<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 23, 1995
REGISTRATION NO. 33-57191
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
CALIFORNIA ENERGY COMPANY, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 94-2213782
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION) IDENTIFICATION NO.)
10831 OLD MILL ROAD, OMAHA, NEBRASKA 68154
(402) 330-8900
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
----------------
STEVEN A. MCARTHUR, ESQ.
SENIOR VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY
CALIFORNIA ENERGY COMPANY, INC.
10831 OLD MILL ROAD, OMAHA, NEBRASKA 68154
(402) 330-8900
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA
CODE, OF AGENT FOR SERVICE)
----------------
WITH COPIES TO:
PETER J. HANLON, ESQ. STEVEN L. WILLIAMSON, ESQ.
WILLKIE FARR & GALLAGHER CHADBOURNE & PARKE
ONE CITICORP CENTER 30 ROCKEFELLER PLAZA
153 EAST 53RD STREET NEW YORK, NEW YORK 10112
NEW YORK, NEW YORK 10022 (212) 408-5100
(212) 821-8000
----------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon
as practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities
Act of 1933, other than securities offered only in connection with dividend
or interest reinvestment plans, please check the following box. [ ]
----------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT THAT SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
- -------------------------------------------------------------------------------
<PAGE>
EXPLANATORY NOTE
This Registration Statement contains two forms of prospectus relating to a
public offering of an aggregate of 16,670,000 Common Shares, $.0675 par
value, of California Energy Company, Inc. One is to be used in connection
with an offering in the United States and Canada (the "U.S. Prospectus"), and
the other is to be used in connection with a concurrent offering outside the
United States and Canada (the "International Prospectus"). The form of the
U.S. Prospectus follows immediately after this Explanatory Note. After such
Prospectus are the alternate pages of the International Prospectus. The U.S.
Prospectus and the International Prospectus are identical except for such
alternate pages. Ten copies of each complete prospectus in the exact form in
which it is to be used after effectiveness will be filed with the Securities
and Exchange Commission pursuant to Rule 424(b).
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED JANUARY 23, 1995
16,670,000 Shares
[LOGO] California Energy Company, Inc.
Common Stock
($.0675 par value)
----------------
All the 16,670,000 shares of Common Stock (the "Common Stock") of California
Energy Company, Inc. (the "Company") offered hereby are being sold by the
Company. Of the 16,670,000 shares of Common Stock being offered, 11,170,000
shares are initially being offered in the United States and Canada (the "U.S.
Shares") by the U.S. Underwriters (the "U.S. Offering") and 4,000,000 shares
are initially being concurrently offered outside the United States and Canada
(the "International Shares" and, together with the U.S. Shares, the "Shares")
by the Managers (the "International Offering" and, together with the U.S.
Offering, the "Offering"). The offering price and underwriting discounts and
commissions of the U.S. Offering and the International Offering are identical.
1,500,000 shares of Common Stock being offered pursuant to this Prospectus
are expected to be purchased by Peter Kiewit Sons', Inc. ("PKS"), directly
from the Company, at a price equal to the Price to Public and PKS set forth
below. PKS has indicated an intention to acquire such shares (the "Direct
Sale"), subject to receipt and review by PKS of a final Prospectus and
conditioned upon the closing of the Offering.
The net proceeds of the Offering and the proceeds of the Direct Sale, together
with borrowings of up to $500 million under bank credit facilities and general
corporate funds of the Company, will be used to complete the Magma Acquisition
(as hereinafter defined). The closing of the Offering will occur concurrently
with, and is conditioned upon, the closing of the Magma Acquisition pursuant to
the All-Cash Option (as hereinafter defined).
The Common Stock of the Company is listed on the New York Stock Exchange under
the symbol "CE". On January 20, 1995, the last reported sale price of the
Common Stock on the New York Stock Exchange Composite Tape was $17 7/8 per
share.
----------------
FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED IN CONNECTION
WITH AN INVESTMENT IN THE COMMON STOCK, SEE "RISK FACTORS".
----------------
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.
<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC AND PKS COMMISSIONS(1) COMPANY(2)
----------------- ---------------- ---------------
<S> <C> <C> <C>
Per Share .... $ $ $
Total (3) .... $ $ $
</TABLE>
(1) No Underwriting Discounts and Commissions are to be paid in connection
with the Direct Sale to PKS.
(2) Before deduction of expenses payable by the Company estimated at $
. Per Share Proceeds to Company reflect per share proceeds from
the Offering but not from the Direct Sale.
(3) The Company has granted the U.S. Underwriters and the Managers an
option, exercisable by CS First Boston Corporation for 30 days from the
date of this Prospectus, to purchase a maximum of 2,275,000 additional
shares to cover over-allotments. If the option is exercised in full,
the total Price to Public and PKS will be $ , Underwriting
Discounts and Commissions will be $ and Proceeds to Company
will be $ .
----------------
The U.S. Shares are offered by the several U.S. Underwriters when, as and
if issued by the Company, delivered to and accepted by the U.S. Underwriters
and subject to their right to reject orders in whole or in part. It is
expected that the U.S. Shares will be ready for delivery on or about
February , 1995.
CS First Boston
Bear, Stearns & Co. Inc.
Donaldson, Lufkin & Jenrette
Securities Corporation
C.J. Lawrence/Deutsche Bank
Securities Corporation
Lehman Brothers
The date of this Prospectus is , 1995.
<PAGE>
#############################################################################
IMAGES OMITTED ON INSIDE FRONT COVER OF PROSPECTUS;
DATAPOINTS AND NARRATIVE SUPPLIED BELOW.
(SEE ALSO "APPENDIX FOR GRAPHICS AND IMAGE MATERIAL"
AFTER BACK COVER PAGE OF PROSPECTUS.)
#############################################################################
[LOGO] CALIFORNIA ENERGY COMPANY, INC.'S PLANNED PROJECT
DEVELOPMENT AND CAPACITY IMPLEMENTATION SCHEDULE
(INCLUDES EXISTING OPERATIONS, CONTRACTS AND AWARDS)*
MW IN OPERATION
1995 1996 1997 1998 1999
---- ---- ---- ---- ----
Net Megawatts (MW) Owned 354 581 1,008 1,321 1,698
Facility Gross MW Capacity 642 883 1,584 2,165 2,770
PROFILE OF PROJECTS**
<TABLE>
<CAPTION>
FACILITY MW
CAPACITY
----------------
NET MW COMMERCIAL
PROJECT GROSS NET OWNED FUEL TYPE OPERATION
- --------------------------- ------- ------- ------- --------------- ------------
<S> <C> <C> <C> <C> <C>
PROJECTS IN OPERATION
Coso Project 288 264 127 geothermal 1987-90
Salton Sea Projects 264 224 150 geothermal 1986-90
Yuma 55 50 50 gas 1994
Roosevelt Hot Springs 25 23 17 geothermal 1984
Desert Peak 10 10 10 geothermal 1985
------- ------- -------
Total 642 571 354
PROJECTS UNDER CONSTRUCTION
Upper Mahiao 128 119 119 geothermal 1996
Mahanagdong 180 165 74 geothermal 1997
Malitbog 231 216 216 geothermal 1996-97
------- ------- -------
Total 539 500 409
AWARDED PROJECTS
BRPU 163 163 163 geothermal TBD
Fish Lake 36 36 36 geothermal 1996
Newberry 30 30 30 geothermal 1997
Dieng 400 400 188 geothermal 1997-99
Patuha 400 400 140 geothermal 1997-99
Casecnan 140 140 98 hydroelectric 1998
Bali 350 350 210 geothermal 1998-99
Alto Peak 70 70 70 geothermal 1997
------- ------- -------
Total 1,589 1,589 935
------- ------- -------
Total 2,770 2,660 1,698
======= ======= =======
</TABLE>
- ---------------
* For projects under award, no assurance can be given that a power sales
contract will be executed. In addition, substantial other contingencies
exist with respect to awards, including without limitation, the need to
obtain financing, permits and licenses, and the completion of
construction.
** For more detailed information concerning the Company's projects, see
"BUSINESS--International Projects; --Domestic Projects."
<PAGE>
THE WORLD'S LARGEST INDEPENDENT PRODUCER OF GEOTHERMAL POWER*
[MAP APPEARS HERE]
THE PHILIPPINES
- -----------------------------------------------------------
<TABLE>
<CAPTION>
FACILITY MW CAPACITY
--------------------
NET MW
PROJECT GROSS NET OWNED FUEL TYPE
- -----------------------------------------------------------
<S> <C> <C> <C> <C>
1 Upper Mahiao 128 119 119 geothermal
2 Mahanagdong 180 165 74 geothermal
3 Malitbog 231 216 216 geothermal
4 Casecnan 140 140 98 hydroelectric
5 Alto Peak 70 70 70 geothermal
- -----------------------------------------------------------
</TABLE>
INDONESIA
- -----------------------------------------------------------
<TABLE>
<CAPTION>
FACILITY MW CAPACITY
--------------------
NET MW
PROJECT GROSS NET OWNED FUEL TYPE
- -----------------------------------------------------------
<S> <C> <C> <C> <C>
1 Dieng 400 400 188 geothermal
2 Patuha 400 400 140 geothermal
3 Bali 350 350 210 geothermal
- -----------------------------------------------------------
</TABLE>
UNITED STATES
- --------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACILITY MW CAPACITY
--------------------
NET MW
PROJECT STATE GROSS NET OWNED FUEL TYPE
- --------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 Coso Project CA 288 264 127 geothermal
2 Salton Sea Projects CA 264 224 150 geothermal
3 Yuma AZ 55 50 50 gas
4 Roosevelt Hot Springs UT 25 23 17 geothermal
5 Desert Peak NV 10 10 10 geothermal
6 BRPU CA 163 163 163 geothermal
7 Fish Lake CA 36 36 36 geothermal
8 Newberry OR 30 30 30 geothermal
- --------------------------------------------------------------------------
</TABLE>
* Based on the Company's estimate of aggregate MW of electric generating
capacity in operation and under construction.
<PAGE>
IN CONNECTION WITH THE OFFERING, CS FIRST BOSTON CORPORATION ON BEHALF OF THE
U.S. UNDERWRITERS AND THE MANAGERS MAY OVER-ALLOT OR EFFECT TRANSACTIONS
WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK AT A LEVEL
ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE, THE PACIFIC
STOCK EXCHANGE, THE LONDON STOCK EXCHANGE OR OTHERWISE. SUCH STABILIZING, IF
COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
DURING THE OFFERING, CERTAIN PERSONS AFFILIATED WITH PERSONS PARTICIPATING IN
THE DISTRIBUTION MAY ENGAGE IN TRANSACTIONS FOR THEIR OWN ACCOUNTS OR FOR THE
ACCOUNTS OF OTHERS IN THE COMMON STOCK PURSUANT TO EXEMPTIONS FROM RULES
10B-6, 10B-7, AND 10B-8 UNDER THE EXCHANGE ACT.
AVAILABLE INFORMATION
California Energy Company, Inc. (the "Company") and Magma Power Company
("Magma") are subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, each files reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). Such reports,
proxy statements and other information filed by the Company or Magma with the
Commission pursuant to the informational requirements of the Exchange Act may
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: Midwest Regional Office,
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661; and New York Regional Office, 14th Floor, Seven World Trade Center,
New York, New York 10048. Copies of such materials can be obtained at
prescribed rates from the Public Reference Section of the Commission at
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549. In addition,
material filed by the Company can be inspected at the offices of the New York
Stock Exchange, Inc. ("NYSE"), 20 Broad Street, New York, New York 10005, on
which the shares of common stock, par value $.0675 per share (the "Common
Stock"), of the Company are listed, at the offices of the Pacific Stock
Exchange at 301 Pine Street, San Francisco, California 94104 and 233 South
Beaudry Avenue, Los Angeles, California 90012 and at the offices of the
London Stock Exchange at International Stock Exchange, Throgmorton Street,
EC2N 1HP, London, England. Material filed by Magma can be inspected at the
offices of the National Association of Securities Dealers, Inc., 1735 K
Street, N.W., Washington, D.C. 20006.
The Company has filed with the Commission a Registration Statement on Form
S-3 (the "Registration Statement," which term shall include all amendments,
exhibits and schedules thereto) under the Securities Act of 1933, as amended
(the "Securities Act"), with respect to the shares of Common Stock
offered pursuant to the Offering (the "Shares") and the Direct Sale. This
Prospectus does not contain all of the information set forth in the
Registration Statement, certain parts of which have been omitted in
accordance with the rules and regulations of the Commission. For further
information with respect to the Company and the Shares, reference is made to
the Registration Statement, including the exhibits and schedules filed as a
part thereof and otherwise incorporated therein. Statements made in this
Prospectus as to the contents of any contract, agreement or other document
referred to are not necessarily complete. With respect to each such contract,
agreement or other document filed as an exhibit to the Registration
Statement, reference is made to such exhibit for a more complete description
of the matter involved and each such statement shall be deemed qualified in
its entirety by such reference. Copies of the Registration Statement and the
exhibits thereto may be inspected, without charge, at the offices of the
Commission, or obtained at prescribed rates from the Public Reference Section
of the Commission at the address set forth above.
3
<PAGE>
INCORPORATION OF DOCUMENTS BY REFERENCE
The Company and Magma hereby incorporate by reference into the
Registration Statement of which this Prospectus is a part the following
documents previously filed with the Commission pursuant to the Exchange Act:
1. The Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1993 (the "Company's 1993 10-K").
2. The Company's Quarterly Reports on Form 10-Q for the quarters ended
March 31, 1994, June 30, 1994 and September 30, 1994.
3. The Company's Current Reports on Form 8-K dated March 7, 1994, March
28, 1994, April 11, 1994, May 6, 1994, June 8, 1994, August 15, 1994,
September 22, 1994, September 30, 1994, October 6, 1994, October 26, 1994,
November 22, 1994, December 9, 1994 and January 11, 1995.
4. The Company's description of the Common Stock contained in the
Company's Registration Statement on Form 8-A, dated July 28, 1993, pursuant
to Section 12 of the Exchange Act, including any amendment or report filed
for the purpose of updating such description.
5. Magma's Annual Report on Form 10-K for the fiscal year ended December
31, 1993 (the "Magma 1993 10-K").
6. Magma's Quarterly Reports on Form 10-Q for the quarters ended March 31,
1994, June 30, 1994 and September 30, 1994.
7. Magma's Current Reports on Form 8-K dated March 31, 1993, as amended,
October 7, 1994, December 9, 1994 and January 11, 1995.
In addition, all reports and other documents filed by the Company or Magma
pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent
to the date hereof and prior to the termination of the Offering hereby shall
be deemed to be incorporated by reference herein and to be a part hereof from
the date of filing of such reports and 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 that also is incorporated or 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 this Prospectus is delivered, upon
written or oral request from such person, a copy of any and all of the
documents incorporated by reference in this Prospectus (other than exhibits
to such documents unless such exhibits are specifically incorporated by
reference into the documents that this Prospectus incorporates). Written or
oral requests for such copies should be directed to California Energy
Company, Inc., 10831 Old Mill Road, Omaha, Nebraska 68154, Attention:
Secretary (telephone no. (402) 330-8900).
4
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information contained elsewhere in this Prospectus and in the information
incorporated by reference herein. In this Prospectus, all references to the
"Company" shall mean California Energy Company, Inc. and its subsidiaries, as
it currently exists and, where the context indicates, following the
completion of the Magma Acquisition described herein. References to "Magma"
refer to Magma Power Company and its subsidiaries. Terms used but not defined
in this summary have the meanings ascribed to them elsewhere in this
Prospectus. Unless otherwise indicated, all information in this Prospectus
assumes that the over-allotment option is not exercised.
THE COMPANY
California Energy Company, Inc. was founded in 1971 to develop geothermal
power production facilities. The Company is primarily engaged in the
exploration for, and development and operation of, environmentally
responsible independent power production facilities worldwide utilizing
geothermal resources or other energy sources, such as hydroelectric, natural
gas, oil and coal.
Following completion of the acquisition of Magma as described below (the
"Magma Acquisition"), the Company will be the largest independent geothermal
power producer in the world (on the basis of the Company's estimate of
aggregate megawatts ("MW") of electric generating capacity in operation and
under construction). The Company believes it will realize certain benefits
from the acquisition of Magma which will improve the Company's competitive
position, including:
o Expansion and enhancement of development efforts;
o Benefits of increased size;
o Opportunities for operational and administrative cost savings; and
o Diversification in sources of revenues and operations.
Subsequent to the Magma Acquisition, the Company will have an aggregate
net ownership interest of 354 MW of electric generating capacity in power
production facilities in the United States having an aggregate net capacity
of 571 MW. All of these facilities will be managed and operated by the
Company and are principally located in Southern California. In addition to
the electricity sales revenue earned from its net ownership position in such
facilities, the Company receives significant fee and royalty income from
operating such plants and managing the production from the geothermal
resource for such facilities. The Company will have an aggregate net
ownership interest of 409 MW of electric generating capacity in three
geothermal power projects in the Republic of the Philippines ("Philippines"),
having an aggregate net capacity of 500 MW, which projects are financed and
under construction. The Company is also developing eight additional projects
with executed or awarded power sales contracts in the Philippines, the
Republic of Indonesia ("Indonesia") and the United States. The Company will
have an approximate net ownership interest of 935 MW in these development
projects representing an aggregate net capacity of 1,589 MW of additional
potential electric generating capacity.
During the next several years, the Company intends to focus its
development efforts in the international marketplace due to the rapid growth
in power requirements in the developing world and the increasing competition
in the U.S. market. The Company is actively pursuing selected opportunities
in nations where power demand is high and the Company's geothermal resource
development and operating experience, project development expertise and
strategic relationships are expected to provide it with a competitive
advantage. The Company believes that opportunities to successfully develop,
construct, finance, own and operate international power projects are
increasing as several countries have initiated the privatization of their
power generation capacity and have solicited bids from private companies to
purchase existing generating facilities or to develop new capacity. Some of
these countries, such as the Philippines and Indonesia, have extensive
geothermal resources.
On January 10, 1995, the Company acquired approximately 51% of the
outstanding shares of common stock of Magma Power Company (the "Magma Common
Stock") through a cash tender offer
5
<PAGE>
(the "Magma Tender Offer") and the Company expects that it will complete the
Magma Acquisition by acquiring the approximately 49% of the outstanding
shares of Magma Common Stock not owned by the Company (the "Remaining Magma
Shares") through a merger (the "Merger"). Magma is engaged in independent
geothermal power operations and development activities similar to those of
the Company. Upon the effective time of the Merger, each outstanding share of
Magma Common Stock (other than shares of Magma Common Stock held by the
Company, CE Acquisition Company, Inc. ("CE Sub"), a wholly owned subsidiary
of the Company, or any other direct or indirect subsidiary of the Company and
shares of Magma Common Stock held in the treasury of Magma) will be converted
into the right to receive, at the Company's election, either cash or a
combination of cash and Common Stock. If the Company elects to pay the Merger
consideration with a combination of cash and Common Stock, the consideration
paid by the Company in the Magma Tender Offer and the Merger will consist, on
a blended basis, of $28.50 per share of Magma Common Stock in cash and $10.50
per share of Magma Common Stock in market value of Common Stock, based on the
average closing price of the Common Stock on the NYSE during the 15
consecutive trading days ending on the fifth business day prior to the
effective time of the Merger (the "Average Closing Price"); provided,
however, that for purposes of the calculating the Average Closing Price, if
the Average Closing Price exceeds $18.73, the Average Closing Price shall be
deemed to be $18.73, and if the Average Closing Price is less than $14.27,
the Average Closing Price shall be deemed to be $14.27. If the Company elects
to pay the Merger consideration solely in cash (the "All-Cash Option"), the
blended consideration paid by the Company in the Magma Tender Offer and the
Merger would be $38.75 per share of Magma Common Stock. The Company currently
intends to pay the Merger consideration solely in cash, funded in significant
part with the net proceeds of the Offering and the proceeds of the Direct
Sale, but such intention is subject to change if (i) the proposed
underwriters for the Offering determine that they cannot or will not proceed
with the Offering upon terms reasonably satisfactory to the Company or (ii)
market conditions would require the issuance of a greater number of shares of
Common Stock in order to fund the Merger pursuant to the All-Cash Option than
would be required to be issued in the Merger in connection with a combination
of cash and Common Stock consideration. If the Company changes its intention
and does not elect the All-Cash Option, it will promptly withdraw the
Registration Statement. The Company currently intends to elect the All-Cash
Option at the time the Price to Public and PKS for the Offering and the Direct
Sale is determined. The closing of the Offering will occur concurrently with,
and is conditioned upon, the closing of the Merger pursuant to the All-Cash
Option. See "THE MAGMA ACQUISITION."
Peter Kiewit Sons', Inc. ("PKS") is an approximate 44% stockholder of the
Company (on a fully diluted basis). PKS is a large employee-owned
construction, mining and telecommunications company with approximately $2.2
billion in revenues in 1993. PKS is one of the largest construction companies
in North America and has been in the construction business since 1884. Since
the initial PKS investment in the Company in 1991 (which at that time
represented approximately 25% of the Common Stock on a fully diluted basis),
a new management team has been installed and the Company's net income has
increased from $12.0 million for the 12-month period ended December 31, 1990
to $29.4 million for the nine-month period ended September 30, 1994. PKS has
indicated an intention to acquire 1,500,000 of the shares of Common Stock
being offered directly by the Company pursuant to this Prospectus (the "Direct
Sale") at the Price to Public and PKS set forth on the cover of this
Prospectus, subject to receipt and review by PKS of a final Prospectus and
conditioned upon the closing of the Offering. Any closing of the Direct Sale
will occur concurrently with and is conditioned upon the closing of the
Offering. Assuming PKS purchases such shares, following completion of the
Offering and the Direct Sale, PKS will be an approximate 33.8% stockholder of
the Company (on a fully diluted basis).
THE OFFERING
Common Stock offered by the Company:
U.S. Offering ............... 11,170,000 shares
International Offering ...... 4,000,000 shares
6
<PAGE>
Direct Sale .......... 1,500,000 shares
Total ................. 16,670,000 shares
Common Stock outstanding
after the Offering (1) . 48,899,584 shares
NYSE symbol ............ CE
Use of Proceeds ........ The net proceeds of the Offering and the
proceeds of the Direct Sale, together with
borrowings of up to $500 million under bank
credit facilities described herein (the
"Merger Facilities") and general corporate
funds of the Company, will be used to
complete the Magma Acquisition. The Company
presently intends to acquire the Remaining
Magma Shares pursuant to the All-Cash
Option. The closing of the Offering will
occur concurrently with, and is conditioned
upon, the closing of the Merger pursuant to
the All-Cash Option. Any closing of the
Direct Sale will occur concurrently with and
is conditioned upon the closing of the
Offering. See "USE OF PROCEEDS" and "THE
MAGMA ACQUISITION--Financing."
---------------
(1) Based on the number of shares of Common Stock outstanding as of
September 30, 1994. Does not include: (i) 9,435,229 shares of Common
Stock reserved for issuance upon the exercise of presently outstanding
stock options; (ii) 4,444,444 shares of Common Stock issuable upon the
conversion of the Company's Convertible Subordinated Debentures due
July 31, 2000 (the "Debentures"); and (iii) 3,393,197 shares of Common
Stock issuable upon conversion of the 1,247 issued and outstanding
shares of the Company's Series C Exchangeable Redeemable Preferred
Stock, no par value per share (the "Series C Preferred Stock").
7
<PAGE>
SUMMARY PRO FORMA UNAUDITED FINANCIAL INFORMATION
The summary Pro Forma Unaudited Financial Information of the Company set
forth in the table below is derived from the Pro Forma Unaudited Condensed
Combined Financial Data found elsewhere in this Prospectus. Such pro forma
financial information is based on the historical Consolidated Financial
Statements of the Company incorporated in this Prospectus by reference,
adjusted to give effect to the Magma Acquisition and the financing thereof,
including the Offering and the Direct Sale. The Pro Forma Condensed Combined
Statements of Earnings for the nine months ended September 30, 1994, and for
the year ended December 31, 1993, give effect to the Magma Acquisition as if
it had occurred at the beginning of each of the periods presented pursuant to
the All-Cash Option. The Pro Forma Condensed Combined Balance Sheet as of
September 30, 1994, gives effect to the Magma Acquisition as if it had
occurred on September 30, 1994. The Pro Forma Financial Information does not
purport to represent what the Company's results of operations or financial
position would actually have been or to project the Company's results of
operations or financial position for any future period.
The summary pro forma financial information should be read in conjunction
with the Pro Forma Unaudited Condensed Combined Financial Data and the notes
thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, 1993 SEPTEMBER 30, 1994
----------------- ------------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C>
STATEMENT OF EARNINGS DATA:
Total revenue ................................. $307,896 $278,921
Cost and expenses:
Plant operations ............................ 74,855 65,095
General and administrative and other ........ 24,572 19,518
Royalties ................................... 8,274 7,898
Depreciation and amortization ............... 57,607 46,753
Interest expense (net of interest
capitalized) .............................. 78,015 79,974
----------------- ------------------
Total costs and expenses ...................... 243,323 219,238
------------------
Income before income taxes .................... 64,573 59,683
Provision for income taxes .................... 15,717 16,205
----------------- ------------------
Income from continuing operations ............. 48,856 43,478
Preferred dividends ........................... 4,630 3,711
----------------- ------------------
Income available to common stockholders ...... $ 44,226 $ 39,767
================= ==================
Income per common and common equivalent share
Assuming no dilution .......................... $ 0.80 $ 0.75
================= ==================
Assuming full dilution ........................ $ 0.79 $ 0.73
================= ==================
Weighted average common shares outstanding ... 55,155 52,844
================= ==================
</TABLE>
<TABLE>
<CAPTION>
AS OF
SEPTEMBER
30, 1994
------------------
(IN THOUSANDS)
<S> <C>
BALANCE SHEET DATA:
Cash and short term
investments .................. $ 151,563
Property and plant, net ...... 1,257,828
Total assets .................. 2,267,669
Total indebtedness ............ 1,476,857
Redeemable preferred stock ... 62,350
Total stockholders' equity ... 467,129
</TABLE>
8
<PAGE>
RISK FACTORS
Prospective purchasers of the Shares offered hereby should consider
carefully all of the information contained in this Prospectus, including the
following:
DEVELOPMENT UNCERTAINTY. The Company is actively seeking to develop,
construct, own and operate new power projects utilizing geothermal and other
technologies, both domestically and internationally, the completion of any of
which is subject to substantial risk. The Company has in development or under
construction projects representing several times the MW's of those currently
in operation. Development can require the Company to expend significant sums
for preliminary engineering, permitting, legal and other expenses in
preparation for competitive bids which the Company may not win or before it
can be determined whether a project is feasible, economically attractive or
capable of being financed. Successful development and construction is
contingent upon, among other things, negotiation on terms satisfactory to the
Company of engineering, construction, fuel supply and power sales contracts
with other project participants, receipt of required governmental permits and
consents and timely implementation of construction. Further, there can be no
assurance that the Company, which will continue to be substantially leveraged
upon completion of the Magma Acquisition, will obtain access to the
substantial debt and equity capital required to continue to develop and
construct electric power projects or to refinance projects. The future growth
of the Company is dependent, in large part, upon the demand for significant
amounts of additional electrical generating capacity and its ability to
obtain contracts to supply portions of this capacity. There can be no
assurance that development efforts on any particular project, or the
Company's efforts generally, will be successful.
DEVELOPMENT UNCERTAINTY OUTSIDE THE UNITED STATES. Upon completion of
the Magma Acquisition, the Company will have three projects under
construction outside the United States representing an aggregate net capacity
of 500 MW of electric generating capacity of which the Company's aggregate
net ownership interest is 409 MW and a number of projects under award outside
the United States. The financing and development of projects outside the
United States entail significant political and financial risks (including,
without limitation, uncertainties associated with first-time privatization
efforts in the countries involved, currency exchange rate fluctuations,
currency repatriation restrictions, political instability, civil unrest and
expropriation) and other structuring issues that have the potential to cause
substantial delays in respect of or material impairment of the value of the
project being developed, which the Company may not be capable of fully
insuring against. The uncertainty of the legal environment in certain foreign
countries in which the Company is developing and may develop or acquire
projects could make it more difficult for the Company to enforce its rights
under agreements relating to such projects. In addition, the laws and
regulations of certain countries may limit the ability of the Company to hold
a majority interest in some of the projects that it may develop or acquire.
The Company's international projects may, in certain cases, be terminated by
the applicable foreign governments.
EXPLORATION, DEVELOPMENT AND OPERATION UNCERTAINTIES OF GEOTHERMAL ENERGY
RESOURCES. Geothermal exploration, development and operations are subject to
uncertainties similar to those typically associated with oil and gas
exploration and development, including dry holes and uncontrolled releases.
Because of the geological complexities of geothermal reservoirs, the
geographic area and sustainable output of geothermal reservoirs can only be
estimated and cannot be definitively established. There is, accordingly, a
risk of an unexpected decline in the capacity of geothermal wells and a risk
of geothermal reservoirs not being sufficient for sustained generation of the
electrical power capacity desired. In addition, geothermal power production
poses unusual risks of seismic activity. Accordingly, there can be no
assurance that earthquake, property damage or business interruption insurance
will be adequate to cover all potential losses sustained in the event of
serious seismic disturbances or that such insurance will be available on
commercially reasonable terms.
The success of a geothermal project depends on the quality of the
geothermal resource and operational factors relating to the extraction of the
geothermal fluids involved in such project. The quality
9
<PAGE>
of a geothermal resource is affected by a number of factors, including the
size of the reservoir, the temperature and pressure of the geothermal fluids
in such reservoir, the depth and capacity of the production and injection
wells, the amount of dissolved solids and noncondensible gases contained in
such geothermal fluids, and the permeability of the subsurface rock
formations containing such geothermal resource, including the presence,
extent and location of fractures in such rocks. The quality of a geothermal
resource may decline as a result of a number of factors, including the
intrusion of lower-temperature fluid into the producing zone. An incorrect
estimate by the Company of the quality of geothermal resource, or a decline
in such quality, could have a material adverse effect on the Company's
results of operations.
In addition, both the cost of operations and the operating performance of
geothermal power plants may be adversely affected by a variety of operating
factors. Production and injection wells can require frequent maintenance or
replacement. Corrosion caused by high-temperature and high-salinity
geothermal fluids may compel the replacement or repair of certain equipment,
vessels or pipelines. New production and injection wells may be required for
the maintenance of current operating levels, thereby requiring substantial
capital expenditures.
COMPETITION. The international power production market is characterized
by numerous strong and capable competitors, many of which have more extensive
and more diversified developmental or operating experience (including
international experience) and greater financial resources than the Company.
Many of these competitors also compete in the domestic market. Further, in
recent years, the domestic power production industry has been characterized
by strong and increasing competition with respect to the industry's efforts
to obtain new power sales agreements, which has contributed to a reduction in
prices offered by utilities. In this regard, many utilities often engage in
"competitive bid" solicitations to satisfy new capacity demands. In the
domestic market, the Energy Policy Act of 1992 is expected to increase
competition.
PRESENT DEPENDENCE ON LARGE CUSTOMER. The Company currently relies on
long-term power purchase "Standard Offer No. 4" contracts (each, an "SO4
Agreement") with a single customer, Southern California Edison Company
("SCE"), to generate substantially all of its operating revenues. Any
material failure by SCE to fulfill its contractual obligations under any of
such contracts is likely to have a material adverse effect on the Company's
results of operations.
CONTRACT RISKS; EXPECTED NEGATIVE IMPACT OF AVOIDED COST PRICING. Each of
the Company's SO4 Agreements provides for both capacity payments and energy
payments for a term of between 20 and 30 years. During the first ten years of
the term of each SO4 Agreement, energy payments are based on a pre-set
schedule. Thereafter, while the basis for the capacity payment remains the
same, the required energy payment is SCE's then-current published avoided
cost of energy ("Avoided Cost of Energy"), as determined by the California
Public Utility Commission ("CPUC"). The initial ten-year period expires in
August 1997 for the Company's Navy I Project, March 1999 for its BLM Project
and January 2000 for its Navy II Project. Such ten-year period expires in
1996 with respect to one of Magma's Salton Sea Known Geothermal Resource Area
Projects (as hereinafter described), in 1999 for three of its Salton Sea
Known Geothermal Resource Area Projects and in 2000 for the remaining two
Salton Sea Known Geothermal Resource Area Projects that operate under SO4
Agreements.
Estimates of SCE's future Avoided Cost of Energy vary substantially in any
given year. The Company cannot predict the likely level of Avoided Cost of
Energy prices under its SO4 Agreements with SCE at the expiration of the
fixed-price periods. SCE's Avoided Cost of Energy as determined by the CPUC
is currently substantially below the current energy prices under the
Company's respective SO4 Agreements and is expected to remain so. For
example, for September 1994, the time period-weighted average of SCE's
Avoided Cost of Energy was 2.2cents per kWh, compared to the time
period-weighted average September 1994 selling prices for energy of
approximately 10.9cents and 10.6cents per kWh, for the Company and Magma,
respectively. Thus, the revenues generated by each of the Company's
facilities operating under SO4 Agreements are likely to decline significantly
after the expiration of the fixed-price period.
10
<PAGE>
SUBSTANTIAL LEVERAGE. Following completion of the Magma Acquisition, the
Company will continue to be substantially leveraged. As of September 30,
1994, the Company's total consolidated indebtedness was $775.5 million, its
total consolidated assets were $1,087.1 million and its total stockholders'
equity was $179.7 million. As of such date, on a pro forma basis, after
giving effect to the completion of the Magma Acquisition, the Offering and
the Direct Sale, the Company's total consolidated indebtedness was $1,476.9
million, its total consolidated assets were $2,267.7 million and its total
stockholders' equity was $467.1 million. The Company's substantial level of
debt presents the risk that the Company might not generate sufficient cash to
service the Company's indebtedness or that its leveraged capital structure
could limit its ability to finance the acquisition and development of
additional projects, to compete effectively or to operate successfully under
adverse economic conditions. However, all project financing debt of the
Company's project subsidiaries (aggregating approximately $955.5 million as
of December 31, 1994) is substantially non-recourse to the Company. See
"BUSINESS--Description of Projects," "CAPITALIZATION" and "PRO FORMA
UNAUDITED CONDENSED COMBINED FINANCIAL DATA."
CERTAIN RISKS OF THE MAGMA ACQUISITION. As a result of the Magma
Acquisition, the Company's total assets, total liabilities and total
resources will each approximately double. Such rapid expansion could divert
the resources and management of the Company and will require the integration
of Magma's operations with those of the Company. There can be no assurance
that the Company will be successful in managing such growth or that it will
be able to achieve any of the anticipated benefits of the Magma Acquisition.
IMPACT OF ENVIRONMENTAL AND OTHER REGULATIONS. The Company is subject to a
number of environmental laws and regulations affecting many aspects of its
present and future operations, including the disposal of various forms of
waste, the construction or permitting of new facilities and the drilling and
operation of new wells. Such laws and regulations generally require the
Company to obtain and comply with a wide variety of licenses, permits and
other approvals. The Company also remains subject to a varied and complex
body of regulations that both public officials and private individuals may
seek to enforce. There can be no assurance that existing regulations will not
be revised or that new regulations will not be adopted or become applicable
to the Company which could have an adverse impact on its operations. The
implementation of regulatory changes imposing more comprehensive or stringent
requirements on the Company, which would result in increased compliance
costs, could have a material adverse effect on the Company's results of
operations. In addition, regulatory compliance for the construction of new
facilities is a costly and time-consuming process, and intricate and rapidly
changing environmental regulations may require major expenditures for
permitting and create the risk of expensive delays or material impairment of
project value if projects cannot function as planned due to changing
regulatory requirements or local opposition.
SHARES OF COMMON STOCK ELIGIBLE FOR FUTURE SALE. Pursuant to the Company's
Amended and Restated 1986 Stock Option Plan (the "1986 Plan"), as of
September 30, 1994, the Company had outstanding various options to its
officers, directors and employees for the purchase of 3,371,075 shares of
Common Stock, of which all of the shares of Common Stock issuable upon
exercise of said options have been registered pursuant to registration
statements on Form S-8, and, as and when fully vested, are available for
immediate resale. Also as of September 30, 1994, there were additional
options outstanding to purchase 6,064,154 shares of Common Stock, 5,789,163
of which were granted to PKS. As of September 30, 1994, PKS has demand and
piggyback registration rights with respect to approximately 8,971,912 shares
of Common Stock (and any shares of Common Stock subsequently held by PKS,
including without limitation, any shares of Common Stock purchased in the
Direct Sale), all options to purchase shares of Common Stock (and the shares
issuable upon the exercise of such options) and 3,393,197 shares of Common
Stock issuable upon conversion of the 1,247 shares of the Series C Preferred
Stock held by PKS (or upon conversion of the Company's Exchangeable
Subordinated Debentures if issued upon the exchange of the Series C Preferred
Stock). In addition, 3,393,197 shares of Common Stock and 4,444,444 shares of
Common Stock have been reserved for issuance pursuant to the conversion of
the 1,247 shares of Series C Preferred Stock held by PKS and the Debentures,
respectively. Sales of substantial amounts of Common Stock or the
availability of Common Stock for sale, could have an adverse impact on the
market price of the Common Stock and on the Company's ability to raise
additional capital through the sale of Common Stock.
11
CAPITAL PRINTING SYSTEMS]
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company of the Offering are estimated to be
approximately $260.7 million (approximately $299.7 million if the
over-allotment option is exercised in full). The proceeds to the Company of
the Direct Sale are estimated to be approximately $26.8 million.
Approximately $957 million will be required to complete the Magma
Acquisition. The net proceeds of the Offering and the proceeds of the Direct
Sale (approximately $287.5 million in the aggregate, assuming no exercise of
the over-allotment option), together with borrowings of $500 million under the
Merger Facilities described herein and general corporate funds of the Company
in the amount of approximately $170 million, will be used by the Company to
acquire the Remaining Magma Shares, to repay certain bank borrowings incurred
in connection with the Magma Tender Offer (the "Tender Facility") and to pay
fees and expenses related to the Magma Acquisition. See "THE MAGMA
ACQUISITION--Financing."
Pursuant to the terms of the Merger Agreement, the Company has the right
to acquire the Remaining Magma Shares either for a combination of cash and
shares of Common Stock valued at approximately $39.00 per share of Magma
Common Stock or pursuant to the All-Cash Option. The Company presently
intends to acquire the Remaining Magma Shares pursuant to the All-Cash
Option. The closing of the Offering will occur concurrently with, and is
conditioned upon, the closing of the Merger pursuant to the All-Cash Option.
Any closing of the Direct Sale will occur concurrently with and is
conditioned upon the closing of the Offering.
MARKET PRICES OF THE COMMON STOCK
The Common Stock is listed for quotation on the NYSE under the symbol
"CE". The following table sets forth the high and low last reported sale
prices of the Common Stock on the NYSE Composite Tape for the fiscal quarters
indicated.
<TABLE>
<CAPTION>
HIGH LOW
-------- --------
<S> <C> <C>
Fiscal Year Ended December 31, 1993
First Quarter ..................... $21.50 $16.50
Second Quarter .................... 20.13 17.25
Third Quarter ..................... 18.38 16.00
Fourth Quarter .................... 20.13 18.13
Fiscal Year Ended December 31, 1994
First Quarter ..................... $19.25 $17.13
Second Quarter .................... 18.13 16.00
Third Quarter ..................... 17.75 16.00
Fourth Quarter .................... 17.13 15.25
Fiscal Year Ended December 31, 1995
First Quarter (through January 20) $17.88 $15.75
</TABLE>
On January 20, 1995, the last reported sale price of the Common Stock on
the NYSE Composite Tape was $17.88.
12
<PAGE>
CAPITALIZATION
The following table sets forth the consolidated capitalizations of the
Company and Magma at September 30, 1994 and as adjusted to reflect borrowings
of $500 million under the Merger Facilities, consummation of the Magma
Acquisition and completion of the Offering and the Direct Sale at a price of
$17.875 per share of Common Stock, and the application of the proceeds (net
proceeds in the
case of the Offering) therefrom. The following table should be read in
conjunction with the other pro forma financial information contained in this
Prospectus and the respective consolidated financial statements and notes
thereto of the Company and Magma incorporated by reference herein.
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
THE COMPANY MAGMA ADJUSTMENTS COMBINED
------------ ---------- ------------- -----------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
INDEBTEDNESS:
Construction loans .......................... $ 21,079 $ -- $ -- $ 21,079
Project loans ............................... 233,080 188,969 -- 422,049
Senior discount notes ....................... 421,375 -- -- 421,375
Convertible subordinated debenture .......... 100,000 -- -- 100,000
Other long term liabilities ................. -- 12,354 500,000 512,354
------------ ---------- ------------- -----------
Total indebtedness .......................... 775,534 201,323 500,000 1,476,857
Redeemable preferred stock .................. 62,350 -- - 62,350
STOCKHOLDERS' EQUITY:
Preferred stock--Series A of no par value;
authorized 2,000 shares .................... -- -- -- --
Common stock of $0.0675 par value;
authorized 60,000 shares; outstanding
32,230 shares--actual; 48,900 shares--pro
forma combined (1) ......................... 2,407 -- 894 3,301
Magma common stock of $0.10 par value;
authorized 30,000 shares; 24,043 issued ... -- 2,401 (2,401) --
Additional paid-in capital .................. 100,000 142,765 84,294 327,059
Unrealized gain from marketable securities . -- (677) 677 --
Retained earnings ........................... 136,769 250,797 (250,797) 136,769
Less treasury stock--3,420 shares at cost .. (59,516) -- 59,516 --
------------ ---------- ------------- -----------
Total stockholders' equity .................. 179,660 395,286 (107,817) 467,129
------------ ---------- ------------- -----------
Total capitalization ........................ $1,017,544 $596,609 $ 392,183 $2,006,336
============ ========== ============= ===========
</TABLE>
- ---------------
(1) There is pending before the stockholders of the Company a proposal to
increase the number of authorized shares of Common Stock to 80,000,000
shares. Issued shares (actual and as adjusted) do not include (i)
9,435,229 shares of Common Stock reserved for issuance upon the
exercise of presently outstanding stock options, (ii) 4,444,444 shares
of Common Stock issuable upon the conversion of the Debentures and
(iii) 3,393,197 shares of Common Stock issuable upon conversion of the
1,247 issued and outstanding shares of Series C Preferred Stock.
See "PRO FORMA UNAUDITED CONDENSED COMBINED FINANCIAL DATA."
13
<PAGE>
THE MAGMA ACQUISITION
The Company is acquiring all of the outstanding equity interest in Magma
in a two-step transaction according to the terms of the Merger Agreement. On
January 10, 1995, the Company acquired approximately 51% of the outstanding
shares of Magma Common Stock in the Magma Tender Offer and the Company
expects that it will complete the Magma Acquisition by acquiring the
Remaining Magma Shares through the Merger. Magma is engaged in independent
geothermal power operations and development activities similar to those of
the Company. Upon the effective time of the Merger, each outstanding share of
Magma Common Stock (other than shares of Magma Common Stock held by the
Company, CE Sub or any other direct or indirect subsidiary of the Company and
shares of Magma Common Stock held in the treasury of Magma) will be converted
into the right to receive, at the Company's election, either cash or a
combination of cash and Common Stock. If the Company elects to pay the Merger
consideration with a combination of cash and Common Stock, the consideration
paid by the Company in the Magma Tender Offer and the Merger will consist, on
a blended basis, of $28.50 per share of Magma Common Stock in cash and $10.50
per share of Magma Common Stock in market value of Common Stock, based on the
Average Closing Price; provided, however, that for purposes of calculating
the Average Closing Price, if the Average Closing Price exceeds $18.73, the
Average Closing Price shall be deemed to be $18.73, and if the Average
Closing Price is less than $14.27, the Average Closing Price shall be deemed
to be $14.27. If the Company elects to pay the All-Cash Option, the blended
consideration paid by the Company in the Magma Tender Offer and the Merger
would be $38.75 per share of Magma Common Stock. The Company currently
intends to pay the Merger consideration solely in cash, funded in significant
part with the net proceeds of the Offering and the proceeds of the Direct
Sale, but such intention is subject to change if (i) the proposed
underwriters for the Offering determine that they cannot or will not proceed
with the Offering upon terms reasonably satisfactory to the Company, or (ii)
market conditions would require the issuance of a greater number of shares of
Common Stock in order to fund the Merger pursuant to the All-Cash Option than
would be required to be issued in the Merger with a combination of cash and
Common Stock consideration. If the Company changes its intention and does not
elect the All-Cash Option, it will promptly withdraw the Registration
Statement. The Company currently intends to elect the All-Cash Option at the
time the Price to Public and PKS for the Offering and the Direct Sale is
determined. The closing of the Offering will occur concurrently with, and is
conditioned upon, the closing of the Merger pursuant to the All-Cash Option.
