<PAGE> 1
Filed Pursuant to Rule 424b5
Registration No. 033-83976
PROSPECTUS SUPPLEMENT
(To Prospectus dated September 26, 1994)
$300,000,000
Texas Utilities Electric Company
SECURED MEDIUM-TERM NOTES, SERIES D
(A Series of First Mortgage Bonds)
------------------------
Due from Nine Months to Thirty Years from Date of Issue
------------------------
Texas Utilities Electric Company (Company) intends to offer from time to
time up to $300,000,000 aggregate principal amount of its Secured Medium-Term
Notes, Series D (Notes) having maturities which may range from nine months to
thirty years from the date of issue. Each Note will bear interest at a fixed
rate determined by the Company at or prior to the sale thereof. The aggregate
principal amount of each issue, the interest rate, purchase price, maturity and
redemption terms, if any, of the Notes (Offered Notes) will be set forth in an
accompanying supplement (Pricing Supplement) to this Prospectus Supplement.
Each Note will be represented by a global security (Global Security)
registered in the name of a nominee of The Depository Trust Company, as
Depositary, as set forth in the applicable Pricing Supplement. Beneficial
interests in the Global Securities will be shown on, and transfers thereof will
be effected only through, records maintained by the Depositary and its
participants. Notes will not be issuable in certificated form except under
limited circumstances described herein. See "Description of the
Notes -- Book-Entry System."
------------------------
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 SUPPLEMENT, ANY PRICING SUPPLEMENT OR
THE ACCOMPANYING PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
<TABLE>
<CAPTION>
PRICE TO AGENTS' PROCEEDS TO THE
PUBLIC(1) COMMISSIONS(2) COMPANY(2)(3)
------------- -------------------- --------------------------
<S> <C> <C> <C>
Per Note............... 100% .125%-.750% 99.250%-99.875%
Total.................. $300,000,000 $375,000-$2,250,000 $297,750,000-$299,625,000
</TABLE>
- ------------
(1) Unless otherwise specified in the applicable Pricing Supplement, the Price
to Public will be 100% of the principal amount.
(2) The Company will pay Morgan Stanley & Co. Incorporated, Bear, Stearns &
Co. Inc. and Lehman Brothers, Lehman Brothers Inc. (each an "Agent" and
collectively, the "Agents") a commission, depending upon the Maturity Date
of the Notes, ranging from .125% to .750% of the principal amount of each
Note, or the issue price of each Note in the case of Notes issued at a
discount, sold through any such Agent. The Company has agreed to indemnify
each Agent against certain liabilities, including liabilities under the
Securities Act of 1933, as amended.
(3) Before deducting expenses payable by the Company estimated at $450,000
including reimbursement of the Agents' expenses.
------------------------
The Notes are being offered on a continuing basis by the Company through
the Agents, each of which has agreed to use its reasonable best efforts to
solicit offers to purchase the Notes. The Notes may also be sold by the Company
to any Agent acting as principal for its own account or for resale to one or
more investors, to be determined by such Agent. The Company reserves the right
to sell the Notes directly to the public on its own behalf in any jurisdiction
where it may be authorized to do so. The Notes will not be listed on any
securities exchange, and there can be no assurance that the Notes offered by
this Prospectus Supplement will be sold. The Company or the Agents may reject,
in whole or in part, any offer to purchase Notes. No termination date for the
offering of the Notes has been established. See "Plan of Distribution."
------------------------
MORGAN STANLEY & CO.
Incorporated
BEAR, STEARNS & CO. INC.
LEHMAN BROTHERS
October 25, 1995
<PAGE> 2
DESCRIPTION OF THE NOTES
The following information concerning the Notes supplements should be
read in conjunction with the statements under "Description of New Bonds" in the
accompanying Prospectus. The particular terms of any Offered Notes will be
described in the Pricing Supplement with respect thereto. Capitalized terms
not defined herein are used as defined in the accompanying Prospectus.
GENERAL
The Notes are to be issued as a series of the Company's First Mortgage
Bonds under the Mortgage, as supplemented and amended by various supplemental
indentures, including the Fifty-Fourth Supplemental Indenture, dated as of
October 1, 1995, relating to the Notes. The Notes will be issued in an
aggregate principal amount of up to $300,000,000.
Each Note will mature from nine months to thirty years from its Issue
Date, as defined below, as selected by the purchaser and agreed to by the
Company.
The Pricing Supplement relating to each Note will include the
following: (1 ) the purchase price of such Note (Issue Price), which may be
expressed as a percentage of the principal amount at which such Note will be
issued; (2) the date on which such Note will be originally issued (Issue Date);
(3) the date on which the principal of such Note will be payable (Maturity
Date); (4) the rate per annum at which such Note will bear interest, if any
(Interest Rate); (5) the terms for redemption, if any; and (6) any other terms
of such Note not inconsistent with the provisions of the Mortgage.
PAYMENT OF PRINCIPAL AND INTEREST
Each Note will bear interest from its Issue Date at the rate per annum
stated on the face thereof, until the principal amount thereof is paid or made
available for payment. Unless otherwise specified in a Pricing Supplement,
interest on Notes will be payable semi-annually on March 1 and September 1 and
at maturity (each an "Interest Payment Date"). Each payment of interest shall
include interest accrued to, but excluding, the Interest Payment Date.
Interest on Notes will be computed on the basis of a 360-day year of twelve
30-day months. If the Issue Date of a Note is after a record date (February 15
for interest payable March 1 and August 15 for interest payable September 1 )
but before the next occurring Interest Payment Date, such Note shall bear
interest from such Issue Date, but the payment of interest shall commence on
the second Interest Payment Date following such Issue Date.
