Registration Nos. 333-14369 and 333-14369-01
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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THE MONTANA POWER COMPANY
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Montana 81-0170530
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
MONTANA POWER CAPITAL I
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS TRUST AGREEMENT)
Delaware To Be Applied For
(STATE OF INCORPORATION (I.R.S. EMPLOYER
OR ORGANIZATION) IDENTIFICATION NO.)
40 East Broadway
Butte, Montana 59701-9394
(406) 723-5421
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE
NUMBER, INCLUDING AREA CODE, OF REGISTRANTS' PRINCIPAL
EXECUTIVE OFFICES)
DANIEL T. BERUBE JEROLD P. PEDERSON ELLEN M. SENECHAL
Chairman of the Board Vice President and Treasurer
and Chief Executive Officer Chief Financial and The Montana Power
The Montana Power Company Information Officer Company
40 East Broadway The Montana Power 40 East Broadway
Butte, Montana 59701-9394 Company Butte, Montana
(406) 723-5421 40 East Broadway 59701-9394
Butte, Montana 59701-9394 (406) 723-5421
(406) 723-5421
ROBERT G. SCHUUR, ESQ.
Reid & Priest LLP
40 West 57th Street
New York, New York 10019
(212) 603-2000
(NAMES AND ADDRESSES, INCLUDING ZIP CODES,
AND TELEPHONE NUMBERS, INCLUDING AREA CODES, OF AGENTS FOR SERVICE)
--------------------------
Copy to:
M. DOUGLAS DUNN, ESQ.
ROBERT B. WILLIAMS, ESQ.
Milbank Tweed Hadley & McCloy
1 Chase Manhattan Plaza
New York, New York 10005
<PAGE>
SUBJECT TO COMPLETION, DATED OCTOBER __, 1996
2,600,000 PREFERRED SECURITIES
MONTANA POWER CAPITAL I
% CUMULATIVE QUARTERLY INCOME PREFERRED SECURITIES, SERIES A ("QUIPS"
SM)*
(LIQUIDATION PREFERENCE $25.00 PER PREFERRED SECURITY)
GUARANTEED TO THE EXTENT MONTANA POWER CAPITAL I HAS FUNDS
AS SET FORTH HEREIN BY
THE MONTANA POWER COMPANY
The % Cumulative Quarterly Income Preferred Securities, Series A
("Preferred Securities") offered hereby represent undivided beneficial
interests in the assets of Montana Power Capital I ("Montana Power
Capital"), a statutory business trust formed under the laws of the State
of Delaware. The Montana Power Company, a Montana corporation
("Company"), will be the owner of all of the beneficial interests
represented by common securities of Montana Power Capital ("Common
Securities", together with the Preferred Securities herein referred to as
the "Trust Securities"). The Bank of New York is the Property Trustee of
Montana Power Capital. Montana Power Capital exists for the sole purpose
of issuing the Trust Securities and investing the proceeds thereof in
Junior Subordinated Deferrable Interest Debentures, % Series due
("Junior Subordinated Debentures"), to be issued by the Company.
The Junior Subordinated Debentures will mature on , 20 and
are redeemable prior to maturity at the option of the Company as
hereinafter described. The Preferred Securities will have a preference
with respect to cash distributions and amounts payable on liquidation,
redemption or otherwise over the Common Securities. See DESCRIPTION OF
THE PREFERRED SECURITIES "Subordination of Common Securities."
(continued on following page)
SEE RISK FACTORS, BEGINNING ON PAGE 3, FOR CERTAIN INFORMATION
RELEVANT TO AN INVESTMENT IN THE PREFERRED SECURITIES.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR BY ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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Initial Public Underwriting Proceeds to
Offering Price Commission(1) Company(2)(3)
-------------- -------------- ----------
Per Unit of Preferred
Securities.............. $ (2) $
Total...................... $ (2) $
(1) Montana Power Capital and the Company have agreed to indemnify
the several Underwriters against certain liabilities, including
liabilities under the Securities Act of 1933, as amended. See
UNDERWRITING.
(2) In view of the fact that the entire proceeds of the sale of the
Preferred Securities will be used to purchase the Junior
Subordinated Debentures, the Underwriting Agreement provides that
the Company will pay to the Underwriters, as compensation for
their arranging the investment therein of such proceeds, $
per unit of Preferred Securities (or $ in the aggregate).
See UNDERWRITING.
(3) Expenses of the offering, which are payable by the Company, are
estimated to be $ .
The Preferred Securities offered hereby are offered severally by the
Underwriters, as specified herein, subject to receipt and acceptance by
them and subject to their right to reject any order in whole or in part.
It is expected that the Preferred Securities will be ready for delivery
in book-entry form only through the facilities of The Depository Trust
Company in New York, New York on or about , 199 ,
against payment therefor in immediately available funds.
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*QUIPS is a servicemark of Goldman, Sachs & Co.
GOLDMAN, SACHS & CO.
DEAN WITTER REYNOLDS INC.
LEHMAN BROTHERS
MERRILL LYNCH & CO.
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The date of this Prospectus is , 199 .
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD
NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION
STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN
OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE
ANY SALE OF THESE SECURITIES IN ANY JURISDICTION IN WHICH SUCH OFFER,
SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR
QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH JURISDICTION.
<PAGE>
(continued from previous page)
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 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.
--------------------------
Holders of the Preferred Securities ("Holders") will be entitled to
receive preferential cumulative cash distributions accruing from the date
of original issuance and payable quarterly in arrears on the last day of
March, June, September and December of each year, commencing ,
199 , at the annual rate of % of the liquidation preference of $25
per Preferred Security ("Distributions"). So long as no Event of Default
under the Indenture with respect to the Junior Subordinated Debentures (a
"Debenture Event of Default") shall have occurred and be continuing, the
Company has the right to defer payments of interest on the Junior
Subordinated Debentures by extending the interest payment period thereon
at any time or from time to time for up to 20 consecutive quarters (each,
an "Extension Period"), provided that no such Extension Period may extend
beyond the maturity of the Junior Subordinated Debentures. Prior to the
end of an Extension Period, the Company may, and at the end of such
Extension Period, the Company shall, pay all interest then accrued and
unpaid (together with interest thereon at the stated rate borne thereby,
to the extent permitted by applicable law). Upon the termination of any
Extension Period and the payment of all amounts then due, including
interest on deferred interest payments, the Company may elect a new
Extension Period, subject to the requirements set forth herein.
If interest payments are so deferred, distributions on the Preferred
Securities also will be deferred, and the Company will not be permitted
to (i) declare or pay any dividends or distributions on, or redeem,
purchase, acquire or make a liquidation payment with respect to, any of
its capital stock (other than dividends or distributions in common stock
of the Company) or (ii) make any payment of principal of, or interest or
premium, if any, on, or repay, repurchase or redeem, or make any sinking
fund payment with respect to, any indebtedness that is pari passu with or
junior in interest to the Junior Subordinated Debentures, or make any
guarantee payments with respect to such indebtedness. During an
Extension Period, the Preferred Securities will accumulate additional
Distributions thereon at the rate of % per annum, compounded
quarterly, and Holders of Preferred Securities will be required to accrue
interest income in the form of original issue discount ("OID") for United
States federal income tax purposes in advance of receipt of cash related
to such income. See DESCRIPTION OF THE JUNIOR SUBORDINATED DEBENTURES
"Option to Extend Interest Payment Period" and CERTAIN UNITED STATES
FEDERAL INCOME TAX CONSEQUENCES "Potential Extension of Interest
Payment Period and Original Issue Discount."
The payment of distributions and payments on liquidation of Montana
Power Capital or the redemption of Preferred Securities, as set forth
below, are guaranteed by the Company to the extent Montana Power Capital
has sufficient funds available to make such payments ("Guarantee"). See
DESCRIPTION OF THE GUARANTEE. If the Company fails to make interest
payments on the Junior Subordinated Debentures held by Montana Power
Capital, Montana Power Capital will have insufficient funds to pay
distributions on the Preferred Securities. The Guarantee does not cover
payment of distributions when Montana Power Capital does not have
sufficient funds to pay such distributions. In such event, a Holder of
Preferred Securities may institute a legal proceeding directly against
the Company to enforce payment of such distributions to such Holder. The
Company's obligations under the Guarantee and the Junior Subordinated
Debentures are subordinate and junior in right of payment to all Senior
Indebtedness (as defined herein) of the Company.
The Preferred Securities are subject to mandatory redemption upon
repayment of the Junior Subordinated Debentures, at stated maturity or
upon maturity by earlier acceleration, redemption or otherwise, in an
amount equal to the amount of Junior Subordinated Debentures so repaid at
a redemption price ("Redemption Price") equal to the aggregate
liquidation preference of such Preferred Securities plus accumulated and
unpaid distributions thereon to the date of redemption ("Redemption
Date"). See DESCRIPTION OF THE PREFERRED SECURITIES - "Redemption
Procedures." The Junior Subordinated Debentures are redeemable prior to
maturity at the option of the Company (i) on or after ,
in whole at any time or in part from time to time or (ii) upon the
occurrence and continuation of a Special Event (as defined herein), in
whole but not in part, in each case subject to the further conditions
described under DESCRIPTION OF THE JUNIOR SUBORDINATED DEBENTURES
"Optional Redemption."
The Company shall have the right to terminate Montana Power Capital at
any time and cause the Junior Subordinated Debentures to be distributed
to the Holders of the Preferred Securities in liquidation of Montana
Power Capital. See DESCRIPTION OF THE PREFERRED SECURITIES
"Liquidation Distribution upon Termination."
<PAGE>
(continued from previous page)
The Junior Subordinated Debentures are subordinated and junior in
right of payment to all Senior Indebtedness of the Company. As of June
30, 1996, the Company had approximately $625,000,000 aggregate principal
amount of Senior Indebtedness outstanding. The terms of the Junior
Subordinated Debentures place no limitation on the amount of Senior
Indebtedness that may be incurred by the Company. See DESCRIPTION OF THE
JUNIOR SUBORDINATED DEBENTURES "Subordination."
In the event of the liquidation of Montana Power Capital, the Holders
of the Trust Securities will be entitled to receive either Junior
Subordinated Debentures in an aggregate principal amount of $25 for each
Preferred Security or, in certain circumstances, a liquidation preference
of $25 for each Preferred Security, plus accrued and unpaid distributions
thereon to the date of payment, subject to certain limitations. See
DESCRIPTION OF THE PREFERRED SECURITIES "Liquidation Distribution upon
Termination."
Application will be made to list the Preferred Securities on The New
York Stock Exchange ("NYSE"). If the Junior Subordinated Debentures are
distributed to the Holders of Preferred Securities upon the liquidation
of Montana Power Capital, the Company will use best efforts to list the
Junior Subordinated Debentures on the NYSE or such other stock exchange
or other organization, if any, on which the Preferred Securities are then
listed.
The Preferred Securities will be represented by global certificates
registered in the name of The Depository Trust Company ("DTC") or its
nominee. Beneficial interests in the Preferred Securities will be shown
on, and transfers thereof will be effected only through, records
maintained by participants in DTC. Except as described herein, Preferred
Securities in certificated form will not be issued in exchange for the
global certificates. See DESCRIPTION OF THE PREFERRED SECURITIES -
"Book-Entry Only Issuance".
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Securities and
Exchange Commission ("Commission") pursuant to the Securities Exchange
Act of 1934, as amended ("1934 Act"), are incorporated herein by
reference:
1. Annual Report on Form 10-K for the year ended December 31, 1995
("1995 10-K").
2. Quarterly Reports on Form 10-Q for the quarters ended March 31
and June 30, 1996.
3. Current Reports on Form 8-K, dated January 5, January 23, April
10, April 23, July 24, and October 22, 1996.
All documents subsequently filed by the Company pursuant to Section
13(a), 13(c), 14 or 15(d) of the 1934 Act and prior to the termination of
the offering hereunder shall be deemed to be incorporated by reference in
this Prospectus and to be a part hereof from the date of filing of such
documents. The documents which are incorporated by reference in this
Prospectus are sometimes hereinafter referred to as the "Incorporated
Documents."
Any statement contained in an Incorporated Document shall be deemed to
be modified or superseded for purposes of this Prospectus to the extent
that a statement contained herein or in any other subsequently filed
document which is deemed to be incorporated by reference herein modifies
or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
The Company hereby undertakes to provide without charge to each
person, including any beneficial owner, to whom a copy of this Prospectus
has been delivered, on the written or oral request of any such person, a
copy of any or all of the documents referred to above which have been or
may be incorporated in this Prospectus by reference, other than exhibits
to such documents (unless such exhibits are specifically incorporated by
reference into such documents). Requests should be directed to Investor
Services, The Montana Power Company, 40 East Broadway, Butte, Montana
59701-9394, telephone (406) 496-5074.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the 1934
Act and in accordance therewith files reports and other information with
the Commission. Such reports and other information filed by the Company
can be inspected and copied at the public reference facilities maintained
by the Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C.
20549, and at the following Regional Offices of the Commission: Chicago
Regional Office, Citicorp Center, 500 West Madison, Suite 1400, Chicago,
Illinois 60661; and New York Regional Office, 7 World Trade Center, 13th
Floor, New York, New York 10048. Copies of such material can also be
obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549 at prescribed rates. The Commission
also maintains a web site (http://www.sec.gov.) that contains reports,
proxy statements and other information regarding the Company. The Common
Shares of the Company are listed on the NYSE, 20 Broad Street, New York,
New York 10005, where reports and other information concerning the
Company may be inspected.
No separate financial statements of Montana Power Capital are included
herein. Montana Power Capital will not file separate reports under the
1934 Act. The Company considers that such financial statements would not
be material to Holders of the Preferred Securities because the Company is
a reporting company under the 1934 Act and Montana Power Capital has no
independent operations, but exists for the sole purpose of issuing the
Trust Securities and holding as trust assets the Junior Subordinated
Debentures.
<PAGE>
RISK FACTORS
Prospective purchasers should carefully review the information
contained in this Prospectus and should particularly consider the
following risk factors with respect to the Preferred Securities and the
Junior Subordinated Debentures.
DEPENDENCE OF MONTANA POWER CAPITAL ON THE COMPANY FOR FUNDS;
SUBORDINATION OF JUNIOR SUBORDINATED DEBENTURES AND GUARANTEE
The ability of Montana Power Capital to pay amounts due on the
Preferred Securities is solely dependent upon the Company making payments
on the Junior Subordinated Debentures as and when required.
The Company's obligations under the Junior Subordinated Debentures and
the Guarantee are unsecured, subordinated and junior in right of payment
to Senior Indebtedness of the Company. As of June 30, 1996, Senior
Indebtedness of the Company aggregated approximately $625,000,000. There
are no terms of the Preferred Securities, the Junior Subordinated
Debentures or the Guarantee that limit the Company's ability to incur
additional indebtedness, including indebtedness that would rank senior to
the Junior Subordinated Debentures and the Guarantee. See DESCRIPTION OF
THE JUNIOR SUBORDINATED DEBENTURES "Subordination" and DESCRIPTION OF
THE GUARANTEE "Status of the Guarantee."
