<PAGE>
FILED PURSUANT TO RULE 424(b)(5)
REGISTRATION NO. 33-61959
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED NOVEMBER 21, 1995
12,000,000 PREFERRED SECURITIES
PG&E CAPITAL I
7.90% CUMULATIVE QUARTERLY INCOME PREFERRED SECURITIES (QUIPS(SM))*, SERIES A
(LIQUIDATION PREFERENCE $25 PER PREFERRED SECURITY)
GUARANTEED TO THE EXTENT THE SERIES A ISSUER HAS FUNDS AS SET FORTH HEREIN BY
PACIFIC GAS AND ELECTRIC COMPANY
---------------
The 7.90% Cumulative Quarterly Income Preferred Securities, Series A (the
"Series A Preferred Securities"), offered hereby represent preferred undivided
beneficial interests in the assets of PG&E Capital I, a statutory business
trust formed under the laws of the State of Delaware (the "Series A Issuer").
PG&E will be the owner of the beneficial interests represented by Common
Securities of the Series A Issuer. The First National Bank of Chicago is the
Property Trustee of the Series A Issuer. The Series A Issuer exists for the
sole purpose of issuing its trust interests and investing the proceeds thereof
in 7.90% Deferrable Interest Subordinated Debentures, Series A, Due 2025 (the
"Series A Debentures") to be issued by PG&E. The preferred interests
represented by the Series A Preferred Securities will have a preference under
certain circumstances with respect to cash distributions and amounts payable
on liquidation, redemption or otherwise over the trust interests represented
by the Common Securities of the Series A Issuer. See "Description of the
Preferred Securities--Subordination of Common Securities" in the accompanying
Prospectus.
Holders of the Series A Preferred Securities will be entitled to receive
cumulative cash Distributions accruing from the date of original issuance and
payable quarterly in arrears on March 31, June 30, September 30 and December
31 of each year, commencing December 31, 1995, at the rate of 7.90% per annum,
payable from amounts received by the Series A Issuer as interest on the Series
A Debentures. So long as an Event of Default under the Indenture has not
occurred and is continuing, PG&E has the right to defer payments of interest
on the Series A Debentures by extending the interest payment period thereon at
any time for up to 20 consecutive quarters (each an "Extension Period"). If
and for so long as interest payments
(Continued on next page)
---------------
SEE "RISK FACTORS" AT PAGE S-4 HEREOF FOR CERTAIN INFORMATION RELEVANT TO AN
INVESTMENT IN THE SERIES A PREFERRED SECURITIES, INCLUDING THE PERIOD AND
CIRCUMSTANCES DURING WHICH PAYMENT OF DISTRIBUTIONS ON THE SERIES A PREFERRED
SECURITIES AND SERIES A DEBENTURES MAY BE DEFERRED AND THE RELATED FEDERAL
INCOME TAX CONSEQUENCES.
---------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT
OR THE PROSPECTUS TO WHICH IT RELATES. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
---------------
<TABLE>
<CAPTION>
INITIAL PUBLIC UNDERWRITING PROCEEDS TO THE
OFFERING PRICE COMMISSION(1) SERIES A ISSUER(2)(3)
-------------- ------------- ---------------------
<S> <C> <C> <C>
Per Series A Preferred Security.. $25.00 (2) $25.00
Total............................ $300,000,000 (2) $300,000,000
</TABLE>
- -------
(1) The Series A Issuer and PG&E have agreed to indemnify the several
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933. See "Underwriting".
(2) In view of the fact that the proceeds of the sale of the Series A Preferred
Securities will be used to purchase the Series A Debentures, the
Underwriting Agreement provides that PG&E will pay to the Underwriters, as
compensation ("Underwriters' Compensation") for their arranging the
investment therein of such proceeds, $0.7875 per Series A Preferred
Security (or $9,450,000 in the aggregate). See "Underwriting".
(3) Expenses of the offering, which are payable by PG&E, are estimated to be
$785,000.
---------------
The Series A Preferred Securities offered hereby are offered severally by
the Underwriters, as specified herein and subject to receipt and acceptance by
them and subject to their right to reject any order in whole or in part. It is
expected that delivery of the Series A Preferred Securities will be made only
in book-entry form through the facilities of DTC on or about November 28,
1995.
- -------
* QUIPS is a service mark of Goldman, Sachs & Co.
GOLDMAN, SACHS & CO.
DEAN WITTER REYNOLDS INC.
A.G. EDWARDS & SONS, INC.
LEHMAN BROTHERS
MORGAN STANLEY & CO. INCORPORATED
PAINEWEBBER INCORPORATED
SMITH BARNEY INC.
---------------
The date of this Prospectus Supplement is November 21, 1995.
<PAGE>
(Continued from previous page)
are so deferred, Distributions on the Series A Preferred Securities will also
be deferred. During an Extension Period, Distributions will continue to
accrue, and holders of Series A Preferred Securities will be required to
accrue interest income for United States federal income tax purposes. See
"Certain Terms of the Series A Debentures--Option to Extend Interest Payment
Period" and "United States Taxation--Potential Extension of Interest Payment
Period and Original Issue Discount".
The payment of Distributions and payments on liquidation of the Series A
Issuer or the redemption of the Series A Preferred Securities, as set forth
below, in each case out of funds held by the Series A Issuer are guaranteed by
PG&E under a Guarantee Agreement (the "Series A Guarantee") to the extent
described herein. If PG&E fails to make interest payments on the Series A
Debentures held by the Series A Issuer, the Series A Issuer will have
insufficient funds to pay Distributions on the Series A Preferred Securities.
The Series A Guarantee does not cover payment of Distributions when the Series
A Issuer does not have sufficient funds on hand available to pay such
Distributions. In such event, the remedy of a holder of Series A Preferred
Securities is to require the Property Trustee to enforce the rights of the
Series A Issuer under the Series A Debentures held by the Series A Issuer. The
obligations of PG&E under the Series A Guarantee are subordinate and junior in
right of payment to all liabilities of PG&E except those made pari passu or
subordinate to the Series A Guarantee expressly by their terms.
The Series A Preferred Securities are subject to mandatory redemption upon
repayment of the Series A Debentures at maturity or their earlier redemption.
PG&E will have the option at any time on or after November 28, 2000 to redeem,
in whole or in part, the Series A Debentures. PG&E also will have the right at
any time, upon occurrence of a Special Event (as defined herein), to redeem,
in whole but not in part, the Series A Debentures. See "Certain Terms of the
Series A Debentures--Redemption".
The Series A Debentures are subordinate and junior in right of payment to
all Senior Indebtedness of PG&E. As of September 30, 1995, PG&E had
approximately $9 billion of principal amount of Senior Indebtedness. The terms
of the Series A Debentures do not limit PG&E's ability to incur additional
Senior Indebtedness. See "Description of the Debentures--Subordination" in the
accompanying Prospectus.
In the event of the liquidation of the Series A Issuer, the holders of the
Series A Preferred Securities will be entitled to receive a stated liquidation
preference of $25 per Series A Preferred Security plus accrued and unpaid
Distributions thereon to the date of payment, unless, in connection with such
liquidation, Series A Debentures are distributed to the holders of the Series
A Preferred Securities, subject to certain limitations. See "Description of
the Preferred Securities--Liquidation Distribution Upon Termination" in the
accompanying Prospectus.
The Series A Preferred Securities have been approved for listing, upon
official notice of issuance, on the American and Pacific Stock Exchanges.
The Series A Preferred Securities will be represented by global certificates
registered in the name of DTC or its nominee. Beneficial interests in the
Series A Preferred Securities will be shown on, and transfers thereof will be
effected only through, records maintained by participants in DTC. Except as
described in the accompanying Prospectus, Series A Preferred Securities in
certificated form will not be issued in exchange for the global certificates.
See "Description of the Preferred Securities--Book-Entry-Only Issuance--The
Depository Trust Company" in the accompanying Prospectus.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SERIES A
PREFERRED SECURITIES AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN
THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE AMERICAN STOCK
EXCHANGE, THE PACIFIC STOCK EXCHANGE, IN THE OVER-THE-COUNTER MARKET OR
OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
S-2
<PAGE>
PROSPECTUS SUMMARY
The following summary information is qualified in its entirety by the
detailed information and financial statements incorporated herein by reference.
THE OFFERING
<TABLE>
<S> <C>
Securities Offered.............................. 7.90% Cumulative Quarterly Income Preferred
Securities, Series A
Distribution Payment Dates...................... March 31, June 30, September 30 and
December 31, commencing December 31,
1995, subject to deferral as described herein
Redemption...................................... As set forth on the Prospectus Supplement
cover
Use of Proceeds................................. Capital expenditures and the redemption,
repurchase, repayment or retirement of
preferred stock
</TABLE>
THE COMPANY
<TABLE>
<S> <C>
Principal Business.............................. Supplying electric and natural gas service
Utility Service Area............................ Most of Northern and Central California
Estimated Population of Utility Service Area
(December 31, 1994)............................ 13,000,000
</TABLE>
CONSOLIDATED FINANCIAL INFORMATION
(DOLLAR AMOUNT IN THOUSANDS)
<TABLE>
<CAPTION>
UNAUDITED
NINE MONTHS
YEARS ENDED DECEMBER 31, ENDED
--------------------------------------------------------- SEPTEMBER 30,
1990 1991 1992 1993 1994 1995
---------- ---------- ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Operating Revenues...... $9,470,092 $9,778,119 $10,296,088 $10,582,408 $10,447,351 $7,400,304
Net Income.............. $ 987,170 $1,026,392 $ 1,170,581 $ 1,065,495 $ 1,007,450 $1,111,800
Ratios of Earnings to
Combined Fixed Charges
and Preferred Stock
Dividends*............. 2.68x 2.85x 3.03x 2.85x 3.08x 3.99x
</TABLE>
- --------
* See "Coverage Ratios."
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30,
1995
----------------------
(UNAUDITED)
AMOUNT PERCENTAGE
----------- ----------
<S> <C> <C>
Common Stock Equity...................................... $ 8,712,341 49.4%
Preferred Stock Without Mandatory Redemption(1).......... 582,995 3.3
Preferred Stock With Mandatory Redemption................ 137,500 0.8
Long-term Debt........................................... 8,207,071 46.5
----------- -------
Total Capitalization................................. $17,639,907 100.0%
=========== =======
Current Liabilities:
Long-term Debt......................................... $ 444,715
Short-term Borrowings.................................. $ 106,304
</TABLE>
- --------
(1) On November 20, 1995, the Company's cash tender offer for up to
$315,000,000 of various series of its Preferred Stock Without Mandatory
Redemption expired. Based on a preliminary count, approximately
$180,000,000 of such Preferred Stock was validly tendered.
S-3
<PAGE>
The following information supplements and should be read in conjunction with
the information contained in the accompanying Prospectus. Each of the
capitalized terms used in this Prospectus Supplement has the meaning set forth
in this Prospectus Supplement or in the accompanying Prospectus.
RISK FACTORS
Prospective purchasers of the Series A Preferred Securities should carefully
review the information contained elsewhere in this Prospectus Supplement and
in the accompanying Prospectus and should particularly consider the following
matters:
SUBORDINATED OBLIGATIONS UNDER THE SERIES A GUARANTEE AND THE SERIES A
DEBENTURES
The obligations of PG&E under the Series A Guarantee issued by PG&E for the
benefit of the holders of Series A Preferred Securities are subordinate and
junior in right of payment to all liabilities of PG&E except those made pari
passu or subordinate to the Series A Guarantee expressly by their terms.
PG&E's obligations under the Series A Debentures are subordinate and junior in
right of payment to all Senior Indebtedness of PG&E. At September 30, 1995,
the Senior Indebtedness of PG&E aggregated approximately $9 billion. There are
no terms in the Series A Preferred Securities, the Series A Debentures or the
Series A Guarantee that limit PG&E's ability to incur additional indebtedness,
including indebtedness that ranks senior to the Series A Debentures and the
Series A Guarantee. See "Description of the Guarantee--Status of the
Guarantee" and "Description of the Debentures--Subordination" in the
accompanying Prospectus.
The ability of the Series A Issuer to pay amounts due on the Series A
Preferred Securities is entirely dependent upon PG&E making payments on the
Series A Debentures as and when required.
OPTION TO EXTEND INTEREST PAYMENT PERIOD; TAX CONSEQUENCES
So long as an Event of Default under the Indenture has not occurred and is
continuing, PG&E has the right at any time and from time to time to extend
interest payment periods on the Series A Debentures for up to 20 consecutive
quarters, and, as a consequence, quarterly Distributions on the Series A
Preferred Securities will be deferred by the Series A Issuer during any
Extension Period. Distributions in arrears after the quarterly payment date
therefor will accumulate additional distributions thereon at the rate per
annum of 7.90% thereof (to the extent permitted by law). In the event PG&E
exercises its right to extend the interest payment periods on the Series A
Debentures, PG&E will not, and will not permit any subsidiary of PG&E to,
declare or pay any dividend or distribution on, or redeem, purchase, acquire,
or make a liquidation or guarantee payment (other than payments under a
Guarantee) with respect to, any shares of PG&E's capital stock or any other
security of PG&E (including other Debentures) ranking pari passu with or
junior in interest to the Series A Debentures, except (i) in each case with
securities junior in interest to the Series A Debentures or (ii) for payments
made on any series of Debentures upon the stated maturity of such Debentures.
As a result, this covenant requires that an interest payment on one series of
Debentures may be extended only if the interest periods on all series of
Debentures are likewise extended. Prior to the termination of any Extension
Period, PG&E may further extend the interest payment period, provided that
such Extension Period, together with all such previous and further extensions
thereof, may not exceed 20 consecutive quarters or extend beyond the maturity
or redemption date of the Series A Debentures. Upon the termination of any
Extension Period and the payment of all amounts then due, PG&E may select a
new Extension Period subject to the above requirements. See "Certain Terms of
the Series A Preferred Securities--Distributions" and "Certain Terms of the
Series A Debentures--Option to Extend Interest Payment Period."
S-4
<PAGE>
Should an Extension Period occur, the Series A Issuer will continue to
accrue income for United States federal income tax purposes which will be
allocated, but not distributed, to holders of the Series A Preferred
Securities. As a result, a holder of Series A Preferred Securities will
include such interest in gross income for United States federal income tax
purposes in advance of the receipt of cash, and will not receive the cash
related to such income if the holder disposes of the Series A Preferred
Securities prior to the record date for the payment of Distributions. See
"United States Taxation--Potential Extension of Interest Payment Period and
Original Issue Discount."
Should PG&E determine to exercise its right to defer payments of interest by
extending the interest payment period on the Series A Debentures, the market
price of the Series A Preferred Securities is likely to be affected. A holder
that disposes of its Series A Preferred Securities during an Extension Period,
therefore, might not receive the same return on its investment as a holder
that continues to hold its Series A Preferred Securities. In addition, as a
result of the existence of PG&E's right to defer interest payments, the market
price of the Series A Preferred Securities (which represent an undivided
beneficial interest in the Series A Debentures) may be more volatile than
other securities on which original issue discount accrues that do not have
such rights.
SPECIAL EVENT REDEMPTION OR DISTRIBUTION
Upon the occurrence and continuation of a Special Event, as described in
"Certain Terms of the Series A Preferred Securities--Special Event Redemption
or Distribution," PG&E has the right to (i) redeem the Series A Debentures and
therefore cause a mandatory redemption of the Series A Preferred Securities or
(ii) terminate the Series A Issuer and cause the Series A Debentures to be
distributed to the holders of the Series A Preferred Securities in liquidation
of such holders' interests in the Series A Issuer. See "Certain Terms of the
Series A Debentures--Redemption."
RIGHTS UNDER THE SERIES A GUARANTEE
The Series A Guarantee will be qualified as an indenture under the Trust
Indenture Act. The First National Bank of Chicago will act as the Guarantee
Trustee under the Series A Guarantee for the purposes of compliance with the
Trust Indenture Act. The Guarantee Trustee will hold the Series A Guarantee
for the benefit of the holders of the Series A Preferred Securities and will
also be the trustee for the Series A Debentures and the Property Trustee.