Principal, premium, if any, and interest on Notes will be paid in
immediately available funds in the manner described below in "Book-Entry
System."
BOOK-ENTRY SYSTEM
DTC will act as securities depository for the Notes. The Notes will
be issued as fully-registered notes registered in the name of Cede & Co.,
DTC's partnership nominee. One or more fully-registered note certificates will
be issued for each tranche of such Notes 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 Securities
Exchange Act of 1934, as amended. DTC holds securities that its participants
(Direct Participants) deposit with DTC. DTC also facilitates the settlement
among Direct Participants of securities transactions, such as transfers and
pledges, in deposited securities through electronic computerized book-entry
changes in Direct Participants' accounts, thereby eliminating the need for
physical movement of securities certificates. Direct Participants include
securities brokers and dealers, banks, trust companies, clearing corporations,
and certain other organizations. DTC is owned by a number of its Direct
Participants and by the New York Stock Exchange, Inc., the American Stock
Exchange, Inc.,
S-2
<PAGE> 3
and the National Association of Securities Dealers, Inc. Access to the DTC
system is also available to others such as securities brokers and dealers,
banks and trust companies that clear through or maintain a custodial
relationship with a Direct Participant, either directly or indirectly (Indirect
Participants). The Rules applicable to DTC and its Direct Participants and
Indirect Participants (together, the Participants) are on file with the
Securities and Exchange Commission.
Purchases of Notes under the DTC system must be made by or through
Direct Participants, which will receive a credit for such Notes on DTC's
records. The ownership interest of each actual purchaser of each such Note
(Beneficial Owner) is in turn to be recorded on the Participants' records.
Beneficial Owners will not receive written confirmation from DTC of their
purchase, but Beneficial Owners are expected to receive written confirmations
providing details of the transaction, as well as periodic statements of their
holdings, from the Participant through which the Beneficial Owner entered into
the transaction. Transfers of ownership interests in such Notes are to be
accomplished by entries made on the books of Participants acting on behalf of
Beneficial Owners. Beneficial Owners will not receive certificates
representing their ownership interests in the Notes except in the event that
use of the book-entry system for the Notes is discontinued.
To facilitate subsequent transfers, all Notes deposited by Direct
Participants with DTC are registered in the name of Cede & Co. The deposit of
Notes with DTC and their registration in the name of Cede & Co. effect no
change in beneficial ownership. DTC has no knowledge of the actual Beneficial
Owners of the Notes; DTC's records reflect only the identity of the Direct
Participants to whose accounts such Notes are credited, which may or may not be
the Beneficial Owners. The Participants will remain responsible for keeping
account of their holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants, and by
Participants to Beneficial Owners will be governed by arrangements among them,
subject to any statutory or regulatory requirements as may be in effect from
time to time.
Redemption notices shall be sent to Cede & Co. If less than all of
the securities within an issue are being redeemed, DTC's practice is to
determine by lot the amount of the interest of each Direct Participant in such
issue to be redeemed.
Neither DTC nor Cede & Co. will consent or vote with respect to Notes.
Under its usual procedures, DTC mails an Omnibus Proxy to the Company as soon
as possible after the record date. The Omnibus Proxy assigns Cede & Co.'s
consenting or voting rights to those Direct Participants to whose accounts the
Notes are credited on the record date (identified in a listing attached to the
Omnibus Proxy).
Principal and interest payments on the Notes will be made to DTC.
DTC's practice is to credit Direct Participants' accounts on the payable date
in accordance with their respective holdings shown on DTC's records unless DTC
has reason to believe that it will not receive payment on the payable date.
Payments by Participants to Beneficial Owners will be governed by standing
instructions and customary practices, as is the case with securities held for
the accounts of customers in bearer form or registered in "street-name," and
will be the responsibility of such Participants and not of DTC, the Company,
or the Agents, subject to any statutory or regulatory requirements as may be in
effect from time to time. Payment of principal and interest to DTC is the
responsibility of the Company or the Trustee. 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.
DTC may discontinue providing its services as securities depository
with respect to the Notes at any time by giving reasonable notice to the
Company and the Trustee. Under such circumstances, in the event that a
successor securities depository is not obtained, note certificates are required
to be printed and delivered.
S-3
<PAGE> 4
The Company may decide to discontinue use of the system of book-entry
transfers of the Notes through DTC (or a successor securities depository). In
that event, note certificates will 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 believes to be reliable
(including DTC), but the Company takes no responsibility for the accuracy
thereof.
The Company, the Agents and the Trustee will not have any
responsibility or obligation to Participants or the persons for whom they act
as nominees with respect to the accuracy of the records of DTC, its nominee or
any Participant with respect to any ownership interest in the Notes, or
payments to, or the providing of notice for, Participants or Beneficial Owners.
S-4
<PAGE> 5
SUMMARY FINANCIAL INFORMATION FOR THE COMPANY
(THOUSANDS OF DOLLARS, EXCEPT RATIOS AND PERCENTAGES)
The following material, 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 appearing in this
Prospectus Supplement and in the accompanying 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 results of operations for the twelve months ended September 30, 1995, have
been made.
THE OFFERING
<TABLE>
<S> <C>
Securities . . . . . . . . . $300,000,000 principal amount of Secured Medium-Term Notes, Series D, being a series of
the Company's First Mortgage Bonds.
Interest Payment Dates . . . March 1 and September 1 and at maturity.
