PROSPECTUS
300,000 SHARES
APPALACHIAN POWER COMPANY
6.85% CUMULATIVE PREFERRED STOCK
(WITHOUT PAR VALUE)
The 6.85% Cumulative Preferred Stock, without par value, of
Appalachian Power Company offered hereby is not redeemable by the
Company except through operation of the sinking fund provisions
herein described. The new Preferred Stock is subject to a
mandatory cumulative sinking fund requiring the Company to redeem
60,000 shares at $100 per share plus accrued and unpaid
dividends to the date of redemption on August 1 of each year
commencing with the year 2000. The Company has the non-
cumulative option to redeem up to 60,000 additional shares on
each such date at the same price. See "Description of the New
Preferred Stock -- Sinking Fund" herein.
The annual dividend rate for the new Preferred Stock shall
be 6.85% per share, per annum, which dividend shall be
calculated, per share, at such percentage multiplied by $100,
payable quarterly on the first days of February, May, August and
November in each year with respect to the quarterly period ending
on the day preceding each such respective payment date, and the
date from which dividends shall be cumulative on all new
Preferred Stock shall be the date of original issuance of the new
Preferred Stock. The initial quarterly dividend on the new
Preferred Stock (covering the period from the date of original
issuance to and including July 31, 1994) will be paid on August
1, 1994 to the persons in whose names the new Preferred Stock is
registered on such day as is fixed by the Board of Directors.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Price to Underwriting Proceeds to
Public(1) Commission(2) Company(3)
Per Share . . . $100.00 $.80 $99.20
Total . . . . . $30,000,000 $240,000 $29,760,000
(1) Plus accrued dividends, if any, from the date of original
issue.
(2) The Company has agreed to indemnify the Underwriters against
certain liabilities, including certain liabilities under the
Securities Act of 1933. See "Underwriting" herein.
(3) Before deduction of expenses payable by the Company estimated
at $185,845.
The new Preferred Stock is offered severally by the
Underwriters, subject to prior sale, when, as and if issued to
and accepted by them, subject to approval of certain legal
matters by counsel for the Underwriters and certain other
conditions. The Underwriters reserve the right to withdraw,
cancel or modify such offer and to reject any order in whole or
in part. It is expected that delivery of the shares of new
Preferred Stock will be made in New York, New York, on or about
June 14, 1994.
MERRILL LYNCH & CO. GOLDMAN, SACHS & CO.
The date of this Prospectus is June 2, 1994.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-
ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE
MARKET PRICE OF THE NEW PREFERRED STOCK OFFERED HEREBY AT A LEVEL
ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET.
SUCH TRANSACTIONS MAY BE EFFECTED IN THE OPEN MARKET OR
OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED
AT ANY TIME.
No dealer, salesperson or other person has been authorized
to give any information or to make any representation not
contained in this Prospectus in connection with the offer made by
this Prospectus, and, if given or made, such information or
representation must not be relied upon as having been authorized
by Appalachian Power Company (the "Company") or any underwriter,
agent or dealer. This Prospectus does not constitute an offer to
sell, or a solicitation of an offer to buy, by any underwriter,
agent or dealer in any jurisdiction in which it is unlawful for
such underwriter, agent or dealer to make such an offer or
solicitation. Neither the delivery of this Prospectus nor any
sale made hereunder shall create, under any circumstances, any
implication that there has been no change in the affairs of the
Company since the date hereof.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of
the Securities Exchange Act of 1934 (the "1934 Act") and in
accordance therewith files reports and other information with the
Securities and Exchange Commission (the "SEC"). Such reports and
other information may be inspected and copied at the public
reference facilities maintained by the SEC at 450 Fifth Street,
N.W., Washington, D.C.; Northwestern Atrium Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois; and 7 World Trade
Center, 13th Floor, New York, New York. Copies of such material
can be obtained from the Public Reference Section of the SEC, 450
Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates.
Certain of the Company's securities are listed on the New York
Stock Exchange, Inc. and on the Philadelphia Stock Exchange,
where reports, information statements and other information
concerning the Company can also be inspected.
DOCUMENTS INCORPORATED BY REFERENCE
The following documents filed by the Company with the SEC
are incorporated in this Prospectus by reference:
-- The Company's Annual Report on Form 10-K for the year
ended December 31, 1993; and
-- The Company's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1994.
