Registration No. 333-_____
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
Kentucky Power Company
(Exact name of registrant as specified in its charter)
Kentucky 61-0247775
(State or other jurisdiction I.R.S. Employer
of incorporation or organization) Identification No.)
1 Riverside Plaza
Columbus, Ohio 43215
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (614) 223-1000
ARMANDO A. PENA, Treasurer
JEFFREY D. CROSS, Senior Vice President and General Counsel
AMERICAN ELECTRIC POWER SERVICE CORPORATION
1 Riverside Plaza
Columbus, Ohio 43215
(614) 223-1580
(Name, address and telephone number, including
area code, of agent for service)
It is respectfully requested that the Commission send copies of
all notices, orders and communications to:
Simpson Thacher & Bartlett Dewey Ballantine LLP
425 Lexington Avenue 1301 Avenue of the Americas
New York, NY 10017-3909 New York, NY 10019-6092
Attention: James M. Cotter Attention: E. N. Ellis, IV
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Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of the Registration Statement.
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If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
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]
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
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Title of Proposed
Each Class Maximum Proposed
of offering Maximum
Securities Amount Price Aggregate Amount of
to be to be Per Unit* Offering Registration Fee
Registered Registered Price*
- --------------- ------------ ---------- --------------------------------
Unsecured
Notes $375,000,000 100% $375,000,000 $34,500
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*Estimated solely for purpose of calculating the registration fee.
The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933, or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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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 is not soliciting an offer to buy these securities
in any state where the offer or sale is not permitted.
SUBJECT TO COMPLETION, DATED ___________ _____, 2002
PROSPECTUS
KENTUCKY POWER COMPANY
1 Riverside Plaza
Columbus, Ohio 43215
(614) 223-1000
$375,000,000
UNSECURED NOTES
TERMS OF SALE
A prospectus supplement or pricing supplement will include the final terms for
each note. If we decide to list upon issuance any note or notes on a securities
exchange, a prospectus supplement or pricing supplement will identify the
exchange and state when we expect trading could begin. The following terms may
apply to the notes that we may sell at one or more times.
- Mature 9 months to 50 years
- Fixed or floating interest rate
- Remarketing features
- Certificate or book-entry form
- Subject to redemption
- Not convertible, amortized or subject to a sinking fund
- Interest paid on fixed rate notes quarterly or semi-annually
- Interest paid on floating rate notes monthly, quarterly, semi-
annually, or annually
- Issued in multiples of a minimum denomination
- Issued with original issue discount
INVESTING IN THESE NOTES INVOLVES RISKS. SEE THE SECTION ENTITLED "RISK FACTORS"
BEGINNING ON PAGE 3 FOR MORE INFORMATION.
The notes have not been approved by the SEC or any state securities commission,
nor have these organizations determined that this prospectus is accurate or
complete. Any representation to the contrary is a criminal offense.
The date of this prospectus is _________________, 2002.
THE COMPANY
We generate, sell, purchase, transmit and distribute electric power. We
serve approximately 173,000 customers in eastern Kentucky. We also sell and
transmit power at wholesale to other electric utilities, municipalities,
electric cooperatives and non-utility entities engaged in the wholesale power
market. Our principal executive offices are located at 1 Riverside Plaza,
Columbus, Ohio 43215 (telephone number (614) 223-1000). We are a subsidiary of
American Electric Power Company, Inc., a public utility holding company, and we
are a part of the American Electric Power integrated utility system. The
executive offices of American Electric Power Company, Inc. are located at 1
Riverside Plaza, Columbus, Ohio 43215 (telephone number 614-223-1000).
RISK FACTORS
RISKS RELATED TO OUR POWER TRADING
AND WHOLESALE BUSINESSES
- - Our revenues and results of operations are subject to market risks that are
beyond our control.
We sell power from our generation facilities into the spot market or
other competitive power markets or on a contractual basis. We also enter into
contracts to purchase and sell electricity as part of our power marketing and
trading operations. With respect to such transactions, we are not guaranteed any
rate of return on our capital investments through regulated rates, and our
revenues and results of operations are likely to depend, in large part, upon
prevailing market prices for power in our regional markets and other competitive
markets. These market prices may fluctuate substantially over relatively short
periods of time. It is reasonable to expect that trading margins may erode as
markets mature and that there may be diminished opportunities for gain should
volatility decline. In addition, the Federal Energy Regulatory Commission (the
"FERC"), which has jurisdiction over wholesale power rates, as well as
independent system operators that oversee some of these markets, may impose
price limitations, bidding rules and other mechanisms to address some of the
volatility in these markets. Fuel prices may also be volatile, and the price we
can obtain for power sales may not change at the same rate as changes in fuel
costs. These factors could reduce our margins and therefore diminish our
revenues and results of operations.
Volatility in market prices for fuel and power may result from:
- weather conditions;
- seasonality;
- power usage;
- illiquid markets;
- transmission or transportation constraints or inefficiencies; - availability
of competitively priced alternative energy sources; - demand for energy
commodities; - natural gas, crude oil and refined products, and coal production
levels; - natural disasters, wars, embargoes and other catastrophic events; and
- federal, state and foreign energy and environmental regulation and
legislation.
- - Our power trading (including fuel procurement and power marketing) and risk
management policies cannot eliminate the risk associated with these
activities.