</TABLE>
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED
----------------------------------------------------------------------------------------
DECEMBER 31, SEPTEMBER 30,
-------------------------------------------------------------------- 1995
1990 1991 1992 1993 1994 (UNAUDITED)
---------- ----------- ---------- ----------- ----------- -----------------
<S> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Operating Revenues . . . $4,540,915 $ 4,891,522 $4,906,695 $ 5,409,156 $ 5,613,175 $ 5,545,186
Net Income (Loss)(a) . . 964,276 (289,173) 821,123 476,526 658,192 408,083
Ratio of Earnings to Fixed
Charges(a)(b) . . . 2.54 0.34 2.48 2.00 2.45 1.92
</TABLE>
<TABLE>
<CAPTION>
ADJUSTED(C)
OUTSTANDING AT -----------
SEPTEMBER 30, 1995 AMOUNT PERCENT
------------------ ------ -------
<S> <C> <C> <C>
CAPITALIZATION (UNAUDITED):
Long-term Debt . . . . . . . . . . . . . . . . . . . . . . $ 7,234,493 $ 7,534,493 51.9%
Preferred Stock
Not subject to mandatory redemption . . . . . . . . . . 855,869 855,869
Subject to mandatory redemption . . . . . . . . . . . . 275,645 275,645
----------- -----------
Total Preferred Stock . . . . . . . . . . . . . . . . 1,131,514 1,131,514 7.8
Common Stock Equity . . . . . . . . . . . . . . . . . . . . 5,849,891 5,849,891 40.3
----------- ----------- -----
Total Capitalization $14,215,898 $14,515,898 100.0%
=========== =========== =====
</TABLE>
(a) The net loss for the twelve month period ended December 31, 1991 was
due primarily to the recognition of a charge against earnings,
representing a provision for regulatory disallowances and for fuel gas
costs disallowed in the Company's Docket 9300 rate case. Additionally,
the twelve month periods ended December 31, 1990, December 31, 1991
and December 31, 1992 were affected by the discontinuation of the
accrual of allowance for funds used during construction (AFUDC) and
the commencement of depreciation on approximately $1.3 billion of
investment in Unit 1 of the Comanche Peak nuclear generating station
(Comanche Peak) and facilities which are common to Comanche Peak Units
1 and 2 incurred after the end of the June 30, 1989 test year and,
therefore, not included in the Company's Docket 9300 rate case.
Effective January 1992, The Company began recording base rate revenue
for energy sold but not billed to achieve a better matching of
revenues and expenses. The effect of this change in accounting
increased net income for the twelve months ended December 31, 1992, by
approximately $102 million, of which approximately $80 million
represents the cumulative effect of the change in accounting at
January 1, 1992. The twelve month period ended December 31, 1993 was
affected by the recording of regulatory disallowances in the Company's
Docket 11735 rate case. (See the Company's Annual Report on Form 10-K
for the year ended December 31, 1994.) The twelve month period ended
September 30, 1995 was affected by the impairment of several
nonperforming assets. (See the Company's Current Report on Form 8-K
dated October 17, 1995).
(b) The Company's earnings were inadequate to cover its fixed charges for
the twelve month period ended December 31, 1991. The deficiency was
$499,062,000. The computation of the ratio of earnings to fixed
charges does not include interest payments made by affiliated
companies on senior notes, which are recovered currently through the
fuel component of rates.
(c) To give effect to the sale of the Notes. Adjusted amounts do not
reflect (1) any possible future sales from time to time by the Company
of up to an additional $350,000,000 principal amount of First Mortgage
Bonds and $25,000,000 of Preferred Stock, for which registration
statements are effective pursuant to Rule 415 under the Securities Act
of 1933 (1933 Act), or (2) any possible cancellation of Preferred
Stock or issuance of preferred securities by affiliated trusts
pursuant to exchange offers for which registration statements have
been filed pursuant to the 1933 Act.
S-5
<PAGE> 6
USE OF PROCEEDS
The following information supplements and should be read in
conjunction with the statements under "Use of Proceeds" and "Description of New
Bonds - Issuance of Additional Bonds" in the accompanying Prospectus.
The Company is offering hereby a maximum of $300,000,000 principal
amount of its Notes. The net proceeds to be received by the Company from the
sale of the Offered Notes will be used for general corporate purposes,
including the repayment of short-term borrowings incurred in connection with
the redemption of its fixed rate securities.
RATE PROCEEDINGS
In July 1994, the Company filed a petition in the 200th Judicial
District Court of Travis County, Texas to seek judicial review of the final
order of the Public Utility Commission of Texas (PUC) granting a $449 million,
or 9.0% rate increase in connection with the Company's January 1993 rate
increase request of $760 million, or 15.3% (Docket 11735). Other parties to
the PUC proceedings also filed appeals with respect to various portions of the
order. The Company is unable to predict the outcome of such appeals.
The PUC's final order (Order) in connection with the Company's January
1990 rate increase request (Docket 9300) was reviewed by the 250th Judicial
District Court of Travis County, Texas (District Court) and thereafter was
appealed to the Court of Appeals for the Third District of Texas (Court of
Appeals). In June 1994, the Court of Appeals affirmed a prudence disallowance
of $472 million provided for in the Order with respect to Comanche Peak,
reversed and remanded the portion of the District Court's judgment that had
affirmed a disallowance of $25 million relating to the Company's reacquisitions
of the minority owner interests in Comanche Peak nuclear fuel, and affirmed the
District Court's remand of the remainder of the disallowance of $884 million
relating to the reacquisitions of such minority owner interests. Therefore,
the Court of Appeals remanded an aggregate of $909 million of disallowances
with respect to the Company's reacquisitions of minority owner interests in
Comanche Peak to the PUC for reconsideration and ordered that such
reconsideration be on the basis of a prudent investment standard.
