PRICING AGREEMENT
Goldman, Sachs & Co.
Salomon Smith Barney, Inc.
Merrill Lynch, Pierce, Fenner & Smith Incorporated
PNC Capital Markets, Inc.
c/o Goldman, Sachs & Co.
85 Broad Street
New York, New York 10004
August 15, 2000
Ladies and Gentlemen:
Allegheny Energy, Inc., a Maryland corporation (the "Company"),
proposes, subject to the terms and conditions stated herein and in the
Underwriting Agreement, dated August 15, 2000 (the "Underwriting Agreement"), to
issue and sell to the Underwriters named in Schedule I hereto (the
"Underwriters") the Securities specified in Schedule II hereto (the "Designated
Securities"). Each of the provisions of the Underwriting Agreement is
incorporated herein by reference in its entirety, and shall be deemed to be a
part of this Agreement to the same extent as if such provisions had been set
forth in full herein; and each of the representations and warranties set forth
therein shall be deemed to have been made at and as of the date of this Pricing
Agreement, except that each representation and warranty which refers to the
Prospectus in Section 2 of the Underwriting Agreement shall be deemed to be a
representation or warranty as of the date of the Underwriting Agreement in
relation to the Prospectus (as therein defined), and also a representation and
warranty as of the date of this Pricing Agreement in relation to the Prospectus
as amended or supplemented relating to the Designated Securities which are the
subject of this Pricing Agreement. Each reference to the Representatives herein
and in the provisions of the Underwriting Agreement so incorporated by reference
shall be deemed to refer to you. Unless otherwise defined herein, terms defined
in the Underwriting Agreement are used herein as therein defined. The
Representatives designated to act on behalf of the Representatives and on behalf
of each of the Underwriters of the Designated Securities pursuant to Section 12
of the Underwriting Agreement and the address of the Representatives referred to
in such Section 12 are set forth at the end of Schedule II hereto.
An amendment to the Registration Statement, or a supplement to the
Prospectus, as the case may be, relating to the Designated Securities, in the
form heretofore delivered to you is now proposed to be filed with the
Commission.
Subject to the terms and conditions set forth herein and in the
Underwriting Agreement incorporated herein by reference, the Company agrees to
issue and sell to each of the Underwriters, and each of the Underwriters agrees,
severally and not jointly, to purchase from the Company, at the time and place
and at the purchase price to the Underwriters set forth in Schedule II hereto,
the principal amount of Designated Securities set forth opposite the name of
such Underwriter in Schedule I hereto.
If the foregoing is in accordance with your understanding, please sign
and return to us one for the Company and each of the Underwriters plus one for
each counsel counterparts hereof, and upon acceptance hereof by you, on behalf
of each of the Underwriters, this letter and such acceptance hereof, including
the provisions of the Underwriting Agreement
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incorporated herein by reference, shall constitute a binding agreement between
each of the Underwriters and the Company. It is understood that your acceptance
of this letter on behalf of each of the Underwriters is or will be pursuant to
the authority set forth in a form of Agreement among Underwriters, the form of
which shall be submitted to the Company for examination upon request, but
without warranty on the part of the Representatives as to the authority of the
signers thereof.
The remaining of this page is left intentionally blank
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Very truly yours,
ALLEGHENY ENERGY, INC.
By: /s/ Thomas J. Kloc
-------------------------------------------
Name: Thomas J. Kloc
Title: Vice President and Controller
Accepted as of the date hereof:
Goldman, Sachs & Co.
Salomon Smith Barney, Inc.
Merrill Lynch, Pierce, Fenner &
Smith Incorporated
PNC Capital Markets, Inc.
By: Goldman, Sachs & Co.
/s/ Goldman, Sachs & Co.
-------------------------------
(Goldman, Sachs & Co.)
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SCHEDULE I
PRINCIPAL
AMOUNT OF
DESIGNATED
SECURITIES
TO BE
UNDERWRITER PURCHASED
----------- ---------
Goldman, Sachs & Co................................................ $ 90,750,000
Salomon Smith Barney, Inc.......................................... 24,750,000
Merrill Lynch, Pierce, Fenner & Smith Incorporated................. 24,750,000
PNC Capital Markets, Inc........................................... 24,750,000
-----------
Total........................................................ $165,000,000
===========
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SCHEDULE II
TITLE OF DESIGNATED SECURITIES:
7.750 % Notes due August 1, 2005
AGGREGATE PRINCIPAL AMOUNT:
$165,000,000
PRICE TO PUBLIC:
99.812% of the principal amount of the Designated Securities
PURCHASE PRICE BY UNDERWRITERS:
99.212% of the principal amount of the Designated Securities
FORM OF DESIGNATED SECURITIES:
Book-entry only form represented by one or more global securities
deposited with The Depository Trust Company ("DTC") or its designated
custodian, to be made available for checking by the Representatives at
least twenty-four hours prior to the Time of Delivery at the office of
DTC.
