<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 25, 1995
REGISTRATION NO. 33-87784
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 2
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
PUGET POWER CONSERVATION GRANTOR TRUST 1995-1
(Issuer with respect to the Certificates)
PUGET SOUND POWER & LIGHT COMPANY
(Originator of the Trust described herein)
(Exact name of registrant as specified in its charter)
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<S> <C> <C>
WASHINGTON 4911 91-0374630
(State of (Primary Standard Industrial (I.R.S. Employer
Organization) Classification Code Number) Identification Number)
</TABLE>
411 - 108TH AVENUE N.E.
BELLEVUE, WASHINGTON 98004-5515
(206) 454-6363
(Address and telephone number of registrant's principal executive offices)
DONALD E. GAINES, TREASURER
411 - 108TH AVENUE N.E.
BELLEVUE, WASHINGTON 98004-5515
(206) 454-6363
(Name, address, and telephone number of agent for service)
------------------------
COPIES TO:
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STEPHEN A. MCKEON CHRISTOPHER J. KELL
Perkins Coie Skadden, Arps, Slate, Meagher & Flom
1201 Third Avenue, 40th Floor 919 Third Avenue
Seattle, Washington 98101-3099 New York, New York 10022
(206) 583-8888 (212) 735-3000
</TABLE>
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Approximate date of commencement of proposed sale to the public:
AS SOON AS PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE.
------------------------
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This Prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
<PAGE>
Subject to Completion, Dated April 25, 1995
PROSPECTUS
$
PUGET POWER CONSERVATION GRANTOR TRUST 1995-1
% CONSERVATION PASS-THROUGH CERTIFICATES, SERIES 1995-1
PUGET SOUND POWER & LIGHT COMPANY
SELLER AND SERVICER
The % Conservation Pass-Through Certificates, Series 1995-1 (the
"Certificates") offered hereby evidence undivided fractional interests in Puget
Power Conservation Grantor Trust 1995-1 (the "Trust"). The Certificates
represent the entire beneficial ownership of the Trust. The Trust will be
created pursuant to a Pooling and Servicing Agreement (the "Pooling and
Servicing Agreement") to be entered into by Puget Sound Power & Light Company
("Puget"), as Seller and Servicer, and Chemical Bank, as Trustee (the
"Trustee"). Puget will sell and transfer to the Trust the Purchased Assets (as
hereinafter defined), which will include the unamortized balance of previous
expenditures by Puget on customer conservation measures that are currently in
rate base in the amount of $ (the "Bondable Conservation Investment
Amount"). The Certificates will be entitled to the benefits of the State of
Washington Conservation Financing Statute (the "Statute"), which gives the
Servicer the right to recover in rates an amount equal to the Bondable
Conservation Investment Amount plus interest thereon at the Certificate Rate (as
hereinafter defined). The Statute permits revenue allocations from a tariff
levied on all of Puget's retail customers (the "Tariff") and obligates the
Washington Utilities and Transportation Commission (the "Commission") to
maintain rates under the Tariff sufficient to fully amortize the Bondable
Conservation Investment Amount and the costs of capital associated therewith in
accordance with the terms of the Pooling and Servicing Agreement.
Principal and interest at the Certificate Rate of % per annum will be paid
quarterly with respect to the Certificates on or about the 11th day of January,
April, July and October of each year (each, a "Distribution Date"), commencing
October 11, 1995 and ending April 11, 2005 (as such date may be extended as
described herein). The Trust property principally consists of the right to
receive revenues from Puget customers pursuant to the Tariff and any Revised
Tariff (as hereinafter defined). On September 30, 2004 (as such date may be
extended as described herein), the Tariff or any Revised Tariff then in effect
will terminate and no further billings will be made thereunder. Puget as
Servicer will be responsible for calculating the Tariff and any Revised Tariff,
for billing and collecting revenues from customers and remitting such
collections to the Trustee and for applying to the Commission for any necessary
adjustments to the Tariff or any Revised Tariff.
The Certificates represent a new issue of securities for which there is
currently no public trading market. There can be no assurance that such a market
for the Certificates will develop or if it does develop that it will continue.
Each of the Underwriters of the Certificates, Salomon Brothers Inc and Chemical
Securities Inc., has informed the Trust that it currently intends to make a
market in the Certificates. The Underwriters are not obligated to do so,
however, and any market making may be discontinued at any time without notice.
PROSPECTIVE INVESTORS SHOULD CONSIDER THE FACTORS SET FORTH UNDER "RISK
FACTORS."
THE CERTIFICATES REPRESENT INTERESTS IN THE TRUST, NOT INTERESTS IN OR
OBLIGATIONS OF PUGET SOUND POWER & LIGHT COMPANY OR ANY OF ITS AFFILIATES.
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.
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Price to Underwriting Proceeds
Public Discount to
(1) Seller
(1)(2)
<S> <C> <C> <C>
Per Certificate............................. % % %
Total....................................... $ $ $
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<FN>
(1) Plus accrued interest, if any, at the Certificate Rate from ,
1995 to the date of delivery.
(2) Before deducting expenses payable by the Seller, estimated at $ .
</TABLE>
The Certificates are offered subject to prior sale and subject to the
Underwriters' right to reject orders in whole or in part. It is expected that
delivery of the Certificates will be made in book-entry form only through the
facilities of The Depositary Trust Company, on or about , 1995.
SALOMON BROTHERS INC CHEMICAL SECURITIES INC.
The date of this Prospectus is , 1995.
<PAGE>
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE CERTIFICATES AT
A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
AVAILABLE INFORMATION
Puget, as originator of the Trust, has filed with the Securities and
Exchange Commission (the "S.E.C.") a Registration Statement on Form S-1 under
the Securities Act of 1933, as amended (the "Securities Act"), with respect to
the Certificates offered hereby (the "Registration Statement"). This Prospectus,
which constitutes part of the Registration Statement, omits certain of the
information contained in the Registration Statement and the exhibits and
schedules thereto on file with the S.E.C. pursuant to the Securities Act and the
rules and regulations of the S.E.C. thereunder. The Registration Statement,
including exhibits and schedules thereto, may be inspected and copied at the
public reference facilities maintained by the S.E.C. at 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the S.E.C.'s Regional Offices at 7 World Trade
Center, Suite 1300, New York, New York 10048, and Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661, and copies may be obtained
at the prescribed rates from the Public Reference Section of the S.E.C. at 450
Fifth Street, N.W., Washington, D.C. 20549.
Statements contained in this Prospectus as to the contents of any contract,
agreement or other document referred to are not necessarily complete and in each
instance reference is made to the copy of such contract, agreement or other
document filed as an exhibit to the Registration Statement, each such statement
being qualified in all respects by such reference.
Puget 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 S.E.C.
Such reports, proxy statements and other information filed by Puget can be
inspected and copied at the public reference facilities maintained by the S.E.C.
at Room 1024, 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549,
and at the S.E.C.'s Regional Offices: New York Regional Office, 7 World Trade
Center, Suite 1300, New York, New York 10048, and Chicago Regional Office,
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661.
Copies of such material can be obtained from the Public Reference Section of the
S.E.C. at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates.
Puget's Common Stock is traded on the New York Stock Exchange. Reports, proxy
statements and other information concerning Puget can be inspected at the
offices of the New York Stock Exchange, 20 Broad Street, New York, New York
10005.
REPORTS TO CERTIFICATEHOLDERS
Unless and until Definitive Certificates (as hereinafter defined) are
issued, the Trustee will provide Cede & Co. ("Cede"), as nominee of The
Depository Trust Company ("DTC") and holder of record of the Certificates (a
"Certificateholder"), quarterly and annual unaudited reports containing
information concerning the Trust prepared by the Servicer pursuant to the
Pooling and Servicing Agreement described in this Prospectus. See "Description
of the Certificates -- Reports to Certificateholders and Evidence of
Compliance." Such reports will be available to beneficial owners of the
Certificates (each, a "Certificate Owner") upon request to the Trustee or the
Servicer. The Servicer, on behalf of the Trust, will file or cause to be filed
with the S.E.C. such periodic reports as are required from time to time under
the Exchange Act, and the rules and regulations of the S.E.C. thereunder. The
Servicer, on behalf of the Trust, will suspend filing periodic reports with the
S.E.C. if they are no longer required by the Exchange Act.
2
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION APPEARING ELSEWHERE IN THIS PROSPECTUS. REFERENCE IS MADE TO THE
INDEX OF TERMS FOR THE LOCATION HEREIN OF CAPITALIZED TERMS USED IN THIS
PROSPECTUS.
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Issuer......................... Puget Power Conservation Grantor Trust 1995-1 formed by the
Seller pursuant to the Pooling and Servicing Agreement
between Puget, as Seller and Servicer, and the Trustee.
Securities Offered............. $ principal amount of % Conservation Pass-Through
Certificates, Series 1995-1.
Certificate Rate............... % per annum, payable in arrears and calculated on the basis
of a 360-day year comprised of twelve 30-day months (the
"Certificate Rate").
The Certificates............... The Certificates will be issued in an initial aggregate
principal amount of $ . Each Certificate represents an
undivided fractional interest in the assets of the Trust.
The Certificates will be available for purchase in minimum
denominations of $1,000 and integral multiples thereof. The
Certificates will initially be represented by one or more
Certificates registered in Cede's name, as nominee of DTC.
Definitive Certificates will be issued only under the
limited circumstances described herein. See "Description of
the Certificates -- General," "-- Book-Entry Registration"
and "-- Definitive Certificates."
Seller and Servicer............ Puget Sound Power & Light Company is an investor-owned
utility providing electric service within a
4,500-square-mile territory in the state of Washington,
principally in the Puget Sound region of western
Washington. During December 1994, Puget provided electric
service to an average of approximately 823,100 Customers
(as hereinafter defined). The Certificates do not represent
interests in or obligations of Puget or any of its
affiliates.
Trustee........................ Chemical Bank, a New York banking corporation.
Statute........................ The Certificates will be entitled to the benefit of the
Statute. The Statute, among other things, (i) grants Puget
(as well as other utilities in the state of Washington with
respect to their conservation investment) the right to
include in rate base and thereby recover from Customers an
amount (the "Conservation Asset Transaction Amount") equal
to the Bondable Conservation Investment Amount plus related
costs of capital, including principal of and interest on
securities issued to finance or refinance such
expenditures, the Trustee Fee (as hereinafter defined) and
the Servicing Fee (as hereinafter defined) and (ii)
expressly defines this statutory right as an item of
property that may be sold, pledged or otherwise made the
basis for the issuance of securities. The issuance and sale
of the Certificates is conditioned upon receipt of the
Initial Order (as hereinafter defined) from the Commission.
Under the Statute, once the issuance of the Certificates
has been authorized by the Commission, this statutory right
to repayment through rates cannot be rescinded or adversely
changed by the Commission.
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3
<PAGE>
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<S> <C>
Tariff......................... Puget has made application to the Commission for an order
(the "Initial Order") that, among other things, (i)
authorizes the sale of the Purchased Assets to the Trust by
Puget, including the right to recover in rates the Bondable
Conservation Investment Amount aggregating $ , plus
interest thereon at the Certificate Rate, (ii) finds that
the Certificates are securities entitled to the benefits of
the Statute, (iii) approves the Tariff, which allocates
revenues to the Trust in an aggregate amount equal to the
Conservation Asset Transaction Amount, (iv) approves the
methodology and mechanism for periodically implementing a
Revised Tariff if a shortfall or surplus in collections
results in a Variance (as hereinafter defined) as of any
Calculation Date (as hereinafter defined), and (v) approves
the Pooling and Servicing Agreement and the transactions
contemplated thereby. The Bondable Conservation Investment
Amount represents the unamortized balance of amounts
previously expended by Puget on conservation measures and
included in Puget's rate base by order of the Commission.
As a result, amounts that provide for amortization of the
Bondable Conservation Investment Amount through rates are
presently being billed to Customers.
The Tariff created by the Initial Order will establish
amounts intended to provide for the amortization of the
Bondable Conservation Investment Amount in accordance with
a pro forma amortization schedule (the "Pro Forma
Schedule"), based on certain assumptions, including, but
not limited to, projected numbers of Customers and expected
delinquencies. The Tariff specifically identifies, for each
class of Puget's retail residential, commercial, industrial
and certain other energy customers (the "Customers"), a
dollar amount of each Customer's regular electric bill that
will be allocated to the Trust from bills sent during each
Regulatory Year (as hereinafter defined). Such amounts will
be collected by Puget as part of its normal collection
activities and will be deposited into an account maintained
with the Trustee for the benefit of the Certificateholders
(the "Collection Account") on each Remittance Date (as
hereinafter defined).
On each September 30, beginning in 1995 and ending in 2003,
and also on March 31, 2004 (each, a "Calculation Date"),
the Servicer is required to compare the unamortized
Bondable Conservation Investment Amount (the "Bondable
Conservation Investment Balance") to the balance set forth
in the Pro Forma Schedule as of such date (the "Projected
Bondable Conservation Investment Balance"). If the Bondable
Conservation Investment Balance at such Calculation Date
differs from the Projected Bondable Conservation Investment
Balance for such Calculation Date by more than 2% (a
"Variance"), the Servicer is required to apply for (and the
Initial Order provides that the Commission will approve
within 30 days of the application) a revised Tariff (a
"Revised Tariff") that will allocate revenues to the Trust
in an amount (the "Revised Tariff Amount") intended to be
sufficient so that the (i) Bondable Conservation Investment
Balance on the next September 30 will equal the Projected
Bondable Conservation Investment Balance as of such date
and (ii) thereafter, will provide for the amortization of
the
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4
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<TABLE>
<S> <C>
remaining Bondable Conservation Investment Balance in
accordance with the Pro Forma Schedule. The Revised Tariff
will be based on updated assumptions by the Servicer,
including, but not limited to, the projected number of
Customers and the expected rate of delinquencies.
Distributions and Cash Flow.... No amounts billed to Customers prior to the issuance of the
Certificates (the "Closing Date") will be transferred to
the Trust. The Trust will have the statutory right to
amounts payable pursuant to the Tariff and any Revised
Tariff from bills mailed by the Servicer on the day
following the Closing Date and, based on historical experi-
ence, such amounts would begin to be received by the
Servicer within 15 days after such date. See "Puget
Customers and Collections."
On each Distribution Date, all funds held in the Collection
Account will be distributed as follows: FIRST, to the
Trustee in the amount of the fee payable to the Trustee
pursuant to the Pooling and Servicing Agreement (the
"Trustee Fee"); SECOND, to the Servicer in the amount of
the Servicing Fee; THIRD, to the Certificateholders as
interest an amount equal to the product of the Certificate
Rate and the aggregate Certificate balance as of the first
day of the related Distribution Period (as hereinafter
defined) (calculated on the basis of a 360-day year
comprised of twelve 30-day months); and FOURTH, to the
Certificateholders, the balance remaining in the Collection
Account as principal to reduce the aggregate Certificate
balance.
Overcollateralization.......... The Statute gives the Servicer the right to recover from
Customers an amount equal to the Bondable Conservation
Investment Amount, which is $ , plus interest thereon
at the Certificate Rate. The initial aggregate Certificate
balance is $ and interest thereon is calculated at the
Certificate Rate. The portion of the Bondable Conservation
Investment Amount in excess of the initial aggregate
Certificate amount represents overcollateralization (the
"Overcollateralization Amount").
On each Distribution Date, all amounts received by the
Trust from amounts collected from Customers in respect of
interest on the Bondable Conservation Investment Amount
will be used to pay the Trustee Fee, the Servicing Fee and
interest on the Certificates. All amounts collected from
Customers in respect of principal of the Bondable
Conservation Investment Amount will be used to pay
principal of the Certificates. Accordingly, amortization of
the aggregate Certificate balance in any period will equal
the reduction of the Bondable Conservation Investment
Balance during such period. As a result, the Bondable
Conservation Investment Balance should always exceed the
aggregate Certificate balance by the Overcollateralization
Amount. The Overcollateralization Amount is intended to
cover any shortfall in receipt of the Bondable Conservation
Investment Amount that may occur after the final
Calculation Date that is not anticipated and provided for
in a Revised Tariff, as described below.
