614/223-1630
Securities and Exchange Commission
450 Fifth Street, N.W.
ATTN: Filing Desk, Stop 1-4
Washington, D.C. 20549-1004
December 2, 1998
Re: Ohio Power Company
Registration Statement on Form S-3
File No. 333-35585
Gentlemen:
Pursuant to Rule 424(b)(2) and on behalf of Ohio Power Company
(the "Company"), submitted herewith is the Prospectus, dated
September 17, 1997, as supplemented by the Prospectus Supplement,
dated September 24, 1997 and a Pricing Supplement No. 2 dated
December 1, 1998, to be used in connection with the anticipated
public offering by the Company of its 6.24% Unsecured Medium Term
Notes, Series A, due December 4, 2008, in the aggregate principal
amount of up to $50,000,000.
Very truly yours,
/s/ David C. House
David C. House
DCH/mms
Rule 424(b)(2)
File No. 333-35585
CUSIP No.: 67741 P AB3
Pricing Supplement No. 2 Dated December 1, 1998
(To Prospectus dated September 17, 1997 and
Prospectus Supplement dated September 24, 1997)
$150,000,000
OHIO POWER COMPANY
Unsecured Medium Term Notes, Series A,
Due From Nine Months to Forty-Two Years from Date of Issue
Fixed Rate Notes
Principal Amount: $50,000,000
Public Offering Price: 100%
Agent's Discount or Commission: .625%
Original Issue Date: 12-04-1998
Stated Maturity: 12-04-2008
Interest Rate: 6.24% per annum
Form: Book-Entry
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.
Redemption Provisions:
Redeemable: Yes X No ____
In Whole: Yes X No ____
In Part: Yes X No ____
We may redeem the notes at our option at any time, upon no
more than 60 and not less than 30 days' notice by mail. We may
redeem the notes either as a whole or in part at a redemption
price equal to the greater of (i) 100% of the principal amount of
the notes being redeemed and (ii) the sum of the present values
of the remaining scheduled payments of principal and interest
thereon discounted to the redemption date on a semi-annual basis
(assuming a 360-day year consisting of twelve 30-day months) at
the Treasury Rate (as defined below) plus 15 basis points, plus,
in each case, accrued interest thereon to the date of redemption.
"Treasury Rate" means, with respect to any redemption date,
the rate per annum equal to the semi-annual equivalent yield to
maturity of the Comparable Treasury Issue, assuming a price for
the Comparable Treasury Issue (expressed as a percentage of its
principal amount) equal to the Comparable Treasury Price for such
redemption date.
"Comparable Treasury Issue" means the United States Treasury
security selected by an Independent Investment Banker as having a
maturity comparable to the remaining term of the notes that would
be utilized, at the time of selection and in accordance with
customary financial practice, in pricing new issues of corporate
debt securities of comparable maturity to the remaining term of
the notes.
"Comparable Treasury Price" means, with respect to any
redemption date, (i) the average of the bid and asked prices for
the Comparable Treasury Issue (expressed in each case as a
percentage of its principal amount) on the third Business Day
preceding such redemption date, as set forth in the daily
statistical release (or any successor release) published by the
Federal Reserve Bank of New York and designated "Composite 3:30
p.m. Quotations for U.S. Government Securities" or (ii) if such
release (or any successor release) is not published or does not
contain such prices on such third Business Day, the Reference
Treasury Dealer Quotation for such redemption date.
"Independent Investment Banker" means one of the Reference
Treasury Dealers appointed by the Company and reasonably
acceptable to the Trustee.
"Reference Treasury Dealer" means a primary U.S. Government
Securities Dealer in New York City selected by the Company and
reasonably acceptable to the Trustee.
"Reference Treasury Dealer Quotation" means, with respect to
the Reference Treasury Dealer and any redemption date, the
average, as determined by the Trustee, of the bid and asked
prices for the Comparable Treasury Issue (expressed in each case
as a percentage of its principal amount) quoted in writing to the
Trustee by such Reference Treasury Dealer at or before 5:00 p.m.,
New York City time, on the third Business Day preceding such
redemption date.
