<PAGE>
Filed pursuant to rule 424B(3)
File number 333-65053
PROSPECTUS SUPPLEMENT
- ---------------------
(To Prospectus Dated October 14, 1998)
[Logo]
$500,000,000
PUGET SOUND ENERGY, INC.
Senior Medium-Term Notes, Series B
Due Nine Months or More From Date of Issue
----------------
Terms specified in pricing supplements. From time to time, we plan to offer
and sell notes with various terms. The final terms of each note will be
specified in a pricing supplement at the time the notes are issued. The pricing
supplements will designate the specific terms of each issue of the notes,
including the following terms:
. aggregate principal amount; . interest rate per annum and interest
payment dates;
. maturity date; . optional redemption or repayment terms;
and
. form of notes (either book . minimum denominations(if other than $1,000
entry or certificate or integral multiples thereof).
indefinitive form);
Security. Each Note will be initially secured by our first mortgage bonds
issued under our electric utility mortgage. However, after the date that all
our first mortgage bonds issued and outstanding under our electric utility
mortgage and, if applicable, our gas utility mortgage have been retired, the
notes will, at our option, become our unsecured obligations or be secured by
first mortgage bonds issued under a mortgage indenture other than our electric
utility mortgage or our gas utility mortgage.
<TABLE>
<CAPTION>
Public
Offering Agent's Discounts Proceeds, before expenses,
Price and Commissions to Puget Sound Energy
------------ --------------------- ---------------------------
<S> <C> <C> <C>
Per note........ 100% .125% - .875% 99.875% - 99.125%
Total........... $500,000,000 $625,000 - $4,375,000 $499,375,000 - $495,625,000
</TABLE>
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus supplement, the accompanying prospectus or any pricing
supplement is truthful or complete. Any representation to the contrary is a
criminal offense.
We may sell Notes to the Agents referred to below and to other agents listed
in an applicable pricing supplement as principal for resale at varying or fixed
offering prices or through the Agents as agent using their reasonable efforts
on our behalf. We may also sell Notes without the assistance of Agents (whether
acting as principal or as agent). Unless we specify otherwise in a pricing
supplement, the Notes will not be listed on any securities exchange.
----------------
Merrill Lynch & Co. Salomon Smith Barney
----------------
The date of this prospectus supplement is March 3, 1999.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Prospectus Supplement Page
--------------------- ----
<S> <C>
The Company......................... S-2
Ratios of Earnings to Fixed Charges. S-3
Description of Senior Medium-Term
Notes, Series B.................... S-3
Supplemental Plan of Distribution... S-5
</TABLE>
<TABLE>
<CAPTION>
Prospectus Page
---------- ----
<S> <C>
Available Information................................................. 2
Incorporation of Certain Documents by Reference....................... 3
The Company........................................................... 4
Ratios of Earnings to Fixed Charges................................... 4
Use of Proceeds....................................................... 5
Securities............................................................ 5
Description of Senior Notes........................................... 6
Pledged Electric Bonds and Electric Utility Mortgage.................. 12
Pledged Gas Bonds and Gas Utility Mortgage............................ 15
Book-Entry System..................................................... 18
Plan of Distribution.................................................. 20
Legal Matters......................................................... 21
Experts............................................................... 21
</TABLE>
You should rely only on the information contained in this prospectus
supplement, the accompanying prospectus and any pricing supplement, or on the
information to which we have referred you. Neither we nor any Agent has
authorized anyone to provide you with information that is different. This
prospectus supplement, the accompanying prospectus and any pricing supplement
may only be used where it is legal to sell these securities. The information in
this prospectus supplement, the accompanying prospectus and any pricing
supplement is accurate only as of the date on the front cover of the applicable
pricing supplement.
THE COMPANY
Puget Sound Energy, Inc. ("Puget"), is an investor-owned public utility
incorporated in the state of Washington furnishing electric and gas service in
a territory covering approximately 6,000 square miles, principally in the Puget
Sound region of Washington state.
As of December 31, 1998, we had approximately 890,800 electric customers,
consisting of 789,800 residential, 95,300 commercial, 4,200 industrial and
approximately 1,500 other customers and approximately 543,900 gas customers,
consisting of 497,200 residential, 43,600 commercial, 3,000 industrial and
approximately 100 other customers. For the year 1998, we added approximately
18,900 electric customers and approximately 22,600 gas customers, representing
annualized growth rates of 2.2% and 4.3%, respectively. During 1998, our billed
retail revenues from electric utility operations were derived 45% from
residential customers, 36% from commercial customers, 15% from industrial
customers and 4% from other customers, and our billed retail revenues from gas
utility operations were derived 61% from residential customers, 28% from
commercial customers, 8% from industrial customers and 3% from other customers.
During this period, the largest customer accounted for 2.4% of our utility
operating revenues.
Gross electric utility plant at December 31, 1998, was approximately $3.8
billion which consisted of 47% distribution, 25% generation, 16% transmission
and 12% general plant and other. Gross gas utility plant at December 31, 1998,
was approximately $1.3 billion which consisted of 82% distribution, 5%
transmission and 13% general plant and other.
Together with our subsidiaries we had approximately 3,260 full-time
equivalent employees at December 31, 1998. Our executive office is located at
411--108th Avenue N.E., Bellevue, Washington 98004-5515, and our telephone
number is (425) 454-6363.
S-2
<PAGE>
RATIOS OF EARNINGS TO FIXED CHARGES
The following table sets forth our ratios of earnings to fixed charges for
the respective periods indicated:
<TABLE>
<CAPTION>
Twelve Months
Ended
September 30, Years Ended December 31,
--------------- ---------------------------
1998 1997(1) 1997(1) 1996 1995 1994 1993
------ -------- ------- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of earnings to fixed
charges(2)(3)..................... 2.8x 2.6x 2.5x 3.1x 2.6x 2.3x 3.0x
</TABLE>
- --------
(1) The ratios for the twelve months ended September 30, 1997 and December 31,
1997 include charges incurred in connection with our merger with the
Washington Energy Company and its principal subsidiary, Washington Natural
Gas Company (the "Merger"). Had such charges been excluded from earnings,
the ratios of earnings to fixed charges for such periods would have been
3.1x and 2.9x, respectively.
(2) As a result of the Merger, each of the our ratios reflects the combined
operations of Puget and the Washington Energy Company. Because the
Washington Energy Company's fiscal year ended September 30, the combined
ratios for the four years ended December 31, 1996 reflect the fiscal years
ended December 31 for us and September 30 for the Washington Energy
Company.
(3) For purposes of computing the ratios of earnings to fixed charges,
earnings represent income from continuing operations before extraordinary
items and cumulative effect of changes in accounting principles plus
applicable income taxes and fixed charges. Fixed charges include all
interest expense and the proportion deemed representative of the interest
factor of rent expense.
DESCRIPTION OF SENIOR MEDIUM-TERM NOTES, SERIES B
The following description of the Notes (referred to in the accompanying
Prospectus as "Senior Notes") supplements the more general description of the
Senior Notes that appears in the Prospectus. If there are any inconsistencies
between the information in this section and the information in the Prospectus,
the information in this section controls. You should read this section together
with the section called "Description of Senior Notes" in the Prospectus. Any
capitalized terms that are defined in the Prospectus have the same meanings in
this section unless a different definition appears in this section. The Notes
will be issued as a separate series of Senior Notes under the Indenture, dated
as of December 1, 1997 (the "Senior Note Indenture"), as supplemented by a
Second Supplemental Indenture dated as of March 1, 1999 (the "Second
Supplemental Indenture"), between Puget and the Senior Note Trustee. Provisions
of the Senior Note Indenture are more fully described in the section called
"Description of Senior Notes" in the Prospectus. We qualify the description of
the Notes by reference to the Senior Note Indenture and the Second Supplemental
Indenture. The following description of the Notes will apply to each Note
offered hereby unless otherwise specified in the Pricing Supplement.
General
The Notes we may offer under this Prospectus Supplement are limited to an
aggregate principal amount of $500,000,000. Such aggregate principal amount may
be reduced from time to time as a result of a sale by the Company of other
Senior Notes as described in the accompanying Prospectus. The Senior Note
Indenture does not limit the aggregate amount of Senior Notes that we may
issue, and we may issue Senior Notes from time to time in one or more series up
to the aggregate initial offering price from time to time authorized for each
series. As of the date of this Prospectus Supplement, we have issued
$500,000,000 aggregate principal amount of Notes under the Senior Note
Indenture, all of which remain outstanding. We may, from time to time, without
the consent of the holders of the Notes, provide for the issuance of Senior
Notes under the Senior Note Indenture in addition to the $500,000,000 aggregate
principal amount of the Notes offered hereby.
Each Note will be issued initially either as a Global Note registered in the
name of a nominee of The Depository Trust Company, as Depository, or as a
certificated note in definitive form ("Certificated Notes"), in either case in
fully registered form without coupons. Except as described in the accompanying
Prospectus in the
S-3
<PAGE>
section called "Book-Entry System," owners of beneficial interests in Global
Notes will not be entitled to receive individual Certificated Notes.
We will offer the Notes on a continuous basis with maturities of nine months
or more from the date of issue, as selected by the purchaser and agreed to by
us. Unless otherwise indicated in the applicable Pricing Supplement, the Notes
will be denominated in United States currency in minimum denominations of
$1,000 and integral multiples thereof. In addition, the Pricing Supplement
applicable to each issue of Notes will specify the following terms:
. the designation and aggregate principal amount of the issue of Notes;
. the date on which the issue of Notes will mature;
. the interest rate or rates, or method of calculation of such rate or
rates, on the issue of Notes, and the date from which interest will
accrue;
. the interest payment dates on which interest will be payable;
. the record dates for payments of interest;
. any redemption terms;
. the period or periods within which, the price or prices at which and the
terms and conditions upon which the issue of Notes may be repaid, in
whole or in part, at the option of the holder; and
. other specific terms applicable to the issue of Notes.
Interest rates applicable to the Notes may differ depending upon a number of
factors, including the aggregate principal amount of Notes purchased in any
single transaction. Unless otherwise indicated in the applicable Pricing
Supplement, interest on the Notes shall be calculated on the basis of a 360-
day year of twelve 30-day months and shall be computed at a fixed rate until
the maturity of the Notes.
Unless otherwise indicated in the applicable Pricing Supplement, there are
no provisions in the Senior Note Indenture or the Notes that require us to
redeem the Notes or that otherwise protect the holders in the event that we
incur substantial additional indebtedness (except for certain restrictions on
our ability to create, assume or incur certain liens or to enter into certain
financing transactions after the Substitution Date, as described in the
sections called "Description of Senior Notes--Limitations on Liens" and "--
Limitations on Sale-Leaseback Transactions" in the accompanying Prospectus),
whether or not in connection with a change in control of Puget. However, any
change in control transaction that involves the incurrence of long-term
indebtedness by us would require approval of state utility regulatory
authorities and, possibly, of federal utility regulatory authorities.