The Series A Guarantee guarantees on a subordinated basis to the holders of
the Series A Preferred Securities the payment (but not the collection) of (i)
any accrued and unpaid Distributions required to be paid on the Series A
Preferred Securities, if and only to the extent the Series A Issuer has funds
on hand available therefor, (ii) the Redemption Price, including all accrued
and unpaid Distributions to the date of redemption, with respect to Series A
Preferred Securities called for redemption by the Series A Issuer to the
extent the Series A Issuer has funds on hand available therefor, and (iii)
upon a voluntary or involuntary termination, winding-up or liquidation of the
Series A Issuer (unless the Series A Debentures are distributed to holders of
Series A Preferred Securities), (a) the aggregate liquidation preference of
$25 per Series A Preferred Security plus all accrued and unpaid Distributions
on the Series A Preferred Securities to the date of payment, to the extent the
Series A Issuer has funds on hand available to make such payment or, if
different, (b) the amount of assets of the Series A Issuer remaining available
for distribution to holders of the Series A Preferred Securities in
liquidation of the Series A Issuer. The holders of not less than a majority in
aggregate liquidation preference of the Series A Preferred Securities have the
right to direct the time, method and place of conducting any proceeding for
any remedy available to the Guarantee Trustee or to direct the exercise of any
trust or power conferred upon the Guarantee Trustee under the Series A
Guarantee. If the Guarantee Trustee fails to enforce the Series A Guarantee,
any holder of Series A Preferred Securities may, after such holder's written
request to the Guarantee Trustee to enforce the Series A
S-5
<PAGE>
Guarantee, institute a legal proceeding directly against PG&E to enforce its
rights under the Series A Guarantee without first instituting a legal
proceeding against the Guarantee Trustee, the Series A Issuer or any other
person or entity. If PG&E were to default on its obligations under the Series
A Debentures, the Series A Issuer would lack available funds for the payment
of Distributions or amounts payable on redemption of the Series A Preferred
Securities or otherwise, and in such event holders of the Series A Preferred
Securities would not be able to rely upon the Series A Guarantee for payment
of such amounts. Instead, holders of the Series A Preferred Securities would
be required to rely on the enforcement by the Property Trustee of its rights,
as registered holder of the Series A Debentures, against PG&E pursuant to the
terms of the Series A Debentures. See "Description of the Guarantee--Status of
the Guarantee" and "Description of the Debentures--Subordination" in the
accompanying Prospectus. The Amended and Restated Trust Agreement of the
Series A Issuer, among PG&E, as sponsor, and the Issuer Trustees (as defined
below) (the "Series A Trust Agreement") provides that each holder of Series A
Preferred Securities by acceptance thereof agrees to the provisions of the
Series A Guarantee and the Indenture.
LIMITED VOTING RIGHTS
Holders of Series A Preferred Securities will have limited voting rights
and, except upon the occurrence of an Event of Default under the Trust
Agreement as a result of an event of default under the Indenture (a "Debenture
Event of Default"), will not be entitled to vote to appoint, remove or replace
the Property Trustee or the Delaware Trustee, which voting rights are vested
exclusively in the holder of trust interests represented by Common Securities
unless and until a Debenture Event of Default has occurred and is continuing.
In no event will the holders of the Series A Preferred Securities have the
right to vote to appoint, remove or replace the Administrative Trustees, which
voting rights are vested exclusively in the holder of the Common Securities.
See "Description of the Preferred Securities--Events of Default; Notice" in
the accompanying Prospectus.
TRADING CHARACTERISTICS OF SERIES A PREFERRED SECURITIES
The Series A Preferred Securities have been approved for listing, upon
official notice of issuance, on the American and Pacific Stock Exchanges. The
Series A Preferred Securities are expected to trade at a price that takes into
account the value, if any, of accrued and unpaid Distributions; thus,
purchasers will not pay and sellers will not receive any accrued and unpaid
interest with respect to their undivided beneficial interests in Series A
Debentures owned through the Series A Preferred Securities that is not
included in the trading price of the Series A Preferred Securities. However,
interest on the Series A Debentures will be included in the gross income of
U.S. holders of Series A Preferred Securities as it accrues, rather than when
it is paid. See "United States Taxation--Income from Series A Preferred
Securities." The trading price of the Series A Preferred Securities is likely
to be sensitive to the level of interest rates generally. If interest rates
rise in general, the trading price of the Series A Preferred Securities may
decline to reflect the additional yield requirements of the purchasers.
Conversely, a decline in interest rates may increase the trading price of the
Series A Preferred Securities, although any increase will be moderated by
PG&E's ability to redeem the Series A Debentures at any time on or after
November 28, 2000. In addition, because payment of Distributions on the Series
A Preferred Securities is dependent upon PG&E's ability to pay interest on the
Series A Debentures, negative developments affecting PG&E may adversely affect
the trading price of the Series A Preferred Securities.
PG&E CAPITAL I
PG&E Capital I is a statutory business trust formed under Delaware law. The
Series A Issuer's business and affairs are conducted by five Issuer Trustees:
The First National Bank of Chicago, as Property Trustee, an individual who is
a resident of Delaware and an employee of an affiliate of the
S-6
<PAGE>
Property Trustee, as Delaware Trustee, and three individual Administrative
Trustees who are employees or officers of or affiliated with PG&E. The
exclusive business of the Series A Issuer is issuing the Series A Preferred
Securities and the Common Securities representing undivided beneficial
interests in the assets of the Series A Issuer, using the proceeds of the sale
of the Series A Preferred Securities and the Common Securities to acquire the
Series A Debentures and engaging in only those other activities that are
necessary or incidental thereto. All of the Common Securities of the Series A
Issuer will be owned directly or indirectly by PG&E. The Common Securities of
the Series A Issuer will rank pari passu, and payments will be made thereon
pro rata, with the Series A Preferred Securities, except that upon the
occurrence and continuance of a Debenture Event of Default under the Series A
Trust Agreement, the rights of PG&E, as holder of the Common Securities of the
Series A Issuer, to payment in respect of Distributions and payments upon
liquidation or redemption will be subordinated to the rights of the holders of
the Series A Preferred Securities. The principal place of business of the
Series A Issuer is c/o Pacific Gas and Electric Company, 77 Beale Street, P.
O. Box 770000, San Francisco, California 94177 and its telephone number is
(415) 973-7000.
PACIFIC GAS AND ELECTRIC COMPANY
Pacific Gas and Electric Company is an operating public utility engaged
principally in the business of supplying electric and natural gas service
throughout most of northern and central California. PG&E was incorporated in
California in 1905. Its principal executive office is located at 77 Beale
Street, P.O. Box 770000, San Francisco, California 94177, and its telephone
number is (415) 973-7000.
COVERAGE RATIOS
The following table sets forth the unaudited ratios of earnings to fixed
charges of PG&E and its subsidiaries for each of the years 1990 through 1994
and for the nine months ended September 30, 1995.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, NINE MONTHS
----------------------------------------------------------- ENDED
1990 1991 1992 1993 1994 SEPTEMBER 30, 1995
---- ----- ----- ----- ----- ------------------
<S> <C> <C> <C> <C> <C>
3.27 3.43 3.54 3.22 3.51 4.51
</TABLE>
For the purpose of computing PG&E and its subsidiaries' ratios of earnings
to fixed charges, "earnings" represent net income adjusted for the minority
interest in losses of less than 100% owned affiliates, PG&E and its
subsidiaries' equity in undistributed income or loss of less than 50% owned
affiliates, income taxes and fixed charges (excluding capitalized interest).
"Fixed charges" include interest on long-term debt and short-term borrowings
(including a representative portion of rental expense), amortization of bond
premium, discount and expense, interest on capital leases and the pretax
earnings required to cover the preferred stock dividend requirements of
majority owned subsidiaries.
The following table sets forth the unaudited ratios of earnings to combined
fixed charges and preferred stock dividends for each of the years 1990 through
1994 and the nine months ended September 30, 1995.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, NINE MONTHS
----------------------------------------------------------- ENDED
1990 1991 1992 1993 1994 SEPTEMBER 30, 1995
---- ----- ----- ----- ----- ------------------
<S> <C> <C> <C> <C> <C>
2.68 2.85 3.03 2.85 3.08 3.99
</TABLE>
For the purpose of computing PG&E and its subsidiaries' ratios of earnings
to combined fixed charges and preferred stock dividends, "earnings" represent
net income adjusted for the minority interest in losses of less than 100%
owned affiliates, PG&E and its subsidiaries' equity in undistributed
S-7
<PAGE>
income or loss of less than 50% owned affiliates, income taxes and fixed
charges (excluding capitalized interest). "Fixed charges" include interest on
long-term debt and short-term borrowings (including a representative portion
of rental expense), amortization of bond premium, discount and expense,
interest on capital leases and the pretax earnings required to cover the
preferred stock dividend requirements of majority owned subsidiaries.
"Preferred stock dividends" represent the sum of requirements for preferred
stock dividends that are deductible for federal income tax purposes and
requirements for preferred stock dividends that are not deductible for federal
income tax purposes increased to an amount representing pretax earnings which
would be required to cover such dividend requirements.
USE OF PROCEEDS
The net proceeds from the sale of the Series A Preferred Securities will be
used by the Series A Issuer to purchase Series A Debentures. The net proceeds
of the sale of the Series A Debentures by PG&E will become part of the
treasury funds of PG&E and will be applied to capital expenditures and to the
redemption, repurchase, repayment or retirement of preferred stock.
CERTAIN TERMS OF THE SERIES A PREFERRED SECURITIES
GENERAL
The following summary of certain terms and provisions of the Series A
Preferred Securities supplements the description of the terms and provisions
of the Preferred Securities set forth in the accompanying Prospectus under the
heading "Description of the Preferred Securities," to which description
reference is hereby made. This summary of certain terms and provisions of the
Series A Preferred Securities does not purport to be complete and is subject
to, and qualified in its entirety by reference to, the Trust Agreement. The
form of the Trust Agreement has been filed as an exhibit to the Registration
Statement of which this Prospectus Supplement and accompanying Prospectus is a
part.
DISTRIBUTIONS
The Series A Preferred Securities represent undivided beneficial interests
in the assets of the Series A Issuer, and as a practical matter the
Distributions on each Series A Preferred Security will be payable at the
annual rate of 7.90% of the stated liquidation preference of $25, payable
quarterly in arrears on March 31, June 30, September 30 and December 31 of
each year. Distributions in arrears after the quarterly payment date therefor
will accumulate additional Distributions thereon (to the extent permitted by
law) compounded quarterly at the rate per annum of 7.90% thereof. The term
"Distributions" as used herein shall include any such additional
Distributions. Distributions will accrue from November 28, 1995, the date of
original issuance. The first Distribution payment date for the Series A
Preferred Securities will be December 31, 1995, and such Distribution will be
cumulative from the date of original issuance. The amount of Distributions
payable for any period will be computed on the basis of a 360-day year of
twelve 30-day months.
So long as an Event of Default under the Indenture has not occurred and is
continuing, PG&E has the right at any time and from time to time to extend the
interest payment period on the Series A Debentures, for not more than 20
consecutive quarters, provided that any such Extension Period shall not extend
beyond the maturity date or redemption date of the Series A Debentures. As a
consequence, quarterly Distributions on the Series A Preferred Securities
would be deferred by the Series A Issuer during any Extension Period (but
would continue to accumulate additional Distributions
S-8
<PAGE>
thereon as set forth above). In the event that PG&E exercises this right, PG&E
will not, and will not permit any subsidiary of PG&E to, declare or pay any
dividend or distribution on, or redeem, purchase, acquire, or make a
liquidation or guarantee payment (other than payments under a Guarantee) with
respect to, any shares of PG&E's capital stock or any security of PG&E
(including other Debentures) ranking pari passu with or junior in interest to
the Series A Debentures, except (i) in each case with securities junior in
interest to the Series A Debentures or (ii) for payments made on any series of
Debentures upon the stated maturity of such Debentures. As a result, this
covenant requires that an interest payment on one series of Debentures may be
extended only if the interest periods on all series of Debentures are likewise
extended. Prior to the termination of any such extended interest payment
period, PG&E may further extend the interest payment period, provided that
such Extension Period together with all such previous and further extensions
thereof may not exceed 20 consecutive quarters or extend beyond the maturity
or redemption date of the Series A Debentures. Upon the termination of any
extension period and the payment of all amounts then due, PG&E may select a
new extended interest payment period, subject to the above requirements. See
"United States Taxation--Potential Extension of Interest Payment Period and
Original Issue Discount" and "Certain Terms of the Series A Debentures--Option
to Extend Interest Payment Period."
PG&E has no current intention of exercising its right to defer payments of
interest by extending the interest payment period on the Series A Debentures.
REDEMPTION
Upon the payment of the Series A Debentures, whether at maturity or upon
earlier redemption as provided in the Indenture, the proceeds from such
payment will be applied by the Property Trustee to redeem a Like Amount (as
defined below) of the Common Securities of the Series A Issuer and the Series
A Preferred Securities, upon not less than 30 nor more than 60 days' notice,
at a Redemption Price equal to the aggregate liquidation preference plus
accumulated and unpaid Distributions to the Redemption Date. See "Certain
Terms of the Series A Debentures--Redemption."
PG&E has the right to redeem the Series A Debentures (a) on or after
November 28, 2000, in whole or in part, or (b) at any time, in whole but not
in part, on occurrence of a Tax Event or an Investment Company Event (each as
defined below, a "Special Event"), subject to the conditions described under
"Certain Terms of the Series A Debentures--Redemption."
SPECIAL EVENT REDEMPTION OR DISTRIBUTION
If a Special Event shall occur and be continuing with respect to the Series
A Issuer or the Series A Preferred Securities, PG&E has the right to (i)
redeem the Series A Debentures in whole (but not in part) and therefore cause
a mandatory redemption of the Series A Preferred Securities in whole (but not
in part) at the Redemption Price within 90 days following the occurrence of
such Special Event, or (ii) terminate the Series A Issuer and cause the Series
A Debentures to be distributed to the holders of the Series A Preferred
Securities in liquidation of the Series A Issuer. If at any time the Series A
Issuer is not or will not be taxed as a grantor trust but a Tax Event has not
occurred, the Depositor has the right to terminate the Series A Issuer and
cause the Series A Debentures to be distributed to the holders of the Series A
Preferred Securities in liquidation of the Series A Issuer. Under current
United States federal income tax law and interpretation and assuming the
Series A Trust is treated as a grantor trust, such a distribution should not
be a taxable event to holders of the Series A Preferred Securities. Should
there be a change in law, a change in legal interpretation, a Special Event or
other circumstances, however, the termination could be a taxable event to
holders of the Series A Preferred Securities. See "United States Taxation--
Receipt of Series A Debentures Upon Liquidation of the Series A Issuer." If
PG&E does not elect either option (i) or (ii) above, the Series A Preferred
Securities will remain outstanding.
S-9
<PAGE>
"Tax Event" means that PG&E shall have received an opinion of counsel (which
may be counsel to PG&E or an affiliate but not an employee thereof and which
must be acceptable to the Property Trustee) experienced in such matters to the
effect that, as a result of any amendment to, or change (including any
announced prospective change) in, the laws (or any regulations thereunder) of
the United States or any political subdivision or taxing authority thereof or
therein affecting taxation, or as a result of any official administrative
pronouncement or judicial decision interpreting or applying such laws or
regulations, which amendment or change is effective or such pronouncement or
decision is announced on or after the date of original issuance of the Series
A Preferred Securities, there is more than an insubstantial risk that (i) the
Series A Issuer is, or will be, subject to United States federal income tax
with respect to interest received on the Series A Debentures, (ii) interest
payable by PG&E on the Series A Debentures is not, or will not be, deductible
for United States federal income tax purposes or (iii) the Series A Issuer is,
or will be, subject to more than a de minimis amount of other taxes, duties,
assessments or other governmental charges.
"Investment Company Event" means the occurrence of a change in law or
regulation or a change in interpretation or application of law or regulation
by any legislative body, court, governmental agency or regulatory authority (a
"Change in 1940 Act Law") to the effect that the Series A Issuer is or will be
considered an "investment company" that is required to be registered under the
Investment Company Act of 1940, as amended, which Change in 1940 Act Law
becomes effective on or after the date of original issuance of the Series A
Preferred Securities.