Our power trading (including fuel procurement and power marketing)
activities expose us to risks of commodity price movements. We attempt to manage
our exposure through enforcement of established risk limits and risk management
procedures. These risk limits and risk management procedures may not always be
followed or may not work as planned and cannot eliminate the risks associated
with these activities. As a result, we cannot predict the impact that our power
trading and risk management decisions may have on our business, operating
results or financial position.
We routinely have open trading positions in the market, within
established guidelines, resulting from the management of our trading portfolio.
To the extent open trading positions exist, fluctuating commodity prices can
improve or diminish our financial results and financial position.
Our power trading and risk management activities, including our power
sales agreements with counterparties, rely on projections that depend heavily on
judgments and assumptions by management of factors such as the future market
prices and demand for power and other energy-related commodities. These factors
become more difficult to predict and the calculations become less reliable the
further into the future these estimates are made. Even when our policies and
procedures are followed and decisions are made based on these estimates, results
of operations may be diminished if the judgments and assumptions underlying
those calculations prove to be wrong or inaccurate.
- - Parties with whom we have contracts may fail to perform their obligations,
which could harm our results of operations.
We are exposed to the risk that counterparties that owe us money or
power will breach their obligations. Should the counterparties to these
arrangements fail to perform, we may be forced to enter into alternative hedging
arrangements or honor underlying commitments at then-current market prices that
may exceed our contractual prices, which would cause our financial results to be
diminished and we might incur losses. Although our estimates take into account
the expected probability of default by a counterparty, our actual exposure to a
default by a counterparty may be greater than the estimates predict if defaults
by counterparties exceed our estimates.
- - We rely on electric transmission facilities that we do not own or control.
If these facilities do not provide us with adequate transmission capacity,
we may not be able to deliver our wholesale electric power to the
purchasers of our power.
We depend on transmission facilities owned and operated by other
unaffiliated power companies to deliver the power we sell at wholesale. This
dependence exposes us to a variety of risks. If transmission is disrupted, or
transmission capacity is inadequate, we may not be able to sell and deliver our
wholesale power. If a region's power transmission infrastructure is inadequate,
our recovery of wholesale costs and profits may be limited. If restrictive
transmission price regulation is imposed, the transmission companies may not
have sufficient incentive to invest in expansion of transmission infrastructure.
The FERC has issued electric transmission initiatives that require
electric transmission services to be offered unbundled from commodity sales.
Although these initiatives are designed to encourage wholesale market
transactions for electricity, access to transmission systems may in fact not be
available if transmission capacity is insufficient because of physical
constraints or because it is contractually unavailable. We also cannot predict
whether transmission facilities will be expanded in specific markets to
accommodate competitive access to those markets.
- - We do not fully hedge against price changes in commodities.
We routinely enter into contracts to purchase and sell electricity as
part of our power marketing and trading operations and to procure fuel. In
connection with these trading activities, we routinely enter into financial
contracts, including futures and options, over-the-counter options, swaps and
other derivative contracts. These activities expose us to risks from price
movements. If the values of the financial contracts change in a manner we do not
anticipate, it could harm our financial position or reduce the financial
contribution of our trading operations.
We manage our exposure by establishing risk limits and entering into
contracts to offset some of our positions (i.e., to hedge our exposure to
demand, market effects of weather and other changes in commodity prices).
However, we do not always hedge the entire exposure of our operations from
commodity price volatility. To the extent we do not hedge against commodity
price volatility, our results of operations and financial position may be
improved or diminished based upon our success in the market.
RISKS RELATED TO OUR REGULATED
BUSINESS AND EVOLVING REGULATION
- - The different regional power markets in which we compete or will compete in
the future have changing transmission regulatory structures, which could
affect our performance in these regions.
Our results are likely to be affected by differences in the market and
transmission regulatory structures in various regional power markets. Problems
or delays that may arise in the formation and operation of new regional
transmission organizations, or "RTOs", may restrict our ability to sell power
produced by our generating capacity to certain markets if there is insufficient
transmission capacity otherwise available. The rules governing the various
regional power markets may also change from time to time which could affect our
costs or revenues. Because it remains unclear which companies will be
participating in the various regional power markets, or how RTOs will develop or
what regions they will cover, we are unable to assess fully the impact that
these power markets may have on our business.
We are participating with four unaffiliated utilities in the formation
of the Alliance RTO (the "Alliance RTO"). In 2001 the Alliance companies and
MISO, an independent operator of transmission assets in the Midwest ("MISO")
entered into a settlement addressing transmission pricing and other "seam"
issues between the two RTOs. On December 19, 2001 the FERC approved the proposal
of the MISO for a regional transmission organization and instructed the Alliance
companies, which had submitted a separate RTO proposal, to explore joining the
MISO organization. The FERC's order is intended to facilitate the establishment
of a single RTO in the Midwest and support the establishment of viable
for-profit transmission companies under an RTO umbrella. In its order, the FERC
concluded that the proposed Alliance RTO lacks sufficient scope to exist as a
stand-alone RTO and directed the Alliance companies to explore how their
business plan can be accommodated within MISO.
Management is unable to predict the outcome of these transmission
regulatory actions and proceedings or their impact on the timing and operation
of RTOs, our transmission operations or future results of operations and cash
flows.
RISKS RELATED TO MARKET OR ECONOMIC VOLATILITY
- - We are subject to risks associated with a changing economic environment.
