<PAGE> 1
Filed pursuant to Rule 424(b)(5)
Registration No. 33-52963
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED APRIL 19, 1994)
$285,000,000
LONG ISLAND LIGHTING COMPANY
$100,000,000 GENERAL AND REFUNDING BONDS, 7 5/8% SERIES DUE 1998
$185,000,000 GENERAL AND REFUNDING BONDS, 8 5/8% SERIES DUE 2004
---------------------------
Interest on the General and Refunding Bonds, 7 5/8% Series Due 1998 (the
"1998 Series Bonds"), and the General and Refunding Bonds, 8 5/8% Series Due
2004 (the "2004 Series Bonds") (collectively, the "New Bonds"), is payable
semi-annually on April 15 and October 15, beginning October 15, 1994. The New
Bonds may not be redeemed prior to maturity, except, as a whole, at 100% of
their principal amount, in the event (i) all of the Company's Common Stock is
acquired by a governmental body or instrumentality or (ii) substantially all of
the Company's property is released from the lien of the General and Refunding
Indenture. Any such redemption may occur upon at least 30 days' notice and upon
payment of the applicable percentage of the principal amount so redeemed,
together with interest accrued thereon to the redemption date. See "Supplemental
Description of the New Bonds."
---------------------------
An application will be made to list the New Bonds on the New York Stock
Exchange.
---------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
Underwriting
Price to Discounts Proceeds to
Public(1) and Commissions(2) Company(1)(3)
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per 1998 Series Bond............... 99.624% .525% 99.099%
- ----------------------------------------------------------------------------------------------------
Per 2004 Series Bond............... 99.536% .675% 98.861%
- ----------------------------------------------------------------------------------------------------
Total.............................. $283,765,600 $1,773,750 $281,991,850
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
</TABLE>
(1) Plus accrued interest, if any, from date of issuance to date of delivery.
(2) The Company has agreed to indemnify the Underwriters against certain
liabilities under the Securities Act of 1933, as amended.
(3) Before deducting expenses payable by the Company estimated at $4,107,151.
---------------------------
The New Bonds offered by this Prospectus Supplement are offered by the
Underwriters subject to prior sale, withdrawal, cancellation or modification of
the offer without notice, to delivery to and acceptance by the Underwriters and
to certain further conditions. It is expected that delivery of the New Bonds
will be made at the offices of Lehman Brothers Inc., New York, New York on or
about June 14, 1994.
---------------------------
LEHMAN BROTHERS
BEAR, STEARNS & CO. INC.
CHEMICAL SECURITIES INC.
DILLON, READ & CO. INC.
GOLDMAN, SACHS & CO.
MERRILL LYNCH & CO.
PAINEWEBBER INCORPORATED
June 7, 1994
<PAGE> 2
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR
EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE
SECURITIES OFFERED HEREBY OR OTHER GENERAL AND REFUNDING BONDS OF THE COMPANY
AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE, IN THE
OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
---------------------------
SERVICE TERRITORY MAP
[MAP]
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<PAGE> 3
FINANCIAL INFORMATION
(IN THOUSANDS OF DOLLARS, EXCEPT FOR PER SHARE AMOUNTS AND OTHER DATA)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
FOR THE YEAR ENDED DECEMBER 31, ENDED MARCH 31,
-------------------------------------- ------------------------
1993 1992 1991 1994 1993
---------- ---------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS:
Electric Revenues................ $2,352,109 $2,194,632 $2,196,568 $ 587,266 $ 536,342
Gas Revenues..................... 528,886 427,207 351,161 284,877 224,109
---------- ---------- ---------- ---------- ----------
Total Revenues................... 2,880,995 2,621,839 2,547,729 872,143 760,451
Operating Income................. 755,551 741,105 785,280 183,865 192,391
Net Income....................... 296,563 301,974 305,538 69,620 67,861
Earnings for Common Stock........ 240,455 238,020 239,144 56,348 53,286
Earnings per Common Share........ $2.15 $2.14 $2.15 $.50 $.48
Dividends declared per Common
Share......................... $1.76 $1.72 $1.60 $.445 $.435
Average Common Shares Outstanding
(in thousands)................ 112,057 111,439 111,348 112,536 111,779
Book Value per Common Share (at
end of period):............... $19.88 $19.58 $19.13 $19.94 $19.65
Utility Plant, net (at end of
period)....................... $3,347,557 $3,161,148 $3,002,733 $3,327,964 $3,183,530
OTHER DATA (UNAUDITED):
Electric System Sales
(millions of kWh)............. 15,824 15,440 15,814 4,092 3,938
Firm Gas Sales
(thousands of dth)............ 59,183 56,292 48,689 30,324 28,068
</TABLE>
<TABLE>
<CAPTION>
AT MARCH 31, 1994