"Like Amount" means (i) with respect to a redemption of the Series A
Preferred Securities and the Common Securities of the Series A Issuer
(together, the "Series A Trust Securities"), Series A Trust Securities having
an aggregate liquidation amount equal to the principal amount of Series A
Debentures to be contemporaneously redeemed in accordance with the Indenture
and the proceeds of which will be used to pay the Redemption Price of such
Series A Trust Securities and (ii) with respect to a distribution to holders
of Series A Trust Securities of Series A Debentures in connection with a
termination or liquidation of the Series A Issuer, Series A Debentures having
a principal amount equal to the aggregate liquidation amount of the Series A
Trust Securities in exchange for which such Series A Debentures are
distributed.
LIQUIDATION VALUE
The amount payable on the Series A Preferred Securities in the event of any
liquidation of the Series A Issuer is $25 per Series A Preferred Security plus
accumulated and unpaid Distributions, unless, in connection with such
liquidation, the Series A Debentures are distributed to the holders of the
Series A Preferred Securities.
CERTAIN TERMS OF THE SERIES A DEBENTURES
GENERAL
The following summary of certain terms and provisions of the Series A
Debentures supplements the description of the terms and provisions of the
Debentures set forth in the accompanying Prospectus under the heading
"Description of the Debentures," to which description reference is hereby
made. The summary of certain terms and provisions of the Series A Debentures
set forth below does not purport to be complete and is subject to, and
qualified in its entirety by reference to, the Indenture. The Indenture has
been filed as an exhibit to the Registration Statement of which this
Prospectus Supplement and accompanying Prospectus is a part.
Concurrently with the issuance of the Series A Preferred Securities, the
Series A Issuer will invest the proceeds thereof and the consideration paid by
PG&E for the Common Securities in the
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<PAGE>
corresponding series of Series A Debentures issued by PG&E to the Series A
Issuer. The Series A Debentures will bear Interest at the annual rate of 7.90%
of the principal amount thereof, payable quarterly in arrears on March 31,
June 30, September 30 and December 31 of each year. Interest which is accrued
and unpaid after the quarterly payment date therefor will bear the additional
interest on the amount thereof (to the extent permitted by law) at the rate
per annum of 7.90% thereof, compounded quarterly. The term "Interest" as used
herein shall include quarterly interest payments, interest on quarterly
interest payments in arrears and Additional Interest (as defined below), as
applicable. The Series A Debentures' other Interest payment provisions
correspond to the Distribution provisions of the Series A Preferred
Securities.
The Series A Debentures will be issued as a series of Debentures under the
Indenture. The Series A Debentures will mature on December 31, 2025. The
Series A Debentures will be unsecured and will rank junior and be subordinate
in right of payment to all Senior Indebtedness of PG&E. See "Description of
the Debentures--Subordination" in the accompanying Prospectus.
OPTION TO EXTEND INTEREST PAYMENT PERIOD
PG&E has the right at any time and from time to time, so long as an Event of
Default under the Indenture has not occurred and is continuing, to extend the
interest payment period for the Series A Debentures for up to 20 consecutive
quarters; provided that no Extension Period shall extend beyond the stated
maturity date or date of redemption of the Series A Debentures. At the end of
the Extension Period, PG&E is obligated to pay all interest then accrued and
unpaid (together with interest thereon to the extent permitted by applicable
law). During any Extension Period, PG&E will not, and will not permit any
subsidiary of PG&E to, declare or pay any dividend or distribution on, or
redeem, purchase, acquire, or make a liquidation or guarantee payment (other
than payments under a Guarantee) with respect to, any shares of PG&E's capital
stock or any security of PG&E (including other Debentures) ranking pari passu
with or junior in interest to the Debentures, except (i) in each case with
securities junior in interest to the Debentures or (ii) for payments made on
any series of Debentures upon the stated maturity of such Debentures. As a
result, this covenant requires that an interest payment on one series of
Debentures may be extended only if the interest periods on all series of
Debentures are likewise extended. Prior to the termination of any Extension
Period, PG&E may further extend the interest payment period, provided that
such Extension Period, together with all such previous and further extensions
thereof, may not exceed 20 consecutive quarters or extend beyond the maturity
or redemption date of the Series A Debentures. Upon the termination of any
Extension Period and the payment of all amounts then due, PG&E may select a
new Extension Period subject to the above requirements. So long as the
Property Trustee shall be the sole holder of the Series A Debentures, PG&E is
required to give the Property Trustee and the Debenture Trustee notice of its
selection of such Extension Period one Business Day prior to the date the
Property Trustee or PG&E is required to give notice to any national securities
exchange on which any of the Series A Preferred Securities are listed or other
applicable self-regulatory organization or to holders of the Series A
Preferred Securities of the record date, but in any event not less than one
Business Day prior to such record date. The Property Trustee will be required
to give such notice of PG&E's selection of such Extension Period to the
holders of the Series A Preferred Securities affected thereby.
ADDITIONAL INTEREST
If the Series A Issuer would be required to pay any taxes, duties,
assessments or other governmental charges of whatever nature (other than
withholding taxes) imposed by the United States, or any other taxing
authority, PG&E also will pay as additional interest on the Series A
Debentures ("Additional Interest") such amounts as shall be required so that
the net amounts received and retained by the Series A Issuer after paying any
such taxes, duties, assessments or governmental
S-11
<PAGE>
charges will be not less than the amounts the Series A Issuer would have
received had no such taxes, duties, assessments or governmental charges been
imposed.
REDEMPTION
The Series A Debentures are redeemable prior to maturity at the option of
PG&E (i) at any time on or after November 28, 2000, in whole or in part, and
(ii) if a Special Event occurs and is continuing, in whole (but not in part),
in any case at a Redemption Price equal to 100% of the principal amount
thereof plus accrued Interest to the redemption date. The Series A Debentures
will be subject to optional redemption in whole (but not in part) upon the
termination and liquidation of the Series A Issuer pursuant to an order for
the dissolution, termination or liquidation of the Series A Issuer entered by
a court of competent jurisdiction. For so long as the Series A Trust is the
holder of all Series A Debentures outstanding, the proceeds of any redemption
described in this section shall be used by the Series A Trust to redeem the
Series A Preferred Securities in accordance with their terms. PG&E shall not
redeem the Series A Debentures in part unless all accrued and unpaid interest
(including any Additional Interest) has been paid in full on all Series A
Debentures outstanding for all quarterly interest periods on or prior to the
Redemption Date.
DISTRIBUTIONS OF SERIES A DEBENTURES
Under certain circumstances involving the termination of the Series A
Issuer, Series A Debentures may be distributed to the holders of the Series A
Preferred Securities in liquidation of the Series A Issuer after satisfaction
of liabilities to creditors of the Series A Issuer as provided by applicable
law. If distributed to holders of Series A Preferred Securities in
liquidation, the Series A Debentures will initially be issued in the form of
one or more global securities and The Depository Trust Company ("DTC"), or any
successor depositary for the Series A Preferred Securities, will act as
depositary for the Series A Debentures. It is anticipated that the depositary
arrangements for the Series A Debentures would be substantially identical to
those in effect for the Series A Preferred Securities. Neither PG&E, The First
National Bank of Chicago, as Debenture Trustee, any paying agent nor any other
agent of PG&E or the Debenture Trustee will have any responsibility or
liability for any aspect of the records relating to or payments made on
account of beneficial ownership interests in a global security for such Series
A Debentures or for maintaining, supervising or reviewing any records relating
to such beneficial ownership interests. For a description of DTC and the terms
of the depositary arrangements relating to payments, transfers, voting rights,
redemption and other notices and other matters, see "Description of the
Preferred Securities--Book-Entry-Only Issuance--The Depository Trust Company"
in the accompanying Prospectus.
A global security shall be exchangeable for Series A Debentures registered
in the names of persons other than DTC or its nominee only if (i) DTC notifies
PG&E that it is unwilling or unable to continue as a depository for such
global security and no successor depository shall have been appointed, or if
at any time DTC ceases to be a clearing agency registered under the Exchange
Act at a time when DTC is required to be so registered to act as such
depository, (ii) PG&E in its sole discretion determines that such global
security shall be so exchangeable, or (iii) there shall have occurred and be
continuing an Event of Default with respect to such global security. Any
global security that is exchangeable pursuant to the preceding sentence shall
be exchangeable for definitive certificates registered in such names as DTC
shall direct. It is expected that such instructions will be based upon
directions received by DTC from its Participants with respect to ownership of
beneficial interests in such global security. In the event that Series A
Debentures are issued in definitive form, such Series A Debentures will be in
denominations of $25 and integral multiples thereof and may be transferred or
exchanged at the offices described below.
Payments on Series A Debentures represented by a global security will be
made to DTC, as the depositary for the Series A Debentures. In the event
Series A Debentures are issued in definitive form,
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<PAGE>
principal and interest will be payable, the transfer of the Series A
Debentures will be registrable, and Series A Debentures will be exchangeable
for Series A Debentures of other denominations of a like aggregate principal
amount, at the corporate office of the Debenture Trustee in Chicago, Illinois,
or at the offices of any paying agent or transfer agent appointed by PG&E,
provided that payment of interest may be made at the option of PG&E by check
mailed to the address of the persons entitled thereto or by wire transfer. In
addition, if the Series A Debentures are issued in certificated form, the
record dates for payment of interest will be the 15th day preceding the end of
each quarter. For a description of DTC and the terms of the depositary
arrangements relating to payments, transfers, voting rights, redemptions and
other notices and other matters, see "Description of the Preferred
Securities--Book-Entry-Only Issuance--The Depository Trust Company" in the
accompanying Prospectus.
If the Series A Debentures are distributed to the holders of Series A
Preferred Securities upon the liquidation of the Series A Issuer, PG&E will
use its best efforts to list the Series A Debentures on such stock exchanges,
if any, as the Series A Preferred Securities are then listed. There can be no
assurance as to the market price of any Series A Debentures that may be
distributed to the holders of Series A Preferred Securities.
UNITED STATES TAXATION
GENERAL
This section is a summary of certain United States federal income tax
considerations that may be relevant to prospective purchasers of Series A
Preferred Securities and represents the opinion of Ballard Spahr Andrews &
Ingersoll, special tax counsel to PG&E and the Series A Issuer, insofar as it
relates to matters of law and legal conclusions. This section is based upon
current provisions of the Internal Revenue Code of 1986, as amended (the
"Code"), existing and proposed regulations thereunder and current
administrative rulings and court decisions, all of which are subject to
change. Subsequent changes may cause tax consequences to vary substantially
from the consequences described below. Unless otherwise stated, this summary
deals only with Series A Preferred Securities held as capital assets and does
not deal with special classes of holders, such as dealers in securities or
currencies, life insurance companies, persons holding Series A Preferred
Securities as a hedge against or which are hedged against currency risks or as
a part of a straddle, or persons whose functional currency is not the United
States dollar.
POTENTIAL INVESTORS ARE ADVISED TO CONSULT THEIR TAX ADVISORS AS TO THE
UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF THE PURCHASE OF SERIES A
PREFERRED SECURITIES PURSUANT TO THE OFFER AND OF THE OWNERSHIP AND
DISPOSITION OF SERIES A PREFERRED SECURITIES IN LIGHT OF THEIR PARTICULAR
CIRCUMSTANCES, AS WELL AS THE EFFECT OF ANY STATE, LOCAL OR OTHER LAWS.
While PG&E believes, based upon the advice of its counsel, that the Series A
Debentures will be treated as indebtedness for United States federal income
tax purposes, holders of Series A Preferred Securities should note that the
Internal Revenue Service (the "IRS") may attempt to treat the Series A
Debentures as equity rather than indebtedness for tax purposes. If the IRS
were successful in such attempt, the Series A Debentures would be subject to
redemption at the option of PG&E as described under "Certain Terms of the
Series A Debentures--Redemption."
INCOME FROM SERIES A PREFERRED SECURITIES
In connection with the issuance of the Series A Debentures, Ballard Spahr
Andrews & Ingersoll will render its opinion to the effect that, under then
current law and assuming full compliance with the
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<PAGE>
terms of the Trust Agreement, the Series A Issuer will be classified as a
grantor trust and not as an association taxable as a corporation.
As a consequence, each holder of Series A Preferred Securities will be
considered the owner of a pro rata portion of the Series A Debentures held by
the Series A Issuer. As a further consequence, each holder of Series A
Preferred Securities will be required to include in gross income his or her
pro rata share of the income accrued on the Series A Debentures held by the
Series A Issuer. Such income should not exceed Distributions received by the
holders of Series A Preferred Securities on the Series A Preferred Securities
except in limited circumstances described under "Certain Terms of the Series A
Preferred Securities--Distributions." No portion of such income will be
eligible for the dividends received deduction.
POTENTIAL EXTENSION OF INTEREST PAYMENT PERIOD AND ORIGINAL ISSUE DISCOUNT
Under the Indenture, PG&E has the option to extend from time to time the
interest payment period on the Series A Debentures to a period not exceeding
20 consecutive quarters but not beyond the maturity date of the Series A
Debentures. PG&E's option to extend the interest payment period will cause the
Series A Debentures to be treated as issued with "original issue discount" for
United States federal income tax purposes. Accordingly, a holder of Series A
Preferred Securities will accrue interest income (i.e., original issue
discount) under a constant yield basis over the term of the Series A
Debentures (including any Extension Period), regardless of the receipt of cash
with respect to the period to which such income is attributable.
As a result, holders of Series A Preferred Securities during an Extension
Period will include interest in gross income in advance of the receipts of
cash, and any holders of Series A Preferred Securities who dispose of Series A
Preferred Securities prior to the record date for the payment of Distributions
following such extension period will include interest in gross income, but
will not receive any cash related thereto. The tax basis of a Series A
Preferred Security will be increased by the amount of any original issue
discount that is included in income without a receipt of cash, and will be
decreased when and if such cash is subsequently received by the holder of the
Series A Preferred Security.
DISPOSITION OF THE SERIES A PREFERRED SECURITIES
Gain or loss will be recognized on a sale, including a redemption for cash,
of Series A Preferred Securities in an amount equal to the difference between
the amount realized and the tax basis of a holder of Series A Preferred
Securities in his or her pro rata share of Series A Debentures represented by
such Series A Preferred Securities. Gain or loss recognized by a holder of
Series A Preferred Securities on the sale or exchange of Series A Preferred
Securities held for more than one year generally will be taxable as long-term
capital gain or loss.
UNITED STATES ALIEN HOLDERS
For purposes of this discussion, a "United States Alien Holder" is any
holder or beneficial owner who or which is (i) a nonresident alien individual
or (ii) a foreign corporation, partnership, estate or trust, in either case
not subject to United States federal income tax on a net income basis in
respect of a Series A Preferred Security.
Under present United States federal income tax law, subject to the
discussion below with respect to backup withholding:
(i) Payments by the Series A Issuer or any of its paying agents to any
United States Alien Holder will not be subject to United States withholding
tax provided that (a) the beneficial owner of the Series A Preferred
Security does not actually or constructively own 10% or more of the total
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combined voting power of all classes of stock of PG&E, (b) the beneficial
owner of the Series A Preferred Securities is not a controlled foreign
corporation that is related to PG&E through stock ownership, and (c) either
(1) the beneficial owner of the Series A Preferred Securities certifies to
the Issuer or its agent, under penalties of perjury, that it is a United
States Alien Holder and provides its name and address or (2) the holder of
the Series A Preferred Securities is a securities clearing organization,
bank or other financial institution that holds customers' securities in the
ordinary course of its trade or business (a "financial institution"), and
such holder certifies to the Series A Issuer or its agent under penalties
of perjury that such statement has been received from the beneficial owner
by it or by a financial institution between it and the beneficial owner and
furnishes the payor with a copy thereof; and
(ii) a United States Alien Holder of a Series A Preferred Security will
not be subject to United States federal income or withholding tax on any
gain realized on the sale or exchange of a Series A Preferred Security
unless such person is present in the United States for 183 days or more in
the taxable year of sale and such person has a "tax home" in the United
States or certain other requirements are met.