The Company sold $50,000,000 principal amount of the notes
to Morgan Stanley & Co. Incorporated as principal in this
transaction, for resale to one or more investors at the public
offering price stated above, or in certain circumstances, at
varying prices related to prevailing market conditions at the
time of resale as determined by Morgan Stanley & Co.
Incorporated.
Prospectus Supplement
(To Prospectus Dated September 17, 1997)
$150,000,000
OHIO POWER COMPANY
Unsecured Medium Term Notes, Series A, Due From Nine Months to
Forty-Two Years from Date of Issue
Ohio Power Company (the "Company") may from time to time offer
its Unsecured Medium Term Notes, Series A (the "Notes"), in the
aggregate principal amount of up to $150,000,000. Each Note will
mature from nine months to forty-two years from its date of
issue.
Each Note will bear interest at a fixed rate. Unless otherwise
indicated in a pricing supplement to this Prospectus Supplement
(a "Pricing Supplement"), interest on each Note will be payable
semiannually in arrears on each May 1 and November 1 (each an
"Interest Payment Date") and at redemption, if any, or stated
maturity.
The interest rate, if any, Public Offering Price, Stated
Maturity, redemption provisions, if any, and certain other terms
with respect to each Note will be established at the time of
issuance and set forth in a Pricing Supplement.
Each Tranche of Notes will be represented by one or more global
Notes (each a "Global Note") registered in the name of a nominee
of The Depository Trust Company, as Depository, or another
depository (such a Note, so represented, being called a "Book-
Entry Note"). Beneficial interests in Global Notes representing
Book-Entry Notes will be shown on, and transfers thereof will be
effected only through, records maintained by the Depository's
participants. Book-Entry Notes will not be issuable as
certificated notes except under circumstances described herein.
See "Supplemental Description of the Notes -- Book-Entry Notes".
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.
Price to Agents' Proceeds to
Public(1) Commission(2) Company(2)(3)
Per Note . . 100.000% .125%-.750% 99.875%-99.250%
Total . . . . $150,000,000 $187,500- $149,812,500-
$1,125,000 $148,875,000
(1) Unless otherwise specified in the applicable Pricing
Supplement, the price to the public will be 100% of the
principal amount.
(2) The Company will pay to Morgan Stanley & Co. Incorporated
and Salomon Brothers Inc, each as agent (together, the
"Agents"), a commission of from .125% to .750% of the
principal amount of any Note, depending upon its Stated
Maturity, sold through such Agent. The Company may also
sell Notes to any Agent, as principal, at a discount for
resale to one or more investors or to another broker-dealer
(acting as principal for purposes of resale) at varying
prices related to prevailing market prices at the time of
resale, as determined by such Agent. Unless otherwise
indicated in the applicable Pricing Supplement, any Note
sold to an Agent as principal shall be purchased by such
Agent at a price equal to 100% of the principal amount
thereof less the percentage equal to the commission
applicable to an agency sale of a Note of identical maturity
and may be resold by such Agent. The Notes may also be sold
by the Company directly to investors, in which case no
commission will be payable to the Agents. The Company has
agreed to indemnify the Agents for certain liabilities,
including certain liabilities under the Securities Act of
1933, as amended. See "Plan of Distribution" herein.
(3) Before deduction of expenses payable by the Company
estimated at $250,705, including reimbursement of certain
expenses of the Agents.