-----------------------------------------------
(UNAUDITED)
ACTUAL (AS ADJUSTED)(3)
------------------- ------------------------
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Net Utility Plant................................. $ 3,327,964 $ 3,327,964
Regulatory Assets................................. 7,586,947 7,586,947
Other Assets...................................... 2,470,188 2,381,848
----------- ------------
Total Assets................................. $13,385,099 $ 13,296,759
========== ============
Long-term Debt and Unamortized Premium
and Discount(1)................................ $ 5,470,642 65% $ 5,295,584 63%
Preferred Stock--Redemption Required(2)........... 653,950 8 653,950 8
Preferred Stock--No Redemption Required........... 64,005 1 64,005 1
Total Common Shareowners' Equity.................. 2,244,559 26 2,331,277 28
----------- ---- ------------ ----
Total Capitalization......................... $ 8,433,156 100% $ 8,344,816 100%
========== ==== ============ ====
</TABLE>
- ---------------
(1) Includes current maturities of long-term debt.
(2) Includes current redemption requirements of Preferred Stock.
(3) Adjusted to reflect (i) the issuance of the New Bonds offered hereby; (ii)
the issuance of 4,500,000 shares of common stock, par value $5 per share
("Common Stock") and the receipt of net proceeds of approximately $86.7
million; (iii) the repayment at maturity of $25 million aggregate principal
amount of First Mortgage Bonds, 4 5/8% Series N Due June 1, 1994; and (iv)
the application of the net proceeds from the issuance of the New Bonds and
the Common Stock as described herein under "Use of Proceeds".
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<PAGE> 4
THE COMPANY
GENERAL
The Company supplies electric and gas service in Nassau and Suffolk
Counties and to the Rockaway Peninsula in Queens County, all on Long Island, New
York. The principal executive offices of the Company are located at 175 East Old
Country Road, Hicksville, New York 11801 and the general telephone number is
(516) 755-6650.
The Company's service territory covers an area of approximately 1,230
square miles. The population of the service area, according to the Company's
1993 estimate, is approximately 2.7 million persons, including approximately
98,000 persons who reside in Queens County within the City of New York. The 1993
population estimate reflects a .14% increase since the 1990 census. This is a
larger population than in each of 20 of the 50 states. The area served is
predominantly residential, but the Company receives approximately one-half of
its electric revenues from commercial and industrial customers. Although
electronics and aerospace are the largest manufacturing industries in the area,
about 88% of total employment is non-manufacturing. Industrialization is
gradually increasing in Suffolk County which, with three times the land area,
has only one-third the population density of Nassau County.
SIGNIFICANT INFORMATION RESPECTING THE COMPANY
The following is a summary of certain information regarding the Company and
is therefore subject to and should be read in conjunction with the detailed
information concerning the Company appearing in the documents incorporated by
reference in this Prospectus Supplement and the accompanying Prospectus.
RESULTS OF RECENT OPERATIONS
Earnings for common stock for the quarter ended March 31, 1994 were $56.3
million or 50 cents per common share, compared to $53.3 million or 48 cents per
common share for the same period last year. Quarterly earnings are not
necessarily indicative of earnings in other quarters.
The Company experienced an increase in earnings for the electric business,
partially offset by lower earnings for the gas business for the three months
ended March 31, 1994 compared to the same period in 1993. The increase in
electric earnings reflects lower operations and maintenance expenses resulting
from the Company's continuing efforts to control costs. Gas revenues continued
to increase as a result of the Company's aggressive gas expansion program.
However, gas earnings declined primarily due to the recognition of previously
deferred storm costs affecting gas operations and a lower allowed rate of return
on common equity as determined by the Public Service Commission of the State of
New York ("PSC").
Although earnings cannot be predicted with certainty, the Company currently
anticipates that its earnings for the first six months of 1994 will be
significantly less than earnings for the same period in 1993. While the Company
can give no assurances, it is expecting that the items described below,
affecting the comparability of earnings between the six-month period ended June
30, 1994 and June 30, 1993, should be offset during the balance of the year by
certain positive factors. These factors include a continuation of reductions in
operations and maintenance expenses and the impact of improved cash flow from
operations.
