<PAGE>
Rule 424(b)(5)
Registration No. 33-61379
PROSPECTUS SUPPLEMENT
(To Prospectus Dated August 14, 1995)
$100,000,000
POTOMAC ELECTRIC POWER COMPANY
FIRST MORTGAGE BONDS, 6 1/2% SERIES DUE 2005
The New Bonds will mature on September 15, 2005. Interest on the New Bonds is
payable semiannually on March 15 and September 15, commencing March 15, 1996.
The New Bonds will not be redeemable prior to maturity.
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. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC(1) DISCOUNT COMPANY(2)
<S> <C> <C> <C>
Per New Bond........................ 99.132% .309% 98.823%
Total............................... $99,132,000 $309,000 $98,823,000
</TABLE>
-------------------------------------------------------------------------------
(1) Plus accrued interest, if any, from September 14, 1995.
(2) Before deduction of expenses payable by the Company, estimated at
$685,000.
The New Bonds are offered subject to receipt and acceptance by the
Underwriters, to prior sale and to the Underwriters' right to reject any order
in whole or in part and to withdraw, cancel or modify the offer without
notice. It is expected that delivery of the New Bonds will be made at the
office of Salomon Brothers Inc, Seven World Trade Center, New York, New York,
or through the facilities of The Depository Trust Company, on or about
September 14, 1995.
SALOMON BROTHERS INC
FIRST UNION CAPITAL MARKETS CORP.
BA SECURITIES, INC.
A.G. EDWARDS & SONS, INC.
The date of this Prospectus Supplement is September 6, 1995.
<PAGE>
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVERALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE NEW BONDS
OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
THE ISSUE IN BRIEF
The following is a summary of certain pertinent facts, and is qualified in
its entirety by detailed information and financial statements appearing
elsewhere in this Prospectus Supplement or the accompanying Prospectus, or in
documents incorporated by reference in the accompanying Prospectus. See
"Incorporation of Certain Documents by Reference" in the accompanying
Prospectus.
THE OFFERING
<TABLE>
<S> <C>
Company............................. Potomac Electric Power Company
Securities Offered.................. $100,000,000 First Mortgage Bonds, 6 1/2%
Series due 2005
Interest Payment Dates.............. March 15 and September 15, commencing
March 15, 1996
Redemption.......................... Non-redeemable
Use of Proceeds..................... See "Use of Proceeds"
</TABLE>
THE COMPANY
<TABLE>
<S> <C>
Business and Service Area........... Generation, transmission, distribution and
sale of electric energy in the Washington,
D.C. metropolitan area
1994 Source of Energy............... Coal 69%; Oil and Natural Gas 18%;
Purchased Capacity 13%
</TABLE>
For selected financial information and the Company's ratios of earnings to
fixed charges see "Selected Financial Information" and "Ratios of Earnings to
Fixed Charges" in the accompanying Prospectus.
DESCRIPTION OF THE NEW BONDS
The following description of the particular terms of the New Bonds offered
hereby supplements the description of the general terms and provisions of the
New Bonds set forth in the accompanying Prospectus, to which description
reference is hereby made. See "Description of Bonds and Mortgage" in the
accompanying Prospectus.
GENERAL
The $100,000,000 principal amount of New Bonds offered hereby will mature on
September 15, 2005, and will bear interest at the rate set forth in the title
thereof, payable semiannually on March 15 and September 15 in each year,
commencing March 15, 1996.
REDEMPTION OF NEW BONDS
The New Bonds offered hereby will not be redeemable prior to maturity.
S-2
<PAGE>
USE OF PROCEEDS
On September 6, 1995, the Company agreed to sell $75,000,000 principal
amount of First Mortgage Bonds, 7 3/8% Series due 2025 (the "Bonds due 2025"),
with net proceeds to the Company of 98.574616% of the principal amount.
Closing on the sale of the Bonds due 2025 (which also is expected on or about
September 14, 1995) and closing on the sale of the New Bonds are not
interdependent.