</TABLE>
5
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While the Bondable Conservation Investment Amount
(including that portion attributable to the
Overcollateralization Amount) represents the statutory
right to recover those amounts, the amounts actually billed
may be less if, for example, the actual number of Customers
is less than the number of Customers projected by Puget for
the purpose of calculating rates under the Tariff or any
Revised Tariff, or the amounts actually collected may be
less if, for example, the actual rate of delinquencies is
greater than the rate of delinquencies projected.
On each Calculation Date, the Servicer is required to
determine whether a Variance has occurred. The Tariff and
any Revised Tariff will be periodically revised, if
Variances occur, through an adjustment to the amount of
revenues allocated to the Trust in respect of the
Conservation Asset Transaction Amount (a "Rate Adjustment")
to take into account factors including, but not limited to,
the projected number of Customers and the expected rate of
delinquencies. However, after the final Calculation Date on
March 31, 2004, there will be no such mechanism for the
remaining term of the Certificates. Accordingly, the
Overcollateralization Amount is intended to cover billing
or collection shortfalls that may occur from the final
Calculation Date through the Final Collection Date (as
hereinafter defined) that are not addressed through the
Rate Adjustment process.
Trust Assets................... The assets sold to the Trust (the "Purchased Assets") will
consist of (i) rights to receive the revenues allocated to
the Trust pursuant to the Tariff and any Revised Tariffs,
as well as the right under the Statute to have rates under
the Tariff and any Revised Tariffs maintained at levels
sufficient for recovery of the Bondable Conservation
Investment Amount, plus interest on the Certificates and
the Trustee Fee and the Servicing Fee, subject to the
Tariff Termination Date (as hereinafter defined) for
billing under the Tariff or any Revised Tariff, (ii) rights
to payments under contracts ("Conservation Repayment
Contracts") between Puget and certain Customers, which
obligate such Customers, if they change energy suppliers,
to pay Termination Fees (as hereinafter defined) generally
intended to reimburse Puget for the Bondable Conservation
Investment Balance arising from expenditures on
conservation measures for such Customers, and (iii) upon a
voluntary or involuntary sale of Puget's utility property
used to serve Customers who cease to be Customers as a
result of such sale, the portion of the proceeds (the
"Purchased Sale Proceeds") of such sale equal to the
amount, if any, of the Bondable Conservation Investment
Balance that the Commission removes from Puget's rate base
pursuant to the Statute as a result of such sale.
Servicing...................... The Servicer will be responsible for billing, servicing,
managing and making collections on the Purchased Assets in
the same manner that it services similar assets for its own
account. In the event of a Variance as of any Calculation
Date, the Servicer will calculate the Revised Tariff Amount
and file an application with the Commission for a Revised
Tariff, as described under "Tariff" above.
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6
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<TABLE>
<S> <C>
Under the Statute, any successor to Puget pursuant to any
bankruptcy, reorganization or other insolvency proceeding
must assume the Servicer's obligations under the Pooling
and Servicing Agreement.
Each month the Servicer will provide the Trustee with a
certificate describing the aggregate amounts collected and
the components thereof for the preceding month. On the
basis of this information, the Trustee will furnish to the
Certificateholders on each quarterly Distribution Date
reports describing (i) the aggregate amounts collected and
the components thereof for the preceding Distribution
Period, (ii) the amounts to be distributed, (iii) the
remaining aggregate Certificate balance after giving effect
to all distributions of principal to the
Certificateholders, (iv) the Bondable Conservation
Investment Balance as of the end of the preceding
Distribution Period, and (v) if the last day of the
preceding Distribution Period is a Calculation Date, a
comparison between the Bondable Conservation Investment
Balance and the Projected Bondable Conservation Investment
Balance, together with a statement as to whether a Variance
exists. In addition, within a reasonable period of time
after the end of each calendar year, the Trustee will
furnish to each person who at any time during the calendar
year was a Certificateholder, a statement of the aggregate
amounts distributed during the year. Certificate Owners
will receive such reports as are required in accordance
with DTC procedures. The reports described above will be
available to any Certificate Owner upon request to the
Trustee or the Servicer.
The Servicer will also act as custodian of all documents
and instruments relating to the Purchased Assets.
Servicing Fee.................. The servicing fee for the period from the Closing Date
through June 30, 1995, and each three-month period
thereafter ending March 31, June 30, September 30 and
December 31 through the Final Collection Date (each, a
"Distribution Period") will be an amount equal to the sum
of (i) $ in respect of the first Distribution Period
and $ in respect of all subsequent Distribution
Periods and (ii) the investment earnings on amounts depos-
ited in the Collection Account during such Distribution
Period (the "Servicing Fee"). The interest in respect of
the Overcollateralization Amount is expected to be
sufficient to pay the fixed portion of the Servicing Fee as
well as the Trustee Fee. Such fees will be payable on each
Distribution Date prior to any distributions on the
Certificates.
Collections.................... The Servicer will deposit, on or before each Remittance
Date, to the Collection Account all amounts received by the
Servicer in respect of the Purchased Assets during such
calendar month.
Distribution Dates............. The Trustee will make quarterly distributions to
Certificateholders on the 11th day of January, April, July
and October of each year commencing October 11, 1995, or,
if such day is not a business day, the next succeeding
business day.
Final Distribution Date........ The Tariff or any Revised Tariff then in effect will expire
on September 30, 2004 (as such date may be extended as
described herein
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7
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<S> <C>
under "The Tariff and the Trust Assets," the "Tariff
Termination Date"), and the Servicer will cease to include
amounts allocable to the Trust in Customers' electric bills
after the Tariff Termination Date. The portion of
receivables outstanding on the Tariff Termination Date
allocable to the Trust under the Tariff or any Revised
Tariff then in effect will continue to be collected by the
Servicer through the Final Collection Date and remitted to
the Collection Account. The scheduled final Distribution
Date will be April 11, 2005 (as such date may be extended
as described herein under "The Tariff and the Trust
Assets," the "Final Distribution Date"). Billings and col-
lections in respect of the Purchased Assets will not cease
upon the reduction of the aggregate Certificate balance to
zero. Any collections through the Final Collection Date in
excess of the aggregate Certificate balance will be
distributed to the Certificateholders on the next
succeeding Distribution Date. As a result, any portion of
the Overcollateralization Amount that is actually collected
prior to the Final Collection Date, and that is not
required to cover billing or collection shortfalls not
recovered through a Revised Tariff, will be distributed to
the Certificateholders on or prior to the Final Distribu-
tion Date.
Customers...................... The source of payment on the Purchased Assets will be
amounts collected from Puget's Customers. Only the portion
of amounts collected from Customers attributable to the
Tariff or any Revised Tariff will be available for payment
on the Purchased Assets. In addition, any amounts collected
that represent partial payment of a Customer's electric
bill will be proportionately allocated between the Trust
and Puget based on the ratio of the portion of the billed
amount allocated under the Tariff to the total billed
amount. During December 1994, Puget had approximately
823,100 Customers, including 731,700 residential Customers,
86,200 commercial Customers, 3,900 industrial Customers and
1,300 other Customers. For the year ended December 31,
1994, the largest Customer represented approximately 3.3%
of Puget's revenues and the 10 largest Customers
represented approximately 9.9% of Puget's revenues.
Tax Status..................... In the opinion of Perkins Coie, counsel to the Seller, the
Trust will constitute a grantor trust for federal income
tax purposes and will not be subject to federal income tax.
Certificate Owners must report their respective allocable
shares of all income earned on the Trust assets, and,
subject to certain limitations on the deduction of
miscellaneous expenses by individuals, estates and trusts,
may deduct their respective allocable shares of the
Servicing Fee and the Trustee Fee. Individuals should
consult their own tax advisors with respect to their own
individual tax situations to determine the federal, state,
local and other tax consequences of the purchase, ownership
and disposition of the Certificates. Prospective investors
should note that no rulings have been or will be sought
from the Internal Revenue Service (the "IRS") with respect
to any of the federal income tax consequences discussed
herein, and there can be no assurance that the IRS will not
take a contrary position. See "Federal Income Tax
Consequences."
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8
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<TABLE>
<S> <C>
ERISA Considerations........... The acquisition of the Certificates by employee benefit
plans that are subject to the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), may result in a
violation of the prohibited transaction rules under Section
406 of ERISA and Section 4975 of the Internal Revenue Code
of 1986, as amended (the "Code"). See "ERISA
Considerations."
Rating......................... It is a condition of issuance of the Certificates that they
be rated " " by one or more of the nationally recognized
statistical rating agencies (the "Rating Agencies"). There
can be no assurance that a rating will not be lowered or
withdrawn by a Rating Agency if circumstances so warrant.
See "Risk Factors -- Limitation of Rating Agency Ratings of
the Certificates." In the event that the rating initially
assigned to the Certificates is subsequently lowered for
any reason, neither Puget nor any other person or entity is
obligated to provide any additional credit enhancement.
</TABLE>
9
<PAGE>
RISK FACTORS
In evaluating an investment in the Certificates, prospective investors
should consider carefully the following factors in addition to the other
information presented in this Prospectus.
LIMITED LIQUIDITY. The Certificates represent a new issue of securities for
which there is currently no market. If a market for the Certificates were to
develop, the Certificates may trade at a discount from their initial offering
price, depending on prevailing interest rates, the market for other securities
and other factors. There can be no assurance that a Certificateholder will be
able to sell a Certificate in the future or that any such sale will be at a
price equal to or higher than the initial public offering price of such
Certificate. Each of the Underwriters of the Certificates, Salomon Brothers Inc
and Chemical Securities Inc., has informed the Trust that, subject to applicable
laws and regulations, it currently intends to make a market in the Certificates.
The Underwriters are not obligated to do so, however, and any market making may
be discontinued at any time without notice.
LIMITED ASSETS. The Trust does not have, nor is it permitted to have, any
significant assets or sources of funds other than the Purchased Assets. The
Certificates represent interests solely in the Trust and will not be insured or
guaranteed by Puget, the Trustee or any other person or entity. Consequently,
Certificateholders will rely solely on collections on the Purchased Assets from
the Closing Date through the Final Collection Date for payment. The Tariff and
any Revised Tariffs will expire on the Tariff Termination Date, and no amounts
will be billed under the Tariff or any Revised Tariff in respect of the
Purchased Assets after that date. As a result, if collections through the Final
Collection Date on amounts billed through the Tariff Termination Date are, for
any reason, insufficient to pay all principal and interest on the Certificates,
the Certificates will not have any other source of payment and the
Certificateholders will suffer a loss on their investments.
POSSIBLE DELAYS IN OR REDUCTIONS OF DISTRIBUTIONS TO CERTIFICATEHOLDERS IN
THE EVENT OF A PUGET INSOLVENCY. In the event of an insolvency of Puget
subsequent to the transfer of the Purchased Assets to the Trust, Puget would be
subject to the United States Bankruptcy Code or other similar state laws
("Insolvency Laws"). If the transfer of the Purchased Assets to the Trust
constitutes a "true sale" to the Trust under the Insolvency Laws, the Purchased
Assets would not be part of Puget's bankruptcy estate and would not be available
to creditors of Puget. However, in the event of Puget's insolvency, it is
possible that the bankruptcy trustee, a creditor of Puget or Puget as debtor in
possession may argue that under the Insolvency Laws the transaction between
Puget and the Trust is a pledge of the Purchased Assets made to secure a
borrowing by Puget, rather than a "true sale," thereby resulting in the
inclusion of the Purchased Assets within Puget's bankruptcy estate. If a filing
were made under any Insolvency Laws by or against Puget and either an attempt
were made to litigate the foregoing issue or a court were to recharacterize the
transaction under the Insolvency Laws as a pledge rather than a "true sale,"
delays in distributions to Certificateholders (and possible reductions of such
distributions) could occur.
The Statute expressly provides that the transfer of the purchased
conservation investment assets to the Trust, if made in the manner described
herein, constitutes a "true sale" to the Trust. The Rating Agencies who will
rate the Certificates will receive a reasoned opinion of counsel on the date of
issuance of the Certificates that analyzes the Statute and analogous case law
(although there is no precedent based on directly similar facts) and concludes
that, subject to certain facts, assumptions and qualifications specified
therein, a court in a properly presented and decided case would determine that
the transfer pursuant to the Pooling and Servicing Agreement of the purchased
conservation investment assets to the Trust will be treated for Insolvency Law
purposes as a "sale or other absolute transfer"-- as opposed to a loan -- and,
accordingly, the purchased conservation investment assets would not be part of
Puget's bankruptcy estate. Such legal opinion is not binding on any court and,
notwithstanding the provisions of the Statute, there can be no assurance that a
court would not reach a contrary conclusion.
To provide for the possibility of the transaction being recharacterized
under the Insolvency Laws as a pledge of the Purchased Assets made to secure a
borrowing by Puget rather than a "true sale," the Pooling and Servicing
Agreement provides for the grant by Puget of a security interest in the
Purchased Assets and the proceeds thereof to the Trustee to secure any such
borrowing. Puget will take the steps
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required to perfect that security interest on or prior to the Closing Date and
will agree to take the steps required to maintain the perfection of that
security interest thereafter. See "Description of the Certificates -- Sale of
Purchased Assets to the Trustee; Effect of Insolvency Laws."
TRUST'S DEPENDENCE ON THE SERVICER. The Servicer is not obligated to make
any payments in respect of the Certificates or the Purchased Assets. The
existence of receivables from Customers in respect of the Purchased Assets,
however, depends on the continued provision of electric service to such
Customers by Puget or a successor to Puget. The Trust also depends on the
Servicer for the determination of any Revised Tariffs and for the Customer
billing and collection that is necessary to recover payments on the Purchased
Assets and, therefore, necessary to make payments on the Certificates. If, as a
result of its insolvency or liquidation or otherwise, Puget were to cease
servicing the Purchased Assets, determining any Revised Tariffs and collecting
payments on the Purchased Assets, it may be difficult to find a substitute
Servicer. In such an event, the risk exists that no additional payments would be
made on the Certificates.
Puget may only be removed as Servicer if (i) it fails to make required
remittances, or otherwise fails to perform in all material respects any of its
covenants under or in accordance with, or breaches any of its material
representations or warranties in, the Pooling and Servicing Agreement (in each
case after notice and lapse of the applicable grace period), (ii) a substitute
Servicer is appointed, (iii) the Holders (as hereinafter defined) of
Certificates representing not less than 75% of the aggregate Certificate balance
then outstanding consent to such removal, and (iv) each Rating Agency notifies
the Trustee that its rating assigned to the Certificates will not be withdrawn
or reduced as a result of appointment of the successor Servicer. As a result of
the requirement of such consent and Rating Agency notices, it may be difficult
to effect the Servicer's removal. Puget may only resign as Servicer if a
successor Servicer is appointed and each Rating Agency notifies the Trustee that
such resignation will not cause the rating then assigned to the Certificates to
be withdrawn or reduced.
Under the Pooling and Servicing Agreement, the Trustee will have only
limited oversight responsibility with regard to the Servicer's activities. The
Servicer is required to provide annually to the Trustee a report of a firm of
independent public accountants with respect to the Servicer's performance and
records relating to the servicing of the Purchased Assets. See "Description of
the Certificates -- Reports to Certificateholders and Evidence of Compliance."
No other party will have oversight over the Servicer's activities under the
Pooling and Servicing Agreement.
DEPENDENCE OF PURCHASED ASSETS ON PUGET. As of the date of the transfer of
the Purchased Assets from Puget to the Trust, the Purchased Assets will not
include any currently existing receivables from Customers. The existence of
receivables from Customers in respect of the Purchased Assets depends on the
continued provision of electric service and the related billing to such
Customers by Puget or any successor to Puget during the period from the date of
delivery of the Certificates through the Tariff Termination Date. If Puget or
any successor to Puget fails to provide electric service and to bill and collect
the resulting receivables during such period, the risk exists that no additional
payments would be made on the Certificates.