Unless otherwise indicated in the applicable Pricing Supplement, in any case
where any interest payment date or the date of maturity of the Notes or the
date fixed for redemption of the Notes is not a Business Day, then payment of
such principal or any premium or interest need not be made on such date but
may be made on the next succeeding Business Day with the same force and effect
as if made on the dates fixed for such payments, and, assuming timely payment
thereof, no interest shall accrue for the period from and after such interest
payment date or the date on which the principal of the Notes is required to be
paid. The term "Business Day" shall mean each Monday, Tuesday, Wednesday,
Thursday and Friday that is not a day on which banking institutions or trust
companies in the Borough of Manhattan, The City of New York, or in the city
where the corporate trust office of the Senior Note Trustee is located, are
obligated or authorized by law or executive order to close.
Security
At the time we issue any of the Notes prior to the Substitution Date, we
will simultaneously deliver to the Senior Note Trustee, as security for such
Notes, First Mortgage Bonds, Pledged Series B, issued under the
S-4
<PAGE>
Electric Utility Mortgage (the "Pledged Electric Bonds"). The Pledged Electric
Bonds will have the same interest rate, interest payment dates, stated maturity
date and redemption provisions, and will be in the same aggregate principal
amount, as the Notes then issued.
As provided in the Senior Note Indenture and the Supplemental Indenture to
the Electric Utility Mortgage which sets forth the terms of the Pledged
Electric Bonds, our obligation to make payments with respect to the principal
of, premium or interest on the Pledged Electric Bonds will be fully or
partially, as the case may be, satisfied and discharged to the extent that, at
the time that any such payment is due, the then due principal of, premium or
interest on the Notes issued simultaneously with such Pledged Electric Bonds
are fully or partially paid or we have deposited with the Senior Note Trustee
pursuant to the Senior Note Indenture sufficient available funds to fully or
partially pay the then due principal of, premium, if any, or interest on such
Notes.
You should read the section called "Description of Senior Notes--Security;
Substitution Date" in the accompanying Prospectus for a description of the
circumstances under which all or part of the Pledged Electric Bonds will cease
to be held by the Senior Note Trustee as security for the Notes. As explained
in the Prospectus, the Notes will cease to be secured by the Pledged Electric
Bonds on the Substitution Date. After the Substitution Date, the Notes will, at
our option either (a) become our unsecured general obligations or (b) be
secured by first mortgage bonds issued under a mortgage indenture other than
the Electric Utility Mortgage or the Gas Utility Mortgage (the "Substituted
Mortgage Bonds"). If we elect not to have the Notes become unsecured on the
Substitution Date, we will simultaneously with the issuance of Notes after the
Substitution Date issue and deliver to the Senior Note Trustee, as security for
such Notes, Substituted Mortgage Bonds. The Substituted Mortgage Bonds will
have the same interest rate, interest payment dates, stated maturity date and
redemption provisions, and will be in the same aggregate principal amount, as
the Notes then issued.
In the event we elect to have the Notes become unsecured on the Substitution
Date, our ability to create, assume or incur certain liens or to enter into
certain financing transactions will be restricted. For a description of those
restrictions, Investors should read the sections called "Description of Senior
Notes--Limitations on Liens" and "--Limitations on Sale-Leaseback Transactions"
in the accompanying Prospectus.
SUPPLEMENTAL PLAN OF DISTRIBUTION
We are offering the Notes on a continuous basis to or through Merrill Lynch &
Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated, Salomon Smith Barney
and other agents named in the applicable Pricing Supplement (the "Agents"). The
Agents, individually or in a syndicate, may purchase Notes, as principal, from
us from time to time for resale to investors and other purchasers at varying
prices relating to prevailing market prices at the time of resale as determined
by the applicable Agent or, if so specified in the applicable Pricing
Supplement, for resale at a fixed offering price. If agreed to by us and an
Agent, such Agent will utilize its reasonable efforts to solicit offers to
purchase the Notes at 100% of the principal amount of the Notes, unless
otherwise specified in the applicable pricing supplement. We will pay each
Agent a commission of .125% to .875% of the principal amount of each Note sold
through such Agent, depending upon the maturity of the Note. Commissions with
respect to Notes with stated maturities in excess of 30 years that are sold
through such Agent will be negotiated between us and such Agent at the time of
such sale. In addition, the expenses incurred by us in connection with the
offering and sale of the Notes, including reimbursement of certain of the
Agents' expenses, are currently estimated to be $600,000.
Unless otherwise specified in the applicable Pricing Supplement, any Note
sold to an Agent as principal will be purchased by such Agent at a price equal
to 100% of the principal amount thereof less a percentage of the principal
amount equal to the commission applicable to an agency sale of a Note of
identical maturity. An Agent may sell Notes it has purchased from us as
principal to certain dealers less a concession equal to all or a portion of the
discount in connection with such purchase. Such Agent may allow, and such
dealers may reallow, a discount to certain other dealers. After the initial
offering of Notes, the offering price (in the case of notes to be resold on a
fixed offering price basis), the concession and reallowances may be changed. We
S-5
<PAGE>
reserve the right to withdraw, cancel or modify the offer made hereby without
notice and may reject offers in whole or in part (whether placed directly with
us or through an Agent). Each Agent will have the right in their discretion
reasonably exercised, to reject in whole or in part any offer to purchase Notes
received by it on an agency basis.
We may authorize the Agents to solicit offers by certain institutions to
purchase the Notes from us at the public offering price set forth in the
applicable Pricing Supplement pursuant to Delayed Delivery Contracts providing
for payment and delivery on the date or dates stated in such Pricing
Supplement. Each Delayed Delivery Contract will be for an amount not less than,
and the aggregate principal amount of the Notes sold pursuant to the Delayed
Delivery Contracts shall be not less nor more than, the respective amounts
stated in such Pricing Supplement. Institutions with whom the Delayed Delivery
Contracts, when authorized, may be made include commercial and savings banks,
insurance companies, pension funds, investment companies, educational and
charitable institutions, and other institutions, but will in all cases be
subject to our approval. The Delayed Delivery Contracts will not be subject to
any conditions except the purchase by an institution of the Notes covered by
its Delayed Delivery Contract shall not at the time of delivery be prohibited
under the laws of any jurisdiction in the United States to which such
institution is subject.
Unless otherwise specified in the Pricing Supplement, payment of the purchase
price of the Notes will be required to be made in immediately available funds,
in U.S. dollars and in New York, New York on the date of settlement.
Upon issuance, the Notes will not have an established trading market. The
Notes will not be listed on any securities exchange. The Agents may from time
to time purchase and sell Notes in the secondary market, but the Agents are not
obligated to do so, and there can be no assurance that there will be a
secondary market for the Notes or that there will be liquidity in the secondary
market if one develops. From time to time, the Agents may make a market in the
Notes, but the Agents are not obligated to do so and may discontinue any
market-making activity at any time.
In connection with an offering of Notes purchased by one or more Agents as
principal on a fixed offering price basis, such Agent(s) will be permitted to
engage in certain transactions that stabilize the price of Notes. Such
transactions may consist of bids or purchases for the purpose of pegging,
fixing or maintaining the price of Notes. If the Agent or Agents sells or sell
Notes in an aggregate principal amount exceeding that stated in the Pricing
Supplement, such Agent(s) may reduce that short position by purchasing Notes in
the open market. In general, purchases of Notes for the purpose of
stabilization or to reduce a short position could cause the price of Notes to
be higher than it might be in the absence of such purchases.
Neither we nor any of the Agents make any representation or prediction as to
the direction or magnitude of any effect that the transactions described in the
immediately preceding paragraph may have on the price of Notes. In addition,
neither we nor any of the Agents makes any representation that the Agents will
engage in any such transactions or that such transactions, once commenced, will
not be discontinued without notice.
The Agents may be deemed to be "underwriters" within the meaning of the
Securities Act of 1933, as amended (the "Securities Act"). We have agreed to
indemnify the Agents against certain civil liabilities, including liabilities
under the Securities Act, or to contribute to payments the Agents may be
required to make in respect thereof. We have agreed to reimburse the Agents for
certain other expenses.
In the ordinary course of business, the Agents and their affiliates have
engaged in and may in the future engage in transactions with and perform
services for us.
From time to time, we may sell other Senior Notes described in the
accompanying Prospectus, and the amount of Notes offered hereby is subject to
reduction as a result of such sales.
S-6
<PAGE>
PROSPECTUS
Puget Sound Energy, Inc.
$500,000,000
Senior Notes
Puget Sound Energy, Inc. (the "Company") may offer from time to time up to
$500,000,000 aggregate principal amount of senior notes (the "Senior Notes").
Prior to the Substitution Date (as defined below), the Senior Notes will be
secured by the delivery to the Senior Note Trustee (as defined below) in trust
for the benefit of the holders of the Senior Notes of (i) first mortgage bonds
issued under the Company's electric mortgage indenture or (ii) first mortgage
bonds issued under the Company's gas mortgage indenture. The Senior Notes may
be offered in one or more series at prices and on terms to be determined at the
time of offering. The aggregate principal amount, maturity, interest rate (or
method of calculating the interest rate), any redemption provisions, any
sinking fund provisions, offering price, proceeds to the Company and other
terms of the offering of any series of the Senior Notes will be set forth in a
Prospectus Supplement to be delivered at the time of any offering.
The Senior Notes will be represented either by Global Notes registered in the
name of The Depository Trust Company ("DTC"), as depository ("Depository"), or
its nominee, or by securities in certificated form issued to the registered
owners thereof, as set forth in the applicable Prospectus Supplement. Interests
in Global Notes will be shown on, and transfers thereof will be effected only
through, records maintained by the Depository and its participants. Global
Notes will not be issuable as certificated securities except in circumstances
described herein or in the applicable Prospectus Supplement.
----------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
----------------
The Senior Notes, or any series thereof if there shall be more than one
series, may be sold directly to a limited number of purchasers, through agents
designated from time to time, or through underwriters or dealers. See "Plan of
Distribution." If any agents of the Company or any underwriters are involved in
the sale of the Senior Notes, or any series thereof, in respect of which this
Prospectus is being delivered, the names of such agents or underwriters and any
applicable discounts or commissions with respect to the Senior Notes offered
hereby will be set forth in the Prospectus Supplement. See "Plan of
Distribution" for possible indemnification arrangements for underwriters,
dealers, agents and purchasers.
The date of this Prospectus is October 14, 1998.
