As filed with the Securities and Exchange Commission on March 16, 1998September 10, 2002
Registration No. 333-
===========================================================================================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
____________________
FORM S-3
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
____________________
PECO ENERGY PECO ENERGY PECO ENERGY
COMPANY CAPITAL, L.P. CAPITAL TRUST III
(Exact name of (Exact name ofEnergy Company
(Exact name of registrant as specified registrant as specified registrant as specified
in its charter)
in its Certificate of in its Certificate
Limited Partnership) of Trust)
PENNSYLVANIA DELAWARE DELAWARE
Pennsylvania 4911 23-0970240
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization)
4931 6799 6799
(Primary Standard Industrial Classification Code Number)
23-0970240 51-0355322 51-0379036
(I.R.S. Employer Identification Number)
P.O. BOXBox 8699
1013 CENTRE ROAD, C/O FIRST UNION TRUST COMPANY,
2301 MARKET STREET SUITE 350F NATIONAL ASSOCIATION
PHILADELPHIA,Market Street
Philadelphia, PA 19101 WILMINGTON, DE 19805 ONE RODNEY SQUARE19101-8699
(215) 841-4000
(302) 998-0592 920 KING STREET, 1ST FLOOR
WILMINGTON, DE 19801
(302) 888-7500http://www.exeloncorp.com
(Address, including zip code and telephone number, including area code, of
Registrant's principal executive offices)
J. B. MITCHELL
VICE PRESIDENT - FINANCE AND TREASURERFrank F. Frankowski
Chief Financial Officer
Vice President Finance
P.O. BOXBox 8699
2301 MARKET STREET
PHILADELPHIA,Market Street
Philadelphia, PA 1910119101-8699
(215) 841-4000841-6098
(Name, address, including zip code and telephone number, including area code,
of agent for service for each registrant)
with copiesservice)
Copies to:
JAMES W. DURHAM, ESQ.
SENIOR VICE PRESIDENT AND GENERAL COUNSEL
P.O. BOX 8699, 2301 MARKET STREET, PHILADELPHIA, PA 19101
ROBERT C. GERLACH, ESQ. ROBERT M. JONES, JR., ESQ.
BALLARD SPAHR ANDREWS & INGERSOLL, LLP DRINKER BIDDLE & REATH LLP
1735 MARKET STREET, 51ST FLOOR 1345 CHESTNUT STREET
PHILADELPHIA, PA 19103-7599 PHILADELPHIA, PA 19107-3496
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As
soon as practicable
Todd D. Cutler Robert C. Gerlach
Assistant Corporate Secretary Lisa M. Sloan
and Assistant General Counsel c/o Ballard Spahr Andrews & Ingersoll, LLP
P.O. Box 8699 1735 Market Street
2301 Market Street Philadelphia, Pennsylvania 19103
Philadelphia, Pennsylvania 19101-8699 (215) 864-8526
(215) 841-4694 (215) 864-8638
and
Approximate date of commencement of proposed sale to the public: From time
to time after the effective date of this Registration Statement becomes effective.
____________________Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /box: [_]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
interest reinvestment plans, please check the following box. / X /
box: [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /[_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /[_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
____________________[_]
CALCULATION OF REGISTRATION FEE
==============================================================================
PROPOSED
MAXIMUM PROPOSED
TITLE OF OFFERING MAXIMUM
EACH CLASS OF PRICE AGGREGATE AMOUNT OF
SECURITIES AMOUNT TO BE PER UNIT OFFERING REGISTRATION
TO BE REGISTERED REGISTERED================================================================================
Amount to be Proposed Proposed
registered maximum offering maximum aggregate Amount of
Title of each class of securities to be registered (1)(2) price per unit (1) offering price (2) registration fee (2)
- --------------------------------------------------------------------------------------------------------------------------
First and Refunding Mortgage Bonds................
- --------------------------------------------------------------------------------------------------------------------------
PECO Energy Company Preferred Stock, no par value.
- --------------------------------------------------------------------------------------------------------------------------
Total.......................................... $900,000,000 100% $900,000,000 $82,800
================================================================================
(1) (2)(3) PRICE (2)(3) FEE (4)
- ------------------------------------------------------------------------------
Capital Trust Pass-through
Securities issuedWe are registering a presently indeterminate principal amount or number of
(a) First and Refunding Mortgage Bonds and (b) shares of Preferred Stock, no
par value, which may be sold from time to time by PECO Energy Capital
Trust III representing
PECO Energy Capital,
L.P. ___% Cumulative
Preferred Securities,
Series D ...............
- ------------------------------------------------------------------------------
PECO Energy Capital,
L.P. ___% Cumulative
Preferred Securities,
Series D ...............
- ------------------------------------------------------------------------------
PECO Energy Company
Guarantee with
respect to PECO Energy
Capital, L.P. ___%
Cumulative Preferred
Securities,
Series D(5)............
- ------------------------------------------------------------------------------
PECO Energy Company, ___%
Subordinated Deferrable
Interest Debentures,
Series D...............
- ------------------------------------------------------------------------------
Total.................... $78,105,000 100% $78,105,000 $23,041
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
(1) There are being registered hereunder 78,105 Capital Trust Pass-through
Securities, each representing a __% Cumulative Preferred Security, Series
D of PECO Energy Capital, L.P., with anus. The aggregate initial
offering price of all First and Refunding Mortgage Bonds and Preferred Stock
issued from time to time pursuant to this registration statement will not
to exceed $78,105,000, and related Guarantee and __%
Subordinated Deferrable Interest Debentures, Series D$900,000,000. If any of PECO Energy
Company for which no separate consideration will be received.the securities are issued at an original
issue discount, the aggregate initial offering price as so discounted shall
not exceed $900,000,000, notwithstanding that the stated principal amount of
such securities may exceed such amount.
(2)Estimated solely for the purposepurposes of determiningcalculating the registration fee. (3) Exclusive of accrued interest and dividends, if any.
(4) Pursuant
to Rule 457(n) and (o),457(o) under the Securities Act of 1933, which permits the
registration fee isto be calculated on the basis of the maximum offering price
of all the securities listed, the table does not specify by each class
information as to the amount to be registered, proposed maximum offering
price of the Capital Trust
Pass-through Securities.
(5) Includes the rights of holders of the ____% Cumulative Preferred
Securities, Series D under the Guarantee and certain backup
undertakings related theretoper unit or proposed maximum aggregate offering price.
We hereby amend this registration statement on such date or dates as describedmay be
necessary to delay its effective date until we shall file a further amendment
which specifically states that this registration statement shall thereafter
become effective in the Registration
Statement.
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE
REGISTRANTS SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT
THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE
WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
==============================================================================
SUBJECT TO COMPLETION, DATED MARCH __, 1998
PROSPECTUS
PECO ENERGY CAPITAL TRUST III
78,105 Capital Trust Pass-through Securities(sm) (TruPS(r))*
each representing a ____% Cumulative Preferred Security,
Series Daccordance with Section 8(a) of PECO Energy Capital, L.P.
(stated liquidation preference $1,000 per Preferred Security)
fully and unconditionally guaranteed to the extent PECO Energy Capital, L.P.
has funds as set forth herein by
PECO ENERGY COMPANY
The Capital Trust Pass-through Securities(sm) ("Capital Securities")
offered hereby by PECO Energy Capital Trust III, a statutory business trust
created under the laws of the State of Delaware (the "Trust") each
represent a ____% Cumulative Preferred Security, Series D (a "Series D
Preferred Security") of PECO Energy Capital, L.P., a limited partnership
formed under the laws of the State
(continued on next page)
SEE "RISK FACTORS" COMMENCING ON PAGE 9 FOR CERTAIN INFORMATION
RELEVANT TO AN INVESTMENT IN THE CAPITAL SECURITIES, INCLUDING THE PERIOD
DURING WHICH AND CIRCUMSTANCES UNDER WHICH DISTRIBUTIONS ON THE CAPITAL
SECURITIES MAY BE DEFERRED AND THE RELATED FEDERAL INCOME TAX CONSEQUENCES.
Application has been made to list the Capital Securities on the New
York Stock Exchange. If approved for listing, trading of the Capital
Securities is expected to commence within a 30-day period after the initial
delivery thereof.
____________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
____________________
Initial Public Underwriting Proceeds to
Offering Price Commission(1) the Trust(2)(3)
-------------- ------------- ---------------
Per Capital Security ...... $1,000.00 (2) $1,000.00
Total ..................... $78,105,000 (2) $78,105,000
_______________________
(1) PECO Energy and PECO Energy Capital have agreed to indemnify the
several Underwriters against certain liabilities, including liabilities
under the Securities Act of 1933,
as amended. See "Underwriting."
(2) Underamended, or until this registration statement shall become effective on such
date as the Underwriting Agreement,Commission, acting pursuant to said Section 8(a), may determine.
================================================================================
The information in this prospectus supplement is not complete and may be
changed. We may not sell these securities until the registration statement
filed with the Securities and Exchange Commission is effective. This prospectus
supplement is not an offer to sell these securities and we are not soliciting
an offer to buy these securities in any jurisdiction where the offer or sale is
not pemitted.
SUBJECT TO COMPLETION DATED , 2002
PRELIMINARY PROSPECTUS SUPPLEMENT
(To Prospectus dated , 20 )
$225,000,000
PECO Energy Company
[LOGO]
Peco/R/
An Exelon Company
First and Refunding Mortgage Bonds, % Series due
-------------
The bonds will bear interest at the annual rate of % per year. We will pay
tointerest on the Underwriters $__________ per Capital Security (or $__________ in the
aggregate)bonds on and of each year, beginning on
, . See "Underwriting."
(3) ExpensesThe bonds will mature on , 20 . We may redeem some or all of
the offering, which are payable by PECO Energy, are
estimated to be $320,000.
_________________________________bonds at any time at the redemption prices described in this prospectus
supplement.
The Capital Securities offered hereby are offered severally by the
Underwriters, as specified herein, subject to receipt and acceptance by
them and subject to their right to reject any order in whole or in part.
It is expected that delivery of the Capital Securitiesbonds will be madesecured equally with all other bonds outstanding or
hereafter issued under our First and Refunding Mortgage.
-------------
Per
Bond Total
- ----- -----
Price to Investors (1)........................... % $
Initial purchasers' discount..................... % $
Proceeds, before expenses, to PECO Energy Company % $
(1)Plus accrued interest from ,20 , if settlement occurs after that
date.
-------------
The Bonds will be ready for delivery in book-entry-onlybook-entry form only through the facilities of The
Depository Trust Company on or about ______________, 1998.
_______________
* Salomon Brothers Inc has filed an application, .
Please see "Risk Factors" beginning on page S-4 for a discussion of factors
you should consider in connection with the United States
Patent and Trademark Office for the registrationa purchase of the "Capital Trust
Pass-through Securities" service mark. "TruPS"bonds.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of the bonds or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
registered service
mark ofcriminal offense.
-------------
Banc One Capital Markets, Inc.
Salomon Brothers Inc.
SALOMON SMITH BARNEY MERRILL LYNCH & CO.
_________________________________Smith Barney
The date of this Prospectusprospectus supplement is _____________, 1998., .
(continued from previous page)You should rely only on information contained in this document or the
prospectus or the documents to which we have referred you. We have not
authorized anyone to provide you with information that is different. This
document may only be used where it is legal to sell these securities. The
information in this document may only be accurate on the date of Delaware ("PECO Energy Capital"). The Trust will use the proceeds
from the sale of its Capital Securities to purchase the Series D Preferred
Securities, which will be the sole assets of the Trust. PECO Energy
Capital will lend the proceeds from the sale of its Series D Preferred
Securities, plus the capital contribution made by PECO Energy Capital
Corp., a Delaware corporationthis document.
-------------
TABLE OF CONTENTS
Page
----
Where You Can Find More Information........... S-1
PECO Energy Company........................... S-2
Corporate Structure........................... S-3
Risk Factors.................................. S-4
Use of Proceeds............................... S-7
Capitalization................................ S-7
Summary Historical Consolidated Financial Data S-8
Description of the Bonds...................... S-9
Underwriting.................................. S-10
Legal Matters................................. S-11
-------------
ABOUT THIS PROSPECTUS SUPPLEMENT
This prospectus supplement and the sole general partner of PECO Energy
Capital (the "General Partner"),attached prospectus contain information
about our company and about the bonds. They also refer to information contained
in other documents that we file with the Securities and Exchange Commission. If
this prospectus supplement is inconsistent with the prospectus or the documents
that are incorporated by reference in this prospectus, rely on this prospectus
supplement.
When we refer to "PECO," "the Company," "we," "our" or "us" in this
prospectus supplement, we mean PECO Energy Company a Pennsylvania
corporation ("PECO Energy"), which loan will be evidenced by PECO Energy's
____% Subordinated Deferrable Interest Debentures, Series D, due 2028 (the
"Series D Subordinated Debt Securities").
Holders of the Capital Securities will be entitled to receive
Distributions (as defined below) at the rate of __% of the liquidation
amount of $1,000 per Capital Security accumulating from the date of
original issuance and payable (subject to any Extension Period described
below) semiannually in arrears on __________ and __________ of each year,
commencing __________, 1998. Whenever the Trust receives any cash
distribution representing a semiannual distribution on the Series D
Preferred Securities (whether or not distributed by PECO Energy Capital on
the regular semiannual distribution date therefor) or payment under the
Payment and Guarantee Agreement (the "Series D Guarantee") issued by PECO
Energy for the benefit of the holders of the Series D Preferred Securities,
the Trust will distribute such amounts to the holders of the Capital
Securities in proportion to their respective number of Series D Preferred
Securities represented by such Capital Securities. As used herein, the
terms "Distribution" and "Distributions" shall include, as the context
requires, all semiannual distributions on the Capital Securities and the
Series D Preferred Securities, including any and all payments made under
the Series D Guarantee, as well as interest payments on the Series D
Subordinated Debt Securities. Under the Indenture dated as of July 1, 1994
between PECO Energy and First Union National Bank, as successor trustee (as
supplemented, the "Indenture"), PECO Energy has the right at any time, so
long as an Event of Default under the Indenture has not occurred and is
continuing, to extend the interest payment period for all Deferrable
Interest Subordinated Debentures issued thereunder (collectively,
"Subordinated Debt Securities") for up to 60 consecutive months (each, an
"Extension Period"). During any Extension Period, no Distributions will be
made on the Series D Preferred Securities represented by the Capital
Securities. See "Description of the Series D Subordinated Debt Securities
and the Indenture-Option to Extend Interest Payment Period" and "-Events of
Default."
PECO Energy will, through the Series D Guarantee, the Amended and
Restated Trust Agreement relating to the Trust (the "Trust Agreement"), the
Indenture and the Series D Subordinated Debt Securities, taken together fully, irrevocably and unconditionally guarantee all of PECO Energy
Capital's obligations under the Series D Preferred Securities. Under the
Series D Guarantee, PECO Energy will guarantee payment of accumulated and
unpaid semiannual Distributions, amounts payable upon redemption and
amounts payable upon liquidation with respect to the Series D Preferred
Securities, in each case, only to the extent that PECO Energy Capital has
funds on hand legally available therefor and payment does not violate
applicable law. If PECO Energy fails to make interest payments on its
Series D Subordinated Debt Securities, PECO Energy Capital will notour
subsidiaries.
WHERE YOU CAN FIND MORE INFORMATION
In connection with this offering, we have sufficient funds to pay Distributions on the Series D Preferred Securities.
The Series D Guarantee does not cover payment of Distributions when PECO
Energy Capital does not have sufficient funds to pay such Distributions.
In such event, the holders of Capital Securities representing the Series D
Preferred Securities would be required to seek enforcement of PECO Energy
Capital's rights against PECO Energy pursuant to the terms of the Indenture
as provided under "Description of the Series D Preferred Securities-Voting
Rights." The obligations of PECO Energy under the Series D Guarantee will
be subordinate and junior in right of payment to all general liabilities of
PECO Energy and its obligations under the Series D Subordinated Debt
Securities will be subordinate and junior in right of payment to all
present and future Senior Indebtedness of PECO Energy (as defined in
"Description of the Series D Subordinated Debt Securities-Subordination"),
which aggregated approximately $4.678 billion at December 31, 1997.
The Capital Securities will be subject to mandatory redemption upon any
redemption of Series D Preferred Securities, which will be subject to
optional redemption upon the occurrence of certain tax events, and which
will be subject to mandatory redemption upon payment at maturity or
redemption of the Series D Subordinated Debt Securities and the occurrence
of certain events under the Investment Company Act of 1940, as amended.
See "Description of the Series D Preferred Securities-Mandatory Redemption"
and "-Special Event Redemptions."
In the event of the liquidation of PECO Energy Capital, the Trust will
distribute to the holders of Capital Securities, after satisfaction of
creditors of the Trust as required by law, the amounts received by the
Trust from PECO Energy Capital representing the lesser of the Partnership
Liquidation Distribution (as defined in "Risk Factors-Rights Under the
Series D Guarantee") or the amount of assets of PECO Energy Capital legally
available therefor, in either case, in proportion to the respective number
of Series D Preferred Securities represented by such Capital Securities.
Upon any voluntary or involuntary dissolution or liquidation of PECO Energy
Capital, the holders of Series D Preferred Securities will be entitled to
receive out of the assets of PECO Energy Capital, after satisfaction of
liabilities to creditors and before distribution of assets is made to
holders of its general partner interests, the sum of their $1,000 stated
liquidation preference and all accumulated and unpaid Distributions to the
date of payment. All assets of PECO Energy Capital remaining after payment
of the liquidation distribution to the holders of all Cumulative Preferred
Securities of PECO Energy Capital (collectively, "Preferred Securities")
will be distributed to the General Partner.
The Capital Securities will be represented by global securities
registered in the name of The Depository Trust Company ("DTC") or its
nominee. Beneficial interests in the Capital Securities will be shown on,
and transfers thereof will be effected only through, records maintained by
participants in DTC. Capital Securities in certificated form will not be
issued in exchange for the global securities. See "Description of the
Capital Securities-Book-Entry-Only Issuance-The Depository Trust Company."
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN
TRANSACTIONS THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE
CAPITAL SECURITIES, INCLUDING ENTERING STABILIZING BIDS, EFFECTING
SYNDICATE COVERING TRANSACTIONS AND IMPOSING PENALTY BIDS. FOR A
DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
AVAILABLE INFORMATION
PECO Energy is subject to the information requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") and, in
accordance therewith, files reports, proxy and information statements and
other informationfiled with the Securities and
Exchange Commission (the "SEC") a registration statement under the Securities
Act of 1933, as amended (the "Securities Act"). SuchAs permitted by SEC rules, this
prospectus supplement and the accompanying prospectus omit information included
in the registration statement. For a more complete understanding of this offer,
you should refer to the registration statement, including its exhibits.
The public may read and copy the registration statement and any reports proxy and information statements andor
other information filed
by PECO Energy may be inspected and copiedthat we file with the SEC at the SEC's public reference facilities maintained by the SECroom,
Room 1024 at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at certain20549.
The public may obtain information on the operation of its regional offices at Suite 1400, 500 West
Madison Street, Chicago, IL 60661-2511 and Suite 1300, 7 World Trade
Center, New York, NY 10048. Copies of such material may also be obtained
from the Public Reference Section ofpublic reference room
by calling the SEC at 450 Fifth Street, N.W.,
Washington, D.C. 205491-800-SEC-0330. These documents are also available to the
public from commercial document retrieval services and at prescribed rates. In addition, registration
statements and certain other filings made withthe web site
maintained by the SEC through its
Electronic Data Gathering, Analysis and Retrieval ("EDGAR") system are
publicly available through the SEC's site on the Internet's World Wide Web,
located at http://www.sec.gov. The Registration Statement, including all
exhibits thereto and amendments thereof, has been filed withYou may also obtain a copy of the
SEC
through EDGAR. Securities ofregistration statement at no cost by writing us at the following address:
PECO Energy Company
Attn: Investor Relations
10 South Dearborn Street, 36th Floor
P.O. Box 805379
Chicago, IL 60680-5379
Information about us is also available on Exelon's web site at
http://www.exeloncorp.com. This URL and the SEC's URL above are listedintended to be
inactive textual references only. Such information on the New York and
Philadelphia Stock Exchanges, where reports, proxy and information
statements and other information concerning PECO Energy may be inspected.
No separate financial statements of PECO Energy Capitalour or the Trust
have been included herein. PECO Energy doesSEC's web site
is not consider that such
financial statements would be material to holders of Capital Securities
offered hereby because PECO Energy Capital and the Trust are special
purpose entities, have no independent operations and are not engaged in,
and do not propose to engage in, any activity other than as set forth
below. See "PECO Energy Capital" and "The Trust."
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the SEC pursuant to Section 13 of
the Exchange Act by PECO Energy (File No. 1-1401) are incorporated herein
by reference:
1. PECO Energy's Annual Report on Form 10-K for the year ended December
31, 1997; and
2. PECO Energy's Current Reports on Form 8-K dated January 9, 1998,
January 15, 1998, January 22, 1998, January 23, 1998 and
January 26, 1998.
Each document filed subsequent to the date of this Prospectus pursuant
to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act and prior to the
termination of the offering shall be deemed to be incorporated by reference
in this Prospectus and shall be a part hereof from the date of filing of
such document. Any statement contained herein or in a document all or a
portion of which is incorporated or deemed to be incorporated by reference
herein shall be deemed to be modified or superseded for purposes of this
Prospectus to the extent that a statement contained herein or in any other
subsequently filed document which also is or is deemed to be incorporated
by reference herein modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
THIS PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE NOT
PRESENTED HEREIN OR DELIVERED HEREWITH. PECO ENERGY UNDERTAKES TO PROVIDE
WITHOUT CHARGE TO EACH PERSON, INCLUDING ANY BENEFICIAL OWNER, TO WHOM A
PROSPECTUS IS DELIVERED, UPON WRITTEN OR ORAL REQUEST OF SUCH PERSON, A
COPY OF ANY OR ALL DOCUMENTS DESCRIBED ABOVE UNDER "INCORPORATION OF
CERTAIN DOCUMENTS BY REFERENCE," OTHER THAN EXHIBITS TO SUCH DOCUMENTS.
SUCH REQUESTS SHOULD BE DIRECTED TOprospectus.
S-1
PECO ENERGY COMPANY
FINANCIAL
DIVISION, S21-1, P.O. BOX 8699, PHILADELPHIA, PA 19101, (215) 841-5678.
3
SUMMARY
The following summary is qualifiedWe are a subsidiary of Exelon Corporation ("Exelon") and are engaged
principally in its entirety by referencethe purchase, transmission, distribution and sale of electricity
to residential, commercial, industrial and wholesale customers and in the
detailed information appearing elsewhere in this Prospectus.
RISK FACTORS
Prospective investors should carefully consider the matters set forth
under "Risk Factors."
PECO ENERGY
Incorporated in Pennsylvania in 1929, PECO Energy provides retail
electricpurchase, distribution and sale of natural gas to residential, commercial and
industrial customers. We deliver electricity to approximately 1.6 million
customers and natural gas service in southeastern Pennsylvania and, through
pilot programs, natural gas service to areas in Maryland and New Jersey.
PECO Energy also engages in the wholesale marketing of electricity on a
national basis and participates in joint ventures which provide
telecommunication services in the Philadelphia area.
PECO Energy'sapproximately 440,000 customers.
Our traditional retail service territory covers 2,107 square miles. Electricmiles in
southeastern Pennsylvania. We provide electric delivery service is furnished toin an area of
1,972 square miles, with a population of approximately 3.6 million, including
1.6 million in the City of Philadelphia. Approximately 94% of the retail electric service
area and 64% of retail kilowatthour sales are in the suburbs around
Philadelphia, and 6% of the retail service area and 36% of such sales are
in the City of Philadelphia. Natural gas service is supplied in a
1,475-square-mile1,475 square mile area ofin southeastern Pennsylvania adjacent to Philadelphia,
with a population of approximately 1.9 million.
Through
Horizon Energy,Pursuant to the Pennsylvania Electricity Generation Customer Choice and
Competition Act (the "Competition Act"), the Commonwealth of Pennsylvania
required the unbundling of retail electric services in Pennsylvania into
separate generation, transmission and distribution services with open retail
competition for generation services. Since the commencement of deregulation in
1999, we have served as the local distribution company providing electric
distribution services to all customers in our service territory and bundled
electric service to provider-of-last-resort customers, which are customers who
do not or cannot choose an alternate electric generation supplier.
As a result of deregulation, Exelon undertook a corporate restructuring to
separate its unregulated generation and other competitive businesses from its
regulated energy delivery businesses. As part of the corporate restructuring,
effective January 1, 2001, our unregulated operations were transferred to
separate subsidiaries of Exelon. The transferred assets and liabilities related
to nuclear, fossil and hydroelectric generation and wholesale services and
unregulated gas and electric sales activities, and administrative, information
technology and other support for all other business activities of Exelon and
its subsidiaries. In connection with the restructuring, we entered into a power
purchase agreement with Exelon Generation Company, LLC, a wholly owned
subsidiary of PECO Energy, and PECO
Energy/EnergyOne,Exelon, to supply us with all of our electric load requirements
for customers through 2010.
As a franchised energy products brand, PECO Energy
participates in Pennsylvania's pilot program for retail competition for
generation. For additional information, see "PECO Energy."
PECO ENERGY CAPITAL
PECO Energy Capital is a limited partnership formed in 1994public utility under the lawsPennsylvania Public Utility Code, we are
subject to regulation by the Pennsylvania Public Utility Commission ("PUC"),
including regulation as to electric distribution rates, retail gas rates,
issuances of securities and certain other aspects of our operations. As a
subsidiary of Exelon, a registered holding company under the StatePublic Utility
Holding Company Act of Delaware. All1935 ("PUHCA"), we are subject to a number of
its general partner interestsrestrictions. As an electric utility under the Federal Power Act, we are ownedalso
subject to regulation by PECOthe Federal Energy Capital Corp., aRegulatory Commission ("FERC" ) as
to transmission rates and certain other aspects of our business, including
interconnections and sales of transmission related assets.
Our principal executive offices are located at 2301 Market Street,
Philadelphia, PA 19101-8699, and our telephone number is (215) 841-4000.
S-2
CORPORATE STRUCTURE
We were incorporated in Pennsylvania in 1929. We are an indirect wholly
owned subsidiary of Exelon, a public utility holding company. Exelon is the
result of the merger in October 2000 between us and Unicom Corporation, the
former parent company of Commonwealth Edison Company. As part of a corporate
restructuring of Exelon, effective January 1, 2001, our power generation assets
and wholesale power marketing business, as well as the power generation assets
and wholesale power marketing business of Commonwealth Edison Company, were
transferred to Exelon Generation Company, LLC.
[FLOWCHART]
Exelon Corporation
-----------------------------------------
Exelon Energy Delivery Exelon Ventures
Company, LLC Company, LLC
--------------- ----------------
Commonwealth PECO Energy asExelon Exelon
Edison Company Company Generation Enterprises
Company, LLC Company, LLC
Electric and Gas Generation and Enterprises infrastructure
Distribution Power Marketing services, communications
retail energy sales,
energy services
----------------------------- --------------------------------------------
Regulated Unregulated
S-3
RISK FACTORS
In addition to the General Partner. As a limited partnership, allinformation contained elsewhere in this prospectus
supplement, you should carefully consider the risks described below. Each of
the following factors could have a material adverse effect on our business and
affairscould result in a loss or a decrease in the value of PECO Energy Capitalyour investment.
