuance of bonds may be applied to the
retirement of bonds or be withdrawn against the deposit of bonds or be withdrawn
to the extent of 60% of the cost or fair value, whichever is less, of unfunded
net property additions (Article VI).
Release and Substitution of Property: The Mortgage (Article X) provides
that, subject to various limitations, property may be released from the lien
thereof when sold or exchanged, upon the basis of cash deposited with the
Trustee, bonds or purchase money obligations delivered to the Trustee, prior
lien bonds delivered to the Trustee or reduced or assumed, property additions
acquired in exchange for the property released, or unfunded net property
additions certified to the Trustee.
6
<PAGE>
The Mortgage (Section 10.05) permits the cash proceeds of released property
and other funds to be withdrawn either upon a showing that unfunded net property
additions exist or against the deposit of bonds and also permits such proceeds
and other funds to be applied to the retirement of bonds.
Restrictions on Common Stock Dividends: There are various restrictions on
Common Stock dividends in the Mortgage (which are to remain in effect so long as
certain series of bonds are outstanding). Any restrictions on dividends and
distributions on Common Stock in the new Supplemental Indenture will be set
forth in the Prospectus Supplement.
See also "Description of New Stock -- Restrictions on Common Stock
Dividends" herein.
Amendments to the Mortgage: By Section 6(g) of the Supplemental Indenture
dated as of October 1, 1981, the Mortgage may be modified with the consent of
the holders of not less than a majority in principal amount of the bonds at the
time outstanding which would be affected by the action proposed to be taken.
However, the bondholders shall have no power (i) to extend the fixed maturity of
any bonds, or reduce the rate or extend the time of payment of interest thereon,
or reduce the principal amount thereof, without the express consent of the
holder of each bond which would be so affected, or (ii) to reduce the aforesaid
percentage of bonds, the holders of which are required to consent to any such
modification, without the consent of the holders of all bonds outstanding, or
(iii) to permit the creation by ALABAMA of any mortgage or pledge or lien in the
nature thereof, not otherwise permitted under the Mortgage, ranking prior to or
equal with the lien of the Mortgage on any of the mortgaged and pledged
property, or (iv) to deprive the holder of any bond outstanding under the
Mortgage of the lien thereof on any of the mortgaged and pledged property. The
Trustee shall not be obligated to enter into a supplemental indenture which
would affect its own rights, duties or immunities under the Mortgage or
otherwise.
Regarding the Trustee: Chemical Bank, New York, is Trustee under the
Mortgage. Such bank is a depositary of ALABAMA. ALABAMA and its affiliates
borrow from such bank from time to time.
Enforcement Provisions: The Mortgage (Section 11.05) provides that, upon
the occurrence of certain events of default, the Trustee or the holders of not
less than 20% in principal amount of outstanding bonds may declare the principal
of all outstanding bonds immediately due and payable, but that, upon the curing
of any such default, the holders of a majority in principal amount of
outstanding bonds may waive such default and its consequences.
The holders of a majority in principal amount of outstanding bonds may
direct the time, method and place of conducting any proceeding for the
enforcement of the Mortgage (Sections 11.12 and 11.01). No holder of any bond
has any right to institute any proceedings to enforce the Mortgage or any remedy
thereunder, unless such holder shall previously have given to the Trustee
written notice of a default, and unless such holder or holders shall have
tendered to the Trustee indemnity against costs, expenses and liabilities, and
unless the holders of not less than 20% in principal amount of outstanding bonds
shall have tendered such indemnity and requested the Trustee to take action and
the Trustee shall have failed to take action within 60 days (Section 11.14).
Defaults: By Section 11.01 of the Mortgage, the following events are
defined as "defaults": failure to pay principal; failure for 60 days to pay
interest; failure for 90 days to pay any sinking or other purchase fund
installment; certain events in bankruptcy, insolvency or reorganization; and
failure for 90 days after notice to perform other covenants. By Section 9.03 of
the Mortgage, a failure by ALABAMA to deposit or direct the application of money
for the redemption of bonds called for redemption also constitutes a default.
Evidence as to Compliance with Conditions and Covenants: The Mortgage
requires ALABAMA to furnish to the Trustee, among other things, a certificate of
officers and an opinion of counsel as evidence of compliance with conditions
precedent provided for therein; a certificate of an engineer (who, in certain
instances, must be an independent engineer) with respect to the fair value of
property certified or released; and a certificate of an accountant (who, in
certain instances, must be an independent public accountant) as to compliance
with the earnings, improvement fund and replacement requirements. Various
certificates and other documents are required to be filed periodically or upon
the happening of certain events; however, no
7
<PAGE>
general periodic evidence is required by the Mortgage to be furnished as to the
absence of default or as to compliance with the terms of the Mortgage in
general.