COMPETITIVE RISKS FACING THE ELECTRIC UTILITY INDUSTRY. The electric
utility industry is experiencing intensifying competitive pressures,
particularly in the wholesale generation and industrial customer markets. The
National Energy Policy Act of 1992 was designed to increase competition in the
wholesale electric generation market by easing regulatory restrictions on
producers of wholesale power and by authorizing the Federal Energy Regulatory
Commission to mandate access to electric transmission systems by wholesale power
generators. The potential for increased competition at the retail level in the
electric utility industry through state-mandated retail wheeling has also been
the subject of legislative and administrative interest in a number of states,
including Washington. Electric utilities, including Puget, now face greater
potential competition for resources and customers from a variety of sources,
including privately owned independent power producers, exempt wholesale power
generators, industrial Customers developing their own generation resources,
suppliers of natural gas and other fuels, other investor-owned electric
utilities and municipal generators. There can be no assurance that such
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<PAGE>
trends will not have a significant adverse impact on Puget's business in the
future. In particular, Puget anticipates increasingly intense competition for
service to its large industrial Customers, some of which may receive proposals
from competitors for part or all of their energy requirements. If large
industrial Customers choose to purchase power from sources other than Puget, and
if Termination Fees payable by such Customers under Conservation Repayment
Contracts, if any, between Puget and such Customers are not sufficient to
reimburse Puget for the Bondable Conservation Investment Balance arising from
expenditures on conservation measures for such Customers, it may be necessary
for Puget to apply to the Commission for a Revised Tariff to account for the
loss of such Customers. See "Risk Factors -- Possible Effect of Inaccurate
Forecast of Number of Customers" and "Puget Customers and Collections --
Forecasting Customers."
POSSIBLE EFFECT OF INACCURATE FORECAST OF NUMBER OF CUSTOMERS. The Tariff
levied on all of Puget's Customers is based in part on calculations by the
Servicer that reflect the Servicer's forecasted number of Customers in each
Customer category and the anticipated rate of delinquencies.
To the extent that the number of Customers in any Customer category is less
than the number forecasted by Puget in calculating the Tariff or any Revised
Tariff or the aggregate payment due from a Customer is less than the forecasted
amount payable by such Customer in respect of the Tariff or any Revised Tariff,
the aggregate amount actually billed under the Tariff or any Revised Tariff may
be less than the forecasted amount. While the Servicer will make all reasonable
efforts to predict such circumstances and incorporate assumptions relating
thereto into the determination of the Tariff or any Revised Tariff, there can be
no assurance that such determination will not result in a shortfall in the
amount billed pursuant to the Tariff or any Revised Tariff. Through March 31,
2004, such shortfalls may be recovered through the filing of a Revised Tariff.
Thereafter, any such shortfalls are expected to be recovered from the
Overcollateralization Amount. To the extent the Overcollateralization Amount is
not sufficient to cover any such shortfalls, amounts in the Collection Account
would not be sufficient to pay the principal of and interest on the Certificates
in full by the Final Distribution Date and the Certificateholders would suffer a
loss on their investments.
POSSIBLE SHORTFALLS IN COLLECTIONS. While the aggregate amount billed
pursuant to the Tariff or any Revised Tariff may be sufficient to enable
interest on the Certificates to be paid on a timely basis and the principal of
the Certificates to be repaid in full by the Final Distribution Date, Customers
may fail to remit payments of amounts billed pursuant to the Tariff in whole or
in part or may remit such payments on a delayed basis. There can be no assurance
as to the rate of payment, the timing of the receipt of payments or the rate of
delinquencies that will actually occur in any future period. If such shortfalls
are sufficient to result in a Variance as of any Calculation Date through March
31, 2004, they may be recovered in subsequent periods through a Revised Tariff.
Thereafter, any such shortfalls are expected to be recovered from the
Overcollateralization Amount. To the extent the Overcollateralization Amount is
not sufficient to cover any such shortfalls, amounts in the Collection Account
would not be sufficient to pay the principal of and interest on the Certificates
in full by the Final Distribution Date and the Certificateholders would suffer a
loss on their investments.
The revenues collected under the Tariff will not fluctuate with levels of
electric usage unless the aggregate payment due from a Customer for the
provision of electric service is less than the amount payable in respect of the
Tariff. Any such excess of the amount payable by a Customer in respect of the
Tariff over the aggregate payment due from the Customer is not required to be
carried forward to subsequent periods.
POTENTIAL DELAYS IN COMMISSION APPROVAL OF REVISED TARIFFS. The Statute
requires the Commission to approve the Tariff at levels sufficient to recover
the Conservation Asset Transaction Amount. Under the Pooling and Servicing
Agreement, the Tariff is subject to a Rate Adjustment if a Variance exists as of
any Calculation Date, in which case Puget is required to apply with the
Commission for a Rate Adjustment within 30 days following any Calculation Date
to which a Variance relates. Failure of Puget to make such application within
that period would constitute a breach of an obligation under the Pooling
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<PAGE>
and Servicing Agreement to which the limitations on Puget's liability under the
Pooling and Servicing Agreement would not apply and which would be enforceable
by the Trustee on behalf of the Certificateholders.
While the Initial Order requires the Commission to implement a Revised
Tariff within 30 days of the application therefor by the Servicer, and the
Statute requires the Commission to maintain rates at levels sufficient to fully
recover the Conservation Asset Transaction Amount, there can be no assurance
that such approval would not require a longer period of time. Under Washington
law applicable to rate filings generally, the Commission is obligated to act on
a rate application no later than 11 months from the date of filing. However, if
a Variance exists at either September 30, 2003 or March 31, 2004 and the
Commission fails to approve a Revised Tariff within 30 days after the Servicer's
application, the Initial Order provides that the Tariff Termination Date of such
Revised Tariff will be extended by such period of time after September 30, 2004
as corresponds to the delay beyond 30 days in approval of the latest such
Revised Tariff to be so delayed, but not to be later than July 31, 2005. If the
Tariff Termination Date is extended, the Final Collection Date will be the last
day of the month that is six months after the month in which the Tariff
Termination Date occurs and the Final Distribution Date will be the next
succeeding Distribution Date (to be no later than April 11, 2006). To the extent
that implementation of a Revised Tariff is delayed either as a result of Puget's
failure to apply for a Rate Adjustment in a timely manner or as a result of the
Commission's failure to implement the Revised Tariff as required by the Initial
Order, the previously existing Tariff would remain unchanged, and the amount
collectible thereunder may be lesser or greater than that which would have been
collected under the Revised Tariff and may be insufficient to enable interest on
the Certificates to be paid on a timely basis or the principal of the
Certificates to be repaid in full by the Final Distribution Date, in which case
the Certificateholders would suffer a loss on their investments. See "The Tariff
and the Trust Assets."
ABILITY OF THE SERVICER TO CHANGE PAYMENT TERMS. The Servicer has reserved
the right to make any change to the amount or reschedule the due date of any
scheduled payment of any billed amount in respect of the Purchased Assets or
change any material term of any Purchased Asset if such action would be in
accordance with its customary practices or those of any successor Servicer with
respect to comparable assets that it services for itself and if such action
would not materially adversely affect the Certificateholders. There are no other
limitations on the Servicer's ability to change the terms of the Purchased
Assets. While Puget has no current intention of taking actions that would change
the payment or other terms of the Purchased Assets, there can be no assurance
that changes in Puget's customary and usual practices for comparable assets it
services for itself might not result in a determination to do so or that a
successor Servicer may not make such determination. It is possible that any such
changes could delay collections from Customers or result in lower collections.
Any change in the amount or timing of scheduled payments on any billed amount in
respect of the Purchased Assets or other change in any material term of any
Purchased Asset could adversely affect the payment of interest on the
Certificates on a timely basis or the payment of the principal of the
Certificates in full by the Final Distribution Date. See "Puget Customers and
Collections -- Credit Policy and Procedures," "-- Billing Process" and "--
Collection Process."
CREDIT POLICY AND PROCEDURES. The ability of Puget to collect amounts
billed to Customers under the Tariff or any Revised Tariff will depend in part
on the creditworthiness of the Customers. Puget is obligated to provide service
to new Customers under Washington law and no outside credit investigations are
performed on new Customers. Puget's information regarding the credit status of
new Customers is limited to information regarding prior service, if any, by
Puget to such Customers. Puget relies on the information provided by Customers
and its customer information system audits to indicate whether a new Customer
has had previous service from Puget. See "Risk Factors -- Possible Shortfalls in
Collections" and "Puget Customers and Collections -- Credit Policy and
Procedures."
ORDER AND APPLICATION OF FUNDS. Under the Pooling and Servicing Agreement,
the Trustee will make distributions from the Collection Account on each
Distribution Date, FIRST, to the Trustee in the amount of the Trustee Fee;
SECOND, to the Servicer in the amount of the Servicing Fee; THIRD, to the
Certificateholders as interest an amount equal to the product of the Certificate
Rate and the aggregate
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Certificate balance as of the first day of the related Distribution Period
(calculated on the basis of a 360-day year comprised of twelve 30-day months);
and, FOURTH, to the Certificateholders, the balance remaining in the Collection
Account as principal to reduce the aggregate Certificate balance. Consequently,
Certificateholders will not receive payments of interest or principal on any
Distribution Date unless the Trustee Fee and the Servicing Fee due on or prior
to such date have been paid in full.
LIMITATION ON LIABILITY OF THE SERVICER AND THE SELLER. The Pooling and
Servicing Agreement provides that none of the Seller, the Servicer or any of
their directors, officers, employees or agents, in their capacities as such,
will be under any liability to the Trust, the Trustee or the Certificateholders
for any action taken, or refrained from being taken, pursuant to the Pooling and
Servicing Agreement, other than any liability that would otherwise be imposed by
reason of the breach of their respective obligations and duties under the
Pooling and Servicing Agreement. As a result, any loss suffered by the Trust or
the Certificateholders caused by any action or failure to act by any of such
parties may not be recoverable unless the loss resulted from a breach of an
obligation under the Pooling and Servicing Agreement.
CHALLENGE TO STATUTE, INITIAL ORDER OR TARIFF. The existence of the
Purchased Assets and their sufficiency as the source of payment for the
Certificates are dependent on the Statute, the Initial Order, the Tariff and any
Revised Tariff. As a result, if the Statute, the Initial Order, the Tariff or
any Revised Tariff is challenged in a lawsuit and is finally determined to be
unenforceable in whole or in part, such determination could adversely affect the
ability of Puget to make remittances to the Trustee as required by the Pooling
and Servicing Agreement, and Certificateholders could suffer a loss on their
investment. The approval of the Initial Order and the Tariff by the Commission
is a condition to the issuance of the Certificates. No challenge to the
enforceability of the Statute, the Initial Order or the Tariff currently exists
and Puget is not aware of any basis for such a challenge.
LIMITATION OF RATING AGENCY RATINGS OF THE CERTIFICATES. It is a condition
to the issuance of the Certificates that they be rated " " by one or more of the
Rating Agencies. The rating of the Certificates addresses the likelihood of the
ultimate payment of principal and the timely payment of interest on the
Certificates. A security rating is not a recommendation to buy, sell or hold
securities. There can be no assurance that a rating will remain for any given
period of time or that a rating will not be lowered or withdrawn entirely by a
Rating Agency if, in its judgment, circumstances so warrant.
RESTRICTIONS OF BOOK-ENTRY REGISTRATION. The Certificates will be initially
represented by one or more Certificates registered in Cede's name, as nominee
for DTC, and will not be registered in the names of the Certificate Owners or
their nominees. Therefore, unless and until Definitive Certificates are issued,
Certificate Owners will not be recognized by the Trustee as Certificateholders.
Hence, until such time, Certificate Owners will only be able to receive payments
from, and exercise the rights of Certificateholders indirectly through, DTC and
participating organizations, and, unless a Certificate Owner requests a copy of
any such report from the Trustee or the Servicer, will receive reports and other
information provided for under the Pooling and Servicing Agreement only if, when
and to the extent provided to Certificate Owners by DTC and its participating
organizations. In addition, the ability of Certificate Owners to pledge
Certificates to persons or entities that do not participate in the DTC system,
or otherwise take actions in respect of such Certificates, may be limited due to
the lack of physical certificates for such Certificates. See "Description of the
Certificates -- Book-Entry Registration" and
"-- Definitive Certificates."
THE STATUTE
The Washington State Legislature enacted the Statute, ch. 268 of Laws of
Washington 1994, to encourage utility investment in demand side management
conservation programs. Demand side management conservation programs comprise a
variety of conservation measures, such as installation of energy-efficient
lighting and building insulation, that help utility customers use electricity
more efficiently. The types of conservation measures eligible for funding are
set forth in a schedule approved by the Commission prior to the expenditures by
the utility. These programs can allow utilities to meet projected increases in
energy load in a manner that can be less costly, in both economic and
environmental terms,
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than adding new energy-generation facilities. However, since conservation
program expenditures often create customer-owned assets installed in the
customer's facilities, a utility typically cannot finance such expenditures by
the issuance of utility mortgage bonds secured by a lien on utility-owned
property.
The Statute creates a new property right that establishes a utility's
statutory right to include in its rate base all of its approved expenditures on
customer conservation measures and to receive through rates revenues sufficient
to recover such expenditures and the costs of capital associated with such
expenditures, including, without limitation, the payment of principal of and
interest on securities sold to finance or refinance them. The Statute provides
that the revenues to be received pursuant to this statutory right may be sold,
pledged or otherwise made the basis for the issuance of securities. Once an
order under the Statute has been obtained from the Commission authorizing the
issuance of securities to finance or refinance approved conservation
expenditures, an unconditional statutory right to repayment through utility
rates arises in favor of the securityholders. Under the Statute, this right to
repayment through rates cannot be rescinded or adversely changed by the
Commission until the full amount of such expenditures and the related costs of
capital are fully amortized in accordance with the terms of the Pooling and
Servicing Agreement.
The Certificates will be securities entitled to the benefits of the Statute.
The Tariff and any Revised Tariffs will expire on the Tariff Termination Date,
and no amounts will be billed under the Tariff or any Revised Tariff in respect
of the Purchased Assets after that date. As a result, if amounts billed through
that date and collected by the Final Collection Date are, for any reason,
insufficient to pay all principal and interest on the Certificates, the
Certificates will have no other source of payment.
THE TARIFF AND THE TRUST ASSETS
Puget has made application to the Commission for the Initial Order that,
among other things, (i) authorizes the sale of the Purchased Assets by Puget to
the Trust, including the right to recover in rates the Bondable Conservation
Investment Amount aggregating $ , plus interest thereon at the Certificate
Rate, (ii) finds that the Certificates are securities entitled to the benefits
of the Statute, (iii) approves the Tariff, which allocates revenues to the Trust
in an aggregate amount equal to the Conservation Asset Transaction Amount, (iv)
approves the methodology and mechanism for periodically implementing a Revised
Tariff if a shortfall or surplus in collections results in a Variance as of any
Calculation Date, and (v) approves the Pooling and Servicing Agreement and the
transaction contemplated thereby.
The Tariff will allocate to the Trust a portion of the amount charged to
each Customer in each utility bill sent during the period from the Closing Date
through September 30, 1995 and during each subsequent period from October 1
through the following September 30 up to and including the period ending on the
Tariff Termination Date (each such period, a "Regulatory Year"). The Tariff will
establish different amounts to be allocated to the Trust based on (i) the type
of electrical service provided to the Customer (each type, a "Schedule") and
(ii) the Regulatory Year. A Customer may receive more than one electric bill
from the Servicer in respect of different Schedules or attributable to multiple
locations of the Customer. The revenues collected under the Tariff will
fluctuate with collection delinquencies and the number of Customers, but not
with levels of electric usage, unless the aggregate payment due from a Customer
for the provision of electric service is less than the amount payable in respect
of the Tariff. Any such excess of the amount payable in respect of the Tariff
over the aggregate payment due from the
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<PAGE>
Customer is not required to be carried forward to subsequent periods. The Tariff
provides that the following monthly amounts of revenue from each Customer's bill
sent during the periods set forth below will be allocated to the Trust:
<TABLE>
<CAPTION>
ORIGINAL MONTHLY TARIFF PER CUSTOMER
- --------------------------------------------------------------------------------------------------------
SECONDARY SECONDARY SECONDARY PRIMARY
YEAR RESIDENTIAL SERVICE 1 SERVICE 2 SERVICE 3 SERVICE HIGH VOLTAGE LIGHTING
- --------- ------------- ------------- ----------- ----------- --------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
1 $ 3.29 $ 5.63 $ 88.22 $ 652.34 $ 537.33 $ 22,364.17 $ 1.73
2 2.42 4.13 64.74 478.96 394.32 16,479.57 1.27
3 2.08 3.55 55.57 411.64 338.78 14,151.26 1.09
4 1.93 3.27 51.33 380.94 313.46 13,401.43 1.01
5 1.78 3.00 47.04 349.65 287.57 12,236.11 0.92
6 1.44 2.42 37.97 282.64 232.38 9,919.11 0.74
7 1.24 2.06 32.42 241.71 198.60 8,341.18 0.64
8 0.90 1.50 23.58 176.08 144.61 6,200.05 0.46
9 0.59 0.98 15.34 114.71 94.18 3,978.95 0.30
10 0.26 0.43 6.70 50.16 41.16 1,747.68 0.13
</TABLE>
The amounts in the table above are preliminary and are subject to
adjustments to reflect the Certificate Rate and the timing of the Closing Date.