We are managedsubject to the risks inherent in the utility business and our cash flow
and earnings could be adversely affected by the General
Partner. PECO Energy Capital was created solelychanges in customer demand for
the purpose of issuing
the Preferred Securities and lending the proceeds thereofenergy, a failure to PECO Energy,
and entering into similar financing arrangements. Such loans are evidenced
by the Subordinated Debt Securities issued by PECO Energy in series under
the Indenture. The Subordinated Debt Securities are the only assets of
PECO Energy Capital and the only revenues of PECO Energy Capital are
interestdeliver on the Subordinated Debt Securities.part of our suppliers or, after our
long-term contracts expire, high prices and volatile markets for purchased
electricity.
The General Partner pays allutility business involves many operating risks. If our operating
expenses exceed the levels recovered from retail customers for an extended
period of PECO Energy Capital'stime, our cash flow and earnings would be negatively affected. In
addition, after our power purchase agreement with our affiliate Exelon
Generation expires in 2010, our results could be affected by increases in
purchased power costs. In addition, our provider-of-last-resort obligation may
continue past the expiration of this contract, which, depending upon the
volatility of the market for electricity at the time, could affect our
operating expenses and therefore results. Factors that could cause purchased
power costs to increase include, but are not limited to:
. increases in demand due to, for example, weather, customer growth or
customer obligations;
. below normal energy available in the market;
. increases in purchases in wholesale markets at prices above the amount
recovered in retail rates;
. extended outages of any thermal or other generating facilities or the
transmission lines that deliver energy to load centers; and
. failure to perform on the part of any party from which we purchase
capacity or energy.
Our financial performance also depends on our operation of our facilities.
Failures of equipment or facilities in our distribution system may cause
interruption of the services we provide, which could adversely affect our
business. Failures of equipment or facilities could result in lost revenues,
additional costs and possible claims against us for damages incurred by
customers as a result of the outage. Our efforts to repair or replace equipment
may not be successful or we may be unsuccessful in making the necessary
improvements to our transmission and distribution system, causing service
interruptions and having an adverse affect on our business.
If our operating expenses exceed the levels recovered from retail customers
for an extended period of time, our cash flow and earnings would be negatively
affected.
Our business may be adversely affected by regulatory changes in the electric
power and natural gas industries.
Transmission and distribution of electricity remain regulated industries,
while in many states, including the Commonwealth of Pennsylvania, electricity
generation has been deregulated. The regulation of the electric power and
natural gas industries, however, continues to undergo substantial changes at
both the federal and state level. These changes have significantly affected the
whole industry and the manner in which its participants conduct their
businesses. Future changes in laws and regulations, including changes resulting
from market volatility and increased security concerns, may have an effect on
our business in ways that we cannot predict.
Our revenues will be affected by rate reductions and rate caps currently in
effect and any that may be imposed in the future. The rate caps limit our
ability to recover increased expenses and the costs of investments
S-4
in new transmission and distribution facilities through rates. As a result, our
future results of operations will depend on our ability:
. to deliver electricity and gas to our customers cost-effectively,
particularly in light of the current caps on rates;
. to realize cost savings; and
. to manage our provider-of-last resort responsibilities.
Our financial performance depends on our ability to predict our load
requirements.
Under electric restructuring legislation in Pennsylvania, we are required to
provide generation and distribution services as the provider-of-last-resort to
customers who cannot or do not choose alternate suppliers or who choose to
return to our utility after taking service elsewhere. This obligation may
continue past the expiration of our power purchase agreement with Exelon
Generation in 2010. Because the choice of electricity generation supplier lies
with the customer, it is difficult for us to predict and plan for the level of
customers and associated energy demand. If these obligations remain unchanged,
we could be required to maintain reserves sufficient to serve 100% of the
service territory load at a tariffed rate on the chance that customers who
switched to new suppliers come back to us as a "last resort" option. A
significant over- or under-estimation of such reserves may subject us to a
commodity price risk. We continue to be obligated to provide a reliable
delivery system under cost-based rates.
We have a limited operating history as a stand-alone transmission and
distribution provider.
We have operated as a separate, stand-alone electric and gas distribution
entity since January 1, 2001. We depend on Exelon for some of our liquidity and
capital resource needs and on our affiliates for generation as well as for
certain general liability for
allcorporate and other services.
We are subject to control by Exelon.
We are ultimately controlled by Exelon and, therefore, Exelon controls
decisions regarding our business and has control over our management and
affairs. In circumstances involving a conflict of PECO Energy Capital's obligations.
THE TRUST
PECO Energy Capital Trust III isinterest between Exelon, on
the one hand, and our creditors, on the other, Exelon could exercise its power
to control us in a statutory business trust recently
createdmanner that would benefit Exelon to the detriment of our
creditors, including the holders of the mortgage bonds.
Conflicts of interest may arise between us and our affiliate.
We rely on purchases from our affiliate Exelon Generation under long-term
contracts in order to supply electricity to our customers. Conflicts of
interest may arise if we need to enforce the terms of agreements between us and
Exelon Generation. Decisions concerning the interpretation or operation of
these agreements could be made from perspectives other than the interests
solely of our company or its creditors, including the holders of the mortgage
bonds.
We are subject to regulation by the SEC under the laws of the State of Delaware. The Trust exists for the
sole purpose of issuing the Capital Securities representing
4
the Series D Preferred SecuritiesPublic Utility Holding
Company Act.
We are subject to be heldregulation by the Trust and
performing functions directly related thereto. The TrustSEC under PUHCA. Under PUHCA, we cannot
issue otherdebt or equity securities or guaranties without the SEC's prior approval.
Under PUHCA, generally, we can invest only in traditional electric and gas
utility businesses and related businesses. As a utility subsidiary, however, we
can issue securities without SEC approval provided that the issuance is
approved by a state commission. PUHCA also imposes restrictions on transactions
among affiliates. The restrictions imposed on us by PUHCA may limit our ability
to pursue acquisition or development opportunities.
S-5
We are subject to regulation by the Pennsylvania Public Utility Commission.
We are a public utility under the Pennsylvania Public Utility Code and, as a
result, we are subject to regulation by the PUC as to electric distribution
rates, retail gas rates, issuances of securities and certain other aspects of
our operations. We cannot predict the ways in which changes in the regulation
by the PUC could affect our business and operations.
We are subject to regulation by FERC.
We also provide wholesale transmission service under rates established by
FERC. FERC has used its regulation of transmission to encourage competition for
wholesale generation services and the development of regional structures to
facilitate regional wholesale markets. FERC continues to propose regulations
regarding evolving wholesale markets. Further regulation by FERC in this area
could affect our business in ways we cannot predict.
There is no public market for the bonds.
We can give no assurances concerning the liquidity of any debt securities. The Series D Preferred
Securities will bemarket that may
develop for the only assetsbonds offered hereby, the ability of any investor to sell any
of the Trust. All expenses and
liabilitiesbonds, or the price at which investors would be able to sell them. If a
market for the bonds does not develop, investors may be unable to resell the
bonds for an extended period of time, if at all. If a market for the bonds does
develop, it may not continue or it may not be sufficiently liquid to allow
holders to resell any of the Trust willbonds. Consequently, investors may not be paid byable to
liquidate their investment readily, and lenders may not readily accept the
General Partner; provided
that, if the trustee of the Trust (the "Trustee") incurs fees, charges or
expensesbonds as collateral for which it is not otherwise liable under the Trust Agreement at
the election of a holder of Capital Securities or other person, such holder
or other person will be liable for such fees, charges and expenses.
THE OFFERING
Securities Offered .....$78,105,000 aggregate stated liquidation preference
of Capital Securities (liquidation preference $1,000
per Capital Security).
Offering Price .........$1,000 per Capital Security.
General ................Each Capital Security will represent a Series D
Preferred Security issued by PECO Energy Capital.
Such Series D Preferred Securities will represent an
undivided beneficial interest in the assets of PECO
Energy Capital. PECO Energy Capital will use the
proceeds from the sale of its Series D Preferred
Securitiesloans.
S-6
USE OF PROCEEDS
We intend to purchase the Series D Subordinated
Debt Securities, which mature on __________,
2028 unless redeemed earlier as described under
"Series D Preferred Securities Special Event
Redemptions."
Distributions ..........The Distributions payable on the Capital Securities
will be fixed at a rate per annum of ____% of the
stated liquidation preference of $1,000 per Capital
Security and will accumulate from the date of
original issuance of the Capital Securities and
(subject to any Extension Period) will be payable
semiannually, in arrears, on ___________ and
___________ of each year, commencing ________,
1998. See "Description of the Capital
Securities Distributions."
5
Option to Extend
Interest Payment
Period ...............So long as no Event of Default has occurred and is
continuing under the Indenture, PECO Energy will
have the right to extend the interest payment period
for all Subordinated Debt Securities pursuant to an
Extension Period. No Extension Period may exceed
60 consecutive months or extend beyond the
maturity date of any Subordinated Debt Securities.
Distributions on the Capital Securities will be
deferred during any Extension Period. See
"Description of the Series D Subordinated Debt
Securities-Option to Extend Interest Payment
Period" and "United States Taxation-Potential
Extension of Payment Period."
Liquidation Preference..In the event of the liquidation of PECO Energy
Capital, the Trust will distribute to the holders of
Capital Securities, after satisfaction of creditors
of the Trust as required by law, the amounts received
by the Trust from PECO Energy Capital
representing the lesser of the Partnership
Liquidation Distribution (as defined in "Risk
Factors-Rights Under the Series D Guarantee") or
the amount of assets of PECO Energy Capital
legally available therefor, in either case, in
proportion to the respective number of Series D
Preferred Securities represented by such Capital
Securities. Upon any voluntary or involuntary
dissolution or liquidation of PECO Energy Capital,
the holders of Series D Preferred Securities will be
entitled to receive out of the assets of PECO Energy
Capital, after satisfaction of liabilities to creditors
and before distribution of assets is made to holders
of its general partner interests, the sum of their
$1,000 stated liquidation preference and all
accumulated and unpaid Distributions to the date of
payment. See "Description of the Series D Preferred
Securities-Liquidation Distribution."
6
Redemption of Capital
Securities ...........The Series D Preferred Securities are not subject to
redemption except upon the repayment of the
Series D Subordinated Debt Securities at maturity or
upon the occurrence of certain Special Events as
described in "Description of the Series D Preferred
Securities-Mandatory Redemption" and " Special
Event Redemptions." The proceeds from any
redemption of the Series D Preferred Securities will
be used to redeem a like amount of Capital
Securities. See "Description of the Capital
Securities-Redemption."
The Series D Guarantee..Under the Series D Guarantee, PECO Energy will
guarantee payment of accumulated and unpaid
semiannual Distributions, amounts payable on
redemption and amounts payable upon liquidation
with respect to the Series D Preferred Securities, in
each case, only to the extent that PECO Energy
Capital has funds on hand legally available therefor
and payment does not violate applicable law. The
Series D Guarantee does not cover payment of
Distributions when PECO Energy Capital does not
have sufficient funds to pay such Distributions.
PECO Energy will, through the Series D Guarantee,
the Trust Agreement, the Indenture and the Series D
Subordinated Debt Securities taken together, fully,
irrevocably and unconditionally guarantee all of
PECO Energy Capital's obligations under the Series
D Preferred Securities.
Ranking.................The Series D Subordinated Debt Securities will be
subordinate and rank junior in right of payment to
all Senior Indebtedness of PECO Energy. See
"Description of the Series D Subordinated Debt
Securities-Subordination." The Guarantee will be
subordinate and rank junior in right of payment to
all general liabilities of PECO Energy. See
"Description of the Guarantee-Status of the Series
D Guarantee."
Voting Rights...........Holders of Capital Securities will have limited
voting rights. See "Description of the Capital
Securities-Voting Rights."
7
Ratings.................The Capital Securities are expected to be rated Baa2
by Moody's Investors Service, Inc., BBB by
Standard and Poor's Rating Services and BBB+ by
Fitch IBCA, Inc. A security rating is not a
recommendation to buy, sell or hold securities and
may be subject to revision or withdrawal at any time
by the assigning rating organization.
ERISA Considerations....Prospective purchasers should consider the
information set forth under "ERISA
Considerations."
Use of Proceeds.........It is anticipated that PECO Energy will use the proceeds from the sale of the Series D Subordinated
Debt Securitiesbonds, after deducting
underwriting compensation and estimated fees and expenses, to redeemrepay commercial
paper and for general corporate purposes. The proceeds of the commercial paper
were used to pay at maturity the following:
. $175,000,000, 7.125% first mortgage bonds due September 1, 2002.
. $5,280,000, 7.5% first mortgage bonds due July 15, 2002.
. $41,636,000, 8.0% first mortgage bonds due April 1, 2002.
CAPITALIZATION
The following table sets forth our short-term debt and capitalization as of
June 30, 2002 (1) on a seriesconsolidated basis and (2) on a consolidated basis as
adjusted to reflect this offering and the use of outstanding
Preferred Securities. Seeproceeds from this offering as
set forth under "Use of Proceeds.Proceeds" above. This table should be read in
conjunction with our consolidated financial statements and related notes for
the periods ended June 30, 2002, incorporated by reference in the accompanying
prospectus. See "Where You Can Find More Information" in the accompanying
prospectus.
As of June 30, 2002
------------------
($ in millions)
As Adjusted
for
Actual Offering(a)
------ -----------
Short-term debt (b)............. $1,085 $ 863
------ ------
Capitalization:
Long-term debt (c):
Transition bonds (d)..... $4,132 $4,132
First mortgage bonds..... 509 734
Other long-term debt..... 228 228
Preferred securities......... 284 284
Common shareholders' equity.. 385 385
------ ------
Total capitalization..... $5,538 $5,763
====== ======
- --------
(a) Reflects the payment of $222 million of first mortgage bonds and commercial
paper.
(b) Includes current maturities of long-term debt of $910 million, of which
$280 million are transition bonds.
(c) Includes unamortized debt discounts and premiums. Excludes current
maturities.
(d) Transition bonds represent bonds issued by our subsidiary to securitize a
portion of our stranded cost recovery.
S-7
SUMMARY HISTORICAL CONSOLIDATED FINANCIAL DATA
The following table sets forth our summary historical consolidated financial
data. The historical consolidated income statement data for the years ended
December 31, 2001, December 31, 2000 and December 31, 1999 and the historical
consolidated balance sheet data as of December 31, 2001 and 2000 have been
derived from our audited financial statements incorporated by reference into
the accompanying prospectus. The historical consolidated income statement data
for the six months ended June 30, 2002 and 2001 and the historical consolidated
balance sheet data as of June 30, 2002 and 2001 have been derived from our
unaudited financial statements incorporated by reference into the accompanying
prospectus. As part of Exelon's restructuring, effective January 1, 2001, our
unregulated generation and other competitive businesses and related assets and
liabilities were transferred to separate subsidiaries of Exelon. The
restructuring has had a significant impact on our assets, liabilities and
equity and our results of operations. Our results of operations and assets and
liabilities prior to January 2001 do not reflect the restructuring. You should
read the following together with our historical consolidated financial
statements and the related notes incorporated by reference in the accompanying
prospectus. See "Where You Can Find More Information."
8
Years Ended December 31, Six Months Six Months
------------------------- Ended Ended
1999 2000 2001 June 30, 2001 June 30, 2002
------- ------- ------- ------------- -------------
($ in millions)
Income Statement Data:
Operating revenues................... $ 5,478 $ 5,950 $ 3,965 $ 1,957 $ 2,015
Operating income..................... 1,373 1,222 999 533 461
Net income on common stock........... 570 497 415 202 177
Cash Flow Data:
EBITDA (a)........................... $ 1,731 $ 1,659 $ 1,415 $ 733 $ 682
Cash interest paid (b)............... $ 350 $ 431 $ 416 $ 212 $ 193
Capital expenditures................. 491 549 264 122 123
Cash flows from operating activities. 895 756 828 321 468
Cash flows from investing activities. (886) (894) (235) (97) (122)
Cash flows from financing activities. (3) 133 (579) (257) (306)
As of December 31,
------------------------- As of As of
1999 2000 2001 June 30, 2001 June 30, 2002
------- ------- ------- ------------- -------------
($ in millions)
Balance Sheet Data:
Property, plant and equipment, net... $ 5,004 $ 5,158 $ 4,047 $ 3,976 $ 4,098
Total assets......................... 13,087 14,776 10,745 10,841 10,717
Long-term debt (c)................... 5,969 6,002 5,438 5,606 4,869
Preferred securities................. 321 302 284 302 284
Common shareholders' equity.......... 1,773 1,638 323 243 385
- --------
(a)EBITDA is defined as operating income plus depreciation and amortization as
reported in the consolidated statements of cash flows. EBITDA is not a
measure of performance under generally accepted accounting principles
("GAAP"). While EBITDA should not be considered as a substitute for net
income, cash flows from operating activities and other income or cash flow
statement data prepared in accordance with GAAP, or as a measure of
profitability or liquidity, management understands that EBITDA is
customarily used as a measure in evaluating companies.
(b)Includes cash interest paid of $107 million, $268 million, $315 million,
$158 million and $145 million in connection with transition bonds for the
years ended December 31, 1999, 2000 and 2001, the six months ended June 30,
2001 and the six months ended June 30, 2002, respectively.
(c)Excludes current maturities of $128 million, $553 million, $548 million,
$567 million and $910 million as of December 31, 1999, December 31, 2000,
December 31, 2001, June 30, 2001 and June 30, 2002, respectively.
S-8
RISK FACTORS
Prospective purchasers of Capital Securities should carefully reviewDESCRIPTION OF THE BONDS
The following description is qualified in its entirety by the more detailed
information containedappearing elsewhere in this Prospectus and should
particularly consider the following matters:
RANKING OF SUBORDINATE OBLIGATIONS UNDER THE SERIES D GUARANTEE AND
SERIES D SUBORDINATED DEBT SECURITIES
PECO Energy's obligations under the Series D Guarantee will be
subordinate and junior in right of payment to all general liabilities of
PECO Energy and its obligations under the Series D Subordinated Debt
Securities will be subordinate and junior in right of payment to all Senior
Indebtedness of PECO Energy (as defined under "Description of the Series D
Subordinated Debt Securitiesprospectus supplement and the
Indenture-Subordination"). At
December 31, 1997, the Senior Indebtedness of PECO Energy aggregated
approximately $4.678 billion. There are no termsaccompanying prospectus. An investment in the Series D
Subordinated Debt Securities or the Series D Guarantee that limit PECO
Energy's abilitybonds involves certain risks
relating to incur additional indebtedness, including indebtedness
that ranks senior to the Series D Subordinated Debt Securitiesour business, prospects, financial condition and the
Series D Guarantee. The Series D Guarantee guarantees paymentresults of
accumulatedoperations and unpaid semiannual Distributions, amounts payable on
redemption and amounts payable on liquidation with respect to the Series D
Preferred Securities, in each case, however, only to the extent that PECO
Energy Capital has funds on hand legally available therefor and payment
thereof does not otherwise violate applicable law. If PECO Energy were to
default on its obligation to pay interest or amounts payable on redemption
or maturity of the Series D Subordinated Debt Securities, PECO Energy
Capital would lack legally available funds for the payment of Distributions
or amounts payable on redemption of the Series D Preferred Securities or
upon liquidation of PECO Energy Capital, and in such event, the holders of
the Capital Securities representing the Series D Preferred Securities would
not be able to rely upon the Series D Guarantee for payment of such
amounts. Instead, holders of the Capital Securities representing the
Series D Preferred Securities would be required to seek enforcement of PECO
Energy Capital's rights against PECO Energy pursuantcertain other risks relating to the terms of the Indenturebonds. These
risks are described in "Risk Factors" beginning on page S-4 of this prospectus
supplement.
Securities Offered.......... $225,000,000, % First and Refunding Mortgage
Bonds due ("bonds"). The bonds will be
issued under our mortgage as provided in "Descriptionproposed to be
further amended and supplemented by a
supplemental mortgage indenture relating to the
bonds (herein sometimes referred to collectively
as the "mortgage"). Wachovia Bank, National
Association is the trustee under the mortgage
("trustee").
Interest Payment Dates...... of each year, beginning
, , until the principal is paid or
made available for payment. Interest on the bonds
will accrue from the most recent date to which
interest has been paid. Interest will be computed
on the basis of a 360-day year comprised of
twelve 30-day months.
Maturity.................... , .
Optional Redemption.........
Security.................... The bonds will be secured equally with all other
bonds outstanding or hereafter issued under the
mortgage (sometimes referred to herein as the
"mortgage bonds") by the lien of the Series D Preferred Securities-
Voting Rights." See "Descriptionmortgage.
The lien of the Series D Guarantee Statusmortgage, subject to (1) minor
exceptions and certain excepted encumbrances that
are defined in the mortgage and (2) the trustee's
prior lien for compensation and expenses,
constitutes a first lien on substantially all of
our properties. The mortgage does not constitute
a lien on any property owned by our subsidiaries
or affiliates. Our properties consist principally
of electric transmission and distribution lines
and substations, gas distribution facilities and
general office and service buildings.
We may not issue securities that will rank ahead
of the Series D Guarantee"mortgage bonds as to security. We may
acquire property subject to prior liens. If such
property is made the basis for the issuance of
additional bonds after we acquire it, all
additional bonds issued under the prior lien must
be pledged with the trustee as additional
security under the mortgage.
Form........................ The bonds will be issued in minimum denominations
of $ and "Descriptionintegral multiples of $ in
excess of that. The bonds will be book-entry only
and registered in the name of a nominee of DTC.
S-9
UNDERWRITING
Under the terms and subject to the conditions contained in an underwriting
agreement dated , 2002, we have agreed to sell to the underwriters named
below, for whom Salomon Smith Barney and Banc One Capital Market, Inc. and
Salomon Smith Barney Inc. are acting as representatives, the following
respective principal amounts of the Series D Subordinated Debtsecurities:
Principal
Underwriter Amount
----------- ------
Banc One Capital Markets, Inc.
Salomon Smith Barney Inc...... $
------------
Total......................... $225,000,000
============
The underwriting agreement provides that the underwriters are obligated to
purchase all of the bonds if any are purchased. The underwriting agreement also
provides that if an underwriter defaults, the purchase commitments of
non-defaulting underwriters may be increased or the offering of the bonds may
be terminated.
The underwriters propose to offer the bonds initially at the public offering
price on the cover page of this prospectus supplement and to selling group
members at that price less a selling concession of % of the principal amount
per bond. The underwriters and selling group members may allow a discount of %
of the principal amount per bond on sales to other broker/dealers. After the
initial public offering, the representatives may change the public offering
price and concession and discount to broker/dealers.
We estimate that our out-of-pocket expenses for this offering will be
approximately $ .
The bonds are a new issue of securities with no established trading market.
One or more of the underwriters intends to make a secondary market for the
bonds. However, they are not obligated to do so and may discontinue making a
secondary market for the bonds at any time without notice. No assurance can be
given as to how liquid the trading market for the bonds will be.
We have agreed to indemnify the underwriters against liabilities under the
Securities Act of 1933, or contribute to payments which the underwriters may be
required to make in that respect.
The underwriters and/or their affiliates have in the past and may in the
Indenture-Subordination."
OPTION TO EXTEND INTEREST PAYMENT PERIOD; TAX CONSIDERATIONS
PECO Energy willfuture provide investment and commercial banking and other related services to
us and our subsidiaries and affiliates in the ordinary course of business, for
which the underwriters and/or their affiliates have received or may receive
customary fees and reimbursement of their out-of-pocket expenses. Banc One
Capital Markets, Inc. is also a dealer in our commercial paper. John W. Rogers
Jr., who is on the board of Exelon, is also a board member of Bank One Corp.
In connection with the offering, underwriters may engage in stabilizing
transactions, over-allotment transactions, syndicate covering transactions and
penalty bids in accordance with Regulation M under the Securities Exchange Act
of 1934.
. Stabilizing transactions permit bids to purchase the underlying security
so long as the stabilizing bids do not exceed a specified maximum.
. Over-allotment involves sales by the underwriters of bonds in excess of
the principal amount of the bonds the underwriters are obligated to
purchase, which creates a syndicate short position.
. Syndicate covering transactions involve purchases of the bonds in the
open market after the distribution has been completed in order to cover
syndicate short positions.
S-10
. Penalty bids permit the representatives to reclaim a selling concession
from a syndicate member when the bonds originally sold by such syndicate
member are purchased in a stabilizing transaction or a syndicate covering
transaction to cover syndicate short positions.
These stabilizing transactions, syndicate covering transactions and penalty
bids may have the right under the Indenture to extend the
interest payment period on all Subordinated Debt Securities for up to 60
consecutive months, and, as a consequence, semiannual Distributions on the
Series D Preferred Securities may be deferred by PECO Energy Capital during
any such Extension Period. Distributions in arrears after the semiannual
distribution date therefor will accumulate additional Distributions thereon
at the rate per annumeffect of _____% thereof. In the event PECO Energy
exercises its right to extend the interest payment period on the
Subordinated Debt Securities, PECO Energy may not declare dividends on any
shares of its capital stock during such Extension Period. See "Description
of the Series D Subordinated Debt Securities and the Indenture Option to
Extend Interest Payment Period."
Should an Extension Period occur, a holder of Capital Securities will
accrue interest income (as original issue discount) on an economic accrual
basis in respect of its pro rata share of the Series D
9
Preferred Securities held by the Trust. As a result, a holder of
Capital Securities will include such interest in gross income for federal
income tax purposes in advance of the receipt of cash, and will not receive
the cash related to such income from the Trust if the holder disposes of
the Capital Securities prior to the record date for the payment of
Distributions. See "United States Taxation-Taxability of Distributions."
PECO Energy has no current intention of exercising its right to defer
payments of interest by extending the interest payment period on the Series
D Subordinated Debt Securities. However, should PECO Energy exercise such
right in the future,raising or maintaining the market price of the
Capital Securities is likely
to be affected. An owner who disposes of Capital Securities during an
Extension Period might not receive the same return on investment as an
owner who continues to hold Capital Securities. In addition, asbonds or preventing or retarding a result
of the mere existence of PECO Energy's right to defer interest payments on
the Series D Subordinated Debt Securities,decline in the market price of the Capital
Securitiesbonds. As
a result, the price of the bonds may be higher than the price that might
otherwise exist in the open market. These transactions, if commenced, may be
discontinued at any time.
A prospectus in electronic format may be made available on the web sites
maintained by one or more volatileof the underwriters participating in this offering.
LEGAL MATTERS
Ballard Spahr Andrews & Ingersoll, LLP, Philadelphia, Pennsylvania, will
provide an opinion as to legal matters in connection with the bonds. Certain
legal matters will be passed on for the underwriters by Winston & Strawn,
Chicago, Illinois. Winston & Strawn provides legal services to Exelon and
certain of its subsidiaries from time to time.
S-11
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an
offer to sell these securities and we are not soliciting an offer to buy these
securities in any jurisdiction where the offer or sale is not permitted.
SUBJECT TO COMPLETION, DATED , 2002.