OPTION TO EXTEND INTEREST PAYMENT PERIOD; TAX CONSEQUENCES; POTENTIAL
MARKET VOLATILITY DURING EXTENSION PERIOD
So long as no Debenture Event of Default shall have occurred and be
continuing, the Company has the right to defer payments of interest on
the Junior Subordinated Debentures for Extension Periods of up to 20
consecutive quarters; provided that any such Extension Period may not
extend beyond the maturity of the Junior Subordinated Debentures. Prior
to the end of an Extension Period, the Company may, and at the end of
such Extension Period, the Company shall, pay all interest then accrued
and unpaid (together with interest thereon at the stated rate borne
thereby, to the extent permitted by applicable law). Upon the
termination of any Extension Period and the payment of all amounts then
due, including interest on deferred interest payments to the extent
permitted by law, the Company may elect a new Extension Period, subject
to the requirements set forth herein. If interest payments are so
deferred, distributions on the Preferred Securities also will be
deferred, and the Company will not be permitted to (i) declare or pay any
dividends or distributions on, or redeem, purchase, acquire or make a
liquidation payment with respect to, any of its capital stock (other than
dividends or distributions in common stock of the Company) or (ii) make
any payment of principal of, or interest or premium, if any, on, or
repay, repurchase or redeem, or make any sinking fund payment with
respect to, any indebtedness that is pari passu with or junior in
interest to the Junior Subordinated Debentures, or make any guarantee
payments with respect to such indebtedness. During an Extension Period,
the Preferred Securities will accumulate additional Distributions thereon
at the rate set forth on the cover page hereof, compounded quarterly.
See DESCRIPTION OF THE JUNIOR SUBORDINATED DEBENTURES "Option to Extend
Interest Payment Period."
Should an Extension Period occur, a Holder of Preferred Securities
will be required to accrue OID income in respect of its pro rata share of
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the Junior Subordinated Debentures held by Montana Power Capital for United
States federal income tax purposes. As a result, a Holder of Preferred
Securities will include such interest in gross income for United States
federal income tax purposes in advance of the receipt of cash, and will
not receive the cash related to such income from Montana Power Capital if
the Holder disposes of the Preferred Securities prior to the record date
for the payment of distributions. See CERTAIN UNITED STATES FEDERAL
INCOME TAX CONSEQUENCES "Potential Extension of Interest Payment Period
and Original Issue Discount" and "Sale, Exchange and Redemption of the
Preferred Securities."
The Company has no current intention of exercising its right to defer
payments of interest by extending the interest payment period on the
Junior Subordinated Debentures. However, should the Company elect to
exercise its right to defer payments of interest on the Junior
Subordinated Debentures, the market price of the Preferred Securities is
likely to be affected. A Holder that disposes of its Preferred
Securities during an Extension Period, therefore, might not receive the
same return on its investment as a Holder that continues to hold its
Preferred Securities. In addition, as a result of the existence of the
Company's right to defer interest payments, the market price of the
Preferred Securities (which represent preferred undivided beneficial
interests in the Junior Subordinated Debentures) may be more volatile
than other securities that do not have such rights.
RIGHTS UNDER THE GUARANTEE; LIMITED FUNDS AVAILABLE TO MONTANA POWER
CAPITAL
The Guarantee guarantees to the Holders of the Preferred Securities
the payment and not the collection of (i) any accrued and unpaid
distributions required to be paid on the Preferred Securities, but only
if and to the extent that the Property Trustee has available funds
sufficient to make such payment, (ii) the Redemption Price of Preferred
Securities called for redemption by Montana Power Capital, but only if
and to the extent that the Property Trustee has available funds
sufficient to make such payment, and (iii) upon a voluntary or
involuntary dissolution, winding-up or termination of Montana Power
Capital (unless the Junior Subordinated Debentures are distributed to
Holders of the Preferred Securities) the lesser of (a) the aggregate of
the liquidation preference and all accrued and unpaid distributions on
the Preferred Securities to the date of payment and (b) the amount of
assets of Montana Power Capital remaining available for distribution to
Holders of the Preferred Securities in liquidation of Montana Power
Capital. If the Company were to default on its obligations under the
Junior Subordinated Debentures, Montana Power Capital would lack
available funds for the payment of distributions or amounts payable on
redemption of the Preferred Securities or otherwise, and in such event
Holders of the Preferred Securities would not be able to rely upon the
Guarantee for payment of such amounts. See DESCRIPTION OF THE GUARANTEE.
The Guarantee will constitute an unsecured obligation of the Company and
will rank subordinate and junior in right of payment to all Senior
Indebtedness of the Company.
SPECIAL EVENT REDEMPTION
Upon the occurrence and continuation of a Special Event (as defined
under DESCRIPTION OF THE JUNIOR SUBORDINATED DEBENTURES "Optional
Redemption"), the Company has the right to redeem the Junior Subordinated
Debentures, in whole but not in part, within 90 days following the
occurrence of such Special Event and thereby cause a mandatory redemption
of the Preferred Securities at the Redemption Price. See CERTAIN UNITED
STATES FEDERAL INCOME TAX CONSEQUENCES "Possible Tax Law Changes" for
information concerning a possible Special Event.
DISTRIBUTION OF JUNIOR SUBORDINATED DEBENTURES UPON TERMINATION;
POTENTIAL ADVERSE EFFECT UPON MARKET PRICE
The Company shall have the right to terminate Montana Power Capital at
any time and cause the Junior Subordinated Debentures to be distributed
to the Holders of Trust Securities in liquidation of Montana Power
Capital. There can be no assurance as to the market prices for the
Junior Subordinated Debentures which may be distributed in exchange for
Preferred Securities if a termination and liquidation of Montana Power
Capital were to occur. Accordingly, the Junior Subordinated Debentures
that a Holder of Preferred Securities may receive on termination and
liquidation of Montana Power Capital may trade at a discount to the price
that the investor paid to purchase the Preferred Securities offered
hereby. Because Holders of Preferred Securities may receive Junior
Subordinated Debentures upon a termination and liquidation of Montana
Power Capital, prospective purchasers of Preferred Securities are also
making an investment decision with respect to the Junior Subordinated
Debentures and should carefully review all the information regarding the
Junior Subordinated Debentures contained herein. See DESCRIPTION OF THE
JUNIOR SUBORDINATED DEBENTURES and CERTAIN UNITED STATES FEDERAL INCOME
TAX CONSEQUENCES.
LIMITED VOTING RIGHTS
Holders of Preferred Securities generally will have limited voting
rights relating only to the modification of the Preferred Securities and
the direction of remedies upon the occurrence of an Event of Default
under the Trust Agreement (as defined herein). Holders of Preferred
Securities will not be entitled to vote to appoint, remove or replace any
Trustee, which voting rights are vested exclusively in the Holder of the
Common Securities, except upon the occurrence of certain events described
herein. The Administrative Trustees (as defined herein) and the Company
may amend the Trust Agreement (as defined herein) to ensure that Montana
Power Capital will be classified for United States federal income tax
purposes as a grantor trust without the consent of Holders, even if such
action adversely affects the interests of Holders. See "DESCRIPTION OF
THE PREFERRED SECURITIES - "Voting Rights; Actions to Enforce Rights" and
"Amendments."
NO ESTABLISHED TRADING MARKET FOR THE PREFERRED SECURITIES; TRADING
PRICE; POTENTIAL ADVERSE INCOME TAX EFFECT
Application will be made to list the Preferred Securities on the NYSE.
If approved for listing, the Preferred Securities may trade at a price
that does not fully reflect the value of accrued but unpaid interest with
respect to the underlying Junior Subordinated Debentures. Should an
Extension Period occur, a Holder that disposes of Preferred Securities
between record dates for payments of distributions thereon will be
required to include accrued but unpaid interest on the Junior
Subordinated Debentures through the date of disposition in income as
ordinary OID income and to add such amount to such Holder's adjusted tax
basis in such Holder's pro rata share of the underlying Junior
Subordinated Debentures deemed disposed of. Such Holder will recognize a
capital loss to the extent that the selling price (which may not fully
reflect the value of accrued but unpaid interest) is less than its
adjusted tax basis (which will include accrued but unpaid interest).
Subject to certain limited exceptions, capital losses cannot be applied
to offset ordinary income for United States federal income tax purposes.
See "CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES - "Sale,
Exchange and Redemption of the Preferred Securities."
<PAGE>
THE COMPANY
The Company and its subsidiaries conduct a number of diversified, but
related businesses. The Company's principal business is its Montana
electric and natural gas utility operation, which is conducted through
both its Energy Supply Division and its Energy and Communications
Services Division. This activity includes regulated utility operations
involved in the generation, purchase, transmission, and distribution of
electricity, and the production, purchase, transportation and
distribution of natural gas. The Company's non-regulated businesses are
involved principally in the mining and sale of coal, exploration for, and
the development, production, processing and sale of oil and natural gas;
the sale of telecommunication equipment and services; and independent
power activities that include the management of long-term power sales,
and the development of and investment in nonutility power projects and
other energy-related businesses. The Company was incorporated in 1961
under the laws of the State of Montana, where its principal business is
conducted, as the successor to a New Jersey corporation incorporated in
1912. The principal executive offices of the Company are located at 40
East Broadway, Butte, Montana 59701-9394. Its telephone number is (406)
723-5421.
MONTANA POWER CAPITAL
Montana Power Capital is a statutory business trust created under
Delaware law pursuant to a trust agreement among the Company, as
depositor, the Property Trustee, the Delaware Trustee and an
Administrative Trustee (each as defined herein) and a certificate of
trust with the Delaware Secretary of State on October 15, 1996. Such
trust agreement will be amended and restated in its entirety (as so
amended and restated, the "Trust Agreement") substantially in the form
filed as an exhibit to the Registration Statement of which this
Prospectus forms a part. The Trust Agreement will be qualified as an
indenture under the Trust Indenture Act of 1939, as amended ("Trust
Indenture Act"). Montana Power Capital's business and affairs will be
conducted by The Bank of New York, as Property Trustee, The Bank of New
York (Delaware), as Delaware Trustee, and three individual Administrative
Trustees who are employees or officers or affiliated with the Company.
Montana Power Capital exists for the exclusive purposes of (i) issuing
Trust Securities representing undivided beneficial interests in its trust
assets and investing the proceeds thereof in the Junior Subordinated
Debentures, (ii) receiving payments to be made with respect to the Junior
Subordinated Debentures and disbursing such payments in accordance with
the terms of the Trust Agreement and (iii) engaging in only those other
activities necessary, convenient or incidental thereto. Accordingly, the
Junior Subordinated Debentures will be the sole assets of Montana Power
Capital, and payments under the Junior Subordinated Debentures and the
Expense Agreement (as hereinafter defined) will be the sole revenue of
Montana Power Capital. The Common Securities will rank pari passu, and
payments will be made thereon pro rata, with the Preferred Securities,
except that upon the occurrence and continuance of an Event of Default
under the Trust Agreement resulting from a Debenture Event of Default (as
defined herein), the rights of the Company as the Holder of the Common
Securities to payment in respect of distributions and payments upon
liquidation, redemption and otherwise will be subordinated to the rights
of the Holders of the Preferred Securities. The Company will acquire
Common Securities in an amount equal to at least 3% of the total capital
of Montana Power Capital and will own all of the issued and outstanding
Common Securities. Montana Power Capital has a term of approximately ___
years, but may terminate earlier as provided in the Trust Agreement.
Montana Power Capital's business and affairs will be conducted by the
Administrative Trustees. The office of the Delaware Trustee in the State
of Delaware is White Clay Center, Route 273, Newark, Delaware 19711. The
principal place of business of Montana Power Capital is c/o The Montana
Power Company, 40 East Broadway, Butte, Montana 59701-9394.
<PAGE>
SELECTED FINANCIAL INFORMATION
(THOUSANDS OF DOLLARS, EXCEPT RATIOS AND PERCENTAGES)
The following financial information, which is presented herein solely
to furnish limited introductory information, is qualified in its entirety
by, and should be considered in conjunction with, the other information
presented in or incorporated by reference into this Prospectus, including
the Incorporated Documents. In the opinion of the Company, all
adjustments (constituting only normal recurring accruals) necessary for a
fair statement of the consolidated results of operations of The Montana
Power Company for the twelve months ended September 30, 1996, have been
made.
Twelve Months Ended
-------------------------------------------
December 31,
--------------------------------------------
1991 1992 1993
---------- -------------- --------
Consolidated Income
statement data:
Operating Revenues $889,254 $943,872 $1,024,285
Income from Operations 198,811 193,670 197,497
Interest Expense and
Other Income 42,703 40,966 36,166
Net Income Available
for Common Stock 101,925 103,275 102,858
Ratio of Earnings to
Fixed Charges 2.70 2.74 2.86
Twelve Months Ended
--------------------------------- September
December 31, 30,
---------------------------------- 1996
1994 1995 (Unaudited)
---------- -------------- --------
Consolidated Income
statement data:
Operating Revenues...... $1,005,970 $953,539 $948,274
Income from Operations 201,103 111,352 148,886
Interest Expense and
Other Income 32,285 32,841 39,189
Net Income Available
for Common Stock 106,365 49,710 64,486
Ratio of Earnings to
Fixed Charges 3.05 1.96(1) 2.29(1)
_______________________
(1) Excluding the effects of the implementation of SFAS No. 21 and
the writedown of a coal mining investment, effective October 1,
1995, the ratio of earnings to Fixed Charges would have been
2.84x at December 31, 1995 and 3.16x at September 30, 1996.
CAPITALIZATION
(Dollars in Thousands)
Outstanding
at
September 30, 1996 Adjusted(1)
------------------ -------------------
Amount Amount Percent
-------- ------- --------
Consolidated Capitalization:
Long-term Debt (including
portion due within
one year) . . . . . . . $652,456 $652,456 37.8%
Company Obligated
Mandatorily Redeemable
Securities of Subsidiary
Trust holding Parent
Junior Subordinated
Debentures(2) . . . . . . 65,000 3.8%
Preferred Stock . . . . . . 101,416 57,654 3.3%
949,915 949,915 55.1%
Common Equity . . . . . . . --------- ---------- -------
$1,703,787 $1,725,025 100.0%
Total Capitalization . . . =========== ========== =======
____________________________
(1) To give effect to this transaction, the redemption of all of the
$2.15 Preferred Stock Series and the retirement of 139,200 shares
of the $6.875 Preferred Stock Series.
(2) The sole assets of such trust consist of junior subordinated
debentures of the Company in principal amounts, and having other
payment terms, corresponding to the securities issued by such trust.
<PAGE>
RECENT DEVELOPMENTS
The Company's consolidated net income for common stock for the
quarter ended September 30, 1996 was $16.4 million, compared with
$14.3 million for the third quarter 1995. Non-Utility earnings
increased primarily due to the October 1995 closure of the Golden
Eagle coal mine in Colorado and improved financial performance at
the Jewett lignite mine in Texas. The increase was partially offset
by decreased coal sales at the Rosebud mine resulting from the
expiration of a Midwestern coal contract and reduced generation at
the Colstrip generating units. Non-Utility earnings also benefitted
from continued growth from independent power project investments.
Consolidated net income for common stock for the nine months ended
September 30, 1996 was $67.4 million compared with $52.6 million
for the same period last year. Increased rates, 10% colder weather,
continued customer growth and reduced power supply expenses contributed
to an increase in Utility earnings. This increase was larger than
the $11.3 million before tax positive impact recorded in 1995 for a
coal contract arbitration decision. The $13.3 million increase in
Non-Utility earnings is due primarily to growth in earnings from
independent power investments and the absence of losses at the
Colorado mine and the coal arbitration decision recorded in 1995.
The increase was partially offset by the decrease in coal sales
mentioned above.
Consolidated net income for common stock for the twelve months
ended September 30, 1996 decreased $31.8 million, primarily as a
result of a $46 million after tax charge due to the adoption of a
new financial accounting standard and the writedown of the Colorado
mine in the fourth quarter of 1995. Also, the absence of significant
power project development fees recorded in the 1995 period contributed
to the decrease. Higher Utility revenues, reduced power supply
expenses for all of the thermal units and increased earnings from
independent power investments moderated these decreases.