The proceeds from the sale of the New Bonds, together with the proceeds from
the sale of the Bonds due 2025, will be used to redeem at 105.03% of principal
amount $59,800,000 of the Company's First Mortgage Bonds, 8 5/8% Series due
2019, which the Company has called for redemption on October 11, 1995, and to
refund certain of the Company's short-term debt incurred primarily to finance,
on a temporary basis, the Company's ongoing utility construction program and
operations.
UNDERWRITING
Under the terms and subject to the conditions set forth in the Underwriting
Agreement, the Company has agreed to sell to each of the Underwriters named
below (the "Underwriters"), and each of the Underwriters, for whom Salomon
Brothers Inc is acting as representative, has severally agreed to purchase,
the principal amount of the New Bonds set forth opposite its name below.
<TABLE>
<CAPTION>
PRINCIPAL
UNDERWRITERS AMOUNT
------------ ------------
<S> <C>
Salomon Brothers Inc ...................................... $ 40,000,000
First Union Capital Markets Corp. ......................... 40,000,000
BA Securities, Inc. ....................................... 10,000,000
A.G. Edwards & Sons, Inc. ................................. 10,000,000
------------
Total.................................................. $100,000,000
============
</TABLE>
Under the terms and subject to the conditions of the Underwriting Agreement,
the Underwriters are committed to take and pay for all of the New Bonds, if
any are taken.
The Underwriters propose to offer the New Bonds in part directly to retail
purchasers at the 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 .25% of the principal amount of the New Bonds. The
Underwriters may allow and such dealers may reallow a concession not in excess
of .20% of the principal amount of the New Bonds on sales to certain other
brokers and dealers. After the New Bonds are released for sale to the public,
the public offering price and other selling terms may be changed.
The Company has agreed to indemnify the several Underwriters against certain
civil liabilities, including certain liabilities under the Securities Act of
1933, as amended.
The Company has been advised by the Underwriters that one or more of the
Underwriters currently intend to make a market in the New Bonds, but that they
are not obligated to do so and may discontinue making a market at any time
without notice. The Company currently has no intention to list the New Bonds
on any securities exchange, and there can be no assurance given as to the
liquidity of the trading market for the New Bonds.
S-3
<PAGE>
POTOMAC ELECTRIC POWER COMPANY
FIRST MORTGAGE BONDS
----------------
Potomac Electric Power Company (the "Company") may offer from time to time
up to $350,000,000 aggregate principal amount of its First Mortgage Bonds (the
"New Bonds"), which may be offered in one or more series in amounts, at prices
and on terms to be determined by market conditions at the time of sale. The
aggregate principal amount, rate (or method of calculation) and time of
payment of interest, maturity, offering price, any redemption terms, and other
specific terms of the series of New Bonds in respect of which this Prospectus
is being delivered, are set forth in the accompanying Prospectus Supplement
(the "Prospectus Supplement"). The amount of First Mortgage Bonds to be
offered hereby will be reduced by the amount of any Medium-Term Notes sold
pursuant to the Registration Statements of which this Prospectus is a part.
See "Description of Bonds and Mortgage."
The Company may sell the New Bonds through underwriters designated by the
Company or through dealers, directly to a limited number of institutional
purchasers, or through agents. See "Plan of Distribution." The Prospectus
Supplement sets forth the names of such underwriters, dealers or agents, if
any, any applicable commissions or discounts and the net proceeds to the
Company from such sale.
----------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR BY ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
----------------
THE DATE OF THIS PROSPECTUS IS AUGUST 14, 1995
<PAGE>
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS OR ANY PROSPECTUS SUPPLEMENT IN CONNECTION WITH
THE OFFER MADE BY THIS PROSPECTUS AND ANY PROSPECTUS SUPPLEMENT AND, IF GIVEN
OR MADE, ANY SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS OR ANY PROSPECTUS
SUPPLEMENT IS NOT AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, BY
ANY PERSON IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE SUCH AN OFFER
OR SOLICITATION. EXCEPT AS OTHERWISE INDICATED HEREIN, THIS PROSPECTUS AND ANY
PROSPECTUS SUPPLEMENT SPEAKS AS OF THE DATE THEREOF AND DOES NOT PURPORT TO
REFLECT ANY CHANGES IN THE AFFAIRS OF THE COMPANY THEREAFTER.