DESCRIPTION OF NEW STOCK
The new Class A Preferred Stock may be issued and sold by ALABAMA in one or
more series. In the following description, references to the "new Stock" are to
new Class A Preferred Stock of the particular series referred to in the
Prospectus Supplement.
General: The new Stock is to be established by resolutions of the Board of
Directors of ALABAMA (the "Resolutions"), a copy of which is an exhibit to the
registration statement (or incorporated by reference therein) to which reference
is hereby made. The Resolutions shall include a provision fixing the stated
capital of the new Stock. The statements herein concerning the new Stock are an
outline and do not purport to be complete. Such statements make use of defined
terms and are qualified in their entirety by express reference to the cited
provisions of the charter of ALABAMA, as amended (the "charter"), a copy of
which is filed as an exhibit to the registration statement. The general
provisions which apply to the preferred stock of ALABAMA of all classes, which
are now or may hereafter be authorized or created, are set forth in the charter.
In addition to the new Class A Preferred Stock, at June 30, 1995, there
were outstanding 11,520,000 shares of Class A Preferred Stock with a stated
capital of $25 per share, 500,000 shares of Class A Preferred Stock with a
stated capital of $100 per share and 200 shares of Class A Preferred Stock with
a stated capital of $100,000 per share. Additionally, at June 30, 1995, ALABAMA
had outstanding 824,000 shares of Preferred Stock which have a par value of $100
per share. The Class A Preferred Stock ranks on a parity as to dividends and
assets with the outstanding Preferred Stock and has the same rights and
preferences as the outstanding Preferred Stock. On all matters submitted to a
vote of the holders of the Preferred Stock and the Class A Preferred Stock
(other than a change in the rights and preferences of only one, but not the
other, such kind of stock), both kinds of stock vote together as a single class,
and each share of Preferred Stock and Class A Preferred Stock shall have the
relative voting rights described in "Voting Rights" herein.
The new Stock will not be subject to further calls or to assessment by
ALABAMA.
Any proposed listing of the new Stock on a securities exchange will be
described in the Prospectus Supplement.
Transfer Agent and Registrar: The new Stock will be transferable at the
office of Southern Company Services, Inc., 64 Perimeter Center East, Atlanta,
Georgia 30346, which will also serve as the Registrar.
Dividend Rights: The holders of the Preferred Stock and Class A Preferred
Stock of each class are entitled to receive cumulative dividends, payable when
and as declared by the Board of Directors, at the rates determined for the
respective classes, before any dividends may be declared or paid on the Common
Stock. Dividends on the Preferred Stock and Class A Preferred Stock must have
been or be contemporaneously declared and set apart for payment, or paid, on the
Preferred Stock and Class A Preferred Stock of all classes for all dividend
periods terminating on the same or an earlier date (Charter -- A. Preferred
Stock -- 2. General Provisions -- a and b).
The Prospectus Supplement will set forth the dividend rate provisions of
the new Stock, including the payment dates and the rate or rates, or the method
of determining the rate or rates (which may involve periodic dividend rate
settings through remarketing or auction procedures or pursuant to one or more
formulae, as described in the Prospectus Supplement). Dividends payable on the
new Stock will be cumulative from the date of original issue.
Restrictions on Common Stock Dividends: ALABAMA's charter contains
provisions which prohibit the payment of cash dividends on Common Stock (except
those paid concurrently with the receipt of a cash capital contribution in like
amount) in cases where retained earnings are not at least equal to two times
annual dividends on the outstanding Preferred Stock and the Class A Preferred
Stock. At June 30, 1995, this restriction amounted to $53,673,000. The charter
also limits cash dividends on Common Stock to 50% of net
8
<PAGE>
income during a prior period of twelve months if, calculated on a corporate
basis, the ratio of Common Stock equity to total capitalization, including
surplus, adjusted to reflect the payment of the proposed dividend, is below 20%,
and to 75% of net income if such ratio is 20% or more but less than 25%.
See also "Description of New Bonds -- Restrictions on Common Stock
Dividends" herein.
Redemption Provisions: The redemption provisions applicable to the new
Stock will be described in the Prospectus Supplement.
