<PAGE>
Filed Pursuant to Rule 424(b)(5)
Registration Nos. 33-54228 & 33-51417
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PROSPECTUS SUPPLEMENT
(To Prospectus dated December 16, 1993)
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$350,000,000
HOUSTON LIGHTING & POWER COMPANY
Collateralized Medium-Term Notes, Series D
Due from 9 Months to 30 Years from Date of Issue
-----------
Houston Lighting & Power Company (Company) may offer from time to time its
collateralized medium-term notes which are issuable in one or more series
and may be offered and sold either in the United States or outside the
United States or both, simultaneously. The Collateralized Medium-Term
Notes, Series D (Notes) offered by this Prospectus Supplement are offered
in the United States in an aggregate principal amount of up to $350,000,000,
subject to reduction as a result of the sale of other Debt Securities.
See "Description of Notes" and "Plan of Distribution of Notes". Also see
"Description of Debt Securities" in the accompanying Prospectus. The Notes
will be denominated in United States dollars. Unless otherwise indicated in
the applicable Prospectus Supplement to this Prospectus Supplement (Pricing
Supplement), the Interest Payment Dates for each Note will be May 1 and
November 1 of each year. Each Note will mature on a day from nine months
to 30 years from its date of issue, and may be subject to redemption prior
to Stated Maturity, as set forth in the applicable Pricing Sulpplement,
Unless otherwise indicated in the applicable Pricing Supplement, the Notes
will be issued only in denominations of $100,000 and integral multiples of
$1,000 in excess thereof.
The Notes will initially be issued and registered only in the name of Cede &
Co., as registered owner and nominee for The Depository Trust Company, New
York, New York (DTC). DTC will act as a securities depository for the Notes.
Purchases of Notes will be made only in book-entry form and, except under the
limited circumstances described herein, beneficial owners of the Notes will
not receive certificates representing their ownership interests. For so long
as the Notes are registered in the name of Cede & Co., (i) the principal of,
premium, if any, and interest due on the Notes will be payable to
DTC for payment to its participants for subsequent disbursements to the
beneficial owners and (ii) all notices, including any noticse of redemption,
will be mailed only to Cede & Co. See "Description of Notes" herein and
and "Description of Debt Securities" in the accompanying Prospectus.
The Notes will be secured as to payment of principal, interest and
premium, if any, by one or more series of first mortgage bonds (Mortgage
Bonds) to be issued and pledged by the Company for the benefit of the
holders of the Notes to the trustee (Trustee) under the indenture for the
Notes. See "Description of Notes". See also "Description of Debt
Securities -- Security; Pledge of Mortgage Bonds" and "Description
of Mortgage Bonds" in the accompanying Prospectus.
The interest rate or interest rate formula, if any, issue price, interest
payment dates (if different from those set forth above),
denominations, redemption provisions, if any, and Stated Maturity for each
Note will be established by the Company at the date of issuance of such
Note and will be set forth in the applicable Pricing Supplement; provided,
that in no event shall any Note at any time bear interest at a rate in excess
of 10% per annum. Unless otherwise indicated in the applicable Pricing
Supplement, the Notes will bear interest at a fixed rate or at a variable
rate determined by reference to LIBOR, the Treasury Rate or the Commercial
Paper Rate, as adjusted by a Spread or Spread Multiplier. Interest rates
and interest rate formulas are subject to change by the Company, but no
such change will affect the interest rate on any Note theretofore issued
or that the Company has agreed to sell.
-----------
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, ANY
SUPPLEMENT HERETO OR THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
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Price to Agents' Proceeds to
Public (1) Commissions (2) (3) Company (2) (4)
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<S> <C> <C> <C>
Not less than
Per Note 100% Not to exceed .75% 99.25%
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Not to exceed Not less than
Total $350,000,000 $2,625,000 $347,375,000
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</TABLE>
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(1) Unless otherwise specified in a Pricing Supplement, Notes will be issued
at 100% of their principal amount.
(2) In the case of Notes sold directly to investors (other than the Agents) by
the Company, no discount will be allowed or commission paid.
(3) The Company has agreed to indemnify the Agents named herein against
certain civil liabilities, including liabilities under the Securities Act
of 1933.
(4) Assuming the Notes are issued at 100% of principal amount and before
deducting expenses payable by the Company estimated at $720,000.
-----------
The Notes are being offered on a continuing basis by the Company through the
Agents, each of which has agreed to use reasonable efforts to solicit offers
to purchase the Notes in the United States. The Notes may be sold at a
discount to any Agent as principal for resale to investors at varying prices
related to prevailing market prices at the time of resale, as determined by
such Agent. The Company reserves the right to sell Notes to or through one or
more additional agents who will, if any, be named in a Prospectus Supplement
hereto, which may be a Pricing Supplement. The Company may also sell Notes
directly to purchasers on its own behalf in those jurisdictions where it is
authorized to do so. The Notes will not be listed on any securities exchange,
and there can be no assurance that the Notes will be sold or that there will
be a secondary market for the Notes. The Company reserves the right to
withdraw, cancel or modify the offer or solicitations of offers made hereby
without notice. The Company or any Agent, if it solicits such offer, may
reject any offer in whole or in part. See "Plan of Distribution of Notes".
CS First Boston
Goldman, Sachs & Co.
J.P. Morgan Securities Inc.
Chase Securities, Inc. Chemical Securities Inc. Citicorp Securities, Inc.
RBC Dominion Securities Corporation SBCI Swiss Bank Corporation
Investment banking
UBS Securities Inc.
Wood Gundy Corp.
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The date of this Prospectus Supplement is January 3, 1994.
<PAGE>
IN CONNECTION WITH THIS OFFERING, THE AGENTS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS IN THE NOTES WITH A VIEW TO STABILIZING OR MAINTAINING THE MARKET
PRICE OF THE NOTES AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE
OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED IN THE OVER-THE-COUNTER MARKET
OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
COMPANY SUMMARY INFORMATION
The following summary information is qualified in its entirety by, and should
be read in conjunction with, the information and financial statements appearing
elsewhere in this Prospectus Supplement, in the accompanying Prospectus or in
the documents incorporated by reference in the Prospectus.
Business and Service Area....... Electric utility serving approximately 5,000
square miles of the Texas Gulf Coast,
including Houston.
Property, Plant and Equipment--
Net (September 30, 1993)....... $8,926,319,000.
Fuel for Electric Generation
(Twelve months ended September
30, 1993)...................... Gas and Oil--49%; Coal and Lignite--48%;
Nuclear--3%.
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED
---------------------------------------------
SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
1993 1992 1991
------------- ------------- -------------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
(RESTATED)(1) (RESTATED)(1)
(AMOUNTS IN THOUSANDS EXCEPT RATIOS)
<S> <C> <C> <C>
Income Summary:
Operating Revenues............... $4,043,734 $3,826,841 $3,674,543
Operating Income................. $ 783,590 $ 749,070 $ 787,775
Allowance for Funds Used During
Construction, Deferred Carrying
Costs and Deferred Return....... $ 6,793 $ 12,360 $ 85,251
Net Income Before Preferred
Dividends....................... $ 477,263 $ 415,282(2) $ 518,898
Ratio of Earnings to Fixed
Charges......................... 3.29(3) 2.73(2) 2.97
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, PERCENT OF
1993 CAPITALIZATION
------------- --------------
(UNAUDITED)
(AMOUNTS IN THOUSANDS)
<S> <C> <C>
Capitalization Summary(4):
Long-Term Debt (including current
maturities)........................... $3,701,772 46.4%
Cumulative Preferred Stock
Not Subject to Mandatory Redemption.. 351,354 4.4
Subject to Mandatory Redemption
(including current maturities)...... 187,236 2.3
Common Stock Equity.................... 3,744,030 46.9
---------- -----
Total Capitalization............... $7,984,392 100.0%
========== =====
</TABLE>
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(1) Restated to reflect the merger, effective as of October 8, 1993, of Utility
Fuels, Inc. with and into the Company. Such merger increased Operating
Income and Net Income Before Preferred Dividends in the amounts of
$40,484,000 and $28,259,000 in 1992 and $39,793,000 and $24,415,000 in
1991, respectively.
(2) Before cumulative effect of change in accounting for revenues.
(3) The Company's ratio of earnings to fixed charges for the nine months ended
September 30, 1993 was 3.84. The Company believes that the ratio for this
nine-month period is not necessarily indicative of the ratio for a twelve-
month period due to the seasonal nature of the Company's business.
(4) Adjustments have not been made to reflect (i) the issuance of the Notes or
any of the $230 million principal amount of other debt securities of the
Company registered for sale under the Securities Act of 1933, as amended,
and unsold at December 31, 1993, (ii) the redemption in October 1993 of
$390,519,000 of the Company's first mortgage bonds and a premium of
$25,657,098 paid in connection therewith, (iii) the issuance on behalf of
the Company in December 1993 of $100,165,000 of pollution control revenue
bonds or the expected related redemptions in 1994 of $100,165,000 of
pollution control revenue bonds, (iv) the maturity in January 1994 of
$19,402,500 of medium-term notes collateralized by first mortgage bonds and
(v) any calls for redemption or purchases of debt securities, or any
premiums which may be paid in connection therewith, which have not yet been
initiated by the Company. The proceeds from the offering of the Notes are
expected to be used to refund then-outstanding debt. See "Application of
Proceeds".
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<PAGE>
APPLICATION OF PROCEEDS
As indicated in the accompanying Prospectus, among the possible uses of the
net proceeds from the sale of the Notes are the redemption, repayment or
retirement of outstanding indebtedness, which may include collateralized debt
securities and first mortgage bonds of the Company. As of December 31, 1993,
the long-term debt that may be redeemed, repaid or retired matures in less than
one year to 30 years and has interest rates ranging from 5.25% to 9.85%. See
"Application of Proceeds" in the accompanying Prospectus.
DESCRIPTION OF NOTES
The following description of the particular terms of the Notes offered hereby
supplements, and to the extent inconsistent therewith replaces, the description
of the general terms and provisions of Debt Securities set forth under the
heading "Description of Debt Securities" in the accompanying Prospectus, to
which description reference is hereby made. Capitalized terms not defined
herein have the meanings assigned to such terms in the Prospectus.
GENERAL
The Notes offered hereby constitute a single series of Debt Securities,
designated as Collateralized Medium-Term Notes, Series D, to be issued under
the Indenture referred to in the accompanying Prospectus. The aggregate
offering price or principal amount for which such series may be issued is
limited to $350,000,000. Terms of the Notes may vary, and the terms of each
Note will be specified in the Pricing Supplement relating thereto.
Each Note will mature on a day from nine months to 30 years from its date of
issue as agreed to by the Company and the initial purchaser and as specified in
the applicable Pricing Supplement. In the event that the maturity date of any
Note or any date fixed for any redemption of any Note is not a Business Day (as
defined below under "Interest Rate"), principal and interest payable at
maturity or upon such redemption will be paid on the next succeeding Business
Day with the same effect as if such Business Day were the maturity date or the
date fixed for redemption and no interest will accrue or be payable for the
period from and after such original maturity date or date fixed for redemption
to such next succeeding Business Day.
The Notes will be issued only in fully registered form. Initially, the Notes
will be issued in the form of one or more fully registered global Securities,
and the transfer of Notes will be registrable through DTC. See "--Book-Entry
System". The authorized denominations of Notes will be $100,000 and integral
multiples of $1,000 in excess thereof.
An Original Issue Discount Note is a Note, including any Zero-Coupon Note,
which is issued at a price lower than the principal amount thereof and that
provides that upon redemption or acceleration of the maturity thereof an amount
less than the principal thereof shall become due and payable. In the event of
redemption or acceleration of the maturity of an Original Issue Discount Note,
the amount payable to the holder of such Note upon such redemption or
acceleration will be determined in accordance with the terms of the Note, but
will be an amount less than the amount payable at the Stated Maturity of such
Note. See "United States Taxation -- United States Holders" in the accompanying
Prospectus.
The Notes will be denominated in United States dollars and payments of
principal of and premium, if any, and interest on the Notes will be made in
United States dollars.
Initially, payments of principal of and premium, if any, on each Note and
interest thereon payable at Maturity and, if applicable, upon redemption will
be made through DTC as described herein under "Book-Entry System". The Trustee
or Chemical Bank, as the Trustee's agent, will act as the Paying Agent with
respect to Notes issued in book-entry form. For a description of the
relationship between Chemical Bank and
S-3
<PAGE>
the Trustee, see "--Concerning the Trustee". If the book-entry system is
terminated, and Notes are issued to and registered in the name or at the
direction of the Beneficial Owners (as hereinafter defined), payments of
principal of and premium, if any, on each Note and interest thereon payable at
Maturity and, if applicable, upon redemption will be made in immediately
available funds, at the request of the Holder, at the office or agency of
Houston Industries Incorporated (Houston Industries), in its capacity as Paying
Agent, in Houston, Texas or at the office of any other duly appointed Paying
Agent; provided that such Note is presented to the Paying Agent in time for the
Paying Agent to make such payments in such funds in accordance with its normal
procedures. Additionally, the Company currently maintains a drop agent, Midwest
Stock Exchange Clearing Corporation (Drop Agent), in The City of New York, that
would, if the book-entry system is terminated, provide the Holders with an
office in New York at which they could present any such Notes for payment. The
Drop Agent, located at 40 Broad Street, New York, New York, would accept Notes
presented for payment and would take payment instructions from any such Holder.
The Drop Agent would then forward any such Notes and any related payment
instructions to the Paying Agent by overnight courier, for next day delivery.
Such Notes would then be deemed to have been presented to the Paying Agent on
the Business Day next succeeding the day any such Notes are delivered to the
Drop Agent.
Interest will be paid through DTC as described herein under "Book-Entry
System". If the book-entry system is terminated and Notes are issued to and
registered in the name or at the direction of the Beneficial Owners, interest
(other than interest payable at Maturity or, if applicable, upon redemption)
will be paid by check mailed to the address of the person entitled thereto as
it appears in the Security Register.
The calculation agent (Calculation Agent) with respect to any issue of
Floating Rate Notes will be set forth in the Pricing Supplement relating to
such Floating Rate Notes.
The transfer and exchange of Notes will be registrable through DTC, as
described herein under "Book-Entry System". The Trustee or Chemical Bank, as
the Trustee's agent, will act as the Security Registrar and the Authenticating
Agent with respect to Notes issued in book-entry form. For a description of the
relationship between Chemical Bank and the Trustee, see "--Concerning the
Trustee". If the book-entry system is terminated and Notes are issued to and
registered in the name or at the direction of the Beneficial Owners, Notes may
be presented by the Holder thereof for registration of transfer or exchange at
the office or agency of Houston Industries, in its capacity as Security
Registrar and Authenticating Agent, in Houston, Texas or at the office of the
Drop Agent in The City of New York. Any Notes presented to the Drop Agent for
registration of transfer or exchange will be deemed to have been presented to
the Security Registrar on the Business Day next succeeding the day the Notes
are delivered to the Drop Agent.
The Notes will be secured as to payment of principal, interest and premium,
if any, by one or more series of Mortgage Bonds, with a stated interest rate of
10% per annum, to be issued and pledged by the Company for the benefit of the
holders of the Notes to the Trustee under the indenture for the Notes. The
Mortgage Bonds will be issued on the basis of retired first mortgage bonds. See
"Description of Debt Securities--Security; Pledge of Mortgage Bonds" and
"Description of Mortgage Bonds" in the accompanying Prospectus.
For a description of the rights attaching to different series of Securities
under the Indenture, see "Description of Debt Securities" in the accompanying
Prospectus.
CONCERNING THE TRUSTEE
Each of Chemical Bank (an agent of the Trustee with respect to Notes issued
in book-entry form) and Chemical Securities Inc. (one of the Agents) is a
subsidiary of Chemical Banking Corporation, which is the parent company of
Texas Commerce Bancshares, Inc. (a multi-bank holding company that owns all of
the common stock of Texas Commerce Bank National Association, the Trustee and
the Mortgage Trustee). See "Description of Mortgage Bonds--Concerning the
Mortgage Trustee" in the accompanying Prospectus.
S-4
<PAGE>
BOOK-ENTRY SYSTEM
DTC will act as securities depository for the Notes. The Notes will be
initially represented by one or more registered global Securities registered in
the name of Cede & Co. (DTC's partnership nominee). One fully registered
Security certificate will be issued for each issue of the Notes, each in the
aggregate principal amount of such issue, and will be deposited with DTC. If,
however, the aggregate principal amount of any issue exceeds $150 million, one
certificate will be issued with respect to each $150 million of principal
amount and an additional certificate will be issued with respect to any
remaining principal amount of such issue.
DTC is a limited-purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Securities Exchange
Act of 1934. DTC holds securities that its participants (Participants) deposit
with DTC. DTC also facilitates the settlement among Participants of securities
transactions, such as transfers and pledges, in deposited securities through
electronic computerized book-entry changes in Participants' accounts, thereby
eliminating the need for physical movement of securities certificates. Direct
Participants include securities brokers and dealers, banks, trust companies,
clearing corporations and certain other organizations. DTC is owned by a number
of its Direct Participants and by the New York Stock Exchange, Inc., the
American Stock Exchange, Inc. and the National Association of Securities
Dealers, Inc. Access to the DTC system is also available to others such as
securities brokers and dealers, banks and trust companies that clear through or
maintain a custodial relationship with a Direct Participant, either directly or
indirectly (Indirect Participants). The Rules applicable to DTC and its
Participants are on file with the Commission.