In addition, the Court of Appeals reversed the District Court's
finding that the PUC erred in ordering a refund of $2.5 million with respect to
certain fuel gas costs. Also, the Court of Appeals specified that, on remand,
the PUC will be required to re-evaluate the appropriate level of the Company's
construction work in progress included in rate base in light of its financial
condition at the time of the initial hearing and to reconsider whether the $442
million revenue increase provided for in the PUC's final order remains the
benchmark in light of this re-examination.
The Court of Appeals also ruled in the appeal of the Company's Docket
9300 rate case that prior court rulings required that the tax benefits
generated by costs, including capital costs, not allowed in rates, must be used
to reduce rates charged to customers, reversing the District Court's decision.
The Company believes that such ruling is erroneous and not consistent with the
Texas Public Utility Regulatory Act. The Company contended that, according to
a Private Letter Ruling issued to the Company by the Internal Revenue Service
(IRS) with respect to investment tax credits, such ratemaking treatment, to the
extent related to property classified for tax purposes as public utility
property, would result in a violation of the normalization rules under the
Internal Revenue Code of 1986, as amended. In September 1995, the IRS issued
another Private Letter Ruling to the Company, which ruled that such ratemaking
treatment would also violate the normalization rules applicable to
depreciation. Violation of the normalization rules would result in a
significant adverse effect on the Company's results of operation and liquidity.
If there are normalization violations, the Company will forfeit its investment
tax credits that remain unamortized as of the date of the violation, and will
also forfeit the ability to take advantage of accelerated tax depreciation in
years to which the violative order relates. This could result in payments to
the IRS of up to $1.3 billion. The Company disagrees with certain portions of
the decision of the Court of Appeals, including specifically its decision with
respect to federal income taxes, and has filed an
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<PAGE> 7
appeal to the Supreme Court of Texas. Other parties have also filed appeals of
this decision to the Supreme Court of Texas. The Company cannot predict
whether such appeals will be accepted by the Supreme Court of Texas and cannot
predict the outcome of any such appeals or any resulting reconsideration of
these issues on remand by the PUC.
In April 1995, in an appeal of a rate case involving another utility,
the Supreme Court of Texas held that the PUC has considerable discretion in
determining the fair share of consolidated tax savings to be allocated to a
utility and, accordingly, is not required to include losses of unregulated
affiliates in determining such fair share. The Supreme Court of Texas also
held that the PUC could not use the tax benefits generated by disallowed
expenses to reduce rates.
PLAN OF DISTRIBUTION
The Notes are being offered on a continuing basis by the Company
through Morgan Stanley & Co. Incorporated, Bear, Stearns & Co. Inc. and Lehman
Brothers, Lehman Brothers Inc., each of which has agreed to use its reasonable
best efforts to solicit offers to purchase the Notes. The Company will pay
each Agent a commission, depending upon the Maturity Date of each Note, of from
.125% to .750% of the principal amount (or the Issue Price in the case of any
Notes issued at a discount) of the Notes sold through such Agent. The Company
has agreed to reimburse the Agents for certain of the Agents' expenses. The
Company may sell the Notes to any of the Agents as a principal for its own
account or for resale to one or more investors at varying prices related to
prevailing market prices at the time of resale, as determined by such Agent.
The Agents may sell Notes to any dealer at a discount and, unless otherwise
specified in the applicable Pricing Supplement, such discount allowed to any
dealer will not be in excess of the discount to be received by such Agent from
the Company. After the initial public offering of Notes to be resold to
investors and other purchasers, the public offering price (in the case of Notes
to be resold at a fixed public offering price) concession and discount may be
changed. The Company reserves the right to sell Notes directly to the public
on its own behalf in those jurisdictions where it may be authorized to do so.
No commission will be payable on any sales made directly to the public by the
Company.
Each Agent may be deemed to be an "underwriter" within the meaning of
the Securities Act of 1933, as amended (Securities Act). Subject to certain
conditions, the Company has agreed to indemnify the Agents and their
controlling persons against certain liabilities, including liabilities under
the Securities Act, arising out of or based upon, among other things, any
untrue statement or alleged untrue statement of a material fact contained in
the Registration Statement, the accompanying Prospectus, this Prospectus
Supplement, any Pricing Supplement, or the Incorporated Documents or the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
The Notes may also be sold at the Issue Price set forth in the
applicable Pricing Supplement to dealers who may resell to investors. Such
dealers may be deemed to be "underwriters" within the meaning of the Securities
Act.
The Company will have the sole right to accept offers to purchase
Notes and may reject any offer in whole or in part. Each Agent will have the
right, in its discretion reasonably exercised, to reject any offer to purchase
Notes received by it, in whole or in part. Payment of the purchase price of
the Notes will be required to be made in immediately available funds. The
Company may accept offers to purchase Notes through additional agents and may
appoint additional agents for the purpose of soliciting offers to purchase
Notes, in either case on terms substantially identical to the terms contained
in the Distribution Agreement. Such other agents, if any, will be named in the
applicable Pricing Supplement.
The Notes are a new issue of securities with no established trading
market. The Agents have informed the Company that they intend to make a market
in the Notes, but are under no obligation to do so and such market making may
be discontinued at any time. No assurance can be given as to the liquidity of
a trading market for the Notes.