The Notes are being offered on a continuous basis by the Company
through the Agents which have agreed to use their reasonable best
efforts to solicit offers to purchase Notes. The Company may
sell Notes at a discount to any Agent, as principal, for resale
to one or more investors or other purchasers at varying prices
relating to prevailing market prices at the time of resale, as
determined by such Agent. The Company also may sell Notes
directly to investors on its own behalf. The Notes will not be
listed on any securities exchange, and there is no assurance that
the maximum amount of Notes offered by this Prospectus Supplement
will be sold or that there will be a secondary market for the
Notes. The Company reserves the right to withdraw, cancel or
modify the offer made hereby without notice. The Company or an
Agent may reject an order, whether or not solicited, in whole or
in part. See "Plan of Distribution" herein.
Morgan Stanley & Co. Incorporated Salomon Brothers Inc
The date of this Prospectus Supplement is September 24, 1997.
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN
TRANSACTIONS THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE
PRICE OF THE NOTES, INCLUDING OVERALLOTMENT, STABILIZING
TRANSACTIONS AND SYNDICATE SHORT COVERING TRANSACTIONS. FOR A
DESCRIPTION OF THESE ACTIVITIES, SEE "PLAN OF DISTRIBUTION".
SUPPLEMENTAL DESCRIPTION OF THE NOTES
The following description of the particular terms of the Notes
supplements, and to the extent inconsistent therewith replaces,
the description of the general terms and provisions of the Notes
set forth under "Description of New Notes" in the accompanying
Prospectus, to which description reference is hereby made.
Certain capitalized terms used herein are defined under
"Description of the New Notes" in the accompanying Prospectus.
The following description of the Notes will apply, unless
otherwise specified in a Pricing Supplement.
General
The Notes will be issued as a series of Debt Securities under the
Indenture. The Notes will be limited in aggregate principal
amount to $150,000,000.
The Notes will be issued in fully registered form only, without
coupons. Each Tranche of Notes will be issued initially as one
or more Book-Entry Notes. Except as set forth herein under
"Book-Entry Notes" or in any Pricing Supplement relating to
specific Notes, the Notes will not be issuable as certificated
notes. The authorized denominations of Global Notes will be
$1,000 and any integral multiple thereof.
Each Note will mature from 9 months to 42 years from its date of
issue, as selected by the purchaser and agreed to by the Company.
Each Note may also be subject to redemption at the option of the
Company prior to its Stated Maturity.
The Pricing Supplement relating to a Note will describe the
following terms: (1) the price (expressed as a percentage of the
aggregate principal amount thereof) at which such Note will be
offered (the "Public Offering Price"); (2) the date on which such
Note will be issued (the "Original Issue Date"); (3) the date on
which such Note shall mature (the "Stated Maturity"); (4) the
Interest Payment Dates for such Note; (5) the interest rate for
such Note; (6) the terms, if any, regarding the optional or
mandatory redemption of such Note, including the redemption date
or dates of such Note, if any, and the price or prices applicable
to such redemption (including any premium); (7) any applicable
discounts or commissions; and (8) any other terms of such Note
not inconsistent with the provisions of the Indenture.
"Business Day" with respect to any Note means any day that (a) in
the Place of Payment (as defined in the Indenture) (or in any of
the Places of Payment, if more than one) in which amounts are
payable as specified in the form of such Note and (b) in the city
in which the Trustee administers its corporate trust business, is
not a day on which banking institutions are authorized or
required by law or regulation to close.
Payment of Principal and Interest
Payments of interest on the Notes (other than interest payable at
redemption, if any, or Stated Maturity) will be made, except as
provided below, in immediately available funds to the owners of
such Notes (which, in the case of Global Notes representing Book-
Entry Notes, will be a nominee of the Depository, as hereinafter
defined) as of the Regular Record Date (as defined below) for
each Interest Payment Date; provided, however, that if the
Original Issue Date of a Note issued as a Global Note is after a
Regular Record Date and before the corresponding Interest Payment
Date, interest for the period from and including the Original
Issue Date for such Note to but excluding such Interest Payment
Date will be paid on the next succeeding Interest Payment Date to
the owner of such Note on the related Regular Record Date.