Purchases of Notes under the DTC system must be made by or through Direct
Participants, which will receive a credit for the Notes on DTC's records. The
ownership interest of each beneficial owner of each Note (Beneficial Owner) is
in turn to be recorded on the Direct and Indirect Participants' respective
records. Beneficial Owners will not receive written confirmation from DTC of
their purchase, but Beneficial Owners are expected to receive written
confirmations providing details of the transaction, as well as periodic
statements of their holdings, from the Direct or Indirect Participant through
which the Beneficial Owner entered into the transaction. Transfers of ownership
interests in the Notes are to be accomplished by entries made on the books of
Participants acting on behalf of Beneficial Owners. Beneficial Owners will not
receive certificates representing their ownership interests in Notes, except in
the event that use of the book-entry system for the Notes is discontinued.
To facilitate subsequent transfers, all Notes deposited by Participants with
DTC are registered in the name of DTC's partnership nominee, Cede & Co. The
deposit of Notes with DTC and their registration in the name of Cede & Co.
effect no change in beneficial ownership. DTC has no knowledge of the actual
Beneficial Owners of the Notes; DTC's records reflect only the identity of the
Direct Participants to whose accounts such Notes are credited, which may or may
not be the Beneficial Owners. The Participants will remain responsible for
keeping account of their holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to Direct Participants,
by Direct Participants to Indirect Participants, and by Direct Participants and
Indirect Participants to Beneficial Owners will be governed by arrangements
among them, subject to any statutory or regulatory requirements as may be in
effect from time to time.
Any redemption notices will be sent to Cede & Co. If less than all of the
Notes within an issue are being redeemed, DTC's practice is to determine by lot
the amount of the interest of each Direct Participant in such issue to be
redeemed.
Neither DTC nor Cede & Co. will consent or vote with respect to Notes. Under
its usual procedures, DTC mails an Omnibus Proxy to the Company as soon as
possible after the record date. The Omnibus Proxy assigns Cede & Co.'s
consenting or voting rights to those Direct Participants to whose accounts the
Notes are credited on the record date (identified in a listing attached to the
Omnibus Proxy).
S-5
<PAGE>
Principal, premium, if any, and interest payments on the Notes will be made
to DTC. DTC's practice is to credit Direct Participants' accounts on the
payable date in accordance with their respective holdings shown on DTC's
records unless DTC has reason to believe that it will not receive payment on
the payable date. Payments by Participants to Beneficial Owners will be
governed by standing instructions and customary practices, as is the case with
securities held for the accounts of customers in bearer form or registered in
"street-name", and will be the responsibility of such Participants and not of
DTC, the Trustee, any Paying Agent, the Security Registrar or the Company,
subject to any statutory or regulatory requirements as may be in effect from
time to time. Payment of principal, premium, if any, and interest to DTC is the
responsibility of the Company, the Trustee or the Paying Agent. Disbursement of
such payments to Direct Participants is the responsibility of DTC and
disbursement of such payments to the Beneficial Owners is the responsibility of
Direct and Indirect Participants.
DTC may discontinue providing its services as securities depository with
respect to the Notes at any time by giving reasonable notice to the Company or
the Trustee. Under such circumstances, in the event that a successor securities
depository is not obtained, registered certificates representing the Notes are
required to be printed and delivered. The Company may at any time decide to
discontinue use of the system of book-entry transfers through DTC (or a
successor securities depository). In that event, registered certificates
representing the Notes will be printed and delivered.
The information in this section concerning DTC and DTC's book-entry system
has been obtained from DTC. The Company believes such information to be
reliable, but takes no responsibility for the accuracy or completeness thereof.
The Company and the Trustee will not have any responsibility or obligation to
Direct Participants or the persons for whom they act as nominees with respect
to the accuracy of the records of DTC, its nominee or any Direct Participant
with respect to any ownership interest in the Notes, or payments to or the
providing of notice for, Direct Participants, Indirect Participants or
Beneficial Owners.
REDEMPTION
The Pricing Supplement will indicate either that the Notes to which it
relates cannot be redeemed prior to the Stated Maturity or that such Notes will
be redeemable at the option of the Company on or after specified dates prior to
the Stated Maturity of such Notes upon payment of specified premiums, together
with accrued interest to the date of redemption. Notice of any redemption will
be given by mail to Holders not less than 30 nor more than 60 days prior to the
applicable redemption date, all as provided in the Indenture. As provided in
the Indenture, notice of any redemption as aforesaid may state that such
redemption shall be conditioned upon the receipt by the Trustee or a Paying
Agent of the redemption monies on or before the date fixed for such redemption;
a notice of redemption so conditioned shall be of no force or effect if such
money is not so received.
The Notes will not be subject to any sinking fund.
INTEREST RATE
Each Note, other than a Zero-Coupon Note, will bear interest from the date of
issue or from the most recent Interest Payment Date to which interest on such
Note has been paid or duly provided for at the fixed rate per annum, or at the
rate per annum determined pursuant to the interest rate formula stated therein
and in the applicable Pricing Supplement until the principal thereof is paid or
made available for payment; provided that in no event will any Note at any time
bear interest at a rate in excess of 10% per annum. Interest will be payable to
the person in whose name a Note is registered at the close of business on the
Regular Record Date next preceding each Interest Payment Date; provided,
however, that interest payable at Maturity or, if applicable, upon redemption,
will be payable to the person to whom principal will be payable. If a Note is
originally issued after the Regular Record Date and before the corresponding
Interest Payment Date, the
S-6
<PAGE>
first payment of interest on such Note shall be made on the next succeeding
Interest Payment Date to the person in whose name such Note was registered on
the Regular Record Date with respect to such next succeeding Interest Payment
Date.
Interest rates, or interest rate formulas, are subject to change by the
Company from time to time, but no such change will affect any Note already
issued or as to which an offer to purchase has been accepted by the Company.
Each Note, other than a Zero-Coupon Note, will bear interest at either (a) a
fixed rate (Fixed Rate Note) or (b) a variable rate determined by reference to
an interest rate formula (Floating Rate Note), which may be adjusted by adding
or subtracting the Spread or multiplying by the Spread Multiplier (each term as
defined below), unless otherwise specified therein; provided that in no event
will any Fixed Rate Note or Floating Rate Note at any time bear interest at a
rate in excess of 10% per annum. A Floating Rate Note may also have either or
both of the following: (a) a maximum interest rate limitation, or ceiling, in
addition to the maximum rate stated in the preceding proviso, on the rate of
interest that may accrue during any interest period; and (b) a minimum interest
rate limitation, or floor, on the rate of interest that may accrue during any
interest period. The "Spread" is the number of basis points specified in the
applicable Pricing Supplement as being applicable to the interest rate basis
for such Note, and the "Spread Multiplier" is the percentage specified in the
applicable Pricing Supplement as being applicable to the interest rate basis
for such Note. "Business Day" means (i) with respect to any Note, any day that
is not a Saturday or Sunday and that, in Houston, Texas or The City of New
York, is not a day on which banking institutions generally are authorized or
obligated by or pursuant to law or executive order to close, and (ii) with
respect to LIBOR Notes only, any such day on which dealings in deposits in
United States dollars are transacted in the London interbank market. "Index
Maturity" means, with respect to a Floating Rate Note, the period to maturity
of the instrument or obligation on which the interest rate formula is based, as
specified in the applicable Pricing Supplement.
The applicable Pricing Supplement relating to a Fixed Rate Note will
designate a fixed rate of interest per annum payable on such Fixed Rate Note.
The applicable Pricing Supplement relating to a Floating Rate Note will
designate an interest rate basis for such Floating Rate Note. Such basis may
be: (a) the Commercial Paper Rate, in which case such Note will be a Commercial
Paper Rate Note, (b) LIBOR, in which case such Note will be a LIBOR Note, (c)
the Treasury Rate, in which case such Note will be a Treasury Rate Note or (d)
such other interest rate formula as is set forth in such Pricing Supplement.
The applicable Pricing Supplement for a Floating Rate Note also will specify
the Spread or Spread Multiplier, if any, and the maximum (if less than 10%) or
minimum interest rate limitation, if any, applicable to each Note. In addition,
such Pricing Supplement will define or particularize for each Note the
following terms, if applicable: Calculation Dates, Initial Interest Rate,
Interest Payment Dates, Regular Record Dates, Index Maturity, Interest
Determination Dates, Interest Reset Dates, Redemption Prices and Redemption
Dates.
The rate of interest on each Floating Rate Note will be reset weekly,
monthly, quarterly, semiannually or annually (each an Interest Reset Date), as
specified in the applicable Pricing Supplement. The Interest Reset Date will
be, in the case of Floating Rate Notes (other than Treasury Rate Notes) that
reset weekly, the Wednesday of each week; in the case of Treasury Rate Notes
that reset weekly, the Tuesday of each week; in the case of Floating Rate Notes
that reset monthly, the third Wednesday of each month; in the case of Floating
Rate Notes that reset quarterly, the third Wednesday of March, June, September
and December; in the case of Floating Rate Notes that reset semiannually, the
third Wednesday of two months of each year, as specified in the applicable
Pricing Supplement; and in the case of Floating Rate Notes that reset annually,
the third Wednesday of one month of each year, as specified in the applicable
Pricing Supplement; provided, however, that (a) the interest rate in effect
from the date of issue to the first Interest Reset Date with respect to a
Floating Rate Note will be the Initial Interest Rate (as set forth in the
applicable Pricing Supplement) and (b) the interest rate in effect for the 10
days immediately prior to Maturity will be that in effect on the tenth day
preceding such Maturity. If any Interest Reset Date for any Floating Rate Note
would otherwise
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<PAGE>
be a day that is not a Business Day for such Floating Rate Note, the Interest
Reset Date for such Floating Rate Note shall be postponed to the next day that
is a Business Day for such Floating Rate Note, except that in the case of a
LIBOR Note, if such Business Day is in the next succeeding calendar month, such
Interest Reset Date shall be the immediately preceding Business Day.
The Interest Determination Date pertaining to an Interest Reset Date for a
Commercial Paper Rate Note (Commercial Paper Interest Determination Date) will
be the second Business Day preceding the Interest Reset Date with respect to
such Note. The Interest Determination Date pertaining to an Interest Reset Date
for a LIBOR Note (LIBOR Interest Determination Date) will be the second London
Business Day (as defined below under "LIBOR Notes") preceding such Interest
Reset Date. The Interest Determination Date pertaining to an Interest Reset
Date for a Treasury Rate Note (Treasury Interest Determination Date) will be
the day of the week in which such Interest Reset Date falls on which Treasury
bills would normally be auctioned. Treasury bills are usually sold at auction
on Monday of each week, unless that day is a legal holiday, in which case the
auction is usually held on the following Tuesday, except that such auction may
be held on the preceding Friday. If, as the result of a legal holiday, an
auction is so held on the preceding Friday, such Friday will be the Treasury
Interest Determination Date pertaining to the Interest Reset Date occurring in
the next succeeding week. If an auction date shall fall on any Interest Reset
Date for a Treasury Rate Note, then such Interest Reset Date shall instead be
the first Business Day immediately following such auction date.
Upon the request of the Holder of any Floating Rate Note, the Calculation
Agent will provide the interest rate then in effect and, if different, the
interest rate that will become effective as a result of a determination made on
the most recent Interest Determination Date with respect to such Floating Rate
Note.
The interest rate on the Fixed Rate Notes and the Floating Rate Notes will in
no event be higher than the lower of 10% and the maximum rate permitted by
applicable Texas law or any applicable law of the United States permitting a
higher maximum nonusurious rate that preempts such applicable Texas law, which
could lawfully be contracted for, charged or received. On the date of this
Prospectus Supplement, such maximum rate exceeds 10%.
INTEREST PAYMENTS
Interest will be paid through DTC as described herein under "Book-Entry
System" unless the book-entry system is terminated. See "--General" and "--
Book-Entry System". Unless otherwise indicated in the applicable Pricing
Supplement, the Interest Payment Dates for each Note shall be May 1 and
November 1 in each year and the Regular Record Dates shall be the April 16 and
October 16 preceding such May 1 and November 1 Interest Payment Dates. Interest
will also be payable at the maturity of any Note and upon any redemption
thereof.
If an Interest Payment Date with respect to any Fixed Rate Note (and, with
respect to any Floating Rate Note, an Interest Payment Date coinciding with
maturity or, if applicable, with redemption) would otherwise fall on a day that
is not a Business Day with respect to such Note, such Interest Payment Date
will be postponed to the next succeeding Business Day with respect to such Note
and no interest will accrue or be payable as a result of the Interest Payment
Date being such next succeeding Business Day. If an Interest Payment Date with
respect to any Floating Rate Note (other than an Interest Payment Date
coinciding with maturity or, if applicable, with redemption) would otherwise
fall on a day that is not a Business Day with respect to such Note, such
Interest Payment Date will be postponed to the next succeeding Business Day
with respect to such Note, except that in the case of a LIBOR Note, if the next
succeeding Business Day falls in the next calendar month, such Interest Payment
Date will be the next preceding Business Day with respect to such LIBOR Note.
Except as provided in the preceding paragraph, interest payments will be the
amount of interest accrued to, but excluding, the Interest Payment Date;
provided, however, that if the Interest Reset Dates with respect to any
Floating Rate Note are weekly, interest payable on any Interest Payment Date,
other than interest payable on any date on which principal on any such Note is
payable, will include interest accrued to and including the next preceding
Regular Record Date.
S-8
<PAGE>
FIXED RATE NOTES
A Fixed Rate Note will bear interest from the date of issue at the annual
rate stated on the face thereof and in the applicable Pricing Supplement.
Interest on Fixed Rate Notes will be computed on the basis of a 360-day year of
twelve 30-day months.
FLOATING RATE NOTES
With respect to a Floating Rate Note, accrued interest from the date of issue
or from the last date to which interest has been paid is calculated by
multiplying the face amount of such Floating Rate Note by an accrued interest
factor. Such accrued interest factor is computed by adding the interest factor
calculated for each day from the date of issue, or from the last date to which
interest has been paid, to the date for which accrued interest is being
calculated. The interest factor (expressed as a decimal rounded, if necessary,
to the next higher one hundred-thousandth of a percentage point (e.g.,
9.876541% or .09876541 being rounded to 9.87655% or .0987655, respectively))
for each such day is computed by dividing the interest rate (expressed as a
decimal rounded, if necessary, to the next higher one hundred-thousandth of a
percentage point) applicable to such date by 360, in the case of Commercial
Paper Rate Notes or LIBOR Notes, or by the actual number of days in the year,
in the case of Treasury Rate Notes.
COMMERCIAL PAPER RATE NOTES
A Commercial Paper Rate Note will bear interest at the interest rates
(calculated with reference to the Commercial Paper Rate and the Spread or
Spread Multiplier, if any), and such interest will be payable on the dates,
specified on the face of the Commercial Paper Rate Note and in the applicable
Pricing Supplement. Unless otherwise indicated in the applicable Pricing
Supplement, the "Calculation Date" pertaining to a Commercial Paper Interest
Determination Date will be the tenth day after such Commercial Paper Interest
Determination Date or, if any such day is not a Business Day, the next
succeeding Business Day.
Unless otherwise indicated in the applicable Pricing Supplement, "Commercial
Paper Rate" means, with respect to any Commercial Paper Interest Determination
Date, the Money Market Yield (as defined below) of the rate on such date for
commercial paper having the Index Maturity designated in the applicable Pricing
Supplement as published by the Board of Governors of the Federal Reserve System
in "Statistical Release H.15 (519), Selected Interest Rates" or any successor
publication of the Board of Governors of the Federal Reserve System (H.15(519))
under the heading "Commercial Paper". In the event that such rate is not
published by 9:00 A.M., New York City time, on the Calculation Date pertaining
to such Commercial Paper Interest Determination Date, then the Commercial Paper
Rate will be the Money Market Yield of the rate on such Commercial Paper
Interest Determination Date for commercial paper having the Index Maturity
designated in the applicable Pricing Supplement as published by the Federal
Reserve Bank of New York in its daily statistical release, "Composite 3:30 P.M.
Quotations for U.S. Government Securities" (Composite Quotations) under the
heading "Commercial Paper". If such rate is not published by 3:00 P.M., New
York City time, on the Calculation Date pertaining to such Commercial Paper
Interest Determination Date, then the Commercial Paper Rate for that Commercial
Paper Interest Determination Date will be calculated by the Calculation Agent
and will be the Money Market Yield of the arithmetic mean (rounded to the next
higher one hundred-thousandth of a percentage point) of the offered rates of
three leading dealers of commercial paper in The City of New York selected by
the Calculation Agent as of 11:00 A.M., New York City time, on such Commercial
Paper Interest Determination Date for commercial paper having the Index
Maturity designated in the applicable Pricing Supplement placed for an
industrial issuer whose bond rating is "AA", or the equivalent, from a
nationally recognized rating agency; provided, however, that if the dealers
selected as aforesaid by the Calculation Agent are not quoting as mentioned in
this sentence, the Commercial Paper Rate will be the Commercial Paper Rate in
effect on such Commercial Paper Interest Determination Date.
"Money Market Yield" means a yield (expressed as a percentage rounded to the
next higher one hundred-thousandth of a percentage point) calculated in
accordance with the following formula:
S-9
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D x 360 x 100
Money Market Yield = ----------------
360 - (D x M )
where "D" refers to the per annum rate for commercial paper quoted on a bank
discount basis and expressed as a decimal; and "M" refers to the actual number
of days in the interest period for which interest is being calculated.