<PAGE>
No person has been authorized to give any information or to make any
representation not contained in this Prospectus or the Prospectus Supplement
and, if given or made, such information or representation must not be relied
upon as having been authorized. This Prospectus and the Prospectus Supplement
do 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 or jurisdiction in
which such offer, solicitation or sale would be unlawful prior to registration
or qualification under the securities laws of any such state or jurisdiction.
Neither the delivery of the Prospectus Supplement nor any sale made thereunder
shall, under any circumstances, create any implication that there has been no
change in the affairs of the Company since the date thereof.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith, files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information may be inspected and copied at the Public
Reference Room maintained by the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549 and at the Commission's regional offices at 7 World
Trade Center, 13th Floor, Suite 1300, New York, New York 10048 and Citicorp
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661.
Information on the operation of the Commission's Public Reference Room may be
obtained by calling 1-800-SEC-0330. Copies of such material may also be
obtained by mail from the Public Reference Section of the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates. Such
information may also be accessed electronically by means of the Commission's
home page on the Internet (http://www.sec.gov). In addition, such reports,
proxy statements and other information concerning the Company may be inspected
at the offices of the New York Stock Exchange, Inc., 20 Broad Street, New York,
New York 10005, on which certain securities of the Company are listed.
This Prospectus constitutes a part of a registration statement on Form S-3
(the "Registration Statement") filed by the Company with the Commission under
the Securities Act of 1933, as amended (the "Securities Act"). This Prospectus
does not contain all the information set forth in the Registration Statement,
certain parts of which are omitted in accordance with the rules and regulations
of the Commission, and reference is hereby made to the Registration Statement
and to the exhibits relating thereto for further information with respect to
the Company and the Senior Notes. Any statements contained herein concerning
the provisions of any document are not necessarily complete, and, in each
instance, reference is made to the copy of such document filed as an exhibit to
the Registration Statement or otherwise filed with the Commission. Each such
statement is qualified in its entirety by such reference.
2
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents heretofore filed with the Commission are hereby
incorporated by reference in this Prospectus:
(a) The Company's Annual Report on Form 10-K for the year ended December
31, 1997 (File No. 1-4393).
(b) The Company's Quarterly Reports on Form 10-Q for the quarters ended
March 31 and June 30, 1998 (File No. 1-4393).
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this Prospectus and prior to the
termination of the offering or offerings of the Senior Notes shall be deemed to
be incorporated by reference in this Prospectus and to be a part hereof from
the respective dates of filing of such documents. Any statement contained in
this Prospectus or in a document incorporated or deemed to be incorporated by
reference herein shall be deemed to be modified or superseded for purposes of
this Prospectus to the extent that another statement contained in this
Prospectus or in any other subsequently filed document which is or is deemed to
be incorporated by reference herein modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
The Company hereby undertakes to provide without charge to each person to
whom a copy of this Prospectus has been delivered, on the written or oral
request of any such person, a copy of any or all of the documents referred to
above which have been or may be incorporated by reference in this Prospectus.
Requests for such copies should be directed to Investor Relations, Puget Sound
Energy, Inc., 411-108th Avenue N.E., Bellevue, Washington 98004-5515, (425)
454-6363.
3
<PAGE>
THE COMPANY
Puget Sound Energy, Inc., formerly Puget Sound Power & Light Company (the
"Company"), is an investor-owned public utility incorporated in the state of
Washington furnishing electric and, since February 10, 1997, gas service in a
territory covering approximately 6,000 square miles, principally in the Puget
Sound region of Washington state. On February 10, 1997, the Company completed a
merger (the "Merger") with the Washington Energy Company ("WECo") and its
principal subsidiary, Washington Natural Gas Company ("WNG"). Seattle-based WNG
provided natural gas distribution service in an area east of Puget Sound that
includes Seattle, Tacoma, Everett, Bellevue and Olympia. The Company changed
its name to Puget Sound Energy, Inc. effective with the Merger. The Company's
executive office is located at 411-108th Avenue N.E., Bellevue, Washington
98004-5515, and its telephone number is (425) 454-6363.
RATIOS OF EARNINGS TO FIXED CHARGES
The following table sets forth the Company's ratios of earnings to fixed
charges for the respective periods indicated:
<TABLE>
<CAPTION>
Twelve Months
Ended June 30, Years Ended December 31,
---------------- ------------------------------
1998 1997(1) 1997(1) 1996(1) 1995 1994 1993
------- -------- ------- ------- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of earnings to fixed
charges(2)(3)................. 2.8x 2.7x 2.5x 3.1x 2.6x 2.3x 3.0x
</TABLE>
- --------
(1) The ratios for the twelve months ended June 30, 1997 and the years ended
December 31, 1997 and 1996 include charges incurred in connection with the
Merger. Had such charges been excluded from earnings, the ratios of
earnings to fixed charges for such periods would have been 3.1x, 2.9x and
3.2x, respectively.
(2) As a result of the Merger, each of the Company's ratios reflects the
combined operations of the Company and WECo. Because WECo's fiscal year
ended September 30, the combined ratios for the four years ended December
31, 1996 reflect the fiscal years ended December 31 for the Company and
September 30 for WECo. The December 31, 1997 and the June 30, 1997 ratios
are comprised of the results of the Company and WECo for the twelve months
ended December 31, 1997 and June 30, 1997, respectively.
(3) For purposes of computing the ratios of earnings to fixed charges,
earnings represent income from continuing operations before extraordinary
items and cumulative effect of changes in accounting principles plus
applicable income taxes and fixed charges. Fixed charges include all
interest expense and the proportion deemed representative of the interest
factor of rent expense.
4
<PAGE>
USE OF PROCEEDS
Except as otherwise set forth in any Prospectus Supplement, the net proceeds
to be received by the Company from the issuance and sale of the Senior Notes
will initially become part of the general funds of the Company and will be used
for the repayment of all or a portion of the Company's outstanding short-term
borrowings incurred for the Company's construction program or for the payment
at maturity or upon redemption of certain securities and for other corporate
purposes.
SECURITIES
The Senior Notes may be issued in one or more series (i) secured by the
Company's first mortgage bonds issued under either or both of the Company's
current mortgage indentures or (ii) following the Substitution Date (as defined
below), as either unsecured senior notes or as senior notes secured by the
Company's first mortgage bonds issued under a mortgage indenture other than the
Company's current mortgage indentures. On the Substitution Date, any
outstanding Senior Notes secured by the Company's first mortgage bonds when
issued will cease to be secured by first mortgage bonds issued under either of
the Company's current mortgage indentures and, at the Company's option, either
(a) will become unsecured general obligations of the Company or (b) will be
secured by first mortgage bonds issued under a mortgage indenture other than
the Company's current mortgage indentures.
Senior Notes will be issued under an indenture (the "Senior Note Indenture"),
which is an exhibit to the Registration Statement, between the Company and
State Street Bank and Trust Company, as trustee (the "Senior Note Trustee"),
and are described below under the caption "Description of Senior Notes." Prior
to the Substitution Date, first mortgage bonds securing the Senior Notes (the
"Pledged Bonds") will be issued under either (a) the Fortieth Supplemental
Indenture, dated September 1, 1954, as heretofore supplemented and amended by
supplemental trust indentures and a new supplemental trust indenture for each
such series of Pledged Bonds issued thereunder (such Fortieth Supplemental
Indenture, as supplemented and as to be supplemented, is herein referred to as
the "Electric Utility Mortgage"), all from the Company to State Street Bank and
Trust Company, as successor trustee (the "Electric Utility Mortgage Trustee")
or (b) the Indenture of First Mortgage, dated April 1, 1957, as heretofore
supplemented and amended by supplemental trust indentures and a new
supplemental trust indenture for each such series of Pledged Bonds issued
thereunder (such Indenture of First Mortgage, as supplemented and as to be
supplemented is herein referred to as the "Gas Utility Mortgage"), all from the
Company, as successor to Washington Natural Gas Company, to Harris Trust and
Savings Bank, Chicago, Illinois, as trustee (the "Gas Utility Mortgage
Trustee"). The Pledged Bonds to be issued under the Electric Utility Mortgage
(the "Pledged Electric Bonds") are described below under the caption "Pledged
Electric Bonds and Electric Utility Mortgage." The Pledged Bonds to be issued
under the Gas Utility Mortgage (the "Pledged Gas Bonds") are described below
under the caption "Pledged Gas Bonds and Gas Utility Mortgage."
There is no requirement, under either the Senior Note Indenture, the Electric
Utility Mortgage or the Gas Utility Mortgage (collectively, the "Indentures"),
that future issues of debt securities of the Company be issued under the
Indentures, and, subject to certain restrictions following the Substitution
Date which are described in "Description of Senior Notes--Limitations on Liens"
and "--Limitations on Sale-Leaseback Transactions," the Company will be free to
employ other indentures or documentation, containing provisions different from
those included in the Indentures or applicable to one or more issues of Senior
Notes, in connection with future issues of such other debt securities.
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DESCRIPTION OF SENIOR NOTES
General
The following summaries of certain provisions of the Senior Note Indenture do
not purport to be complete and are subject to, and qualified in their entirety
by, all of the provisions of the Senior Note Indenture which is incorporated
herein by this reference and which is an exhibit to the Registration Statement
of which this Prospectus is a part. References to Section numbers under this
caption are references to the Section numbers of the Senior Note Indenture.
Until the Substitution Date (as defined below), the Senior Notes will be
secured by one or more series of Pledged Bonds issued under either the Electric
Utility Mortgage or the Gas Utility Mortgage and delivered by the Company to
the Senior Note Trustee. See "--Security; Substitution Date." On the
Substitution Date (as defined below), the Senior Notes will cease to be secured
by the Pledged Bonds and, at the Company's option, either (i) will become
unsecured general obligations of the Company or (ii) will be secured by first
mortgage bonds (the "Substituted Pledged Bonds") issued under a mortgage
indenture other than the Electric Utility Mortgage or the Gas Utility Mortgage
(a "Substituted Mortgage"). The Senior Note Indenture provides that, in
addition to the Senior Notes offered hereby, additional Senior Notes may be
issued thereunder, without limitation as to aggregate principal amount,
provided that, prior to the Substitution Date, the amount of Senior Notes that
may be issued cannot exceed the aggregate principal amount of first mortgage
bonds that the Company is able to issue under its Electric Utility Mortgage and
its Gas Utility Mortgage. See "Pledged Electric Bonds and Electric Utility
Mortgage--Issuance of Pledged Electric Bonds and Withdrawal of Cash Deposited
Against Such Issuance" and "Pledged Gas Bonds and Gas Utility Mortgage--
Issuance of Pledged Gas Bonds and Withdrawal of Cash Deposited Against Such
Issuance."
