(As filed on October 9, 1998)
File No. 70-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM U-1
APPLICATION-DECLARATION
UNDER
THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
___________________________________
INTERSTATE POWER COMPANY
1000 MAIN STREET
P.O. BOX 769
DUBUQUE, IOWA 52004-07691
(Name of company filing this statement
and address of principal executive offices)
___________________________________
INTERSTATE ENERGY CORPORATION
(Name of top registered holding company parent of each
applicant or declarant)
___________________________________
Erroll B. Davis, Jr., Chief Executive Officer
Interstate Power Company
P.O. Box 192
Madison, Wisconsin 53701-0192
(Name and address of agent for service)
___________________________________
The Commission is also requested to send copies of any
communications in connection with this matter to:
Barbara J. Swan, General Counsel William T. Baker, Jr., Esq.
Steven R. Suleski, Senior Attorney Thelen Reid & Priest LLP
Interstate Energy Corporation 40 West 57th Street
222 West Washington Avenue New York, New York 10019-4097
Madison, Wisconsin 53703-0192
ITEM 1. DESCRIPTION OF PROPOSED TRANSACTIONS.
SECTION A. OVERVIEW
1. Interstate Power Company (the "Company"), is a
Delaware corporation and a wholly-owned subsidiary of Interstate
Energy Corporation ("Interstate"), a registered holding company
under the Public Utility Holding Company Act of 1935, as amended
(the "Holding Company Act"). The Company proposes, from time to
time through December 31, 2000, to:
(i) issue and sell one or more series of First
Mortgage Bonds of the Company (the "First Mortgage
Bonds");
(ii) issue and sell one or more series of Senior
Unsecured Debentures of the Company (the "Senior
Debentures");
(iii) issue and sell one or more series of
Unsecured Subordinated Debt Securities of the Company (the
"Subordinated Debentures"); and
(iv) enter into arrangements for the issuance and sale
of one or more series of tax-exempt bonds (the "Tax-Exempt
Bonds", and, together with the First Mortgage Bonds, the
Senior Debentures and the Subordinated Debentures, the "Debt
Securities") for the financing of certain pollution control
facilities, including without limitation sewage and solid
waste disposal facilities and air and water pollution
control facilities that have not heretofore been the subject
of such financing or for the refinancing of outstanding
tax-exempt bonds issued for that purpose, including the
possible issuance and pledge of one or more new series of
bonds ("Tax-Exempt Collateral Bonds") as collateral security
for such Tax-Exempt Bonds.
2. The aggregate principal amount of the Debt
Securities shall not exceed $80 million (such amount excludes
the principal amount of the Tax-Exempt Collateral Bonds). Each
of the proposed transactions is discussed in detail below.
3. The Company became a wholly-owned subsidiary of
Interstate as a result of the combination of WPL Holdings, Inc.
("WPLH"), IES Industries Inc. and the Company (the
"Transaction"). WPLH was renamed Interstate. The Transaction
was approved by Order 35-26856 of the Commission on April 14,
1998 in File No. 70-8891. The Company operates within the States
of Iowa, Minnesota and Illinois.
SECTION B. FIRST MORTGAGE BONDS
4. The new series of First Mortgage Bonds will be
issued under the Company's Indenture, dated as of January 1,
1948, to The Chase Manhattan Bank and C. J. Heinzelmann, as
Trustees, as heretofore supplemented and as proposed to be
further supplemented by additional supplemental indenture(s),
each relating to one or more new series of First Mortgage Bonds
(the "Mortgage"). The First Mortgage Bonds would be issued on
the basis of unfunded net property additions and/or previously
retired bonds, as permitted and authorized by the Mortgage.
5. Each new series of First Mortgage Bonds will be
sold at such price, bear interest at such rate or rates, and
mature on such date or dates as shall be determined at the time
of sale or when the agreement to sell is entered into, as the
case may be. No series of First Mortgage Bonds will be issued at
rates in excess of the lower of 15% per annum or those rates
generally obtainable at the time of pricing for sales of mortgage
bonds having the same or reasonably similar maturities, issued by
companies of the same or reasonably comparable credit quality and
having reasonably similar terms, conditions and features. The
price, exclusive of accrued interest, to be paid to the Company
for each new series of First Mortgage Bonds to be sold at
competitive bidding will be within a range (to be specified by
the Company to prospective purchasers) of 95% to 105% of the
principal amount thereof. Each series of First Mortgage Bonds
will mature not later than 40 years from the day of issuance.
6. As to series having an adjustable interest rate,
the initial interest rate for First Mortgage Bonds of such series
would be determined in discussions between the Company and the
purchasers of such series and would be based on the current
market rate for comparable bonds. Thereafter, the interest rate
on such First Mortgage Bonds would be adjusted according to a
pre-established formula or method of determination ("Floating
Rate First Mortgage Bonds") or would be that rate which, when
set, would be sufficient to remarket the First Mortgage Bonds of
such series at their principal amount ("Remarketed First Mortgage
Bonds").
7. The interest rate for Floating Rate First Mortgage
Bonds after the initial interest rate period may be set as a
percentage of, or as a specified spread from, a benchmark rate,
such as the London Interbank Offered Rate ("LIBOR") or the yield
to maturity of specified United States Treasury securities
("Treasury Rate"), or may be established by reference to orders
received in an auction procedure, and will not exceed a specified
maximum rate greater than 15% per annum. Such interest rate may
be adjusted at established intervals or may be adjusted
simultaneously with changes in the benchmark rate.
8. The interest rate for Remarketed First Mortgage
Bonds after the initial interest rate period would not be greater
than rates generally obtained at the time of remarketing of bonds
having similar maturities, issued by companies of comparable
credit quality and having reasonably comparable terms, and would
not exceed a specified maximum rate greater than 15% per annum.
9. The supplemental indenture to the Mortgage for any
series of Remarketed First Mortgage Bonds would provide that
holders thereof would have the right to tender or be required to
tender their First Mortgage Bonds at a price equal to the
principal amount thereof, plus any accrued and unpaid interest
thereon, on dates specified in or established in accordance with
the applicable supplemental indenture. A Tender Agent may be
appointed to facilitate the tender of any First Mortgage Bonds by
holders. Any holder of First Mortgage Bonds wishing to have such
First Mortgage Bonds purchased may be required to deliver the
same during a specified period of time preceding such purchase
date to the Tender Agent, if one shall have been appointed, or to
the Remarketing Agent appointed to reoffer such tendered First
Mortgage Bonds for sale.
10. The Company would be obligated to pay amounts
equal to the amounts to be paid to the Remarketing Agent or the
Tender Agent pursuant to the supplemental indenture for the
purchase of First Mortgage Bonds so tendered, such amounts to be
paid by the Company on the dates such payments by the Remarketing
Agent or the Tender Agent are to be made, reduced by the amount
of any other moneys available therefor, including the proceeds of
the sale of such tendered First Mortgage Bonds by the Remarketing
Agent. Upon the delivery of such First Mortgage Bonds by holders
to the Remarketing Agent or the Tender Agent for purchase, the
Remarketing Agent would use its best efforts to sell such First
Mortgage Bonds at a price equal to the principal amount of such
First Mortgage Bonds.
11. One or more new series of First Mortgage Bonds may
include provisions for redemption prior to maturity at various
percentages of the principal amount thereof and may include
restrictions on optional redemption for a given number of years.