CONDITIONS OF THE MERGER
Consummation of the Merger remains subject to certain conditions,
including (i) the approval and adoption of the Merger and the Merger
Agreement by the requisite vote of Magma's stockholders, which approval and
adoption can be effected by the Company without the affirmative action of any
other Magma stockholder; (ii) the approval of the Company's stockholders of
the issuance of Common Stock in order to provide a portion of the
consideration for the Merger (if a combination of cash and shares of Common
Stock were used to acquire the Remaining Magma Shares); and (iii) that there
shall not be in effect (a) any judgment, decree or order issued by any
Federal, state or local court of competent jurisdiction, or (b) any statute,
rule or regulation enacted or promulgated by any Federal, state, local or
legislative, administrative or regulatory body of competent jurisdiction,
that in either of cases (a) or (b) prohibits the consummation of the Merger
or makes such consummation illegal. The waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, has
expired.
FINANCING
A total of approximately $957 million will be required to complete the
Magma Acquisition. Pursuant to the Merger Facilities, Credit Suisse will
provide, on specified terms and subject to customary conditions, up to $500
million in secured bank financing. Such funds, together with the net proceeds
of the Offering, the proceeds of the Direct Sale and general corporate funds
of the Company, will be sufficient to complete the Magma Acquisition.
The Merger Facilities are expected to be comprised of (i) a six year term
loan ("Term Loan A") in a principal amount of up to the difference between $500
million and the principal amount of Term Loan B (as defined
14
<PAGE>
below), expected to be amortized in semi-annual payments, and (ii) an eight
year term loan ("Term Loan B") in a principal amount to be not less than $150
million, expected to be amortized in semi-annual payments in the seventh and
eighth years of such Term Loan. Loans under the Merger Facilities will be
made to the Company on a non-recourse basis, and the Company will lend the
proceeds of such loans to Magma in exchange for a secured term note of Magma
(the "Magma Note"). The loans under the Merger Facilities are to be amortized
from payments received by the Company from Magma on the Magma Note which will
be amortized from internally generated funds of Magma. Loans under the Merger
Facilities will be secured by an assignment and pledge by the Company of the
Magma Note and 100% of the capital stock of Magma. The Magma Note will be
secured by an assignment of certain unencumbered assets of Magma.
Interest on loans under the Merger Facilities is expected to payable at
spreads of 2.50% above LIBOR (adjusted for reserves) or 1.50% above the Base
Rate for Term Loan A, and 3.00% above LIBOR (adjusted for reserves) or 2.00%
above the Base Rate for Term Loan B. The LIBOR spreads are subject to upward
adjustment in certain instances. The Company may elect to have loans bear
interest based on either LIBOR or the Base Rate (as defined in the Merger
Facilities).
The Merger Facilities will contain affirmative and negative covenants
customary for similar non-recourse credit facilities. Such covenants will
include a negative pledge of all stock and unencumbered assets of Magma; a
limitation on guaranties by Magma; a limitation on mergers and sales of
assets by Magma; a limitation on investments in other persons by Magma; a
prohibition on dividends and other payments by Magma to the Company unless
the proceeds are used to pay down the Merger Facilities; a prohibition on the
sale of ownership interests in Magma; a limitation on the incurrence of
additional debt by Magma; a requirement that the Company deliver each fiscal
quarter a certificate as to the absence of material adverse changes in the
Company or Magma which could reasonably be expected to materially affect the
ability of the Company to repay the Merger Facilities or the ability of the
lenders to realize on the collateral for the Merger Facilities; and a
restriction on a change in the nature of the business of the Company and
Magma.
The Merger Facilities will also contain financial covenants and customary
events of default, including events of default based on breaches of certain
representations, warranties and covenants; cross defaults with respect to
certain debt of the Company and Magma; bankruptcy and similar events; the
failure to pay one or more final judgments aggregating more than a specified
threshold to be agreed upon; the failure to make a payment with respect to
the Merger Facilities when due; and the failure of the pledge agreement with
respect to the capital stock of Magma and the Magma Note to be in full force
and effect.
Credit Suisse's commitment to provide the Merger Facilities is subject to
certain customary conditions, including without limitation (i) capital
investment in CE Sub in an amount and form satisfactory to Credit Suisse and
(ii) the absence of certain material adverse changes.
15
<PAGE>
BUSINESS
THE COMPANY
California Energy Company, Inc. was founded in 1971 to develop geothermal
power production facilities. The Company is primarily engaged in the
exploration for, and development and operation of, environmentally
responsible independent power production facilities worldwide utilizing
geothermal resources or other energy sources, such as hydroelectric, natural
gas, oil and coal.
Following completion of the Magma Acquisition, the Company will be the
largest independent geothermal power producer in the world (on the basis of
the Company's estimate of the aggregate MW of electric generating capacity in
operation and under construction). The Company will have an aggregate net
ownership interest of 354 MW of electric generating capacity in power
production facilities in the United States having an aggregate net capacity
of 571 MW. All of these facilities will be managed and operated by the
Company and are principally located in Southern California. In addition to
the electricity sales revenue earned from its net ownership position in such
facilities, the Company receives significant fee and royalty income from
operating such plants and managing the production from the geothermal
resource for such facilities. The Company will have an aggregate net
ownership interest of 409 MW of electric generating capacity in three
geothermal power projects in the Philippines, having an aggregate net
capacity of 500 MW, which projects are financed and under construction. The
Company is also developing eight additional projects with executed or awarded
power sales contracts in the Philippines, Indonesia and the United States.
The Company will have an approximate net ownership interest of 935 MW in
these development projects representing an aggregate net capacity of 1,589 MW
of additional potential electric generating capacity.
PKS is an approximate 44% stockholder of the Company (on a fully diluted
basis). PKS is a large employee-owned construction, mining and
telecommunications company with approximately $2.2 billion in revenues in
1993. PKS is one of the largest construction companies in North America and
has been in the construction business since 1884. Since the initial PKS
investment in the Company in 1991 (which at that time represented
approximately 25% of the Common Stock on a fully diluted basis), a new
management team has been installed and the Company's net income has increased
from $12.0 million for the 12-month period ended December 31, 1990 to $29.4
million for the nine-month period ended September 30, 1994. PKS has indicated
an intention to acquire 1,500,000 of the shares of Common Stock being offered
in the Direct Sale at the Price to Public and PKS set forth on the cover of
this Prospectus, subject to receipt and review by PKS of a final Prospectus and
conditioned upon the closing of the Offering. Assuming PKS purchases such
shares, following the completion of the Offering and the Direct Sale, PKS will
be an approximate 33.8% stockholder of the Company (on a fully diluted basis).
Any closing of the Direct Sale will occur concurrently with and is conditioned
upon the closing of the Offering.
REASONS FOR THE MAGMA ACQUISITION
The Company believes that Magma is an excellent strategic fit and that the
acquisition of Magma will create significant benefits, including:
O EXPANSION AND ENHANCEMENT OF DEVELOPMENT EFFORTS
Development of new opportunities, particularly internationally, is a key
component of the Company's strategy. Since 1990, the Company and Magma have
each pursued international development opportunities primarily in Southeast
Asia. By pursuing additional development opportunities rather than competing
with Magma for the same opportunities, the Company expects to expand its
development efforts to cover additional projects and thereby more effectively
capitalize on the numerous opportunities in the growing international
independent power market.
Furthermore, the Company will have available to it technology of both
companies. The Company owns production technology compatible with the
relatively low mineral content of its wells at the Coso Project, and Magma
owns technology compatible with the high levels of mineral precipitates found
in the
16
<PAGE>
geothermal resource at the Salton Sea Projects. The Company expects that
access to these technologies will enable it to compete for new power
development projects from geothermal reservoirs encompassing a wide range of
geothermal resource characteristics.
O BENEFITS OF INCREASED SIZE
The Company believes that size is an important factor in determining the
success of an independent power producer. This view is based on the Company's
belief that potential customers consider both the price of power and the
provider's capacity to fulfill its obligations as primary factors in the
selection of power suppliers. The expanded size and capabilities of the
combined companies is expected to further enhance the Company's reputation
and credibility with sovereign governments and state utility customers and
therefore enhance its ability to successfully compete for new projects.
Following the Magma Acquisition, the Company will have over $2 billion of
total assets and an aggregate net ownership interest of 1,698 MW in projects
in operation, under construction or in development, which projects have an
aggregate net generating capacity of 2,770 MW. The Company also believes that
the combination with Magma will create the opportunity to reduce the
Company's average cost per kWh by expanding its asset base, without
materially expanding its cost structure. This will allow the Company to be
more price competitive with other geothermal power producers and traditional
fossil fuel power plants, which the Company believes will be its primary
competition in the future.
O OPPORTUNITIES FOR OPERATIONAL AND ADMINISTRATIVE COST SAVINGS
Based in part on its experience in restructuring the operations of the
Company since 1991, management of the Company believes that it can achieve
meaningful cost savings upon the combination of Magma and the Company.
Through the implementation of the Company's existing organizational
structure, management policies and cost controls, the Company presently
expects that the cost of duplicate functions will be substantially eliminated
and that the productivity of its combined operating and administrative staff
will be significantly increased.
O DIVERSIFICATION IN SOURCES OF REVENUE AND OPERATIONS
The combination of the Company's and Magma's operations will increase the
Company's sources of revenue and increase the number of operating sites
(including projects under construction) from eight to 16. The Company
believes that the resulting diversification in sources of revenue and
operations can be expected to reduce the risk profile of the Company, thereby
enhancing its overall credit position and improving its access to capital in
relation to competitors with more concentrated sources of revenue and
operations.
GEOTHERMAL ENERGY
Geothermal energy is a clean, renewable and generally sustainable energy
source that releases significantly lower levels of emissions than result from
energy generation based on the burning of fossil fuels. Geothermal energy is
derived from the natural heat of the earth when water comes sufficiently
close to hot molten rock to heat the water to temperatures of 400 degrees
Fahrenheit or more. The heated water then ascends naturally toward the
surface of the earth where it can be extracted by drilling geothermal wells.
The energy necessary to operate a geothermal power plant is typically
obtained from several such wells which are drilled using established
technology similar to that employed in the oil and gas industry.
17
<PAGE>
GEOTHERMAL ENERGY
#############################################################################
IMAGE OMITTED:
[Schematic representing Geothermal Energy]
(SEE ALSO "APPENDIX FOR GRAPHICS AND IMAGE MATERIAL"
AFTER BACK COVER PAGE OF PROSPECTUS.)
#############################################################################
Geothermal production wells are normally located within approximately one
to two miles of the power plant as geothermal fluids cannot be transported
economically over longer distances. From the well heads, the heated fluid
flows through pipelines to a series of separators where it is separated into
water, brine and steam. The steam is passed through a turbine which drives a
generator to generate electricity. Once the steam has passed through the
turbine, it is then cooled and condensed back into water which, along with
any brine, is returned to the geothermal reservoir via injection wells.
Geothermal plants in the United States are eligible to be qualifying
facilities ("QFs") under the Public Utility Regulatory Policies Act of 1978
("PURPA"), which provides for certain beneficial Federal regulatory
treatment. The geothermal reservoir is a renewable source of energy if
natural ground water sources and re-injection of extracted geothermal fluids
are adequate over the long term to replenish the geothermal reservoir after
the withdrawal of geothermal fluids.
The generation of electric power from geothermal resources has certain
advantages when compared to other methods of electric power generation.
Geothermal energy facilities generate significantly less emissions than
fossil fuel power plants. Geothermal energy facilities typically have higher
capital costs but tend to have significantly lower variable costs than fossil
fuel based power plants. The utilization of geothermal power is preferred by
certain governments so as to minimize the import, or maximize the export, of
hydrocarbons. Geothermal power facilities also enjoy certain tax benefits in
the United States.
18
<PAGE>
GEOTHERMAL RESOURCE--"RING OF FIRE"
Geothermal energy is most prevalent where the different sections or plates
of the Earth's crust meet. Productive geothermal resources are found
throughout the Pacific Rim (the so-called "Ring of Fire"), including the
western United States, Latin America, Hawaii, Indonesia, the Philippines,
Malaysia and New Zealand. These areas are experiencing high rates of
population growth and increased demand for new electric generating capacity.
AREAS OF POTENTIAL GEOTHERMAL ACTIVITY
#############################################################################
IMAGE OMITTED:
[Map depicting areas of Potential Geothermal Energy]
(SEE ALSO "APPENDIX FOR GRAPHICS AND IMAGE MATERIAL"
AFTER BACK COVER PAGE OF PROSPECTUS.)
#############################################################################
THE GLOBAL POWER MARKET
The opportunity for independent power generation has expanded from a
United States market consisting of cogeneration and small power production
projects to a global competitive market for power generation. Many foreign
countries have initiated restructuring policies after the advent of the
independent power market in the United States.
In the United States, the independent power industry expanded rapidly in
the 1980's, facilitated by the enactment of PURPA. PURPA was enacted to
encourage the production of electricity by non-utility companies as well as
to lessen reliance on imported fuels. According to the Utility Data
Institute, independent power producers were responsible for about 30,000 MW,
or 50%, of the U.S. electric generation capacity which has been placed in
service since 1988.
As the size of the United States independent power market has increased,
available domestic power capacity and competition in the industry have also
significantly increased. Over the past decade, obtaining a power sales
contract from a U.S. utility has generally become increasingly difficult,
expensive and competitive. Many states now require power sales contracts to
be awarded through competitive bidding, which both increases the cost of
obtaining such contracts and decreases the chances of obtaining such
contracts as bids significantly outnumber awards in most competitive
solicitations. The federal Energy Policy Act of 1992 is expected to further
increase domestic competition. As a result of this increased
19
<PAGE>
competition, it may be difficult to obtain a power sales agreement for a
proposed project in the United States, and the terms and conditions of any
such contract may be less favorable than those in prior agreements.
Large amounts of new electric power generating capacity are required in
developing countries. The movement toward privatization in some developing
countries has created significant new markets outside the United States. In
1990, the World Bank estimated that developing countries will need
approximately 380,000 MW of new power generating capacity through the end of
the decade. The need for such rapid expansion has caused many countries to
select private power development as their only practical alternative and to
restructure their legislative and regulatory systems to facilitate such
development. The Company believes that this significant need for power has
created strong local support for private power projects in many foreign
countries and increased the availability of attractive long-term power
contracts. The Company intends to take advantage of opportunities in these
new markets and to develop, construct and acquire power generation projects
outside the United States.
STRATEGY
Domestically, the Company is focusing on market opportunities in which it
believes it has relative competitive advantages due to its geotechnical,
project management and operating expertise. In addition, the Company expects
to continue diversification into other environmentally responsible sources of
energy primarily through selected acquisitions of partially developed or
existing power generating projects and contracts.
The Company presently believes that the international independent power
market holds the majority of new opportunities for financially attractive
private power development in the next several years, in large part because
the demand for new generating capacity is growing more rapidly in emerging
nations than in the United States. In developing its international strategy,
the Company pursues development opportunities in countries which it believes
have an acceptable risk profile and where the Company's geothermal resource
development and operating experience, project development expertise or
strategic relationship with PKS or local partners are expected to provide it
with a competitive advantage. Subsequent to the Magma Acquisition, the
Company will have financed and have under construction three projects
representing an aggregate of 409 MW of net ownership of electric generating
capacity in the Philippines. In addition, the Company is currently pursuing a
number of other electric power project opportunities in countries including
the Philippines and Indonesia. These countries are ideally suited for the
Company to develop, finance and operate power projects successfully because
of their excellent population demographics, extensive geothermal resources
and stated commitments to the development of private power programs. The
Company's development efforts include both so-called "greenfield" development
as well as the acquisition of or participation in the joint venture
development of projects which are under development or already operating. In
greenfield development, the Company attempts to negotiate power sales
contracts for new generation capacity or engages in competitive bids in
response to government agency or utility requests for proposals for new
capacity.
In pursuing its international strategy, the Company intends to own a
significant equity interest in, and to operate, the projects it develops or
acquires. In order to compete more effectively internationally, the Company's
strategy is to attempt to diversify its project portfolio, extend its future
equity funding capacity through joint ventures and utilize fixed-price,
turnkey construction contracts with contractors experienced in the
construction of power plants or other infrastructure facilities. The Company
also believes that it is important in foreign transactions to work with local
partners who are knowledgeable concerning local culture, politics and
commercial practices and who provide a visible local presence and local
project representation.
With respect to emerging market projects, the Company's policy is to
attempt to minimize currency risks, including the devaluation of local
currencies versus the U.S. dollar, as well as the risk of availability of
hard currency convertibility. To date, all of the Company's executed power
contracts contain provisions which index the Company's returns to U.S.
dollars or provide for the payment of capacity payments in U.S. dollars. To
the extent possible, the Company attempts to secure "political risk"
insurance from the Overseas Private Insurance Corporation ("OPIC") or similar
multilateral agencies to limit its risk in
20
<PAGE>
emerging market countries. In addition, the Company endeavors to involve the
World Bank, export credit agencies or multilateral funding sources in its
international project financings. The Company believes multilateral lending
agencies and foreign source financing and political risk insurance are
available for certain international private power projects, particularly
those utilizing indigenous fuel sources in renewable or otherwise
environmentally responsible generating facilities. The Company believes that
the involvement of these institutions will enhance an international project's
position in emerging market countries.
The Company has an international joint venture agreement with PKS which
the Company believes enhances the Company's capabilities in foreign power
markets. The joint venture agreement is limited to international activities
and provides that if both the Company and PKS agree to participate in a
project, they will share all development costs equally. Each of the Company
and PKS will provide 50% of the equity required for financing a project
developed by the joint venture and the Company will operate and manage such
project. The agreement creates a joint development structure under which, on
a project by project basis, the Company will be the development manager,
managing partner and/or project operator, an equal equity participant with
PKS and a preferred participant in the construction consortium and PKS will
be an equal equity participant and the preferred turnkey construction
contractor. The joint venture agreement may be terminated by either party on
15 days written notice, provided that such termination cannot affect the
pre-existing contractual obligations of either party.
In order to augment its technical capabilities, in 1993 the Company
acquired The Ben Holt Co. ("BHCO"), a California based engineering firm with
over 25 years of geothermal experience, specializing in feasibility studies,
process design, detailed engineering, procurement, construction and operation
of geothermal power plants, gathering systems and related facilities.
THE PROJECTS
Upon completion of the Magma Acquisition, the Company will have net
ownership interests of an aggregate of (i) 354 MW in 13 projects in operation
representing an aggregate net capacity of 571 MW of electric generating
capacity, (ii) 409 MW in three projects under construction representing an
aggregate net capacity of 500 MW of electric generating capacity and (iii)
935 MW in eight projects in development stages with signed power sale
agreements or under award representing an aggregate net capacity of 1,589 MW
of electric generating capacity. The following table sets out the Company's
various projects in operation, under construction and in the latter stages of
development pursuant to signed power sales agreements or awarded mandates in
each case subsequent to the Magma Acquisition.
21
<PAGE>
INTERNATIONAL PROJECTS
PROJECTS UNDER CONSTRUCTION
<TABLE>
<CAPTION>
FACILITY FACILITY NET PROJECTED
GROSS NET OWNERSHIP COMMERCIAL
CAPACITY CAPACITY INTEREST OPERATION CONTRACT CONTRACT POWER
PROJECT (IN MW)(1) (IN MW)(2) (IN MW) LOCATION DATE EXPIRATION(3) TYPE PURCHASER(4)
- ------------------------- ---------- ---------- ----------- ------------- ------------ ------------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Upper Mahiao ............. 128 119 119 Leyte, the 1996 CO+10 Build, Own, PNOC- EDC
Philippines Transfer (GOP)(5)
Mahanagdong(6) ........... 180 165 74 Leyte, the 1997 CO+10 Build, Own, PNOC- EDC
Philippines Transfer (GOP)(5)
Malitbog-Phase I and II . 231 216 216 Leyte, the 1996-1997 CO+10 Build, Own, PNOC- EDC
--- --- --- Philippines Transfer (GOP)(5)
Total Under Construction 539 500 409
--- --- ---
</TABLE>
PROJECTS WITH SIGNED POWER SALES CONTRACTS OR AWARDED DEVELOPMENT RIGHTS
<TABLE>
<CAPTION>
FACILITY
FACILITY NET NET PROJECTED
GROSS CAPACITY OWNERSHIP COMMERCIAL
CAPACITY (IN INTEREST OPERATION CONTRACT CONTRACT POWER
PROJECT (IN MW)(7) MW)(2)(7) (IN MW)(7) LOCATION DATE EXPIRATION TYPE PURCHASER(4)
- ---------------------------- ---------- ---------- ----------- ------------- ---------- ---------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Dieng(6) .................... 400 400 188 Central Java, 1997-1999 CO+30 Build, Own, PLN
Indonesia Transfer (GOI)
Patuha(6) ................... 400 400 140 Western Java, 1997-1999 CO+30 Build, Own, PLN
Indonesia Transfer (GOI)
Casecnan(8) ................. 140 140 98 Luzon, the 1998 CO+20 Build, Own, NIA
Philippines Transfer (GOP)(5)
Bali(8)(9) .................. 350 350 210 Bali, 1998-1999 CO+30 Build, Own, PLN
Indonesia Transfer (GOI)
Alto Peak ................... 70 70 70 Leyte, the 1997 CO+10 Build, Own, PNOC-
----- ----- ----- Philippines Transfer EDC
(GOP)(5)
Total Contracted/ Awarded 1,360 1,360 706
----- ----- -----
Total International Projects 1,899 1,860 1,115
----- ----- -----
<FN>
- ---------------
(1) Actual MW may vary depending on operating and reservoir conditions and
plant design. Facility Gross Capacity (in MW) for projects under
construction represents gross electric output of the facility prior to
subtraction of the parasitic load. Parasitic load is electrical output
used by the facility and not made available for sale to utilities or
other outside purchasers. Facility Gross Capacity (in MW) does not
necessarily reflect electric output available for sale to utilities or
other purchasers.
(2) Facility Net Capacity (in MW) represents Facility Gross Capacity (in
MW) less parasitic load.
(3) Commercial Operation (CO).
(4) Philippine National Oil Company-Energy Development Company (PNOC-EDC);
Government of the Philippines (GOP); P.T. PLN (Persero) (PLN);
Government of Indonesia (GOI); and Philippine National Irrigation
Administration (NIA).
(5) Government of the Philippines undertaking supports PNOC-EDC's and
NIA's respective obligations.
(6) PKS has elected to exercise its ownership option pursuant to its joint
venture agreement with the Company.
(7) Actual MW may vary depending on operating and reservoir conditions and
final plant design. Facility Gross Capacity (in MW) for awarded
projects equals maximum sales amount. Significant contingencies exist
in respect of awards, including without limitation, the need to obtain
financing, permits and licenses, and the completion of construction.
(8) PKS has not indicated whether it intends to exercise its ownership
option pursuant to its joint venture agreement with the Company and
such net ownership interest remains subject to the PKS option. The
Casecnan Project is a combined hydroelectric and irrigation project and
will also sell water to NIA.
(9) Geothermal resource development rights have been awarded and the power
sales contract is subject to negotiation.
</TABLE>
22
<PAGE>
DOMESTIC PROJECTS
PROJECTS IN OPERATION
<TABLE>
<CAPTION>
FACILITY
FACILITY NET NET
GROSS CAPACITY OWNERSHIP DATE OF
CAPACITY (IN INTEREST COMMERCIAL CONTRACT CONTRACT POWER
PROJECT(1) (IN MW)(2) MW)(3)(4) (IN MW) LOCATION OPERATION EXPIRATION TYPE PURCHASER(5)
- --------------- ---------- --------- --------- -------- ---------- ---------- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Navy I .............. 96 88 41 China Lake, CA 8/1987 8/2011 SO4 SCE
BLM ................. 96 88 42 China Lake, CA 3/1989 3/2019 SO4 SCE
Navy II ............. 96 88 44 China Lake, CA 1/1990 1/2010 SO4 SCE
Vulcan .............. 41 34 17 Imperial Valley, CA 2/1986 2/2016 SO4 SCE
Hoch (Del Ranch) ... 46 38 19 Imperial Valley, CA 1/1989 12/2018 SO4 SCE
Elmore .............. 46 38 19 Imperial Valley, CA 1/1989 12/2018 SO4 SCE
Leathers ............ 46 38 19 Imperial Valley, CA 1/1990 12/2019 SO4 SCE
Salton Sea I ........ 11 8 8 Imperial Valley, CA 7/1987 6/2017 Negotiated SCE
Salton Sea II ....... 20 18 18 Imperial Valley, CA 4/1990 4/2020 SO4 SCE
Salton Sea III ...... 54 50 50 Imperial Valley, CA 2/1989 2/2019 SO4 SCE
Yuma ................ 55 50 50 Yuma, AZ 5/1994 5/2024 Negotiated SDG&E
Roosevelt Hot
Springs ............ 25 23 17 Milford, UT 5/1984 1/2021 Gathered Steam UP&L
Desert Peak ......... 10 10 10 Desert Peak, NV 12/1985 12/1995 Negotiated SPPC
---- ---- ----
Total in Operation 642 571 354
---- ---- ----
</TABLE>
PROJECTS WITH SIGNED POWER SALES CONTRACTS OR AWARDED DEVELOPMENT RIGHTS
<TABLE>
<CAPTION>
FACILITY
FACILITY NET NET PROJECTED
GROSS CAPACITY OWNERSHIP COMMERCIAL
CAPACITY (IN INTEREST OPERATION CONTRACT CONTRACT POWER
PROJECT (IN MW)(6) MW)(3)(6) (IN MW) LOCATION DATE EXPIRATION TYPE PURCHASER(5)
- --------------- ---------- --------- --------- -------- ---------- ---------- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BRPU(7) .......... 163 163 163 Imperial Valley, CA TBD TBD FSO4 SCE
Fish Lake(8) ..... 36 36 36 Imperial Valley, CA 1996 CO+30 Negotiated SCE
Newberry ......... 30 30 30 Bend, OR 1997 CO+50 Negotiated BPA/EWEB
----- ----- -----
Total Contracted/
Awarded 229 229 229
----- ----- -----
Total Domestic
Projects 871 800 583
----- ----- -----
Total Projects 2,770 2,660 1,698
===== ===== =====
<FN>
- ---------------
(1) In addition to the electricity sales revenue earned from its net
ownership position in such facilities, the Company receives significant
fee and royalty income from operating such plants and managing the
production from the geothermal resource for such facilities.
(2) Actual MW may vary depending on operating and reservoir conditions and
plant design. Facility Gross Capacity (in MW) for projects in operation
represents gross electric output of the facility prior to subtraction
of the parasitic load. Parasitic load is electrical output used by the
facility and not made available for sale to utilities or other outside
purchasers. Facility Gross Capacity (in MW) does not necessarily
reflect electric output available for sale to utilities or other
purchasers.
(3) Facility Net Capacity (in MW) represents Facility Gross Capacity (in
MW) less parasitic load.
(4) With respect to the Vulcan, Hoch (Del Ranch), Elmore, Leathers, Salton
Sea II and Salton Sea III Projects, this represents contract nameplate.
(5) Southern California Edison Company (SCE); San Diego Gas & Electric
Company (SDG&E); Utah Power & Light Company (UP&L); Sierra Pacific
Power Company (SPPC); Bonneville Power Authority (BPA); and Eugene
Water and Electric Board (EWEB).
(6) Actual MW may vary depending on operating and reservoir conditions and
final plant design. Facility Gross Capacity (in MW) for awarded
projects equals maximum sales amount. Significant contingencies exist
in respect of awards, including without limitation, the need to obtain
financing, permits and licenses, and the completion of construction.
(7) SCE is contesting the BRPU award; accordingly, no power sales contract
is currently signed.
(8) Combined Fish Lake and Salton Sea Expansion.
</TABLE>
23
<PAGE>
The following summary project descriptions are qualified in their entirety
by reference to the Company's 1993 10-K and the Magma 1993 10-K and the other
documents incorporated herein by reference.
INTERNATIONAL PROJECTS
PROJECTS IN CONSTRUCTION
THE PHILIPPINES. The Company believes that increasing industrialization, a
rising standard of living and an expanding power distribution network has
significantly increased demand for electrical power in the Philippines.
According to the 1993 Power Development Program of the National Power
Corporation of the Philippines ("NAPOCOR"), demand for electricity exceeds
supply. NAPOCOR has also reported that its ability to sustain desired levels
of electric production from existing facilities has been limited due to
frequent breakdowns in many of its older electric generating plants. As a
result, the Philippines has experienced severe power outages, with Manila
suffering significant daily brownouts during much of 1993 and periodic
brownouts during 1994. Although the occurrence of brownouts has been recently
reduced, NAPOCOR has said that it still anticipates significant energy
shortages in the future.
In 1993, the Philippine Congress, pursuant to Republic Act 7648, granted
President Ramos emergency powers to remedy the Philippine energy crisis,
including authority to (i) exempt power projects from public bidding
requirements, (ii) increase power rates and (iii) reorganize NAPOCOR. Until
1987, NAPOCOR had a monopoly on power generation and transmission in the
Philippines. In 1987, then President Aquino issued Executive Order No. 215,
which granted private companies the right to develop certain power generation
projects, such as those using indigenous energy sources, on a
"build-operate-transfer" or "build-transfer" basis. In 1990, the Philippine
Congress enacted Republic Act No. 6957, which authorized private development
of priority infra-structure projects on a "build-operate-transfer" and a
"build-transfer" basis. In addition, under that Act, such power projects were
made eligible for certain tax benefits, including exemption from Philippine
national income taxes for at least six years and exemption from, or
reimbursement for, customs duties and value added taxes on capital equipment
to be incorporated into such projects. In 1994, certain amendments to
Republic Act No. 6957 were approved by the Philippine Congress and signed
into law (R.A. 7718). Among other things, such amendments provide for the
financing of "unsolicited proposals" on a "build-operate-transfer" basis.
In an effort to remedy the shortfall of electricity, the Philippines,
NAPOCOR and the Philippine National Oil Company-Energy Development Company
("PNOC-EDC") continue to jointly solicit bids for private power projects.
Among private power projects selected through this solicitation process were
the Upper Mahiao (the "Upper Mahiao Project"), Mahanagdong (the "Mahanagdong
Project"), Malitbog (the "Malitbog Project") and Alto Peak (the "Alto Peak
Project") geothermal power projects, as described below. Geothermal power has
been identified as a preferred alternative by the Philippine Government due
to the domestic availability and the minimal environmental effects of
geothermal power in comparison to other forms of power production. PNOC-EDC,
which is responsible for developing the Philippines' domestic energy sources,
has been successful in the exploration and development of geothermal
resources.
The Company and Magma have financed and commenced construction of the
Upper Mahiao, Mahanagdong and Malitbog Projects, which have an aggregate net
capacity of 500 MW, of which the Company's aggregate net ownership interest
is 409 MW subsequent to the Magma Acquisition.
24
<PAGE>
MAP OF THE PHILIPPINES
#############################################################################
IMAGE OMITTED:
[Map of the Republic of the Philippines with Project locations]
(SEE ALSO "APPENDIX FOR GRAPHICS AND IMAGE MATERIAL"
AFTER BACK COVER PAGE OF PROSPECTUS.)
#############################################################################
Upper Mahiao. The Company has closed the financing and commenced
construction of the Upper Mahiao Project, a 128 gross MW geothermal project
to be located in the Greater Tongonan area of the island of Leyte in the
Philippines. The Upper Mahiao Project will be built, owned and operated by CE
Cebu Geothermal Power Company, Inc. ("CE Cebu"), a Philippine corporation
that is approximately 100% indirectly owned by the Company. It will sell 100%
of its capacity on a "take-or-pay" basis (described below) to PNOC-EDC, which
will in turn sell the power to NAPOCOR for distribution to the island of
Cebu, located about 40 miles west of Leyte.
The Upper Mahiao Project will have a total project cost of approximately
$218 million, including interest during construction, project contingency
costs and a debt service reserve fund. A consortium of international banks
has committed to provide approximately $162 million in a project-financed
construction loan, supported by political risk insurance from the
Export-Import Bank of the United States ("ExIm Bank"). The largest portion of
the term loan for the project will also be provided by ExIm Bank. The
Company's equity contribution to the Upper Mahiao Project is $56 million.
Subject to the pledge of the project company's stock to the lenders, the
Company has arranged for political risk insurance of its equity investment
through OPIC. The financing is collateralized by all the assets of the
project.
The Upper Mahiao Project is being constructed by Ormat, Inc. ("Ormat") and
its affiliates pursuant to supply and construction contracts (collectively,
the "Upper Mahiao EPC"), which, taken together, provide for the construction
of the plant on a fixed-price, date-certain, turnkey basis. Ormat is an
international manufacturer and construction contractor that builds binary
geothermal turbines. It has provided its equipment to several geothermal
power projects throughout the United States, the Philippines and
internationally. The Upper Mahiao EPC provides liquidated damage protection
of up to
25
<PAGE>
30% of the Upper Mahiao EPC price. Ormat's performance under the Upper Mahiao
EPC is backed by a completion guaranty of Ormat, by letters of credit, and by
a limited guaranty of Ormat Industries, Ltd., an Israeli corporation and the
parent of Ormat, in each case for the benefit of the project lenders.
Under the terms of an energy conversion agreement, executed on September
6, 1993 (the "Upper Mahiao ECA"), CE Cebu will build, own and operate the
Upper Mahiao Project during the approximately two-year construction period
and the ten-year cooperation period, after which ownership will be
transferred to PNOC-EDC at no cost.
The Upper Mahiao Project will be located on land provided by PNOC-EDC at
no cost. It will take geothermal steam and fluid, also provided by PNOC-EDC
at no cost, and convert its thermal energy into electrical energy to be sold
to PNOC-EDC on a "take-or-pay" basis. Specifically, PNOC-EDC will be
obligated to pay for the electric capacity that is nominated each year by CE
Cebu, irrespective of whether PNOC-EDC is willing or able to accept delivery
of such capacity. PNOC-EDC will pay to CE Cebu a fee (the "Capacity Fee")
based on the plant capacity nominated to PNOC-EDC in any year (which, at the
plant's design capacity, is approximately 95% of total contract revenues) and
a fee (the "Energy Fee") based on the electricity actually delivered to
PNOC-EDC (approximately 5% of total contract revenues). The Capacity Fee
serves to recover the capital costs of the project, to recover fixed
operating costs and to cover return on investment. The Energy Fee is designed
to cover all variable operating and maintenance costs of the power plant.
Payments under the Upper Mahiao ECA will be denominated in U.S. dollars, or
computed in U.S. dollars and paid in Philippine pesos at the then-current
exchange rate, except for the Energy Fee, which will be used to pay
Philippine peso-denominated expenses. The convertibility of Philippine peso
receipts into U.S. dollars is insured by OPIC. Significant portions of the
Capacity Fee and Energy Fee will be indexed to U.S. and Philippine inflation
rates, respectively. PNOC-EDC's payment requirements, and its other
obligations under the Upper Mahiao ECA, are supported by the Government of
the Philippines through a performance undertaking.
The payment of the Capacity Fee is not excused if PNOC-EDC fails to
deliver or remove the steam or fluids or fails to provide the transmission
facilities, even if its failure was caused by a force majeure event. In
addition, PNOC-EDC must continue to make Capacity Fee payments if there is a
force majeure event (e.g., war, nationalization, etc.) that affects the
operation of the Upper Mahiao Project and that is within the reasonable
control of PNOC-EDC or the government of the Philippines or any agency or
authority thereof. If CE Cebu fails to meet certain construction milestones
or the power plant fails to achieve 70% of its design capacity by the date
that is 120 days after the scheduled completion date (as that date may be
extended for force majeure and other reasons under the Upper Mahiao ECA), the
Upper Mahiao Project may, under certain circumstances, be deemed "abandoned,"
in which case the Upper Mahiao Project must be transferred to PNOC-EDC at no
cost, subject to any liens existing thereon.
PNOC-EDC is obligated to purchase CE Cebu's interest in the facility under
certain circumstances, including (i) extended outages resulting from the
failure of PNOC-EDC to provide the required geothermal fluid, (ii) certain
material changes in policies or laws which adversely affect CE Cebu's
interest in the project, (iii) transmission failure, (iv) failure of PNOC-EDC
to make timely payments of amounts due under the Upper Mahiao ECA, (v)
privatization of PNOC-EDC or NAPOCOR, and (vi) certain other events. Prior to
completion of the Upper Mahiao Project, the buy-out price will be equal to
all costs incurred through the date of the buy-out, including all Upper
Mahiao Project debt, plus an additional rate of return on equity of ten
percent per annum. In a post-completion buy-out, the price will be the net
present value (at a discount rate based on the last published Commercial
Interest Reference Rate of the Organization for Economic Cooperation and
Development) of the total remaining amount of Capacity Fees over the
remaining term of the Upper Mahiao ECA.
Mahanagdong. The Company has also closed the financing and commenced
construction of the Mahanagdong Project, a 180 gross MW geothermal project,
which will also be located on the island of Leyte. The Mahanagdong Project
will be built, owned and operated by CE Luzon Geothermal Power Company, Inc.
("CE Luzon"), a Philippine corporation that during construction is indirectly
owned 50% by the Company and 50% by PKS. Up to a 10% financial interest in CE
Luzon may be sold at completion
26
<PAGE>
to another industrial company at the option of such company. The Mahanagdong
Project will sell 100% of its capacity on a similar basis as described above
for the Upper Mahiao Project to PNOC-EDC, which will in turn sell the power
to NAPOCOR for distribution to the island of Luzon.
Mahanagdong has a total project cost of approximately $320 million,
including interest during construction, project contingency costs and a debt
service reserve fund. The capital structure consists of a project financing
construction and term loan of approximately $240 million provided by OPIC,
ExIm Bank and a consortium of international banks, and approximately $80
million in equity contributions. Political risk insurance from ExIm Bank has
been obtained for the commercial lenders. The Company's equity investment for
the Mahanagdong Project will be approximately $40 million. Subject to the
pledge of the project company's stock to the lenders, the Company has
arranged for political risk insurance on its equity investment through OPIC.
The financing is collateralized by all the assets of the project.
The Mahanagdong Project is being constructed by a consortium (the "EPC
Consortium") of Kiewit Construction Group, Inc. ("KCG") and BHCO pursuant to
fixed-price, date-certain, turnkey supply and construction contracts
(collectively, the "Mahanagdong EPC"). The obligations of the EPC Consortium
under the Mahanagdong EPC are supported by a guaranty of KCG at an aggregate
amount equal to approximately 50% of the Mahanagdong EPC price. The
Mahanagdong EPC provides for maximum liability for liquidated damages of up
to $100.5 million and total liability of up to $201 million. KCG, a wholly
owned subsidiary of PKS, is the lead member of the EPC Consortium, with an
80% interest. KCG performs construction services for a wide range of public
and private customers in the U.S. and internationally. Construction projects
undertaken by KCG during 1993 included transportation projects, including
highways, bridges, airports and railroads, power facilities, buildings and
sewer and waste disposal systems, and water supply systems, utility
facilities, dams and reservoirs. KCG accounts for 80% of PKS's revenues,
contributing $1.7 billion in revenues in 1993. KCG has an extensive
background in power plant construction.
BHCO will provide design and engineering services for the EPC Consortium,
holding a 20% interest. The Company has provided a guaranty of BHCO's
obligations under the Mahanagdong EPC Contract.
The terms of an energy conversion agreement (the "Mahanagdong ECA"),
executed on September 18, 1993, are substantially similar to those of the
Upper Mahiao ECA. The Mahanagdong ECA provides for an approximately
three-year construction period and a ten-year cooperation period. At the end
of the cooperation period, the facility will be transferred to PNOC-EDC at no
cost. All of PNOC-EDC's obligations under the Mahanagdong ECA are supported
by the Government of the Philippines through a performance undertaking. The
capacity fees are expected to be approximately 97% of total revenues at the
design capacity levels and the energy fees are expected to be approximately
3% of such total revenues.
Malitbog. In December 1994, Magma closed the financing and commenced
construction of the Malitbog Project, a 231 gross MW geothermal project,
which will also be located on the island of Leyte. The Malitbog Project will
be built, owned and operated by Visayas Geothermal Power Company ("VGPC"), a
Philippine general partnership that is wholly owned, indirectly, by Magma.
VGPC will sell 100% of its capacity on substantially the same basis as
described above for the Upper Mahiao Project to PNOC-EDC, which will in turn
sell the power to NAPOCOR.
The Malitbog Project has a total project cost of approximately $280
million, including interest during construction and project contingency
costs. A consortium of international banks and OPIC have provided a total of
$210 million of construction and term loan facilities, the $135 million
international bank portion of which is supported by political risk insurance
from OPIC. Magma's equity contribution to VGPC was $70 million. Magma's
equity participation is covered by political risk insurance from OPIC.
The Malitbog Project will be constructed by Sumitomo Corporation
("Sumitomo") pursuant to a fixed-price, date-certain, turnkey supply and
construction contract (the "Malitbog EPC"). The Malitbog EPC provides that
certain liquidated damages will be paid by Sumitomo for failure to meet
certain scheduled performance test dates, including the payment of any
liquidated damages or penalties required to be paid by VGPC to PNOC-EDC under
an energy conversion agreement (the "Malitbog ECA")
27
<PAGE>
(subject to limitations on the total amount of liquidated damages payable by
Sumitomo). The Malitbog EPC also provides for the payment of certain
liquidated damages on a per unit basis if upon completion of the facility
tests do not demonstrate such unit's ability to operate at a net generating
capacity of at least 74.1 MW. The liquidated damages for each generating unit
are capped at 13 1/3 % of the total Malitbog EPC price. Pursuant to a
reimbursement undertaking, Magma has agreed to reimburse Sumitomo for draws,
if any, by PNOC-EDC on the construction bond provided by Sumitomo on behalf
of Magma in excess of the liquidated damage amounts provided in the Malitbog
EPC.
Sumitomo is one of the principal trading and investment companies in
Japan, and has built power plants around the world, often on a turnkey basis.
As of October 20, 1994, Sumitomo had a credit rating of "Aa3" from Moody's
Investors Service, Inc. ("Moody's"). The Malitbog EPC requires Sumitomo to
provide engineering, procurement, construction, start-up and testing services
with respect to the facility.
Construction of the facility has begun, with commercial operation of unit
1 scheduled to commence in July 1996, and commercial operation of unit 2 and
unit 3 scheduled to commence in July 1997.
The terms of the Malitbog ECA, executed on September 10, 1993, are
substantially similar to those of the Upper Mahiao ECA. The Malitbog ECA
provides for a two-phase construction period, of three identical 77 gross MW.
The cooperation period is ten years from the completion of unit 3. At the end
of the cooperation period, the facility will be transferred to PNOC-EDC at no
cost. All of PNOC-EDC's obligations under the Malitbog ECA are supported by
the Government of the Philippines through a performance undertaking. The
capacity fees are 100% of total revenues and there is no energy fee.
PROJECTS IN DEVELOPMENT
Casecnan. In November 1994, the Company signed a "Project Agreement" with
the Philippine National Irrigation Administration ("NIA") to develop an
estimated $320 million combined irrigation and hydroelectric power generation
project (the "Casecnan Multipurpose Project"). Such Project will deliver
excess water from the Casecnan and Denip (Cagayan) watershed in Northern
Luzon to the Pampanga watershed and the Pantabangan Reservoir for irrigation
use in the Central Luzon Valley. The Casecnan Multipurpose Project, which has
satisfied the requirements for an unsolicited proposal under the amended BOT
law, will also provide 140 MW of net electric generation capacity to the
Luzon grid.
The project agreement is structured as a build, operate and transfer
agreement under which NIA will supply the water for the Project and provides
for a 20-year cooperation period with significant "take-or-pay" obligations
for water and electricity. At the end of the 20-year cooperation period, the
Casecnan Multipurpose Project will be transferred to NIA at no cost. The
Company anticipates commencing construction in 1995.