In response to the occurrence of several recent events, including the
September 11, 2001 terrorist attack on the United States, the ongoing war
against terrorism by the United States, and the bankruptcy of Enron Corp., the
financial markets have been disrupted in general, and the availability and cost
of capital for our business and that of our competitors has been at least
temporarily harmed. In addition, following the bankruptcy of Enron Corp., the
credit ratings agencies initiated a thorough review of the capital structure and
earnings power of energy companies, including us. These events could constrain
the capital available to our industry and could limit our access to funding for
our operations. Our business is capital intensive, and we are dependent upon our
ability to access capital at rates and on terms we determine to be attractive.
If our ability to access capital becomes significantly constrained, our interest
costs will likely increase and our financial condition could be harmed and
future results of operations could be significantly harmed.
The insurance industry has also been disrupted by these events. As a
result, the availability of insurance covering risks we and our competitors
typically insure against may decrease. In addition, the insurance we are able to
obtain may have higher deductibles, higher premiums and more restrictive policy
terms.
- - A downgrade in our credit rating could negatively affect our ability to
access capital and/or to operate our power trading businesses.
Standard & Poor's and Moody's rate our senior, unsecured debt at BBB+
and Baa2, respectively. If Moody's or Standard & Poor's were to downgrade our
long-term rating, particularly below investment grade, our borrowing costs would
increase which would diminish our financial results. In addition, we would
likely be required to pay a higher interest rate in future financings, and our
potential pool of investors and funding sources could decrease. Further, if
AEP's short-term rating were to fall below P-2 or A-2, the current ratings
assigned by Standard & Poor's and Moody's, respectively, it would significantly
limit its access to the commercial paper market and would increase our
short-term borrowing costs because we conduct our short-term borrowing through
AEP, and on the same terms available to AEP.
Our power trading business relies on the investment grade ratings of
our senior, unsecured debt. Most of our counterparties require the
creditworthiness of an investment grade entity to stand behind transactions. If
our rating were to decline below investment grade, our ability to profitably
operate our power trading business would be diminished because we would likely
have to deposit cash or cash related instruments which would reduce our profits.
- - Our operating results may fluctuate on a seasonal and quarterly basis.
Electric power generation is generally a seasonal business. In many
parts of the country, demand for power peaks during the hot summer months, with
market prices also peaking at that time. In other areas, power demand peaks
during the winter. As a result, our overall operating results in the future may
fluctuate substantially on a seasonal basis. The pattern of this fluctuation may
change depending on the terms of power sale contracts we enter into. In
addition, we have historically sold less power, and consequently earned less
income, when weather conditions are milder. We expect that unusually mild
weather in the future could diminish our results of operations and harm our
financial condition.
- - Changes in technology may significantly affect our business by making our
power plants less competitive.
A key element of our business model is that generating power at central
power plants achieves economies of scale and produces power at relatively low
cost. There are other technologies that produce power, most notably fuel cells,
microturbines, windmills and photovoltaic (solar) cells. It is possible that
advances in technology will reduce the cost of alternative methods of producing
power to a level that is competitive with that of most central power station
electric production. If this were to happen and if these technologies achieved
economies of scale, our market share could be eroded, and the value of our power
plants could be reduced. Changes in technology could also alter the channels
through which retail electric customers buy power, thereby harming our financial
results.
- - Changes in commodity prices may increase our cost of producing power or
decrease the amount we receive from selling power, harming our financial
performance.
We are heavily exposed to changes in the price and availability of coal
because all of our generating capacity is coal-fired. We have contracts of
varying durations for the supply of coal for most of our existing generation
capacity, but as these contracts end, we may not be able to purchase coal on
terms as favorable as the current contracts.
Changes in the cost of coal and changes in the relationship between
such cost and the market price of power will affect our financial results. Since
the price we obtain for wholesale power may not change at the same rate as the
change in coal costs, we may be unable to pass on the changes in costs to our
customers.
In addition, actual power prices and fuel costs will differ from those
assumed in financial projections used to initially value our trading and
marketing transactions, and those differences may be material. As a result, our
financial results may be diminished in the future as those transactions are
marked to market.
- - At times, demand for power could exceed our supply capacity.
We are currently obligated to supply power to our customers. At peak
times, the demand for power required to meet this obligation will exceed our
available generation capacity. In the past, we have had little need to purchase
power in the market for our retail customers. In the future, we may be required
to buy more power on the market. We may not always have the ability to pass
these market purchase costs to our customers. However, we are currently
protected from an increase in rates in Kentucky because we have an active fuel
clause.
RISKS RELATED TO ENVIRONMENTAL REGULATION
- - Our costs of compliance with environmental laws are significant.
Our operations are subject to extensive federal, state and local
environmental statutes, rules and regulations relating to air quality, water
quality, waste management, natural resources and health and safety. Compliance
with these legal requirements requires us to commit significant capital toward
environmental monitoring, installation of pollution control equipment, emission
fees and permits at all of our facilities. These expenditures have been
significant in the past and we expect that they will increase in the future.
Costs of compliance with environmental regulations could harm our industry, our
business and our results of operations and financial position, especially if
emission and/or discharge limits are tightened, more extensive permitting
requirements are imposed, additional substances become regulated and the number
and types of assets we operate increase. However, we continue to be protected
from erosion of cash flow and profitability by an environmental cost recovery
mechanism that provides the opportunity to recover in retail rates both capital
and O&M costs associated with environmental compliance.
- - We anticipate that we will incur considerable capital costs for compliance.