In addition, one or more series of First Mortgage Bonds may
include provisions for the mandatory retirement of some or all of
such series prior to maturity. The Company desires the
flexibility, in connection with the issuance of the First
Mortgage Bonds of any series, to deviate from the provisions, if
applicable, of the Statement of Policy Regarding First Mortgage
Bonds with respect to (i) redemption and refunding provisions by,
for example, providing refunding limitations for periods of more
than five years or prohibiting redemptions for specified periods
of time (including as long as the life of any series of the First
Mortgage Bonds), and (ii) limitations on payment of common stock
dividends by, for example, including a less restrictive provision
or no such provision in the supplemental indenture relating to a
particular series, all as determined in light of market
conditions and other relevant considerations at the time of
issuance.
12. Reference is made to Exhibit A-1 hereto for
further information with respect to the terms of each series of
First Mortgage Bonds.
SECTION C. SENIOR DEBENTURES
13. The Senior Debentures will be issued under the
Company's Indenture (For Senior Unsecured Debt Securities) to The
First National Bank of Chicago (or to another institution), as
trustee, as proposed to be supplemented by supplemental
indenture(s), each relating to one or more new series of Senior
Debentures.
14. The Senior Debentures will be unsecured
obligations of the Company and will rank on a parity with all
other unsecured and unsubordinated debt of the Company.
15. Each series of Senior Debentures will be sold at
such price, will bear interest at such rate(s) and will mature on
such date(s) as shall be determined at the time of
sale. Senior Debentures will not be sold if the fixed interest
rate or initial adjustable interest rate thereon would exceed the
lower of 15% or rates generally obtainable at the time of pricing
for sales of debentures having the same or reasonably equivalent
maturity, issued by companies of comparable credit quality and
having reasonably similar terms, conditions and features. As to
series of Senior Debentures having an adjustable interest rate,
the initial interest rate for such series will be negotiated by
the Company and the purchasers of such series and will be based
on the current market rate for comparable debentures.
Thereafter, the interest rate on such Senior Debentures would be
adjusted according to a pre-established formula or method of
determination ("Floating Rate Senior Debentures") or will be that
rate which, when set, would be sufficient to remarket the Senior
Debentures of such series at their principal amount ("Remarketed
Senior Debentures").
16. The interest rate for Floating Rate Senior
Debentures after the initial interest rate period may be set as a
percentage of, or as a specified spread from, a benchmark rate
such as LIBOR or the Treasury Rate, or may be established by
reference to orders received in an auction procedure, and will
not exceed a specified maximum rate, which shall not exceed 15%
per annum. Such interest rate may be adjusted at established
intervals or may be adjusted simultaneously with changes in the
benchmark rate.
17. The interest rate for Remarketed Senior Debentures
after the initial interest rate period will not exceed rates
generally obtainable at the time of remarketing of debentures
having the same or reasonably similar maturity, issued by
companies of comparable credit quality and having the same or
reasonably comparable terms and will not exceed a specified
maximum rate not to exceed 15% per annum.
18. The terms of Remarketed Senior Debentures would
provide that holders thereof have the right to tender or are
required to tender their Senior Debentures and have them
purchased at a price equal to the principal amount thereof plus
accrued and unpaid interest thereon, on specified dates. A
Tender Agent may be appointed to facilitate the tender of any
Senior Debentures by holders. Any holder of Remarketed Senior
Debentures wishing to have them purchased may be required to
deliver the same during a specified period of time preceding such
purchase date to the Tender Agent, if one shall be appointed, or
to the Remarketing Agent appointed to reoffer the same for sale.
19. The Company would be obligated to pay amounts
equal to the amounts to be paid to the Remarketing Agent or the
Tender Agent for the purchase of Remarketed Senior Debentures so
tendered, which amounts would be paid by the Company on the dates
such payments by the Remarketing Agent or the Tender Agent are to
be made, reduced by the amount of any other moneys available
therefor, including the proceeds of the sale of such tendered
Senior Debentures by the Remarketing Agent. Upon the delivery of
such Senior Debentures by holders to the Remarketing Agent or the
Tender Agent for purchase, the Remarketing Agent would use its
best efforts to sell the same at a price equal to the principal
amount thereof.
20. The price, exclusive of accrued interest, to be
paid to the Company for each such series of Senior Debentures
sold at competitive bidding will be within a range (to be
specified by the Company to prospective purchasers) of 95% to
105% of the principal amount of such series. Each series of
Senior Debentures will mature not later than 30 years from the
day of issuance.
21. One or more series of Senior Debentures may
include provisions for redemption prior to maturity at various
percentages of the principal amount thereof, restrictions on
optional redemption for a given number of years and/or provisions
for the mandatory retirement of some or all of such series prior
to maturity.
22. Reference is made to Exhibit A-2 hereto for
further information with respect to the terms of each series of
Senior Debentures.
SECTION D. SUBORDINATED DEBENTURES
23. The Subordinated Debentures will be issued under
the Company's Indenture (For Unsecured Subordinated Debt
Securities) to The First National Bank of Chicago (or to another
institution), as trustee, as proposed to be supplemented by
supplemental indenture(s), each relating to one or more new
series of Subordinated Debentures.
24. The Subordinated Debentures will be unsecured,
subordinated obligations of the Company. The indenture relating
the Subordinated Debentures will provide that payment of the
principal of, premium, if any, and interest on Subordinated
Debentures will be subordinated and subject in right or payment
to the prior payment in full of all senior indebtedness of the
Company.
25. Each series of Subordinated Debentures will be
sold at such price, will bear interest at such rate(s) and will
mature on such date(s) as shall have been be determined at the
time of sale. Subordinated Debentures will not be sold if the
fixed interest rate or initial adjustable interest rate thereon
would exceed the lower of 15% or rates generally obtainable at
the time of pricing for sales of debentures having the same or
reasonably equivalent maturity, issued by companies of comparable
credit quality and having reasonably similar terms, conditions
and features. As to series of Subordinated Debentures having an
adjustable interest rate, the initial interest rate for such
series will be negotiated by the Company and the purchasers of
such series and will be based on the current market rate for
comparable debentures. Thereafter, the interest rate on such
Subordinated Debentures would be adjusted according to a
pre-established formula or method of determination ("Floating
Rate Subordinated Debentures") or will be that rate which, when
set, would be sufficient to remarket the Subordinated Debentures
of such series at their principal amount ("Remarketed
Subordinated Debentures").
26. The interest rate for Floating Rate Subordinated
Debentures after the initial interest rate period may be set as a
percentage of, or as a specified spread from, a benchmark rate
such as LIBOR or the Treasury Rate, or may be established by
reference to orders received in an auction procedure, and will
not exceed a specified maximum rate, which shall not exceed 15%
per annum. Such interest rate may be adjusted at established
intervals or may be adjusted simultaneously with changes in the
benchmark rate.
27. The interest rate for Remarketed Subordinated
Debentures after the initial interest rate period will not exceed
rates generally obtainable at the time of remarketing of
debentures having the same or reasonably similar maturity, issued
by companies of comparable credit quality and having the same or
reasonably comparable terms and will not exceed a specified
maximum rate not to exceed 15% per annum.
28. The terms of Remarketed Debentures would provide
that holders thereof have the right to tender or are required to
tender their Subordinated Debentures and have them purchased at a
price equal to the principal amount thereof plus accrued and
unpaid interest thereon, on specified dates. A Tender Agent may
be appointed to facilitate the tender of any Subordinated
Debentures by holders. Any holder of Remarketed Subordinated
Debentures wishing to have them purchased may be required to
deliver the same during a specified period of time preceding such
purchase date to the Tender Agent, if one shall be appointed, or
to the Remarketing Agent appointed to reoffer the same for sale.