Completion of such Project remains subject to a number of significant
uncertainties, including arranging financing, obtaining certain required
permits and licenses and completing construction, none of which can be
assured.
Alto Peak. The Alto Peak Project is a smaller geothermal project in the
same general area of Leyte as the Upper Mahiao, Mahanagdong and Malitbog
Projects. Magma and PNOC-EDC have executed a 70 MW net Energy Conversion
Agreement, dated May 7, 1994. The general terms and conditions are similar to
the Malitbog ECA. However, the plant design has not been initiated as
PNOC-EDC has not finalized the steam conditions (pressure, composition and
ph), as PNOC-EDC is still drilling and testing the geothermal wells that will
supply steam to such project. Consequently, Magma has not commenced financing
arrangements for the Alto Peak Project.
INDONESIA. Indonesia, which has the world's fourth largest population,
has experienced rapid growth in electricity demand. The Company believes that
load growth has exceeded 13% since 1980. Furthermore, the Company believes
that rapid expansion in industrial growth has created a backlog of
unconnected industrial users in excess of 4,000 MW. In its sixth five-year
plan, the Indonesian government has called for the addition of 12,000 MW of
additional generating capacity by 1999. The long range plan calls for an
additional 15,000 MW to be added by the year 2004. The plans call for
approximately 75% of this capacity to be added by independent power
producers. Although Indonesia is a member of OPEC
28
<PAGE>
and is also the world's largest exporter of liquified natural gas, the
Government of Indonesia has announced that it wishes to maintain sufficient
amounts of oil for export, which will require a shift to coal fired generation
and the use of other energy sources, such as geothermal.
It is estimated that Indonesia has sufficient geothermal steam potential
to generate 16,000 MW, centered in the Java and Sumatra areas (the two most
populous of the 13,000 islands in Indonesia). To date, less than 150 MW of
geothermal facilities have been commissioned, as the Government of Indonesia
was not encouraging the development of geothermal energy.
The Indonesian state-owned utility, has recently been converted to a
limited liability company, P.T. PLN (Persero) ("PLN"), as a first step toward
the privatization of its two largest generating subsidiaries. The main
objective of Indonesia's electric energy policy has been to secure a
continuity of supply at reasonable rates for households (more than 50% of
which have been reported to have no power) and to minimize the utilization of
hydrocarbons. Rural electrification will remain an important component of the
energy policy as PLN is targeting the addition of 2 million customers a year.
Indonesia is rated "Baa3" by Moody's and "BBB-" by Standard & Poor's
Ratings Group ("S&P"). The Company believes that Indonesia represents an
attractive development opportunity, as it combines growing power needs with
ample geothermal resources and creditworthy contract parties.
MAP OF INDONESIA AND NEIGHBORING COUNTRIES
#############################################################################
IMAGE OMITTED:
[Map of Indonesia and Neighboring Countries with Project locations]
(SEE ALSO "APPENDIX FOR GRAPHICS AND IMAGE MATERIAL"
AFTER BACK COVER PAGE OF PROSPECTUS.)
#############################################################################
29
<PAGE>
The following is a summary description of certain information concerning
the Company's projects in Indonesia. Since these projects are still in
development, however, there can be no assurance that this information will
not change materially over time. In addition, there can be no assurance that
development efforts on any particular project, or the Company's efforts
generally, will be successful.
Dieng. On December 2, 1994, a subsidiary of the Company executed a joint
operation contract (the "Dieng JOC") for the development of the geothermal
steam field and geothermal power facilities at the Dieng geothermal field,
located in Central Java (the "Dieng Project") with Perusahaan Pertambangan
Minyak Dan Gas Bumi Negara ("Pertamina"), the Indonesian national oil
company, and executed a "take-or-pay" energy sales contract (the "Dieng ESC")
with both Pertamina and PLN, the Indonesian national electric utility.
A subsidiary of the Company has entered into a joint development agreement
with P.T. Himpurna Enersindo Abadi ("P.T. HEA"), its Indonesian partner,
which is a subsidiary of Himpurna, an association of Indonesian military
veterans, whereby the Company and P.T. HEA have agreed to work together on an
exclusive basis to develop the Dieng Project (the "Dieng Joint Venture"). The
Dieng Joint Venture is structured with subsidiaries of the Company having a
minimum 47% interest, subsidiaries of PKS having the option to take a 47%
interest and P.T. HEA having a 6% interest in the Dieng Project.
Pursuant to the Dieng JOC and ESC, Pertamina will grant to the Dieng Joint
Venture the geothermal field and the wells and other facilities presently
located thereon and the Dieng Joint Venture will build, own and operate power
production units with an aggregate capacity of up to 400 MW. The Dieng Joint
Venture will accept the field operation responsibility for developing and
supplying the geothermal steam and fluids required to operate the plants. The
Dieng JOC is structured as a build own transfer agreement and will expire
(subject to extension by mutual agreement) on the date which is the later of
(i) 42 years following effectiveness of the Dieng JOC and (ii) 30 years
following the date of commencement of commercial generation of the final unit
completed. Upon the expiration of the proposed Dieng JOC, all facilities will
be transferred to Pertamina at no cost. The Dieng Joint Venture is required
to pay Pertamina a production allowance equal to three percent of the Dieng
Joint Venture's net operating income from the Dieng Project, plus a further
amount based upon the negotiated value of existing Pertamina geothermal
production facilities that the Company expects will be made available by
Pertamina.
Pursuant to the Dieng ESC, PLN agreed to purchase and pay for all of the
Project's capacity and energy output on a "take or pay" basis regardless of
PLN's ability to accept such energy made available from the Dieng Project for
a term equal to that of the Dieng JOC. The price paid for electricity
includes a base energy price per kWh multiplied by the number of kWhs the
plants deliver or are "capable of delivering," whichever is greater. Energy
price payments are also subject to adjustment for inflation. PLN will also
pay a capacity payment based on plant capacity. All such payments are payable
in U.S. dollars.
The Company presently intends to begin well testing by the second quarter
of 1995 and to commence construction of an initial 55 MW unit in the 4th
quarter of 1995, and then to proceed on a modular basis with construction of
three additional units to follow shortly thereafter, resulting in an
aggregate first phase net capacity at this site of 220 MW. The Company
estimates that the total project cost of these units will be approximately
$450 million. The next phase is expected to expand the total capacity to 400
MW. The cost of the full Dieng Project is estimated to approximate $1
billion. The Company anticipates a consortium consisting of KCG and BHCO will
submit a proposal for the design and construction of the Dieng Project, and
that the Company, through a subsidiary, will be responsible for operating and
managing the Dieng Project.
The Dieng field has been explored domestically for over 20 years and BHCO
has been active in the area for more than five years. Pertamina has drilled a
total of 27 wells to date. The Company has a significant amount of data,
which it believes to be reliable as to the production capacity of the field.
However, a number of significant steps, both financial and operational, must
be completed before the Dieng Project can proceed further. These steps, none
of which can be assured, include obtaining required regulatory permits and
approvals, completing the well testing, entering into a construction
agreement and other project contracts, and arranging financing.
30
<PAGE>
Patuha. The Company is also developing a geothermal power plant with
respect to the Patuha geothermal field in Java, Indonesia (the "Patuha
Project"). The Company has entered into a joint venture (the "Patuha Joint
Venture") for Patuha with P.T. Enerindo Supra Abadi ("P.T. ESA"), an
Indonesian company. P.T. ESA is an affiliate of the Bukaka Group, which has
extensive experience in general construction, fabrication and electrical
transmission construction in Indonesia. In exchange for project development
services, P.T. ESA will receive a 10% equity interest in the Patuha Project
with an option to acquire an additional 20% interest for cash upon the
satisfaction of certain conditions. Subject to the exercise of that option,
subsidiaries of the Company will have a 45% interest and subsidiaries of PKS
will have the option to take a 45% interest in the Patuha Project.
On December 2, 1994, the Patuha Joint Venture executed both a joint
operation contract and an energy sales contract, each of which currently
contains terms substantially similar to those described above for the Dieng
Project. The Patuha Joint Venture intends to proceed on a modular basis
similar to the Dieng Project, with an aggregate capacity of up to 400 MW. The
Company estimates that the total cost will be approximately $1 billion. The
Company presently intends to begin well testing and further exploration in
the fourth quarter of 1995 with construction of the first unit expected to
begin by 1996.
The Patuha Project remains subject to a number of significant
uncertainties, as described above in connection with the Dieng Project, and
there can be no assurance that the Patuha Project will proceed or reach
commercial operation.
Bali. The Company and PT Panutan Group, an Indonesian consortium of
energy, oil, gas and mining companies, have formed a joint venture to pursue
the development of geothermal resources in Bali (the ''Bali Project") and to
obtain a power sales contract from PLN.
The Company presently intends to develop the Bali Project and other
possible projects in Indonesia using a structure similar to that contemplated
for the Dieng Project.
The Bali Project remains subject to a number of significant uncertainties,
as described above for the Dieng Project, and there can be no assurance that
the Company will pursue the Bali Project or that it will proceed or reach
commercial operation.
31
<PAGE>
DOMESTIC PROJECTS
MAP OF THE WESTERN UNITED STATES
#############################################################################
IMAGE OMITTED:
[Map of the Western United States with Project locations]
(SEE ALSO "APPENDIX FOR GRAPHICS AND IMAGE MATERIAL"
AFTER BACK COVER PAGE OF PROSPECTUS.)
#############################################################################
PROJECTS IN OPERATION
The Coso Project. In 1979, the Company entered into a 30-year contract
(the "Navy Contract") with the United States Department of the Navy (the
"Navy") to develop geothermal power facilities located on approximately 5,000
acres of the Naval Air Weapons Station at China Lake, California (150 miles
northeast of Los Angeles). In 1985, the Company entered into a 30-year lease
(the "BLM Lease") with the United States Bureau of Land Management ("BLM")
for approximately 19,000 acres of land adjacent to the land covered by the
Navy Contract. The Navy Contract and the BLM Lease provide for certain
royalty payments as a percentage of gross revenue and certain other formulas.
The Company formed three joint ventures (the "Coso Joint Ventures") with one
primary joint venture partner, Caithness Corporation ("Caithness"), to
develop and construct the three facilities which comprise the Navy I project
(the "Navy I Project"), the BLM project (the "BLM Project") and the Navy II
project (the "Navy II Project") (collectively the "Coso Project").
The Coso Joint Ventures are as follows: (i) Coso Finance Partners, which
owns the Navy I Project (the "Navy I Partnership"), (ii) Coso Energy
Developers, which owns the BLM Project (the "BLM Partnership") and (iii) Coso
Power Developers, which owns the Navy II Project (the "Navy II Partnership"
and, together with the Navy I Partnership and the BLM Partnership, the "Coso
Partner-
32
<PAGE>
ships"). The Company holds ownership interests of approximately 46% in the
Navy I Partnership; approximately 48% in the BLM Partnership, after payout to
the Company and Caithness; and 50% in the Navy II Partnership. The Company
consolidates its respective share of the operating results of the Coso
Partnerships into its financial statements. In addition, the Company
indirectly holds rights to certain cash flows from its partners in the BLM
Project, and, to a lesser extent, the Navy I Project and Navy II Project.
Each of the Coso Joint Ventures is managed by a management committee which
consists of two representatives from the Company and two representatives from
the Company's partners. The Company operates the Coso Project, for which it
receives fees from the Coso Partnerships.
The Coso Project sells all electricity generated by the respective plants
pursuant to three long-term SO4 Agreements between the Navy I Partnership,
the BLM Partnership, and the Navy II Partnership, respectively, and SCE.
These SO4 Agreements provide for capacity payments, capacity bonus payments
and energy payments. SCE makes fixed annual capacity payments to the Coso
Partnerships, and to the extent that capacity factors exceed certain
benchmarks is required to make capacity bonus payments. The price for
capacity and capacity bonus payments is fixed for the life of the SO4
Agreements. Energy is sold at increasing fixed rates for the first ten years
of each contract and thereafter at SCE's Avoided Cost of Energy. The fixed
price periods of the SO4 Agreements extend until August 1997, March 1999 and
January 2000 for each of the Navy I, BLM and Navy II Partnerships,
respectively, at rates ranging from 11.0cents per kWh in 1994 to 14.6cents
per kWh in 2000. The Company's share of the revenues received by the Coso
Partnerships for 1993 and the first nine months of 1994 was $92.9 million and
$78.9 million, respectively.
The physical facilities used for geothermal energy production are
substantially the same at the Navy I, BLM and Navy II Projects.
The Navy I Project. The geothermal resource for the Navy I Project
currently is produced from approximately 32 wells. The Navy I Project
consists of three turbine generators, each with approximately 32 MW of
electrical generating capacity. The Navy I Project has an aggregate gross
electrical generating capacity of approximately 96 MW. Based on an assumed
net capacity of 80 MW, the Navy I Project operated at an average operating
capacity factor of 99.8% in 1992, 111.2% in 1993 and 114.6% in the first nine
months of 1994.
The BLM Project. The BLM Project's geothermal resource currently is
produced from approximately 20 wells. The BLM Project consists of three
turbine generators. Two of these turbine generators are located at the BLM
East site in a dual flash system, each with a nameplate capacity of 29 MW;
and one is located at the BLM West site in a single flash system, with a
nameplate capacity of 29 MW. The BLM Project has an aggregate gross
electrical generating capacity of approximately 96 MW. Based on an assumed
capacity of 80 MW, the BLM Project operated at an average operating capacity
factor of 87.2% in 1992, 98.1% in 1993, and 98.5% in the first nine months of
1994.
The Navy II Project. The geothermal resource for the Navy II Project
currently is produced from approximately 25 wells. The Navy II Project
consists of three individual turbine generators, each with approximately 32
MW of electrical generating capacity. The Navy II Project has an aggregate
gross electrical capacity of approximately 96 MW. Based on an assumed net
capacity of 80 MW, the Navy II Project operated at an average operating
capacity factor of 98.1% in 1992, 102.6% in 1993, and 103.5% in the first
nine months of 1994.
In December 1992, the Coso Joint Ventures refinanced the existing bank
debt on the Coso Project with the proceeds of the sale of approximately $560
million in non-recourse senior secured notes (the "Notes") in a private
placement pursuant to Rule 144A under the Securities Act. The Notes were
issued by Coso Funding Corp. ("Coso Funding"), a corporation owned by the
Coso Joint Ventures and formed exclusively for the purpose of issuing the
Notes. Coso Funding lent the Coso Joint Ventures substantially all of the net
proceeds of the sale of the Notes. At the time of their issuance, the Notes
were rated "Baa3" by Moody's, "BBB-" by S&P and "BBB" by Duff & Phelps Credit
Rating Co., all investment grade ratings. The outstanding balance of the
Notes on September 30, 1994 was $483.5 million with a remaining average life
of 3.5 years, and the average interest rate on the Notes for the nine months
ending on the same date was 8.07%. The obligations of each Coso Partnership
under the loans from Coso Funding are
33
<PAGE>
non-recourse to the Company. Coso Funding may look solely to each Coso
Partnership's pledged assets for satisfaction of such Coso Partnership's
loan. In addition, the loans are cross-collateralized by certain support
loans only to the extent of the other Coso Joint Ventures' available cash
flow and, under certain circumstances, the debt service reserve funds, and
not as to other assets.
Salton Sea Known Geothermal Resource Area Projects. Magma acquired three
geothermal power plants which comprise the Salton Sea I project (the "Salton
Sea I Project"), the Salton Sea II project (the "Salton Sea II Project") and
the Salton Sea III project (the "Salton Sea III Project") (collectively, the
"Salton Sea Projects") and all related wellfield, land and other related
assets in March 1993 from Union Oil Company of California. Each of the
Vulcan, Hoch (Del Ranch), Elmore and Leathers projects (the "Vulcan Project,"
the "Hoch (Del Ranch) Project," the "Elmore Project" and the "Leathers
Project," respectively, and collectively, the "Partnership Projects") is
owned by an equal partnership (the "Vulcan Partnership," the "Del Ranch
Parthership," the "Elmore Partnership" and the "Leathers Partnership,"
respectively, and collectively, the "Partnerships") between Magma and a
subsidiary of Mission Energy, a wholly owned subsidiary of SCE. In the case
of the Vulcan Project, the Vulcan Partnership owns certain geothermal
resources supplying the Vulcan Project plant. In the case of the other three
Partnership Project plants, Magma owns the geothermal resources and receives
royalty payments from the Del Ranch, Elmore and Leathers Partnerships. In the
first nine months of 1994, such royalties together with the royalties from
the East Mesa Plant and Mammoth Plants (as defined below) totaled $15.1
million. Magma's share of the aggregate electricity revenues received by the
Salton Sea Projects and the Partnerships for the first nine months of 1994
was $124.1 million. In each case, a subsidiary of Magma is the managing
general partner, and Magma consolidates one-half of the operating results of
each Partnership Project plant into its financial statements. A subsidiary of
Magma operates each of the Salton Sea Project plants and the Partnership
Project plants.
The Salton Sea Projects operated at a combined contract nameplate factor
(excluding scheduled maintenance hours) of 94.1% in the nine months ended
December 31, 1993 and 90.8% in the first nine months of 1994. The Partnership
Projects operated at a combined contract nameplate factor of 100.7% in 1993
and 105.0% in the first nine months in 1994.
Vulcan. The Vulcan Project sells electricity to SCE under a 30-year SO4
Agreement that commenced on February 10, 1986. The Vulcan Project has a
contract capacity and contract nameplate of 29.5 MW and 34 MW, respectively.
Under the SO4 Agreement, SCE is obligated to pay the Vulcan Project a
capacity payment, a capacity bonus payment and an energy payment.
The price for contract capacity payments is fixed for the life of such SO4
Agreement. The as-available capacity price is based on a payment schedule as
approved by the CPUC from time to time. The contract energy payment increases
each year for the first ten years, which period expires on February 9, 1996.
Thereafter, the energy payments will be based on SCE's Avoided Cost of
Energy. The energy payment per kWh is 10.9cents for 1994, 11.8cents for 1995
and 12.6cents for 1996. The Vulcan Project is unleveraged.
Hoch (Del Ranch). The Hoch (Del Ranch) Project sells electricity to SCE
under a 30-year SO4 Agreement that commenced on January 1, 1989. The contract
capacity and contract nameplate are 34 MW and 38 MW, respectively. The
provisions of such SO4 Agreement are substantially the same as the SO4
Agreement with respect to the Vulcan Project.
The price for contract capacity payment is fixed for the life of the SO4
Agreement. The energy payments per kWh for the first ten-year period, which
expires on December 31, 1998, are fixed at rates ranging from 10.9cents for
1994 to 14.6cents for 1998. Thereafter, the energy payments will be based on
SCE's Avoided Cost of Energy.
The Del Ranch Partnership entered into a $66 million secured credit
facility with commercial banks in March 1988. The final maturity date of the
term loans is September 15, 2001. The secured credit agreement was amended to
allow for the issuance of commercial paper and medium-term notes supported by
a letter of credit as an alternative to borrowing directly from the banks.
34
<PAGE>
Elmore. The Elmore Project sells electricity to SCE under a 30-year SO4
Agreement that commenced on January 1, 1989. The contract capacity and
contract nameplate are 34 MW and 38 MW, respectively. The provisions of such
SO4 Agreement are substantially the same as the SO4 Agreement with respect to
the Vulcan Project.
The price for contract capacity payments is fixed for the life of the SO4
Agreement. The energy payments per kWh for the first ten-year period, which
expires on December 31, 1998, are fixed at rates ranging from 10.9cents in
1994 to 14.6cents in 1998. Thereafter, the energy payments will be based on
SCE's Avoided Cost of Energy.
The Elmore Partnership entered into a $66 million secured credit facility
with commercial banks in March 1988. The final maturity date of the term
loans is September 15, 2001. The secured credit agreement was amended and
restated on April 18, 1990 to allow for the issuance of commercial paper and
medium-term notes supported by a letter of credit as an alternative to
borrowing directly from the banks.
Leathers. The Leathers Project sells electricity to SCE pursuant to a
30-year SO4 Agreement that commenced on January 1, 1990. The contract
capacity and contract nameplate are 34 MW and 38 MW, respectively. The
provisions of such SO4 Agreement are substantially the same as the SO4
Agreement with respect to the Vulcan Project.
The price for contract capacity payments is fixed for the life of the SO4
Agreement. The energy payments per kWh for the first ten-year period, which
expires on December 31, 1999, are fixed at rates ranging from 10.9cents in
1994 to 15.6cents in 1999. Thereafter, the energy payments are based on SCE's
Avoided Cost of Energy.
The Leathers Partnership entered into an $82 million secured credit
facility with commercial banks in March 1988. The final maturity date of the
term loans is September 15, 2002. The secured credit agreement was amended to
allow for the issuance of commercial paper and medium-term notes supported by
a letter of credit as an alternative to borrowing directly from the banks.
Salton Sea I Project. The Salton Sea I Project sells electricity to SCE
pursuant to a 30-year negotiated power purchase agreement, as amended (the
"Salton Sea I PPA"), which provides for capacity and energy payments. The
initial contract capacity and contract nameplate are each 10 MW. The Salton
Sea I Project may add subsequent increments of contract capacity (subject to
notification requirements) the sum of which may not exceed 20 MW (the
''Salton Sea I Project Expansion"). See "--Projects in Development-Fish
Lake/Salton Sea I Expansion."
The capacity payment is based on the firm capacity price which is
currently $123.61/kW-year. The contract capacity payment adjusts quarterly
based on a basket of energy indices for the term of the Salton Sea I PPA. The
energy payment is calculated using a Base Price (defined as the initial value
of the energy payment (4.701cents per kWh for the second quarter of 1992)),
which is subject to quarterly adjustments based on a basket of indices. The
time period weighted average energy payment for Unit 1 was 4.8cents per kWh
during 1993. As the Salton Sea I PPA is not an SO4 Agreement, the energy
payments do not revert to SCE's Avoided Cost of Energy.
Salton Sea II Project. The Salton Sea II Project sells electricity to SCE
pursuant to a 30-year modified SO4 Agreement that commenced on April 15,
1990. The contract capacity and contract nameplate are 15MW and 18 MW,
respectively. The contract requires SCE to make capacity payments, capacity
bonus payments and energy payments. The price for contract capacity and
contract capacity bonus payments is fixed for the life of the modified SO4
Agreement. The energy payments for the first ten-year period, which period
expires on April 4, 2000, are levelized at a time period weighted average of
10.6cents per kWh. Thereafter, the monthly energy payments will be SCE's
Avoided Cost of Energy. For the period April 1, 1994 through March 31, 2004,
SCE is entitled to receive, at no cost, 5% of all energy delivered in excess
of 80% of contract capacity.
35
<PAGE>
Salton Sea III Project. The Salton Sea III Project sells electricity to
SCE pursuant to a 30-year modified SO4 Agreement. The contract capacity is
47.5 MW and the contract nameplate is 50 MW. The SO4 Agreement requires SCE
to make capacity payments, capacity bonus payments and energy payments for
the life of the SO4 Agreement. The price for contract capacity payments is
fixed. The energy payments for the first ten-year period, which period
expires on February 13, 1999, are levelized at a time period weighted average
of 9.8cents per kWh. Thereafter, the monthly energy payments will be SCE's
Avoided Cost of Energy.
The partnerships that own the Salton Sea Projects (the "Salton Sea
Partnerships") are parties to a secured credit facility with commercial
banks. The agreement provides for a $130 million term loan broken into two
tranches, (i) tranche A (covers Units 1 and 2) in the original principal
amount of $37 million with a final maturity date of March 15, 2000 and (ii)
tranche B (covers Unit 3) in the original principal amount of $93 million
with a final maturity date of January 31, 1999. In addition, the agreement
provides for a renewable working capital loan in the aggregate principal
amount of $5 million with an initial maturity date of February 27, 1995.
Yuma. During 1992, the Company acquired a development stage 50 MW natural
gas-fired cogeneration project in Yuma, Arizona (the "Yuma Project"). The
Yuma Project is designed to be a QF under PURPA and to provide 50 MW of
electricity to San Diego Gas & Electric Company ("SDG&E") under an existing
30-year power purchase contract. The electricity is sold at SDG&E's Avoided
Cost of Energy. The power is wheeled to SDG&E over transmission lines
constructed and owned by Arizona Public Service Company ("APS"). An agreement
for interconnection and a firm transmission service agreement have been
executed between APS and the Yuma Project entity and have been accepted for
filing by the Federal Energy Regulatory Commission ("FERC").
The Yuma Project commenced commercial operation in May 1994. The project
entity has executed steam sales contracts with an adjacent industrial entity
to act as its thermal host in order to maintain its status as a QF, which is
a requirement of its SDG&E contract. Since the industrial entity has the
right under its contract to terminate the agreement upon one year's notice if
a change in its technology eliminates its need for steam, and in any case to
terminate the agreement at any time upon three years notice, there can be no
assurance that the Yuma Project will maintain its status as a QF. However, if
the industrial entity terminates the agreement, the Company anticipates that
it will be able to locate an alternative thermal host in order to maintain
its status as a QF or build a greenhouse at the site for which the Company
believes it would obtain QF status. A natural gas supply and transportation
agreement has been executed with Southwest Gas Corporation, terminable under
certain circumstances by the Company and Southwest Gas Corporation. The Yuma
Project is unleveraged other than intercompany debt.
Roosevelt Hot Springs. The Company operates and owns an approximately 70%
interest in a 25MW geothermal steam field which supplies geothermal steam to
a power plant owned by Utah Power & Light Company ("UP&L") located on the
Roosevelt Hot Springs property under a 30-year steam sales contract. The
Company obtained approximately $20.3 million of cash under a pre-sale
agreement with UP&L whereby UP&L paid in advance for the steam produced by
the steam field. The Company must make certain penalty payments to UP&L if
the steam produced does not meet certain quantity and quality requirements.
Desert Peak. The Company is the owner and operator of a 10 MW geothermal
plant at Desert Peak, Nevada that is currently selling electricity to Sierra
Pacific Power Company under a power sales contract that expires December 31,
1995 and that may be extended on a year-to-year basis as agreed by the
parties. The price for electricity under this contract is 6.3cents per kWh,
comprising an energy payment of 1.8cents per kWh (which is adjustable
pursuant to an inflation-based index) and a capacity payment of 4.5cents per
kWh. The Company is currently negotiating the terms of an extension to this
contract.
Mammoth Plants. Magma receives royalty revenues from a 10 MW and a 12 MW
contract nameplate geothermal power plant (the "First Mammoth Plant" and the
"Second Mammoth Plant", respectively, and referred to herein, collectively,
as the "Mammoth Plants") at Mammoth Lakes, California. Electricity from the
Mammoth Plants is sold to SCE under two long-term power purchase agreements.
The First Mammoth Plant and the Second Mammoth Plant began commercial
operation in
36
<PAGE>
1985 and 1991, respectively. Magma leases both property and geothermal
resources to support the Mammoth Plants in return for certain base royalty
and bonus royalty payments. For the First Mammoth Plant and the Second
Mammoth Plant, the base royalty is 12.5% and 12%, respectively, of gross
electricity sales revenues. The bonus royalty for the Mammoth Plants is 50%
of the excess of annual gross electricity sales revenues over an annual
revenue standard based on the Mammoth Plants operating at 85% of contract
capacity.
The East Mesa Plant. Magma also receives royalty revenues from a 37 MW
contract nameplate geothermal power plant (with two units) at East Mesa in
Imperial Valley, California (the "East Mesa Plant"). Electricity from the
plant is sold to SCE pursuant to two SO4 Agreements formerly held by Magma,
and Magma is entitled to receive a senior payment of 4% of gross electricity
sales revenues and a junior payment of 10% of gross electricity sales
revenues. To date, such junior payment has not been received. Since 1992,
Magma recognized the accrued junior payments as royalty income.
PROJECTS IN DEVELOPMENT
The BRPU Process. Magma is seeking new long-term final standard offer no.
4 power purchase agreements in southern California through the bidding
process adopted by the CPUC under its 1992 Biennial Resource Plan Update
("BRPU"). In its 1992 BRPU, the CPUC cited the need for an additional 9,600
MW of power production through 1999 among California's three investor-owned
utilities, SCE, SDG&E and Pacific Gas and Electric Company (collectively, the
"IOUs"). Of this amount, 275 MW was set aside for bidding by independent
power producers (such as Magma) utilizing renewable resources. Pursuant to an
order of the CPUC dated June 22, 1994 (confirmed on December 21, 1994), Magma
was awarded 163 MW for sale to SCE and SDG&E, with in-service dates in 1997
and 1998. However, the IOUs may continue to challenge the order and there can
be no assurance that power sales contracts will be executed or that any such
projects will be completed.
Fish Lake/Salton Sea I Expansion. The Salton Sea I Project has an option
to supply an additional 20 MW of power to SCE under the Salton Sea I PPA.
Magma, through its wholly-owned subsidiary, Fish Lake Power Company, acquired
in 1992 a modified ISO4 power purchase agreement (the "Fish Lake ISO4") to
supply electric power to SCE from a 16 MW geothermal power plant proposed to
be built at Fish Lake in Esmeralda County, Nevada (the "Fish Lake Project").
The Fish Lake ISO4 is a 30-year contract providing for a contract capacity
of 14 MW and a contract nameplate of 16 MW. The contract capacity payment
under the Fish Lake ISO4 is levelized in the contract for the full 30-year
term of the contract at $180 per kW-year. The capacity portion (plus bonus
capacity) of such revenues is levelized at approximately 2.5cents per kWh for
30 years (assuming a 90% nameplate capacity factor). The energy payment
thereunder is fixed for the first ten years starting at 10.2cents per kWh in
1996 and escalates at an average annual rate of 3.9%. For years 11 through
15, such energy payment is set at SCE's Avoided Cost of Energy, plus an
additional specified amount which decreases each year. For the last 15 years
of the Fish Lake ISO4, the energy payment will be based on SCE's Avoided Cost
of Energy.
On November 29, 1994, SCE filed an application with the CPUC seeking
approval for the proposed restructuring of (i) the Salton Sea I PPA and (ii)
the Fish Lake ISO4, whereby the Fish Lake Project would not be developed at
its present site in Nevada's Fish Lake Valley and instead would be developed
under an amended and restated 30-year power purchase agreement (the "Amended
PPA") in conjunction with the Salton Sea I PPA.
If approved, the Amended PPA will consolidate the Salton Sea I Project
Expansion with the Fish Lake Project. The Amended PPA also would reduce the
price for contract capacity payments to $158/kW-year and would alter the
energy payment schedule to commence in 1996 at 8.8cents per kWh.
Newberry. Under a Bonneville Power Administration ("BPA") geothermal pilot
program, the Company is developing a 30 MW net geothermal project within the
Newberry known geothermal resource area of Deschutes County, Oregon (the
"Newberry Project"). Pursuant to two power sales contracts executed in
September 1994, after the final environmental impact statement for the
Newberry Project was issued, the Company has agreed to sell 20 MW to BPA and
10 MW to Eugene Water and
37
<PAGE>
Electric Board ("EWEB") from the Newberry Project. In addition, BPA and EWEB
together have an option to purchase up to an additional 100 MW of production
from the Newberry Project under certain circumstances. In a public-private
development effort, the Company is responsible for development, permitting,
financing, construction and operation of the project (which will be 100%
owned by the Company), while EWEB will cooperate in the development efforts
by providing assistance with government and community affairs and sharing in
the development costs (up to 30%). The Newberry Project is currently expected
to commence commercial operation in 1997. The power sales contracts provide
that under certain circumstances the contracts may be utilized at an
alternative location. Completion of the Newberry Project is subject to a
number of significant uncertainties and cannot be assured.
38
<PAGE>
CERTAIN TAX CONSIDERATIONS
The following is a discussion, based upon present law, of certain U.S.
federal income and estate tax consequences to U.S. Holders and Non-U.S.
Holders of owning and disposing of shares of Common Stock. The term "U.S.
Holder" means a citizen (and, under certain circumstances, a former 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 U.S. federal income taxation, regardless of its source, and the
term "Non-U.S. Holder" means any person who is not a U.S. Holder.
This discussion does not deal with all aspects of U.S. federal income and
estate taxation that may be relevant to holders of the shares of Common Stock
and does not deal with tax consequences arising under the laws of any
foreign, state or local jurisdiction. This discussion assumes that each
holder holds the shares of Common Stock as capital assets and that any
amounts received by a Non-U.S. Holder with respect to the shares of Common
Stock are not effectively connected with the conduct by such Non-U.S. Holder
of a trade or business in the United States. Each prospective holder is
advised to consult its own tax adviser with respect to current and possible
future tax consequences of acquiring, holding and disposing of the shares of
Common Stock.
U.S. HOLDERS
Disposition of Shares of Common Stock. In general, the U.S. Holder of the
shares of Common Stock will recognize capital gain or loss upon the sale or
other disposition of shares of Common Stock measured by the difference
between the amount realized and the U.S. Holder's tax basis in the shares of
Common Stock. The gain or loss on such disposition of shares of Common Stock
will be long-term capital gain or loss if the shares of Common Stock have
been held for more than one year at the time of such disposition.
Dividends. Distributions on shares of Common Stock will constitute
dividends for U.S. federal income tax purposes to the extent of current or
accumulated earnings and profits of the Company as determined under U.S.
federal income tax principles. Such dividends will be subject to U.S. federal
income taxation in the hands of U.S. Holders of shares of Common Stock under
rules generally applicable to dividends received from U.S. corporations. For
example, such dividends paid to U.S. Holders that are U.S. corporations may
qualify for the 70% dividends-received deduction permitted by Section 243 of
the Internal Revenue Code of 1986 (the "Code"). Individuals, partnerships,
trusts, and certain corporations, including certain foreign corporations, are
not entitled to the dividends-received deduction.
NON-U.S. HOLDERS
Gain on Disposition of Shares of Common Stock. A Non-U.S. Holder will not
be subject to U.S. federal income tax by withholding or otherwise on any gain
realized upon the disposition of shares of Common Stock unless (i) in the
case of a Non-U.S. Holder who is an individual, such Non-U.S. Holder is
present in the U.S. for a period or periods aggregating 183 days or more
during the taxable year of the disposition but is still not a resident of the
U.S. and either (a) the Non-U.S. Holder has a "tax home" (within the meaning
of the Code) in the U.S. (unless such gain is attributable to a fixed place
of business in a foreign country maintained by such individual and has been;
subject to foreign tax of at least 10%) or (b) the gain is attributable to an
office or other fixed place of business maintained by the Non-U.S. Holder in
the U.S., or (ii) the Company is or has been a "United States real property
holding corporation" for U.S. federal income tax purposes at any time within
the shorter of the five-year period ending on the date of such disposition or
such Non-U.S. Holder's holding period, and no treaty exception is applicable,
and either (a) at any point in time during such period the Non-U.S. Holder
has held, directly or indirectly, more than 5% of the Common Stock or (b) the
Common Stock is not "regularly traded" on an established securities market in
the U.S., within the meaning of Temporary Treasury Regulation Section
1.897-9T(d). If clause (ii) is applicable, a withholding tax will apply
(generally at a rate of 10% of the gross proceeds of any such sale or other
disposition). Any amount withheld pursuant to these rules will be creditable
against such Non-U.S. Holder's U.S. federal income tax liability and may
entitle such Non-U.S. Holder to a refund upon furnishing the required
information to the Internal Revenue Service.
39
<PAGE>
Dividends. Generally, any distribution on shares of Common Stock to a
Non-U.S. Holder will be subject to U.S. federal income tax withholding at a
rate of 30% of the amount of the distribution, or at a lesser applicable
treaty rate. Under current Treasury regulations, dividends paid to an address
in a foreign country are presumed to be paid to a resident of such country
for purposes of determining the applicability of a treaty rate unless the
Company has definite knowledge that such presumption is not warranted or an
applicable tax treaty requires some other method for determining a Non-U.S.
Holder's residence.
To the extent, if any, that a distribution to a Non-U.S. Holder is treated
as a tax-free return of capital or as a capital gain (see "U.S.
Holders--Dividends" above), the Company nevertheless intends to withhold U.S.
federal income tax at the 30% or lesser applicable treaty rate. In such
event, the Non-U.S. Holder is entitled to apply for a refund of such withheld
amounts by filing Form 1040NR or Form 1120F with the Internal Revenue
Service. To the extent that the distribution is treated as a capital gain,
however, it will be subject to the same rules as applicable to gains realized
on the disposition of Common Stock (see "Gains on Disposition of Shares of
Common Stock"), and therefore a refund may not be granted.
Estate Tax. Shares of Common Stock held at the time of death (or
previously transferred subject to certain retained rights or powers) by an
individual holder, who at such time was not a citizen or resident of the
U.S., will be subject to U.S. federal estate tax, except as otherwise
provided by an applicable estate tax treaty.
INFORMATION REPORTING AND BACKUP WITHHOLDING
In addition to the withholding rules described above, interest, dividends,
distributions, and payments of proceeds from the disposition by certain
non-corporate holders of shares of Common Stock may be subject to backup
withholding at a rate of 31%. Such a U.S. Holder generally will be subject to
backup withholding at a rate of 31% unless the recipient of such payment
supplies an accurate taxpayer identification number, as well as certain other
information, or otherwise establishes, in the manner prescribed by law, an
exemption from backup withholding. Any amount withheld under backup
withholding is allowable as a credit against the U.S. Holder's federal income
tax, upon furnishing the required information.
Under temporary and proposed U.S. Treasury regulations, backup withholding
will not apply to dividends paid on shares of Common Stock to a Non-U.S.
Holder. Generally, the payor of the dividends may rely on the payee's address
outside the U.S. in determining that such payee is a Non-U.S. Holder. The
Company must report annually to the Internal Revenue Service and to each
Non-U.S. Holder the amounts of dividends paid to, and the tax withheld with
respect to, each Non-U.S. Holder. These information reporting requirements
apply regardless of whether withholding was reduced by an applicable tax
treaty. Copies of these information returns may also be made available under
the provisions of a specific treaty or agreement to the tax authorities in
the country in which the Non-U.S. Holder resides. The payment of the proceeds
of the disposition of shares of Common Stock to or through the U.S. office of
a broker will be subject to information reporting and backup withholding at a
rate of 31% unless the owner certifies its status as a Non-U.S. Holder under
penalties of perjury or otherwise establishes an exemption. The proceeds of
the disposition by a Non-U.S. Holder of shares of Common Stock to or through
a foreign office of a broker will not be subject to backup withholding.
However, if such broker is a U.S. person, a controlled foreign corporation
for U.S. tax purposes, or a foreign person 50% or more of whose gross income
from all sources for a specified three-year period is from activities that
are effectively connected with a U.S. trade or business, information
reporting will apply unless such broker has documentary evidence in its files
of the owner's status as a Non-U.S. Holder and has no actual knowledge to the
contrary.
Holders should consult their tax advisors regarding the application of
information reporting and backup withholding in their particular situation
and the availability of an exemption therefrom, and the procedures for
obtaining any such exemption.
40
<PAGE>
UNDERWRITING
Under the terms and subject to the conditions contained in the
Underwriting Agreement, dated , 1995 (the "U.S. Underwriting
Agreement"), the Underwriters named below (the "U.S. Underwriters"), for whom
CS First Boston Corporation, Bear, Stearns & Co. Inc., Donaldson, Lufkin &
Jenrette Securities Corporation, C.J. Lawrence/Deutsche Bank Securities
Corporation and Lehman Brothers Inc., are acting as representatives (the
"Representatives"), have severally but not jointly agreed to purchase from
the Company the following respective numbers of U.S. Shares:
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS SHARES
-------------- -----------
<S> <C>
CS First Boston Corporation .........................
Bear, Stearns & Co. Inc. ............................
Donaldson, Lufkin & Jenrette Securities Corporation
C.J. Lawrence/Deutsche Bank Securities Corporation .
Lehman Brothers Inc. ................................
----------
Total ............................................. 11,170,000
==========
</TABLE>
The U.S. Underwriting Agreement provides that the obligations of the U.S.
Underwriters are subject to certain conditions precedent and that the U.S.
Underwriters will be obligated to purchase all the U.S. Shares if any are
purchased.
The U.S. Underwriting Agreement provides that, in the event of a default
by a U.S. Underwriter, in certain circumstances the purchase commitments of
non-defaulting U.S. Underwriters may be increased or the U.S. Underwriting
Agreement may be terminated.
The Company has entered into a Subscription Agreement (the "Subscription
Agreement") with the Managers of the International Offering (the "Managers")
providing for the concurrent offer and sale of the International Shares
outside the United States. The closing of the U.S. Offering and the closing
of the International Offering are each conditional on the other.
The Company has granted to the U.S. Underwriters and the Managers an
option, exercisable by CS First Boston Corporation, expiring at the close of
business on the 30th day after the date of this Prospectus, to purchase up to
2,275,000 additional shares at the public offering price, less the
underwriting discounts and commissions, all as set forth on the cover page of
this Prospectus. Such option may be exercised only to cover over-allotments
in the sale of the Shares offered hereby. To the extent that this option to
purchase is exercised, each U.S. Underwriter and each Manager will become
obligated, subject to certain conditions, to purchase approximately the same
percentage of additional shares being sold to the U.S. Underwriters and the
Managers as the number of U.S. Shares set forth next to such U.S.
Underwriter's name in the preceding table bears to the total number of U.S.
Shares in such table and as the number set forth next to such Manager's name
in the corresponding table in the Prospectus relating to the International
Offering bears to the total number of International Shares in such table.
The Company has been advised by the Representatives that the U.S.
Underwriters propose to offer the U.S. Shares in the United States and Canada
to the public initially at the public offering price set forth on the cover
page of this Prospectus and, through the Representatives, to certain dealers
at such price less a concession of $ per share, and the U.S.
Underwriters and such dealers may allow a discount of $ per share on
sales to certain other dealers. After the initial public offering, the public
offering price and concession and discount to dealers may be changed by the
U.S. Underwriters. Gleacher & Co., Inc. ("Gleacher") has provided financial
advisory services to the Company in connection with the Magma
41
<PAGE>
Acquisition. Gleacher is also expected to participate as a dealer in the sale
of Shares in the Offering. In addition to its fees for such financial
advisory services and any selling commissions to which it may be entitled in
the Offering, Gleacher will receive out of the gross underwriting discounts
and commissions (as set forth on the cover page of this Prospectus), a fee in
the amount of 20% of the underwriting fee (not to exceed $250,000).
The public offering price, the aggregate underwriting discounts and
commissions per share and per share concession and discount to dealers for
the U.S. Offering and the concurrent International Offering will be
identical. Pursuant to an Agreement between the U.S. Underwriters and
Managers (the "Intersyndicate Agreement") relating to the Offering, changes
in the public offering price, concession and discount to dealers will be made
only upon the mutual agreement of CS First Boston Corporation, as
representative of the U.S. Underwriters, and CS First Boston Limited
("CSFBL"), on behalf of the Managers.
Pursuant to the Intersyndicate Agreement, each of the U.S. Underwriters
has agreed that, as part of the distribution of the U.S. Shares and subject
to certain exceptions, it has not offered or sold, and will not offer or
sell, directly or indirectly, any shares of Common Stock or distribute any
prospectus relating to the Common Stock to any person outside the United
States or Canada or to any other dealer who does not so agree. Each of the
Managers has agreed or will agree that, as part of the distribution of the
International Shares and subject to certain exceptions, it has not offered or
sold, and will not offer or sell, directly or indirectly, any shares of
Common Stock or distribute any prospectus relating to the Common Stock in the
United States or Canada or to any other dealer who does not so agree. The
foregoing limitations do not apply to stabilization transactions or to
transactions between the U.S. Underwriters and the Managers pursuant to the
Intersyndicate Agreement. As used herein, "United States" means the United
States of America (including the States and the District of Columbia), its
territories, possessions and other areas subject to its jurisdiction,
"Canada" means Canada, its provinces, its territories, possessions and other
areas subject to its jurisdiction, and an offer or sale shall be in the
United States or Canada (i) any individual resident in the United States or
Canada or (ii) any corporation, partnership, pension, profit-sharing or other
trust or other entity (including any such entity acting as an investment
adviser with discretionary authority) whose office most directly involved
with the purchase is located in the United States or Canada.