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<PAGE> 8
PROSPECTUS
$650,000,000
TEXAS UTILITIES ELECTRIC COMPANY
FIRST MORTGAGE BONDS
Texas Utilities Electric Company (Company) intends to offer from time to time
up to $650,000,000 aggregate principal amount of its First Mortgage Bonds (New
Bonds). The specific designation, aggregate principal amount, purchase price,
maturity, rate and time of payment of interest, repayment, redemption terms, if
any, or other specific terms of the New Bonds in respect of which this
Prospectus is being delivered (Offered Bonds), will be determined when the
agreement to sell is made or at the time of sale and will be set forth in a
supplement or supplements to this Prospectus (Prospectus Supplement), together
with the terms of offering such Offered Bonds.
The Company may sell the New Bonds through underwriters, dealers or agents, or
directly to one or a limited number of purchasers. The Prospectus Supplement
will set forth the names of underwriters, dealers or agents, if any, any
applicable commissions or discounts and the net proceeds to the Company from
the sale of the Offered Bonds. See "Plan of Distribution" for possible
indemnification arrangements for underwriters and agents.
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.
The date of this Prospectus is September 26, 1994.
<PAGE> 9
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, 1993
(1993 10-K).
2. Quarterly Reports on Form 10-Q for the quarters ended March 31,
1994 and June 30, 1994.
3. Current Reports on Form 8-K dated January 14, 1994, January 31,
1994, April 29, 1994 and June 20, 1994.
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 or in the Prospectus Supplement
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 PETER B. TINKHAM, SECRETARY, TEXAS UTILITIES
ELECTRIC COMPANY, 2001 BRYAN TOWER, DALLAS, TEXAS 75201, TELEPHONE NUMBER (214)
812-4600.
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, 500
West Madison, 14th Floor, 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. Certain Depositary Shares representing fractional interests in shares of
cumulative preferred stock of the Company are listed on the New York Stock
Exchange, where reports and other information concerning the Company may be
inspected.
Securityholders of the Company may obtain, upon request, copies of an
Annual Report on Form 10-K containing financial statements as of the end of the
most recent fiscal year audited and reported upon (with an opinion expressed)
by independent auditors.
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<PAGE> 10
THE COMPANY
The Company was incorporated under the laws of the State of Texas in 1982
and has perpetual existence under the provisions of the Texas Business
Corporation Act. The Company is an electric utility engaged in the generation,
purchase, transmission, distribution and sale of electric energy wholly within
the State of Texas. The principal executive offices of the Company are located
at 2001 Bryan Tower, Dallas, Texas 75201; the telephone number is (214)
812-4600.
The Company is the principal subsidiary of Texas Utilities Company (Texas
Utilities). The other subsidiaries of Texas Utilities include: Southwestern
Electric Service Company, an electric utility engaged in the purchase,
transmission, distribution and sale of electric energy, serving approximately
40,000 customers in ten counties in the eastern and central parts of Texas;
Texas Utilities Fuel Company, which owns a natural gas pipeline system,
acquires, stores and delivers fuel gas and provides other fuel services at cost
for the generation of electric energy by the Company; Texas Utilities Mining
Company, which owns, leases and operates fuel production facilities for the
surface mining and recovery of lignite at cost for the generation of electric
energy by the Company; Texas Utilities Properties Inc., which owns or leases
real and personal properties which it leases to the Texas Utilities Company
System; and Texas Utilities Services Inc., which provides financial,
accounting, computer, telecommunications, personnel, procurement and other
administrative services for the Texas Utilities Company System at cost.
The Company's service area covers the north central, eastern and western
parts of Texas, with a population estimated at 5,650,000 -- about one-third of
the population of Texas. Electric service is provided in 88 counties and 372
incorporated municipalities, including Dallas, Fort Worth, Arlington, Irving,
Plano, Waco, Mesquite, Grand Prairie, Wichita Falls, Odessa, Midland,
Carrollton, Tyler, Richardson and Killeen. The area is a diversified commercial
and industrial center with substantial banking, insurance, communications,
electronics, aerospace, petrochemical and specialized steel manufacturing, and
automotive and aircraft assembly. The territory served includes major portions
of the oil and gas fields in the Permian Basin and East Texas, as well as
substantial farming and ranching sections of the State. It also includes the
Dallas-Fort Worth International Airport and the Alliance Airport.
USE OF PROCEEDS
The Company is offering hereby a maximum of $650,000,000 aggregate
principal amount of its First Mortgage Bonds. The net proceeds to be received
by the Company from the sale of the New Bonds, together with funds from
operations, are expected to be used for the acquisition or redemption of
certain of its securities, and may also be used to meet expenditures for its
construction program and for other corporate purposes, including the repayment
of short-term borrowings incurred for similar purposes and outstanding at the
time of any such sale. Proceeds may be temporarily invested in short-term
instruments pending their application to the foregoing purposes.
The Company estimates that it will require additional funds for the
acquisition or redemption of certain of its securities, for its construction
program and for other corporate purposes and expects to incur short-term
borrowings and may issue and sell additional securities as needed, in amounts
and of types presently undetermined. The Company has registered with the
Commission pursuant to Rule 415 under the Securities Act of 1933, as amended
(1933 Act), 250,000 unissued shares of cumulative preferred stock, without par
value, and an indeterminate number of depositary shares representing fractional
interests therein, for issuance from time to time depending upon market
conditions.