USE OF PROCEEDS
The proceeds to be received by Montana Power Capital from the sale of
the Preferred Securities will be used to purchase Junior Subordinated
Debentures of the Company. Of the proceeds of such purchase, $30,000,000
will be used to redeem all of the outstanding shares of the Company's
Preferred Stock $2.15 Series. The balance will be applied by the Company
for general corporate purposes.
DESCRIPTION OF THE PREFERRED SECURITIES
The following summaries of certain provisions of the Preferred
Securities and the Trust Agreement do not purport to be complete and are
subject to, and are qualified in their entirety by reference to, the
provisions of the Trust Agreement, including the definitions therein of
certain terms, and the Trust Indenture Act. Wherever particular sections
or defined terms of the Trust Agreement are referred to, such sections or
defined terms are incorporated herein by reference. A form of the Trust
Agreement has been filed as an exhibit to the Registration Statement of
which this Prospectus forms a part.
GENERAL
The Trust Securities represent undivided beneficial interests in the
assets of Montana Power Capital. The Trust Securities will have a
liquidation preference of $25 per unit. Approximately 97% of the total
liquidation preference amount will be represented by Preferred Securities
and the remainder by Common Securities. All of the Common Securities
will be owned by the Company. The Common Securities rank pari passu, and
payments will be made thereon pro rata, with the Preferred Securities
based on the liquidation preference of the Trust Securities, except that,
if an Event of Default under the Trust Agreement resulting from a
Debenture Event of Default shall have occurred and be continuing, the
Preferred Securities shall have a preference over the Common Securities.
(Section 4.03). The Junior Subordinated Debentures will be held by the
Property Trustee in trust for the benefit of the Holders of the Trust
Securities. (Section 2.07). The Company has agreed in an Agreement as to
Expenses and Liabilities (the "Expense Agreement") to provide funds to
Montana Power Capital as needed to pay obligations of Montana Power
Capital to parties other than the holders of the Trust Securities. The
Junior Subordinated Debentures and the Guarantee, together with the
obligations of the Company with respect to the Preferred Securities under
the Indenture, the Trust Agreement and the Expense Agreement, constitute
a full and unconditional guarantee by the Company of payments on the
Preferred Securities in accordance with their terms. See DESCRIPTION OF
THE GUARANTEE.
DISTRIBUTIONS
The distributions payable on the Preferred Securities will be fixed at
the annual rate set forth on the cover page of this Prospectus of the
stated liquidation preference amount of $25 per Preferred Security. The
term "distributions" as used herein includes interest payable on overdue
distributions, unless otherwise stated. The amount of distributions
payable for any period will be computed on the basis of a 360-day year of
twelve 30-day months and for any period shorter than a full month, on the
basis of the actual number of days elapsed in such period.
(Section 4.01(b)).
Distributions on the Preferred Securities will be cumulative, will
accrue from, and including, the date of initial issuance thereof, and
will be payable quarterly in arrears, on March 31, June 30, September 30
and December 31 of each year, commencing , 199 , except as
otherwise described below. Such distributions will accrue to, and
including, the first distribution payment date, and for each subsequent
distribution payment date will accrue from, and excluding, the last
distribution payment date through which distributions have been paid or
duly provided for. In the event that any date on which distributions are
otherwise payable on the Preferred Securities is not a Business Day,
payment of the distribution payable on such date will be made on the next
succeeding Business Day, except that, if such Business Day is in the next
succeeding calendar year, payment of such distribution shall be made on
the immediately preceding Business Day, in each case with the same force
and effect as if made on such date (each date on which distributions are
otherwise payable in accordance with the foregoing, a "Distribution
payment date"). (Section 4.01(a) and (b)). A Business Day is used
herein to mean any day, other than a Saturday or a Sunday, which is not a
day on which banking institutions in The City of New York are authorized
or required by law or executive order to remain closed and a day on which
the principal corporate trust office of the Property Trustee or the
Debenture Trustee (as defined herein) is closed for business. (Section
1.01).
The income of Montana Power Capital available for distribution to the
Holders of the Preferred Securities will be limited to payments received
on the Junior Subordinated Debentures. See DESCRIPTION OF THE JUNIOR
SUBORDINATED DEBENTURES. If the Company does not make interest payments
on the Junior Subordinated Debentures, the Property Trustee will not have
funds available to pay distributions on the Preferred Securities. The
payment of distributions (if and to the extent Montana Power Capital has
sufficient funds available for the payment of such distributions) is
guaranteed by the Company as described under DESCRIPTION OF THE
GUARANTEE.
Distributions on the Preferred Securities will be payable to the
Holders thereof as they appear on the register of Montana Power Capital
on the relevant record dates, each of which, so long as the Preferred
Securities are held in book-entry only form, will be one Business Day
prior to the related distribution payment date. Subject to any
applicable laws and regulations and the provisions of the Trust
Agreement, each such payment will be made as described under "Book-Entry
Only Issuance." In the event the Preferred Securities are no longer held
in book-entry only form, the record date shall be 15 days prior to the
related distribution payment date. (Section 4.01(d)).
So long as no Debenture Event of Default with respect to the Junior
Subordinated Debentures shall have occurred and be continuing, the
Company has the right to defer payments of interest on the Junior
Subordinated Debentures for Extension Periods of up to 20 consecutive
quarters; provided that any such Extension Period may not extend beyond
the maturity of the Junior Subordinated Debentures. Prior to the end of
an Extension Period, the Company may, and at the end of such Extension
Period, the Company shall, pay all interest then accrued and unpaid
(together with interest thereon at the stated rate borne thereby, to the
extent permitted by applicable law). Upon the termination of any
Extension Period and the payment of all amounts then due, including
interest on deferred interest payments, the Company may elect a new
Extension Period, subject to the requirements set forth herein. If
interest payments are so deferred, distributions on the Preferred
Securities also will be deferred, and the Company will not be permitted
to (i) declare or pay any dividends or distributions on, or redeem,
purchase, acquire or make a liquidation payment with respect to, any of
its capital stock (other than dividends or distributions in common stock
of the Company) or (ii) make any payment of principal of, or interest or
premium, if any, on, or repay, repurchase or redeem, or make any sinking
fund payment with respect to, any indebtedness that is pari passu with or
junior in interest to the Junior Subordinated Debentures or make any
guarantee payments with respect to such indebtedness. During an
Extension Period, the Preferred Securities will accumulate additional
Distributions thereon at the annual rate stated on the cover page hereof,
compounded quarterly. See DESCRIPTION OF THE JUNIOR SUBORDINATED
DEBENTURES "Option to Extend Interest Payment Period."
REDEMPTION
Upon the repayment of the Junior Subordinated Debentures, whether at
stated maturity or upon maturity by earlier acceleration, redemption or
otherwise, the proceeds from such repayment shall be applied by the
Property Trustee to redeem a Like Amount (as defined below) of Trust
Securities at the Redemption Price. (Section 4.02). See DESCRIPTION OF
THE JUNIOR SUBORDINATED DEBENTURES - "Optional Redemption."
"Like Amount" means (i) with respect to a redemption of Trust
Securities, Trust Securities having an aggregate liquidation value equal
to the principal amount of Junior Subordinated Debentures to be
contemporaneously redeemed and (ii) with respect to a distribution of
Junior Subordinated Debentures to Holders of Trust Securities, Junior
Subordinated Debentures having a principal amount equal to the aggregate
liquidation value of the Trust Securities with respect to which such
Junior Subordinated Debentures are distributed.
REDEMPTION PROCEDURES
Preferred Securities redeemed on each Redemption Date shall be
redeemed at the Redemption Price with the proceeds from the
contemporaneous redemption of Junior Subordinated Debentures.
Redemptions of the Preferred Securities shall be made and the Redemption
Price shall be deemed payable on each Redemption Date only if Montana
Power Capital has funds available for the payment of such Redemption
Price. (Section 4.02(d)). See also "Subordination of Common
Securities."
Notice of redemption shall be given not less than 30 nor more than 60
days prior to the Redemption Date and shall specify, among other things,
whether (i) less than all of the outstanding Trust Securities are to be
redeemed and (ii) such redemption is conditional upon receipt of funds by
the Property Trustee on the Redemption Date. (Section 4.02(b) and (c)).
If notice of redemption shall have been given and funds deposited as
required, then on the Redemption Date, all rights of Holders of Preferred
Securities so called for redemption will cease, except the right to
receive the Redemption Price, but without interest thereon, and such
Preferred Securities will cease to be outstanding. In the event that any
date fixed for redemption of Preferred Securities is not a Business Day,
then payment of the amount payable on such date will be made on the next
succeeding day which is a Business Day, except that if such Business Day
is in the next succeeding calendar year, such payment shall be made on
the immediately preceding Business Day, in each case with the same force
and effect as if made on such date. In the event that payment of the
Redemption Price in respect of Preferred Securities called for redemption
is not paid either by Montana Power Capital or by the Company pursuant to
the Guarantee, Distributions on such Preferred Securities will continue
to accrue at the then applicable rate, from the original redemption date
to the date of payment. (Section 4.02(e)).
If less than all the Trust Securities are to be redeemed on a
Redemption Date, the aggregate liquidation preference of such securities
to be redeemed shall be allocated on a pro rata basis to the Common
Securities and the Preferred Securities. The particular Preferred
Securities to be redeemed shall be selected not more than 60 days prior
to the Redemption Date by the Property Trustee from the outstanding
Preferred Securities not previously called for redemption, by such method
as the Property Trustee shall deem fair and appropriate and which may
provide for the selection for redemption of less than all of the
Preferred Securities represented by any certificate therefor. The
Property Trustee shall promptly notify the transfer agent in writing of
the Preferred Securities selected for redemption and, in the case of any
Preferred Securities certificate selected for partial redemption, the
number of Preferred Securities to be redeemed. (Section 4.02(f)).
SUBORDINATION OF COMMON SECURITIES
If on any Distribution payment date or Redemption Date an Event of
Default under the Trust Agreement resulting from a Debenture Event of
Default shall have occurred and be continuing, no payment of any
Distribution on, or Redemption Price of, any Common Security shall be
made. (Section 4.03(a)).
In the case of any Event of Default under the Trust Agreement
resulting from a Debenture Event of Default, the Holder of Common
Securities will be deemed to have waived any such Event of Default until
the effect of such Event of Default with respect to the Preferred
Securities has been cured, waived or otherwise eliminated. Until any
such Event of Default with respect to the Preferred Securities has been
so cured, waived or otherwise eliminated, the Property Trustee shall act
solely on behalf of the Holders of the Preferred Securities, and only
Holders of Preferred Securities will have the right to direct the
Property Trustee. (Section 4.03(b)).
LIQUIDATION DISTRIBUTION UPON TERMINATION
Pursuant to the Trust Agreement, Montana Power Capital shall terminate
and shall be liquidated by the Property Trustee on December 31, , or,
if earlier, on the first to occur of (i) certain events of bankruptcy,
dissolution or liquidation of the Company; (ii) the redemption of all of
the Preferred Securities; (iii) the receipt by the Property Trustee of a
written direction from the Company to terminate Montana Power Capital
(which direction may be given at any time and is wholly within the
discretion of the Company); and (iv) termination of the trust by court
order. (Sections 9.01 and 9.02).
If an early termination occurs as described in clause (i), (iii) or
(iv) above, Montana Power Capital shall be liquidated by the Property
Trustee by promptly distributing, after satisfaction of all amounts due
to creditors of Montana Power Capital as provided by applicable law, to
each Holder of Trust Securities a Like Amount of Junior Subordinated
Debentures, unless such distribution is determined by the Property
Trustee not to be practical, in which event such Holders will be entitled
to receive, out of the assets of Montana Power Capital available for
distribution to Holders, an amount equal to the aggregate liquidation
preference of the Trust Securities plus accrued and unpaid distributions
thereon to the date of payment (such amount being the "Liquidation
Distribution"). If such Liquidation Distribution can be paid only in
part because Montana Power Capital has insufficient assets available to
pay in full the aggregate Liquidation Distribution, then the amounts
payable by Montana Power Capital on the Trust Securities shall be paid on
a pro rata basis; provided, however, that if an Event of Default has
occurred and is continuing under the Trust Agreement, the Preferred
Securities shall have a preference over the Common Securities. (Sections
9.04(a) and 9.04(d)).
On the date fixed for the distribution of Junior Subordinated
Debentures upon termination of Montana Power Capital (i) the Preferred
Securities and the Common Securities will no longer be deemed to be
outstanding; (ii) all rights of the Holders thereof will cease, except
the right to receive Junior Subordinated Debentures upon surrender of the
certificates representing their Trust Securities; and (iii) the Company
will use best efforts to list the Junior Subordinated Debentures on the
NYSE or on such other exchange or organization on which the Preferred
Securities shall then be listed. (Section 9.04(c)).
EVENTS OF DEFAULT; NOTICE
Any one of the following events constitutes an Event of Default under
the Trust Agreement (whatever the reason for such Event of Default and
whether it shall be voluntary or involuntary or be effected by operation
of law or pursuant to any judgment, decree or order of any court or any
order, rule or regulation of any administrative or governmental body):
(i) the occurrence of a Debenture Event of Default (see DESCRIPTION
OF THE JUNIOR SUBORDINATED DEBENTURES "Events of Default"); or
(ii) default by Montana Power Capital in the payment of any
Distribution when it becomes due and payable, and continuation of such
default for a period of 30 days; or
(iii) default by Montana Power Capital in the payment of any
Redemption Price of any Trust Security when it becomes due and
payable; or
(iv) default in the performance, or breach, in any material respect,
of any covenant or warranty of the Trustees in the Trust Agreement
(other than a covenant or warranty a default in the performance of
which or the breach of which is specifically dealt with in clause (ii)
or (iii) above), and continuation of such default or breach for a
period of 60 days after there shall have been given, by registered or
certified mail, to the Property Trustee by the Holders of Preferred
Securities having at least 33% of the aggregate liquidation preference
amount of the outstanding Preferred Securities a written notice
specifying such default or breach and requiring it to be remedied and
stating that such notice is a Notice of Default thereunder; or
(v) the occurrence of certain events of bankruptcy or insolvency
with respect to the Trust. (Section 1.01)
Within five Business Days after the occurrence of any Event of Default
known to the Property Trustee, the Property Trustee shall transmit to the
Holders of Trust Securities notice of such Event of Default, unless such
Event of Default shall have been cured or waived. (Section 8.02).
If, in the event of a Debenture Event of Default, the Debenture
Trustee fails, or the holders of not less than 33% in principal amount of
the outstanding Junior Subordinated Debentures fail, to declare the
principal of all of the Junior Subordinated Debentures to be immediately
due and payable, the Holders of at least 33% in aggregate liquidation
preference of the Preferred Securities then outstanding shall have such
right.
VOTING RIGHTS; ACTIONS TO ENFORCE RIGHTS
Holders of Trust Securities shall be entitled to one vote for each $25
in liquidation preference represented by their Trust Securities in
respect of any matter as to which such Holders of Trust Securities are
entitled to vote. Except as described below and under "Amendments," and
under DESCRIPTION OF THE GUARANTEE "Amendments" and as otherwise
required by law, the Holders of the Preferred Securities will have no
voting rights. (Section 6.01).