All of our generating capacity is coal burning. We plan to install new
emissions control equipment and may be required to upgrade existing equipment,
purchase emissions allowances or reduce operations. We expect to spend
approximately $140 million (of which $13 million has already been expended) in
connection with the installation of emission control equipment at our facilities
to comply with the new NOx rule and the Section 126 Rule. Moreover,
environmental laws are subject to change, which may materially increase our
costs of compliance or accelerate the timing of these capital expenditures. Our
compliance strategy, although reasonably based on the information available to
us today, may not successfully address the relevant standards and
interpretations of the future.
- - Governmental authorities may assess penalties on us for failures to comply
with environmental laws and regulations.
If we fail to comply with environmental laws and regulations, even if
caused by factors beyond our control, that failure may result in the assessment
of civil or criminal penalties and fines against us. Recent lawsuits by the EPA
and various states filed against us highlight the environmental risks faced by
generating facilities, in general, and coal-fired generating facilities, in
particular.
Since 1999, we and some of our affiliates have been involved in
litigation regarding generating plant emissions under the Clean Air Act. Federal
EPA and a number of states alleged that we and eleven unaffiliated utilities
modified certain units at coal-fired generating plants in violation of the Clean
Air Act. Federal EPA filed complaints against us and some of our affiliated
public utility subsidiaries in U.S. District Court for the Southern District of
Ohio. A separate lawsuit initiated by certain special interest groups was
consolidated with the Federal EPA case. The alleged modification of the
generating units occurred over a 20 year period.
If these actions are resolved against us, substantial modifications of
our existing coal-fired power plants would be required. In addition, we could be
required to invest significantly in additional emission control equipment,
accelerate the timing of capital expenditures, pay penalties and/or halt
operations. Moreover, our results of operations could be reduced and our
financial position could suffer due to the consequent distraction of management
and the expense of ongoing litigation.
PROSPECTUS SUPPLEMENTS
We provide information to you about the notes in as many as three
separate documents that progressively provide more detail: (a) this prospectus
provides general information some of which may not apply to your notes, (b) the
accompanying prospectus supplement provides more specific terms of your notes,
and (c) if not in the accompanying prospectus supplement, the pricing supplement
will provide the final terms of your notes. It is important for you to consider
the information contained in this prospectus, the prospectus supplement and the
pricing supplement in making your investment decision.
RATIO OF EARNINGS TO FIXED CHARGES
The Ratio of Earnings to Fixed Charges for each of the periods
indicated is as follows:
Twelve Months
Period Ended Ratio
December 31, 1997 2.12
December 31, 1998 2.09
December 31, 1999 2.33
December 31, 2000 2.23
December 31, 2001 2.09
For current information on the Ratio of Earnings to Fixed Charges, please see
our most recent Form 10-K and 10-Q. See Where You Can Find More Information.
WHERE YOU CAN FIND MORE INFORMATION
This prospectus is part of a registration statement we filed with the
SEC. We also file annual, quarterly and special reports and other information
with the SEC. You may read and copy any document we file at the SEC's Public
Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549. Please call
the SEC at 1-800-SEC-0330 for further information on the Public Reference Room.
You may also examine our SEC filings through the SEC's web site at
http://www.sec.gov.
The SEC allows us to "incorporate by reference" the information we file
with them, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
considered to be part of this prospectus, and later information that we file
with the SEC will automatically update and supersede this information. We
incorporate by reference the documents listed below and any future filings made
with the SEC under Sections 13(a), 13(c), 14, or 15(d) of the Securities
Exchange Act of 1934 until we sell all the notes.
- Annual Report on Form 10-K for the year ended December 31, 2001.
You may request a copy of these filings, at no cost, by writing or telephoning
us at the following address:
Mr. G. C. Dean
American Electric Power Service Corporation
1 Riverside Plaza
Columbus, Ohio 43215
614-223-1000
You should rely only on the information incorporated by reference or provided in
this prospectus or any supplement. We have not authorized anyone else to provide
you with different information. We are not making an offer of these notes in any
state where the offer is not permitted. You should not assume that the
information in this prospectus or any supplement is accurate as of any date
other than the date on the front of those documents.
USE OF PROCEEDS
Unless otherwise stated in a prospectus supplement, the net proceeds
from the sale of the notes will be used for general corporate purposes relating
to our utility business. These purposes include redeeming or repurchasing
outstanding debt and other corporate purposes. If we do not use the net proceeds
immediately, we temporarily invest them in short-term, interest-bearing
obligations. We estimate that our construction costs in 2002 will approximate
$128,800,000. At April 24, 2002, our outstanding short-term debt was
$71,805,000.
DESCRIPTION OF THE NOTES
General
We will issue the notes under the Indenture dated September 1, 1997 (as
previously supplemented and amended) entered into between us and the Trustee,
Bankers Trust Company. This prospectus briefly outlines some provisions of the
Indenture. If you would like more information on these provisions, review the
Indenture and any supplemental indentures or company orders that we file with
the SEC. See Where You Can Find More Information on how to locate these
documents. You may also review these documents at the Trustee's offices at Four
Albany Street, New York, New York.
The Indenture does not limit the amount of notes that may be issued.
The Indenture permits us to issue notes in one or more series or tranches upon
the approval of our board of directors and as described in one or more company
orders or supplemental indentures. Each series of notes may differ as to their
terms. The Indenture also gives us the ability to reopen a previous issue of a
series of notes and issue additional notes of such series.
The notes are unsecured and will rank equally with all our unsecured
unsubordinated debt. Substantially all of our fixed properties and franchises
are subject to the lien of our first mortgage bonds issued under and secured by
a Mortgage and Deed of Trust, dated as of May 1, 1949, as previously
supplemented and amended, between us and Bankers Trust Company, as trustee. For
current information on our debt outstanding see our most recent Form 10-K and
10-Q.