Pursuant to the Intersyndicate Agreement, sales may be made between the
U.S. Underwriters and the Managers of such number of shares of Common Stock
as may be mutually agreed upon. The price of any shares so sold will be the
public offering price, less such amount as may be mutually agreed upon by CS
First Boston Corporation, as representative of the U.S. Underwriters and
CSFBL, on behalf of the Managers, but not exceeding the selling concession
applicable to such shares. To the extent there are sales between the U.S.
Underwriters and the Managers pursuant to the Intersyndicate Agreement, the
number of shares of Common Stock initially available for sale by the U.S.
Underwriters or by the managers may be more or less than the amount appearing
on the cover page of the Prospectus. Neither the U.S. Underwriters nor the
Managers are obligated to purchase from the other any unsold shares of Common
Stock.
This Prospectus may be used by underwriters and dealers in connection with
sales of International Shares to persons located in the United States, to the
extent such sales are permitted by the contractual limitations on sales
described above.
The Company and its officers and directors have agreed that they will not
offer, sell, contract to sell, pledge or otherwise dispose of, directly or
indirectly, or file with the Securities and Exchange Commission a
registration statement under the Securities Act relating to, any additional
shares of its Common Stock without the prior written consent of CS First
Boston Corporation for a period of 90 days after the date of this Prospectus,
except issuances pursuant to the exercise of employee stock options
outstanding on the date hereof or pursuant to the conversion of the Company's
Debentures or its Series C Preferred Stock.
The Company has agreed to indemnify the U.S. Underwriters and the Managers
against certain liabilities, including civil liabilities under the Securities
Act, or to contribute to payments that the U.S. Underwriters and the Managers
may be required to make in respect thereof.
42
<PAGE>
Each of Bear, Stearns & Co. Inc., Donaldson Lufkin & Jenrette Securities
Corporation and Lehman Brothers Inc. were underwriters of the Company's
$529,640,000 senior discount notes offering in March 1994.
Lehman Brothers Inc. has provided financial advisory services to the
Company in connection with the Magma Acquisition.
Credit Suisse, an affiliate of CS First Boston Corporation, has provided
certain credit facilities and commercial banking services to the Company and
its subsidiaries from time to time and is the agent bank in connection with
the Tender Facility and the Merger Facilities. The Company is currently
indebted to Credit Suisse in the amount of $245.6 million under the Tender
Facility. Such loan is secured by a pledge to Credit Suisse of the 12,600,000
shares of Magma Common Stock owned by CE Sub. The Company is currently in
compliance with the terms and conditions contained in the Tender Facility.
Certain of the net proceeds of the Offering may be deemed to be used to repay
some portion of the Tender Facility. Accordingly, the Offering is being made
in accordance with the requirements of Section 44(c)(8) of Article III of the
Rules of Fair Practice of the National Association of Securities Dealers,
Inc. The decision of CS First Boston to underwrite the Offering was made
independently of Credit Suisse, which had no involvement in determining
whether or when to underwrite the Offering or the terms of the Offering. CS
First Boston will not receive any benefit from the Offering other than its
respective portion of the gross underwriting discounts and commissions as set
forth on the cover page of this Prospectus.
1,500,000 shares of the Common Stock being offered in the Direct Sale
pursuant to this Prospectus are expected to be purchased by PKS directly from
the Company at a price equal to the Price to Public and PKS set forth on the
cover of this Prospectus. PKS has indicated an intention to acquire such
shares, subject to receipt and review by PKS of a final Prospectus and
conditioned upon the closing of the Offering.
NOTICE TO CANADIAN RESIDENTS
RESALE RESTRICTIONS
The distribution of the Common Stock in Canada is being made only on a
private placement basis exempt from the requirement that the Company prepare
and file a prospectus with the securities regulatory authorities in each
province where trades of the Common Stock are effected. Accordingly, any
resale of the Common Stock in Canada must be made in accordance with
applicable securities laws which will vary depending on the relevant
jurisdiction, and which may require resales to be made in accordance with
available statutory exemptions or pursuant to a discretionary exemption
granted by the applicable Canadian securities regulatory authority.
Purchasers are advised to seek legal advice prior to any resale of the Common
Stock.
REPRESENTATIONS OF PURCHASERS
Each purchaser of the Common Stock in Canada who receives a purchase
confirmation will be deemed to represent to the Company and the dealer from
whom such purchase confirmation is received that (i) such purchaser is
entitled under applicable provincial securities laws to purchase such Common
Stock without the benefit of a prospectus qualified under such securities
laws, (ii) where required by law, that such purchaser is purchasing as
principal and not as agent, and (iii) such purchaser has reviewed the text
above under "Resale Restrictions".
RIGHTS OF ACTION AND ENFORCEMENT
The securities being offered are those of a foreign issuer and Ontario
purchasers will not receive the contractual right of action prescribed by
section 32 of the Regulation under the Securities Act (Ontario). As a result,
Ontario purchasers must rely on other remedies that may be available,
including common law rights of action for damages or recission or rights of
action under the civil liability provisions of the U.S. federal securities
laws.
All of the Company's directors and officers as well as the experts named
herein may be located outside of Canada and, as a result, it may not be
possible for Ontario purchasers to effect service of
43
<PAGE>
process within Canada upon the Company or such persons. All or a substantial
portion of the assets of the Company and such persons may be located outside
of Canada and, as a result, it may not be possible to satisfy a judgment
against the Company or such persons in Canada or to enforce a judgment
obtained in Canadian courts against such Company or persons outside of
Canada.
NOTICE TO BRITISH COLUMBIA RESIDENTS
A purchaser of the Common Stock to whom the Securities Act (British
Columbia) applies is advised that such purchaser is required to file with the
British Columbia Securities Commission a report within ten days of the sale
of any Common Stock acquired by such purchaser pursuant to this offering.
Such report must be in the form attached to British Columbia Securities
Commission Blanket Order BOR #88/5, a copy of which may be obtained from the
Company. Only one such report must be filed in respect of Common Stock
acquired on the same date and under the same prospectus exemption.
LEGAL MATTERS
Certain legal matters with respect to the validity of the securities
offered hereby will be passed upon for the Company by Willkie Farr &
Gallagher, One Citicorp Center, 153 East 53rd Street, New York, New York
10022. Chadbourne & Parke, 30 Rockefeller Plaza, New York, New York 10112,
will pass on certain legal matters for the U.S. Underwriters and the Managers
in connection with the Offering.
EXPERTS
The financial statements and the related financial statement schedules of
the Company and its subsidiaries incorporated in this Prospectus by reference
to the Company's 1993 10-K have been audited by Deloitte & Touche,
independent auditors, as stated in their reports (which reports express an
unqualified opinion and include an explanatory paragraph referring to the
Company's adoption effective January 1, 1993, of Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes") 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.
With respect to the unaudited interim financial information for the
periods ended March 31, 1993 and 1994, June 30, 1993 and 1994, and September
30, 1993 and 1994, incorporated herein by reference, Deloitte & Touche LLP
have applied limited procedures in accordance with professional standards for
a review of such information. However, as stated in their reports included in
the Company's Quarterly Reports on Form 10-Q for the quarters ended March 31,
1994, June 30, 1994 and September 30, 1994 and incorporated by reference
herein, they did not audit and they do not express an opinion on that interim
financial information. Accordingly, the degree of reliance on their reports
on such information should be restricted in light of the limited nature of
the review procedures applied. Deloitte & Touche LLP are not subject to the
liability provisions of Section 11 of the Securities Act for their reports on
the unaudited interim financial information because those reports are not
"reports" or a "part" of a registration statement prepared or certified by an
accountant within the meaning of Sections 7 and 11 of the Act.
The consolidated balance sheets of Magma and subsidiaries as of December
31, 1993 and 1992 and the related consolidated statements of operations,
changes in stockholders' equity, and cash flows for each of the three years
in the period ended December 31, 1993 and the Statement of Net Assets
Acquired as of March 31, 1993 and the Historical Summaries of Gross Revenues
and Direct Operating Expenses for each of the three years in the period ended
December 31, 1992 of the Imperial Valley Geothermal Interests, incorporated
by reference in this Prospectus have been incorporated herein in reliance on
the reports of Coopers & Lybrand, independent accountants, given on the
authority of that firm as experts in accounting and auditing.
44
<PAGE>
INDEX TO PRO FORMA UNAUDITED CONDENSED COMBINED FINANCIAL DATA
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
Pro Forma Unaudited Condensed Combined Balance Sheet of the Company and Magma As
of September 30, 1994 .......................................................... P-3
Pro Forma Unaudited Condensed Combined Statements of Earnings of the Company and
Magma For the Year Ended December 31, 1993 and the Nine Months Ended September
30, 1994 ....................................................................... P-4
Notes to Pro Forma Unaudited Condensed Combined Financial Data of the Company
and Magma ...................................................................... P-5
</TABLE>
P-1
<PAGE>
PRO FORMA UNAUDITED CONDENSED COMBINED FINANCIAL DATA
The following Pro Forma Unaudited Condensed Combined Balance Sheet as of
September 30, 1994 and the Pro Forma Unaudited Condensed Combined Statements
of Earnings for the year ended December 31, 1993 and the nine months ended
September 30, 1994 combine the historical consolidated balance sheets of the
Company and Magma as if the acquisition had been effected on September 30,
1994 and the historical statements of income as if the acquisition had been
effected at the beginning of each of the periods presented pursuant to the
All-Cash Option. The acquisition is recorded under the purchase method of
accounting, after giving effect to the pro forma adjustments and assumptions
described in the accompanying notes. Under this method of accounting, which
is in accordance with generally accepted accounting principles, assets and
liabilities of Magma are adjusted to the estimated fair value and combined
with the recorded values of the assets and liabilities of the Company. This
pro forma combined financial data should be read in conjunction with the
financial data appearing in, and are qualified in their entirety by, the
consolidated financial statements, including the notes thereto, of the
Company and Magma, included in the documents incorporated by reference
herein.
The Company has not completed reviewing Magma's records in order to make
its determination of the fair value of Magma's assets and liabilities. The
fair value adjustments reflected in the accompanying pro forma condensed
combined financial data reflect, among other things, estimates of fair value
made by the Company based on market quotations and assumptions it believes to
be reasonable. Accordingly, the final pro forma condensed combined amounts
may be different from those set forth herein.
It should be noted, however, that the actual fair values will be
determined on the basis of the financial condition of Magma at the time the
Magma shares are purchased.
The pro forma combined financial data are intended for information
purposes only and are not intended to present the results that would have
actually occurred if the acquisition had been in effect on the assumed dates
and for the assumed periods, and are not necessarily indicative of the
results that may be obtained in the future.
P-2
<PAGE>
PRO FORMA UNAUDITED CONDENSED COMBINED BALANCE SHEET
THE COMPANY AND MAGMA
AS OF SEPTEMBER 30, 1994
(In thousands)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
THE COMPANY MAGMA ADJUSTMENTS COMBINED
------------- ---------- -------------- ------------
<S> <C> <C> <C> <C>
ASSETS
Cash and short-term investments ........... $ 316,349 $ 5,111 $(169,897)(5C) $ 151,563
Marketable securities ..................... -- 43,609 -- 43,609
Joint venture cash and short-term
investments .............................. 27,088 25,478 -- 52,566
Restricted cash and short-term investments 127,380 -- -- 127,380
Accounts receivable--trade and other ..... 33,901 54,204 -- 88,105
Prepaid expenses and other assets ........ -- 10,423 -- 10,423
Due from joint ventures ................... 1,639 -- -- 1,639
Property and plant, net ................... 522,268 395,560 340,000 (5B) 1,257,828
Equipment, net ............................ 4,699 -- -- 4,699
Notes receivable--joint venture ........... 12,255 -- -- 12,255
Other investments ......................... 11,517 41,245 -- 52,762
Power purchase contracts .................. -- 21,313 60,000 (5B) 81,313
Deferred charges and other assets ........ 29,968 24,480 6,948 (5B,5C) 61,396
Goodwill .................................. -- 8,999 313,132 (5B) 322,131
------------- ---------- -------------- ------------
Total assets ............................ $1,087,064 $630,422 $ 550,183 $2,267,669
============= ========== ============== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Accounts payable .......................... $ 1,021 $ 7,832 $ -- $ 8,853
Other accrued liabilities ................. 23,357 3,605 -- 26,962
Income taxes payable ...................... 587 -- -- 587
Construction loans ........................ 21,079 -- -- 21,079
Project loans ............................. 233,080 188,969 -- 422,049
Senior discount notes ..................... 421,375 -- -- 421,375
Convertible subordinated debenture ....... 100,000 -- -- 100,000
Deferred income taxes ..................... 24,774 22,376 158,000 (5B) 205,150
Other long-term liabilities ............... -- 12,354 500,000 (5C) 512,354
------------- ---------- -------------- ------------
Total liabilities ....................... 825,273 235,136 658,000 1,718,409
Deferred income ........................... 19,781 -- -- 19,781
Redeemable preferred stock ................ 62,350 -- -- 62,350
STOCKHOLDERS' EQUITY
Common stock .............................. 2,407 2,401 (1,507)(5A) 3,301
Additional paid-in capital ................ 100,000 142,765 84,294 (5A) 327,059
Unrealized gain from marketable securities -- (677) 677 (5A) --
Retained earnings ......................... 136,769 250,797 (250,797)(5A) 136,769
Treasury stock ............................ (59,516) -- 59,516 (5A) --
------------- ---------- -------------- ------------
Total stockholders' equity .............. 179,660 395,286 (107,817) 467,129
------------- ---------- -------------- ------------
Total liabilities and stockholders'
equity ................................ $1,087,064 $630,422 $ 550,183 $2,267,669
============= ========== ============== ============
</TABLE>
The accompanying notes to the pro forma unaudited condensed combined
financial data are an integral part of these statements.
P-3
<PAGE>
PRO FORMA UNAUDITED CONDENSED COMBINED STATEMENTS OF EARNINGS
THE COMPANY AND MAGMA
FOR THE YEAR ENDED DECEMBER 31, 1993 AND THE NINE MONTHS ENDED
SEPTEMBER 30, 1994
(In thousands, except per share data)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1993 NINE MONTHS ENDED SEPTEMBER 30, 1994
------------------------------------------------- -------------------------------------------
PRO FORMA PRO FORMA
THE ADJUSTMENT PRO FORMA THE ADJUSTMENT PRO FORMA
COMPANY MAGMA (5 D) COMBINED COMPANY MAGMA (5 D) COMBINED
---------- ---------- ------------ ----------- ---------- ---------- ------------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
REVENUES
Sales of electricity and steam ... $132,059 $137,882 $ -- $269,941 $117,208 $124,086 $ -- $241,294
Royalties ......................... -- 19,629 -- 19,629 -- 15,062 -- 15,062
Interest and other income ......... 17,194 4,195 (8,495) 12,894 21,980 3,866 (6,371) 19,475
Management services ............... -- 5,432 -- 5,432 -- 3,090 -- 3,090
---------- ---------- ------------ ----------- ---------- ---------- ------------ -------
Total revenue ................... 149,253 167,138 (8,495) 307,896 139,188 146,104 (6,371) 278,921
---------- ---------- ------------ ----------- ---------- ---------- ------------ -------
COSTS AND EXPENSES ................
Plant operations .................. 25,362 49,493 -- 74,855 23,887 41,208 -- 65,095
General and administrative ........ 13,158 10,943 -- 24,101 9,536 9,602 -- 19,138
Royalties ......................... 8,274 -- -- 8,274 7,898 -- -- 7,898
Depreciation and amortization .... 17,812 21,692 18,103 57,607 15,439 17,737 13,577 46,753
Other non-plant costs ............. -- 471 _ 471 _ 380 -- 380
Interest expense .................. 30,205 9,626 45,000 84,831 44,480 9,262 33,750 87,492
Less interest capitalized ......... (6,816) -- -- (6,816) (7,518) -- -- (7,518)
---------- ---------- ------------ ----------- ---------- ---------- ------------ ------
Total costs and expenses ........ 87,995 92,225 63,103 243,323 93,722 78,189 47,327 219,238
---------- ---------- ------------ ----------- ---------- ---------- ------------ -------
Income before income taxes ........ 61,258 74,913 (71,598) 64,573 45,466 67,915 (53,698) 59,683
Provision for income taxes ........ 18,184 22,778 (25,245) 15,717 14,067 21,072 (18,934) 16,205
---------- ---------- ------------ ----------- ---------- ---------- ------------ ------
Income from continuing operations 43,074 52,135 (46,353) 48,856 31,399 46,843 (34,764) 43,478
Preferred dividends ............... 4,630 -- -- 4,630 3,711 -- -- 3,711
---------- ---------- ------------ ----------- ---------- ---------- ------------ ------
Income available to common
stockholders ..................... $ 38,444 $ 52,135 $(46,353) $ 44,226 $ 27,688 $ 46,843 $(34,764) $39,767
========== ========== ============ =========== ========== ========== ============ =======
INCOME PER COMMON AND COMMON
EQUIVALENT SHARE
Assuming no dilution .............. $1.00 $2.17 $0.80 $0.77 $1.95 $0.75
========== ========== =========== ========== ========== =======
Assuming full dilution ............ $1.00 $2.17 $0.79 $0.76 $1.95 $0.73
========== ========== =========== ========== ========== =======
Weighted average common shares
outstanding ...................... 38,485 24,063 55,155 36,174 24,017 52,844
========== ========== =========== ========== ========== =======
</TABLE>
The accompanying notes to the pro forma unaudited condensed combined
financial data are an integral part of these statements.
P-4
<PAGE>
NOTES TO PRO FORMA UNAUDITED CONDENSED COMBINED FINANCIAL DATA
THE COMPANY AND MAGMA
(Tables in thousands)
The Magma Acquisition will be accounted for as a purchase. The resulting
adjustments are based on the historical consolidated financial statements of
the Company and Magma. The final adjustments will be based upon the net
proceeds to the Company from the sale of the shares of Common Stock in the
Offering and the Direct Sale and the fair market value of the assets of Magma
at or near the effective time of the Merger.
The pro forma unaudited condensed combined financial data are based on the
following assumptions:
1. The Magma Acquisition occurred on September 30, 1994 for balance sheet
purposes and at the beginning of the periods presented for statements of
earnings purposes.
2. 15,170,000 shares of Common Stock will be sold in the Offering at a
price sufficient to provide net proceeds of approximately $17.18 per Share to
the Company and 1,500,000 shares of Common Stock will be sold in the Direct
Sale at a price sufficient to provide proceeds of $17.875 per share to the
Company, the sum of which will be used to fund a significant portion of the
purchase price under the Merger. The Company's treasury stock will be canceled.
3. 23,843,000 Magma shares outstanding as of September 30, 1994 will be
purchased for cash in an amount of $483,600,000 as to 12,400,000 Magma shares
and cash in an amount of $440,266,000 as to 11,443,000 Magma shares.
4. Outstanding Magma options will be retired for approximately $8,500,000
in cash.
5. The pro forma adjustments to reflect the effect of the transaction are
as follows:
A. The adjustments reflect the elimination of Magma's equity accounts,
the sale of the shares of Common Stock pursuant to the Offering and the
Direct Sale, and the cancellation of the Company's treasury stock.
B. The adjustments which have been made to the net assets of Magma and
the Company to give effect to the Magma Acquisition follow:
<TABLE>
<CAPTION>
<S> <C> <C>
Cash consideration plus estimated direct costs to be
incurred in consummating the Magma Acquisition .... $ 936,366
Cost of retiring outstanding Magma options ......... 8,500
Cost of 200,000 Magma shares owned by the Company
prior to the Merger ................................ 5,552
Net assets of Magma ................................. $395,286
Adjustment to eliminate goodwill of Magma .......... (8,999) (386,287)
---------- -----------
Excess of purchase price over carrying value of net
assets acquired .................................... 564,131
Allocated to:
Property and plant ................................. (340,000)
Power purchase contracts ........................... (60,000)
Deferred income taxes on allocated costs .......... 158,000
-----------
Goodwill ............................................ $ 322,131
===========
</TABLE>
P-5
<PAGE>
NOTES TO PRO FORMA UNAUDITED CONDENSED COMBINED FINANCIAL DATA
THE COMPANY AND MAGMA--(CONTINUED)
C. The cash which the Company will be required to pay in order to
effect the Magma Acquisition has been provided for in the pro forma
adjustments as follows:
<TABLE>
<CAPTION>
<S> <C>
Reduce cash on hand ............................. $169,897
Net proceeds from the Offering and the Direct
Sale ........................................... 287,469
Increase long-term debt ......................... 500,000
----------
Total sources of cash ........................... $957,366
==========
Payments to Magma common stockholders ........... $923,866
Payments to Magma stock option holders ......... 8,500
Other direct acquisition costs .................. 12,500
Financing costs ................................. 12,500
----------
Total uses of cash .............................. $957,366
==========
</TABLE>
D. The pro forma adjustments to the pro forma condensed combined
statements of earnings are as follows:
i. Record amortization of the excess of purchase price over net assets
acquired over a 40-year period, eliminate the amortization of goodwill
from the historical operating results of Magma and provide depreciation
expense on costs allocated to property and plant. The Company's policy is
to provide depreciation and amortization expense beginning upon the
commencement of energy production over the estimated remaining useful life
of plant and equipment or the contract period for costs applicable to
power sales and development contracts. Costs of $150 million have been
allocated to power sales and development contracts and plant for which
energy production is not expected to commence until 1996 or later.
Accordingly, revenues, period operating costs and amortization of future
costs to be incurred in the completion of such facilities together with
amortization of this allocation of acquisition costs are not included in
the pro forma combined statements of earnings.
ii. Increase interest expense relating to amortization of deferred
financing costs over ten years and cash used to finance the Magma
Acquisition, utilizing an 8.75 percent annual interest rate assumption
applied to additional borrowings and a 5 percent annual interest rate
assumption applicable to the reduction of cash on hand.
iii. Change income tax expense as a result of pro forma adjustments
which affect taxable income.
The pro forma income per common and common share equivalent has been
determined on the basis of weighted average shares which have been adjusted
to include the number of shares of Common Stock sold pursuant to the Offering
and the Direct Sale.
P-6
<PAGE>
#############################################################################
IMAGES OMITTED:
[Photographs of:
(a) Navy I Facility at the
Coso Project;
(b) One of the Salton Sea
Projects]
(SEE ALSO "APPENDIX FOR GRAPHICS AND IMAGE MATERIAL"
AFTER BACK COVER PAGE OF PROSPECTUS.)
#############################################################################
<PAGE>
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY U.S. UNDERWRITER. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER
TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON
TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION HEREIN IS CORRECT
AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF OR THAT THERE HAS BEEN NO CHANGE
IN THE AFFAIRS OF THE COMPANY SINCE SUCH DATE.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
Available Information ..................... 3
Incorporation of Documents by Reference .. 4
Prospectus Summary ........................ 5
Risk Factors .............................. 9
Use of Proceeds ........................... 12
Market Prices of the Common Stock ........ 12
Capitalization ............................ 13
The Magma Acquisition ..................... 14
Business .................................. 16
Certain Tax Considerations ................ 39
Underwriting .............................. 41
Notice to Canadian Residents .............. 43
Legal Matters ............................. 44
Experts ................................... 44
Index to Pro Forma Unaudited Condensed
Combined Financial Data .................. P-1
</TABLE>
[CALIFORNIA ENERGY LOGO]
California Energy Company, Inc.
16,670,000 Shares
Common Stock
($0.0675 par value)
PROSPECTUS
CS First Boston
Bear, Stearns & Co. Inc.
Donaldson, Lufkin & Jenrette
Securities Corporation
C.J. Lawrence/Deutsche Bank
Securities Corporation
Lehman Brothers
APPENDIX FOR GRAPHIC AND IMAGE MATERIAL
Graphics or images which cannot be reproduced in the ASCII format
required for EDGAR have been omitted from the pages of the preceding document
as listed below. Pursuant to Rule 304 of Regulation S-T, the substantive
information contained in these graphics or images is conveyed in tabular and/or
narrative form:
Page in
Typeset Copy Description
- ------------ -----------
Inside front cover of
US Prospectus Planned Project Development; Capacity
Implementation Schedule; Chart listing
facilities with MW capacity; Map
[Datapoints/tables are provided in place of the
graphics inside the front cover of this EDGAR
file, as necessary, to disclose material
content of said graphics.]
18 Schematic representing Geothermal Energy
19 Map depicting areas of Potential Geothermal
Energy
25 Map of the Republic of the
Philippines with Project locations
29 Map of Indonesia and Neighboring
Countries with Project locations
32 Map of the Western United States
with Project locations
Inside back cover of
US Prospectus Photographs of (a) Navy I Facility at the
Coso Project; (b) One of the Salton Sea
Projects
<PAGE>
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.
[Alternate Page For International Prospectus]
SUBJECT TO COMPLETION, DATED JANUARY 23, 1995
16,670,000 Shares
[CALIFORNIA ENERGY LOGO]
California Energy Company, Inc.
Common Stock
($0.0675 par value)
All the 16,670,000 shares of Common Stock (the "Common Stock") of California
Energy Company, Inc. (the "Company") offered hereby are being sold by the
Company. Of the 16,670,000 shares of Common Stock being offered, 4,000,000
shares are initially being offered outside the United States and Canada (the
"International Shares") by the Managers (the "International Offering") and
11,170,000 shares are initially being concurrently offered in the United States
and Canada (the "U.S. Shares" and, together with the International Shares, the
"Shares") by the U.S. Underwriters (the "U.S. Offering" and, together with the
International Offering, the "Offering"). The offering price and underwriting
discounts and commissions of the International Offering and the U.S. Offering
are identical. 1,500,000 shares of Common Stock being offered pursuant to this
Prospectus are expected to be purchased by Peter Kiewit Sons', Inc. ("PKS"),
directly from the Company, at a price equal to the Price to Public and PKS set
forth below. PKS has indicated an intention to acquire such shares (the "Direct
Sale"), subject to receipt and review by PKS of a final Prospectus and
conditioned upon the closing of the Offering.
The net proceeds of the Offering and the proceeds of the Direct Sale, together
with borrowings of up to $500 million under bank credit facilities and general
corporate funds of the Company, will be used to complete the Magma Acquisition
(as hereinafter defined). The closing of the Offering will occur concurrently
with, and is conditioned upon, the closing of the Magma Acquisition pursuant to
the All-Cash Option (as hereinafter defined).
The Common Stock of the Company is listed on the New York Stock Exchange under
the symbol "CE". On January 20, 1995, the last reported sale price of the
Common Stock on the New York Stock Exchange Composite Tape was $17 7/8 per
share.
FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED IN CONNECTION
WITH AN INVESTMENT IN THE COMMON STOCK, SEE "RISK FACTORS".
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.
<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO PUBLIC DISCOUNTS AND PROCEEDS TO
AND PKS COMMISSIONS (1) COMPANY (2)
----------------- ----------------- ---------------
<S> <C> <C> <C>
Per Share .... $ $ $
Total (3) .... $ $ $
<FN>
(1) No Underwriting Discounts and Commissions are to be paid in connection
with the Direct Sale to PKS.
(2) Before deduction of expenses payable by the Company estimated at $
. Per Share Proceeds to Company reflect per share proceeds
from the Offering, but not from the Direct Sale.
(3) The Company has granted the Managers and the U.S. Underwriters an
option, exercisable by CS First Boston Corporation for 30 days from the
date of this Prospectus to purchase a maximum of 2,275,000 additional
shares to cover over-allotments. If the option is exercised in full,
the total Price to Public and PKS will be $ , Underwriting Discounts
and Commissions will be $ and Proceeds to Company will be
$ .
</TABLE>
The International Shares are offered by the several Managers when, as and
if issued by the Company, delivered to and accepted by the Managers and
subject to their right to reject orders in whole or in part. It is expected
that the International Shares will be ready for delivery on or about February
, 1995.
CS First Boston
Bear, Stearns International Limited Donaldson, Lufkin & Jenrette
Securities Corporation
Deutsche Bank Lehman Brothers
Aktiengesellschaft
The date of this Prospectus is , 1995.
<PAGE>
[Inside Front Cover Page For International Prospectus]
#############################################################################
IMAGES OMITTED ON INSIDE FRONT COVER OF PROSPECTUS;
DATAPOINTS AND NARRATIVE SUPPLIED BELOW.
(SEE ALSO "APPENDIX FOR GRAPHICS AND IMAGE MATERIAL"
AFTER BACK COVER PAGE OF PROSPECTUS.)
#############################################################################
[LOGO] CALIFORNIA ENERGY COMPANY, INC.'S PLANNED PROJECT
DEVELOPMENT AND CAPACITY IMPLEMENTATION SCHEDULE
(INCLUDES EXISTING OPERATIONS, CONTRACTS AND AWARDS)*
MW IN OPERATION
1995 1996 1997 1998 1999
---- ---- ---- ---- ----
Net Megawatts (MW) Owned 354 581 1,008 1,321 1,698
Facility Gross MW Capacity 642 883 1,584 2,165 2,770
PROFILE OF PROJECTS**
<TABLE>
<CAPTION>
FACILITY MW
CAPACITY
----------------
NET MW COMMERCIAL
PROJECT GROSS NET OWNED FUEL TYPE OPERATION
- --------------------------- ------- ------- ------- --------------- ------------
<S> <C> <C> <C> <C> <C>
PROJECTS IN OPERATION
Coso Project 288 264 127 geothermal 1987-90
Salton Sea Projects 264 224 150 geothermal 1986-90
Yuma 55 50 50 gas 1994
Roosevelt Hot Springs 25 23 17 geothermal 1984
Desert Peak 10 10 10 geothermal 1985
------- ------- -------
Total 642 571 354
PROJECTS UNDER CONSTRUCTION
Upper Mahiao 128 119 119 geothermal 1996
Mahanagdong 180 165 74 geothermal 1997
Malitbog 231 216 216 geothermal 1996-97
------- ------- -------
Total 539 500 409
AWARDED PROJECTS
BRPU 163 163 163 geothermal TBD
Fish Lake 36 36 36 geothermal 1996
Newberry 30 30 30 geothermal 1997
Dieng 400 400 188 geothermal 1997-99
Patuha 400 400 140 geothermal 1997-99
Casecnan 140 140 98 hydroelectric 1998
Bali 350 350 210 geothermal 1998-99
Alto Peak 70 70 70 geothermal 1997
------- ------- -------
Total 1,589 1,589 935
------- ------- -------
Total 2,770 2,660 1,698
======= ======= =======
</TABLE>
- ---------------
* For projects under award, no assurance can be given that a power sales
contract will be executed. In addition, substantial other contingencies
exist with respect to awards, including without limitation, the need to
obtain financing, permits and licenses, and the completion of
construction.
** For more detailed information concerning the Company's projects, see
"BUSINESS--International Projects; --Domestic Projects."
<PAGE>
THE WORLD'S LARGEST INDEPENDENT PRODUCER OF GEOTHERMAL POWER*
[MAP APPEARS HERE]
THE PHILIPPINES
- -----------------------------------------------------------
<TABLE>
<CAPTION>
FACILITY MW CAPACITY
--------------------
NET MW
PROJECT GROSS NET OWNED FUEL TYPE
- -----------------------------------------------------------
<S> <C> <C> <C> <C>
1 Upper Mahiao 128 119 119 geothermal
2 Mahanagdong 180 165 74 geothermal
3 Malitbog 231 216 216 geothermal
4 Casecnan 140 140 98 hydroelectric
5 Alto Peak 70 70 70 geothermal
- -----------------------------------------------------------
</TABLE>
INDONESIA
- -----------------------------------------------------------
<TABLE>
<CAPTION>
FACILITY MW CAPACITY
--------------------
NET MW
PROJECT GROSS NET OWNED FUEL TYPE
- -----------------------------------------------------------
<S> <C> <C> <C> <C>
1 Dieng 400 400 188 geothermal
2 Patuha 400 400 140 geothermal
3 Bali 350 350 210 geothermal
- -----------------------------------------------------------
</TABLE>
UNITED STATES
- --------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACILITY MW CAPACITY
--------------------
NET MW
PROJECT STATE GROSS NET OWNED FUEL TYPE
- --------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 Coso Project CA 288 264 127 geothermal
2 Salton Sea Projects CA 264 224 150 geothermal
3 Yuma AZ 55 50 50 gas
4 Roosevelt Hot Springs UT 25 23 17 geothermal
5 Desert Peak NV 10 10 10 geothermal
6 BRPU CA 163 163 163 geothermal
7 Fish Lake CA 36 36 36 geothermal
8 Newberry OR 30 30 30 geothermal
- --------------------------------------------------------------------------
</TABLE>
* Based on the Company's estimate of aggregate MW of electric generating
capacity in operation and under construction.
<PAGE>
[Alternate Page For International Prospectus]
No dealer, salesperson or other person has been authorized to give any
information or to make any representation not contained in this Prospectus
and, if given or made, such information or representation must not be relied
upon as having been authorized by the Company or any Manager. This Prospectus
does not constitute an offer to sell or a solicitation of an offer to buy any
of the securities offered hereby in any jurisdiction to any person to whom it
is unlawful to make such offer in such jurisdiction. Neither the delivery of
this Prospectus nor any sale made hereunder shall, under any circumstances,
create any implication that the information herein is correct as of any time
subsequent to the date hereof or that there has been no change in the affairs
of the Company since such date.
In this Prospectus, references to "dollars" and "$" are to United States
dollars.
IN CONNECTION WITH THE OFFERING, CS FIRST BOSTON CORPORATION ON BEHALF OF
THE U.S. UNDERWRITERS AND THE MANAGERS MAY OVER-ALLOT OR EFFECT TRANSACTIONS
WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK AT A LEVEL
ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE, THE PACIFIC
STOCK EXCHANGE, THE LONDON STOCK EXCHANGE OR OTHERWISE. SUCH STABILIZING, IF
COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
DURING THE OFFERING, CERTAIN PERSONS AFFILIATED WITH PERSONS PARTICIPATING
IN THE DISTRIBUTION MAY ENGAGE IN TRANSACTIONS FOR THEIR OWN ACCOUNTS OR FOR
THE ACCOUNTS OF OTHERS IN THE COMMON STOCK PURSUANT TO EXEMPTIONS FROM RULES
10b-6, 10b-7, AND 10b-8 UNDER THE EXCHANGE ACT.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
Available Information ................ 3
Incorporation of Documents by
Reference ........................... 4
Prospectus Summary ................... 5
Risk Factors ......................... 9
Use of Proceeds ...................... 12
Market Prices of the Common Stock .... 12
Capitalization ....................... 13
The Magma Acquisition ................ 14
Business ............................. 16
Certain Tax Considerations ........... 39
Subscription and Sale ................ 41
Legal Matters ........................ 43
Experts .............................. 43
Index to Pro Forma Unaudited
Condensed Combined Financial Data .. P-1
</TABLE>
AVAILABLE INFORMATION
California Energy Company, Inc. (the "Company") and Magma Power Company
("Magma") are each subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, each files reports, proxy statements and other
information with the Securities and Exchange Commission (the "Commission").
Such reports, proxy statements and other information filed by the Company or
Magma with the Commission pursuant to the informational requirements of the
Exchange Act may 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: Midwest Regional Office, Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661; and New York Regional Office,
14th Floor, Seven World Trade Center, New York, New York 10048. Copies of
such materials can be obtained at prescribed rates from the Public Reference
Section of the Commission at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549. In addition, material filed by the Company can be
inspected at the offices of the New York Stock Exchange, Inc. ("NYSE"), 20
Broad Street, New York, New York 10005, on which the shares of common stock,
par value $.0675 per share (the "Common Stock") of the Company, are listed,
at the offices of the Pacific Stock Exchange at 301 Pine Street, San
Francisco, California 94104 and 233 South Beaudry Avenue, Los Angeles,
California 90012 and at the offices of the London Stock Exchange at
International Stock Exchange, Throgmorton Street, EC2N 1HP, London, England.
Material filed by Magma can be inspected at the offices of the National
Association of Securities Dealers, Inc., 1735 K Street, N.W., Washington,
D.C. 20006.
The Company has filed with the Commission a Registration Statement on Form
S-3 (the "Registration Statement," which term shall include all amendments,
exhibits and schedules thereto) under the
3
<PAGE>
[Alternate Page For International Prospectus]
Securities Act of 1933, as amended (the "Securities Act"), with respect to
the shares of Common Stock offered pursuant to the Offering (the "Shares")
and the Direct Sale. This Prospectus does not contain all of the information
set forth in the Registration Statement, certain parts of which have been
omitted in accordance with the rules and regulations of the Commission. For
further information with respect to the Company and the Shares, reference is
made to the Registration Statement, including the exhibits and schedules
filed as a part thereof and otherwise incorporated therein. Statements made
in this Prospectus as to the contents of any contract, agreement or other
document referred to are not necessarily complete. With respect to each such
contract, agreement or other document filed as an exhibit to the Registration
Statement, reference is made to such exhibit for a more complete description
of the matter involved and each such statement shall be deemed qualified in
its entirety by such reference. Copies of the Registration Statement and the
exhibits thereto may be inspected, without charge, at the offices of the
Commission, or obtained at prescribed rates from the Public Reference Section
of the Commission at the address set forth above.
INCORPORATION OF DOCUMENTS BY REFERENCE
The Company and Magma hereby incorporate by reference into this Prospectus
the following documents previously filed with the Commission pursuant to the
Exchange Act:
1. The Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1993 (the "Company's 1993 10-K").
2. The Company's Quarterly Reports on Form 10-Q for the quarters ended
March 31, 1994, June 30, 1994 and September 30, 1994.
3. The Company's Current Reports on Form 8-K dated March 7, 1994, March
28, 1994, April 11, 1994, May 6, 1994, June 8, 1994, August 15, 1994,
September 22, 1994, September 30, 1994, October 6, 1994, October 26, 1994,
November 22, 1994, December 9, 1994 and January 11, 1995.
4. The Company's description of the Common Stock contained in the
Company's Registration Statement on Form 8-A, dated July 28, 1993, pursuant
to Section 12 of the Exchange Act.
5. Magma's Annual Report on Form 10-K for the fiscal year ended December
31, 1993 (the "Magma 1993 10-K").
6. Magma's Quarterly Reports on Form 10-Q for the quarters ended March 31,
1994, June 30, 1994 and September 30, 1994.
7. Magma's Current Reports on Form 8-K dated March 31, 1993, as amended,
October 7, 1994, December 9, 1994 and January 11, 1995.
In addition, all reports and other documents filed by the Company or Magma
pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent
to the date hereof and prior to the termination of the Offering hereby shall
be deemed to be incorporated by reference herein and to be a part hereof from
the date of filing of such reports and 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 that also is incorporated or 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 this Prospectus is delivered, upon
written or oral request from such person, a copy of any and all of the
documents incorporated by reference in this Prospectus (other than exhibits
to such documents unless such exhibits are specifically incorporated by
reference into the documents that this Prospectus incorporates). Written or
oral requests for such copies should be directed to California Energy
Company, Inc., 10831 Old Mill Road, Omaha, Nebraska 68154, Attention:
Secretary (telephone no. (402) 330-8900).
4
<PAGE>
[Alternate Page For International Prospectus]
SUBSCRIPTION AND SALE
The institutions named below (the "Managers") have, pursuant to a
Subscription Agreement dated , 1995 (the "Subscription Agreement"),
severally and not jointly, agreed with the Company to subscribe and pay for
the following respective numbers of International Shares as set forth
opposite their names:
<TABLE>
<CAPTION>
NUMBER OF
INTERNATIONAL
MANAGER SHARES
- ------------------------------------------------------- ------------------------
<S> <C>
CS First Boston Limited ................................
Bear, Stearns International Limited ....................
Donaldson, Lufkin & Jenrette Securities Corporation ...
Deutsche Bank Aktiengesellschaft .......................
Lehman Brothers International (Europe) .................
------------------------
Total ................................................ 4,000,000
========================
</TABLE>
The Subscription Agreement provides that the obligations of the Managers
are such that, subject to certain conditions precedent, the Managers will be
obligated to purchase all the International Shares if any are purchased. The
Subscription Agreement provides that, in the event of a default by a Manager,
in certain circumstances the purchase commitments of the non-defaulting
managers may be increased or the Subscription Agreement may be terminated.
The Company has entered into an Underwriting Agreement (the "Underwriting
Agreement") with the U.S. Underwriters of the U.S. Offering (the "U.S.
Underwriters") providing for the concurrent offer and sale of the U.S. Shares
in the United States and Canada. The closing of the U.S. Offering is a
condition to the closing of the International Offering and vice versa.
The Company has granted to the Managers and the U.S. Underwriters an
option, exercisable by CS First Boston Corporation, expiring at the close of
business on the 30th day after the date of this Prospectus to purchase up to
2,275,000 additional shares at the public offering price, less the
underwriting discounts and commissions, all as set forth on the cover page of
this Prospectus. Such option may be exercised only to cover overallotments in
the sale of the Shares offered hereby. To the extent that this option to
purchase is exercised, each Manager and each U.S. Underwriter will become
obligated, subject to certain conditions, to purchase approximately the same
percentage of additional shares being sold to the Managers and the U.S.
Underwriters as the number of International Shares set forth next to such
Manager's name in the preceding table bears to the total number of
International Shares in such table and as the number set forth next to such
U.S. Underwriter's name in the corresponding table in the Prospectus relating
to the U.S. Offering bears to the total number of U.S. Shares in such table.
The Company has been advised by CS First Boston Limited, on behalf of the
Managers, that the Managers propose to offer the International Shares outside
the United States and Canada initially at the public offering price set forth
on the cover page of this Prospectus and, through the Managers, to certain
dealers at such price less a commission of $ per share and that the
Managers may reallow a commission of $ per share on sales to certain
other dealers. After the initial public offering, the public offering price
and commission and reallowance may be changed. Gleacher & Co., Inc.
("Gleacher") has provided financial advisory services to the Company in
connection with the Magma Acquisition. Gleacher is also expected to
participate as a dealer in the sale of Shares in the Offering. In addition to
its fees for such financial advisory services and any selling commissions to
which it may be entitled in the Offering, Gleacher will receive out of the
gross underwriting discounts and commissions (as set forth on the cover page
of this Prospectus), a fee in the amount of 20% of the underwriting fee (not
to exceed $250,000).
41
<PAGE>
[Alternate Page For International Prospectus]
The offering price and the aggregate underwriting discounts and
commissions per share and per share commission and re-allowance to dealers
for the International Offerings and the concurrent U.S. Offering will be
identical. Pursuant to an Agreement between the U.S. Underwriters and
Managers (the "Intersyndicate Agreement") relating to the Common Stock
Offering, changes in the offering price, the aggregate underwriting discounts
and commissions per share and per share commission and re-allowance to
dealers will be made only upon the mutual agreement of CS First Boston
Limited, on behalf of the Managers, and CS First Boston Corporation, on
behalf of the U.S. Underwriters.
Pursuant to the Intersyndicate Agreement, each of the Managers has agreed
that, as part of the distribution of International Shares and subject to
certain exceptions, it has not offered or sold, and will not offer to sell,
directly or indirectly, any shares of Common Stock or distribute any
prospectus relating to the Common Stock in the United States or Canada or to
any other dealer who does not so agree. Each of the U.S. Underwriters has
agreed that, as part of the distribution of the U.S. Shares an subject to
certain exceptions, it has not offered or sold and will not offer or sell,
directly or indirectly, any shares of Common Stock or distribute any
prospectus relating to the Common Stock to any person outside the United
States and Canada or to any dealer who does not so agree. The foregoing
limitations do not apply to stabilization transactions or to transactions
between the Managers and the U.S. Underwriters pursuant to the Intersyndicate
Agreement. As used herein, "United States" means the United States of America
(including the States and the District of Columbia), its territories,
possessions and other areas subject to its jurisdiction, "Canada" means
Canada, its provinces, territories, possessions and other areas subject to
its jurisdiction, and an offer or sale shall be in the United States or
Canada it is made to (i) any individual resident in the United States or
Canada or (ii) any corporation, partnership, pension, profit-sharing or other
trust or other entity (including any such entity acting as an investment
adviser with discretionary authority) whose office most directly involved
with the purchase is located in the United States or Canada.