----------------
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "1934 Act"), and in accordance therewith
files periodic and current reports and other information with the Securities
and Exchange Commission (the "Commission"). Information concerning directors
and officers, their remuneration and any material interest of such persons in
transactions with the Company, as of particular dates, is disclosed in such
reports and in proxy statements distributed to shareholders of the Company and
filed with the Commission. Such reports, proxy statements and other
information can be inspected and copied at the public reference facilities of
the Commission at 450 Fifth Street, N.W., Washington, D.C.; 500 West Madison
Street, Suite 1400, Chicago, Illinois; and 7 World Trade Center, New York, New
York. Copies of such material can also be obtained from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at
prescribed rates. In addition, reports, proxy statements and other information
concerning the Company can be inspected at the offices of the New York Stock
Exchange, Inc., where certain securities of the Company are listed.
The Company has filed with the Commission registration statements on Form S-
3 relating to the First Mortgage Bonds (herein, together with all amendments
and exhibits, referred to as the "Registration Statements") under the
Securities Act of 1933, as amended (the "1933 Act"). This Prospectus does not
contain all of the information set forth in the Registration Statements,
certain parts of which are omitted in accordance with the rules and
regulations of the Commission. For further information, reference is hereby
made to the Registration Statements.
----------------
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents heretofore filed by the Company with the Commission
under the 1934 Act are incorporated by reference in this Prospectus:
(a) The Company's Annual Report on Form 10-K for the year ended December
31, 1994.
(b) The Company's Quarterly Reports on Form 10-Q for the quarters ended
March 31, 1995 and June 30, 1995.
(c) The Company's Current Reports on Form 8-K dated January 27, 1995 and
dated May 19, 1995.
All documents subsequently filed by the Company with the Commission pursuant
to Sections 13(a), 13(c), 14 or 15(d) of the 1934 Act after the date of this
Prospectus and prior to the termination of this offering shall be deemed to be
incorporated by reference in this Prospectus and to be a part hereof from the
date of the filing of such documents. Any statement contained in an
incorporated document shall be deemed to be modified or superseded for
purposes of this Prospectus to the extent that a statement contained herein or
in any other incorporated document subsequently filed or in an accompanying
Prospectus Supplement modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus.
THE COMPANY HEREBY UNDERTAKES TO FURNISH, WITHOUT CHARGE, TO EACH PERSON,
INCLUDING ANY BENEFICIAL OWNER, TO WHOM A COPY OF THIS PROSPECTUS HAS BEEN
DELIVERED, ON THE WRITTEN OR ORAL REQUEST OF ANY SUCH PERSON, A COPY OF ANY OR
ALL OF THE DOCUMENTS REFERRED TO ABOVE WHICH HAVE BEEN OR MAY BE INCORPORATED
BY REFERENCE IN THIS PROSPECTUS, OTHER THAN EXHIBITS TO SUCH DOCUMENTS.
REQUESTS FOR SUCH DOCUMENTS SHOULD BE DIRECTED TO ELLEN SHERIFF ROGERS,
ASSOCIATE GENERAL COUNSEL, ASSISTANT SECRETARY AND ASSISTANT TREASURER,
POTOMAC ELECTRIC POWER COMPANY, 1900 PENNSYLVANIA AVENUE, N.W., WASHINGTON,
D.C. 20068 (202-872-3526).