Comparative earnings for the six-month period are expected to be affected
by certain factors including: (1) the recognition in 1993 of the benefits
associated with certain tax credits that the Company does not anticipate in
1994; (2) the recognition of previously deferred storm costs, mentioned above;
(3) a provision in the Company's gas rate structure that was not in effect prior
to December 1, 1993 that requires earnings in excess of a 10.6% rate of return
on common equity to be shared equally between the Company's firm gas customers
and its shareowners; (4) a lower allowed rate of return on common equity for the
Company's gas business; and (5) lower gas revenues for the three months ended
June 30, 1994, resulting from a refinement in the Company's procedures used to
estimate revenues not yet billed, which will in turn increase gas revenues in
the second six-month period of 1994.
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<PAGE> 5
RATE MATTERS
Electric Rates
Overview: Nearly five years have passed since the Company and the State of
New York (by its Governor) entered into an agreement, the 1989 Settlement, which
was designed to eliminate the controversy surrounding the Shoreham Nuclear Power
Station ("Shoreham"). Over this period of time, the Company has attempted to
manage costs and improve operating efficiencies. The Company's efforts, coupled
with six electric rate increases, lower than anticipated fuel and financing
costs and significantly lower production expenses, have helped to improve the
Company's financial health. Since the 1989 Settlement became effective, the
Company has refinanced approximately $4.6 billion of its high-cost debt and
preferred stock, resulting in annual cash savings of approximately $88 million.
The Company's focus on managing costs and improving operating efficiencies has
also enabled the Company to file with the PSC a three-year electric rate plan,
described in greater detail below, that requests a freeze of base rates for the
two-year period beginning December 1, 1994.
The Company's proposal to freeze base rates is designed to moderate the
rate increases that were originally contemplated in the 1989 Settlement. The
base rate freeze for the initial two years of the plan, if approved, will help
better position the Company to respond to competitive challenges and to assist
in Long Island's economic recovery.
Electric Rate Case: In December 1993, the Company filed a three-year
electric rate plan with the PSC for the period beginning December 1, 1994 (the
"Rate Proposal"). The Rate Proposal, which may be approved, modified or rejected
by the PSC, requests an allowed rate of return on common equity of 11.0% and
provides for zero percent base rate increases in years one and two of the plan
and an overall rate increase of 4.3% in the third year. Although base electric
rates would be frozen during the first two years of the Rate Proposal, annual
rate increases of approximately 1% to 2% are expected to result in these years
from the operation of a fuel cost adjustment ("FCA") mechanism. The FCA
captures, among other amounts, any increases in the cost of fuel above the level
recovered in base rates, and any amounts to be recovered or refunded to
ratepayers in excess of $15 million which result from the reconciliation of
revenue, certain expenses and earned performance incentive components.
The Rate Proposal reflects four underlying objectives: (i) to limit the
balance of the Rate Moderation Component ("RMC"), discussed in greater detail
under the heading "Ratio of Earnings" in the accompanying Prospectus, during the
three-year period to no more than its 1992 peak balance of $652 million; (ii) to
recover the RMC within no more than 13 years of its 1989 inception; (iii) to
minimize, beginning in the third year of the Rate Proposal, the final three rate
increases contemplated in the 1989 Settlement that follow the two-year rate
freeze period; and (iv) to continue the Company's gradual return to financial
health.
On May 19, 1994, the staff of the PSC ("Staff") and other intervening
parties filed testimony in response to the Rate Proposal. Staff concurs with the
Company's proposal for an 11.0% return on common equity in each of the three
years. However, Staff has recommended an overall zero percent rate increase for
the first two years, contrasted with the Company's proposal for a zero percent
base rate increase and FCA adjustments of 1% to 2% in each of these years as
described above. Staff has not yet made a firm recommendation for the level of
rate relief in the third year, but has reaffirmed its commitment to the
principles of the Rate Moderation Agreement ("RMA"), including the full recovery
of the RMC.
In addition, Staff supports both the Company's proposed continuation of its
current FCA mechanism and the continuation of the Long Island Lighting Company
Ratemaking and Performance Plan ("LRPP") mechanisms and proposes to continue the
performance incentives, with some modifications. Staff is also recommending
demand side management ("DSM") expenditures that exceed those proposed by the
Company. The Company is reviewing the proposals submitted by Staff and the
intervenors, discussed below, in preparation for hearings expected to commence
in mid-June.