So long as any Junior Subordinated Debentures are held by the Property
Trustee, the Property Trustee shall not (i) direct the time, method and
place of conducting any proceeding for, or taking any other action
relating to, any remedy available to the Debenture Trustee, or executing
any trust or power conferred on the Debenture Trustee with respect to the
Junior Subordinated Debentures, (ii) waive any past default which is
waivable under Section 813 of the Indenture, (iii) exercise any right to
rescind or annul a declaration that the principal of all the Junior
Subordinated Debentures shall be due and payable or (iv) consent to any
amendment, modification or termination of the Indenture or the Junior
Subordinated Debentures, where such consent shall be required, without,
in each case, obtaining the prior approval of the Holders of Preferred
Securities of a majority of the aggregate liquidation preference amount
of the outstanding Preferred Securities; provided, however, that where a
consent under the Indenture would require the consent of each holder of
Junior Subordinated Debentures affected thereby, no such consent shall be
given by the Property Trustee without the prior consent of each Holder of
Preferred Securities. The Property Trustee shall not revoke any action
previously authorized or approved by a vote of the Preferred Securities,
except pursuant to a subsequent vote of the Preferred Securities. The
Property Trustee shall notify all Holders of the Preferred Securities of
any notice of default received from the Debenture Trustee. In addition
to obtaining the foregoing approvals of the Holders of the Preferred
Securities, prior to taking any of the foregoing actions, the Property
Trustee shall receive an opinion of counsel experienced in such matters
to the effect that the contemplated action will not cause Montana Power
Capital to fail to be classified as a "grantor trust" for United States
federal income tax purposes on account of such action.
(Section 6.01(c)).
Notwithstanding that Holders of Preferred Securities are entitled to
vote or consent under any of the circumstances described above, any of
the Preferred Securities that are owned by the Company, the Property
Trustee or any affiliate of the Company or the Property Trustee, shall,
for purposes of such vote or consent, be treated as if they were not
outstanding.
If the Property Trustee fails to enforce its rights under the Junior
Subordinated Debentures or the Trust Agreement, a Holder of Preferred
Securities may institute, to the fullest extent permitted by law, a legal
proceeding directly against the Company to enforce the Property Trustee's
rights under the Junior Subordinated Debentures or the Trust Agreement
without first instituting any legal proceeding against the Property
Trustee or any other person. A Holder of Preferred Securities also may
institute a proceeding for enforcement of payment to such Holder directly
of principal of or interest on the Junior Subordinated Debentures having
a principal amount equal to the aggregate liquidation amount of the
Preferred Securities of such Holder on or after the due dates specified
in the Junior Subordinated Debentures. (Section 6.10).
AMENDMENTS
The Trust Agreement may be amended from time to time by a majority of
the Administrative Trustees and the Company, without the consent of any
Holders of Trust Securities, (i) to cure any ambiguity, correct or
supplement any provision herein or therein which may be inconsistent with
any other provision therein, or to make any other provisions with respect
to matters or questions arising under the Trust Agreement, which shall
not be inconsistent with the other provisions of the Trust Agreement;
provided that such action shall not adversely affect in any material
respect the interests of any Holder of Trust Securities or (ii) to
modify, eliminate or add to any provisions of the Trust Agreement to such
extent as shall be necessary to ensure that Montana Power Capital will
not be classified for United States federal income tax purposes other
than as a "grantor trust" at any time that any Trust Securities are
outstanding or to ensure Montana Power Capital's exemption from the
status of an "investment company" under the Investment Company Act of
1940, as amended (the "Investment Company Act") or (iii) to effect the
acceptance of a successor Trustee's appointment. (Section 10.03(a)).
Except as provided below, any provision of the Trust Agreement may be
amended by a majority of the Administrative Trustees and the Company with
(i) the consent of a majority in liquidation preference amount of the
Trust Securities then outstanding and (ii) receipt by the Trustees of an
opinion of counsel to the effect that such amendment or the exercise of
any power granted to the Trustees in accordance with such amendment will
not affect Montana Power Capital's status as a grantor trust for United
States federal income tax purposes or affect Montana Power Capital's
exemption from status of an "investment company" under the Investment
Company Act. (Section 10.03(b)).
Without the consent of each affected Holder of Trust Securities, the
Trust Agreement may not be amended to (i) reduce the liquidation
preference of any Trust Security, (ii) change the amount or timing of any
distribution with respect to the Trust Securities or otherwise adversely
affect the amount of any distribution required to be made in respect of
the Trust Securities as of a specified date, (iii) restrict the right of
a Holder of Trust Securities to institute suit for the enforcement of any
such payment on or after such date, or (iv) change the consent
requirement for any such actions. (Section 10.03(c)).
TRUSTEES
Unless an Event of Default shall have occurred and be continuing, any
Trustee may be removed at any time by act of the Holder of the Common
Securities. If an Event of Default has occurred and is continuing, any
Trustee may be removed at such time by act of the Holders of a majority
of the Preferred Securities. No resignation or removal of any Trustee
and no appointment of a successor trustee shall be effective until the
acceptance of appointment by the successor Trustee in accordance with the
provisions of the Trust Agreement. (Section 8.10).
The Property Trustee, other than during the occurrence and continuance
of an Event of Default, undertakes to perform only such duties as are
specifically set forth in the Trust Agreement and, after such Event of
Default, must exercise the same degree of care and skill as a prudent
person would exercise or use in the conduct of his or her own affairs.
Subject to this provision, the Property Trustee is under no obligation to
exercise any of the powers vested in it by the Trust Agreement at the
request of any Holder of Preferred Securities unless it is offered
reasonable indemnity against the costs, expenses and liabilities that
might be incurred thereby. If no Event of Default has occurred and is
continuing and the Property Trustee is required to decide between
alternative causes of action, construe an ambiguous provision in the
Trust Agreement or is unsure of the application of any provision of the
Trust Agreement, and the matter is not one on which Holders of Preferred
Securities are entitled under the Trust Agreement to vote, then the
Property Trustee shall take such action as is directed by the Company and
if not so directed, shall take such action as it deems advisable and in
the best interests of the Holders of the Preferred Securities and the
Common Securities and will have no liability except for its own bad
faith, negligence or willful misconduct.
The Delaware Trustee will act as the resident trustee in the State of
Delaware and will have no other significant duties. The Property Trustee
will hold the Junior Subordinated Debentures on behalf of Montana Power
Capital and will maintain a payment account with respect to the Trust
Securities, and will also act as trustee under the Trust Agreement for
the purposes of the Trust Indenture Act. See "Events of Default;
Notice." The Administrative Trustees will administer the day to day
operations of Montana Power Capital.
The Administrative Trustees are authorized and directed to conduct the
affairs of Montana Power Capital and to operate Montana Power Capital so
that Montana Power Capital will not be deemed to be an "investment
company" required to be registered under the Investment Company Act or
taxed as a corporation for United States federal income tax purposes and
so that the Junior Subordinated Debentures will be treated as
indebtedness of the Company for United States federal income tax
purposes. In this connection, the Administrative Trustees are authorized
to take any action, not inconsistent with applicable law, the certificate
of trust or the Trust Agreement, that the Administrative Trustees
determine in their discretion to be necessary or desirable for such
purposes, as long as such action does not materially adversely affect the
interests of the Holders of the Preferred Securities.
FORM, EXCHANGE, AND TRANSFER
The following provisions shall apply to the Preferred Securities only
in the event that the Preferred Securities are no longer held in book-
entry only form.
The Preferred Securities will be issuable only in fully registered
form in units having a liquidation preference amount of $25 and any
integral multiple thereof. At the option of the Holder, subject to the
terms of the Trust Agreement, Preferred Securities will be exchangeable
for other Preferred Securities of the same series, of any authorized
denomination and of like tenor and aggregate liquidation preference.
Subject to the terms of the Trust Agreement, Preferred Securities may be
presented for exchange as provided above or for registration of transfer
(duly endorsed or accompanied by a duly executed instrument of transfer)
at the office of The Bank of New York, as transfer agent, or at the
office of any transfer agent designated by the Company for such purpose.
The Company may designate itself the Transfer Agent and Registrar. No
service charge will be made for any registration of transfer or exchange
of Preferred Securities, but the Transfer Agent may require payment of a
sum sufficient to cover any tax or other governmental charge payable in
connection therewith.
Montana Power Capital will not be required to (i) issue, register the
transfer of, or exchange any Preferred Securities during a period
beginning at the opening of business 15 calendar days before the day of
mailing of a notice of redemption of any Preferred Securities called for
redemption and ending at the close of business on the day of such mailing
or (ii) register the transfer of or exchange any Preferred Securities so
selected for redemption, in whole or in part, except the unredeemed
portion of any such Preferred Securities being redeemed in part.
BOOK-ENTRY ONLY ISSUANCE
The Depository Trust Company ("DTC") will act as securities depositary
for the Preferred Securities. The Preferred Securities initially will be
issued only as fully-registered securities registered in the name of Cede
& Co. (DTC's nominee). One or more fully-registered global Preferred
Securities certificates, representing the total aggregate number of
Preferred Securities, will be issued and will be deposited with DTC.
DTC is a limited-purpose trust company organized under the New York
Banking Law, a "banking organization" within the meaning of the New York
Banking Law, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code
and a "clearing agency" registered pursuant to the provisions of Section
17A of the 1934 Act. DTC holds securities that its participants
("Participants") deposit with DTC. DTC also facilitates the settlement
among Participants of securities transactions, such as transfers and
pledges, in deposited securities through electronic computerized book-
entry changes in Participants' accounts, thereby eliminating the need for
physical movement of securities certificates. Direct Participants
include securities brokers and dealers, banks, trust companies, clearing
corporations and certain other organizations ("Direct Participants").
DTC is owned by a number of its Direct Participants and by the NYSE, the
American Stock Exchange, Inc., and the National Association of Securities
Dealers, Inc. Access to the DTC system is also available to others, such
as securities brokers and dealers, banks and trust companies that clear
transactions through or maintain a direct or indirect custodial
relationship with a Direct Participant either directly or indirectly
("Indirect Participants"). The rules applicable to DTC and its Direct
Participants and Indirect Participants (together, "Participants") are on
file with the Commission.
Purchases of Preferred Securities within the DTC system must be made
by or through Direct Participants, which will receive a credit for the
Preferred Securities on DTC's records. The ownership interest of each
actual purchaser of each Preferred Security (a "Beneficial Owner") is in
turn to be recorded on the Participants' records. Beneficial Owners will
not receive written confirmation from DTC of their purchases, but
Beneficial Owners are expected to receive written confirmations providing
details of the transactions, as well as periodic statements of their
holdings, from the Participants through which the Beneficial Owners
purchased Preferred Securities. Transfers of ownership interests in the
Preferred Securities are to be accomplished by entries made on the books
of Participants acting on behalf of Beneficial Owners. Beneficial Owners
will not receive certificates representing their ownership interests in
the Preferred Securities, except in the event that use of the book-entry
system for the Preferred Securities is discontinued.
To facilitate subsequent transfers, all the Preferred Securities
deposited by Direct Participants with DTC are registered in the name of
DTC's nominee, Cede & Co. The deposit of Preferred Securities with DTC
and their registration in the name of Cede & Co. effect no change in
beneficial ownership. DTC has no knowledge of the actual Beneficial
Owners of the Preferred Securities. DTC's records reflect only the
identity of the Direct Participants to whose accounts such Preferred
Securities are credited, which may or may not be the Beneficial Owners.
The Participants will remain responsible for keeping account of their
holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants and by
Participants to Beneficial Owners will be governed by arrangements among
them, subject to any statutory or regulatory requirements that may be in
effect from time to time.
Redemption notices shall be sent to Cede & Co. If less than all of
the Preferred Securities are being redeemed, DTC's practice is to
determine by lot the amount of the interest of each Direct Participant in
such issue to be redeemed.
Although voting with respect to the Preferred Securities is limited,
in those cases where a vote is required, neither DTC nor Cede & Co. will
itself consent or vote with respect to Preferred Securities. Under its
usual procedures, DTC would mail an Omnibus Proxy to Montana Power
Capital as soon as possible after the record date. The Omnibus Proxy
assigns Cede & Co. consenting or voting rights to those Direct
Participants to whose accounts the Preferred Securities are credited on
the record date (identified in a listing attached to the Omnibus Proxy).
The Company and Montana Power Capital believe that the arrangements among
DTC, Direct and Indirect Participants, and Beneficial Owners will enable
the Beneficial Owners to exercise rights equivalent in substance to the
rights that can be directly exercised by a holder of a beneficial
interest in Montana Power Capital.
Distribution payments on the Preferred Securities will be made to DTC.
DTC's practice is to credit Direct Participants' accounts on the relevant
payment date in accordance with their respective holdings shown on DTC's
records unless DTC has reason to believe that it will not receive
payments on such payment date. Payments by Participants to Beneficial
Owners will be governed by standing instructions and customary practices,
as is the case with securities held for the account of customers in
bearer form or registered in "street name," and such payments will be the
responsibility of such Participant and not of DTC, Montana Power Capital
or the Company, subject to any statutory or regulatory requirements to
the contrary that may be in effect from time to time. Payment of
distributions to DTC is the responsibility of Montana Power Capital,
disbursement of such payments to Direct Participants is the
responsibility of DTC, and disbursement of such payments to the
Beneficial Owners is the responsibility of Participants.
Except as provided herein, a Beneficial Owner will not be entitled to
receive physical delivery of Preferred Securities. Accordingly, each
Beneficial Owner must rely on the procedures of DTC to exercise any
rights under the Preferred Securities.
DTC may discontinue providing its services as securities depositary
with respect to the Preferred Securities at any time by giving reasonable
notice to the Property Trustee and to Montana Power Capital. Under such
circumstances, in the event that a successor securities depositary should
not be obtained, Preferred Securities certificates would be required to
be printed and delivered. Additionally, the Administrative Trustees
(with the consent of the Company) may decide to discontinue use of the
system of book-entry transfers through DTC (or any successor depositary)
with respect to the Preferred Securities. After a Debenture Event of
Default, the holders of a majority in liquidation preference of the
Preferred Securities may determine to discontinue the system of book-
entry transfers through DTC. In that event, certificates for the
Preferred Securities would be printed and delivered.
The information in this section concerning DTC and DTC's book-entry
system has been obtained from sources that the Company and Montana Power
Capital believe to be reliable, but neither the Company nor Montana Power
Capital takes responsibility for the accuracy thereof.
CONCERNING THE PROPERTY TRUSTEE
The Property Trustee is The Bank of New York. In addition to acting
as Property Trustee, The Bank of New York acts as trustee under the
Company's Mortgage and Deed of Trust with respect to substantially all of
the properties of the Company, which secures the Company's first mortgage
bonds. The Bank of New York also acts as the Guarantee Trustee under the
Guarantee and the Debenture Trustee under the Indenture. The Bank of New
York (Delaware) acts as the Delaware Trustee under the Trust Agreement.
The Company may maintain deposit accounts and conduct other banking
transactions with The Bank of New York in the ordinary course of its
business.
DESCRIPTION OF THE GUARANTEE
The following summary of certain provisions of the Guarantee does not
purport to be complete and is subject in all respects to the provisions
of, and is qualified in its entirety by reference to, the Guarantee,
including the definitions therein of certain terms, and the Trust
Indenture Act. Whenever particular sections or defined terms of the
Guarantee are referred to, such sections or defined terms are
incorporated herein by reference. The Guarantee has been filed as an
exhibit to the Registration Statement of which this Prospectus forms a
part.