2
<PAGE>
THE COMPANY
Potomac Electric Power Company, a District of Columbia and Virginia
corporation (the "Company"), is engaged in the generation, transmission,
distribution and sale of electric energy in the Washington, D.C. metropolitan
area, including the District of Columbia and major portions of Montgomery and
Prince George's Counties in Maryland. It also supplies, at wholesale, electric
energy to the Southern Maryland Electric Cooperative, Inc., which distributes
electricity in Calvert, Charles, Prince George's and St. Mary's Counties in
southern Maryland. The Company's wholly owned nonutility subsidiary, Potomac
Capital Investment Corporation ("PCI"), was organized in late 1983 with the
objective of supplementing utility earnings and building long-term value. The
principal assets of PCI are portfolios of securities and equipment leases, and
to a lesser extent real estate and other investments. In May 1995, PCI
announced adoption of a plan to end its investment in the aircraft equipment
leasing business. The mailing address of the Company's executive offices is
1900 Pennsylvania Avenue, N.W., Washington, D.C. 20068, and its telephone
number is 202-872-2000.
USE OF PROCEEDS
The Company may offer from time to time pursuant to this Prospectus up to an
aggregate principal amount of $350,000,000 of its First Mortgage Bonds.
The proceeds from the sale of the securities offered hereby will be used to
refund short-term debt incurred primarily to finance, on a temporary basis,
the Company's utility construction program and operations, and to refund the
Company's senior securities, including the retirement of long-term debt and
the satisfaction of contractual sinking fund requirements.
3
<PAGE>
SELECTED FINANCIAL INFORMATION
The following is a selection of certain consolidated financial information
of the Company which was derived from, and is qualified in its entirety by,
the audited consolidated financial statements contained in the Company's
Annual Report on Form 10-K for the year ended December 31, 1994, and the
unaudited consolidated financial information contained in its Quarterly Report
on Form 10-Q for the quarter ended June 30, 1995, which are available as
described herein under "Incorporation of Certain Documents by Reference." The
interim financial data are unaudited; however, in the opinion of the
management of the Company, such data reflect all adjustments, consisting of
normal recurring accruals, necessary for a fair statement of the results of
operations for the interim periods presented.
<TABLE>
<CAPTION>
12 MONTHS ENDED
-----------------------------------------------
JUNE 30, DEC. 31, DEC. 31, DEC. 31,
1995 1994 1993 1992(1)
----------- ----------- ----------- -----------
(THOUSANDS OF DOLLARS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Income Statement Data:
Total Revenue................. $ 1,772,847 $ 1,823,074 $ 1,725,205 $ 1,601,558
Operating Revenue............. 1,761,147 1,790,600 1,702,442 1,562,167
Net Income.................... 87,646 227,162 241,579 216,782
Earnings for Common Stock..... 70,949 210,725 225,324 202,390
Earnings Per Share of Common
Stock........................ .60 1.79 1.95 1.80
Balance Sheet Data at end of
period:
Property and Plant, net....... $ 4,343,543 $ 4,298,260 $ 4,131,142 $ 3,931,257
</TABLE>
--------
(1) In 1992, Net Income and Earnings for Common Stock include $16,022,000, and
Earnings Per Share of Common Stock includes $.14, from the cumulative
effect of a change in accounting to provide for the accrual of revenue for
service rendered but unbilled.
<TABLE>
<CAPTION>
AS OF JUNE 30,
1995
-----------------
AMOUNT RATIO
----------- -----
(THOUSANDS)
<S> <C> <C>
Capital Structure (excluding nonutility subsidiary debt
and current maturities):
Long-Term Debt....................................... $1,703,370 44.9%
Preferred Stock...................................... 268,886 7.1
Common Equity........................................ 1,818,554 48.0
---------- -----
Total Capitalization............................... $3,790,810 100.0%
==========
Parent Company Long-Term Debt Due in One Year and
Short-Term Debt....................................... $ 419,000
==========
</TABLE>
RATIOS OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
12 MONTHS ENDED
-----------------------------------------------------
JUNE 30, DEC. 31, DEC. 31, DEC. 31, DEC. 31, DEC. 31,
1995 1994 1993 1992 1991 1990
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Parent company only....... 2.87 3.23 3.20 2.73 2.86 2.79
Fully consolidated........ 1.47 2.37 2.31 2.19 2.23 2.14
</TABLE>
For purposes of computing the ratio of earnings to fixed charges for rate-
regulated public utilities, earnings represent net income before cumulative
effect of accounting changes plus income taxes and fixed charges. Fixed
charges represent interest charges on debt (exclusive of credits arising from
the allowance for funds used during construction) and the portion of rentals
deemed representative of the interest factor.