The charter provides that ALABAMA shall not redeem, purchase or otherwise
acquire any shares of Preferred Stock or Class A Preferred Stock if, at the time
of such redemption, purchase or other acquisition, dividends payable on the
Preferred Stock or Class A Preferred Stock of any class shall be in default in
whole or in part unless, prior to or concurrently with such redemption, purchase
or other acquisition, all such defaults shall be cured or unless such action has
been ordered, approved or permitted under the Public Utility Holding Company Act
of 1935 by the SEC or any successor commission or regulatory authority of the
United States of America (Charter -- A. Preferred Stock -- 2. General
Provisions -- d).
Voting Rights: Except as otherwise provided by law or in the charter, the
right to vote is vested in the holders of the Common Stock; provided, however,
that, if and so long as four quarterly dividends payable on the Preferred Stock
or Class A Preferred Stock of any class shall be in default, the holders of the
Preferred Stock and Class A Preferred Stock of all classes shall have the
exclusive right, voting separately and as a single class, to elect the smallest
number of directors which shall constitute a majority of the then authorized
number of directors and, on all other matters, the right to vote together with
the holders of the Common Stock. In each instance in which the holders of the
Preferred Stock and the Class A Preferred Stock are entitled to vote separately
and as a single class or to vote together with the holders of the Common Stock,
the relative voting power of the various classes of stock shall be computed as
hereinafter provided. Stockholders are entitled to cumulative voting at
elections of directors (Charter -- C. Voting Powers).
The affirmative vote of at least two-thirds of the total voting power of
the outstanding shares of Preferred Stock and Class A Preferred Stock will be
required for --
(a) the authorization or creation of any kind of stock preferred as to
dividends or assets over the Preferred Stock or Class A Preferred Stock or
the issue (such issuance to be within twelve months after such vote) of any
shares of any kind of stock preferred as to dividends or assets over the
Preferred Stock or Class A Preferred Stock or any security convertible into
such kind of stock or a change in any of the rights and preferences of the
then outstanding Preferred Stock or Class A Preferred Stock in any manner
so as to affect adversely the holders thereof; provided, however, that, if
any such change would adversely affect the holders of only one, but not the
other, such kind of stock, only the vote of the holders of at least
two-thirds of the total voting power of the outstanding shares of the kind
so affected will be required; or
(b) the issue, sale or other disposition of any shares of Preferred
Stock if the total number of shares thereof to be outstanding would exceed
300,000, or the issue, sale or other disposition of any shares of Class A
Preferred Stock, or the issue, sale or other disposition of any senior or
equally ranking stock, or the reissue, sale or other disposition of any
shares of Preferred Stock or Class A Preferred Stock or senior or equally
ranking stock which have been redeemed, purchased or otherwise acquired by
ALABAMA, unless, in any such case, (i) net income available for dividends
for a period of twelve consecutive calendar months within the 15 preceding
calendar months is at least equal to two times the annual dividend
requirements on all outstanding shares of Preferred Stock and Class A
Preferred Stock and on senior or equally ranking stock to be outstanding;
(ii) gross income available for interest for a period of twelve consecutive
calendar months within the 15 preceding calendar months is at least equal
to one and one-half times the aggregate of annual interest requirements and
annual dividend requirements on all outstanding shares of Preferred Stock
and Class A Preferred Stock and on senior or equally ranking stock to be
outstanding; and (iii) the aggregate of common stock capital and surplus is
not less than the aggregate amount payable upon involuntary liquidation on
all shares of Preferred Stock and Class A Preferred Stock and on senior or
equally ranking stock to be outstanding (Charter -- A. Preferred
Stock -- 2. General Provisions -- e.).
9
<PAGE>
The affirmative vote of at least a majority of the total voting power of
the outstanding shares of Preferred Stock and Class A Preferred Stock will be
required for --
(a) a disposition of substantially all of ALABAMA's property, or a
merger or consolidation, unless such action has been approved under the
Public Utility Holding Company Act of 1935 by the SEC or any successor
commission or regulatory authority of the United States of America; or
(b) the issue or assumption of any securities representing unsecured
debt (other than for the purpose of refunding or renewing outstanding
unsecured securities resulting in equal or longer maturities or redeeming
or otherwise retiring all outstanding shares of the Preferred Stock or
Class A Preferred Stock or of any senior or equally ranking stock) if
immediately after such issue or assumption the total outstanding principal
amount of all securities representing unsecured debt will thereby exceed
20% of the aggregate of all existing secured debt and the capital stock,
premiums thereon, and surplus, as stated on the books. (Charter -- A.