29. The Company would be obligated to pay amounts
equal to the amounts to be paid to the Remarketing Agent or the
Tender Agent for the purchase of Remarketed Subordinated
Debentures so tendered, which amounts would be paid by the
Company on the dates such payments by the Remarketing Agent or
the Tender Agent are to be made, reduced by the amount of any
other moneys available therefor, including the proceeds of the
sale of such tendered Subordinated Debentures by the Remarketing
Agent. Upon the delivery of such Subordinated Debentures by
holders to the Remarketing Agent or the Tender Agent for
purchase, the Remarketing Agent would use its best efforts to
sell the same at a price equal to the principal amount thereof.
30. The price, exclusive of accrued interest, to be
paid to the Company for each such series of Subordinated
Debentures sold at competitive bidding will be within a range (to
be specified by the Company to prospective purchasers) of 95% to
105% of the principal amount of such series. Each series of
Subordinated Debentures will mature not later than 30 years from
the day of issuance.
31. One or more series of Subordinated Debentures may
include provisions for redemption prior to maturity at various
percentages of the principal amount thereof, restrictions on
optional redemption for a given number of years and/or provisions
for the mandatory retirement of some or all of such series prior
to maturity.
32. Reference is made to Exhibits A-3 hereto for
further information with respect to the terms of each series of
Subordinated Debentures.
SECTION E. GENERAL MATTERS RELATING TO FIRST MORTGAGE
BONDS, SENIOR DEBENTURES AND SUBORDINATED
DEBENTURES
33. The Company anticipates that the issuance and sale
of each series of First Mortgage Bonds, Senior Debentures and
Subordinated Debentures will be by means of competitive bidding
or negotiated public offering or private placement with
institutional investors in order to secure the advantages of an
advance marketing effort and/or the best available terms.
34. Sale(s) of First Mortgage Bonds, Senior Debentures
and Subordinated Debentures are separate transactions not
contingent upon one another.
35. The Company proposes to use the net proceeds
derived from the issuance and sale of First Mortgage Bonds,
Senior Debentures and Subordinated Debentures for general
corporate purposes, including without limitation the conduct of
its business as a utility, the repayment of outstanding
securities when due and/or the possible redemption, acquisition,
or refunding of certain outstanding securities prior to their
stated maturity or due date. The Company's request for
authorization for such sales is in part to provide the
flexibility to permit a quick response to changing market
conditions if it becomes beneficial for the Company to refinance,
refund, or otherwise acquire outstanding high cost securities.
SECTION F. TAX-EXEMPT BONDS AND RELATED TRANSACTIONS
36. Each issue of the proposed pollution control
revenue bonds will be issued for the financing or refinancing of
the costs of certain air and water pollution control facilities
and sewage and solid waste disposal facilities at one or more of
the Company generating plants or other facilities located in
various counties. It is proposed that each such municipality,
county or the otherwise appropriate public or state body or
instrumentality (the "Authority") will issue its revenue bonds
(the "Tax-Exempt Bonds") to finance or refinance the costs of the
acquisition, construction, installation and equipping of said
facilities at the plant or other facility located in its
jurisdiction (the "Project"). Each Authority is authorized by
relevant state law to issue its Tax-Exempt Bonds for such
purposes.
37. While the actual amount of Tax-Exempt Bonds to be
issued by each Authority has not yet been determined, such amount
will be based upon the cost of refunding outstanding bonds or the
cost of the Project located in its jurisdiction.
38. The Company proposes to enter into a Loan or
Installment Sale Agreement with the Authority relating to each
issue of the Tax-Exempt Bonds (the "Agreement"). Under the
Agreement, the Authority will loan to the Company the proceeds of
the sale of the Authority's Tax-Exempt Bonds, and the Company may
issue a non-negotiable promissory note therefor (the "Note"), or
the Authority will undertake to purchase and sell the related
Project to the Company. The installment sale structure may be
used because it is required by applicable state law or to the
extent it affords transactional advantages to the Company. Such
proceeds will be deposited with a trustee (the "Trustee") under
an indenture to be entered into between the Authority and such
Trustee (the "Trust Indenture"), pursuant to which such Tax-
Exempt Bonds are to be issued and secured, and will be applied by
the Company to payment of the Cost of Construction (as defined in
the Agreement) of the Project or to refund outstanding pollution
control revenue obligations.
39. The Note or the Agreement will provide for
payments to be made by the Company at times and in amounts which
shall correspond to the payments with respect to the principal
of, premium, if any, and interest on the related Tax-Exempt Bonds
whenever and in whatever manner the same shall become due,
whether at stated maturity, upon redemption or declaration or
otherwise.
40. The Agreement will provide for the assignment to
the Trustee of the Authority's interest in, and of the moneys
receivable by the Authority under, the Agreement and the Note.
41. The Agreement will also obligate the Company to
pay the fees and charges of the Trustee and may provide that the
Company may at any time, so long as it is not in default
thereunder, prepay the amount due under the Agreement or the
Note, including interest thereon, in whole or in part, such
payment to be sufficient to redeem or purchase outstanding Tax-
Exempt Bonds in the manner and to the extent provided in the
Trust Indenture.
42. The Trust Indenture will provide that the Tax-
Exempt Bonds issued thereunder will be redeemable (i) at any time
on or after a specified date from the date of issuance, in whole
or in part, at the option of the Company, and may require the
payment of a premium at a specified percentage of the principal
amount which may decline annually thereafter, and (ii) in whole,
at the option of the Company, in certain other cases of undue
burdens or excessive liabilities imposed with respect to the
related Project, its destruction or damage beyond practicable or
desirable repairability or condemnation or taking by eminent
domain, or if operation of the related facility is enjoined and
the Company determines to discontinue operation thereof, such
redemption of all such outstanding Tax-Exempt Bonds to be at the
principal amount thereof plus accrued interest, but without
premium. It is proposed that the Tax-Exempt Bonds will mature
not more than 30 years from the first day of the month in which
they are initially issued and may, if it is deemed advisable for
purposes of the marketability of the Tax-Exempt Bonds, be
entitled to the benefit of a mandatory redemption sinking fund
calculated to retire a portion of the aggregate principal amount
of the Tax-Exempt Bonds prior to maturity.
43. The Trust Indenture and the Agreement may give the
holders of the Tax-Exempt Bonds the right, during such time as
the Tax-Exempt Bonds bear interest at a fluctuating rate or
otherwise, to require the Company to purchase the Tax-Exempt
Bonds from time to time, and arrangements may be made for the
remarketing of any such Tax-Exempt Bonds through a remarketing
agent. The Company also may be required to purchase the Tax-
Exempt Bonds, or the Tax-Exempt Bonds may be subject to mandatory
redemption, at any time if the interest thereon is determined to
be subject to federal income tax. Also in the event of
taxability, interest on the Tax-Exempt Bonds may be effectively
converted to a higher variable or fixed rate, and the Company
also may be required to indemnify the bondholders against any
other additions to interest, penalties, and additions to tax;
such terms are not considered to constitute the issuance of a
separate security under Sections 6(a) and 7 of the Holding
Company Act, but rather possible additional terms of the Tax-
Exempt Bonds and the Company's obligations with respect thereto.
44. In order to obtain the benefit of ratings for the
Tax-Exempt Bonds equivalent to the rating of the First Mortgage
Bonds outstanding under the Mortgage, which ratings the Company
has been advised may be thus attained, the Company may determine
to secure its obligations under the Note and the related
Agreement by delivering to the Trustee, to be held as collateral,
a series of its First Mortgage Bonds (the "Tax-Exempt Collateral
Bonds") in principal amount either (i) equal to the principal
amount of the Tax-Exempt Bonds or (ii) equal to the sum of such
principal amount of the Tax-Exempt Bonds plus interest payments
thereon for a specified period. Such series of Tax-Exempt
Collateral Bonds will be issued under an indenture supplemental
to the Mortgage (the "Supplemental Indenture"), will mature on
the maturity date of such Tax-Exempt Bonds and will be
non-transferable by the Trustee. The Tax-Exempt Collateral
Bonds, in the case of clause (i) above, would bear interest at a
rate or rates equal to the interest rate or rates to be borne by
the related Tax-Exempt Bonds and, in the case of clause (ii)
above, would be non-interest bearing.