BACKUP WITHHOLDING AND INFORMATION REPORTING
In general, information reporting requirements will apply to payments to
noncorporate United States holders of the proceeds of the sale of the Series A
Preferred Securities within the United States and "backup withholding" at a
rate of 31% will apply to such payments if the seller fails to provide a
correct taxpayer identification number.
Payments of the proceeds from the sale by a United States Alien Holder of
Series A Preferred Securities made to or through a foreign office of a broker
will not be subject to information reporting or backup withholding, except
that, if the broker is a United States person, a controlled foreign
corporation for United States tax purposes or a foreign person 50% or more of
whose gross income is effectively connected with a United States trade or
business for a specified three-year period, information reporting may apply to
such payment. Payments of the proceeds from the sale of Series A Preferred
Securities to or through the United States office of a broker is subject to
information reporting and backup withholding unless the holder or beneficial
owner certifies as to its non-United States status or otherwise establishes an
exemption from information reporting and backup withholding.
RECEIPT OF SERIES A DEBENTURES UPON LIQUIDATION OF THE SERIES A ISSUER
Under certain circumstances described in "Certain Terms of the Series A
Preferred Securities--Redemption," PG&E may cause the Series A Issuer to be
terminated and cause the Series A Debentures to be distributed to the holders
of Series A Preferred Securities in liquidation of such holders' interests in
the Series A Issuer. Under current United States federal income tax law and
interpretation and assuming the Series A Trust is treated as a grantor trust,
such a distribution should not be treated as a taxable event to holders of the
Series A Preferred Securities. Such a tax-free transaction would result in the
holder of Series A Preferred Securities receiving an aggregate tax basis in
the Series A Debentures equal to such holder's aggregate tax basis in the
holder's Series A Preferred Securities. A holder's holding period for such
Series A Debentures would include the period for which the Series A Preferred
Securities were held by such holder.
POTENTIAL EXTENSION OF INTEREST PAYMENT PERIOD
In the event that the interest payment period on the Series A Debentures is
extended (as provided under "Certain Terms of the Series A Preferred
Securities--Distributions"), the Series A Issuer will continue to accrue
income, generally equal to the amount of the interest payment due at the end
of the Extension Period, over the length of the extended interest payment
period.
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<PAGE>
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, PG&E and
the Series A Issuer have agreed that the Series A Issuer will sell to each of
the Underwriters named below, for whom Goldman, Sachs & Co., Dean Witter
Reynolds Inc., A.G. Edwards & Sons, Inc., Lehman Brothers Inc., Morgan Stanley
& Co. Incorporated, PaineWebber Incorporated and Smith Barney Inc. are acting
as Representatives, and each of the Underwriters has severally agreed to
purchase from the Series A Issuer the respective number of Series A Preferred
Securities set forth opposite its name below:
<TABLE>
<CAPTION>
NUMBER OF SERIES A
UNDERWRITER PREFERRED SECURITIES
----------- --------------------
<S> <C>
Goldman, Sachs & Co..... 1,286,000
Dean Witter Reynolds
Inc.................... 1,285,500
A.G. Edwards & Sons,
Inc.................... 1,285,500
Lehman Brothers Inc..... 1,285,500
Morgan Stanley & Co.
Incorporated........... 1,285,500
PaineWebber
Incorporated........... 1,285,500
Smith Barney Inc. ...... 1,285,500
Advest, Inc. ........... 53,000
Robert W. Baird & Co.
Incorporated........... 53,000
M.R. Beal & Company..... 53,000
Bear, Stearns & Co.
Inc. .................. 104,000
J.C. Bradford & Co. .... 53,000
Alex. Brown & Sons
Incorporated........... 104,000
CS First Boston
Corporation............ 104,000
Commerzbank Capital
Markets Corporation.... 53,000
Cowen & Company......... 53,000
Crowell, Weedon & Co. .. 53,000
Dain Bosworth
Incorporated........... 53,000
Doft & Co., Inc. ....... 53,000
Donaldson, Lufkin &
Jenrette Securities
Corporation............ 104,000
EVEREN Securities,
Inc. .................. 104,000
Fahnestock & Co. Inc. .. 53,000
J.J.B. Hilliard, W.L.
Lyons, Inc. ........... 53,000
Interstate/Johnson Lane
Corporation............ 53,000
Janney Montgomery Scott
Inc. .................. 53,000
Edward D. Jones & Co. .. 53,000
Kennedy, Cabot & Co. ... 53,000
Legg Mason Wood Walker,
Incorporated........... 53,000
McDonald & Company
Securities, Inc. ...... 53,000
McGinn, Smith & Co.,
Inc. .................. 53,000
J.P. Morgan Securities
Inc. .................. 104,000
Morgan Keegan & Company,
Inc. .................. 53,000
The Ohio Company........ 53,000
Olde Discount
Corporation............ 53,000
Oppenheimer & Co.,
Inc. .................. 104,000
Piper Jaffray Inc. ..... 53,000
Principal Financial
Securities, Inc. ...... 53,000
Prudential Securities
Incorporated........... 104,000
Pryor, McClendon, Counts
& Co., Inc. ........... 53,000
Ragen MacKenzie
Incorporated........... 53,000
Rauscher Pierce Refsnes,
Inc. .................. 53,000
Raymond James &
Associates, Inc. ...... 53,000
Redwood Securities
Group, Inc. ........... 104,000
The Robinson-Humphrey
Company, Inc. ......... 53,000
Roney & Co. ............ 53,000
SBC Capital Markets
Inc. .................. 104,000
Muriel Siebert & Co.,
Inc. .................. 53,000
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
NUMBER OF SERIES A
UNDERWRITER PREFERRED SECURITIES
----------- --------------------
<S> <C>
Sutro & Co. Incorporated............................. 53,000
Trilon International Inc. ........................... 53,000
Tucker Anthony Incorporated.......................... 53,000
U.S. Clearing Corp. ................................. 53,000
Van Kasper & Company................................. 53,000
Wedbush Morgan Securities............................ 53,000
Wheat, First Securities, Inc. ....................... 53,000
----------
Total.............................................. 12,000,000
==========
</TABLE>
Under the terms and conditions of the Underwriting Agreement, the
Underwriters are committed to take and pay for all such Series A Preferred
Securities offered hereby, if any are taken.
The Underwriters propose to offer the Series A Preferred Securities in part
directly to the public at the initial public offering price set forth on the
cover page of this Prospectus Supplement, and in part to certain securities
dealers at such price less a concession of $0.50 per Series A Preferred
Security. The Underwriters may allow, and such dealers may reallow, a
concession not in excess of $0.25 per Series A Preferred Security to certain
brokers and dealers. After the Series A Preferred Securities are released for
sale to the public, the offering price and other selling terms may from time
to time be varied by the Representatives.
In view of the fact that the proceeds from the sale of the Series A
Preferred Securities will be used to purchase the Series A Debentures issued
by PG&E, the Underwriting Agreement provides that PG&E will pay as
Underwriters' Compensation for the Underwriters arranging the investment
therein of such proceeds an amount of $0.7875 per Series A Preferred Security
for the accounts of the several Underwriters.
PG&E and the Series A Issuer have agreed, during the period beginning from
the date of the Underwriting Agreement and continuing to and including the
earlier of (i) the date on which the distribution of the Series A Preferred
Securities ceases, as determined by the Underwriters, or (ii) 30 days after
the closing date, not to offer, sell, contract to sell or otherwise dispose of
any Preferred Securities, any other interests of the Issuers, or any preferred
stock or any other securities of the Issuers or PG&E which are substantially
similar to the Preferred Securities, including a Guarantee, or any securities
convertible into or exchangeable for Preferred Securities, preferred stock or
such substantially similar securities of either an Issuer or PG&E, without the
prior written consent of the Representatives.
Prior to this offering, there has been no public offering or market for the
Series A Preferred Securities. The Series A Preferred Securities have been
approved for listing, upon official notice of issuance, on the American and
Pacific Stock Exchanges under the symbol "PCG.CA". Trading of the Series A
Preferred Securities on the American and Pacific Stock Exchanges is expected
to commence within a seven-day period after the initial delivery of the Series
A Preferred Securities. The Representatives have advised PG&E that they intend
to make a market in the Series A Preferred Securities prior to the
commencement of trading on the American Stock Exchange, but are not obligated
to do so and may discontinue any such market making at any time without
notice.
PG&E and the Series A Issuer have agreed to indemnify the several
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933.
S-17
<PAGE>
PG&E CAPITAL I
PG&E CAPITAL II
PG&E CAPITAL III
PG&E CAPITAL IV
CUMULATIVE QUARTERLY INCOME PREFERRED SECURITIES (QUIPS(SM))*
GUARANTEED TO THE EXTENT SUCH ISSUER HAS FUNDS AS SET FORTH HEREIN BY
PACIFIC GAS AND ELECTRIC COMPANY
----------------
PG&E Capital I, PG&E Capital II, PG&E Capital III and PG&E Capital IV, each
a statutory business trust formed under the laws of the State of Delaware
(each, the "Issuer," and collectively, the "Issuers") may severally offer,
from time to time, their respective cumulative quarterly income preferred
securities (the "Preferred Securities") representing preferred undivided
beneficial interests in the assets of each Issuer. Pacific Gas and Electric
Company, a California corporation ("PG&E"), will be the owner of beneficial
interests represented by common securities (the "Common Securities") of each
Issuer. The First National Bank of Chicago is the Property Trustee of each
Issuer. The payment of periodic cash distributions ("Distributions") with
respect to the Preferred Securities of each Issuer and payments on liquidation
or redemption with respect to such Preferred Securities, in each case out of
funds held by such Issuer, are each guaranteed by PG&E to the extent described
herein (each, a "Guarantee"). The obligations of PG&E under each Guarantee
will be subordinate and junior in right of payment to all liabilities of PG&E
except any liabilities that may be made pari passu or subordinate to the
Guarantee expressly by their terms. Concurrently with the issuance by each
Issuer of its Preferred Securities, such Issuer will invest the proceeds
thereof in a corresponding series of PG&E's deferrable interest subordinated
debentures (the "Debentures") with terms corresponding to that Issuer's
Preferred Securities. The Debentures will be unsecured and subordinate and
junior in right of payment to Senior Indebtedness (as defined herein) of PG&E.
The Debentures will be the sole assets of each Issuer and the interest on the
Debentures will be the only revenue of each Issuer. Upon the occurrence of
certain events as may be described in the accompanying Prospectus Supplement,
PG&E may redeem the Debentures or may terminate each Issuer and cause the
Debentures to be distributed to the holders of the Preferred Securities in
liquidation of their interest in such Issuer. See "Description of the
Preferred Securities--Liquidation Distribution Upon Termination".
The Preferred Securities may be offered in amounts, at prices and on terms
to be determined at the time of offering, provided, however, that the
aggregate initial public offering price of all Preferred Securities issued
pursuant to the Registration Statement of which this Prospectus forms a part
shall not exceed $335,000,000. Certain specific terms of a particular Issuer's
Preferred Securities in respect of which this Prospectus is being delivered
will be set forth in an accompanying Prospectus Supplement, including where
applicable and to the extent not set forth herein, the identity of that
Issuer, the specific title, the aggregate amount, the Distribution rate (or
the method for determining such rate), the stated liquidation preference,
redemption provisions, other rights, the initial public offering price, and
any other special terms, as well as any planned listing on a securities
exchange, of such Preferred Securities.
The Preferred Securities may be sold in a public offering to or through
underwriters or dealers designated from time to time. See "Plan of
Distribution". The names of any such underwriters or dealers involved in the
sale of the Preferred Securities of any particular Issuer in respect of which
this Prospectus is being delivered, the number of Preferred Securities to be
purchased by any such underwriters or dealers and any applicable commissions
or discounts will be set forth in the Prospectus Supplement. The net proceeds
to each Issuer will also be set forth in the Prospectus Supplement.
The Prospectus Supplement will also contain information concerning United
States federal income tax considerations applicable to the Preferred
Securities offered thereby.
----------------
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.
----------------
* QUIPS is a service mark of Goldman, Sachs & Co.
The date of this Prospectus is November 21, 1995.
<PAGE>
AVAILABLE INFORMATION
Pacific Gas and Electric Company, a California corporation ("PG&E") is
subject to the informational requirements of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and, in accordance therewith, files
reports, proxy statements and other information with the Securities and
Exchange Commission (the "Commission"). Such reports, proxy statements and
other information can be inspected and copied at the public reference room of
the Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C., and the
public reference facilities in the Commission's Regional Offices located at
Seven World Trade Center, 7th Floor, New York, New York and Citicorp Center,
500 West Madison Street, Suite 1400, Chicago, Illinois. Copies of such
material can be obtained at prescribed rates by writing to the Securities and
Exchange Commission, Public Reference Section, Washington, D.C. 20549. Such
material can also be inspected at the New York, American and Pacific Stock
Exchanges.
PG&E and each of PG&E Capital I, PG&E Capital II, PG&E Capital III and PG&E
Capital IV, each a statutory business trust formed under the laws of the State
of Delaware, have filed with the Commission a Registration Statement on Form
S-3 (herein, together with all amendments and exhibits, referred to as the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Act"). This Prospectus does not contain all of the information set forth in
the Registration Statement as certain parts are omitted in accordance with the
rules and regulations of the Commission. For further information, reference is
hereby made to the Registration Statement.
No separate financial statements of any Issuer have been included herein.
PG&E and the Issuers do not consider that such financial statements would be
material to holders of Preferred Securities offered hereby because each Issuer
is a newly formed special purpose entity, has no operating history or
independent operations and is not engaged in, and does not propose to engage
in, any activity other than as set forth below. See "The Issuers."
----------------
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by PG&E with the Commission are incorporated
by reference in this Prospectus:
1. PG&E's annual report on Form 10-K for the year ended December 31,
1994.
2. PG&E's quarterly reports on Form 10-Q for the quarters ended March 31,
1995, June 30, 1995 and September 30, 1995.
3. PG&E's current reports on Form 8-K dated January 4, 1995, January 19,
1995, February 21, 1995, March 2, 1995, April 20, 1995, May 17, 1995, May
23, 1995, May 26, 1995, July 14, 1995, July 20, 1995, August 17, 1995,
October 4, 1995, October 19, 1995, October 26, 1995, November 2, 1995 and
November 20, 1995.
All other documents filed by PG&E pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this Prospectus and the
accompanying Prospectus Supplement and prior to the termination of the
offering of the Preferred Securities shall be deemed to be incorporated by
reference in this Prospectus and the accompanying Prospectus Supplement, and
to be a part hereof from the respective dates of the filing of such documents.
Any statement contained herein or in a document all or a portion of which is
incorporated or deemed to be incorporated by reference herein shall be deemed
to be modified or superseded for purposes of this Prospectus and the
accompanying Prospectus Supplement to the extent that a statement contained
herein or in any other subsequently filed document which also is or is deemed
to be incorporated by reference herein modifies or supersedes such statement.
Any such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus or the
accompanying Prospectus Supplement.
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<PAGE>
PG&E hereby undertakes to provide without charge to each person, including
any beneficial owner, to whom a copy of this Prospectus has been delivered, on
the written or oral request of any such person, a copy of any or all the
documents referred to above which have been or may be incorporated in this
Prospectus by reference, other than exhibits to such documents which are not
specifically incorporated by reference in the information that this Prospectus
incorporates. Requests should be directed to Transfer Agent, Shareholder
Services, Pacific Gas and Electric Company, 77 Beale Street, Room 2600, P.O.
Box 770000, San Francisco, California 94177 (Telephone: 1-800-367-7731).
THE ISSUERS
Each of PG&E Capital I, PG&E Capital II, PG&E Capital III and PG&E Capital
IV is a statutory business trust formed under Delaware law pursuant to (i) a
trust agreement executed by PG&E, as sponsor for the Issuer, and the Issuer
Trustees (as defined herein) of such Issuer and (ii) the filing of a
certificate of trust with the Delaware Secretary of State. Each trust
agreement will be amended and restated in its entirety (each, as so amended
and restated, the "Trust Agreement") substantially in the form filed as an
exhibit to the Registration Statement of which this Prospectus forms a part.
