PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED JANUARY 14, 1994)
$200,000,000
NORTHERN STATES POWER COMPANY
(A MINNESOTA CORPORATION)
5 1/2% FIRST MORTGAGE BONDS, SERIES DUE FEBRUARY 1, 1999
-------------
INTEREST PAYABLE FEBRUARY 1 AND AUGUST 1
--------------
INTEREST ON THE 5 1/2% FIRST MORTGAGE BONDS, SERIES DUE FEBRUARY 1, 1999 (THE
"OFFERED BONDS") IS PAYABLE ON FEBRUARY 1 AND AUGUST 1 OF EACH YEAR,
COMMENCING AUGUST 1, 1994. THE OFFERED BONDS ARE NOT
REDEEMABLE PRIOR TO MATURITY. SEE
"SUPPLEMEN TAL DESCRIPTION OF
OFFERED BONDS".
--------------
THE OFFERED BONDS WILL BE REPRESENTED BY GLOBAL BONDS REGISTERED IN THE NAME OF
A NOMINEE OF THE DEPOSITORY TRUST COMPANY, AS DEPOSITARY ("DTC"). BENEFICIAL
INTERESTS IN THE OFFERED BONDS WILL BE SHOWN ON, AND TRANSFERS THEREOF
WILL BE EFFECTED ONLY THROUGH, RECORDS MAINTAINED BY DTC (WITH
RESPECT TO PARTICIPANTS' INTERESTS) AND IT PARTICPANTS. EXCEPT AS
DESCRIBED IN THE ACCOMPANYING PROSPECTUS, OFFERED BONDS IN
CERTIFICATED FORM WILL NOT BE ISSUED IN
EXCHANGE FOR THE GLOBAL BONDS.
--------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS SUPPLEMENT OR THE PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
--------------
PRICE 99.825% AND ACCRUED INTEREST
--------------
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC (1) COMMISSIONS (2) COMPANY (1)(3)
---------------- --------------- ----------------
PER BOND...................... 99.825% .1620% 99.663%
TOTAL......................... $199,650,000 $324,000 $199,326,000
<FN>
- ---------
(1) PLUS ACCRUED INTEREST FROM FEBRUARY 1, 1994.
(2) THE COMPANY HAS AGREED TO INDEMNIFY THE UNDERWRITERS AGAINST CERTAIN
LIABILITIES, INCLUDING LIABILITIES UNDER THE SECURITIES ACT OF 1933, AS
AMENDED.
(3) BEFORE DEDUCTING ESTIMATED EXPENSES OF $421,000 PAYABLE BY THE COMPANY.
--------------
THE OFFERED BONDS ARE OFFERED, SUBJECT TO PRIOR SALE, WHEN, AS AND IF
ACCEPTED BY THE UNDERWRITERS AND SUBJECT TO APPROVAL OF CERTAIN LEGAL MATTERS BY
GARDNER, CARTON & DOUGLAS, COUNSEL FOR THE UNDERWRITERS. IT IS EXPECTED THAT
DELIVERY OF THE OFFERED BONDS WILL BE MADE ON OR ABOUT FEBRUARY 17, 1994 THROUGH
THE BOOK-ENTRY FACILITIES OF THE DEPOSITORY TRUST COMPANY, AGAINST PAYMENT
THEREFOR IN NEW YORK FUNDS.
--------------
MORGAN STANLEY & CO.
INCORPORATED
SMITH BARNEY SHEARSON INC.
PIPER JAFFRAY INC.
FEBRUARY 10, 1994
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE OFFERED BONDS
OR ANY OTHER SECURITIES OF THE COMPANY AT LEVELS ABOVE THOSE WHICH MIGHT
OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
No person has been authorized to give any information or to make any
representations other than those contained in this Prospectus Supplement or the
Prospectus and, if given or made, such information or representations must not
be relied upon as having been authorized. This Prospectus Supplement and the
Prospectus do not constitute an offer to sell or the solicitation of an offer to
buy any securities other than the securities described in this Prospectus
Supplement or an offer to sell or the solicitation of an offer to buy such
securities in any circumstances in which such offer or solicitation is unlawful.
Neither the delivery of this Prospectus Supplement or the Prospectus nor any
sale made hereunder or thereunder shall, under any circumstances, create any
implication that the information contained herein or therein is correct as of
any time subsequent to the date of such information.
--------------
USE OF PROCEEDS
The net proceeds from the sale of $200,000,000 in aggregate principal amount
of the Offered Bonds will be added to the general funds of the Company and
applied to the redemption of (i) $30,000,000 in principal amount of its 6 1/8%
First Mortgage Bonds, Series due June 1, 1995, at a redemption price of 100.29%
of the principal amount thereof plus accrued interest to the date of redemption,
(ii) $45,000,000 in principal amount of its 5 7/8% First Mortgage Bonds, Series
due August 1, 1996, at a redemption price of 100.51% of the principal amount
thereof plus accrued interest to the date of redemption, (iii) $30,000,000 in
principal amount of its 6 1/2% First Mortgage Bonds, Series due October 1, 1997,
at a redemption price of 100.75% of the principal amount thereof plus accrued
interest to the date of redemption and (iv) $45,000,000 in principal amount of
its 6 3/4% First Mortgage Bonds, Series due May 1, 1998, at a redemption price
of 100.93% of the principal amount thereof plus accrued interest to the date of
redemption. The balance of the net proceeds will be used to repay short-term
borrowings. Short-term borrowings of the Company aggregated $192 million as of
January 31, 1994.
CONSTRUCTION PROGRAM AND FINANCING
Total Northern States Power Company (NSP) capital expenditures (including
allowance for funds used during construction and excluding business
acquisitions) totaled $362 million in 1993. Internally generated funds provided
98.5% of the capital expenditures for 1993. These capital expenditures include
gross additions to utility property of $357 million. In addition to capital
expenditures, NSP invested $159 million in 1993 to acquire three energy-related
businesses: Minneapolis Energy Center, Viking Gas Transmission Company and
certain assets of Centran Corporation.
NSP's utility capital expenditures (including allowance for funds used
during construction) are currently estimated to be $396 million for 1994 and
$1.8 billion for the five years ended December 31, 1998. Also included in NSP's
projected capital expenditures is $60 million in 1994 and $280 million during
the five years ended December 31, 1998 for nuclear fuel for NSP's three existing
nuclear units. The remaining capital expenditures through 1998 are for many
utility projects, none of which are extraordinarily large relative to the total
capital expenditure program. Approximately 80% of the 1994 utility capital
expenditures and approximately 95% of the 1994-1998 utility capital expenditures
are expected to be provided by internally generated funds. The foregoing
estimates of utility capital expenditures and internally generated funds may be
subject to substantial changes due to unforeseen factors, such as changed
economic conditions, competitive conditions, resource planning, new government
regulations, changed tax laws and rate regulation.
S-2
Although they may vary depending on the success, timing and level of
involvement in projects currently under consideration, potential capital
requirements for NSP's non-regulated projects (including equity investments in
joint ventures) are estimated to be $130 million in 1994 and $540 million for
the five-year period 1994-1998. These non-regulated projects are expected to be
financed primarily through project debt. The remaining project costs would be
funded through equity investments from NSP. Such equity investments are expected
to be financed on a long-term basis through internally generated funds or
through NSP's issuance of common stock and debt.
RECENT DEVELOPMENTS
1993 FINANCIAL RESULTS
NSP's 1993 earnings per share from continuing operations were $3.02,
compared with $2.31 in 1992 before an accounting change. The increase in
earnings was due primarily to more normal weather and rate increases in 1993.