On each Calculation Date, the Servicer is required to compare the Bondable
Conservation Investment Balance to the Projected Bondable Conservation
Investment Balance set forth in the Pro Forma Schedule. If the Bondable
Conservation Investment Balance at such Calculation Date differs from the
Projected Bondable Conservation Investment Balance for such Calculation Date by
more than 2%, the Servicer is required to apply for (and the Initial Order
provides that the Commission will approve within 30 days of the application) a
Revised Tariff that will allocate revenues to the Trust in an amount intended to
be sufficient so that (i) the Bondable Conservation Investment Balance on the
next September 30 will equal the Projected Bondable Conservation Investment
Balance as of such date and (ii) thereafter, will provide for the amortization
of the remaining Bondable Conservation Investment Balance in accordance with the
Pro Forma Schedule. The Revised Tariff will be based on updated assumptions by
the Servicer, including, but not limited to, the projected number of Customers
and the expected rate of delinquencies.
The Tariff and any Revised Tariff are scheduled to terminate on September
30, 2004, in which case the last day for collections under the Tariff or any
Revised Tariff will be March 31, 2005 (as such date may be extended as described
below, the "Final Collection Date") and the Final Distribution Date will be
April 11, 2005. However, if a Variance exists at either September 30, 2003 or
March 31, 2004 and the Commission fails to approve a Revised Tariff within 30
days after the Servicer's application, the Initial Order provides that the
Tariff Termination Date of such Revised Tariff will be extended by such period
of time after September 30, 2004 as corresponds to the delay beyond 30 days in
approval of the latest such Revised Tariff to be so delayed, but not to be later
than July 31, 2005. If the Tariff Termination Date is extended, the Final
Collection Date will be last day of the month that is six months after the month
in which the Tariff Termination Date occurs and the Final Distribution Date will
be the next succeeding Distribution Date (to be no later than April 11, 2006).
Puget has entered into Conservation Repayment Contracts with certain
Customers (representing approximately 13% of the Bondable Conservation
Investment Amount) who have installed approved conservation measures on their
properties, some or all of the expenses of which have been paid by Puget. If any
of such Customers thereafter cease to be Customers, Puget is entitled to recover
certain amounts from such Customers under such contracts (the "Termination
Fees"). The actual terms underlying the Termination Fees vary depending on the
category of Customer. For a residential Customer, the Termination Fee is
generally the full amount of the initial conservation expenditure by Puget (the
"Grant") should the Customer change energy suppliers within five years of the
date of the contract. A commercial or industrial Customer generally must pay a
percentage of the Grant (determined as the percentage of
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<PAGE>
the total estimated useful life of the conservation measure remaining upon
termination) should it cease to be a Customer of Puget or should electricity
cease to be the fuel source for the conservation measure funded with the Grant.
The Termination Fees are lump sum payments that vary, even among Customers
of the same type, depending on the specific Grant amount and date of
termination. In contrast, amounts recovered under the Tariff are, for each
category of Customers, fixed monthly payments. A specific Termination Fee may be
greater or less than the amount the former Customer would have paid in monthly
rates. Puget is currently unable to predict the amount of future Termination
Fees, but Termination Fees collected in recent years have been nominal. Since
January 1991, Puget has collected less than $50,000 in such fees from former
residential Customers, and it has collected no Termination Fees from commercial
or industrial Customers.
Pursuant to the Pooling and Servicing Agreement, Puget will pay to the
Trustee for the benefit of the Certificate Owners any Termination Fees it
receives from Customers in respect of the Bondable Conservation Investment
Balance. Any such amounts will be distributed ratably to Certificateholders in
the same manner as other revenues relating to the Purchased Assets sold to the
Trust.
The Statute provides that the Commission may remove from Puget's rate base
any portion of the Bondable Conservation Investment Balance arising from
conservation expenditures made for the benefit of Customers that cease to be
Customers as a result of a voluntary or involuntary sale by Puget of the utility
property used to serve those Customers. If Puget loses Customers as a result of
such a sale and the Commission removes from Puget's rate base a portion of the
Bondable Conservation Investment Balance, the Pooling and Servicing Agreement
requires Puget to pay to the Trustee for the benefit of the Certificate Owners,
from the sale proceeds, the Purchased Sale Proceeds, which amount equals the
portion of the Bondable Conservation Investment Balance that the Commission
removes from Puget's rate base as a result of such sale.
The Purchased Assets to be owned by the Trust include (i) all of Puget's
right, title and interest in and to, and to receive, payments pursuant to the
Tariff or any Revised Tariff, (ii) all of Puget's rights to have the
Conservation Asset Transaction Amount recovered through rates pursuant to and in
accordance with the Statute, (iii) all of Puget's right, title and interest
under the Conservation Repayment Contracts in and to the Termination Fees to the
extent paid by Customers, and (iv) all of Puget's right, title and interest in
and to the Purchased Sale Proceeds.
The Statute gives the Servicer the right to recover from Customers an amount
equal to the Bondable Conservation Investment Amount, which is $ , plus
interest thereon at the Certificate Rate. The initial aggregate Certificate
balance is $ and interest thereon is calculated at the Certificate Rate.
The portion of the Bondable Conservation Investment Amount in excess of the
initial aggregate Certificate amount represents the Overcollateralization
Amount.
On each Distribution Date, all amounts received by the Trust from amounts
collected from Customers in respect of interest on the Bondable Conservation
Investment Amount will be used to pay the Trustee Fee, the Servicing Fee and
interest on the Certificates. All amounts collected from Customers in respect of
principal of the Bondable Conservation Investment Amount will be used to pay
principal of the Certificates. Accordingly, amortization of the aggregate
Certificate balance in any period will equal the reduction of the Bondable
Conservation Investment Balance during such period. As a result, the Bondable
Conservation Investment Balance should always exceed the initial aggregate
Certificate amount by the Overcollateralization Amount. The
Overcollateralization Amount is intended to cover any shortfall in receipt of
the Bondable Conservation Investment Amount that may occur after the final
Calculation Date that is not anticipated and provided for in a Revised Tariff.
While the Bondable Conservation Investment Balance (including that portion
attributable to the Overcollateralization Amount) represents the statutory right
to recover those amounts, the amounts actually billed may be less if, for
example, the actual number of Customers is less than the number of
17
<PAGE>
Customers projected by Puget for the purpose of calculating monthly allocations
to the Trust from amounts billed under the Tariff or any Revised Tariff or the
amounts actually collected may be less if, for example, the actual rate of
delinquencies is greater than the rate of delinquencies projected.
The Tariff and any Revised Tariff will be periodically revised, if Variances
occur, through a Rate Adjustment to take into account factors including, but not
limited to, the projected number of Customers and the expected rate of
delinquencies. However, after the final Calculation Date on March 31, 2004,
there will be no such mechanism for the remaining term of the Certificates.
Accordingly, the Overcollateralization Amount is intended to cover billing or
collection shortfalls that may occur from the final Calculation Date through the
Final Collection Date and that are not addressed through the Rate Adjustment
process.
Any collections through the Final Collection Date by the Servicer in respect
of the amounts allocable to the Trust in excess of the aggregate Certificate
balance will be distributed to the Certificateholders. Billings and collections
in respect of the Purchased Assets will not cease upon the reduction of the
aggregate Certificate balance to zero. Any collections through the Final
Collection Date in excess of the aggregate Certificate balance will be
distributed to the Certificateholders on the next succeeding Distribution Date.
As a result, any portion of the Overcollateralization Amount that is actually
collected prior to the Final Collection Date, and that is not required to cover
billing or collection shortfalls not recovered through a Revised Tariff, will be
distributed to the Certificateholders on or prior to the Final Distribution
Date.
THE TRUST
Prior to this transaction, the Trust had no assets, obligations or operating
history. Upon formation, the Trust will not engage in any business activity
other than acquiring and holding the Purchased Assets, issuing the Certificates
and making payments thereon. The Servicer is required to pay all expenses
incurred in connection with its duties under the Pooling and Servicing
Agreement. See "Description of the Certificates -- Servicer Compensation" and
"-- Distributions." The Trust will not acquire any assets other than the
Purchased Assets. As a consequence, the Trust is not expected to have any need
for, or source of, additional capital resources other than the assets of the
Trust.
USE OF PROCEEDS
The Trustee on behalf of the Trust will apply the entire proceeds to be
received from the sale of the Certificates to the purchase of the Purchased
Assets from Puget.
THE SELLER AND THE SERVICER
Puget, the largest investor-owned electric utility headquartered in
Washington State, provides electric service within a 4,500-square-mile territory
principally in the Puget Sound region of western Washington. Puget has been
engaged in the electric utility business in Washington State for most of this
century. The population of Puget's service area is over 1,800,000 and during
December 1994, Puget provided electric service to an average of approximately
823,100 Customers. For each year since 1990, Puget has had a total energy output
in excess of 20 billion kilowatt hours. Approximately one-third of this energy
output represents Puget-generated electricity, with the remaining two-thirds
representing purchased power. At December 31, 1994, Puget's peak power resources
were approximately 5,400,000 kilowatts. Puget's net utility plant assets at
December 31, 1994 exceeded $2.2 billion and its common stock equity exceeded
$1.1 billion. For 1994, Puget had operating revenues and net income of
approximately $1.2 billion and $120 million, respectively. Puget currently has
approximately 2,220 employees. Puget's executive office is located at 411 -
108th Avenue N.E., Bellevue, Washington 98004-5515 and its telephone number is
(206) 454-6363.
18
<PAGE>
PUGET CUSTOMERS AND COLLECTIONS
BONDABLE CONSERVATION INVESTMENT AMOUNTS
Puget has offered energy conservation programs to assist Customers in
conserving electricity since 1978. Puget has capitalized these expenditures and,
in accordance with general rate proceedings and periodic rate adjustment
mechanism proceedings, these amounts have generally been incorporated into its
rate base on October 1 of each year. Pursuant to the Commission Order in Docket
No. U-78-45, Puget has amortized these expenditures over a 10-year period from
the time of their incorporation into its rate base. The table below sets forth
the Projected Bondable Conservation Investment Balance as of September 30 of
each year through 2004.
<TABLE>
<CAPTION>
PROJECTED BONDABLE
CONSERVATION
SEPTEMBER 30, INVESTMENT BALANCE
- ------------------------------------------------------ ------------------------
<S> <C>
1995.................................................. $ 191,721,002
1996.................................................. 161,106,486
1997.................................................. 133,905,961
1998.................................................. 106,705,436
1999.................................................. 79,504,911
2000.................................................. 56,039,465
2001.................................................. 34,441,554
2002.................................................. 17,528,547
2003.................................................. 5,692,310
2004.................................................. 0
</TABLE>
Puget currently has conservation programs available for all Customers. Of
the [$215,962,146] Bondable Conservation Investment Balance at [December 31,
1994], approximately 56% is attributable to residential Customers, 35% to
commercial Customers and 9% to industrial Customers.
CONSERVATION REPAYMENT CONTRACTS
Approximately 13% of the Bondable Conservation Investment Amount represents
conservation measures supplied by Puget to Customers who have entered into
Conservation Repayment Contracts providing that the Customer must pay a
Termination Fee to Puget if it changes energy suppliers. The amount of the
Termination Fee varies based on Customer type, the conservation measures
supplied and the year the conservation measures were installed. Approximately
79% of the Conservation Repayment Contracts are with residential Customers and
21% are with commercial and industrial Customers. See "The Tariff and the Trust
Assets."
19
<PAGE>
PUGET CUSTOMER BASE
COMPOSITION. Puget's Customer base may be divided into four categories:
residential, commercial, industrial and other Customers. The table below sets
forth the number of Customers and operating revenues billed to each Customer
category.
CUSTOMERS AND OPERATING REVENUES
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------
1992 1993 1994
--------------------- ---------------------- ----------------------
% OF % OF % OF
TOTAL TOTAL TOTAL
---------- ---------- ----------
--------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
AVERAGE NUMBER OF CUSTOMERS:
Residential................ 692,100 89.0% 708,123 89.0% 723,566 88.9%
Commercial................. 80,963 10.4 82,875 10.4 85,203 10.4
Industrial................. 3,659 0.5 3,715 0.5 3,851 0.5
Other (1).................. 1,254 0.1 1,289 0.1 1,325 0.2
--------- ----- ---------- ----- ---------- -----
777,976 100.0% 796,002 100.0% 813,945 100.0%
--------- ----- ---------- ----- ---------- -----
--------- ----- ---------- ----- ---------- -----
OPERATING REVENUES ($000S):
Residential................ $ 443,490 47.1% $ 502,037 48.4% $ 532,124 47.9%
Commercial................. 323,764 34.4 356,586 34.4 375,751 33.9
Industrial................. 138,416 14.7 150,063 14.5 163,574 14.7
Other (1).................. 35,779 3.8 28,189 2.7 38,759 3.5
--------- ----- ---------- ----- ---------- -----
$ 941,449 100.0% $1,036,875 100.0% $1,110,208 100.0%
--------- ----- ---------- ----- ---------- -----
--------- ----- ---------- ----- ---------- -----
<FN>
- ------------------------
(1) "Other" primarily consists of street lighting.
</TABLE>
CONCENTRATIONS. For the year ended December 31, 1994, the largest Customer
represented approximately 3.3% of Puget's revenues and the 10 largest Customers
represented approximately 9.9% of Puget's revenues. There can be no assurance
that current Customers will remain Customers or that the levels of Customer
concentration in the future will be similar to those set forth above.
GROWTH. The total average number of Customers has grown every year for more
than 40 years. The compounded annual growth rate in the average number of
Customers from 1984 through 1994 was 3.1%. Due to migration from other states,
Washington State has experienced significant population growth in recent years.
From 1988 through 1993, Washington's population increased from 4,617,000 to
5,241,000, an increase of 624,000, while population in the Puget service area
increased from 1,536,500 to 1,811,800, an increase of 275,300. There can be no
assurance that future Customer growth rates for Puget or Washington State will
be similar to historical experience.
FORECASTING CUSTOMERS
Accurate projections of the number of Customers is important in setting and
maintaining rates under the Tariff or any Revised Tariff at levels sufficient to
recover the Bondable Conservation Investment Amount, interest on the
Certificates, the Trustee Fee and the Servicing Fee.
Customer projections are determined by Puget, based on demographic and
economic information, and there is a different methodology used for each
Customer category. The residential Customer forecasting process begins with a
review of population forecasts from the Washington State Office of Financial
Management and the Puget Sound Regional Council. Puget uses these sources to
develop internal population forecasts for each of the nine counties in which it
operates. Puget then employs its own historical data regarding the percentage of
each county's population served by Puget, as well as such other factors as Puget
deems relevant, to convert the internal population forecast into a projection of
residential Customers within its service area.
20
<PAGE>
The commercial Customer forecasting process begins with a review of
nonmanufacturing employment for each county. This information is based on
projections from the Washington State Office of the Forecast Council (which
produces the official state revenue forecast) and the Puget Sound Regional
Council. Puget uses these sources to develop internal employment forecasts for
each county it serves. Puget then considers its historical data regarding the
percentage of employment in each county served by Puget, as well as such other
factors as Puget deems relevant, to convert the internal employment forecast
into a projection of commercial Customers within its service area.
The forecasting process for the industrial and other Customer categories are
based on factors including examination of past Customer growth trends and
discussions with major industrial Customers.