The Senior Note Indenture provides that the Senior Notes will be issued in
one or more series, may be issued at various times, may have differing maturity
dates and may bear interest at differing rates. The Prospectus Supplement
applicable to each series of Senior Notes will set forth any variation in the
terms and provisions of such Senior Notes and the related series of Pledged
Bonds from those described in this Prospectus. Unless otherwise indicated in
the applicable Prospectus Supplement, the Senior Notes will be denominated in
United States currency in minimum denominations of $1,000 and integral
multiples thereof.
Unless otherwise indicated in the applicable Prospectus Supplement, there are
no provisions in the Senior Note Indenture or the Senior Notes that require the
Company to redeem, or permit the holders to cause a redemption of, the Senior
Notes or that otherwise protect the holders in the event that the Company
incurs substantial additional indebtedness (except for certain restrictions on
the Company's ability to create, assume or incur certain liens or to enter into
certain financing transactions after the Substitution Date, as described in "--
Limitations on Liens" and "--Limitations on Sale-Leaseback Transactions"),
whether or not in connection with a change in control of the Company. However,
any change in control transaction that involves the incurrence of additional
long-term indebtedness (as notes, first mortgage bonds or otherwise) by the
Company in such a transaction would require approval of state utility
regulatory authorities and, possibly, of federal utility regulatory
authorities.
Registration, Transfer and Exchange
Senior Notes of any series will be exchangeable for other Senior Notes of the
same series of any authorized denominations and of a like aggregate principal
amount and tenor. (Section 2.06).
Unless otherwise indicated in the applicable Prospectus Supplement, Senior
Notes may be presented for registration of transfer (duly endorsed or
accompanied by a duly executed written instrument of transfer), at the office
of the Senior Note Trustee maintained for such purpose with respect to any
series of Senior Notes and referred to in the applicable Prospectus Supplement,
without service charge and upon payment of any taxes and other governmental
charges as described in the Senior Note Indenture. Such transfer or exchange
will be
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effected upon being satisfied with the documents of title and indemnity of the
person making the request. (Sections 2.06 and 2.07).
In the event of any redemption of Senior Notes of any series, the Senior Note
Trustee will not be required to exchange or register a transfer of any Senior
Notes of such series selected, called or being called for redemption except, in
the case of any Senior Note to be redeemed in part, the portion thereof not to
be so redeemed. (Section 2.06). See "Book-Entry System."
Payment and Paying Agents
Principal of and interest and premium, if any, on Senior Notes issued in the
form of Global Notes will be paid in the manner described below under the
caption "Book-Entry System." Unless otherwise indicated in the applicable
Prospectus Supplement, interest on Senior Notes that are in the form of
certificated securities will be paid by wire transfer of clearinghouse funds or
by check mailed to the person entitled thereto at such person's address as it
appears in the register for the Senior Notes maintained by the Senior Note
Trustee; however, a holder of Senior Notes of one or more series under the
Senior Note Indenture in the aggregate principal amount of $10,000,000 or more
having the same interest payment dates will be entitled to receive payments of
interest on such series by wire transfer of immediately available funds to a
bank if appropriate wire transfer instructions have been received by the Senior
Note Trustee on or prior to the applicable regular record date. (Section 2.12).
Unless otherwise indicated in the applicable Prospectus Supplement, the
principal of, and interest at maturity and premium, if any, on Senior Notes in
the form of certificated securities will be payable in immediately available
funds at the office of the Senior Note Trustee. (Section 2.12).
All moneys paid by the Company to a paying agent for the payment of principal
of, interest or premium, if any, on any Senior Note which remain unclaimed at
the end of one year after such principal, interest or premium shall have become
due and payable will be repaid to the Company and the holder of such Senior
Note will thereafter look only to the Company for payment thereof. (Section
5.04).
Security; Substitution Date
Until the Substitution Date (as defined below), the Senior Notes will be
secured by one or more series of the Pledged Electric Bonds and/or by one or
more series of the Pledged Gas Bonds issued and delivered by the Company to the
Senior Note Trustee. See "Pledged Electric Bonds and Electric Utility Mortgage"
and "Pledged Gas Bonds and Gas Utility Mortgage." Upon the issuance of Senior
Notes prior to the Substitution Date, the Company will simultaneously issue and
deliver to the Senior Note Trustee, as security for such Senior Notes, Pledged
Electric Bonds or Pledged Gas Bonds. (Sections 4.01 and 4.08). Such Pledged
Bonds will have the same stated rate or rates of interest (or interest
calculated in the same manner), interest payment dates, stated maturity date
and redemption provisions, and will be in the same aggregate principal amount
as the Senior Notes being issued. (Section 4.09). The Company's obligations to
make payments with respect to the principal of, premium or interest on the
Pledged Bonds will be fully or partially, as the case may be, satisfied and
discharged to the extent that, at the time that any such payment shall be due,
the then due principal of, premium or interest on the related issue of Senior
Notes shall have been fully or partially paid or there shall have been
deposited with the Senior Note Trustee pursuant to the Senior Note Indenture
sufficient available funds to fully or partially pay the then due principal of,
premium or interest on such Senior Notes. (Section 2.12).
The "Substitution Date" will be the date that all first mortgage bonds of the
Company issued and outstanding under the Electric Utility Mortgage ("Electric
Bonds"), other than Pledged Electric Bonds, and, if any Pledged Gas Bonds are
then held by the Senior Note Trustee, all first mortgage bonds of the Company
issued and outstanding under the Gas Utility Mortgage ("Gas Bonds" and,
together with the Electric Bonds, the "First Mortgage Bonds"), other than
Pledged Gas Bonds, have been retired (at, before or after the maturity thereof)
through payment, redemption or otherwise (including those Electric Bonds deemed
to be paid within the meaning of the Electric Utility Mortgage and those Gas
Bonds
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deemed to be paid within the meaning of the Gas Utility Mortgage). On the
Substitution Date, the Senior Note Trustee will deliver to the Company for
cancellation all Pledged Bonds, and the Company will cause the Senior Note
Trustee to provide notice to all holders of Senior Notes of the occurrence of
the Substitution Date. As a result, on the Substitution Date, the Pledged Bonds
will cease to secure the Senior Notes, and, at the option of the Company, the
Senior Notes either (i) will become unsecured general obligations of the
Company or (ii) will be secured by Substituted Pledged Bonds. (Section 4.11).
Each issue of Pledged Bonds will be an issue of Electric Bonds or Gas Bonds of
the Company, all of which are secured by a lien on certain property owned by
the Company. In certain circumstances prior to the Substitution Date, the
Company is permitted to reduce the aggregate principal amount of an issue of
Pledged Bonds held by the Senior Note Trustee, but in no event to an amount
lower than the aggregate outstanding principal amount of the Senior Notes
initially issued contemporaneously with such Pledged Bonds. (Section 4.07).
Following the Substitution Date, the Company will cause the Electric Utility
Mortgage and the Gas Utility Mortgage to be closed, and the Company will not
issue any additional bonds under either such Indenture. (Section 4.10).
Limitations on Liens
Under the terms of the Senior Note Indenture, the Company may not issue any
First Mortgage Bonds other than Pledged Bonds, and the Company will be
precluded after the Substitution Date from issuing additional Electric Bonds or
Gas Bonds. In addition, except as described below and unless Substituted
Pledged Bonds are issued to secure the Senior Notes, after the Substitution
Date the Company may not create, assume or incur any mortgage, pledge, lien or
security interest (collectively referred to in this section and under "--
Limitations on Sale-Leaseback Transactions" as "mortgages") upon any real
property interest or other depreciable asset which is used in the Company's
electric or gas utility business, whether owned at the Substitution Date or
thereafter acquired, to secure any indebtedness for money borrowed other than
indebtedness with maturities of twelve months or less ("Debt"), without
effectively securing all Senior Notes (other than such Senior Notes, if any,
which shall by their terms be expressly excluded from such provision) equally
and ratably with such Debt; provided, however, that this restriction will not
apply to:
(a) mortgages on any property existing at the time of the property's
acquisition (but excluding any extension of or addition to such property
unless the terms of the mortgage as of the date of acquisition of such
property provide that such mortgage shall be secured by such extensions or
additions);
(b) mortgages to secure the payment of all or part of the purchase price
of property or to secure any Debt incurred prior to, at the time of or
within 180 days after the acquisition of such property for the purpose of
financing all or part of the purchase price of such property;
(c) mortgages secured by property used in the generation of electricity;
(d) mortgages existing as of the date of the Senior Note Indenture;
(e) certain permitted encumbrances similar to the permitted encumbrances
under the Electric Utility Mortgage;
(f) any extension, renewal or replacement (or successive extensions,
renewals or replacements), in whole or in part, of any mortgage referred to
in clauses (a) through (e); provided, however, that the principal amount of
Debt secured thereby may not exceed the principal amount of Debt (plus any
premium or fee payable in connection with such extension, renewal or
replacement) so secured at the time of such extension, renewal or
replacement; and provided, further, that such mortgage must be limited to
all or such part of the property which was subject to the mortgage so
extended, renewed or replaced (plus improvements on such property);
(g) mortgages in favor of the United States, any State thereof, any other
country or any political subdivision of any of the foregoing, to secure
partial, progress, advance or other payments under any contract or statute;
or
(h) mortgages securing industrial development, pollution control or
similar revenue bonds.
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Notwithstanding the foregoing restriction, the Company may create, assume or
incur any mortgage not excepted above without equally and ratably securing the
Senior Notes if the aggregate amount of all Debt then outstanding and secured
by such mortgage or any other mortgage not excepted above, together with all
net sale proceeds from Sale-Leaseback Transactions (as defined below) which are
not described in clause (i) or (ii) under "--Limitations on Sale-Leaseback
Transactions" below, does not exceed 15% of the Company's total consolidated
capitalization as shown on its latest audited consolidated balance sheet.
(Section 6.07).
Limitations on Sale-Leaseback Transactions
Except as described below and unless Substituted Pledged Bonds are issued to
secure the Senior Notes, from and after the Substitution Date the Company may
not sell or transfer any real property interest or other depreciable asset,
with the Company taking back a lease of such property (any such transaction, a
"Sale-Leaseback Transaction"), unless (i) such Sale-Leaseback Transaction
occurs within 180 days after the later of the date of acquisition of such
property or the date of the completion of construction or commencement of full
operations on such property or (ii) within 120 days after such Sale-Leaseback
Transaction, the Company applies or causes to be applied to the retirement of
Debt of the Company (other than Debt which is subordinate in right of payment
to the Senior Notes) an amount not less than the net proceeds of the sale of
such property. (Section 6.07).
Notwithstanding the foregoing restriction, the Company may effect any Sale-
Leaseback Transaction not excepted above if the net sale proceeds from such
Sale-Leaseback Transaction, together with the net sale proceeds from all other
Sale-Leaseback Transactions not excepted above and all Debt then outstanding
and secured by mortgages not described in any of clauses (a) through (h) under
"--Limitations on Liens," does not exceed 15% of the Company's total
consolidated capitalization as shown on its latest audited consolidated balance
sheet. The Company may also effect any Sale-Leaseback Transaction involving a
lease for a period, including renewals, of not more than 36 months. (Section
6.07).