Reference is made to the Incorporated Documents with respect to the
Company's construction program and other significant capital requirements, its
general financing plan and capabilities, and information concerning the
Comanche Peak nuclear generating station and the Company's rate proceedings.
Reference is also made to the Prospectus Supplement.
RATIO OF EARNINGS TO FIXED CHARGES
The ratio of earnings to fixed charges for each of the years ended December
31, 1989-1993 and the twelve months ended July 31, 1994 was 2.63, 2.54, 0.34,
2.48, 2.00 and 1.92, respectively. As indicated by the foregoing ratio for the
twelve month period ended December 31, 1991, the Company's earnings were
inadequate to cover its fixed charges
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for such twelve month period. The deficiency was $499,062,000. (Reference is
made to Note 11 to Financial Statements and Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations, contained in the
1993 10-K.) The computation of the ratio of earnings to fixed charges does not
include interest payments made by affiliated companies on senior notes, which
are recovered currently through the fuel component of rates.
DESCRIPTION OF NEW BONDS
General. The First Mortgage Bonds, including the New Bonds, are to be
issued under the Company's Mortgage and Deed of Trust, dated as of December 1,
1983, as supplemented, with The Bank of New York, Trustee (Trustee), referred
to herein as the "Mortgage."
As herein summarized, bonds now or hereafter issued under the Mortgage
(Bonds) are, or will be, secured by a first mortgage Lien on certain property
of the Company. Bonds issued under the Mortgage are equally secured and pari
passu.
The Mortgage is an exhibit to the Registration Statement. The statements
herein concerning the Mortgage, the New Bonds and the Bonds are merely an
outline and do not purport to be complete. Such statements include terms
defined in the Mortgage and are qualified in their entirety by reference to the
Mortgage.
The New Bonds will be issuable in the form of fully registered bonds in
denominations of $l,000 and any multiple thereof, unless otherwise specified in
the Prospectus Supplement. The New Bonds may be transferred without charge,
other than for applicable taxes or other governmental charges, at The Bank of
New York, New York, New York.
Maturity and Interest Payments. Reference is made to the Prospectus
Supplement for the date or dates on which the New Bonds will mature; the rate
or rates per annum at which the New Bonds will bear interest; and the times at
which such interest will be payable.
Redemption, Repayment or Purchase of New Bonds. The New Bonds may be
redeemable, in whole or in part, on not less than 30 days' notice either at the
option of the Company or as required by the Mortgage.
Reference is made to the Prospectus Supplement for the redemption terms, if
any, and other specific terms.
If, at the time notice of redemption is given, the redemption moneys are
not held by the Trustee, the redemption may be made subject to their receipt on
or before the date fixed for redemption and such notice shall be of no effect
unless such moneys are so received.
While the Mortgage contains provisions for the maintenance of the Mortgaged
and Pledged Property, the Mortgage does not permit redemption of Bonds pursuant
to these provisions. There is no sinking fund under the Mortgage.
Cash deposited under any provisions of the Mortgage may be applied (with
certain exceptions) to the purchase or redemption of Bonds of any series.
(Mortgage, Arts. XII and XIII.)
In addition to or in lieu of any terms of redemption, the Company may grant
holders of a particular series of New Bonds the right to tender their bonds
prior to maturity to the Company for repayment at stated prices and at stated
times. Reference is made to the Prospectus Supplement for the terms of any such
right to tender New Bonds.
Security and Priority. The Bonds issued under the Mortgage will be secured
by a first mortgage Lien of the Mortgage. Substantially all of the Company's
property is subject to the Lien of the Mortgage.
The Lien of the Mortgage is subject to Excepted Encumbrances, as defined in
the Mortgage, including tax and construction liens, purchase money liens and
certain other exceptions.
There are excepted from the Lien of the Mortgage all cash and securities
(except those specifically deposited); equipment, materials or supplies held
for sale or other disposition; any fuel and similar consumable materials and
supplies; automobiles, other vehicles, aircraft and vessels; timber, minerals,
mineral rights and royalties; receivables,
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contracts, leases and operating agreements; electric energy, gas, water, steam,
ice and other products for sale, distribution or other use; natural gas wells;
and gas transportation lines or other property used in the sale of natural gas
to customers or to a natural gas distribution or pipeline company, up to the
point of connection with any distribution system.
The Mortgage contains provisions subjecting after-acquired property to the
Lien thereof. These provisions may be limited, at the option of the Company, in
the case of consolidation, merger or sale of substantially all of the Company's
assets. (Mortgage, Sec. 18.03.) In addition, after-acquired property may be
subject to purchase money mortgages and other liens or defects in title.
The Mortgage provides that the Trustee shall have a lien upon the mortgaged
property, prior to the Bonds, for the payment of its reasonable compensation
and expenses and for indemnity against certain liabilities. (Mortgage, Sec.
19.09.)
Issuance of Additional Bonds. The maximum principal amount of Bonds which
may be issued under the Mortgage is not limited. Bonds of any series may be
issued from time to time on the basis of: (1) 70% of qualified Property
Additions after adjustments to offset retirements; (2) retirement of Bonds or
certain prior lien bonds; and/or (3) deposits of cash. With certain exceptions
in the case of (2) above, the issuance of Bonds is subject to Adjusted Net
Earnings of the Company (before income taxes) being, for 12 out of the
preceding 15 months, equal to at least twice the Annual Interest Requirements
on all Bonds at the time outstanding, including the additional issue and all
other indebtedness of prior rank. In general, interest on variable interest
bonds, if any, is calculated using the average rate in effect during such 12
month period.