Unless otherwise specified in the applicable Pricing Supplement,
the principal of the Notes and any premium and interest thereon
payable at redemption, if any, or Stated Maturity will be paid in
immediately available funds upon surrender thereof at the office
of Bankers Trust Company at Four Albany Street in New York, New
York. Should any Note be issued other than as a Global Note,
interest (other than interest payable at redemption or Stated
Maturity) may, at the option of the Company, be paid to the
person entitled thereto by check mailed to any such person. See
"Book-Entry Notes" herein.
If, with respect to any Note, any Interest Payment Date,
redemption date or the Stated Maturity is not a Business Day,
payment of amounts due on such Note on such date may be made on
the next succeeding Business Day, and, if such payment is made or
duly provided for on such Business Day, no interest shall accrue
on such amounts for the period from and after such Interest
Payment Date, redemption date or Stated Maturity, as the case may
be, to such Business Day.
The "Regular Record Date" with respect to a Note (unless
otherwise specified in the applicable Pricing Supplement) will be
April 15 or October 15, as the case may be, next preceding an
Interest Payment Date for Notes or if such April 15 or October 15
is not a Business Day, the next preceding Business Day.
Each Note issued as a Global Note will bear interest from its
Original Issue Date at the fixed interest rate per annum stated
on the face thereof until the principal amount thereof is paid or
made available for payment. Unless otherwise set forth in the
applicable Pricing Supplement, interest on each Note will be
payable semiannually in arrears on each May 1 and November 1
(each such date, an "Interest Payment Date") and at redemption,
if any, or Stated Maturity. Each payment of interest in respect
of an Interest Payment Date shall include interest accrued
through the day before such Interest Payment Date. Interest on
Notes will be computed on the basis of a 360-day year of twelve
30-day months.
Redemption
Unless otherwise set forth in a Pricing Supplement, the Notes
will be subject to redemption by the Company on and after the
initial redemption date, if any, fixed at the time of sale and
set forth in the applicable Pricing Supplement (the "Initial
Redemption Date"). If no Initial Redemption Date is indicated
with respect to a Note, such Note will not be redeemable prior to
Stated Maturity. On and after the Initial Redemption Date with
respect to any Note subject to redemption, such Note will be
redeemable in whole or in part in increments of $1,000 at the
option of the Company at a redemption price (the "Redemption
Price") determined in accordance with the following paragraph,
together with interest thereon payable to the date of redemption,
on notice given no more than 60 nor less than 30 days prior to
the date of redemption.
Unless otherwise set forth in a Pricing Supplement, the Initial
Redemption Price for each Note subject to redemption shall
initially be equal to a certain percentage of the principal
amount of such Note to be redeemed and shall decline at each
anniversary of the Initial Redemption Date with respect to such
Note by a percentage (the "Reduction Percentage") of the
principal amount to be redeemed until the Redemption Price is
100% of such principal amount. The Initial Redemption Price and
any Reduction Percentage with respect to each Note subject to
redemption prior to maturity will be fixed at the time of sale
and set forth in the applicable Pricing Supplement.
Book-Entry Notes
Except under the circumstances described below, the Notes will be
issued in whole or in part in the form of one or more Global
Notes that will be deposited with, or on behalf of, The
Depository Trust Company, New York, New York ("DTC"), or such
other depository as may be subsequently designated (the
"Depository"), and registered in the name of a nominee of the
Depository.
Book-Entry Notes represented by a Global Note will not be
exchangeable for certificated notes and, except under the
circumstances described below, will not otherwise be issuable as
certificated notes.