All documents subsequently filed by the Company pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the 1934 Act after the date
of this Prospectus and prior to the termination of the offering
made by this Prospectus 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.
Any statement contained in a document incorporated or deemed
to be incorporated by reference herein shall be deemed to be
modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any other
subsequently filed document 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 will provide without charge to each person to
whom a copy of this Prospectus has been delivered, upon the
written or oral request of any such person, a copy of any or all
of the documents described above which have been incorporated by
reference in this Prospectus, other than exhibits to such
documents. Written requests for copies of such documents should
be addressed to Mr. G. C. Dean, American Electric Power Service
Corporation, 1 Riverside Plaza, Columbus, Ohio 43215 (telephone
number: 614-223-1000). The information relating to the Company
contained in this Prospectus does not purport to be comprehensive
and should be read together with the information contained in the
documents incorporated by reference.
THE COMPANY
The Company is engaged in the generation, purchase,
transmission and distribution of electric power to approximately
838,000 customers in Virginia and West Virginia, and in supplying
electric power at wholesale to other electric utility companies
and municipalities in those states and in Tennessee. Its
principal executive offices are located at 40 Franklin Road,
S.W., Roanoke, Virginia 24011 (telephone number: 703-985-2300).
The Company is a subsidiary of American Electric Power Company,
Inc. ("AEP") and is a part of the AEP integrated utility system
(the "AEP System"). The executive offices of AEP are located at
1 Riverside Plaza, Columbus, Ohio 43215 (telephone number: 614-
223-1000).
USE OF PROCEEDS
The Company proposes to use the proceeds from the sale of
the new Preferred Stock to fund its construction program, to
repay short-term indebtedness incurred to fund its construction
program or for other corporate purposes permitted by law. The
Company has estimated that its consolidated construction costs
(inclusive of allowance for funds used during construction)
during 1994 will be approximately $219,700,000. At April 29,
1994, the Company had approximately $60,725,000 of short-term
unsecured indebtedness outstanding.
RATIO OF EARNINGS TO FIXED CHARGES AND
PREFERRED STOCK DIVIDEND REQUIREMENTS COMBINED
Below is set forth the ratio of earnings to fixed charges
and preferred stock dividend requirements combined for each of
the years in the period 1989 through 1993 and for the twelve
months ended March 31, 1994.
12-Month
Period Ended Ratio
December 31, 1989 2.80
December 31, 1990 2.16
December 31, 1991 2.42
December 31, 1992 2.16
December 31, 1993 2.20
March 31, 1994 2.12
DESCRIPTION OF THE NEW PREFERRED STOCK
The 6.85% Cumulative Preferred Stock, without par value (the
"new Preferred Stock") will be issued as a new series of the
Cumulative Preferred Stock, without par value, of the Company
under the Restated Articles of Incorporation of the Company, as
amended (the "Amended Articles"). A copy of the proposed
Articles of Amendment with respect to the new Preferred Stock is
filed as an exhibit to the Registration Statement. References to
paragraphs are to numbered paragraphs of Article V of such
Amended Articles. The statements herein concerning the
Cumulative Preferred Stock (including the new Preferred Stock),
the Amended Articles, and the Articles of Amendment with respect
to the new Preferred Stock are merely an outline and do not
purport to be complete. They are qualified in their entirety by
express reference to the cited provisions and do not relate or
give effect to the provisions of statutory or common law.
The shares of the new Preferred Stock, when duly issued and
paid for, will be fully paid and nonassessable.
The Transfer Agent and Registrar for the new Preferred Stock
will be First Chicago Trust Company of New York, 14 Wall Street,
New York, New York 10005.
Dividend Rights and Restrictions
The holders of the new Preferred Stock are entitled to
receive cumulative preferential dividends, when and as declared
by the Board of Directors, out of funds legally available for the
payment of dividends, at the annual dividend rate set forth on
the cover page of this Prospectus, payable quarterly on February
1, May 1, August 1 and November 1 to stockholders of record on
such dates, not more than 50 and not less than 10 days preceding
such payment dates, as may be fixed by the Board of Directors.
(See Paragraph (2).) Dividends on the new Preferred Stock will
accrue from the date of original issue of the new Preferred
Stock, and the initial quarterly dividend payment date will be
August 1, 1994.