The Consumer Protection Board and Long Island Power Authority ("CPB/LIPA")
jointly filed testimony in which they proposed that total electric bills be cut
by 2.6% for the first rate year, 1.2% for the second rate year, and 1.2% for the
third rate year. CPB/LIPA also proposed higher sales forecasts, reductions
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<PAGE> 6
in forecasted expenses, and a reduction in return on common equity from the
Company's proposed 11.0% to 10.6%. Other intervenors proposed various
adjustments to the Rate Proposal, including increasing DSM expenditures and
reducing the authorized return on common equity. The CPB/LIPA response to the
Company's Rate Proposal is unrelated to a CPB/LIPA petition filed in December
1993 also seeking to reduce the Company's electric rates. The Commission has not
acted upon this prior CPB/LIPA petition.
The Commission is expected to issue a final order in the Company's rate
proceeding in November 1994. The Company is unable to predict the ultimate
outcome of this rate proceeding.
The RMA and the LRPP: The RMA, one of the constituent documents of the
1989 Settlement, contemplated that the Company would apply to the PSC for
targeted annual electric rate increases of 4.5% to 5.0% for an eight-year period
beginning December 1, 1991. For additional information about the RMA and
definitions of the terms used herein, see "Ratios of Earnings" in the
accompanying Prospectus.
In response to the Company's electric rate filing in December 1990, which
requested a three-year rate increase with annual increases consistent with the
RMA, the PSC approved, and the Company accepted, the LRPP. The LRPP provides
that the Company receive, for each of the three years beginning December 1,
1991, annual electric rate increases of 4.15%, 4.1% and 4.0%, respectively, with
an allowed return on common equity from electric operations of 11.6%.
The LRPP contains three major components--revenue reconciliation, expense
attrition and reconciliation, and performance incentives. Revenue reconciliation
is provided through a mechanism that reduces the impact of experiencing electric
sales that are above or below the annual net margin level (defined as sales
revenues, net of fuel and gross receipts taxes) that the Company is forecasted
to receive in each of the three rate years under the LRPP. The expense attrition
and reconciliation component permits the Company to make adjustments for certain
expenses recognizing that certain cost increases are unavoidable due to
inflation and changes in the business. The LRPP includes the annual
reconciliation of certain expenses for wage rates, property taxes, interest
charges and DSM costs, the deferral and amortization of certain costs for
enhanced reliability, production operations and maintenance expenses, and the
application of an inflation index to other expenses for the rate years beginning
December 1, 1992 and 1993.
Under the performance incentive component of the LRPP, the Company is
allowed to earn up to 60 additional basis points, or forfeit up to 38 basis
points, of the allowed return on common equity as a result of its performance
within certain incentive and/or penalty programs. These programs consist of a
customer service performance plan, a DSM program, a time-of-use program, a
partial pass through fuel cost incentive plan and, effective December 1, 1993,
an electric transmission and distribution reliability plan. The LRPP also
contains a mechanism whereby earnings in excess of the allowed rate of return on
common equity, excluding the impacts of the various incentive and/or penalty
programs, will be shared equally between ratepayers and shareowners.
In the past, the PSC has taken actions which have been consistent with the
establishment and recovery from ratepayers of the 1989 Settlement-deferred
charges provided by the RMA. In addition, the PSC has granted the Company six of
the 11 electric rate increases contemplated by the RMA (including the three rate
increases provided by the LRPP) and has publicly confirmed its commitment to the
effectuation of the 1989 Settlement. Therefore, the Company has no reason to
believe that the PSC will not honor its commitments, contained in the RMA,
respecting the recovery of the FRA and other 1989 Settlement-deferred charges.
Gas Rates
In December 1993, the PSC approved a three-year gas rate settlement between
the Company and Staff. The gas rate settlement provides that the Company
receive, for each of the rate years beginning December 1, 1993, 1994 and 1995,
annual gas rate increases of 4.7%, 3.8% and 2.8%, respectively. In the
determination of the revenue requirements for the first year of the gas rate
settlement an allowed rate of return on equity of 10.1% was used. The gas rate
decision also provides that earnings in excess of a 10.6% return on equity in
any of the three rate years covered by the settlement be shared equally between
the Company's firm gas customers
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<PAGE> 7
and its shareowners. The allowed rate of return on equity for the rate year that
began December 1, 1992 was 11.0%.