So long as the Depository, or its nominee, is the registered
owner of a Global Note, such Depository or such nominee, as the
case may be, will be considered the sole owner of the individual
Book-Entry Notes represented by such Global Note for all purposes
under the Indenture. Payments of principal of and premium, if
any, and any interest on individual Book-Entry Notes represented
by a Global Note will be made to the Depository or its nominee,
as the case may be, as the owner of such Global Note. Except as
set forth below, owners of beneficial interests in a Global Note
will not be entitled to have any of the individual Book-Entry
Notes represented by such Global Note registered in their names,
will not receive or be entitled to receive physical delivery of
any such Book-Entry Note and will not be considered the owners
thereof under the Indenture, including, without limitation, for
purposes of consenting to any amendment thereof or supplement
thereto.
If the Depository is at any time unwilling or unable to continue
as depository and a successor depository is not appointed, the
Company will issue individual certificated notes in exchange for
the Global Note representing the corresponding Book-Entry Notes.
In addition, the Company may at any time and in its sole
discretion determine not to have any Notes represented by the
Global note and, in such event, will issue individual certificat-
ed notes in exchange for the Global Note representing the
corresponding Book-Entry Notes. In any such instance, an owner
of a Book-Entry Note represented by a Global Note will be
entitled to physical delivery of individual certificated notes
equal in principal amount to such Book-Entry Note and to have
such certificated notes registered in his or her name.
Individual certificated notes so issued will be issued as
registered Notes in denominations, unless otherwise specified by
the Company, of $1,000 and integral multiples thereof.
DTC has confirmed to the Company and the Agents the following
information:
1. DTC will act as securities depository for the Global
Notes. The Notes will be issued as fully-registered securities
registered in the name of Cede & Co. (DTC's partnership nominee).
One fully-registered Global Note will be issued for each Tranche
of Notes, in the aggregate principal amount of such Tranche, and
will be deposited with DTC.
2. 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 1934
Act. 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 Partici-
pants 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 Securities and Exchange
Commission.
3. Purchases of Notes under the DTC system must be made by
or through Direct Participants, which will receive a credit for
the Notes on DTC's records. The ownership interest of each
actual purchaser of each Note ("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
Notes are to be accomplished by entries made on the books of
Participants acting on behalf of Beneficial Owners. Beneficial
Owners will not receive certificates representing their ownership
interests in Notes, except in the event that use of the book-
entry system for the Notes is discontinued.
4. To facilitate subsequent transfers, all Notes deposited
by Participants with DTC are registered in the name of DTC's
partnership nominee, Cede & Co. The deposit of Notes with DTC
and their registration in the name of Cede & Co. effect no change
in beneficial ownership. DTC has no knowledge of the actual
Beneficial Owners of the Notes; DTC's records reflect only the
identity of the Direct Participants to whose accounts such Notes
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.
5. Conveyance of notices and other communications by DTC to
Direct Participants, by Direct Participants to Indirect
Participants, and by Direct Participants and Indirect Partici-
pants 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.
6. Redemption notices shall be sent to Cede & Co. If less
than all of the Notes are being redeemed, DTC's practice is to
determine by lot the amount of the interest of each Direct
Participant in such issue to be redeemed.
7. Neither DTC nor Cede & Co. will consent or vote with
respect to the Notes. Under its usual procedures, DTC mails an
Omnibus Proxy to the Company as soon as possible after the record
date. The Omnibus Proxy assigns Cede & Co.'s consenting or
voting rights to those Direct Participants to whose accounts the
Notes are credited on the record date (identified in a listing
attached to the Omnibus Proxy).
8. Principal and interest payments on the Notes will be made
to DTC. DTC's practice is to credit Direct Participants'
accounts on the date on which interest is payable in accordance
with their respective holdings shown on DTC's records unless DTC
has reason to believe that it will not receive payment on such
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 Underwrit-
ers 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 responsi-
bility of Direct and Indirect Participants.
9. DTC may discontinue providing its services as securities
depository with respect to the Notes at any time by giving
reasonable notice to the Company and the Trustee. Under such
circumstances, in the event that a successor securities
depository is not obtained, certificated notes are required to be
printed and delivered.
10. The Company may decide to discontinue use of the system
of book-entry transfers through DTC (or a successor securities
depository). In that event, certificated notes will be printed
and delivered.