Events of Default
The following constitute events of default under the Senior Note Indenture:
(a) default in the payment of principal or premium, if any, on any Senior Note
when due and payable and continuance of such default for five days; (b) default
in the payment of interest on any Senior Note when due which continues for 30
days; (c) default in the performance or breach of any other covenant or
warranty of the Company in the Senior Note Indenture and the continuation
thereof for 90 days after written notice to the Company as provided in the
Senior Note Indenture; (d) prior to the Substitution Date, the occurrence of a
default under the Electric Utility Mortgage, of which default the Electric
Utility Mortgage Trustee or the holders of a majority in aggregate principal
amount of the outstanding Senior Notes have given written notice to the Senior
Note Trustee; (e) prior to the Substitution Date, the occurrence of a default
under the Gas Utility Mortgage, of which default the Gas Utility Mortgage
Trustee or the holders of a majority in aggregate principal amount of the
outstanding Senior Notes have given written notice to the Senior Note Trustee;
(f) if any Substituted Pledged Bonds are outstanding, the occurrence of a
default under the Substituted Mortgage, of which default the trustee under such
Substituted Mortgage or the holders of a majority in aggregate principal amount
of the outstanding Senior Notes have given written notice to the Senior Note
Trustee; and (g) certain events of bankruptcy, insolvency or reorganization of
the Company. (Section 8.01).
If an event of default occurs and is continuing, either the Senior Note
Trustee or the holders of a majority in principal amount of the outstanding
Senior Notes may declare the principal amount of all Senior Notes to be due and
payable immediately. Upon such acceleration of the Senior Notes, the Senior
Note Trustee is empowered to cause the mandatory redemption of the Pledged
Bonds or Substituted Pledged Bonds under the terms of the Electric Utility
Mortgage, Gas Utility Mortgage or the Substituted Mortgage, as the case may be.
At any time after an acceleration of the Senior Notes has been declared, but
before a judgment or decree for the immediate payment of the principal amount
of the Senior Notes has been obtained, and so long as all first mortgage bonds
have not been accelerated, if the Company pays or deposits with the Senior Note
Trustee a
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sum sufficient to pay all matured installments of interest, the principal and
any premium which has become due otherwise than by acceleration and any other
amounts due the Senior Note Trustee, and all defaults shall have been cured or
waived, then such payment or deposit will cause an automatic rescission and
annulment of the acceleration of the Senior Notes. (Section 8.01).
The Senior Note Indenture provides that the Senior Note Trustee generally
will be under no obligation to exercise any of its rights or powers under the
Senior Note Indenture at the request or direction of any of the holders unless
such holders have offered to the Senior Note Trustee reasonable security or
indemnity against the liabilities and costs which may be incurred by such
exercise. (Section 9.02). The holders of a majority in principal amount of the
outstanding Senior Notes generally will have the right to direct the time,
method and place of conducting any proceeding for any remedy available to the
Senior Note Trustee, or of exercising any trust or power conferred on the
Senior Note Trustee, with respect to the Senior Notes. (Section 8.07). Each
holder of any Senior Note has the right to institute a proceeding with respect
to the Senior Note Indenture, but such right is subject to certain conditions
precedent specified in the Senior Note Indenture. (Section 8.04). The Senior
Note Indenture provides that the Senior Note Trustee, within 90 days after the
occurrence of a default with respect to the Senior Notes, is required to give
the holders of the Senior Notes notice of such default, unless cured or waived,
but, except in the case of default in the payment of principal of, or premium,
if any, or interest on any Senior Notes, the Senior Note Trustee may withhold
such notice if it determines in good faith that it is in the interest of such
holders to do so. (Section 8.08). The Company is required to deliver to the
Senior Note Trustee each year a certificate as to whether or not, to the
knowledge of the officers signing such certificate, the Company is in
compliance with the conditions and covenants under the Senior Note Indenture.
(Section 6.06).
Modification
Modification and amendment of the Senior Note Indenture may be effected by
the Company and the Senior Note Trustee with the consent of the holders of a
majority in principal amount of the outstanding Senior Notes affected thereby,
provided that no such modification or amendment may, without the consent of the
holder of each outstanding Senior Note affected thereby, (a) change the
maturity date of any Senior Note; (b) reduce the rate or extend the time of
payment of interest on any Senior Note; (c) reduce the principal amount of, or
premium payable on, any Senior Note; (d) change the coin or currency of any
payment of principal of, or any premium or interest on, any Senior Note; (e)
change the date on which any Senior Note may be redeemed or adversely affect
the rights of a holder to institute suit for the enforcement of any payment on
or with respect to any Senior Note; (f) impair the interest of the Senior Note
Trustee in the Pledged Bonds or Substituted Pledged Bonds held by it or, prior
to the Substitution Date, reduce the principal amount of any issue of Pledged
Bonds or Substituted Pledged Bonds securing the Senior Notes to an amount less
than the principal amount of the related issue of Senior Notes or alter the
payment provisions of such Pledged Bonds or Substituted Pledged Bonds in a
manner adverse to the holders of the Senior Notes; or (g) modify the foregoing
requirements or reduce the percentage of outstanding Senior Notes necessary to
modify or amend the Senior Note Indenture or to waive any past default to less
than a majority. Modification and amendment of the Senior Note Indenture may be
effected by the Company and the Senior Note Trustee without the consent of the
holders (a) to add to the covenants of the Company for the benefit of the
holders or to surrender a right conferred on the Company in the Senior Note
Indenture; (b) to add further security for the Senior Notes; (c) to make
certain other modifications, generally of a ministerial or immaterial nature;
or (d) to make certain other modifications which are not prejudicial to the
interests of the holders of the Senior Notes. (Sections 13.01 and 13.02).
Defeasance and Discharge
The Senior Note Indenture provides that the Company will be discharged from
any and all obligations in respect to the Senior Notes and the Senior Note
Indenture (except for certain obligations such as obligations to register the
transfer or exchange of Senior Notes, replace stolen, lost or mutilated Senior
Notes and maintain
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paying agencies) if, among other things, the Company irrevocably deposits with
the Senior Note Trustee, in trust for the benefit of holders of Senior Notes,
money or certain United States government obligations, or any combination
thereof, which through the payment of interest thereon and principal thereof in
accordance with their terms will provide money in an amount sufficient, without
reinvestment, to make all payments of principal of, and any premium and
interest on, the Senior Notes on the dates such payments are due in accordance
with the terms of the Senior Note Indenture and the Senior Notes provided that,
unless all of the Senior Notes are to be due within 90 days of such deposit by
redemption or otherwise, the Company shall also have delivered to the Senior
Note Trustee an opinion of counsel to the effect that the holders of the Senior
Notes will not recognize income, gain or loss for federal income tax purposes
as a result of such defeasance or discharge of the Senior Note Indenture.
Thereafter, the holders of Senior Notes must look only to such deposit for
payment of the principal of, and interest and any premium on, the Senior Notes.
(Section 5.01).
Consolidation, Merger and Sale or Disposition of Assets
The Company will not consolidate with or merge into any other corporation or
sell, transfer or otherwise dispose of all or substantially all its assets
unless the successor or transferee corporation assumes by supplemental
indenture the due and punctual payment of the principal of and premium and
interest on all the Senior Notes and the performance of every covenant of the
Senior Note Indenture to be performed or observed by the Company and (i) if
such transaction occurs prior to the Substitution Date, unless the successor or
transferee corporation assumes the Company's obligations under the Electric
Utility Mortgage and the Gas Utility Mortgage with respect to the Pledged
Bonds, or (ii) if such transaction occurs on or after the Substitution Date and
Substituted Pledged Bonds are outstanding, unless the successor or transferee
corporation assumes the Company's obligations under the Substituted Mortgage
with respect to the Substituted Pledged Bonds. Upon any such consolidation,
merger, sale, transfer or other disposition of all or substantially all of the
assets of the Company, the successor corporation formed by such consolidation
or into which the Company is merged or to which such transfer is made shall
succeed to, and be substituted for, and may exercise every right and power of,
the Company under the Senior Note Indenture with the same effect as if such
successor corporation had been named as the Company therein and the Company
will be released from all obligations under the Senior Note Indenture. The
Senior Note Indenture defines "all or substantially all" of the assets of the
Company as being 50% or more of the total assets of the Company as shown on the
balance sheet of the Company as of the end of the prior year and specifically
permits any such sale, transfer or other disposition during a calendar year of
less than 50% of total assets without the consent of the holders of the Senior
Notes and without the assumption by the transferee of the Company's obligations
on the Senior Notes and covenants contained in the Senior Note Indenture.
(Sections 12.01 and 12.02).
Voting of Pledged Bonds Held by Senior Note Trustee
The Senior Note Trustee, as a holder of Pledged Electric Bonds and/or Pledged
Gas Bonds, will attend any meeting of bondholders under the Electric Utility
Mortgage or the Gas Utility Mortgage, as the case may be, as to which it
receives due notice, or, at its option, will deliver its proxy in connection
therewith. Either at such meeting, or otherwise where the consent of holders of
Electric Bonds or Gas Bonds is sought without a meeting, the Senior Note
Trustee will vote all of the Pledged Electric Bonds or Pledged Gas Bonds held
by it, or will consent with respect thereto, as directed by the holders of a
majority in aggregate principal amount of the outstanding Senior Notes;
provided, however, that the Senior Note Trustee shall not be required to vote
the Pledged Bonds of any particular issue in favor of, or give consent to, any
action except upon notification by the Senior Note Trustee to the holders of
the related issue of Senior Notes of such proposal and consent thereto of the
holders of a majority in principal amount of the outstanding Senior Notes of
such issue. (Section 4.03).
Resignation or Removal of Senior Note Trustee
The Senior Note Trustee may resign at any time upon written notice to the
Company specifying the day upon which the resignation is to take effect and
such resignation will take effect immediately upon the later of the appointment
of a successor Senior Note Trustee and such specified day. (Section 9.10).
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The Senior Note Trustee may be removed at any time by an instrument or
concurrent instruments in writing filed with the Senior Note Trustee and signed
by the holders, or their attorneys-in-fact, of at least a majority in principal
amount of the then outstanding Senior Notes. In addition, so long as no event
of default or event which, with the giving of notice or lapse of time or both,
would become an event of default has occurred and is continuing, the Company
may remove the Senior Note Trustee upon notice to the holder of each Senior
Note outstanding and the Senior Note Trustee, and appointment of a successor
Senior Note Trustee. (Section 9.10).