ENERGY SUPPLY
The Company's current electric load forecasts indicate that, with
implementation of its conservation and load management programs and with the
availability of electricity provided by the Company's existing generating
facilities, by its portion of nuclear energy generated at Nine Mile Point
Nuclear Power Station, Unit 2 and by power purchased from other electric systems
and from certain non-Company owned facilities, located within the Company's
service territory, Long Island has adequate generating sources to meet its
energy demands for the next ten years.
COMPETITIVE ENVIRONMENT
The Company believes that competitive forces are a factor in the electric
utility industry. Some of the factors affecting competition, applicable to the
Company, are discussed below.
Current Competitive Factors: The development of the non-utility generator
("NUG") industry has been encouraged by federal and state legislation. There are
two ways that NUGs can negatively impact the Company: first, NUGs may locate on
a customer's site, providing part or all of that customer's electric energy
requirements. The Company estimates that in 1993, it lost sales to on-site NUGs
generating a total of 234 gigawatt-hours ("GWh") representing approximately $20
million in revenues, net of fuel, or approximately 1.0% of the Company's 1993
net revenues. Second, in accordance with the Public Utility Regulatory Policies
Act of 1978 ("PURPA"), the Company is required to purchase all the power offered
by NUGs that are Qualified Facilities ("QF"). QFs have the choice of pricing
these sales at either (i) PSC published estimates of the Company's long run
avoided costs ("LRAC") or (ii) the Company's tariff rates which reflect the
Company's actual avoided cost. Additionally, until repealed in 1992, New York
State law set a minimum price of six cents per kilowatt-hour ("kWh") for certain
categories of QFs, considerably above the Company's avoided cost. The six-cent
minimum now only applies to contracts entered into before June 1992. The Company
believes that the repeal of the six-cent law, coupled with the PSC's updates
which resulted in lower LRAC estimates, has significantly reduced the economic
benefits to QF's seeking to sell power to the Company.
As of December 31, 1993, 39 QFs were on line and selling approximately 200
megawatts ("MW") of power to the Company. The Company estimates that in 1993,
purchases from QFs required by federal and state law cost the Company $47
million more than it would have cost had the Company generated this power
itself. However, with the exception of approximately 40 MW of power to be
produced annually at the Stony Brook Campus of the State University of New York
("Stony Brook") beginning in early 1995, the Company does not expect any
significant new NUGs to be built on Long Island in the foreseeable future.
The Company had been ordered by the PSC to enter into a contract with
Mayflower Energy Partners, L.P. ("Mayflower"), to purchase, on an energy-only
basis, power for 15 years from a 300 MW facility originally scheduled to begin
commercial operation in 1995. However, a New York State appellate court upheld a
lower court's decision to annul the PSC order and also affirmed the lower
court's finding that the PSC had violated PURPA and the New York Public Service
Law and that it acted arbitrarily when it ordered the Company to execute the
agreement. On April 28, 1994, the New York State Court of Appeals denied
Mayflower's motion for leave to appeal the appellate court's decision. In
addition, on May 4, 1994, the Company notified Mayflower that it was exercising
its right to terminate the agreement as a result of Mayflower's failure to meet
certain construction commencement milestone dates.
After the anticipated loss of the Stony Brook load, the Company expects
that load losses to cogeneration will stabilize. The Company believes that a
number of factors will mitigate load loss, including customer load
characteristics, such as a lack of a significant industrial base and
accompanying large thermal load, which would make cogeneration economically
attractive. Also, the Company's geographic location and the limited electrical
interconnections to Long Island limit the accessibility of its transmission grid
to potential competitors.
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<PAGE> 8
For over a decade, the Company has voluntarily provided wheeling of New
York Power Authority ("NYPA") power for economic development. As a result, NYPA
power has displaced approximately 400 GWh of energy sales. The net revenue loss
associated with this amount of sales is approximately $27 million or 1.3% of the
Company's 1993 net revenues. Currently, the potential loss of additional load is
limited by conditions in the Company's transmission agreements with NYPA.
Competition for customer loads also comes from other electric utilities
(including those in Connecticut, New York, and New Jersey) which seek to attract
commercial and industrial customers to relocate within their service territories
by offering reduced rates and other incentives. In order to retain existing and
attract new commercial and industrial customers, the Company offers an Economic
Development Rate which provides rate abatement to new or existing customers that
qualify under the program approved by the PSC.