Pursuant to the Intersyndicate Agreement, sales may be made between the
Managers and the U.S. Underwriters of such number of shares of Common Stock
as may be mutually agreed upon. The price of any shares so sold will be the
public offering price less such amount agreed upon by CS First Boston
Limited, on behalf of the Managers, and CS First Boston Corporation, as
representative of the U.S. Underwriters, but not exceeding the selling
concession applicable to such shares. To the extent there are sales between
the Managers and the U.S. Underwriters pursuant to the Intersyndicate
Agreement, the number of shares of Common Stock initially available for sale
by the Managers or by the U.S. Underwriters may be more or less than the
amount appearing on the cover page of this Prospectus. Neither the Managers
nor the U.S. Underwriters are obligated to purchase from the other any unsold
shares of Common Stock.
Each of the Managers and the U.S. Underwriters severally represents and
agrees that (1) it has not offered or sold, and will not offer or sell, in
the United Kingdom, by means of any document, any shares of Common Stock
other than to persons whose ordinary business it is to buy or sell shares or
debentures, whether as a principal or agent, or in circumstances which do not
constitute an offer to the public within the meaning of the Companies Act
1985, (2) it has complied and will comply with all applicable provisions of
the Financial Services Act of 1986 with respect to anything done by it in
relation to any shares of Common Stock in, from or otherwise involving the
United Kingdom, and (3) it has only issued or passed on and will only issue
or pass on to any person in the United Kingdom any document received by it in
connection with the issue of any shares of Common Stock if the person is of a
kind described in Article 9(3) of the Financial Services Act 1986 (Investment
Advertisements) (Exemptions) Order 1988 (as amended by Article 6(c) of the
Financial Services Act of 1986 (Investment Advertisements) Order 1992) or is
a person to whom the document may otherwise lawfully be issued or passed on.
The Company and its officers and directors agreed that they will not
offer, sell, contract to sell, pledge or otherwise dispose of, directly or
indirectly, or file with the Securities and Exchange Commission a
registration statement under the Securities Act relating to, any additional
shares of its Common Stock or securities convertible or exchangeable into or
exercisable for any shares of its Common Stock without the
42
<PAGE>
[Alternate Page For International Prospectus]
prior written consent of CS First Boston Corporation for a period of 90 days
after the date of this Prospectus, except issuances pursuant to the exercise
of employee stock options outstanding on the date hereof or pursuant to the
conversion of the Company's Debentures or its Series C Preferred Stock.
The Company has agreed to indemnify the Managers and the U.S. Underwriters
against certain liabilities or to contribute to payments that the Managers
and the U.S. Underwriters may be required to make in respect thereof.
Each of Bear, Stearns & Co., Inc., Donaldson Lufkin & Jenrette Securities
Corporation and Lehman Brothers Inc. were underwriters of the Company's
$529,640,000 senior discount notes offering in March 1994.
Lehman Brothers Inc. has provided financial advisory services to the
Company in connection with the Magma Acquisition.
Credit Suisse, an affiliate of CS First Boston, has provided certain
credit facilities and commercial banking services to the Company and its
subsidiaries from time to time and is the agent bank in connection with the
Tender Facility and the Merger Facilities. The Company is currently
indebted to Credit Suisse in the amount of $245.6 million under the Tender
Facility. Such loan is secured by a pledge to Credit Suisse of the
12,600,000 shares of Magma Common Stock owned by CE Sub. The Company is
currently in compliance with the terms and conditions contained in the Tender
Facility. Certain of the net proceeds of the Offering may be deemed to
be used to repay some portion of the Tender Facility. Accordingly, the
Offering is being made in accordance with the requirements of Section 44(c)
(8) of Article III of the Rules of Fair Practice of the National Association
of Securities Dealers, Inc. The decision of CS First Boston to underwrite the
Offering was made independently of Credit Suisse, which had no involvement in
determining whether or when to underwrite the Offering or the terms of the
Offering. CS First Boston will not receive any benefit from the Offering
other than its respective portion of the gross underwriting discounts and
commissions as set forth on the cover page of this Prospectus.
1,500,000 shares of Common Stock being offered pursuant to this
Prospectus are expected to be purchased by PKS from the Company in the Direct
Sale at a price equal to the Price to Public and PKS set forth on the cover of
this Prospectus. PKS has indicated an intention to acquire such shares, subject
to receipt and review by PKS of a final Prospectus and conditioned upon the
closing of the Offering.
LEGAL MATTERS
Certain legal matters with respect to the validity of the securities
offered hereby will be passed upon for the Company by Willkie Farr &
Gallagher, One Citicorp Center, 153 East 53rd Street, New York, New York
10022. Chadbourne & Parke, 30 Rockefeller Plaza, New York, New York 10112,
will pass on certain legal matters for the U.S. Underwriters and the Managers
in connection with the Offering.
EXPERTS
The financial statements and the related financial statement schedules of
the Company and its subsidiaries incorporated in this Prospectus by reference
to the Company's 1993 10-K have been audited by Deloitte & Touche,
independent auditors, as stated in their reports (which reports express an
unqualified opinion and include an explanatory paragraph referring to the
Company's adoption effective January 1, 1993, of Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes") 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.
With respect to the unaudited interim financial information for the
periods ended March 31, 1993 and 1994, June 30, 1993 and 1994, and September
30, 1993 and 1994, incorporated herein by reference, Deloitte & Touche LLP
have applied limited procedures in accordance with professional standards for
a review of such information. However, as stated in their reports included in
the Company's Quarterly
43
<PAGE>
[Alternate Page For International Prospectus]
Reports on Form 10-Q for the quarters ended March 31, 1994, June 30, 1994 and
September 30, 1994 and incorporated by reference herein, they did not audit
and they do not express an opinion on that interim financial information.
Accordingly, the degree of reliance on their reports on such information
should be restricted in light of the limited nature of the review procedures
applied. Deloitte & Touche LLP are not subject to the liability provisions of
Section 11 of the Securities Act for their reports on the unaudited interim
financial information because those reports are not "reports" or a "part" of
a registration statement prepared or certified by an accountant within the
meaning of Sections 7 and 11 of the Act.
The consolidated balance sheets of Magma and subsidiaries as of December
31, 1993 and 1992 and the related consolidated statements of operations,
changes in stockholders' equity, and cash flows for each of the three years
in the period ended December 31, 1993 and the Statement of Net Assets
Acquired as of March 31, 1993 and the Historical Summaries of Gross Revenues
and Direct Operating Expenses for each of the three years in the period ended
December 31, 1992 of the Imperial Valley Geothermal Interests, incorporated
by reference in this Prospectus have been incorporated herein in reliance on
the reports of Coopers & Lybrand, independent accountants, given on the
authority of that firm as experts in accounting and auditing.
44
APPENDIX FOR GRAPHIC AND IMAGE MATERIAL
Graphics or images which cannot be reproduced in the ASCII format
required for EDGAR have been omitted from the pages of the preceding document
as listed below. Pursuant to Rule 304 of Regulation S-T, the substantive
information contained in these graphics or images is conveyed in tabular and/or
narrative form:
Page in
Typeset Copy Description
- ------------ -----------
Inside front cover of
International Prospectus California Energy Company, Inc.'s Planned
Project Development; Capacity
Implementation Schedule; Chart listing
facilities with MW capacity; Map
[Datapoints/tables are provided in place of the
graphics inside the front cover of this EDGAR
file, as necessary, to disclose material
content of said graphics.]
18 Schematic representing Geothermal Energy
19 Map depicting areas of Potential Geothermal
Energy
25 Map of the Republic of the
Philippines with Project locations
29 Map of Indonesia and Neighboring
Countries with Project locations
32 Map of the Western United States
with Project locations
Inside back cover of
International Prospectus Photographs of (a) Navy I Facility at the
Coso Project; (b) One of the Salton Sea
Projects
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the various expenses in connection with the
sale and distribution of the securities being registered which will be paid
solely by the Company. All the amounts shown are estimates, except the
Commission registration fee and the NASD filing fee:
<TABLE>
<CAPTION>
<S> <C>
Commission Registration Fee ................... $ 102,063.72
NASD Fees ..................................... 30,098.00
NYSE Listing Fee .............................. 25,650.00
Transfer Agent and Registrar Fees and Expenses 15,000.00
Printing and Engraving Expenses ............... 100,000.00
Legal Fees and Expenses ....................... 200,000.00
Accounting Fees and Expenses .................. 120,000.00
Blue Sky Fees and Expenses .................... 15,000.00
Financial Advisory Fee ........................ 1,500,000.00
Miscellaneous Expenses ........................ 25,000.28
--------------
Total ....................................... $2,132,812.00
==============
<FN>
* To be completed by amendment.
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the General Corporation Law of the State of Delaware (the
"DGCL") grants each corporation organized thereunder, such as the Company,
the power to indemnify its directors and officers against liabilities for
certain of their acts. Article EIGHTH of the Company's Restated Certificate
of Incorporation and Article V of the Company's By-Laws provide for
indemnification of directors and officers of the Company to the fullest
extent permitted by the DGCL. Article V of the Company's By-Laws further
provides that the Company may enter into contracts providing indemnification
to the full extent authorized or permitted by the DGCL and that the Company
may create a trust fund, grant a security interest and/or use other means to
ensure the payment of such amounts as may become necessary to effect
indemnification pursuant to such contracts or otherwise.
Section 102(b)(7) of the DGCL permits a provision in the certificate of
incorporation of each corporation organized thereunder, such as the Company,
eliminating or limiting, with certain exceptions, the personal liability of a
director to the corporation or its stockholders for monetary damages for
certain breaches of fiduciary duty as a director. Article EIGHTH of the
Company's Restated Certificate of Incorporation eliminates the personal
liability of directors to the full extent permitted by the DGCL.
The foregoing statements are subject to the detailed provisions of
Sections 145 and 102(b)(7) of the DGCL, Article EIGHTH of the Company's
Restated Certificate of Incorporation and Article V of Company's By-Laws.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
A. Exhibits
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
- --------------- -------------------------------------------------------------------------------------------
<S> <C>
1.1 Form of Underwriting Agreement among the Registrant, CS First Boston, Bear, Stearns & Co., Inc.,
Donaldson, Lufkin & Jenrette Securities Corporation, C.J. Lawrence/Deutsche Bank Securities
Corporation and Lehman Brothers Inc.
II-1
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
- --------------- -------------------------------------------------------------------------------------------
<S> <C>
1.2 Form of Subscription Agreement among the Registrant, CS First Boston Limited, Bear, Stearns
International Limited, Donaldson, Lufkin & Jenrette Securities Corporation, Deutsche Bank
Aktiengesellschaft and Lehman Brothers International (Europe).
2.1 Agreement and Plan of Merger, dated as of December 5, 1994, among California Energy Company,
Inc., CE Acquisition Company, Inc., and Magma Power Company (incorporated by reference to Exhibit
2.1 of the Registrant's Registration Statement on Form S-4 filed with the Commission on December
23, 1994, File No. 33-57053).
4.1 Specimen copy of form of Common Stock Certificate (incorporated by reference to Exhibit 4.1 of
the Registrant's 1993 Form 10-K).
4.2 Stockholders Rights Agreement between the Registrant and Manufacturers Hanover Trust Company
of California dated December 1, 1988 (incorporated by reference to Exhibit 1 to the Registrant's
Form 8-K dated December 5, 1988, File No. 1-9874).
4.3 Amendment Number 1 to Stockholders Rights Agreement, dated February 15, 1991 (incorporated by
reference to Exhibit 4.2 to the Registrant's Annual Report on Form 10-K for the fiscal year ended
December 31, 1992).
5.1 Opinion of Willkie Farr & Gallagher regarding the legality of the Shares offered hereby.
15.1 Awareness Letter for Review Reports of Deloitte & Touche LLP.
23.1 Consent of Deloitte & Touche LLP.
23.2 Consent of Coopers & Lybrand L.L.P.
23.3 Consent of Willkie Farr & Gallagher (set forth in their opinion filed as Exhibit 5.1 to this
Registration Statement).
24.1 Power of Attorney.*
<FN>
* Previously filed.
</TABLE>
B. Financial Statement Schedules.
All financial statement schedules required to be filed are incorporated by
reference to the Registrant's 1993 10-K.
ITEM 17. UNDERTAKINGS.
(1) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's and Magma Power Company's annual report pursuant to section
13(a) or section 15(d) of the Exchange Act (and, where applicable, each
filing of an employee benefit plan's annual report pursuant to section 15(d)
of the Exchange Act) that is incorporated by reference in the registration
statement shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(2) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of
II-2
<PAGE>
any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Securities Act and will be governed by the
final adjudication of such issue.
(3) The undersigned Registrant hereby undertakes that:
(a) For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of
this Registration Statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of the
Registration Statement as of the time it was declared effective.
(b) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-3
<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 the
Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Omaha, State of Nebraska, on
January 23, 1995.
CALIFORNIA ENERGY COMPANY, INC.
By: /s/ David L. Sokol
David L. Sokol
President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------ --------------------------------------- -------------------
<S> <C> <C>
/s/ David L. Sokol Chairman of the Board of Directors,
David L. Sokol President and Chief Executive Officer
(Principal Executive Officer) January 23, 1995
/s/ John G. Sylvia
John G. Sylvia Senior Vice President, Chief Financial
Officer and Treasurer (Principal
Financial Officer and Principal
Accounting Officer) January 23, 1995
*
Edgar D. Aronson Director January 23, 1995
*
Judith E. Ayres Director January 23, 1995
*
James Q. Crowe Director January 23, 1995
*
Richard K. Davidson Director January 23, 1995
*
Ben M. Holt Director January 23, 1995
*
Richard R. Jaros Director January 23, 1995
*
Everett B. Laybourne Director January 23, 1995
*
Herbert L. Oakes, Jr. Director January 23, 1995
*
Walter Scott, Jr. Director January 23, 1995
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------ --------------------------------------- -------------------
<S> <C> <C>
*
Barton W. Shackelford Director January 23, 1995
*
David E. Wit Director January 23, 1995
*By: /s/ Steven A. McArthur
Steven A. McArthur January 23, 1995
</TABLE>
Pursuant to a Power of Attorney
previously filed with the
Securities and Exchange
Commission.
II-5
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION PAGE
- --------------- ------------------------------------------------------------------------------------------- ----
<S> <C>
1.1 Form of Underwriting Agreement among the Registrant, CS First Boston, Bear, Stearns & Co., Inc.,
Donaldson, Lufkin & Jenrette Securities Corporation, C.J. Lawrence/Deutsche Bank Securities
Corporation and Lehman Brothers Inc.
1.2 Form of Subscription Agreement among the Registrant, CS First Boston Limited, Bear, Stearns
International Limited, Donaldson, Lufkin & Jenrette Securities Corporation, Deutsche Bank
Aktiengesellschaft and Lehman Brothers International (Europe).
2.1 Agreement and Plan of Merger, dated as of December 5, 1994, among California Energy Company,
Inc., CE Acquisition Company, Inc., and Magma Power Company (incorporated by reference to Exhibit
2.1 of the Registrant's Registration Statement on Form S-4 filed with the Commission on December
23, 1994, File No. 33-57053).
4.1 Specimen copy of form of Common Stock Certificate (incorporated by reference to Exhibit 4.1 of
the Registrant's 1993 Form 10-K).
4.2 Stockholders Rights Agreement between the Registrant and Manufacturers Hanover Trust Company
of California dated December 1, 1988 (incorporated by reference to Exhibit 1 to the Registrant's
Form 8-K dated December 5, 1988, File No. 1-9874).
4.3 Amendment Number 1 to Stockholders Rights Agreement, dated February 15, 1991 (incorporated by
reference to Exhibit 4.2 to the Registrant's Annual Report on Form 10-K for the fiscal year ended
December 31, 1992).
5.1 Opinion of Willkie Farr & Gallagher regarding the legality of the Shares offered hereby.
15.1 Awareness Letter for Review Reports of Deloitte & Touche LLP.
23.1 Consent of Deloitte & Touche LLP.
23.2 Consent of Coopers & Lybrand L.L.P.
23.3 Consent of Willkie Farr & Gallagher (set forth in their opinion filed as Exhibit 5.1 to this
Registration Statement).
24.1 Power of Attorney.*
- ---------------
<FN>
* Previously filed.
</TABLE>
[Draft of January 23, 1995]
45
NY1: 33189.02
15,170,000 Shares
CALIFORNIA ENERGY COMPANY, INC.
Common Stock
UNDERWRITING AGREEMENT
, 1995
CS First Boston Corporation
Bear, Stearns & Co. Inc.
Donaldson, Lufkin & Jenrette Securities
Corporation
C.J. Lawrence/Deutsche
Bank Securities Corporation
Lehman Brothers Inc.
As Representatives of the Several Underwriters,
c/o CS First Boston Corporation
Park Avenue Plaza
New York, New York 10055
Dear Sirs:
1. Introductory. California Energy Company,
Inc., a Delaware corporation ("Company"), proposes to issue
and sell to the several Underwriters named in Schedule A
hereto ("Underwriters") 11,170,000 shares ("U.S. Firm
Securities") of its Common Stock, par value $.0675 per share
("Securities").
It is understood that the Company is concurrently
entering into a Subscription Agreement, dated the date
hereof ("Subscription Agreement"), with CS First Boston
Limited ("CSFBL"), Bear, Stearns International Limited,
Donaldson, Lufkin & Jenrette Securities Corporation,
Deutsche Bank Aktiengesellschaft and Lehman Brothers
International (Europe), and the other managers named therein
("Managers") relating to the concurrent offering and sale of
4,000,000 shares of Securities ("International Firm
Securities") outside the United States and Canada
("International Offering").
In addition, the Company proposes to issue and
sell to the Underwriters and the Managers an option
exercisable by CS First Boston Corporation ("CSFBC") for an
aggregate of not more than 2,275,000 additional shares of
Securities ("Optional Securities"; the Optional Securities
for the offering in the United States and Canada are
referred to as the "U.S. Optional Securities" and the
Optional Securities for the International Offering are
referred to as the "International Optional Securities").
The U.S. Firm Securities and the U.S. Optional Securities
are hereinafter called the "U.S. Securities"; the
International Firm Securities and the International Optional
Securities are hereinafter called the "International
Securities"; and the U.S. Firm Securities and the
International Firm Securities are hereinafter called the
"Firm Securities". The U.S. Securities and the
International Securities are collectively referred to as the
"Offered Securities". To provide for the coordination of
their activities, the Underwriters and the Managers have
entered into an Agreement Between U.S. Underwriters and
Managers which permits them, among other things, to sell the
Offered Securities to each other for purposes of resale.
The Company hereby agrees with the several
Underwriters as follows:
2. Representations and Warranties of the
Company. The Company represents and warrants to, and agrees
with, the several Underwriters that:
(a) A registration statement on Form S-3
(No. 33-57191) relating to the Offered Securities,
including a form of prospectus relating to the U.S.
Securities and a form of prospectus relating to the
International Securities being offered in the
International Offering, has been filed with the
Securities and Exchange Commission ("Commission") and
either (i) has been declared effective under the
Securities Act of 1933 ("Act") and is not proposed to
be amended or (ii) is proposed to be amended by
amendment or post-effective amendment. If the Company
does not propose to amend such registration statement
and if any post-effective amendment to such
registration statement has been filed with the
Commission prior to the execution and delivery of this
Agreement, the most recent such amendment has been
declared effective by the Commission. For purposes of
this Agreement, "Effective Time" means (i) if the
Company has advised the Representatives that it does
not propose to amend such registration statement, the
date and time as of which such registration statement,
or the most recent post-effective amendment thereto (if
any) filed prior to the execution and delivery of this
Agreement, was declared effective by the Commission, or
(ii) if the Company has advised the Representatives
that it proposes to file an amendment or post-effective
amendment to such registration statement, the date and
time as of which such registration statement, as
amended by such amendment or post-effective amendment,
as the case may be, is declared effective by the
Commission. "Effective Date" means the date of the
Effective Time. Such registration statement, as
amended at the Effective Time, including all material
incorporated by reference therein and including all
information (if any) deemed to be a part of such
registration statement as of the Effective Time
pursuant to Rule 430A(b) under the Act, is hereinafter
referred to as the "Registration Statement", and the
form of prospectus relating to the U.S. Securities and
the form of prospectus relating to the International
Securities, each as first filed with the Commission
pursuant to and in accordance with Rule 424(b)
("Rule 424(b)") under the Act or (if no such filing is
required) as included in the Registration Statement,
including all material incorporated by reference in
each such prospectus, are hereinafter referred to as
the "U.S. Prospectus" and the "International
Prospectus", respectively, and collectively as the
"Prospectuses".
(b) If the Effective Time is prior to the
execution and delivery of this Agreement: (i) on the
Effective Date, the Registration Statement conformed in
all material respects to the requirements of the Act
and the rules and regulations of the Commission
thereunder and did not include any untrue statement of
a material fact or omit to state any material fact
required to be stated therein or necessary to make the
statements therein not misleading, and (ii) on the date
of this Agreement, the Registration Statement conforms,
and at the time of filing of each of the Prospectuses
pursuant to Rule 424(b), the Registration Statement and
each of the Prospectuses will conform, in all material
respects to the requirements of the Act and the rules
and regulations of the Commission thereunder, and none
of such documents includes, or will include, any untrue
statement of a material fact or omits, or will omit, to
state any material fact required to be stated therein
or necessary (with respect to the Prospectuses, in the
light of the circumstances under which they were made)
to make the statements therein not misleading. If the
Effective Time is subsequent to the execution and
delivery of this Agreement: on the Effective Date, the
Registration Statement and each of the Prospectuses
will conform in all material respects to the
requirements of the Act and the rules and regulations
of the Commission thereunder, and none of such
documents will include any untrue statement of a
material fact or will omit to state any material fact
required to be stated therein or necessary to make the
statements therein not misleading. The two preceding
sentences do not apply to statements in or omissions
from the Registration Statement or either of the
Prospectuses based upon written information furnished
to the Company by or on behalf of any Underwriter
through the Representatives or by or on behalf of any
Manager through CSFBL specifically for use therein, it
being understood and agreed that the only such
information is that described as such in Section 7(b).
(c) The documents incorporated by reference in
the Registration Statement and the Prospectuses, when
they became effective or were last amended or filed
with the Commission, as the case may be, conformed in
all material respects to the requirements of the Act or
the Securities Exchange Act of 1934, as amended
("Exchange Act"), as applicable, and the rules and
regulations of the Commission under the Act and the
Exchange Act, as applicable ("Rules and Regulations"),
and none of such documents contained an untrue
statement of a material fact or omitted to state a
material fact required to be stated therein or
necessary to make the statements therein not misleading
in light of the circumstances under which they were
made, and any further documents so filed and
incorporated by reference in the Registration Statement
and the Prospectuses, when such documents become
effective or are filed with the Commission, as the case may be,
shall conform in all material respects to the
requirements of the Act and the Exchange Act as
applicable, and the Rules and Regulations and shall not
contain an untrue statement of a material fact or omit
to state a material fact required to be stated therein
or necessary to make the statements therein not
misleading in light of the circumstances under which
they were made.
(d) The Company, each Subsidiary (as defined
below) and each Joint Venture (as defined below) have
been duly organized and are validly existing and, if
applicable, in good standing under the laws of their
respective jurisdictions of organization as a
corporation or partnership, as the case may be, and
have the power and authority to own, lease and operate
their property and conduct their businesses as
described in the Prospectuses; the Company, the
Subsidiaries and the Joint Ventures are duly qualified
to do business and are in good standing as foreign
corporations or foreign partnerships, as the case may
be, in each jurisdiction, domestic or foreign, in which
such registration or qualification or good standing is
required (whether by reason of the ownership or leasing
of property, the conduct of business or otherwise),
except where the failure to so register or qualify or
be in good standing is not reasonably likely to have a
material adverse effect on the financial condition,
business or results of operations of the Company, its
Subsidiaries and Joint Ventures taken as a whole; and
the Company has all requisite corporate power and
authority to enter into this Agreement, and to
consummate the transactions contemplated hereby. For
purposes of this Agreement, (A) the term "Subsidiary"
shall mean the entities listed as such on Schedule B
hereto, and (B) the term "Joint Venture" shall mean the
entities listed as such on Schedule B hereto, it being
understood that such term means the general or limited
partnership or other joint venture entity and not the
individual general or limited partners or other joint
venturers thereof. The Subsidiaries listed on
Schedule B are all the material direct and indirect
"subsidiaries" of the Company, as such term is defined
in Rule 405 of the Rules and Regulations, and are all
of the "Significant Subsidiaries" of the Company, as
such term is defined in Rule 1-02 of Regulation S-X.
(e) The Offered Securities and all the other
issued and outstanding shares of capital stock of the
Company have been validly authorized; all outstanding
shares of capital stock of the Company are, and when
the Offered Securities have been delivered and paid for
in accordance with this Agreement and the Subscription
Agreement on each Closing Date (as defined below) such
Offered Securities will have been, validly issued,
fully-paid and nonassessable and will conform in all
material respects to the description thereof contained
in the Prospectuses; there are no preemptive or similar
rights to subscribe for or to purchase, nor any
restriction on the transfer of, the Offered Securities
pursuant to the Company's charter, by-laws or any
agreement or other instrument, except as provided in
the Shareholders Agreement dated as of February 18,
1991 by and between the Company and Kiewit Energy
Company, as amended, in respect of which a waiver has
been received regarding the Offered Securities; all the
outstanding shares of capital stock of each Subsidiary
have been duly and validly authorized and issued and
are fully-paid and nonassessable; and except as
otherwise set forth or referred to in the Prospectuses,
all outstanding shares of capital stock of each
Subsidiary are owned beneficially by the Company free
and clear of any material claims, liens, encumbrances
and security interests. All of the partnership
interests in Joint Ventures beneficially owned by the
Company (as reflected in Schedule B) have been duly and
validly authorized and issued and, except as otherwise
disclosed or referred to in the Prospectuses, are owned
beneficially by the Company free and clear of any
material claims, liens, encumbrances and security
interests.
(f) The authorized capital stock of the Company,
including the Offered Securities, conforms as to legal
matters in all material respects to the description
thereof contained in the Prospectuses.
(g) Except (i) in respect of the agreement
between the Company and Gleacher & Co., Inc.
("Gleacher"), dated December 22, 1994, whereby Gleacher
will be entitled to, among other things, a success fee
("Success Fee") in the amount of 20% of the total
underwriting fee (not to exceed $250,000) and (ii) as
otherwise disclosed in the Prospectuses, there are no
contracts, agreements or understandings between the
Company and any person that would give rise to a valid
claim against the Company or any Underwriter or Manager
for a brokerage commission, finder's fee or other like
payment.
(h) There are no contracts, agreements or
understandings between the Company and any person
granting such person the right to require the Company
to file a registration statement under the Act with
respect to any securities of the Company owned or to be
owned by such person or to require the Company to
include any such securities in the securities
registered pursuant to the Registration Statement or in
any securities being registered pursuant to any other
registration statement filed by the Company under the
Act except for the registration rights agreement dated
February 18, 1991, as amended by Amendment No. 1, dated
June 19, 1991, between the Company and Kiewit Energy
Company and the registraton rights agreement dated June
19, 1991, as amended by Amendment No. 1, dated November
20, 1991, between the Company and Kiewit Energy
Company, the rights under which have been waived in
respect of the Offered Securities.
(i) The Securities are listed on the New York
Stock Exchange and the London Stock Exchange (the
"Stock Exchanges").
(j) The execution, delivery and performance of
this Agreement and the Subscription Agreement, and the
issuance and sale of the Offered Securities shall not
(A) conflict with the corporate charter or by-laws or
partnership agreement of the Company, any Subsidiary or
any Joint Venture, (B) conflict with, result in the
creation or imposition of any lien, charge or other
encumbrance upon any asset of the Company, any
Subsidiary or any Joint Venture pursuant to the terms
of, or constitute a breach of, or default under, any
agreement, indenture or other instrument to which the
Company, any Subsidiary or any Joint Venture is a party
or by which the Company, any Subsidiary or any Joint
Venture is bound or to which any of the properties of
the Company, any Subsidiary or any Joint Venture is
subject, or (C) result in a violation of any statute,
any rule, regulation, order, judgment or decree of any
court or governmental agency, body or authority having
jurisdiction over the Company, any Subsidiary or any
Joint Venture or any of their properties where any such
conflicts, encumbrances, breaches, defaults or
violations under clauses (B) or (C), individually or in
the aggregate, is reasonably likely to have a material
adverse effect on the financial condition, business or
results of operations of the Company, its Subsidiaries
and Joint Ventures taken as a whole. Except for (A)
the registration of the Offered Securities under the
Act, (B) such consents, approvals, authorizations,
registrations or qualifications as may be required
under the Exchange Act and applicable state securities
laws in connection with the purchase and distribution
of the Offered Securities and (C) the waiver by Kiewit
Energy Company, Inc. of its preemptive rights and its
right to include securities in the Registration
Statement, which has been obtained prior to the date of
this Agreement, no consent, approval, authorization or
order of, or filing or registration by the Company, any
Subsidiary or, to the best of the Company's knowledge,
any Joint Venture with, any court, governmental agency
or third party is required in connection with the
execution, delivery and performance of this Agreement
and the Subscription Agreement, the consummation of the
transactions contemplated herein and therein, and the
issuance, distribution and sale of the Offered Securities
as contemplated herein and therein. The Company has full
power and authority to authorize, issue and sell the Offered
Securities as contemplated by this Agreement and the
Subscription Agreement, respectively.
(k) This Agreement and the Subscription Agreement
have been duly authorized, executed and delivered by
the Company.
(l) Except as disclosed in or contemplated by the
Prospectuses, the Company, each Subsidiary and each
Joint Venture holds, as applicable, good and valid
title to, or valid and enforceable leasehold or
contractual interests in, all real properties and all
other properties and assets owned or leased by each of
them that are material to the business of each such
entity, in each case free from liens, encumbrances and
defects that would materially affect the value thereof
or materially interfere with the use made or to be made
thereof by them.
(m) Except as disclosed in the Prospectuses, the
Company, the Subsidiaries and the Joint Ventures carry,
or are covered by, insurance in such amounts and
covering such risks as is customary for similarly
situated companies in the Company's, such Subsidiaries'
and such Joint Ventures' industries, respectively.
Each of the foregoing insurance policies is valid and
in full force and effect, and no event has occurred and
is continuing that permits, or after notice or lapse of
time or both would permit, modifications or
terminations of the foregoing that, individually or in
the aggregate, is reasonably likely to have a material
adverse effect on the financial condition, business or
results of operations of the Company, its Subsidiaries
and Joint Ventures taken as a whole.
(n) Except as disclosed in the Propsectuses, the
Company, each Subsidiary and each Joint Venture (i) has
obtained each license, permit, certificate, franchise
or other governmental authorization which is material
to the ownership of their properties or to the conduct
of their businesses as described in the Prospectuses
and (ii) is in compliance with all terms and conditions
of such license, permit, certificate, franchise or
other governmental authorization, except (x) in either
case where the failure to do so is not reasonably
likely to have, individually or in the aggregate, a
material adverse effect on the financial condition,
business or results of operations of the Company, the
Subsidiaries and Joint Ventures taken as a whole, (y)
permits, consents and approvals that may be required
for future drilling or operating activities which are
ordinarily deemed to be ministerial in nature and which
are anticipated to be obtained in the ordinary course
and (z) permits, consents and approvals for
developmental or construction activities which have not
yet been obtained but which have been or will be
applied for in the course of development or
construction and which are anticipated to be obtained
in the ordinary course.
(o) There is no legal or governmental action,
suit or proceeding before any court, governmental
agency, body or authority, domestic or foreign, now
pending or, to the knowledge of the Company, threatened
against, or, to the knowledge of the Company,
involving, the Company, any Subsidiary or any Joint
Venture (i) of a character required to be disclosed in
the Registration Statement which is not adequately
disclosed in the Registration Statement or (ii) that,
if determined adversely to the Company, any Subsidiary
or any Joint Venture, is reasonably likely to have,
individually or in the aggregate, a material adverse
effect on the finanical condition, business or results
of operations of the Company, the Subsidiaries and
Joint Ventures taken as a whole or on the ability of
the Company to perform its obligations under this
Agreement or the Subscription Agreement.
(p) The conditions for use of Form S-3, as set
forth in the General Instructions thereto, have been
satisfied.
(q) The Company, the Subsidiaries and the Joint
Ventures are currently conducting their respective
businesses as described in the Prospectuses.
(r) There are no contracts or other documents
that are required to be described in the Prospectuses
or filed as exhibits to the Registration Statement by
the Act or by the Rules and Regulations that have not
been described in the Prospectuses or filed as exhibits
to the Registration Statement or incorporated therein
by reference as permitted by the Rules and Regulations.
(s) There is no relationship, direct or indirect,
that exists between or among the Company on the one
hand, and the directors, officers, stockholders,
customers or suppliers of the Company on the other
hand, that is required by the Act or by the Rules and
Regulations to be described in the Prospectuses and
which is not so described.
(t) There is no labor problem or disturbance with
the persons employed by the Company, any Subsidiary or
any Joint Venture that exists or, to the knowledge of
the Company, that is threatened and that might
reasonably be expected to have a material adverse
effect on the financial condition, business or results
of operations of the Company, the Subsidiaries and
Joint Ventures taken as a whole.
(u) The Company and each person who is a member
of a group which is under common control with the
Company and its Subsidiaries and its Joint Ventures,
who together with the Company, the Subsidiaries and the
Joint Ventures is treated as a single employer ("ERISA
Affiliate") within the meaning of Section 414(b), (c),
(m) or (o) of the Internal Revenue Code of 1986, as
amended from time to time ("IRC") or Section 4001(b) of
the Employment Retirement Income Security Act of 1974,
as amended from time to time ("ERISA") is in compliance
with all applicable provisions of ERISA and the
regulations and published interpretations thereunder
with respect to all employee benefit plans within the
meaning of Section 3(3) of ERISA which is established,
sponsored or maintained for, or on behalf of, its
current or former employees, officers or directors by
the Company, or the Subsidiaries or Joint Ventures or
any ERISA Affiliate or has at any time within the
preceding six years been established, sponsored or
maintained for, or on behalf of, its current or former
employees, officers or directors by the Company, or the
Subsidiaries or Joint Ventures or any current or former
ERISA Affiliate ("Employee Benefit Plans"). Each
Employee Benefit Plan that is intended to be qualified
under Section 401(a) of the IRC has been determined by
the Internal Revenue Service to be so qualified, and
each trust related to such plan has been determined to
be exempt from tax pursuant to Section 501(a) of the
IRC. No material liability has been incurred by the
Company, or its Subsidiaries or Joint Ventures or any
ERISA Affiliate which remains unsatisfied for any taxes
or penalties with respect to any Employee Benefit Plan.
No Employee Benefit Plan which is subject to the
provisions of Title IV of ERISA or Section 412 of the
IRC ("Pension Plan") has been terminated, nor has any
accumulated funding deficiency (as defined in Section
412 of the IRC) been incurred. Neither the Company nor
any of its Subsidiaries or Joint Ventures nor, in the
case of clauses (ii) and (iii) hereof, any ERISA
Affiliate has: (i) engaged in a nonexempt prohibited
transaction described in Section 406 of ERISA or
Section 4975 of the IRC; (ii) incurred any liability to
the Pension Benefit Guaranty Corporation or any
successor thereto ("PBGC") which remains outstanding
other than the payment of premiums and there are no
premium payments which are due and unpaid; or (iii)
failed to make a required installment or other required
payment under Section 412 of the IRC, which in any such
case in clauses (i) through (iii), the occurrence of
which results in or could reasonably be expected to
result in a material adverse effect on the financial
condition, business or results of operations of the
Company, the Subsidiaries and Joint Ventures taken as a
whole. No "reportable event" (as defined in Section
4043 of ERISA) has occurred or is reasonably expected
to occur with respect to any Employee Benefit Plan which
has or could reasonably be expected to have a material
adverse effect on the financial condition, business or
results of operations of the Company and its Subsidiaries
and Joint Ventures taken as a whole. Neither the Company
nor any of its Subsidiaries, Joint Ventures or ERISA
Affiliates has incurred or expects to incur any
liability under Title IV of ERISA arising in connection
with the termination of or withdrawal from an Employee
Benefit Plan covered or previously covered by Title IV
of ERISA.
(v) None of the Company, any Subsidiary or any
Joint Venture (i) is in violation of its respective
charter, by-laws or partnership agreements, (ii) is in
default, and no event exists and is continuing that,
with notice or lapse of time or both, would constitute
such a default, in the due performance and observance
of any material term contained in any lease, license,
indenture, mortgage, deed of trust, note, bank loan or
other evidence of indebtedness or any other agreement,
understanding or instrument to which the Company, any
Subsidiary or any Joint Venture is a party or by which
the Company, any Subsidiary or any Joint Venture or any
property of the Company, any Subsidiary or any Joint
Venture may be bound or affected, which default,
individually or in the aggregate, is reasonably likely
to have a material adverse effect on the financial
condition, business or results of operations of the
Company, the Subsidiaries and Joint Ventures taken as a
whole, or (iii) is in violation of any law, ordinance,
governmental rule or regulation or court decree to
which it may be subject, which violation, individually
or in the aggregate, is reasonably likely to have a
material adverse effect on the financial condition,
business or results of operations of the Company, the
Subsidiaries and Joint Ventures taken as a whole.
(w) There has been no storage, disposal,
generation, manufacture, refinement, transportation,
handling or treatment of toxic wastes, hazardous wastes
or hazardous substances by the Company, any Subsidiary
or any Joint Venture (or, to the knowledge of the
Company, any of their predecessors in interest) at,
upon or from any of the property now or previously
owned or leased by the Company, any Subsidiary or any
Joint Venture in violation of any applicable law,
ordinance, rule, regulation, order, judgment, decree or
permit or which would require remedial action under any
applicable law, ordinance, rule, regulation, order,
judgment, decree or permit, except for any violation or
remedial action which does not have, or would not be
reasonably likely to have, individually or in the
aggregate with all such violations and remedial
actions, a material adverse effect on the financial
condition, business or results of operations of the
Company, its Subsidiaries and the Joint Ventures taken
as a whole; there has been no material spill,
discharge, leak, emission, injection, escape, dumping
or release of any kind onto such property or into the
environment surrounding such property of any toxic
wastes, solid wastes, hazardous wastes or hazardous
substances due to or caused by the Company, any
Subsidiary or any Joint Venture or with respect to
which the Company, any Subsidiary or any Joint Venture
has knowledge, except for any such spill, discharge,
leak, emission, injection, escape, dumping or release
which does not have, or would not be reasonably likely
to have, individually or in the aggregate with all such
spills, discharges, leaks, emissions, injections,
escapes, dumpings and releases, a material adverse
effect on the financial condition, business or results
of operations of the Company, the Subsidiaries and the
Joint Ventures taken as a whole; and the terms
"hazardous wastes", "toxic wastes" and "hazardous
substances" shall have the meanings specified in any
applicable local, state, federal and foreign laws or
regulations with respect to environmental protection.
(x) Neither the Company nor any Subsidiary or
Joint Venture is, and, after giving effect to the
issuance of the Offered Securities and the application
of the proceeds therefrom, shall be, an "investment
company," or, to the best knowledge of the Company
after due inquiry, a company "controlled" by an
"investment company" within the meaning of the
Investment Company Act of 1940, as amended (the "1940
Act").
(y) The Company, each Subsidiary and each Joint
Venture has filed all federal, state and local income
and franchise tax returns required to be filed through
the date hereof, or has filed extensions in accordance
with applicable law, and has paid all taxes required to
be paid through the date hereof thereon, except for
such failures to file or pay that would not,
individually or in the aggregate, be reasonably likely
to have a material adverse effect on the financial
condition, business or results of operations of the
Company and the Subsidiaries and Joint Ventures taken
as a whole, and no tax deficiency has been determined
adversely to the Company, any Subsidiary or any Joint
Venture that has had (nor does the Company have any
knowledge of any tax deficiency which, if determined
adversely to the Company, any Subsidiary or any Joint
Venture would be reasonably likely to have) a material
adverse effect on the financial condition, business or
results of operations of the Company and the
Subsidiaries and Joint Ventures taken as a whole.
(z) The financial statements of the Company and
its consolidated subsidiaries and the related notes and
schedules included or incorporated by reference in the
Registration Statement and the Prospectuses fairly
present the financial position, the results of
operations and the cash flows of the Company and its
consolidated subsidiaries at the respective dates and
for the respective periods to which they apply; such
financial statements and the related notes and
schedules have been prepared in conformity with United
States generally accepted accounting principles applied
on a consistent basis throughout the periods therein
specified. The capitalization of the Company, as set
forth in the column labeled "The Company" under the
caption "Capitalization" in the Prospectus, is
accurately described as of the date presented therein.
(aa) Since the date of the latest audited
financial statements included in the Prospectuses
(i) there has been no material adverse change, nor any
development or event involving a prospective material
adverse change, in the financial condition, business or
results of operations of the Company, its Subsidiaries
and Joint Ventures taken as a whole, and (ii) except as
disclosed in the Prospectuses, there have not been any
transactions entered into by the Company, its
Subsidiaries or any Joint Venture, other than those in
the ordinary course of business, which are material to
the Company, its Subsidiaries and Joint Ventures taken
as a whole; except as disclosed in the Prospectuses,
there has been no dividend or distribution of any kind
declared, paid or made by the Company on any class of
its capital stock.
(bb) Neither the Company nor any of its affiliates
does business with the government of Cuba or with any
person or affiliate located in Cuba within the meaning
of Section 517.075, Florida Statutes and the Company
agrees to comply with such Section if prior to the
completion of the distribution of the Offered
Securities it commences doing such business.
(cc) Deloitte & Touche, who have certified certain
financial statements of the Company, and Coopers &
Lybrand, who have certified certain financial
statements of Magma Power Company ("Magma"), whose
reports appear in the Prospectuses or are incorporated
by reference therein, each are and were independent
public accountants as required by the Act and the Rules
and Regulations during the periods covered by the
financial statements on which they reported contained
or incorporated in the Prospectuses.
(dd) (i) Each of the operational electric
generation facilities ("Plants") owned in whole or
part, directly or indirectly by (A) the Company, (B)
its Subsidiaries or (C) its Joint Ventures is located
in the United States and is a "qualifying cogeneration
facility" ("QF") or a "qualifying small power
production facility" ("Small Power QF"), as such terms
are defined under the Federal Power Act, as amended
("FPA"), and the regulations thereunder, and has
continuously been in compliance with the requirements
for being a QF or Small Power QF since it commenced
sales of electricity; (ii) the owner or operator of
each of the Plants under development by the Company,
its Subsidiaries or Joint Ventures and located in the
United States will qualify as a QF, a Small Power QF or
an "exempt wholesale generator" ("EWG"), as such terms
are defined under the FPA, the Public Utility Holding
Company Act of 1935, as amended ("PUHCA") and the
regulations thereunder; (iii) the owner or operator of
each of the Plants under development by the Company,
its Subsidiaries or Joint Ventures and located outside
the United States will qualify either (A) as an EWG or
(B) as a "foreign utility company," as such term is
defined under PUHCA and the regulations thereunder;
(iv) none of the entities identified in clause (A) or
(B) of subparagraph (i) above owns or operates any
electric distribution facilities or any electric
transmission facilities other than electric
transmission facilities that are part of a QF or Small
Power QF; and (v) none of the entities identified in
clause (A), (B) or (C) of subparagraph (i) above is, or
is subject to regulation as, a "public utility holding
company" or a "subsidiary company" of a "public utility
holding company," as those terms are defined under
PUHCA, or is subject to regulation under the FPA, other
than as contemplated by 18 C.F.R. Section 292.601(c),
or, except as described in the Registration Statement,
subject to regulation by any state law with respect to
rates or the financial or organizational regulation of
electric utilities.
3. Purchase, Sale and Delivery of Offered
Securities. On the basis of the representations, warranties
and agreements herein contained, but subject to the terms
and conditions herein set forth, the Company agrees to sell
to the Underwriters, and the Underwriters agree, severally
and not jointly, to purchase from the Company, at a purchase
price of $ per share, the respective number of shares
of U.S. Firm Securities set forth opposite the names of the
Underwriters in Schedule A hereto.
The Company will deliver the U.S. Firm Securities
to the Representatives for the accounts of the Underwriters,
against payment of the purchase price by certified or
official bank check or checks in New York Clearing House
(next day) funds drawn to the order of
at the office of
, at A.M., New York
time, on or at such other time not later
than seven full business days thereafter as CSFBC and the
Company determine, such time being herein referred to as the
"First Closing Date". The certificates for the U.S. Firm
Securities so to be delivered will be in definitive form, in
such denominations and registered in such names as CSFBC
requests and will be made available for checking and
packaging at the above office of
, at least 24 hours prior to the
First Closing Date.