Total earnings per share of $3.04 in 1992 include a one-time increase of 73
cents per share due to an accounting change that recognizes the accrual of prior
year's unbilled revenues. The Company's Current Report on Form 8-K dated
February 9, 1994 contains NSP's unaudited Statements of Income, unaudited
Consolidated Statements of Cash Flows and unaudited Consolidated Statement of
Changes in Common Stockholders' Equity for the three years ended December 31,
1993, and its unaudited Consolidated Balance Sheet and unaudited Consolidated
Statements of Capitalization, as of December 31, 1993 and 1992, and are
incorporated herein by reference.
The following summary financial information is qualified in its entirety by
the detailed information and financial statements included elsewhere in this
Prospectus, including the information contained in the documents incorporated
herein by reference.
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(THOUSANDS OF DOLLARS, EXCEPT FOR PER SHARE AMOUNTS)
YEAR ENDED DECEMBER 31,
-------------------------------------------------
1991 1992 1993
---------------- ---------------- -------------
(FROM AUDITED AMOUNTS IN FORM (UNAUDITED)
10-K)
INCOME STATEMENT:
Electric Revenues........................................ $ 1,863,238 $ 1,823,316 $ 1,974,916
Gas Revenues............................................. 337,920 336,206 429,076
Income from Continuing Operations before Accounting
Change.................................................. 207,012(1) 160,928(2) 211,740
Net Income............................................... 224,047(3) 206,440(3) 211,740
Earnings Available for Common Stock...................... 206,053 190,268 197,160
Earnings per Average Common Share:
Continuing Operations before Accounting Change......... $3.02 $2.31(2) $3.02
Total................................................ $3.29 (3) $3.04 (3) $3.02
DECEMBER 31, 1993
-------------------------------------------------------
(UNAUDITED)
PERCENT OF ADJUSTED
ACTUAL AS ADJUSTED (4) CAPITALIZATION
---------------- ---------------- -------------------
CAPITALIZATION:
Long-term Debt, due after one year.................... $ 1,291,867(5) $ 1,341,867(5) 39.35 %
Cumulative Preferred Stock (including premium)........ 240,469 240,469 7.05 %
Common Stockholders' Equity (including premium)....... 1,827,454 1,827,454 53.60 %
---------------- ---------------- -------
Total............................................... $ 3,359,790 $ 3,409,790 100.00 %
---------------- ---------------- -------
---------------- ---------------- -------
<FN>
- ---------
(1) Excludes income (net of tax) from discontinued telephone operations of $0.2
million in 1991.
(2) Includes the 1992 current-year impact of the change in accounting for
unbilled revenues, which increased income by $9.8 million ($0.16 per share).
S-3
(CONTINUATION OF FOOTNOTES FROM PRIOR PAGE)
(3) Includes, net of tax, income from discountinued operations and gain on
disposal of telephone operations of $17.0 million ($0.27 per share) in 1991
and, net of tax, cumulative effect of unbilled revenue accounting change of
$45.5 million ($0.73 per share) in 1992.
(4) Adjusted to give effect to the refunding of $150 million in long-term debt
and the issuance of $200 million in long-term debt.
(5) Excludes $90.6 million of current portion of long-term debt and $141.6
million of pollution control revenue bonds that are subject to optional
tender for purchase upon seven days notice by any bondholder.
RATE MATTERS
The Company received final rate orders from the Minnesota Public Utilities
Commission (MPUC) in December 1993 and January 1994 allowing an annual retail
electric rate increase of $72.2 million (5.4%) and an annual retail gas rate
increase of $10.0 million (3.9%). The return on equity granted in both cases was
11.47%. Electric rate refunds of interim rates collected are required in the
amount of $12.6 million and are expected to be paid in May 1994. No refunds of
interim gas rates collected are required. Final rates for gas and electric are
expected to be implemented in March and April 1994, respectively. The effects of
the final orders were recorded in fourth quarter 1993. However, the Company
restated its third quarter 1993 earnings for the effects of the final orders,
reporting earnings per share of $0.96 and $2.27, versus the previously reported
earnings per share of $0.84 and $2.15 for three months and nine months ended
September 30, 1993, respectively.
On January 31, 1994, an appeal of the MPUC's determination on allowed return
on equity was filed with the Minnesota Court of Appeals by the Minnesota
Department of Public Service, the Office of Attorney General and the Minnesota
Energy Consumers intervenor groups. The appeal concerns the method of
calculation of the rate of return for both the electric and gas cases. This
issue could impact approximately $7 million in annual revenues for the Company.
The ultimate financial impact of this appeal, if any, is not determinable at
this time. A decision by the court is expected by year end 1994.
UNION NEGOTIATIONS
NSP's labor agreements with its five local unions expired on December 31,
1993. An interim agreement with the unions expires March 31, 1994. The Company's
final offer for settlement is currently being presented to NSP's union
employees. Results of the employees' vote is expected on or about March 14,
1994. The Company is not able to predict the outcome of negotiations at this
time.
BUSINESS ACQUISITIONS
On March 4, 1993, NRG signed a letter of intent to join with Comalco Limited
of Australia (Comalco) and other parties to acquire the Gladstone Power Station
from Queensland Electricity Commission (QEC). Gladstone is a 1,680 Mw coal-fired
plant located in Gladstone, Queensland, Australia. A large portion of the
generated electricity would be sold to Boyne Smelters Limited for use in its
aluminum smelter, with the remainder being sold to QEC, in each case pursuant to
long-term power purchase agreements. NRG expects to acquire 37.5 percent
interest in the Gladstone plant for approximately $60 million. A wholly-owned
subsidiary of NRG is expected to operate the Gladstone plant. Closing of the
acquisition is expected in the first half of 1994.
PRAIRIE ISLAND NUCLEAR STORAGE FACILITY
As previously disclosed, the Company is experiencing uncertainty regarding
its ability to store used nuclear fuel from its Prairie Island nuclear
generating facility. The Company's Prairie Island nuclear generating facility
stores its used nuclear fuel on an interim basis in a storage pool in the plant,
pending the availability of a U.S. Department of Energy high-level-radioactive
waste storage or permanent disposal facility, or a private interim storage
facility. At current operating levels, the pool will be full in 1994, so NSP has
proposed to augment Prairie Island's interim storage capacity by using steel
containers for dry storage of used nuclear fuel on the plant site. Without
additional on-site storage, operations at
S-4
Prairie Island, which supplies about 20 percent of the Company's output, will
begin to be curtailed in mid-1995 and the plant will cease operating by early
1996. The Company has obtained a Certificate of Need from the MPUC allowing use
of a limited number of steel containers, providing adequate storage at least
through the year 2001. The Nuclear Regulatory Commission has also issued a
license approving a dry storage facility on the plant site for Prairie Island's
used fuel. However, in June 1993, the Minnesota Court of Appeals decided that
the additional temporary storage facilities must be approved by the Minnesota
Legislature. The Company has requested such approval from the Legislature and
expects a decision on this issue during the current session, which begins on
February 22, 1994. Although hearings have begun, the Company cannot predict what
action the Minnesota Legislature will take.
NSP's net investment in the Prairie Island generating facility at December
31, 1993, was $520 million. Future plant decommissioning costs in excess of
amounts not accrued and collected in rates were $247 million at December 31,
1993. Should the facility need to be shut down due to the full utilization of
spent fuel storage capacity, the Company would request recovery of and a return
on its investment and unrecorded decommissioning costs through utility rates.