Potential Competitive Factors: In the pending rate proceeding discussed
above, Staff expressed concern over the competitive position of New York State
utilities and their ability to meet competition. In order to address competitive
opportunities generally available to electric and gas customers, the PSC has
instituted a generic proceeding in which they have adopted guidelines for
allowing New York State utilities to negotiate flexible rates with individual
customers in order to avoid additional loss of sales. The Company generally
supports this objective although the Company opposes Staff's proposal to share
the difference in revenues between the flexible rate and the higher conventional
rate between ratepayers and shareholders. The PSC is also considering whether to
expand this proceeding in order to address retail competition in the State of
New York. Until the scope of any such proposal relating to retail wheeling is
known, the Company is unable to predict what impact it may have on the Company.
Recently, the Long Island Power Authority ("LIPA") indicated that it would
hold public hearings to discuss proposals to build a 400-450 MW natural
gas-powered generating plant at Shoreham scheduled for operation as early as
1996, which reportedly would result in ratepayer savings of between $283 million
and $458 million over 20 years. However, based on previous LIPA and Company
studies analyzing the feasibility of building a gas-powered plant at Shoreham,
the Company continues to believe that such a facility would not result in
ratepayer savings. This view is supported by the February 1994 draft State
Energy Plan issued by the New York State Energy Planning Board which states that
bringing a gas-powered facility at Shoreham on line before the turn of the
century would raise the Company's rates. The Company is unable, however, to
predict the likelihood of a generating unit operating at the Shoreham site. The
impact, if any, on the Company of the operation of such a plant would depend on
the nature of the project, the price at which it would propose to sell power and
other factors.
In addition, on May 12, 1994, a petition was filed with the PSC by the
Education/Electric Buying Group asking the PSC to require the Company to
transport power purchased from other electricity producers to member school
districts on Long Island. The Company believes that the proposed request is in
conflict with existing federal and state policy and will oppose this petition.
The Company is currently unable to predict the action, if any, that the PSC may
take regarding this petition, or the impact on the Company if this proposal were
ultimately approved.
FINANCING PLANS
The nature, timing and amount of the Company's future financings will be
determined in light of various factors, including, among others, market
conditions, the adequacy of rate relief experienced by the Company and the
Company's financial condition. The Company has a total of approximately $1.1
billion of debt securities maturing during the three-year period beginning
January 1, 1994, with a total of $600 million maturing in June and November of
1994. Subject to market conditions, the Company currently intends to fund these
requirements with the proceeds from the sale of equity and debt securities in
addition to the use of cash.
RATINGS OF THE COMPANY'S SECURITIES
As part of its review of the Company's proposed sale of long-term debt,
Moody's Investors Service, Inc. ("Moody's") has downgraded the long-term credit
ratings of the Company's securities. In addition to
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<PAGE> 9
Moody's, the Company's securities are also rated by Standard & Poor's
Corporation ("S&P"), Fitch Investors Service, Inc. ("Fitch") and Duff and
Phelps, Inc. ("D&P"). The current ratings of the Company's securities are as
follows:
<TABLE>
<CAPTION>
MOODY'S S&P FITCH D&P
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<S> <C> <C> <C> <C>
First Mortgage Bonds..................................... Baa3 BBB- BBB BBB
General and Refunding Bonds.............................. Baa3 BBB- BBB BBB
1985 Pollution Control Revenue Bonds* ("PCRBs").......... Aaa NR NR NR
1993 Electric Facilities Revenue Bonds* ("EFRBs")........ Aa2 NR NR NR
Other PCRBs and EFRBs (unsecured)........................ Ba1 BB+ NR NR
Debentures (unsecured)................................... Ba1 BB+ BBB- BB+
Preferred Stock.......................................... "ba1" BB+ BBB- BB
MINIMUM INVESTMENT GRADE................................. Baa3 BBB- BBB- BBB-
</TABLE>
- ---------------
* -- Secured by Letters of Credit.
NR -- Not rated.
USE OF PROCEEDS
The Company plans to apply the net proceeds from the sale of the New Bonds
toward the repayment, at maturity, of $400 million aggregate principal amount of
Debentures, 10.25% Series Due June 15, 1994 and toward the redemption of
approximately $30.5 million aggregate principal amount of Debentures, 10.875%
Series Due June 15, 1999, and approximately $4.5 million aggregate principal
amount of Debentures, 11.375% Series Due June 15, 2019, and to pay approximately
$1.9 million of redemption premiums. The balance of the funds needed to repay
this maturing series and to accomplish these redemptions will be provided from
cash on hand and from the sale, on June 6, 1994, subject to delivery on June 13,
1994, of 4,500,000 shares of Common Stock, the net proceeds of which will amount
to approximately $86.7 million.