PROSPECTUS
PECO Energy Company
[LOGO]
Peco/R/
An Exelon Company
-------------
up to $900,000,000
First and Refunding Mortgage Bonds
Preferred Stock, no par value
-------------
We will provide you with more specific terms of the securities to be offered
at any time in supplements to this prospectus. The prospectus supplements may
also add, update or change information contained in this prospectus. You should
read this prospectus and the applicable prospectus supplement carefully before
you invest. This prospectus may not be used to sell securities unless
accompanied by a prospectus supplement.
We may offer these securities from time to time in amounts, at prices and on
other terms to be determined at the time of offering. The total offering price
of the securities offered to the public will be limited to $900,000,000.
-------------
Neither the Securities and Exchange Commission nor any other regulatory body
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.
This prospectus may not be used to consummate sales of offered securities
unless accompanied by a prospectus supplement.
The date of this prospectus is , 2002.
You should rely only on the information contained in this document or
incorporated by reference into this document. We have not authorized anyone to
provide you with information that is different. This prospectus and any related
supplement may only be used where it is legal to sell these securities. You
should not assume that the information contained in this prospectus or any
supplement is accurate as of any date other than the date on the front of those
documents. Our business, financial condition, results of operations and
prospects may have changed since that date.
-------------
TABLE OF CONTENTS
Section Page
------- ----
About this Prospectus............................................................. 1
Forward-Looking Statements........................................................ 1
Where You Can Find More Information............................................... 2
Documents Incorporated by Reference............................................... 3
PECO Energy Company............................................................... 3
Use of Proceeds................................................................... 4
Ratio of Earnings to Fixed Charges and Ratio of Earnings to Combined Fixed Charges
and Preferred Stock Dividends................................................... 4
Description of the First and Refunding Mortgage Bonds............................. 5
Description of the Preferred Stock................................................ 8
Book-Entry Bonds and Preferred Stock.............................................. 11
Plan of Distribution.............................................................. 13
Legal Matters..................................................................... 13
Experts........................................................................... 13
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that we filed with the
Securities and Exchange Commission (the "SEC") using a "shelf" registration
process, relating to the first and refunding mortgage bonds and the preferred
stock, no par value, generally described in this prospectus. Under this shelf
process, we may sell the securities described in this prospectus in one or more
offerings up to a total initial offering price of $900,000,000.
This prospectus provides you with a general description of the securities we
may offer. This prospectus does not contain all of the information set forth in
the registration statement as permitted by the rules and regulations of the
SEC. For additional information regarding us and the offered securities, please
refer to the registration statement of which this prospectus forms a part. Each
time we sell securities, we will provide a prospectus supplement that will
contain specific information about the terms of that offering. A prospectus
supplement may also add, update or change information contained in this
prospectus. You should read both this prospectus and any prospectus supplement
together with additional information described under the heading "Where You Can
Find More Information."
Unless otherwise indicated, all references in this prospectus or a
supplement to "PECO Energy Company," "PECO," "we," "our," "us," or similar
terms refer to PECO Energy Company together with our subsidiaries.
FORWARD-LOOKING STATEMENTS
This prospectus and the documents we have filed with the SEC, which we have
referenced under "Where You Can Find More Information" and "Documents
Incorporated by Reference" contain forward-looking statements made pursuant to
the safe harbor provisions of the Private Securities Litigation Reform Act of
1995. All statements, other securitiesthan statements of historical facts, included in
this prospectus that address activities, events or developments that we expect
or anticipate will or may occur in the future, including such matters as our
projections, future capital expenditures, business strategy, competitive
strengths, goals, expansion, market and industry developments and the growth of
our businesses and operations, are forward-looking statements. These statements
are based on assumptions and analyses made by us in light of our experience and
our perception of historical trends, current conditions and expected future
developments, as well as other factors we believe are appropriate under the
circumstances. These statements involve a number of risks and uncertainties,
many of which are beyond our control. The following are among the most
important factors that could cause actual results to differ materially from the
forward-looking statements:
. the significant considerations and risks discussed in this prospectus;
. general and local economic, market or business conditions;
. fluctuations in demand for electricity, capacity and ancillary services
in the markets in which we operate;
. uncertain obligations due to customers' right to choose generation
suppliers;
. changes in laws or regulations that are not subjectapplicable to such deferrals.
TAX EVENT OR INVESTMENT COMPANY EVENT REDEMPTION
Upon the occurrenceus;
. environmental constraints on construction and continuation of a Tax Event (as defined in
"Descriptionoperation; and
. access to capital.
Consequently, all of the Series D Preferred Securities-Special Event
Redemptions"),forward-looking statements made in this prospectus
are qualified by these cautionary statements and we cannot assure you that the
General Partnerresults or developments anticipated by us will be realized or, even if
realized, will have the rightexpected consequences to redeemor effects on us or our
business prospects, financial condition or results of operations. You should
not place undue reliance on these forward-looking
1
statements in making your investment decision. We expressly disclaim any
obligation or undertaking to release publicly any updates or revisions to these
forward-looking statements to reflect events or circumstances that occur or
arise or are anticipated to occur or arise after the Series
D Preferreddate hereof. In making an
investment decision regarding the securities described in this prospectus, we
are not making, and you should not infer, any representation about the likely
existence of any particular future set of facts or circumstances.
WHERE YOU CAN FIND MORE INFORMATION
We are a reporting company and file annual, quarterly and current reports,
proxy statements and other information with the SEC. The public may read and
copy the registration statement and any reports or other information that we
file with the SEC at the SEC's public reference room, Room 1024 at Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549. The public may obtain
information on the operation of the public reference room by calling the SEC at
1-800-SEC-0330. These documents are also available to the public from
commercial document retrieval services and at the web site maintained by the
SEC at http://www.sec.gov. Each outstanding series of our preferred stock is
listed on the New York Stock Exchange where reports, proxy and information
statements and other information about us may be inspected. You may also obtain
a copy of the registration statement at no cost by writing us at the following
address:
PECO Energy Company
Attn: Investor Relations
10 South Dearborn Street, 36/th/ Floor
P.O. Box 805379
Chicago, IL 60680-5379
This prospectus is one part of a registration statement filed on Form S-3
with the SEC under the Securities Act of 1933, as amended, known as the
Securities Act. This prospectus does not contain all of the information set
forth in wholethe registration statement and the exhibits and schedules to the
registration statement. For further information concerning us and the
securities, you should read the entire registration statement, including this
prospectus and any related prospectus supplements, and the additional
information described under the sub-heading "Documents Incorporated By
Reference" below. The registration statement has been filed electronically and
may be obtained in any manner listed above. 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 SEC. Each
such statement is qualified in its entirety by such reference.
Information about us is also available on Exelon's web site at
http://www.exeloncorp.com. This URL and the SEC's URL above are intended to be
inactive textual references only. Such information on our or the SEC's web site
is not a part of this prospectus.
2
DOCUMENTS INCORPORATED BY REFERENCE
The SEC allows us to "incorporate by reference" information that we file
with them, which means that we can disclose important information to you by
referring you to those other documents. The information incorporated by
reference is an important part of this prospectus, and information that we file
later with the SEC will automatically update and supersede this information. We
incorporate by reference the documents listed below and any future filings we
will make with the SEC under Section 13(a), 13(c), 14 or 15(d) of the Exchange
Act but prior to the termination of any offering of securities made by this
prospectus:
. PECO's Annual Report on Form 10-K for the fiscal year ended December 31,
2001;
. PECO's Quarterly Report on Form 10-Q for the period ended March 31, 2002;
. PECO's Quarterly Report on Form 10-Q for the period ended June 30, 2002;
and
. PECO's Current Reports on Form 8-K filed August 2, 2002, July 16, 2002,
April 25, 2002 and January 31, 2002.
Upon written or oral request, we will provide without charge to each person,
including any beneficial owner, to whom this prospectus is delivered, a copy of
any or all of such documents which are incorporated herein by reference (other
than exhibits to such documents unless such exhibits are specifically
incorporated by reference into the documents that this prospectus
incorporates). Written or oral requests for copies should be directed to PECO
Energy Company, Attn: Investor Relations, 10 South Dearborn Street, 36/th/
Floor, P.O. Box 805379, Chicago, IL 60680-5379.
Any statement contained in this prospectus, or in part, and upon the occurrencea document all or a
portion of an
Investment Company Event (as defined in "Descriptionwhich is incorporated by reference, shall be modified or superseded
for purposes of the Series D
Preferred Securities-Special Event Redemptions"), the General Partner must
redeem the Series D Preferred Securities in whole but not in part, and in
either case, cause a mandatory redemption of the Capital Securities at a
redemption price equal to the liquidation preference of $1,000 plus
accumulated and unpaid Distributions to the date of redemption within 90
days following the occurrence of such Tax Event or Investment Company
Event. A holder of Series D Preferred Securities will recognize gain or
loss upon such a redemption for federal income tax purposesthis prospectus to the extent that a statement contained in
this prospectus, any supplement or any document incorporated by reference
modifies or supersedes such statement. Any such statement so modified or
superseded shall not, except as so modified or superseded, constitute a part of
this prospectus.
PECO ENERGY COMPANY
We are a subsidiary of Exelon Corporation and are engaged principally in the
liquidation preference differs from such holder's adjusted tax
basis for the Series D Preferred Securities. Any accumulatedpurchase, transmission, distribution and unpaid
Distributions also will be taxablesale of electricity to the extent that such holder has not
already taken such Distributions into account. See "United States Taxation-
Disposition of the Capital Securities."
RIGHTS UNDER THE SERIES D GUARANTEE
Under the Series D Guarantee, PECO Energy will agree to pay (i) any
accumulatedresidential,
commercial, industrial and unpaid Distributions on the Series D Preferred Securities
to the extent that PECO Energy Capital has funds on hand legally available
therefor, (ii) the redemption price payable with respect to any Series D
Preferred Securities called for redemption by PECO Energy Capital to the
extent that PECO Energy Capital has funds on hand legally available
therefor, and (iii) upon liquidation of PECO Energy Capital, the lesser of
(a) the portion of the Partnership Liquidation Distribution (as defined
below) applicable to the Series D Preferred Securities and (b) the amount
of assets of PECO Energy Capital legally available for distribution to
holders of Series D Preferred Securities in liquidation of PECO Energy
Capital. For the purposes hereof, "Partnership Liquidation Distribution"
shall mean the stated liquidation preference of all Preferred Securities
and all accumulated and unpaid Distributions to the date of payment for
such series of Preferred Securities. See "Description of the Series D
Guarantee-General." If PECO Energy were to default on its obligation to
pay amounts payable on the Series D Subordinated Debt Securities, PECO
Energy Capital would lack funds for the payment of Distributions or amounts
payable on
10
redemption of the Series D Preferred Securities or upon liquidation of
PECO Energy Capital,wholesale customers and in each such event, holdersthe purchase,
distribution and sale of Capital Securities
would not be ablenatural gas to rely upon the Series D Guarantee for payment of such
amounts. The holders of Capital Securities, together with the holders of
Series D Preferred Securities other than the Trust, representing not less
than 10% aggregate liquidation preference of the Series D Preferred
Securities will have the rightresidential, commercial and industrial
customers. We deliver electricity to direct the time, method and place of
conducting any proceeding for any remedy available in respect of the Series
D Guarantee, including the right to direct the General Partner or the
Special Representative (as defined under "Description of the Series D
Preferred Securities-Voting Rights"), as the case may be. If the General
Partner or Special Representative fails to enforce the Series D Guarantee,
any holder of the Capital Securities may institute a legal proceeding
directly against PECO Energy to enforce its rights under the Series D
Guarantee without first instituting a legal proceeding against PECO Energy
Capital or any other person or entity. See "Description of the Series D
Guarantee-Status of the Series D Guarantee" and "Description of the Series
D Subordinated Debt Securities and the Indenture-Subordination."
The Series D Guarantee will constitute an unsecured obligation of PECO
Energy and will rank subordinate and junior in right of payment to all
general liabilities of PECO Energy. The Trust Agreement provides that each
holder of Capital Securities, by acceptance thereof, agrees to the
provisions of the Series D Guarantee, including the subordination
provisions thereof.
LIMITED VOTING RIGHTS
Holders of Capital Securities will have limited voting rights and will
only be entitled, together with the other holders of Preferred Securities,
to appoint and authorize a Special Representative to enforce PECO Energy
Capital's rights against PECO Energy upon the occurrence of the following:
(i) PECO Energy Capital fails to pay Distributions in full on the Preferred
Securities for 18 consecutive months; (ii) an Event of Default (as defined
in the Indenture) occurs and is continuing; or (iii) PECO Energy is in
default on any of its payment obligations under any Payment and Guarantee
Agreement issued by PECO Energy for the benefit of the holders of Preferred
Securities (a "Guarantee"). See "Description of the Series D Preferred
Securities-Voting Rights."
TRADING CHARACTERISTICS OF THE CAPITAL SECURITIES
The Capital Securities may trade at a price that does not fully reflect
the value of accrued but unpaid interest with respect to the Series D
Subordinated Debt Securities. An owner of Capital Securities who disposes
of Capital Securities between record dates for payments of Distributions
will nevertheless be required to include accrued but unpaid interest on the
Series D Subordinated Debt Securities through the date of disposition in
income as ordinary income and to add such amount to its adjusted tax basis
of the Capital Securities so disposed. Such owner will recognize a capital
loss to the extent the selling price (which may not fully reflect the value
of accrued but unpaid interest) is less than its adjusted tax basis (which
will include accrued but unpaid interest). Subject to certain limited
exceptions, capital losses cannot be applied to offset ordinary income for
federal income tax purposes. See "United States Taxation."
11
PECO ENERGY
Incorporated in Pennsylvania in 1929, PECO Energy provides retail
electricapproximately 1.6 million customers and
natural gas service in southeastern Pennsylvania and, through
pilot programs, natural gas service to areas in Maryland and New Jersey.
PECO Energy also engages in the wholesale marketing of electricity on a
national basis and participates in joint ventures which provide
telecommunication services in the Philadelphia area.
PECO Energy'sapproximately 440,000 customers.
Our traditional retail service territory covers 2,107 square miles. Electricmiles in
southeastern Pennsylvania. We provide electric delivery service is furnished toin an area of
1,972 square miles, with a population of approximately 3.6 million, including
1.6 million in the City of Philadelphia. Approximately 94% of the retail electric service
area and 64% of retail kilowatthour sales are in the suburbs around
Philadelphia, and 6% of the retail service area and 36% of such sales are
in the City of Philadelphia. Natural gas service is supplied in a
1,475-square-mile1,475 square mile area ofin southeastern Pennsylvania adjacent to Philadelphia,
with a population of approximately 1.9 million.
Through
Horizon Energy, a wholly owned subsidiary of PECO Energy, and PECO
Energy/EnergyOne, a franchised energy products brand, PECO Energy
participates in Pennsylvania's pilot program for retail competition for
generation.
The electric and gas utility industriesOur principal executive offices are both undergoing fundamental
restructuring. In 1996, the Federal Energy Regulatory Commission issued
Order No. 888 providing for competition in wholesale generation by
requiring that all public utilities file non-discriminatory, open-access
transmission tariffs. In December 1996, Pennsylvania Governor Ridge signed
into law the Electricity Generation Customer Choice and Competition Act
(the "Competition Act") which provides for the restructuring of the
electric utility industry in Pennsylvania, including retail competition for
generation beginning in 1999. At December 31, 1997, the Company
discontinued the use of regulatory accounting in its financial statements
for its electric generation operations.
DEREGULATION
Pursuant to the Competition Act, in April 1997, PECO Energy filed with
the Pennsylvania Public Utility Commission (the "PUC") a comprehensive
restructuring plan detailing its proposal to implement full customer choice
of electric generation supplier. PECO Energy's restructuring plan
identified $7.5 billion of stranded costs (the loss in value of PECO
Energy's electric generation-related assets, which will result from
competition). In August 1997, PECO Energy and various intervenors in PECO
Energy's restructuring proceeding filed with the PUC a Joint Petition for
Partial Settlement (the "Pennsylvania Plan").
In December 1997, the PUC rejected the Pennsylvania Plan and entered an
Opinion and Order, revised in January 1998 (the "PUC Restructuring Order"),
that deregulates PECO Energy's electric generation operations. The PUC
Restructuring Order authorizes PECO Energy to recover stranded costs of
$4.9 billion on a discounted basis, or $5.3 billion on a book-value basis,
over 8-1/2 years beginning in 1999. In January 1998, PECO Energy filed
appeals of the PUC Restructuring Order with the U.S. District Court for
the Eastern District of Pennsylvania (the "Eastern District Court") and the
Commonwealth Court of Pennsylvania (the "Commonwealth Court").
12
PECO Energy believes that the PUC Restructuring Order provides
sufficient details regarding the deregulation of PECO Energy's electric
generation operations to require PECO Energy to discontinue the use of
regulatory accounting in its financial statements for those operations.
PECO Energy determined thatlocated at December 31, 1997, $5.8 billion of its $7.1
billion of electric generation assets were impaired and it had $2.6 billion
of other electric generation-related regulatory assets. Effective December
31, 1997, PECO Energy recorded an extraordinary charge against income of
$3.1 billion ($1.8 billion net of income taxes) to reflect the amount of
such electric generation-related assets which will not be recovered from
customers either prior to the commencement of competition or under the PUC
Restructuring Order.
On January 25, 1998, PECO Energy's Board of Directors reduced the
quarterly common stock dividend from $0.45 per share to $0.25 per share,
effective with the dividend payable on March 31, 1998. The Board of
Directors concluded that, given the impact of the PUC Restructuring Order,
the dividend reduction was necessary to provide PECO Energy with the
financial flexibility needed to meet the demands of competition. Although
PECO Energy cannot predict the ultimate effect of the PUC Restructuring
Order and competition for electric generation services, PECO Energy
believes that its future financial condition and results of operations will
be adversely affected.
PECO Energy's mailing address is P.O. Box 8699,2301 Market Street,
Philadelphia, PA 19101,19101-8699 and itsour telephone number is (215) 841-4000.
PECO ENERGY CAPITAL
PECO Energy Capital is a limited partnership formed in 1994 under3
USE OF PROCEEDS
The net proceeds from the lawssale of the State of Delaware. All of itsbonds and preferred stock will be added to
our general partner interests are
owned by PECO Energy Capital Corp., a wholly owned subsidiary of PECO
Energy, as the General Partner. As a limited partnership, all of the
businessfunds and affairs of PECO Energy Capital are managed by the General
Partner. PECO Energy Capital was created solelywill be used for the purposerepayment of issuing
the Preferred Securitiesoutstanding
indebtedness and lending the proceeds thereoffor general corporate purposes, all as more specifically set
forth in a prospectus supplement.
RATIO OF EARNINGS TO FIXED CHARGES AND RATIO OF EARNINGS TO COMBINED
FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
The following are our consolidated ratios of earnings to PECO Energy,
and entering into similar financing arrangements. Such loans are evidenced
by the Subordinated Debt Securities issued by PECO Energy in series under
the Indenture. The Subordinated Debt Securities are the only assets of
PECO Energy Capital and the only revenues of PECO Energy Capital are
interest on the Subordinated Debt Securities. The General Partner pays all
of PECO Energy Capital's operating expenses and has general liability for
all of PECO Energy Capital's obligations. PECO Energy Capital's mailing
address is 1013 Centre Road, Suite 350F, Wilmington, DE 19805, and its
telephone number is (302) 998-0592.
THE TRUST
PECO Energy Capital Trust III is a statutory business trust recently
created under the laws of the State of Delaware. The Trust exists for the
sole purpose of issuing the Capital Securities representing the Series D
Preferred Securities to be held by the Trust and performing functions
directly related thereto. The Trust cannot issue other equity securities
or any debt securities. The Series D Preferred Securities will be the only
assets of the Trust. All expenses and liabilities of the Trust will be
paid by the General Partner, provided that if the Trustee of the Trust
incurs fees, charges or expenses for which it is not otherwise liable under
the Trust Agreement at the election of a holder of Capital Securities or
other
13
person, such holder or other person will be liable for such fees,fixed charges and
expenses. The Trust's mailing address is c/o First Union Trust
Company, National Association, One Rodney Square, 920 King Street, 1st
Floor, Wilmington, DE 19801,ratio of earnings to combined fixed charges and its telephone number is (302) 888-7539.
COVERAGE RATIOS
PECO Energy's Ratio of Earnings to Fixed Chargespreferred stock dividends for
each of the periods indicated was as follows:
Years ended December 31,
----------------------------------------------
1993 1994 1995 1996 1997
---- ---- ---- ---- ----
3.15 2.66 3.41 3.29 2.71indicated:
Years Ended December 31, Twelve Months
------------------------ Ended
1997 1998 1999 2000 2001 June 30, 2002
---- ---- ---- ---- ---- -------------
Ratio of earnings to fixed charges....................... 2.56 3.38 3.37 2.70 2.46 2.49
Ratio of earnings to combined fixed charges and preferred
stock dividends........................................ 2.38 3.20 3.22 2.61 2.38 2.41
The Ratioratio of Earningsearnings to Fixed Chargesfixed charges represents, on a pre-tax basis, the
number of times earnings cover fixed charges. Earnings consist of pre-tax net
income from continuing operations after adjustment for income from equity
investees and capitalized interest or allowance for funds used during
construction ("AFUDC"), to which has been added fixed charges and taxes based on income of
PECO Energy.charges. Fixed charges
consist of interest on funded indebtedness,
other interest,costs and amortization of net gaindebt discount and premium on reacquired debt and net
discount on debtall
indebtedness and the interest portion of all rentals chargedrental expense.
The ratio of earnings to income.
PECO Energy's Ratio of Earnings to Combined Fixed Chargescombined fixed charges and Preferred
Stock Dividends for each of the periods indicated was as follows:
Years ended December 31,
----------------------------------------------
1993 1994 1995 1996 1997
---- ---- ---- ---- ----
2.67 2.32 3.12 3.04 2.50
The Ratio of Earnings to Combined Fixed Charges and Preferred Stock
Dividendspreferred stock
dividends represents, on a pre-tax basis, the number of times earnings cover
fixed charges and preferred stock dividends. Earnings consist of pre-tax net
income from continuing operations after adjustment for income from equity
investees and capitalized interest or AFUDC to which has been added fixed
charges and taxes based on income of
PECO Energy.charges. Combined fixed charges and preferred stock dividends consist of
interest on funded indebtedness, other interest,costs and amortization of net
gaindebt discount and premium on reacquired debt and net discount on debt,all
indebtedness, preferred stock dividends (increased to reflect the pre-tax
earnings required to cover such dividend requirements) and the interest portion
of all rentals charged to income.
For purposes of calculating the 1997 ratio of earnings to fixed charges
and ratio of earnings to fixed charges and preferred stock dividends, net
income does not reflect the extraordinary charge against income of $3.1
billion ($1.8 billion net of income taxes). See "PECO Energy."
14rental expense.
4
ACCOUNTING TREATMENT
The financial statements of PECO Energy Capital will be consolidated
with PECO Energy's financial statements, with the Series D Preferred
Securities shown on PECO Energy's consolidated financial statements as
"Company Obligated Mandatorily Redeemable Preferred Securities of a
Partnership, which holds Solely Subordinated Debentures of the Company."
PECO Energy's financial statements will include a footnote that discloses,
among other things, that the sole asset of PECO Energy Capital consists of
Subordinated Debt Securities and will specify the principal amount,
interest rate and maturity date of each series of Subordinated Debt
Securities.
USE OF PROCEEDS
The net proceeds from the sale of Capital Securities will be used by
the Trust to purchase the Series D Preferred Securities from PECO Energy
Capital. PECO Energy Capital will lend the proceeds from the sale of the
Series D Preferred Securities, plus the capital contribution made by the
General Partner, to PECO Energy, which loan will be evidenced by the Series
D Subordinated Debt Securities. These funds will be used by PECO Energy in
connection with its redemption of $78,104,575 aggregate liquidation value
of Trust Receipts of PECO Energy Capital Trust I, each representing an
8.72% Cumulative Monthly Income Preferred Security, Series B of PECO Energy
Capital.
DESCRIPTION OF THE CAPITAL SECURITIESFIRST AND REFUNDING MORTGAGE BONDS
General. We will issue the first and refunding mortgage bonds in series
under our First and Refunding Mortgage, dated May 1, 1923, as amended and
supplemented by supplemental mortgage indentures and as proposed to be further
amended and supplemented by a supplemental mortgage indenture relating to the
offered series of bonds (herein sometimes referred to collectively as the
"mortgage"). Wachovia Bank, National Association (formerly First Union National
Bank) is trustee under the mortgage (the "trustee").
The following is a summary of certain termsthe mortgage does not purport to be complete and is
subject to, and is qualified in its entirety by reference to, all provisions of
the Capital Securitiesmortgage. Certain terms used in this section are defined in the mortgage.
Copies of the First and Refunding Mortgage and the Trust Agreement. Referencesupplemental mortgage
indentures are on file with the SEC. Copies of supplemental mortgage indentures
under which any series of bonds is made to the Trust
Agreement which is an exhibit to the Registration Statement of which this
Prospectus forms a part.
GENERAL
The Capital Securitiesbe issued will be filed with the SEC.
Principal, Maturity and Interest. The aggregate principal amount of any
series of bonds to be issued bywill be specified in the Trust pursuant torelated prospectus
supplement. Unless otherwise provided in the Trust Agreement. Each Capital Security will represent a Series D Preferred
Security, with a stated liquidation preference of $1,000. The Capital
Securitiesprospectus supplement, the bonds
will be issued in book-entry form through DTC or such other
depository at which PECO Energy may have established an account. Capital
Securities mayonly. The bonds will be exchanged for the underlying Series D Preferred
Securities as described under "-Withdrawal of Series D Preferred
Securities."
The Trust is a statutory business trust created under the Delaware
Business Trust Act. The Trustee will hold the Series D Preferred
Securities depositedin denominations
specified in the Trust forrelated prospectus supplement.
The bonds will mature on the benefit of the holders of the
Capital Securities. The Trust Agreement provides that, to the fullest
extent permitted by law, without the need for any other action of any
person, including the Trustee and any other holder of Capital Securities,
each holder of Capital Securities shall be entitled to enforcedate or dates set forth in the name
ofrelated
prospectus supplement. Interest will be payable on the Trustbonds as set forth in
the Trust's rights underprospectus supplement until the Series D Preferred Securities
represented by the Capital Securities held by such holder.
Itprincipal is anticipated that the assets of the Trustpaid or made available for
distribution to the holders of the Capital Securities will be limited to
payments from PECO Energy Capital under the Series D Preferred
15
Securities, which payments by PECO Energy Capital will be limited to
payments from PECO Energypayment. Interest on the Series D Subordinated Debt Securities.
See "Descriptionbonds will accrue and be calculated as set forth in
the related prospectus supplement.
For so long as the bonds are issued in book-entry form, payments of
the Series D Subordinated Debt Securitiesprincipal and the
Indenture." If PECO Energy fails to make a payment on the Series D
Subordinated Debt Securities or if PECO Energy Capital fails to make a
Distribution on the Series D Preferred Securities, the Trust will not have
sufficient funds to make related payments, including Distributions, on the
Capital Securities.