45. The Supplemental Indenture will provide, however,
that the obligation of the Company to make payments with respect
to the Tax-Exempt Collateral Bonds will be satisfied to the
extent that payments are made under the Note or the Agreement
sufficient to meet payments when due in respect of the related
Tax-Exempt Bonds. The Supplemental Indenture will provide that,
upon acceleration by the Trustee of the principal amount of all
related outstanding Tax-Exempt Bonds under the Trust Indenture,
the Trustee may demand the mandatory redemption of the related
Tax-Exempt Collateral Bonds then held by it as collateral at a
redemption price equal to the principal amount thereof plus
accrued interest, if any, to the date fixed for redemption. The
Supplemental Indenture may also provide that, upon the optional
redemption of the Tax-Exempt Bonds, in whole or in part, a
related principal amount of the Tax-Exempt Collateral Bonds will
be redeemed at the redemption price of the Tax-Exempt Bonds.
46. In the case of interest bearing Tax-Exempt
Collateral Bonds, because interest accrues in respect of such
Tax-Exempt Collateral Bonds until satisfied by payments under the
Note or the Agreement, "annual interest charges" in respect of
such Tax-Exempt Collateral Bonds will be included in computing
the "interest earnings requirement" of the Mortgage which
restricts the amount of First Mortgage Bonds which may be issued
and sold to the public in relation to the Company's net earnings.
In the case of non-interest bearing Tax-Exempt Collateral Bonds,
since no interest would accrue in respect of such Tax-Exempt
Collateral Bonds, the "interest earnings requirement" would be
unaffected.
47. The Trust Indenture will provide that, upon
deposit with the Trustee of funds sufficient to pay or redeem all
or any part of the related Tax-Exempt Bonds, or upon direction to
the Trustee by the Company to so apply funds available therefor,
or upon delivery of such outstanding Tax-Exempt Bonds to the
Trustee by or for the account of the Company, the Trustee will be
obligated to deliver to the Company the Tax-Exempt Collateral
Bonds then held as collateral in an aggregate principal amount as
they relate to the aggregate principal amount of such Tax-Exempt
Bonds for the payment or redemption of which such funds have been
deposited or applied or which shall have been so delivered.
48. As an alternative to or in conjunction with the
Company's securing its obligations through the issuance of the
Tax-Exempt Collateral Bonds as above described, the Company may
cause an irrevocable Letter of Credit or other credit facility
(the "Letter of Credit") of a bank or other financial institution
(the "Bank") to be delivered to the Trustee. The Letter of
Credit would be an irrevocable obligation of the Bank to pay to
the Trustee, upon request, up to an amount necessary in order to
pay principal of and accrued interest on the Tax-Exempt Bonds
when due. Pursuant to a separate agreement with the Bank, the
Company would agree to pay to the Bank, on demand or pursuant to
a borrowing under such agreement, all amounts that are drawn
under the Letter of Credit, as well as certain fees and expenses.
Such delivery of the Letter of Credit to the Trustee would obtain
for the Tax-Exempt Bonds the benefit of a rating equivalent to
the credit rating of the Bank. In the event that the Letter of
Credit is delivered to the Trustee as an alternative to the
issuance of the Tax-Exempt Collateral Bonds, the Company may also
convey to the Authority a subordinated security interest in the
Project or other property of the Company as further security for
the Company's obligations under the Agreement and the Note. Such
subordinated security interest would be assigned by the Authority
to the Trustee.
49. As a further alternative to, or in conjunction
with, securing its obligations under the Agreement and Note as
above described, and in order to obtain a "AAA" rating for the
Tax-Exempt Bonds by one or more nationally recognized securities
rating services, the Company may cause an insurance company to
issue a policy of insurance guaranteeing the payment when due of
the principal of and interest on such series of the Tax-Exempt
Bonds. Such insurance policy would extend for the term of the
related Tax-Exempt Bonds and would be non-cancelable by the
insurance company for any reason. The Company's payment of the
premium with respect to said insurance policy could be in various
forms, including a non-refundable, one-time insurance premium
paid at the time the policies are issued, and/or an additional
interest percentage to be paid to said insurer in correlation
with regular interest payments. In addition, the Company may be
obligated to make payments of certain specified amounts into
separate escrow funds and to increase the amounts on deposit in
such funds under certain circumstances. The amount in each
escrow fund would be payable to the insurance company as
indemnity for any amounts paid pursuant to the related insurance
policy in respect of principal of or interest on the related Tax-
Exempt Bonds. In the event that an insurance policy is issued as
an alternative to the issuance of the Tax-Exempt Collateral
Bonds, the Company may also convey to the Authority a
subordinated security interest in the Project or other property
of the Company as further security for the Company's obligations
under the Agreement and the Note. Such subordinated security
interest would be assigned by the Authority to the Trustee. If,
due to insufficiency of coverages or for other reasons, the
Company is unable or determines not to issue the Tax-Exempt
Collateral Bonds or to deliver the Letter of Credit to the
Trustee as above described or to cause an insurance policy to be
issued, the Tax-Exempt Bonds would be issued without the benefit
of such security. In that event the Company may convey to the
Authority a subordinated security interest in the Project or
other property of the Company as security for its obligations
under the Agreement and the Note. Such subordinated security
interest would be assigned by the Authority to the Trustee. the
Company also may guarantee the payment of the principal of,
premium, if any, and interest on the Tax-Exempt Bonds.
50. It is contemplated that the Tax-Exempt Bonds will
be sold by the Authority pursuant to arrangements with one or
more purchasers, placement agents or underwriters. In accordance
with applicable state laws, the interest rate to be borne by the
Tax-Exempt Bonds will be approved by the Authority and will be
either a fixed rate, which fixed rate may be convertible to a
rate which will fluctuate in accordance with a specified prime or
base rate or rates or may be determined pursuant to certain
remarketing or auction procedures, or a fluctuating rate, which
fluctuating rate may be convertible to a fixed rate. While the
Company may not be party to the purchase, placement or
underwriting arrangements for the Tax-Exempt Bonds, such
arrangements will provide that the terms of the Tax-Exempt Bonds
and their sale by the Authority shall be satisfactory to the
Company. Bond Counsel will issue an opinion that, based upon
existing law, interest on the Tax-Exempt Bonds will generally be
excludable from gross income for federal income tax purposes.
The Company has been advised that the interest rates on
obligations, the interest on which is tax exempt, recently have
been and can be expected at the time of issue of the Tax-Exempt
Bonds to be approximately one to three percentage points lower
than the rates on obligations of like tenor and comparable
quality, interest on which is fully subject to federal income
taxation.
51. The Company also proposes that it may enter into
arrangements providing for the delayed or future delivery of Tax-
Exempt Bonds to one or more purchasers or underwriters. The
obligations of the purchasers or underwriters to purchase Tax-
Exempt Bonds under any such arrangements may be secured by U.S.
Treasury securities, letters of credit or other collateral. The
effective cost to the Company of any series of the Tax-Exempt
Bonds will not exceed the yield on U.S. Treasury securities
having a maturity comparable to that of such series of Tax-Exempt
Bonds. Such effective cost will reflect the applicable interest
rate or rates and any underwriters' discount or commission.
52. The premium (if any) payable upon the redemption
of any Tax-Exempt Bonds at the option of the Company will not
exceed the greater of (i) 5% of the principal amount of the Tax-
Exempt Bonds so to be redeemed, or (ii) a percentage of such
principal amount equal to the rate of interest per annum borne by
such Tax-Exempt Bonds.