4
<PAGE>
DESCRIPTION OF BONDS AND MORTGAGE
GENERAL. The New Bonds are to be issued under the Mortgage and Deed of Trust
dated July 1, 1936, between the Company and The Riggs National Bank of
Washington, D.C., as Trustee (the "Trustee"), as amended and supplemented and
as to be supplemented by a separate supplemental indenture (the "Supplemental
Indenture") each time New Bonds are offered under this Prospectus and the
accompanying Prospectus Supplement. Said mortgage, as so amended and
supplemented and to be supplemented, is herein sometimes called the
"Mortgage." Copies of the documents currently constituting the Mortgage are
exhibits to the Registration Statements, as is the form of the Supplemental
Indenture.
Reference is made to the Prospectus Supplement which accompanies this
Prospectus for the following terms and other information with respect to the
New Bonds being offered thereby: (1) the designation and aggregate principal
amount of such New Bonds; (2) the date on which such New Bonds will mature;
(3) the rate per annum at which such New Bonds will bear interest, or the
method of determining such rate; (4) the dates on which such interest will be
payable; (5) any redemption terms; and (6) other specific terms applicable to
the New Bonds.
The New Bonds will be available only in fully registered form without
coupons in denominations of $1,000 or any multiple thereof, except as may be
set forth in the accompanying Prospectus Supplement. Both principal and
interest on the New Bonds will be payable at the agencies of the Company, The
Riggs National Bank of Washington, D.C. and Bankers Trust Company, New York,
N.Y. The Company will not impose charges for any exchanges of New Bonds.
The Supplemental Indenture will contain no provisions for an improvement and
sinking fund or any maintenance and replacement requirement or dividend
restriction; neither does the Mortgage nor any indenture supplemental thereto
relating to any outstanding Series of Bonds contain any such provisions.
The Mortgage does not contain any covenants or other provisions that
specifically are intended to afford holders of the New Bonds special
protection in the event of a highly leveraged transaction.
The following statements are outlines of certain provisions contained in the
Mortgage and do not purport to be complete. They are qualified by express
reference to the cited Sections and Articles of the Mortgage. Certain terms
used are as defined in the Mortgage.
SECURITY. The New Bonds will be secured, together with all other Bonds now
or hereafter issued under the Mortgage, by a valid and direct first lien
(subject to certain leases, Permitted Liens and other minor matters) on
substantially all the properties and franchises of the Company (the principal
properties being its generating stations and its electric transmission and
distribution systems), other than cash, accounts receivable and other liquid
assets, securities (including securities evidencing investments in
subsidiaries of the Company), leases by the Company as lessor, equipment and
materials not installed as part of the fixed property, and electric energy and
other materials, merchandise or supplies produced or purchased by the Company
for sale, distribution or use. The Company's 9.72% undivided interest in a
mine-mouth, steam-electric generating station, known as the Conemaugh
Generating Station, which is located in Indiana County, Pennsylvania, and its
associated transmission lines is that of a tenant in common with eight other
utility owners. Substantially all of the Company's transmission and
distribution lines of less than 230,000 volts, portions of its 230,000 and
500,000 volt transmission lines, substantially all of the Conemaugh
transmission lines, and 11 substations are located on land owned by others or
on public streets and highways.
The Mortgage contains provisions subjecting after-acquired property (subject
to pre-existing and Permitted Liens) to the lien thereof. The lien on such
property is, however, subject to rights of persons having superior equities
attaching prior to the recording or filing of an appropriate supplemental
indenture.