THE GUARANTEE
The Company will irrevocably and unconditionally agree, to the extent
set forth herein, to pay the Guarantee Payments (as defined herein) in
full to the Holders of the Preferred Securities (except to the extent
paid by or on behalf of Montana Power Capital), as and when due,
regardless of any defense, right of set-off or counterclaim that Montana
Power Capital may have or assert. The following payments with respect to
the Preferred Securities, to the extent not paid by or on behalf of
Montana Power Capital, will be subject to the Guarantee (without
duplication) (the "Guarantee Payments"): (i) any accrued and unpaid
distributions required to be paid on the Preferred Securities, but only
if and to the extent that the Property Trustee has available funds
sufficient to make such payment, (ii) the Redemption Price with respect
to any Preferred Securities called for redemption by Montana Power
Capital, but only if and to the extent that the Property Trustee has
available funds sufficient to make such payment, and (iii) upon a
voluntary or involuntary dissolution, winding-up or termination of
Montana Power Capital (unless the Junior Subordinated Debentures are
distributed to the Holders), the lesser of (a) the aggregate of the
liquidation preference and all accrued and unpaid distributions on the
Preferred Securities to the date of payment and (b) the amount of assets
of Montana Power Capital remaining available for distribution to Holders
of Preferred Securities. The Company's obligation to make a Guarantee
Payment may be satisfied by direct payment of the required amounts by the
Company to the Holders of Preferred Securities or by causing Montana
Power Capital to pay such amounts to such Holders. (Sections 1.01 and
5.01).
The Guarantee will constitute a guarantee of payment and not of
collection (i.e., the guaranteed party may institute a legal proceeding
directly against the Company to enforce its rights under the Guarantee
without first instituting a legal proceeding against any other person or
entity). (Section 5.05).
The Company has agreed in the Expense Agreement to provide funds to
Montana Power Capital as needed to pay obligations of Montana Power
Capital to parties other than Holders of Trust Securities. The Junior
Subordinated Debentures and the Guarantee, together with the obligations
of the Company with respect to the Preferred Securities under the
Indenture, the Trust Agreement, the Guarantee and the Expense Agreement,
constitute a full and unconditional guarantee of the Preferred Securities
by the Company.
AMENDMENTS
Except with respect to any changes that do not materially adversely
affect the rights of Holders of Preferred Securities (in which case no
consent will be required), the terms of the Guarantee may be changed only
with the prior approval of the Holders of Preferred Securities of at
least 66 2/3% of the liquidation preference amount of the outstanding
Preferred Securities. (Section 8.02).
EVENTS OF DEFAULT
An event of default under the Guarantee will occur upon the failure of
the Company to perform any of its payment or other obligations
thereunder. The Holders of a majority of the liquidation preference of
the Preferred Securities have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the
Guarantee Trustee in respect of the Guarantee or to direct the exercise
of any trust or power conferred upon the Guarantee Trustee under the
Guarantee. Any Holder of Preferred Securities may institute a legal
proceeding directly against the Company to enforce its rights under the
Guarantee without first instituting a legal proceeding against Montana
Power Capital, the Guarantee Trustee or any other person or entity.
(Section 5.04).
The Company, as Guarantor, will be required to provide annually to the
Guarantee Trustee a statement as to the performance by the Company of
certain of its obligations under the Guarantee and as to any default in
such performance, and an officer's certificate as to the Company's
compliance with all conditions under the Guarantee. (Section 2.03).
CONCERNING THE GUARANTEE TRUSTEE
The Guarantee Trustee, prior to the occurrence of a default by the
Company in performance of the Guarantee, has undertaken to perform only
such duties as are specifically set forth in the Guarantee and, after
default with respect to the Guarantee, must exercise the same degree of
care as a prudent individual would exercise in the conduct of his or her
own affairs. Subject to this provision, the Guarantee Trustee is under
no obligation to exercise any of the powers vested in it by the Guarantee
at the request of any Holder of Preferred Securities unless it is offered
reasonable indemnity against the costs, expenses and liabilities that
might be incurred thereby. (Section 3.01).
The Bank of New York will act as Guarantee Trustee. See DESCRIPTION
OF THE PREFERRED SECURITIES - "Concerning the Property Trustee."
STATUS OF THE GUARANTEE
The Guarantee will constitute an unsecured obligation of the Company
and will rank subordinate and junior in right of payment to all Senior
Indebtedness of the Company to the same extent as the Junior Subordinated
Debentures. (Section 6.01). The Trust Agreement provides that each
Holder of Preferred Securities by acceptance thereof agrees to the
subordination provisions and other terms of the Guarantee.
GOVERNING LAW
The Guarantee will be governed by and construed in accordance with the
laws of the State of New York.
DESCRIPTION OF THE JUNIOR SUBORDINATED DEBENTURES
The following summary does not purport to be complete and is subject
in all respects to the provisions of, and is qualified in its entirety by
reference to, the Indenture, including the definitions therein of certain
terms, and the Trust Indenture Act. Whenever particular provisions or
defined terms in the Indenture are referred to herein, such provisions or
defined terms are incorporated by reference herein. The Indenture has
been filed as an exhibit to the Registration Statement of which this
Prospectus forms a part.
GENERAL
The Indenture provides for the issuance of unsecured, subordinated
debentures (including the Junior Subordinated Debentures), notes or other
evidence of indebtedness by the Company (each a "Debt Security") in an
unlimited amount from time to time. The Junior Subordinated Debentures
constitute a separate series under the Indenture.
The Junior Subordinated Debentures will be limited in aggregate
principal amount to the sum of the aggregate liquidation preference
amount of the Preferred Securities and the consideration paid by the
Company for the Common Securities. The Junior Subordinated Debentures
are unsecured, subordinated obligations of the Company which rank junior
to all of the Company's Senior Indebtedness.
The entire outstanding principal amount of the Junior Subordinated
Debentures will become due and payable, together with any accrued and
unpaid interest thereon, including Additional Interest (as defined
herein), if any, on the date set forth on the cover page of this
Prospectus. The amounts payable as principal and interest on the Junior
Subordinated Debentures will be sufficient to provide for payment of
distributions payable on the Trust Securities.
If Junior Subordinated Debentures are distributed to Holders of
Preferred Securities in a termination of Montana Power Capital, such
Junior Subordinated Debentures will be issued in the form of one or more
global securities, and DTC, or any successor securities depositary for
the Preferred Securities, will act as depositary for the Junior
Subordinated Debentures. It is anticipated that the depositary
arrangements for the Junior Subordinated Debentures would be
substantially identical to those in effect for the Preferred Securities.
Payments of principal and interest on Junior Subordinated Debentures
will be payable, the transfer of Junior Subordinated Debenture will be
registrable, and Junior Subordinated Debentures will be exchangeable for
Junior Subordinated Debentures of other denominations of a like aggregate
principal amount, at the corporate trust office of the Debenture Trustee
in The City of New York; provided that payment of interest may be made at
the option of the Company by check mailed to the address of the persons
entitled thereto and that the payment in full of principal with respect
to any Junior Subordinated Debenture will be made only upon surrender of
such Junior Subordinated Debenture to the Debenture Trustee.
OPTIONAL REDEMPTION
The Company will have the right to redeem the Junior Subordinated
Debentures (i) on or after ____________, in whole at any time or in part
from time to time, at a redemption price equal to 100% of the principal
amount of the Junior Subordinated Debentures so redeemed plus any accrued
and unpaid interest thereon to the date fixed for redemption or (ii) upon
the occurrence and continuation of a Tax Event or an Investment Company
Event (each as defined below, and as so defined, collectively, a "Special
Event"), in whole but not in part, on any date within 90 days of such
occurrence, at a redemption price equal to 100% of the principal amount
of the Junior Subordinated Debentures then outstanding plus any accrued
and unpaid interest (including Additional Interest) thereon to the date
fixed for redemption, in each case subject to conditions described in the
third succeeding paragraph.
"Tax Event" means the receipt by Montana Power Capital or the Company
of an opinion of counsel experienced in such matters to the effect that,
as a result of any amendment to, or change (including any announced
prospective change) in, the laws (or any regulations thereunder) of the
United States or any political subdivision or taxing authority thereof or
therein affecting taxation, or as a result of any official administrative
or judicial pronouncement or decision interpreting or applying such laws
or regulations, which amendment or change is effective or which
pronouncement or decision is announced on or after the date of original
issuance of the Preferred Securities, there is more than an insubstantial
risk that at such time or within 90 days of the date thereof (i) Montana
Power Capital is, or will be, subject to United States federal income tax
with respect to income received or accrued on the Junior Subordinated
Debentures, (ii) interest payable by the Company on the Junior
Subordinated Debentures is not, or will not be, fully deductible by the
Company for United States federal income tax purposes, or (iii) Montana
Power Capital is, or will be, subject to more than a de minimis amount of
other taxes, duties or other governmental charges.
"Investment Company Event" means the receipt by Montana Power Capital
of an opinion of counsel, rendered by a law firm having a recognized
national tax and securities practice, to the effect that as a result of
the occurrence of a change in law or regulation or a change in
interpretation or application of law or regulation by any legislative
body, court, governmental agency or regulatory authority (a "Change in
1940 Act Law"), Montana Power Capital is or will be considered an
"investment company" that is required to be registered under the
Investment Company Act, which Change in 1940 Act Law becomes effective on
or after the date of original issuance of the Preferred Securities.
For so long as Montana Power Capital is the Holder of all the
outstanding Junior Subordinated Debentures, the proceeds of any such
redemption will be used by Montana Power Capital to redeem Preferred
Securities and Common Securities in accordance with their terms. The
Company may not redeem less than all the Junior Subordinated Debentures
unless all accrued and unpaid interest, including any Additional
Interest, if any, has been paid in full (or duly provided for) on all
outstanding Junior Subordinated Debentures for all quarterly interest
periods terminating on or prior to the date of redemption.
Any optional redemption of Junior Subordinated Debentures shall be
made upon not less than 30 nor more than 60 days' notice from the
Debenture Trustee to the Holders of Junior Subordinated Debentures, as
provided in the Indenture. (Section 404).
INTEREST
The Junior Subordinated Debentures shall bear interest at the rate per
annum set forth on the cover page of this Prospectus. Such interest is
payable quarterly in arrears on March 31, June 30, September 30 and
December 31 of each year (each, an "Interest Payment Date"), commencing
, 199 , to the person in whose name each Junior Subordinated
Debenture is registered, by the close of business on the Business Day
next preceding such Interest Payment Date. It is anticipated that
Montana Power Capital will be the sole Holder of the Junior Subordinated
Debentures.
The amount of interest payable for any period will be computed on the
basis of a 360-day year of twelve 30-day months and, for any period
shorter than a full month, on the basis of the actual number of days
elapsed in such period (Section 310). In the event that any date on
which interest is payable on the Junior Subordinated Debentures is not a
Business Day, then payment of the interest payable on such date will be
made on the next succeeding day which is a Business Day, except that, if
such Business Day is in the next succeeding calendar year, such payment
shall be made on the immediately preceding Business Day, in each case
with the same force and effect as if made on the date the payment was
originally payable. (Section 113).
OPTION TO EXTEND INTEREST PAYMENT PERIOD
So long as no Debenture Event of Default shall have occurred and be
continuing, the Company has the right to defer payments of interest on
the Junior Subordinated Debentures for Extension Periods of up to 20
consecutive quarters; provided that any such Extension Period may not
extend beyond the maturity of the Junior Subordinated Debentures. Prior
to the end of an Extension Period, the Company may, and at the end of
such Extension Period, the Company shall, pay all interest then accrued
and unpaid (together with interest thereon at the stated rate borne
thereby, to the extent permitted by applicable law). Upon the
termination of any Extension Period and the payment of all amounts then
due, including interest on deferred interest payments, the Company may
elect a new Extension Period, subject to the requirements set forth
herein. If interest payments are so deferred, distributions on the
Preferred Securities also will be deferred, and the Company will not be
permitted to (i) declare or pay any dividends or distributions on, or
redeem, purchase, acquire or make a liquidation payment with respect to,
any of its capital stock (other than dividends or distributions in common
stock of the Company) or (ii) make any payment of principal of, or
interest or premium, if any, on, or repay, repurchase or redeem, or make
any sinking fund payment with respect to any indebtedness that is pari
passu with or junior in interest to the Junior Subordinated Debentures or
make any guarantee payments with respect to such indebtedness.
ADDITIONAL INTEREST
So long as any Preferred Securities remain outstanding, if Montana
Power Capital shall be required to pay, with respect to its income
derived from the interest payments on the Junior Subordinated Debentures,
any amounts for or on account of any taxes, duties, assessments or
governmental charges of whatever nature imposed by the United States, or
any other taxing authority, then, in any such case, the Company will pay
as interest on such Junior Subordinated Debentures such additional
interest ("Additional Interest") as may be necessary in order that the
net amounts received and retained by Montana Power Capital after the
payment of such taxes, duties, assessments or governmental charges shall
result in Montana Power Capital's having such funds as it would have had
in the absence of the payment of such taxes, duties, assessments or
governmental charges. (Section 313).
DEFEASANCE
The principal amount of any series of Debt Securities issued under the
Indenture will be deemed to have been paid for purposes of the Indenture,
and the entire indebtedness of the Company in respect thereof will be
deemed to have been satisfied and discharged, if there shall have been
irrevocably deposited with the Debenture Trustee or any paying agent, in
trust: (a) money in an amount which will be sufficient, or (b) in the
case of a deposit made prior to the maturity of such Debt Securities,
Government Obligations, which do not contain provisions permitting the
redemption or other prepayment thereof at the option of the issuer
thereof, the principal of and the interest on which when due, without any
regard to reinvestment thereof, will provide moneys which, together with
the money, if any, deposited with or held by the Debenture Trustee, will
be sufficient, or (c) a combination of (a) and (b) which will be
sufficient, to pay when due the principal of and premium, if any, and
interest, if any, due and to become due on the Debt Securities of such
series that are outstanding; provided that if such deposit shall have
been made prior to the maturity of such Debt Securities, the Company
shall have delivered to the Debenture Trustee an opinion of counsel to
the effect that the holders of such Debt Securities will not recognize
income, gain or loss for federal income tax purposes as a result of the
satisfaction and discharge of the Company's indebtedness in respect of
such Debt Securities, and such holders will be subject to federal income
taxation on the same amounts and in the same manner and at the same times
as if such satisfaction and discharge had not occurred. For this
purpose, Government Obligations include direct obligations of, or
obligations unconditionally guaranteed by, the United States of America
entitled to the benefit of the full faith and credit thereof and
certificates, depositary receipts or other instruments which evidence a
direct ownership interest in such obligations or in any specific interest
or principal payments due in respect thereof. (Sections 101 and 701).
SUBORDINATION
The Junior Subordinated Debentures will be subordinate and junior in
right of payment to all Senior Indebtedness of the Company as provided in
the Indenture. No payment of principal of (including redemption and
sinking fund payments), or interest on, the Junior Subordinated
Debentures may be made (i) upon the occurrence of certain events of
bankruptcy, insolvency or reorganization, (ii) if any Senior Indebtedness
is not paid when due, (iii) if any other default has occurred pursuant to
which the holders of Senior Indebtedness shall have the right to
accelerate the maturity thereof, and, with respect to (ii) and (iii),
such default has not been cured or waived, or (iv) if the maturity of any
series of Debt Securities has been accelerated, because of an event of
default with respect thereto, which remains uncured. Upon any
distribution of assets of the Company to creditors upon any dissolution,
winding-up, liquidation or reorganization, whether voluntary or
involuntary or in bankruptcy, insolvency, receivership or other
proceedings, all principal of, and premium, if any, and interest due or
to become due on, all Senior Indebtedness must be paid in full before the
Holders of the Junior Subordinated Debentures are entitled to receive or
retain any payment thereon. (Section 1502).