Forecasts are produced by a staff of two employees and are reviewed
internally by an Executive Forecast Review Committee, which includes five Puget
officers. Puget's Customer projections are reviewed by the Commission and are
factored into the Commission's ultimate determination on whether a proposed rate
schedule is fair, just and reasonable. In the course of its review, the
Commission may request additional data in support of the projections or compare
such projections to other regional forecasts. The Commission may make an
explicit finding regarding the projections, but is not required to do so.
For calendar years 1992 through 1994, Customer projection forecast error was
less than 1%. However, a shortfall or surplus in collections may result if the
actual number of Customers in any category differs from the number forecasted. A
summary of the total annual forecasted and actual number of Puget Customers is
shown below. There can be no assurance that the future variance between actual
and projected Customers in the aggregate or by category will be similar to the
historical experience of the aggregate Customer base set forth below.
<TABLE>
<CAPTION>
AVERAGE NUMBER OF CUSTOMERS
FOR THE YEAR ENDED DECEMBER 31,
----------------------------------------
1992 1993 1994
------------ ------------ ------------
<S> <C> <C> <C>
Forecasted............................................................. 780,685 798,918 811,766
Actual................................................................. 777,976 796,002 813,945
Variance............................................................... (0.3%) (0.4%) 0.3%
</TABLE>
CREDIT POLICY AND PROCEDURES
Puget is obligated to provide service to new Customers under Washington law.
No outside credit investigations are performed on new Customers. Puget relies on
the information provided by the Customer and its customer information system
audits to indicate whether the Customer has been previously served by Puget.
Based on previous payment history, each new Customer is assigned one of
three credit codes. A new Customer is automatically assigned the middle credit
code and can be moved to the higher (i.e., signifying a Customer deemed more
creditworthy) or lower (i.e., signifying a Customer deemed less creditworthy)
credit code based on ongoing payment experience. If a Customer leaves the Puget
territory and later returns, the Customer will be assigned the middle credit
code, unless the Customer had a low credit code upon leaving the territory, in
which case the Customer would be re-assigned that lower credit code. This
Customer credit code is used, among other things, to determine the need for a
deposit and the timing of the collection process. A Customer with a poor payment
history or no previous history is deemed a credit risk and a deposit may be
required. Deposit requests are governed by Washington Administrative Code rules
and amounts are determined by previous consumption at the service location.
Puget may change its credit policies and procedures from time to time. It is
expected that any such changes would be designed to enhance Puget's ability to
make timely recovery of amounts billed to Customers.
21
<PAGE>
BILLING PROCESS
Puget operates on a continuous billing cycle, with an approximately equal
number of bills being distributed each business day. For the year ended December
31, 1994, the Company mailed out an average of 23,334 bills daily to its various
Customer categories. Puget bills the majority of its residential Customers
bi-monthly, while all commercial and industrial Customers are billed monthly. Of
the 823,066 Customers of record billed by Puget as of December 31, 1994,
approximately 21% were billed monthly, while approximately 79% were billed
bi-monthly.
Accounts with potential billing errors are held by the computer system for
review. This review examines accounts that have abnormally high or low bills,
potential meter-reading errors, safety problems as identified by the
meter-reading staff and possible meter malfunctions.
Puget may change its billing policies and procedures from time to time. It
is expected that any such changes would be designed to enhance Puget's ability
to make timely recovery of amounts billed to Customers.
COLLECTION PROCESS
In 1994, approximately 77% of total bill payments were received by Puget via
the U.S. mail. During the same period, approximately 21% of total payments were
paid in person at one of Puget's 26 local business offices.
Puget also receives payments at 44 pay stations (which are located in
unaffiliated businesses or organizations) throughout the service territory. In
addition, since May 1994, Washington Natural Gas Company ("WNG") offices have
accepted Puget payments at selected sites. Customer receipts from these two
types of locations represented approximately 1% of bill payments in 1994. Since
both WNG and the pay stations are strictly bill payment sites, it is not their
responsibility to comply with any policy regarding delinquencies or collections.
Other payment methods include pay-by-phone and direct debits of customer
accounts through a local bank, which accounted for less than 1% of payments
collected in 1994.
Puget uses in-house collection attempts for all delinquent accounts. All
Customer bills are due 15 days from the date on which the bill is sent. The
timing of the collection process depends on the credit code assigned to that
Customer. The first step of the process is a reminder notice sent between 25
days (in the case of Customers with the lowest credit code) and 40 days (in the
case of Customers with the highest credit code) after billing. Between 10 to 25
(assuming the lowest and highest credit codes, respectively) days later, a
notice warning is sent regarding termination of service unless payment is
received. Puget then calls the Customer 13 days thereafter, and if full payment
is not received within four days, power is disconnected. Power is not
disconnected only if the delinquent Customer is subject to the Washington State
winter moratorium (the "Winter Moratorium"), which prohibits the disconnection
of electricity to low-income Customers (defined as those whose income is below
125% of the "poverty line") from November 15 through March 15 of each year. In
the 1993-94 winter period, 27 Customers were subject to the Winter Moratorium.
These Customer bills accumulate during the Winter Moratorium and payment plans
are established for each Customer. Customers subject to the Winter Moratorium
are required to pay 7% of their income toward their electric bills during the
Winter Moratorium period. Electric service is subject to disconnection if
satisfactory payment arrangements are not established.
If a Customer account is closed, either because a Customer has moved or the
Customer has failed to remedy a delinquent account, a reminder notice is sent 23
days after the date the account is closed. Assuming the uncollected amounts are
not received, a final request for payment is sent 36 days after the account
closing date, and a third-party collection letter is sent 50 days after such
date. After 80 days without receipt of payment, a closed account collector
attempts to contact the Customer by telephone. If after 120 days these telephone
attempts are unsuccessful, Puget's customer information system will
automatically code the account as a bad debt and send the account to a
collection agency. In 1994, $3,944,000 was referred to the collection agency,
$931,000 was recovered by the collection agency for
22
<PAGE>
accounts previously referred to it and $631,000 was remitted to Puget after
deducting the collection agency's fee. Collection recovery rates are monitored
monthly. Once written off, the uncollected amount remains monitored for six
years and may be collected at any point during that time.
Puget may change its collection policies and procedures from time to time.
It is expected that any such changes would be designed to enhance Puget's
ability to make timely recovery of amounts billed to Customers.
DELINQUENCY AND LOSS EXPERIENCE
The following table sets forth the loss and aging experience with respect to
payments to Puget for each of the periods indicated below. There can be no
assurance that the future loss and aging experience for Puget will be similar to
the historical experience set forth below:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
-------------------------------
1992 1993 1994
--------- --------- ---------
<S> <C> <C> <C>
Net Charge-Offs as a percentage of Billed Revenues............................... 0.19% 0.25% 0.29%
Delinquencies (30 days+) as a percentage of Billed Revenues...................... 16.45% 16.21% 16.19%
</TABLE>
DESCRIPTION OF THE CERTIFICATES
The Certificates will be issued pursuant to the Pooling and Servicing
Agreement to be entered into by Puget, as originator of the Trust, Seller and
Servicer, and Chemical Bank, as Trustee, substantially in the form filed as an
exhibit to the Registration Statement of which this Prospectus is a part. The
Trustee will provide a copy of the final form of the Pooling and Servicing
Agreement to Certificateholders without charge on written request addressed to
the Trustee at its principal corporate trust office, located at 450 West 33rd
Street, 15th Floor, New York, New York 10001, Attention: Structured Finance
Services (ABS). The following summary describes certain terms of the Pooling and
Servicing Agreement and is qualified in its entirety by reference to the Pooling
and Servicing Agreement.
GENERAL
The Certificates will be available for purchase in book-entry form in
minimum denominations representing $1,000 of aggregate Certificate amount and in
integral multiples thereof and will evidence an undivided fractional interest
(the "Fractional Interest") in the Trust equal to the percentage obtained by
dividing the denomination of the Certificate by the aggregate Certificate
amount.
BOOK-ENTRY REGISTRATION
The Certificates will initially be represented by one or more certificates
registered in the name of the nominee of DTC, except as set forth below. Puget
has been informed by DTC that DTC's nominee will be Cede. Accordingly, Cede is
expected to be the holder of record of the Certificates. Unless and until
Definitive Certificates are issued under the limited circumstances described
herein, no Certificate Owner will be entitled to receive a Certificate
representing such person's interest in the Trust. All references herein to
action by Certificateholders shall refer to actions taken by DTC upon
instructions from its participating organizations (the "Participants") and all
references herein to distributions, notices, reports and statements to
Certificateholders shall refer to distributions, notices, reports and statements
of DTC or Cede, as the registered holder of the Certificates, as the case may
be, for distribution to Certificate Owners in accordance with DTC procedures.
DTC is a limited-purpose trust company organized under the laws of the state
of New York, 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 was created to hold securities for its Participants and to facilitate
the clearance and settlement of securities transactions between Participants
through electronic book-entry changes in accounts of its Participants, thereby
eliminating the need for physical movement of certificates. Participants include
securities brokers and dealers, banks, trust companies and clearing corporations
and may include certain other organizations (including the Underwriters).
Indirect access to the
23
<PAGE>
DTC system also is available to others such as banks, brokers, dealers and trust
companies that clear through or maintain a custodial relationship with a
Participant, either directly or indirectly (the "Indirect Participants").
Certificate Owners that are not Participants or Indirect Participants but
desire to purchase, sell or otherwise transfer ownership of, or other interests
in, Certificates may do so only through Participants and Indirect Participants.
In addition, Certificate Owners will receive all distributions of principal of
and interest on the Certificates from the Trustee, as paying agent, or its
successor in such capacity (the "Paying Agent"), through the Participants who in
turn will receive them from DTC. Under a book-entry format, Certificate Owners
may experience some delay in receiving payments, because such payments will be
forwarded by the Paying Agent to Cede by wire transfer of immediately available
funds, as nominee for DTC. DTC will forward such payments to its Participants
who thereafter will forward them to Indirect Participants or Certificate Owners.
It is anticipated that the only "Certificateholder" will be Cede, as nominee of
DTC. Certificate Owners will not be recognized by the Trustee as
Certificateholders, as such term is used in the Pooling and Servicing Agreement,
and the Certificate Owners will only be permitted to exercise the rights of
Certificateholders indirectly through the Participants who in turn will exercise
the rights of Certificateholders through DTC.
Under the rules, regulations and procedures creating and affecting DTC and
its operations, DTC is required to make book-entry transfers among Participants
on whose behalf it acts with respect to the Certificates and is required to
receive and transmit distributions of principal of and interest on the
Certificates. Participants and Indirect Participants with which Certificate
Owners have accounts with respect to the Certificates similarly are required to
make book-entry transfers and receive and transmit such payments on behalf of
their respective Certificate Owners. Accordingly, although Certificate Owners
will not possess Certificates, Certificate Owners will receive payments and will
be able to transfer their interests.
Because DTC can only act on behalf of Participants, which in turn act on
behalf of Indirect Participants and certain banks, the ability of a Certificate
Owner to pledge Certificates to persons or entities that do not participate in
the DTC system, or otherwise take actions in respect of such Certificates, may
be limited due to the lack of a physical certificate.
DTC will take any action permitted to be taken by a Certificateholder under
the Pooling and Servicing Agreement only at the direction of one or more
Participants to whose account with DTC the Certificates are credited.
Additionally, DTC will take such actions with respect to specified Fractional
Interests of the Trust only at the direction of and on behalf of Participants
whose holdings include undivided interests that satisfy such specified
Fractional Interest. DTC may take conflicting actions with respect to other
undivided interests to the extent that such actions are taken on behalf of
Participants whose holdings include such undivided interests.
None of the Trustee, the Seller or the Servicer will have any liability for
any actions taken by DTC or its nominee, including, without limitation, actions
for any aspects of the records relating to or payments made on account of
beneficial ownership interests in the Certificates held by the nominee of DTC,
or for maintaining, supervising or reviewing any records relating to such
beneficial ownership interests.
DEFINITIVE CERTIFICATES
The Certificates will be issued in fully registered, certificated form to
Certificate Owners or their nominees ("Definitive Certificates"), rather than to
DTC or its nominee, only if (i) the Trustee advises the Servicer in writing that
DTC is no longer willing or able to discharge properly its responsibilities as
depository with respect to the Certificates, and the Trustee is unable to locate
a qualified successor, (ii) Certificate Owners with aggregate Fractional
Interests representing more than 50% of the Trust advise the Trustee and the
clearing agency through Participants in writing that the continuation of a
book-entry system through DTC (or a successor thereto) is no longer in the best
interests of the Certificate Owners, or (iii) after the Servicer becomes subject
to insolvency proceedings, Certificate Owners with aggregate
24
<PAGE>
Fractional Interests representing more than 50% of the Trust advise the Trustee
and the clearing agency through Participants in writing that the continuation of
a book-entry system through DTC (or a successor thereto) is no longer in the
best interests of the Certificate Owners.
Upon the occurrence of any of the events described in the immediately
preceding paragraph, DTC is required to notify all Participants of the
availability through DTC of Definitive Certificates. Upon surrender by DTC of
the physical certificates representing the Certificates and instructions for
reregistration, the Trustee will issue Definitive Certificates according to
DTC's instructions, and thereafter the Trustee will recognize the holders of
Definitive Certificates as Certificateholders under the Pooling and Servicing
Agreement (the "Holders").
If Definitive Certificates are issued, distributions of principal and
interest on the Definitive Certificates will be made by the Paying Agent
(initially the Trustee) directly to Holders of Definitive Certificates in
accordance with the procedures set forth herein and in the Pooling and Servicing
Agreement. Interest payments and principal payments on each payment date will be
made to holders in whose names the Definitive Certificates were registered at
the close of business on the last business day of the calendar month immediately
preceding the payment date. Distributions will be made by check mailed to the
address of such Holder as it appears on the Certificate register. The final
payment on any Certificate (whether Definitive Certificates or the certificates
registered in the name of Cede representing the Certificates), however, will be
made only upon presentation and surrender of such Certificate at the office or
agency specified in the notice of final distribution to Certificateholders. The
Paying Agent will provide such notice to registered Certificateholders not later
than the fifth day of the month of such final distributions.
Definitive Certificates will be transferable and exchangeable at the offices
of the Trustee in New York, New York. No service charge will be imposed for any
registration of transfer or exchange, but the Trustee may require payment of a
sum sufficient to cover any tax or other governmental charge imposed in
connection therewith.
SALE OF PURCHASED ASSETS TO THE TRUSTEE; EFFECT OF INSOLVENCY LAWS
On the Closing Date, Puget will sell and assign to the Trustee on behalf of
the Trust, without recourse or reversion, its entire interest in the Purchased
Assets. Puget believes that the transfer of the Purchased Assets by Puget to the
Trust will constitute a "true sale" of the Purchased Assets to the Trust for
Insolvency Law (but not tax law) purposes. Puget has granted a security interest
in the Purchased Assets and the proceeds thereof to the Trustee and has taken
the steps required by the Statute to perfect that security interest if for any
reason the transaction were to be recharacterized for Insolvency Law purposes as
a pledge of the Purchased Assets made to secure a borrowing by Puget rather than
a "true sale" under the Pooling and Servicing Agreement.
In the event of proceedings by or against Puget under any Insolvency Laws,
the Trustee would have the right pursuant to the Statute to cause the Commission
to order the sequestration, and payment to the Trust, of the revenues arising
from the Purchased Assets, although there can be no assurance that the
Commission would issue such an order in light of the automatic stay provisions
of Section 362 of the Bankruptcy Code or, alternatively, that a bankruptcy court
would lift the automatic stay to permit such action by the Commission. In that
event, the Trustee is required under the Pooling and Servicing Agreement to seek
an order from the bankruptcy court lifting the automatic stay with respect to
such action by the Commission and an order requiring an accounting and
segregation of the revenues arising from the Purchased Assets, although there
can be no assurance that the court would grant either order. If the transaction
were recharacterized as a secured borrowing in any such proceedings, the
bankruptcy court, under Section 363 of the Bankruptcy Code, could substitute
other collateral for the Purchased Assets and the proceeds therefrom if the
court were to conclude that the revenues arising from the Purchased Assets were
required for Puget's continuing operations and that the Certificateholders would
be "adequately protected" by a lien on such substitute collateral, in which case
delays and possible reductions in distributions to Certificateholders could
occur.