No dividends may be declared on any series of the Cumulative
Preferred Stock in respect of any quarter-yearly dividend period
unless proportionate dividends are likewise declared on all
shares of all other series of the Cumulative Preferred Stock to
the extent that such shares are entitled to receive dividends for
such quarter-yearly dividend period. Unless dividends (but not
sinking fund payments) on all outstanding shares of Cumulative
Preferred Stock have been paid for all past quarter-yearly
dividend periods, the Company may not declare or pay any
dividend, or make any distribution on, or purchase or otherwise
acquire, any shares of Common Stock. (See Paragraph (2).) If
dividends payable on the Cumulative Preferred Stock are in
default, no shares of Cumulative Preferred Stock may be purchased
or acquired by the Company (except by redemption of all
outstanding shares of Cumulative Preferred Stock) unless such
purchase or acquisition has been approved by the SEC or by a
successor regulatory authority. (See Paragraph (3).) So long as
any shares of Cumulative Preferred Stock are outstanding the
Company may not declare or pay any dividend on the Common Stock
if such dividend together with all other dividends on Common
Stock paid within the year ending on the date such dividend is
payable will exceed (a) 50% of the net income available for
dividends on Common Stock of the Company for the 12 full calendar
months immediately preceding the calendar month in which such
dividend is declared, if Common Stock Equity, as defined, is or
would become less than 20% of total capitalization, as defined,
or (b) 75% of said net income if Common Stock Equity is or would
become less than 25% but not less than 20% of total
capitalization. (See Paragraph (5).)
Various restrictions on the use of retained earnings for
cash dividends on Common Stock, and other purposes are contained
in or result from covenants in the Company's Mortgage and Deed of
Trust, dated as of December 1, 1940, as heretofore amended and
supplemented, relating to outstanding series of the Company's
first mortgage bonds, under which Bankers Trust Company, New
York, New York, is acting as Trustee (the "Mortgage"), its
debenture agreement, charter provisions and orders of regulatory
authorities. At March 31, 1994, the Company's consolidated
retained earnings amounted to $229,721,000, of which
approximately $37,000,000 were so restricted.
Redemption of the New Preferred Stock
The shares of the new Preferred Stock are not redeemable
except through the sinking fund. (See "Sinking Fund" herein.)
Sinking Fund
The new Preferred Stock is entitled to a cumulative sinking
fund requiring the Company, to the extent not prohibited by law,
to redeem 60,000 shares of the new Preferred Stock at $100 per
share plus accrued and unpaid dividends to the date of such
redemption on August 1 of each year commencing with the year
2000.
The Company has the non-cumulative option to redeem on any
sinking fund date, at a redemption price of $100 per share plus
accrued and unpaid dividends to the date of redemption, up to an
additional 60,000 shares of the new Preferred Stock, but no
redemption made pursuant to such option shall be deemed to
fulfill any sinking fund requirement. The Company is entitled,
at its election, to credit against any sinking fund requirement
due on any sinking fund date, shares of the new Preferred Stock
theretofore purchased or otherwise acquired by the Company (other
than pursuant to such option) and not previously credited against
any sinking fund requirement.
There is no restriction on the repurchase or redemption of
shares of Cumulative Preferred Stock of any series, including the
new Preferred Stock, by the Company while there is any arrearage
in sinking fund installments with respect to the new Preferred
Stock.
Voting Rights
Holders of the Cumulative Preferred Stock issued prior to
June 1, 1977 have one vote for each share of such stock, and
holders of the Common Stock have one vote for each share of such
stock, for the election of directors and upon all other matters;
except that if and when dividends payable on the Cumulative
Preferred Stock shall be in default in an amount equivalent to
four full quarter-yearly dividends on all shares of all series of
the Cumulative Preferred Stock then outstanding, and until all
dividends in default shall have been paid, the holders of all
shares of the Cumulative Preferred Stock, voting separately as
one class, shall be entitled to elect the smallest number of
directors necessary to constitute a majority of the Board of
Directors, and the holders of the Common Stock voting separately
as a class, shall be entitled to elect the remaining directors.
On any matter on which the holders of any series of the
Cumulative Preferred Stock shall be entitled to vote, each share
shall entitle the holder thereof to a vote equal to the fraction
of which the involuntary liquidation amount fixed for such share
is the numerator and $100 is the denominator. The special voting
rights of holders of the Cumulative Preferred Stock cease upon
payment of all dividends then in default. (See Paragraph (9).)