53. The purchase price payable by or on behalf of the
Company in respect of Tax-Exempt Bonds tendered for purchase at
the option of the holders thereof will not exceed 100% of the
principal amount thereof, plus accrued interest to the purchase
date.
54. Any Letter of Credit issued as security for the
payment of Tax-Exempt Bonds will be issued pursuant to a
Reimbursement Agreement between the Company and the financial
institution issuing such Letter of Credit. Pursuant to the
Reimbursement Agreement, the Company will agree to pay or cause
to be paid to the financial institution, on each date that any
amount is drawn under such institution's Letter of Credit, an
amount equal to the amount of such drawing, whether by cash or by
means of a borrowing from such institution pursuant to the
Reimbursement Agreement. Any such borrowing may have a term of
up to 10 years and will bear interest at the lending
institution's prevailing rate offered to corporate borrowers of
similar quality which will not exceed (i) the London Interbank
Offered Rate plus up to 2%, (ii) the lending institution's
certificate of deposit rate plus up to 1-3/4%, or (iii) a rate
not to exceed the prime rate plus 1%, to be established by
agreement with the lending institution prior to the borrowing.
ITEM 2. FEES, COMMISSIONS AND EXPENSES.
55. The fees, commissions and expenses, other than
those of the underwriters, to be incurred in connection with the
issuance and sale of the First Mortgage Bonds, Senior Debentures
and Subordinated Debentures will be filed by amendment to this
Form U-1.
56. The fees, commissions and expenses, other than
those of the underwriters, to be incurred in connection with the
issuance and sale of the Tax-Exempt Bonds (including expenses
related to the issuance and pledge of the Tax-Exempt Collateral
Bonds) will be filed by amendment to this Form U-1.
57. The fees, commissions and expenses of the
underwriters expected to be incurred with respect to the Debt
Securities will not exceed the lesser of 2% of the principal
amount of the Debt Securities to be sold or those generally paid
at the time of pricing for sales of first mortgage bonds, senior
debentures, subordinated debentures or tax-exempt bonds having
the same maturity, issued by companies of comparable credit
quality and having similar terms, conditions and features.
ITEM 3. APPLICABLE STATUTORY PROVISIONS.
SECTION A. DEBT SECURITIES
58. The Company considers that the issuance of the
Debt Securities is subject to Sections 6(a), 7 and 12(c) of the
Holding Company Act and Rules 23, 24 and 42 thereunder.
59. The Company further considers that the sale or
granting of subordinated security interests in the Projects or
other property of the Company, as set forth under Section F of
Item 2 above, may be subject to Section 12(d) of the Holding
Company Act and Rule 44 thereunder.
60. The Company considers that any guarantee of
payment of the Tax-Exempt Bonds, or any promissory note of the
Company to the Authority in connection with the Tax-Exempt Bonds,
may be subject to Sections 6(a) and 7 of the Holding Company Act.
61. The Company considers that Sections 9(a) and 10 of
the Holding Company Act may be applicable to any purchase of Tax-
Exempt Bonds by the Company as described herein and to the extent
that the transactions contemplated herein in connection with the
Tax-Exempt Bonds involve an Installment Sale Agreement or
agreements pursuant to which the Authority undertakes to sell the
related Project to the Company.
62. The proposed transactions will be carried out in
accordance with the procedure specified in Rule 23 and pursuant
to an order or orders of the Commission in respect thereto.
SECTION B. RULE 54 ANALYSIS
63. Under Rule 54, in determining whether to approve
the issue or sale of a security by a registered holding company
for purposes other than the acquisition of an "exempt wholesale
generator" or "foreign utility company", as such terms are
defined in Sections 32 and 33, respectively, of the Holding
Company Act, or other transactions by such registered holding
company or its subsidiaries other than with respect to "exempt
wholesale generators" or "foreign utility companies", the
Commission shall not consider the effect of the capitalization or
earnings of any subsidiary which is an "exempt wholesale
generator" or a "foreign utility company" upon the registered
holding company system if the "safe harbor" conditions of Rule 53
are satisfied.
64. Interstate currently meets all of the "safe
harbor" conditions of Rule 53. Interstate's "aggregate
investment", as defined in Rule 53(a)(1)(i) under the Holding
Company Act, in "exempt wholesale generators" and "foreign
utility companies" at June 30, 1998 was approximately $68
million, representing approximately 11.5% of Interstate's
"consolidated retained earnings", as defined in Rule
53(a)(1)(ii), for the four quarters ended June 30, 1998 ($591
million). Furthermore, Interstate has and will continue to
comply with the record keeping requirements of Rule 53(a)(2)
concerning affiliated "exempt wholesale generators" and "foreign
utility companies." In addition, as required by Rule 53(a)(3),
no more than 2% of the employees of Interstate's operating
utility subsidiaries will, at any one time, directly or
indirectly, render services to "exempt wholesale generators" and
"foreign utility companies". Finally, since none of the
circumstances described in Rule 53(b) exists, the provisions of
Rule 53(a) are not made inapplicable by Rule 53(b).
ITEM 4. REGULATORY APPROVAL.
65. No state regulatory body or agency and no federal
commission or agency other than this Commission has jurisdiction
over the transactions proposed herein.
ITEM 5. PROCEDURE
66. The Company requests that the Commission's notice
of proposed transactions published pursuant to Rule 23(e) be
issued by October 16, 1998, or as soon thereafter as practicable.
The Company further requests that the Commission's order
authorizing the consummation of the proposed transactions be
entered no later than November 25, 1998, or as soon thereafter as
practicable.
67. Upon the completion of each transaction involving
the issuance and sale of any of the Debt Securities, the Company
shall file a Certificate pursuant to Rule 24 with copies of the
executed documents relating thereto as exhibits.
68. The Company hereby waives a recommended decision
by a hearing officer or any other responsible officer of the
Commission; agrees that the Staff of the Division of Investment
Management may assist in the preparation of the Commission's
decision; and requests that there be no waiting periods between
the issuance of the Commission's orders and the dates on which
they are to become effective.
ITEM 6. EXHIBITS AND FINANCIAL STATEMENTS.
SECTION A. EXHIBITS:
A-1(a) Indenture of Interstate Power Company to The
Chase National Bank of the City of New York
and Carl E. Buckley, as Trustees, dated as of
January 1, 1948, as supplemented by First
Supplemental Indenture dated as of January 1,
1948 securing First Mortgage Bonds
(incorporated by reference to Exhibit 4(b) to
Registration Statement No. 33-59352, dated
March 11, 1993, under the Securities Act of
1933).
A-1(b) Second Supplemental Indenture of Interstate
Power Company to The Chase National Bank of
the City of New York and Carl E. Buckley, as
Trustees, dated as of July 1, 1948
(incorporated by reference to Exhibit 4(c) to
Registration Statement No. 33-59352, dated
March 11, 1993, under the Securities Act of
1933).
A-1(c) Third Supplemental Indenture of Interstate
Power Company to The Chase National Bank of
the City of New York and Carl E. Buckley, as
Trustees, dated as of January 1, 1950
(incorporated by reference to Exhibit 4(d) to
Registration Statement No. 33-59352, dated
March 11, 1993, under the Securities Act of
1933).
A-1(d) Fourth Supplemental Indenture of Interstate
Power Company to The Chase National Bank of
the City of New York and Carl E. Buckley, as
Trustees, dated as of January 1, 1952
(incorporated by reference to Exhibit 4(e) to
Registration Statement No. 33-59352, dated
March 11, 1993, under the Securities Act of
1933).