Preferred Stock -- 2. General Provisions -- f.).
The charter provides that relative voting power of each share of Preferred
Stock and Class A Preferred Stock shall be in the same proportion to all the
outstanding shares of Preferred Stock and Class A Preferred Stock as the ratio
of (i) the stated capital of such share to (ii) the aggregate stated capital of
all then outstanding shares of Preferred Stock and Class A Preferred Stock.
Thus, a share of Class A Preferred Stock having a stated capital of $25 per
share will have one-fourth the voting power of a share of Preferred Stock or
Class A Preferred Stock having a stated capital of $100 per share. In voting by
holders of Preferred Stock and Class A Preferred Stock together with the holders
of the Common Stock, each share of Common Stock will have one vote, each share
of Preferred Stock will have one vote and each share of Class A Preferred Stock
having a stated capital of other than $100 per share will have that number of
votes which is proportionate to such one vote as determined above in this
paragraph (Charter -- C. Voting Powers).
Liquidation Rights: Upon voluntary or involuntary liquidation, the holders
of the Preferred Stock and Class A Preferred Stock of each class, without
preference between classes, will be entitled to receive the amounts specified to
be payable on the shares of such class (which, in the case of the new Stock, is
an amount equal to the stated capital per share on involuntary liquidation, or
an amount equal to the then current regular redemption price per share on
voluntary liquidation, plus accrued dividends in each case) before any
distribution of assets may be made to the holders of the Common Stock. Available
assets, if insufficient to pay such amounts to the holders of the Preferred
Stock and Class A Preferred Stock, are to be distributed pro rata to the
payment, first, of the amount per share payable in the event of involuntary
liquidation, second, of accrued dividends, and third, of any premium
(Charter -- A. Preferred Stock -- 2. General Provisions -- c.).
Sinking Fund: The terms and conditions of a sinking fund or purchase fund,
if any, for the benefit of the holders of the new Stock will be set forth in the
Prospectus Supplement.
Other Rights: The holders of the new Stock do not have any preemptive or
conversion rights.
LEGAL OPINIONS AND EXPERTS
Counsel for ALABAMA, Balch & Bingham, Birmingham, Alabama, and Troutman
Sanders LLP, Atlanta, Georgia, will render opinions to the underwriters or
purchasers upon the legality of the new First Mortgage Bonds and new Class A
Preferred Stock. A separate firm may act as counsel for the underwriters or
purchasers and render an opinion to them upon the legality of the new First
Mortgage Bonds and new Class A Preferred Stock. However, all matters of Alabama
law will be passed upon only by Balch & Bingham.
The financial statements and schedules of ALABAMA included in ALABAMA's
Annual Report on Form 10-K for the year ended December 31, 1994, incorporated by
reference in this Prospectus, have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their reports with respect
thereto, and are incorporated herein in reliance upon the authority of said firm
as experts in accounting and auditing in giving said reports. With respect to
the ALABAMA unaudited interim financial information for the periods ended March
31, 1995 and 1994, and June 30, 1995 and 1994, included in ALABAMA's Quarterly
Reports on Form 10-Q for the quarters ended March 31, 1995 and June 30, 1995,
respectively, and incorporated by reference herein, Arthur Andersen LLP has
applied limited procedures in accordance with professional standards for review
of such information. However, their separate reports thereon state that they did
not audit and they do not express an opinion on such interim financial
information. Accordingly, the
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degree of reliance on their reports on such information should be restricted in
light of the limited nature of the review procedures employed. In addition, the
accountants are not subject to the liability provisions of Section 11 of the
Securities Act of 1933, as amended, for their reports on the unaudited interim
financial information because these reports are not "reports" or "parts" of the
registration statement prepared or certified by the accountants within the
meaning of Sections 7 and 11 of said Act.
Statements as to matters of law and legal conclusions in ALABAMA's Annual
Report on Form 10-K for the year ended December 31, 1994, relating to titles to
property of ALABAMA under "Item 2 -- Properties -- Titles to Property", relating
to ALABAMA and SEGCO under "Item 1 -- Business -- Regulation" and relating to
ALABAMA under "Item 1 -- Business -- Rate Matters", "Item
1 -- Business -- Long-Term Power Sales Agreements" and "Item
1 -- Business -- Competition", and in this Prospectus relating to the lien of
the Mortgage and the priority of the new First Mortgage Bonds under "Description
of New Bonds -- Priority and Security", have been reviewed by Balch & Bingham,
general counsel for ALABAMA, and such statements are made upon the authority of
such firm as experts.