DISTRIBUTIONS
Each Capital Security will represent a Series D Preferred Security of
PECO Energy Capital, and Distributions on the Capital Securitiesinterest will be made concurrently with Distributions onin immediately available funds by wire
transfer to The Depository Trust Company ("DTC") or its nominee. If the Series D Preferred Securities.
Distributions on the Series D Preferred Securities will be cumulativebonds
are issued in certificated form to a holder other than DTC, payments of
principal and will accumulate from the date of original issuance at the annual rate of
____% of the liquidation preference of $1,000 per Series D Preferred
Security. Distributions will be payable semiannually in arrears on
__________ and __________ of each year, commencing __________, 1998.
Distributions in arrears after the semiannual payment date therefor will
accumulate additional Distributions (to the extent permitted by law)
compounded semiannually at the annual rate of ____% thereof. The term
"Distributions," as used herein, shall include any such additional
Distributions. The amount of Distributions payable for any period will be
compounded on the basis of a 360-day year of twelve 30-day months.
Whenever the Trust shall receive any cash Distribution representing a
semiannual Distribution on the Series D Preferred Securities (whether or
not distributed by PECO Energy Capital on the regular semiannual
Distribution date therefor) or payment under the Series D Guarantee in
respect thereof, the Trust shall distribute such amounts to the holders of
the Capital Securities in proportion to the respective number of Series D
Preferred Securities represented by such Capital Securities. Under the
Indenture, PECO Energy shall have the right at any time, so long as an
Event of Default under the Indenture has not occurred and is continuing, to
extend the interest payment period for all Subordinated Debt Securities for
up to 60 consecutive months; provided that, no Extension Period shall
extend beyond the stated maturity date or date of redemption of any series
of Subordinated Debt Securities. At the end of the Extension Period, PECO
Energy shall pay all interest then accrued and payable on the Series D
Subordinated Debt Securities (together with interest thereon to the extent
permitted by applicable law at the rate per annum borne by the Series D
Subordinated Debt Securities). During any Extension Period, no
Distributions will be made by check mailed to such holder at such
holder's registered address. Payment of principal of the bonds in certificated
form will be made against surrender of those bonds at the office or agency of
our company in the City of Philadelphia, Pennsylvania and an office or agency
in the Borough of Manhattan, City of New York. Payment of interest on the Series D Preferred Securities representedbonds
will be made to the person in whose name the bonds are registered at the close
of business on record dates fixed by the Capital Securities; however, all accrued and payable Distributions
(togetherCompany which must be not more than 14
days prior to the relevant interest payment date. Default interest will be paid
in the same manner to holders as of a special record date established in
accordance with the mortgage.
All amounts paid by us for the payment of principal, premium (if any) or
interest on any applicable Distributions on such Distributions) shall be
paidbonds that remain unclaimed at the end of anytwo years after such
Extension Period. See "Description of the
Series D Subordinated Debt Securitiespayment has become due and the Indenture-Option to Extend
Interest Payment Period."
REDEMPTION OF CAPITAL SECURITIES
The Capital Securitiespayable will be subjectrepaid to mandatory redemption upon
redemption of the Series D Preferred Securities. Whenever PECO Energy
Capital shall elect or is required to redeem the Series D Preferred
Securities in accordance with the Amendedus and Restated Limited Partnership
Agreement of PECO Energy Capital, dated as of July 25, 1994, as amended
(the "Partnership Agreement"), and as provided under "Description of the
Series D Preferred Securities-Special Event Redemptions," PECO Energy
Capital shall give the Trustee at least 40 days' prior notice thereof. The
Trustee will mail the notice of redemption not less than 30 nor more than
60 days prior to the date fixed for redemption of the
16
Series D Preferred Securities and the Capital Securities to the holders of such
bonds will thereafter look only to us for payment thereof.
Redemption. The redemption provisions, if any, for each series of bonds
will be set forth in the Capital Securities. Onrelated prospectus supplement.
Security. The bonds will be secured equally with all other mortgage bonds
outstanding or hereafter issued under the date of redemptionmortgage by the lien of the Series D
Preferred Securities, providedmortgage.
The lien of the mortgage, subject to (1) minor exceptions and certain excepted
encumbrances that PECO Energy Capital (or PECO Energy
pursuantare defined in the mortgage and (2) the trustee's prior lien
for compensation and expenses, constitutes a first lien on substantially all of
our properties. The mortgage does not constitute a lien on any property owned
by our subsidiaries or affiliates. Our properties consist principally of
electric transmission and distribution lines and substations, gas distribution
facilities and general office and service buildings.
We may not issue securities which will rank ahead of the mortgage bonds as
to security. We may acquire property subject to prior liens. If such property
is made the Series D Guarantee) shall havebasis for the issuance of additional bonds after we acquire it, all
additional bonds issued under the prior lien must be pledged with the trustee
as additional security under the mortgage.
5
Authentication and Delivery of Additional Bonds. The mortgage permits the
issuance from time to time of additional mortgage bonds, without limit as to
aggregate amount. Additional mortgage bonds may be in principal amount equal to:
(1) the principal amount of underlying bonds secured by a prior lien upon
property acquired by us after March 1, 1937 and deposited with the Trusttrustee
under the aggregatemortgage;
(2) the principal amount payable uponof any such underlying bonds redeemed or
retired, or for the payment, redemption or retirement of all Series D Preferred
Securities heldwhich funds have
been deposited in trust;
(3) the principal amount of bonds previously authenticated under the
mortgage on or after March 1, 1937, which have been delivered to the trustee;
(4) the principal amount of bonds previously issued under the mortgage on
or after March 1, 1937, which are being refunded or redeemed, if funds for
the refunding or redemption have been deposited with the trustee;
(5) an amount not exceeding 60% of the actual cost or the fair value,
whichever is less, of the net amount of permanent additions to the property
subject to the lien of the mortgage, made or acquired after November 30,
1941, and of additional plants or property acquired by the Trustus after November 30,
1941, and to be redeemed, the Trust shall redeem Capital
Securities representing the same numberused in connection with its electric or gas business as part
of such Series D Preferred
Securities redeemed by PECO Energy Capital at the same redemption price at
which such Series D Preferred Securities are redeemed. In the event that
fewer than all the outstanding Capital Securities are redeemed, the Capital
Securities to be redeemed shall be selected by lotone connected system and located in Pennsylvania or pro rata or other
equitable method determined by the Trustee. Under the Trust Agreement,
PECO Energy Capital will agree that if a partial redemptionwithin 150 miles of
the Series D
Preferred Securities would result in a delisting of the Capital Securities
from any national exchange on which the Capital Securities are then listed,
PECO Energy Capital will only redeem the Series D Preferred Securities in
whole.
PAYMENTS ON LIQUIDATION OF PECO ENERGY CAPITAL
Upon receipt by the Trust of any distribution from PECO Energy Capital
upon liquidation of PECO Energy Capital (or payment by PECO Energy under
the Series D Guarantee in respect thereof), after satisfaction of creditors
of the Trust as required by applicable law, the Trustee shall distribute to
the holders of the Capital Securities such amounts in proportion to the
respective number of Series D Preferred Securities represented by such
Capital Securities.
WITHDRAWAL OF SERIES D PREFERRED SECURITIES
Any beneficial owner of Capital Securities may withdraw all, but not
less than all, of the Series D Preferred Securities represented by such
Capital Securities by providing a written noticePhiladelphia; and
agreement to be bound
by the terms of the Partnership Agreement to the Trustee, with evidence of
beneficial ownership in form satisfactory to the Trustee. Within a
reasonable period after such request has been made, the Trustee shall
instruct DTC to reduce the number of Capital Securities represented by the
global certificate held by DTC by(6) the amount equal toof cash deposited with the number of Capital
Securities to be so withdrawn by the withdrawing owner, PECO Energy Capital
shall issue to the withdrawing owner a certificate representing the number
of Series D Preferred Securities so withdrawn and the Trustee shall reduce
the number of Series D Preferred Securities represented by the global
certificate held by the Trust by a like amount; provided that, PECO Energy
Capitaltrustee, which cash shall not
issueat any fractional number of Series D Preferred
Securities. The Series D Preferred Securities will only be issued in
certificated form.
Any holder of Series D Preferred Securities may redeposit withdrawn
Series D Preferred Securities by delivery to the Trustee of a certificatetime exceed $3,000,000 or certificates for the Series D Preferred Securities to be deposited,
properly endorsed or accompanied, if required by the Trustee, by a properly
executed instrument of transfer or endorsement in form satisfactory to the
Trustee and in compliance with the terms of the Partnership Agreement,
together with all such certifications as may be required by the Trustee in
its sole discretion and in accordance with the provisions of the Trust
Agreement. Within a reasonable period after such deposit is properly made,
the Trustee shall instruct DTC to increase the number of Capital Securities
represented by the global certificate held by DTC by an amount equal to the
Series D Preferred Securities to be deposited. The Capital Securities will
not be issued in certificated form.
17
VOTING RIGHTS
If the holders of the Preferred Securities, acting as a single class,
are entitled to appoint and authorize a Special Representative pursuant to
the Partnership Agreement, the Trustee shall notify the holders of the
Capital Securities of such right, request direction of each holder of a
Capital Security as to the appointment of a Special Representative and vote
the Series D Preferred Securities represented by such Capital Security in
accordance with such direction. If the General Partner fails to convene a
general meeting of PECO Energy Capital as required in the Partnership
Agreement, the Trustee shall notify the holders of the Capital Securities
and, if so directed by the holders of the Capital Securities representing
(i) Preferred Securities constituting at least 10% of the aggregate stated
liquidation preferenceprincipal amount of
bonds then outstanding under the mortgage, whichever is greater, and which
cash may subsequently be withdrawn to the extent of 60% of capital
expenditures, as described in clause (5) above.
No additional bonds may be issued under the mortgage as outlined in clauses
(5) and (6) and, in certain cases, clause (3) above, unless the net earnings
test of the outstanding Preferred Securities or (ii)
Series D Preferred Securities constituting 10%mortgage is satisfied. The net earnings test of the aggregate stated
liquidation preferencemortgage, which
relates only to the issuance of Series D Preferred Securities, shall conveneadditional mortgage bonds, requires for 12
consecutive calendar months, within the 15 calendar months immediately
preceding the application for such meeting. Underbonds, that our net earnings, after
deductions for amounts set aside for renewal and replacement or depreciations
reserves and before provision for income taxes, must have been equal to at
least twice the Trust Agreement, PECO Energy Capital will agree that
withoutannual interest charges on all bonds outstanding under the
consentmortgage (including those then applied for) and any other bonds secured by a
lien on our property.
Release and Substitution of Property. While no event of default exists, we
may obtain the release of the holders of 66-2/3% in liquidation amountlien of the Capital Securities, itmortgage on mortgaged property which
is sold or exchanged if (1) we deposit or pledge cash or purchase money
obligations with the trustee, or (2) in certain instances, if we substitute
other property of equivalent value. The mortgage also contains certain
requirements relating to our withdrawal or application of proceeds of released
property and other funds held by the trustee.
Corporate Existence. We may not consolidate amalgamate,or merge with or into or be replaced by, or convey,
transfer or lease its properties and assetsall, or substantially as an entiretyall, of the mortgage property to any
corporation lawfully entitled to acquire or other entity if, as a
result,lease and operate the Capital Securities would be delisted byproperty,
provided that: such consolidation, merger, conveyance, transfer or lease in no
respect impairs the lien of the mortgage or any national securities
exchangerights or other organization on whichpowers of the Capital Securities may be
listed, downgraded by any "nationally recognized statistical rating
organization," as that term is defined by the SEC for purposes of Rule
436(g)(2) under the Securities Act of 1933, as amended (the "Securities
Act")trustee
or the holders thereof would recognizeof the outstanding mortgage bonds; and such successor
corporation executes and causes to be recorded an indenture which assumes all
of the terms, covenants and conditions of the mortgage and any gainindenture
supplement thereto.
6
The mortgage does not contain any covenant or lossother provision that
specifically is intended to afford holders of our mortgage bonds special
protection in the event of a highly leveraged transaction. The issuance of
long-term debt securities requires the approval of the PUC.
Defaults. Events of default are defined in the mortgage as (1) default for
federal
income tax purposes as a result60 days in the payment of such consolidation, amalgamation,
merger, conveyanceinterest on mortgage bonds or transfer.
Upon receiptsinking funds deposits
under the mortgage, (2) default in the payment of noticeprincipal of mortgage bonds
under the mortgage at maturity or upon redemption, (3) default in the
performance of any meeting at whichother covenant in the mortgage continuing for a period of 60
days after written notice from the trustee, and (4) certain events of
bankruptcy or insolvency.
Upon the authentication and delivery of additional mortgage bonds or the
release of cash or property, we are required to file documents and reports with
the trustee with respect to the absence of default.
Rights of Bondholders upon Default. Upon the occurrence of an event of
default, the holders of Series D
Preferred Securities are entitleda majority in principal amount of all the outstanding
mortgage bonds may require the trustee to vote,accelerate the Trustee shall, as soon as
practicable thereafter, mailmaturity of the
mortgage bonds and to enforce the lien of the mortgage. Prior to any sale under
the mortgage, and upon the remedying of all defaults, any such acceleration of
the maturity of the mortgage bonds may be annulled by the holders of Capital Securitiesat least a
notice,
which shall be provided bymajority in principal amount of all the General Partner and which shall contain (i)
such information as is contained in such notice of meeting, (ii) a
statement thatoutstanding mortgage bonds. The
mortgage permits the holders of Capital Securities will be entitled, subjecttrustee to any applicable provision of law,require indemnity before proceeding to instructenforce
the Trustee as to the
exerciselien of the voting rights pertaining to the amount of Series D
Preferred Securities represented by their respective Capital Securities,
and (iii) a brief statement as to the manner in which such instructions may
be given. Upon the written request of a holder of a Capital Security, the
Trustee shall vote or cause to be voted the number of Series D Preferred
Securities represented by such Capital Securities in accordance with the
instructions set forth in such request.
AMENDMENT AND TERMINATION OF TRUST AGREEMENT
PECO Energy Capital or the General Partner,mortgage.
Amendments. We and the Trustee,trustee may at
any time and from time to time enter into one or more agreements
supplemental toamend the Trust Agreementmortgage without the consent
of the holders of the Capital Securities: (i)mortgage bonds: (1) to subject additional property to the
lien to the mortgage; (2) to define the covenants and provisions permitted
under or not inconsistent with the mortgage; (3) to add to the limitations of
the authorized amounts, date of maturity, method, conditions and purposes of
issue of any bonds issued under the mortgage; (4) to evidence the succession of
another partnership, corporation or other entity to PECO Energy Capital or the
General Partnerus and the assumption by anya successor corporation of our
covenants and obligations under the mortgage; (5) to make such successor of the covenants
of PECO Energy Capital or the General Partner in the Trust Agreement; (ii)
to add to the covenants of PECO Energy Capital or the General Partner for
the benefit of the holders of the Capital Securities, or to surrender any
right or power herein conferred upon PECO Energy Capital or the General
Partner; (iii) to correct or supplement any provision in
the Trust
Agreement which may be defective or inconsistent with any other provision
therein or to make any other provisions with respectregard to matters or questions arising under the Trust Agreement; provided that, any such action
shallmortgage as may be necessary
or desirable and not materially adversely affectinconsistent with the interestsmortgage.
We and the trustee may amend the mortgage or modify the rights of the
holders of Capital Securities; or (iv) to cure any ambiguity or correct any
18
mistake. Any other amendmentthe mortgage bonds with the written consent of the Trust Agreement must be approved
by the holders of 66-2/at least 66 2/3% of
the Capital Securities.
The Trust Agreement will terminate uponprincipal amount of the mortgage bonds then outstanding; provided, that no
such amendment shall, without the written consent of the holder of each
outstanding mortgage bond affected thereby: (1) change the date of maturity of
the principal of, or any installment hereof on, any mortgage bond, or reduce
the principal amount of any mortgage bond or the interest thereon or any
premium payable on the redemption thereof, or change any place of payment
where, or currency in which, any mortgage bond or interest thereon is payable,
or impair the Capital
Securities or a final distribution in respectright to institute suit for the enforcement of the Series D Preferred
Securities andany such distribution has been delivered to the holders of the
Capital Securities. In addition, PECO Energy Capital may instruct the
Trustee to dissolve the Trust and distribute the Series D Preferred
Securities on a pro rata basis to the holders of Capital Securities if the
Trust, at any time, is subject to federal income tax with respect to
interest received on its allocable share of interest on the Series D
Subordinated Debt Securities received by PECO Energy Capital, the Trust is
subject to more than a de minimis amount of other taxes, duties or
governmental charges, or a Change in 1940 Act Law (as defined in "Series D
Preferred Securities-Special Event Redemptions") has occurred, to the
effect that the Trust is or will be considered an "Investment Company"
which is required to be registered under the 1940 Act (as defined in
"Series D Preferred Securities-Special Event Redemptions"), which Change in
1940 Act Law becomes effectivepayment
on or after the date of maturity thereof; or (2) reduce the percentage in
principal amount of the outstanding mortgage bonds, the consent of whose
holders is required for any amendment, waiver of compliance with the provisions
of the mortgage or certain defaults and their consequences; or (3) modify any
of the amendment provisions or Section 22 of Article VIII (relating to waiver
of default), except to increase any such percentage or to provide that certain
other provisions of the mortgage cannot be modified or waived without the
consent of the holder of each mortgage bond affected thereby.
Governing Law. The mortgage is governed by the laws of the Commonwealth of
Pennsylvania.
Trustee. Wachovia Bank, National Association (formerly First Union National
Bank), the trustee under the mortgage, is the registrar and disbursing agent
for our mortgage bonds. Wachovia Bank, National Association is also our
depository, from time to time makes loans to us and is trustee for a series of
senior unsecured notes of Exelon Generation.
7
DESCRIPTION OF THE PREFERRED STOCK
General. As of December 31, 2001, our authorized capital stock consists of
500,000,000 shares of common stock, without par value and 15,000,000 shares of
preferred stock, without par value. As of August 1, 2002, there were
170,478,507 shares of common stock outstanding and 1,375 shares of preferred
stock outstanding.
Our Board of Directors is authorized, without further shareholder action, to
divide the preferred stock into one or more series and to determine the
following designations, preferences, limitations and special rights of any
series (which for any series will be set forth in the related prospectus
supplement):
. the annual dividend rate or rates;
. the rights, if any, of the holders of shares of the series upon voluntary
or involuntary liquidation, dissolution or winding up of our company;
. the terms and conditions upon which shares may be converted into shares
of other series or other capital stock, if issued with the privilege of
conversion;
. the price at and the terms and conditions upon which shares may be
redeemed;
. the terms and amount of any sinking fund for the purchase or redemption
of shares of a series; and
. the exchange or exchanges on which the preferred stock will be listed, if
any.
Dividend Rights. The annual dividend rate for each new series of preferred
stock will be set forth in the applicable prospectus supplement. Dividends will
be cumulative from the date of issuance and will be payable, when declared,
quarterly on the first day of February, May, August and November. The dividends
on shares of all series of preferred stock will be cumulative. Any limitations
on our rights to pay dividends will be described in the applicable prospectus
supplement.
Unless dividends on all outstanding shares of preferred stock of all series
shall have been paid for all past quarterly dividend periods, no dividends are
paid or declared and no other distribution is made on the common stock, and no
common stock shall be purchased or otherwise acquired for value by us.
Voting Rights. Our articles of incorporation provide that the board of
directors is to be classified into three classes. Holders of preferred stock
and common stock elect an entire class for three-year terms. If and when
dividends payable on all shares of the preferred stock are in default in an
amount equal to four full quarterly dividends, and until all dividends then in
default are paid or declared and set apart for payment, the holders of all
shares of preferred stock, voting separately as a class, are entitled to elect
the smallest number of directors necessary to constitute a majority of the full
board of directors, and the holders of the common stock, voting separately as a
class, are entitled to elect the remaining directors.
Holders of preferred stock will be entitled to vote on certain matters
relating to:
(1) authorization of stock (other than a series of preferred stock)
ranking prior to or on a parity with the preferred stock or any security
convertible into shares of stock of such kinds;
(2) change the express terms of the preferred stock or of any series
thereof in a manner prejudicial to the holders thereof;
(3) issuance of additional shares of preferred stock unless, for any
twelve consecutive calendar months within the Capital Securities. See "United States Taxation-Withdrawal or Distributionfifteen calendar months
immediately preceding the calendar month within which such additional shares
are issued, net earnings applicable to the payment of Series D Preferred Securities."
EXPENSES OF THE TRUST
Alldividends on the
preferred stock and net income before payment of interest charges or expenseson
indebtedness and after provision for depreciation and taxes shall have been,
respectively, at least two times the dividend requirements upon the entire
amount of preferred stock to be outstanding immediately after the proposed
issue of such additional shares, and at least one and one-half times the
aggregate of such dividend requirements and interest charges for such period
on the entire amount of indebtedness then to be outstanding;
8
(4) issuance of additional shares of preferred stock, unless our capital
represented by the common stock together with its surplus is in the
aggregate at least equal to the involuntary liquidating value of the
Trust, includingpreferred stock;
(5) increase in the chargestotal authorized amount of preferred stock of all
series; and
expenses(6) merger or consolidation with or into any corporation, or division,
unless ordered, exempted, approved, or permitted by the SEC or other federal
regulatory authority.
Except as otherwise provided in the express terms of any series of preferred
stock, the number of authorized shares of preferred stock of any series may be
increased without vote or consent of the Trustee,holders of the outstanding shares of
the series affected, subject to the aggregate limit on the authorized number of
shares of preferred stock. With respect to (1), (2), (3) and (4) above, the
consent or affirmative vote of the holders of shares of the preferred stock
entitled to cast at least two-thirds of the votes which all holders of
preferred stock of all series then outstanding are entitled to cast (or of the
affected series in the case of a change prejudicial to less than all series) is
required; and with respect to (5) and (6), the consent or affirmative vote of
the holders of shares of the preferred stock entitled to cast at least a
majority of the votes which all holders of preferred stock of all series then
issued and outstanding are entitled to cast is required.
The preferred stock of all series constitutes one class in any vote of
shareholders except as stated above, or some mandatory provision of law is
controlling. At all meetings of the holders of preferred stock at which such
holders have the right to vote, each holder of preferred stock of each series
shall be entitled to one vote or fraction thereof, for each $100 or fraction
thereof of involuntary liquidating value represented by the shares of preferred
stock of such series held by each such holder.
Liquidation Rights. Upon liquidation or dissolution of our company, holders
of the preferred stock then outstanding are entitled to receive a cash payment
per share equal to the liquidation value provided for the respective series,
plus accrued and unpaid dividends to the date of liquidation, before any
payment shall be made to holders of common stock.
No dividend payment or distribution shall be made to holders of common
stock, if, after giving effect to such dividend payment or distribution, our
capital represented by the common stock, together with surplus, is less than
the involuntary liquidating value of all outstanding preferred stock.
The amount per share payable on each series of the new preferred stock in
the event of any voluntary or involuntary liquidation will be paidset forth in the
applicable prospectus supplement.
Redemption Provisions. The redemption provisions, if any, with respect to
each series of new preferred stock will be set forth in the applicable
prospectus supplement. After payment of all dividends on all series of
preferred stock for past dividend periods, we, by action of our Board of
Directors, may redeem the whole or any part of any series of the preferred
stock, to the extent permitted by the General Partner; providedterms of that if the Trustee incurs fees, charges or expenses for which it is not
otherwise liable under the Trust Agreement, at the electionseries of a holder of
Capital Securities or other person, such holder or other person will be
liable for such fees, charges and expenses.
RESIGNATION AND REMOVAL OF THE TRUSTEE
The Trust shall at all times have a Trustee which is a bank that has
its principal place of business in the State of Delaware having a combined
capital and surplus of $50,000,000. If the Trustee ceases to be eligible,
it will resign.
The Trustee maypreferred stock,
at any time resign as trusteeor from time to time at the applicable redemption price of the
shares of the particular series together with accrued and unpaid dividends.
9
Sinking Fund. The sinking fund provisions, if any, with respect to each
series of new preferred stock will be set forth in the applicable prospectus
supplement.
Miscellaneous. Holders of our preferred stock will not have any preemptive
rights to subscribe for or purchase any additional shares of our capital stock,
or other securities or other right or option to purchase shares of capital
stock. The new preferred stock, when issued, will be fully paid and
nonassessable.
There is no provision restricting us from purchasing shares of preferred
stock in the event of an arrearage in the payment of dividends or sinking fund
obligations.
Listing. We intend to list each series of preferred stock offered hereby on
the New York Stock Exchange, but we are under the Trust Agreement
by notice of its electionno obligation to do so deliveredso. The
prospectus supplement will indicate whether and where the preferred stock to PECO Energy Capitalbe
issued will be listed.
10
BOOK-ENTRY BONDS AND PREFERRED STOCK
Book-Entry, Delivery and Form. Unless otherwise specified in a prospectus
supplement, the certificates representing first and refunding mortgage bonds or
preferred stock will be in fully registered, global form ("global securities").
Ownership of beneficial interests in global securities will be limited to
persons who have accounts with DTC ("participants") or persons who hold
interests through participants. Ownership of beneficial interests in global
securities will be shown on, and the General Partner, such resignationtransfer of that ownership will be
effected only through, records maintained by DTC or its nominee (with respect
to take effect uponinterests of participants) and the appointmentrecords of a
successor trustee andparticipants (with respect to
interests of persons other than participants).
So long as DTC or its acceptance of such appointment as hereinafter
provided. The Trustee may at any time be removed by PECO Energy Capital by
notice of such removal delivered tonominee is the Trustee, such removal to take
effect upon the appointment of a successor trustee and its acceptance of
such appointment.
In case at any time the Trustee shall resignregistered owner or be removed, PECO Energy
Capital shall, within 45 days after the deliveryholder of the
notice of
resignationglobal securities, DTC or removal,such nominee, as the case may be, appoint a successor trustee,
which shallwill be a bankconsidered
the sole record owner or trust company,holder of the bonds represented by such global
securities for all purposes under the indenture or the preferred stock
represented by such global securities. No beneficial owner of an affiliate of a bank or trust
company, having its principal officeinterest in
the State of Delaware and having a
combined capital and surplus of at least $50,000,000.
19
BOOK-ENTRY-ONLY ISSUANCE -- THE DEPOSITORY TRUST COMPANY
DTC will initially act as securities depositary for all of the Capital
Securities. The Capital Securitiesglobal bonds or global certificates will be issued only as fully registered
securities registeredable to transfer that interest
except in accordance with DTC's applicable procedures, in addition to those
provided for under the name of Cede & Co. (DTC's nominee) asindenture with respect to bonds and, if applicable,
Euroclear or Clearstream.
Payments on the
holder thereof. One or more fully registered global securities will be issuedmade to DTC or its nominee, as the
case may be, as the registered owner thereof. None of us, the trustee, or any
paying agent will have any responsibility or liability for any aspect of the
records relating to or payments made on account of beneficial ownership
interests in the global securities or for maintaining, supervising or reviewing
any records relating to such beneficial ownership interests.