See Where You Can Find More Information.
The notes will be denominated in U.S. dollars and we will pay principal
and interest in U.S. dollars. Unless an applicable pricing or prospectus
supplement states otherwise, the notes will not be subject to any conversion,
amortization, or sinking fund. We expect that the notes will be "book-entry,"
represented by a permanent global note registered in the name of The Depository
Trust Company, or its nominee. We reserve the right, however, to issue note
certificates registered in the name of the noteholders.
In the discussion that follows, whenever we talk about paying principal
on the notes, we mean at maturity or redemption. Also, in discussing the time
for notices and how the different interest rates are calculated, all times are
New York City time and all references to New York mean the City of New York,
unless otherwise noted.
The following terms may apply to each note as specified in the
applicable pricing or prospectus supplement and the note.
Redemptions
If we issue redeemable notes, we may redeem such notes at our option
unless an applicable pricing or prospectus supplement states otherwise. The
pricing or prospectus supplement will state the terms of redemption. We may
redeem notes in whole or in part by delivering written notice to the noteholders
no more than 60, and not less than 30, days prior to redemption. If we do not
redeem all the notes of a series at one time, the Trustee selects the notes to
be redeemed in a manner it determines to be fair.
Remarketed Notes
If we issue notes with remarketing features, an applicable pricing or
prospectus supplement will describe the terms for the notes including: interest
rate, remarketing provisions, our right to redeem notes, the holders' right to
tender notes, and any other provisions.
Book-Entry Notes - Registration, Transfer, and Payment of Interest and Principal
Unless otherwise stated in a prospectus supplement, book-entry notes of
a series will be issued in the form of a global note that the Trustee will
deposit with The Depository Trust Company, New York, New York ("DTC"). This
means that we will not issue note certificates to each holder. One or more
global notes will be issued to DTC who will keep a computerized record of its
participants (for example, your broker) whose clients have purchased the notes.
The participant will then keep a record of its clients who purchased the notes.
Unless it is exchanged in whole or in part for a note certificate, a global note
may not be transferred; except that DTC, its nominees, and their successors may
transfer a global note as a whole to one another.
Beneficial interests in global notes will be shown on, and transfers of
global notes will be made only through, records maintained by DTC and its
participants.
DTC has provided us the following information: DTC is a limited-purpose
trust company organized under the New York Banking Law, a "banking organization"
within the meaning of the New York Banking Law, a member of the United States
Federal Reserve System, a "clearing corporation" within the meaning of the New
York Uniform Commercial Code and a "clearing agency" registered under the
provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds
securities that its participants ("Direct Participants") deposit with DTC. DTC
also records the settlement among Direct Participants of securities
transactions, such as transfers and pledges, in deposited securities through
computerized records for Direct Participant's accounts. This eliminates the need
to exchange note certificates. Direct Participants include securities brokers
and dealers, banks, trust companies, clearing corporations and certain other
organizations.
Other organizations such as securities brokers and dealers, banks and
trust companies that work through a Direct Participant also use DTC's book-entry
system. The rules that apply to DTC and its participants are on file with the
SEC.
A number of its Direct Participants and the New York Stock Exchange, Inc.,
The American Stock Exchange, Inc. and the National Association of Securities
Dealers, Inc. own DTC.
We will wire principal and interest payments to DTC's nominee. We and
the Trustee will treat DTC's nominee as the owner of the global notes for all
purposes. Accordingly, we, the Trustee and any paying agent will have no direct
responsibility or liability to pay amounts due on the global notes to owners of
beneficial interests in the global notes.
It is DTC's current practice, upon receipt of any payment of principal
or interest, to credit Direct Participants' accounts on the payment date
according to their respective holdings of beneficial interests in the global
notes as shown on DTC's records. In addition, it is DTC's current practice to
assign any consenting or voting rights to Direct Participants whose accounts are
credited with notes on a record date. The customary practices between the
participants and owners of beneficial interests will govern payments by
participants to owners of beneficial interests in the global notes and voting by
participants, as is the case with notes held for the account of customers
registered in "street name." However, payments will be the responsibility of the
participants and not of DTC, the Trustee or us.
According to DTC, the foregoing information with respect to DTC has
been provided to the Industry for informational purposes only and is not
intended to serve as a representation, warranty, or contract modification of any
kind.
Notes represented by a global note will be exchangeable for note
certificates with the same terms in authorized denominations only if:
- DTC notifies us that it is unwilling or unable to continue as
depositary or if DTC ceases to be a clearing agency registered under
applicable law and a successor depositary is not appointed by us within
90 days; or
- we determine not to require all of the notes of a series to be
represented by a global note and notify the Trustee of our decision.
Note Certificates-Registration, Transfer, and Payment of Interest and Principal
If we issue note certificates, they will be registered in the name of
the noteholder. The notes may be transferred or exchanged, pursuant to
administrative procedures in the indenture, without the payment of any service
charge (other than any tax or other governmental charge) by contacting the
paying agent. Payments on note certificates will be made by check.
Original Issue Discount
We may issue the notes at an original issue discount, bearing no
interest or bearing interest at a rate that, at the time of issuance, is below
market rate, to be sold at a substantial discount below their stated principal
amount. Generally speaking, if the notes are issued at an original issue
discount and there is an event of default or acceleration of their maturity,
holders will receive an amount less than their principal amount. Tax and other
special considerations applicable to original issue discount debt will be
described in the prospectus supplement in which we offer those notes.