The term Senior Indebtedness is defined in the Indenture to mean all
obligations (other than non-recourse obligations and the indebtedness
issued under the Indenture) of, or guaranteed or assumed by, the Company
for borrowed money, including both senior and subordinated indebtedness
for borrowed money (other than the Debt Securities), or for the payment
of money relating to any lease which is capitalized on the consolidated
balance sheet of the Company and its subsidiaries in accordance with
generally accepted accounting principles as in effect from time to time,
or evidenced by bonds, debentures, notes or other similar instruments,
and in each case, amendments, renewals, extensions, modifications and
refundings of any such indebtedness or obligations, whether existing as
of the date of the Indenture or subsequently incurred by the Company
unless, in the case of any particular indebtedness, obligation, renewal,
extension or refunding, the instrument creating or evidencing the same or
the assumption or guarantee of the same expressly provides that such
indebtedness, obligation, renewal, extension or refunding is not superior
in right of payment to or is pari passu with the Junior Subordinated
Debentures; provided that the Company's obligations under the Guarantee
shall not be deemed to be Senior Indebtedness. (Section 101).
The Indenture does not limit the aggregate amount of Senior
Indebtedness that may be issued. As of June 30, 1996, the Company had
approximately $625,000,000 principal amount of indebtedness for borrowed
money constituting Senior Indebtedness.
CERTAIN COVENANTS OF THE COMPANY
The Company covenants that it shall not, and shall not permit any
subsidiary of the Company to, (a) declare or pay any dividends or
distributions on, or redeem, purchase, acquire or make a liquidation
payment with respect to, any of its capital stock (other than dividends
or distributions in common stock of the Company), or (b) make any payment
of principal of or, interest or premium, if any, on or repay or
repurchase or redeem, or make any sinking fund payment with respect to,
any indebtedness that is pari passu with or junior in interest to the
Debt Securities or make any guarantee payments with respect to such
indebtedness if at such time (i) there shall have occurred and be
continuing a default under the Indenture with respect to the payment of
principal of or interest on any Debt Security (whether before or after
expiration of any period of grace), or (ii) the Company shall have
elected to extend any interest payment period, and any such extension
period, or any extension thereof, shall be continuing. (Section 608).
The Company also covenants that it shall (i) maintain direct or indirect
ownership of all of the Common Securities, (ii) not voluntarily (to the
extent permitted by law) dissolve, terminate, liquidate or wind up
Montana Power Capital, except in connection with a distribution of the
Junior Subordinated Debentures to the Holders of the Preferred Securities
in liquidation of Montana Power Capital or in connection with certain
mergers, consolidations or amalgamations permitted by the Trust
Agreement, (iii) remain the sole Depositor under the Trust Agreement and
timely perform in all material respects all of its duties as Depositor,
and (iv) use reasonable efforts to cause Montana Power Capital to remain
a business trust and otherwise continue to be treated as a grantor trust
for federal income tax purposes. (Section 609).
CONSOLIDATION, MERGER, AND SALE OF ASSETS
Under the terms of the Indenture, the Company may not consolidate with
or merge into any other entity or convey, transfer or lease its
properties and assets substantially as an entirety to any entity, unless
(i) the corporation formed by such consolidation or into which the
Company is merged or the entity which acquires by conveyance or transfer,
or which leases, the property and assets of the Company substantially as
an entirety shall be an entity organized and validly existing under the
laws of any domestic jurisdiction and such entity assumes the Company's
obligations on all Debt Securities and performance of every covenant
under the Indenture, (ii) immediately after giving effect to the
transaction, no Event of Default, and no event which, after notice or
lapse of time or both, would become an Event of Default, shall have
occurred and be continuing, and (iii) the Company shall have delivered to
the Debenture Trustee an Officer's Certificate and an Opinion of Counsel
as provided in the Indenture. (Section 1101).
EVENTS OF DEFAULT
Each of the following will constitute an Event of Default under the
Indenture with respect to the Debt Securities of any series: (a) failure
to pay any interest on the Debt Securities of such series within 30 days
after the same becomes due and payable; (b) failure to pay principal or
premium, if any, on the Debt Securities of such series when due and
payable; (c) failure to perform, or breach of, any other covenant or
warranty of the Company in the Indenture (other than a covenant or
warranty of the Company in the Indenture solely for the benefit of one or
more series of Debt Securities other than such series) for 60 days after
written notice to the Company by the Debenture Trustee, or to the Company
and the Debenture Trustee by the Holders of at least 33% in principal
amount of the Debt Securities of such series outstanding under the
Indenture as provided in the Indenture; (d) the entry by a court having
jurisdiction in the premises of (1) a decree or order for relief in
respect of the Company in an involuntary case or proceeding under any
applicable federal or state bankruptcy, insolvency, reorganization or
other similar law or (2) a decree or order adjudging the Company a
bankrupt or insolvent, or approving as properly filed a petition by one
or more Persons other than the Company seeking reorganization,
arrangement, adjustment or composition of or in respect of the Company
under any applicable federal or state law, or appointing a custodian,
receiver, liquidator, assignee, trustee, sequestrator or other similar
official for the Company or for any substantial part of its property, or
ordering the winding up or liquidation of its affairs, and any such
decree or order for relief or any such other decree or order shall have
remained unstayed and in effect for a period of 90 consecutive days; and
(e) the commencement by the Company of a voluntary case or proceeding
under any applicable federal or state bankruptcy, insolvency,
reorganization or other similar law or of any other case or proceeding to
be adjudicated a bankrupt or insolvent, or the consent by it to the entry
of a decree or order for relief in respect of the Company in a case or
other similar proceeding or to the commencement of any bankruptcy or
insolvency case or proceeding against it under any applicable federal or
state law or the filing by it of a petition or answer or consent seeking
reorganization or relief under any applicable federal or state law, or
the consent by it to the filing of such petition or to the appointment of
or taking possession by a custodian, receiver, liquidator, assignee,
trustee, sequestrator or similar official of the Company or of any
substantial part of its property, or the making by it of an assignment
for the benefit of creditors, or the admission by it in writing of its
inability to pay its debts generally as they become due, or the
authorization of such action by the Board of Directors. (Section 801).
An Event of Default with respect to the Debt Securities of a
particular series may not necessarily constitute an Event of Default with
respect to Debt Securities of any other series issued under the
Indenture.
If an Event of Default due to the default in payment of principal of
or interest on any series of Debt Securities or due to the default in the
performance or breach of any other covenant or warranty of the Company
applicable to the Debt Securities of such series but not applicable to
all series occurs and is continuing, then either the Trustee or the
Holders of not less than 33% in principal amount of the outstanding Debt
Securities of such series (or, if such persons fail to act, Holders of
not less than 33% in liquidation preference of the outstanding Preferred
Securities) may declare the principal of all of the Debt Securities of
such series and interest accrued thereon to be due and payable
immediately (subject to the subordination provisions of the Indenture).
If an Event of Default due to the default in the performance of any other
covenants or agreements in the Indenture applicable to all outstanding
Debt Securities or due to certain events of bankruptcy, insolvency or
reorganization of the Company has occurred and is continuing, either the
Trustee or the Holders of not less than 33% in principal amount of all
outstanding Debt Securities, considered as one class, and not the Holders
of the Debt Securities of any one of such series, may make such
declaration of acceleration (subject to the subordination provisions of
the Indenture).
At any time after the declaration of acceleration with respect to the
Debt Securities of any series has been made and before a judgment or
decree for payment of the money due has been obtained, the Event or
Events of Default giving rise to such declaration of acceleration will,
without further act, be deemed to have been waived, and such declaration
and its consequences will, without further act, be deemed to have been
rescinded and annulled, if
(a) the Company has paid or deposited with the Debenture Trustee a sum
sufficient to pay
(1) all overdue interest on all Debt Securities of such series;
(2) the principal of and premium, if any, on any Debt Securities of
such series which have become due otherwise than by such declaration of
acceleration and interest thereon at the rate or rates prescribed
therefor in such Debt Securities;
(3) interest upon overdue interest at the rate or rates prescribed
therefor in such Debt Securities, to the extent that payment of such
interest is lawful; and
(4) all amounts then due to the Debenture Trustee under the
Indenture;
(b) any other Event or Events of Default with respect to Debt Securities
of such series, other than the nonpayment of the principal of the Debt
Securities of such series which has become due solely by such declaration
of acceleration, have been cured or waived as provided in the Indenture.
(Section 802).
Subject to the provisions of the Indenture relating to the duties of
the Debenture Trustee, the Debenture Trustee will be under no obligation
to exercise any of its rights or powers under the Indenture at the
request or direction of any of the Holders, unless such Holders shall
have offered to the Debenture Trustee reasonable indemnity (Section 903).
If an Event of Default has occurred and is continuing in respect of a
series of Debt Securities, subject to such provisions for the
indemnification of the Debenture Trustee, the Holders of a majority in
principal amount of the outstanding Debt Securities of such series will
have the right to direct the time, method and place of conducting any
proceeding for any remedy available to the Debenture Trustee, or
exercising any trust or power conferred on the Debenture Trustee, with
respect to the Debt Securities of such series; provided, however, that if
an Event of Default occurs and is continuing with respect to more than
one series of Debt Securities, the Holders of a majority in aggregate
principal amount of the outstanding Debt Securities of all such series,
considered as one class, will have the right to make such direction, and
not the Holders of the Debt Securities of any one of such series; and
provided, further, that such direction will not be in conflict with any
rule of law or with the Indenture. (Section 812).
No Holder of Debt Securities of any series will have any right to
institute any proceeding with respect to the Indenture, or for the
appointment of a receiver or a trustee, or for any other remedy
thereunder, unless (i) such Holder has previously given to the Debenture
Trustee written notice of a continuing Event of Default with respect to
the Debt Securities of such series, (ii) the Holders of at least 33% in
aggregate principal amount of the outstanding Debt Securities of all
series in respect of which an Event of Default shall have occurred and be
continuing, considered as one class, have made written request to the
Debenture Trustee to institute proceedings in respect of such Event of
Default in its own name as Trustee, (iii) such Holder or Holders have
offered reasonable indemnity to the Debenture Trustee to institute such
proceeding and (iv) the Debenture Trustee has failed to institute any
proceeding, and has not received from the Holders of a majority in
aggregate principal amount of the outstanding Debt Securities of such
series a direction inconsistent with such request, within 60 days after
such notice, request and offer (Section 807). However, such limitations
do not apply to a suit instituted by a Holder of a Debt Security for the
enforcement of payment of the principal of or any premium or interest on
such Debt Security or a holder of a Preferred Security representing an
interest in a Debt Security on or after the applicable due date specified
in such Debt Security. (Section 808).
The Company will be required to furnish to the Debenture Trustee
annually a statement by an appropriate officer as to such officer's
knowledge of the Company's compliance with all conditions and covenants
under the Indenture, such compliance to be determined without regard to
any period of grace or requirement of notice under the Indenture.
(Section 606).
MODIFICATION AND WAIVER
Without the consent of any Holder of Debt Securities, the Company and
the Debenture Trustee may enter into one or more supplemental indentures
for any of the following purposes: (a) to evidence the assumption by any
permitted successor to the Company of the covenants of the Company in the
Indenture and in the Debt Securities; or (b) to add one or more covenants
of the Company or other provisions for the benefit of the Holders of
outstanding Debt Securities or to surrender any right or power conferred
upon the Company by the Indenture; or (c) to add any additional Events of
Default with respect to outstanding Debt Securities; or (d) to change or
eliminate any provision of the Indenture or to add any new provision to
the Indenture, provided that if such change, elimination or addition will
adversely affect the interests of the Holders of Debt Securities of any
series in any material respect, such change, elimination or addition will
become effective with respect to such series only (1) when the consent of
the Holders of Debt Securities of such series has been obtained in
accordance with the Indenture, or (2) when no Debt Securities of such
series remain outstanding under the Indenture; or (e) to provide
collateral security for all but not part of the Debt Securities; or (f)
to establish the form or terms of Debt Securities of any other series as
permitted by the Indenture; or (g) to provide for the authentication and
delivery of bearer securities and coupons appertaining thereto
representing interest, if any, thereon and for the procedures for the
registration, exchange and replacement thereof and for the giving of
notice to, and the solicitation of the vote or consent of, the Holders
thereof, and for any and all other matters incidental thereto; or (h) to
evidence and provide for the acceptance of appointment of a successor
Debenture Trustee under the Indenture with respect to the Debt Securities
of one or more series and to add to or change any of the provisions of
the Indenture as shall be necessary to provide for or to facilitate the
administration of the trusts under the Indenture by more than one
trustee; or (i) to provide for the procedures required to permit the
utilization of a noncertificated system of registration for the Debt
Securities of all or any series; or (j) to change any place where (1) the
principal of and premium, if any, and interest, if any, on all or any
series of Debt Securities shall be payable, (2) all or any series of Debt
Securities may be surrendered for registration of transfer or exchange
and (3) notices and demands to or upon the Company in respect of Debt
Securities and the Indenture may be served; or (k) to cure any ambiguity
or inconsistency or to add or change any other provisions with respect to
matters and questions arising under the Indenture, provided such changes
or additions shall not adversely affect the interests of the Holders of
Debt Securities of any series in any material respect (Section 1201).
The Holders of at least a majority in aggregate principal amount of
the Debt Securities of all series then outstanding may waive compliance
by the Company with certain restrictive provisions of the Indenture
(Section 607). The Holders of not less than a majority in principal
amount of the outstanding Debt Securities of any series may waive any
past default under the Indenture with respect to such series, except a
default in the payment of principal, premium, or interest and certain
covenants and provisions of the Indenture that cannot be modified or be
amended without the consent of the Holder of each outstanding Debt
Security of such series affected; provided, however, that so long as
Preferred Securities are outstanding such waiver shall require the
consent of a majority in liquidation preference of outstanding Preferred
Securities (Section 813).
Without limiting the generality of the foregoing, if the Trust
Indenture Act is amended after the date of the Indenture in such a way as
to require changes to the Indenture or the incorporation therein of
additional provisions or so as to permit changes to, or the elimination
of, provisions which, at the date of the Indenture or at any time
thereafter, were required by the Trust Indenture Act to be contained in
the Indenture, the Indenture will be deemed to have been amended so as to
conform to such amendment of the Trust Indenture Act or to effect such
changes, additions or elimination, and the Company and the Debenture
Trustee may, without the consent of any Holders, enter into one or more
supplemental indentures to evidence or effect such amendment (Section
1201).