Concerning the Senior Note Trustee
State Street Bank and Trust Company is the Senior Note Trustee under the
Senior Note Indenture. The Senior Note Trustee also acts as trustee for the
Company's Electric Bonds. Though the Company does not currently maintain any
other banking relationships with the Senior Note Trustee in the ordinary course
of business, it may choose to do so in the future.
PLEDGED ELECTRIC BONDS AND ELECTRIC UTILITY MORTGAGE
General
The Pledged Electric Bonds issued as security for Senior Notes will be series
of Electric Bonds issued under the Electric Utility Mortgage and a new
supplemental trust indenture for each such series of Pledged Electric Bonds,
all from the Company to the Electric Utility Mortgage Trustee. Copies of the
Electric Utility Mortgage and the form of supplemental indenture for the
Pledged Electric Bonds are filed as exhibits to the Registration Statement of
which this Prospectus is a part. The following summaries of certain provisions
of the Electric Utility Mortgage do not purport to be complete and are subject
to, and qualified in their entirety by, the detailed provisions of the Electric
Utility Mortgage which are incorporated herein by this reference. References to
Article and Section numbers under this caption are references to Article and
Section numbers of the Electric Utility Mortgage unless otherwise indicated.
Unless the context indicates otherwise, words or phrases defined in the
Electric Utility Mortgage are capitalized and used with the same meanings under
this caption.
Terms of Pledged Electric Bonds
Pledged Electric Bonds will be issued to the Senior Note Trustee. Each issue
of Pledged Electric Bonds to the Senior Note Trustee will be in a principal
amount equal to the principal amount of the Senior Notes issued
contemporaneously with such Pledged Electric Bonds. The Company's obligations
to make payments with respect to the principal of, premium or interest on the
Pledged Electric Bonds will be fully or partially, as the case may be,
satisfied and discharged to the extent that, at the time that any such payment
shall be due, the then due principal of, premium or interest on the related
issue of Senior Notes shall have been fully or partially paid or there shall
have been deposited with the Senior Note Trustee pursuant to the Senior Note
Indenture sufficient available funds to fully or partially pay the then due
principal of, premium or interest on such Senior Notes. The Pledged Electric
Bonds will be exchangeable for a like aggregate principal amount of Pledged
Electric Bonds of the same series of other authorized denominations at the
office of the Electric Utility Mortgage Trustee in Boston, Massachusetts,
without payment of any charge other than for any stamp tax or other
governmental charge incidental thereto.
The Electric Utility Mortgage does not contain any covenants or other
provisions that are specifically intended to afford holders of the Pledged
Electric Bonds special protection in the event of a highly leveraged
transaction.
The Prospectus Supplement applicable to each series of Senior Notes will set
forth any variation in the terms and provisions of the related series of
Pledged Electric Bonds, if any, from those described in this Prospectus. Each
issue of Pledged Electric Bonds will have the same stated rate or rates of
interest (or interest
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calculated in the same manner), interest payment dates, stated maturity date
and redemption provisions, and will be in the same aggregate principal amount,
as the related issue of Senior Notes.
Depreciation Fund
The Company will pay cash or deliver Electric Bonds of any series to the
Electric Utility Mortgage Trustee by May 31 of each year in an amount equal to
the minimum provision for depreciation for the preceding year (i.e., an amount
by which 15% of gross utility operating revenues of the Company, after
deducting cost of electricity purchased and rental and lease payments, exceeds
maintenance, repairs and renewals). Cash held in the depreciation fund may be
applied to the retirement of the Electric Bonds of certain of the Secured
Medium-Term Notes, Series A, certain of the Secured Medium-Term Notes, Series
B, the 7.05% Series due 2021, the 7.25% Series due 2021 and the 6.80% Series
due 2022 (the last three series were issued as collateral for City of Forsyth,
Rosebud County, Montana, Pollution Control Revenue Refunding Bonds) at a price
not exceeding the applicable Regular Redemption Price thereof, or other
Electric Bonds at a price not exceeding the applicable Special Redemption Price
thereof. In lieu of paying cash or delivering Electric Bonds, the Company will
have the option of satisfying this obligation through the use of unfunded
property additions or unfunded Electric Bond credits, or both. Cash and
Electric Bonds held in such fund may also be withdrawn by using either of the
aforesaid credits. (Section Four, Article II, Part I). For information on the
proposed modification of the depreciation fund requirements, see "--Consent by
Holders of the Pledged Electric Bonds to Modification of Mortgage."
Titles and Kind and Priority of Lien
The Pledged Electric Bonds are to be secured equally and ratably with all
other Electric Bonds heretofore or hereafter issued under the Electric Utility
Mortgage by a valid and direct first mortgage of the Company's electric utility
property, and on its electric franchises and permits, except as stated below
and subject only to permitted encumbrances. (Granting Clauses).
The Electric Utility Mortgage permits the Company to acquire utility property
subject to certain prior liens. The Electric Utility Mortgage requires that
there shall be subjected to the lien thereof (subject to certain liabilities in
cases of mergers and consolidations) all utility property (other than excepted
property) which the Company may hereafter acquire. (Granting Clauses of the
Electric Utility Mortgage and Sections 9.06, 9.10 and 14.04). The lien of the
Electric Utility Mortgage is subject to the lien of the Gas Utility Mortgage
with respect to the gas utility property of WNG acquired in connection with the
Merger, as well as all substitutions, replacements, additions, betterments,
developments, extensions and enlargements to, of or upon such gas utility
property. (Sections 9.07, 9.10 and 14.05 of the Electric Utility Mortgage and
Section 14.03 of the Gas Utility Mortgage). See "Pledged Gas Bonds and Gas
Utility Mortgage--Titles and Kind and Priority of Lien."
There are excepted from the lien of the Electric Utility Mortgage: cash,
securities, notes, accounts receivable and similar instruments; conditional
sales, appliance rental or lease agreements; materials and supplies;
merchandise held for the purpose of sale, lease or distribution; fuel
(including fissionable material) and personal property consumable in
operations; oil, gas and other minerals and timber under or upon lands of the
Company; office furniture and equipment, automobiles and similar transportation
equipment; nonutility property and certain property of a successor corporation
in a merger or consolidation. (Section 20.01).
Dividend Restriction
So long as any of the Electric Bonds are outstanding, the Company shall not
(i) declare or pay any dividends (other than dividends payable in the Company's
common stock) or make any other distribution on any shares of its common stock
or (ii) purchase, redeem or otherwise retire for consideration any shares of
stock except out of net income available for dividends on its common stock (as
defined), accumulated after December 31, 1957, plus the sum of $7,500,000.
(Section 1.05 of the Forty-fourth Supplemental Indenture to the Electric
Utility Mortgage).
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Issuance of Electric Bonds and Withdrawal of Cash Deposited Against Such
Issuance
The principal amount of Electric Bonds which may be issued under the Electric
Utility Mortgage is not limited, provided that the issuance tests in the
Electric Utility Mortgage are satisfied. (Section 3.01). Electric Bonds may be
issued from time to time against (i) 60% of unfunded net additions (Section
5.03), (ii) deposit of cash (Section 5.04) and/or (iii) 100% of unfunded
Electric Bond credits (Section 5.05). The issuance of Electric Bonds against
unfunded net additions, and the issuance of Electric Bonds for other purposes,
with certain exceptions, is subject to net earnings available for interest
being at least two times the annual interest requirement on all Electric Bonds
and prior lien debt to be outstanding. (Section 1.42). Cash deposited is
withdrawable against 60% of unfunded net additions and 100% of unfunded
Electric Bond credits (Sections 8.02 and 8.03).
Modification of Mortgage
The rights of the bondholders under the Electric Utility Mortgage may be
modified with the consent of the holders of 66-2/3% of the Electric Bonds,
including the consent of the holders of 66-2/3% of the Electric Bonds of each
series affected by the proposed modification. In general, no adverse
modification of the terms of payment and no modification permitting additional
prior or parity liens, or reducing the percentage of Electric Bonds required
for modification, is effective against any bondholder without the consent of
such holder. (Section 18.02).
The Electric Utility Mortgage Trustee
The holders of a majority in principal amount of the Electric Bonds have the
right to require the Electric Utility Mortgage Trustee to enforce the Electric
Utility Mortgage, but the Electric Utility Mortgage Trustee is entitled to
receive reasonable indemnity and under certain circumstances is not required to
act (Section 12.20).
Defaults and Notices
A default under the Electric Utility Mortgage is defined as (i) failure to
pay the principal and premium when due or interest for 30 days after becoming
due, (ii) failure to satisfy any sinking, improvement or depreciation fund
obligation for 60 days after becoming due, (iii) failure for 90 days after
notice to observe other covenants or conditions, (iv) entry of an order for
reorganization or appointment of a trustee or receiver and continuance of such
order or appointment unstayed for 90 days, (v) certain adjudications, petitions
or consents in bankruptcy, insolvency or reorganization proceedings and (vi)
rendering of a judgment in excess of $100,000 and its continuance unsatisfied
for 90 days. (Section 12.01).
The Electric Utility Mortgage does not require the filing with the Trustee of
any periodic evidence as to the absence of default or as to compliance with the
terms of the Electric Utility Mortgage.
Consent by Holders of the Pledged Electric Bonds to Modification of First
Mortgage Indenture
The Company anticipates that its fuel costs may increase in future years as
it utilizes its combustion turbines and other thermal resources. The offsetting
increases in revenues may escalate the minimum provision for depreciation (15%
of operating revenues less certain deductions) out of proportion to reasonable
maintenance and replacement needs. This distortion would adversely affect the
calculation of unfunded net property additions available for certain purposes
under the Electric Utility Mortgage, including issuance of Pledged Electric
Bonds.
In such event, the Company would propose to modify the Electric Utility
Mortgage by reducing the amount of operating revenues used in determining the
minimum provision for depreciation by the amount of fuel costs.
Each supplemental indenture for a new series of Pledged Electric Bonds will
provide that each holder of the Pledged Electric Bonds, by his acceptance
thereof, consents to such modification. This modification has
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been similarly consented to by the holders of the Electric Bonds of the Secured
Medium-Term Notes, Series A and the Secured Medium Term Notes, Series B. The
Sixty-seventh Supplemental Indenture to the Electric Utility Mortgage provides
that the trustee holding the Electric Bonds issued under said Supplemental
Indenture as collateral for the Puget Energy, Inc. Guaranteed Collateralized
Bonds consents to such modification on behalf of the holders of such Guaranteed
Collateralized Bonds. The Seventy-second and Seventy-third Supplemental
Indentures to the Electric Utility Mortgage provide that the trustees holding
Electric Bonds issued under said Supplemental Indentures as collateral for City
of Forsyth, Rosebud County, Montana, Pollution Control Revenue Refunding Bonds
consent to such modification on behalf of the holders of such Pollution Control
Revenue Refunding Bonds. The modification will become effective when consents
have been obtained from the holders of 66-2/3% in principal amount of each
other series of Electric Bonds at the time outstanding.