In addition, upon written notice from CSFBC given
to the Company from time to time not more than 30 days
subsequent to the date of the initial public offering of the
Offered Securities, the Underwriters and the Managers may
purchase all or less than all of the Optional Securities at
the purchase price per Security to be paid for the Firm
Securities. The U.S. Optional Securities to be purchased
by the Underwriters on any Optional Closing Date (as defined
below) shall be in the same proportion to all the Optional
Securities to be purchased by the Underwriters and the
Managers on such Optional Closing Date as the U.S. Firm
Securities bear to all the Firm Securities and the
International Optional Securities to be purchased by the
Managers on any Optional Closing Date shall be in the same
proportion to all the Optional Securities to be purchased by
the Underwriters and the Managers on such Optional Closing
Date as the International Firm Securities bear to all the
Firm Securities. The Company agrees to sell to the
Underwriters such U.S. Optional Securities and the
Underwriters agree, severally and not jointly, to purchase
such U.S. Optional Securities. The U.S. Optional Securities
shall be purchased for the account of each Underwriter in
the same proportion as the number of shares of U.S. Firm
Securities set forth opposite such Underwriter's name bears
to the total number of shares of U.S. Firm Securities
(subject to adjustment by CSFBC to eliminate fractions). The
Optional Securities may be purchased by the Underwriters and
the Managers only for the purpose of covering
over-allotments made in connection with the sale of the Firm
Securities. No Optional Securities shall be sold or
delivered unless the related Firm Securities previously have
been, or simultaneously are, sold and delivered. The right
to purchase the Optional Securities or any portion thereof
may be exercised from time to time and to the extent not
previously exercised may be surrendered and terminated at
any time upon notice by CSFBC on behalf of the Underwriters
and the Managers to the Company.
Each time for the delivery of and payment for the
U.S. Optional Securities, being herein referred to as an
"Optional Closing Date", which may be the First Closing Date
(the First Closing Date and each Optional Closing Date, if
any, being sometimes referred to as a "Closing Date"), shall
be determined by CSFBC but shall be not later than seven
full business days after written notice of election to
purchase Optional Securities is given. The Company will
deliver the U.S. Optional Securities being purchased on each
Optional Closing Date to the Representatives for the
accounts of the several Underwriters, against payment of the
purchase price therefor by certified or official bank check
or checks in New York Clearing House (next day) funds drawn
to the order of , at the above office of
. The certificates for the U.S. Optional
Securities will be in definitive form, in such denominations
and registered in such names as CSFBC requests upon
reasonable notice prior to such Optional Closing Date and
will be made available for checking and packaging at the
above office of , at a reasonable time in
advance of such Optional Closing Date.
4. Offering by Underwriters. It is understood
that the several Underwriters propose to offer the U.S.
Securities for sale to the public, and upon the terms and
conditions, as set forth in the U.S. Prospectus.
5. Certain Agreements of the Company. The
Company agrees with the several Underwriters that:
(a) If the Effective Time is prior to the execution
and delivery of this Agreement, the Company will file
each of the Prospectuses with the Commission pursuant
to and in accordance with subparagraph (1) (or, if
applicable and if consented to by CSFBC, subparagraph
(4)) of Rule 424(b) not later than the earlier of
(A) the second business day following the execution and
delivery of this Agreement or (B) the fifth business
day after the Effective Date. The Company will advise
CSFBC promptly of any such filing pursuant to
Rule 424(b).
(b) The Company will advise CSFBC promptly of any
proposal to amend or supplement the registration
statement as filed or the Registration Statement or
either of the Prospectuses and will not effect such
amendment or supplementation without CSFBC's prior
consent, which consent shall not be unreasonably
withheld; and the Company will also advise CSFBC
promptly of the effectiveness of the Registration
Statement (if the Effective Time is subsequent to the
execution and delivery of this Agreement) and of any
amendment or supplementation of the Registration
Statement or either of the Prospectuses and of the
institution by the Commission of any stop order
proceedings in respect of the Registration Statement
and will use its reasonable best efforts to prevent the
issuance of any such stop order and to obtain as soon
as possible its lifting, if issued.
(c) If, at any time when a prospectus relating to
the Offered Securities is required, in the opinion of
counsel for the Underwriters, to be delivered under the
Act in connection with sales by any Underwriter,
Manager or dealer, any event occurs as a result of
which either or both of the Prospectuses as then
amended or supplemented would include an untrue
statement of a material fact or omit to state any
material fact necessary to make the statements therein,
in the light of the circumstances under which they were
made, not misleading, or if it is necessary at any such
time to amend either or both Prospectuses to comply
with the Act, the Company will promptly notify CSFBC of
such event and will promptly prepare and file with the
Commission, at its own expense, an amendment or
supplement which will correct such statement or
omission or an amendment which will effect such
compliance. Neither CSFBC's consent to, nor the
Underwriters' delivery of, any such amendment or
supplement shall constitute a waiver of any of the
conditions set forth in Section 6.
(d) As soon as practicable, but not later than
the Availability Date (as defined below), the Company
will make generally available to its securityholders an
earnings statement (which need not be audited) covering
a period of at least 12 months beginning after the
Effective Date which will satisfy the provisions of
Section 11(a) of the Act. For the purpose of the
preceding sentence, "Availability Date" means the 45th
day after the end of the fourth fiscal quarter
following the fiscal quarter that includes the
Effective Date, except that, if such fourth fiscal
quarter is the last quarter of the Company's fiscal
year, "Availability Date" means the 90th day after the
end of such fourth fiscal quarter.
(e) The Company will furnish to the
Representatives copies of the Registration Statement
(six of which will be signed and will include all
exhibits), each preliminary prospectus relating to the
U.S. Securities, and, so long as delivery of a
prospectus relating to the Offered Securities is
required to be delivered under the Act in connection
with sales by any Underwriter or dealer, the U.S.
Prospectus and all amendments and supplements to such
documents, in each case as soon as available and in
such quantities as CSFBC requests. The Company will
pay the expenses of printing and distributing to the
Underwriters all such documents.
(f) The Company will arrange for the
qualifications of the Offered Securities for sale under
the laws of such jurisdiction in the United States as
CSFBC designates and will continue such qualifications
in effect so long as required for the distribution,
provided that, in connection therewith the Company
shall not, with respect to any such jurisdiction, be
required to qualify as a foreign corporation, to file a
general consent to service of process or to take any
other action that would subject it to service of
process in suits other than those arising out of the
offering of the Offered Securities or to taxation in
respect of doing business in any jurisdiction in which
it is not otherwise subject.
(g) During the period of three years hereafter,
the Company will furnish to the Representatives and,
upon request, to each of the Underwriters, as soon as
practicable, after the end of each fiscal year, a copy
of its annual report to stockholders for such year; and
the Company will furnish to the Representatives (i) as
soon as available, a copy of each report and any
definitive proxy statement of the Company filed with
the Commission under the Securities Exchange Act of
1934 or mailed to stockholders, and (ii) from time to
time, such other information concerning the Company as
CSFBC may reasonably request.
(h) The Company will pay all expenses incident to
the performance of its obligations under this Agreement
and will reimburse the Underwriters (if and to the
extent incurred by them) for any filing fees and other
expenses (including fees and disbursements of counsel up
to an aggregate of $15,000) incurred by them in
connection with qualification of the Offered Securities
for sale under the laws of such jurisdictions in the
United States as CSFBC designates and the printing of
memoranda relating thereto, for the filing fee of the
National Association of Securities Dealers, Inc.
relating to the Offered Securities, for any travel
expenses of the Company's officers and employees and any
other expenses of the Company in connection with
attending or hosting meetings with prospective
purchasers of the Offered Securities and for expenses
incurred in distributing preliminary prospectuses and
the Prospectuses (including any amendments and
supplements thereto) to the Underwriters. Such amount
may be deducted from the purchase price for the Offered
Securities set forth in Section 3. Except as provided
in this paragraph (h), the Underwriters and Managers
shall pay the Gleacher Success Fee in paragraph 2(g)
hereof and their own costs and expenses, including the
costs and expenses of their legal counsel, any transfer
taxes on the Offered Securities that they may sell and
the expenses of marketing and advertising any offering
of the Offered Securities made by them.
(i) The Company will indemnify and hold harmless
the Underwriters against any documentary, stamp or
similar issuance tax, including any interest and
penalties, on the creation, issuance and sale of the
Offered Securities and on the execution and delivery of
this Agreement. All payments to be made by the Company
hereunder shall be made without withholding or
deduction for or on account of any present or future
taxes, duties or governmental charges whatsoever unless
the Company is compelled by law to deduct or withhold
such taxes, duties or charges. In that event, the
Company shall pay such additional amounts as may be
necessary in order that the net amounts received after
such withholding or deduction shall equal the amounts
that would have been received if no withholding or
deduction had been made.
(j) For a period of 90 days after the date of the
initial public offering of the Offered Securities,
neither the Company nor any of its directors or
officers, will offer, sell, contract to sell, pledge or
otherwise dispose of, directly or indirectly, or file
with the Commission a registration statement under the
Act relating to, any additional shares of the Company's
Securities or securities convertible into or
exchangeable or exercisable for any shares of the
Company's Securities, or publicly disclose the
intention to make any such offer, sale, pledge,
disposal or filing, without the prior written consent
of CSFBC, except issuances of Securities pursuant to
the conversion or exchange of convertible or
exchangeable securities or the exercise of warrants or
options, in each case outstanding on the date hereof.
The Company shall, concurrently with the execution of
this Agreement, deliver to CSFBC an agreement executed
by each of the directors and officers of the Company
pursuant to which each such person agrees, not to
offer, sell, contract to sell, pledge, grant any option
to purchase, or otherwise dispose of any of the
Company's Securities or any securities convertible into
or exercisable or exchangeable for such Securities for
a period of 90 days after the date of the initial
public offering of the Offered Securities.
(k) The Company shall apply the net proceeds from
the sale of the Offered Securities as set forth in the
Prospectuses.
(l) No action has been or, prior to the
completion of the distribution of the Offered
Securities will be taken by the Company in any
jurisdiction outside the United States and Canada that
would permit a public offering of the Offered
Securities, or possession or distribution of the
International Prospectus, or any amendment or
supplement thereto, or any related preliminary
prospectus issued in connection with the offering of
the Offered Securities, or any other offering material,
in any country or jurisdiction where action for that
purpose is required.
(m) The Company shall use its best efforts to
have the Offered Securities listed on the Stock
Exchanges concurrently with the Effective Time.
6. Conditions of the Obligations of the
Underwriters. The obligations of the several Underwriters
to purchase and pay for the U.S. Firm Securities on the
First Closing Date and the U.S. Optional Securities to be
purchased on each Optional Closing Date will be subject to
the accuracy of the representations and warranties on the
part of the Company herein, to the accuracy of the
statements of Company officers made pursuant to the
provisions hereof, to the performance by the Company of its
obligations hereunder and to the following additional
conditions precedent:
(a) The Representatives shall have received a
letter, dated the date of delivery thereof (which, if
the Effective Time is prior to the execution and
delivery of this Agreement, shall be on or prior to the
date of this Agreement or, if the Effective Time is
subsequent to the execution and delivery of this
Agreement, shall be prior to the filing of the
amendment or post-effective amendment to the
registration statement to be filed shortly prior to the
Effective Time), of each of Deloitte & Touche (in
respect of the Company) and Coopers & Lybrand (in
respect of Magma) confirming that they are independent
public accountants within the meaning of the Act and
the applicable published Rules and Regulations
thereunder and stating to the effect that:
(i) in their opinion the financial statements
and schedules of such company examined by them and
included in the Registration Statement and the
Prospectuses comply in form in all material
respects with the applicable accounting
requirements of the Act and the Exchange Act, as
applicable, and the related published Rules and
Regulations;
(ii) they have performed the procedures
specified by the American Institute of Certified
Public Accountants for a review of interim
financial information as described in Statement of
Auditing Standards No. 71, Interim Financial
Information, on the unaudited financial statements
included in the Registration Statement and the
Prospectuses;
(iii) on the basis of the review referred to in
clause (ii) above, a reading of the latest
available interim financial statements of such
company, inquiries of officials of such company
who have responsibility for financial and
accounting matters and other specified procedures,
nothing came to their attention that caused them
to believe that:
(A) any unaudited financial statements
included in the Registration Statement and
the Prospectuses do not comply in form in
all material respects with the applicable
accounting requirements of the Commission
under the Act and the Exchange Act, as
applicable, and the related published Rules
and Regulations or that any material
modifications should be made to such
unaudited financial statements for them to
be in conformity with generally accepted
accounting principles applied on a basis
substantially consistent with that of the
audited financial statements included in
the Registration Statement and the
Prospectuses;
(B) at the date of the latest available
balance sheet read by such accountants, or
at a subsequent specified date not more
than five days prior to the date of this
Agreement, there was any change in the
capital stock or any increase in short-term
indebtedness or long-term indebtedness
(excluding project finance indebtedness for
projects currently in construction) of such
company and its consolidated subsidiaries
or, at the date of the latest available
balance sheet read by such accountants,
[there was any increase in consolidated net
current liabilities or any decrease in
consolidated net current assets] as
compared with amounts shown on the latest
balance sheet included in the Registration
Statement and the Prospectuses; or
(C) for the period from the closing date
of the latest income statement included in
the Registration Statement and the
Prospectuses to the closing date of the
latest available income statement read by
such accountants there were any decreases,
as compared with the corresponding period
of the previous year and with the period of
corresponding length ended the date of the
latest income statement included the
Registration Statement in the Prospectuses,
in consolidated operating revenues, net
income or pre-tax income or in the total or
per share amounts of consolidated income
before extraordinary items;
except in all cases set forth in clauses (B) and
(C) above for changes, increases or decreases
which the Prospectuses disclose have occurred or
may occur;
(iv) they have performed certain other
specified procedures as a result of which they
determined that certain information of an
accounting, tabular, financial or statistical
nature (which is limited to accounting, tabular,
financial or statistical information derived from
the general accounting records of the company and
its subsidiaries or are derived directly from such
records by analysis or computation) set forth in
the Registration Statement and the Prospectuses,
agrees with the accounting records of the Company
and its subsidiaries, excluding any questions of
legal interpretation;
(v) on the basis of a reading of the
unaudited pro forma financial statements included
in the Registration Statement and the Prospectuses
(the "pro forma financial statements"); carrying
out certain specified procedures; inquiries of
certain officials of the Company and Magma who
have responsibility for financial and accounting
matters; and proving the arithmetic accuracy of
the application of the pro forma adjustments to
the historical amounts in the pro forma financial
statements, nothing came to their attention which
causes them to believe that the pro forma
financial statements do not comply in form in all
material respects with the applicable accounting
requirements of Rule 11-02 of Regulation S-X or
that the pro forma adjustments have not been
properly applied to the historical amounts in the
compilation of such statements.
For purposes of this subsection, if the Effective Time
is subsequent to the execution and delivery of this
Agreement, "Registration Statement" shall mean the
registration statement as proposed to be amended by the
amendment or post-effective amendment to be filed
shortly prior to the Effective Time, and "Prospectuses"
shall mean the prospectuses included in the
Registration Statement. All financial statements and
schedules included in material incorporated by
reference into the Registration Statement and the
Prospectuses shall be deemed included in the
Registration Statement and the Prospectuses for
purposes of this subsection.
(b) If the Effective Time is not prior to the
execution and delivery of this Agreement, the Effective
Time shall have occurred not later than 8:00 P.M.,
New York time, on the date of this Agreement or such
later date as shall have been consented to by CSFBC.
If the Effective Time is prior to the execution and
delivery of this Agreement, each of the Prospectuses
shall have been filed with the Commission in accordance
with the Rules and Regulations and Section 5(a) of this
Agreement. Prior to such Closing Date, no stop order
suspending the effectiveness of the Registration
Statement shall have been issued and no proceedings for
that purpose shall have been instituted or, to the
knowledge of the Company or the Representatives, shall
be contemplated by the Commission.
(c) Subsequent to the execution and delivery of
this Agreement, there shall not have occurred (i) any
change, or any development or event involving a
prospective change, in the financial condition,
business or results of operations of the Company, the
Subsidiaries and the Joint Ventures, taken as a whole,
which, in the judgment of a majority in interest of the
Underwriters including the Representatives, is material
and adverse and makes it impractical or inadvisable to
proceed with completion of the public offering or the
sale of and payment for the U.S. Securities; (ii) any
downgrading in the rating of any debt securities or
preferred stock of the Company by any "nationally
recognized statistical rating organization" (as defined
for purposes of Rule 436(g) under the Act), or any
public announcement that any such organization has
under surveillance or review its rating of any debt
securities or preferred stock of the Company (other
than an announcement with positive implications
of a possible upgrading, and no implication of a
possible downgrading, of such rating); (iii) any
suspension or limitation of trading in securities
generally on the New York Stock Exchange [or
the London Stock Exchange], or any setting of minimum
prices for trading on such exchanges, or any suspension
of trading of any securities of the Company on any
exchange or in the over-the-counter market; (iv) any
banking moratorium declared by U.S. Federal, New York
[or United Kingdom] authorities; or (v) any outbreak or
escalation of major hostilities in which the United
States is involved, any declaration of war by Congress
or any other substantial national or international
calamity or emergency if, in the judgment of a majority
in interest of the Underwriters including the
Representatives, the effect of any such outbreak,
escalation, declaration, calamity or emergency on the
financial markets makes it impractical or inadvisable
to proceed with completion of the public offering or
the sale of and payment for the U.S. Securities.
(d) The Representatives shall have received an
opinion, dated such Closing Date, of Steven A.
McArthur, General Counsel to the Company, to the effect
that:
(i) Each of the Company, the Subsidiaries
and the Joint Ventures has been duly organized and
is validly existing and, if applicable, in good
standing under the laws of its respective
jurisdiction of organization and each of the
Company, the Subsidiaries and the Joint Ventures
has the power and authority to own, lease and
operate its respective properties and to conduct
its businesses as described in the Prospectuses;
(ii) Each of the Company, the Subsidiaries
and the Joint Ventures is duly registered or
qualified to do business and is in good standing
as a foreign corporation or a foreign partnership,
as the case may be, in each jurisdiction, domestic
or foreign, in which such registration,
qualification or good standing is required
(whether by reason of the ownership or leasing of
property, the conduct of its business or
otherwise), except where the failure to so
register or qualify or be in good standing is not
reasonably likely to have a material adverse
effect on the financial condition, business or
results of operation of the Company, the
Subsidiaries and the Joint Ventures taken as a
whole;
(iii) The Company has the authorized and
outstanding capitalization as set forth in the
column labeled "The Company" under the caption
"Capitalization" in the Prospectuses; the Offered
Securities and all the other issued and
outstanding Securities of the Company have been
validly authorized; all outstanding Securities of
the Company are, and when the Offered Securities
have been delivered and paid for in accordance
with this Agreement and the Subscription Agreement
on each Closing Date such Offered Securities will
have been, validly issued, fully-paid and
nonassessable and will conform in all material
respects to the description thereof contained in
the Prospectuses; there are no preemptive or
similar rights to subscribe for or to purchase,
nor any restriction on the transfer of, the
Offered Securities pursuant to the Company's
charter, by-laws or any agreement or other
instrument, except as provided in the Shareholders
Agreement dated as of February 18, 1991 by and
between the Company and Kiewit Energy Company, in
respect of which a waiver has been received
regarding the Offered Securities; to the best
knowledge of such counsel, all the outstanding
shares of capital stock of each Subsidiary have
been duly and validly authorized and issued and
are fully-paid and nonassessable; and to the best
knowledge of such counsel, except as otherwise set
forth or referred to in the Prospectuses, all
outstanding shares of capital stock of each
Subsidiary are owned beneficially by the Company
free and clear of any material claims, liens,
encumbrances and security interests; and all of
the partnership interests in Joint Ventures owned
by the Company (as reflected in Schedule B) have
been duly and validly authorized and issued, and,
except as otherwise disclosed or referred to in
the Prospectuses, are owned beneficially by the
Company free and clear of any material claims,
liens, encumbrances and security interests;
(iv) The authorized capital stock of the
Company, including the Offered Securities,
conforms as to legal matters in all material
respects to the description thereof contained in
the Prospectuses;
(v) To such counsel's knowledge, except in
respect of the agreement between the Company and
Gleacher, dated December 22, 1994, and as
otherwise disclosed in the Prospectuses, there are
no contracts, agreements or understandings between
the Company and any person that would give rise to
a valid claim against the Company or any
Underwriter or Manager for a brokerage commission,
finder's fee or other like payment;
(vi) To such counsel's knowledge, there are
no contracts, agreements or understandings between
the Company and any person granting such person
the right to require the Company to file a
registration statement under the Act with respect
to any securities of the Company owned or to be
owned by such person or to require the Company to
include any such securities in the securities
registered pursuant to the Registration Statement
or in any securities being registered pursuant to
any other registration statement filed by the
Company under the Act except for the agreement
dated June 19, 1991, as amended by Amendment
No. 1, dated November 20, 1991, between the
Company and Kiewit Energy Company, the rights
under which have been waived in respect of the
Offered Securities;
(vii) Except as contemplated in the
Prospectuses with respect to (i) the pledging or
granting of security interests in all material
properties to secure project financing obligations
and (ii) governmental contracts, leases and other
non-transferable interests that are terminable by
the applicable governmental body, each of the
Company, the Subsidiaries and the Joint Ventures
has good and valid title to, or valid and
enforceable leasehold or contractual interests in,
all real properties and all other properties and
assets owned or leased by each of them that are
material to the business of each such entity, in
each case free from all liens, encumbrances, and
defects that would materially affect the value
thereof or materially interfere with the use made
or to be made thereof by them;
(viii) To such counsel's knowledge, there is no
legal or governmental action, suit or proceeding
before any court, governmental agency, body or
authority, domestic or foreign, now pending,
threatened against, or involving, the Company, any
Subsidiary or any Joint Venture (i) of a character
required to be disclosed in the Registration
Statement which is not adequately disclosed in the
Registration Statement or (ii) that, if determined
adversely to the Company, any Subsidiary or any
Joint Venture, is reasonably likely to have,
individually or in the aggregate, a material
adverse effect on the condition (financial or
other), business, properties or results of
operations of the Company, the Subsidiaries and
Joint Ventures taken as a whole or on the ability
of the Company to perform its obligations under
this Agreement or the Subscription Agreement;
(ix) To such counsel's knowledge, the
Company, each Subsidiary and each Joint Venture
(i) has properly obtained each license, permit,
certificate, franchise or other governmental
authorization which is material to the ownership
of their properties or to the conduct of their
businesses as described in the Prospectuses and
(ii) is in compliance with all terms and
conditions of such license, permit, certificate,
franchise or other governmental authorization,
except (x) in either case where the failure to do
so is not reasonably likely to have, individually
or in the aggregate, a material adverse effect on
the condition (financial or other) business,
properties or results of operations of the
Company, the Subsidiaries and Joint Ventures
taken as a whole, (y) permits, consents and
approvals that may be required for future
drilling or operating activities which are
ordinarily deemed to be ministerial in nature and
which are anticipated to be obtained in the
ordinary course and (z) permits, consents and
approvals for developmental or construction
activities which have not yet been obtained but
which have been or will be applied for in the
course of development or construction and which
are anticipated to be obtained in the ordinary
course;
(x) The Company has all requisite corporate
power and authority to enter into this Agreement,
to issue the Offered Securities and to consummate
the transactions contemplated by this Agreement;
(xi) There are no contracts or other
documents which are required to be described in
the Prospectuses or filed as exhibits to the
Registration Statement by the Act or by the Rules
and Regulations which have not been described or
filed as exhibits to the Registration Statement or
incorporated by reference therein as permitted by
the Rules and Regulations;
(xii) This Agreement and the Subscription
Agreement have been duly authorized, executed and
delivered by the Company;
(xiii) (A) The execution, delivery and
performance of this Agreement and the Subscription
Agreement, and the issuance and sale of the
Offered Securities do not and will not
(i) conflict with the corporate charter or by-laws
or partnership agreement of the Company, any
Subsidiary or any Joint Venture, (ii) to the best
knowledge of such counsel, conflict with, result
in the creation or imposition of any lien, charge
or other encumbrance upon any asset of the
Company, any Subsidiary or any Joint Venture
pursuant to the terms of, or constitute a breach
of, or default under, any agreement, indenture or
other instrument to which the Company, any
Subsidiary or any Joint Venture is a party or by
which the Company, any Subsidiary or any Joint
Venture is bound or to which any of the properties
of the Company, any Subsidiary or any Joint
Venture is subject, or (iii) to the best knowledge
of such counsel, result in a violation of any
statute, any rule, regulation, order, judgment or
decree of any court or governmental agency, body
or authority having jurisdiction over the Company,
any Subsidiary or any Joint Venture or any of
their properties where any such conflicts,
encumbrances, breaches, defaults or violations
under clauses (ii) or (iii), individually or in
the aggregate, is reasonably likely to have a
material adverse effect on the financial
condition, business or results of operations of
the Company, its Subsidiaries and Joint Ventures
taken as a whole; (B) to the knowledge of such
counsel, except for (i) the registration of the
Offered Securities under the Act, (ii) such
consents, approvals, authorizations, registrations
or qualifications as may be required under the
Exchange Act and applicable state securities laws
in connection with the purchase and distribution
of the Offered Securities and (iii) the waiver by
Kiewit Energy Company, Inc. of its preemptive
rights and its right to include securities in the
Registration Statement, which has been obtained
prior to the date of this Agreement, no consent,
authorization or order of, or filing or
registration by the Company, any Subsidiary or any
Joint Venture with, any court, governmental agency
or third party is required in connection with the
execution, delivery and performance by the Company
of this Agreement and the Subscription Agreement,
the consummation of the transactions contemplated
herein and therein, and the issuance, distribution
and sale of the Offered Securities as contemplated
herein and therein, the failure to obtain which,
individually or in the aggregate, is reasonably
likely to have a material adverse effect on the
financial condition, business or results of
operations of the Company, the Subsidiaries and
the Joint Ventures taken as a whole, or on the
Offered Securities or the ability of the Company
to perform its obligations under this Agreement
and the Subscription Agreement, and (C) the
Company has full power and authority to authorize,
issue and sell the Offered Securities as
contemplated by this Agreement and the
Subscription Agreement, respectively;
(xiv) The Company is not, and after giving
effect to the issuance of the Offered Securities
and the application of the proceeds therefrom
shall not be, an "investment company," or, to such
counsel's knowledge, a company "controlled" by an
"investment company," within the meaning of the
1940 Act;
(xv) The documents incorporated by reference
in the Prospectuses and any further amendments or
supplements to any such incorporated document made
by the Company prior to the Closing Date (other
than the financial statements, related schedules
and other financial and statistical information
contained therein or omitted therefrom as to which
such counsel need express no opinion), when they
became effective or were filed with the
Commission, as the case may be, appear on their
face to have been appropriately responsive in all
material respects to the applicable requirements
of the Act or the Exchange Act, as the case may
be, and the Rules and Regulations of the
Commission thereunder; and
(e) The Company shall have furnished to the
Representatives the opinion of Willkie Farr &
Gallagher, special counsel to the Company, addressed to
the Underwriters and dated the Closing Date, in form
and substance satisfactory to the Representatives, to
the effect that:
(i) The Company has been duly organized and
is validly existing and in good standing under the
laws of its jurisdiction of organization and the
Company has the corporate power and authority to
own, lease and operate its properties and to
conduct its businesses as described in the
Prospectuses;
(ii) Such counsel has been advised by the
Commission that the Registration Statement has
been declared effective under the Act; the
Prospectuses have been filed with the Commission
pursuant to the appropriate subparagraph of Rule
424(b) of the Rules and Regulations; to the best
knowledge of such counsel, no stop order
suspending the effectiveness of the Registration
Statement has been issued and no proceeding for
that purpose is pending or threatened by the
Commission;
(iii) The Registration Statement and the
Prospectuses and any further amendments or
supplements thereto made by the Company prior to
the Closing Date (other than the financial
statements, related schedules, other financial and
statistical information contained therein or
omitted therefrom as to which such counsel need
express no opinion) as of their effective dates,
appear on their face to have been appropriately
responsive in all material respects to the
applicable requirements of the Act, the Exchange
Act and the Rules and Regulations;
(iv) To such counsel's knowledge, there are
no contracts or other documents which are required
to be described in the Prospectuses or filed as
exhibits to the Registration Statement by the Act
or by the Rules and Regulations which have not
been described or filed as exhibits to the
Registration Statement or incorporated by
reference therein as permitted by the Rules and
Regulations;
(v) This Agreement and the Subscription
Agreement have been duly authorized, executed and
delivered by the Company; and
(vi) No consent, authorization, order of, or
filing or registration by the Company with, any
governmental authority or body having jurisdiction
over the Company is necessary or required for the
performance by the Company of its obligations
under this Agreement or the Subscription
Agreement, or in connection with the issuance and
sale of the Offered Securities hereunder or
thereunder, except as may be required under
applicable state or foreign securities laws or
blue sky laws in connection with the purchase and
distribution of the Offered Securities.
(f) In the rendering of the opinions described in
Section 6(d) and Section 6(e) above, such counsel may
(i) state that their opinion is limited to matters
governed by the Federal laws of the United States of
America, the laws of the State of New York, the General
Corporation Law of the State of Delaware and
Nevada and, in the case of the General Counsel of the
Company, the laws of the States of California and
Nevada, and (ii) rely, to the extent they deem proper,
in respect of matters of fact, upon certificates and
representations of officers of the Company, the
Subsidiaries or the Joint Ventures and public officials
and, in respect of matters of Nevada law, upon the
opinion of competent Nevada counsel who is reasonably
satisfactory to the Representatives. Such counsel
shall also have furnished to the Representatives a
written statement, addressed to the Underwriters and
dated such Closing Date, in form and substance
reasonably satisfactory to the Representatives, to the
effect that (i) such counsel (in the case of Willkie
Farr & Gallagher, such counsel may state that they have
acted as special counsel to the Company for purposes of
the subject Offering) have participated in conferences
with representatives of the Company, some of which have
been attended by the Underwriters and their counsel, at
which conferences the contents of the Registration
Statement, the Prospectuses, each amendment thereof and
supplement thereto and related matters were discussed,
although such counsel has not independently checked or
verified and is not passing upon and assumes no
responsibility for the factual accuracy, completeness
or fairness of the statements contained in the
Registration Statement, the Prospectuses, any amendment
thereof or supplement thereto, and (ii) based on the
foregoing, no facts have come to the attention of such
counsel which cause them to believe that (except for
the financial statements, related schedules and other
financial and statistical information contained therein
or omitted therefrom as to all of which such counsel
need not express any belief) (I) the Registration
Statement (other than the documents incorporated by
reference therein), as of the Effective Date, contained
any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or
necessary in order to make the statements therein not
misleading, or that the Prospectuses, as amended and
supplemented as of the Effective Time, contain any
untrue statement of a material fact or omit to state a
material fact required to be stated therein or
necessary in order to make the statements therein, in
the light of the circumstances under which they were
made, not misleading or (II), in the case of the
General Counsel of the Company, any document
incorporated by reference in the Prospectuses or any
further amendment or supplement to such incorporated
document made by the Company prior to the Closing Date
when they became effective or were filed with the
Commission, as the case may be, contained, in the case
of a registration statement that became effective under
the Act, any untrue statement of a material fact or
omitted to state a material fact required to be stated
therein, in the light of the circumstances under which
they were made, or necessary in order to make the
statements therein not misleading, or, in the case of
other documents which were filed under the Exchange Act
with the Commission, an untrue statement of a material
fact or omitted to state a material fact necessary in
order to make the statements therein, in light of the
circumstances under which they were made, not
misleading.
(g) The Representatives shall have received from
Chadbourne & Parke, counsel for the Underwriters, such
opinion or opinions, dated such Closing Date, with
respect to the incorporation of the Company, the
validity of the Offered Securities delivered on such
Closing Date, the Registration Statement, the
Prospectuses and other related matters as the
Representatives may require, and the Company shall have
furnished to such counsel such documents as they
request for the purpose of enabling them to pass upon
such matters.
(h) The Representatives shall have received a
certificate, dated such Closing Date, of the President
or any Vice-President and a principal financial or
accounting officer of the Company in which such
officers, shall state that to the best of their
knowledge after reasonable investigation, the
representations and warranties of the Company in this
Agreement and the Subscription Agreement are true and
correct, that the Company has complied with all
agreements and satisfied all conditions on its part to
be performed or satisfied hereunder at or prior to such
Closing Date, that no stop order suspending the
effectiveness of the Registration Statement has been
issued and no proceedings for that purpose have been
instituted or are contemplated by the Commission and
that, subsequent to the date of the most recent
financial statements in the Prospectuses, there has
been no material adverse change, nor any development or
event involving a prospective material adverse change,
in the condition (financial or other), business,
properties or results of operations of the Company, the
Subsidiaries and the Joint Ventures taken as a whole
except as set forth in or contemplated by the
Prospectuses or as described in such certificate.
(i) The Representatives shall have received
letters, dated such Closing Date, of Deloitte & Touche
and Coopers & Lybrand which meet the requirements of
subsection (a) of this Section, except that the
specified date referred to in such subsection will be a
date not more than five days prior to such Closing Date
for the purposes of this subsection.
(j) On such Closing Date, the Managers shall have
purchased the International Firm Securities or the
International Optional Securities, as the case may be,
pursuant to the Subscription Agreement.
(k) The merger of CE Acquisition Company, Inc. a
Delaware corporation and a wholly-owned subsidiary of
the Company, with and into Magma, pursuant to the All-
Cash Option (as defined in the Prospectuses) shall have
become effective and all required filings in respect
thereof shall have been made in the States of Nevada
and Delaware.
(l) Since the date of the latest audited
financial statements included or incorporated by
reference in the Prospectuses (i) except as disclosed
in the Prospectuses, there shall have been no material
adverse change, or a development which is reasonably
likely to lead to a material adverse change, in the
financial condition, business or results of operations
of the Company, the Subsidiaries and Joint Ventures
taken as a whole and (ii) except as disclosed in the
Prospectuses, there shall not have been any
transactions entered into by the Company, the
Subsidiaries or any Joint Venture, other than those in
the ordinary course of business, which are material and
adverse to the Company, the Subsidiaries and Joint
Ventures taken as a whole, and which, in the judgment
of the Representatives, make it impracticable or
inadvisable to proceed with the public offering or the
delivery of the Offered Securities on the terms and in
the manner contemplated in the Prospectuses.
The Company will furnish the Representatives with such
conformed copies of such opinions, certificates, letters and
documents as the Representatives reasonably requests. CSFBC
may in its sole discretion waive on behalf of the
Underwriters compliance with any conditions to the
obligations of the Underwriters hereunder, whether in
respect of an Optional Closing Date or otherwise.
7. Indemnification and Contribution. (a) The
Company will indemnify and hold harmless each Underwriter
against any losses, claims, damages or liabilities, joint or
several, to which such Underwriter may become subject, under
the Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise
out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the
Registration Statement, either of the Prospectuses, or any
amendment or supplement thereto, or any related preliminary
prospectus, or arise out of or are based upon the omission
or alleged omission to state therein a material fact
required to be stated therein or necessary to make the
statements therein (with respect to the Prospectuses,
in light of the circumstances under which they were
made) not misleading, and will reimburse each Underwriter
for any legal or other expenses reasonably incurred by such
Underwriter in connection with investigating or defending
any such loss, claim, damage, liability or action as such
expenses are incurred; provided, however, that the Company
will not be liable in any such case to the extent that any
such loss, claim, damage or liability or action arises out
of or is based upon an untrue statement or alleged untrue
statement in or omission or alleged omission from any of
such documents in reliance upon and in conformity with
written information furnished to the Company by or on behalf
of any Underwriter through the Representatives specifically
for use therein, it being understood and agreed that the
only information furnished by any Underwriter consists of
the information described as such in subsection (b) below;
and provided, further, that, with respect to any untrue
statement or omission in any Preliminary Prospectuses, this
indemnity agreement shall not inure to the benefit of any
Underwriter on account of any loss, claim, damage, liability
or action arising from the sale of any Offered Securities to
any person by that Underwriter if that Underwriter failed to
send or give a copy of the Prospectuses, as the same may be
amended or supplemented, to that person within the time
required by the Act, and the untrue statement or alleged
untrue statement of a material fact or omission or alleged
omission to state a material fact in such Preliminary
Prospectuses was corrected in the Prospectuses and the
Prospectuses were made available to the Underwriters prior
to the sale of the Offered Securities. For purposes of the
last proviso to the immediately preceding sentence, the term
"Prospectuses" shall not be deemed to include the documents
incorporated by reference therein, and no Underwriter shall
be obligated to send or give any supplement or amendment to
any document incorporated by reference in any Preliminary
Prospectuses or Prospectuses to any person other than a
person to whom such Underwriter had delivered such
incorporated document or documents in response to a written
request therefor.
Insofar as the foregoing indemnity agreement, or
the representations and warranties contained in Section
2(b), may permit indemnification for liabilities under the
Act of any person who is an Underwriter or a partner or
controlling person of an Underwriter within the meaning of
Section 15 of the Act and who, at the date of this
Agreement, is a director, officer or controlling person of
the Company, the Company has been advised that in the
opinion of the Commission such provisions may contravene
Federal public policy as expressed in the Act and may
therefore be unenforceable. In the event that a claim for
indemnification under such agreement or such representations
and warranties for any such liabilities (except insofar as
such agreement provides for the payment by the Company of
expenses incurred or paid by a director, officer or
controlling person in the successful defense of any action,
suit or proceeding) is asserted by such a person, the
Company will submit to a court of appropriate jurisdiction
(unless in the opinion of counsel for the Company the matter
has already been settled by controlling precedent) the
question of whether or not indemnification by it for such
liabilities is against public policy as expressed in the Act
and therefore unenforceable, and the Company will be
governed by the final adjudication of such issue.
(b) Each Underwriter will severally and not
jointly indemnify and hold harmless the Company against any
losses, claims, damages or liabilities to which the Company
may become subject, under the Act or otherwise, insofar as
such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact
contained in the Registration Statement, either of the
Prospectuses, or any amendment or supplement thereto, or any
related preliminary prospectus, or arise out of or are based
upon the omission or the alleged omission to state therein a
material fact required to be stated therein or necessary to
make the statements therein not misleading, in each case to
the extent, but only to the extent, that such untrue
statement or alleged untrue statement or omission or alleged
omission was made in reliance upon and in conformity with
written information furnished to the Company by or on behalf
of such Underwriter through the Representatives specifically
for use therein, and will reimburse any legal or other
expenses reasonably incurred by the Company in connection
with investigating or defending any such loss, claim,
damage, liability or action as such expenses are incurred,
it being understood and agreed that the only such
information furnished by any Underwriter consists of the
following information in the U.S. Prospectus furnished on
behalf of each Underwriter: the last paragraph at the
bottom of the cover page concerning the terms of the
offering by the Underwriters, the legend concerning over-
allotments and stabilizing on page 2, the legend concerning
transactions by certain affiliates participating in the
distribution on page 2, the information relating to the
Intersyndicate Agreement in paragraphs 7, 8 and 9 in the
section "Underwriting", the concession and reallowance
figures appearing in the sixth paragraph in the Section
"Underwriting" and the information furnished in respect of
Credit Suisse, Lehman Brothers, Inc., Bear Stearns & Co.
Inc. and Donaldson Lufkin & Jenrette Securities Corporation,
under paragraphs 13, 14 and 15 in the Section
"Underwriting".
(c) Promptly after receipt by an indemnified
party under this Section of notice of the commencement of
any action, such indemnified party will, if a claim in
respect thereof is to be made against the indemnifying party
under subsection (a) or (b) above, notify the indemnifying
party of the commencement thereof; but the omission so to
notify the indemnifying party will not relieve it from any
liability which it may have to any indemnified party
otherwise than under subsection (a) or (b) above, except to
the extent it has been materially prejudiced by such
failure; and provided, further, that such omission will not
relieve it from any liability which it may otherwise have to
an indemnified party. In case any such action is brought
against any indemnified party and it notifies the
indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate therein
and, to the extent that it may wish, jointly with any other
indemnifying party similarly notified, to assume the defense
thereof, with counsel reasonably satisfactory to such
indemnified party and after notice from the indemnifying
party to such indemnified party of its election so to assume
the defense thereof, the indemnifying party will not be
liable to such indemnified party under this Section for any
legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof
other than reasonable costs of investigation; [provided,
however, that the indemnified party shall have the right to
employ counsel to represent the indemnified party and their
respective controlling persons who may be subject to
liability arising out of any claim in respect of which
indemnity may be sought by the indemnified party against the
indemnifying party under this Section 7 if the employment of
such counsel shall have been authorized in writing by the
indemnifying party in connection with the defense of such
action or, if in the written opinion of counsel to either
the indemnifying party or the indemnified party,
representation of both parties by the same counsel would be
inappropriate due to actual or likely conflicts of interest
between them, and in that event the fees and expenses of one
firm of separate counsel (in addition to the fees and
expenses of local counsel) shall be paid by the indemnifying
party.]. No indemnifying party shall, without the prior
written consent of the indemnified party, effect any settlement of
any pending or threatened action in respect of which any
indemnified party is or could have been a party and
indemnity could have been sought hereunder by such
indemnified party unless such settlement includes an
unconditional release of such indemnified party from all
liability on any claims that are the subject matter of such
action.
(d) If the indemnification provided for in this
Section is unavailable or insufficient to hold harmless an
indemnified party under subsection (a) or (b) above, then
each indemnifying party shall contribute to the amount paid
or payable by such indemnified party as a result of the
losses, claims, damages or liabilities referred to in
subsection (a) or (b) above (i) in such proportion as is
appropriate to reflect the relative benefits received by the
Company on the one hand and the Underwriters on the other
from the offering of the U.S. Securities or (ii) if the
allocation provided by clause (i) above is not permitted by
applicable law, in such proportion as is appropriate to
reflect not only the relative benefits referred to in clause
(i) above but also the relative fault of the Company on the
one hand and the Underwriters on the other in connection
with the statements or omissions which resulted in such
losses, claims, damages or liabilities as well as any other
relevant equitable considerations. The relative benefits
received by the Company on the one hand and the Underwriters
on the other shall be deemed to be in the same proportion as
the total net proceeds from the offering of the U.S.
Securities (before deducting expenses) received by the
Company bear to the total underwriting discounts and
commissions received by the Underwriters. The relative
fault shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a
material fact relates to information supplied by the Company
or the Underwriters and the parties' relative intent,
knowledge, access to information and opportunity to correct
or prevent such untrue statement or omission. The amount
paid by an indemnified party as a result of the losses,
claims, damages or liabilities referred to in the first
sentence of this subsection (d) shall be deemed to include
any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or
defending any action or claim which is the subject of this
subsection (d). Notwithstanding the provisions of this
subsection (d), no Underwriter shall be required to
contribute any amount in excess of the amount by which the
total price at which the U.S. Securities underwritten by it
and distributed to the public were offered to the public
exceeds the amount of any damages which such Underwriter has
otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission.
No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Act) shall be entitled to
contribution from any person who was not guilty of such
fraudulent misrepresentation. The Underwriters' obligations
in this subsection (d) to contribute are several in
proportion to their respective underwriting obligations and
not joint.
(e) The obligations of the Company under this
Section shall be in addition to any liability which the
Company may otherwise have and shall extend, upon the same
terms and conditions, to each person, if any, who controls
any Underwriter within the meaning of the Act; and the
obligations of the Underwriters under this Section shall be
in addition to any liability which the respective
Underwriters may otherwise have and shall extend, upon the
same terms and conditions, to each director of the Company,
to each officer of the Company who has signed the
Registration Statement and to each person, if any, who
controls the Company within the meaning of the Act.