A-1(e) Fifth Supplemental Indenture of Interstate
Power Company to The Chase Manhattan Bank and
Carl E. Buckley, as Trustees, dated as of
September 30, 1955 (incorporated by reference
to Exhibit 4(f) to Registration Statement No.
33-59352, dated March 11, 1993, under the
Securities Act of 1933).
A-1(f) Sixth Supplemental Indenture of Interstate
Power Company to The Chase Manhattan Bank and
Arthur F. Henning, as Trustees, dated as of
May 1, 1957 (incorporated by reference to
Exhibit 4(g) to Registration Statement No.
33-59352, dated March 11, 1993, under the
Securities Act of 1933).
A-1(g) Seventh Supplemental Indenture of Interstate
Power Company to The Chase Manhattan Bank and
Arthur F. Henning, as Trustees, dated as of
May 1, 1959 (incorporated by reference to
Exhibit 4(h) to Registration Statement No.
33-59352, dated March 11, 1993, under the
Securities Act of 1933).
A-1(h) Eighth Supplemental Indenture of Interstate
Power Company to The Chase Manhattan Bank and
Arthur F. Henning, as Trustees, dated as of
May 1, 1961 (incorporated by reference to
Exhibit 4(i) to Registration Statement No.
33-59352, dated March 11, 1993, under the
Securities Act of 1933).
A-1(i) Ninth Supplemental Indenture of Interstate
Power Company to The Chase Manhattan Bank and
Arthur F. Henning, as Trustees, dated as of
May 1, 1963 (incorporated by reference to
Exhibit 4(j) to Registration Statement No.
33-59352, dated March 11, 1993, under the
Securities Act of 1933).
A-1(j) Tenth Supplemental Indenture of Interstate
Power Company to The Chase Manhattan Bank and
C.F. Ruge, as Trustees, dated as of May 1,
1965 (incorporated by reference to Exhibit 4-
K to Registration Statement No. 2-26130 under
the Securities Act of 1933).
A-1(k) Eleventh Supplemental Indenture of Interstate
Power Company to The Chase Manhattan Bank
(National Association) and C.F. Ruge, as
Trustees, dated as of May 1, 1967
(incorporated by reference to Exhibit 2-B-13
to Registration Statement No. 2-32133 under
the Securities Act of 1933).
A-1(l) Twelfth Supplemental Indenture of Interstate
Power Company to The Chase Manhattan Bank
(National Association) and C.F. Ruge, as
Trustees, dated as of May 1, 1969
(incorporated by reference to Exhibit A to
Form 8-K of May 1969 under the Securities
Exchange Act of 1934 as Exhibit A).
A-1(m) Thirteenth Supplemental Indenture of
Interstate Power Company to The Chase
Manhattan Bank (National Association) and
C.F. Ruge, as Trustees, dated as of May 1,
1974 (incorporated by reference to Exhibit A
to Form 8-K of May 1974 under the Securities
Exchange Act of 1934).
A-1(n) Fourteenth Supplemental Indenture of
Interstate Power Company to The Chase
Manhattan Bank (National Association) and
C.F. Ruge, as Trustees, dated as of October
15, 1975 (incorporated by reference to
Exhibit A to Form 8-K of October 1975 under
the Securities Exchange Act of 1934).
A-1(o) Fifteenth Supplemental Indenture of
Interstate Power Company to The Chase
Manhattan Bank (National Association) and
C.F. Ruge, as Trustees, dated as of October
1, 1976 (incorporated by reference to Exhibit
A of Form 8-K of October 1976 under the
Securities Exchange Act of 1934).
A-1(p) Sixteenth Supplemental Indenture of
Interstate Power Company to The Chase
Manhattan Bank (National Association) and
C.F. Ruge, as Trustees, dated as of September
15, 1977 (incorporated by reference to
Exhibit A to Form 8-K of October 1977 under
the Securities Exchange Act of 1934).
A-1(q) Seventeenth Supplemental Indenture of
Interstate Power Company to The Chase
Manhattan Bank (National Association) and
C.F. Ruge, as Trustees, dated as of March 15,
1978 (incorporated by reference to Exhibit A
to Form 10-K of March 1979 for the year ended
December 31, 1978).
A-1(r) Eighteenth Supplemental Indenture of
Interstate Power Company to The Chase
Manhattan Bank (National Association) and C.
J. Heinzelmann, as Trustees, dated as of
September 15, 1991 (incorporated by reference
to Exhibit Y to Form 10-K of March, 1992 for
the year-ended December 31, 1991).
A-1(s) Nineteenth Supplemental Indenture of
Interstate Power Company to The Chase
Manhattan Bank (National Association) and C.
J. Heinzelmann, as Trustees, dated as of
February 15, 1992 (incorporated by reference
to Exhibit 4 to Form 8-K of February 27, 1992
under the Securities Exchange Act of 1934).
A-1(t) Twentieth Supplemental Indenture of
Interstate Power Company to The Chase
Manhattan Bank and C. J. Heinzelmann, as
Trustees, dated as of May 15, 1993
(incorporated by reference to Exhibit 4(u) to
Registration Statement No. 33-59352, dated
March 11, 1993, under the Securities Act of
1933).
A-2 Indenture (For Senior Unsecured Debt
Securities), dated as of _________ 1, 1998,
between the Company and __________________,
as Trustee (to be filed by amendment).
A-3 Indenture (For Unsecured Subordinated Debt
Securities), dated as of _________ 1, 1998,
between the Company and __________________,
as Trustee (to be filed by amendment).
B None.
C Registration Statement filed under the
Securities Act of 1933 with respect to the
First Mortgage Bonds, Senior Debentures and
Subordinated Debentures (to be filed by
amendment, if necessary).
D None.
E None.
F Opinion of counsel for the Company (to be
filed by amendment).
G-1 Financial Data Schedule for Interstate
(incorporated by reference to Exhibit 27.2 to
the Interstate's Form 10-Q for the quarter
ended June 30, 1998).
G-2 Financial Data Schedule for the Company (to
be filed by amendment).
H Form of Notice.
SECTION B. FINANCIAL STATEMENTS
69. Balance sheet of the Company at June 30, 1998 (to
be filed by amendment).
70. Statement of income and surplus of the Company for
the six months ended June 30, 1998 (to be filed by amendment).
71. Consolidated balance sheet of Interstate at June
30, 1998 (incorporated by reference to the Company's Form 10-Q
for the quarter ended June 30, 1998, File No. 001-09894).
72. Consolidated statement of income and surplus of
Interstate for the six months ended June 30, 1998 (incorporated
by reference to the Company's Form 10-Q for the quarter ended
June 30, 1998, File No. 001-09894).
73. Since June 30, 1998, there have been no material
adverse changes, not in the ordinary course of business, in the
financial condition of the Company or of Interstate and its
subsidiaries consolidated from that set forth in or contemplated
by the foregoing financial statements.
ITEM 7. INFORMATION AS TO ENVIRONMENTAL EFFECTS
74. The proposed transactions are strictly financial
in nature in the ordinary course of the Company's business.
Accordingly, the Commission's action in these matters will not
constitute any major federal action significantly affecting the
quality of the human environment within the meaning of the
National Environmental Policy Act.
75. No other federal agency has prepared or is
preparing an environmental impact statement with regard to the
proposed transactions.
SIGNATURE
Pursuant to the requirements of the Public Utility
Holding Company Act of 1935, the undersigned company has duly
caused this statement to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: October 9, 1998 INTERSTATE POWER COMPANY
By: /s/ Erroll B. Davis, Jr.
____________________________
Name: Erroll B. Davis, Jr.
Title: Chief Executive Officer
<PAGE>
EXHIBIT INDEX
Exhibit Description
------- -----------
H Form of Notice
EXHIBIT H
FORM OF NOTICE OF PROPOSED TRANSACTIONS
SECURITIES AND EXCHANGE COMMISSION
(Release No. 35- ; 70- )
Filings Under the Public Utility Holding Company Act of 1935
("Act").