PLEDGED GAS BONDS AND GAS UTILITY MORTGAGE
General
The Pledged Gas Bonds issued as security for Senior Notes will be series of
Gas Bonds issued under the Gas Utility Mortgage and a new supplemental trust
indenture for each such series of Pledged Gas Bonds, all from the Company to
the Gas Utility Mortgage Trustee. A copy of the Gas Utility Mortgage is filed
as an exhibit to the Registration Statement of which this Prospectus is a part.
The following summaries of certain provisions of the Gas Utility Mortgage do
not purport to be complete and are subject to, and qualified in their entirety
by, the detailed provisions of the Gas Utility Mortgage which are incorporated
herein by this reference. References to Article and Section numbers under this
caption are references to Article and Section numbers of the Gas Utility
Mortgage unless otherwise indicated. Unless the context indicates otherwise,
words or phrases defined in the Gas Utility Mortgage are capitalized and used
with the same meanings under this caption.
Terms of Pledged Gas Bonds
Pledged Gas Bonds will be issued to the Senior Note Trustee. Each issue of
Pledged Gas Bonds to the Senior Note Trustee will be in a principal amount
equal to the principal amount of the Senior Notes issued contemporaneously with
such Pledged Gas Bonds. The Company's obligations to make payments with respect
to the principal of, premium or interest on the Pledged Gas Bonds will be fully
or partially, as the case may be, satisfied and discharged to the extent that,
at the time that any such payment shall be due, the then due principal of,
premium or interest on the related issue of Senior Notes shall have been fully
or partially paid or there shall have been deposited with the Senior Note
Trustee pursuant to the Senior Note Indenture sufficient available funds to
fully or partially pay the then due principal of, premium or interest on such
Senior Notes. The Pledged Gas Bonds will be exchangeable for a like aggregate
principal amount of Pledged Gas Bonds of the same series of other authorized
denominations at the office of the Gas Utility Mortgage Trustee in Chicago,
Illinois, without payment of any charge other than for any stamp tax or other
governmental charge incidental thereto.
The Gas Utility Mortgage does not contain any covenants or other provisions
that are specifically intended to afford holders of the Pledged Gas Bonds
special protection in the event of a highly leveraged transaction.
The Prospectus Supplement applicable to each series of Senior Notes will set
forth any variation in the terms and provisions of the related series of
Pledged Gas Bonds, if any, from those described in this Prospectus. Each issue
of Pledged Gas Bonds will have the same stated rate or rates of interest (or
interest calculated in the same manner), interest payment dates, maturity date
and redemption provisions, and will be in the same aggregate principal amount,
as the related issue of Senior Notes.
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Renewal Fund
The Company will pay cash and/or deliver Gas Bonds (taken at the principal
amount thereof) to the Gas Utility Mortgage Trustee for deposit into a renewal
fund on or before May 1 of each year in an amount equal to the greater of
(a) the aggregate amount of the minimum provision for depreciation (i.e.,
an amount computed at the rate of 2% per annum, or such other rate as may
be permitted or required by the Washington Utilities and Transportation
Commission, of the book value of depreciable gas utility property subject
to the lien of the Gas Utility Mortgage and not to prior liens) from March
1, 1957 to the end of the next preceding calendar year; or
(b) the aggregate amount of retirements for the same period;
in excess of the greater of
(i) the aggregate amounts for the minimum provision for depreciation or
retirements, whichever is greater, shown in the next preceding renewal fund
certificate filed with the Gas Utility Mortgage Trustee pursuant to the
requirements of Section 4.04 of the Gas Utility Mortgage; or
(ii) the aggregate amounts for the minimum provision for depreciation or
retirements, whichever is greater, shown in the latest certificate of
available net additions delivered to the Gas Utility Mortgage Trustee
pursuant to Section 2.01 of the Gas Utility Mortgage;
less the aggregate amount of Gas Bonds retired by sinking fund operations, not
theretofore used as a credit on account of the renewal fund in previous renewal
fund certificates. The renewal fund obligation may be satisfied in whole or in
part by credits consisting of unfunded property additions and/or unfunded Gas
Bond credits. (Section 4.04).
Any cash deposited in the renewal fund, if and to the extent that the Company
at the time does not have property additions available for use as a credit to
satisfy such renewal fund obligation, may, upon the written order of the
Company, be applied by the Gas Utility Mortgage Trustee to the redemption of
certain Gas Bonds or, if not so applied pursuant to the provisions of the Gas
Utility Mortgage, to the retirement of Gas Bonds. (Section 4.04).
Titles and Kind and Priority of Lien
The Pledged Gas Bonds are to be secured equally and ratably with all other
Gas Bonds heretofore issued under the Gas Utility Mortgage by a valid and
direct first mortgage of the Company's gas utility property (except as stated
below) and on its gas utility franchises and permits and gas purchase contracts
(Section 9.14 and Article Two of the Seventh Supplemental Indenture to the Gas
Utility Mortgage), subject only to permitted encumbrances (Granting Clause VI
and Section 1.39) and certain minor exceptions (Granting Clause IX).
Notwithstanding the foregoing, there is excepted from the lien of the Gas
Utility Mortgage, among other things, all property owned by Puget Sound Power &
Light Company immediately prior to the effective time of the Merger, as well as
any property acquired by the Company after the Merger (except substitutions,
replacements, additions, betterments, developments, extensions and enlargements
to, of or upon the gas utility property owned by WNG at the time of the
Merger). (Section 1.03 of the Thirty-first Supplemental Indenture to the Gas
Utility Mortgage).
The Gas Utility Mortgage permits the Company to acquire gas utility property
subject to prior liens, but such property shall not be deemed to be "property
additions" under the Gas Utility Mortgage unless and until such prior lien is
paid. At such time as title to such property shall vest in the Company free and
clear of such prior lien, then such property shall be subject to the lien of
the Gas Utility Mortgage, subject only to the permitted encumbrances and
exceptions referred to herein. (Sections 1.28, 9.07 and 9.10).
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There are excepted from the lien of the Gas Utility Mortgage: cash,
securities, notes, accounts receivable and similar instruments; conditional
sales, appliance rental or lease agreements; materials and supplies;
merchandise held for the purpose of sale, lease or distribution; gas or liquid
hydrocarbons in pipe lines and in storage; fuel and personal property
consumable in operations; oil, gas and other minerals and timber under or upon
lands of the Company; office furniture and equipment, automobiles and similar
transportation equipment; nonutility property and certain property of a
successor corporation in a merger or consolidation. (Granting Clause IX).
Dividend Restriction
So long as any of the Company's Secured Medium Term Notes, Series C, issued
under the Gas Utility Mortgage, are outstanding, the Company shall not (i)
declare or pay any dividends (other than dividends payable in the Company's
common stock) or make any other distribution on any shares of its common stock
or (ii) purchase, redeem or otherwise retire for consideration any shares of
stock (other than in exchange for, or from the net cash proceeds of, other new
shares of capital stock of the Company and other than any shares of any class
of stock ranking as to dividends or assets prior to the Company's common stock
required to be purchased, redeemed or otherwise retired for any sinking fund or
purchase fund for such class of stock), if the aggregate amount of all such
dividends, distributions and expenditures made since September 30, 1994 would
exceed the aggregate amount of the net income of the Company accumulated after
September 30, 1994 plus the sum of $20,000,000. (Section 1.04 of the Thirtieth
Supplemental Indenture to the Gas Utility Mortgage).
Issuance of Gas Bonds and Withdrawal of Cash Deposited Against Such Issuance
The principal amount of Gas Bonds issuable under the Gas Utility Mortgage is
not limited, provided that the issuance tests in the Gas Utility Mortgage are
satisfied. (Section 3.01). Gas Bonds may be issued from time to time against
(i) 60% of unfunded net additions (Section 5.03); (ii) deposit of cash (Section
5.04); and/or (iii) 100% of unfunded Gas Bond credits (Section 5.05). With
certain exceptions, the issuance of Gas Bonds is subject to net earnings
available for interest being at least (a) two times the annual interest
requirements on all Gas Bonds and prior lien debt to be outstanding (Section
1.41) and (b) 1.75 times the annual interest charges on all indebtedness of the
Company to be outstanding immediately after such issuance. (Section 1.05 of the
Thirtieth Supplemental Indenture to the Gas Utility Mortgage). Cash deposited
is withdrawable against 60% of unfunded net additions in the case of moneys on
deposit with the Gas Utility Mortgage Trustee for the purpose described in
clause (ii) of this paragraph, 100% of the amount of unfunded net additions in
the case of any other trust moneys and 100% of unfunded Gas Bond credits.
(Section 8.02 and 8.03).
Modification of Mortgage
The rights of the bondholders under the Gas Utility Mortgage may be modified
with the consent of the holders of 66 2/3% of the Gas Bonds, including the
consent of the holders of 66 2/3% of the Gas Bonds of each series affected by
the proposed modification. In general, no adverse modification of the terms of
payment and no modification permitting additional prior or parity liens, or
reducing the percentage of Gas Bonds required for modification, is effective
against any bondholder without the consent of such holder. (Section 18.02).
The Gas Utility Mortgage Trustee
The holders of a majority in principal amount of the Gas Bonds have the right
to require the Gas Utility Mortgage Trustee to enforce the Gas Utility
Mortgage, but the Gas Utility Mortgage Trustee is entitled to receive
reasonable indemnity and under certain circumstances is not required to act.
(Section 12.20).
Defaults and Notices
An event of default under the Gas Utility Mortgage is defined as (i) failure
to pay the principal and premium when due, (ii) failure to pay interest for 10
days after becoming due, (iii) failure to satisfy any
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sinking, renewal, improvement, maintenance or depreciation fund obligation for
30 days after becoming due, (iv) failure for 30 days after notice to observe
other covenants or conditions, (v) entry of an order for reorganization or
appointment of a trustee or receiver or for the liquidation of the Company or
the attachment of the Company's property and continuance of such order,
appointment or attachment unstayed for 60 days, (vi) certain adjudications,
petitions or consents in bankruptcy, insolvency or reorganization proceedings,
(vii) failure to pay any part of the principal of, premium, if any, or interest
on, or any other payment of money due under any indebtedness (other than the
Gas Bonds) in an aggregate outstanding amount of $500,000 or more, or the
failure by the Company to perform or observe any other agreement, term or
condition contained in any document evidencing or securing such indebtedness,
if the effect of such failure is to cause, or to permit the holders of such
indebtedness to cause, or permit any other party to such indebtedness to cause,
any payment in respect of such indebtedness to become due prior to its due
date, and (viii) rendering of a judgment in excess of $100,000 and its
continuance unsatisfied for 90 days. (Section 12.01 and Article IV of the
Twenty-second Supplemental Indenture).