Interest Rate
The interest rate on the notes will either be fixed or floating. The
interest paid will include interest accrued to, but excluding, the date of
maturity or redemption. Interest is generally payable to the person in whose
name the note is registered at the close of business on the record date before
each interest payment date. Interest payable at maturity or redemption, however,
will be payable to the person to whom principal is payable.
If we issue a note after a record date but on or prior to the related
interest payment date, we will pay the first interest payment on the interest
payment date after the next record date. We will pay interest payments by check
or wire transfer, at our option.
Fixed Rate Notes
A pricing or prospectus supplement will designate the record dates,
payment dates and the fixed rate of interest payable on a note. We will pay
interest monthly, quarterly or semi-annually, and upon maturity or redemption.
Unless an applicable pricing or prospectus supplement states otherwise, if any
payment date falls on a day that is not a business day, we will pay interest on
the next Business Day and no additional interest will be paid. Interest payments
will be the amount of interest accrued to, but excluding, each payment date.
Interest will be computed using a 360-day year of twelve 30-day months.
Floating Rate Notes: General
Each floating rate note will have an interest rate formula. The
applicable pricing supplement will state the initial interest rate or interest
rate formula on each note effective until the first interest reset date. The
applicable pricing or prospectus supplement will state the method and dates on
which the interest rate will be determined, reset and paid.
Events of Default
"Event of Default" means any of the following:
- failure to pay for three Business Days the principal of (or
premium, if any, on) any note of a series when due and payable;
- failure to pay for 30 days any interest on any note of any series
when due and payable;
- failure to perform any other requirements in such notes, or in
the Indenture in regard to such notes, for 90 days after notice;
- certain events of bankruptcy or insolvency; or
- any other event of default specified in a series of notes.
An Event of Default for a particular series of notes does not
necessarily mean that an Event of Default has occurred for any other series of
notes issued under the Indenture. If an Event of Default occurs and continues,
the Trustee or the holders of at least 33% of the principal amount of the notes
of the series affected may require us to repay the entire principal of the notes
of such series immediately ("Repayment Acceleration"). In most instances, the
holders of at least a majority in aggregate principal amount of the notes of the
affected series may rescind a previously triggered Repayment Acceleration.
However, if we cause an Event of Default because we have failed to pay
(unaccelerated) principal, premium, if any, or interest, Repayment Acceleration
may be rescinded only if we have first cured our default by depositing with the
Trustee enough money to pay all (unaccelerated) past due amounts and penalties,
if any.
The Trustee must within 90 days after a default occurs, notify the
holders of the notes of the series of default unless such default has been cured
or waived. We are required to file an annual certificate with the Trustee,
signed by an officer, concerning any default by us under any provisions of the
Indenture.
Subject to the provisions of the Indenture relating to its duties in
case of default, the Trustee shall be under no obligation to exercise any of its
rights or powers under the Indenture at the request, order or direction of any
holders unless such holders offer the Trustee reasonable indemnity. Subject to
the provisions for indemnification, the holders of a majority in principal
amount of the notes of any series may direct the time, method and place of
conducting any proceedings for any remedy available to, or exercising any trust
or power conferred on, the Trustee with respect to such notes.
Modification of Indenture
Under the Indenture, our rights and obligations and the rights of the
holders of any notes may be changed. Any change affecting the rights of the
holders of any series of notes requires the consent of the holders of not less
than a majority in aggregate principal amount of the outstanding notes of all
series affected by the change, voting as one class. However, we cannot change
the terms of payment of principal or interest, or a reduction in the percentage
required for changes or a waiver of default, unless the holder consents. We may
issue additional series of notes and take other action that does not affect the
rights of holders of any series by executing supplemental indentures without the
consent of any noteholders.
Consolidation, Merger or Sale
We may merge or consolidate with any corporation or sell substantially
all of our assets as an entirety as long as the successor or purchaser expressly
assumes the payment of principal, and premium, if any, and interest on the
notes.
Legal Defeasance
We will be discharged from our obligations on the notes of any series
at any time if:
- we deposit with the Trustee sufficient cash or government securities
to pay the principal, interest, any premium and any other sums due to
the stated maturity date or a redemption date of the note of the
series, and
- we deliver to the Trustee an opinion of counsel stating that the
federal income tax obligations of noteholders of that series will not
change as a result of our performing the action described above.
If this happens, the noteholders of the series will not be entitled to
the benefits of the Indenture except for registration of transfer and exchange
of notes and replacement of lost, stolen or mutilated notes.
Covenant Defeasance
We will be discharged from our obligations under any restrictive
covenant applicable to the notes of a particular series if we perform both
actions described above. See Legal Defeasance. If this happens, any later breach
of that particular restrictive covenant will not result in Repayment
Acceleration. If we cause an Event of Default apart from breaching that
restrictive covenant, there may not be sufficient money or government
obligations on deposit with the Trustee to pay all amounts due on the notes of
that series. In that instance, we would remain liable for such amounts.
Governing Law
The Indenture and notes of all series will be governed by the laws of
the State of New York.
Concerning the Trustee
We and our affiliates use or will use some of the banking services of
the Trustee in the normal course of business.
PLAN OF DISTRIBUTION
We may sell the notes (a) through agents; (b) through underwriters or
dealers; or (c) directly to one or more purchasers.