However, at this time, the regulators' ultimate response to such a request is
unknown. Without the generating capability of the Prairie Island facility, the
Company estimates that additional purchased power expenses of at least $200
million per year could be incurred. To the extent such additional costs
represent energy purchases, current rate treatment provides recovery through
cost-of-energy adjustments to customer rates. The Company will request recovery
of costs associated with additional capacity purchases or investments in new
plants through general rate filings. However, at this time the need for such
costs and regulators' ultimate response to such a request is unknown. The
Company estimates that the present value of the cost of supplying replacement
power and recovering its investment in the plant and unrecognized
decommissioning costs will be $1.8 billion. Due to the adverse consequences of a
plant shutdown, the Company will pursue all legal and legislative actions which,
at its discretion, may be applicable.
NSP'S RATIO OF EARNINGS TO FIXED CHARGES
YEAR ENDED DECEMBER 31,
---------------------------------------
1993 1992 1991 1990 1989
----------- ---- ---- ---- ----
(UNAUDITED)
Ratio of Earnings to Fixed Charges........... 4.0 3.2 3.9 3.7 4.1
For purposes of computing the ratio of earnings to fixed charges, (i)
earnings consist of income from continuing operations before accounting change
plus fixed charges, federal and state income taxes, deferred income taxes and
investment tax credits; and (ii) fixed charges consist of interest on long-term
debt, other interest charges, the interest component on leases and amortization
of debt discount, premium and expense.
Assuming variable interest rate debt continues at year-end 1993 rates, the
annual interest requirement on long-term debt of NSP outstanding at December 31,
1993 was $95,144,989.
SUPPLEMENTAL DESCRIPTION OF OFFERED BONDS
The following description of the particular terms of the Offered Bonds
supplements the description of the general terms and provisions of the New Bonds
set forth in the accompanying Prospectus under the caption "Description of New
Bonds," to which description reference is hereby made. The following brief
summaries of certain provisions contained in the Supplemental Trust Indenture,
dated February 1, 1994, relating to the Offered Bonds (the "New Supplemental
Indenture") do not purport to be complete, use certain terms defined in the New
Supplemental Indenture, and are qualified in their entirety by express reference
to the provisions of the New Supplemental Indenture. Capitalized words not
defined herein are used as defined in the accompanying Prospectus or the New
Supplemental Indenture.
S-5
GENERAL
Interest on the Offered Bonds at the annual rate set forth on the cover page
of this Prospectus Supplement will accrue from February 1, 1994, and is to be
payable semi-annually on February 1 and August 1, beginning August 1, 1994.
Subject to certain exceptions, the New Supplemental Indenture provides for the
payment of interest on the interest payment date only to persons in whose names
the Offered Bonds are registered on the Record Date (the January 21 prior to
February 1 and the July 21 prior to August 1 unless any Record Date is not a
Business Day, in which event the Record Date will be the next preceding Business
Day).
Excluding the Offered Bonds, 17 series of Bonds in an aggregate principal
amount of $844,900,000 currently are outstanding under the Indenture. At
December 31, 1993 the amount of net Permanent Additions available for issuance
of Bonds exceeded $3.7 billion. As of December 31, 1993, $255 million of retired
Bonds were available for the authentication of Bonds, of which $200 million will
be used for the authentication of the Offered Bonds. Assuming the interest cost
on variable rate bonds is at the maximum allowable rate, earnings applicable to
bond interest for the twelve months ended December 31, 1993, would be 6.4 times
the annual interest requirements of the Bonds, including the Offered Bonds.
REDEMPTION AND SINKING FUND PROVISIONS
The Offered Bonds will not be redeemable prior to maturity and will not be
subject to a sinking fund.
BOOK-ENTRY BONDS
DTC will act as securities depository for the Offered Bonds. The Offered
Bonds will be registered in the name of Cede & Co. (DTC's partnership nominee).
Two fully-registered Offered Bond certificates will be issued in the aggregate
principal amount of the Offered Bonds, and will be deposited with DTC.
DTC is a limited-purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Securities Exchange
Act of 1934. DTC holds securities that its participants ("Participants") deposit
with DTC. DTC also facilitates the settlement among Participants of securities
transactions, such as transfers and pledges, in deposited securities through
electronic computerized book-entry changes in Participants' accounts, thereby
eliminating the need for physical movement of securities certificates. Direct
Participants include securities brokers and dealers, banks, trust companies,
clearing corporations, and certain other organizations. DTC is owned by a number
of its Direct Participants and by the New York Stock Exchange, Inc., the
American Stock Exchange, Inc., and the National Association of Securities
Dealers, Inc. Access to the DTC system is also available to others such as
securities brokers and dealers, banks, and trust companies that clear through or
maintain a custodial relationship with a Direct Participant, either directly or
indirectly ("Indirect Participants"). The Rules applicable to DTC and its
Participants are on file with the Commission.
Purchases of the Offered Bonds under the DTC system must be made by or
through Direct Participants, which will receive a credit for the Offered Bonds
on DTC's records. The ownership interest of each actual purchaser of each
Offered Bond ("Beneficial Owner") is in turn to be recorded on the Direct and
Indirect Participants' records. Beneficial Owners will not receive written
confirmation from DTC of their purchase, but Beneficial Owners are expected to
receive written confirmations providing details of the transaction, as well as
periodic statements of their holdings, from the Direct or Indirect Participant
through which the Beneficial Owner entered into the transaction. Transfers of
ownership interests in the Offered Bonds are to be accomplished by entries made
on the books of Participants acting on behalf of Beneficial Owners. Beneficial
Owners will not receive certificates representing their ownership interests in
the Offered Bonds, except in the event that use of the book-entry system for the
Offered Bonds is discontinued.
S-6
To facilitate subsequent transfers, all Offered Bonds deposited by
Participants with DTC are registered in the name of DTC's partnership nominee,
Cede & Co. The deposit of the Offered Bonds with DTC and their registration in
the name of Cede & Co. effect no change in beneficial ownership. DTC has no
knowledge of the actual Beneficial Owners of the Offered Bonds; DTC's records
reflect only the identity of the Direct Participants to whose accounts such
Offered Bonds are credited, which may 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 DTC to Direct
Participants, by Direct Participants to Indirect Participants, and by Direct
Participants to Beneficial Owners will be governed by arrangements among them,
subject to any statutory or regulatory requirements as may be in effect from
time to time.
Neither DTC nor Cede & Co. will consent or vote with respect to the Offered
Bonds. Under its usual procedures, DTC mails an Omnibus Proxy to the Company as
soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.'s
consenting or voting rights to those Direct Participants to whose accounts the
Offered Bonds are credited on the record date (identified in a listing attached
to the Omnibus Proxy).
Principal and interest payments on the Offered Bonds will be made to DTC.
DTC's practice is to credit Direct Participants' accounts on payable date in
accordance with their respective holdings shown on DTC's records unless DTC has
reason to believe that it will not receive payment on payable date. Payments by
Participants to Beneficial Owners will be governed by standing instructions and
customary practices, as 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, the Trustee, or the Company,
subject to any statutory or regulatory requirements as may be in effect from
time to time. Payment of principal and interest to DTC is the responsibility of
the Company or the Trustee, disbursement of such payments to Direct Participants
shall be the responsibility of DTC, and disbursement of such payments to the
Beneficial Owners shall be the responsibility of Direct and Indirect
Participants.
DTC may discontinue providing its services as securities depository with
respect to the Offered Bonds at any time by giving reasonable notice to the
Company or the Trustee. Under such circumstances, if a successor securities
depository is not obtained, certificates for the Offered Bonds are required to
be printed and delivered.