LIBOR NOTES
A LIBOR Note will bear interest at the interest rates (calculated with
reference to LIBOR and the Spread or Spread Multiplier, if any), and such
interest will be payable on the dates, specified on the face of the LIBOR Note
and in the applicable Pricing Supplement.
Unless otherwise indicated in the applicable Pricing Supplement, "LIBOR" will
be determined with respect to each LIBOR Interest Determination Date by the
Calculation Agent in accordance with the following provisions:
LIBOR will be determined on the basis of the rates at which deposits in
United States dollars are offered by four major banks in the London
interbank market selected by the Calculation Agent (Reference Banks) at
approximately 11:00 A.M., London time, on that LIBOR Interest Determination
Date to prime banks in the London interbank market having the Index
Maturity designated in the applicable Pricing Supplement commencing on the
second day on which dealings in deposits in United States dollars are
transacted in the London interbank market (London Business Day) immediately
following that LIBOR Interest Determination Date and in a principal amount
equal to an amount of not less than $1,000,000 that is representative for a
single transaction in such market at such time. The Calculation Agent will
request the principal London office of each of such Reference Banks to
provide a quotation of its rate. If at least two such quotations are
provided, LIBOR in respect of that LIBOR Interest Determination Date will
be the arithmetic mean (rounded, if necessary, to the nearest one hundred-
thousandth of a percentage point) of such quotations. If fewer than two
quotations are provided, LIBOR in respect of that LIBOR Interest
Determination Date will be (i) the arithmetic mean (rounded, if necessary,
to the nearest one hundred-thousandth of a percentage point) of the rates,
as communicated to the Calculation Agent by the Reference Banks concerned,
quoted to not less than two of the Reference Banks at approximately 11:00
A.M., New York City time, on that LIBOR Interest Determination Date by
three major banks in The City of New York, selected by the Calculation
Agent, for United States dollar deposits, or (ii) if such rates are
communicated by less than two Reference Banks, the arithmetic mean
(rounded, if necessary, to the nearest one hundred-thousandth of a
percentage point) of the rates quoted by three major banks in The City of
New York selected by the Calculation Agent at approximately 11:00 A.M., New
York City time, on that LIBOR Interest Determination Date for United States
dollar deposits to other leading European banks, such deposits, in the case
of (i) and (ii), having the Index Maturity designated in the applicable
Pricing Supplement commencing on the second London Business Day immediately
following that LIBOR Interest Determination Date and in a principal amount
equal to an amount of not less than $1,000,000 that is representative for a
single transaction in such market at such time; provided, however, that if
the banks in The City of New York selected as aforesaid by the Calculation
Agent are not quoting as mentioned in clause (ii) of this sentence, LIBOR
with respect to such LIBOR Interest Determination Date will be LIBOR in
effect on such LIBOR Interest Determination Date.
TREASURY RATE NOTES
A Treasury Rate Note will bear interest at the interest rates (calculated
with reference to the Treasury Rate and the Spread or Spread Multiplier, if
any), and such interest will be payable on the dates, specified on
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<PAGE>
the face of the Treasury Rate Note and in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, the
"Calculation Date" with respect to a Treasury Interest Determination Date will
be the tenth day after such Treasury Interest Determination Date or, if any
such day is not a Business Day, the next succeeding Business Day.
Unless otherwise indicated in the applicable Pricing Supplement, "Treasury
Rate" means, with respect to any Treasury Interest Determination Date, the rate
for the most recent auction of direct obligations of the United States
(Treasury bills) having the Index Maturity specified in the applicable Pricing
Supplement as published in H.15(519) under the heading, "U.S. Government
Securities/Treasury Bills/Auction Average (Investment)" or, if not so published
by 9:00 A.M., New York City time, on the Calculation Date pertaining to such
Treasury Interest Determination Date, the Treasury Rate will be the auction
average rate (expressed as a bond equivalent, rounded to the next higher one
hundred-thousandth of a percentage point, on the basis of a year of 365 or 366
days, as applicable, and applied on a daily basis) as otherwise announced by
the United States Department of the Treasury. If the results of the auction of
Treasury bills having the Index Maturity designated in the applicable Pricing
Supplement are not published or announced as provided above by 3:00 P.M., New
York City time, on such Calculation Date, or if no such auction is held in a
particular week, then the Treasury Rate will be calculated by the Calculation
Agent and will be a yield to maturity (expressed as a bond equivalent, rounded
to the next higher one hundred-thousandth of a percentage point, on the basis
of a year of 365 or 366 days, as applicable, and applied on a daily basis) of
the arithmetic mean of the secondary market bid rates as of approximately 3:30
P.M., New York City time, on such Treasury Interest Determination Date, of
three leading primary United States government securities dealers selected by
the Calculation Agent, for the issue of Treasury bills with a remaining
maturity closest to the Index Maturity designated in the applicable Pricing
Supplement; provided, however, that if the dealers selected as aforesaid by the
Calculation Agent are not quoting as mentioned in this sentence, the Treasury
Rate with respect to such Treasury Interest Determination Date will be the
Treasury Rate in effect on such Treasury Interest Determination Date.
PLAN OF DISTRIBUTION OF NOTES
Under the terms of an Agency Agreement, dated January 3, 1994, as it may be
amended from time to time (Agency Agreement), the Notes are offered on a
continuing basis by the Company through CS First Boston Corporation, Goldman,
Sachs & Co., J.P. Morgan Securities Inc., Chase Securities, Inc., Chemical
Securities Inc., Citicorp Securities, Inc., RBC Dominion Securities
Corporation, SBCI Swiss Bank Corporation Investment banking Inc., UBS
Securities Inc. and Wood Gundy Corp. (each an "Agent" and collectively the
"Agents"), each of which has agreed to use reasonable efforts to solicit
purchases of the Notes. The Company will pay each Agent a commission not to
exceed .75% of the principal amount of each Note, depending on its Stated
Maturity, sold through such Agent. The Company will have the sole right to
accept offers to purchase Notes and may reject any such offer, in whole or in
part. Each Agent shall have the right, in its discretion reasonably exercised,
without notice to the Company, to reject any offer to purchase Notes received
by it, in whole or in part. The Company also may sell Notes to any Agent,
acting as principal, at a discount to be agreed upon at the time of sale, for
resale to one or more investors at varying prices related to prevailing market
prices at the time of such resale, as determined by such Agent, or for resale
to certain securities dealers at the offering price set forth in the applicable
Pricing Supplement, less the applicable concession. The offering price and
selling terms for such resales may from time to time be varied by such Agent.
The Company may replace the Agents or appoint additional agents in connection
with the offering of the Notes from time to time. The Company has reserved the
right to sell Notes to or through one or more other agents. The identity of any
other agent will be set forth in the Pricing Supplement relating to the Notes
sold by such other agent. Any sales of Notes to or through other agents will be
made in accordance with the terms and conditions of the Agency Agreement.
S-11
<PAGE>
The Notes may also be sold by the Company directly to purchasers on its own
behalf in those jurisdictions where it is authorized to do so. In the case of
Notes sold directly to purchasers (other than Agents) by the Company, no
discount will be allowed or commission paid.
The obligation of any Agent acting as principal to purchase Notes may be
subject to certain conditions precedent; however, such Agent will, in any
event, be obligated to purchase all such Notes if any are purchased.
The Agents and any other agent may be deemed to be "underwriters" within the
meaning of the Securities Act of 1933, as amended (Securities Act). The Company
has agreed to indemnify the Agents against, and contribute toward, certain
civil liabilities, including liabilities under the Securities Act. The Company
has agreed to reimburse the Agents for certain expenses.
Each of the Agents has from time to time acted as an agent or as an
underwriter in connection with offerings of securities by or on behalf of the
Company. Each of CS First Boston Corporation, Goldman, Sachs & Co. and J.P.
Morgan Securities Inc. engages in transactions with and performs services for
the Company in the ordinary course of business. Affiliates of each of the other
Agents and J.P. Morgan Securities Inc. are parties to credit agreements under
which the Company, Houston Industries and certain other subsidiaries and
entities in which Houston Industries has an ownership interest have bank lines
of credit. The Company also maintains depository and other normal banking
relationships with such affiliates. Chemical Securities Inc. (one of the
Agents) is a subsidiary of Chemical Banking Corporation, which is the parent
company of Texas Commerce Bancshares, Inc. (a multi-bank holding company that
owns all of the common stock of Texas Commerce Bank National Association, the
Trustee and the Mortgage Trustee). Chemical Bank (an agent of the Trustee with
respect to Notes issued in book-entry form) is also a subsidiary of Chemical
Banking Corporation. See "Description of Mortgage Bonds--Concerning the
Mortgage Trustee" in the accompanying Prospectus.
The Notes will be a new issue of securities with no established trading
market. No assurance can be given as to the liquidity of the trading market for
the Notes.
S-12
<PAGE>
PROSPECTUS
HOUSTON LIGHTING & POWER COMPANY
COLLATERALIZED DEBT SECURITIES
----------------
Houston Lighting & Power Company (Company) may offer from time to time its
collateralized debt securities consisting of notes or other evidences of
indebtedness (Debt Securities) up to an aggregate principal amount of not more
than $480,000,000 or, if applicable, the equivalent thereof in any other
currency or currencies, subject to reduction as a result of the sale of other
debt securities. See "Description of Debt Securities". The Debt Securities may
be offered as separate series in amounts, at prices and on terms to be
determined in light of market conditions at the time of sale and set forth in
a prospectus supplement or prospectus supplements (Prospectus Supplement).
The terms of each series of Debt Securities, including, where applicable,
the specific designation, aggregate principal amount, authorized
denominations, maturity date or dates, interest rate or rates (which may be
fixed or variable) and time or times of payment of any interest, any terms for
optional or mandatory redemption or payment of additional amounts or any
sinking fund provisions, any initial public offering price, the net proceeds
to the Company and any other specific terms in connection with the offering
and sale of such series (Offered Securities) will be set forth in a Prospectus
Supplement; provided, however, that in no event shall the interest rate
(whether fixed or variable) on any Debt Securities exceed the interest rate on
the underlying Mortgage Bonds (as defined below) relating thereto. As used
herein, Debt Securities shall include securities denominated in United States
dollars or, at the option of the Company if so specified in any applicable
Prospectus Supplement, in any other currency. The Debt Securities will not be
issued in composite currencies.
The Debt Securities will be secured by one or more series of first mortgage
bonds (Mortgage Bonds) to be issued to and pledged by the Company with Texas
Commerce Bank National Association (Texas Commerce Bank), acting as the
trustee (Debt Securities Trustee) under the indenture for the Debt Securities.
Texas Commerce Bank also acts as trustee under the Mortgage (as defined
herein) for the Mortgage Bonds. See "Description of Mortgage Bonds--Concerning
the Mortgage Trustee". The aggregate principal amount of the Debt Securities
outstanding and aggregate premium thereon, if any, will not exceed the
aggregate principal amount of Mortgage Bonds pledged with and held by the Debt
Securities Trustee. The Mortgage Bonds will bear interest at times and in
amounts sufficient to provide for the payment of interest on the Debt
Securities, and the Mortgage Bonds also will be redeemed at times and in
amounts that correspond to the required payments of principal of and any
premium on the Debt Securities. Payments on the Debt Securities will satisfy
payment obligations on the underlying Mortgage Bonds relating thereto. See
"Description of Debt Securities--Security; Pledge of Mortgage Bonds" and
"Description of Mortgage Bonds".
The Debt Securities may be sold directly by the Company, through agents
designated from time to time or to or through underwriters or dealers. See
"Plan of Distribution". If any agents of the Company or any underwriters or
dealers are involved in the sale of any Debt Securities in respect of which
this Prospectus is being delivered, the names of such agents or underwriters
or dealers, a description of any indemnification arrangements and any
applicable discounts, commissions or allowances will be set forth in, or, in
the case of discounts, commissions or allowances, may be calculated on the
basis set forth in, a Prospectus Supplement.
The Debt Securities may be issued in registered form or bearer form with
coupons attached, or both. In addition, all or a portion of the Debt
Securities of a series may be issuable in temporary or permanent global form.
For certain limitations on the offer and sale of bearer securities, see
"Limitations on Issuance of Bearer Securities".
For a discussion of certain United States federal income tax consequences to
holders of Debt Securities, see "United States Taxation".
----------------
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.
----------------
This Prospectus may not be used to consummate sales of Debt Securities
unless accompanied by a Prospectus Supplement.
----------------
The date of this Prospectus is December 16, 1993.
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (Exchange Act), and, in accordance therewith,
files reports and other information with the Securities and Exchange Commission
(Commission). Such reports and other information can be inspected and copied at
the public reference facilities maintained by the Commission at 450 Fifth
Street, N.W., Judiciary Plaza, Room 1024, Washington, D.C. 20549; and at the
Commission's regional offices at Seven World Trade Center, Suite 1300, New
York, New York 10048 and 500 West Madison St., 14th Floor, Chicago, Illinois
60661. Copies of such material may be obtained at prescribed rates from the
Public Reference Section of the Commission at its principal office at 450 Fifth
Street, N.W., Judiciary Plaza, Room 1024, Washington, D.C. 20549.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, which have been filed by the Company with the
Commission pursuant to the Exchange Act (File No. 1-3187), are incorporated by
reference in this Prospectus and shall be deemed to be a part hereof:
1) The Company's Annual Report on Form 10-K for the year ended December 31,
1992;
2) The Company's Quarterly Reports on Form 10-Q for the quarters ended
March 31, June 30 and September 30, 1993; and
3) The Company's Current Reports on Form 8-K dated March 10, March 17,
March 18, June 25, July 1 and July 7, 1993.
All documents subsequently filed by the Company with the Commission pursuant
to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act prior to the
termination of the offering made by this Prospectus shall be deemed to be
incorporated herein by reference and to be a part hereof from the date of
filing 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 to the extent that a statement
contained herein or in any other subsequently filed document that also is or is
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus.
The Company is not required to deliver an annual report to its security
holders pursuant to Section 14 of the Exchange Act or any stock exchange
requirements and will not deliver reports to its security holders unless
otherwise required by law.
The Company hereby undertakes to provide without charge to each person,
including any beneficial owner, to whom a copy of this Prospectus has been
delivered, upon written or oral request of any such person, a copy of any or
all of the documents referred to above that have been incorporated by reference
in this Prospectus (not including exhibits to the documents that are
incorporated by reference unless such exhibits are specifically incorporated by
reference into such documents). Written or oral requests for such copies should
be directed to the Investor Relations Department, P.O. Box 4505, Houston, Texas
77210, telephone (800) 231-6406 (if calling from outside Texas) or (800) 392-
4261 (if calling from inside Texas) (toll free in either case).
----------------
Unless otherwise indicated, currency amounts in this Prospectus and any
Prospectus Supplement are stated in United States dollars ("$", "dollars",
"U.S. dollars" or "U.S. $").
2
<PAGE>
THE COMPANY
Houston Lighting & Power Company (Company) is engaged in the generation,
transmission, distribution and sale of electric energy, and serves customers in
an approximately 5,000 square mile area of the Texas Gulf Coast, including
Houston. The address of the Company's principal executive offices is 611 Walker
Avenue, Houston, Texas 77002. Its telephone number is (713) 228-9211.
The Company is a subsidiary of Houston Industries Incorporated (Houston
Industries), which owns directly or indirectly all of the Company's outstanding
common stock. Houston Industries is a holding company as defined in the Public
Utility Holding Company Act of 1935, as amended (Holding Company Act), but is
exempt from regulation as a "registered" holding company under the Holding
Company Act.
APPLICATION OF PROCEEDS
Except as otherwise described in the applicable Prospectus Supplement, the
net proceeds from the sale of the Offered Securities will be used for general
corporate purposes. These purposes include, but are not limited to, the
redemption, repayment or retirement of outstanding indebtedness or preferred
stock of the Company, the payment of expenditures relating to the Company's
construction program (as discussed in the documents incorporated herein by
reference), and the repayment of short-term indebtedness incurred in connection
with any of the foregoing. Such short-term indebtedness bears or will bear
interest at fluctuating rates generally lower than the prime rate.
Except as otherwise described in the applicable Prospectus Supplement,
pending the uses described above, the proceeds from the sale of the Offered
Securities may be invested in short-term investments or in the Houston
Industries "money fund", a cash management program in which subsidiaries of
Houston Industries, including the Company, may invest excess funds or borrow
funds. Houston Industries pays interest on funds invested by its subsidiaries
in the money fund generally at a fluctuating rate.
RATIOS OF EARNINGS TO FIXED CHARGES
The following table sets forth the ratios of earnings to fixed charges of the
Company for each of the years 1988 through 1992 and for the twelve months ended
September 30, 1993.
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED
TWELVE MONTHS ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------------------ -------------------
1988(1) 1989(1) 1990(1) 1991(1) 1992(1)(2) 1993(3)
------- ------- ------- ------- ---------- -------------------
<C> <C> <C> <C> <C> <C>
2.78 3.12 2.85 2.97 2.73 3.29
</TABLE>
- --------
(1) Restated to reflect the merger, effective as of October 8, 1993, of Utility
Fuels, Inc. with and into the Company.
(2) Before cumulative effect of change in accounting for revenues.
(3) The ratio of earnings to fixed charges for the nine-month period ended
September 30, 1993 is 3.84. The Company believes that the ratio for this
nine-month period is not necessarily indicative of the ratio for a twelve-
month period due to the seasonal nature of the Company's business.