Each Trust Agreement will be qualified as an indenture under the Trust
Indenture Act of 1939, as amended (the "Trust Indenture Act"). Each Issuer
exists for the exclusive purposes of (i) issuing and selling its Preferred
Securities and Common Securities, (ii) using the proceeds from the sale of
such Preferred Securities and Common Securities to acquire a corresponding
series of Debentures issued by PG&E and (iii) engaging in those activities
necessary, convenient or incidental thereto. All of the Common Securities will
be owned by PG&E. The Common Securities will rank pari passu, and payments
will be made thereon pro rata, with the Preferred Securities, except that upon
the occurrence and continuance of a Debenture Event of Default (as defined
herein) under the Trust Agreement, the rights of the holders of the Common
Securities to payment in respect of Distributions and payments upon
liquidation, redemption or other acquisition of Common Securities will be
subordinated to the rights of the holders of the Preferred Securities. PG&E
will acquire Common Securities in an aggregate liquidation amount equal to 3%
of the total capital of each Issuer. Each Issuer has a term of approximately
36 years, but may terminate earlier as provided in the applicable Trust
Agreement. Each Issuer's business and affairs is conducted by its trustees,
each appointed by PG&E as holder of the Common Securities: The First National
Bank of Chicago (the "Property Trustee"), a Delaware Trustee and three
individual trustees (the "Administrative Trustees") who are employees or
officers of or affiliated with PG&E (collectively, the "Issuer Trustees"). The
holder of the Common Securities, or the holders of a majority in liquidation
preference of the Preferred Securities if a Debenture Event of Default has
occurred and is continuing, will be entitled to appoint, remove or replace the
Property Trustee and the Delaware Trustee. In no event will the holders of the
Series A Preferred Securities have the right to vote to appoint, remove or
replace the Administrative Trustees, which voting rights are vested
exclusively in the holder of the Common Securities. The duties and obligations
of each of the Issuer Trustees are governed by the applicable Trust Agreement.
PG&E will pay all fees and expenses related to the Issuers and the offering of
the Preferred Securities and will pay, directly or indirectly, all ongoing
costs, expenses and liabilities of the Issuers. The principal place of
business of each Issuer is c/o Pacific Gas and Electric Company, 77 Beale
Street, P. O. Box 770000, San Francisco, California 94177, and its telephone
number is (415) 973-7000.
PACIFIC GAS AND ELECTRIC COMPANY
Pacific Gas and Electric Company is an operating public utility engaged
principally in the business of supplying electric and natural gas service
throughout most of northern and central California. PG&E was incorporated in
California in 1905. Its principal executive office is located at 77 Beale
Street, P.O. Box 770000, San Francisco, California 94177, and its telephone
number is (415) 973-7000.
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<PAGE>
DESCRIPTION OF THE PREFERRED SECURITIES
Pursuant to the terms of each Trust Agreement, the Issuer Trustees will
issue the Preferred Securities and the Common Securities (together, the "Trust
Securities"). The Preferred Securities of a particular issue will represent
preferred undivided beneficial interests in the assets of the related Issuer
and the holders thereof will be entitled to a preference in certain
circumstances with respect to Distributions and amounts payable on redemption
or liquidation over the Common Securities of such Issuer, as well as other
benefits as described in the corresponding Trust Agreement. This summary of
certain provisions of each Trust Agreement does not purport to be complete and
is subject to, and is qualified in its entirety by reference to, all the
provisions of each Trust Agreement, including the definitions therein of
certain terms, and the Trust Indenture Act. The form of the Trust Agreement
has been filed as an exhibit to the Registration Statement of which this
Prospectus forms a part and each Trust Agreement has been qualified as an
indenture under the Trust Indenture Act. Each of the Issuers is a legally
separate entity and the assets of one are not available to satisfy the
obligations of any of the others.
GENERAL
The Preferred Securities of an Issuer will rank pari passu, and payments
will be made thereon pro rata, with the Common Securities of that Issuer
except as described under "--Subordination of Common Securities." The
Debentures will be owned by the Property Trustee and will be held in trust for
the benefit of the holders of the related Trust Securities. Each Guarantee
Agreement executed by PG&E for the benefit of the holders of each Issuer's
Preferred Securities (each, the "Guarantee") is a full and unconditional
guarantee on a subordinated basis with respect to the related Preferred
Securities but does not guarantee payment of Distributions or amounts payable
on redemption or liquidation of such Preferred Securities when the related
Issuer does not have funds on hand available to make such payments. See
"Description of the Guarantee."
DISTRIBUTIONS
Each Issuer's Preferred Securities represent undivided beneficial interests
in the assets of such Issuer, and as a practical matter the Distributions on
each Preferred Security will be payable at a rate specified in the Prospectus
Supplement for such Preferred Securities. The amount of Distributions payable
for any period will be computed on the basis of a 360-day year of twelve 30-
day months.
Distributions on the Preferred Securities will be cumulative, will accrue
from the date of original issuance and will be payable quarterly in arrears,
on March 31, June 30, September 30 and December 31 of each year (except as
otherwise described below). In the event that any date on which Distributions
are otherwise payable on the Preferred Securities is not a Business Day,
payment of the Distribution payable on such date will be made on the next
succeeding day that is a Business Day (and without any interest or other
payment in respect to any such delay) except that, if such Business Day is in
the next succeeding calendar year, payment of such Distribution shall be made
on the immediately preceding Business Day, in each case with the same force
and effect as if made on such date (each date on which Distributions are
otherwise payable in accordance with the foregoing, a "Distribution Date"). A
"Business Day" shall mean any day other than a Saturday or a Sunday or a day
on which banking institutions in The City of New York are authorized or
required by law or executive order to remain closed or a day on which the
corporate trust office of the Property Trustee is closed for business.
PG&E has the right under the Indenture to extend the interest payment period
from time to time on each series of the Debentures, with the consequence that
quarterly Distributions on the corresponding Preferred Securities would be
deferred.
It is anticipated that the income of each Issuer available for distribution
to its holders of Preferred Securities will be limited to payments under the
corresponding series of Debentures in which the Issuer
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<PAGE>
will invest the proceeds from the issuance and sale of its Preferred
Securities and its Common Securities. See "Description of the Debentures." If
PG&E does not make interest payments on such Debentures, the Property Trustee
will not have funds available to pay Distributions on the corresponding
Preferred Securities.
Distributions on the Preferred Securities will be payable to the holders
thereof as they appear on the register of such Issuer on the relevant record
dates, which, as long as the Preferred Securities remain in book-entry-only
form, will be one Business Day prior to the relevant Distribution Date.
Subject to any applicable laws and regulations and the provisions of the
applicable Trust Agreement, each such payment will be made as described under
"--Book-Entry-Only Issuance--The Depository Trust Company." In the event any
Preferred Securities are not in book-entry-only form, the relevant record date
for such Preferred Securities shall be the date 15 days prior to the relevant
Distribution Date.
REDEMPTION
Upon the repayment of any series of Debentures, whether at maturity or upon
earlier redemption as provided in the Indenture, the proceeds from such
repayment will be applied by the Property Trustee to redeem the corresponding
Trust Securities, upon not less than 30 nor more than 60 days' notice, at the
redemption price (the "Redemption Price") including all accrued and unpaid
Distributions to the redemption date (the "Redemption Date"). The redemption
terms of a particular series of Debentures and the related Preferred
Securities will be set forth in the accompanying Prospectus Supplement.
REDEMPTION PROCEDURES
Preferred Securities redeemed on each Redemption Date shall be redeemed at
the Redemption Price with the proceeds from the contemporaneous redemption of
the corresponding series of Debentures. Redemptions of the Preferred
Securities shall be made and the Redemption Price shall be payable on each
Redemption Date only to the extent that the Issuer has funds on hand available
for the payment of such Redemption Price. See also "--Subordination of Common
Securities."
If an Issuer gives a notice of redemption in respect of its Preferred
Securities, then, by 12:00 noon, New York City time, on the Redemption Date,
to the extent funds are available, the Property Trustee will deposit
irrevocably with The Depository Trust Company ("DTC") funds sufficient to pay
the applicable Redemption Price and will give DTC irrevocable instructions and
authority to pay the Redemption Price to the holders of such Preferred
Securities. See "--Book Entry-Only Issuance--The Depository Trust Company." If
such Preferred Securities are no longer in book-entry-only form, the Issuer,
to the extent funds are available, will irrevocably deposit with the paying
agent for such Preferred Securities funds sufficient to pay the applicable
Redemption Price and will give such paying agent irrevocable instructions and
authority to pay the Redemption Price to the holders thereof upon surrender of
their certificates evidencing such Preferred Securities. Notwithstanding the
foregoing, Distributions payable on or prior to the Redemption Date for any
Preferred Securities called for redemption shall be payable to the holders of
such Preferred Securities on the relevant record dates for the related
Distribution Dates. If notice of redemption shall have been given and funds
deposited as required, then upon the date of such deposit, all rights of the
holders of such Preferred Securities so called for redemption will cease,
except the right of the holders of such Preferred Securities to receive the
Redemption Price, but without interest on such Redemption Price, and such
Preferred Securities will cease to be outstanding. In the event that any date
fixed for redemption of Preferred Securities is not a Business Day, then
payment of the Redemption Price payable on such date will be made on the next
succeeding day which is a Business Day (and without any interest or other
payment in respect of any such delay), except that, if such Business Day falls
in the next calendar year, such
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<PAGE>
payment will be made on the immediately preceding Business Day. In the event
that payment of the Redemption Price in respect of Preferred Securities called
for redemption is improperly withheld or refused and not paid either by the
Issuer or by PG&E pursuant to the Guarantee as described under "Description of
the Guarantee," Distributions on such Preferred Securities will continue to
accrue at the then applicable rate, from the original Redemption Date to the
date of payment, in which case the actual payment date will be considered the
date fixed for redemption for purposes of calculating the Redemption Price.
Subject to applicable law, PG&E or its subsidiaries may at any time and from
time to time purchase outstanding Preferred Securities by tender, in the open
market or by private agreement.
Payment of the Redemption Price on the Preferred Securities and any
distribution of Debentures to holders of Preferred Securities shall be made to
the applicable recordholders thereof as they appear on the register for such
Preferred Securities on the relevant record date, which shall be one Business
Day prior to the relevant Redemption Date or liquidation date, as applicable;
provided, however, that in the event that any Preferred Securities are not in
book-entry-only form, the relevant record date for such Preferred Securities
shall be the date 15 days prior to the Redemption Date or liquidation date, as
applicable.
If less than all the securities issued by an Issuer are to be redeemed on a
Redemption Date, then the aggregate liquidation preference of such securities
to be redeemed shall be allocated 3% to its Common Securities and 97% to its
Preferred Securities. The particular Preferred Securities to be redeemed shall
be selected not more than 60 days prior to the Redemption Date by the Property
Trustee from the outstanding Preferred Securities not previously called for
redemption, by such method as the Property Trustee shall deem fair and
appropriate and which may provide for the selection for redemption of portions
(equal to $25 or integral multiples thereof) of the liquidation preference of
Preferred Securities of a denomination larger than $25. The Property Trustee
shall promptly notify the security registrar in writing of the Preferred
Securities selected for redemption and, in the case of any Preferred
Securities selected for partial redemption, the liquidation preference thereof
to be redeemed. For all purposes of each Trust Agreement, unless the context
otherwise requires, all provisions relating to the redemption of Preferred
Securities shall relate, in the case of any Preferred Securities redeemed or
to be redeemed only in part, to the portion of the aggregate liquidation
preference of Preferred Securities which has been or is to be redeemed.
SUBORDINATION OF COMMON SECURITIES
Payment of Distributions on, and the Redemption Price of, each Issuer's
Trust Securities, as applicable, shall be made pro rata based on the
liquidation preference of such Trust Securities; provided, however, that if on
any Distribution Date or Redemption Date a Debenture Event of Default (as
defined below, see "--Events of Default; Notice") under the applicable Trust
Agreement shall have occurred and be continuing, no payment of any
Distribution on, or Redemption Price of, any of the Issuer's Common
Securities, and no other payment on account of the redemption, liquidation or
other acquisition of such Common Securities, shall be made unless payment in
full in cash of all accumulated and unpaid Distributions on all of the
Issuer's outstanding Preferred Securities for all Distribution periods
terminating on or prior thereto, or in the case of payment of the Redemption
Price the full amount of such Redemption Price on all of the Issuer's
outstanding Preferred Securities, shall have been made or provided for, and
all funds available to the Property Trustee shall first be applied to the
payment in full in cash of all Distributions on, or Redemption Price of, the
Issuer's Preferred Securities then due and payable.
In the case of any Event of Default under any Trust Agreement resulting from
an event of default under the Indenture (a "Debenture Event of Default"), the
holder of such Issuer's Common Securities will be deemed to have waived any
right to act with respect to such Event of Default under such Trust
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Agreement until the effect of all such Events of Default with respect to such
Preferred Securities have been cured, waived or otherwise eliminated. Until
any such Events of Default under the applicable Trust Agreement with respect
to the Preferred Securities have been so cured, waived or otherwise
eliminated, the Property Trustee shall act solely on behalf of the holders of
such Preferred Securities and not on behalf of the holder of the Issuer's
Common Securities, and only the holders of such Preferred Securities will have
the right to direct the Property Trustee to act on their behalf.
LIQUIDATION DISTRIBUTION UPON TERMINATION
Pursuant to each Trust Agreement, each Issuer shall be terminated by PG&E on
the first to occur of: (i) December 31, 2031, the expiration of the term of
such Issuer; (ii) the bankruptcy, dissolution or liquidation of PG&E; (iii)
the distribution of a Like Amount of the corresponding series of Debentures to
the holders of its Preferred Securities and Common Securities following the
occurrence of a Special Event or in the event the Issuer is not or will not be
taxed as a grantor trust but a Tax Event has not occurred; (iv) the redemption
of all of the Issuer's Preferred Securities; and (v) an order for the
termination of the Issuer shall have been entered by a court of competent
jurisdiction.
If an early termination occurs as described in clause (ii), (iii) or (v)
above, the Issuer shall be liquidated by the Issuer Trustees as expeditiously
as the Issuer Trustees determine to be possible by distributing, after
satisfaction of liabilities to creditors of such Issuer as provided by
applicable law, to the holders of such Preferred Securities and Common
Securities a Like Amount of the corresponding series of Debentures, unless
such distribution is determined by the Property Trustee not to be practical,
in which event such holders will be entitled to receive out of the assets of
the Issuer available for distribution to holders, after satisfaction of
liabilities to creditors of such Issuer as provided by applicable law, an
amount equal to, in the case of holders of Preferred Securities, the aggregate
of the stated liquidation preference of $25 per Preferred Security plus
accrued and unpaid Distributions thereon to the date of payment (such amount
being the "Liquidation Distribution"). If such Liquidation Distribution can be
paid only in part because such Issuer has insufficient assets available to pay
in full the aggregate Liquidation Distribution, then the amounts payable
directly by such Issuer on its Preferred Securities shall be paid on a pro
rata basis. The holder(s) of such Issuer's Common Securities will be entitled
to receive distributions upon any such liquidation pro rata with the holders
of its Preferred Securities, except that if a Debenture Event of Default has
occurred and is continuing, the Preferred Securities shall have a priority
over the Common Securities. A supplemental Indenture may provide that if an
early termination occurs as described in clause (v) above, the related series
of Debentures may be subject to optional redemption in whole (but not in
part).