Except as provided above, the consent of the Holders of not less than
a majority in aggregate principal amount of the Debt Securities of all
series then outstanding, considered as one class, is required for the
purpose of adding any provisions to, or changing in any manner, or
eliminating any of the provisions of, the Indenture or modifying in any
manner the rights of the Holders of such Debt Securities under the
Indenture pursuant to one or more supplemental indentures; provided,
however, that if less than all of the series of Debt Securities
outstanding are directly affected by a proposed supplemental indenture,
then the consent only of the Holders of a majority in aggregate principal
amount of outstanding Debt Securities of all series so directly affected,
considered as one class, and the consent of a majority in liquidation
preference of the related outstanding Preferred Securities will be
required; and provided further, that no such amendment or modification
may without the consent of each Holder of Debt Securities and Preferred
Securities affected thereby (a) change the Stated Maturity of the
principal of, or any installment of principal of or interest on, any Debt
Security, or reduce the principal amount thereof or the rate of interest
thereon (or the amount of any installment of interest thereon) or change
the method of calculating such rate or reduce any premium payable upon
the redemption thereof, or change the coin or currency (or other
property) in which any Debt Security or any premium or the interest
thereon is payable, or impair the right to institute suit for the
enforcement of any such payment on or after the Stated Maturity of any
Debt Security (or, in the case of redemption, on or after the redemption
date), (b) reduce the percentage in principal amount of the outstanding
Debt Security of any series, (or, if applicable, in liquidation
preference of Preferred Securities) the consent of the Holders of which
is required for any such supplemental indenture, or the consent of the
Holders of which is required for any waiver of compliance with any
provision of the Indenture or any default thereunder and its
consequences, or reduce the requirements for quorum or voting, or (c)
modify certain of the provisions of the Indenture relating to
supplemental indentures, waivers of certain covenants and waivers of past
defaults with respect to the Debt Security of any series. A supplemental
indenture which changes or eliminates any covenant or other provision of
the Indenture which has expressly been included solely for the benefit of
one or more particular series of Debt Securities, or modifies the rights
of the Holders of Debt Securities of such series with respect to such
covenant or other provision, will be deemed not to affect the rights
under the Indenture of the Holders of the Debt Securities of any other
series. (Section 1202).
The Indenture provides that in determining whether the Holders of the
requisite principal amount of the outstanding Debt Securities have given
any request, demand, authorization, direction, notice, consent or waiver
under the Indenture, or whether a quorum is present at the meeting of the
Holders of Debt Securities, Debt Securities owned by the Company or any
other obligor upon the Debt Securities or any affiliate of the Company or
of such other obligor (unless the Company, such affiliate or such obligor
owns all Debt Securities outstanding under the Indenture, determined
without regard to this provision) shall be disregarded and deemed not to
be outstanding. (Section 101).
If the Company shall solicit from Holders any request, demand,
authorization, direction, notice, consent, election, waiver or other Act,
the Company may, at its option, fix in advance a record date for the
determination of Holders entitled to give such request, demand,
authorization, direction, notice, consent, waiver or other Act, but the
Company shall have no obligation to do so. If such a record date is
fixed, such request, demand, authorization, direction, notice, consent,
waiver or other Act may be given before or after such record date, but
only the Holders of record at the close of business on such record date
shall be deemed to be Holders for the purposes of determining whether
Holders of the requisite proportion of the outstanding Debt Securities
have authorized or agreed or consented to such request, demand,
authorization, direction, notice, consent, waiver or other Act, and for
that purpose the outstanding Debt Securities shall be computed as of the
record date. Any request, demand, authorization, direction, notice,
consent, election, waiver or other Act of a Holder shall bind every
future Holder of the same Debt Security and the Holder of every Debt
Security issued upon the registration of transfer thereof or in exchange
therefor or in lieu thereof in respect of anything done, omitted or
suffered to be done by the Debenture Trustee or the Company in reliance
thereon, whether or not notation of such action is made upon such Debt
Security. (Section 104).
RESIGNATION OR REMOVAL OF DEBENTURE TRUSTEE
The Debenture Trustee may resign at any time by giving written notice
thereof to the Company or may be removed at any time by Act of the
Holders of a majority in principal amount of all series of Debt
Securities then outstanding delivered to the Debenture Trustee and the
Company (accompanied, at any time that the Preferred Securities are
outstanding, by the consent of a majority in liquidation preference of
the outstanding Preferred Securities). No resignation or removal of the
Debenture Trustee and no appointment of a successor trustee will become
effective until the acceptance of appointment by a successor trustee in
accordance with the requirements of the Indenture. So long as no Event
of Default or event which, after notice or lapse of time, or both, would
become an Event of Default has occurred and is continuing and except with
respect to a Debenture Trustee appointed by Act of the Holders, if the
Company has delivered to the Debenture Trustee a resolution of its Board
of Directors appointing a successor trustee and such successor has
accepted such appointment in accordance with the terms of the Indenture,
the Debenture Trustee will be deemed to have resigned and the successor
will be deemed to have been appointed as trustee in accordance with the
Indenture. (Section 910).
NOTICES
Notices to Holders of Debt Securities will be given by mail to the
addresses of such Holders as they may appear in the security register
therefor. (Section 106).
TITLE
The Company, the Debenture Trustee, and any agent of the Company or
the Debenture Trustee, may treat the Person in whose name Debt Securities
are registered as the absolute owner thereof (whether or not such Debt
Securities may be overdue) for the purpose of making payments and for all
other purposes irrespective of notice to the contrary. (Section 308).
GOVERNING LAW
The Indenture and the Debt Securities will be governed by, and
construed in accordance with, the laws of the State of New York.
REGARDING THE DEBENTURE TRUSTEE
The Debenture Trustee under the Indenture is The Bank of New York. In
addition to acting as Debenture Trustee under the Indenture, The Bank of
New York acts as trustee under the Company's Mortgage and Deed of Trust
with respect to substantially all the properties of the Company, which
secures the Company's first mortgage bonds. In addition, The Bank of New
York acts as Property Trustee under the Trust Agreement and as Guarantee
Trustee under the Guarantee. The Bank of New York (Delaware) acts as the
Delaware Trustee under the Trust Agreement. The Company may maintain
deposit accounts and conduct other banking transactions with the
Debenture Trustee. See DESCRIPTION OF THE PREFERRED SECURITIES -
"Concerning the Property Trustee" and DESCRIPTION OF THE GUARANTEE
"Concerning the Guarantee Trustee."
RELATIONSHIP AMONG THE PREFERRED SECURITIES,
THE JUNIOR SUBORDINATED DEBENTURES AND THE GUARANTEE
As long as payments of interest and other payments are made when due
on the Junior Subordinated Debentures, such payments will be sufficient
to cover Distributions and other payments due on the Preferred
Securities, primarily because (i) the aggregate principal amount of the
Junior Subordinated Debentures will be equal to the sum of the aggregate
stated liquidation preference amount of the Preferred Securities and the
Common Securities; (ii) the interest rate and interest and other payment
dates on the Junior Subordinated Debentures will match the Distribution
rate and Distribution and other payment dates for the Preferred
Securities; (iii) the Company shall pay for all and any costs, expenses
and liabilities of Montana Power Capital except Montana Power Capital's
obligations to Holders of the Preferred Securities under the Preferred
Securities; and (iv) the Trust Agreement further provides that Montana
Power Capital will not engage in any activity that is not consistent with
the limited purposes of Montana Power Capital.
Payments of Distributions and other amounts due on the Preferred
Securities (to the extent Montana Power Capital has funds available for
the payment of such Distributions) are irrevocably guaranteed by the
Company as and to the extent set forth under "Description of the
Guarantee." Taken together, the Company's obligations under the Junior
Subordinated Debentures, the Indenture, the Trust Agreement, the Expense
Agreement and the Guarantee provide, in the aggregate, a full,
irrevocable and unconditional guarantee of payments of distributions and
other amounts due on the Preferred Securities. No single document
standing alone or operating in conjunction with fewer than all of the
other documents constitutes such guarantee. It is only the combined
operation of these documents that has the effect of providing a full,
irrevocable and unconditional guarantee of Montana Power Capital's
obligations under the Preferred Securities. If and to the extent that
the Company does not make payments on the Junior Subordinated Debentures,
Montana Power Capital will not pay Distributions or other amounts due on
the Preferred Securities. The guarantee does not cover payment of
Distributions when Montana Power Capital does not have sufficient funds
to pay such Distributions. In such event, a Holder of Preferred
Securities may institute a legal proceeding directly against the Company
to enforce payment of such Distributions to such Holder after the
respective due dates. The obligations of the Company under the Guarantee
are subordinate and junior in right of payment to all Senior Indebtedness
of the Company.
Notwithstanding anything to the contrary in the Indenture, the Company
has the right to set-off any payment it is otherwise required to make
thereunder with and to the extent the Company has theretofore made, or is
concurrently on the date of such payment making, a payment under the
Guarantee.
A Holder of Preferred Securities may institute a legal proceeding
directly against the Company to enforce its rights under the Guarantee
without first instituting a legal proceeding against the Guarantee
Trustee, Montana Power Capital or any other person or entity.
The Preferred Securities evidence preferred undivided beneficial
interests in Montana Power Capital, and Montana Power Capital exits for
the sole purpose of issuing the Preferred Securities and the Common
Securities and investing the proceeds thereof in Junior Subordinated
Debentures. A principal difference between the rights of a Holder of
Preferred Securities and a holder of Junior Subordinated Debentures is
that a holder of Junior Subordinated Debentures is entitled to receive
from the Company the principal amount of and interest accrued on Junior
Subordinated Debentures held, while a Holder of Preferred Securities is
entitled to receive Distributions from Montana Power Capital (or from the
Company under the Guarantee) if and to the extent Montana Power Capital
has funds available for the payment of such Distributions.
Upon any voluntary or involuntary termination, winding-up or
liquidation of Montana Power Capital involving the liquidation of the
Junior Subordinated Debentures, the Holders of the Preferred Securities
will be entitled to receive, out of assets held by Montana Power Capital,
the Liquidation Distribution in cash. See DESCRIPTION OF PREFERRED
SECURITIES-"Liquidation Distribution upon Termination." Upon any
voluntary or involuntary liquidation or bankruptcy of the Company, the
Property Trustee, as holder of the Junior Subordinated Debentures, would
be a subordinated creditor of the Company, subordinated in right of
payment to all Senior Indebtedness, but entitled to receive payment in
full of principal and interest before any stockholders of the Company
receive payments or distributions. Since the Company is the guarantor
under the Guarantee and has agreed to pay for all costs, expenses and
liabilities of Montana Power Capital (other than Montana Power Capital's
obligations to the Holders of the Preferred Securities), the positions of
a Holder of Preferred Securities and a holder of the Junior Subordinated
Debentures relative to the other creditors and to stockholders of the
Company in the event of liquidation or bankruptcy of the Company would be
substantially the same.
A default or event of default under any Senior Indebtedness of the
Company will not constitute a default or Event of Default under the
Indenture. However, in the event of payment defaults under, or
acceleration of, Senior Indebtedness of the Company, the subordination
provisions of the Indenture provide that no payments may be made in
respect of the Junior Subordinated Debentures until such Senior
Indebtedness has been paid in full or any payment default thereunder has
been cured or waived. Failure to make required payments on the Junior
Subordinated Debentures would constitute an Event of Default under the
Indenture.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following summary describes certain United States federal income
tax consequences of the ownership of Preferred Securities as of the date
hereof and represents the opinion of Reid & Priest LLP, special counsel
to the Company, insofar as it relates to matters of law or legal
conclusions. Except where noted, it deals only with Preferred Securities
held as capital assets and does not deal with special situations, such as
those of dealers in securities or currencies, financial institutions,
life insurance companies, persons holding Preferred Securities as a part
of a hedging or conversion transaction or a straddle, United States
Holders (as defined herein) whose "functional currency" is not the U.S.
dollar, or persons who are not United States Holders. In addition, this
discussion does not address the tax consequences to persons who purchase
Preferred Securities other than pursuant to their initial issuance and
distribution. Furthermore, the discussion below is based upon the
provisions of the Internal Revenue Code of 1986, as amended ("Code"), and
regulations, rulings and judicial decisions thereunder as of the date
hereof, and such authorities may be repealed, revoked or modified so as
to result in federal income tax consequences different from those
discussed below. These authorities are subject to various
interpretations and it is therefore possible that the United States
federal income tax treatment of the Preferred Securities may differ from
the treatment described below.
PROSPECTIVE PURCHASERS OF PREFERRED SECURITIES, INCLUDING PERSONS WHO
ARE NOT UNITED STATES HOLDERS AND PERSONS WHO PURCHASE PREFERRED
SECURITIES IN THE SECONDARY MARKET, ARE ADVISED TO CONSULT WITH THEIR TAX
ADVISORS AS TO THE UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF THE
OWNERSHIP AND DISPOSITION OF PREFERRED SECURITIES IN LIGHT OF THEIR
PARTICULAR CIRCUMSTANCES, AS WELL AS THE EFFECT OF ANY STATE, LOCAL OR
OTHER TAX LAWS.
UNITED STATES HOLDERS
As used herein, a "United States Holder" means a Holder that is a
citizen or resident of the United States, a corporation, partnership or
other entity created or organized in or under the laws of the United
States or any political subdivision thereof, or an estate or trust the
income of which is subject to United States federal income taxation
regardless of its source.
CLASSIFICATION OF MONTANA POWER CAPITAL
Reid & Priest LLP, special counsel to the Company and Montana Power
Capital, is of the opinion that, under current law and assuming full
compliance with the terms of the Indenture and the instruments
establishing Montana Power Capital (and certain other documents), Montana
Power Capital will be classified as a "grantor trust" for United States
federal income tax purposes and will not be classified as an association
taxable as a corporation. Each Holder will be treated as owning an
undivided beneficial interest in the Junior Subordinated Debentures.
Investors should be aware that the opinion of Reid & Priest LLP is not
binding on the Internal Revenue Service ("IRS") or the courts.
CLASSIFICATION OF THE JUNIOR SUBORDINATED DEBENTURES
Based on the advice of its counsel, the Company believes and intends
to take the position that the Junior Subordinated Debentures will
constitute indebtedness for United States federal income tax purposes.
No assurance can be given that such position will not be challenged by
the Internal Revenue Service or, if challenged, that such a challenge
will not be successful. By purchasing and accepting Preferred
Securities, each Holder covenants to treat the Junior Subordinated
Debentures as indebtedness and the Preferred Securities as evidence of an
indirect beneficial ownership in the Junior Subordinated Debentures. The
remainder of this discussion assumes that the Junior Subordinated
Debentures will be classified as indebtedness of the Company for United
States federal income tax purposes.
POSSIBLE TAX LAW CHANGES
On March 19, 1996, the Revenue Reconciliation Bill of 1996 ("Revenue
Bill"), the revenue portion of President Clinton's budget proposal, was
released. The Revenue Bill would, among other things, generally deny
interest deductions for interest on an instrument issued by a corporation
that has a maximum weighted average maturity of more than 40 years. The
Revenue Bill would also generally treat as equity an instrument, issued
by a corporation, that has a maximum term of more than 20 years and that
is not shown as indebtedness on the separate balance sheet of the issuer
or, where the instrument is issued to a related party (other than a
corporation), where the holder or some other related party issues a
related instrument that is not shown as indebtedness on the issuer's
consolidated balance sheet. The above-described provisions were proposed
to be effective generally for instruments issued on or after December 7,
1995. If either provision were to apply to the Junior Subordinated
Debentures, the Company would be unable to deduct interest on the Junior
Subordinated Debentures. However, on March 29, 1996, the Chairmen of the
Senate Finance and House Ways and Means Committees issued a joint
statement to the effect that it was their intention that the effective
date of the President's legislative proposals, if adopted, will be no
earlier than the date of appropriate Congressional action. There can be
no assurance, however, that current or future legislative proposals or
final legislation will not affect the ability of the Company to deduct
interest on the Junior Subordinated Debentures. If legislation were
enacted limiting, in whole or in part, the deductibility by the Company
of interest on the Junior Subordinated Debentures for United States
federal income tax purposes, such enactment could give rise to a Tax
Event.
PAYMENTS OF INTEREST
Except as set forth below, stated interest on Junior Subordinated
Debenture will generally be taxable to a United States Holder as ordinary
income at the time it is paid or accrued in accordance with the United
States Holder's method of accounting for tax purposes.