PLAN OF DISTRIBUTION
ALABAMA may sell the new First Mortgage Bonds and new Class A Preferred
Stock in one or more transactions. Purchasers of the new First Mortgage Bonds
and new Class A Preferred Stock from ALABAMA may include underwriters, dealers
or purchasers acting for themselves. A Prospectus Supplement will set forth the
purchase price of any series of the new First Mortgage Bonds and new Class A
Preferred Stock with respect to which an agreement of sale has been entered into
by ALABAMA, the proceeds to ALABAMA from such sale, and the terms of any
re-offering, including the names of any underwriters, any underwriting discounts
and other items consisting of underwriters' compensation, any fixed public
offering price and any discounts or concessions allowed or reallowed or paid to
dealers. Any fixed public offering price and any discounts or concessions
allowed or reallowed or paid to dealers may be changed from time to time.
If underwriters are involved in the sale, new First Mortgage Bonds or new
Class A Preferred Stock will be acquired by the underwriters for their own
account and may be resold from time to time in one or more transactions,
including negotiated transactions, at a fixed public offering price or at
varying prices determined at the time of sale. Unless otherwise set forth in a
Prospectus Supplement, the obligations of the underwriters to purchase new First
Mortgage Bonds or new Class A Preferred Stock will be subject to certain
conditions precedent, and the underwriters will be obligated to purchase all
such new First Mortgage Bonds or new Class A Preferred Stock if any are
purchased.
New First Mortgage Bonds and new Class A Preferred Stock may be sold
directly by ALABAMA or through agents designated by ALABAMA from time to time. A
Prospectus Supplement will set forth the name of any agent involved in any such
offer or sale, as well as any commissions payable by ALABAMA to such agent.
Unless otherwise indicated in the Prospectus Supplement, any such agent will be
acting on a best efforts basis for the period of its appointment.
The Prospectus Supplement will set forth the name or names and terms of
appointment of any remarketing agent or agents or any auction agent or agents
which may be appointed by ALABAMA in connection with any remarketing procedures
or auction procedures, as the case may be, that may be applicable as described
in the Prospectus Supplement.
ALABAMA may agree to indemnify underwriters and purchasers of the new First
Mortgage Bonds and new Class A Preferred Stock and any agents designated by
ALABAMA as aforesaid against certain civil liabilities, including liabilities
under the Securities Act of 1933, as amended.
Underwriters or purchasers of the new Class A Preferred Stock may include
one or more of the following: Robert W. Baird & Co. Incorporated; Bear, Stearns
& Co. Inc.; J.C. Bradford & Co.; Alex. Brown & Sons Incorporated; Chase
Securities Inc.; Chemical Securities Inc.; Citicorp Securities, Inc.; Dain
Bosworth Incorporated; Daiwa Securities America Inc.; Dean Witter Reynolds Inc.;
Dillon, Read & Co. Inc.; Donaldson, Lufkin & Jenrette Securities Corporation;
A.G. Edwards & Sons, Inc.; CS First Boston Corporation; Goldman, Sachs & Co.;
Interstate/Johnson Lane Corporation; Edward D. Jones & Co.; Kemper
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Securities Group, Inc.; W.R. Lazard; Legg Mason Wood Walker Incorporated; Lehman
Brothers; Merrill Lynch, Pierce, Fenner & Smith Incorporated; J.P. Morgan
Securities Inc.; Morgan Keegan & Company, Inc.; Morgan Stanley & Co.
Incorporated; Nomura Securities International, Inc.; PaineWebber Incorporated;
Porter, White & Company, Inc.; Prudential Securities Incorporated; Pryor,
McClendon, Counts & Co., Inc.; Raymond James & Associates, Inc.; Rauscher Pierce
Refsnes, Inc.; The Robinson-Humphrey Company, Inc.; L.F. Rothschild and Co.
Incorporated; Salomon Brothers Inc; Smith Barney Inc.; Sterne, Agee & Leach,
Inc.; SouthTrust Securities, Inc.; Swiss Bank Corporation International
Securities Inc.; Thomson McKinnon Securities Inc.; Thorton, Farish & Company,
Inc.; Tucker Anthony Incorporated; UBS Securities Inc.; and Wertheim Schroder &
Co. Incorporated.
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