Property Additions generally include electric, gas, steam and/or hot water
utility property but not fuel, securities, automobiles, other vehicles or
aircraft, or property used principally for the production or gathering of
natural gas.
After giving effect to the discharge in July and August 1994 of the three
mortgages and deeds of trust previously established by the Company's corporate
predecessors, unfunded net Property Additions of approximately $6,400,000,000
were available under the Mortgage as of June 30, 1994. Up to approximately
$4,480,000,000 aggregate principal amount of Bonds could be issued based on
such Property Additions. In addition, approximately $1,245,000,000 aggregate
principal amount of Bonds could be issued on the basis of Bonds that have been
retired, subject, in each case, to the earnings test and other requirements of
the Mortgage.
The issuance of Bonds on the basis of Property Additions subject to prior
liens is restricted. (Mortgage, Secs. 1.04 to 1.07 and 3.01 to 7.01.)
Release and Substitution of Property. Property subject to the Lien of the
Mortgage may be released upon the basis of: (1) the deposit of cash or, to a
limited extent, purchase money mortgages, (2) Property Additions, after making
adjustments for certain prior lien bonds outstanding against Property
Additions, and/or (3) waiver of the right to issue Bonds. Cash may be withdrawn
upon the bases stated in (2) and (3) above. When property released is not
funded property, Property Additions used to effect the release may be available
as credits under the Mortgage. Similar provisions are in effect as to cash
proceeds of such property. The Mortgage contains special provisions with
respect to certain prior lien bonds deposited and disposition of moneys
received on deposited prior lien bonds. (Mortgage, Secs. 1.05, 7.02, 7.03,
9.05, 10.01 to 10.04 and 13.03 to 13.09.)
Dividend Restrictions. The Mortgage provides that the Company may declare
or pay dividends (other than dividends payable solely in shares of its common
stock) on any shares of its common stock only out of the unreserved and
unrestricted retained earnings of the Company and will not make any such
declaration or payment when the Company is insolvent, or when the payment
thereof would render the Company insolvent. (Mortgage, Sec. 9.07.) The amount
restricted is subject to being increased or decreased on the basis of various
factors, and any restricted retained earnings can be otherwise used by the
Company. Reference is made to the Incorporated Documents for information
relating to other restrictions.
Special Provisions for Retirement of Bonds. If mortgaged property is
condemned or sold (other than in a project to be jointly owned by the Company
and others) to any governmental authority resulting in the receipt of
$50,000,000
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or more as proceeds, the Company (subject to certain conditions) must apply
such proceeds, less certain deductions, to the retirement of Bonds. (Mortgage,
Sec. 9.14.)
Modification. The rights of bondholders may be modified with the consent of
holders of 60% of the Bonds, or, if less than all series of Bonds are adversely
affected, the consent of the holders of 60% of the Bonds adversely affected and
(unless Bonds issued prior to 1989 are retired or the holders thereof otherwise
consent) of the holders of a majority of all Bonds. In general, no modification
of the terms of payment of principal, premium, if any, or interest and no
modification affecting the Lien or reducing the percentage required for
modification is effective against any bondholder without such holder's consent.
(Mortgage, Art. XXI.)
Defaults and Notice Thereof. Defaults are defined in the Mortgage as:
default in payment of principal; default for 60 days in payment of interest or
an installment of any fund required to be applied to the purchase or redemption
of any Bonds; default in payment of principal or interest with respect to
certain prior lien bonds; certain events in bankruptcy, insolvency or
reorganization; and default in other covenants for 90 days after notice.
(Mortgage, Sec. 15.01.) The Trustee may withhold notice of default (except in
payment of principal, interest or funds for retirement of bonds) if it
determines that it is in the best interest of the bondholders. (Mortgage, Sec.
15.02.)
The Trustee or the holders of 25% of the Bonds may declare the principal
and interest due and payable on Default, but a majority may annul such
declaration if such Default has been cured. (Mortgage, Sec. 15.03.) No holder
of Bonds may enforce the Lien of the Mortgage without giving the Trustee
written notice of a Default and unless the holders of 25% of the Bonds have
requested the Trustee to act and have offered it reasonable opportunity to act
and indemnity satisfactory to it against the costs, expenses and liabilities to
be incurred thereby and the Trustee shall have failed to act. (Mortgage, Sec.
15.16.) The holders of a majority of the Bonds may direct the time, method and
place of conducting any proceedings for any remedy available to the Trustee or
exercising any trust or power conferred on the Trustee. (Mortgage, Sec.
15.07.) The Trustee is not required to risk its funds or incur personal
liability if there is reasonable ground for believing that repayment is not
reasonably assured. (Mortgage, Sec. 19.08.)
Evidence to be Furnished to the Trustee. Compliance with Mortgage
provisions is evidenced by written statements of Company officers or persons
selected or paid by the Company. In certain cases, opinions of counsel and
certification of an engineer, accountant, appraiser or other expert (who in
some cases must be independent) must be furnished. The Company must give the
Trustee an annual statement as to whether or not the Company has fulfilled its
obligations under the Mortgage throughout the preceding calendar year.
EXPERTS AND LEGALITY
The financial statements and financial statement schedules included in the
latest Annual Report of the Company on Form 10-K, incorporated herein by
reference, have been audited by Deloitte & Touche LLP, Independent Auditors, as
stated in its report included in said latest Annual Report of the Company on
Form 10-K, and have been incorporated by reference herein in reliance upon such
report given upon the authority of that firm as experts in accounting and
auditing.