ISSUANCE OF ADDITIONAL BONDS. Additional Bonds ranking equally with the New
Bonds may be issued in an aggregate amount of up to (i) 60% of the Net
Bondable Value of Property Additions not subject to an
5
<PAGE>
Unfunded Prior Lien, (ii) the amount of cash deposited with the Trustee (which
may thereafter be withdrawn on the same basis that Additional Bonds are
issuable under (i) and (iii)), and (iii) the amounts of Bonds retired or to be
retired (except out of trust moneys or by any sinking or analogous fund if the
fund prevents such use) (Secs. 4, 6 and 7, Art. III; Sec. 4, Art. VIII).
Additional Bonds may not be issued unless Net Earnings of the Company
Available for Interest and Property Retirement Appropriations (i.e., earnings
before depreciation, amortization, income taxes and interest charges) during
12 of the immediately preceding 15 months shall have been at least twice the
annual interest charges on all Bonds and Prior Lien Bonds then outstanding and
then being issued, unless they are being issued on the basis of Bonds paid at
or redeemed or purchased within two years of maturity or on the basis of
Property Additions subject to an Unfunded Prior Lien (which simultaneously
becomes a Funded Prior Lien) and the Bonds are issued within two years of the
maturity of the Prior Lien Bonds secured by such Prior Liens (Secs. 3, 4 and
7, Art. III). Giving effect to the issuance of the New Bonds at an assumed
rate of interest of 8%, such Net Earnings for the twelve months ended June 30,
1995 would be approximately 5.1 times the aggregate annual interest charges
referred to above. Such coverage would permit issuance of approximately $2.2
billion of mortgage bonds (in addition to the New Bonds) at an assumed average
interest rate of 8% per annum, against property additions or cash deposits,
although only approximately $360 million of such additional bonds could
currently be issued in compliance with unbonded net property addition
limitations contained in the Mortgage.
So long as any New Bonds are outstanding, Property Additions constructed or
acquired on or before December 31, 1946 may not be made the basis for the
issue of Bonds, or the withdrawal of cash, or the reduction of cash required
to be paid to the Trustee (Sec. 2, Part IV, Supplemental Indenture).
Prior Lien Bonds secured by an Unfunded Prior Lien may be issued under the
circumstances and subject to the limitations contained in the Mortgage (Sec.
16, Art. IV).
After giving effect to the issuance of the New Bonds (which are to be issued
against Property Additions), approximately $600 million of the Property
Additions as of June 30, 1995 will remain available for the purposes permitted
in the Mortgage, including the issuance of Bonds.
RELEASE OF PROPERTY. The Mortgage permits property to be released from the
lien of the Mortgage upon compliance with the provisions thereof. Such
provisions generally require that cash be deposited with the Trustee in an
amount equal to the fair value of the property to be released. The Mortgage
permits the Company to reduce such amounts of cash otherwise required to be
deposited by substituting a like amount of Bonds retired. The Mortgage also
contains certain requirements relating to the withdrawal of cash deposited to
obtain a release of property (Art. VII and Art. VIII).
MODIFICATION OF MORTGAGE. With the consent of the holders of 80% in amount
of Bonds and of 80% in amount of Bonds of each series affected if less than
all are affected, the Mortgage may be changed except to affect the terms of
payment of the principal or interest on any Bonds or to reduce the percentage
of Bondholders required to effect any change (Sec. 6, Art. XV).
The Supplemental Indenture, however, provides that the foregoing percentages
shall be reduced to 60% upon the consent or agreement to such change by the
holders of all outstanding Bonds. Purchasers of the New Bonds will be deemed
to have agreed to such reduction pursuant to the terms of the Supplemental
Indenture.
EVENTS OF DEFAULT. The holders of 25% in amount of Bonds, upon any Event of
Default, may require the Trustee to accelerate maturity of the Bonds (although
a majority in amount of Bonds may waive such default and rescind such
acceleration if such default is cured) and to enforce the lien of the Mortgage
upon being indemnified to its satisfaction (Sec. 1 and 4, Art. IX).