By Agents
Notes may be sold on a continuing basis through agents designated by
us. The agents will agree to use their reasonable efforts to solicit purchases
for the period of their appointment.
The Agents will not be obligated to make a market in the notes. We
cannot predict the amount of trading or liquidity of the notes.
By Underwriters
If underwriters are used in the sale, the underwriters will acquire the
notes for their own account. The underwriters may resell the notes in one or
more transactions, including negotiated transactions, at a fixed public offering
price or at varying prices determined at the time of sale. The obligations of
the underwriters to purchase the notes will be subject to certain conditions.
The underwriters will be obligated to purchase all the notes of the series
offered if any of the notes are purchased. Any initial public offering price and
any discounts or concessions allowed or re-allowed or paid to dealers may be
changed from time to time.
Direct Sales
We may also sell notes directly. In this case, no underwriters or
agents would be involved.
General Information
Underwriters, dealers, and agents that participate in the distribution
of the notes may be underwriters as defined in the Securities Act of 1933 (the
"Act"), and any discounts or commissions received by them from us and any profit
on the resale of the notes by them may be treated as underwriting discounts and
commissions under the Act.
We may have agreements with the underwriters, dealers and agents to
indemnify them against certain civil liabilities, including liabilities under
the Act.
Underwriters, dealers and agents may engage in transactions with, or
perform services for, us or our affiliates in the ordinary course of their
businesses.
LEGAL OPINIONS
Our counsel, Simpson Thacher & Bartlett, New York, NY, and one of our
lawyers will each issue an opinion about the legality of the notes for us. Dewey
Ballantine LLP, New York, NY will issue an opinion for the agents or
underwriters. From time to time, Dewey Ballantine LLP acts as counsel to our
affiliates for some matters.
EXPERTS
The financial statements and the related financial statement schedule
incorporated in this prospectus by reference from the Company's Annual Report on
Form 10-K for the year ended December 31, 2001 have been audited by Deloitte &
Touche llp, independent auditors, as stated in their reports, which are
incorporated herein by reference, and have been so incorporated in reliance upon
the reports of such firm given upon their authority as experts in accounting and
auditing.
Table of Contents
THE COMPANY............................... 2
RISK FACTORS.............................. 2
PROSPECTUS SUPPLEMENTS.................... 8
RATIO OF EARNINGS TO
FIXED CHARGES.......................... 9
WHERE YOU CAN FIND MORE
INFORMATION .......................... 9
USE OF PROCEEDS ..........................10
DESCRIPTION OF THE NOTES .................10
General ............................10
Redemptions .........................11
Remarketed Notes....................11
Book-Entry Notes - Registration,
Transfer, and Payment of $375,000,000 Unsecured Notes
Interest and Principal ........11
Note Certificates- Registration,
Transfer, and Payment of
Interest and Principal .........12
Original Issue Discount.........13
Interest Rate .......................13 PROSPECTUS
Fixed Rate Notes ................13
Floating Rate Notes: .........13
Events of Default....................14
Modification of Indenture............14
Consolidation, Merger or Sale........15
Legal Defeasance.....................15 The date of this
Covenant Defeasance..................15 prospectus is ___________, 2002
Governing Law........................15
Concerning the Trustee...............15
PLAN OF DISTRIBUTION......................16
By Agents............................16
By Underwriters......................16
Direct Sales.........................16
General Information..................16
LEGAL OPINIONS............................16
EXPERTS...................................17
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.*
Securities and Exchange Commission Filing Fees $ 34,500
Printing Registration Statement, Prospectus, etc....$ 30,000
Independent Auditors' Fees...............................$ 34,000
Charges of Trustee (including counsel fees) $ 10,000
Legal Fees of Counsel....................................$.....100,000
Rating Agency Fees.......................................$.....179,875
Miscellaneous Expenses...................................$......50,000
-------------
Total..................................$ 438,375
=============
*Estimated, except for filing fees.
Item 15. Indemnification of Directors and Officers.
Section 271B.8-510 of the Kentucky Revised Statutes provides that a
Kentucky corporation may indemnify an individual made a party to a proceeding
because the individual is or was a director if (i) the individual's conduct was
in good faith, (ii) the individual reasonably believed that, in the case of
conduct in the individual's official capacity with the corporation, his or her
conduct was in the best interests of the corporation and, in all other cases,
his or her conduct was at least not opposed to the best interests of the
corporation and (iii) in the case of a criminal proceeding, that the individual
had no reasonable cause to believe that such conduct was unlawful. The
termination of a proceeding by judgment, order, settlement, conviction, or upon
a plea of nolo contendere or its equivalent is not, of itself, determinative
that a director did not meet the required standard of conduct. Section
271B.8-520 requires a corporation, unless limited by its articles of
incorporation, to indemnify a director who has been wholly successful in the
defense of a proceeding against reasonable expenses (including counsel fees) so
incurred. Section 271B.8-530 authorizes a corporation to pay for or reimburse
the reasonable expenses (including counsel fees) incurred by a director in
advance of final disposition of a proceeding upon a determination that in light
of the facts then known indemnification is permissible, a written affirmation by
the director of his or her good faith belief that the required standard of
conduct has been met and an undertaking by the director to repay any such
advance if it is ultimately determined that the director did not meet the
required standard of conduct. Unless limited by a corporation's articles of
incorporation, a director may, pursuant to Section 271B.8-540, apply for
indemnification to a court of competent jurisdiction. An officer is entitled to
mandatory indemnification under Section 271B.8-520 and to apply for
court-ordered indemnification under Section 271B.8-540 to the same extent as a
director. A corporation may indemnify and advance expenses to an officer,
employee or agent to the same extent as to a director. A corporation may
purchase and maintain insurance on behalf of an individual who is a director,
officer, employee or agent, whether or not the corporation would have power by
statute to indemnify the individual against the same liability. Section
271B.8-580 provides that the statutory provisions do not exclude any other
rights to indemnification and advances for expenses that a person may otherwise
have. The by-laws of the Company provide for the indemnification of directors
and officers of the Company to the full extent permitted by law.