ORIGINAL ISSUE DISCOUNT AND POTENTIAL EXTENSION OF INTEREST PAYMENT
PERIOD
Under income tax regulations that recently became effective, the
Company believes that the Junior Subordinated Debentures will not be
treated as issued with original issue discount or OID. It should be
noted that these regulations have not yet been addressed in any rulings
or other interpretations by the IRS. Accordingly, it is possible that
the IRS could take a position contrary to the interpretation described
herein.
The Company has the right to defer payments of interest on the Junior
Subordinated Debentures for Extension Periods of up to 20 consecutive
calendar quarters and to pay as a lump sum at the end of such period all
of the interest that has accrued during such period. During any such
Extension Period, distributions on the Preferred Securities will also be
deferred. Should the Company exercise this option to extend the interest
payment periods, the Junior Subordinated Debentures would at that time be
treated as issued with OID and all the stated interest payments on the
Junior Subordinated Debentures would thereafter be treated as OID as long
as they remained outstanding. As a result, United States Holders of
Preferred Securities would, in effect, be required to accrue interest
income even if the holders are on the cash method of tax accounting.
Consequently, in the event that the interest payment period is extended,
a United States Holder would be required to include OID in income on an
economic accrual basis notwithstanding that the Company will not make any
interest payments during such period on the Junior Subordinated
Debentures. The tax basis of a Preferred Security will be increased by
the amount of any OID that is included in income, and will be decreased
when and if distributions are subsequently received from Montana Power
Capital by such Holders.
RECEIPT OF JUNIOR SUBORDINATED DEBENTURES OR CASH UPON LIQUIDATION OF
MONTANA POWER CAPITAL
As described under the caption DESCRIPTION OF THE PREFERRED SECURITIES
"Liquidation Distribution upon Termination," Junior Subordinated
Debentures may be distributed to Holders of Preferred Securities in
exchange for the Preferred Securities and in liquidation of Montana Power
Capital. Under current law, for United States federal income tax
purposes, such a distribution would be treated as a non-taxable event to
each United States Holder, and each United States Holder would receive an
aggregate tax basis in the Junior Subordinated Debentures equal to such
Holder's aggregate tax basis in its Preferred Securities. A United
States Holder's holding period for the Junior Subordinated Debentures
received in liquidation of Montana Power Capital would include the period
during which such Holder held the Preferred Securities.
As described under the caption DESCRIPTION OF THE PREFERRED SECURITIES
"Redemption," the Junior Subordinated Debentures may be redeemed for
cash and the proceeds of such redemption distributed to Holders of
Preferred Securities in redemption of the Preferred Securities. Under
current law, such a redemption would, for United States federal income
tax purposes, constitute a taxable disposition of the Preferred
Securities, and a Holder would recognize gain or loss as if such Holder
had sold such redeemed Preferred Securities. See "Sale, Exchange and
Redemption of the Preferred Securities."
SALE, EXCHANGE AND REDEMPTION OF THE PREFERRED SECURITIES
Upon the sale, exchange or redemption of Preferred Securities, a
United States Holder will recognize gain or loss equal to the difference
between the amount realized upon the sale, exchange or redemption and
such Holder's adjusted tax basis in the Preferred Securities. A United
States Holder's adjusted tax basis will, in general, be the issue price
of the Preferred Securities, increased by any OID previously included in
income by the United States Holder and reduced by any distributions on
the Preferred Securities. Such gain or loss will be capital gain or loss
and will be long-term capital gain or loss if at the time of sale,
exchange or redemption, the Preferred Securities have been held for more
than one year. Under current law, net capital gains of individuals are,
under certain circumstances, taxed at lower rates than items of ordinary
income. The deductibility of capital losses is subject to limitations.
INFORMATION REPORTING AND BACKUP WITHHOLDING
Subject to the qualification discussed below, income on the Preferred
Securities will be reported to holders on Forms 1099, which should be
mailed to such holders by January 31 following each calendar year.
For so long as the Preferred Securities will be held in book-entry
only form, Montana Power Capital will report annually to Cede & Co.,
as holder of record of the Preferred Securities, the interest
income (or if an Extension Period has occurred, the OID) related to the
Junior Subordinated Debentures that accrued during the year. Montana
Power Capital currently intends to report such information on Form 1099
prior to January 31, following each calendar year. The Underwriters have
indicated to Montana Power Capital that, to the extent that they hold
Preferred Securities as nominees for beneficial holders, they expect to
report the interest income (or OID, if appropriate) that accrued during
the calendar year on such Preferred Securities to such beneficial holders
on Forms 1099 by January 31 following each calendar year. Under current
law, holders of Preferred Securities who hold as nominees for beneficial
holders will not have any obligation to report information regarding the
beneficial holders to Montana Power Capital. Montana Power Capital,
moreover, will not have any obligation to report to beneficial holders
who are not also record holders. Thus, beneficial holders of Preferred
Securities who hold their Preferred Securities through nominees other
than the Underwriters will receive Forms 1099 reflecting the income on
their Preferred Securities from such nominee holders rather than from
Montana Power Capital or the Underwriters.
Payments made in respect of, and proceeds from the sale of, Preferred
Securities (or Junior Subordinated Debentures distributed to holders of
Preferred Securities) may be subject to "backup" withholding tax of 31%
if the holder fails to comply with certain identification requirements,
fails to report in full dividend or interest income or does not otherwise
establish its entitlement to an exemption. Any withheld amounts will be
allowed as a credit against the holder's United States federal income tax
liability, provided certain required information is provided by the
holder to the Internal Revenue Service.
These information reporting and backup withholding tax rules are
subject to temporary Treasury Regulations. Accordingly, the application
of such rules to the Preferred Securities could be changed.
EXPERTS
The consolidated financial statements incorporated in this Prospectus
by reference to the Company's Annual Report on Form 10-K for the year
ended December 31, 1995, have been so incorporated in reliance on the
report of Price Waterhouse LLP, independent accountants, given on the
authority of said firm as experts in auditing and accounting.
The statements made as to matters of law and legal conclusions under
"Business Utility Division Regulation and Rates" and
"Business Environment" in the Company's Annual Report on Form 10-K
incorporated herein by reference have been reviewed by Michael E.
Zimmerman, Esq., General Counsel of the Company, and are set forth
therein and herein upon the authority of such Counsel as expert. As of
June 30, 1996, Mr. Zimmerman owned 2,672 shares of the Company's common
stock and held options to purchase 16,700 additional shares at the market
price existing on the date of grant. Mr. Zimmerman's shares of common
stock, including the shares subject to option, have a current fair market
value of approximately $433,000.
LEGALITY
Certain matters of Delaware law relating to the validity of the
Preferred Securities, the enforceability of the Trust Agreement and the
creation of Montana Power Capital are being passed upon by Richards,
Layton & Finger, P.A., Special Delaware counsel for the Company and
Montana Power Capital. The legality of the other securities offered
hereby will be passed upon for the Company and Montana Power Capital by
Michael E. Zimmerman, Esq., General Counsel of the Company and by Reid &
Priest LLP, New York, New York, and for the Underwriters by Milbank,
Tweed, Hadley & McCloy, New York, New York. However, all matters
pertaining to incorporation of the Company and all other matters of
Montana law will be passed upon only by Michael E. Zimmerman, Esq.
Certain United States federal income taxation matters will be passed upon
for the Company and Montana Power Capital by Reid & Priest LLP, special
tax counsel to the Company and Montana Power Capital.
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement,
the Company and Montana Power Capital have agreed that Montana Power
Capital will issue and sell to each of the Underwriters named below, and
each of the Underwriters, for whom Goldman, Sachs & Co., Dean Witter
Reynolds Inc., Lehman Brothers Inc. and Merrill Lynch, Pierce, Fenner &
Smith Incorporated are acting as Representatives, has severally agreed to
purchase from Montana Power Capital the respective number of Preferred
Securities set forth opposite its name below:
Number of
Underwriters Preferred Securities
------------ -------------------------
Goldman, Sachs & Co. . . . . . . . . . .
Dean Witter Reynolds Inc. . . . . . . . .
Lehman Brothers Inc. . . . . . . . . . .
Merrill Lynch, Pierce, Fenner & Smith
Incorporated. . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . 2,600,000
===============
Subject to the terms and conditions of the Underwriting Agreement, the
Underwriters are committed to take and pay for all the Preferred
Securities offered hereby, if any are taken.
The Underwriters propose to offer the Preferred Securities in part
directly to the public at the initial public offering price set forth on
the cover page of this Prospectus, and in part to certain securities
dealers at such price less a concession of $. per unit of Preferred
Securities. The Underwriters may allow, and such dealers may reallow, a
concession not in excess of $. per unit of Preferred Securities to
certain brokers and dealers. After the Preferred Securities are released
for sale to the public, the offering price and other selling terms may
from time to time be varied by the Representatives.
In view of the fact that the proceeds of the sale of the Preferred
Securities will be used to purchase the Junior Subordinated Debentures,
the Underwriting Agreement provides that the Company will pay as
compensation, for the Underwriters' arranging the investment therein of
such proceeds, an amount of $ per unit of Preferred Securities for the
accounts of the several Underwriters.
The Company and Montana Power Capital have agreed that, during the
period beginning from the date of the Underwriting Agreement and
continuing to an including the earlier of (i) the termination of trading
restriction on the Preferred Securities, as determined by the
Underwriters, and (ii) 30 days after the closing date, they will not
offer, sell, contract to sell or otherwise dispose of any Preferred
Securities, any other beneficial interests in the assets of Montana Power
Capital or any preferred securities or any other securities of the
Company or Montana Power Capital which are substantially similar to the
Preferred Securities, including any guarantee of such securities, or any
securities convertible or exchangeable for or that represent the right to
receive preferred securities or any such substantially similar securities
of either the Company or Montana Power Capital, without the prior written
consent of the Representatives, except for the Preferred Securities and
the Guarantee offered in connection with the offering.
Prior to this offering, there has been no public market for the
Preferred Securities. Application will be made to list the Preferred
Securities on the NYSE. In order to meet one of the requirements for
listing the Preferred Securities on the NYSE, the Underwriters will
undertake to sell lots of 100 or more Preferred Securities to a minimum
of 400 beneficial holders. Trading of the Preferred Securities on the
NYSE is expected to commence within a thirty-day period after the initial
delivery of the Preferred Securities. The Representatives have advised
the Company that they intend to make a market in the Preferred Securities
prior to commencement of trading on the NYSE, but are not obligated to do
so and may discontinue any such market making at any time without notice.
The Company and Montana Power Capital have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
1933 Act.
Goldman, Sachs & Co. and Merrill Lynch, Pierce, Fenner & Smith
Incorporated engage in transactions with, and from time to time have
performed services for, the Company in the ordinary course of business.
<PAGE BREAK>
==================================================
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS
OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER
TO SELL OR THE SOLICITATION OF AN OFFER
TO BUY ANY SECURITIES OTHER THAN THE
SECURITIES DESCRIBED IN THIS PROSPECTUS
OR AN OFFER TO SELL OR THE SOLICITATION
OF ANY OFFER TO BUY SUCH SECURITIES IN
ANY CIRCUMSTANCES IN WHICH SUCH OFFER
OR SOLICITATION IS UNLAWFUL. NEITHER
THE DELIVERY OF THIS PROSPECTUS NOR ANY
SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION
THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE
HEREOF OR THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO ITS DATE.
-------------------
TABLE OF CONTENTS
Page
-----
INCORPORATION OF CERTAIN
DOCUMENTS BY REFERENCE................2
AVAILABLE INFORMATION....................2
RISK FACTORS.............................3
THE COMPANY..............................6
SELECTED FINANCIAL INFORMATION...........7
RECENT DEVELOPMENTS......................8
USE OF PROCEEDS..........................8
DESCRIPTION OF THE PREFERRED
SECURITIES............................8
DESCRIPTION OF THE GUARANTEE.............16
DESCRIPTION OF THE JUNIOR
SUBORDINATED DEBENTURES...............17
RELATIONSHIP AMONG THE
PREFERRED SECURITIES,
THE JUNIOR SUBORDINATED DEBENTURES
AND THE GUARANTEE.....................25
CERTAIN UNITED STATES FEDERAL INCOME
TAX CONSEQUENCES.......................27
EXPERTS..................................29
LEGALITY.................................30
UNDERWRITING.............................31
==================================================
==================================================
PREFERRED SECURITIES
MONTANA POWER CAPITAL I
% CUMULATIVE QUARTERLY INCOME
PREFERRED SECURITIES, SERIES A ("QUIPS")
GUARANTEED TO THE EXTENT
MONTANA POWER CAPITAL I HAS FUNDS
AS SET FORTH HEREIN BY
THE MONTANA POWER COMPANY
-----------
PROSPECTUS
----------
GOLDMAN, SACHS & CO.
DEAN WITTER REYNOLDS INC.
LEHMAN BROTHERS
MERRILL LYNCH & CO.
REPRESENTATIVES OF THE UNDERWRITERS
==================================================
<PAGE>
PART II.
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 16. EXHIBITS.
------------------
EXHIBIT
-------
12(b) -- Computation of Ratio of Earnings to Fixed
Charges for the twelve months ended
September 30, 1996.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it
meets all of the requirements for filing on Form S-3 and has duly caused
this amendment to registration statement to be signed on its behalf by
the undersigned, thereunto duly authorized, in the Municipality of Butte-
Silver Bow, and State of Montana, on the 25th day of October, 1996.
THE MONTANA POWER COMPANY
By: /s/ Ellen M. Senechal
------------------------------
(Ellen M. Senechal, Attorney
in fact)
Pursuant to the requirements of the Securities Act of 1933, this
amendment to registration statement has been signed below by the
following persons in the capacities and on the date indicated.
Signature Title Date
--------- ----- ----
Chairman of the
D.T. Berube Board, Chief
(Principal Executive Officer) Executive Officer
and Director
Vice President and
J. P. Pederson Chief Financial
(Principal Financial and and Information
Accounting Officer) Officer
and Director
By: /s/ Ellen M. Senechal October 25, 1996
------------------------------
Ellen M. Senechal
(Attorney in fact)
Directors
---------
T. H. Adams, A. F. Cain, R. D. Corette, K. Foster,
R. P. Gannon, B. D. Harris, C. T. Hibbard, D. P. Lambros,
J. R. Jester, C. Lehrkind, III, J. P. Lucas, A. K. Neill,
G. H. Selover, N. E. Vosburg
By: /s/ Ellen M. Senechal October 25, 1996
-------------------------------
Ellen M. Senechal
(Attorney in fact)
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE
REGISTRANT CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT
MEETS ALL OF THE REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED
THIS AMENDMENT TO REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY
THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE MUNICIPALITY OF
BUTTE-SILVER BOW, AND STATE OF MONTANA, ON THE 25TH DAY OF OCTOBER, 1996.
MONTANA POWER CAPITAL I
By: /s/ Ellen M. Senechal
----------------------------
Ellen M. Senechal, not in her
individual capacity but solely
as Trustee
<PAGE>
EXHIBIT INDEX
Exhibit Description
------- -----------
12(b) Computation of Ratio of Earnings to
Fixed Charges for the twelve months
ended September 30, 1996.
Exhibit 12(b)
THE MONTANA POWER COMPANY
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(DOLLARS IN THOUSANDS)
TWELVE MONTHS
ENDED
SEPTEMBER 30, 1996
------------------
Net Income $72,594
Income Taxes 37,983
------------
$110,577
------------
Fixed Charges:
Interest $49,468
Amortization of Debt Discount,
Expense and Premium 1,570
Rentals 34,585
------------
$85,623
Earnings Before Income Taxes
and Fixed Charges $196,200
============
Ratio of Earnings to Fixed Charges 2.29 x
============