The Company may decide to discontinue use of the system of book-entry
transfers through DTC (or a successor securities depository). In that event,
certificates for the Offered Bonds will be printed and delivered.
The information in this section concerning DTC and DTC's book-entry system
has been obtained from DTC, and the Company and the Underwriters take no
responsibility for the accuracy thereof.
S-7
UNDERWRITERS
Subject to the terms and conditions set forth in an Underwriting Agreement
dated February 10, 1994 (the "Underwriting Agreement"), the Underwriters have
severally agreed to purchase from the Company the amount of Offered Bonds set
forth opposite their names below:
NAME AMOUNT
------------
Morgan Stanley & Co. Incorporated............................... $160,000,000
Smith Barney Shearson Inc....................................... 20,000,000
Piper Jaffray Inc............................................... 20,000,000
------------
Total..................................................... $200,000,000
------------
------------
The Underwriting Agreement provides that the Underwriters are required to
take and pay for all of the Offered Bonds, if any are taken. The obligations of
the Underwriters are subject to certain conditions precedent set forth in the
Underwriting Agreement.
The Underwriters have advised the Company as follows:
The Underwriters propose to offer the Offered Bonds to the public
initially at the offering price set forth on the cover page of this
Prospectus Supplement and to certain dealers at such price less a concession
not in excess of .125% of the principal amount of such Bonds. The
Underwriters may allow, and such dealers may reallow, a concession not in
excess of .100% to certain other dealers. After the Offered Bonds are
released for sale to the public, the public offering price and the
concessions to dealers may be changed by the Underwriters.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as amended,
and or contribute to payments the Underwriters may be required to make in
respect thereof.
The Offered Bonds of each series are a new issue of securities with no
established trading market. The Company does not intend to apply for listing of
the Offered Bonds on a national securities exchange. The Underwriters have
advised the Company that they intend to make a market in the Offered Bonds but
they 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 of the Offered Bonds.
S-8
PROSPECTUS
NORTHERN STATES POWER COMPANY
(A MINNESOTA CORPORATION)
FIRST MORTGAGE BONDS
---------
Northern States Power Company, a Minnesota corporation (the "Company"), may
offer for sale from time to time up to $600,000,000 aggregate principal amount
of its First Mortgage Bonds (the "New Bonds"), in one or more series, on terms
and in amounts to be determined at the time of sale. The aggregate principal
amount, rate or rates (or method of calculation) and time or times and place of
payment of interest, maturity or maturities, offering price, any redemption
terms or other specific terms of the series of New Bonds in respect of which
this Prospectus is being delivered (the "Offered Bonds") will be set forth in a
supplement to this Prospectus (the "Prospectus Supplement").
The Company may sell the New Bonds through underwriters or dealers, directly
to a limited number of institutional purchasers or through agents. See "Plan of
Distribution." The Prospectus Supplement will set forth the names of any
underwriters, dealers or agents involved in the distribution of the Offered
Bonds and any applicable commissions or discounts and the net proceeds to the
Company from such sale.
--------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
--------------
THE DATE OF THIS PROSPECTUS IS JANUARY 14, 1994
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY OR ANY UNDERWRITER OR AGENT. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE
THE DATE HEREOF. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY THE NEW BONDS IN ANY JURISDICTION TO ANY PERSON
TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION IN SUCH JURISDICTION.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information on file can be inspected at the public
reference offices of the Commission currently at 450 Fifth Street, N.W.,
Washington, D.C. 20549; 500 West Madison Street, Chicago, Illinois 60661; and 7
World Trade Center, New York, New York 10045. Copies of such material can be
obtained from the Public Reference Section of the Commission at its principal
office at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates.
In addition, reports, proxy material and other information concerning the
Company may be inspected at the Library of the New York Stock Exchange, 20 Broad
Street, New York, New York, at the office of the Chicago Stock Exchange, 440
South LaSalle Street, Chicago, Illinois, and at the office of the Pacific Stock
Exchange, 301 Pine Street, San Francisco, California, on which exchanges the
Company's Common Stock is listed. The Company is not required to, and does not,
provide annual reports to holders of its debt securities unless specifically
requested by a holder.
The Company has filed with the Commission a registration statement on Form
S-3 (herein, together with all amendments and exhibits, referred to as the
"Registration Statement") under the Securities Act of 1933, as amended. This
Prospectus does not contain all of the information set forth in the Registration
Statement, certain parts of which are omitted in accordance with the rules and
regulations of the Commission. For further information, reference is made to the
Registration Statement.
DOCUMENTS INCORPORATED BY REFERENCE
The following documents filed by the Company with the Commission are
incorporated by reference into this Prospectus:
1. The Company's Annual Report on Form 10-K for the year ended December
31, 1992;
2. The Company's Quarterly Reports on Form 10-Q for the quarters ended
March 31, 1993, June 30, 1993 and September 30, 1993; and
3. The Company's Current Reports on Form 8-K dated March 30, 1993,
April 28, 1993, May 4, 1993, June 8, 1993, July 16, 1993, August 20,
1993, October 1, 1993, December 7, 1993 and December 10, 1993.
All documents filed by the Company pursuant to Section 13(a), 19(c), 14 or
15(d) of the Exchange Act after the date of this Prospectus and prior to the
termination of this offering shall be deemed to be incorporated by reference in
this Prospectus from the date of filing of such documents. Any statement
contained in a document incorporated or deemed to be incorporated by reference
in this Prospectus shall be deemed to be modified or superseded for purposes of
this Prospectus to the extent that a statement contained in this Prospectus or
in any other subsequently filed document which also is or is deemed to be
incorporated by reference in the Prospectus modifies or supersedes such
statement. Any statement so modified or superseded shall not be deemed, except
as so modified or superseded, to constitute a part of this Prospectus.
THE COMPANY WILL PROVIDE WITHOUT CHARGE TO EACH PERSON (INCLUDING ANY
BENEFICIAL OWNER) TO WHOM A COPY OF THIS PROSPECTUS HAS BEEN DELIVERED, UPON THE
WRITTEN OR ORAL REQUEST OF ANY SUCH PERSON, A COPY OF ANY OR ALL OF THE
DOCUMENTS REFERRED TO ABOVE WHICH HAVE BEEN INCORPORATED IN THIS PROSPECTUS BY
REFERENCE, OTHER THAN EXHIBITS TO SUCH DOCUMENTS. REQUESTS FOR SUCH COPIES
SHOULD BE DIRECTED TO THE ASSISTANT SECRETARY, NORTHERN STATES POWER COMPANY,
414 NICOLLET MALL, MINNEAPOLIS, MINNESOTA 55401 (612-330-5994).
2
[LOGO]
Northern States Power Company (the "Company") was incorporated in 1909 under
the laws of Minnesota. Its executive offices are located at 414 Nicollet Mall,
Minneapolis, Minnesota 55401. (Phone 612-330-5500). The Company has one
significant subsidiary, Northern States Power Company, a Wisconsin corporation
(the "Wisconsin Company"), and several other subsidiaries including Viking Gas
Transmission Company, a Delaware corporation, and NRG Energy, Inc. ("NRG"), a
Delaware corporation. NRG manages many of NSP's non-utility energy subsidiaries.
The Company and its subsidiaries collectively are referred to herein as NSP.
NSP is predominantly an operating public utility engaged in the generation,
transmission and distribution of electricity throughout a 49,000 square mile
service area and the distribution of natural gas in approximately 130
communities within this area.
The Company serves customers in Minnesota, North Dakota and South Dakota.