25
<PAGE>
The Statute provides that any successor to Puget pursuant to any Insolvency
Laws will be required to perform the Servicer's obligations with respect to the
Certificates. See "Risk Factors -- Possible Delays in or Reductions of
Distributions to Certificateholders in the Event of a Puget Insolvency."
ADMINISTRATION AND SERVICING OF PURCHASED ASSETS
The Trustee will irrevocably appoint the Servicer as agent to calculate the
Tariff and any Revised Tariff and to bill, manage, service, administer and make
collections of amounts due from Customers under the Tariff or any Revised
Tariff, the Conservation Repayment Contracts and the Purchased Sale Proceeds.
The Servicer shall use all reasonable efforts, consistent with its customary
procedures, to make collections from Customers of amounts due under the Tariff
or any Revised Tariff, the Conservation Repayment Contracts and the Purchased
Sale Proceeds, in each case to the same extent that it makes collection efforts
for its own account. The Servicer will maintain records of all revenues
collected under the Tariff or any Revised Tariff. The Servicer will deposit to
the Collection Account all amounts received by the Servicer in respect of the
Purchased Assets during such calendar month (i) within two business days after
such amounts are received by the Servicer, during any period in which the
long-term unsecured debt rating of the Servicer is below the fourth highest
long-term rating category of any of the Rating Agencies, or (ii) on or before
the tenth calendar day succeeding the last day of each calendar month (a
"Remittance Date"). The Trust has designated the Servicer as custodian to
maintain possession of all documents and instruments relating exclusively to the
Purchased Assets.
The Servicer has reserved the right to make any change to the amount or
reschedule the due date of any scheduled payment of any billed amount in respect
of the Purchased Assets or change any material term of any Purchased Asset if
such action would be in accordance with its customary practices or those of any
successor Servicer with respect to comparable assets that it services for itself
and if such action would not materially adversely affect the Certificateholder.
SERVICER COMPENSATION
The Servicing Fee for each quarterly Distribution Period will be an amount
equal to the sum of (i) $ in respect of the first Distribution Period and
$ in respect of all subsequent Distribution Periods and (ii) the
investment earnings on amounts deposited in the Collection Account during such
Distribution Period. The interest in respect of the Overcollateralization Amount
is expected to be sufficient to pay the fixed portion of the Servicing Fee as
well as the Trustee Fee. Such fees will be payable on each Distribution Date
prior to any distributions on the Certificates.
TARIFF
The Tariff specifically identifies, for each category of Puget's Customers,
a dollar amount of each Customer's regular electric bill that will be allocated
to the Trust from bills sent during each Regulatory Year. Such amounts will be
collected by Puget daily as part of its normal collection activities and will be
deposited to the Collection Account monthly on each Remittance Date.
DISTRIBUTIONS
On each Distribution Date, the Trustee will cause to be made the following
distributions, to the extent of funds available in the Collection Account, in
the following order of priority and in the amounts set forth in the applicable
Trustee's certificate:
(i) to the Trustee, the Trustee Fee for such Distribution Period and
any unpaid Trustee Fee for any prior Distribution Periods;
(ii) to the Servicer, the Servicing Fee for such Distribution Period and
any unpaid Servicing Fee for any prior Distribution Periods;
(iii) to the Certificateholders, an amount equal to the product of the
quarterly Certificate Rate and the aggregate Certificate balance as of the
first day of the Distribution Period plus any such amounts due to
Certificateholders with respect to any prior Distribution Period (plus an
amount equal to the product of the quarterly Certificate Rate and such
previously due amounts); and
(iv) to the Certificateholders, the balance remaining in the Collection
Account after payment of the amounts described in clauses (i) through (iii)
above as principal to reduce the aggregate Certificate balance.
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AMORTIZATION
Set forth below is the Pro Forma Schedule showing the Projected Bondable
Conservation Investment Balances.
<TABLE>
<CAPTION>
PROJECTED BONDABLE
CONSERVATION INVESTMENT
DATE BALANCE
- ------------------------------------------------------------------ ------------------------
<S> <C>
Initial........................................................... $199,801,384
September 30, 1995................................................ 191,721,002
September 30, 1996................................................ 161,106,486
September 30, 1997................................................ 133,905,961
September 30, 1998................................................ 106,705,436
September 30, 1999................................................ 79,504,911
September 30, 2000................................................ 56,039,465
September 30, 2001................................................ 34,441,554
September 30, 2002................................................ 17,528,547
September 30, 2003................................................ 5,692,310
March 31, 2004.................................................... 2,846,155
September 30, 2004................................................ 0
</TABLE>
All amounts received by the Trust from amounts collected from Customers in
respect of interest on the Bondable Conservation Investment Amount will be used
to pay the Trustee Fee, one component of the Servicing Fee and interest on the
Certificates, and all such amounts in respect of principal of the Bondable
Conservation Investment Amount will be used to pay principal of the
Certificates. As a result, amortization of the aggregate principal amount of
Certificates in any period will equal the reduction of the Bondable Conservation
Investment Balance during such period. Assuming reductions of the Bondable
Conservation Investment Balance in accordance with the Pro Forma Schedule set
forth above and assuming straight-line amortization within each yearly period,
the weighted average life of the Certificates would be years. The Servicer
does not, however, anticipate straight-line amortization within each yearly
period and deviations from the Pro Forma Schedule are expected to occur subject
to subsequent adjustment through Revised Tariffs, both of which factors could
affect the weighted average life of the Certificates. No representation can be
made as to the actual amortization of the Certificates.
PERIODIC RATE ADJUSTMENTS
On each Calculation Date, the Servicer is required to compare the Bondable
Conservation Investment Balance to the Projected Bondable Conservation
Investment Balance set forth in the Pro Forma Schedule as of such date. If the
Bondable Conservation Investment Balance at a Calculation Date differs from the
Projected Bondable Conservation Investment Balance for such Calculation Date by
more than 2%, the Servicer is required within 30 days of such Calculation Date
to apply for (and the Initial Order provides that the Commission will approve
within 30 days of the application) a Revised Tariff that will allocate revenues
to the Trust in an amount intended to be sufficient so that (i) the Bondable
Conservation Investment Balance on the next September 30 will equal the
Projected Bondable Conservation Investment Balance as of such date and (ii)
thereafter, will provide for the amortization of the remaining Bondable
Conservation Investment Amount in accordance with the Pro Forma Schedule. Under
Washington law applicable to rate filings generally, the Commission is obligated
to act on a rate application no later than 11 months from the date of filing.
The Revised Tariff will be based on updated assumptions by the Servicer,
including, but not limited to, the projected number of Customers and the
expected rate of delinquencies.
COLLECTION ACCOUNT
The Servicer will establish and maintain an account in the Trustee's name
for the benefit of the Certificateholders. The Collection Account shall be a
segregated identifiable trust account established in the trust department of a
Qualified Trust Institution (as hereinafter defined). The Collection Account
will be established and maintained with the Trustee, which is a Qualified Trust
Institution. The Servicer will remit to the Collection Account, prior to 1:00
p.m., New York City time, on each Remittance Date, the amounts received by the
Servicer from or on behalf of Customers pursuant to the Tariff and any Revised
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Tariffs, the Conservation Repayment Contracts and the Purchased Sale Proceeds
during the preceding calendar month. However, during any period in which the
long-term first-mortgage debt rating of the Servicer is below the fourth highest
long-term rating category of any of the Rating Agencies, the Servicer is
obligated to remit such amounts to the Collection Account within two business
days after such amounts are received by the Servicer. "Qualified Trust
Institution" is defined as an institution organized under the laws of the United
States or one of the states thereof or incorporated under the laws of a foreign
jurisdiction with a branch or agency located in the United States and subject to
supervision and examination by federal or state banking authorities which at all
times (i) is authorized under such laws to act as a trustee or in any other
fiduciary capacity, (ii) has not less than $1,000,000,000 in assets under
fiduciary management, (iii) has a minimum net worth of at least $50,000,000, and
(iv) has a long-term deposits rating in one of the four highest rating
categories by each of the Rating Agencies.
Funds in the Collection Account may be invested in any of the following: (i)
obligations of the United States or any agency thereof, provided such
obligations are backed by the full faith and credit of the United States; (ii)
general obligations of or obligations guaranteed as to the timely payment of
interest and principal by any state of the United States or the District of
Columbia then rated in the highest long-term rating category by the Rating
Agencies or such lower rating categories (as approved in writing by the Rating
Agencies) as will not result in the qualification, downgrading or withdrawal of
the ratings then assigned to the Certificates by the Rating Agencies; (iii)
commercial paper that is then rated in the highest short-term rating category by
the Rating Agencies or such lower rating categories (as approved in writing by
the Rating Agencies) as will not result in the qualification, downgrading or
withdrawal of the ratings then assigned to the Certificates by the Rating
Agencies; (iv) certificates of deposit, demand or time deposits, federal funds
or banker's acceptances issued by any depository institution or trust company
(including the Trustee acting in its commercial banking capacity) incorporated
under the laws of the United States or of any state thereof or incorporated
under the laws of a foreign jurisdiction with a branch or agency located in the
United States and subject to supervision and examination by federal or state
banking authorities, provided that the short-term unsecured deposit obligations
of such depository institution or trust company are then rated in the highest
short-term rating category by the Rating Agencies or such lower rating
categories (as approved in writing by the Rating Agencies) as will not result in
the qualification, downgrading or withdrawal of the ratings then assigned to the
Certificates by the Rating Agencies; (v) demand or time deposits of, or
certificates of deposit issued by, any bank, trust company, savings bank or
other savings institution, provided that such deposits or certificates of
deposit are fully insured by the FDIC; (vi) guaranteed reinvestment agreements
issued by any bank, insurance company or other corporation (a) the short-term
unsecured debt or deposits of which are rated in the highest short-term rating
category by the Rating Agencies or the long-term unsecured debt of which is
rated in the highest long-term rating category by the Rating Agencies or (b)
that are otherwise approved in writing by the Rating Agencies as investments
that will not result in the qualification, downgrading or withdrawal of the
ratings then assigned to the Certificates by the Rating Agencies; (vii)
repurchase obligations with respect to any security described in clause (i),
(ii) or (ix) herein or any other security issued or guaranteed by the FHLMC, the
FNMA or any other agency or instrumentality of the United States that is backed
by the full faith and credit of the United States, in either case entered into
with a federal agency or a depository institution or trust company (acting as
principal) described in clause (iv) above or a corporation (acting as principal)
described in clause (vi) above; (viii) investments in money market funds, which
funds are (a) not subject to any sales, load or other similar charge; (b) rated
in the highest rating category by the Rating Agencies; and (c) invested solely
in obligations described in clauses (i) through (vii) above; (ix) interests in
any open-end or closed-end management-type investment company or investment
trust (a) registered under the Investment Company Act of 1940, as from time to
time amended, the portfolio of which is limited to obligations of the United
States or obligations guaranteed by the United States and to agreements to
repurchase such obligations, which agreements, with respect to principal and
interest, are at least 100% collateralized by such obligations marked to market
on a daily basis and pursuant to which the investment company or investment
trust is required to take delivery of such obligations either directly or
through an independent custodian designated in accordance with the Investment
Company Act of 1940, as from time to time amended, and
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(b) acceptable to the Rating Agencies (as approved in writing by the Rating
Agencies) as collateral for securities having ratings equivalent to the ratings
of the Certificates on the Closing Date; and (x) such other investments where
either (a) the short-term unsecured debt or deposits of the obligor on such
investments are rated in the highest short-term rating category by the Rating
Agencies or (b) such investments are acceptable to, and approved in writing by,
the Rating Agencies and will not result in the qualification, downgrading or
withdrawal of the ratings then assigned to the Certificates by the Rating
Agencies.
REPORTS TO CERTIFICATEHOLDERS AND EVIDENCE OF COMPLIANCE
For each Calculation Date, the Servicer will provide to the Trustee a
certificate indicating (i) the Bondable Conservation Investment Balance as of
such Calculation Date and (ii) a comparison of the Bondable Conservation
Investment Balance and the Projected Bondable Conservation Investment Balance,
together with a statement as to whether a Variance exists. Moreover, on or
before each Remittance Date, the Servicer will prepare and furnish to the
Trustee a certificate for the related Collection Period setting forth the
aggregate amount remitted and the components thereof. On the basis of this
information, the Trustee will furnish to the Certificateholders on each
Distribution Date reports describing (a) the aggregate amounts collected and the
components thereof for the preceding Distribution Period, (b) the amounts to be
distributed and the components thereof, (c) the aggregate remaining balance on
the Certificates after giving effect to all distributions of principal to the
Certificateholders, (d) the Bondable Conservation Investment Balance as of the
end of the preceding Distribution Period, and (e) if the last day of the related
Distribution Period is a Calculation Date, a comparison between the Bondable
Conservation Investment Balance and the Projected Bondable Conservation
Investment Balance, together with a statement as to whether a Variance exists.
In addition, within a reasonable period of time after the end of each calendar
year, the Trustee shall furnish to each person who at any time during the
calendar year was a Certificateholder a statement of the aggregate amounts
distributed during the year.
The Servicer shall deliver to the Trustee on or before April 30 of each
year, a certificate signed by an appropriate officer of the Servicer stating
that to the best of such officer's knowledge, after a review of the Servicer's
activities during the prior year, the Servicer has fulfilled all of its material
obligations in all material respects under the Pooling and Servicing Agreement.
The Servicer shall also cause a firm of independent public accountants to
prepare a report for the Trustee's use on or before May 31 of each year to the
effect that such firm has performed certain review procedures with respect to
the Servicer's performance and records relating to servicing the Purchased
Assets and has found them to be in compliance with the Pooling and Servicing
Agreement.
The Trustee will provide a copy of any Servicer's certificate described in
the two preceding paragraphs to any Certificateholder who so requests in writing
at the Trustee's offices located at 450 West 33rd Street, 15th Floor, New York,
New York 10001, Attention: Structured Finance Services (ABS). All reports
described above will be available to any Certificate Owner upon request to the
Trustee or the Servicer.
REPRESENTATIONS AND WARRANTIES
As of the Closing Date, the Seller will make representations and warranties
to the Trust relating to the Purchased Assets to the effect, among other things,
that as of the Closing Date (i) the Purchased Assets have been conveyed to the
Trust free and clear of any liens, claims or encumbrances arising through the
Seller; (ii) no authorization or approval or other action by, and no notice to
or filing with, and no consent by, any governmental authority, regulatory body
or third party is required for the due execution and delivery by the Seller of
the Pooling and Servicing Agreement and the performance by the Seller of its
obligations thereunder, except for (a) the Initial Order and (b) such other
authorizations, approvals, notices, consents and filings as have been duly
received or made; (iii) the Seller is a corporation duly organized and in good
standing under the laws of the state of Washington with the power and authority
to own its properties and to conduct its business as currently owned or
conducted, and to execute, deliver and perform its obligations under the Pooling
and Servicing Agreement; (iv) the execution,
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<PAGE>
delivery and performance of the Pooling and Servicing Agreement by the Seller
have been duly authorized by the Seller by all necessary corporate action; (v)
the Pooling and Servicing Agreement constitutes a legal, valid and binding
agreement of the Seller enforceable against the Seller in accordance with its
terms, subject to bankruptcy and equity exceptions; and (vi) the consummation of
the transactions contemplated by the Pooling and Servicing Agreement do not (a)
conflict with the Seller's charter or bylaws or the material terms of any
agreements of the Seller, (b) result in the creation or imposition of any lien
upon the Seller's properties, or (c) violate any law or any order, rule or
regulation applicable to the Seller. As of the Closing Date, the Servicer will
make representations and warranties to the Trust similar in form and substance
to those described in clauses (ii) through (vi) above.
In the event of a material breach by the Seller or the Servicer of any of
its representations and warranties described in the preceding paragraph, the
Seller or the Servicer, as the case may be, will indemnify, defend and hold
harmless the Trustee, the Trust and the Certificateholders against any loss,
liability or expense that is the sole and direct result thereof.