The Gas Utility Mortgage does not require the filing with the Gas Utility
Mortgage Trustee of any periodic evidence as to the absence of default or as to
compliance with the terms of the Gas Utility Mortgage.
BOOK-ENTRY SYSTEM
Each series of Senior Notes may be issued in the form of one or more Global
Notes representing all or part of such series of Senior Notes and which will be
deposited with or on behalf of the Depository and registered in the name of the
Depository or a nominee of the Depository.
The following is based solely on information furnished by DTC:
Unless otherwise specified in the Prospectus Supplement, DTC will act as
Depository for those Senior Notes issued as Global Notes. The Global Notes will
be issued as fully-registered securities registered in the name of Cede & Co.
(DTC's partnership nominee). DTC is a limited-purpose trust company organized
under the New York Banking Law, a "banking organization" within the meaning of
the New York Banking Law, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code, and a
"clearing agency" registered pursuant to the provisions of Section 17A of the
Securities Exchange Act of 1934. DTC holds securities that its participants
("Participants") deposit with DTC. DTC also facilitates the settlement among
Participants of securities transactions, such as transfers and pledges, in
deposited securities through electronic computerized book-entry changes in
Participants' accounts, thereby eliminating the need for physical movement of
securities certificates. "Direct Participants" include securities brokers and
dealers, banks, trust companies, clearing corporations, and certain other
organizations. DTC is owned by a number of its Direct Participants and by the
New York Stock Exchange, Inc., the American Stock Exchange, Inc., and the
National Association of Securities Dealers, Inc. Access to the DTC system is
also available to others such as securities brokers and dealers, banks, and
trust companies that clear through or maintain a custodial relationship with a
Direct Participant, either directly or indirectly ("Indirect Participants").
The rules applicable to DTC and its Participants are on file with the
Commission.
Purchases of the Senior Notes under the DTC system must be made by or through
Direct Participants, which will receive a credit for the Senior Notes on DTC's
records. The ownership interest of each actual purchaser of each Security
("Beneficial Owner") is in turn to be recorded on the Direct and Indirect
Participants' records. Beneficial Owners will not receive written confirmation
from DTC of their purchase, but Beneficial Owners are expected to receive
written confirmation providing details of the transaction, as well as periodic
statements of their holdings, from the Direct or Indirect Participant through
which the Beneficial Owner entered into the transaction. Transfers of ownership
interests in the Senior Notes are to be accomplished by entries made on the
books of Participants acting on behalf of Beneficial Owners. Beneficial Owners
will not receive certificates representing their ownership interests in the
Senior Notes, except in the event that use of the book-entry system for the
Senior Notes is discontinued.
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To facilitate subsequent transfers, all securities deposited by Participants
with DTC are registered in the name of DTC's partnership nominee, Cede & Co.
The deposit of the Senior Notes with DTC and their registration in the name of
Cede & Co. effect no change in beneficial ownership. DTC has no knowledge of
the actual Beneficial Owners of the Senior Notes; DTC's records reflect only
the identity of the Direct Participants to whose accounts such Senior Notes are
credited, which may or may not be the Beneficial Owners. The Participants will
remain responsible for keeping account of the holdings on behalf of their
customers.
Conveyance of notices and other communications by DTC to Direct Participants,
by Direct Participants to Indirect Participants, and by Direct Participants to
Beneficial Owners will be governed by arrangements among them, subject to any
statutory or regulatory requirements as may be in effect from time to time.
If the Global Notes are redeemable, redemption notices shall be sent to Cede
& Co. If less than all of the Global Notes are being redeemed, DTC's practice
is to determine by lot the amount of the interest of each Direct Participant in
such issue to be redeemed.
Neither DTC nor Cede & Co. will consent or vote with respect to the Senior
Notes. Under its usual procedures, DTC mails an Omnibus Proxy to the Company as
soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.'s
consenting or voting rights to those Direct Participants to whose accounts the
Senior Notes are credited on the record date (identified in a listing attached
to the Omnibus Proxy).
Principal, interest and any premium payments on the Senior Notes will be made
to DTC. DTC's practice is to credit Direct Participant's accounts on payable
date in accordance with their respective holdings shown on DTC's records unless
DTC has reason to believe that it will not receive payment on payable date.
Payments by Participants to Beneficial Owners will be governed by standing
instructions and customary practices, as in the case with securities held for
the accounts of customers in bearer form or registered in "street name," and
will be the responsibility of such Participant and not of DTC, the applicable
Trustee or the Company, subject to any statutory or regulatory requirements as
may be in effect from time to time. Payment of principal, interest and any
premium to DTC is the responsibility of the Company or the applicable Trustee,
disbursement of such payments to Direct Participants shall be the
responsibility of DTC, and disbursement of such payments to the Beneficial
Owners shall be the responsibility of Direct and Indirect Participants.
DTC may discontinue providing its services as securities depository with
respect to a series of Senior Notes at any time by giving reasonable notice to
the Company or the Senior Note Trustee. Under such circumstances, if a
successor securities depository is not obtained, certificates for such series
of Senior Notes are required to be printed and delivered.
The Company may decide to discontinue use of the system of book-entry
transfers through DTC (or a successor securities depository) for any series of
Senior Notes. In that event, certificates for such series of Senior Notes will
be printed and delivered.
The information in this section concerning DTC and DTC's book-entry system
has been obtained from DTC, and the Company and any underwriters, dealers or
agents take no responsibility for the accuracy thereof.
The underwriters, dealers or agents of any Senior Notes may be Direct
Participants of DTC.
None of the Company, the Senior Note Trustee, the Electric Utility Mortgage
Trustee, the Gas Utility Mortgage Trustee or any agent for payment on or
registration of transfer or exchange of the Global Note will have any
responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial interests in such Global Note or for
maintaining, supervising or reviewing any records relating to such beneficial
interests.
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PLAN OF DISTRIBUTION
The Company may offer the Senior Notes (i) through underwriters or dealers,
(ii) directly to a limited number of purchasers or to a single purchaser or
(iii) through agents. A Prospectus Supplement with respect to each series of
Senior Notes will set forth the terms of the offering and sale of such Senior
Notes, including the proceeds to the Company from such sale, the name or names
of any underwriters, the purchase price of such Senior Notes, any underwriting
discounts and other items constituting underwriter compensation, any initial
public offering price, any discounts or concessions allowed or reallowed or
paid to dealers and any securities exchanges on which such Senior Notes may be
listed. Any initial public offering price and any discounts or concessions
allowed or reallowed or paid to dealers may be changed from time to time.
If underwriters are utilized, the Senior Notes being sold to them will be
acquired by the underwriters for their own account and may be resold from time
to time in one or more transactions, including negotiated transactions, at a
fixed public offering price or at varying prices determined at the time of
sale. The Senior Notes may be offered to the public either through underwriting
syndicates represented by one or more managing underwriters or directly by one
or more underwriters. The underwriter or underwriters with respect to the
Senior Notes being offered will be named in a Prospectus Supplement relating to
such offering and, if an underwriting syndicate is used, the managing
underwriter or underwriters will be set forth on the cover page of such
Prospectus Supplement. Unless otherwise provided in the Prospectus Supplement,
the obligations of the underwriters will be subject to certain conditions
precedent, and the underwriters will be obligated to purchase all of such
Senior Notes if any are purchased.
The Senior Notes may be sold directly by the Company or through agents
designated by the Company from time to time. Any agent involved in the offer or
sale of any Senior Notes in respect of which this Prospectus is delivered will
be named, and any commissions payable by the Company to such agent will be set
forth, in a Prospectus Supplement. Unless otherwise provided in the Prospectus
Supplement, any such agent will be acting on a best efforts basis for the
period of its appointment.
If so indicated in a Prospectus Supplement, the Company will authorize
agents, underwriters or dealers to solicit offers by certain institutions to
purchase the Senior Notes from the Company at the public offering price set
forth in such Prospectus Supplement pursuant to Delayed Delivery Contracts
("Contracts") providing for payment and delivery on the date or dates stated in
such Prospectus Supplement. Each Contract will be for an amount not less than,
and the aggregate principal amount of the Senior Notes sold pursuant to the
Contracts shall be not less nor more than, the respective amounts stated in
such Prospectus Supplement. Institutions with whom the Contracts, when
authorized, may be made include commercial and savings banks, insurance
companies, pension funds, investment companies, educational and charitable
institutions, and other institutions, but will in all cases be subject to the
approval of the Company. The Contracts will not be subject to any conditions
except (i) the purchase by an institution of the Senior Notes covered by its
Contract shall not at the time of delivery be prohibited under the laws of any
jurisdiction in the United States to which such institution is subject, and
(ii) if the Senior Notes are being sold to underwriters, the Company shall have
sold to such underwriters the total principal amount of the Senior Notes less
the principal amount thereof covered by the Contracts. The underwriters will
not have any responsibility in respect of the validity or performance of the
Contracts.
Any underwriters, dealers or agents participating in the distribution of the
Senior Notes may be deemed to be underwriters, and any discounts or commissions
received by them on the sale or resale of the Senior Notes may be deemed to be
underwriting discounts and commissions under the Securities Act. Agents and
underwriters may be entitled, under agreements entered into with the Company,
to indemnification by the Company against certain civil liabilities, including
liabilities under the Securities Act, and to contribution with respect to
payments which the agents or underwriters may be required to make in respect
thereof. Agents and underwriters may engage in transactions with or perform
services for the Company in the ordinary course of business.
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LEGAL MATTERS
The validity of the Senior Notes to be offered will be passed upon for the
Company by Perkins Coie LLP, Seattle, Washington and for any underwriters,
dealers or agents by Skadden, Arps, Slate, Meagher & Flom, LLP, New York, New
York, which shall rely upon the opinion of Perkins Coie with respect to matters
pertaining to the laws of the State of Washington. All matters pertaining to
the laws of the State of Washington will be passed upon by Perkins Coie.
EXPERTS
The consolidated financial statements and financial statement schedule of the
Company at December 31, 1997 and 1996, and for each of the three years in the
period ended December 31, 1997, incorporated by reference in this Prospectus
and the Registration Statement, have been incorporated herein in reliance on
the report, which includes an emphasis paragraph related to the Company's
merger with Washington Energy Company, of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of that firm as experts in
accounting and auditing.
21
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[LOGO]
$500,000,000
PUGET SOUND ENERGY, INC.
Senior Medium-Term Notes, Series B
Due Nine Months or More
From Date of Issue
----------------
PROSPECTUS SUPPLEMENT
----------------
Merrill Lynch & Co.
Salomon Smith Barney
March 3, 1999
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