The Wisconsin Company serves customers in Wisconsin and Michigan. Of the
approximately three million people served by NSP, the majority is concentrated
in the Minneapolis-St. Paul Metropolitan Area. For 1992, about 61 percent of
NSP's electric retail revenue was derived from sales in the Minneapolis-St. Paul
Metropolitan Area and about 57 percent of gas revenues came from sales in the
St. Paul area. NSP's electric generation for 1992 was provided for by coal
(60%), nuclear (35%), and hydro and other fuels (5%). NSP currently operates
three nuclear units that were placed in service in 1971, 1973 and 1974. NSP has
no additional nuclear units under construction.
USE OF PROCEEDS
The proceeds from the sale of the New Bonds will be added to the general
funds of the Company and used for general corporate purposes, which may include
the purchase or redemption of one or more series of outstanding first mortgage
bonds and the repayment of outstanding short-term borrowings incurred in
connection with NSP's continuing construction program. Short-term borrowings of
the Company aggregated $92.83 million as of November 30, 1993. The specific
allocation of the proceeds of a particular series of the Offered Bonds will be
described in the Prospectus Supplement.
CONSTRUCTION PROGRAM AND FINANCING
NSP's utility capital expenditures (including allowance for funds used
during construction and excluding business acquisitions) are estimated to be
$370 million for 1993 and up to $2.4 billion for the five years ending December
31, 1997. Included in these projected capital investments are $38 million and
$267 million, respectively, for nuclear fuel for NSP's three existing nuclear
units. The remaining capital investments through 1997 are for numerous utility
projects, none of which are significantly large relative to the total capital
investment program. Approximately 90-100% of the 1993 utility capital
expenditures and at least 77% of the 1993-1997 utility capital expenditures are
expected to be provided by internally generated funds. In addition, NSP is
attempting to reduce its capital expenditures for the period 1993-1997 below the
above estimates. If successful, the percentage of utility capital expenditures
provided by internally generated funds for the five-year period 1993-1997 is
expected to increase. The foregoing estimates of utility capital expenditures
and internally generated funds may be subject to substantial changes due to
unforeseen factors, such as changed economic conditions, competitive conditions,
resource planning, new government regulations, changed tax laws and rate
regulation.
Dependent on the involvement in projects currently under consideration,
potential capital investments in NSP's non-utility projects are estimated to be
$160-190 million in 1993 and approximately $550-650 million for the five year
period 1993-1997.
3
NSP'S RATIO OF EARNINGS TO FIXED CHARGES
TWELVE MONTHS YEAR ENDED DECEMBER 31,
ENDED ----------------------------
SEPTEMBER 30, 1993 1992 1991 1990 1989 1988
------------------ ---- ---- ---- ---- ----
(UNAUDITED)
Ratio of Earnings to Fixed
Charges...................... 3.6 3.2 3.9 3.7 4.1 4.0
For purposes of computing the ratio of earnings to fixed charges, (i)
earnings consist of income from continuing operations plus fixed charges,
federal and state income taxes, deferred income taxes and investment tax
credits; and (ii) fixed charges consist of interest on long-term debt, other
interest charges, the interest component on leases and amortization of debt
discount, premium and expense.
The annual interest requirement on long-term debt of NSP outstanding at
September 30, 1993, was $126,894,400.
DESCRIPTION OF NEW BONDS
Each series of New Bonds is to be an initial issue of a new series of first
mortgage bonds (the "Bonds") issued under the Trust Indenture dated February 1,
1937 (the "1937 Indenture") as supplemented by 41 supplemental trust indentures
(collectively, the "Supplemental Indentures"), a Supplemental and Restated Trust
Indenture dated May 1, 1988 (the "Restated Indenture") and a new supplemental
trust indenture for such series of New Bonds (the "New Supplemental Indenture"),
all from the Company to Harris Trust and Savings Bank, as trustee (the
"Trustee"). The 1937 Indenture, as supplemented by the Supplemental Indentures,
the Restated Indenture and the New Supplemental Indenture herein are referred to
collectively as the "Indenture." Excluding the New Bonds, and giving effect to
the expected redemption of $220,000,000 aggregate principal amount of
outstanding Bonds in December 1993 and January 1994, there will be 17 series of
Bonds in an aggregate principal amount of $920,900,000 outstanding under the
Indenture. Copies of the 1937 Indenture, the Supplemental Indentures, the
Restated Indenture and the form of the New Supplemental Indenture are filed as
Exhibits 4.01A to 4.01RR to the Registration Statement and the statements herein
made (being for the most part succinct summaries of certain provisions of the
Indenture) are subject to the detailed provisions of the 1937 Indenture, the
Supplemental Indentures, the Restated Indenture and the New Supplemental
Indenture which are incorporated herein by reference.
The Restated Indenture amends and restates the 1937 Indenture and the
Supplemental Indentures. The Restated Indenture will not become effective and
operative until all Bonds of each series issued under the Indenture prior to May
1, 1988 shall have been retired through payment or redemption (including those
Bonds "deemed to be paid" within the meaning of that term as used in Article
XVII of the 1937 Indenture) or (except as described below) until the holders of
the requisite principal amount of such Bonds shall have consented to the
amendments contained in the Restated Indenture (herein, the "Effective Date").
Holders of the New Bonds and of each series of Bonds issued under the Indenture
after May 1, 1988 likewise will be bound by the amendments contained in the
Restated Indenture when they become effective and operative. If the consent of
the holders of Bonds of each series issued prior to May 1, 1988 is not obtained,
the Company presently expects the Restated Indenture to become effective no
earlier than December 1, 2006.
The following summary of the provisions of the Indenture includes, where
applicable, a discussion of the amendments contained in the Restated Indenture.
References are made to specific Article and Section numbers of the 1937
Indenture, the Supplemental Indentures, the Restated Indenture and the New
Supplemental Indenture. Unless the context indicates otherwise, words or phrases
defined in the 1937 Indenture, the Supplemental Indentures, the Restated
Indenture or the New Supplemental Indenture are capitalized and used with the
same meanings herein.
4
TERMS OF NEW BONDS
The New Bonds will be issued as fully registered bonds without coupons in
denominations of multiples of $1,000. New Bonds may be issued in temporary form
if, for any reason, the Company is unable to deliver New Bonds in definitive
form. Principal and interest are to be payable in Chicago, Illinois, at Harris
Trust and Savings Bank or in New York, New York at Harris Trust Company of New
York. New Bonds will be interchangeable in the manner provided in Article II of
the New Supplemental Indenture. The New Bonds may be issued in book-entry form
through the facilities of a depository. The description of any book-entry
arrangements will be contained in the Prospectus Supplement.
No charge will be made by the Company for any exchange or transfer of New
Bonds, other than for any taxes or other governmental charges.
Reference is made to the Prospectus Supplement that will accompany this
Prospectus for the following terms and other information with respect to the
Offered Bonds: (1) the designation and aggregate principal amount of such
Offered Bonds; (2) the date or dates on which such Offered Bonds will mature;
(3) the rate or rates per annum (or method of calculation) at which such Offered
Bonds will bear interest and the date from which such interest shall accrue; (4)
the dates on which such interest will be payable; (5) the record dates for
payments of interest; and (6) any optional or mandatory redemption terms or
other specific terms applicable to the Offered Bonds. The holders of the
outstanding Bonds do not, and the holders of the New Bonds will not, have the
right to tender such Bonds to the Company for repurchase upon the Company
becoming involved in a highly leveraged transaction.