Interstate Energy Corporation ("Interstate")
Interstate Power Company (the "Company")
Notice of Proposal to Issue and Sell Debt Securities
October ___, 1998
Notice is hereby given that the following filing(s)
has/have been made with the Commission pursuant to provisions of
the Act and rules promulgated thereunder. All interested persons
are referred to the application(s) and/or declaration(s) for
complete statements of the proposed transaction(s) summarized
below. The application(s) and/or declaration(s) and any
amendments thereto is/are available for public inspection through
the Commission's Office of Public Reference.
Interested persons wishing to comment or request a
hearing on the application(s) and/or declaration(s) should submit
their views in writing by __________, 1998 to the Secretary,
Securities and Exchange Commission, Washington, D.C. 20549, and
serve a copy on the relevant applicant(s) and/or declarant(s) at
the address(es) specified below. Proof of service (by affidavit
or, in case of an attorney at law, by certificate) should be
filed with the request. Any request for hearing shall identify
specifically the issues of fact or law that are disputed. A
person who so requests will be notified of any hearing, if
ordered, and will receive a copy of any notice or order issued in
the matter. After said date, the application(s) and/or
declaration(s), as filed or as amended, may be granted and/or
permitted to become effective.
* * * * *
SECTION A. OVERVIEW
Interstate Power Company (the "Company"), is a
Delaware corporation and a wholly-owned subsidiary of Interstate
Energy Corporation ("Interstate"), a registered holding company
under the Public Utility Holding Company Act of 1935, as amended
(the "Holding Company Act"). The Company proposes, from time to
time through December 31, 2000, to:
(i) issue and sell one or more series of First
Mortgage Bonds of the Company (the "First Mortgage Bonds");
(ii) issue and sell one or more series of Senior
Unsecured Debentures of the Company (the "Senior
Debentures");
(iii) issue and sell one or more series of
Unsecured Subordinated Debt Securities of the Company (the
"Subordinated Debentures"); and
(iv) enter into arrangements for the issuance and sale
of one or more series of tax-exempt bonds (the "Tax-Exempt
Bonds", and, together with the First Mortgage Bonds, the
Senior Debentures and the Subordinated Debentures, the "Debt
Securities") for the financing of certain pollution control
facilities, including without limitation sewage and solid
waste disposal facilities and air and water pollution
control facilities that have not heretofore been the subject
of such financing or for the refinancing of outstanding
tax-exempt bonds issued for that purpose, including the
possible issuance and pledge of one or more new series of
bonds ("Tax-Exempt Collateral Bonds") as collateral security
for such Tax-Exempt Bonds.
The aggregate principal amount of the Debt
Securities shall not exceed $80 million (such amount excludes
the principal amount of the Tax-Exempt Collateral Bonds). Each
of the proposed transactions is discussed in detail below.
The Company became a wholly-owned subsidiary of
Interstate as a result of the combination of WPL Holdings, Inc.
("WPLH"), IES Industries Inc. and the Company (the
"Transaction"). WPLH was renamed Interstate. The Transaction
was approved by Order 35-26856 of the Commission on April 14,
1998 in File No. 70-8891. The Company operates within the States
of Iowa, Minnesota and Illinois.
SECTION B. FIRST MORTGAGE BONDS
The new series of First Mortgage Bonds will be
issued under the Company's Mortgage and Deed of Trust, dated as
of January 1, 1948, to The Chase Manhattan Bank
and C. J. Heinzelmann, as Trustees, as heretofore
supplemented and as proposed to be further supplemented by
additional supplemental indenture(s), each relating to one or
more new series of First Mortgage Bonds (the "Mortgage"). The
First Mortgage Bonds would be issued on the basis of unfunded net
property additions and/or previously retired bonds, as permitted
and authorized by the Mortgage.
Each new series of First Mortgage Bonds will be
sold at such price, bear interest at such rate or rates, and
mature on such date or dates as shall be determined at the time
of sale or when the agreement to sell is entered into, as the
case may be. No series of First Mortgage Bonds will be issued at
rates in excess of the lower of 15% per annum or those rates
generally obtainable at the time of pricing for sales of mortgage
bonds having the same or reasonably similar maturities, issued by
companies of the same or reasonably comparable credit quality and
having reasonably similar terms, conditions and features. The
price, exclusive of accrued interest, to be paid to the Company
for each new series of First Mortgage Bonds to be sold at
competitive bidding will be within a range (to be specified by
the Company to prospective purchasers) of 95% to 105% of the
principal amount thereof. Each series of First Mortgage Bonds
will mature not later than 40 years from the day of issuance.
One or more new series of First Mortgage Bonds may
include provisions for redemption prior to maturity at various
percentages of the principal amount thereof and may include
restrictions on optional redemption for a given number of years.
In addition, one or more series of First Mortgage Bonds may
include provisions for the mandatory retirement of some or all of
such series prior to maturity.
SECTION C. SENIOR DEBENTURES
The Senior Debentures will be issued under the
Company's Indenture (For Senior Unsecured Debt Securities) to The
First National Bank of Chicago (or to another institution), as
trustee, as proposed to be supplemented by supplemental
indenture(s), each relating to one or more new series of Senior
Debentures.
The Senior Debentures will be unsecured
obligations of the Company and will rank on a parity with all
other unsecured and unsubordinated debt of the Company.
Each series of Senior Debentures will be sold at
such price, will bear interest at such rate(s) and will mature on
such date(s) as shall have been be determined at the time of
sale. Senior Debentures will not be sold if the fixed interest
rate or initial adjustable interest rate thereon would exceed the
lower of 15% or rates generally obtainable at the time of pricing
for sales of debentures having the same or reasonably equivalent
maturity, issued by companies of comparable credit quality and
having reasonably similar terms, conditions and features. As to
series of Senior Debentures having an adjustable interest rate,
the initial interest rate for such series will be negotiated by
the Company and the purchasers of such series and will be based
on the current market rate for comparable debentures.
Thereafter, the interest rate on such Senior Debentures would be
adjusted according to a pre-established formula or method of
determination or will be that rate which, when set, would be
sufficient to remarket the Senior Debentures of such series at
their principal amount.
One or more series of Senior Debentures may
include provisions for redemption prior to maturity at various
percentages of the principal amount thereof, restrictions on
optional redemption for a given number of years and/or provisions
for the mandatory retirement of some or all of such series prior
to maturity.
SECTION D. SUBORDINATED DEBENTURES
The Subordinated Debentures will be issued under
the Company's Indenture (For Unsecured Subordinated Debt
Securities) to The First National Bank of Chicago (or to another
institution), as trustee, as proposed to be supplemented by
supplemental indenture(s), each relating to one or more new
series of Subordinated Debentures.
The Subordinated Debentures will be unsecured,
subordinated obligations of the Company. The indenture relating
the Subordinated Debentures will provide that payment of the
principal of, premium, if any, and interest on Subordinated
Debentures will be subordinated and subject in right or payment
to the prior payment in full of all senior indebtedness of the
Company.
Each series of Subordinated Debentures will be
sold at such price, will bear interest at such rate(s) and will
mature on such date(s) as shall have been be determined at the
time of sale. Subordinated Debentures will not be sold if the
fixed interest rate or initial adjustable interest rate thereon
would exceed the lower of 15% or rates generally obtainable at
the time of pricing for sales of debentures having the same or
reasonably equivalent maturity, issued by companies of comparable
credit quality and having reasonably similar terms, conditions
and features. As to series of Subordinated Debentures having an
adjustable interest rate, the initial interest rate for such
series will be negotiated by the Company and the purchasers of
such series and will be based on the current market rate for
comparable debentures. Thereafter, the interest rate on such
Subordinated Debentures would be adjusted according to a
pre-established formula or method of determination or will be
that rate which, when set, would be sufficient to remarket the
Subordinated Debentures of such series at their principal amount.