The favorable vote of holders of more than two-thirds of the
total voting power of the Cumulative Preferred Stock then
outstanding is required (a) to increase the total authorized
amount of the Cumulative Preferred Stock (see Paragraph
(7)(A)(a)), (b) to create or authorize any series of stock (other
than a series of the Cumulative Preferred Stock) ranking prior to
or on a parity with the Cumulative Preferred Stock as to assets
or dividends, or to create or authorize any obligation or
security convertible into shares of any such stock (see Paragraph
(7)(A)(b)), or (c) to amend, alter, change or repeal any of the
express terms of the Cumulative Preferred Stock or of any
outstanding series thereof in a manner prejudicial to the holders
thereof (see Paragraph (7)(A)(c)). Stock or securities
authorized under Paragraph (7)(A)(b) can only be issued under
such authorization within twelve months after the date of such
authorization. Under Paragraph (7)(A)(c), if less than all
series are prejudicially affected, only the consent of the
holders of two-thirds of the total number of votes which holders
of the shares of each series so affected are entitled to cast is
required.
The favorable vote of the holders of a majority of the total
voting power of the Cumulative Preferred Stock then outstanding
is required before the Company may (see Paragraph (7)(B)):
(a) merge or consolidate with or into any other
corporation or corporations, or sell or otherwise dispose of
all or substantially all of its assets, unless such action
has been approved by the SEC or by a successor regulatory
authority;
(b) issue or assume any evidences of indebtedness,
secured or unsecured, (other than (i) bonds issued under the
Company's Mortgage, (ii) bonds issued under a new mortgage
replacing the Mortgage, (iii) bonds issued under any other
new mortgage, provided the Mortgage shall have been
irrevocably closed against the authentication of additional
bonds thereunder, (iv) indebtedness secured by bonds of the
Company or by bonds issued under any such new mortgage, (v)
indebtedness secured by bonds issued under a mortgage
existing at the time of acquisition on property acquired by
the Company, provided such mortgage, or any mortgage
replacing it, is irrevocably closed against authentication
of additional bonds thereunder, or (vi) obligations to pay
the purchase price of materials or equipment made in the
ordinary course of the Company's business), for purposes
other than the refunding or renewing of evidences of
indebtedness previously issued or assumed by the Company
resulting in equal or longer maturities or redeeming or
otherwise retiring all outstanding shares of the Cumulative
Preferred Stock, if immediately after such issue or
assumption, (x) the total principal amount of all such
indebtedness (other than those referred to in (i) through
(vi) above) issued or assumed by the Company and then
outstanding (including the evidences of indebtedness then to
be issued or assumed) would exceed 20% of the sum of (1) the
total principal amount of all debt securities of the
character hereinbefore described in (i) through (vi) above,
issued or assumed by the Company and then to be outstanding,
and (2) the stated capital and surplus of the Company, or
(y) the total outstanding principal amount of all unsecured
debt securities of the Company (other than obligations of
the character described in (vi) above) would exceed 20% of
the sum of (1) the total outstanding principal amount of all
bonds or other secured debt of the Company, and (2) the
stated capital and surplus of the Company, or (z) the total
outstanding principal amount of all unsecured debt
securities of the Company (other than obligations of the
character described in (vi) above) of maturities of less
than 10 years would exceed 10% of the sum of (1) the total
principal amount of all bonds or other secured debt of the
Company, and (2) the stated capital and surplus of the
Company; provided that the payment due upon the maturity of
unsecured debt having an original single maturity of 10 or
more years or the payment due upon the final maturity of any
unsecured serial debt which had original maturities of 10 or
more years is not regarded for purposes of this subparagraph
(b) as unsecured debt of a maturity of less than 10 years
until payment thereof is required within 3 years; or
(c) issue or reissue any shares of the Cumulative
Preferred Stock or of any other class of stock ranking on a
parity with the outstanding shares of Cumulative Preferred
Stock as to dividends or assets for any purpose other than
to refinance an amount of outstanding Cumulative Preferred
Stock, or stock ranking prior to or on a parity with the
Cumulative Preferred Stock as to dividends or assets, having
an aggregate involuntary liquidation amount equal to the
aggregate involuntary liquidation amount of such issued or
reissued shares, unless (i) the net income of the Company,
determined in accordance with generally accepted accounting
principles to be available for the payment of dividends for
a period of 12 consecutive calendar months within the 15
calendar months immediately preceding the calendar month of
such issuance, is equal to at least twice the annual
dividend requirements on the Cumulative Preferred Stock
(including dividend requirements on such prior or parity
stock), which will be outstanding immediately after such
issuance; (ii) the gross income of the Company for the same
period determined in accordance with generally accepted
accounting principles (but in any event after all taxes
including taxes based on income) is equal to at least one
and one-half times the aggregate of annual interest charges
on indebtedness (excluding interest charges on indebtedness
to be retired by the application of the proceeds from the
issuance of such shares) and the annual dividend
requirements on the Cumulative Preferred Stock (including
dividend requirements on such prior or parity stock), which
will be outstanding immediately after such issuance; and
(iii) the aggregate of the Common Stock Equity, as defined,
is at least equal to the aggregate amount payable in
connection with an involuntary liquidation of the Company
with respect to all shares of Cumulative Preferred Stock and
all shares of such prior or parity stock, if any, which will
be outstanding immediately after such issuance. No
dividends may be paid on Common Stock which would result in
the reduction of the Common Stock Equity, as defined, below
the requirements of the above clause (c)(iii).