Reference is made to the Selling Agency Agreement and Underwriting
Agreement, filed as Exhibits 1(a) and 1(b) hereto, which provide for
indemnification, under certain circumstances, of the Company, certain of its
directors and officers, and persons who control the Company.
The Company maintains insurance policies insuring its directors and
officers against certain obligations that may be incurred by them.
Item 16. Exhibits.
Reference is made to the information contained in the Exhibit Index
filed as a part of this Registration Statement.
Item 17. Undertakings.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3)
of the Securities Act of 1933;
(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 Notes (if the total dollar value of
Notes 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) of the Securities Act of 1933 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;
(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 (i) and (ii) do not apply if the registration
statement is on Form S-3 or Form S-8, 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 Commission by the registrant
pursuant to section 13 or section 15(d) of the Securities Exchange Act of 1934
that are incorporated by reference in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment 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.
(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.
(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 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 Notes, and the offering thereof 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 laws of the Commonwealth of Kentucky,
the registrant's By-laws or otherwise, the registrant has been advised that in
the opinion of the SEC such indemnification is against public policy as
expressed in said 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 notes, 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 said Act 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 shall be deemed to be part of this registration
statement as of the time it was declared effective.
(7) For purposes 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.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable cause 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, thereunto duly
authorized, in the City of Columbus and State of Ohio, on the 29th day of April,
2002.
KENTUCKY POWER COMPANY
E. Linn Draper, Jr.*
Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed below by the following persons in the
capacities and on the dates indicated.
Signature Title Date
(i) Principal Executive
Officer Chairman of the
Board and Chief
E. Linn Draper, Jr.* Executive Officer April 29, 2002
(ii) Principal Financial
Officer: Vice President,
and Chief
/s/ Susan Tomasky Financial Officer April 29, 2002
Susan Tomasky
(iii) Principal Accounting
Officer:
Controller and Chief
/s/ Joseph M. Buonaiuto Accounting Officer April 29, 2002
Joseph M. Buonaiuto
(iv) A Majority of the
Directors:
E. Linn Draper, Jr.*
Henry W. Fayne*
Armando A. Pena* April 29, 2002
Robert P. Powers*
Thomas V. Shockley, III*
Susan Tomasky
J. H. Vipperman*
*By /s/ Susan Tomasky
(Susan Tomasky, Attorney-in-Fact)
II-6
EXHIBIT INDEX
Certain of the following exhibits, designated with an asterisk (*), are
filed herewith. The exhibits not so designated have heretofore been filed with
the Commission and, pursuant to 17 C.F.R. Secion 201.24 and Section 230.411, are
incorporated herein by reference to the documents indicated following the
descriptions of such exhibits.
Exhibit No. Description
* 1(a) - Proposed form of Selling Agency Agreement for the unsecured notes.
* 1(b) - Proposed form of Underwriting Agreement for the unsecured notes.
4(a) - Indenture between the Company and Bankers Trust Company, as Trustee,
dated as of September 1, 1997 for the notes. [Registration statement
on Form S-3 dated April 6, 1999, File No. 333-75785, Exhibit 4(a)].
4(b) - Company Order and Officers' Certificate, dated September 24, 1997,
establishing certain terms of Unsecured Medium Term Notes, Series A.
[Registration statement on Form S-3 dated April 6, 1999, File No.
333-75785, Exhibit 4(b)].
4(c) - Instructions, dated September 26, 1997, from the Company to Bankers
Trust Company, establishing certain terms of the 6.91% Unsecured
Medium Term Notes, Series A, due 2007. [Registration statement on Form
S-3 dated April 6, 1999, File No. 333-75785, Exhibit 4(c)].
4(d) - Instructions, dated November 4, 1998, from the Company to Bankers
Trust Company, establishing certain terms of the 6.45% Unsecured
Medium Term Notes, Series A, due 2008. [Registration statement on Form
S-3 dated April 6, 1999, File No. 333-75785, Exhibit 4(d)].
* 4(e) - Company Order and Officers' Certificate, dated November 2, 1999,
establishing certain terms of Floating Rate Notes, Series A, due 2000.
* 4(f) - Company Order and Officers' Certificate dated November 17, 2000,
establishing certain terms of Floating Rate Notes, Series B, due 2002.
* 4(g) - Proposed form of Company Order and Officers' Certificate
establishing certain terms of the notes.
* 5 - Opinion of Simpson Thacher & Bartlett as to the legality of the notes
12 - Statement re: Computation of Ratios [Annual Report on Form 10-K of
the Company for the period ended December 31, 2001, File No. 1-3570,
Exhibit 12].
* 23(a)- Consent of Deloitte & Touche LLP.
23(b)- Consent of Simpson Thacher & Bartlett (included in Exhibit 5).
* 24 - Powers of Attorney and resolutions of the Board of Directors of the
Company.
* 25 - Form T-1 re: Eligibility of Bankers Trust Company.