8. Default of Underwriters. If any Underwriter
or Underwriters default in their obligations to purchase
U.S. Securities hereunder on either the First or any
Optional Closing Date and the aggregate number of shares of
U.S. Securities that such defaulting Underwriter or
Underwriters agreed but failed to purchase does not exceed
10% of the total number of shares of U.S. Securities that
the Underwriters are obligated to purchase on such Closing
Date, CSFBC may make arrangements satisfactory to the
Company for the purchase of such U.S. Securities by other
persons, including any of the Underwriters, but if no such
arrangements are made by such Closing Date the non-
defaulting Underwriters shall be obligated severally, in
proportion to their respective commitments hereunder, to
purchase the U.S. Securities that such defaulting
Underwriters agreed but failed to purchase on such Closing
Date. If any Underwriter or Underwriters so default and the
aggregate number of shares of U.S. Securities with respect
to which such default or defaults occur exceeds 10% of the
total number of shares of U.S. Securities that the
Underwriters are obligated to purchase on such Closing Date
and arrangements satisfactory to CSFBC and the Company for
the purchase of such U.S. Securities by other persons are
not made within 36 hours after such default, this Agreement
will terminate without liability on the part of any non-
defaulting Underwriter or the Company, except as provided in
Section 9 (provided that if such default occurs with respect
to U.S. Optional Securities after the First Closing Date,
this Agreement will not terminate as to the U.S. Firm
Securities or any U.S. Optional Securities purchased prior
to such termination). As used in this Agreement, the term
"Underwriter" includes any person substituted for an
Underwriter under this Section. Nothing herein will relieve
a defaulting Underwriter from liability for its default.
9. Survival of Certain Representations and
Obligations. The respective indemnities, agreements,
representations, warranties and other statements of the
Company or its officers and of the several Underwriters set
forth in or made pursuant to this Agreement will remain in
full force and effect, regardless of any investigation, or
statement as to the results thereof, made by or on behalf of
any Underwriter, the Company or any of their respective
representatives, officers or directors or any controlling
person, and will survive delivery of and payment for the
U.S. Securities. If this Agreement is terminated pursuant
to Section 8 or if for any reason the purchase of the U.S.
Securities by the Underwriters is not consummated, the
Company shall remain responsible for the expenses to be paid
or reimbursed by it pursuant to Section 5 and the respective
obligations of the Company and the Underwriters pursuant to
Section 7 shall remain in effect and if any U.S. Securities
have been purchased hereunder the representations and
warranties in Section 7 and in all obligations under Section
5 shall also remain in effect. If the purchase of the U.S.
Securities by the Underwriters is not consummated for any
reason other than solely because of the termination of this
Agreement pursuant to Section 8 or the occurrence of any
event specified in clause (iii), (iv), or (v) of Section
6(c), the Company will reimburse the Underwriters for all
out-of-pocket expenses (including fees and disbursements of
counsel) reasonably incurred by them in connection with the
offering of the U.S. Securities.
10. Notices. All communications hereunder will
be in writing and, if sent to the Underwriters, will be
mailed, delivered or telegraphed and confirmed to the
Representatives, c/o CS First Boston Corporation, Park
Avenue Plaza, New York, N.Y. 10055, Attention: Investment
Banking DepartmentTransactions Advisory Group, or, if sent
to the Company, will be mailed, delivered or telegraphed and
confirmed to it at , Attention:
; provided, however, that any notice to an
Underwriter pursuant to Section 7 will be mailed, delivered
or telegraphed and confirmed to such Underwriter.
11. Successors. This Agreement will inure to the
benefit of and be binding upon the parties hereto and their
respective successors and the officers and directors and
controlling persons referred to in Section 7, and no other
person will have any right or obligation hereunder.
12. Representation of Underwriters. The
Representatives will act for the several Underwriters in
connection with this financing, and any action under this
Agreement taken by the Representatives jointly or by CSFBC
will be binding upon all the Underwriters.
13. Counterparts. This Agreement may be executed
in any number of counterparts, each of which shall be deemed
to be an original, but all such counterparts shall together
constitute one and the same Agreement.
14. Applicable Law. This Agreement shall be
governed by, and construed in accordance with, the laws of
the State of New York, without regard to principles of
conflicts of laws.
The Company hereby submits to the non-exclusive
jurisdiction of the Federal and state courts in the Borough
of Manhattan in The City of New York in any suit or
proceeding arising out of or relating to this Agreement or
the transactions contemplated hereby.
If the foregoing is in accordance with the
Representatives' understanding of our agreement, kindly sign
and return to us the Company of the counterparts hereof,
whereupon it will become a binding agreement
between the Company and the several Underwriters in
accordance with its terms.
Very truly yours,
CALIFORNIA ENERGY COMPANY, INC.
By:
[insert title]
The foregoing Underwriting
Agreement is hereby
confirmed and accepted as
of the date first above
written.
CS First Boston Corporation
Bear, Stearns & Co. Inc.
Donaldson, Lufkin & Jenrette Securities
Corporation
C.J. Lawrence/Deutsche
Bank Securities Corporation
Lehman Brothers Inc.
As Representatives of the Several Underwriters,
c/o CS First Boston Corporation
Park Avenue Plaza
New York, New York 10055
Acting on behalf of
themselves and as the
Representatives of the
several Underwriters.
SCHEDULE A
Underwriter Number of
U.S. Firm Securities
CS First Boston Corporation
Bear, Stearns & Co. Inc.
Donaldson, Lufkin & Jenrette
Securities Corporation
C.J. Lawrence/Deutsche Bank
Securities Corporation
Lehman Brothers Inc.
Total 11,170,000
SCHEDULE B
I. List of Subsidiaries
Coso Hotsprings Intermountain Power, Inc. (CHIP)
Incorporated in Delaware
Capital Stock: Owned 100% by California Energy
Company, Inc. ("Parent")
China Lake Operating Co. (CLOC)
Incorporated in Delaware
Capital Stock: Owned 100% by Parent
Coso Technology Corporation (CTC)
Incorporated in Delaware
Capital Stock: Owned 100% by Parent
China Lake Geothermal Management Company (CLGMC)
Incorporated in Delaware
Capital Stock: Owned 100% by Parent
China Lake Plant Services, Inc. (CLPSI)
Incorporated in California
Capital Stock: Owned 100% by Parent
Coso Hotsprings Overland Power, Inc. (CHOP)
Incorporated in Delaware
Capital Stock: Owned 100% by Parent
CE Geothermal, Inc. (CEG)
Incorporated in Delaware
Capital Stock: Owned 100% by Parent
Western States Geothermal Company (WSG)
Incorporated in Delaware
Capital Stock: Owned 100% by Parent
Intermountain Geothermal Company (IGC)
Incorporated in Delaware
Capital Stock: Owned 100% by Parent
California Energy Development Corporation (CEDC)
Incorporated in Delaware
Capital Stock: Owned 100% by Parent
California Energy Yuma Corporation (CEYC)
Incorporated in Utah
Capital Stock: Owned 100% by CEDC
Yuma Cogeneration Associates (YCA)
Formed in Utah
General Partnership: Owned 50% by CEDC; 50% by CEYC
Rose Valley Properties, Inc. (RVP)
Incorporated in Delaware
Capital Stock: Owned 100% by Parent
The Ben Holt International Co., Inc. (BHIC)
Incorporated in Delaware
Capital Stock: Owned 100% by Parent
CBE Engineering Co. (CBE)
Incorporated in Delaware
Capital Stock: Owned 100% by Parent
Kennebec Construction, Co. (KCC)
Incorporated in California
Capital Stock: Owned 100% by BHC
CE Exploration Company (CEX)
Incorporated in Delaware
Capital Stock: Owned 100% by Parent
CE Newberry, Inc. (CEH)
Incorporated in Delaware
Capital Stock: Owned 100% by Parent
CE Acquisition Company, Inc.
Incorporated in Delaware
Capital Stock: Owned 100% by Parent
CE International Investments Ltd. (CEII)
Incorporated in Bermuda
Capital Stock: Owned 100% by Parent
CE Philippines Ltd.
Incorporated in Bermuda
Capital Stock: Owned 100% by CEII
Ormat Cebu Ltd.
Incorporated in Bermuda
Capital Stock: Owned 48% by CEII; 52% by
CE Philippines, Ltd.
CE Cebu Geothermal Power Company, Inc.
Incorporated in the Philippines
Capital Stock: Owned 52% by Ormat CEbu Ltd.; 48% by CE
Philippines Ltd.
CE Indonesia Ltd.
Incorporated in Bermuda
Capital Stock: Owned 100% by CEII
Bali Energy Ltd.
Incorporated in Bermuda
Capital Stock: Owned 100% by CE Bali Ltd. (P.T.
Pandanwangi Sekartaji has the right to purchase up
to 40% of the equity for this project)
CE Casecnan Ltd.
Incorporated in Bermuda
Capital Stock: Owned 100% by CEII
CE Singapore Ltd.
Incorporated in Bermuda
Capital Stock: Owned 100% by CEII
California Energy International Ltd.
Incorporated in Bermuda
Capital Stock: Owned 100% by CEII
CE Casecnan Water and Energy Company, Inc.
Incorporated in the Philippines
Capital Stock: Owned 100% by CE Casecnan Ltd.;
La Prairie Group Contractors (International) Ltd. and
San Lorenzo Ruiz Builders & Developers Group, Inc.
each are entitled to a 15% equity interest
CE Bali Ltd.
Incorporated in Bermuda
Capital Stock: Owned 100% by CEII
Magma Operating Company
Incorporated in Nevada
Formerly Red Hill Geothermal, Inc. (9/17/87 - 3/29/93)
Formerly Salton Sea Geothermal, Inc. (9/14/87 - 9/17/87)
Capital Stock: Owned 100% by Magma Power Company
Salton Sea Power Company
Incorporated in Nevada
Capital Stock: owned 100% by Magma Power Company
Vulcan Power Company
Incorporated in Nevada
Formerly Magmamax (1/25/72 - 6/24/81)
Formerly Magma Properties (10/21/69 - 1/25/72)
Capital Stock: Owned 100% by Magma Power Company
Imperial Magma
Incorporated in Nevada
Formerly Impak Mining Company (6/25/69 - 11/8/74)
Capital Stock: Owned 100% by Magma Power Company
Magma Land Company I
Incorporated in Nevada
Capital Stock: Owned 100% by Magma Power Company
Desert Valley Company
Incorporated in California
Capital Stock: Owned 100% by Magma Power Company
Fish Lake Power Company
Incorporated in Delaware
Formerly MPC Properties, Inc. (3/26/90 - 3/13/92)
Capital Stock: Owned 100% by Magma Power Company
Magma Netherlands, B.V.
Formed in the Netherlands
Formerly Haremhab Investments B.V. (4/3/93 - 5/20/94)
LLC Interest: Owned 100% by Magma Power Company
Visayas Geothermal Power Company
Formed in the Philippines
Partnership Interests: Magma Netherlands, B.V.
99% General Partner; Tongonan Power Investment, Inc.
1% General Partner
Tongonan Power Investment, Inc.
Incorporated in the Philippines
Capital Stock: Owned 100% by Magma Power Company
Salton Sea Brine Processing L.P.
Formed in California
Partnership Interests: Salton Sea Power Company 99%
General Partner; Magma Power Company 1% Limited Partner
Salton Sea Power Generation L.P.
Formed in California
Partnership Interests: Salton Sea Power Company 99%
General Partner; Magma Power Company 1% Limited Partner
II. List of Joint Ventures
Coso Energy Developers (CED)
Formed in California
General Partnership: 48% CHIP; 52% Caithness Coso
Holdings, L.P.
Coso Finance Partners (CFP)
Formed in California
General Partnership: 46.3% owned by CLOC; 53.7%
owned by ESCA I, L.P.
Coso Power Developers (CPD)
Formed in California
General Partnership: 50% owned by CTC; 50% by
Caithness Navy II
Coso Funding Corp. (CFC)
Incorporated in Delaware
General Partnership: Owned 33% by CFP; 35% by CPD;
32% by CED
Coso Transmission Line Partners (CTLP)
Formed in California
General Partnership: Owned 50% by CED; 50% by CPD
Coso Finance Partners II (CFP II)
Formed in California
General Partnership: Owned 50% by CLGMC, 50%
by ESCA II, L.P.
China Lake Joint Venture (CLJV)
Formed in California
General Partnership: Owned 50%
by Parent; 50% by Caithness Geothermal 1980, Ltd.
Coso Land Company (CLC)
Formed in California
General Partnership: Owned 50% by Parent;
50% by Caithness Geothermal 1980, Ltd.
Coso Geothermal Company (CGC)
Formed in California
General Partnership: Owned 57% by CLC; 16% by Parent
CE Luzon Geothermal Power Company, Inc.
Incorporated in the Philippines
Capital Stock: Owned 50% by CE Mahanagdong Ltd.;
50% by Kiewit Energy International (Bermuda) Ltd.;
an industrial company has the right to acquire 10%
of the equity - 5% from CE Mahanagdong Ltd and 5%
from Kiewit Energy International (Bermuda) Ltd.
Himpurna California Energy Ltd.
Incorporated in Bermuda
Capital Stock: Owned 90% by CE Indonesia Ltd., 10%
by P.T. Himpuma Enersindo Abadi; California Energy
International Ltd. has an option to acquire an
interest in P.T. Himpuma or its project company
shares equal to up to 4% of the project company;
under the Joint Operating Contract, Pertamina has
certain rights to acquire up to a 25% interest in the
Joint Operating Contract, but not under the Energy
Sales Contract
Patuha Power, Ltd.
Incorporated in Bermuda
Capital Stock: Owned 90% by CE Singapore Ltd.;
10% by P.T. Enersindo Supra Abadi; P.T. Enersindo
Supra Abdai has the right to acquire an additional
20% of the project equity in certain circumstances
and for a limited time; under the Joint Operating
Contract, Pertamina has certain rights to acquire up
to a 25% interest in the Joint Operating Contract,
but not under the Energy Sales Agreement
Vulcan/BN Geothermal Power Company
Formed in Nevada
Partnership Interests: Vulcan Power Company 50%
General Partner; BN Geothermal, Inc. 50% General
Partner
Del Ranch, L.P.
Formed in California
Partnership Interests: Magma Power Company 10%
Limited Partner; Magma Operating Company 40% General
Partner; Conejo Energy Company 10% Limited Partner
and 40% General Partner
Elmore, L.P.
Formed in California
Partnership Interests: Magma Power Company 10%
Limited Partner; Magma Operating Company 40% General
Partner; Niguel Energy Company 10% Limited Partner
and 40% General Partner
Leathers, L.P.
Formed in California
Partnership Interests: Magma Power Company 10%
Limited Partner; Magma Operating Company 40% General
Partner; San Felipe Energy Company 10% Limited Partner
and 40% General Partner
SCHEDULE C
[Draft of January 23, 1995]
15,170,000 Shares
CALIFORNIA ENERGY COMPANY, INC.
Common Stock
SUBSCRIPTION AGREEMENT
London, England
_____, 1995
To: CS FIRST BOSTON LIMITED
Bear, Stearns International Limited
Donaldson, Lufkin & Jenrette Securities Corporation
Deutsche Bank Aktiengesellschaft
Lehman Brothers International (Europe)
c/o: CS FIRST BOSTON LIMITED ("CSFBL")
One Cabot Square
London, England E14 4QJ
Dear Sirs:
1. Introductory. California Energy Company,
Inc., a Delaware corporation ("Company"), proposes to issue
and sell to the several Managers named in Schedule A hereto
("Managers") 4,000,000 shares ("International Firm
Securities") of its Common Stock, par value $.0675 per share
("Securities").
It is understood that the Company is concurrently
entering into an Underwriting Agreement, dated the date
hereof ("Underwriting Agreement"), with certain United
States underwriters listed in Schedule A thereto (the "U.S.
Underwriters"), for whom CS First Boston Corporation
("CSFBC"), Bear Stearns & Co. Inc., Donaldson, Lufkin &
Jenrette Securities Corporation, C.J. Lawrence/Deutsche Bank
Securities Corporation and Lehman Brothers Inc. are acting
as representatives (the "U.S. Representatives"), relating to
the concurrent offering and sale of 11,170,000 shares of
Securities ("U.S. Firm Securities") in the United States and
Canada ("U.S. Offering").
In addition, the Company proposes to issue and
sell to the U.S. Underwriters and the Managers, an option
exercisable by CSFBC for an aggregate of not more than
2,275,000 additional shares of Securities ("Optional
Securities"; the Optional Securities for the U.S. Offering
are referred to as the "U.S. Optional Securities" and the
Optional Securities for the Offering outside the United
States and Canada are referred to as the "International
Optional Securities"). The U.S. Firm Securities and the
U.S. Optional Securities are hereinafter called the "U.S.
Securities"; the International Firm Securities and the
International Optional Securities are hereinafter called the
"International Securities"; the U.S. Firm Securities and the
International Firm Securities are hereinafter called the
"Firm Securities". The U.S. Securities and the
International Securities are collectively referred to as the
"Offered Securities". To provide for the coordination of
their activities, the U.S. Underwriters and the Managers
have entered into an Agreement Between U.S. Underwriters and
Managers which permits them, among other things, to sell the
Offered Securities to each other for purposes of resale.
The Company hereby agrees with the several
Managers as follows:
2. Representations and Warranties of the Company.
The Company represents and warrants to, and agrees with, the
several Managers that:
(a) A registration statement on Form S-3 (No. 33-
57191) relating to the Offered Securities, including a
form of prospectus relating to the U.S. Securities and
a form of prospectus relating to the International
Securities being offered in the International Offering,
has been filed with the Securities and Exchange
Commission ("Commission") and either (i) has been
declared effective under the Securities Act of 1933
("Act") and is not proposed to be amended or (ii) is
proposed to be amended by amendment or post-effective
amendment. If the Company does not propose to amend
such registration statement and if any post-effective
amendment to such registration statement has been filed
with the Commission prior to the execution and delivery
of this Agreement, the most recent such amendment has
been declared effective by the Commission. For
purposes of this Agreement, "Effective Time" means
(i) if the Company has advised the Representatives that
it does not propose to amend such registration
statement, the date and time as of which such
registration statement, or the most recent
post-effective amendment thereto (if any) filed prior
to the execution and delivery of this Agreement, was
declared effective by the Commission, or (ii) if the
Company has advised the Representatives that it
proposes to file an amendment or post-effective
amendment to such registration statement, the date and
time as of which such registration statement, as
amended by such amendment or post-effective amendment,
as the case may be, is declared effective by the
Commission. "Effective Date" means the date of the
Effective Time. Such registration statement, as
amended at the Effective Time, including all material
incorporated by reference therein and including all
information (if any) deemed to be a part of such
registration statement as of the Effective Time
pursuant to Rule 430A(b) under the Act, is hereinafter
referred to as the "Registration Statement", and the
form of prospectus relating to the U.S. Securities and
the form of prospectus relating to the International
Securities, each as first filed with the Commission
pursuant to and in accordance with Rule 424(b)
("Rule 424(b)") under the Act or (if no such filing is
required) as included in the Registration Statement,
including all material incorporated by reference in
each such prospectus, are hereinafter referred to as
the "U.S. Prospectus" and the "International
Prospectus", respectively, and collectively as the
"Prospectuses".
(b) If the Effective Time is prior to the
execution and delivery of this Agreement: (i) on the
Effective Date, the Registration Statement conformed in
all material respects to the requirements of the Act
and the rules and regulations of the Commission
thereunder and did not include any untrue statement of
a material fact or omit to state any material fact
required to be stated therein or necessary to make the
statements therein not misleading, and (ii) on the date
of this Agreement, the Registration Statement conforms,
and at the time of filing of each of the Prospectuses
pursuant to Rule 424(b), the Registration Statement and
each of the Prospectuses will conform, in all respects
to the requirements of the Act and the rules and
regulations of the Commission thereunder, and none of
such documents includes, or will include, any untrue
statement of a material fact or omits, or will omit, to
state any material fact required to be stated therein
or necessary (with respect to the Prospectuses, in the
light of the circumstances under which they were made)
to make the statements therein not misleading. If the
Effective Time is subsequent to the execution and
delivery of this Agreement: on the Effective Date, the
Registration Statement and each of the Prospectuses
will conform in all respects to the requirements of the
Act and the rules and regulations of the Commission
thereunder, and none of such documents will include any
untrue statement of a material fact or will omit to
state any material fact required to be stated therein
or necessary to make the statements therein not
misleading. The two preceding sentences do not apply
to statements in or omissions from the Registration
Statement or either of the Prospectuses based upon
written information furnished to the Company by any
Manager through CSFBL or by any U.S. Underwriter
through the U.S. Representatives specifically for use
therein, it being understood and agreed that the only
such information is that described as such in
Section 7(b).
(c) The documents incorporated by reference in
the Registration Statement and the Prospectuses, when
they became effective or were last amended or filed
with the Commission, as the case may be, conformed in
all material respects to the requirements of the Act or
the Securities Exchange Act of 1934 as amended
("Exchange Act"), as applicable, and the rules and
regulations of the Commission under the Act and the
Exchange Act, as applicable ("Rules and Regulations"),
and none of such documents contained an untrue
statement of a material fact or omitted to state a
material fact required to be stated therein or
necessary to make the statements therein not misleading
in light of the circumstances under which they were
made, and any further documents so filed and
incorporated by reference in the Prospectuses, when
such documents become effective or are filed with the
Commission, as the case may be, shall conform in all
material respects to the requirements of the Act or
the Exchange Act, as applicable, and the Rules and
Regulations of the Commission and shall not contain
an untrue statement of a material fact or omit to state
a material fact required to be stated therein or
necessary to make the statements therein not misleading
in light of the circumstances under which they were
made.
(d) The Company, each Subsidiary (as defined
below) and each Joint Venture (as defined below) have
been duly organized and are validly existing and, if
applicable, in good standing under the laws of their
respective jurisdictions of organization as a
corporation or partnership, as the case may be, and
have the power and authority to own, lease and operate
their property and conduct their businesses as
described in the Prospectuses; the Company, the
Subsidiaries and the Joint Ventures are duly qualified
to do business and are in good standing as foreign
corporations or foreign partnerships, as the case may
be, in each jurisdiction, domestic or foreign, in which
such registration or qualification or good standing is
required (whether by reason of the ownership or leasing
of property, the conduct of business or otherwise),
except where the failure to so register or qualify or
be in good standing is not reasonably likely to have a
material adverse effect on the financial condition,
business or results of operations of the Company, its
Subsidiaries and Joint Ventures taken as a whole; and
the Company has all requisite corporate power and
authority to enter into this Agreement, and to
consummate the transactions contemplated hereby. For
purposes of this Agreement, (A) the term "Subsidiary"
shall mean the entities listed as such on Schedule B
hereto, and (B) the term "Joint Venture" shall mean the
entities listed as such on Schedule B hereto, it being
understood that such term means the general or limited
partnership or other joint venture entity and not the
individual general or limited partners or other joint
venturers thereof. The Subsidiaries listed on
Schedule B are all the material direct and indirect
"subsidiaries" of the Company, as such term is defined
in Rule 405 of the Rules and Regulations, and are all
of the "Significant Subsidiaries" of the Company, as
such term is defined in Rule 1-02 of Regulation S-X.
(e) The Offered Securities and all the other
issued and outstanding shares of capital stock of the
Company have been validly authorized; all outstanding
shares of capital stock of the Company are, and when
the Offered Securities have been delivered and paid for
in accordance with this Agreement and the Underwriting
Agreement on each Closing Date (as defined below) such
Offered Securities will have been, validly issued,
fully-paid and nonassessable and will conform in all
material respects to the description thereof contained
in the Prospectuses; there are no preemptive or similar
rights to subscribe for or to purchase, nor any
restriction on the transfer of, the Offered Securities
except as provided in the Shareholders Agreement dated
as of February 18, 1991 by and between the Company and
Kiewit Energy Company, as amended, in respect of which
a waiver has been received regarding the Offered
Securities; all the outstanding shares of capital stock
of each Subsidiary have been duly and validly
authorized and issued and are fully-paid and
nonassessable; and except as otherwise set forth or
referred to in the Prospectuses, all outstanding shares
of capital stock of each Subsidiary are owned
beneficially by the Company free and clear of any
material claims, liens, encumbrances and security
interests. All of the partnership interests in Joint
Ventures beneficially owned by the Company (as
reflected in Schedule B) have been duly and validly
authorized and issued and, except as otherwise
disclosed or referred to in the Prospectuses, are owned
beneficially by the Company free and clear of any
material claims, liens, encumbrances and security
interests.
(f) The authorized capital stock of the Company,
including the Offered Securities, conforms as to legal
matters in all material respects to the description
thereof contained in the Prospectuses.
(g) Except (i) in respect of the agreement
between the Company and Gleacher & Co., Inc.
("Gleacher"), dated December 22, 1994, whereby Gleacher
will be entitled to, among other things, a success fee
("Success Fee") in the amount of 20% of the total
underwriting fee (not to exceed $250,000), and (ii) as
otherwise disclosed in the Prospectuses, there are no
contracts, agreements or understandings between the
Company and any person that would give rise to a valid
claim against the Company or any U.S. Underwriter or
Manager for a brokerage commission, finder's fee or
other like payment.
(h) There are no contracts, agreements or
understandings between the Company and any person
granting such person the right to require the Company
to file a registration statement under the Act with
respect to any securities of the Company owned or to be
owned by such person or to require the Company to
include any such securities in the securities
registered pursuant to the Registration Statement or in
any securities being registered pursuant to any other
registration statement filed by the Company under the
Act except for the registration rights agreement dated
February 18, 1991, as amended by Amendment No. 1, dated
June 19, 1991, between the Company and Kiewit Energy
Company and the registration rights agreement dated
June 19, 1991, as amended by Amendment No. 1, dated
November 20, 1991, between the Company and Kiewit
Energy Company, the rights under which have been waived
in respect of the Offered Securities.
(i) The Securities are listed on the New York
Stock Exchange and the London Stock Exchange (the
"Stock Exchanges").
(j) The execution, delivery and performance of
this Agreement and the Underwriting Agreement, and the
issuance and sale of the Offered Securities shall not
(A) conflict with the corporate charter or by-laws or
partnership agreement of the Company, any Subsidiary or
any Joint Venture, (B) conflict with, result in the
creation or imposition of any lien, charge or other
encumbrance upon any asset of the Company, any
Subsidiary or any Joint Venture pursuant to the terms
of, or constitute a breach of, or default under, any
agreement, indenture or other instrument to which the
Company, any Subsidiary or any Joint Venture is a party
or by which the Company, any Subsidiary or any Joint
Venture is bound or to which any of the properties of
the Company, any Subsidiary or any Joint Venture is
subject, or (C) result in a violation of any statute,
any rule, regulation, order, judgment or decree of any
court or governmental agency, body or authority having
jurisdiction over the Company, any Subsidiary or any
Joint Venture or any of their properties where any such
conflicts, encumbrances, breaches, defaults or
violations under clauses (B) or (C), individually or in
the aggregate, is reasonably likely to have a material
adverse effect on the financial condition, business or
results of operations of the Company, the Subsidiaries
and Joint Ventures taken as a whole. Except for (A)
the registration of the Offered Securities under the
Act, (B) such consents, approvals, authorizations,
registrations or qualifications as may be required
under the Exchange Act and applicable state securities
laws in connection with the purchase and distribution
of the Offered Securities by the U.S. Underwriters and
(C) the waiver by Kiewit Energy Company, Inc. of its
preemptive rights and its right to include securities
in the Registration Statement, which has been obtained
prior to the date of this Agreement, no consent,
approval, authorization or order of, or filing or
registration by the Company, any Subsidiary or, to the
best of the Company's knowledge, any Joint Venture
with, any court, governmental agency or third party is
required in connection with the execution, delivery and
performance of this Agreement and the Underwriting
Agreement, the consummation of the transactions
contemplated herein and therein, and the issuance,
distribution and sale of the Offered Securities as
contemplated herein and therein. The Company has
full power and authority to authorize, issue and
sell the Offered Securities as contemplated by this
Agreement and the Underwriting Agreement, respectively.
(k) This Agreement and the Underwriting Agreement
have been duly authorized, executed and delivered by
the Company.
(l) Except as disclosed in or contemplated by the
Prospectuses, the Company, each Subsidiary and each
Joint Venture holds, as applicable, good and valid
title to, or valid and enforceable leasehold or
contractual interests in, all real properties and all
other properties and assets owned or leased by each of
them that are material to the business of each such
entity, in each case free from liens, encumbrances and
defects that would materially affect the value thereof
or materially interfere with the use made or to be made
thereof by them.
(m) Except as disclosed in the Prospectuses, the
Company, the Subsidiaries and the Joint Ventures carry,
or are covered by, insurance in such amounts and
covering such risks as is customary for similarly
situated companies in the Company's, such Subsidiaries'
and such Joint Ventures' industries, respectively.
Each of the foregoing insurance policies is valid and
in full force and effect, and no event has occurred and
is continuing that permits, or after notice or lapse of
time or both would permit, modifications or
terminations of the foregoing that, individually or in
the aggregate, is reasonably likely to have a material
adverse effect on the financial condition, business or
results of operations of the Company, the Subsidiaries
and Joint Ventures taken as a whole.
(n) Except as disclosed in the Prospectuses, the
Company, each Subsidiary and each Joint Venture (i) has
obtained each license, permit, certificate, franchise
or other governmental authorization which is material
to the ownership of their properties or to the conduct
of their businesses as described in the Prospectuses
and (ii) is in compliance with all terms and conditions
of such license, permit, certificate, franchise or
other governmental authorization, except (x) in either
case where the failure to do so is not reasonably
likely to have, individually or in the aggregate, a
material adverse effect on the financial condition,
business or results of operations of the Company and
the Subsidiaries and Joint Ventures taken as a whole,
(y) permits, consents and approvals that may be
required for future drilling or operating activities
which are ordinarily deemed to be ministerial in nature
and which are anticipated to be obtained in the
ordinary course and (z) permits, consents and approvals
for developmental or construction activities which have
not yet been obtained but which have been or will be
applied for in the course of development or
construction and which are anticipated to be obtained
in the ordinary course.
(o) There is no legal or governmental action,
suit or proceeding before any court, governmental
agency, body or authority, domestic or foreign, now
pending or, to the knowledge of the Company, threatened
against, or, to the knowledge of the Company,
involving, the Company, any Subsidiary or any Joint
Venture (i) of a character required to be disclosed in
the Registration Statement which is not adequately
disclosed in the Registration Statement or (ii) that,
if determined adversely to the Company, any Subsidiary
or any Joint Venture, is reasonably likely to have,
individually or in the aggregate, a material adverse
effect on the financial condition, business or results
of operations of the Company, the Subsidiaries and
Joint Ventures taken as a whole or on the ability of
the Company to perform its obligations under this
Agreement or the Underwriting Agreement.
(p) The conditions for use of Form S-3, as set
forth in the General Instructions thereto, have been
satisfied.
(q) The Company, the Subsidiaries and the Joint
Ventures are currently conducting their respective
businesses as described in the Prospectuses.
(r) There are no contracts or other documents
that are required to be described in the Prospectuses
or filed as exhibits to the Registration Statement by
the Act or by the Rules and Regulations that have not
been described in the Prospectuses or filed as exhibits
to the Registration Statement or incorporated therein
by reference as permitted by the Rules and Regulations.
(s) There is no relationship, direct or indirect,
that exists between or among the Company on the one
hand, and the directors, officers, stockholders,
customers or suppliers of the Company on the other
hand, that is required by the Act or by the Rules and
Regulations to be described in the Prospectuses and
which is not so described.
(t) There is no labor problem or disturbance with
the persons employed by the Company, any Subsidiary or
any Joint Venture that exists or, to the knowledge of
the Company, that is threatened and that might
reasonably be expected to have a material adverse
effect on the financial condition, business or results
of operations of the Company, the Subsidiaries and
Joint Ventures taken as a whole.
(u) The Company and each person who is a member
of a group which is under common control with the
Company and its Subsidiaries and its Joint Ventures,
who together with the Company, the Subsidiaries and its
Joint Ventures is treated as a single employer ("ERISA
Affiliate") within the meaning of Section 414(b), (c),
(m) or (o) of the Internal Revenue Code of 1986, as
amended from time to time ("IRC"), or Section 4001(b)
of the Employment Retirement Income Security Act of
1974, as amended from time to time ("ERISA"), is in
compliance with all applicable provisions of ERISA and
the regulations and published interpretations
thereunder with respect to all employee benefit plans
within the meaning of Section 3(3) of ERISA which is
established, sponsored or maintained for, or on behalf
of, its current or former employees, officers or
directors by the Company, or the Subsidiaries or Joint
Ventures or any ERISA Affiliate or has at any time
within the preceding six years been established,
sponsored or maintained for, or on behalf of, its
current or former employees, officers or directors by
the Company, or the Subsidiaries or Joint Ventures or
any current or former ERISA Affiliate ("Employee
Benefit Plans"). Each Employee Benefit Plan that is
intended to be qualified under Section 401(a) of the
IRC has been determined by the Internal Revenue Service
to be so qualified, and each trust related to such plan
has been determined to be exempt from tax pursuant to
Section 501(a) of the IRC. No material liability has
been incurred by the Company, or the Subsidiaries or
Joint Ventures or any ERISA Affiliate which remains
unsatisfied for any taxes or penalties with respect to
any Employee Benefit Plan. No Employee Benefit Plan
which is subject to the provisions of Title IV of ERISA
or Section 412 of the IRC ("Pension Plan") has been
terminated, nor has any accumulated funding deficiency
(as defined in Section 412 of the IRC) been incurred.
Neither the Company nor any of its Subsidiaries or
Joint Ventures nor, in the case of clauses (ii) and
(iii) hereof, any ERISA Affiliate has: (i) engaged in
a nonexempt prohibited transaction described in Section
406 of ERISA or Section 4975 of the IRC; (ii) incurred
any liability to the Pension Benefit Guaranty
Corporation or any successor thereto ("PBGC") which
remains outstanding other than the payment of premiums
and there are no premium payments which are due and
unpaid; or (iii) failed to make a required installment
or other required payment under Section 412 of the IRC,
which in any such case in clauses (i) through (iii),
the occurrence of which results in or could reasonably
be expected to result in a material adverse effect on
the financial condition, business or results of
operations of the Company, the Subsidiaries and Joint
Ventures taken as a whole.
No "reportable event" (as defined in Section
4043 of ERISA) Termination Event has occurred or is
reasonably expected to occur with respect to any
Employee Benefit Plan which has or could reasonably be
expected to have a material adverse effect on the
financial condition, business or results of operations
of the Company and the Subsidiaries and Joint Ventures
taken as a whole. Neither the Company nor any of its
Subsidiaries, Joint Ventures or ERISA Affiliates has
incurred or expects to incur any liability under
Title IV of ERISA arising in connection with the
termination of or withdrawal from an Employee Benefit
Plan covered or previously covered by Title IV of
ERISA.
(v) None of the Company, any Subsidiary or any
Joint Venture (i) is in violation of its respective
charter, by-laws or partnership agreements, (ii) is in
default, and no event exists and is continuing that,
with notice or lapse of time or both, would constitute
such a default, in the due performance and observance
of any material term contained in any lease, license,
indenture, mortgage, deed of trust, note, bank loan or
other evidence of indebtedness or any other agreement,
understanding or instrument to which the Company, any
Subsidiary or any Joint Venture is a party or by which
the Company, any Subsidiary or any Joint Venture or any
property of the Company, any Subsidiary or any Joint
Venture may be bound or affected, which default,
individually or in the aggregate, is reasonably likely
to have a material adverse effect on the financial
condition, business or results of operations of the
Company, the Subsidiaries and Joint Ventures taken as a
whole, or (iii) is in violation of any law, ordinance,
governmental rule or regulation or court decree to
which it may be subject, which violation, individually
or in the aggregate, is reasonably likely to have a
material adverse effect on the financial condition,
business or results of operations of the Company, the
Subsidiaries and Joint Ventures taken as a whole.
(w) There has been no storage, disposal,
generation, manufacture, refinement, transportation,
handling or treatment of toxic wastes, hazardous wastes
or hazardous substances by the Company, any Subsidiary
or any Joint Venture (or, to the knowledge of the
Company, any of their predecessors in interest) at,
upon or from any of the property now or previously
owned or leased by the Company, any Subsidiary or any
Joint Venture in violation of any applicable law,
ordinance, rule, regulation, order, judgment, decree or
permit or which would require remedial action under any
applicable law, ordinance, rule, regulation, order,
judgment, decree or permit, except for any violation or
remedial action which does not have, or would not be
reasonably likely to have, individually or in the
aggregate with all such violations and remedial
actions, a material adverse effect on the financial
condition, business or results of operations of the
Company, the Subsidiaries and the Joint Ventures taken
as a whole; there has been no material spill,
discharge, leak, emission, injection, escape, dumping
or release of any kind onto such property or into the
environment surrounding such property of any toxic
wastes, solid wastes, hazardous wastes or hazardous
substances due to or caused by the Company, any
Subsidiary or any Joint Venture or with respect to
which the Company, any Subsidiary or any Joint Venture
has knowledge, except for any such spill, discharge,
leak, emission, injection, escape, dumping or release
which does not have, or would not be reasonably likely
to have, individually or in the aggregate with all such
spills, discharges, leaks, emissions, injections,
escapes, dumpings and releases, a material adverse
effect on the financial condition, business or results
of operations of the Company, the Subsidiaries and the
Joint Ventures taken as a whole; and the terms
"hazardous wastes", "toxic wastes" and "hazardous
substances" shall have the meanings specified in any
applicable local, state, federal and foreign laws or
regulations with respect to environmental protection.
(x) Neither the Company nor any Subsidiary or
Joint Venture is, and, after giving effect to the
issuance of the Offered Securities and the application
of the proceeds therefrom, shall be, an "investment
company," or, to the best knowledge of the Company
after due inquiry, a company "controlled" by an
"investment company" within the meaning of the
Investment Company Act of 1940, as amended (the "1940
Act").
(y) The Company, each Subsidiary and each Joint
Venture has filed all federal, state and local income
and franchise tax returns required to be filed through
the date hereof, or has filed extensions in accordance
with applicable law, and has paid all taxes required to
be paid through the date hereof thereon, except for
such failures to file or pay that would not,
individually or in the aggregate, be reasonably likely
to have a material adverse effect on the financial
condition, business or results of operations of the
Company and the Subsidiaries and Joint Ventures taken
as a whole, and no tax deficiency has been determined
adversely to the Company, any Subsidiary or any Joint
Venture that has had (nor does the Company have any
knowledge of any tax deficiency which, if determined
adversely to the Company, any Subsidiary or any Joint
Venture would be reasonably likely to have) a material
adverse effect on the financial condition, business or
results of operations of the Company and the
Subsidiaries and Joint Ventures taken as a whole.
(z) The financial statements of the Company and
its consolidated subsidiaries and the related notes and
schedules included or incorporated by reference in the
Registration Statement and the Prospectuses fairly
present the financial position, the results of
operations and the cash flows of the Company and its
consolidated subsidiaries at the respective dates and
for the respective periods to which they apply; such
financial statements and the related notes and
schedules have been prepared in conformity with United
States generally accepted accounting principles applied
on a consistent basis throughout the periods therein
specified. The capitalization of the Company, as set
forth in the column labeled "The Company" under the
caption "Capitalization" in the Prospectus, is
accurately described as of the date presented therein.
(aa) Since the date of the latest audited
financial statements included in the Prospectuses
(i) there has been no material adverse change, nor any
development or event involving a prospective material
adverse change, in the financial condition, business or
results of operations of the Company, the Subsidiaries
and Joint Ventures taken as a whole, and (ii) except as
disclosed in the Prospectuses, there have not been any
transactions entered into by the Company, the
Subsidiaries or any Joint Venture, other than those in
the ordinary course of business, which are material to
the Company, its Subsidiaries and Joint Ventures taken
as a whole; except as disclosed in the Prospectuses,
there has been no dividend or distribution of any kind
declared, paid or made by the Company on any class of
its capital stock.
(bb) Neither the Company nor any of its affiliates
does business with the government of Cuba or with any
person or affiliate located in Cuba within the meaning
of Section 517.075, Florida Statutes and the Company
agrees to comply with such Section if prior to the
completion of the distribution of the Offered
Securities it commences doing such business.
(cc) Deloitte & Touche, who have certified certain
financial statements of the Company, and Coopers &
Lybrand, who have certified certain financial
statements of Magma Power Company ("Magma"), whose
reports appear in the Prospectuses or are incorporated
by reference therein, each are and were independent
public accountants as required by the Act and the Rules
and Regulations during the periods covered by the
financial statements on which they reported contained
or incorporated in the Prospectuses.
(dd) (i) Each of the operational electric
generation facilities ("Plants") owned in whole or
part, directly or indirectly by (A) the Company,
(B) the Subsidiaries or (C) the Joint Ventures is
located in the United States and is a "qualifying
cogeneration facility" ("QF") or a "qualifying small
power production facility" ("Small Power QF"), as such
terms are defined under the Federal Power Act, as
amended ("FPA"), and the regulations thereunder, and
has continuously been in compliance with the requirements
for being a QF or Small Power QF since it commenced sales
of electricity; (ii) the owner or operator of each of the
Plants under development by the Company, the Subsidiaries
or Joint Ventures and located in the United States will
either qualify as a QF, a Small Power QF or an "exempt
wholesale generator" ("EWG"), as such terms are defined
under the FPA, the Public Utility Holding Company Act
of 1935, as amended ("PUHCA") and the regulations
thereunder; (iii) the owner or operator of each of the
Plants under development by the Company, the
Subsidiaries or Joint Ventures and located outside the
United States will, no later than the date operations
commence, qualify either (A) as an EWG or (B) as a
"foreign utility company," as such term is defined
under PUHCA and the regulations thereunder; (iv) none
of the entities identified in clause (A) or (B) of
subparagraph (i) above owns or operates any electric
distribution facilities or any electric transmission
facilities other than electric transmission facilities
that are part of a QF or Small Power QF; and (v) none
of the entities identified in clause (A), (B) or (C) of
subparagraph (i) above is a "public utility holding
company" or a "subsidiary company" of a "public utility
holding company," as those terms are defined under
PUHCA or is subject to regulation under the FPA, other
than as contemplated by 18 C.F.R. Section 292.601(c),
or, except as described in the Registration Statement,
subject to regulation by any state law with respect to
rates or the financial or organizational regulation of
electric utilities.
3. Purchase, Sale and Delivery of Offered
Securities. On the basis of the representations, warranties
and agreements herein contained, but subject to the terms
and conditions herein set forth, the Company agrees to sell
to the Managers, and the Managers agree, severally and not
jointly, to purchase from the Company, at a purchase price
of U.S.$ per share (representing the offering price
of U.S.$ per share less a selling concession of
U.S.$ per share), the respective numbers of shares of
International Firm Securities set forth opposite the names
of the Managers in Schedule A hereto.
The Company will deliver the International Firm
Securities to CSFBL for the accounts of the Managers, [If
delivery to be in different city from payment, insertat the
office of ,] against payment of the
purchase price in U.S. dollars by certified or official bank
check or checks in New York Clearing House (next day) funds
drawn to the order of at the office of
, at A.M., New York time, on
, or at such other time not later than
seven full business days thereafter as CSFBL and the Company
determine, such time being herein referred to as the "First
Closing Date". The certificates for the International Firm
Securities so to be delivered will be in definitive form, in
such denominations and registered in such names as CSFBL
requests and will be made available for checking and
packaging at the [above] office of ,
at least 24 hours prior to the First Closing Date.
In addition, upon written notice from CSFBC given
to the Company from time to time not more than 30 days
subsequent to the date of the initial public offering of the
Offered Securities, the U.S. Underwriters and the Managers
may purchase all or less than all of the Optional Securities
at the purchase price per Security to be paid for the Firm
Securities. The International Optional Securities to be
purchased by the Managers on any Optional Closing Date (as
defined below) shall be in the same proportion to all the
Optional Securities to be purchased by the Managers and U.S.
Underwriters on such Optional Closing Date as the
International Firm Securities bear to all the Firm
Securities and the U.S. Optional Securities to be purchased
by the U.S. Underwriters on any Optional Closing Date shall
be in the same proportion to all the Optional Securities to
be purchased by the U.S. Underwriters and the Managers on
such Optional Closing Date as the U.S. Firm Securities bear
to all the Firm Securities. The Company agrees to sell to
the Managers such International Optional Securities and the
Managers agree, severally and not jointly, to purchase such
International Optional Securities. Such International
Optional Securities shall be purchased for the account of
each Manager in the same proportion as the number of shares
of International Firm Securities set forth opposite such
Manager's name bears be the total number of shares of
International Firm Securities (subject to adjustment by
CSFBC to eliminate fractions). The Optional Securities may
be purchased by the U.S. Underwriters and the Managers only
for the purpose of covering over-allotments made in
connection with the sale of the Firm Securities. No
Optional Securities shall be sold or delivered unless the
related Firm Securities previously have been, or
simultaneously are, sold and delivered. The right to
purchase the Optional Securities or any portion thereof may
be exercised from time to time and to the extent not
previously exercised may be surrendered and terminated at
any time upon notice by CSFBC on behalf of the Managers and
the U.S. Underwriters to the Company.