EVENTS OF DEFAULT; NOTICE
Any one of the following events constitutes an "Event of Default" under each
Trust Agreement with respect to the Preferred Securities issued thereunder
(whatever the reason for such Event of Default and whether it shall be
voluntary or involuntary or be effected by operation of law or pursuant to any
judgment, decree or order of any court or any order, rule or regulation of any
administrative or governmental body):
(i) the occurrence of an "Event of Default" as defined the Indenture (see
"Description of the Debentures--Events of Default"); or
(ii) default by the Property Trustee in the payment of any Distribution
when it becomes due and payable, and continuation of such default for a
period of 30 days; or
(iii) default by the Property Trustee in the payment of any Redemption
Price of any Preferred Security or Common Security when it becomes due and
payable; or
(iv) default in the performance, or breach, in any material respect, of
any covenant or warranty of the Issuer Trustees in such Trust Agreement
(other than a covenant or warranty a default in the performance of which or
the breach of which is dealt with in clause (ii) or (iii) above), and
continuation of such default or breach for a period of 60 days after there
has been given, by registered or certified mail, to the defaulting Issuer
Trustee or Trustees by the holders of at least 10% in aggregate liquidation
preference of the outstanding Preferred Securities of the applicable
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Issuer, a written notice specifying such default or breach and requiring it
to be remedied and stating that such notice is a "Notice of Default" under
such Trust Agreement; or
(v) the occurrence of certain events of bankruptcy or insolvency with
respect to the Property Trustee and the failure by PG&E to appoint a
successor Property Trustee within 60 days thereof.
Within five Business Days after the occurrence of any Event of Default
actually known to the Property Trustee, the Property Trustee shall transmit
notice of such Event of Default to the holders of such Issuer's Preferred
Securities, the Administrative Trustees and PG&E, as Depositor, unless such
default shall have been cured or waived. PG&E, as Depositor, and the
Administrative Trustees are required to file annually with the Property
Trustee a certificate as to whether or not they are in compliance with all the
conditions and covenants applicable to them under the Trust Agreement.
Under each Trust Agreement, if the Property Trustee fails to enforce its
rights under the Trust Agreement, to the fullest extent permitted by law, any
holder of Preferred Securities issued thereunder may, after such holder's
written request to the Property Trustee to enforce such rights, institute a
legal proceeding directly against any person to enforce the Property Trustee's
rights under the Trust Agreement without first instituting a legal proceeding
against the Property Trustee or any other person.
If a Debenture Event of Default has occurred and is continuing, the
Preferred Securities shall have a preference over the Common Securities upon
termination of each Issuer as described above. See "--Liquidation Distribution
Upon Termination."
REMOVAL OF ISSUER TRUSTEES
Unless an Event of Default shall have occurred and be continuing, any Issuer
Trustee may be removed at any time by the holder of the Common Securities. If
a Debenture Event of Default has occurred and is continuing, the Property
Trustee and the Delaware Trustee may be removed at such time by the holders of
a majority in liquidation preference of the outstanding Preferred Securities.
In no event will the holders of the Preferred Securities have the right to
vote to appoint, remove or replace the Administrative Trustees, which voting
rights are vested exclusively in the holder of the Common Securities. No
resignation or removal of an Issuer Trustee and no appointment of a successor
trustee shall be effective until the acceptance of appointment by the
successor trustee in accordance with the provisions of the Trust Agreement.
CO-TRUSTEES AND SEPARATE PROPERTY TRUSTEE
Unless an Event of Default under a Trust Agreement shall have occurred and
be continuing, at any time or times, for the purpose of meeting the legal
requirements of the Trust Indenture Act or of any jurisdiction in which any
part of the Trust Property (as defined in each Trust Agreement) may at the
time be located, the holder of the applicable Common Securities and the
Administrative Trustees shall have power to appoint one or more persons either
to act as co-trustee, jointly with the Property Trustee, of all or any part of
such Trust Property, or to act as separate trustee of any such property, in
either case with such powers as may be provided in the instrument of
appointment, and to vest in such person or persons in such capacity any
property, title, right or power deemed necessary or desirable, subject to the
provisions of the Trust Agreement. In case a Debenture Event of Default under
the Indenture has occurred and is continuing, the Property Trustee alone shall
have power to make such appointment.
MERGER OR CONSOLIDATION OF ISSUER TRUSTEES
Any corporation into which the Property Trustee, the Delaware Trustee or any
Administrative Trustee may be merged or converted or with which it may be
consolidated, or any corporation resulting from any merger, conversion or
consolidation to which such Trustee shall be a party, or any
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corporation succeeding to all or substantially all the corporate trust
business of such Trustee, shall be the successor of such Trustee under the
Trust Agreements, provided such corporation shall be otherwise qualified and
eligible.
VOTING RIGHTS; AMENDMENT OF TRUST AGREEMENT
Except as provided below and under "Description of the Guarantee--Amendments
and Assignment" and as otherwise required by law and each Trust Agreement, the
holders of the Preferred Securities will have no voting rights.
A Trust Agreement may be amended from time to time by the Depositor and the
Issuer Trustees, without the consent of the holders of the Preferred
Securities, (i) to cure ambiguities or (ii) to ensure that the Issuer will be
classified for federal income tax purposes as a grantor trust, provided that
any such amendment shall not adversely affect in any material respect the
interests of any holder of Preferred Securities. A Trust Agreement may be
amended by the Depositor and the Issuer Trustees in any other respect (except
to change the amount or timing of any Distribution) with the consent of the
holders of a majority in liquidation preference of Preferred Securities and
upon receipt of an opinion of counsel to the effect that such amendment will
not affect the Issuer's status as a grantor trust for federal income tax
purposes or its exemption from regulation as an investment company under the
Investment Company Act of 1940, as amended.
So long as any Debentures are held by the Property Trustee, the Issuer
Trustees shall not (i) direct the time, method and place of conducting any
proceeding for any remedy available to the Debenture Trustee, or executing any
trust or power conferred on the Property Trustee with respect to such
Debentures, (ii) waive any past default that is waiveable under Section 513 of
the Indenture, (iii) exercise any right to rescind or annul a declaration that
the principal of all the Debentures shall be due and payable or (iv) consent
to any amendment, modification or termination of the Indenture or the
Debentures, where such consent shall be required, without, in each case,
obtaining the prior approval of the holders of a majority in aggregate
liquidation preference of all outstanding Preferred Securities; provided,
however, that where a consent under the Indenture would require the consent of
each holder of Debentures affected thereby, no such consent shall be given by
the Property Trustee without the prior consent of each holder of the
corresponding Preferred Securities. The Issuer Trustees shall not revoke any
action previously authorized or approved by a vote of the Preferred Securities
except by subsequent vote of the holders of the Preferred Securities. The
Property Trustee shall notify all holders of the Preferred Securities of any
notice of default with respect to the Debentures. In addition to obtaining the
foregoing approvals of the holders of the Preferred Securities, prior to
taking any of the foregoing actions, the Issuer Trustees shall obtain an
opinion of counsel experienced in such matters to the effect that the Issuer
will not be classified as a corporation or partnership for United States
federal income tax purposes on account of such action.
Any required approval of holders of Preferred Securities may be given at a
meeting of holders of Preferred Securities convened for such purpose or
pursuant to written consent. The Property Trustee will cause a notice of any
meeting at which holders of Preferred Securities are entitled to vote, or of
any matter upon which action by written consent of such holders is to be
taken, to be given to each holder of record of Preferred Securities in the
manner set forth in each Trust Agreement.
No vote or consent of the holders of Preferred Securities will be required
for each Issuer to redeem and cancel its Preferred Securities in accordance
with the applicable Trust Agreement.
Notwithstanding that holders of Preferred Securities are entitled to vote or
consent under any of the circumstances described above, any of the Preferred
Securities that are owned by PG&E, the Issuer Trustees or any affiliate of
PG&E or any Issuer Trustee, shall, for purposes of such vote or consent, be
treated as if they were not outstanding.
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PAYMENT AND PAYING AGENCY
Payments in respect of the Preferred Securities shall be made to DTC, which
shall credit the relevant accounts at DTC on the applicable Distribution Dates
or, if any Issuer's Preferred Securities are not held by DTC, such payments
shall be made by check mailed to the address of the holder entitled thereto as
such address shall appear on the Register. The paying agent (the "Paying
Agent") shall initially be The First National Bank of Chicago and any co-
paying agent chosen by The First National Bank of Chicago, and acceptable to
the Property Trustee and PG&E. The First National Bank of Chicago shall be
permitted to resign as Paying Agent upon 30 days' written notice to the
Property Trustee and PG&E, as Depositor. In the event that The First National
Bank of Chicago shall no longer be the Paying Agent, the Property Trustee
shall appoint a successor to act as Paying Agent (which shall be a bank or
trust company).
BOOK-ENTRY-ONLY ISSUANCE -- THE DEPOSITORY TRUST COMPANY
DTC will act as securities depositary for all of the Preferred Securities.
The Preferred Securities will be issued only as fully-registered securities
registered in the name of Cede & Co. (DTC's nominee). One or more fully-
registered global certificates will be issued for the Preferred Securities of
each Issuer, representing in the aggregate the total number of such Issuer's
Preferred Securities, and will be deposited with DTC.
DTC is a limited purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law,
a member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act. DTC
holds securities that its participants ("Participants") deposit with DTC. DTC
also facilitates the settlement among Participants of securities transactions,
such as transfers and pledges, in deposited securities through electronic
computerized book-entry changes in Participants' accounts, thereby eliminating
the need for physical movement of securities certificates. Direct Participants
include securities brokers and dealers, banks, trust companies, clearing
corporations and certain other organizations ("Direct Participants"). DTC is
owned by a number of its Direct Participants and by the New York Stock
Exchange, Inc. (the "New York Stock Exchange"), the American Stock Exchange,
Inc. and the National Association of Securities Dealers, Inc. Access to the
DTC system is also available to others such as securities brokers and dealers,
banks and trust companies that clear through or maintain custodial
relationships with Direct Participants, either directly or indirectly
("Indirect Participants"). The rules applicable to DTC and its Participants
are on file with the Commission.
Purchases of Preferred Securities within the DTC system must be made by or
through Direct Participants, which will receive a credit for the Preferred
Securities on DTC's records. The ownership interest of each actual purchaser
of each Preferred Security ("Beneficial Owner") is in turn to be recorded on
the Direct and Indirect Participants' records. Beneficial Owners will not
receive written confirmation from DTC of their purchases, but Beneficial
Owners are expected to receive written confirmations providing details of the
transactions, as well as periodic statements of their holdings, from the
Direct or Indirect Participants through which the Beneficial Owners purchased
Preferred Securities. Transfers of ownership interests in the Preferred
Securities are to be accomplished by entries made on the books of Participants
acting on behalf of Beneficial Owners. Beneficial Owners will not receive
certificates representing their ownership interests in Preferred Securities,
except in the event that use of the book-entry system for the Preferred
Securities of such Issuer is discontinued.
DTC has no knowledge of the actual Beneficial Owners of the Preferred
Securities; DTC's records reflect only the identity of the Direct Participants
to whose accounts such Preferred Securities are credited, which may or may not
be the Beneficial Owners. The Participants will remain responsible for keeping
account of their holdings on behalf of their customers.
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Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants, and by Direct
Participants and Indirect Participants to Beneficial Owners will be governed
by arrangements among them, subject to any statutory or regulatory
requirements as may be in effect from time to time.
Redemption notices shall be sent to Cede & Co. as the registered holder of
the Preferred Securities. If less than all of an Issuer's Preferred Securities
are being redeemed, DTC's practice is to determine by lot the amount of the
interest of each Direct Participant to be redeemed.
Although voting with respect to the Preferred Securities is limited to the
holders of record of the Preferred Securities, in those instances in which a
vote is required, neither DTC nor Cede & Co. will itself consent or vote with
respect to Preferred Securities. Under its usual procedures, DTC would mail an
omnibus proxy (the "Omnibus Proxy") to the Property Trustee as soon as
possible after the record date. The Omnibus Proxy assigns Cede & Co.'s
consenting or voting rights to those Direct Participants to whose accounts
such Preferred Securities are credited on the record date (identified in a
listing attached to the Omnibus Proxy).
Distribution payments on the Preferred Securities will be made by the
Property Trustee to DTC. DTC's practice is to credit Direct Participants'
accounts on the relevant payment date in accordance with their respective
holdings shown on DTC's records unless DTC has reason to believe that it will
not receive payments on such payment date. Payments by Participants to
Beneficial Owners will be governed by standing instructions and customary
practices and will be the responsibility of such Participant and not of DTC,
the Property Trustee, the Issuer thereof or PG&E, subject to any statutory or
regulatory requirements as may be in effect from time to time. Payment of
Distributions to DTC is the responsibility of the Property Trustee,
disbursement of such payments to Direct Participants is the responsibility of
DTC, and disbursements of such payments to the Beneficial Owners is the
responsibility of Direct and Indirect Participants.
DTC may discontinue providing its services as securities depositary with
respect to any of the Preferred Securities at any time by giving reasonable
notice to the Property Trustee and PG&E. In the event that a successor
securities depositary is not obtained, definitive Preferred Security
certificates representing such Preferred Securities are required to be printed
and delivered. The Depositor, at its option, may decide to discontinue use of
the system of book-entry transfers through DTC (or a successor depositary).
After a Debenture Event of Default, the holders of a majority in liquidation
preference of Preferred Securities may determine to discontinue the system of
book-entry transfers through DTC. In any such event, definitive certificates
for such Issuer's Preferred Securities will be printed and delivered.
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that the Issuers and PG&E believe to be
accurate, but the Issuers and PG&E assume no responsibility for the accuracy
thereof. Neither the Issuers nor PG&E has any responsibility for the
performance by DTC or its Participants of their respective obligations as
described herein or under the rules and procedures governing their respective
operations.
REGISTRAR AND TRANSFER AGENT
The First National Bank of Chicago will initially act as registrar and
transfer agent for the Preferred Securities.
Registration of transfers of Preferred Securities will be effected without
charge by or on behalf of each Issuer, but upon payment of any tax or other
governmental charges that may be imposed in connection with any transfer or
exchange.
The Issuers will not be required to register or cause to be registered the
transfer of their Preferred Securities after such Preferred Securities have
been called for redemption.
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INFORMATION CONCERNING THE PROPERTY TRUSTEE
The Property Trustee is the sole Trustee under the Trust Agreements for
purposes of the Trust Indenture Act and shall have and be subject to all of
the duties and responsibilities specified with respect to an indenture trustee
under that Act. The Property Trustee, other than during the occurrence and
continuance of an Event of Default, undertakes to perform only such duties as
are specifically set forth in the Trust Agreements and, after an Event of
Default, must exercise the same degree of care and skill as a prudent person
would exercise or use in the conduct of his or her own affairs. Subject to
this provision, the Property Trustee is under no obligation to exercise any of
the powers vested in it by the Trust Agreement at the request of any holder of
Preferred Securities unless it is offered reasonable indemnity against the
costs, expenses and liabilities that might be incurred thereby. If no
Debenture Event of Default has occurred and is continuing and the Property
Trustee is required to decide between alternative causes of action, construe
ambiguous provisions in a Trust Agreement or is unsure of the application of
any provision of a Trust Agreement, and the matter is not one on which holders
of Preferred Securities are entitled under the Trust Agreement to vote, then
the Property Trustee shall take such action as is directed by PG&E as
Depositor and if not so directed, shall take such action as it deems advisable
and in the best interests of the holders of the Preferred Securities and the
Common Securities and will have no liability except for its own bad faith,
negligence or willful misconduct.
MISCELLANEOUS
The Administrative Trustees are authorized and directed to conduct the
affairs of and to operate the Issuers in such a way that no Issuer will be
deemed to be an "investment company" required to be registered under the
Investment Company Act of 1940 or taxed as a corporation for federal income
tax purposes and so that the Debentures will be treated as indebtedness of
PG&E for United States federal income tax purposes. In this connection, PG&E
and the Administrative Trustees are authorized to take any action, not
inconsistent with applicable law, the certificate of trust of each Issuer or
each Trust Agreement, that PG&E and the Administrative Trustees determine in
their discretion to be necessary or desirable for such purposes, as long as
such action does not materially adversely affect the interests of the holders
of the related Preferred Securities.
Holders of the Preferred Securities have no preemptive or similar rights.
No Issuer may borrow money or issue debt or mortgage or pledge any of its
assets.
Except as otherwise provided in the Trust Agreements, any action requiring
the consent or vote of the Trustees shall be approved by a majority of the
Administrative Trustees.