We expect that DTC or its nominee, upon receipt of any payment in respect of
the global securities, will credit participants, accounts with payments in
amounts proportionate to their respective beneficial ownership interests in of
such global securities, as shown on the records of DTC or its nominee. We also
expect that payments by participants to owners of beneficial interests in such
global securities held through such participants will be governed by standing
instructions and customary practices, as is now the case with securities held
for the Capital Securities andaccounts of customers registered in the names of nominees for such
customers.
Such payments will be deposited with DTC. The
Capital Securities will not be available in certificated form.the responsibility of such participants.
DTC has advised us as follows: DTC is a limited-purposelimited purpose trust company
organized under the laws of the State of 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""Clearing Agency" registered pursuant to the provisions
of Section 17A of the Exchange Act. DTC holdswas created to hold securities thatfor its
participants ("Participants") deposit with DTC. DTC also facilitatesand facilitate the clearance and settlement
among Participants of securities
transactions such as transfers and
pledges, in deposited securitiesbetween participants through electronic computerized book-entry changes in
Participants' accounts of its participants, thereby eliminating the need for physical
movement of securitiesthe certificates. Direct Participants include securities brokers and
dealers, banks, trust companies and clearing corporations and certain other
organizations. Indirect access to the DTC system is available to others such as
banks, brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a participant, either directly or indirectly
("indirect participants").
Neither the trustee nor we will have any responsibility for the performance
by DTC or its participants or indirect participants of their respective
obligations under the rules and procedures governing their operations.
If DTC is at any time unwilling or unable to continue as a depositary for
the global securities and a successor depositary is not appointed within 90
days, we will issue definitive, certificated original bonds or preferred stock,
as the case may be, in exchange for the global securities.
11
Euroclear has advised us as follows: Euroclear was created in 1968 to hold
securities for its participants and to clear and settle transactions between
its participants through simultaneous electronic book-entry delivery against
payment, thereby eliminating the need for physical movement of certificates and
any risk from lack of simultaneous transfers of securities and cash. Euroclear
provides various other services, including securities lending and borrowing,
and interfaces with domestic markets in several countries. Euroclear is
operated by Euroclear Bank S.A./N.V. (the "Euroclear Operator"), under contract
with Euroclear Clearance Systems, S.C., a Belgian cooperative corporation (the
"Cooperative"). All operations are conducted by the Euroclear Operator, and all
Euroclear securities clearance accounts and Euroclear cash accounts are
accounts with the Euroclear Operator, not the Cooperative. The Cooperative
establishes policy for Euroclear on behalf of Euroclear participants. Euroclear
participants include banks (including central banks), securities brokers and
dealers and other professional financial intermediaries. Indirect access to
Euroclear is also available to others that clear through or maintain a
custodial relationship with a Euroclear participant, either directly or
indirectly.
Securities clearance accounts and cash accounts with the Euroclear Operator
are governed by the Terms and Conditions Governing Use of Euroclear and the
related Operating Procedures of the Euroclear System, and applicable Belgian
law (collectively, the "Terms and Conditions"). The Terms and Conditions govern
transfers of securities and cash within Euroclear, withdrawals of securities
and cash from Euroclear, and receipts of payments with respect to securities in
Euroclear. All securities in Euroclear are held on a fungible basis without
attribution of specific certificates to specific securities clearance accounts.
The Euroclear Operator acts under the Terms and Conditions only on behalf of
Euroclear participants and has no record of or relationship with persons
holding through Euroclear participants.
Distributions with respect to global securities held beneficially through
Euroclear will be credited to the cash accounts of Euroclear participants in
accordance with the Terms and Conditions, to the extent received by Euroclear.
Clearstream has advised us as follows: Clearstream is incorporated under the
laws of The Grand Duchy of Luxembourg as a professional depositary. Clearstream
holds securities for its participants and facilitates the clearance and
settlement of securities transactions between its participants through
electronic book-entry changes in accounts of its participants, thereby
eliminating the need for physical movement of certificates. Clearstream
provides to its participants, among other things, services for safekeeping,
administration, clearance and settlement of internationally traded securities
and securities lending and borrowing. Clearstream interfaces with domestic
markets in several countries. As a professional depositary, Clearstream is
subject to regulation by the Luxembourg Monetary Institute. Clearstream
participants are financial institutions around the world, including 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. AccessIndirect access to the DTC systemClearstream 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,Clearstream
participant either directly or indirectly ("Indirect Participants"). Theindirectly.
Distributions with respect to mortgage bonds or preferred stock held
beneficially through Clearstream will be credited to cash accounts of
Clearstream participants in accordance with its rules applicableand procedures, to DTCthe
extent received by Clearstream.
12
PLAN OF DISTRIBUTION
We may sell the first and its Participants are on file withrefunding mortgage bonds and the SEC.
Purchases of Capital Securities under the DTC system must be made bypreferred stock
to or through Direct Participants, which will receive a credit forunderwriters, dealers or agents or directly to one or more other
purchasers.
The prospectus supplement sets forth the Capital
Securities on DTC's records. The ownership interest of each actual
purchaser of each Capital Security ("Beneficial Owner") is in turn to be
recorded on the Direct and Indirect Participants' records. Beneficial
Owners will not receive written confirmation from DTC of their purchases,
but Beneficial Owners are expected to receive written confirmations
providing detailsterms of the transaction,offering of the
particular series or issue of mortgage bonds or preferred stock to which that
prospectus relates, including, as well as periodic statementsapplicable:
. the name or names of their holdings,any underwriters or agents with whom we have entered
into arrangements with respect to the sale of those securities;
. the initial public offering or purchase price of those securities;
. any underwriting discounts, commissions and other items constituting
underwriters' compensation from us and any other discounts, concessions
or commissions allowed or reallowed or paid by any underwriters or other
dealers;
. any commission paid to agents;
. the Direct or Indirect Participant throughnet proceeds to us; and
. the securities exchanges, if any, on which the Beneficial Owner entered into the transaction. Transfers of ownership
interests in the Capital Securities are tosecurities will 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 Capital Securities, except in the event that uselisted.
The obligations of the book-entry system for the Capital Securities is discontinued.
To facilitate subsequent transfers, all Capital Securities deposited by
Participants with DTC are registered in the name of DTC's partnership
nominee, Cede & Co. The deposit of Capital Securities with DTCunderwriters to purchase securities will be subject
to certain conditions precedent and their
registration in the name of Cede & Co. effect no change in beneficial
ownership. DTC has no knowledgeeach of the actual Beneficial Ownersunderwriters will be obligated
to purchase all of the Capital Securities; DTC's records reflect only the identitysecurities of the Direct
Participantsthat series or issue allocated to whose accounts such Capital Securitiesit if
any of those securities are credited, which
maypurchased. Any initial public offering price and
any discounts or may not be the Beneficial Owners. The Participants will remain
responsible for keeping account of their holdings on behalf of their
customers.
Conveyance of notices and other communications by DTCconcessions allowed or reallowed or paid to Direct
Participants, by Direct Participants to Indirect Participants, and by
Direct Participants and Indirect Participants to Beneficial
20
Owners will be governed by arrangements among them, subject to any
statutory or regulatory requirements asdealers may be
in effectchanged from time to time.
Redemption notices shall be sent to DTC. If less than all of the
Capital Securities are being redeemed, DTC's practice is to determine by
lot the amount of the interest of each Direct Participant to be redeemed.
Neither DTC nor Cede & Co. will consent or vote with respect to the
Capital Securities. Under its usual procedures, DTC mails an Omnibus Proxy
to the Trust 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 Capital Securities are credited on the
record date (identified in a listing attached to the Omnibus Proxy).
Redemption proceeds and Distributions on the Capital Securities will be
made to Cede & Co., as nominee of DTC. DTC's practice is to credit Direct
Participants' accounts, upon DTC's receipt of funds and corresponding
detail information from the Trustee on behalf of the Trust on any
Distribution or other payment date in accordance with their respective
holdings shown on DTC's records. Payments by Participants to Beneficial
Owners will be governed by standing instructions and customary practices,
as is 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, PECO Energy, PECO Energy Capital or the Trust,
subject to any statutory or regulatory requirements as may be in effectoffered and sold by us directly or through agents that
we designate from time to time. Payment of redemption proceeds and Distributions to
Cede & Co. shall beAny agent involved in the responsibilityoffer or sale of the
Trusteesecurities for which this prospectus is delivered will be named in, and any
commission payable by us to that agent, will be set forth in the applicable
prospectus supplement. Each agent will be acting on behalfa best efforts basis for
the period of its appointment.
Any underwriters, dealers or agents participating in the distribution of the
Trust, disbursement of such payments to Direct Participants shall be the
responsibility of Cede & Co. and disbursement of such payments to the
Beneficial Owners shall be the responsibility of Direct and Indirect
Participants.
DTCsecurities may discontinue providing its services as securities depository
with respect to the Capital Securities at any time by giving reasonable
notice to the Trustee and PECO Energy. Under such circumstances, in the
event that a successor securities depository is not obtained, physical
certificates representing Capital Securities are required to be printed and
delivered.
PECO Energy, at its option, may decide to discontinue use of the system
of book-entry transfers through DTC (or a successor securities depository).
In that event, physical certificates representing Capital Securities will
be printed and delivered.
In the event that the book-entry-only system is discontinued, the
Trustee shall keep the registration books for such Capital Securities at
its corporate trust office in Delaware. Such Capital Securities may be
transferred or exchanged for one or more Capital Securities upon surrender
thereof at the corporate trust office of the Trustee in Delaware by the
holders or their duly authorized attorneys or legal representatives. Upon
surrender of any Capital Securities to be transferred or exchanged, the
Trustee shall record the transfer or exchange in the registration books and
shall deliver new Capital Securities appropriately registered. The Trustee
shall not be required to register the transfer of any Capital Securities
that have been called for redemption on or after the liquidation date of
PECO Energy Capital. The Trust and the Trustee shall be entitled to treat
the holders of the Capital Securities, as their names appear in the
registration books, as the owners of those Capital Securities for all
purposes under the Trust Agreement.
21
The information set forth above concerning DTC and DTC's book-entry
system has been obtained from sources that PECO Energy Capital and PECO
Energy believe to be accurate, but PECO Energy Capital and PECO Energy
assume no responsibility for the accuracy thereof. None of the Trustee,
the Trust, PECO Energy Capital nor PECO Energy has any responsibility for
the performance by DTC or its Participants of their respective obligations
as described herein or under the rules and procedures governing their
respective operations.
DESCRIPTION OF THE SERIES D PREFERRED SECURITIES
The following is a summary of certain terms and provisions of the
Series D Preferred Securities represented by the Capital Securities.
Reference is made to the Partnership Agreement which is an exhibit to the
Registration Statement of which this Prospectus forms a part.
GENERAL
Under the Partnership Agreement, PECO Energy Capital is authorized to
issue two classes of partner interests: the Preferred Securities
representing limited partner interests, including the Series D Preferred
Securities, and general partner interests. All of the general partner
interests of PECO Energy Capital are owned by the General Partner, which is
a wholly owned subsidiary of PECO Energy. All of the Preferred Securities
issued by PECO Energy Capital will be of equal rank in participation in the
profits and assets and income of PECO Energy Capital. The Partnership
Agreement authorizes the General Partner to establish series of Preferred
Securities having such designations, rights, privileges, restrictions and
other terms and provisions as the General Partner may determine.
Distributions on all series of Preferred Securities must be paid in full
before the General Partner may participate in the profits or assets of PECO
Energy Capital.
DISTRIBUTIONS
The Series D Preferred Securities will be entitled to Distributions out
of funds on hand legally available therefor held by PECO Energy Capital at
the annual rate of ____% of the stated liquidation preference of $1,000,
payable semiannually in arrears on ____________ and ____________ of each
year. Distributions on the Series D Preferred Securities will be
cumulative, will accrue from the original date of issuance, and, except as
otherwise described below, will be payable semiannually in arrears
commencing on ____________, 1998. Distributions in arrears after the
semiannual payment date therefor will accumulate additional Distributions
thereon at the rate of ____% per annum. PECO Energy Capital has previously
issued Cumulative Monthly Income Preferred Securities, Series A, Series B
and Series C, which have an aggregate stated liquidation preference of
$221,250,000, $78,104,575 and $50,000,000, respectively. PECO Energy
intends to use the proceeds from the sale of its Series D Subordinated Debt
Securities to PECO Energy Capital to redeem its 8.72% Deferrable Interest
Subordinated Debentures, Series B and thereby cause a mandatory redemption
of PECO Energy Capital's 8.72% Cumulative Monthly Income Preferred
Securities, Series B.
The General Partner may make distributions on the general partner
interests of PECO Energy Capital only after payment in full of all
Distributions accrued on the Series D Preferred Securities and any other
outstanding Preferred Securities of PECO Energy Capital.
22
PECO Energy has the right under the Indenture to extend the interest
payment period from time to time on all Subordinated Debt Securities to a
period not exceeding 60 consecutive months; provided that, such Extension
Period shall not extend beyond the stated maturity date or redemption date
of any series of Subordinated Debt Securities, including the Series D
Subordinated Debt Securities. As a consequence, semiannual Distributions
on the Series D Preferred Securities would be deferred (but would continue
to accumulate with Distributions thereon) by PECO Energy Capital during any
such Extension Period. In the event that PECO Energy exercises its right
to extend the interest payment period on the Subordinated Debt Securities,
PECO Energy may not declare or pay dividends on, or redeem, purchase or
acquire, any of its capital stock during the Extension Period. PECO Energy
Capital and PECO Energy currently believe that the extension of an interest
payment period is unlikely. Prior to the termination of any such Extension
Period, PECO Energy may further extend the interest payment period;
provided that, such Extension Period together with all such previous and
further extensions thereof may not exceed 60 consecutive months. Upon the
termination of any Extension Period and the payment of all amounts then due
on all series of Subordinated Debt Securities, PECO Energy may elect to
extend the interest payment period again, subject to the above
requirements. Following an Extension Period of 18 consecutive months, the
holders of Preferred Securities, including the Series D Preferred
Securities, shall have the right to appoint a Special Representative to
enforce PECO Energy Capital's rights against PECO Energy under the
Subordinated Debt Securities and the Indenture and the obligations of PECO
Energy under the Guarantees. See "-Voting Rights," "Risk Factors" and
"Description of the Series D Subordinated Debt Securities and the Indenture-
Option to Extend Interest Payment Period" and "-Interest."
Distributions on the Series D Preferred Securities must be paid by PECO
Energy Capital to the extent that PECO Energy Capital has funds on hand
legally available therefor. It is anticipated that the funds available for
distribution by PECO Energy Capital will be limited to payments received by
PECO Energy Capital in respect of the Series D Subordinated Debt
Securities. See "Description of the Series D Subordinated Debt Securities
and the Indenture."
The amount of Distributions payable for any period will be computed on
the basis of twelve 30-day months and a 360-day year. Distributions on the
Series D Preferred Securities will be made to the holders thereof as they
appear on the books and records of PECO Energy Capital on the relevant
record dates, which will be __________ and __________. If any date on
which Distributions are payable on the Series D Preferred Securities is not
a business day, then payment of the Distributions payable on such date will
be made on the next succeeding day that is a business day (and without any
interest or other payment in respect of any such delay). The term
"business day," as used in relation to the Series D Preferred Securities,
shall mean any day other than a day on which banking institutions in the
City of New York or the State of Delaware are authorized or required by law
to close.
CERTAIN RESTRICTIONS ON PECO ENERGY CAPITAL
If distributions have not been paid in full on any series of Preferred
Securities of PECO Energy Capital, PECO Energy Capital shall not: (i) pay
any distributions on any other series of Preferred Securities, unless the
amount of any distributions paid on any Preferred Securities is paid on all
Preferred Securities then outstanding on a pro rata basis in proportion to
the full distributions to which each series of Preferred Securities would
be entitled if paid in full; (ii) pay any distribution on the general
partner interests; or (iii) redeem, purchase or otherwise acquire any
Preferred Securities or the general partner
23
interests; until, in each case, such time as all accumulated and unpaid
distributions on all series of Preferred Securities shall have been paid in
full for all prior distribution periods.
MANDATORY REDEMPTION
The Series D Preferred Securities will be subject to mandatory
redemption upon the repayment by PECO Energy of the Series D Subordinated
Debt Securities at maturity, at $1,000 per Series D Preferred Security,
plus accumulated and unpaid Distributions (whether or not declared), if
any, to the date fixed for redemption (the "Redemption Price").
The Series D Preferred Securities will not be entitled to any sinking
fund.
SPECIAL EVENT REDEMPTIONS
If a Tax Event (as defined below) shall occur and be continuing, the
Series D Preferred Securities will be subject to redemption, at the option
of the General Partner, in whole or in part at the Redemption Price within
90 days following the occurrence of such Tax Event. "Tax Event" means that
PECO Energy Capital shall have received an opinion of counsel (which may be
regular counsel to PECO Energy or an affiliate but not an employee thereof)
experienced in such matters to the effect that, as a result of any
amendment to, or change (including any announced prospective change) in,
the laws (or any regulations thereunder) of the United States or any
political subdivision or taxing authority thereof or therein affecting
taxation, or as a result of any official administrative pronouncement or
judicial decision interpreting or applying such laws or regulations, which
amendment or change is effective or such interpretation or pronouncement is
announced on or after the date of issuance of the Series D Preferred
Securities, there is more than an insubstantial risk that (i) PECO Energy
Capital is subject to federal income tax with respect to interest received
on the Series D Subordinated Debt Securities or PECO Energy Capital will
otherwise not be taxed as a partnership, (ii) interest payable by PECO
Energy on the Series D Subordinated Debt Securities will not be deductible
for federal income tax purposes or (iii) PECO Energy Capital is subject to
more than a de minimis amount of other taxes, duties or other governmental
charges.
If an Investment Company Event (as defined below) shall occur and be
continuing, the Series D Preferred Securities will be subject to mandatory
redemption in whole at the Redemption Price within 90 days following the
occurrence of such Investment Company Event. "Investment Company Event"
means the occurrence of a change in law or regulation or a change in
official interpretation of law or regulation by any legislative body,
court, governmental agency or regulatory authority (a "Change in 1940 Act
Law") to the effect that PECO Energy Capital is or will be considered an
"Investment Company" which is required to be registered under the
Investment Company Act of 1940, as amended (the "1940 Act"), which Change
in 1940 Act Law becomes effective on or after the date of the issuance of
the Series D Preferred Securities; provided that, no Investment Company
Event shall be deemed to have occurred if PECO Energy Capital has received
an opinion of counsel (which may be regular counsel to PECO Energy or any
affiliate but not an employee thereof) experienced in such matters, to the
effect that PECO Energy Capital and/or PECO Energy has taken reasonable
measures, in its discretion, to avoid such Change in 1940 Act Law so that
notwithstanding such Change in 1940 Act Law, PECO Energy Capital is not
required to be registered as an "Investment Company" within the meaning of
the 1940 Act.
24
REDEMPTION PROCEDURES
PECO Energy Capital may not redeem any Series D Preferred Securities
unless all accumulated and unpaid Distributions have been paid on all
Series D Preferred Securities for all semiannual Distribution periods
terminating on or prior to the date of redemption.
Notice of any redemption of the Series D Preferred Securities will be
given by PECO Energy Capital by mail or delivery to each record holder of
Series D Preferred Securities to be redeemed not fewer than 30, nor more
than 60 days prior to the date fixed for redemption thereof (at least 40
days' prior for notice to the Trust). A notice of redemption shall be deemed to be givenunderwriters, and any discounts or commissions
received by them on the day such notice is first mailed by first-class
mail, postage prepaid,sale or on the date it was delivered in person, receipt
acknowledged to the holdersresale of such Series D Preferred Securities. Notices
of redemption shallsecurities may be addressed to the record holders of the Series D
Preferred Securities at the addresses of the holders appearing in the books
and records of PECO Energy Capital.
If notice of redemption shall have been given and payment shall have
been made by PECO Energy Capital to the Trust and any other holder of
Series D Preferred Securities, then, upon the date of such payment, all
rights of owners of the Series D Preferred Securities so called for
redemption will cease. In the event that any date fixed for redemption of
Series D Preferred Securities is not a business day, then payment of the
Redemption Price payable on such date will be made on the next succeeding
day which is a business day (and without any interest or other payment in
respect of any such delay), except that if such business day falls in the
next succeeding calendar year, such payment will be made on the immediately
preceding business day (in each case with the same force and effect as if
made on such day).
LIQUIDATION DISTRIBUTION
In the event of any voluntary or involuntary dissolution and
liquidation of PECO Energy Capital, the holders of the Preferred Securities
will be entitled to receive out of the assets of PECO Energy Capital, after
satisfaction of liabilities to creditors as required by Delaware law and
before any distribution of assets is made to holders of its general partner
interests, the lesser of the Partnership Liquidation Distribution or the
amount of assets of PECO Energy Capital legally available for distribution
to the holders of Preferred Securities. All assets of PECO Energy Capital
remaining after payment thereof will be distributed to the General Partner.
If, upon such liquidation, the Partnership Liquidation Distribution can be
paid only in part because PECO Energy Capital has insufficient assets
available to pay in full the aggregate Partnership Liquidation Distribution
on all Preferred Securities, then the amounts payable on each series of
Preferred Securities shall be paid on a pro rata basis, in proportion to
the full Partnership Liquidation Distribution to which each series of
Preferred Securities would be otherwise entitled.
Pursuant to the Partnership Agreement, PECO Energy Capital shall be
dissolved and its affairs shall be wound up upon the occurrence of any of
the following events: (i) upon the expiration of PECO Energy Capital in
2093; (ii) upon the withdrawal, removal or bankruptcy of the General
Partner or the occurrence of any other event that under applicable law
causes PECO Energy Capital Corp. to ceasedeemed to be
the General Partner, except
for a transfer to a permitted successor of the General Partner or as
otherwise provided in the Partnership Agreement; (iii) the entry of a
decree of judicial dissolution; or
25
(iv) the written consent of the General Partnerunderwriter discounts and all of the holders
of the Preferred Securities. Upon such dissolution, PECO Energy is
required to redeem all series of Subordinated Debt Securities to fund the
Partnership Liquidation Distribution.
The amount per share payable on the Series D Preferred Securities in
the event of any voluntary or involuntary liquidation of PECO Energy
Capital is $1,000 plus accumulated and unpaid Distributions.
MERGER, CONSOLIDATION, ETC. OF PECO ENERGY CAPITAL
PECO Energy Capital may not consolidate, amalgamate, merge with or
into, or be replaced by, or convey, transfer or lease its properties and
assets substantially as an entirety to any corporation or other entity,
except with the approval of the General Partner and the holders of 66-2/3% in
aggregate stated liquidation preference of the outstanding Preferred
Securities or as otherwise described below. The General Partner may,
without the consent of the holders of the Preferred Securities, cause PECO
Energy Capital to consolidate, amalgamate, merge with or into, or be
replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety to, a corporation, a limited liability company
or a limited partnership, a trust or other entity organized as such under
the laws of any state of the United States of America or the District of
Columbia; provided that, (i) such successor entity either (x) expressly
assumes all of the obligations of PECO Energy Capital under the Preferred
Securities or (y) substitutes for the Preferred Securities other securities
having substantially the same terms as the Preferred Securities (the
"Successor Securities") so long as the Successor Securities rank, as
regards to participation in the profits and assets of the successor entity,
at least as high as the Preferred Securities rank, as regards to
participation in the profits and assets of PECO Energy Capital, (ii) PECO
Energy confirms its obligations under the Guarantees with regard to the
Successor Securities, if any, (iii) such consolidation, amalgamation,
merger, replacement, conveyance, transfer or lease does not cause any
series of Preferred Securities or Successor Securities to be delisted by
any national securities exchange or other organization on which such series
of Preferred Securities may be listed, (iv) such consolidation,
amalgamation, merger, replacement, conveyance, transfer or lease does not
cause the Preferred Securities or Successor Securities to be downgraded by
any "nationally recognized statistical rating organization," as that term
is defined by the SEC for purposes of Rule 436(g)(2)commissions under the Securities Act (v) such consolidation, amalgamation, merger, replacement, conveyance,
transfer or lease does not adversely affect the powers, preferencesof 1933, as
amended. Underwriters, dealers and other special rights of holders of Preferred Securities or Successor
Securities in any material respect, (vi) such successor entity has a
purpose substantially identical to that of PECO Energy Capital and (vii)
prior to such consolidation, amalgamation, merger, replacement, conveyance,
transfer or lease, PECO Energy has received an opinion of counsel (whichagents may be regular tax or other counselentitled, under agreements
entered into with us, to PECO Energy or an affiliate, but not
an employee thereof) experienced in such matters to the effect that (w)
holders of outstanding Preferred Securities will not recognize any gain or
loss for federal income tax purposes as a result of the consolidation,
amalgamation, merger, replacement, conveyance, transfer or lease, (x) such
successor entity will be treated as a partnership for federal income tax
purposes, (y) following such consolidation, amalgamation, merger,
replacement, conveyance, transfer or lease, PECO Energy and such successor
entity will be in compliance with the 1940 Act without registering
thereunder as an investment company, and (z) such consolidation,
amalgamation, merger, replacement, conveyance, transfer or lease will not
adversely affect the limited liability of holders of Preferred Securities
or Successor Securities.
26
VOTING RIGHTS
Except as provided below and under "-Merger, Consolidation, etc. of
PECO Energy Capital" and "Description of the Series D Guarantee-Amendments"
and as otherwise requiredindemnification by law and the Partnership Agreement, the holders
of the Series D Preferred Securities have no voting rights.
If (i) PECO Energy Capital fails to pay distributions in full on the
Preferred Securities for 18 consecutive months, (ii) an Event of Default
(as defined in the Indenture) occurs and is continuing, or (iii) PECO
Energy is in default on any of its payment obligations under any Guarantee,
then the holders of the Preferred Securities, acting as a single class,
will be entitled by a vote of the majority of the aggregate stated
liquidation preference of the outstanding Preferred Securities to appoint a
special representative (the "Special Representative") to enforce PECO
Energy Capital's rightsus against PECO Energy under the Subordinated Debt
Securities and the Indenture and the obligations undertaken by PECO Energy
under the Guarantees issued in conjunction with the issuance of the
Preferred Securities, including, after failure to pay distributions for 60
consecutive months on the Preferred Securities, the payment of
distributions on the Preferred Securities. The Special Representative
shall not be admitted as a partner of PECO Energy Capital or otherwise be
deemed a partner of PECO Energy Capital and shall have no liability for the
debts, obligations or liabilities of PECO Energy Capital.
For purposes of determining whether PECO Energy Capital has failed to
pay distributions in full for 18 consecutive months, distributions shall be
deemed to remain in arrears, notwithstanding any payments in respect
thereof, until full cumulative distributions on all Preferred Securities
have been or contemporaneously are paid with respect to all distribution
periods for such Preferred Securities terminating on or prior to the date
of payment of such full cumulative distributions. Subject to the
requirements of applicable law, not later than 30 days after such right to
appoint the Special Representative, the General Partner will convene a
general meeting for the above purpose. If the General Partner fails to
convene such meeting within such 30-day period, the holders of 10% of the
aggregate stated liquidation preference of (i) the Preferred Securities or
(ii) the Series D Preferred Securities will be entitled to convene such
meeting. The provisions of the Partnership Agreement relating to the
convening and conduct of the general meetings of security holders will
apply with respect to any such meeting. Any Special Representative so
appointed shall vacate office immediately if PECO Energy Capital (or PECO
Energy pursuant to a Guarantee) shall have paid in full all accumulated and
unpaid distributions on the Preferred Securities or such Event of Default
under the Indenture or default under the Guarantee or breach, as the case
may be, shall have been cured. Notwithstanding the appointment of any such
Special Representative, PECO Energy retains all rights under the Indenture,
including the right to extend the interest payment period on the
Subordinated Debt Securities.