For the purpose of computing the Company's ratios of earnings to fixed
charges, "earnings" represent the aggregate of net income, taxes on income and
fixed charges. The calculation of the Company's earnings used in the
calculation of the ratios of earnings to fixed charges include the allowance
for funds used during construction, deferred carrying costs and deferred
return. "Fixed charges" represent interest on capital leases and short-term and
long-term debt and amortization of bond premium, discount and expenses,
excluding amortization of the net gain or loss on reacquired mortgage bonds.
3
<PAGE>
DESCRIPTION OF DEBT SECURITIES
The Debt Securities are to be issued under the Collateral Trust Indenture,
dated as of September 1, 1988, as supplemented, and as to be further
supplemented in connection with the issuance and sale of the Debt Securities,
between the Company and Texas Commerce Bank, in its capacity as Debt Securities
Trustee (Indenture).
A copy of the Indenture is filed as an exhibit to the Registration Statement
of which this Prospectus is a part. The statements and descriptions under this
caption are summaries of certain provisions of the Indenture, do not purport to
be complete and are subject to, and are qualified in their entirety by
reference to, all of the provisions of the Indenture, including the definitions
therein of certain terms.
The principal amount of Debt Securities that may be offered hereunder is
subject to reduction as a result of the sale of certain other debt securities.
The Registration Statement of which this Prospectus is a part also includes a
separate prospectus relating to an offering of up to $480,000,000 aggregate
principal amount of the Company's first mortgage bonds, which may be offered
prior to or concurrently with the offering of the Debt Securities. Any first
mortgage bonds sold by the Company pursuant to such separate prospectus will
reduce the principal amount of Debt Securities that may be offered by the
Company pursuant to this Prospectus. Conversely, any Debt Securities sold by
the Company hereunder will reduce the principal amount of first mortgage bonds
that may be offered pursuant to such separate prospectus.
The Company has previously issued pursuant to supplemental indentures to the
Indenture $700 million aggregate principal amount of collateralized medium-term
notes. An additional $100 million aggregate principal amount of Collateralized
Medium-Term Notes, Series C may be issued by the Company pursuant to the Third
Supplemental Indenture to the Indenture.
The term "Securities", as used under this caption, refers to all Securities
issued under the Indenture and includes the Debt Securities.
GENERAL
The Debt Securities may be issued from time to time in one or more series.
The particular terms of each series of Debt Securities offered by any
Prospectus Supplement will be described in such Prospectus Supplement relating
to such series.
The Indenture does not limit the aggregate amount of Securities that may be
issued thereunder, and Securities may be issued thereunder from time to time in
separate series up to the aggregate amount from time to time authorized by the
Company for each series. For a description of the security for the Securities,
see "Security; Pledge of Mortgage Bonds" below and "Description of Mortgage
Bonds".
Except as may be otherwise indicated in a Prospectus Supplement, the
Indenture does not contain any covenants or other provisions that afford
holders of the Debt Securities special protection in the event of a highly
leveraged transaction involving the Company except for any such protection
provided by the provisions of the Indenture described below under "Security;
Pledge of Mortgage Bonds".
The applicable Prospectus Supplement will describe the following terms of the
Offered Securities: (1) the title of the Offered Securities; (2) any limit on
the aggregate principal amount of the Offered Securities; (3) whether the
Offered Securities are to be issuable as Registered Securities or Bearer
Securities or both, whether any of the Offered Securities are to be issuable
initially in temporary global form and whether any of the Offered Securities
are to be issuable in permanent global form; (4) if other than as described
under "Form, Exchange, Registration and Transfer" and "Limitations on Issuance
of Bearer Securities" below, any restrictions applicable to the offer, sale or
delivery of Bearer Securities and the terms, if any, upon which any Bearer
Securities may be exchanged for Registered Securities; (5) the price or prices
(expressed as a percentage
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of the aggregate principal amount thereof) at which the Offered Securities will
be issued; (6) the date or dates on which the Offered Securities will mature;
(7) the rate or rates at which the Offered Securities will bear interest, if
any, or the formula pursuant to which such rate or rates will be determined,
and the date or dates from which any such interest will accrue; provided that
in no event shall the interest rate (whether fixed or variable) on the Offered
Securities exceed the interest rate on the underlying Mortgage Bonds relating
thereto; (8) the Interest Payment Dates on which any such interest on the
Offered Securities will be payable, the Regular Record Date for any interest
payable on any Offered Securities that are Registered Securities on any
Interest Payment Date; (9) the Person to whom any interest on any Registered
Security of the series will be payable, if other than the Person in whose name
such Registered Security (or one or more Predecessor Securities) is registered
at the close of business on the Regular Record Date for such interest as
described under "Payment and Paying Agents" below, and the manner in which, or
the Person to whom, any interest on any Bearer Security will be paid if other
than in the manner described under "Payment and Paying Agents" below and the
extent to which, or the manner in which, any interest payable on a temporary
global certificate for Bearer Securities on an Interest Payment Date will be
paid if other than in the manner described under "Temporary Global Certificates
for Bearer Securities" below and the extent to which, or the manner in which,
any interest payable on a permanent global Security on an Interest Payment Date
will be paid; (10) any mandatory or optional sinking fund, redemption or
analogous provisions; (11) each office or agency where, subject to the terms of
the Indenture as described below under "Payment and Paying Agents", the
principal of (and premium, if any) and interest on the Offered Securities will
be payable and each office or agency where, subject to the terms of the
Indenture as described below under "Form, Exchange, Registration and Transfer",
the Offered Securities may be presented for registration of transfer or
exchange; (12) the date, if any, after which, and the price or prices at which,
the Offered Securities may be redeemed, in whole or in part at the option of
the Company, or pursuant to mandatory redemption provisions, and the other
detailed terms and provisions of any such optional or mandatory redemption
provisions; (13) the denominations in which any Offered Securities that are
Registered Securities will be issuable, if other than denominations of $1,000
and any integral multiple thereof, and the denomination or denominations in
which any Offered Securities that are Bearer Securities will be issuable, if
other than the denomination of $5,000; (14) the currency of payment of
principal of (and premium, if any) and interest on the Offered Securities; (15)
any index used to determine the amount of payments of principal of (and
premium, if any) and interest on the Offered Securities; (16) the portion of
the principal amount of the Offered Securities, if other than the entire
principal amount thereof, payable upon acceleration of maturity thereof; (17)
the Person who shall be the Security Registrar for Offered Securities issuable
as Registered Securities, if other than Houston Industries; (18) any deletions
or modifications of or additions to the Events of Default or covenants set
forth in the Indenture; (19) any applicable Paying Agent or Authenticating
Agent for Offered Securities, if other than Houston Industries; (20) whether
the Offered Securities will be issued in book-entry or certificated form; and
(21) any other terms of the Offered Securities not inconsistent with the
provisions of the Indenture. Any such Prospectus Supplement will also describe
any special provisions for the payment of additional amounts with respect to
the Offered Securities. (Section 301)
Offered Securities may be issued as Original Issue Discount Securities to be
sold at a discount below their principal amount. Special United States federal
income tax considerations applicable to Offered Securities issued at an
original issue discount, including Original Issue Discount Securities, and
special United States tax considerations applicable to any Offered Securities
that are denominated in a currency other than U.S. dollars, are described under
"United States Taxation--United States Holders".
COMPLIANCE WITH CONDITIONS AND COVENANTS
The Indenture provides that, except as otherwise set forth therein, upon
application or request by the Company to the Debt Securities Trustee to take
any action under the Indenture, the Company shall furnish to the Debt
Securities Trustee both an Officers' Certificate and an Opinion of Counsel
stating that all applicable conditions precedent contained in the Indenture
have been complied with and, to the extent that conditions precedent are
subject to verification by certain experts, a certificate or opinion of such
persons that the applicable conditions precedent have been complied with.
(Section 102)
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AUTHENTICATION AND DELIVERY
The Indenture provides that the Company may deliver Securities of any series,
and any related coupons, executed by the Company to the Debt Securities Trustee
or an Authenticating Agent for authentication, and the Debt Securities Trustee
or such Authenticating Agent shall authenticate and deliver such Securities,
subject to certain conditions set forth in the Indenture with respect to Bearer
Securities. The Debt Securities Trustee or an Authenticating Agent shall have
the right to decline to authenticate and deliver such Securities if the Debt
Securities Trustee or such Authenticating Agent, as the case may be, has
determined in good faith that such action would expose the Debt Securities
Trustee or such Authenticating Agent, as the case may be, to personal liability
to existing Holders or has been advised by counsel that such action may not
lawfully be taken. No Security or coupon shall be entitled to any benefit under
the Indenture or be valid or obligatory for any purpose unless such Security
has been authenticated in accordance with the Indenture. (Section 303)
Houston Industries has been appointed an Authenticating Agent with respect to
the Debt Securities and, in such capacity, is authorized to act on behalf of
the Trustee to authenticate and deliver Debt Securities upon original issuance
or upon exchange, registration of transfer or partial redemption. Such
appointment may be rescinded with respect to a particular series of Securities
upon the execution of a supplemental indenture providing for such rescission.
The appointment of Houston Industries as Authenticating Agent may be terminated
by the Trustee only in the event of gross negligence, willful misconduct, the
failure by Houston Industries to perform its duties under the Indenture or
under any agreement executed in connection therewith, or for other good cause
shown.
SECURITY; PLEDGE OF MORTGAGE BONDS
General. In order to secure by the lien of the Mortgage the obligation of the
Company to pay the principal of (and premium, if any) and interest on the
Securities, the Company will issue and deliver to and pledge with Texas
Commerce Bank, acting as the Debt Securities Trustee, in trust for the ratable
benefit of the Holders of the Securities, Mortgage Bonds, which Mortgage Bonds
will be issued pursuant to that certain Mortgage and Deed of Trust (Mortgage),
dated as of November 1, 1944, between the Company and South Texas Commercial
National Bank of Houston (Texas Commerce Bank, as successor trustee), as
trustee (Mortgage Trustee), as amended and supplemented. (Section 401) The
aggregate principal amount of the Securities outstanding and maximum aggregate
amount of premium thereon, if any, will not exceed the aggregate principal
amount of Mortgage Bonds pledged with and held by the Debt Securities Trustee.
The Mortgage Bonds will bear interest at times and in amounts sufficient to
provide for the payment of interest on the Securities and also will be redeemed
at times and in amounts that correspond to the required payments of principal
of and any premium on the Securities. Payments on the Securities will satisfy
payment obligations on the underlying Mortgage Bonds relating thereto. The
Mortgage Bonds will be secured by a first mortgage lien on certain property
owned by the Company and will rank on a parity with all other first mortgage
bonds of the Company. As of December 8, 1993, the Company had outstanding
$3,151,550,000 aggregate principal amount of first mortgage bonds. See
"Description of Mortgage Bonds".
Pledge of Mortgage Bonds. The Company from time to time will issue and
deliver to and pledge with the Debt Securities Trustee for the benefit of the
holders of the Securities, Mortgage Bonds in an aggregate principal amount such
that the sum of (i) the aggregate principal amount of Mortgage Bonds then being
delivered to the Debt Securities Trustee pursuant to the Indenture and (ii) the
aggregate principal amount of Mortgage Bonds previously delivered to and then
being held by the Debt Securities Trustee pursuant to the Indenture is equal to
or greater than the sum of (x) the aggregate principal amount (or, in the case
of Original Issue Discount Securities, the aggregate principal amount thereof
due and payable at the Stated Maturity thereof) of, plus the maximum aggregate
amount of any premium on, any Securities then being delivered to the Debt
Securities Trustee or an Authenticating Agent for authentication pursuant to
the Indenture and (y) the aggregate principal amount (or, in the case of
Original Issue Discount Securities, the aggregate principal amount thereof due
and payable at the Stated Maturity thereof) of, plus the maximum aggregate
amount of
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any premium on, the Securities then outstanding (treating, for purposes of this
clause (y), the Securities then being delivered to the Debt Securities Trustee
or an Authenticating Agent for authentication pursuant to the Indenture as not
being outstanding). (Section 401(b))
The Indenture provides that the Company will not issue and deliver Securities
of any series to the Debt Securities Trustee or an Authenticating Agent for
authentication, and the Debt Securities Trustee or such Authenticating Agent
will not authenticate Securities of any series, unless the Company has
delivered to the Debt Securities Trustee or such Authenticating Agent a Company
Order, pursuant to which the Company designates with respect to such series
Designated Mortgage Bonds, which designation, subject to certain provisions
relating to the surrender of the Designated Mortgage Bonds, shall remain in
effect for so long as the series of Securities with respect to which the
Designated Mortgage Bonds have been so designated are Outstanding; provided
that if the Securities are to be authenticated by such Authenticating Agent,
the Company Order shall also be delivered to the Debt Securities Trustee
concurrently with its delivery to such Authenticating Agent. (Section 401(d))
For purposes of the foregoing, "Designated Mortgage Bonds", with respect to any
series of Securities, means an aggregate principal amount of Mortgage Bonds
held by (or then being delivered to) the Debt Securities Trustee, not
designated at the time with respect to Outstanding Securities, equal to the
aggregate principal amount (or, in the case of Original Issue Discount
Securities, the aggregate principal amount thereof due and payable at the
Stated Maturity thereof) of, plus the maximum aggregate amount of any premium
on, the Securities of such series issued and delivered by the Company to the
Debt Securities Trustee or an Authenticating Agent for authentication pursuant
to the Indenture.
Payments in Foreign Currencies. Pursuant to the terms of the Indenture, a
series of Securities may not be made payable in any currency unless the
Designated Mortgage Bonds relating to such series are also made payable in the
same currency.
Satisfaction of Payment Obligation on Mortgage Bonds. The interest rate on
the Mortgage Bonds will be as specified in the applicable Prospectus
Supplement. The Indenture provides that the obligation of the Company to make
any payment of the principal of (and premium, if any) or interest on the
Designated Mortgage Bonds will be deemed to have been satisfied and discharged
to the extent that at the time any such payment shall be due, the then due
principal of (and premium, if any) or interest on the Securities to which such
Designated Mortgage Bonds relate, and any coupons appertaining to such
Securities, shall have been paid, deemed to have been paid or otherwise
satisfied and discharged. In addition, such obligation to make any payment of
the principal of (and premium, if any) or interest on the Designated Mortgage
Bonds at any time shall be deemed to have been satisfied and discharged to the
extent that the amount of the Company's obligation to make any payment of the
principal of (and premium, if any) or interest on the Designated Mortgage Bonds
exceeds the obligation of the Company at that time to make any payment of the
principal of (and premium, if any) or interest on the Securities to which such
Designated Mortgage Bonds relate. The obligation of the Company to make any
payment of the principal of (and premium, if any) or interest on the Mortgage
Bonds other than Designated Mortgage Bonds shall be deemed to have been
satisfied and discharged in full at the time any such payment shall be due.
(Section 403(a))
Redemption of Mortgage Bonds. The Company covenants and agrees in the
Indenture that upon the required payment of principal or premium, if any,
becoming due and payable with respect to any Securities, it will redeem the
Designated Mortgage Bonds relating to such Securities in an aggregate principal
amount equal to the amount becoming due and payable on such Securities, plus
accrued interest; provided, however, that the Company's obligation to redeem
such Designated Mortgage Bonds will be fully or partially deemed to have been
satisfied and discharged to the extent that at the time any such payment shall
be due, the then due aggregate principal amount of the Securities to which such
Designated Mortgage Bonds relate, plus the aggregate amount of any premium on,
or accrued interest to the redemption date for, such Securities shall have been
fully or partially paid, deemed to have been paid or otherwise satisfied and
discharged. Except for such redemption, the Company covenants that it will not
redeem the Mortgage Bonds or take any action that will result in the Mortgage
Trustee's incurring an obligation to redeem any Mortgage Bonds. (Section 404)
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Surrender and Exchange of Mortgage Bonds. Pursuant to the Indenture, any time
that Securities of any series cease to be Outstanding, the Debt Securities
Trustee will, upon request of the Company, surrender to the Mortgage Trustee
for cancellation Designated Mortgage Bonds relating to such series in an
aggregate principal amount equal to the aggregate principal amount (or, in the
case of Original Issue Discount Securities that cease to be Outstanding, the
aggregate principal amount thereof that would have been due and payable at the
Stated Maturity thereof) of, plus the maximum aggregate amount of any premium
on, the Securities that cease to be Outstanding; provided that the aggregate
principal amount of Designated Mortgage Bonds held by the Debt Securities
Trustee at any time relating to any series of Outstanding Securities shall not
be less than the aggregate principal amount (or, in the case of Original Issue
Discount Securities, the aggregate principal amount thereof that shall be due
and payable at the Stated Maturity thereof) of, plus the maximum aggregate
amount of any premium on, all Outstanding Securities of such series. (Section
406(b))
The Debt Securities Trustee will, upon request of the Company, surrender to
the Mortgage Trustee for cancellation Mortgage Bonds in an aggregate principal
amount equal to the aggregate principal amount of any other Mortgage Bonds
delivered to and pledged with the Debt Securities Trustee pursuant to the
Indenture in exchange therefor; provided that the Mortgage Bonds so delivered
to and pledged with the Debt Securities Trustee contain no provisions that
would impair the benefit of the lien of the Mortgage in favor of the holders of
the Outstanding Securities. With respect to the delivery to and pledge with the
Debt Securities Trustee of Mortgage Bonds payable in a currency other than the
currency of the Mortgage Bonds to be surrendered in exchange therefor, the
aggregate principal amount of Mortgage Bonds to be surrendered by the Debt
Securities Trustee shall be equal to the equivalent of the aggregate principal
amount of Mortgage Bonds so delivered and pledged in the currency in which the
Mortgage Bonds to be surrendered in exchange therefor are payable, as
determined by the Company by reference to the noon buying rate in The City of
New York for cable transfers for such currency on the day on which such
exchange and surrender occurs, as such rate is reported or otherwise made
available by the Federal Reserve Bank of New York. (Section 406(c))
From time to time upon request of the Company, the Debt Securities Trustee
will surrender to the Mortgage Trustee for cancellation Mortgage Bonds other
than Designated Mortgage Bonds held by the Debt Securities Trustee pursuant to
the Indenture. (Section 406(d))
FORM, EXCHANGE, REGISTRATION AND TRANSFER
Securities of a series may be issuable in definitive form solely as
Registered Securities, solely as Bearer Securities or as both Registered
Securities and Bearer Securities. Unless otherwise indicated in an applicable
Prospectus Supplement, definitive Bearer Securities will have interest coupons
attached. (Section 201) The Indenture also provides that Securities of a series
may be issuable in temporary and permanent global form. (Section 201) See
"Temporary Global Certificates for Bearer Securities", "Permanent Global
Securities" and "Book-Entry Debt Securities".