SERVICER COVENANTS
In the Pooling and Servicing Agreement, the Servicer has covenanted that, in
servicing the Purchased Assets: (i) it will manage, service, administer and make
collections on the Purchased Assets with reasonable care and in accordance with
law, using that degree of skill and attention that the Servicer exercises with
respect to assets that the Servicer services for itself; (ii) it will follow its
customary standards, policies and procedures in performing its duties as
Servicer; (iii) it will use all reasonable efforts, consistent with its
customary servicing procedures, to (a) enforce, and maintain rights in respect
of, the Purchased Assets in each case to the extent it services comparable
assets that it services for itself and (b) maintain the aggregate amount of
revenues allocated to the Trust pursuant to the Tariff or any Revised Tariff by
making necessary filings or refilings with the Commission; and (iv) it will
comply with all laws applicable to and binding on it relating to the Purchased
Assets, the noncompliance with which would have a material adverse effect on the
value of the Purchased Assets; PROVIDED, HOWEVER, that the foregoing is not
intended to, and shall not, impose any liability on the Servicer for
noncompliance with any law that the Servicer is contesting in good faith in
accordance with its customary standards and procedures.
In addition, under the Pooling and Servicing Agreement, the Servicer has
agreed, among other things, (i) to calculate the Bondable Conservation
Investment Balance as of each Calculation Date and deliver a written copy of
such calculation to the Trustee not later than two business days prior to the
Distribution Date immediately following such Calculation Date and, within 30
days following the Calculation Date to which a Variance relates, to apply with
the Commission for a Rate Adjustment and (ii) in connection with each such Rate
Adjustment, to (a) calculate the relevant Revised Tariff, (b) file an
application with the Commission, (c) take all reasonable actions and make all
reasonable efforts in order to effectuate the rate adjustment and enforce the
provisions of the Statute that obligate the Commission to approve rates at
levels sufficient to recover the Conservation Asset Transaction Amount in
accordance with the Pooling and Servicing Agreement, and (d) send to the Trustee
copies of all material notices and documents.
In the event of a material breach by the Servicer of any of these covenants,
the Servicer will indemnify, defend and hold harmless the Trustee, the Trust and
the Certificateholders against any costs, expenses, losses, claims, damages and
liabilities incurred as a sole and direct result thereof.
In addition, the Servicer has agreed to indemnify, defend and hold harmless
the Trustee against any loss, liability or expense (except for recurring
expenses incurred in the ordinary course of business, which are intended to be
covered by the Trustee Fee) in connection with the Trustee's administration of
the Trust, other than any loss, liability or expense incurred by reason of
willful misfeasance, bad faith or negligence in the performance of the Trustee's
duties under the Pooling and Servicing Agreement or reckless disregard of its
obligations and duties thereunder.
LIMITATION ON LIABILITY OF THE SELLER AND THE SERVICER
The Pooling and Servicing Agreement provides that none of the Seller, the
Servicer or any of their directors, officers, employees or agents, in their
capacities as such, will be under any other liability to the
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Trust, the Trustee or the Certificateholders for any action taken, or refrained
from being taken, pursuant to the Pooling and Servicing Agreement, provided that
the Seller and the Servicer are not so protected against any liability that
would otherwise be imposed by reason of the breach of their respective
obligations and duties under the Pooling and Servicing Agreement.
SUCCESSOR SERVICER; EVENTS OF DEFAULT
The Pooling and Servicing Agreement and the Statute provide that any
successor to Puget pursuant to any bankruptcy, reorganization or other
insolvency proceeding shall perform and satisfy all of Puget's obligations as
Servicer under the Pooling and Servicing Agreement.
Any person into which the Servicer may be merged or consolidated or any
person resulting from any merger or consolidation to which the Servicer is a
party, or any person succeeding to the electric utility distribution business of
the Servicer, will be the successor to the Servicer under the Pooling and
Servicing Agreement.
Except as provided in the preceding paragraph, the Servicer may not transfer
or assign all or a portion of its rights, obligations and duties under the
Pooling and Servicing Agreement unless (i) such transfer or assignment will not
result in a withdrawal or reduction by the Rating Agencies of the rating then
assigned to the Certificates or (ii) the Trustee and the Certificateholders
evidencing not less than 75% of the aggregate Certificate balance consent
thereto.
The Servicer may not resign from its obligations and duties under the
Pooling and Servicing Agreement except upon (i) appointment of a successor
Servicer and (ii) receipt by the Trustee of notice from each of the Rating
Agencies to the effect that the rating then assigned to the Certificates will
not be withdrawn or reduced as a result of such resignation and the appointment
of a successor.
The Servicer may be removed by the Certificateholders upon an Event of
Default. "Event of Default" shall mean (i) the Servicer's failure to make
remittances required under the Pooling and Servicing Agreement, which failure
continues unremedied for five business days after notice from the Trustee, (ii)
the Servicer's failure to observe and perform in all material respects any of
the other covenants or agreements on the Servicer's part under the Pooling and
Servicing Agreement, which failure continues unremedied for 30 days after notice
from the Trustee or from the holders of Certificates representing not less than
25% of the aggregate Certificate balance, and (iii) any representation or
warranty of the Servicer having been incorrect when made that has a material
adverse effect on the Certificate Owners, which material adverse effect
continues for 30 days after notice from the Trustee or from the holders of
Certificates representing not less than 25% of the aggregate Certificate
balance, and in each case which is followed by notice of termination from the
holders of Certificates representing not less than 75% of the aggregate
Certificate balance, appointment of a successor Servicer and receipt by the
Trustee of notice from each of the Rating Agencies to the effect that the rating
then assigned to the Certificates will not be qualified, downgraded or withdrawn
as a result of appointment of the successor Servicer.
AMENDMENTS
The Pooling and Servicing Agreement may be amended from time to time by
agreement of the Trustee, the Servicer and the Seller without the consent of any
Certificateholders to cure any ambiguity, to correct or supplement any provision
that may be inconsistent with any other provision therein, to evidence a
succession to the Servicer or the Seller pursuant thereto or to add any other
provisions with respect to matters or questions arising thereunder that are not
inconsistent with the provisions thereof; PROVIDED, HOWEVER, that such action
may not, as evidenced by an officer's certificate or an opinion of counsel
delivered to the Trustee, adversely and materially affect the interests of the
Trust or any of the Certificateholders.
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The Pooling and Servicing Agreement may also be amended from time to time by
the Seller, the Servicer and the Trustee with the consent of the holders of
Certificates evidencing not less than 51% of the aggregate Certificate balance
for the purpose of adding any provision or changing any of the provisions
thereof, or modifying in any manner the rights of the Certificateholders,
provided that no such amendment may (i) increase or reduce in any manner the
amount of, or accelerate or delay the timing of, collections of payments with
respect to the Purchased Assets or distributions to be made to
Certificateholders, (ii) modify the provisions of the Pooling and Servicing
Agreement relating to Events of Default or waiver of past defaults, or (iii)
reduce the percentage of the aggregate Certificate balance referenced above for
approval of an amendment, without the consent of all Certificateholders.
The Trustee will furnish written notice of the substance of any such
amendment to each Certificateholder promptly following the execution of any such
amendment (other than any amendment described in the first paragraph of this
section).
THE TRUSTEE
Chemical Bank is the initial Trustee under the Pooling and Servicing
Agreement. The Corporate Trust Department of Chemical Bank is located at 450
West 33rd Street, 15th Floor, New York, New York 10001. The Servicer and its
affiliates may from time to time enter into normal banking and trustee
relationships with the Trustee and its affiliates. An affiliate of the Trustee,
Chemical Securities Inc., will be one of the Underwriters of the Certificates.
The Trustee and the Servicer and any of their respective affiliates may hold
Certificates in their own names; however, any Certificates held by the Servicer
or any of its affiliates shall not be entitled to participate in any decisions
made or instructions given to the Trustee by Certificateholders as a group. In
addition, for purposes of meeting the legal requirements of certain local
jurisdictions, the Trustee, acting jointly with the Servicer, shall have the
power to appoint a co-trustee or separate trustee of all or any part of the
Trust. In the event of such appointment, all rights, powers, duties and
obligations shall be conferred or imposed on the Trustee and such separate
trustee or co-trustee jointly or, in any jurisdiction in which the Trustee shall
be incompetent or unqualified to perform certain acts, singly upon such separate
trustee or co-trustee, who shall exercise and perform such rights, powers,
duties and obligations solely at the direction of the Trustee. Such appointment
shall not absolve the Trustee of its obligations under the Pooling and Servicing
Agreement.
The Trustee may resign at any time, in which event the holders of
Certificates evidencing not less than 51% of the aggregate Certificate balance
(the "Majority Holders") may appoint a successor Trustee. The Majority Holders
may also remove the Trustee if the Trustee ceases to be eligible to continue as
such under the Pooling and Servicing Agreement or if the Trustee becomes
insolvent. In such circumstances, the Majority Holders will be obligated to
appoint a successor Trustee. Any resignation or removal of the Trustee and
appointment of a successor Trustee will not become effective until acceptance of
the appointment by the successor Trustee.
The Trustee will have no obligation to exercise any of the rights or powers
vested in it by the Pooling and Servicing Agreement, or to institute, conduct or
defend any litigation under or in relation to the Pooling and Servicing
Agreement, at the request, order or direction of any of the Certificateholders
unless such Certificateholders have offered to the Trustee reasonable security
or indemnity against the costs, expenses and liabilities that may be incurred
therein or thereby. The Trustee will have the right to decline to follow any
such request, order or direction if the Trustee, in accordance with an opinion
of counsel, determines that the action or proceeding may not lawfully be taken
or if the Trustee in good faith determines that the action or proceeding so
directed would involve it in personal liability or be unjustly prejudicial to
the nonassenting Certificateholders.
TERMINATION OF THE TRUST
The respective responsibilities of the Seller, the Servicer and the Trustee
created by the Pooling and Servicing Agreement will terminate upon distribution
to the Certificateholders of all amounts required to be distributed to them
under the Pooling and Servicing Agreement. The Tariff and any Revised Tariffs
will expire on the Tariff Termination Date, which will be the final date on
which rates under the Tariff or any
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Revised Tariff may be billed to Customers. Amounts received on any date prior to
the Final Collection Date with respect to bills sent on or prior to the Tariff
Termination Date will be distributed on the succeeding Distribution Date, but
not later than the Final Distribution Date.
LIST OF CERTIFICATEHOLDERS
At such time, if any, as Definitive Certificates have been issued, upon
written request of any Certificateholder of record holding Certificates
evidencing not less than 10% of the aggregate Certificate balance, the Trustee
will afford such Certificateholder access during business hours to the current
list of Certificateholders for purposes of communicating with other
Certificateholders with respect to their rights under the Pooling and Servicing
Agreement. See "-- Book-Entry Registration" and "-- Definitive Certificates."
The Pooling and Servicing Agreement will not provide for any annual or other
meetings of Certificateholders.
FEDERAL INCOME TAX CONSEQUENCES
CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS
Perkins Coie, counsel to Puget ("Tax Counsel"), has prepared the following
summary of Tax Counsel's opinion regarding the material U.S. federal income tax
consequences resulting from the purchase, ownership and disposition of
Certificates. This summary neither purports to consider all the possible tax
consequences of the purchase, ownership or disposition of the Certificates nor
reflects issues that may be material to an investor based on its particular tax
situation. It deals only with Certificates held as capital assets and, except as
expressly indicated, it is addressed only to initial purchasers of Certificates.
It does not deal with holders with a special tax status or special tax
situations, such as dealers in securities. Except to the extent discussed under
"-- Taxation of Non-U.S. Certificateholders," this discussion may not apply to
non-U.S. persons that are not subject to U.S. federal income tax on a net income
basis.
This summary is based on the U.S. federal income tax laws and regulations
now in effect and as currently interpreted, and does not take into account
possible changes in such tax laws or such interpretations, all of which may be
applied retroactively. It does not include any description of the tax laws of
any state or local governments within the United States, or of any foreign
government, that may be applicable to the Certificates or the
Certificateholders. Persons considering the purchase of Certificates should
consult their own tax advisors concerning the application of the U.S. federal
income tax laws to their particular situations, as well as any consequences
arising under the laws of any other taxing jurisdiction.
No rulings have been or will be sought from the IRS with respect to any of
the U.S. federal income tax consequences discussed below. Thus, there can be no
assurance that the IRS will not take contrary positions. Accordingly, each
prospective investor is urged to consult its own tax advisor with respect to the
U.S. federal income tax consequences of holding an interest in a Certificate.
For purposes of the discussion below, (i) "U.S. Person" means a citizen or
resident of the United States, a corporation, partnership or other specified
entity created or organized in or under the laws of the United States, or any
political subdivision thereof, or an estate or trust the income of which is
includible in gross income for U.S. federal income tax purposes regardless of
its source and (ii) "non-U.S. Person" means a person other than a U.S. Person.
TAX STATUS OF THE TRUST
Under the trust agreement, the Certificateholders agree to treat the Trust
as a grantor trust within the meaning of Section 671 ET SEQ. of the Code. As
such, the Trust itself should not be subject to tax unless it is recharacterized
as an association taxable as a corporation. Characterization of the Trust as an
association taxable as a corporation could cause the Trust to incur federal
income taxes and cause payments received by Certificateholders to constitute
taxable dividends. Tax Counsel has reviewed the Pooling and Servicing Agreement
and is of the opinion that the Trust will not be taxable as a corporation.
33
<PAGE>
TAXATION OF U.S. CERTIFICATEHOLDERS
Each Certificateholder that is a U.S. Person will be required to include in
income, in accordance with its usual method of accounting, the portion of the
stated interest attributable to the Certificates held by such holder. For
federal income tax purposes, Puget intends to treat the transactions described
herein as a loan by the Trust to Puget secured by a pledge of the Purchased
Assets, and the Trust will be treated as owning debt in which each
Certificateholder will own an undivided interest; accordingly, each
Certificateholder will be required to report as interest income its share of the
income of the Trust, which will equal in amount the stated interest attributable
to the Certificates held by such holder. Tax Counsel is of the opinion that the
Certificateholders will not be required to include in taxable income from the
Trust any original issue discount ("OID") income. However, any
Overcollateralization Amount received by a Certificateholder will be ordinary
income if and when received. In addition, under current proposed regulations
(which are not yet in effect), any distribution by the Trust to a
Certificateholder in excess of the amount equal to the Bondable Conservation
Investment Amount allocable to such holder plus interest at the Certificate Rate
would be contingent interest that is required to be included in gross income of
the Certificateholder in the year in which the amount of such payment becomes
fixed, which is expected to be the year in which any such amount will be
distributed.
A Certificateholder that is a U.S. Person will recognize gain or loss upon
the sale or exchange of a Certificate equal to the difference between the amount
realized from such sale or exchange (exclusive of any portion thereof reflecting
accrued but unpaid interest) and its tax basis in the Certificate. A
Certificateholder that is a U.S. Person will have a tax basis in a Certificate
equal to the Certificateholder's purchase price for such Certificate, decreased
by any principal repayments and any amortization of bond premium and increased
by the amount of any OID previously taken into income.
TAXATION OF NON-U.S. CERTIFICATEHOLDERS
Interest paid to a Certificateholder that is a non-U.S. Person will be
subject to a U.S. withholding tax of 30% or such lower amount as may apply by
income tax treaty between the United States and the country in which the
Certificateholder is resident, except that no withholding tax will apply if the
portfolio interest exemption under Section 881(c) or 871(g) of the Code applies.
The portfolio interest exemption should apply if the Certificateholder is not a
bank and it provides to the Trustee a form W-8 or the equivalent thereof. See
"-- Information Reporting and Backup Withholding" for requirements for exemption
of non-U.S. Persons from information reporting and backup withholding.
Notwithstanding the foregoing, if interest or other income received with
respect to the Certificates is effectively connected with a U.S. trade or
business conducted by a Certificateholder that is a non-U.S. Person, such
Certificateholder, although exempt from the withholding tax described in the
preceding paragraph, may be subject to U.S. federal income tax on such interest
in the same manner as if it were a U.S. Person. In addition, if such
Certificateholder is a corporation, it may be subject to a branch profits tax
equal to 30% (or lower treaty rate) of its effectively connected earnings and
profits for the taxable year, subject to certain adjustments.