If any proposed amendment to the Partnership Agreement provides for, or
the General Partner otherwise proposes to effect, any action which would
materially adversely affect the powers, preferences or special rights
attached to any series of Preferred Securities, whether by way of amendment
to the Partnership Agreement or otherwise, then the holders of such series
of Preferred Securities will be entitled to vote on such amendment or
action of the General Partner (but not on any other amendment or action)
and, in the case of an amendment or action which would equally adversely
affect the rights or preferences of any other Preferred Securities, such
Preferred Securities shall vote together as a class on such amendment or
action of the General Partner (but not on any other amendment or action),
and such amendment or action shall not be effective except with the
approval of the holders of not less than 66-2/3%
27
of the aggregate stated liquidation preference of such series of
Preferred Securities. Except in certain circumstances described under
"-Liquidation Distribution," PECO Energy Capital will be dissolved and wound
up only with the consent of the holders of all Preferred Securities then
outstanding as well as the General Partner.
The powers, preferences or special rights attached to any Preferred
Securities will be deemed not to be adversely affected by the creation or
issue of, and no vote will be required for the creation or issue of, any
additional series of Preferred Securities or additional general partner
interests. Holders of Preferred Securities have no preemptive rights.
So long as any series of Subordinated Debt Securities are held by PECO
Energy Capital, the General Partner, unless so directed by the Special
Representative, shall not (i) direct the time, method and place of
conducting any proceeding for any remedy available to the holder of the
Subordinated Debt Securities or the Trustee under the Indenture (the
"Indenture Trustee"), or executing any trust or power conferred on the
Indenture Trustee, (ii) waive any past default which is available under the
Indenture, (iii) exercise any right to rescind or annul a declaration that
the principal of all the Subordinated Debt Securities shall be due and
payable or (iv) consent to any amendment, modification or termination of
the Indenture, where such consent shall be required, without, in each case,
obtaining the prior approval of the holders of at least 66-2/3% in aggregate
stated liquidation preference of all series of Preferred Securities
affected thereby, acting as a single class; provided, however, that where a
consent under the Indenture would require the consent of each holder
affected thereby, no such consent shall be given by the General Partner
without the prior consent of each holder of all series of Preferred
Securities affected thereby. The General Partner shall not revoke any
action previously authorized or approved by a vote of any series of
Preferred Securities. The General Partner shall notify all holders of the
Preferred Securities of any notice of default received from the Indenture
Trustee with respect to any series of Subordinated Debt Securities.
Any required approval of holders of Preferred Securities may be given
at a separate meeting of such holders convened for such purposes, at a
meeting of all partners of PECO Energy Capital or pursuant to written
consent. PECO Energy Capital will cause a notice of any meeting at which
holders of any series of Preferred Securities are entitled to vote, or of
any matter upon which action by written consent of such holders is to be
taken, to be mailed to each holder of record of such series of Preferred
Securities. Each such notice will include a statement setting forth (i)
the date of such meeting or the date by which such action is to be taken,
(ii) a description of any resolution proposed for adoption at such meeting
on which such holders are entitled to vote or of such matter upon which
written consent is sought and (iii) instructions for the delivery of
proxies or consents.
The holders of the Preferred Securities will have no rights to remove
or replace the General Partner.
MISCELLANEOUS
The General Partner is authorized and directed to use its best efforts
to manage the affairs of PECO Energy Capital in such a way that PECO Energy
Capital would not be deemed to be an "investment company" required to be
registered under the 1940 Act or taxed as a corporation for federal income
tax purposes and so that all series of Subordinated Debt Securities will be
treated as indebtedness
28
of PECO Energy for federal income tax purposes. In this connection,
the General Partner is authorized to take any action not inconsistent with
applicable law, the Certificate of Limited Partnership of PECO Energy
Capital or the Partnership Agreement, and that does not materially
adversely affect the interests of holders of Preferred Securities, that the
General Partner determines in its discretion to be necessary or desirable
for such purposes.
PECO Energy Capital may not borrow money or issue debt or mortgage or
pledge any of its assets.
DESCRIPTION OF THE SERIES D GUARANTEE
The following is a summary of certain provisions of the Series D
Guarantee which will be executed and delivered by PECO Energy concurrently
with the issuance of the Series D Preferred Securities. Reference is made
to the Series D Guarantee, which is filed as an exhibit to the Registration
Statement of which this Prospectus forms a part.
GENERAL
Under the Series D Guarantee, PECO Energy will agree to pay (i) any
accumulated and unpaid Distributions on the Series D Preferred Securities
to the extent that PECO Energy Capital has funds on hand legally available
therefor, (ii) the Redemption Price payable with respect to any Series D
Preferred Securities called for redemption by PECO Energy Capital (as
described under "Series D Preferred Securities-Mandatory Redemption" and
"-Special Event Redemptions") to the extent that PECO Energy Capital has
funds on hand legally available therefor and (iii) upon a liquidation of
PECO Energy Capital, the lesser of (a) the portion of the Partnership
Liquidation Distribution applicable to the Series D Preferred Securities
and (b) the amount of assets of PECO Energy Capital legally available for
distribution to holders of Series D Preferred Securities in liquidation of
PECO Energy Capital (collectively, the "Guarantee Payments"). PECO Energy
will agree to pay the Guarantee Payments, as and when due (except to the
extent paid by PECO Energy Capital), to the fullest extent permitted by
law, regardless of any defense, right of setoff or counterclaim which PECO
Energy may have or assert against PECO Energy Capital, the General Partner,
the Trust or the Trustee. PECO Energy's obligation to make a Guarantee
Payment may be satisfied by direct payment of the required amounts by PECO
Energy to the holders of Series D Preferred Securities or by causing PECO
Energy Capital to pay such amounts to such holders.
STATUS OF THE SERIES D GUARANTEE
The Series D Guarantee will constitute an unsecured obligation of PECO
Energy and will rank subordinate and junior in right of payment to all
general liabilities of PECO Energy.
The Series D Guarantee will constitute a guarantee of payment and not
of collection. The Series D Guarantee will be held by the General Partner
for the benefit of the holders of the Series D Preferred Securities. In
the event of the appointment of a Special Representative, the Special
Representative may enforce the Series D Guarantee. If no Special
Representative has been appointed to enforce the Series D Guarantee, the
General Partner will have the right to enforce the Series D Guarantee
29
on behalf of the holders of the Series D Preferred Securities. The
holders of Capital Securities, together with the holders of the Series D
Preferred Securities other than the Trust, representing not less than 10%
in aggregate stated liquidation preference of the Series D Preferred
Securities will have the right to direct the time, method and place of
conducting any proceeding to enforce any remedy available in respect of the
Series D Guarantee, including the giving of directions to the General
Partner or the Special Representative, as the case may be. If the General
Partner or the Special Representative fails to enforce the Series D
Guarantee as above provided, any holder of Capital Securities representing
Series D Preferred Securities, and any holder of Series D Preferred
Securities other than the Trust, may institute a legal proceeding directly
against PECO Energy to enforce its rights under the Series D Guarantee
without first instituting a legal proceeding against PECO Energy Capital or
any other person or entity. The Series D Guarantee will not be discharged
except by payment of the Guarantee Payments in full to the extent not paid
by PECO Energy Capital and by complete performance of all obligations of
PECO Energy contained in the Series D Guarantee.
RELATIONSHIP AMONG SERIES D GUARANTEE, SERIES D SUBORDINATED DEBT
SECURITIES AND SERIES D PREFERRED SECURITIES
In addition to the obligations of PECO Energy under the Series D
Guarantee, the Indenture provides that PECO Energy shall cause the General
Partner to remain the general partner of PECO Energy Capital and timely
perform all its duties as such (including the duty to pay distributions on
the Preferred Securities), which include, among other things, the General
Partner's duties under the Partnership Agreement to directly pay all costs
and expenses of PECO Energy Capital (for the purpose of insuring that
payment of principal and interest by PECO Energy on the Subordinated Debt
Securities will be sufficient to allow payment in full to the holders of
the Preferred Securities) and the covenant of the General Partner in the
Partnership Agreement to at all times maintain a "fair market value net
worth" of at least 10% of the total contributions (less redemptions) to
PECO Energy Capital. While the assets of the General Partner will not be
available for making distributions on the Preferred Securities, they will
be available for payment of the expenses of PECO Energy Capital.
Accordingly, the Series D Guarantee and the Indenture, together with the
related covenants contained in the Partnership Agreement and PECO Energy's
obligations under the Subordinated Debt Securities, provide for PECO
Energy's full and unconditional guarantee of the Series D Preferred
Securities as set forth above.
CERTAIN COVENANTS OF PECO ENERGY
Under the Series D Guarantee, PECO Energy will covenant that, so long
as any Series D Preferred Securities remain outstanding, neither PECO
Energy nor any majority owned subsidiary of PECO Energy shall declare or
pay any dividend on, or redeem, purchase, acquire or make a liquidation
payment with respect to, any of its capital stock (other than dividends by
a wholly owned subsidiary) if at such time PECO Energy shall be in default
with respect to its payment obligations under the Series D Guarantee or
there shall have occurred any event that, with the giving of notice or the
lapse of time or both, would constitute an Event of Default under the
Indenture.
AMENDMENTS
Except with respect to any changes which do not materially adversely
affect the rights of holders of Series D Preferred Securities (in which
case no vote will be required), the Series D Guarantee may
30
be amended only with the prior approval of the holders of Capital
Securities representing not less than 66-2/3% of the aggregate stated
liquidation preference of the outstanding Series D Preferred Securities.
MERGER OF PECO ENERGY
So long as the Series D Preferred Securities remain outstanding, PECO
Energy will maintain its corporate existence; provided that, PECO Energy
may consolidate with or merge with or into any other person or sell,
convey, transfer or lease all or substantially all its properties and
assets to any person if the successor person shall be organized and
existing under the laws of the United States or any state thereof or the
District of Columbia and shall expressly assume the obligations of PECO
Energy under the Series D Guarantee.
TERMINATION OF THE SERIES D GUARANTEE
The Series D Guarantee will terminate and be of no further force and
effect upon full payment of the Redemption Price of all Series D Preferred
Securities or upon full payment of the amounts payable with respect to the
Series D Preferred Securities upon liquidation of PECO Energy Capital. The
Series D Guarantee will continue to be effective or will be reinstated, as
the case may be, if at any time any holder of Series D Preferred Securities
must restore payments of any sums paid under the Series D Preferred
Securities or the Series D Guarantee.
DESCRIPTION OF THE SERIES D SUBORDINATED
DEBT SECURITIES AND THE INDENTURE
The following is a summary of certain terms and provisions of the
Series D Subordinated Debt Securities and the Indenture. Reference is made
to the Indenture, which is filed as an exhibit to the Registration
Statement of which this Prospectus forms a part.
GENERAL
The Series D Subordinated Debt Securities will be unsecured,
subordinated obligations of PECO Energy issued under the Indenture. The
Series D Subordinated Debt Securities will be in a principal amount equal
to the aggregate stated liquidation preference of the Series D Preferred
Securities plus the General Partner's capital contribution in PECO Energy
Capital, will bear interest at a rate equal to the Distribution rate on the
Series D Preferred Securities payable on the Distribution dates, will have
maturity and redemption provisions corresponding to the redemption
provisions of the Series D Preferred Securities and will be subject to
mandatory redemption upon the dissolution and liquidation of PECO Energy
Capital. The entire principal amount of the Series D Subordinated Debt
Securities will become due and payable, together with any accrued and
unpaid interest thereon, on ________, 2028.
PECO Energy will deliver the Series D Subordinated Debt Securities to
the General Partner to be held on behalf of the holders of the Series D
Preferred Securities. The Series D Subordinated Debt Securities will be
delivered by PECO Energy to evidence the loan by PECO Energy Capital to
PECO Energy of an amount equal to the proceeds received from the sale of
the Series D Preferred Securities, plus the General Partner's concurrent
capital contribution in PECO Energy Capital.
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REDEMPTION
Except as provided below, the Series D Subordinated Debt Securities may
not be redeemed prior to maturity. PECO Energy Capital has the right to
redeem the Series D Preferred Securities at any time upon the occurrence of
a Tax Event, upon not less than 30 nor more than 60 days' notice (and not
less than 40 days' notice to the Trust), as described under "Description of
the Series D Preferred Securities-Special Event Redemptions." The Series D
Subordinated Debt Securities will be subject to mandatory redemption upon
the dissolution of PECO Energy Capital or upon redemption of the Series D
Preferred Securities.
If PECO Energy gives a notice of redemption in respect of Series D
Subordinated Debt Securities, then, on or prior to the redemption date,
PECO Energy shall deposit with the paying agent funds sufficient to pay the
Redemption Price and will give irrevocable instructions and authority to
pay the Redemption Price. If notice of redemption shall have been given,
if required, then the Series D Subordinated Debt Securities called for
redemption shall become due and payable on the redemption date and upon the
redemption date, interest will cease to accrue on the Series D Subordinated
Debt Securities called for redemption and such Series D Subordinated Debt
Securities will no longer be deemed to be outstanding.
INTEREST
The Series D Subordinated Debt Securities will bear interest at an
annual rate of ____% plus Additional Interest (as defined under
"-Additional Interest"), if any, from the original date of issuance.
Interest will be payable semiannually in arrears on ____________ and
____________ of each year, commencing on ____________, 1998, to PECO Energy
Capital.
PECO Energy will make additional interest payments on any overdue
installment of interest on the Series D Subordinated Debt Securities to
PECO Energy Capital at the same rate per annum as the annual rate payable
on the Series D Subordinated Debt Securities.
Interest payments on the Subordinated Debt Securities are eliminated in
consolidation from the consolidated statements of income of PECO Energy.
Distributions on the Preferred Securities appear as a separate line item
under interest charges entitled "Company Obligated Mandatorily Redeemable
Preferred Securities of a Partnership, which holds Solely Subordinated
Debentures of the Company" on the consolidated statements of income of PECO
Energy.
ADDITIONAL INTEREST
If at any time PECO Energy Capital would be required to pay any taxes,
duties or other governmental charges of whatever nature (other than
withholding taxes) imposed by the United States, or any other taxing
authority, then, in any such case, PECO Energy also will pay as additional
interest ("Additional Interest") such amounts as shall be required so that
the net amounts received and retained by PECO Energy Capital after paying
any such taxes, duties or other governmental charges will not be less than
the amounts PECO Energy Capital would have received had no such taxes,
duties or other governmental charges been imposed.
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OPTION TO EXTEND INTEREST PAYMENT PERIOD
Under the Indenture, PECO Energy shall have the right at any time, so
long as an Event of Default under the Indenture has not occurred and is
continuing, to extend the interest payment period for all Subordinated Debt
Securities for up to 60 consecutive months; provided that no Extension
Period shall extend beyond the stated maturity date or date of redemption
of any series of Subordinated Debt Securities. At the end of the Extension
Period, PECO Energy shall pay all interest then accrued and payable on the
Series D Subordinated Debt Securities (together with interest thereon to
the extent permitted by applicable law at the rate per annum borne by the
Series D Subordinated Debt Securities). During any such Extension Period,
neither PECO Energy nor any majority owned subsidiary of PECO Energy shall
declare or pay any dividend on, or redeem, purchase, acquire or make a
liquidation payment with respect to, any of its capital stock (other than
dividends by wholly owned subsidiaries). Prior to the termination of any
such Extension Period, PECO Energy may shorten or further extend the
interest payment period; provided that, such Extension Period, together
with all such further extensions thereof, may not exceed 60 consecutive
months. Upon the termination of any Extension Period and the payment of
all amounts then due, PECO Energy may select a new Extension Period,
subject to the above requirements. PECO Energy shall give the Indenture
Trustee notice of its selection of such extended or shortened interest
payment period one business day prior to the earlier of (i) the date PECO
Energy has selected to make the interest payment or (ii) the date PECO
Energy Capital is required to give notice to any national securities
exchange or other applicable self-regulatory organization of the record
date or the date distributions on the Preferred Securities are payable, but
in any event not less than two business days prior to such record date.
PECO Energy shall cause the Indenture Trustee to give such notice of PECO
Energy's selection of such Extension Period to the holders of the Preferred
Securities.
SUBORDINATION
The Indenture provides that all payments by PECO Energy in respect of
the Subordinated Debt Securities, including the Series D Subordinated Debt
Securities, shall be subordinated to the prior payment in full of all
amounts payable on Senior Indebtedness. The term "Senior Indebtedness"
means (i) the principal of and premium, if any, in respect of (a)
indebtedness of PECO Energy for money borrowed and (b) indebtedness
evidenced by securities, debentures, bonds or other similar instruments
issued by PECO Energy; (ii) all capital lease obligations of PECO Energy;
(iii) all obligations of PECO Energy issued or assumed as the deferred
purchase price of property, all conditional sale obligations of PECO Energy
and all obligations of PECO Energy under any title retention agreement (but
excluding trade accounts payable arising in the ordinary course of
business); (iv) certain obligations of PECO Energy for the reimbursement of
any obligor on any letter of credit, banker's acceptance, security purchase
facility or similar credit transaction; (v) all obligations of the type
referred to in clauses (i) through (iv) of other persons and all dividends
of other persons (other than Preferred Securities) for the payment of
which, in either case, PECO Energy is responsible or liable as obligor,
guarantor or otherwise; and (vi) all obligations of the type referred to in
clauses (i) through (v) of other persons secured by any lien on any
property or asset of PECO Energy (whether or not such obligation is assumed
by PECO Energy), except for any such indebtedness that is by its terms
subordinated to or pari passu with the Subordinated Debt Securities or
indebtedness between or among PECO Energy and its affiliates.
Upon any payment or distribution of assets or securities of PECO
Energy, upon any dissolution or winding up or total or partial liquidation
or reorganization of PECO Energy, whether voluntary or
33
involuntary, or in bankruptcy, insolvency, receivership or other
proceedings, all amounts payable on Senior Indebtedness (including any
interest accruing on such Senior Indebtedness subsequent to the
commencement of a bankruptcy, insolvency or similar proceeding) shall first
be paid in full before PECO Energy Capital (as holder of the Subordinated
Debt Securities), the Indenture Trustee on behalf of such holder or any
Special Representative appointed by the holders of the Preferred Securities
shall be entitled to receive from PECO Energy any payment of principal of
or interest on or any other amounts in respect of the Subordinated Debt
Securities or distribution of any assets or securities.
No direct or indirect payment by or on behalf of PECO Energy of
principal of or interest on the Subordinated Debt Securities, whether
pursuant to the terms of the Subordinated Debt Securities or upon
acceleration or otherwise, shall be made if, at the time of such payment,
there exists (i) a default in the payment of all or any portion of any
Senior Indebtedness or (ii) any other default pursuant to which the
maturity of Senior Indebtedness has been accelerated and, in either case,
requisite notice has been received by the Indenture Trustee and such
default shall not have been cured or waived by or on behalf of the holders
of such Senior Indebtedness.
If the Indenture Trustee, PECO Energy Capital (as holder of the
Subordinated Debt Securities) or any Special Representative appointed by
the holders of the Preferred Securities, shall have received any payment on
account of the principal of or interest on the Subordinated Debt Securities
when such payment is prohibited and before all amounts payable on, under or
in connection with Senior Indebtedness are paid in full, then such payment
shall be received and held in trust for the holders of Senior Indebtedness
and shall be paid over or delivered first to the holders of the Senior
Indebtedness remaining unpaid to the extent necessary to pay such Senior
Indebtedness in full.
Nothing in the Indenture shall limit the right of the Indenture
Trustee, PECO Energy Capital (as holder of the Subordinated Debt
Securities) or the Special Representative to take any action to accelerate
the maturity of the Subordinated Debt Securities or to pursue any rights or
remedies against PECO Energy; provided that, all Senior Indebtedness shall
be paid before PECO Energy Capital (as holder of the Subordinated Debt
Securities) is entitled to receive any payment from PECO Energy of
principal of or interest on the Subordinated Debt Securities.
Upon the payment in full of all Senior Indebtedness, PECO Energy
Capital (as holder of the Subordinated Debt Securities) (and any Special
Representative appointed by the holders of the Preferred Securities) shall
be subrogated to the rights of the holders of such Senior Indebtedness to
receive payments or distributions of assets of PECO Energy made on such
Senior Indebtedness until the Subordinated Debt Securities shall be paid in
full.
The Indenture does not limit the aggregate amount of Senior
Indebtedness which PECO Energy may issue.
CERTAIN COVENANTS OF PECO ENERGY
PECO Energy will covenant that it and any majority owned subsidiary
will not declare or pay any dividend on, or redeem, purchase, acquire or
make a liquidation payment with respect to, any of its capital stock (other
than dividends by wholly owned subsidiaries) (i) during an Extension
Period, (ii) if there shall have occurred any event that, with the giving
of notice or the lapse of time or both, would
34
constitute an Event of Default under the Indenture or (iii) if PECO
Energy shall be in default with respect to its payment obligations under
any Guarantee. PECO Energy will also covenant (i) to maintain direct or
indirect 100% ownership of the General Partner and will cause the General
Partner to maintain 100% ownership of the general partner interests of PECO
Energy Capital, (ii) to cause the General Partner to at all times maintain
a "fair market net worth" of at least 10% of the total capital
contributions (less redemptions) to PECO Energy Capital and to maintain
general partner interests representing 3% of all interests in the capital,
income, gain, loss, deduction and credit of PECO Energy Capital, (iii) to
cause the General Partner to timely perform all of its duties as general
partner of PECO Energy Capital (including the duty to pay Distributions on
the Series D Preferred Securities), and (iv) to use its reasonable efforts
to cause PECO Energy Capital to remain a limited partnership and otherwise
continue to be treated as a partnership for federal income tax purposes.
PECO Energy Capital may not waive compliance or waive any default in
compliance by PECO Energy with any covenant or other term in the Indenture
without the approval of the Special Representative or without the direction
of the holders of 66-2/3% of the aggregate stated liquidation preference of
the Preferred Securities.
MODIFICATION OF THE INDENTURE
The Indenture contains provisions permitting PECO Energy and the
Indenture Trustee, without the consent of the Special Representative or
PECO Energy Capital, to modify the Indenture or any supplemental indenture:
(i) to cure any ambiguity, defect or inconsistency; (ii) to comply with the
provisions of the Indenture regarding a successor to PECO Energy; (iii) to
provide for uncertificated Subordinated Debt Securities in addition to or
in place of certificated Subordinated Debt Securities; (iv) to make any
other change that does not adversely affect the rights of any holder of the
Subordinated Debt Securities; (v) to comply with any requirement for
qualification of the Indenture under the Trust Indenture Act of 1939, as
amended; and (vi) to set forth the terms and conditions of any series of
Subordinated Debt Securities.
The Indenture contains provisions permitting PECO Energy and the
Indenture Trustee, with the consent of the Special Representative or PECO
Energy Capital at the direction of the holders of not less than 66-2/3% of the
aggregate stated liquidation preference of the Preferred Securities, to
modify the Indenture or any supplemental indenture or the rights of the
holders of the Subordinated Debt Securities issued under the Indenture;
provided that, no such modification, without the consent of each holder of
the Subordinated Debt Securities affected, may (i) change the stated
maturity date of the principal of, or any installment of principal of or
interest, if any, on, the Subordinated Debt Securities, (ii) reduce the
principal amount of, or premium or rate of interest, if any, on, the
Subordinated Debt Securities, (iii) reduce the amount of principal of
Subordinated Debt Securities payable upon acceleration of the maturity
thereof, (iv) make the Subordinated Debt Securities payable in money or
securities other than as stated in the Subordinated Debt Securities, (v)
impair the right to institute suit for the enforcement of any payment on or
with respect to the Subordinated Debt Securities, (vi) adversely change the
redemption provisions of the Subordinated Debt Securities, (vii) adversely
affect the rights of the holders of the Subordinated Debt Securities with
respect to subordination or (viii) reduce the principal amount of the
holders of the Subordinated Debt Securities that must consent to an
amendment of the Indenture.
35
EVENTS OF DEFAULT
The following are Events of Default under the Indenture: (i) default
for ten days in payment of any interest on any series of the Subordinated
Debt Securities (other than the payment of interest during an Extension
Period); (ii) default in payment of principal of (or premium, if any, on)
any Subordinated Debt Securities; (iii) default for 60 days after notice in
the performance of any other covenant or agreement in the Indenture or any
series of Subordinated Debt Securities or (iv) certain events of
bankruptcy, insolvency or reorganization of PECO Energy. In case an Event
of Default under the Indenture shall occur and be continuing (other than an
Event of Default relating to bankruptcy, insolvency or reorganization of
PECO Energy, in which case principal and interest on all of the
Subordinated Debt Securities shall become immediately due and payable), the
Indenture Trustee, PECO Energy Capital (as holder of the Subordinated Debt
Securities) or the Special Representative may declare the principal of all
the Subordinated Debt Securities to be due and payable. Under certain
circumstances, a declaration of acceleration with respect to Subordinated
Debt Securities may be rescinded and past defaults (except, unless
theretofore cured, a default in the payment of principal of or interest on
the Subordinated Debt Securities) may be waived only by the Special
Representative or by PECO Energy Capital at the direction of the holders of
66-2/3% in aggregate stated liquidation preference of Preferred Securities.
PECO Energy is required to furnish to the Indenture Trustee annually a
statement as to the performance by PECO Energy of its obligations under the
Indenture and as to any default in such performance.
ENFORCEMENT OF CERTAIN RIGHTS OF HOLDERS OF PREFERRED SECURITIES
The holders of the Preferred Securities will have the rights referred
to under "Description of the Series D Preferred Securities-Voting Rights,"
including the right to appoint a Special Representative authorized to
exercise the rights of PECO Energy Capital, as the holder of the Series D
Subordinated Debt Securities, to declare the principal and interest on the
Series D Subordinated Debt Securities due and payable and to enforce the
obligations of PECO Energy under the Series D Subordinated Debt Securities
and the Indenture directly against PECO Energy, without first proceeding
against PECO Energy Capital or any other person or entity.
CONSOLIDATION, MERGER, SALE OR CONVEYANCE
The Indenture provides that PECO Energy may not consolidate with or
merge with or into, or sell, convey, transfer or lease all or substantially
all its assets (either in one transaction or a series of transactions) to
any person unless, among other things (i) the successor person shall be
organized and existing under the laws of the United States or any state
thereof or the District of Columbia, and shall expressly assume by a
supplemental indenture all of the obligations of PECO Energy under the
Subordinated Debt Securities and the Indenture and (ii) immediately prior
to and after giving effect to such transaction, no Event of Default, and no
event which, after notice or lapse of time or both, would become an Event
of Default, shall have happened and be continuing.