SECURITY FOR NEW BONDS
In the opinion of counsel for the Company, the New Bonds when issued will be
secured equally and ratably, except as to sinking fund provisions, with all
other outstanding Bonds by a valid and direct first mortgage lien on all of the
real and fixed properties, leasehold rights, franchises and permits then owned
by the Company subject only (a) to Permitted Liens and (b) as to parts of the
Company's property, to certain easements, conditions, restrictions, leases and
similar encumbrances which do not affect the Company's use of such property in
the usual course of its business, to certain minor defects in titles which are
not material and to defects in titles to certain properties not essential to the
Company's business. The Indenture contains provisions for subjecting to the lien
thereof all property, rights and franchises (except as otherwise expressly
provided) acquired by the Company after the date of the 1937 Indenture. Such
provisions might not be effective as to property acquired, within 90 days prior
and subsequent to the filing of a case, with respect to the Company, under the
United States Bankruptcy Code. The opinion of counsel does not cover titles to
easements for water flowage purposes or rights-of-way for electric and gas
transmission and distribution facilities, steam mains and telephone lines.
However, the Company has the power of eminent domain in the states in which it
operates.
The Indenture provides that no prior liens, other than Permitted Liens, may
be created or permitted to exist upon the mortgaged and pledged property whether
now owned or hereafter acquired. (Section 4 of Article VIII of the 1937
Indenture.) Following the retirement of the Bonds of each series issued prior to
May 1, 1988, the Restated Indenture will amend the foregoing provisions to allow
Permitted Encumbrances on the mortgaged and pledged property. Permitted
Encumbrances include Permitted Liens and (a) rights of Persons who are parties
to agreements with the Company relating to property owned or used jointly (in
common) by the Company with such Persons, provided (i) that such rights do not
materially impair the use of such jointly owned or used property in the normal
operation of the Company's business and do not materially affect the security
afforded by the Indenture and (ii) that such rights are not inconsistent with
the remedies of the Trustee upon a Completed Default; (b) (i) leases existing at
the Effective Date of the Restated Indenture affecting property owned by the
Company on the Effective Date; (ii) leases which do not interfere in any
material respect with the use of the related property for the purpose for which
it is held by the Company and which will not have a material adverse impact on
the security afforded by the Indenture or (iii) other leases relating to not
more than 5% of the
5
sum of the Company's Depreciable Property and Land; and (c) any mortgage, lien,
charge or encumbrance prior or equal to the Lien of the Indenture, other than a
Prepaid Lien, existing at the date any property is acquired by the Company,
provided that at the date of acquisition of such property: (i) no Default has
occurred and is continuing; (ii) the principal amount of indebtedness
outstanding under and secured by such mortgage, lien, charge or encumbrance
shall not exceed 66 2/3% of the lesser of the Cost or Fair Value of the property
so acquired; and (iii) each such mortgage, lien, charge or encumbrance shall
apply only to the property and improvements originally subject thereto and that
the Company shall cause to be closed all mortgages or other liens existing at
the time of acquisition of any property thereafter acquired by the Company and
will permit no additional indebtedness to be issued thereunder or secured
thereby. (Section 1.03 of the Restated Indenture.)
Following the retirement of the Bonds of each series issued prior to May 1,
1988, the holders of 66 2/3% of the principal amount of Bonds Outstanding may
(a) consent to the creation or existence of a Prior Lien with respect to up to
50% of the sum of the Company's Depreciable Property and Land, after giving
effect to such Prior Lien or (b) terminate the Lien of the Indenture with
respect to up to 50% of the sum of the Company's Depreciable Property and Land.
(Section 18.02(e) of the Restated Indenture.)
The Indenture is not a lien on the properties of the Wisconsin Company, nor
is the stock of the Wisconsin Company owned by the Company pledged thereunder.
SINKING FUND PROVISIONS
The sinking fund redemption provision, if any, for each series of the New
Bonds will be set forth in the related Prospectus Supplement. As an annual
sinking fund, the Company covenants to pay to the Trustee annually, on October
1, an amount sufficient to redeem, for sinking fund purposes, 1% of the highest
amount, at any time outstanding, of each outstanding series of Bonds, other than
Bonds of the Series due October 1, 1997, Bonds of the Series due April 1, 2003,
Bonds of the Series due December 1, 2000, Bonds of the Series due December 1,
2005 and other than Pollution Control Series C, J, K, L and Resource Recovery
Series I. Sinking fund payments may be offset by (a) application of net
Permanent Additions of a Cost or Fair Value, whichever is less, equal to 150% of
the principal amount of Bonds which otherwise would be required to be retired by
the sinking fund or (b) retirement or delivery to the Trustee of Bonds of the
series for which the sinking fund is applicable. The Trustee is required to
apply sinking fund money to the purchase or redemption of Bonds of the series
for which such money is applicable. (Article III of each Supplemental Indenture
except those dated June 1, 1942, February 1, 1944, October 1, 1945, July 1,
1948, August 1, 1949, August 1, 1957, October 1, 1992, April 1, 1993, December
1, 1993, and those relating to each Pollution Control Series and to Resource
Recovery Series I.)
Certain of the Bonds of Resource Recovery Series I are subject to a
mandatory sinking fund applicable to each respective series. (Section 3.02 of
the Supplemental Indenture dated December 1, 1984.)
MAINTENANCE PROVISIONS
As a Maintenance Fund for the Bonds, the Company covenants to pay to the
Trustee annually on May 1 an amount equal to 15% of the Consolidated Gross
Operating Revenues of the Company for the preceding calendar year, after
deducting from such revenues: (a) cost of electricity and gas purchased for
resale, (b) rentals paid for utility property, less credits at the Company's
option for (i) maintenance, (ii) property retirements offset by Permanent
Additions, (iii) retirements of Bonds and (iv) Cost or Fair Value, whichever is
less, of Permanent Additions after deducting property retirements. Withdrawals
from the Maintenance Fund may be made on the basis of retirements of Bonds and
net Permanent Additions, but cash in excess of $100,000 remaining on deposit in
the Maintenance Fund for more than three years must be used for the purchase or
redemption of Bonds. Any such redemption would be at the applicable
6
regular redemption price of the Bonds to be redeemed and subject to any
restrictions on the redemption of such Bonds. (Article IX of the 1937 Indenture;
Article IV of the Supplemental Indenture dated June 1, 1952.)
The Restated Indenture will amend the foregoing provisions of the Indenture
by replacing the current Maintenance Fund deposit formula with the requirement
that the Company pay to the Trustee annually on May 1 an amount equal to 2.50%
of its Completed Depreciable Property as of the end of the preceding calendar
year, after deducting credits at the Company's option for (a) maintenance, (b)
property retirements offset by Permanent Additions, (c) retirements of Bonds and
(d) Amounts of Established Permanent Additions. (Section 9.01 of the Restated
Indenture.) The Restated Indenture further provides that to the extent that
Maintenance Fund credits exceed 2.50% of Completed Depreciable Property for any
year after 1987, such excess credits may be applied in future years (a) to
offset any Maintenance Fund deficiency or (b) to increase the Amount of
Established Permanent Additions available for use under the Indenture. (Section
9.05 of the Restated Indenture.) In addition, the Restated Indenture eliminates
the requirement that cash in excess of $100,000 remaining on deposit in the
Maintenance Fund for more than three years be used for the purchase or
redemption of Bonds.
The Company has covenanted to maintain its properties in adequate repair,
working order and condition. (Section 6 of Article VIII of the 1937 Indenture;
Section 8.06 of the Restated Indenture.)