One or more series of Subordinated Debentures may
include provisions for redemption prior to maturity at various
percentages of the principal amount thereof, restrictions on
optional redemption for a given number of years and/or provisions
for the mandatory retirement of some or all of such series prior
to maturity.
SECTION E. GENERAL MATTERS RELATING TO FIRST MORTGAGE
BONDS, SENIOR DEBENTURES AND SUBORDINATED
DEBENTURES
The Company anticipates that the issuance and sale
of each series of First Mortgage Bonds, Senior Debentures and
Subordinated Debentures will be by means of competitive bidding
or negotiated public offering or private placement with
institutional investors in order to secure the advantages of an
advance marketing effort and/or the best available terms.
Sale(s) of First Mortgage Bonds, Senior Debentures
and Subordinated Debentures are separate transactions not
contingent upon one another.
The Company proposes to use the net proceeds
derived from the issuance and sale of First Mortgage Bonds,
Senior Debentures and Subordinated Debentures for general
corporate purposes, including without limitation the conduct of
its business as a utility, the repayment of outstanding
securities when due and/or the possible redemption, acquisition,
or refunding of certain outstanding securities prior to their
stated maturity or due date. The Company's request for
authorization for such sales is in part to provide the
flexibility to permit a quick response to changing market
conditions if it becomes beneficial for the Company to refinance,
refund, or otherwise acquire outstanding high cost securities.
SECTION F. TAX-EXEMPT BONDS AND RELATED TRANSACTIONS
Each issue of the proposed pollution control
revenue bonds will be issued for the financing or refinancing of
the costs of certain air and water pollution control facilities
and sewage and solid waste disposal facilities at one or more of
the Company generating plants or other facilities located in
various counties. It is proposed that each such municipality,
county or the otherwise appropriate public or state body or
instrumentality (the "Authority") will issue its revenue bonds
(the "Tax-Exempt Bonds") to finance or refinance the costs of the
acquisition, construction, installation and equipping of said
facilities at the plant or other facility located in its
jurisdiction (the "Project"). Each Authority is authorized by
relevant state law to issue its Tax-Exempt Bonds for such
purposes.
While the actual amount of Tax-Exempt Bonds to be
issued by each Authority has not yet been determined, such amount
will be based upon the cost of refunding outstanding bonds or the
cost of the Project located in its jurisdiction.
The Company proposes to enter into a Loan or
Installment Sale Agreement with the Authority relating to each
issue of the Tax-Exempt Bonds (the "Agreement"). Under the
Agreement, the Authority will loan to the Company the proceeds of
the sale of the Authority's Tax-Exempt Bonds, and the Company may
issue a non-negotiable promissory note therefor (the "Note"), or
the Authority will undertake to purchase and sell the related
Project to the Company. The installment sale structure may be
used because it is required by applicable state law or to the
extent it affords transactional advantages to the Company. Such
proceeds will be deposited with a trustee (the "Trustee") under
an indenture to be entered into between the Authority and such
Trustee (the "Trust Indenture"), pursuant to which such Tax-
Exempt Bonds are to be issued and secured, and will be applied by
the Company to payment of the Cost of Construction (as defined in
the Agreement) of the Project or to refund outstanding pollution
control revenue obligations.
The Note or the Agreement will provide for
payments to be made by the Company at times and in amounts which
shall correspond to the payments with respect to the principal
of, premium, if any, and interest on the related Tax-Exempt Bonds
whenever and in whatever manner the same shall become due,
whether at stated maturity, upon redemption or declaration or
otherwise.
The Agreement will provide for the assignment to
the Trustee of the Authority's interest in, and of the moneys
receivable by the Authority under, the Agreement and the Note.
The Agreement will also obligate the Company to
pay the fees and charges of the Trustee and may provide that the
Company may at any time, so long as it is not in default
thereunder, prepay the amount due under the Agreement or the
Note, including interest thereon, in whole or in part, such
payment to be sufficient to redeem or purchase outstanding Tax-
Exempt Bonds in the manner and to the extent provided in the
Trust Indenture.
The Trust Indenture will provide that the Tax-
Exempt Bonds issued thereunder will be redeemable (i) at any time
on or after a specified date from the date of issuance, in whole
or in part, at the option of the Company, and may require the
payment of a premium at a specified percentage of the principal
amount which may decline annually thereafter, and (ii) in whole,
at the option of the Company, in certain other cases of undue
burdens or excessive liabilities imposed with respect to the
related Project, its destruction or damage beyond practicable or
desirable repairability or condemnation or taking by eminent
domain, or if operation of the related facility is enjoined and
the Company determines to discontinue operation thereof, such
redemption of all such outstanding Tax-Exempt Bonds to be at the
principal amount thereof plus accrued interest, but without
premium. It is proposed that the Tax-Exempt Bonds will mature
not more than 30 years from the first day of the month in which
they are initially issued and may, if it is deemed advisable for
purposes of the marketability of the Tax-Exempt Bonds, be
entitled to the benefit of a mandatory redemption sinking fund
calculated to retire a portion of the aggregate principal amount
of the Tax-Exempt Bonds prior to maturity.
The Trust Indenture and the Agreement may give the
holders of the Tax-Exempt Bonds the right, during such time as
the Tax-Exempt Bonds bear interest at a fluctuating rate or
otherwise, to require the Company to purchase the Tax-Exempt
Bonds from time to time, and arrangements may be made for the
remarketing of any such Tax-Exempt Bonds through a remarketing
agent. The Company also may be required to purchase the Tax-
Exempt Bonds, or the Tax-Exempt Bonds may be subject to mandatory
redemption, at any time if the interest thereon is determined to
be subject to federal income tax. Also in the event of
taxability, interest on the Tax-Exempt Bonds may be effectively
converted to a higher variable or fixed rate, and the Company
also may be required to indemnify the bondholders against any
other additions to interest, penalties, and additions to tax;
such terms are not considered to constitute the issuance of a
separate security under Sections 6(a) and 7 of the Holding
Company Act, but rather possible additional terms of the Tax-
Exempt Bonds and the Company's obligations with respect thereto.
It is contemplated that the Tax-Exempt Bonds will
be sold by the Authority pursuant to arrangements with one or
more purchasers, placement agents or underwriters. In accordance
with applicable state laws, the interest rate to be borne by the
Tax-Exempt Bonds will be approved by the Authority and will be
either a fixed rate, which fixed rate may be convertible to a
rate which will fluctuate in accordance with a specified prime or
base rate or rates or may be determined pursuant to certain
remarketing or auction procedures, or a fluctuating rate, which
fluctuating rate may be convertible to a fixed rate. While the
Company may not be party to the purchase, placement or
underwriting arrangements for the Tax-Exempt Bonds, such
arrangements will provide that the terms of the Tax-Exempt Bonds
and their sale by the Authority shall be satisfactory to the
Company. Bond Counsel will issue an opinion that, based upon
existing law, interest on the Tax-Exempt Bonds will generally be
excludable from gross income for federal income tax purposes.
The Company has been advised that the interest rates on
obligations, the interest on which is tax exempt, recently have
been and can be expected at the time of issue of the Tax-Exempt
Bonds to be approximately one to three percentage points lower
than the rates on obligations of like tenor and comparable
quality, interest on which is fully subject to federal income
taxation.
* * * * *
For the Commission, by the Division of Investment
Management, pursuant to delegated authority.
Jonathan G. Katz
Secretary