36
DEFEASANCE AND DISCHARGE
Under the terms of the Indenture, PECO Energy will be deemed to have
paid and discharged the entire indebtedness of the Series D Subordinated
Debt Securities if PECO Energy irrevocably deposits with the Indenture
Trustee or other paying agent, in trust (i) cash and/or (ii) United States
Government Obligations (as defined in the Indenture), which through the
payment of interest thereon and principal thereof in accordance with their
terms will provide cash in an amount sufficient to pay all the principal
of, premium, if any, and interest on, the Series D Subordinated Debt
Securities then outstanding on the dates such payments are due in
accordance with the terms of the Series D Subordinated Debt Securities.
INFORMATION CONCERNING THE INDENTURE TRUSTEE
Subject to the provisions of the Indenture relating to its duties, the
Indenture Trustee will be under no obligation to exercise any of its rights
or powers under the Indenture, unless the Indenture Trustee receives
security and indemnity reasonably satisfactory to it. Subject to such
provision for indemnification, the holders of a majority in principal
amount of the Subordinated Debt Securities then outstanding thereunder or
the Special Representative will have the right to direct the time, method
and place of conducting any proceeding for any remedy available to the
Indenture Trustee thereunder, or exercising any trust or power conferred on
the Indenture Trustee.
The Indenture contains limitations on the right of the Indenture
Trustee, as a creditor of PECO Energy, to obtain payment of claims in
certain cases, or to realize on certain property received in respect of any
such claim as security or otherwise. In addition, the Indenture Trustee
may be deemed to have a conflicting interest and may be required to resign
as Indenture Trustee if at the time of default under the Indenture it is a
creditor of PECO Energy.
First Union National Bank, the Indenture Trustee, has from time to time
engaged in transactions with, or performed services for, PECO Energy and
its affiliates in the ordinary course of business and is the trustee under
PECO Energy's First and Refunding Mortgage dated May 1, 1923.
UNITED STATES TAXATION
In the opinion of Ballard Spahr Andrews & Ingersoll, LLP, special tax
counsel to PECO Energy, the following are the material federal income tax
consequences (and certain Pennsylvania tax considerations) of the ownership
and disposition of Capital Securities. Unless otherwise stated, this
summary deals only with Capital Securities held as capital assets by
holders. It does not deal with special classes of holders, such as dealers
in securities or currencies, life insurance companies, persons holding
Capital Securities as a hedge against or which are hedged against currency
risks or as a part of a straddle, or persons whose functional currency is
not the United States dollar. This summary is based on the Internal
Revenue Code of 1986, as amended (the "Code"), Treasury regulations
thereunder and administrative and judicial interpretations thereof, as of
the date hereof, all of which are subject to change. Prospective
purchasers should particularly note that any such change could have
retroactive application to Capital Securities acquired through this
offering.
37
This summary assumes that Capital Securities are held as capital
assets, within the meaning of section 1221 of the Code, and does not
address all of the tax consequences that may be relevant to a particular
holder of Capital Securities ("Securityholder") in light of the
Securityholder's personal circumstances, or to certain types of
Securityholders (such as certain financial institutions, dealers in
securities or commodities, insurance companies, regulated investment
companies, personal holding companies, corporations subject to the
alternative minimum tax, tax-exempt organizations or persons who hold
Capital Securities as positions in a "straddle" or as part of a "hedging,"
"conversion" or "constructive sale" transaction for United States federal
income tax purposes). Also not addressed are the consequences under state,
local and foreign tax laws or the tax consequences to subsequent
Securityholders.
ALL PROSPECTIVE INVESTORS ARE ADVISED TO CONSULT THEIR TAX ADVISERS
REGARDING THE FEDERAL INCOME TAX CONSEQUENCES OF THE OWNERSHIP AND
DISPOSITION OF CAPITAL SECURITIES IN LIGHT OF THEIR PARTICULAR
CIRCUMSTANCES, AS WELL AS THE EFFECT OF ANY STATE, LOCAL OR OTHER LAWS.
CLASSIFICATION OF PECO ENERGY CAPITAL AND THE TRUST
In connection with the issuance of Capital Securities, Ballard Spahr
Andrews & Ingersoll, LLP will render its tax opinion to the effect that,
under then current law and assuming full compliance with the terms of the
Partnership Agreement and the Trust Agreement, (i) PECO Energy Capital will
be classified for United States federal income tax purposes as a
partnership and not as a business entity taxable as a corporation and (ii)
the Trust will be classified as a grantor trust and not as a business
entity taxable as a corporation.
As a consequence, each Securityholder will be considered the owner of a
pro rata portion of the Series D Preferred Securities held by the Trust.
As a further consequence, each Securityholder will be required to include
in gross income as fully taxable interest income his pro rata share of the
income accrued on the Series D Subordinated Debt Securities held by PECO
Energy Capital and allocated by the Trust. Such income should not exceed
Distributions received by the Securityholders on the Capital Securities
except in limited circumstances described under "-Potential Extension of
Payment Period." No portion of such income will be eligible for the
dividends received deduction.
TAXABILITY OF DISTRIBUTIONS
PECO Energy Capital will be required to include stated interest on the
Series D Subordinated Debt Securities in its gross income as it accrues.
Each Securityholder, including a taxpayer who otherwise uses the cash
method of accounting, will be required to include his pro rata share of
such interest income in his gross income. Actual distributions of stated
interest will not be separately reported as taxable income. So long as
there is no Extension Period, cash Distributions received by an initial
Securityholder for any semiannual interest period should equal the sum of
the daily accruals of income for such interest period.
Under the applicable Treasury Regulations, a "remote" contingency that
stated interest will not be timely paid on the Series D Subordinated Debt
Securities will be ignored in determining whether the
38
Series D Subordinated Debt Securities are issued with original issue
discount. PECO Energy believes that the likelihood of it exercising its
option to defer payments of interest on the Series D Subordinated Debt
Securities is remote since, among other things, exercising that option
would prevent PECO Energy from declaring dividends on any of its capital
stock. Accordingly, PECO Energy intends to take the position, based on the
advise of tax counsel, that the Series D Subordinated Debt Securities will
not be considered to be issued with original issue discount.
POTENTIAL EXTENSION OF PAYMENT PERIOD
Under the terms of the Indenture, PECO Energy will be permitted to
extend the interest payment period on the Series D Subordinated Debt
Securities for up to 60 consecutive months. In the event that PECO Energy
exercises this right, PECO Energy may not declare dividends on any of its
capital stock during such Extension Period. PECO Energy currently believes
that the extension of an interest payment period is unlikely. In the event
that the interest payment period is extended, PECO Energy Capital will
continue to accrue income, generally equal to the amount of the interest
payment due at the end of the Extension Period, over the length of the
Extension Period.
During an Extension Period, PECO Energy Capital will be required to
include original issue discount on the Series D Subordinated Debt
Securities in its gross income as it accrues, in accordance with a constant
yield method based on a compounding of interest. Each Securityholder,
including a taxpayer who otherwise uses the cash method of accounting, will
be required to include his pro rata share of such original issue discount
in gross income. Accrued income will be allocated, but not distributed, to
Securityholders of record on ____________ and ____________ of each year.
As a result, during an Extension Period, Securityholders will be required
to include interest in gross income in advance of the receipt of cash, and
any Securityholders who dispose of Capital Securities prior to the record
date for the payment of Distributions following such Extension Period will
include interest in gross income but will not receive any cash related
thereto from the Trust. The tax basis of a Series D Preferred Security
will be increased by the amount of any interest that is included in income
without a corresponding receipt of cash, and will be decreased again when
and if such cash is subsequently received from PECO Energy and distributed
by PECO Energy Capital and the Trust. The subsequent receipt or
distribution of such cash will not be included in gross income.
WITHDRAWAL OR DISTRIBUTION OF SERIES D PREFERRED SECURITIES
The receipt of Series D Preferred Securities by a Securityholder in
exchange for Capital Securities (and vice versa) at the option of the
Securityholder or upon termination of the Trust will not be a taxable
event. The Securityholder's tax basis and holding period for the Series D
Preferred Securities immediately after such exchange or distribution will
equal the Securityholder's tax basis and holding period for the Capital
Securities (or Series D Preferred Securities, as applicable) surrendered in
such exchange or distribution. Income earned from the Series D Preferred
Securities (rather than the Capital Securities) will be reported annually
to the Securityholder and to the Internal Revenue Service on Schedule K-1
and not on Form 1099.
39
DISPOSITION OF THE CAPITAL SECURITIES
Gain or loss will be recognized on a sale, including a redemption for
cash, of Capital Securities in an amount equal to the difference between
the amount realized and the Securityholder's tax basis in his pro rata
share of Series D Preferred Securities represented by such Capital
Securities. Gain or loss recognized by a Securityholder on the sale or
exchange of Capital Securities held for (a) more than one year but not more
than eighteen months generally will be taxable as mid-term capital gain or
loss and (b) more that eighteen months generally will be taxable as
long-term capital gain or loss.
STATE OF PENNSYLVANIA PERSONAL PROPERTY TAXES
Personal property taxes are no longer being imposed in the State of
Pennsylvania on intangible personal property such as the Capital
Securities.
BACKUP WITHHOLDING
Under the backup withholding provisions of the Code and applicable
Treasury regulations, a Securityholder may be subject to backup withholding
at the rate of 31% with respect to interest paid on, original issue
discount accrued with respect to, or the proceeds of a sale, exchange or
redemption of the Series D Preferred Securities or the Capital Securities,
unless such Securityholder (a) is a corporation or comes within certain
other exempt categories and when required demonstrates this fact or (b)
provides a taxpayer identification number, certifies as to no loss of
exemption from backup withholding and otherwise complies with applicable
requirements of the backup withholding rules. The amount of any backup
withholding from a payment to a Securityholder will be allowed as a credit
against the Securityholder's federal income tax liability and may entitle
such Securityholder to a refund, provided that the required information is
furnished to the Internal Revenue Service ("IRS").
SPECIAL TAX RULES APPLICABLE TO FOREIGN SECURITYHOLDERS
For purposes of the following discussion, a "Foreign Securityholder" is
any securityholder who is not (i) a citizen or resident of the United
States, (ii) a corporation, partnership or other entity created or
organized in or under the laws of the United States, any state or any
political subdivision thereof, (iii) an estate the income of which is
subject to United States federal income taxation regardless of source, or
(iv) a trust (A) over the administration of which a court within the United
States is able to exercise primary supervision and (B) all substantial
decisions of which one or more United States persons have the authority to
control.
Income received by a Foreign Securityholder in the form of interest and
original issue discount on the Series D Preferred Securities will be
subject to a United States federal withholding tax at a 30% rate upon the
actual payment of interest or original issue discount except as described
below and except where an applicable tax treaty provides for the reduction
or elimination of such withholding tax. A Foreign Securityholder generally
will be taxable in the same manner as a United States corporation or
resident with respect to interest or original issue discount income if such
income is effectively connected with the conduct of a trade or business in
the United States. Such effectively connected income received by a Foreign
Securityholder that is a corporation may in certain circumstances be
subject to an additional "branch profits tax" at a 30% rate, or if
applicable, a lower treaty rate.
40
Payments of interest and original issue discount on the Series D
Preferred Securities received by a Foreign Securityholder on or prior to
December 31, 1998, will not be subject to United States federal withholding
tax provided that (a) the Foreign Securityholder does not actually or
constructively own 10% or more of the total combined voting power of all
classes of stock of PECO Energy entitled to vote, (b) the Securityholder is
not a controlled foreign corporation that is related to PECO Energy through
stock ownership, and (c) either (1) the beneficial owner of the Series D
Preferred Securities, under penalties of perjury, provides PECO Energy or
its agent with its name and address and certifies that it is not a United
States person or (2) a securities clearing organization, bank or other
financial institution that holds customers' securities in the ordinary
course of its trade or business (a "Financial Institution") certifies to
PECO Energy or its agent, under penalties of perjury, that such a statement
has been received from the beneficial owner by its or another Financial
Institution and furnishes to PECO Energy or its agent a copy thereof.
Backup withholding and information reporting also generally will not apply
to payments of interest and original discount on or prior to December 31,
1998, if the certification described above is received, provided the payor
does not have actual knowledge that the Securityholder is a United States
person.
Payments of interest and original issue discount received by a Foreign
Securityholder after December 31, 1998, will not be subject to United
States federal withholding tax (or to backup withholding and information
reporting) provided that requirements (a) and (b) of the preceding
paragraph are satisfied and, in general, (1) PECO Energy or its paying
agent can reliably associate the payment with documentation upon which it
can rely to treat the payment as made to a foreign beneficial owner under
Treasury regulations issued under section 1441 of the Code; (2) PECO Energy
or its paying agent can reliably associate the payment with a withholding
certificate from a person claiming to be a withholding foreign partnership
and the foreign partnership can reliably associate the payment with
documentation upon which it can rely to treat the payment as made to a
foreign beneficial owner in accordance with such Treasury regulations; (3)
PECO Energy or its paying agent can reliably associate the payment with a
withholding certificate from a person representing to be a "qualified
intermediary" that has assumed primary withholding responsibility under
such Treasury regulations and the qualified intermediary can reliably
associate the payment with documentation upon which it can rely to treat
the payment as made to a foreign beneficial owner in accordance with its
agreement with the IRS; (4) PECO Energy or its paying agent can reliably
associate the payment with a withholding certificate described in the
Treasury Regulations from a person claiming to be a U.S. branch of a
foreign bank or insurance company subject to regulatory jurisdiction by the
Federal Reserve Board or by the National Association of Insurance
Commissioners or the insurance department of a state, a territory or the
District of Columbia under which the U.S. branch agrees to be treated as a
U.S. person with respect to that payment; or (5) PECO Energy or its paying
agent receives a statement, under penalties of perjury from an authorized
representative of a Financial Institution stating that the Financial
Institution has received from the beneficial owner a withholding
certificate described in such Treasury regulations or that it has received
from another Financial Institution a similar statement that it, or another
Financial Institution acting on behalf of the beneficial owner, has
received such a withholding certificate from the beneficial owner. In
general, it will not be necessary for a Foreign Securityholder to obtain or
furnish a United States taxpayer identification number to PECO Energy or
its paying agent in order to claim any of the foregoing exemptions from
United States withholding tax on payments of interest and original issue
discount.
A Foreign Securityholder generally will not be subject to United States
federal income or withholding tax on gain realized on the sale or exchange
of the Series D Preferred Securities or the
41
Capital Securities, unless (i) the Foreign Securityholder is an
individual who is present in the United States for 183 days or more during
the taxable year and as to whom such gain is from United States sources or
(ii) the gain is effectively connected with a United States trade or
business of the holder.
The payment of the proceeds of the sale of the Series D Preferred
Securities or the Capital Securities to or through the United States office
of a broker will be subject to information reporting and possible backup
withholding at a rate of 31% unless the owner certifies its non-United
States status under penalties of perjury or otherwise establishes an
exemption in accordance with applicable Treasury regulations. The payment
of the proceeds of the sale of the Series D Preferred Stock or the Capital
Securities to or through the foreign office of a broker generally will not
be subject to this backup withholding tax. However, in the case of the
payment of proceeds from the disposition of the Series D Preferred
Securities or the Capital Securities through a foreign office of a broker
that is a United States person or a "United States related person," the
applicable Treasury regulations require information reporting on the
payment unless the broker has documentary evidence in its files that the
owner is a non-United States person and the broker has no actual knowledge
to the contrary. For this purpose, a "United States related person" is (i)
a "controlled foreign corporation" for United States federal income tax
purposes, or (ii) a foreign person 50% or more of whose gross income from
all sources for a specified period is derived from activities that are
effectively connected with the conduct of a United States trade or
business. Any amounts withheld under the backup withholding rules from a
payment to a Foreign Securityholder will be allowed as a refund or a credit
against such Foreign Securityholder's United States federal income tax,
provided that the required information is furnished to the IRS.
OTHER TAX CONSIDERATIONS
In the opinion of Ballard Spahr Andrews & Ingersoll, LLP, under current
law, interest on the Series D Subordinated Debt Securities is deductible by
PECO Energy. In the past, the Clinton Administration had proposed certain
tax law changes that would, among other things, generally deny interest
deductions to corporate issuers if the debt instrument has a term exceeding
15 years and is not reflected as indebtedness on such issuer's consolidated
balance sheet. Because the term of the Series D Subordinated Debt
Securities exceeds 15 years, if such proposal were to become effective
retroactively, PECO Energy would be precluded from deducting interest on
the Series D Subordinated Debt Securities. There can be no assurance,
however, that a legislative proposal which would affect the ability of PECO
Energy to deduct interest on the Series D Subordinated Debt Securities
might not be adopted which, in turn, might give rise to a Tax Event and,
accordingly, the General Partner's optional right to redeem the Series D
Preferred Securities, as described under "Description of the Series D
Preferred Securities-Special Event Redemptions."
ERISA CONSIDERATIONS
FIDUCIARIES UNDER ERISA
A fiduciary of a pension, profit sharing or other employee pension
benefit plan that is intended to be tax-qualified under section 401(a) of
the Code (a "Qualified Plan") is subject to certain requirements under the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
including the discharge of duties solely in the interest of, and for the
exclusive purpose of providing benefits to, the
42
Qualified Plan's participants and beneficiaries. A fiduciary is
required to perform the fiduciary's duties with the skill, prudence and
diligence of a prudent person acting in a like capacity, to diversify
investments so as to minimize the risk of large losses and to act in
accordance with the Qualified Plan's governing documents.
Fiduciaries with respect to a Qualified Plan include any persons who
exercise or possess any authority or control with respect to the management
or disposition of the funds or other property of the Qualified Plan. For
example, any person who is responsible for choosing a Qualified Plan's
investments, or who is a member of a committee that is responsible for
choosing a Qualified Plan's investments, is a fiduciary of that Qualified
Plan. Also, an investment professional whose advice will serve as one of
the primary bases for a Qualified Plan's investment decisions may be a
fiduciary of the Qualified Plan, as may any other person with special
knowledge or influence with respect to a Qualified Plan's investment or
administrative activities.
While the owner of an IRA is generally treated as a fiduciary of the
IRA under the Code, IRAs generally are not subject to ERISA's fiduciary
duty rules. Also, where a participant in a Qualified Plan exercises
control over the participant's individual account in the Qualified Plan in
a self-directed investment arrangement that meets the requirements of
Section 404(c) of ERISA, in general no person who would otherwise be a
fiduciary of the Qualified Plan may be held responsible for the
consequences of the participant's investment decisions. A fiduciary may
still, however, be held responsible for its decision to offer a particular
investment option under a Qualified Plan. Moreover, certain Qualified
Plans of sole proprietors or partnerships in which at all times (before and
after the investment) the only participants are the sole proprietor and his
spouse or the partners and their spouses, certain Qualified Plans of
corporations in which at all times (before and after the investment) the
only participant(s) is or are an individual and/or his spouse who own(s)
100% of the corporation's stock, are generally not subject to ERISA's
fiduciary duty rules, although they are subject to the Code's prohibited
transaction rules, explained below. Finally, governmental plans (as
defined in Section 3(32) of ERISA), certain church plans (as defined in
Section 3(33) of ERISA) and foreign plans (as described in Section 4(b)(4)
of ERISA) are not subject to the requirements of ERISA or Section 4975 of
the Code.
A person subject to ERISA's fiduciary rules with respect to a Qualified
Plan should consider those rules in the context of the particular
circumstances of the Qualified Plan before authorizing an investment of a
portion of the Qualified Plan's assets in Capital Securities.
PROHIBITED TRANSACTIONS UNDER ERISA AND THE CODE
Code Section 4975 (which applies to all Qualified Plans, except as
noted above, and IRAs) and Section 406 of ERISA (which does not apply to
IRAs or to certain Qualified Plans that, under the rules summarized above,
are not subject to ERISA's fiduciary rules) prohibit Qualified Plans and
IRAs from engaging in certain transactions involving "plan assets" with
parties that are "disqualified persons" under the Code or parties in interest
under ERISA ("Disqualified Persons") unless an exemption is available for a
particular transaction. Disqualified Persons include fiduciaries of the
Qualified Plan or IRA, officers, directors, shareholders and other owners
of the company sponsoring the Qualified Plan and natural persons and legal
entities sharing certain family or ownership relationships with other
Disqualified Persons.
43
"Prohibited transactions" include: (1) any direct or indirect transfer
or use of a Qualified Plan's or IRA's assets to or for the benefit of a
Disqualified Person; (ii) any act by a fiduciary that involves the use of a
Qualified Plan's or IRA's assets in the fiduciary's individual interest or
for the fiduciary's own account; and (iii) any receipt by a fiduciary of
consideration for his or her own personal account from any party dealing
with a Qualified Plan or IRA in connection with a transaction involving the
assets of the Qualified Plan or the IRA. Under ERISA, a Disqualified
Person that engages in a prohibited transaction will be required to
disgorge any profits made in connection with the transaction and will be
required to compensate any Qualified Plan that was a party to the
prohibited transaction for any losses sustained by the Qualified Plan. In
addition, ERISA authorizes additional penalties and further relief. Code
Section 4975 imposes excise taxes on a Disqualified Person that engages in
a prohibited transaction with a Qualified Plan or IRA.
Fiduciaries of, and other Disqualified Persons with respect to,
Qualified Plans and IRAs should be alert to the potential for prohibited
transactions that may occur in the context of a particular Qualified Plan's
or IRA's decision to purchase Capital Securities.
PLAN ASSETS
If the Trust assets were determined under ERISA or the Code to be "plan
assets" of Qualified Plans or IRAs holding Capital Securities, fiduciaries
of such Qualified Plans and IRAs might under certain circumstances be
subject to liability for actions taken by the Trust. Moreover, fiduciaries
with responsibilities to Qualified Plans (other than IRAs) might be deemed
to have improperly delegated their fiduciary responsibilities to the Trust
in violation of ERISA.
Although under certain circumstances ERISA and the Code, as interpreted
by the Department of Labor in currently effective regulations, apply a
"look-through" rule under which the assets of an entity in which a Qualified
Plan or IRA has made an equity investment may generally constitute "plan
assets", the applicable regulations except investments in certain publicly
registered securities from the application of the "look-through" principle.
In order to qualify for the exception described above, the securities
in question must be: (i) freely transferable; (ii) owned by at least 100
investors independent of the issuer and of one another; and (iii) either
(a) part of a class of securities registered under Section 12(b) or 12(g)
of the Securities Exchange Act, or (b) sold as part of a public offering
pursuant to an effective registration statement under the Securities Act
and registered under the Securities Exchange Act within 120 days (or such
later time as may be allowed by the Commission) after the end of the
issuer's fiscal year during which the offering occurred.
The Trust currently anticipates that the Capital Securities will be
"freely transferable" within the meaning of the Department of Labor
regulations, and will be owned by at least 100 investors independent of the
issuer and of one another will subscribe for the purchase of the Capital
Securities. Finally, no Capital Securities will be sold except pursuant to
an effective registration statement under the Securities Act, and the Trust
intends to make the required filings under the Securities Exchange Act.
Therefore, the Trust should qualify for the exception, so that the Trust
assets should not be "plan assets" of any Qualified Plan or IRA investor, and
the Trust's underlying assets should not be treated as "plan assets"
44
of Qualified Plan or IRA investors for purposes of determining whether
any prohibited transaction has occurred.
OTHER ERISA CONSIDERATIONS
In addition to the considerations discussed above in connection with
the "plan assets" issue, a fiduciary's decision to cause a Qualified Plan or
IRA to acquire Capital Securities should involve, among other factors,
considerations that include whether: (i) the investment is in accordance
with the documents and instruments governing the Qualified Plan or IRA;
(ii) the purchase is prudent; (iii) the investment will provide sufficient
cash distributions in light of the Qualified Plan's likely required benefit
payments and other needs for liquidity; (iv) the investment is made solely
in the interests of the plan participants; and (v) the fair market value of
the Capital Securities will be sufficiently ascertainable, with sufficient
frequency, to enable the Qualified Plan to value its assets on an annual
basis in accordance with the Qualified Plan's rules and policies.
The foregoing discussion is general in nature and is not intended to be
all inclusive. Accordingly, prospective purchasers of Capital Securities
are urged to consult their own legal counsel or advisors with respect to
the considerations associated with the acquisition and ownership of Capital
Securities under ERISA and the Code.
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, PECO
Energy and PECO Energy Capital have agreed to cause the Trust to sell to
each of the Underwriters named below, and each of such Underwriters, for
whom Salomon Brothers Inc and Merrill Lynch, Pierce, Fenner and Smith
Incorporated are acting as Representatives (the "Representatives"), has
severally agreed to purchase from the Trust, the respective number of
Capital Securities set forth opposite its name below:
Number of
Underwriter Capital Securities
----------- ------------------
Salomon Brothers Inc....................
Merrill Lynch, Pierce, Fenner and Smith
Incorporated.........................
_____________
Total ..................................
=============
Under the terms and conditions of the Underwriting Agreement, the
Underwriters are committed to take and pay for all of the Capital
Securities offered hereby, if any are taken.
The Underwriters propose to offer the Capital Securities in part
directly to the public at the initial public offering price set forth on
the cover page of this Prospectus, and in part to certain securities
dealers at such price less a concession of $____ per Capital Security. The
Underwriters may allow, and such dealers may reallow, a concession not in
excess of $____ per Capital Security to certain brokers and
45
dealers. After the Capital Securities are released for sale to the
public, the offering price and other selling terms may from time to time be
varied by the Representatives.
Under the Underwriting Agreement, PECO Energy has agreed to pay to the
Underwriters an underwriting commission of $10 per Capital Security.
Prior to this offering, there has been no public market for the Capital
Securities. An application has been made to list the Capital Securities on
the New York Stock Exchange. If the application is approved, trading of
the Capital Securities on the New York Stock Exchange is expected to
commence within a 30-day period after the initial delivery thereof. The
Representatives have advised PECO Energy that they intend to make a market
in the Capital Securities prior to commencement of trading on the New York
Stock Exchange, but are not obligated to do so and may discontinue market
making at any time without notice. No assurance can be given as to the
liquidity of the trading market for the Capital Securities.
In connection with this offering and in compliance with applicable law,
the Underwriters may effect transactions which stabilize, maintain or
otherwise affect the market price of the Capital Securities at levels above
those which might otherwise prevail in the open market. Such transactions
may include placing bids for the Capital Securities or effecting purchases
of the Capital Securities for the purpose of pegging, fixing or maintaining
the price of the Capital Securities or for the purpose of reducing a
syndicate short position created in connection with the offering. In
addition, the contractual arrangements among the Underwriters include a
provision whereby, if the Representatives purchase Capital Securities in
the open market for the account of the underwriting syndicate and the
Capital Securities purchased can be traced to a particular Underwriter or
member of the selling group, the underwriting syndicate may require the
Underwriter or selling group member in question to purchase the Capital
Securities in question at the cost price to the syndicate or may recover
from (or decline to pay to) the Underwriter or selling group member in
question the selling concession applicable to the Capital Securities in
question. The Underwriters are not required to engage in any of these
activities and any such activities, if commenced, may be discontinued at
any time.