ISSUANCE OF ADDITIONAL BONDS
The maximum principal amount of Bonds that may be issued under the Indenture
is not limited, except as described below. Additional Bonds may be issued on the
basis of (a) 60% of the Cost or Fair Value, whichever is less, of Permanent
Additions after deducting retirements (Article V of the 1937 Indenture; also
Sections 1 and 3 of Article III of the Supplemental Indenture dated February 1,
1944); (b) retired Bonds, which have not been otherwise used under the Indenture
(Article VI of the 1937 Indenture); and (c) deposit of an equal amount of cash
with the Trustee, which cash may be withdrawn on the same basis as additional
Bonds may be issued under clauses (a) and (b) above. (Article VII of the 1937
Indenture; Section 2 of Article III of the Supplemental Indenture dated February
1, 1944; and Article IV of the Supplemental Indenture dated June 1, 1952.) The
Restated Indenture will amend the foregoing provisions of the Indenture by
increasing the percentage in clause (a) above from 60% to 66 2/3%. (Section 5.03
of the Restated Indenture.)
The New Bonds will be issued under clause (a) and/or (b) above. At November
30, 1993, the amount of net Permanent Additions available for the issuance of
Bonds exceeded $3.7 billion, of which $1 billion could be used for the
authentication of $600 million principal amount of the New Bonds. As of December
15, 1993, $109 million of retired Bonds were available for the authentication of
up to $109 million of New Bonds.
No additional Bonds may be issued on the basis of clause (a), clause (b)
under specified conditions, or clause (c), unless the Earnings Applicable to
Bond Interest for a specified twelve-month period are equal to twice the annual
interest requirements on the Bonds, including those about to be issued. (Section
4 of Article V, Section 2 of Article VI, and Section 1 of Article VII of the
1937 Indenture.)
Permanent Additions include: the Company's electric and steam generating,
transmission and distribution properties; the Company's gas storage and
distribution properties; construction work-in-progress; and fractional and
undivided property interests of the Company. (Section 4 of Article I of the 1937
Indenture; Section 1.03 of the Restated Indenture.) Under the Restated
Indenture, Permanent Additions also will include property used for providing
telephone or other communication services and engineering, financial, economic,
environmental, geological and legal or other studies, surveys or reports
associated with the acquisition or construction of any Depreciable Property.
(Section 1.03 of the Restated Indenture.)
7
Earnings Applicable to Bond Interest for the twelve months ended September
30, 1993, would be 3.6 times the annual interest requirements on the Bonds
including the New Bonds at an assumed 8% interest rate. Additional Bonds may
vary from the Offered Bonds as to maturity, interest rate, redemption prices,
and sinking fund, and in certain other respects. (Article II of the 1937
Indenture and Article II of the Restated Indenture.) The Restated Indenture will
amend the Indenture by requiring that Earnings Applicable to Bond Interest for a
specified twelve-month period be equal to twice the annual interest requirements
on the Bonds, including those about to be issued, and any obligations secured by
Prior Liens and any indebtedness secured by Permitted Encumbrances. (Sections
1.03 and 5.04 of the Restated Indenture.) Under the Restated Indenture, the
calculation of Earnings Applicable to Bond Interest will include all non-utility
revenues of the Company. (Section 1.03 of the Restated Indenture.)
PROVISION LIMITING DIVIDENDS ON COMMON STOCK
The Company has covenanted that the sum of (i) all dividends and
distributions on the common stock of the Company after September 30, 1954 (other
than in common stock), and (ii) the cost of all shares of its common stock
acquired by it after that date shall not exceed the sum of (a) the earned
surplus of the Company and its Qualified Subsidiary Companies, consolidated, at
September 30, 1954, and (b) an amount equal to the consolidated net income of
the Company and its Qualified Subsidiary Companies, earned after September 30,
1954, after making provision for all dividends accruing after that date on
preferred stock of the Company and after taking into consideration all proper
charges and credits to earned surplus made after that date. In computing net
income for the purpose of this covenant, there will be deducted an amount, if
any, by which 15% of the Consolidated Gross Operating Revenues of such
companies, after certain deductions, exceeds the aggregate of the amounts
expended for maintenance and appropriated for reserves for renewals,
replacements, retirements, depreciation or depletion. (Article IV of the
Supplemental Indenture dated October 1, 1954.) As of 1957, the Company no longer
had any Qualified Subsidiary Companies. At November 30, 1993, no portion of the
retained earnings of the Company was restricted by the foregoing provision.
The Restated Indenture will replace the dividend restriction described above
with the requirement that (a) the sum of: (i) all dividends and distributions on
the Company's common stock after the Effective Date of the Restated Indenture
(other than in common stock) and (ii) the amount, if any, by which the
Considerations given by the Company for the purchase or other acquisition of its
common stock after the Effective Date exceeds the Considerations received by it
after the Effective Date from the sale of common stock, shall not exceed (b) the
sum of (i) the retained earnings of the Company at the Effective Date, and (ii)
an amount equal to the net income of the Company earned after the Effective
Date, after deducting all dividends accruing after the Effective Date on all
classes and series of preferred stock of the Company and after taking into
consideration all proper charges and credits to earned surplus made after the
Effective Date. In computing net income for the purpose of this amended
covenant, there will be deducted the amount, if any, by which, after the date
commencing 365 days prior to the Effective Date, the actual expenditures or
charges for ordinary repairs and maintenance and the charges for reserves,
renewals, replacements, retirements, depreciation and depletion are less than
2.50% of the Company's Completed Depreciable Property. (Section 8.07 of the
Restated Indenture.)
RELEASE PROVISIONS
The Indenture contains provisions permitting the release from its lien of
any property upon depositing or pledging cash or certain other property of
comparable Fair Value. The Indenture also contains provisions for the sale or
other disposal of securities not pledged under the Indenture, contracts,
accounts, motor cars, and certain equipment and supplies; for the cancellation,
change or alteration of leases, rights-of-way and easements; and for the
surrender and modification of any franchise or governmental consent subject to
certain restrictions; in each case without any release or consent by the Trustee
or accountability thereto for any consideration received by the Company.
(Article XI of the 1937 Indenture and Article XI of the Restated Indenture.)
8
Following the retirement of the Bonds of each series issued prior to May 1,
1988, (a) the Company may sell or otherwise dispose of, free of the Lien of the
Indenture, all motor vehicles, vessels and marine equipment, railroad cars,
engines and related equipment, airplanes, office furniture and leasehold
interests in property owned by third parties and (b) the Company may enter into
leases with respect to the property subject to the Lien of the Indenture which
do not interfere in any material respect with the use of such property for the
purpose for which it is held by the Company and will not have a material adverse
impact on the security afforded by the Indenture. (Section 11.02(b) of the
Restated Indenture.)
Following the retirement of the Bonds of each series issued prior to May 1,
1988, any of the mortgaged and pledged property may be released from the Lien of
the Indenture if, after such release, the Fair Value of the remaining mortgaged
and pledged property equals or exceeds a sum equal to 150% of the aggregate
principal amount of Bonds Outstanding. (Section 11.03(k) of the Restated
Indenture.)
MODIFICATION OF THE INDENTURE
With the consent of the Company, the provisions of the Indenture may be
changed by the affirmative vote of the holders of 80% in principal amount of the
Bonds Outstanding except that, among other things, the maturity of a Bond may
not be extended, the interest rate reduced, nor the terms of payment of
principal or interest changed without the consent of the holder of each Bond so
affected. (Article XVIII of the 1937 Indenture.)