Liquidation Rights
On any liquidation, dissolution or winding up of the
Company, after payment of the creditors of the Company, the
holders of the new Preferred Stock have a right to receive $100
per share plus accrued and unpaid dividends, or, if the Company's
assets are insufficient, to share ratably with all other series
of the Cumulative Preferred Stock in proportion to the full
preferential amounts to which they are respectively entitled,
prior to any distribution to the holders of the Common Stock.
(See Paragraphs (4) and (6).)
Pre-emptive and Conversion Rights
Holders of the Cumulative Preferred Stock have no pre-
emptive right to acquire unissued shares of the Company, no right
to acquire any securities convertible into or exchangeable for
such shares and no right to acquire any options, warrants or
rights to purchase such shares; nor shall the holders of the new
Preferred Stock have any rights to convert the same into and/or
purchase stock of any other series or class or any other
securities. (See Paragraph (8).)
UNDERWRITING
Subject to the terms and conditions set forth in the
Underwriting Agreement, the Company has agreed to sell to each of
the Underwriters named below (the "Underwriters"), and each of
the Underwriters has severally agreed to purchase the number of
shares of the new Preferred Stock set forth opposite its name
below:
Number of Shares
of the new
Underwriters Preferred Stock
Merrill Lynch, Pierce, Fenner & Smith
Incorporated ....................... 150,000
Goldman, Sachs & Co............................. 150,000
Total 300,000
Under the terms and conditions of the Underwriting
Agreement, the Underwriters are committed to take and pay for all
of the shares of the new Preferred Stock, if any are taken.
The Company has been advised by the Underwriters that the
Underwriters propose initially to offer the shares to the public
at the price to public set forth on the cover page of this
Prospectus, and to certain dealers at such price less a
concession not in excess of $.50 per share. The Underwriters may
allow, and such dealers may reallow, a discount not in excess of
$.25 per share to certain other dealers. After the initial
public offering, the price to public, concession and discount may
from time to time be changed by the Underwriters.
The new Preferred Stock will not have an established trading
market when issued. The new Preferred Stock will not be listed
on any securities exchange. The Company has been advised by the
Underwriters that they intend to make a market in the new
Preferred Stock, but the Underwriters are not obligated to do so
and may discontinue any market-making at any time without notice.
There can be no assurance as to the liquidity of the trading
market for the new Preferred Stock.
The Underwriters, and certain affiliates thereof, engage in
transactions with and perform services for the Company and its
affiliates in the ordinary course of business.
The Company has agreed to indemnify the Underwriters against
certain liabilities, including certain liabilities under the
Securities Act of 1933.
LEGAL OPINIONS
Opinions with respect to the legality of the new Preferred
Stock will be rendered by Simpson Thacher & Bartlett (a
partnership which includes professional corporations), 425
Lexington Avenue, New York, New York, and 1 Riverside Plaza,
Columbus, Ohio, counsel for the Company, and by Winthrop,
Stimson, Putnam & Roberts, One Battery Park Plaza, New York, New
York, counsel for the Underwriters.
EXPERTS
The financial statements and related financial statement
schedules incorporated in this Prospectus by reference from the
Company's Annual Report on Form 10-K have been audited by
Deloitte & Touche, independent auditors, as stated in their
reports, which are incorporated herein by reference, and have
been so incorporated in reliance upon the reports of such firm
given upon their authority as experts in accounting and auditing.