SUPPLEMENTAL DESCRIPTION OF THE NEW BONDS
The following description of the particular terms of the New Bonds offered
hereby supplements, and to the extent inconsistent therewith replaces, the
description of the general terms and provisions of New Bonds set forth in the
accompanying Prospectus.
General: The New Bonds are the thirtieth and thirty-first series of bonds
to be issued under the Company's General and Refunding Indenture, dated as of
June 1, 1975, as supplemented by twenty-six supplemental indentures and to be
supplemented by a Twenty-seventh Supplemental Indenture (the "G&R Mortgage"),
with United States Trust Company of New York, as Trustee (the "G&R Trustee").
The 1998 Series Bonds are limited to $100 million aggregate principal
amount, and the 2004 Series Bonds are limited to $185 million aggregate
principal amount.
Interest and Payment: The 1998 Series Bonds will mature April 15, 1998, and
the 2004 Series Bonds will mature April 15, 2004. The New Bonds will bear
interest from the date of issuance, at the rate shown in their title, payable on
April 15 and October 15, beginning October 15, 1994.
Redemption Provisions: The New Bonds may not be redeemed prior to maturity
except as set forth below under the heading "Extraordinary Redemption".
Extraordinary Redemption: The New Bonds of each series may be redeemed at
100% of their principal amount, together with interest accrued thereon to the
redemption date, upon at least 30 days' notice, as a whole, (i) at the Company's
election within 120 days of the acquisition date if all of the Company's Common
Stock is acquired by a governmental body or instrumentality, or (ii) at any time
that all or substantially all of the Company's property is released from the
lien of the G&R Mortgage.
S-9
<PAGE> 10
SUPPLEMENTAL DESCRIPTION OF THE PLEDGED BONDS
The following description of the particular terms of the Pledged Bonds to
be issued concurrently with the issuance of the New Bonds supplements and, to
the extent inconsistent therewith, replaces the description of the general terms
and provisions of Pledged Bonds set forth in the accompanying Prospectus.
General: The G&R Mortgage prohibits the issuance of additional bonds under
the Company's Indenture of Mortgage and Deed of Trust, dated as of September 1,
1951, as supplemented (the "First Mortgage"), except as Pledged Bonds. The
Company anticipates that it will issue $264 million aggregate principal amount
of Pledged Bonds, the maximum amount of Pledged Bonds that the Company is able
to issue concurrently with the issuance of the New Bonds, based upon
approximately $400 million of Net Bondable Additions and $25 million of retired
First Mortgage Bonds. For a description of the circumstances under which
additional Pledged Bonds of the same series of First Mortgage Bonds are required
to be issued, see the discussion under the headings "Description of the New
Bonds and the G&R Mortgage -- Pledged Bonds" and "Description of the Pledged
Bonds and the First Mortgage -- Issuance of Pledged Bonds" in the accompanying
Prospectus.
Interest and Payment: In connection with the issuance of the New Bonds, the
Company anticipates that it will, as required by the G&R Mortgage and to the
extent permitted by the First Mortgage, issue a total of $264 million of First
Mortgage Bonds, all to be pledged with the G&R Trustee, consisting of: $100
million of a new series of First Mortgage Bonds, designated Series DDD, 7 5/8%
Due 1998 and $164 million of a new Series of First Mortgage Bonds, designated
Series EEE, 8 5/8% Due 2004. See the discussion under the heading "New Bonds and
the G&R Mortgage -- Pledged Bonds" in the accompanying Prospectus.
The Series DDD and the Series EEE, to be issued pursuant to a Fiftieth
Supplemental Indenture to the First Mortgage, will mature April 15, 1998, and
April 15, 2004, respectively, and will bear interest at the rate shown in their
titles until maturity. In the event of default, these Pledged Bonds will bear
interest at the rate of 6% per annum thereafter. However, the G&R Mortgage
provides that, except during the continuance of a Completed Default under the
G&R Mortgage, no payment by way of interest, principal or otherwise shall be
demanded or received on any Pledged Bonds.