In connection with its sale during the restricted period (as defined below),
no Bearer Security (including a Security in permanent global form that is
either a Bearer Security or exchangeable for Bearer Securities) shall be mailed
or otherwise delivered to any location in the United States or its possessions
(as defined under "Limitations on Issuance of Bearer Securities") and a Bearer
Security may be delivered in definitive form in connection with its original
issuance only if prior to delivery the owner of such Bearer Security or a
financial institution or clearing organization through which the owner holds
such Bearer Security, directly or indirectly, furnishes written certification,
in the form required by the Indenture, to the effect that such Bearer Security
is owned by: (a) a Person (purchasing for its own account) who is not a United
States person (as defined under "Limitations on Issuance of Bearer
Securities"); (b) a United States person who is (i) a foreign branch of a
United States financial institution purchasing for its own account or for
resale or (ii) a United States person purchasing for its own account who
acquired such Bearer Security through the foreign branch of a United States
financial institution and who for purposes of this certification holds such
Bearer Security through such financial institution on the date of certification
and, in either case, such United States financial institution provides a
certificate to the Company or the distributor selling the Bearer Security
within a
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reasonable period of time stating that it agrees to comply with the
requirements of Section 165(j)(3)(A), (B) or (C) of the United States Internal
Revenue Code of 1986, as amended (Code), and the regulations thereunder; or (c)
a financial institution for purposes of resale within the "restricted period"
as defined in United States Treasury Regulations Section 1.163-
5(c)(2)(i)(D)(7). A financial institution described in clause (c) of the
preceding sentence (whether or not also described in clauses (a) and (b)) must
certify that it has not acquired the Bearer Security for purposes of resale,
directly or indirectly, to a United States person or to a person within the
United States or its possessions. In the case of a Bearer Security in permanent
global form, such certification must be given in connection with notation of a
beneficial owner's interest therein in connection with the original issuance of
such Security or upon exchange of a portion of a temporary global Security.
(Section 303) See "Temporary Global Certificates for Bearer Securities" and
"Limitations on Issuance of Bearer Securities". Each Bearer Security other than
a temporary global Bearer Security will bear a legend notifying the holder
thereof of certain limitations under the United States income tax laws
applicable to bearer securities.
Unless otherwise indicated in an applicable Prospectus Supplement, Registered
Securities of any series will be exchangeable for other Registered Securities
of the same series and of like tenor of any authorized denominations and of a
like aggregate principal amount and Stated Maturity. In addition, if Securities
of any series are issuable as both Registered Securities and Bearer Securities,
at the option of the Holder upon request confirmed in writing, and subject to
the terms of the Indenture, Bearer Securities (with all unmatured coupons,
except as provided below, and all matured coupons in default) of such series
will be exchangeable for Registered Securities of the same series and of like
tenor of any authorized denominations and of a like aggregate principal amount
and Stated Maturity. Bearer Securities surrendered in exchange for Registered
Securities between the close of business on a Regular Record Date or a Special
Record Date and the relevant date for payment of interest shall be surrendered
without the coupon relating to such date for payment of interest, and interest
will not be payable in respect of the Registered Security issued in exchange
for such Bearer Security, but will be payable only to the Holder of such coupon
when due in accordance with the terms of the Indenture. Bearer Securities will
not be issued in exchange for Registered Securities. (Section 305)
Unless otherwise indicated in an applicable Prospectus Supplement, Securities
may be presented for exchange as provided above, and Registered Securities may
be presented for registration of transfer (with the form of transfer endorsed
thereon duly executed), at the office of the Security Registrar or at the
office of any transfer agent designated by the Company for such purpose with
respect to any series of Securities and referred to in an applicable Prospectus
Supplement, without service charge and upon payment of any taxes and other
governmental charges as described in the Indenture. Such transfer or exchange
will be effected upon the Security Registrar or such transfer agent, as the
case may be, being satisfied with the documents of title and identity of the
person making the request. (Section 305) Houston Industries is the initial
Security Registrar for the Securities. (Section 101) If a Prospectus Supplement
refers to any transfer agents (in addition to the Security Registrar) initially
designated by the Company with respect to any series of Securities, the Company
may at any time rescind the designation of any such transfer agent or approve a
change in the location through which any such transfer agent (or Security
Registrar) acts, except that, if Securities of a series are issuable solely as
Registered Securities, the Company will be required to maintain a transfer
agent in each Place of Payment for such series and, if Securities of a series
are issuable as Bearer Securities, the Company will be required to maintain (in
addition to the Security Registrar) a transfer agent in a Place of Payment for
such series located outside the United States. The Company may at any time
designate additional transfer agents with respect to any series of Securities.
(Section 1102)
In the event of any redemption of Securities, the Company shall not be
required to: (i) issue, register the transfer of or exchange Securities of any
series during a period beginning at the opening of business 15 days before any
selection of Securities of that series to be redeemed and ending at the close
of business on (A) if Securities of the series are issuable only as Registered
Securities, the day of mailing of the relevant notice of redemption and (B) if
Securities of the series are issuable as Bearer Securities, the day of the
first publication of the relevant notice of redemption or, if Securities of the
series are also issuable as Registered Securities
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and there is no publication, the mailing of the relevant notice of redemption;
(ii) register the transfer of or exchange any Registered Security, or portion
thereof, called for redemption, except the unredeemed portion of any Registered
Security being redeemed in part; or (iii) exchange any Bearer Security called
for redemption, except to exchange such Bearer Security for a Registered
Security of that series and of like tenor that is simultaneously surrendered
for redemption. (Section 305)
PAYMENT AND PAYING AGENTS
Unless otherwise indicated in an applicable Prospectus Supplement, payment of
principal of (and premium, if any) and interest on Bearer Securities will be
payable, subject to any applicable laws and regulations, at the offices of such
Paying Agents outside the United States and its possessions as the Company may
designate from time to time, or, at the option of the Holder, by a check or by
transfer to an account maintained by the payee with a bank located outside the
United States; provided, however, that the written certification described
above under "Form, Exchange, Registration and Transfer" has been delivered
prior to the first actual payment of interest. Unless otherwise indicated in an
applicable Prospectus Supplement, payment of interest on Bearer Securities on
any Interest Payment Date will be made only against surrender outside the
United States, to the Paying Agent, of the coupon relating to such Interest
Payment Date. No payment with respect to any Bearer Security will be made at
any office or agency of the Company in the United States or by check mailed to
any address in the United States or by transfer to an account maintained with a
bank located in the United States. Notwithstanding the foregoing, payments of
principal of (and premium, if any) and interest on Bearer Securities
denominated and payable in U.S. dollars will be made at the office of the
Company's Paying Agent in the Borough of Manhattan, The City of New York, if
(but only if) payment of the full amount thereof in U.S. dollars at all offices
or agencies outside the United States is illegal or effectively precluded by
exchange controls or other similar restrictions. (Section 1102)
Unless otherwise indicated in an applicable Prospectus Supplement, payment of
principal of (and premium, if any) and interest on Registered Securities will
be made at the office of such Paying Agent or Paying Agents as the Company may
designate from time to time, except that at the option of the Company payment
of any interest may be made by check mailed to the address of the Person
entitled thereto as such address shall appear in the Security Register. Unless
otherwise indicated in an applicable Prospectus Supplement, payment of any
installment of interest on Registered Securities on any Interest Payment Date
will be made to the Person in whose name such Registered Security (or
Predecessor Security) is registered at the close of business on the Regular
Record Date for such interest. (Section 307)
Unless otherwise indicated in an applicable Prospectus Supplement, Houston
Industries is the sole Paying Agent for payments with respect to Offered
Securities that are issuable solely as Registered Securities. A Paying Agent
will be designated as the Company's Paying Agent in the Borough of Manhattan,
The City of New York, for payments with respect to Offered Securities (subject
to the limitations described above in the case of Bearer Securities) that are
issuable solely as Bearer Securities or as both Registered Securities and
Bearer Securities. Any Paying Agents outside the United States and any other
Paying Agents in the United States initially designated by the Company for the
Offered Securities will be named in an applicable Prospectus Supplement. The
Company may at any time designate additional Paying Agents or rescind the
designation of any Paying Agent or approve a change in the office through which
any Paying Agent acts, except that if Securities of a series are issuable
solely as Registered Securities, the Company will be required to maintain a
Paying Agent in each Place of Payment for such series and, if Securities of a
series are issuable as Bearer Securities, the Company will be required to
maintain (i) a Paying Agent in the Borough of Manhattan, The City of New York,
for payments with respect to any Registered Securities of the series (and for
payments with respect to Bearer Securities of the series in the circumstances
described above, but not otherwise) and (ii) a Paying Agent in a Place of
Payment located outside the United States where Securities of such series and
any coupons appertaining thereto may be presented and surrendered for payment;
provided that if the Securities of such series are listed on The Stock Exchange
of the United Kingdom and the Republic of Ireland or the Luxembourg Stock
Exchange or any other stock exchange located outside the United States
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and such stock exchange shall so require, the Company will maintain a Paying
Agent in London or Luxembourg or any other required city located outside the
United States, as the case may be, for the Securities of such series. (Section
1102)
All moneys paid by the Company to a Paying Agent or held by the Company in
trust for the payment of principal of (and premium, if any) or interest on any
Security, which remain unclaimed at the end of two years after such principal,
premium or interest shall have become due and payable, will be discharged from
trust and repaid to the Company, and the Holder of such Security or any coupon
will thereafter look only to the Company for payment thereof. (Section 1103)
TEMPORARY GLOBAL CERTIFICATES FOR BEARER SECURITIES
If so specified in an applicable Prospectus Supplement, all or any portion of
the Securities of a series that are issuable as Bearer Securities will
initially be represented by one or more temporary global certificates, without
interest coupons, to be deposited with a common depositary in London for Morgan
Guaranty Trust Company of New York, Brussels Office, as operator of the Euro-
clear System (Euro-clear) and CEDEL S.A. (CEDEL) for credit to the designated
accounts. On and after the date determined as provided in any such temporary
global certificate and described in an applicable Prospectus Supplement, each
such temporary global certificate will be exchangeable for definitive Bearer
Securities, definitive certificates representing Registered Securities or all
or a portion of a permanent global certificate representing Bearer Securities,
or any combination thereof, as specified in an applicable Prospectus
Supplement, but, unless otherwise specified in an applicable Prospectus
Supplement, only upon written certification in the form and to the effect
described under "Form, Exchange, Registration and Transfer". No definitive
Bearer Security or permanent global certificates representing Bearer Securities
delivered in exchange for a portion of a temporary global certificate shall be
mailed or otherwise delivered to any location in the United States in
connection with such exchange. (Section 304)
Unless otherwise specified in an applicable Prospectus Supplement, interest
in respect of any portion of a temporary global certificate representing Bearer
Securities payable in respect of an Interest Payment Date occurring prior to
the issuance of definitive Securities or a permanent global certificate
representing Bearer Securities will be paid to each of Euro-clear and CEDEL
with respect to the portion of the temporary global certificate held for its
account. Each of Euro-clear and CEDEL will undertake in such circumstances to
credit such interest received by it in respect of a temporary global
certificate to the respective accounts for which it holds such temporary global
certificate only upon receipt in each case of written certification in the form
and to the effect described above under "Form, Exchange, Registration and
Transfer" as of the relevant Interest Payment Date regarding the portion of
such temporary global certificate representing Bearer Securities on which
interest is to be so credited. (Section 304)
PERMANENT GLOBAL SECURITIES
If any Securities of a series are issuable in permanent global form, the
applicable Prospectus Supplement will describe the circumstances, if any, under
which beneficial owners of interests in any such permanent global certificate
may exchange such interests for Securities of such series and of like tenor and
principal amount of any authorized form and denomination. No Bearer Security
delivered in exchange for a portion of a permanent global certificate shall be
mailed or otherwise delivered to any location in the United States in
connection with such exchange. (Section 305) Except as otherwise specified in a
Prospectus Supplement, a Person having a beneficial interest in a permanent
global certificate will, except with respect to payment of principal of (and
premium, if any) and interest on such permanent global certificate, be treated
as a Holder of such principal amount of Outstanding Securities represented by
such permanent global certificate as shall be specified in a written statement
of the Holder of such permanent global certificate that is delivered to the
Securities Registrar by such Person. Principal of (and premium, if any) and
interest on a permanent global certificate will be payable in the manner
described in the applicable Prospectus Supplement. (Section 203)
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BOOK-ENTRY DEBT SECURITIES
The Registered Debt Securities of a series may be issued, in whole or in
part, in the form of one or more global Securities that would be deposited with
a depositary or its nominee identified in the applicable Prospectus Supplement.
The specific terms of any depositary arrangement with respect to any portion of
a series of Debt Securities and the rights of, and limitations on, owners of
beneficial interests in any such global Security representing all or a portion
of a series of Debt Securities will be described in the applicable Prospectus
Supplement.
SATISFACTION AND DISCHARGE OF THE INDENTURE AND THE SECURITIES
The Indenture will cease to be of further effect, and the Debt Securities
Trustee shall execute instruments acknowledging satisfaction and discharge of
the Indenture and shall pay, or assign or transfer and deliver, the Trust
Estate held by it as security for the Securities remaining, when (1) either (a)
all Securities authenticated and delivered and any related coupons (other than
certain specified Securities and coupons) have been delivered for cancellation;
or (b) all such Securities and any related coupons have become or will become
within one year due and payable, or are to be called for redemption within one
year under arrangements satisfactory to the Debt Securities Trustee, and the
Company has deposited or caused to be deposited in trust with the Debt
Securities Trustee funds sufficient to pay and discharge the entire
indebtedness on such Securities for principal (and premium, if any) and
interest to the date of such deposit (in the case of Securities that have
become due and payable) or to their Stated Maturity or Redemption Date, as the
case may be; and (2) the Company has paid or caused to be paid all other sums
payable by it under the terms of the Indenture. (Section 501)
If so specified in the supplemental indenture or other instrument creating a
series of Securities, the Company shall be deemed to have paid and discharged
the indebtedness on all the Outstanding Securities of such series and the Debt
Securities Trustee shall execute instruments acknowledging the satisfaction and
discharge of such indebtedness and shall pay, or assign or transfer and deliver
to the Company the Designated Mortgage Bonds which have been held as security
for the Securities of such series if (1) either (a) with respect to all
Outstanding Securities of such series (i) the Company has irrevocably deposited
or caused to be irrevocably deposited with the Debt Securities Trustee an
amount sufficient to pay and discharge the entire indebtedness on all
Outstanding Securities of such series for principal (and premium, if any) and
interest to the Stated Maturity or any Redemption Date, as the case may be, or
(ii) the Company has irrevocably deposited or caused to be irrevocably
deposited with the Debt Securities Trustee such amount of direct noncallable
obligations of, or noncallable obligations the payment of principal of and
interest on which is fully guaranteed by, the United States of America, or to
the payment of which obligations or guarantees the full faith and credit of the
United States of America is pledged, maturing as to principal and interest in
such amounts and at such times as will, without consideration of any
reinvestment thereof, be sufficient to pay and discharge the entire
indebtedness on all Outstanding Securities of such series for principal (and
premium, if any) and interest to the Stated Maturity or any Redemption Date, as
the case may be, or (b) the Company has properly fulfilled such other means of
satisfaction and discharge as is specified in the supplemental indenture or
other instrument creating such series; (2) after giving effect to the
satisfaction and discharge of the Securities of such series and to the release
of the related Designated Mortgage Bonds from the lien of the Indenture, the
aggregate principal amount of Designated Mortgage Bonds held by the Debt
Securities Trustee and relating to all Outstanding Securities of all other
series shall not be less than the aggregate principal amount of, plus the
maximum aggregate amount of any premium on, all Outstanding Securities of all
such other series; and (3) the Company has paid or caused to be paid all other
sums payable with respect to the Outstanding Securities of such series.
(Section 503)
For federal income tax purposes, the deposit in trust of cash or direct
noncallable obligations of, or noncallable obligations the payment of principal
of and interest on which is fully guaranteed by, the United States of America
(U.S. Government Obligations) by the Company in connection with the
satisfaction and
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full discharge of the indebtedness on all the Outstanding Securities of a
particular series may be treated as a taxable exchange of such Securities for
interests in the trust. The holders of the Outstanding Securities thereafter
would be treated for tax purposes as the owners of their proportionate shares
of the funds or U.S. Government Obligations held in trust and would be required
to include currently in their income any income, gain or loss attributable
thereto, even though no cash in excess of the interest on the Outstanding
Securities otherwise payable to them in accordance with the terms of such
Securities would actually be received until maturity of the Securities.