The Supplemental Indenture dated May 1, 1985 amended the foregoing
provisions of the Indenture by reducing the 80% requirement to 66 2/3%. This
amendment will not become effective and operative until all Bonds of each series
issued prior to May 1, 1985 shall have been retired or until all the holders
thereof shall have consented to such amendment. Holders of the New Bonds and of
each subsequent series issued under the Indenture will likewise be bound by the
amendment when it becomes effective and operative. (Article VI of the
Supplemental Indenture dated May 1, 1985 and Section 18.02 of the Restated
Indenture.)
CONCERNING THE TRUSTEE
In case of a Completed Default either the Trustee or the holders of 25% in
principal amount of (i) the Bonds Outstanding or (ii) the Bonds affected by such
default, may declare the Bonds due and payable subject to the right of the
holders of a majority of the Bonds then Outstanding to rescind or annul such
action. Further, it is obligatory upon the Trustee to take the actions provided
in the Indenture to enforce payment of the Bonds and the Lien of the Indenture
upon being requested to do so by the holders of a majority in principal amount
of the Bonds. However, the holders of a majority in principal amount of the
Bonds may direct the taking of any such action or the refraining therefrom as is
not contrary to law or the Indenture. As a condition precedent to certain
actions, the Trustee may require adequate indemnity against the costs, expenses
and liabilities to be incurred therein or thereby. (Article XIII of the 1937
Indenture; Section 6 of Article VI of Supplemental Indenture dated February 1,
1944; Section 4.03 of Supplemental Indenture dated October 1, 1945 and Article
XIII of the Restated Indenture.)
DEFAULTS
The following is a summary of events defined in the Indenture as Completed
Defaults: (a) default in payment of principal of any Bond, (b) default continued
for 90 days in payment of interest on any Bond, (c) default in the covenant
contained in Section 11 of Article VIII of the Indenture (Section 8.11 of the
Restated Indenture) with respect to bankruptcy, insolvency, assignment or
receivership and (d) default continued for 90 days after notice in the
performance of any other covenant, agreement or condition. (Section 4.02 of the
Supplemental Indenture dated October 1, 1945 and Section 13.01 of the Restated
Indenture.)
The Trustee is required to give notice to bondholders (1) within 90 days
after the occurrence of a default known to the Trustee within such period, or
(2) if the Trustee is unaware of a default during such period, then, within 30
days after the Trustee knows of such default, unless such default shall have
been
9
cured before giving such notice; provided that, except in the case of a default
resulting from the failure to make any payment of principal of or interest on
any Bonds or to make any sinking fund payment, the Trustee may withhold such
notice upon determination in good faith by the board of directors, the executive
committee or a trust committee of directors or responsible officers of the
Trustee that the withholding of such notice is in the interest of the
bondholders. (Section 4 of Article V of the Supplemental Indenture dated
February 1, 1944 and Section 16.02 of the Restated Indenture.)
The Company is required to file with the Trustee such information, documents
and reports with respect to compliance by the Company with the conditions and
covenants of the Indenture as may be required by the rules and regulations of
the Commission including a certificate, furnished not less frequently than
annually, as to the Company's compliance with all of the conditions and
covenants under the Indenture. (Section 8 of Article III of the Supplemental
Indenture dated February 1, 1944 and Section 8.18 of the Restated Indenture.)
GENERAL
Whenever all indebtedness secured thereby shall have been paid, or adequate
provision therefor made, the Trustee shall cancel and discharge the Indenture.
(Article XVII of the 1937 Indenture and Article XVII of the Restated Indenture.)
After the Effective Date, the Company may deposit with the Trustee any
combination of cash or Government Obligations in order to provide for the
payment of any series or all of the Bonds Outstanding. The Indenture also
provides that the Company shall furnish, to the Trustee, Officers' Certificates,
certificates of an Engineer, Appraiser or other expert and, in certain cases,
Accountants' Certificates in connection with the authentication of Bonds, the
release or release and substitution of property and certain other matters, and
Opinions of Counsel as to the Lien of the Indenture and certain other matters.
(Article IV of the Supplemental Indenture dated February 1, 1944; Articles IV,
V, VI, VII, XI and XVII and Section 20.08 of the Restated Indenture.)
LEGAL OPINIONS
Legal opinions relating to the New Bonds will be rendered by Gary R.
Johnson, 414 Nicollet Mall, Minneapolis, Minnesota, counsel for the Company, and
by Gardner, Carton & Douglas, 321 North Clark Street, Chicago, Illinois, counsel
for any underwriters, dealers or agents named in a Prospectus Supplement. Gary
R. Johnson is Vice President, General Counsel and Secretary of the Company.
Matters pertaining to local laws will be passed upon by counsel for the Company
and as to these matters Gardner, Carton & Douglas will rely on their opinions.
The opinion contained in this Prospectus under "Description of New
Bonds--Security for New Bonds," is the opinion of Gary R. Johnson. Gardner,
Carton & Douglas has acted from time to time as special counsel for NSP in
connection with certain matters.
EXPERTS
The financial statements and the related financial statement schedules
incorporated in this Prospectus by reference from the Company's Annual Report on
Form 10-K have been audited by Deloitte & Touche, independent public
accountants, as stated in their report included in such Form 10-K which is
incorporated herein by reference, and have been so incorporated in reliance upon
such report given upon the authority of that firm as experts in accounting and
auditing.
PLAN OF DISTRIBUTION
The Company may sell the New Bonds (i) to or through underwriters or
dealers; (ii) directly to one or more purchasers; or (iii) through agents. The
Prospectus Supplement with respect to each series of Offered Bonds will set
forth the terms of the offering of such Offered Bonds, including the name or
names of any underwriters, the purchase price of such Offered Bonds and the
proceeds to the Company from such sale, any underwriting discounts and other
items constituting underwriters' compensation, any
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initial public offering price, any discounts or concessions allowed or reallowed
or paid to dealers and any securities exchanges on which such Offered Bonds may
be listed. Any initial offering price and any discounts, concessions or
commissions allowed or reallowed or paid to dealers may be changed from time to
time.
If underwriters are used in the sale, the Offered Bonds will be acquired by
the underwriters for their own account and may be resold from time to time in
one or more transactions, including negotiated transactions, at a fixed public
offering price or at varying prices determined at the time of sale. The Offered
Bonds may be offered to the public either through underwriting syndicates
represented by one or more managing underwriters or directly by one or more of
such firms. The specific managing underwriter or underwriters, if any, will be
set forth in the Prospectus Supplement relating to the Offered Bonds together
with the members of the underwriting syndicate, if any. Unless otherwise set
forth in the Prospectus Supplement, the obligations of the underwriters to
purchase the Offered Bonds offered thereby will be subject to certain conditions
precedent and the underwriters will be obligated to purchase all such Offered
Bonds if any are purchased.
Offered Bonds may be sold directly by the Company or through agents
designated by the Company from time to time. The Prospectus Supplement will set
forth the name of any agent involved in the offer or sale of the Offered Bonds
in respect of which the Prospectus Supplement is delivered and any commissions
payable by the Company to such agent.
Any underwriters, dealers or agents participating in the distribution of the
Offered Bonds may be deemed to be underwriters and any discounts or commissions
received by them on the sale or resale of the Offered Bonds may be deemed to be
underwriting discounts and commissions under the Securities Act of 1933. Agents
and underwriters may be entitled, under agreements entered into with the
Company, to indemnification by the Company against certain civil liabilities,
including liabilities under the Securities Act of 1933, or to contributions with
respect to payments which the agents or underwriters may be required to make in
respect thereof. Agents and underwriters may engage in transactions with or
perform services for the Company in the ordinary course of business.
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