With respect to any unaudited interim financial information included in the
Company's Quarterly Reports on Form 10-Q, that are or will be incorporated
herein by reference, Deloitte & Touche LLP applies limited procedures in
accordance with professional standards for reviews of such information. As
stated in any of its reports that are included in the Company's Quarterly
Reports on Form 10-Q, that are or will be incorporated herein by reference,
Deloitte & Touche LLP did not audit and did not express an opinion on such
interim financial information. Accordingly, the degree of reliance on any of
its reports on such information should be restricted in light of the limited
nature of the review procedures applied. Deloitte & Touche LLP is not subject
to the liability provisions of Section 11 of the 1933 Act for any of its
reports on such unaudited interim financial information because those reports
are not "reports" or a "part" of the Registration Statement filed under the
1933 Act with respect to the New Bonds prepared or certified by an accountant
within the meaning of Sections 7 and 11 of the 1933 Act.
The statements made as to matters of law and legal conclusions in this
Prospectus under Description of New Bonds and in the Company's latest Annual
Report on Form 10-K under Part I, Item 1 -- Business-Regulation and Rates and
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Environmental Matters, incorporated herein by reference, have been reviewed by
Worsham, Forsythe, Sampels & Wooldridge, L.L.P., Dallas, Texas, General Counsel
for the Company. All of such statements are set forth or incorporated by
reference herein in reliance upon the opinion of that firm given upon their
authority as experts. At July 31, 1994, members of the firm of Worsham,
Forsythe, Sampels & Wooldridge, L.L.P. owned approximately 50,500 shares of the
common stock of Texas Utilities.
The legality of the securities offered hereby will be passed upon for the
Company by Worsham, Forsythe, Sampels & Wooldridge, L.L.P. and by Reid &
Priest, New York, New York, of counsel to the Company, and for any underwriter
or agent by Winthrop, Stimson, Putnam & Roberts, New York, New York. However,
all matters pertaining to incorporation, titles to properties, franchises,
licenses and permits, the Lien of the Mortgage on property located in Texas and
all other matters of Texas law will be passed upon only by Worsham, Forsythe,
Sampels & Wooldridge, L.L.P.
PLAN OF DISTRIBUTION
The Company may sell the New Bonds in any of three ways: (i) through
underwriters or dealers; (ii) directly to a limited number of purchasers or to
a single purchaser; or (iii) through agents. The Prospectus Supplement with
respect to the Offered Bonds sets forth the terms of the offering of the
Offered Bonds, including the name or names of any underwriters, dealers or
agents, the purchase price of such Offered Bonds and the proceeds to the
Company from such sale, any underwriting discounts and other items constituting
underwriters' compensation, any initial public offering price and any discounts
or concessions allowed or reallowed or paid to dealers. Any initial public
offering price and any discounts or concessions allowed or reallowed or paid to
dealers may be changed from time to time.
If underwriters are used in the sale, the Offered Bonds will be acquired by
the underwriters for their own account and may be resold from time to time in
one or more transactions, including negotiated transactions, at a fixed public
offering price or at varying prices determined at the time of the sale. The
underwriter or underwriters with respect to a particular underwritten offering
of Offered Bonds are named in the Prospectus Supplement relating to such
offering and, if an underwriting syndicate is used, the managing underwriter or
underwriters are set forth on the cover page of such Prospectus Supplement.
Unless otherwise set forth in the Prospectus Supplement, the obligations of the
underwriters to purchase the Offered Bonds will be subject to certain
conditions precedent, and the underwriters will be obligated to purchase all
such Offered Bonds if any are purchased.
Offered Bonds may be sold directly by the Company or through agents
designated by the Company from time to time. The Prospectus Supplement sets
forth the name of any agent involved in the offer or sale of the Offered Bonds
in respect of which the Prospectus Supplement is delivered as well as any
commissions payable by the Company to such agent. Unless otherwise indicated in
the Prospectus Supplement, any such agent will be acting on a best efforts
basis for the period of its appointment.
If so indicated in the Prospectus Supplement, the Company will authorize
agents, underwriters or dealers to solicit offers by certain specified
institutions to purchase Offered Bonds from the Company at the public offering
price set forth in the Prospectus Supplement pursuant to delayed delivery
contracts providing for payment and delivery on a specified date in the future.
Such contracts will be subject to those conditions set forth in the Prospectus
Supplement, and the Prospectus Supplement will set forth the commission payable
for solicitation of such contracts.
Subject to certain conditions, the Company may agree to indemnify the
several underwriters or agents and their controlling persons against certain
liabilities, including liabilities under the 1933 Act, arising out of or based
upon, among other things, any untrue statement or alleged untrue statement of a
material fact contained in the registration statement, this Prospectus, a
Prospectus Supplement or the Incorporated Documents or the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading. See the Prospectus Supplement.
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NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS AND ANY PROSPECTUS SUPPLEMENT IN CONNECTION WITH THE OFFER MADE BY
THIS PROSPECTUS OR ANY PROSPECTUS SUPPLEMENT AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR ANY OTHER PERSON, UNDERWRITER, DEALER OR AGENT.
NEITHER THE DELIVERY OF THIS PROSPECTUS OR ANY PROSPECTUS SUPPLEMENT NOR ANY
SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE AN IMPLICATION THAT
THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR
THEREOF. THIS PROSPECTUS OR ANY PROSPECTUS SUPPLEMENT DOES NOT CONSTITUTE AN
OFFER OR SOLICITATION BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR
SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR
SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO
MAKE SUCH OFFER OR SOLICITATION.
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