Prospective investors are urged to consult their own tax advisors as to the
specific tax consequences of a defeasance.
EVENTS OF DEFAULT
Any one of the following events will constitute an Event of Default under the
Indenture with respect to Securities of any series: (a) failure to pay any
interest on any Security of that series when due, continued for 60 days; (b)
failure to pay principal of (or premium, if any, on) any Security of that
series when due; (c) failure to deposit any sinking fund payment, when due, in
respect of any Security of that series and continuance of such default for 60
days; (d) failure to perform any other covenant or warranty of the Company in
the Indenture (other than a covenant or warranty included in the Indenture
solely for the benefit of a series of Securities other than that series),
continued for 90 days after written notice as provided in the Indenture; (e)
certain events of bankruptcy, insolvency or reorganization involving the
Company; (f) the occurrence of a "default" (as such term is defined in the
Mortgage); and (g) any other Event of Default provided in an indenture
supplemental thereto with respect to Securities of that series. (Section 601)
Unless the Debt Securities Trustee holds more than 25% of the outstanding
Mortgage Bonds under the Mortgage, it cannot, without the concurrence of other
holders of first mortgage bonds, force a declaration of "default" under the
Mortgage or acceleration of the Mortgage Bonds. See "Description of Mortgage
Bonds--Events of Default".
If an Event of Default with respect to Securities of any series at the time
Outstanding occurs and is continuing, either the Debt Securities Trustee or the
Holders of at least 25% in aggregate principal amount of the Outstanding
Securities of that series by notice as provided in the Indenture may declare
the principal amount (or, if the Securities of that series are Original Issue
Discount Securities, such portion of the principal amount as may be specified
in the terms of that series) of all the Securities of that series to be due and
payable immediately. At any time after a declaration of acceleration with
respect to Securities of any series has been made, but before a judgment or
decree for payment of money has been obtained by the Debt Securities Trustee,
and subject to applicable law and certain other provisions of the Indenture,
the Holders of a majority in aggregate principal amount of the Outstanding
Securities of that series may, under certain circumstances, rescind and annul
such acceleration. (Section 602)
The Indenture provides that within 90 days after the occurrence of any Event
of Default thereunder with respect to the Securities of any series, the Debt
Securities Trustee shall transmit, in the manner set forth in the Indenture,
notice of such Event of Default to the Holders of the Securities of such series
unless such Event of Default has been cured or waived; provided, however, that
except in the case of a default in the payment of the principal of (or premium,
if any) or interest on any Security of such series or in the payment of any
sinking fund installment with respect to Securities of such series, the Debt
Securities Trustee may withhold such notice if and so long as the board of
directors, the executive committee or a trust committee of directors or
Responsible Officers of the Debt Securities Trustee has in good faith
determined that the withholding of such notice is in the interest of the
Holders of Securities of such series; and provided, further, that in the case
of any default referred to in clause (d) of the third preceding paragraph with
respect to Securities of such series, no such notice to Holders shall be given
until at least 30 days after the occurrence thereof. (Section 702)
Upon the occurrence of an Event of Default with respect to Securities of any
series, the Debt Securities Trustee may in its discretion proceed to protect
and enforce its rights and the rights of the Holders of
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Securities of such series by all appropriate judicial proceedings, including
the rights of the Debt Securities Trustee as the holder of the Mortgage Bonds;
provided, however, the Debt Securities Trustee shall not have the power to sell
the Mortgage Bonds. (Section 603)
The Indenture provides that, subject to the duty of the Debt Securities
Trustee during default to act with the required standard of care, the Debt
Securities Trustee will be under no obligation to exercise any of its rights or
powers under the Indenture at the request or direction of any of the Holders,
unless such Holders shall have offered to the Debt Securities Trustee
reasonable indemnity. (Sections 701 and 703) Subject to such provisions for the
indemnification of the Debt Securities Trustee, and subject to applicable law
and certain other provisions of the Indenture, the Holders of a majority in
aggregate principal amount of the Outstanding Securities of any series will
have the right to direct the time, method and place of conducting any
proceeding for any remedy available to the Debt Securities Trustee, or
exercising any trust or power conferred on the Debt Securities Trustee, with
respect to the Securities of that series. (Section 612)
The Company will be required to furnish to the Debt Securities Trustee
annually a statement as to the performance by the Company of certain of its
obligations under the Indenture and as to any default in such performance.
(Section 1109)
MEETINGS, MODIFICATION AND WAIVER
Modifications and amendments of the Indenture may be made by the Company and
the Debt Securities Trustee with the consent of the Holders of not less than a
majority in aggregate principal amount of the Outstanding Securities of each
series affected by such modification or amendment; provided, however, that no
such modification or amendment may, without the consent of the Holder of each
Outstanding Security affected thereby, (a) change the Stated Maturity of the
principal of, or any installment of principal of or interest on, any Security,
(b) reduce the principal amount of, or premium or interest on, any Security,
(c) change the coin or currency in which any Security or any premium or any
interest thereon is payable, (d) impair the right to institute suit for the
enforcement of any payment on or after the Stated Maturity of any Security (or,
in the case of redemption, on or after the Redemption Date), (e) reduce the
percentage in principal amount of the Outstanding Securities of any series, the
consent of whose Holders is required in order to take certain actions, (f)
change any obligation of the Company to maintain an office or agency in the
places and for the purposes required by the Indenture or (g) modify any of the
above provisions. (Section 1002)
The Holders of at least 66 2/3% in aggregate principal amount of the
Outstanding Securities of each series may, on behalf of the Holders of all the
Securities of that series, waive, insofar as that series is concerned,
compliance by the Company with certain restrictive provisions of the Indenture.
(Section 1110) The Holders of not less than a majority in aggregate principal
amount of the Outstanding Securities of each series may, on behalf of all
Holders of Securities of that series and any coupons appertaining thereto,
waive any past default and its consequences under the Indenture with respect to
Securities of that series, except a default (a) in the payment of principal of
(or premium, if any) or any interest on any Security of such series or (b) in
respect of a covenant or provision of the Indenture that cannot be modified or
amended without the consent of the Holder of each Outstanding Security of such
series affected. (Section 613)
The Indenture provides that in determining whether the Holders of the
requisite principal amount of the Outstanding Securities have given any
request, demand, authorization, direction, notice, consent or waiver thereunder
or whether a quorum is present at a meeting of Holders of Securities or the
number of votes entitled to be cast by the Holder of any Security (i) the
principal amount of an Original Issue Discount Security that shall be deemed to
be Outstanding shall be the amount of the principal thereof that would be due
and payable as of the date of such determination upon acceleration of the
Maturity thereof, (ii) the principal amount of a Security denominated in a
foreign currency shall be the U.S. dollar equivalent, determined as of the date
of original issuance of such Security by the Company in good faith, of the
principal amount of such Security (or, in the case of an Original Issue
Discount Security, the U.S. dollar equivalent,
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determined as of the date of original issuance of such Security, of the amount
determined as provided in (i) above) and (iii) Securities owned by the Company
or any other obligor upon the Securities or any Affiliate of the Company or of
such other obligor shall be disregarded and deemed not to be Outstanding.
(Section 101)
The Indenture contains provisions for convening meetings of the Holders of
Securities of a series. (Section 1401) A meeting may be called at any time by
the Debt Securities Trustee, and also, upon request, by the Company or the
Holders of at least 10% in principal amount of the Outstanding Securities of
such series, in any such case upon notice given in accordance with "Notices"
below. (Section 1402) Except for any consent that must be given by the Holder
of each Outstanding Security affected thereby, as described above, any
resolution presented at a meeting or adjourned meeting at which a quorum is
present may be adopted by the affirmative vote of the Holders of a majority in
principal amount of the Outstanding Securities of that series; provided,
however, that, except for any consent that must be given by the Holder of each
Outstanding Security affected thereby, as described above, any resolution with
respect to any consent or waiver that may be given by the Holders of not less
than 66 2/3% in principal amount of the Outstanding Securities of a series may
be adopted at a meeting or an adjourned meeting duly convened at which a quorum
is present only by the affirmative vote of the Holders of 66 2/3% in principal
amount of the Outstanding Securities of that series; and provided, further,
that, except for any consent that must be given by the Holder of each
Outstanding Security affected thereby, as described above, any resolution with
respect to any request, demand, authorization, direction, notice, consent,
waiver or other action that may be made, given or taken by the Holders of a
specified percentage, which is less than a majority in principal amount of the
Outstanding Securities of a series, may be adopted at a meeting or adjourned
meeting duly reconvened at which a quorum is present by the affirmative vote of
the Holders of such specified percentage in principal amount of the Outstanding
Securities of that series. Any resolution passed or decision taken at any
meeting of Holders of Securities of any series duly held in accordance with the
Indenture will be binding on all Holders of Securities of that series and the
related coupons. The quorum at any meeting called to adopt a resolution, and at
any reconvened meeting, will be persons holding or representing a majority in
principal amount of the Outstanding Securities of a series; provided, however,
that if any action is to be taken at such meeting with respect to a consent or
waiver that may be given by the Holders of not less than 66 2/3% in principal
amount of the Outstanding Securities of a series, the persons holding or
representing 66 2/3% in principal amount of the Outstanding Securities of such
series will constitute a quorum. (Section 1404)
CONSOLIDATION, MERGER AND SALE OF ASSETS
The Company, without the consent of the Holders of any of the Outstanding
Securities under the Indenture, may consolidate with or merge into, or transfer
or lease its properties and assets substantially as an entirety to, any Person
that is a corporation, partnership or trust organized and validly existing
under the laws of any domestic jurisdiction, or may permit any such Person to
consolidate with or merge into the Company or convey, transfer or lease its
properties and assets substantially as an entirety to the Company, provided
that any successor Person assumes the Company's obligations on the Securities
and under the Indenture, that after giving effect to the transaction no Event
of Default, and no event which, after notice or lapse of time or both, would
become an Event of Default, shall have occurred and be continuing, and that
certain other conditions are met. (Section 901)
NOTICES
Except as otherwise provided in the Indenture, notices to Holders of Bearer
Securities will be given by publication at least twice in a daily newspaper in
The City of New York and in such other city or cities as may be specified in
such Securities. Notices to Holders of Registered Securities will be given by
mail to the addresses of such Holders as they appear in the Security Register.
(Section 106)
TITLE
Title to any temporary global certificate representing Bearer Securities, any
Bearer Securities (including Bearer Securities in permanent global form) and
any coupons appertaining thereto will pass by delivery. The
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Company, the Debt Securities Trustee and any agent of the Company or the Debt
Securities Trustee may treat the bearer of any Bearer Security and the bearer
of any coupon and the registered owner of any Registered Security as the
absolute owner thereof (whether or not such Security or coupon shall be overdue
and notwithstanding any notice to the contrary) for the purpose of making
payment and for all other purposes. (Section 308)
REPLACEMENT OF SECURITIES AND COUPONS
Any mutilated Security or a Security with a mutilated coupon appertaining
thereto will be replaced by the Company at the expense of the Holder upon
surrender of such Security to the Debt Securities Trustee or to Houston
Industries, as an Authenticating Agent. Securities or coupons that become
destroyed, stolen or lost will be replaced by the Company at the expense of the
Holder upon delivery to the Debt Securities Trustee or to Houston Industries,
as an Authenticating Agent, of the Security, coupon or coupons or evidence of
the destruction, loss or theft thereof satisfactory to the Company and the Debt
Securities Trustee or Houston Industries; in the case of any coupon that
becomes destroyed, stolen or lost, such coupon will be replaced by issuance of
a new Security in exchange for the Security to which such coupon appertains. In
the case of a destroyed, lost or stolen Security or coupon, an indemnity
satisfactory to the Debt Securities Trustee or Houston Industries, as an
Authenticating Agent, as the case may be, and the Company may be required at
the expense of the Holder of such Security or coupon before a replacement
Security will be issued. (Section 306)
GOVERNING LAW
The Indenture, the Securities and the coupons will be governed by, and
construed in accordance with, the laws of the State of Texas. (Section 113)
CONCERNING THE DEBT SECURITIES TRUSTEE
Texas Commerce Bank will be the Debt Securities Trustee under the Indenture.
Texas Commerce Bank also serves as Mortgage Trustee under the Mortgage. See
"Description of Mortgage Bonds--Concerning the Mortgage Trustee".
DESCRIPTION OF MORTGAGE BONDS
A copy of the Mortgage is filed as an exhibit to the Registration Statement
of which this Prospectus is a part. The statements and descriptions under this
caption are summaries of certain provisions of the Mortgage and the Mortgage
Bonds, do not purport to be complete and are subject to, and are qualified in
their entirety by reference to, all of the provisions of the Mortgage,
including the definitions therein of certain terms.
GENERAL
In order to secure by the lien of the Mortgage the obligation of the Company
to pay the principal of (and premium, if any) and interest on the Securities in
accordance with the terms thereof, any coupons relating thereto and the
Indenture, the Company will from time to time issue and deliver to and pledge
with the Debt Securities Trustee, in trust for the ratable benefit of the
holders of the outstanding Securities, one or more series of Mortgage Bonds.
For additional information concerning the pledge of the Mortgage Bonds with the
Debt Securities Trustee, see "Description of Debt Securities--Security; Pledge
of Mortgage Bonds".
SINKING OR IMPROVEMENT FUNDS
No series of the Mortgage Bonds will be entitled to the benefits of any
sinking fund provision applicable specifically to the Mortgage Bonds. Such
provisions are in effect with respect to certain other series of first mortgage
bonds outstanding under the Mortgage. Payments required by such sinking fund
provisions may be made, at the Company's option, in cash or by applying as a
credit against each such required payment
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either (a) retired first mortgage bonds of the series that is subject to the
sinking fund provision or (b) a percentage (60%) of the cost or fair value of
certain gross property additions made by the Company under the procedures
described in the Mortgage. The requirement may not be anticipated.
The Mortgage also provides for a sinking or improvement fund of 1% per annum
applicable to the Mortgage Bonds and each other series of first mortgage bonds
at the time outstanding under the Mortgage. This fund may be satisfied with the
deposit of cash or first mortgage bonds or with property additions at 100% and
the same property additions may be credited to the replacement fund referred to
below. In general, cash sinking fund payments with respect to a series may be
used to redeem first mortgage bonds of that series, so long as the first
mortgage bonds of such series are subject to redemption prior to maturity. Cash
payments pursuant to the sinking or improvement fund will not be used to redeem
the Mortgage Bonds except as described under "Description of Debt Securities--
Security; Pledge of Mortgage Bonds--Redemption of Mortgage Bonds".
REPLACEMENT FUND
The Company agrees to expend an amount each year for replacements and
improvements in respect of its depreciable mortgaged utility property equal to
$1,450,000 plus 2 1/2% of net additions to such mortgaged property made after
March 31, 1948 and prior to July 1 of the preceding year. Such requirement may
be met with cash, first mortgage bonds, gross property additions or
expenditures for repairs or replacements or by taking credit for property
additions certified under the sinking or improvement fund discussed under
"Sinking or Improvement Funds" above. In general, deposited cash may be
withdrawn on similar bases or, at the option of the Company, used to redeem
first mortgage bonds of any series subject to special redemption at the special
redemption price applicable to such series. Deposited cash will not be used to
redeem the Mortgage Bonds except as described under "Description of Debt
Securities--Security; Pledge of Mortgage Bonds--Redemption of Mortgage Bonds".
SECURITY
The Mortgage Bonds, together with all other first mortgage bonds now or
hereafter issued under the Mortgage, will be secured by the Mortgage, which
will constitute, in the opinion of counsel, a first mortgage lien on all of the
present properties of the Company (except as stated below), subject to excepted
encumbrances. There are excepted from the lien of the Mortgage all cash and
securities; equipment, materials or supplies acquired for consumption in the
operation of the Company's properties or for resale in the ordinary course of
its business; timber, minerals, mineral rights and royalties; and accounts
receivable, contracts, leases and operating agreements.
The Mortgage contains provisions for subjecting certain after-acquired
property to the lien thereof, subject to any pre-existing liens and to certain
limitations in the case of consolidation, merger or sale of substantially all
of the Company's assets.
The Mortgage provides that the Mortgage Trustee will have a lien upon the
mortgaged property, prior to the first mortgage bonds, for the payment of its
reasonable compensation and expenses and for indemnity against certain
liabilities.
ISSUANCE OF ADDITIONAL FIRST MORTGAGE BONDS
The maximum principal amount of first mortgage bonds that may be issued under
the Mortgage is not limited. First mortgage bonds of any series may be issued
from time to time on the basis of (a) 60% of property additions after
adjustments to offset retirements; (b) retirement of first mortgage bonds or
prior lien bonds; and (c) the deposit of cash. Property additions generally
include utility properties acquired after October 31, 1944. With certain
exceptions in the case of (b) above, the issuance of first mortgage bonds is
permitted only if adjusted net earnings of the Company for 12 out of the
preceding 15 months were at least twice the annual interest requirements on all
first mortgage bonds at the time outstanding, plus the annual
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interest requirements on the additional issue of first mortgage bonds, and all
indebtedness of prior rank. Such adjusted net earnings are computed before
income taxes, interest or sinking funds but after expenses for repairs and
maintenance and provisions for retirement and depreciation of property. For the
12 months ended September 30, 1993, the adjusted net earnings (including the
allowance for funds used during construction to the extent permitted by the
Mortgage) were 3.11 times such annual interest requirements as of December 8,
1993, which would permit the issuance of approximately $1.8 billion principal
amount of first mortgage bonds in addition to the $480,000,000 aggregate
principal amount of first mortgage bonds that the Company has registered for
sale with the Commission pursuant to the Registration Statement of which this
Prospectus is a part and a previously filed Registration Statement or
alternatively that will collateralize the Debt Securities (assuming the annual
interest rate on such additional first mortgage bonds is equal to 10%).