DESCRIPTION OF THE GUARANTEE
Each Guarantee will be executed and delivered by PG&E concurrently with the
issuance by each Issuer of its Preferred Securities for the benefit of the
holders from time to time of such Preferred Securities. The First National
Bank of Chicago will act as indenture trustee ("Guarantee Trustee") under each
Guarantee for the purposes of compliance with the Trust Indenture Act. This
summary of certain provisions of the Guarantees does not purport to be
complete and is subject to, and qualified in its entirety by reference to, all
of the provisions of each Guarantee Agreement, including the definitions
therein of certain terms, and the Trust Indenture Act. The form of the
Guarantee has been filed as an exhibit to the Registration Statement of which
this Prospectus forms a part. Reference in this summary to Preferred
Securities means that Issuer's Preferred Securities to which a Guarantee
relates. The Guarantee Trustee will hold each Guarantee for the benefit of the
holders of the related Issuer's Preferred Securities.
GENERAL
PG&E will irrevocably and unconditionally agree on a subordinated basis, to
the extent set forth in each Guarantee, to pay in full, to the holders of the
related Issuer's Preferred Securities, the Guarantee
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Payments (as defined below) (except to the extent paid by or on behalf of such
Issuer), as and when due, regardless of any defense, right of set-off or
counterclaim which such Issuer may have or assert. The following payments, to
the extent not paid by an Issuer (the "Guarantee Payments"), will be subject
to the applicable Guarantee (without duplication): (i) any accumulated and
unpaid Distributions required to be paid on such Preferred Securities, to the
extent that such Issuer has funds on hand available therefor, (ii) the
Redemption Price with respect to any Preferred Securities called for
redemption to the extent that such Issuer has funds on hand available
therefor, or (iii) upon a voluntary or involuntary dissolution, winding up or
termination of such Issuer (unless the corresponding series of Debentures are
distributed to holders of such Preferred Securities), the lesser of (a) the
Liquidation Distribution and (b) the amount of assets of such Issuer remaining
available for distribution to holders of Preferred Securities. PG&E's
obligation to make a Guarantee Payment may be satisfied by direct payment of
the required amounts by PG&E to the holders of the applicable Preferred
Securities or by causing the Issuer to pay such amounts to such holders. While
the assets of PG&E will not be available for making Distributions on any
Preferred Securities, PG&E has agreed to pay the expenses of the related
Issuer. Accordingly, each Guarantee, together with the backup undertakings,
consisting of PG&E's obligations under such agreement to pay expenses and
related covenants contained in each Trust Agreement and certain of PG&E's
obligations under the Indenture and the Debentures, provide for PG&E's full
and unconditional guarantee of the Preferred Securities as set forth above.
STATUS OF THE GUARANTEE
Each Guarantee will constitute an unsecured obligation of PG&E and will rank
subordinate and junior in right of payment to all liabilities of PG&E except
those made pari passu or subordinate to such Guarantee expressly by their
terms. The Trust Agreements provide that each holder of Preferred Securities
by acceptance thereof agrees to the subordination provisions and other terms
of the related Guarantee.
Each Guarantee will rank pari passu with all other Guarantees issued by
PG&E. Each Guarantee will constitute a guarantee of payment and not of
collection (i.e., the guaranteed party may institute a legal proceeding
directly against the Guarantor to enforce its rights under the Guarantee
without first instituting a legal proceeding against any other person or
entity). Each Guarantee will be held for the benefit of the holders of the
related Preferred Securities. Each Guarantee will not be discharged except by
payment of the Guarantee Payments in full to the extent not paid by the Issuer
or upon distribution to the holders of the Preferred Securities of the
corresponding series of Debentures.
AMENDMENTS AND ASSIGNMENT
Except with respect to any changes which do not materially adversely affect
the rights of holders of the related Preferred Securities (in which case no
vote will be required), no Guarantee may be amended without the prior approval
of the holders of not less than a majority of the aggregate liquidation
preference of such outstanding Preferred Securities. The manner of obtaining
any such approval will be as set forth under "Description of the Preferred
Securities--Voting Rights; Amendment of Trust Agreement." All guarantees and
agreements contained in each Guarantee shall bind the successors, assigns,
receivers, trustees and representatives of PG&E and shall inure to the benefit
of the holders of the related Preferred Securities then outstanding.
EVENTS OF DEFAULT
An event of default under each Guarantee will occur upon the failure of PG&E
to perform any of its payment or other obligations thereunder. The holders of
not less than a majority in aggregate liquidation preference of the related
Preferred Securities have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Guarantee Trustee in
respect of such Guarantee or to direct the exercise of any trust or power
conferred upon the Guarantee Trustee under such Guarantee.
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If the Guarantee Trustee fails to enforce any Guarantee, any holder of the
related Preferred Securities may, after such holder's written request to the
Guarantee Trustee to enforce such Guarantee, institute a legal proceeding
directly against PG&E to enforce its rights under such Guarantee without first
instituting a legal proceeding against the Issuer, the Guarantee Trustee or
any other person or entity.
PG&E, as guarantor, is required to file annually with the Guarantee Trustee
a certificate as to whether or not PG&E is in compliance with all the
conditions and covenants applicable to it under the Guarantee.
INFORMATION CONCERNING THE GUARANTEE TRUSTEE
The Guarantee Trustee, other than during the occurrence and continuance of a
default by PG&E in performance of any Guarantee, undertakes to perform only
such duties as are specifically set forth in each Guarantee and, after default
with respect to any Guarantee, must exercise the same degree of care and skill
as a prudent person would exercise or use in the conduct of his or her own
affairs. Subject to this provision, the Guarantee Trustee is under no
obligation to exercise any of the powers vested in it by any Guarantee at the
request of any holder of any Preferred Securities unless it is offered
reasonable indemnity against the costs, expenses and liabilities that might be
incurred thereby.
TERMINATION OF THE GUARANTEE
Each Guarantee will terminate and be of no further force and effect upon
full payment of the Redemption Price of the related Preferred Securities, upon
full payment of the amounts payable upon liquidation of the related Issuer or
upon distribution of Debentures to the holders of the related Preferred
Securities. Each Guarantee will continue to be effective or will be
reinstated, as the case may be, if at any time any holder of the related
Preferred Securities must restore payment of any sums paid under such
Preferred Securities or such Guarantee.
GOVERNING LAW
Each Guarantee will be governed by and construed in accordance with the laws
of the State of California.
DESCRIPTION OF THE DEBENTURES
This summary of certain terms and provisions of the Debentures and the
Indenture does not purport to be complete and is subject to, and is qualified
in its entirety by reference to the Debentures and the Indenture, the forms of
which are filed as exhibits to the Registration Statement of which this
Prospectus forms a part.
GENERAL
Concurrently with the issuance of each Issuer's Preferred Securities, the
Issuer will invest the proceeds thereof and the consideration paid by PG&E for
the Common Securities in a corresponding series of Debentures issued by PG&E
to the Issuer. The Debentures will be unsecured subordinated obligations of
PG&E issued under the Indenture. Each series of Debentures will be in the
principal amount equal to the aggregate stated liquidation preference of the
related Preferred Securities plus PG&E's concurrent investment in the Common
Securities and will rank pari passu with all other series of Debentures. The
Indenture does not limit the aggregate principal amount of Debentures which
may be issued thereunder.
INTEREST
The Debentures will bear interest at the rate per annum specified in the
Prospectus Supplement. Such interest will be payable quarterly in arrears on
the dates in each year specified in the Prospectus
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Supplement (each, an "Interest Payment Date") to the person in whose name each
Debenture is registered, subject to certain exceptions, at the close of
business on the Business Day next preceding such Interest Payment Date. It is
anticipated that the Debentures will be held in the name of the Property
Trustee in trust for the benefit of the holders of the Preferred Securities.
The amount of interest payable for any period will be computed on the basis
of a 360-day year of twelve 30-day months. In the event that any date on which
interest is payable on the Debentures is not a Business Day, then payment of
the interest payable on such date will be made on the next succeeding day
which is a Business Day (and without any interest or other payment in respect
of any such delay), except that, if such Business Day is in the next
succeeding calendar year, such payment shall be made on the immediately
preceding Business Day, in each case with the same force and effect as if made
on the date such payment was originally payable.
SUBORDINATION
The Indenture provides that all payments by PG&E in respect of the
Debentures shall be subordinate to the prior payment in full of all amounts
payable on Senior Indebtedness. The term "Senior Indebtedness" means (i) the
principal of and premium (if any) in respect of (A) indebtedness of PG&E for
money borrowed and (B) indebtedness evidenced by securities, debentures, bonds
or other similar instruments issued by PG&E; (ii) all capital lease
obligations of PG&E; (iii) all obligations of PG&E issued or assumed as the
deferred purchase price of property, all conditional sale obligations of PG&E
and all obligations of PG&E under any title retention agreement (but excluding
trade accounts payable arising in the ordinary course of business); (iv)
certain obligations of PG&E for the reimbursement of any obligor on any letter
of credit, banker's acceptance, security purchase facility, surety bond or
similar credit transaction entered into in the ordinary course of business of
PG&E; (v) all obligations of the type referred to in clauses (i) through (iv)
of other persons and all dividends of other persons (other than Preferred
Securities) for the payment of which, in either case, PG&E is responsible or
liable as obligor, guarantor or otherwise; and (vi) all obligations of the
type referred to in clauses (i) through (v) of other persons secured by any
lien on any property or asset of PG&E (whether or not such obligation is
assumed by PG&E), except for any such indebtedness that is by its terms
subordinated to or pari passu with the Debentures.
Upon any payment or distribution of assets or securities of PG&E upon any
dissolution, winding up, liquidation or reorganization of PG&E, whether
voluntary or involuntary, or in bankruptcy, insolvency, receivership or other
proceedings, all amounts due upon all Senior Indebtedness shall be paid in
full before the holders of the Debentures or the Property Trustee on behalf of
the holders shall be entitled to receive from PG&E any payment of principal
of, premium, if any, or interest on the Debentures or distributions of any
assets or securities.
No payment by or on behalf of PG&E of principal of, premium, if any, or
interest on the Debentures, whether pursuant to the terms of the Debentures or
upon acceleration or otherwise, shall be made if, at the time of such payment,
there exists a default in the payment of all or any portion of any Senior
Indebtedness or any other default pursuant to which the maturity of Senior
Indebtedness has been accelerated.
If the Debenture Trustee or the Property Trustee, as holder of the
Debentures shall have received any payment on account of the principal of,
premium, if any, or interest on the Debentures when such payment is prohibited
and before all amounts payable on Senior Indebtedness are paid in full, then
such payment shall be received and held in trust for the holders of Senior
Indebtedness and shall be paid over or delivered to the holders of the Senior
Indebtedness remaining unpaid to the extent necessary to pay such Senior
Indebtedness in full, provided that requisite notice has been given to PG&E.
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Nothing in the Indenture shall limit the right of the Debenture Trustee, the
Property Trustee or the holders of the Debentures to pursue any rights or
remedies under applicable law against PG&E; provided that all Senior
Indebtedness shall be paid before holders of the Debentures are entitled to
receive any payment from PG&E of principal of or interest on the Debentures.
Upon the payment in full of all Senior Indebtedness, the holders of the
Debentures shall be subrogated to the rights of the holders of such Senior
Indebtedness to receive payments or distributions of assets of PG&E made on
such Senior Indebtedness until the Debentures shall be paid in full.
The Indenture does not limit the aggregate amount of Senior Indebtedness
which PG&E may incur.
CERTAIN COVENANTS OF PG&E
PG&E will covenant, as to each series of Debentures, that it will not, and
will not permit any subsidiary of PG&E to, declare or pay any dividend or
distribution on, or redeem, purchase, acquire, or make a liquidation or
guarantee payment (other than payments under a Guarantee) with respect to, any
shares of PG&E's capital stock or any security of PG&E (including other
Debentures) ranking pari passu with or junior in interest to the Debentures,
except (i) in each case with securities junior in interest to the Debentures
or (ii) for payments made on any series of Debentures upon the stated maturity
of such Debentures, if at such time (i) there shall have occurred any event of
which PG&E has actual knowledge that (a) with the giving of notice or the
lapse of time, or both, would constitute an Event of Default with respect to
Debentures of such series and (b) in respect of which PG&E shall not have
taken reasonable steps to cure, (ii) PG&E shall be in default with respect to
its payment of any obligations under the Guarantee relating to the Preferred
Securities of the Trust to which Debentures of such series have been issued or
(iii) PG&E shall have given notice of its selection of an Extension Period as
provided in the Indenture with respect to Debentures of such series and such
Extension Period, or any extension thereof shall have commenced and be
continuing. PG&E will also covenant, as to each series of Debentures, (i) to
maintain directly or indirectly 100% ownership of the Common Securities of the
Issuer to which Debentures have been issued, provided that certain successors
which are permitted pursuant to the Indenture may succeed to PG&E's ownership
of the Common Securities, (ii) not to voluntarily terminate, wind-up or
liquidate any Issuer, except in (A) connection with the distribution of
Debentures to the holders of the Preferred Securities in liquidation of such
Issuer, (B) as permitted by the terms of the Debentures, or (C) in connection
with certain mergers, consolidations or amalgamations permitted by the related
Trust Agreement and (iii) to use its reasonable efforts, consistent with the
terms and provisions of the related Trust Agreement, to cause such Issuer to
remain a business trust and otherwise not to be classified as an association
taxable as a corporation for United States federal income tax purposes.
MODIFICATION OF THE INDENTURE
From time to time, PG&E and the Debenture Trustee may, without the consent
of the holders of any series of Debentures, amend, waive or supplement the
Indenture for specified purposes, including, among other things, curing
ambiguities, defects or inconsistencies, qualifying, or maintaining the
qualification of, the Indenture under the Trust Indenture Act, or making any
other change that does not affect the rights of any holder of Debentures in
any material respect. The Indenture contains provisions permitting PG&E and
the Debenture Trustee, with the consent of the holders of not less than a
majority in principal amount of each outstanding series of Debentures
affected, to modify the Indenture in a manner affecting the rights of the
holders of such series of the Debentures; provided that no such modification
may, without the consent of the holder of each outstanding Debenture so
affected, (i) change the stated maturity of any series of Debentures, or
reduce the principal amount thereof, or reduce the rate or extend the time of
payment of interest thereon, reduce any premium payable upon
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redemption of the Debentures, or change any place of payment where, or the
coin or currency in which, any Debenture or any premium or interest is
payable, or impair the right to institute suit for the enforcement of any such
payment on or after the stated maturity or redemption date, or modify the
provisions of the Indenture with respect to the subordination of the
Debentures in a manner adverse to the holders of the Debentures, (ii) reduce
the percentage of principal amount of Debentures of any series, the holders of
which are required to consent to any such modification of the Indenture or
(iii) modify certain provisions of the Indenture relating to the waiver of
past defaults or compliance by PG&E with the covenants therein.
In addition, PG&E and the Debenture Trustee may execute, without the consent
of any holder of Debentures, any supplemental Indenture for the purpose of
creating any new series of Debentures.
EVENTS OF DEFAULT
The Indenture provides that any one or more of the following described
events with respect to a series of Debentures that has occurred and is
continuing constitutes an "Event of Default" with respect to such series of
Debentures:
(a) failure for 30 days to pay any interest on such series of the
Debentures, including any Additional Interest in respect thereof, when due
(subject to the deferral of any due date in the case of an Extension
Period); or
(b) failure to pay any principal on such series of Debentures when due
whether at maturity, upon redemption, by declaration or otherwise; or
(c) failure to observe or perform in any material respect certain other
covenants contained in the Indenture for 90 days after written notice to
PG&E from the Debenture Trustee or the holders of at least 25% in principal
amount of such series of outstanding Debentures; or
(d) certain events in bankruptcy, insolvency or reorganization of PG&E.
The holders of a majority in outstanding principal amount of such series of
Debentures have the right to direct the time, method and place of conducting
any proceeding for any remedy available to the Debenture Trustee. The
Debenture Trustee or the holders of not less than 25% in aggregate outstanding
principal amount of such series of Debentures may declare the principal due
and payable immediately upon an Event of Default, and should the Debenture
Trustee or such holders of such Debentures fail to make such declaration the
holders of at least 25% in aggregate liquidation preference of Preferred
Securities shall have such right. The holders of a majority in aggregate
outstanding principal amount of such series of Debentures may annul such
declaration and waive the default if the default has been cured (or, in
certain circumstances, even if the default has not been cured) and a sum
sufficient to pay all matured installments of interest and principal due
otherwise than by acceleration and any Additional Interest has been deposited
with the Debenture Trustee.