S-10
<PAGE> 11
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting
Agreement, the Company has agreed to sell to the underwriters named below (the
"Underwriters") and the Underwriters have severally agreed to purchase from the
Company the principal amount of New Bonds set forth opposite their names below:
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT OF
----------------------------
1998 2004
------------ ------------
UNDERWRITERS SERIES BONDS SERIES BONDS
-------------------------------------------------- ------------ ------------
<S> <C> <C>
Lehman Brothers Inc. ............................. $ 16,000,000 $ 29,000,000
Bear, Stearns & Co. Inc. ......................... 14,000,000 26,000,000
Chemical Securities Inc. ......................... 14,000,000 26,000,000
Dillon, Read & Co. Inc. .......................... 14,000,000 26,000,000
Goldman, Sachs & Co. ............................. 14,000,000 26,000,000
Merrill Lynch, Pierce, Fenner & Smith
Incorporated......................... 14,000,000 26,000,000
PaineWebber Incorporated.......................... 14,000,000 26,000,000
Total........................................ $100,000,000 $185,000,000
=========== ===========
</TABLE>
The Company has been advised that the several Underwriters propose
initially to offer the New Bonds to the public at the public offering prices set
forth on the cover page of this Prospectus Supplement, and to certain dealers at
such prices less a concession of not in excess of .375% of the principal amount
of the 1998 Series Bonds and .400% of the principal amount of the 2004 Series
Bonds. Underwriters may allow, and such dealers may re-allow, a concession not
in excess of .125% of the principal amount of the 1998 Series Bonds and .250% of
the principal amount of the 2004 Series Bonds, to certain other dealers. After
the initial public offering of the New Bonds, the public offering prices and
concessions may be changed.
Chemical Securities Inc. is an affiliate of Chemical Bank, which is (i) a
lender under the Company's Revolving Credit Agreement; (ii) the trustee under
the Company's Indenture, dated as of November 1, 1992, as supplemented and
amended, under which various series of the Company's debentures have been
issued; and (iii) paying agent under the Company's G&R Mortgage, under which
various series of the Company's G&R bonds have been issued. In addition,
Chemical Bank, or its affiliates, participate on a regular basis in various
general financing and banking transactions for the Company.
The Underwriting Agreement provides that the Company will indemnify the
several Underwriters against certain civil liabilities, including liabilities
arising under the Securities Act of 1933, as amended.
S-11
<PAGE> 12
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- ------------------------------------------------------
No dealer, salesman or other person has been authorized to give any
information or to make any representation not contained in this Prospectus
Supplement or the accompanying Prospectus and, if given or made, such
information or representation must not be relied upon as having been authorized
by the Company or any underwriter. This Prospectus Supplement and the
accompanying Prospectus do not constitute an offer to sell or a solicitation of
any offer to buy any of the securities offered hereby in any jurisdiction to any
person to whom it is unlawful to make such offer in such jurisdiction. Neither
the delivery of this Prospectus Supplement or the accompanying Prospectus nor
any sale made hereunder or thereunder shall, under any circumstances, create any
implication that there has been no change in the affairs of the Company since
the date hereof.
------------------------
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Financial Information................. S-3
The Company........................... S-4
Significant Information Respecting
the Company......................... S-4
Use of Proceeds....................... S-9
Supplemental Description of the
New Bonds........................... S-9
Supplemental Description of the
Pledged Bonds....................... S-10
Underwriting.......................... S-11
PROSPECTUS
Available Information................. 1
Incorporation of Certain
Documents by Reference.............. 2
The Company........................... 3
Use of Proceeds....................... 3
Ratios of Earnings.................... 4
Description of the Securities......... 6
Experts............................... 19
Legality.............................. 19
Plan of Distribution.................. 19
</TABLE>
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
$285,000,000
LONG ISLAND
LIGHTING COMPANY
$100,000,000 GENERAL AND REFUNDING
BONDS, 7 5/8% SERIES DUE 1998
$185,000,000 GENERAL AND REFUNDING
BONDS, 8 5/8% SERIES DUE 2004
------------------------
PROSPECTUS SUPPLEMENT
June 7, 1994
------------------------
LEHMAN BROTHERS
BEAR, STEARNS & CO. INC.
CHEMICAL SECURITIES INC.
DILLON, READ & CO. INC.
GOLDMAN, SACHS & CO.
MERRILL LYNCH & CO.
PAINEWEBBER INCORPORATED
- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 13
APPENDIX TO ELECTRONIC FORMAT DOCUMENT
A map outlining the Company's service territory is displayed on page S-2 of
this prospectus supplement. This map appears in the paper format version of the
document and not in this electronic filing.