As of December 8, 1993 the Company had retired an aggregate principal amount
of approximately $1.3 billion of first mortgage bonds, which can be used as the
basis for issuing a like amount of additional first mortgage bonds.
Whether the Mortgage Bonds will be issued on the basis of retired first
mortgage bonds, property additions or a combination of retired first mortgage
bonds and property additions will be set forth in the applicable Prospectus
Supplement. At September 30, 1993, at least $800 million of property additions
are available for the purposes permitted by the Mortgage.
The Company may acquire property subject to liens and, subject to the
restrictions referred to above and to certain reductions, may issue first
mortgage bonds or take credits on the basis of such property.
RELEASE AND SUBSTITUTION OF PROPERTY
Property may be released from the lien of the Mortgage upon the bases of (a)
cash or, to a limited extent, purchase money mortgages, (b) property additions
and (c) waiver of the right to issue first mortgage bonds that would otherwise
be issuable by virtue of compliance with applicable provisions of the Mortgage
(except any earnings test). Cash may be withdrawn upon the bases stated in (b)
and (c) above. No prior notice to holders of first mortgage bonds is required
in connection with releases, but subsequent reports are required in certain
cases.
EVENTS OF DEFAULT
The following are "defaults" under the Mortgage: (a) failure to pay principal
when due; (b) failure to pay any interest installment, continued for 60 days;
(c) failure to pay any installment of any fund established under the Mortgage
for the purchase or redemption of any first mortgage bonds, continued for 60
days; (d) failure to perform any covenant of the Company, continued for 90 days
after written notice; and (e) certain events in bankruptcy, reorganization or
insolvency. The Mortgage Trustee may withhold notice of default (except in the
payment of principal, interest or in respect of funds established for the
purchase or redemption of first mortgage bonds) if it deems such action to be
in the interests of the holders of the first mortgage bonds.
Upon occurrence of a default, the holders of a majority in principal amount
of the first mortgage bonds outstanding under the Mortgage may require the
Mortgage Trustee to accelerate the maturity thereof, or the holders of 25% in
principal amount of such first mortgage bonds may accelerate such maturity, but
the holders of a majority in principal amount of such first mortgage bonds may,
in any such case, annul such declaration and destroy its effect if such default
has been cured. No holder of any first mortgage bond may
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enforce the lien of the Mortgage except in case of the refusal or neglect of
the Mortgage Trustee to act after default and after request of the holders of
25% in principal amount of outstanding first mortgage bonds and the tender to
the Mortgage Trustee of indemnity or security satisfactory to it. This
provision will not prevent any holder of a first mortgage bond from enforcing
payment of principal thereof or interest thereon. Holders of a majority in
principal amount of the first mortgage bonds may direct the Mortgage Trustee to
take action in the event of any default, but the Mortgage Trustee need not take
any action unless the holders of first mortgage bonds have offered it security
or indemnity satisfactory to it.
MODIFICATION
The rights of the holders of first mortgage bonds may be modified with the
consent of 70% of the first mortgage bonds, and, if fewer than all series of
first mortgage bonds are affected, the consent also of 70% of the first
mortgage bonds of each series affected. In general, no modification of the
terms of payment of principal or interest, and no modification affecting the
lien or reducing the percentage required for modification, is effective against
any holder of a first mortgage bond without his consent.
VOTING OF THE MORTGAGE BONDS
The Debt Securities Trustee will attend such meetings of the holders of
mortgage bonds, or deliver its proxy in connection therewith, as relate to
matters with respect to which it is entitled to vote or consent. The Indenture
provides that the Debt Securities Trustee will vote or consent as a holder of
the Mortgage Bonds proportionately with what the Debt Securities Trustee
reasonably believes will be the vote or consent of the holders of all other
first mortgage bonds outstanding under the Mortgage that will vote or consent;
provided, however, that the Debt Securities Trustee will not vote in favor of,
or consent to, any modification of the Mortgage that is correlative to a
modification of the Indenture that would require the approval of holders of
Debt Securities without the approval of the holders of Debt Securities that
would be required for such correlative modification of the Indenture. (Section
407 of the Indenture)
CONCERNING THE MORTGAGE TRUSTEE
Texas Commerce Bank National Association (TCB), the Mortgage Trustee and the
Debt Securities Trustee, is a party to a credit agreement under which Paragon
Communications, a Colorado partnership in which a subsidiary of Houston
Industries has a 50% ownership interest, has a bank line of credit. Chemical
Bank (Chemical), a subsidiary of Chemical Banking Corporation which is the
parent company of Texas Commerce Bancshares, Inc. (a multi-bank holding company
that owns all of the common stock of TCB), is a party to credit agreements
under which the Company, Houston Industries and certain other subsidiaries and
entities in which Houston Industries has an ownership interest have bank lines
of credit. The Company maintains depository and other normal banking
relationships with TCB and Chemical. TCB serves as the trustee under
retirement, savings and welfare benefit plans of Houston Industries and KBLCOM
Incorporated, a subsidiary of Houston Industries, and serves as the Trustee
under the Indenture relating to the Debt Securities that may be issued from
time to time pursuant to this Prospectus and any applicable Prospectus
Supplements, which Indenture also relates to the Company's outstanding
collateralized medium-term notes. As of December 8, 1993, $700 million
aggregate principal amount of such medium-term notes have been issued under the
Indenture. The collateralized medium-term notes are, and any other notes issued
under the Indenture will be, secured as to payment of principal, interest and
premium, if any, by first mortgage bonds of the Company. TCB also serves as
trustee under certain indentures relating to approximately $1.3 billion
aggregate principal amount of pollution control revenue bonds issued on behalf
of the Company. Chemical Securities, Inc., a subsidiary of Chemical Banking
Corporation and, as such, an affiliate of TCB, served as an underwriter of
pollution control revenue bonds issued in December 1993 on behalf of the
Company. Chemical serves as auction agent for the Company's variable term
cumulative preferred stock. Mr. Don D. Jordan, Chairman, Chief Executive
Officer and a director of the Company and Chairman, Chief Executive Officer and
a director of Houston Industries, is a director of Texas Commerce Bancshares,
Inc.
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LIMITATIONS ON ISSUANCE OF BEARER SECURITIES
In compliance with United States federal tax laws and regulations, Bearer
Securities (including Securities in definitive global form that are either
Bearer Securities or exchangeable for Bearer Securities) may not be offered or
sold during the restricted period (as defined in United States Treasury
Regulations Section 1.163-5(c)(2)(i)(D)(7)) within the United States or its
possessions or to United States persons (each as defined below) other than (a)
to an office located outside the United States of a United States financial
institution (as defined in Section 1.165-12(c)(1)(v) of the United States
Treasury Regulations) purchasing for its own account or for resale or for the
account of certain customers which financial institution provides a certificate
stating that it agrees to comply with the requirements of Section 165(j)(3)(A),
(B) or (C) of the Code and the United States Treasury Regulations thereunder or
(b) to certain other persons described in Section 1.163-
5(c)(2)(i)(D)(1)(iii)(B) of the United States Treasury Regulations. Moreover,
such Bearer Securities may not be delivered in connection with their sale
during the restricted period within the United States or its possessions. Any
underwriters, agents and dealers participating in the offering of Bearer
Securities must covenant that (x) they will not offer or sell during the
restricted period any Bearer Securities (1) within the United States or its
possessions or (2) to United States persons (other than the persons described
in clause (a) or clause (b) above) or (y) deliver in connection with the sale
of Bearer Securities during the restricted period any Bearer Securities within
the United States or its possessions and must covenant that they have in effect
procedures reasonably designed to ensure that their employees and agents who
are directly engaged in selling the Bearer Securities are aware of the
restrictions described above. No Bearer Security (other than a temporary global
certificate representing Bearer Securities) may be delivered in connection with
its original issuance nor may interest be paid on any Bearer Security until
receipt by the Company of the written certification described above under
"Description of Debt Securities--Form, Exchange, Registration and Transfer".
Any United States person who holds Bearer Securities will be subject to
limitations under the United States income tax laws, including the limitations
provided in Sections 165(j) and 1287(a) of the Code. Other purchasers of Bearer
Securities also may be affected by certain limitations under United States tax
laws. See "United States Taxation--United States Aliens".
As used herein, "United States person" means a citizen or resident of the
United States, a corporation, partnership or other entity created or organized
in or under the laws of the United States and an estate or trust the income of
which is subject to United States federal income taxation regardless of its
source, "United States" means the United States of America (including the
States and the District of Columbia), and "possessions" of the United States
include Puerto Rico, the U.S. Virgin Islands, Guam, American Samoa, Wake Island
and the Northern Mariana Islands.
FOREIGN CURRENCY RISKS
GENERAL
Debt Securities of a series may be denominated in such foreign currencies or
currency units as may be designated by the Company at the time of offering
(Foreign Currency Securities).
THIS PROSPECTUS DOES NOT DESCRIBE ALL RISKS OF AN INVESTMENT IN FOREIGN
CURRENCY SECURITIES THAT RESULT FROM SUCH SECURITIES BEING DENOMINATED IN A
FOREIGN CURRENCY OR CURRENCY UNIT EITHER AS SUCH RISKS EXIST AT THE DATE OF
THIS PROSPECTUS OR AS SUCH RISKS MAY CHANGE FROM TIME TO TIME. PROSPECTIVE
PURCHASERS SHOULD CONSULT THEIR OWN FINANCIAL AND LEGAL ADVISORS AS TO THE
RISKS INVOLVED IN AN INVESTMENT IN FOREIGN CURRENCY SECURITIES. FOREIGN
CURRENCY SECURITIES ARE NOT AN APPROPRIATE INVESTMENT FOR INVESTORS WHO ARE
UNSOPHISTICATED WITH RESPECT TO FOREIGN CURRENCY TRANSACTIONS.
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Unless otherwise indicated in an applicable Prospectus Supplement, a Foreign
Currency Security will not be sold in, or to a resident of, the country of the
Specified Currency (as defined below) in which such Security is denominated.
The information set forth below is by necessity incomplete, and prospective
purchasers of Foreign Currency Securities should consult their own financial
and legal advisors with respect to any matters that may affect the purchase or
holding of a Foreign Currency Security or the receipt of payments of principal
of, and any premium and interest on, a Foreign Currency Security in a Specified
Currency.
EXCHANGE RATES AND EXCHANGE CONTROLS
An investment in Foreign Currency Securities entails significant risks that
are not associated with a similar investment in a security denominated in U.S.
dollars. Such risks include, without limitation, the possibility of significant
changes in rate of exchange between the U.S. dollar and the currency or
currency unit designated by the Company at the time of offering (Specified
Currency) and the possibility of the imposition or modification of foreign
exchange controls by either the United States or foreign governments. Such
risks generally depend on economic and political events and the supply of and
demand for the relevant currencies, over which the Company has no control. In
recent years, rates of exchange between the U.S. dollar and certain foreign
currencies have been highly volatile and such volatility may be expected in the
future. Fluctuations in any particular exchange rate that have occurred in the
past are not necessarily indicative, however, of fluctuations in the rate that
may occur during the term of any Foreign Currency Security. Depreciation of the
Specified Currency applicable to a Foreign Currency Security against the U.S.
dollar would result in a decrease in the U.S. dollar equivalent yield of such
Security, in the U.S. dollar-equivalent value of the principal repayable at
Maturity of such Security and, generally, in the U.S. dollar-equivalent market
value of such Security.
Governments have imposed from time to time exchange controls and may in the
future impose or revise exchange controls that could affect exchange rates as
well as the availability of a Specified Currency at the time of payment of
principal of, and premium, if any, or interest on a Debt Security. Even if
exchange controls are not in effect, it is possible that the Specified Currency
for any particular Foreign Currency Security would not be available at such
Security's maturity due to other circumstances beyond the control of the
Company. In that event, the Company will make payment in United States dollars
on the basis of the noon buying rate in The City of New York for cable
transfers for such currency, as such rate is reported or otherwise made
available by the Federal Reserve Bank of New York (Market Exchange Rate), on
the date of such payment, or, if such rate of exchange is not available, on the
basis of the last available Market Exchange Rate.
GOVERNING LAW AND JUDGMENTS
The Debt Securities will be governed by and construed in accordance with the
laws of the State of Texas. In the event an action based on Foreign Currency
Securities were commenced in a court of the United States, such court might
grant judgment relating to such Securities only in U.S. dollars. The Indenture
provides that in granting any such judgment, the rate of conversion into U.S.
dollars would be determined, to the fullest extent allowed under applicable
law, on the New York Business Day (as defined therein) next preceding the date
judgment is rendered. Holders of Foreign Currency Securities would bear the
risk of exchange rate fluctuations between the time the amount of the judgment
is calculated and the time the U.S. dollars are converted to the Specified
Currency for payment of the judgment.
UNITED STATES TAXATION
The following discusses the material federal income tax consequences of
general application of the acquisition, disposition or holding of Debt
Securities by persons who acquire such Debt Securities pursuant to this
Prospectus and who hold such Debt Securities as capital assets. It does not
discuss, however, the effect of such matters upon any taxpayer's particular
circumstances or the effect of rules which are limited to special
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<PAGE>
classes of holders, such as dealers in securities or currencies, life insurance
companies, persons holding Debt Securities as a hedge or hedged against
currency risks, and United States holders whose functional currency is not the
U.S. dollar. Such discussion is based upon the provisions of the Code, Treasury
regulations promulgated thereunder, and judicial and administrative
interpretations thereof which are in effect on the date of this Prospectus.
Changes in such authorities could affect such United States federal income tax
consequences, possibly with retroactive effect. In addition, the discussion of
original issue discount is based in part on proposed regulations, and final
regulations, when issued, may significantly alter the federal income tax
treatment of Debt Securities issued with original issue discount. The Company
will not request any rulings from the Internal Revenue Service concerning the
federal income tax consequences of the acquisition, disposition or holding of
Debt Securities.
UNITED STATES HOLDERS
The discussion under this caption "--United States Holders" in this
Prospectus applies to United States persons (as defined under "Limitations on
Issuance of Bearer Securities").
Stated Interest on Debt Securities. A Holder of a Debt Security will be
required to report stated interest on the Debt Security in accordance with the
Holder's method of accounting for tax purposes.
Original Issue Discount. If the stated redemption price at maturity of a Debt
Security exceeds the issue price of the Debt Security by at least 1/4 of 1
percent of the stated redemption price at maturity of the Debt Security
multiplied by the number of complete years to maturity of the Debt Security,
then such excess, which is referred to as original issue discount, is included
for United States federal income tax purposes in income over the term of the
Debt Security by the holder of such Debt Security before the receipt of cash in
respect thereof. The amount of any original issue discount which is included in
income for a taxable year is equal to the sum of the daily portions of the
original issue discount for each day during the taxable year during which the
discount Debt Security was held. The daily portion is determined by allocating
to each day in each accrual period the ratable portion for such day of the
increase in the adjusted issue price during the accrual period, which is the
excess of (a) the product of the adjusted issue price at the beginning of the
accrual period and the yield to maturity of such Debt Security (determined on
the basis of compounding at the close of each accrual period and adjusted for
the length of the accrual period) over (b) the sum of the amounts payable as
interest on such Debt Security during such accrual period. As a result, the
terms of a Debt Security, which will be specified in the applicable Prospectus
Supplement, will determine the amount of any original issue discount and the
rate at which such original issue discount will be included in income.
The Code provides that (a) the stated redemption price at maturity of a Debt
Security is the debt service payable on the Debt Security excluding interest
("qualified stated interest") based on a fixed rate and payable unconditionally
at fixed periodic intervals of 1 year or less (any qualified stated interest is
taken into account by a holder in accordance with its method of accounting),
(b) the issue price of a publicly offered debt instrument (such as a Debt
Security) is the initial offering price to the public (excluding bond houses
and brokers) at which price a substantial amount of such issue of debt
instruments was sold, (c) an accrual period is a fixed period of 6-months or
less which ends on the day in the calendar year which is the maturity date of
the debt instrument or the date 6 months before such maturity date, and (d)
yield to maturity is determined on the basis of compounding at the close of
each accrual period. Regulations were proposed in December 1992 (at which time
the prior proposed regulations on the subject were withdrawn) which are to
apply to debt instruments issued on or after the date that is 60 days after the
date the regulations are finalized (prior to which such regulations are
authority within the meaning of Section 6662 of the Code) which provide
guidance beyond the language of the Code as to the meaning of the terms which
are identified in the preceding sentence. The December 1992 proposed
regulations, among other matters, describe the circumstances in which a
variable interest rate will generate qualified stated interest, permit certain
flexibility in the choice of accrual periods, and provide that there can be no
"intention to call before maturity" with respect to a publicly offered debt
instrument. It is possible that any final regulations will be materially
different from the December 1992 proposed regulations.