INFORMATION REPORTING AND BACKUP WITHHOLDING
The Trustee will be required to report annually to the IRS, and to each
Certificateholder of record, certain information, including the
Certificateholder's name, address and taxpayer identification number (either the
Certificateholder's social security number or its employer identification
number, as the case may be), the aggregate amount of principal and interest paid
and the amount of tax withheld, if any. This obligation, however, does not apply
with respect to certain U.S. Persons, including corporations, tax-exempt
organizations, qualified pension and profit-sharing trusts and individual
retirement accounts.
In the event a U.S. Person subject to the reporting requirements described
above fails to supply its correct taxpayer identification number in the manner
required by applicable law or underreports its tax liability, the Trust, its
agents or the Paying Agent may be required to "backup" withhold a tax equal to
31% of each payment of principal and interest on the Certificates. This backup
withholding is not an additional tax and may be credited against the
Certificateholder's U.S. federal tax liability, provided that the required
information is furnished to the IRS.
34
<PAGE>
Under current Treasury regulations, information reporting and backup
withholding will not apply to payments made by the Trust or any agent thereof to
a Certificateholder that is a non-U.S. Person if (i) the beneficial owner of the
Certificate certifies under penalties of perjury that it is not a U.S. Person
and provides its name, address and taxpayer identification number (if any) or
(ii) a securities clearing organization, bank or other financial institution
that holds customer's securities in the ordinary course of its trade or business
(a "financial institution") and holds the Certificate certifies to the Trust or
its agent, under penalties of perjury, that such statement has been received
from the beneficial owner by it or another financial institution and furnishes
the payor with a copy thereof. To take advantage of any treaty exemption from
U.S. withholding tax on interest, a Certificateholder must provide an IRS Form
1001. To take advantage of the portfolio interest exemption, Certificateholders
must provide a form W-8 or the equivalent thereof.
Payment of the proceeds from the sale of a Certificate to or through a
foreign office of a broker will not be subject to information reporting or
backup withholding, except to the extent that the broker is (i) a U.S. Person,
(ii) a controlled foreign corporation for U.S. federal income tax purposes, or
(iii) a foreign person 50% or more of whose gross income from all sources for
the three-year period ending with the close of its taxable year preceding the
payment was effectively connected with a U.S. trade or business. Payment of the
proceeds from the sale of a Certificate to or through the U.S. office of a
broker is subject to information reporting and backup withholding unless the
Certificateholder or beneficial owner certifies as to its taxpayer
identification number or otherwise establishes an exemption from information
reporting and backup withholding.
ERISA CONSIDERATIONS
ERISA and the Code impose certain restrictions on employee benefit plans
("Plans") subject to ERISA or the Code and on persons who have certain specified
relationships to such Plans ("Parties-in-Interest" under ERISA and "Disqualified
Persons" under the Code). ERISA also imposes certain duties on persons who are
fiduciaries of Plans subject to ERISA and prohibits certain transactions between
a Plan and Parties-in-Interest or Disqualified Persons with respect to such
Plans.
The Department of Labor has issued a regulation (29 C.F.R.
Section 2510.3-101) concerning the definition of what constitutes the assets of
a Plan (the "Plan Asset Regulation"). The Plan Asset Regulation provides that,
as a general rule, the underlying assets and properties of corporations,
partnerships, trusts and certain other entities in which a Plan purchases an
"equity interest" will be deemed for purposes of ERISA to be assets of the
investing Plan, unless certain exceptions apply.
The Plan Asset Regulation defines an "equity interest" as any interest in an
entity other than an instrument that is treated as indebtedness under applicable
local law and that has no substantial equity features. Although it is not free
from doubt, the Certificates offered hereby should be treated as "equity
interests" for purposes of the Plan Asset Regulation. In addition, there can be
no assurance that any of the exceptions set forth in the Plan Asset Regulation
will apply to the purchase of the Certificates offered hereby.
One exception under the Plan Asset Regulation provides that an investing
Plan's assets will not include any of the underlying assets of an entity if the
class of "equity" interests in question are (i) held by 100 or more investors
who are independent of the issuer and each other, (ii) freely transferable, and
(iii) sold as part of an offering pursuant to (a) an effective registration
statement under the Securities Act or (b) an effective registration statement
under Section 12(b) or 12(g) of the Exchange Act (the "Publicly Offered
Securities Exception"). There can be no assurance that the Publicly Offered
Securities Exception or any other exception set forth in the Plan Asset
Regulation will be applicable to the Certificates offered hereby.
Under the terms of the Plan Asset Regulation, if the issuer were deemed to
hold Plan assets by reason of a Plan's investment in a Certificate, such Plan
assets would include an undivided interest in the Purchased Assets held by the
issuer. In such event, the persons providing services with respect to the
Purchased Assets may be subject to the fiduciary responsibility provisions of
Title 1 of ERISA and to the
35
<PAGE>
prohibited transaction provisions of ERISA and Section 4975 of the Code with
respect to transactions involving such assets. In addition, if any of the
obligors on the Purchased Assets is a Party-in-Interest or a Disqualified Person
with respect to an investing Plan, such Plan's investment could be deemed to
constitute a transaction prohibited under Title 1 of ERISA or Section 4975 of
the Code (e.g., the extension of credit between a Plan and a Party-in-Interest
or Disqualified Person). Such transactions may, however, be subject to a
statutory or administrative exemption such as Prohibited Transaction Class
Exemption ("PTCE") 90-1, which exempts certain transactions involving an
insurance company pooled separate account; PTCE 91-38, which exempts certain
transactions involving bank collective investment funds; and PTCE 84-14, which
exempts certain transactions effected on behalf of a Plan by a "qualified
professional asset manager" or pursuant to any other available exemption. Such
exemptions may not, however, apply to all the transactions that could be deemed
prohibited transactions in connection with the Plan's investment.
Any Plan fiduciary that proposes to cause a Plan to purchase Certificates
should consult with its counsel with respect to the potential applicability of
ERISA and the Code to such investment and whether any exemption would be
applicable and determine on its own whether all conditions of such exemption or
exemptions have been satisfied. Moreover each Plan fiduciary should determine
whether, under the general fiduciary standards of investment prudence and
diversification, an investment in the Certificates is appropriate for the Plan,
taking into account the Plan's overall investment policy and the composition of
the Plan's investment portfolio.
36
<PAGE>
UNDERWRITING
Subject to the terms and conditions set forth in the underwriting agreement
(the "Underwriting Agreement") among Puget, as originator of the Trust, and
Salomon Brothers Inc and Chemical Securities Inc., as underwriters (the
"Underwriters"), the Seller has agreed to cause the Trust to sell to each of the
Underwriters, and the Underwriters have severally agreed to purchase, the
principal amount of Certificates set forth opposite each Underwriter's name
below:
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT OF
UNDERWRITERS CERTIFICATES TO BE PURCHASED
- -------------------------------------------------------------------------- ----------------------------
<S> <C>
Salomon Brothers Inc...................................................... $
Chemical Securities Inc................................................... $
---------------
Total................................................................. $
---------------
---------------
</TABLE>
In the Underwriting Agreement, the Underwriters have severally agreed,
subject to the terms and conditions set forth therein, to purchase all the
Certificates offered hereby if any Certificates are purchased. Puget has been
advised that the Underwriters propose initially to offer the Certificates to the
public at the public offering price set forth on the cover page of this
Prospectus, and to certain dealers at such price less a concession not in excess
of % of the principal amount of the Certificates. The Underwriters may allow
and such dealers may reallow a concession not in excess of % of the principal
amount of the Certificates. After the initial public offering, the public
offering price and such concessions may be changed.
Puget, as the Seller, will be responsible for payment of the underwriting
compensation and fees to the Underwriters. The Trust and the Certificateholders
will not pay any underwriting discounts, commissions or other compensation to
the Underwriters.
Chemical Securities Inc. is an affiliate of Chemical Bank, which is a lender
to Puget. In addition, Chemical Bank, or its affiliates, participates on a
regular basis in various general financing and banking transactions for Puget.
The Underwriting Agreement provides that Puget will indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act.
LEGAL MATTERS
Certain legal matters relating to the issuance of the Certificates will be
passed upon for the Seller and the Servicer by Perkins Coie, Seattle,
Washington, and for the Underwriters by Skadden, Arps, Slate, Meagher & Flom,
New York, New York. Certain federal income tax matters will be passed upon for
the Seller by Perkins Coie.
37
<PAGE>
INDEX OF TERMS
<TABLE>
<S> <C>
Bondable Conservation Investment Amount.................................................. 1
Bondable Conservation Investment Balance................................................. 4
Calculation Date......................................................................... 4
Cede..................................................................................... 2
Certificate Owner........................................................................ 2
Certificate Rate......................................................................... 3
Certificateholder........................................................................ 2
Certificates............................................................................. 1
Closing Date............................................................................. 5
Code..................................................................................... 9
Collection Account....................................................................... 4
Commission............................................................................... 1
Conservation Asset Transaction Amount.................................................... 3
Conservation Repayment Contracts......................................................... 6
Customers................................................................................ 4
Definitive Certificates.................................................................. 24
Disqualified Persons..................................................................... 35
Distribution Date........................................................................ 1
Distribution Period...................................................................... 7
DTC...................................................................................... 2
ERISA.................................................................................... 9
Event of Default......................................................................... 31
Exchange Act............................................................................. 2
Final Collection Date.................................................................... 16
Final Distribution Date.................................................................. 8
financial institution.................................................................... 35
Fractional Interest...................................................................... 23
Grant.................................................................................... 16
Holders.................................................................................. 25
Indirect Participants.................................................................... 24
Initial Order............................................................................ 4
Insolvency Laws.......................................................................... 10
IRS...................................................................................... 8
Majority Holders......................................................................... 32
non-U.S. Person.......................................................................... 33
OID...................................................................................... 34
Overcollateralization Amount............................................................. 5
Participants............................................................................. 23
Parties-in-Interest...................................................................... 35
Paying Agent............................................................................. 24
Plan Asset Regulation.................................................................... 35
Plans.................................................................................... 35
Pooling and Servicing Agreement.......................................................... 1
Pro Forma Schedule....................................................................... 4
Projected Bondable Conservation Investment Balance....................................... 4
PTCE..................................................................................... 36
Publicly Offered Securities Exception.................................................... 35
Puget.................................................................................... 1
Purchased Assets......................................................................... 6
Purchased Sale Proceeds.................................................................. 6
Qualified Trust Institution.............................................................. 28
</TABLE>
38
<PAGE>
<TABLE>
<S> <C>
Rate Adjustment.......................................................................... 6
Rating Agencies.......................................................................... 9
Registration Statement................................................................... 2
Regulatory Year.......................................................................... 15
Remittance Date.......................................................................... 26
Revised Tariff........................................................................... 4
Revised Tariff Amount.................................................................... 4
S.E.C.................................................................................... 2
Schedule................................................................................. 15
Securities Act........................................................................... 2
Servicing Fee............................................................................ 7
Statute.................................................................................. 1
Tariff................................................................................... 1
Tariff Termination Date.................................................................. 7
Tax Counsel.............................................................................. 33
Termination Fees......................................................................... 16
Trust.................................................................................... 1
Trustee.................................................................................. 1
Trustee Fee.............................................................................. 5
Underwriters............................................................................. 37
Underwriting Agreement................................................................... 37
U.S. Person.............................................................................. 33
Variance................................................................................. 4
Winter Moratorium........................................................................ 22
WNG...................................................................................... 22
</TABLE>
39
<PAGE>
- -------------------------------------------
-------------------------------------------
- -------------------------------------------
-------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION IN CONNECTION WITH THE OFFERING OTHER
THAN THOSE CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY PUGET,
THE TRUST OR THE UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO
SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY
IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER IN
SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AT ANY TIME SUBSEQUENT TO THE DATE
HEREOF OR THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE TRUST.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Available Information.......................... 2
Reports to Certificateholders.................. 2
Prospectus Summary............................. 3
Risk Factors................................... 10
The Statute.................................... 14
The Tariff and the Trust Assets................ 15
The Trust...................................... 18
Use of Proceeds................................ 18
The Seller and the Servicer.................... 18
Puget Customers and Collections................ 19
Description of the Certificates................ 23
Federal Income Tax Consequences................ 33
ERISA Considerations........................... 35
Underwriting................................... 37
Legal Matters.................................. 37
Index of Terms................................. 38
</TABLE>
------------------------
UNTIL , 1995 (90 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
$
PUGET POWER
CONSERVATION GRANTOR
TRUST 1995-1
% CONSERVATION PASS-THROUGH CERTIFICATES, SERIES 1995-1
PUGET SOUND POWER & LIGHT COMPANY
SELLER AND SERVICER
SALOMON BROTHERS INC
CHEMICAL SECURITIES INC.
PROSPECTUS
DATED , 1995
- -------------------------------------------
-------------------------------------------
- -------------------------------------------
-------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses payable by the
registrant in connection with the sale of the Certificates being registered
hereby. All amounts shown are estimated, except the Securities and Exchange
Commission registration fee.
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee.................. $ 345
Blue Sky fees and expenses........................................... *
Printing and engraving expenses...................................... *
Legal fees and expenses.............................................. *
Accounting fees and expenses......................................... *
Trustee fees and expenses............................................ *
Rating agencies' fees................................................ *
Miscellaneous expenses............................................... *
---------
Total............................................................ $ *
---------
<FN>
- ------------------------
* To be completed by amendment.
</TABLE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) EXHIBITS
<TABLE>
<C> <S>
+1.1 Form of Underwriting Agreement.
+3.1 Restated Articles of Incorporation of Puget Sound Power & Light Company.
+3.2 Bylaws of Puget Sound Power & Light Company.
+4.1 Form of Pooling and Servicing Agreement between Puget Sound Power & Light
Company and Chemical Bank, including Form of Certificate.
*5.1 Opinion of Perkins Coie with respect to legality.
*8.1 Opinion of Perkins Coie with respect to tax matters.
*23.1 Consent of Perkins Coie (included as part of Exhibit 5.1).
+24.1 Power of Attorney of Officers and Directors (contained on signature page).
*99.1 Opinion of Perkins Coie with respect to certain matters.
*99.2 Initial Order and Tariff.
<FN>
- ------------------------
* To be filed by amendment.
+ Previously filed
</TABLE>
(b) FINANCIAL STATEMENT SCHEDULES
None.
II-1
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Puget Sound
Power & Light Company, the registrant and the originator of the Puget Power
Conservation Grantor Trust 1995-1, has duly caused this Amendment No. 2 to
Registration Statement to be signed on its behalf by the undersigned, thereto
duly authorized, in the City of Bellevue, State of Washington, on the 24th day
of April, 1995.
By: /s/ R.R. SONSTELIE*
-----------------------------------
R.R. Sonstelie
PRESIDENT AND CHIEF EXECUTIVE
OFFICER
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 2 to Registration Statement has been signed by the following persons in the
capacities indicated below on the 24th day of April, 1995.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- -------------------------------------------------- ----------------------------
<C> <S>
/s/ R.R. SONSTELIE* President and Chief
-------------------------------------------- Executive Officer and
R.R. Sonstelie Director
/s/ WILLIAM S. WEAVER* Executive Vice President,
-------------------------------------------- Chief Financial Officer and
William S. Weaver Director
/s/ JAMES W. ELDREDGE* Secretary and Controller
-------------------------------------------- (Principal Accounting
James W. Eldredge Officer)
/s/ DOUGLAS P. BEIGHLE*
-------------------------------------------- Director
Douglas P. Beighle
/s/ CHARLES W. BINGHAM*
-------------------------------------------- Director
Charles W. Bingham
/s/ PHYLLIS J. CAMPBELL*
-------------------------------------------- Director
Phyllis J. Campbell
/s/ JOHN D. DURBIN*
-------------------------------------------- Director
John D. Durbin
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE
- -------------------------------------------------- ----------------------------
<C> <S>
/s/ JOHN W. ELLIS*
-------------------------------------------- Director
John W. Ellis
/s/ DANIEL J. EVANS*
-------------------------------------------- Director
Daniel J. Evans
-------------------------------------------- Director
Nancy L. Jacob
/s/ R. KIRK WILSON*
-------------------------------------------- Director
R. Kirk Wilson
*By DONALD E. GAINES
---------------------------------------
Donald E. Gaines,
ATTORNEY-IN-FACT
</TABLE>
II-3