Each time for the delivery of and payment for the
International Optional Securities, being herein referred to
as an "Optional Closing Date", which may be the First
Closing Date (the First Closing Date and each Optional
Closing Date, if any, being sometimes referred to as a
"Closing Date"), shall be determined by CSFBC but shall be
not later than seven full business days after written notice
of election to purchase Optional Securities is given. The
Company will deliver the International Optional Securities
being purchased on each Optional Closing Date to CSFBL for
the accounts of the several Managers, against payment of the
purchase price therefor by certified or official bank check
or checks in New York Clearing House (next day) funds drawn
to the order of , at the [above]
office of . The certificates for
the International Optional Securities will be in definitive
form, in such denominations and registered in such names as
CSFBL requests upon reasonable notice prior to such Optional
Closing Date and will be made available for checking and
packaging at the [above] office of ,
at a reasonable time in advance of the such Optional Closing
Date.
The Company will pay to the Managers as aggregate
compensation for their commitments hereunder and for their
services in connection with the purchase of the
International Securities and the management of the offering
thereof, if the sale and delivery of the International
Securities to the Managers provided herein is consummated,
an amount equal to U.S. $ per International Security,
which may be divided among the Managers in such proportions
as they may determine. Such payment will be made on the
First Closing Date in the case of the International Firm
Securities and on each Optional Closing Date in the case of
the International Optional Securities sold to the Managers
on such Closing Date in each case by way of deduction by the
Managers of said amount from the purchase price for the
International Securities referred to above.
4. Offering by Managers. It is understood that
the several Managers propose to offer the International
Securities for sale to the public, and upon the terms and
conditions, as set forth in the International Prospectus.
In connection with the distribution of the
International Securities, the Managers, through a
stabilizing manager, may over-allot or effect transactions
on any exchange, in any over-the-counter market or otherwise
which stabilize or maintain the market prices of the
International Securities at levels other than those which
might otherwise prevail, but in such event and in relation
thereto, the Managers will act for themselves and not as
agents of the Company, and any loss resulting from
over-allotment and stabilization will be borne, and any
profit arising therefrom will be beneficially retained, by
the Managers. Such stabilizing, if commenced, may be
discontinued at any time.
5. Certain Agreements of the Company. The
Company agrees with the several Managers that:
(a) If the Effective Time is prior to the
execution and delivery of this Agreement, the Company
will file each of the Prospectuses with the Commission
pursuant to and in accordance with subparagraph (1)
(or, if applicable and if consented to by CSFBL,
subparagraph (4)) of Rule 424(b) not later than the
earlier of (A) the second business day following the
execution and delivery of this Agreement or (B) the
fifth business day after the Effective Date. The
Company will advise CSFBL promptly of any such filing
pursuant to Rule 424(b).
(b) The Company will advise CSFBL promptly of any
proposal to amend or supplement the registration
statement as filed or either of the related
prospectuses or the Registration Statement or either of
the Prospectuses and will not effect such amendment or
supplementation without CSFBL's prior consent, which
consent shall not be unreasonably withheld; and the
Company will also advise CSFBL promptly of the
effectiveness of the Registration Statement (if the
Effective Time is subsequent to the execution and
delivery of this Agreement) and of any amendment or
supplementation of the Registration Statement or either
of the Prospectuses and of the institution by the
Commission of any stop order proceedings in respect of
the Registration Statement and will use its reasonable
best efforts to prevent the issuance of any such stop
order and to obtain as soon as possible its lifting, if
issued.
(c) If, at any time when a prospectus relating to
the Offered Securities is required, in the opinion of
counsel for the Underwriters, to be delivered under the
Act in connection with sales by any U.S. Underwriter,
Manager or dealer any event occurs as a result of which
either or both of the Prospectuses as then amended or
supplemented would include an untrue statement of a
material fact or omit to state any material fact
necessary to make the statements therein, in the light
of the circumstances under which they were made, not
misleading, or if it is necessary at any such time to
amend either or both of the Prospectuses to comply with
the Act, the Company will promptly notify CSFBL of such
event and will promptly prepare and file with the
Commission, at its own expense, an amendment or
supplement which will correct such statement or
omission or an amendment which will effect such
compliance. Neither CSFBL's consent to, nor the
Managers' delivery of, any such amendment or supplement
shall constitute a waiver of any of the conditions set
forth in Section 6.
(d) As soon as practicable, but not later than
the Availability Date (as defined below), the Company
will make generally available to its securityholders an
earnings statement (which need not be audited) covering
a period of at least 12 months beginning after the
Effective Date which will satisfy the provisions of
Section 11(a) of the Act. For the purpose of the
preceding sentence, "Availability Date" means the 45th
day after the end of the fourth fiscal quarter
following the fiscal quarter that includes the
Effective Date, except that, if such fourth fiscal
quarter is the last quarter of the Company's fiscal
year, "Availability Date" means the 90th day after the
end of such fourth fiscal quarter.
(e) The Company will furnish to the Managers
copies of the Registration Statement (six of which will
be signed and will include all exhibits), each
preliminary prospectus relating to the International
Securities, and, until completion of the distribution
of the International Securities as determined by CSFBL,
the International Prospectus and all amendments and
supplements to such documents, in each case as soon as
available and in such quantities as CSFBL requests.
The Company will pay the expenses of printing and
distributing to the Managers all such documents.
(f) No action has been or, prior to the
completion of the distribution of the Offered
Securities will be taken by the Company in any
jurisdiction outside the United States and Canada that
would permit a public offering of the Offered
Securities, or possession or distribution of the
International Prospectus, or any amendment or
supplement thereto, or any related preliminary
prospectus issued in connection with the offering of
the Offered Securities, or any other offering material,
in any country or jurisdiction where action for that
purpose is required.
(g) During the period of three years hereafter,
the Company will furnish to CSFBL and, upon request, to
each of the other Managers, as soon as practicable
after the end of each fiscal year, a copy of its annual
report to stockholders for such year; and the Company
will furnish to CSFBL (i) as soon as available, a copy
of each report and any definitive proxy statement of
the Company filed with the Commission under the
Securities Exchange Act of 1934 or mailed to
stockholders, and (ii) from time to time, such other
information concerning the Company as CSFBL may
reasonably request.
(h) The Company will pay all expenses incident to
the performance of its obligations under this Agreement
and will reimburse the Managers (if and to the extent
incurred by them) for the filing fee of the National
Association of Securities Dealers, Inc. relating to the
Offered Securities, for any travel expenses of the
Company's officers and employees and any other expenses
of the Company in connection with attending or hosting
meetings with prospective purchasers of the Offered
Securities and for expenses incurred in distributing
preliminary prospectuses and the Prospectuses
(including any amendments and supplements thereto) to
the Managers. In addition to the foregoing, the
Underwriting Agreement provides that the Company will
pay to the U.S. Representatives on behalf of the U.S.
Underwriters and the Managers on the First Closing Date
the sum (for their respective accounts in proportion to
their commitments to purchase the Offered Securities
pursuant to this Agreement and the Underwriting
Agreement) contemplated in Section 5(h) of the
Underwriting Agreement. Such amount may be deducted
from the purchase price for the Offered Securities set
forth in Section 3. Except as provided in this
paragraph (h), the Underwriters and Managers shall pay
the Gleacher Success Fee in paragraph 2(g) hereof and
their own costs and expenses, including the costs and
expenses of their legal counsel, any transfer taxes on
the Offered Securities that they may sell and the
expenses of marketing and advertising any offering of
the Offered Securities made by them.
(i) The Company will indemnify and hold harmless
the Managers against any documentary, stamp or similar
issuance tax, including any interest and penalties, on
the creation, issuance and sale of the Offered
Securities and on the execution and delivery of this
Agreement. All payments to be made by the Company
hereunder shall be made without withholding or
deduction for or on account of any present or future
taxes, duties or governmental charges whatsoever unless
the Company is compelled by law to deduct or withhold
such taxes, duties or charges. In that event, the
Company shall pay such additional amounts as may be
necessary in order that the net amounts received after
such withholding or deduction shall equal the amounts
that would have been received if no withholding or
deduction had been made.
(j) For a period of 90 days after the date of the
initial public offering of the Offered Securities,
neither the Company nor its directors or officers will
offer, sell, contract to sell, pledge or otherwise
dispose of, directly or indirectly, or file with the
Commission a registration statement under the Act
relating to, any additional shares of their Securities
or securities convertible into or exchangeable or
exercisable for any shares of the Company's Securities, or
publicly disclose the intention to make any such offer,
sale, pledge, disposal or filing, without the prior
written consent of CSFBC, except issuances of
Securities pursuant to the conversion or exchange of
convertible or exchangeable securities or the exercise
of warrants or options, in each case outstanding on the
date hereof. The Company shall, concurrently with the
execution of this Agreement, deliver to CSFBL an
agreement executed by each of the directors and
officers of the Company pursuant to which each such
person agrees, not to offer, sell, contract to sell,
pledge, grant any option to purchase, or otherwise
dispose of any of the Company's Securities or any
securities convertible into or exercisable or
exchangeable for such Securities for a period of 90
days after the date of the initial public offering of
the Offered Securities.
(k) The Company shall apply the net proceeds from
the sale of the Offered Securities as set forth in the
Prospectuses.
(l) The Company shall use its best efforts to
have the Offered Securities listed on the Stock
Exchanges concurrently with the Effective Time.
6. Conditions of the Obligations of the Managers.
The obligations of the several Managers to purchase and pay
for the International Firm Securities on the First Closing
Date and the International Optional Securities to be
purchased on each Optional Closing Date will be subject to
the accuracy of the representations and warranties on the
part of the Company herein, to the accuracy of the
statements of Company officers made pursuant to the
provisions hereof, to the performance by the Company of its
obligations hereunder and to the following additional
conditions precedent:
(a) The Managers shall have received a
letter, dated the date of delivery thereof (which, if
the Effective Time is prior to the execution and
delivery of this Agreement, shall be on or prior to the
date of this Agreement or, if the Effective Time is
subsequent to the execution and delivery of the
Agreement, shall be prior to the filing of the
amendment or post-effective amendment to the
registration statement to be filed shortly prior to the
Effective Time), of Deloitte & Touche and Coopers &
Lybrand, in the agreed form.
(b) If the Effective Time is not prior to
the execution and delivery of this Agreement, the
Effective Time shall have occurred not later than
8:00 P.M., New York time, on the date of this Agreement
or such later date as shall have been consented to by
CSFBL. If the Effective Time is prior to the execution
and delivery of this Agreement, each of the
Prospectuses shall have been filed with the Commission
in accordance with the Rules and Regulations and
Section 5(a) of this Agreement. Prior to such Closing
Date, no stop order suspending the effectiveness of the
Registration Statement shall have been issued and no
proceedings for that purpose shall have been instituted
or, to the knowledge of the Company or the Managers,
shall be contemplated by the Commission.
(c) Subsequent to the execution and delivery
of this Agreement, there shall not have occurred (A) a
change in U.S. or international financial, political or
economic conditions or currency exchange rates or
exchange controls as would, in the judgment of CSFBL,
be likely to prejudice materially the success of the
proposed issue, sale or distribution of the
International Securities, whether in the primary market
or in respect of dealings in the secondary market, or
(B)(i) any change, or any development or event
involving a prospective change, in the financial
condition, business or results of operations of the
Company, the Subsidiaries and the Joint Ventures, taken
as a whole, which, in the judgment of CSFBL, is
material and adverse and makes it impractical or
inadvisable to proceed with completion of the public
offering or the sale of and payment for the
International Securities; (ii) any downgrading in the
rating of any debt securities or preferred stock of the
Company by any "nationally recognized statistical
rating organization" (as defined for purposes of Rule
436(g) under the Act), or any public announcement that
any such organization has under surveillance or review
its rating of any debt securities or preferred stock of
the Company (other than an announcement with positive
implications of a possible upgrading, and no
implication of a possible downgrading, of such rating);
(iii) any suspension or limitation of trading in
securities generally on the New York Stock Exchange [or
the London Stock Exchange], or any setting of minimum
prices for trading on such exchanges, or any suspension
of trading of any securities of the Company on any
exchange or in the over-the-counter market; (iv) any
banking moratorium declared by U.S. Federal, New York
[or United Kingdom] authorities; or (v) any outbreak or
escalation of major hostilities in which the United
States is involved, any declaration of war by the
United States Congress or any other substantial
national or international calamity or emergency if, in
the judgment of CSFBL, the effect of any such outbreak,
escalation, declaration, calamity or emergency on the
financial markets makes it impractical or inadvisable
to proceed with completion of the public offering or
the sale of and payment for the International
Securities.
(d) The Managers shall have received
opinions, dated such Closing Date, of Steven A.
McArthur, General Counsel to the Company, and Willkie
Farr & Gallagher, special counsel to the Company, in
the agreed form.
(e) The Managers shall have received from
Chadbourne & Parke, counsel for the Managers, such
opinion or opinions, dated such Closing Date, with
respect to the incorporation of the Company, the
validity of the Offered Securities delivered on such
Closing Date, the Registration Statement, the
Prospectuses and other related matters as the Managers
may require, and the Company shall have furnished to
such counsel such documents as they request for the
purpose of enabling them to pass upon such matters.
(f) The Managers shall have received a
certificate, dated such Closing Date, of the President
or any Vice-President and a principal financial or
accounting officer of the Company in which such
officers shall state that, to the best of their
knowledge after reasonable investigation, the
representations and warranties of the Company in this
Agreement and the Underwriting Agreement are true and
correct, that the Company has complied with all
agreements and satisfied all conditions on its part to
be performed or satisfied hereunder at or prior to such
Closing Date, that no stop order suspending the
effectiveness of the Registration Statement has been
issued and no proceedings for that purpose have been
instituted or are contemplated by the Commission and
that, subsequent to the date of the most recent
financial statements in the Prospectuses, there has
been no material adverse change, nor any development or
event involving a prospective material adverse change,
in the condition (financial or other), business,
properties or results of operations of the Company, the
Subsidiaries and the Joint Ventures taken as a whole
except as set forth in or contemplated by the
Prospectuses or as described in such certificate.
(g) The Managers shall have received
letters, dated such Closing Date, of Deloitte & Touche
and Coopers & Lybrand which meet the requirements of
subsection (a) of this Section, except that the
specified date referred to in such subsection will be a
date not more than five days prior to such Closing Date
for the purposes of this subsection.
(h) The merger of CE Acquisition Company,
Inc., a Delaware corporation and a wholly-owned
subsidiary of the Company, with and into Magma pursuant
to the All-Cash Option (defined in the Prospectuses)
shall have become effective and all required filings in
respect thereof shall have been made in the States of
Nevada and Delaware.
(i) On such Closing Date, the U.S.
Underwriters shall have purchased the U.S. Firm
Securities or the U.S. Optional Securities, as the case
may be, pursuant to the Underwriting Agreement.
(j) Since the date of the latest audited
financial statements included or incorporated by reference
in the Prospectuses (i) except as disclosed in the
Prospectuses, there shall have been no material adverse
change, or a development which is reasonably likely to
lead to a material adverse change, in the financial condition,
business or results of operations of the Company, the
Subsidiaries and Joint Ventures taken as a whole and (ii)
except as disclosed in the Prospectuses, there shall not have
been any transactions entered into by the Company, the
Subsidiaries or any Joint Venture, other than those in
the ordinary course of business, which are material and
adverse to the Company, the Subsidiaries and Joint
Ventures taken as a whole, and which, in the judgment
of the Representatives, make it impracticable or
inadvisable to proceed with the public offering or the
delivery of the Offered Securities on the terms and in
the manner contemplated in the Prospectuses.
Documents described as being "in the agreed form" are
documents which are in the forms which have been initialed
for the purpose of identification by Chadbourne & Parke,
copies of which are held by the Company and CSFBL with such
changes as CSFBL may approve. The Company will furnish the
Managers with such conformed copies of such opinions,
certificates, letters and documents as the Managers
reasonably request, CSFBL may in its sole discretion waive
on behalf of the Managers compliance with any conditions to
the obligations of the Managers hereunder, whether in
respect of an Optional Closing Date or otherwise.
7. Indemnification and Contribution. (a) The
Company will indemnify and hold harmless each Manager
against any losses, claims, damages or liabilities, joint or
several, to which such Manager may become subject, under the
Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or
are based upon any untrue statement or alleged untrue
statement of any material fact contained in the Registration
Statement, either of the Prospectuses, or any amendment or
supplement thereto, or any related preliminary prospectus,
or arise out of or based upon the omission or alleged
omission to state therein a material fact required to be
stated therein or necessary to make the statements therein
(with respect to the Prospectuses, in light of the
circumstances under which they were made) not misleading,
and will reimburse each Manager for any legal or other
expenses reasonably incurred by such Manager in connection
with investigating or defending any such loss, claim,
damage, liability or action as such expenses are incurred;
provided, however, that the Company will not be liable in
any such case to the extent that any such loss, claim,
damage, liability or action arises out of or is based upon
an untrue statement or alleged untrue statement in or
omission or alleged omission from any of such documents in
reliance upon and in conformity with written information
furnished to the Company by or on behalf of any Manager
through CSFBL specifically for use therein, it being
understood and agreed that the only information furnished by
any Manager consists of the information described as such in
subsection (b) below; and provided, further, that, with
respect to any untrue statement or omission in any
Preliminary Prospectuses, this indemnity agreement shall not
inure to the benefit of any Manager on account of any loss,
claim, damage, liability or action arising from the sale of
any Offered Securities to any person by that Manager if that
Manager failed to send or give a copy of the Prospectuses,
as the same may be amended or supplemented, to that person
within the time required by the Act, and the untrue
statement or alleged untrue statement of a material fact or
omission or alleged omission to state a material fact in
such Preliminary Prospectuses was corrected in the
Prospectuses and the Prospectuses were made available to the
Managers prior to the sale of the Offered Securities. For
purposes of the last proviso to the immediately preceding
sentence, the term "Prospectuses" shall not be deemed to
include the documents incorporated by reference therein, and
no Manager shall be obligated to send or give any supplement
or amendment to any document incorporated by reference in
any Preliminary Prospectuses or Prospectuses to any person
other than a person to whom such Manager had delivered such
incorporated document or documents in response to a written
request therefor.
Insofar as the foregoing indemnity agreement, or
the representations and warranties contained in Section
2(b), may permit indemnification for liabilities under the
Act of any person who is a Manager or a partner or
controlling person of a Manager within the meaning of
Section 15 of the Act and who, at the date of this
Agreement, is a director, officer or controlling person of
the Company, the Company has been advised that in the
opinion of the Commission such provisions may contravene
Federal public policy as expressed in the Act and may
therefore be unenforceable. In the event that a claim for
indemnification under such agreement or such representations
and warranties for any such liabilities (except insofar as
such agreement provides for the payment by the Company of
expenses incurred or paid by a director, officer or
controlling person in the successful defense of any action,
suit or proceeding) is asserted by such a person, the
Company will submit to a court of appropriate jurisdiction
(unless in the opinion of counsel for the Company the matter
has already been settled by controlling precedent) the
question of whether or not indemnification by it for such
liabilities is against public policy as expressed in the Act
and therefore unenforceable, and the Company will be
governed by the final adjudication of such issue.
(b) Each Manager will severally and not jointly
indemnify and hold harmless the Company against any losses,
claims, damages or liabilities to which the Company may
become subject, under the Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact
contained in the Registration Statement, either of the
Prospectuses, or any amendment or supplement thereto, or any
related preliminary prospectus, or arise out of or are based
upon the omission or the alleged omission to state therein a
material fact required to be stated therein or necessary to
make the statements therein not misleading, in each case to
the extent, but only to the extent, that such untrue
statement or alleged untrue statement or omission or alleged
omission was made in reliance upon and in conformity with
written information furnished to the Company by or on behalf
of such Manager through CSFBL specifically for use therein,
and will reimburse any legal or other expenses reasonably
incurred by the Company in connection with investigating or
defending any such loss, claim, damage, liability or action
as such expenses are incurred, it being understood and
agreed that the only such information furnished by any
Manager consists of the following information in the
International Prospectus furnished by or on behalf of each
Manager: the last paragraph at the bottom of the cover page
concerning the terms of the offering by the Managers, the
legend concerning over-allotments and stabilizing on page 2,
the legend concerning transactions by certain affiliates
participating in the distribution on page 2, the concession
and reallowance figures appearing in the fifth paragraph
under the caption "Subscription and Sale" and under
paragraphs 6, 7, 8, 9, 12, 13 and 14 under the caption
"Subscription and Sale".
(c) Promptly after receipt by an indemnified
party under this Section of notice of the commencement of
any action, such indemnified party will, if a claim in
respect thereof is to be made against the indemnifying party
under subsection (a) or (b) above, notify the indemnifying
party of the commencement thereof; but the omission so to
notify the indemnifying party will not relieve it from any
liability which it may have to any indemnified party otherwise
than under subsection (a) or (b) above except to the extent
it has been materially prejudiced by such failure; and provided,
further, that such omission will not relieve it from any liability
which it may otherwise have to an indemnified party. In case any
such action is brought against any indemnified party and it
notifies the indemnifying party of the commencement thereof,
the indemnifying party will be entitled to participate
therein and, to the extent that it may wish, jointly with
any other indemnifying party similarly notified, to assume
the defense thereof, with counsel satisfactory to such
indemnified party (who shall not, except with the consent of
the indemnified party, be counsel to the indemnifying
party), and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense
thereof, the indemnifying party will not be liable to such
indemnified party under this Section for any legal or other
expenses subsequently incurred by such indemnified party in
connection with the defense thereof other than reasonable
costs of investigation, provided, however, that the
indemnified party shall have the right to employ counsel to
represent the indemnified party and their respective
controlling persons who may be subject to liability arising
out of any claim in respect of which indemnity may be sought
by the indemnified party against the indemnifying party
under this Section 7 if the employment of such counsel shall
have been authorized in writing by the indemnifying party in
connection with the defense of such action or, if in the
written opinion of counsel to either the indemnifying party
or the indemnified party, representation of both parties by
the same counsel would be inappropriate due to actual or
likely conflicts of interest between them, and in that event
the fees and expenses of one firm of separate counsel (in
addition to the fees and expenses of local counsel) shall be
paid by the indemnifying party. No indemnifying party
shall, without the prior written consent of the indemnified
party, effect any settlement of any pending or threatened
action in respect of which any indemnified party is or could
have been a party and indemnity could have been sought
hereunder by such indemnified party unless such settlement
includes an unconditional release of such indemnified party
from all liability on any claims that are the subject matter
of such action.
(d) If the indemnification provided for in this
Section is unavailable or insufficient to hold harmless an
indemnified party under subsection (a) or (b) above, then
each indemnifying party shall contribute to the amount paid
or payable by such indemnified party as a result of the
losses, claims, damages or liabilities referred to in
subsection (a) or (b) above (i) in such proportion as is
appropriate to reflect the relative benefits received by the
Company on the one hand and the Managers on the other from
the offering of the International Securities or (ii) if the
allocation provided by clause (i) above is not permitted by
applicable law, in such proportion as is appropriate to
reflect not only the relative benefits referred to in clause
(i) above but also the relative fault of the Company on the
one hand and the Managers on the other in connection with
the statements or omissions which resulted in such losses,
claims, damages or liabilities as well as any other relevant
equitable considerations. The relative benefits received by
the Company on the one hand and the Managers on the other
shall be deemed to be in the same proportion as the total
net proceeds from the offering of the International
Securities (before deducting expenses) received by the
Company bear to the total underwriting discounts and
commissions received by the Managers. The relative fault
shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material
fact or the omission or alleged omission to state a material
fact relates to information supplied by the Company or the
Managers and the parties' relative intent, knowledge, access
to information and opportunity to correct or prevent such
untrue statement or omission. The amount paid by an
indemnified party as a result of the losses, claims, damages
or liabilities referred to in the first sentence of this
subsection (d) shall be deemed to include any legal or other
expenses reasonably incurred by such indemnified party in
connection with investigating or defending any action or
claim which is the subject of this subsection (d).
Notwithstanding the provisions of this subsection (d), no
Manager shall be required to contribute any amount in excess
of the amount by which the total price at which the
International Securities underwritten by it and distributed
to the public were offered to the public exceeds the amount
of any damages which such Manager has otherwise been
required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty
of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Act) shall be entitled to contribution
from any person who was not guilty of such fraudulent
misrepresentation. The Managers' obligations in this
subsection (d) to contribute are several in proportion to
their respective underwriting obligations and not joint.
(e) The obligations of the Company under this
Section shall be in addition to any liability which the
Company may otherwise have and shall extend, upon the same
terms and conditions, to each person, if any, who controls
any Manager within the meaning of the Act; and the
obligations of the Managers under this Section shall be in
addition to any liability which the respective Managers may
otherwise have and shall extend, upon the same terms and
conditions, to each director of the Company, to each officer
of the Company who has signed the Registration Statement and
to each person, if any, who controls the Company within the
meaning of the Act.
8. Default of Managers. If any Manager or
Managers default in their obligations to purchase
International Securities hereunder on either the First or
any Optional Closing Date and the aggregate number of shares
of International Securities that such defaulting Manager or
Managers agreed but failed to purchase does not exceed 10%
of the total number of shares of International Securities
that the Managers are obligated to purchase on such Closing
Date, CSFBL may make arrangements satisfactory to the
Company for the purchase of such International Securities by
other persons, including any of the Managers, but if no such
arrangements are made by such Closing Date the non-
defaulting Managers shall be obligated severally, in
proportion to their respective commitments hereunder, to
purchase the International Securities that such defaulting
Managers agreed but failed to purchase on such Closing Date.
If any Manager or Managers so default and the aggregate
number of shares of International Securities with respect to
which such default or defaults occur exceeds 10% of the
total number of shares of International Securities that the
Managers are obligated to purchase on such Closing Date and
arrangements satisfactory to CSFBL and the Company for the
purchase of such International Securities by other persons
are not made within 36 hours after such default, this
Agreement will terminate without liability on the part of
any non-defaulting Manager or the Company, except as
provided in Section 9 (provided that if such default occurs
with respect to International Optional Securities after the
First Closing Date, this Agreement will not terminate as to
the International Firm Securities or any International
Optional Securities purchased prior to such termination).
As used in this Agreement, the term "Manager" includes any
person substituted for a Manager under this Section.
Nothing herein will relieve a defaulting Manager from
liability for its default.
9. Survival of Certain Representations and
Obligations. The respective indemnities, agreements,
representations, warranties and other statements of the
Company or its officers and of the several Managers set
forth in or made pursuant to this Agreement will remain in
full force and effect, regardless of any investigation, or
statement as to the results thereof, made by or on behalf of
any Manager, the Company or any of their respective
representatives, officers or directors or any controlling
person, and will survive delivery of and payment for the
International Securities. If this Agreement is terminated
pursuant to Section 8 or if for any reason the purchase of
the International Securities by the Managers is not
consummated, the Company shall remain responsible for the
expenses to be paid or reimbursed by it pursuant to Section
5 and the respective obligations of the Company and the
Managers pursuant to Section 7 shall remain in effect and if
any International Securities have been purchased hereunder
the representations and warranties in Section 2 and all
obligations under Section 5 shall also remain in effect. If
the purchase of the International Securities by the Managers
is not consummated for any reason other than solely because
of the termination of this Agreement pursuant to Section 8
or the occurrence of any event specified in Section 6(c)(A)
or clause (iii), (iv) or (v) of Section 6(c)(B), the Company
will reimburse the Managers for all out-of-pocket expenses
(including fees and disbursements of counsel) reasonably
incurred by them in connection with the offering of the
International Securities.
10. Notices. All communications hereunder will
be in writing and, if sent to the Managers, will be mailed,
delivered or telexed and confirmed to CSFBL at One Cabot
Square, London E14 4QJ England, Attention: Company
Secretary, or, if sent to the Company, will be mailed,
delivered or telegraphed and confirmed to it at
, Attention: ;
provided however, that any notice to a Manager pursuant to
Section 7 will be mailed, delivered or telexed and confirmed
to such Manager.
11. Successors. This Agreement will inure to the
benefit of and be binding upon the parties hereto and their
respective successors and the officers and directors and
controlling persons referred to in Section 7, and no other
person will have any right or obligation hereunder.
12. Representation of Managers. CSFBL will act
for the several Managers in connection with this financing,
and any action under this Agreement taken by CSFBL will be
binding upon all the Managers.
13. Counterparts. This Agreement may be executed
in any number of counterparts, each of which shall be deemed
to be an original, but all such counterparts shall together
constitute one and the same Agreement.
14. Applicable Law. This Agreement shall be
governed by, and construed in accordance with, the laws of
the State of New York, without regard to principles of
conflicts of laws.
The Company hereby submits to the non-exclusive
jurisdiction of the Federal and state courts in the Borough
of Manhattan in The City of New York in any suit or
proceeding arising out of or relating to this Agreement or
the transactions contemplated hereby.
If the foregoing is in accordance with the
Managers' understanding of our agreement, kindly sign and
return to us the Company of the counterparts hereof,
whereupon it will become a binding agreement between the
Company and the several Managers in accordance with its
terms.
Very truly yours,
CALIFORNIA ENERGY COMPANY, INC.
By
[Insert title]
The foregoing Subscription Agreement is
hereby confirmed and accepted as of
the date first above written.
CS FIRST BOSTON LIMITED
By:
[Insert title]
Bear, Stearns International Limited
Donaldson, Lufkin & Jenrette Securities Corporation
Deutsche Bank Aktiengesellschaft
Lehman Brothers International (Europe)
Each by its duly authorized attorney-in-fact:
[Insert name]
SCHEDULE A
Manager Number of
International
Firm Securities
CS First Boston Limited . . . . .
Bear, Stearns International Limited . . . . . . . . . . . .
Donaldson, Lufkin & Jenrette Securities Corporation. . . . .
Deutsche Bank Aktiengesellschaft
Lehman Brothers International (Europe). . . . . . . . . . .
Total . . . . . . . . . . . . . 4,000,000
SCHEDULE B
I. List of Subsidiaries
Coso Hotsprings Intermountain Power, Inc. (CHIP)
Incorporated in Delaware
Capital Stock: Owned 100% by California Energy
Company, Inc. ("Parent")
China Lake Operating Co. (CLOC)
Incorporated in Delaware
Capital Stock: Owned 100% by Parent
Coso Technology Corporation (CTC)
Incorporated in Delaware
Capital Stock: Owned 100% by Parent
China Lake Geothermal Management Company (CLGMC)
Incorporated in Delaware
Capital Stock: Owned 100% by Parent
China Lake Plant Services, Inc. (CLPSI)
Incorporated in California
Capital Stock: Owned 100% by Parent
Coso Hotsprings Overland Power, Inc. (CHOP)
Incorporated in Delaware
Capital Stock: Owned 100% by Parent
CE Geothermal, Inc. (CEG)
Incorporated in Delaware
Capital Stock: Owned 100% by Parent
Western States Geothermal Company (WSG)
Incorporated in Delaware
Capital Stock: Owned 100% by Parent
Intermountain Geothermal Company (IGC)
Incorporated in Delaware
Capital Stock: Owned 100% by Parent
California Energy Development Corporation (CEDC)
Incorporated in Delaware
Capital Stock: Owned 100% by Parent
California Energy Yuma Corporation (CEYC)
Incorporated in Utah
Capital Stock: Owned 100% by CEDC
Yuma Cogeneration Associates (YCA)
Formed in Utah
General Partnership: Owned 50% by CEDC; 50% by CEYC
Rose Valley Properties, Inc. (RVP)
Incorporated in Delaware
Capital Stock: Owned 100% by Parent
The Ben Holt Co. (BHC)
Incorporated in Delaware
Capital Stock: Owned 100% by Parent
CBE Engineering Co. (CBE)
Incorporated in Delaware
Capital Stock: Owned 100% by Parent
Kennebec Construction, Co. (KCC)
Incorporated in California
Capital Stock: Owned 100% by BHC
CE Exploration Company (CEX)
Incorporated in Delaware
Capital Stock: Owned 100% by Parent
CE Newberry, Inc. (CEH)
Incorporated in Delaware
Capital Stock: Owned 100% by Parent
CE Acquisition Company, Inc.
Incorporated in Delaware
Capital Stock: Owned 100% by Parent
CE International Investments Ltd. (CEII)
Incorporated in Bermuda
Capital Stock: Owned 100% by Parent
CE Philippines Ltd.
Incorporated in Bermuda
Capital Stock: Owned 100% by CEII
Ormat Cebu Ltd.
Incorporated in Bermuda
Capital Stock: Owned 48% by CEII; 52% by
CE Philippines, Ltd.
CE Cebu Geothermal Power Company, Inc.
Incorporated in the Philippines
Capital Stock: Owned 52% by Ormat Cebu Ltd.; 48% by CE
Philippines Ltd.
CE Indonesia Ltd.
Incorporated in Bermuda
Capital Stock: Owned 100% by CEII
Bali Energy Ltd.
Incorporated in Bermuda
Capital Stock: Owned 100% by CE Bali Ltd. (P.T.
Pandanwangi Sekartaji has the right to purchase up
to 40% of the equity for this project)
CE Casecnan Ltd.
Incorporated in Bermuda
Capital Stock: Owned 100% by CEII
CE Singapore Ltd.
Incorporated in Bermuda
Capital Stock: Owned 100% by CEII
California Energy International Ltd.
Incorporated in Bermuda
Capital Stock: Owned 100% by CEII
CE Casecnan Water and Energy Company, Inc.
Incorporated in the Philippines
Capital Stock: Owned 100% by CE Casecnan Ltd.;
La Prairie Group Contractors (International) Ltd. and
San Lorenzo Ruiz Builders & Developers Group, Inc.
each are entitled to a 15% equity interest
CE Bali Ltd.
Incorporated in Bermuda
Capital Stock: Owned 100% by CEII
Magma Operating Company
Incorporated in Nevada
Formerly Red Hill Geothermal, Inc. (9/17/87 - 3/29/93)
Formerly Salton Sea Geothermal, Inc. (9/14/87 - 9/17/87)
Capital Stock: Owned 100% by Magma Power Company
Salton Sea Power Company
Incorporated in Nevada
Capital Stock: Owned 100% by Magma Power Company
Vulcan Power Company
Incorporated in Nevada
Formerly Magmamax (1/25/72 - 6/24/81)
Formerly Magma Properties (10/21/69 - 1/25/72)
Capital Stock: Owned 100% by Magma Power Company
Imperial Magma
Incorporated in Nevada
Formerly Impak Mining Company (6/25/69 - 11/8/74)
Capital Stock: Owned 100% by Magma Power Company
Magma Land Company I
Incorporated in Nevada
Capital Stock: Owned 100% by Magma Power Company
Desert Valley Company
Incorporated in California
Capital Stock: Owned 100% by Magma Power Company
Fish Lake Power Company
Incorporated in Delaware
Formerly MPC Properties, Inc. (3/26/90 - 3/13/92)
Capital Stock: Owned 100% by Magma Power Company
Magma Netherlands, B.V.
Formed in the Netherlands
Formerly Haremhab Investments B.V. (4/3/93 - 5/20/94)
LLC Interest: Owned 100% by Magma Power Company
Visayas Geothermal Power Company
Formed in the Philippines
Partnership Interests: Magma Netherlands, B.V.
99% General Partner; Tongonan Power Investment, Inc.
1% General Partner
Tongonan Power Investment, Inc.
Incorporated in the Philippines
Capital Stock: Owned 100% by Magma Power Company
Salton Sea Brine Processing L.P.
Formed in California
Partnership Interests: Salton Sea Power Company 99%
General Partner; Magma Power Company 1% Limited Partner
Salton Sea Power Generation L.P.
Formed in California
Partnership Interests: Salton Sea Power Company 99%
General Partner; Magma Power Company 1% Limited Partner
II. List of Joint Ventures
Coso Energy Developers (CED)
Formed in California
General Partnership: 48% CHIP; 52% Caithness Coso
Holdings, L.P.
Coso Finance Partners (CFP)
Formed in California
General Partnership: 46.3% owned by CLOC; 53.7%
owned by ESCA I, L.P.
Coso Power Developers (CPD)
Formed in California
General Partnership: 50% owned by CTC; 50% by
Caithness Navy II
Coso Funding Corp. (CFC)
Incorporated in Delaware
General Partnership: Owned 33% by CFP; 35% by CPD;
32% by CED
Coso Transmission Line Partners (CTLP)
Formed in California
General Partnership: Owned 50% by CED; 50% by CPD
Coso Finance Partners II (CFP II)
Formed in California
General Partnership: Owned 50% by CLGMC, 50%
by ESCA II, L.P.
China Lake Joint Venture (CLJV)
Formed in California
General Partnership: Owned 50%
by Parent; 50% by Caithness Geothermal 1980, Ltd.
Coso Land Company (CLC)
Formed in California
General Partnership: Owned 50% by Parent;
50% by Caithness Geothermal 1980, Ltd.
Coso Geothermal Company (CGC)
Formed in California
General Partnership: Owned 57% by CLC; 16% by Parent
CE Luzon Geothermal Power Company, Inc.
Incorporated in the Philippines
Capital Stock: Owned 50% by CE Mahanagdong Ltd.;
50% by Kiewit Energy International (Bermuda) Ltd.;
an industrial company has the right to acquire 10%
of the equity - 5% from CE Mahanagdong Ltd. and 5%
from Kiewit Energy International (Bermuda) Ltd.
Himpurna California Energy Ltd.
Incorporated in Bermuda
Capital Stock: Owned 90% by CE Indonesia Ltd., 10%
by P.T. Himpuma Enersindo Abadi; California Energy
International Ltd. has an option to acquire an
interest in P.T. Himpuma or its project company
shares equal to up to 4% of the project company;
under the Joint Operating Contract, Pertamina has
certain rights to acquire up to a 25% interest in the
Joint Operating Contract, but not under the Energy
Sales Contract
Patuha Power, Ltd.
Incorporated in Bermuda
Capital Stock: Owned 90% by CE Singapore Ltd.;
10% by P.T. Enersindo Supra Abadi; P.T. Enersindo
Supra Abdai has the right to acquire an additional
20% of the project equity in certain circumstances
and for a limited time; under the Joint Operating
Contract, Pertamina has certain rights to acquire up
to a 25% interest in the Joint Operating Contract,
but not under the Energy Sales Agreement
Vulcan/BN Geothermal Power Company
Formed in Nevada
Partnership Interests: Vulcan Power Company 50%
General Partner; BN Geothermal, Inc. 50% General
Partner
Del Ranch, L.P.
Formed in California
Partnership Interests: Magma Power Company 10%
Limited Partner; Magma Operating Company 40% General
Partner; Conejo Energy Company 10% Limited Partner
and 40% General Partner
Elmore, L.P.
Formed in California
Partnership Interests: Magma Power Company 10%
Limited Partner; Magma Operating Company 40% General
Partner; Niguel Energy Company 10% Limited Partner
and 40% General Partner
Leathers, L.P.
Formed in California
Partnership Interests: Magma Power Company 10%
Limited Partner; Magma Operating Company 40% General
Partner; San Felipe Energy Company 10% Limited Partner
and 40% General Partner
SCHEDULE C
EXHIBIT 5.1
January 23, 1995
California Energy Company, Inc.
10831 Old Mill Road
Omaha, Nebraska 68154
Gentlemen:
We have acted as counsel to California Energy Company, Inc. (the "Company"), a
corporation organized under the laws of the State of Delaware, in connection
with the preparation of a Registration Statement on Form S-3 (the "Registration
Statement") relating to the offer and sale by the Company (the "Offering") of
19,170,000 shares (the "Shares") of common stock, par value $.0675 per share
(the "Common Stock"), of the Company.
We have examined copies of the Certificate of Incorporation and By-Laws of the
Company, and the amendments thereto, the Registration Statement, applicable
resolutions adopted by the Company's Board of Directors and other records and
documents that we have deemed necessary for the purpose of this opinion. We
have also examined such other documents, papers, statutes and authorities as we
have deemed necessary to form a basis for the opinion hereinafter expressed.
In our examination, we have assumed the genuineness of all signatures and the
conformity to original documents of all copies submitted to us. As to various
questions of fact material to our opinion, we have relied on statements and
certificates of officers and representatives of the Company and public
officials.
Our opinion set forth in clause (2) below is based on the provisions of the
Internal Revenue Code of 1986, as amended, regulations under such Code,
judicial authority and current administrative rulings and practice, all as of
the date of this letter, and all of which may change at any time.
Based on the foregoing, we are of the opinion that (1) the Shares, when duly
sold, issued and paid for in accordance with the terms of the Prospectus
included as part of the Registration Statement (the "Prospectus") and when
approval of the shareholders of the Company of a proposal to increase the
number of authorized shares of Common Stock from 60,000,000 shares to
80,000,000 shares is obtained by the Company, will be duly authorized and
validly issued and will be fully paid and nonassessable, and (2) the section of
the Prospectus entitled "Certain Tax Considerations" contains an accurate
discussion of all material Federal income tax consequences of ownership of
Shares to the typical shareholder.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to us in the Prospectus.
Very truly yours,
/s/ Willkie Farr & Gallagher
<PAGE>
EXHIBIT 15.1
California Energy Company, Inc.
Omaha, Nebraska
We have made a review, in accordance with standards established by the
American Institute of Certified Public Accountants, of the unaudited interim
financial information of California Energy Company, Inc. for the periods
ended March 31, 1994 and 1993, June 30, 1994 and 1993, and September 30, 1994
and 1993, as indicated in our reports dated April 14, 1994, July 15, 1994,
and October 19, 1994, respectively; because we did not perform an audit, we
expressed no opinion on that information.
We are aware that our reports referred to above, which were included in
your Quarterly Reports on Form 10-Q for the quarters ended March 31, 1994,
June 30, 1994 and September 30, 1994 are being incorporated by reference in
this Registration Statement on Form S-3.
We are also aware that the aforementioned reports, pursuant to Rule 436(C)
under the Securities Act of 1933, are not considered a part of the
Registration Statement prepared or certified by an accountant or a report
prepared or certified by an accountant within the meaning of Sections 7 and
11 of the Act.
/s/ DELOITTE & TOUCHE LLP
DELOITTE & TOUCHE LLP
Omaha, Nebraska
January 18, 1995
<PAGE>
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration
Statement of California Energy Company, Inc. on Form S-3 of the reports of
Deloitte & Touche dated February 24, 1994 (which reports express an
unqualified opinion and include an explanatory paragraph referring to
California Energy Company, Inc.'s adoption effective January 1, 1993, of
Statement of Financial Accounting Standards No. 109, Accounting for Income
Taxes, appearing in and incorporated by reference in the Annual Report on
Form 10-K of California Energy Company, Inc. for the year ended December 31,
1993 and to the reference to Deloitte & Touche LLP under the heading
"Experts' in the Prospectus, which is part of this Registration Statement.
/s/ DELOITTE & TOUCHE LLP
DELOITTE & TOUCHE LLP
Omaha, Nebraska
January 18, 1995
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the Registration Statement
of California Energy Company, Inc. on Form S-3 of our report dated March 18,
1994, on our audits of the consolidated financial statements and consolidated
financial statement schedules of Magma Power Company and subsidiaries as of
December 31, 1993 and 1992 and for each of the three years in the period
ended December 31, 1993, included in the Annual Report on Form 10-K and to
the incorporation by reference of our report dated May 6, 1993 on our audits
of the Statement of Net Assets Acquired as of March 31, 1993 and Historical
Summaries of Gross Revenues and Direct Operating Expenses for each of the
three years in the period ended December 31, 1992 of the Imperial Valley
Geothermal Interests (acquired by Magma Power Company from Union Oil Company
of California) included on Form 8-K/A. We also consent to the reference to
our Firm under the caption "Experts."
/s/ COOPERS & LYBRAND L.L.P.
COOPERS & LYBRAND L.L.P.
San Diego, California
January 20, 1995