The holders of a majority in amount of Bonds may direct proceedings for the
sale of the trust estate, or for the appointment of a receiver or any other
proceedings under the Mortgage, but have no right to involve the Trustee in
any personal liability without indemnifying it to its satisfaction (Sec. 11,
Art. IX).
6
<PAGE>
Events of Default include failure to pay principal, failure for 30 days to
pay interest or to satisfy any improvement, maintenance or sinking fund
obligation, failure for 60 days (after notice by the Trustee or the holders of
15% in amount of Bonds) to perform any other covenant, and certain events of
bankruptcy, insolvency or reorganization (Sec. 1, Art. IX).
While the Mortgage by its terms does not require that periodic evidence be
furnished to the Trustee as to the absence of default or as to compliance with
the terms of the Mortgage, the Trust Indenture Act of 1939, as amended, now
requires that annual certificates as to the absence of such defaults be
furnished to the Trustee.
RELATIONSHIPS WITH TRUSTEE. The Riggs National Bank of Washington, D.C.
("Riggs Bank") is Trustee under the Company's General Retirement Plan, Savings
Plan for Exempt Employees, Savings Plan for Non-Bargaining Unit, Non-Exempt
Employees, and Savings Plan for Bargaining Unit Employees. The Company has
with Riggs Bank, as it has with various other banks, demand deposit accounts.
Riggs Bank is one of a number of banks with which the Company has conventional
and revolving credit arrangements and also performs various other banking-
related services for the Company.
PLAN OF DISTRIBUTION
The Company may sell the New Bonds: (i) through underwriters or dealers;
(ii) directly to one or more purchasers; (iii) through agents or; (iv) through
a combination of any such methods of sale. The Prospectus Supplement with
respect to any New Bonds being offered thereby sets forth the terms of the
offering of such New Bonds, including the name or names of any underwriters,
the purchase price of such New Bonds and the proceeds to the Company from such
sale, any underwriting discounts and other items constituting underwriters'
compensation, any initial public offering price and any discounts or
concessions allowed or reallowed or paid to dealers and any securities
exchanges on which such New Bonds may be listed.
If underwriters are used in the sale, the New Bonds will be acquired by the
underwriters for their own account and may be resold from time to time in one
or more transactions, including negotiated transactions, at a fixed public
offering price or at varying prices determined at the time of sale. The New
Bonds may be offered to the public, either through underwriting syndicates
represented by the underwriter or underwriters to be designated by the Company
or directly by one or more of such firms. Unless otherwise set forth in the
Prospectus Supplement, the obligations of the underwriters to purchase the New
Bonds offered thereby will be subject to certain conditions precedent, and the
underwriters will be obligated to purchase all such New Bonds if any are
purchased. Any initial public offering price and any discounts or concessions
allowed or reallowed or paid to dealers may be changed from time to time.
New Bonds may be sold directly by the Company or through agents designated
by the Company from time to time. The Prospectus Supplement sets forth the
name of any agent involved in the offer or sale of the New Bonds in respect of
which the Prospectus Supplement is delivered as well as any commission payable
by the Company to such agent. Unless otherwise indicated in the Prospectus
Supplement, any such agent is acting on a best efforts basis for the period of
its appointment.
If so indicated in the Prospectus Supplement, the Company will authorize
agents, underwriters or dealers to solicit offers by certain specified
institutions to purchase the New Bonds from the Company at the public offering
price set forth in the Prospectus Supplement pursuant to delayed delivery
contracts providing for payment and delivery on a specified date in the
future. Such contracts will be subject to those conditions set forth in the
Prospectus Supplement, and the Prospectus Supplement will set forth the
commission payable for solicitation of such contracts.
Agents and underwriters may be entitled under agreements entered into with
the Company to indemnification by the Company against certain civil
liabilities, including liabilities under the 1933 Act. Agents and underwriters
may be customers of, engaged in transactions with, or perform services for the
Company in the ordinary course of business.