PECO Energy and PECO Energy Capital have agreed, during the period
beginning from the date of the Underwriting Agreement and continuing to and
including the earlier of (i) the date on which the distribution of the
Capital Securities ceases, as determined by the Representatives, or (ii) 30
days after the closing date, not to offer, sell, contract to sell or
otherwise dispose of any Capital Securities, Preferred Securities or any
preferred stock or any other securities of PECO Energy which are
substantially similar to the Capital Securities or the Series D Preferred
Securities, including any guarantee of such securities, or any securities
convertible into or exchangeable for or representing the right to receive
any of the foregoing securities, without the prior written consent of the
Representatives.
PECO Energy and PECO Energy Capital have agreed to indemnify the
several Underwriters against certainsome civil liabilities,
including liabilities under the Securities Act.
46
LEGAL MATTERS
Certain matters of Delaware law relating to the validity of the Series
D Preferred Securities and the Capital Securities will be passed upon for
PECO Energy Capital and the Trust by Richards, Layton & Finger, P.A.,
Wilmington, Delaware, special Delaware counsel to PECO Energy Capital and
the Trust. The validity of the Series D Guarantee and the Series D
Subordinated Debt Securities will be passed upon on behalf of PECO Energy
by
Ballard Spahr Andrews & Ingersoll, LLP, Philadelphia, Pennsylvania.
CertainPennsylvania, will
provide an opinion as to legal matters willin connection with the securities that
we may offer. Additional legal matters may be passed upon on behalf offor any underwriters,
dealers or agents by counsel which we will name in the Underwriters by
Drinker Biddle & Reath LLP, Philadelphia, Pennsylvania, counsel to the
Underwriters. Ballard Spahr Andrews & Ingersoll, LLP and Drinker Biddle &
Reath LLP will rely on Richards, Layton & Finger, P.A. as to certain
matters of Delaware law.applicable prospectus
supplement.
EXPERTS
The consolidated financial statements and schedule of PECO Energy
incorporated in this prospectus by reference in this Prospectus have been audited by Coopers &
Lybrand L.L.P., independent accountants, for the periods indicated in their
report thereon which is included into the
Annual Report onor Form 10-K for the year ended December 31, 1997. The consolidated financial statements and
schedule audited by Coopers & Lybrand L.L.P.2001 have been so
incorporated herein
by reference in reliance on theirupon the report of PricewaterhouseCoopers LLP,
independent accountants, given on theirthe authority of said firm as experts in
accountingauditing and auditing.
47accounting.
13
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THE OFFER
MADE HEREBY EXCEPT AS CONTAINED OR INCORPORATED BY REFERENCE IN THIS================================================================================
$225,000,000
PECO Energy Company
First and Refunding Mortgage Bonds,
% Series due
[LOGO]
Peco/R/
An Exelon Company
-------------
PROSPECTUS AND IF GIVEN OR MADE, NO SUCH INFORMATION OR REPRESENTATIONS
SHOULD BE RELIED UPON AS HAVING BEEN AUTHORIZED BY PECO ENERGY, PECO ENERGY
CAPITAL OR THE TRUST. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL
OR A SOLICITATION OF AN OFFER TO BUY THE CAPITAL SECURITIES BY ANYONE IN
ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR
IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO
DO SO OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION.
------------
TABLE OF CONTENTS
Page
AVAILABLE INFORMATION . . . . . . . . . . . . . . . . . . . . . . . .
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE . . . . . . . . . . .
SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
RISK FACTORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PECO ENERGY . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PECO ENERGY CAPITAL . . . . . . . . . . . . . . . . . . . . . . . . .
THE TRUST . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
COVERAGE RATIOS . . . . . . . . . . . . . . . . . . . . . . . . . . .
ACCOUNTING TREATMENT. . . . . . . . . . . . . . . . . . . . . . . . .
USE OF PROCEEDS . . . . . . . . . . . . . . . . . . . . . . . . . . .
DESCRIPTION OF THE CAPITAL SECURITIES . . . . . . . . . . . . . . . .
DESCRIPTION OF THE SERIES D PREFERRED SECURITIES. . . . . . . . . . .
DESCRIPTION OF THE SERIES D GUARANTEE . . . . . . . . . . . . . . . .
DESCRIPTION OF THE SERIES D SUBORDINATED
DEBT SECURITIES AND THE INDENTURE . . . . . . . . . . . . . . . . .
UNITED STATES TAXATION. . . . . . . . . . . . . . . . . . . . . . . .
ERISA CONSIDERATIONS. . . . . . . . . . . . . . . . . . . . . . . . .
UNDERWRITING. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
LEGAL MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . .
EXPERTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$78,105,000
PECO ENERGY CAPITAL TRUST III
____% CAPITAL TRUST PASS-THROUGH
SECURITIES(SM) (TRUPS(R))
(LIQUIDATION PREFERENCE $1,000 PER CAPITAL SECURITY)
FULLY AND UNCONDITIONALLY GUARANTEED, TO THE
EXTENT PECO ENERGY CAPITAL, L.P. HAS FUNDS
AS SET FORTH HEREIN BY
PECO ENERGY COMPANY
[LOGO]
SALOMON SMITH BARNEY
MERRILL LYNCH & CO.SUPPLEMENT
, 20
-------------
Banc One Capital Markets, Inc.
Salomon Smith Barney
================================================================================
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEMItem 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.*
Filing Fees - Securities and Exchange Commission . $ 23,041
Printing . . . . . . . . . . . . . . . . . . . . . 75,000
Legal fees and Blue Sky fees . . . . . . . . . . . 100,000
Accounting fees. . . . . . . . . . . . . . . . . . 25,000
Trustee fees and expenses. . . . . . . . . . . . . 10,000
Rating agencies fees and expenses. . . . . . . . . 40,000
Miscellaneous. . . . . . . . . . . . . . . . . . . 46,959
--------
Total . . . . . . . . . . . . . . . . . . . . $320,000
========
*Estimated
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
PECO Energy's Bylaws provide that PECO Energy is obligated to indemnify
directors and officers and other persons designated by the Board of
Directors against any liability including any damage, judgment, amount paid
in settlement, fine, penalty, cost or expense (including, without
limitation, attorneys' fees and disbursements) incurredOther Expenses Of Issuance And Distribution
The expenses in connection with any proceeding. The Bylaws provide that no indemnification shallthe issuance and distribution of the
securities being registered, other than underwriting discounts and commissions,
are estimated to be made
where the act or failure to act giving rise to the claim for
indemnification is determined by arbitration or otherwise to have
constituted willful misconduct or recklessness or attributable to receipt
from PECO Energy of a personal benefit to which the recipient is not
legally entitled.
Section 518as follows:
Securities and Exchange Commission registration fee $ 82,800
Trustee's fees*.................................... $ 15,000
Printing expenses*................................. $ 15,000
Legal fees and expenses*........................... $150,000
Accounting fees and expenses*...................... $ 30,000
Rating Agency Fees*................................ $ 90,000
Miscellaneous*..................................... $ 10,000
--------
Total*............................................. $377,800
========
- --------
* Estimated
Item 15. Indemnification Of Directors And Officers
Sections 1741 through 1750 of the Pennsylvania Business Corporation Law of
1988, as amended, permits, and in some cases requires, the indemnification of
officers, directors and employees of the Registrant. Section 505 of the
registrant's certificate of incorporation provides, that indemnification pursuantas follows:
. Section 505. Liability of Directors and Officers. An officer of the
Corporation shall not be personally liable, as such, to the Corporation,
and a bylaw maydirector of the Corporation shall not be grantedpersonally liable, as
such for monetary damages (including, without limitation, any judgment,
amount paid in settlement, penalty, punitive damages or expenses of any
nature (including, without limitation, attorneys' fees and
disbursements)) for any action taken, or any failure to take any action,
absent a court
determinationunless the director or officer has breached or failed to perform the
duties of willful misconducthis or recklessness,her office under these articles of incorporation, the
bylaws of the Corporation or applicable provisions of law and may be made
whetherthe breach
or not the corporation would have the powerfailure to indemnify the person
under any other provision of law.
Pursuant to the Pennsylvania Business Corporation Law of 1988, PECO
Energy's Bylaws provide that directors generally will not be liable for
monetary damages in any action whether brought by shareholders directly or
in the right of PECO Energy or by third parties unless they fail in the
good faith performance of their duties as fiduciaries (the standard of care
established by the Pennsylvania Business Corporation Law of 1988), and such
failureperform constitutes self-dealing, willful misconduct or
recklessness.
PECO Energy has purchased directors'Additionally, Article VII of the Registrant's Bylaws sets forth the
provisions relating to Indemnification of Directors, Officers and officers' liability insurance.
Pursuant toOther
Authorized Representatives. This Article VII includes the Partnership Agreement, tofollowing provisions:
. Section 7.01 (a) sets forth the fullest extent permitted
by applicable law, PECO Energy Capitalgeneral rule of indemnification for the
registrant as follows:
"The corporation shall indemnify and hold harmless
the General Partner or any Special Representative, any affiliate of the
General Partner or any Special Representative or any officers, directors,
shareholders, partners, employees, representatives or agents of the General
Partner or any Special Representative, or any employee or agent of PECO
Energy Capital or its affiliates (each, an "Indemnified Person") from andindemnified representative against
any loss, damageliability incurred in connection with any proceeding in which the
indemnified representative may be involved as a party or claim incurred by such Indemnified Person by
reason of any act or omission performed or omitted by such Indemnified
Person in good faith on behalf of PECO Energy Capital and in a manner
reasonably believed to be within the scope of authority conferred on such
Indemnified Person by the Partnership Agreement, except that no Indemnified
Person shall be indemnified
II-1
for any loss, claim or damage incurredotherwise by reason
of the Indemnified
Person'sfact that such person is or was serving in an indemnified capacity,
including, without limitation, liabilities resulting from any actual or
alleged breach or neglect of duty, error, misstatement or misleading
statement, negligence, gross negligence or act giving rise to strict or
products liability, except:
(1) where such indemnification is expressly prohibited by applicable
law;
(2) where the conduct of the indemnified representative has been
finally determined pursuant to Section 7.06 or otherwise:
(i) to constitute willful misconduct or fraud; provided, however,
thatrecklessness within the
meaning of 15 Pa.C.S. (S)(S) 513(b) and 1746(b) and 42 Pa.C.S. (S)
8365(b) or any such indemnity shallsuperseding provision of law sufficient in the
circumstances to bar indemnification against liabilities arising from
the conduct; or
II-1
(ii) to be provided outbased upon or attributable to the receipt by the
indemnified representative from the corporation of anda personal benefit to
which the indemnified representative is not legally entitled; or
(3) to the extent of PECO
Energy Capital's assets only, and no General Partner or limited partner
(collectively, "Partners"), any affiliate ofsuch indemnification has been finally determined in a
Partner or any officers,
directors, shareholders, partners, employees, representatives or agents of
a Partner or its respective affiliates, or any employee or agent of PECO
Energy Capital or its affiliates or any Special Representative shall have
any personal liability on account thereof. To the fullest extent permitted
by applicable law, expenses (including legal fees) incurred by an
Indemnified Person in defending any claim, demand, action, suit or
proceeding shall, from time to time, be advanced by PECO Energy Capital
prior to the final disposition of such claim, demand, action, suit or
proceeding pursuant to an undertaking by or on behalf of the Indemnified
Person to repay such amount if it shall be determined that the Indemnified
Person is not entitled to be indemnified.
The Trust Agreement provides, to the fullest extent permitted by law,
that the General Partner will indemnify and defend the Trustee and its
directors, officers, employees and agents against, and hold each of them
harmless from, any liability, costs and expenses (including reasonable
attorneys' fees) that may arise out of or in connection with its acting as
the Trustee under the Trust Agreement and the Capital Securities, except
for any liability arising out of gross negligence, bad faith or willful
misconduct on the part of any such person or persons.
ITEM 16. EXHIBITS
Exhibit
Numbers Exhibit
- ------- -------
1-1 Form of Underwriting Agreement.
3-1 Amended and Restated Articles of Incorporation of PECO Energy
(incorporated by reference to PECO Energy's 1993 Annual Report on
Form 10-K, File No. 1-1401).
3-2 Bylaws of PECO Energy, adopted February 26, 1990 and amended
January 26, 1998 (incorporated by reference to Exhibit 3-2 of PECO
Energy's 1997 Annual Report on Form 10-K, File No. 1-1401).
3-3 Certificate of Limited Partnership of PECO Energy Capital,
L.P. (incorporated by reference to Registration Statement Nos.
33-53785 and 33-53785-01).
4-1 Amended and Restated Limited Partnership Agreement of PECO
Energy Capital (incorporated by reference to Exhibit 10-7 of PECO
Energy's 1994 Annual Report on Form 10-K, File No. 1-1401).
4-2 Amendment No. 1 to Amended and Restated Limited Partnership
Agreement of PECO Energy Capital (incorporated by reference to
Exhibit 10-8 of PECO Energy's 1995 Annual Report on Form 10-K,
File No. 1-1401).
4-3 Amendment No. 2 to Amended and Restated Limited Partnership
Agreement of PECO Energy Capital (incorporated by reference to
Exhibit 10-9 of PECO Energy's 1995 Annual Report on Form 10-K,
File No. 1-1401).
4-4 Amendment No. 3 to Amended and Restated Limited Partnership
Agreement of PECO Energy Capital.
II-2
4-5 Form of Action of General Partner creating Series D
Preferred Securities.
4-6 Form of Series D Preferred Security Certificate
(included in Exhibit 4-1).
4-7 Subordinated Debenture Indenture dated as of July 1, 1994
(incorporated by reference to Exhibit
4-5 of PECO Energy's 1994 Annual Report on Form 10-K,
File No. 1-1401).
4-8 Form of Series D Subordinated Debt Security
(included in Exhibit 4-11).
4-9 First Supplemental Indenture to Subordinated Debenture
Indenture, dated as of December 1,
1995 (incorporated by reference to Exhibit 4-7
of PECO Energy's 1995 Annual Report on Form
10-K, File No. 1-1401).
4-10 Second Supplemental Indenture to Subordinated Debenture
Indenture, dated as of June 1, 1997
(incorporated by reference to Exhibit 4-6 of
PECO Energy's 1997 Annual Report on Form 10-K,
File No. 1-1401).
4-11 Form of Third Supplemental Indenture to
Subordinated Debenture Indenture.
4-12 Certificate of Trust for the Trust.
4-13 Trust Agreement for the Trust.
4-14 Form of Amended and Restated Trust Agreement for the Trust.
4-15 Form of Payment and Guarantee Agreement.
4-16 Form of Certificate Representing the Capital
Securities (included in Exhibit 4-14).
5-1 Opinion of Ballard Spahr Andrews & Ingersoll, LLP
relating to the legality of the Series D
Subordinated Debt Securities and Series D Guarantee,
including consent.
5-2 Opinion of Richards, Layton & Finger, P.A. relating to
the legality of the Capital Securities and
the Series D Preferred Securities, including consent.
8 Opinion of Ballard Spahr Andrews & Ingersoll, LLP as to tax matters.
12-1 Computations of PECO Energy's Ratio of Earnings
to Fixed Charges and Ratio of Earnings to
Combined Fixed Charges and Preferred Stock Dividend
Requirements for the years ended
December 31, 1993-1997 (incorporated by reference to
Exhibits 12-1 and 12-2, respectively,
of PECO Energy's 1997 Annual Report on Form 10-K, File No. 1-1401).
13 PECO Energy's Annual Report on Form 10-K for the
fiscal year ended December 31, 1997
(incorporated by reference, File No. 1-1401).
21 List of Subsidiaries of PECO Energy (incorporated by
reference to Exhibit 21 of PECO
Energy's 1997 Annual Report on Form 10-K, File No. 1-1401).
23-1 Consent of Coopers & Lybrand, L.L.P.
II-3
23-2 Consent of Ballard Spahr Andrews & Ingersoll, LLP
(included in Exhibit 5-1).
23-3 Consent of Richards, Layton & Finger, P.A. (included in Exhibit 5-2).
24 Powers of Attorney.
25 Statement of Eligibility under the Trust Indenture
Act of 1939, as amended, of First Union
National Bank, as Trustee under the Third Supplemental Indenture.
ITEM 17. UNDERTAKINGS
(1) The undersigned registrants hereby undertake that, for purposes of
determining any liability under the Securities Act of 1933, each filing of
the registrants' annual reportadjudication pursuant to Section 13(a) or7.06 to be otherwise unlawful."
. Section 15(d)7.01(d)(2) defines "indemnified representative" as "any and all
directors and officers of the Securities Exchange Actcorporation any other person designated as
an indemnified representative by the board of 1934 (and, where applicable, each filing
of an employee benefit plan's annual report pursuant to Section 15(d)directors of the
Securities Exchange Act of 1934) that is incorporated by reference in
the registration statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial bona fide
offering thereof.
(2) The Trust hereby undertakes to provide to the underwritercorporation (which may, but need not, include any person serving at the
closing specified in the underwriting agreement certificates in such
dominations and registered in such names as required by the underwriter to
permit prompt delivery to each purchaser.
(3) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling personsrequest of the Registrants pursuant to the foregoing
provisions, or otherwise, the Registrants have been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policycorporation, as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrants of expenses incurred
or paid by a director, officer, employee, agent,
fiduciary or controlling persontrustee of another corporation, partnership, joint venture,
trust, employee benefit plan or other entity or enterprise)."
. Section 7.08 provides that "to the extent that an authorized
representative of the Registrantscorporation has been successful on the merits or
otherwise in
the successful defense of any action, suit or proceeding) is assertedproceeding referred to in
Section 1741 or 1742 of the Business Corporation Law or in defense of
any claim, issue or matter therein, such person shall be indemnified
against expenses (including attorneys' fees and disbursements) actually
and reasonably incurred by such director, officer of controlling person in connection withtherewith."
The officers and employees of the securities being registered,registrant are insured under policies of
insurance, within the Registrants will, unlesslimits and subject to the limitations of the policies,
against claims made against them for acts in the opiniondischarge of its counseltheir duties, and
the matter has been settled by controlling precedent, submitregistrant is insured to a court of appropriate jurisdiction the question whether such
indemnification byextent that it is against public policy as expressed inrequired or permitted by law
to indemnify the Actofficers and will be governedemployees for such loss. The premiums for such
insurance are paid by the final adjudication of such issue.
(4) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
ofregistrant.
Item 16. Exhibits
See Exhibit Index included with this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filedRegistration Statement which is
incorporated herein by the registrants pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(5) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
(6)reference.
Item 17. Undertakings
The undersigned registrantsRegistrant hereby undertake: (i)undertakes:
(1) To file, during anythe period in which any offers or sales are being made, a
post-effective amendment to thethis registration statement:
II-4
(a)(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(b)(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than a 20% change in the maximum aggregate offering
price set forth in the "Calculation of Registration Fee" table in the
effective registration statement; and
(c)(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement;
provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if the
registration statement is on Form S-3, Form S-8 or Form F-3 and the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the
SEC by the Registrant pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 that are incorporated by reference in the
registration statement.
(ii)II-2
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offeringoffered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(iii)(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
II-5(4) That, for purposes of determining any liability under the Securities
Act of 1933, each filing of the Registrant's annual report pursuant to
Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (and, where
applicable, each filing of an employee benefit plan's annual report pursuant
to Section 15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in the registration statement shall be deemed to
be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(5) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing provisions,
or otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the Registrant of expenses incurred or paid by a
director, officer or controlling person of the Registrant in the successful
defense of any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act of 1933 and will be
governed by the final adjudication of such issue.
(6) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4)
or 497(h) under the Securities Act of 1933 shall be deemed to be part of
this registration statement as of the time it was declared effective.
(7) For purposes of determining liability under the Securities Act of
1933, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(8) To file an application for the purpose of determining the eligibility
of the trustee to act under subsection (a) of Section 310 of the Trust
Indenture Act in accordance with the rules and regulations prescribed by the
Commission under Section 305(b)(2) of the Act.
II-3
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant, PECO Energy Company, certifies that it has reasonable grounds to
believe that it meets all of the requirements for filing on Form S-3 and has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, hereuntothereunto duly authorized, in the City of Philadelphia,
Commonwealth of Pennsylvania, on March 16, 1998.September 9, 2002.
PECO Energy CompanyENERGY COMPANY
By: /s/ C.A. McNeill, Jr.
_______________________________
C.A. McNeill, Jr.
Chairman of the Board,FRANK F. FRANKOWSKI
-----------------------------
Name: Frank F. Frankowski
Title: Vice President,
Finance and Chief ExecutiveFinancial
Officer
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Frank F. Frankowski and Kenneth G. Lawrence and
each or any one of them, his true and lawful attorneys-in-fact and agents, with
full power of substitution and resubstitution, for him and in his name, place
and stead, in any and all capacities, to sign any and all amendments (including
post-effective amendments) to this registration statement and any registration
statement relating to any offering made pursuant to this registration statement
that is to be effective upon filing pursuant to Rule 462(b) under the
Securities Act, and to file the same, with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of them, full power
and authority to perform each and every act and thing requisite and necessary
to be done in connection therewith, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, or his or their substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
registration statement has been signed by the following persons in the
capacities and on the datedates indicated.
SIGNATURE TITLE DATESignature Title Date
--------- ----- ----
/s/ C.A. McNeill, Jr. Chairman of the Board, March 16, 1998
----------------------- President and Chief Executive
C.A. McNeill, Jr. Officer
(Principal Executive Officer)
/s/ M.J. Egan Senior Vice President - March 16, 1998
----------------------- Finance and Chief Financial
M.J. Egan Officer (Principal Financial
and Accounting Officer)
This Registration Statement has also been signed by C.A. McNeill, Jr.,
Attorney-in-Fact, on behalf of the following Directors on the date
indicated:
Susan W. Catherwood James A. Hagen
Daniel L. Cooper Kinnaird R. McKee
M. Walter D'Alessio Joseph J. McLaughlinKENNETH G. Fred DiBona, Jr. John M. Palms
R. Keith Elliott Joseph F. Paquette, Jr.
Richard G. Gilmore Ronald Rubin
Richard H. Glanton Robert Subin
By: /s/ C.A. McNeill, Jr. March 16, 1998
--------------------------
C.A. McNEILL, JR.,
ATTORNEY-IN-FACT
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant, PECO Energy Capital, L.P., certifies that it has reasonable
grounds to believe that it meets all of the requirements for filing on Form
S-3 and has duly caused this Registration Statement to be signed on its
behalf by the undersigned, hereunto duly authorized in the City of
Philadelphia, Commonwealth of Pennsylvania, on March 16, 1998.
PECO Energy Capital, L.P.
By: PECO Energy Capital Corp.,
its general partner
By: /s/ J.B. Mitchell
---------------------------
J.B. Mitchell
President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the date indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ J.B. MitchellLAWRENCE President and Director, March 16, 1998
---------------- (Principal Executive Officer
J.B. Mitchell and Principal Financial and
Accounting Officer)
/s/ M.J. Egan Director March 16, 1998
-----------------
M.J. Egan
/s/ G.A. Massih III Director March 16, 1998
-----------------
G.A. Massih III
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant,September 9, 2002
------------------------ PECO Energy Capital Trust III, certifies that it has reasonable
grounds to believe that it meets all of the requirements for filing on Form
S-3Company
Kenneth G. Lawrence
/s/ FRANK F. FRANKOWSKI Vice President, Finance and has duly caused this Registration Statement to be signed on its
behalf by the undersigned, hereunto duly authorized in the City of
Philadelphia, Commonwealth of Pennsylvania, on March 16, 1998.September 9, 2002
------------------------ Chief Financial Officer,
Frank F. Frankowski PECO Energy Capital Trust III
By: PECO Energy Capital, L.P.,
as its grantor
By: PECO Energy Capital Corp.,
as general partner
By:Company
/s/ J.B. Mitchell
-------------------------
J.B. Mitchell
President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----JOHN W. ROWE Director September 9, 2002
------------------------
John W. Rowe
/s/ J.B. Mitchell (Principal Executive March 16, 1998
---------------- Officer and Principal
J.B. Mitchell Financial and
Accounting Officer)PAMELA B. STROBEL Director September 9, 2002
------------------------
Pamela B. Strobel
/s/ M.J. EganRUTH ANN M. GILLIS Director March 16, 1998
----------------
M.J. EganSeptember 9, 2002
------------------------
Ruth Ann M. Gillis
/s/ G.A. Massih IIIFRANK M. CLARK Director March 16, 1998
----------------
G.A. Massih IIISeptember 9, 2002
------------------------
Frank M. Clark
II-4
EXHIBIT INDEX
Exhibit
Number Description
------ -----------
1.1 Form of Underwriting Agreement relating to first and refunding mortgage bonds.
1.2 Form of Underwriting Agreement relating to preferred stock.
3.1 Amended and Restated Articles of Incorporation of PECO Energy Company (file No. 1-1401, 2000
Form 10-K, Exhibit 3-3).
3.2 Bylaws of PECO Energy Company, adopted February 26, 1990 and amended January 26, 1998 (File
No. 1-01401, 1997 Form 10-K, Exhibit 3-2).
4.1 First and Refunding Mortgage dated May 1, 1923 between The Counties Gas and Electric Company
(predecessor to PECO Energy Company) and Fidelity Trust Company, Trustee (Wachovia Bank,
National Association, successor) (Registration No. 2-2281, Exhibit B-1).
4.1.2 Supplemental Indentures to PECO Energy Company's First and Refunding Mortgage:
Dated as of File Reference Exhibit No.
May 1, 1927 2-2881 B-1(c)
March 1, 1937 2-2881 B-1(g)
December 1, 1941 2-4863 B-1(h)
November 1, 1944 2-5472 B-1(i)
December 1, 1946 2-6821 7-1(j)
September 1, 1957 2-13562 2(b)-17
May 1, 1958 2-14020 2(b)-18
March 1, 1968 2-34051 2(b)-24
March 1, 1981 2-72802 4-46
March 1, 1981 2-72802 4-47
December 1, 1984 1-01401, 1984 Form 10-K 4-2(b)
April 1, 1991 1-01401, 1991 Form 10-K 4(e)-76
December 1, 1991 1-01401, 1991 Form 10-K 4(e)-77
April 1, 1992 1-01401, March 31, 1992 4(e)-79
Form 10-Q
June 1, 1992 1-01401, June 30, 1992 4(e)-81
Form 10-Q
July 15, 1992 1-01401, June 30, 1992 4(e)-83
Form 10-Q
March 1, 1993 1-01401, 1992 Form 10-K 4(e)-86
May 1, 1993 1-01401, March 31, 1993 4(e)-88
Form 10-Q
May 1, 1993 1-01401, March 31, 1993 4(e)-89
Form 10-Q
August 15, 1993 1-01401, Form 8-A dated 4(e)-92
August 19, 1993
May 1, 1995 1-01401, Form 8-K dated 4(e)-96
May 24, 1995
October 15, 2001 1-01401, Form 10-K dated 4.2.1
April 1, 2002
4.2 Form of Statement with Respect to Shares of Preferred Stock.
4.3 Form of Supplemental Mortgage Indenture between PECO Energy Company and the Trustee.
5 Opinion of Ballard Spahr Andrews & Ingersoll, LLP.
12 Statement regarding computation of ratios of earnings.
23.1 Consent of Ballard Spahr Andrews & Ingersoll, LLP (contained in Exhibit 5).
23.2 Consent of Independent Accountants.
25 Statement of Eligibility of Trustee on Form T-1, as trustee for PECO Energy Company first and
refunding mortgage bonds.