The holders of a majority in outstanding principal amount of the Debentures
affected thereby may, on behalf of the holders of all the Debentures, waive
any past default, except a default in the payment of principal or interest
(unless such default has been cured and a sum sufficient to pay all matured
installments of interest and principal due otherwise than by acceleration has
been deposited with the Debenture Trustee) or a default in respect of a
covenant or provision which under the Indenture cannot be modified or amended
without the consent of the holder of each outstanding Debenture. PG&E is
required to file annually with the Debenture Trustee a certificate as to
whether or not PG&E is in compliance with all the conditions and covenants
applicable to it under the Indenture.
In case an Event of Default shall occur and be continuing as to a series of
Debentures, the Property Trustee will have the right to declare the principal
of and the interest on such Debentures
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(including any Additional Interest) and any other amounts payable under the
Indenture to be forthwith due and payable and to enforce its other rights as a
creditor with respect to such Debentures.
CONSOLIDATION, MERGER, SALE OR CONVEYANCE
The Indenture provides that PG&E may not consolidate with or merge with or
into any other person or sell, convey, transfer or lease its properties and
assets as an entirety or substantially as an entirety to any person, unless
(i) the successor person is a corporation, partnership, trust or other entity
organized and validly existing under the laws of the United States or any
state thereof or the District of Columbia, and expressly assumes by a
supplemental indenture all of the obligations of PG&E under the Debentures,
the Indenture and any Guarantees, (ii) immediately after giving effect to such
transaction and treating any indebtedness which becomes an obligation of PG&E
or any subsidiary as a result of such transaction as having been incurred by
it at the time of the transaction, no Event of Default, and no event which,
after notice or lapse of time or both, would become an Event of Default, shall
have occurred and be continuing, (iii) such transaction does not give rise to
any breach or violation of any Trust Agreement or any Guarantee and (iv)
certain other conditions are met.
SATISFACTION AND DISCHARGE
Under the terms of the Indenture, PG&E will be discharged from any and all
obligations in respect of any series of Debentures (except in each case for
certain obligations to register the transfer or exchange of such Debentures,
replace stolen, lost or mutilated Debentures and hold moneys for payment in
trust) if (subject to certain conditions) PG&E deposits with the Debenture
Trustee, in trust, (i) cash and/or (ii) United States Government Obligations
(as defined in the Indenture), which through the payment of interest thereon
and principal thereof in accordance with their terms will provide cash in an
amount sufficient to pay all the principal of, and interest on, such series of
Debentures on the dates such payments are due in accordance with the terms of
such Debentures.
FORM, EXCHANGE, AND TRANSFER
The Debentures will be issuable only in registered form, without coupons and
only in denominations of $25 and integral multiples thereof.
Subject to the terms of the Indenture, Debentures may be presented for
registration of transfer or exchange (duly endorsed or accompanied by
satisfactory instruments of transfer) at the office of the Security Registrar
or at the office of any transfer agent designated by PG&E for such purpose. No
service charge will be made for any registration of transfer or exchange of
Debentures, but PG&E may require payment of a sum sufficient to cover any tax
or other governmental charge payable in connection therewith. Such transfer or
exchange will be effected upon the Security Registrar or such transfer agent,
as the case may be, being satisfied with the documents of transfer, title and
identity of the person making the request. PG&E has appointed the Debenture
Trustee as the initial Security Registrar. PG&E may at any time designate
additional transfer agents or rescind the designation of any transfer agent or
approve a change in the office through which any transfer agent acts.
If the Debentures are to be redeemed in part, PG&E will not be required to
issue, register the transfer or exchange any Debentures during a period
beginning at the opening of business 15 days before the day of mailing of a
notice of redemption of any such Debentures that may be selected for
redemption and ending at the close of business on the day of such mailing,
except the unredeemed portion of any such Debentures being redeemed in part.
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PAYMENT AND PAYING AGENTS
Payment of interest on a Debenture on any Interest Payment Date will be made
to the person in whose name such Debenture (or one or more predecessor
securities) is registered at the close of business on the Regular Record Date
(as defined in the Indenture) for such interest.
Principal or any interest on the Debentures will be payable at the office of
such Paying Agent or Paying Agents as PG&E may designate for such purpose from
time to time, except that at the option of PG&E, payment of any interest may
be made by check mailed to the address of the person entitled thereto as such
address appears in the Security Register or by wire transfer. The corporate
trust office of the Debenture Trustee in Chicago, Illinois is initially
designated as PG&E's sole Paying Agent for payments with respect to the
Debentures. PG&E may at any time designate additional Paying Agents or rescind
the designation of any Paying Agent or approve a change in the office through
which any Paying Agent acts.
GOVERNING LAW
The Indenture and the Debentures will be governed by and construed in
accordance with the laws of the State of California.
INFORMATION CONCERNING THE DEBENTURE TRUSTEE
The Debenture Trustee shall have and be subject to all the duties and
responsibilities specified with respect to an indenture trustee under the
Trust Indenture Act. Subject to such provision, the Debenture Trustee is under
no obligation to exercise any of the powers vested in it by the Indenture at
the request of any holder of Debentures, unless offered reasonable indemnity
by such holder against the costs, expenses and liabilities which might be
incurred thereby. The Debenture Trustee is not required to expend or risk its
own funds or otherwise incur personal financial liability in the performance
of its duties if the Debenture Trustee reasonably believes that repayment or
adequate indemnity is not reasonably assured to it.
The First National Bank of Chicago has a course of regular dealings with
PG&E in the ordinary course of business and from time to time may also make
short-term loans and revolving credit and term loans to PG&E and its
affiliates. The First National Bank of Chicago also serves as trustee for a
PG&E subsidiary's senior and subordinated indentures.
RELATIONSHIP AMONG THE PREFERRED SECURITIES, THE DEBENTURES AND THE GUARANTEES
As long as payments of interest and other payments are made when due on each
series of Debentures, such payments will be sufficient to cover Distributions
and other payments due on the corresponding Preferred Securities, primarily
because (i) the aggregate principal amount of each series of Debentures will
be equal to the sum of the aggregate stated liquidation amount of the
corresponding Preferred Securities and corresponding Common Securities; (ii)
the interest rate and interest and other payment dates on each series of
Debentures will match the Distribution rate and Distribution and other payment
dates for the corresponding Preferred Securities; (iii) each Expense Agreement
entered into by PG&E pursuant to each Trust Agreement provides that PG&E shall
pay for all and any costs, expenses and liabilities of such Issuer except the
Issuer's obligations to holders of its Preferred Securities under such
Preferred Securities; and (iv) each Trust Agreement further provides that the
Issuer will not engage in any activity that is not consistent with the limited
purposes of such Issuer.
Payments of Distributions and other amounts due on the Preferred Securities
(to the extent the Issuer has funds available for the payment of such
Distributions) are guaranteed by PG&E as and to
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the extent set forth under "Description of the Guarantee." If and to the
extent that PG&E does not make payments on any series of Debentures, such
Issuer will not pay Distributions or other amounts due on its Preferred
Securities.
If the Guarantee Trustee fails to enforce any Guarantee, a holder of any
related Preferred Security may, after such holder's written request to the
Guarantee Trustee to enforce such Guarantee, institute a legal proceeding
directly against PG&E to enforce its rights under such Guarantee without first
instituting a legal proceeding against the Guarantee Trustee, the Issuer or
any other person or entity.
Each Issuer's Preferred Securities evidence the rights of the holders
thereof to the benefits of such Issuer, and each Issuer exists for the sole
purpose of issuing its Trust Securities and investing the proceeds thereof in
a corresponding series of Debentures. A principal difference between the
rights of a holder of a Preferred Security and a holder of a Debenture is that
a holder of a Debenture will accrue, and (subject to the permissible extension
of the interest period) is entitled to receive, interest on the principal
amount of Debentures held, while a holder of Preferred Securities is only
entitled to receive Distributions if and to the extent the Issuer has funds
available for the payment of such Distributions.
Upon any voluntary or involuntary termination, winding-up or liquidation of
any Issuer involving the liquidation of the corresponding series of
Debentures, the holders of Preferred Securities will be entitled to receive,
out of assets held by such Issuer, the Liquidation Distribution in cash. See
"Description of the Preferred Securities--Liquidation Distribution Upon
Termination." Upon any voluntary or involuntary liquidation or bankruptcy of
PG&E, the Property Trustee, as holder of the Debentures, would be a
subordinated creditor of PG&E, subordinated in right of payment to all Senior
Indebtedness, but entitled to receive payment in full of principal and
interest, before any stockholders of PG&E receive payments or distributions.
Since PG&E is the guarantor under each Guarantee and has agreed to pay for all
costs, expenses and liabilities of each Issuer (other than the Issuer's
obligations to the holders of its Preferred Securities), the positions of a
holder of such Preferred Securities and a holder of such Debentures relative
to other creditors and to stockholders of PG&E in the event of liquidation or
bankruptcy of PG&E would be substantially the same.
A default or event of default under any Senior Indebtedness would not
constitute a default or Event of Default under the Debentures. However, in the
event of payment defaults under, or acceleration of, Senior Indebtedness, the
subordination provisions of the Debentures provide that no payments may be
made in respect of the Debentures until such Senior Indebtedness has been paid
in full or any payment default thereunder has been cured or waived. Failure to
make required payments on any series of Debentures would constitute an Event
of Default under the Indenture.
PLAN OF DISTRIBUTION
The Preferred Securities may be sold in a public offering to or through
underwriters or dealers designated from time to time. Each Issuer may sell its
Preferred Securities as soon as practicable after effectiveness of the
Registration Statement of which the Prospectus is a part. The names of any
underwriters or dealers involved in the sale of the Preferred Securities of
any particular Issuer in respect of which this Prospectus is delivered, the
number of Preferred Securities to be purchased by any such underwriters and
any applicable commissions or discounts will be set forth in the Prospectus
Supplement.
Underwriters may offer and sell Preferred Securities at a fixed price or
prices, which may be changed, or from time to time at market prices prevailing
at the time of sale, at prices related to such prevailing market prices or at
negotiated prices. In connection with the sale of Preferred Securities,
underwriters may be deemed to have received compensation from PG&E and/or the
applicable Issuer
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in the form of underwriting discounts or commissions and may also receive
commissions. Underwriters may sell Preferred Securities to or through dealers,
and such dealers may receive compensation in the form of discounts,
concessions or commissions from the underwriters.
Any underwriting compensation paid by PG&E and/or the applicable Issuer to
underwriters in connection with the offering of Preferred Securities, and any
discounts, concessions or commissions allowed by such underwriters to
participating dealers, will be set forth in an applicable Prospectus
Supplement. Underwriters and dealers participating in the distribution of
Preferred Securities may be deemed to be underwriters, and any discounts and
commissions received by them and any profit realized by them on resale of such
Preferred Securities may be deemed to be underwriting discounts and
commissions, under the Act. Underwriters and dealers may be entitled, under
agreement with PG&E and the applicable Issuer, to indemnification against and
contribution toward certain civil liabilities, including liabilities under the
Act, and to reimbursement by PG&E for certain expenses.
In connection with the offering of the Preferred Securities of any Issuer,
such Issuer may grant to the underwriters an option to purchase additional
Preferred Securities to cover over-allotments, if any, at the initial public
offering price (with an additional underwriting commission), as may be set
forth in the accompanying Prospectus Supplement. If such Issuer grants any
over-allotment option, the terms of such over-allotment option will be set
forth in the Prospectus Supplement for such Preferred Securities.
Underwriters and dealers may engage in transactions with, or perform
services for, PG&E and/or the applicable Issuer and/or any of their affiliates
in the ordinary course of business.
Each Issuer's Preferred Securities will be a new issue of securities and
will have no established trading market. Any underwriters to whom an Issuer's
Preferred Securities are sold by such Issuer for public offering and sale may
make a market in such Preferred Securities, but such underwriters will not be
obligated to do so and may discontinue any market making at any time without
notice. Such Preferred Securities may or may not be listed on a national
securities exchange. No assurance can be given as to the liquidity of or the
existence of trading markets for any Preferred Securities.
EXPERTS
The consolidated balance sheet and statement of consolidated capitalization
of PG&E and subsidiaries as of December 31, 1993 and 1994, and the related
statements of consolidated income, cash flows, common stock equity and
preferred stock, and the schedule of consolidated segment information for each
of the three years in the period ended December 31, 1994, and the related
supplemental schedule incorporated by reference in this Prospectus, have been
audited by Arthur Andersen LLP, independent public accountants, as indicated
in their reports with respect thereto which are incorporated by reference
herein in reliance upon the authority of said firm as experts in accounting
and auditing in giving said reports.
LEGAL MATTERS
Certain legal matters will be passed upon for PG&E and the Issuers by Gary
P. Encinas, Esq., Chief Counsel, Corporate, of PG&E, by Richards, Layton &
Finger, special Delaware counsel to PG&E and the Issuers and by Ballard Spahr
Andrews & Ingersoll, Philadelphia, Pennsylvania, special tax counsel to PG&E.
The validity of the Preferred Securities will be passed on for the
underwriters by Sullivan & Cromwell, Los Angeles, California, who may rely on
the opinions of Mr. Encinas and of Richards, Layton & Finger as to certain
matters of California and Delaware law, respectively. Mr. Encinas and his
associates in PG&E's Law Department who will participate in consideration of
legal matters relating to the Preferred Securities, together with members of
their respective families, own in the aggregate approximately 1,750 shares of
PG&E's common stock.
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NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRE-
SENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS SUPPLEMENT OR THE
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS PROSPECTUS SUPPLEMENT AND THE
PROSPECTUS DO NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF ANY OFFER
TO BUY ANY SECURITIES OTHER THAN THE SECURITIES DESCRIBED IN THIS PROSPECTUS
SUPPLEMENT AND THE PROSPECTUS OR AN OFFER TO SELL OR THE SOLICITATION OF AN
OFFER TO BUY SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SO-
LICITATION IS UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT OR
THE PROSPECTUS NOR ANY SALE MADE HEREUNDER OR THEREUNDER SHALL, UNDER ANY CIR-
CUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN OR
THEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE OF SUCH INFORMATION.
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TABLE OF CONTENTS
<TABLE>
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PAGE
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<S> <C>
PROSPECTUS SUPPLEMENT
Prospectus Summary........................................................ S-3
Risk Factors.............................................................. S-4
PG&E Capital I............................................................ S-6
Pacific Gas and Electric Company.......................................... S-7
Coverage Ratios........................................................... S-7
Use of Proceeds........................................................... S-8
Certain Terms of the Series A Preferred Securities........................ S-8
Certain Terms of the Series A Debentures.................................. S-10
United States Taxation.................................................... S-13
Underwriting.............................................................. S-16
PROSPECTUS
Available Information..................................................... 2
Incorporation of Certain Documents by Reference........................... 2
The Issuers............................................................... 3
Pacific Gas and Electric Company.......................................... 3
Description of the Preferred Securities................................... 4
Description of the Guarantee.............................................. 12
Description of the Debentures............................................. 14
Relationship Among the Preferred Securities, the Debentures and the
Guarantees............................................................... 19
Plan of Distribution...................................................... 20
Experts................................................................... 21
Legal Matters............................................................. 21
</TABLE>
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12,000,000 PREFERRED SECURITIES
PG&E CAPITAL I
7.90% CUMULATIVE QUARTERLY INCOME PREFERRED SECURITIES, SERIES A
GUARANTEED TO THE EXTENT THE SERIES A
ISSUER HAS FUNDS AS SET FORTH HEREIN BY
PACIFIC GAS AND ELECTRIC COMPANY
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PROSPECTUS SUPPLEMENT
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GOLDMAN, SACHS & CO.
DEAN WITTER REYNOLDS INC.
A.G. EDWARDS & SONS, INC.
LEHMAN BROTHERS
MORGAN STANLEY & CO.
INCORPORATED
PAINEWEBBER INCORPORATED
SMITH BARNEY INC.
REPRESENTATIVES OF THE UNDERWRITERS
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