7
<PAGE>
EXPERTS
The consolidated financial statements incorporated in this Prospectus by
reference to the Company's Annual Report on Form 10-K for the year ended
December 31, 1994 have been so incorporated in reliance on the report of Price
Waterhouse LLP, independent accountants, given on the authority of said firm
as experts in auditing and accounting.
With respect to the unaudited consolidated financial information of the
Company for the three month periods ended March 31, 1995 and 1994, and the six
month periods ended June 30, 1995 and 1994 incorporated by reference in this
Prospectus, Price Waterhouse LLP reported that they have applied limited
procedures in accordance with professional standards for a review of such
information. However, their separate reports dated May 1, 1995 and July 28,
1995, incorporated by reference herein, state that they did not audit and they
do not express opinions on that unaudited consolidated financial information.
Price Waterhouse LLP has not carried out any significant or additional audit
tests beyond those which would have been necessary if such reports had not
been incorporated by reference. Accordingly, the degree of reliance on their
reports on such information should be restricted in light of the limited
nature of the review procedures applied. Price Waterhouse LLP is not subject
to the liability provisions of Section 11 of the 1933 Act for their reports on
the unaudited consolidated financial information because each such report is
not a "report" or a "part" of the registration statement prepared or certified
by Price Waterhouse LLP within the meaning of Sections 7 and 11 of the 1933
Act.
The statements as to matters of law and legal conclusions contained under
"Description of Bonds and Mortgage--Security" have been prepared under the
supervision of, and reviewed by, William T. Torgerson, Esq., Senior Vice
President and General Counsel for the Company, and are made on his authority.
LEGAL OPINIONS
Certain legal matters in connection with the securities to be offered hereby
will be passed upon for the Company by Covington & Burling, 1201 Pennsylvania
Avenue, N.W., Washington, D.C., and William T. Torgerson, Esq., 1900
Pennsylvania Avenue, N.W., Washington, D.C. Mr. Torgerson is regularly
employed by the Company as Senior Vice President and General Counsel. Unless
otherwise indicated in the accompanying Prospectus Supplement, the legality of
such securities will be passed upon for the underwriter, dealer or agents by
Winthrop, Stimson, Putnam & Roberts, One Battery Park Plaza, New York, N.Y.,
who will, however, not pass on the incorporation of the Company.
8
<PAGE>
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY IN-
FORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS IN CONNECTION WITH THE
OFFER CONTAINED IN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS
AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE UNDERWRITERS. THIS
PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS SHALL NOT CONSTITUTE AN
OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OF-
FERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE
SUCH OFFER OR SOLICITATION IN SUCH JURISDICTION. THE DELIVERY OF THIS PROSPEC-
TUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS AT ANY TIME DOES NOT IMPLY THAT
THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HERE-
OF.
---------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROSPECTUS SUPPLEMENT
The Issue in Brief................................................. S-2
Description of the New Bonds....................................... S-2
Use of Proceeds.................................................... S-3
Underwriting....................................................... S-3
PROSPECTUS
Available Information.............................................. 2
Incorporation of Certain Documents by Reference.................... 2
The Company........................................................ 3
Use of Proceeds.................................................... 3
Selected Financial Information..................................... 4
Ratios of Earnings to Fixed Charges................................ 4
Description of Bonds and Mortgage.................................. 5
Plan of Distribution............................................... 7
Experts............................................................ 8
Legal Opinions..................................................... 8
</TABLE>
$100,000,000
POTOMAC ELECTRIC POWER COMPANY
FIRST MORTGAGE BONDS,
6 1/2% SERIES DUE 2005
[LOGO OF POTOMAC ELECTRIC
POWER COMPANY APPEARS HERE]
SALOMON BROTHERS INC
FIRST UNION CAPITAL MARKETS CORP.
BA SECURITIES, INC.
A.G. EDWARDS & SONS, INC.
PROSPECTUS SUPPLEMENT
DATED SEPTEMBER 6, 1995