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In general, a person who does not use an accrual method of accounting and who
holds any Debt Security that matures one year or less from the date of its
issuance is not required to accrue original issue discount with respect to that
Debt Security unless he elects to do so. However, certain other holders,
including banks and dealers in securities, are required to accrue the original
issue discount on such Debt Securities on a straight-line basis unless an
election is made to accrue the original issue discount under the constant yield
method (based on daily compounding). In the case of a holder not required and
not electing to include the original issue discount in income currently, any
gain realized on the sale or maturity of the Debt Security will be ordinary
income to the extent of the original issue discount accrued on a straight-line
basis through the date of sale or at maturity and deductions for interest on
borrowings allocable to these Debt Securities in an amount not exceeding the
deferred income are deferred until the deferred income is realized.
The Company is required to report to the Internal Revenue Service information
with respect to the amount of original issue discount accrued on Debt
Securities held of record by United States persons other than corporations and
other exempt holders.
A holder's tax basis for determining gain or loss on a sale or other
disposition of a Debt Security will generally be the holder's cost increased by
any original issue discount theretofore included in income and decreased by any
payments on such Debt Security other than qualified stated interest. Gain or
loss on the sale or redemption of a Debt Security will generally be long-term
capital gain or loss if the Debt Security was a capital asset which has been
held for more than one year.
Foreign Currency-Denominated Debt Securities. If payment of interest on a
Debt Security is made in a foreign currency, the amount of interest income
recognized by a United States person will be the U.S. dollar value of the
interest payment based on the exchange rate in effect on the date of receipt
or, in the case of an accrual basis holder, based on the average exchange rate
in effect during the interest accrual period. Upon receipt of an interest
payment, including a payment attributable to accrued but unpaid interest upon
the sale or retirement of a Debt Security, in a foreign currency, an accrual
basis holder will recognize ordinary income or loss measured by the difference
between such average exchange rate and the exchange rate in effect on the date
of receipt. Original issue discount on a foreign currency denominated Discount
Security for any accrual period will be determined in the foreign currency and
then translated into U.S. dollars based on the average exchange rate in effect
during the accrual period. Upon the receipt of an amount attributable to
original issue discount (whether in connection with a payment of interest or
the sale or retirement of a Discount Security) a holder will recognize ordinary
income or loss measured generally by the difference between the value of such
payment using such average exchange rate and the value of such payment using
the exchange rate in effect on the date of receipt.
A United States person's initial tax basis in a foreign currency denominated
Debt Security at a time will be the U.S. dollar value of the purchase price on
the date of purchase increased by the amount includable in income as original
issue discount with respect to such Debt Security on or prior thereto. The
amount realized by a United States person on a sale or retirement of a foreign
currency-denominated Debt Security will be the U.S. dollar value of the foreign
currency amount on the date of sale or retirement. Gain or loss recognized by a
United States person on the sale or retirement of a Debt Security which is
attributable to changes in exchange rates will be treated as ordinary income or
loss. The amount of such exchange gain or loss will be calculated by
multiplying the United States person's purchase price of a Debt Security
(expressed in the relevant foreign currency) by the change in exchange rates
(expressed in U.S. dollars per unit of the relevant foreign currency) between
the date on which the person acquired the Debt Security and the date on which
the person receives payment in respect of the sale or retirement of the Debt
Security. Such foreign currency gain or loss will be recognized only to the
extent of total gain or loss realized by a person on the sale or retirement of
the Debt Security.
Foreign currency received as interest on a Debt Security or on the sale or
retirement of a Debt Security will have a tax basis equal to its U.S. dollar
value at the time such interest is received or at the time of such sale or
retirement. Foreign currency that is purchased will generally have a tax basis
equal to its U.S. dollar
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cost. Any gain or loss recognized on a sale or other disposition of foreign
currency (including its use to purchase Debt Securities or upon exchange for
U.S. dollars) will generally be ordinary income or loss.
Debt Securities Purchased at a Premium. A United States person that purchases
a Debt Security for an amount in excess of its principal amount may elect to
treat such excess as "amortizable bond premium", in which case the amount
required to be included in such holder's income each year with respect to
interest on the Debt Security will be reduced by the amount of amortizable bond
premium allocable (based on the Debt Security's yield to maturity) to such
year. Any such election shall apply to all bonds (other than bonds the interest
on which is excludable from gross income) held by the holder at the beginning
of the first taxable year to which the election applies or thereafter acquired
by the holder, and is irrevocable without the consent of the Internal Revenue
Service.
UNITED STATES ALIENS
Any beneficial holder of Debt Securities who is a United States Alien (as
defined below) will not generally be subject to United States income tax (or
the related withholding of such income tax) with respect to payments of
interest (including any original issue discount) on a Debt Security provided
that the interest or the original issue discount, as the case may be, is not
effectively connected with the conduct of a trade or business within the United
States by such beneficial holder and in the case of a Registered Security (as
defined in the Indenture) provided that (a) either (i) the beneficial owner of
the Debt Security certifies to the Company or its agent, under penalties of
perjury, that he is not a United States person (as defined under "Limitations
on Issuance of Bearer Securities") and provides his name and address or (ii) a
securities clearing organization, bank or other financial institution that
holds customers' securities in the ordinary course of its trade or business (a
financial institution) and holds the Debt Security certifies to the Company
under penalties of perjury that such statement has been received from the
beneficial owner by it or by one or more financial institutions between it and
the beneficial owner and furnishes the Company or its agent with a copy
thereof, (b) the beneficial holder does not own, actually or constructively,
10% or more of the total combined voting power of all classes of voting stock
of the Company, and (c) the beneficial holder is not a controlled foreign
corporation related to the Company through stock ownership.
If the interest (including any original issue discount) on a Debt Security
held by a United States Alien is effectively connected with the conduct of a
trade or business within the United States by such United States Alien, then
such United States Alien will be subject to United States federal income tax on
such interest and original issue discount in the manner applicable to United
States persons (including the allowance of certain deductions and credits).
Moreover, any such effectively connected interest or original issue discount
which is received by a foreign corporation generally will also be subject to a
30% (or any lower applicable treaty rate permitted by Section 884(e) of the
Code) branch profits tax when such amount is no longer invested in certain
United States trade or business assets.
A holder of a Debt Security who is a United States Alien will be subject to
United States income tax in the manner applicable to United States persons
(including the allowance of certain deductions and credits) on any gain
realized upon the sale of a Debt Security if such gain is effectively connected
with the conduct of a trade or business within the United States by such United
States Alien. However, if the gain is not so effectively connected with the
conduct of a trade or business within the United States, then any such gain
will be subject to United States income tax only if the United States Alien is
an individual who is present in the United States for 183 days or more during
the calendar year (or taxable year if one has been established) in which such
sale occurs, the Debt Security is a capital asset and either (a) such
individual's "tax home", within the meaning of Section 911(d)(3) of the Code,
is in the United States or (b) the gain is attributable to an office or other
fixed place of business maintained in the United States by such individual.
A Debt Security or coupon held by an individual who at the time of death is
not a citizen or resident of the United States will not be subject to United
States federal estate tax if interest thereon would be eligible
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for the exemption from United States federal income tax, which is discussed
above, if such interest were received by such individual at the time of his
death.
As used herein, the term "United States Alien" means any person who, for
United States federal income tax purposes, is a foreign corporation, a
nonresident alien individual, a nonresident alien fiduciary of a foreign estate
or trust or a foreign partnership one or more of the members of which is, for
United States federal income tax purposes, a foreign corporation, a nonresident
alien individual or a nonresident alien fiduciary of a foreign estate or trust.
BACKUP WITHHOLDING AND INFORMATION REPORTING
The payment of interest (including original issue discount) and the payment
of proceeds of the disposition of a Debt Security to or through the United
States office of a broker is subject to information reporting and backup
withholding at a rate of 31% unless the owner certifies that he is an "exempt
foreign-person", as defined in the regulations, under penalties of perjury or
otherwise establishes an exemption. The payment of any such amount to or
through a foreign office of a United States broker will not generally be
subject to information reporting if such broker has documentary evidence of the
owner's foreign status, has no actual knowledge to the contrary and certain
other requirements are satisfied. Even if a foreign office of a United States
broker is subject to information reporting requirements, its payment of such
amount is generally not subject to backup withholding. However, the United
States Internal Revenue Service has stated that it is studying the possible
application of backup withholding in the case of a foreign office of a United
States broker.
Backup withholding and information reporting do not apply to payments of
principal (including original issue discount, if any), premium, if any, and
interest, if any, made outside the United States by the Company or a paying
agent on a Bearer Security (as defined in the Indenture) or coupon provided
that the payor does not have actual knowledge that the holder is a United
States person. In addition, if payments are collected outside the United States
by a foreign office of a custodian, nominee or other agent acting on behalf of
a beneficial owner of a Bearer Security or coupon, such custodian, nominee or
other agent will not be required to deduct backup withholding from payments
made to such owner and information reporting requirements will not apply.
However, if the custodian, nominee or other agent is a United States person, a
controlled foreign corporation for United States tax purposes or a foreign
person 50% or more of whose gross income for a specified period is from a
United States trade or business, information reporting will be required with
respect to payments made to such owner, unless the custodian, nominee or agent
has documentary evidence in its records that the beneficial owner is not a
United States person and other conditions are met or the beneficial owner
otherwise establishes an exemption. The Internal Revenue Service has indicated
that it is studying the possible application of backup withholding in such
cases.
Any amounts withheld under the backup withholding rules will be refunded (or
credited against the holder's United States income tax liability, if any),
provided that the required information is furnished to the United States
Internal Revenue Service.
PROSPECTIVE PURCHASERS OF DEBT SECURITIES SHOULD CONSULT THEIR OWN TAX
ADVISORS CONCERNING THE UNITED STATES FEDERAL INCOME TAX CONSEQUENCES IN THEIR
PARTICULAR SITUATIONS, AS WELL AS THE APPLICATION OF STATE, LOCAL AND FOREIGN
TAX LAWS.
PLAN OF DISTRIBUTION
The Company may sell Offered Securities to one or more underwriters for
public offering and sale by them or may sell Offered Securities through agents
or directly to purchasers on its own behalf in those jurisdictions where it is
authorized to do so. Any such underwriter or agent involved in the offer and
sale of the Offered Securities will be named in an applicable Prospectus
Supplement.
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Underwriters may offer and sell the Offered Securities at a fixed price or
prices, which may be changed, or from time to time at market prices prevailing
at the time of sale, at prices related to such prevailing market prices or at
negotiated prices. The Company also may offer and sell the Offered Securities
in exchange for one or more of its other issues of debt securities outstanding
from time to time. The Company also may, from time to time, authorize
underwriters acting as the Company's agents to offer and sell the Offered
Securities upon the terms and conditions as shall be set forth in any
Prospectus Supplement. In connection with the sale of Offered Securities,
underwriters may be deemed to have received compensation from the Company in
the form of underwriting discounts or commissions and may also receive
commissions from purchasers of Offered Securities for whom they may act as
agent. Underwriters may sell Offered Securities to or through dealers, and such
dealers may receive compensation in the form of discounts, concessions or
commissions from the underwriters and/or commissions (which may be changed from
time to time) from the purchasers for whom they may act as agent. In the case
of Debt Securities sold directly to purchasers (other than underwriters or
agents) by the Company, no discount will be allowed or commission paid.
Any underwriting compensation paid by the Company to underwriters or agents
in connection with the offering of Offered Securities, and any discounts,
concessions or commission allowed by underwriters to participating dealers,
will be set forth in an applicable Prospectus Supplement. Underwriters, dealers
and agents participating in the distribution of Offered Securities may be
deemed to be underwriters under the Securities Act of 1933, as amended
(Securities Act). Underwriters, dealers and agents may be entitled, under
agreements which may be entered into by the Company, to indemnification against
and contribution toward certain civil liabilities, including liabilities under
the Securities Act, and to reimbursement by the Company for certain expenses.
If so indicated in an applicable Prospectus Supplement, the Company will
authorize dealers acting as the Company's agents to solicit offers by certain
institutions to purchase Offered Securities from the Company at the public
offering price set forth in such Prospectus Supplement pursuant to delayed
delivery contracts (Contracts) providing for payment and delivery on the date
or dates stated in such Prospectus Supplement. Each Contract will be for an
amount not less than, and the aggregate principal amount of Offered Securities
sold pursuant to Contracts shall be not less nor more than, the respective
amounts stated in such Prospectus Supplement. Institutions with whom Contracts,
when authorized, may be made include commercial and savings banks, insurance
companies, pension funds, investment companies, educational and charitable
institutions and other institutions, but will in all cases be subject to the
approval of the Company. Contracts will not be subject to any conditions except
(i) the purchase by an institution of Offered Securities covered by its
Contracts shall not at the time of delivery be prohibited under the laws of any
jurisdiction in the United States to which such institution is subject and (ii)
if Offered Securities are being sold to underwriters, the Company shall have
sold to such underwriters the total principal amount of Offered Securities less
the principal amount thereof covered by Contracts. Agents and underwriters will
have no responsibility in respect of the delivery or performance of Contracts.
Any underwriters, agents and dealers participating in the offering of Bearer
Securities must covenant that they will not offer or sell during the restricted
period (as defined in United States Treasury Regulations Section 1.163-
5(c)(2)(i)(D)(7)) any Bearer Securities within the United States or its
possessions or to United States persons (each as defined under "Limitations on
Issuance of Bearer Securities"), other than certain persons described in
"Limitations on Issuance of Bearer Securities", or deliver in connection with
the sale of Bearer Securities during the restricted period any Bearer
Securities within the United States or its possessions and that they have in
effect procedures reasonably designed to ensure that their employees and agents
who are directly engaged in selling the Bearer Securities are aware of the
restrictions described above.
All Offered Securities will be a new issue of securities with no established
trading market. Any underwriters to whom Offered Securities are sold by the
Company for public offering and sale may make a market in such Offered
Securities, but such underwriters will not be obligated to do so and may
discontinue any market making at any time without notice. No assurance can be
given as to the liquidity of the trading market for any Offered Securities.
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The principal amount of Debt Securities that may be offered hereunder is
subject to reduction as a result of the sale of certain other debt securities
subject to the Registration Statement of which this Prospectus is a part. See
"Description of Debt Securities".
Unless otherwise indicated in the applicable Prospectus Supplement, payment
of the purchase price of Debt Securities will be required to be made in
immediately available funds in The City of New York.
Certain of the underwriters or agents and their associates and affiliates may
be customers of, engage in transactions with and perform services for the
Company or certain of its affiliates in the ordinary course of business.
EXPERTS
The financial statements and financial statement schedules of the Company
included in the Company's Annual Report on Form 10-K, which is incorporated in
this Prospectus by reference, have been audited by Deloitte & Touche,
Independent Auditors, as stated in their report appearing therein. Such
financial statements and financial statement schedules are incorporated by
reference in this Prospectus in reliance upon such report, given upon the
authority of that firm as experts in accounting and auditing.
LEGAL OPINIONS
Certain legal matters in connection with the Debt Securities will be passed
upon for the Company by Baker & Botts, L.L.P., Houston, Texas, and either Hugh
Rice Kelly, Esq., Senior Vice President, General Counsel and Corporate
Secretary of the Company, or Rufus S. Scott, Esq., Associate General Counsel
and Assistant Corporate Secretary of the Company, and for any underwriters or
agents by Reid & Priest, New York, New York. Reid & Priest will rely as to all
matters covered by their opinion governed by Texas law upon the opinion of
Baker & Botts, L.L.P.
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No dealer, salesman or other person has been authorized to give any
information or to make any representation other than those contained in this
Prospectus, Prospectus Supplement and any Pricing Supplement in connection
with this offering, and, if given or made, such information or representation
must not be relied upon as having been authorized by the Company or any Agent.
This Prospectus, Prospectus Supplement and any Pricing Supplement shall not
constitute an offer to sell, or a solicitation of an offer to buy, any of the
securities offered hereby 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, Prospectus Supplement and any Pricing Supplement
nor any sale made hereunder shall, under any circumstances, create any
implication that there has been no change in the affairs of the Company since
the date of this Prospectus, Prospectus Supplement and any Pricing Supplement
or that the information set forth herein is correct as of any time subsequent
to the date hereof or the date of filing of any documents incorporated by
reference herein.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
PROSPECTUS SUPPLEMENT
Company Summary Information................................................ S-2
Application of Proceeds.................................................... S-3
Description of Notes....................................................... S-3
Plan of Distribution of Notes.............................................. S-11
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
PROSPECTUS
Available Information....................................................... 2
Incorporation of Certain Documents by Reference............................. 2
The Company................................................................. 3
Application of Proceeds..................................................... 3
Ratios of Earnings to Fixed Charges......................................... 3
Description of Debt Securities.............................................. 4
Description of Mortgage Bonds............................................... 16
Limitations on Issuance of Bearer Securities................................ 20
Foreign Currency Risks...................................................... 20
United States Taxation...................................................... 21
Plan of Distribution........................................................ 25
Experts..................................................................... 27
Legal Opinions.............................................................. 27
</TABLE>
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HOUSTON LIGHTING
& POWER COMPANY
[LOGO of Houston Lighting Appears here]
$350,000,000
Collateralized Medium-Term
Notes, Series D
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PROSPECTUS SUPPLEMENT
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CS First Boston
Goldman, Sachs & Co.
J.P. Morgan Securities Inc.
Chase Securities, Inc.
Chemical Securities Inc.
Citicorp Securities, Inc.
RBC Dominion Securities Corporation
SBCI Swiss Bank Corporation
Investment banking
UBS Securities Inc.
Wood Gundy Corp.
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