SPECIFIED FUNDS FOR PAYMENT OF PURCHASE PRICE:
Federal (same day) funds
TIME OF DELIVERY:
10 a.m. (New York City time), August 18, 2000
INDENTURE:
Indenture dated July 26, 2000, between the Company and Bank One Trust
Company, N.A., as Trustee
MATURITY:
August 1, 2005
INTEREST RATE:
7.750%
INTEREST PAYMENT DATES:
February 1 and August 1 of each year, commencing February 1, 2001
REDEMPTION PROVISIONS:
The Designated Securities may be redeemed, in whole or in part at the
option of the Company, in the amount of $1,000 or an integral multiple
thereof, at any time, at a redemption price equal to the greater of:
o 100% of the principal amount of the notes to be redeemed, plus accrued
interest to the redemption date, or
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o as determined by the Quotation Agent, the sum of the present values of
the remaining scheduled payments of principal and interest on the
notes to be redeemed (not including any portion of payments of
interest accrued as of the redemption date) discounted to the
redemption date on a semi-annual basis at the Adjusted Treasury Rate
plus 15 basis points, plus accrued interest to the redemption date.
The redemption price will be calculated assuming a 360-day year
consisting of twelve 30-day months.
"Adjusted Treasury Rate" means, with respect to any redemption date, the
rate per year equal to the semi-annual equivalent yield to maturity of the
Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue
(expressed as a percentage of its principal amount) equal to the Comparable
Treasury Price for that redemption date.
"Comparable Treasury Issue" means the United States Treasury security
selected by the Quotation Agent as having a maturity comparable to the remaining
term of the notes that would be used, at the time of selection and in accordance
with customary financial practice, in pricing new issues of corporate debt
securities of comparable maturity to the remaining term of the notes.
"Comparable Treasury Price" means, with respect to any redemption date;
o the average of the Reference Treasury Dealer Quotations for
that redemption date, after excluding the highest and lowest
of the Reference Treasury Dealer Quotations, or
o If the trustee obtains fewer than three Reference Treasury
Dealer Quotations, the average of all Reference Treasury
Dealer Quotations so received.
"Quotation Agent" means the Reference Treasury Dealer appointed by the
Company.
"Reference Treasury Dealer" means (i) each of Goldman, Sachs & Co.,
Salomon Smith Barney, Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated
and Banc of America Securities LLC and their respective successors, unless any
of them ceases to be a primary U.S. Government securities dealer in New York
City (a "Primary Treasury Dealer), in which case we shall substitute another
Primary Treasury Dealer; and (ii) any other Primary Treasury Dealer selected by
us.
"Reference Treasury Dealer Quotations" means, with respect to each
Reference Treasury Dealer and any redemption date, the average, as determined by
the trustee, of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) quoted in
writing to the trustee by that Reference Treasury Dealer at 5:00 p.m., New York
City time, on the third business day preceding that redemption date.
The Company will mail notice of any redemption at least 30 days but not
more than 60 days before the redemption date to each holder of the notes to be
redeemed.
Unless the Company defaults in payment of the redemption price, on and
after the redemption date, interest will cease to accrue on the notes or
portions of the notes called for redemption.
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SINKING FUND PROVISIONS:
None
EXTENDABLE PROVISIONS:
None
FLOATING RATE PROVISIONS:
None
CLOSING LOCATION FOR DELIVERY OF DESIGNATED SECURITIES:
Sullivan & Cromwell
125 Broad Street
New York, NY 10004
ADDITIONAL CLOSING CONDITIONS:
None
NAMES AND ADDRESSES OF THE REPRESENTATIVE:
Goldman, Sachs & Co.
Salomon Smith Barney, Inc.
Merrill Lynch, Pierce, Fenner & Smith Incorporated
PNC Capital Markets, Inc.
Address for Notices, etc.:
Goldman, Sachs & Co.
85 Broad Street
New York, NY 10004
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