The information in this section concerning DTC and DTC's book-
entry system has been obtained from sources that the Company
believes to be reliable, but the Company takes no responsibility
for the accuracy thereof.
None of the Company, the Trustee or any agent for payment on or
registration of transfer or exchange of any Global Note will have
any responsibility or liability for any aspect of the records
relating to or payments made on account of beneficial interests
in such Global Note or for maintaining, supervising or reviewing
any records relating to such beneficial interests.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following summary describes certain material United States
federal income tax consequences of the ownership of Notes as of
the date hereof. Except where noted, it deals only with Notes
held by initial purchasers who have purchased Notes at the
initial offering price thereof and who hold such Notes as capital
assets and does not deal with special situations, such as those
of dealers in securities or currencies, financial institutions,
tax exempt entities, life insurance companies, persons holding
Notes as a part of a hedging or conversion transaction or a
straddle, United States Holders (as defined below) whose
"functional currency" is not the U.S. dollar, or Non-United
States Holders (as defined below) owning (actually or construc-
tively) ten percent or more of the combined voting power of all
classes of voting stock of the Company. Persons considering the
purchase, ownership or disposition of Notes should consult their
own tax advisors concerning the federal income tax consequences
in light of their particular situations as well as any conse-
quences arising under the laws of any other taxing jurisdiction.
Furthermore, the discussion below is based upon the provisions of
the Internal Revenue Code of 1986, as amended (the "Code") and
regulations, rulings and judicial decisions thereunder as of the
date hereof, and such authorities may be repealed, revoked or
modified so as to result in federal income tax consequences
different from those discussed below. Any special United States
federal income tax considerations relevant to a particular
Tranche of the Notes will be provided in the applicable Pricing
Supplement.
United States Holders
As used herein, a "United States Holder" of a Note means a holder
that is (i) a citizen or resident of the United States; (ii) a
corporation or partnership created or organized in or under the
laws of the United States or any political subdivision thereof;
(iii) an estate the income of which is subject to United States
federal income taxation regardless of its source; or (iv) any
trust if a court within the United States is able to exercise
primary supervision over the administration of the trust and one
or more U.S. persons have the authority to control all substan-
tial decisions of the trust. A "Non-United States Holder" is a
holder that is not a United States Holder.
Payments of Interest. Except as set forth below, interest on a
Note will generally be taxable to a United States Holder as
ordinary income from domestic sources at the time it is paid or
accrued in accordance with the United States Holder's method of
accounting for tax purposes.
Original Issue Discount. A United States Holder of a Note issued
with original issue discount ("OID") will be subject to special
tax accounting rules, as described in greater detail below.
United States Holders of such Notes should be aware that they
generally must include OID in gross income in advance of the
receipt of cash attributable to that income. Notes issued with
OID will be referred to as "Original Issue Discount Notes".
Notice will be given in the applicable Pricing Supplement when
the Company determines that a particular Note will be an Original
Issue Discount Note.
This summary is based upon final Treasury regulations
addressing debt instruments issued with OID (the "OID Regula-
tions"). A Note with an "issue price" that is less than its
stated redemption price at maturity (the sum of all payments to
be made on the Note other than "qualified stated interest") will
be issued with OID if such difference is at least 0.25 percent of
the stated redemption price at maturity multiplied by the number
of complete years to maturity. The "issue price" of each Note in
a particular offering will be the first price at which a
substantial amount of that particular offering is sold (other
than to an underwriter, placement agent or wholesaler). The term
"qualified stated interest" means stated interest that is
unconditionally payable in cash or in property (other than debt
instruments of the issuer) at least annually at a single fixed
rate or, subject to certain conditions, based on one or more
interest indices. Interest is payable at a single fixed rate
only if the rate appropriately takes into account the length of
the interval between payments. Notice will be given in the
applicable Pricing Supplement when the Company determines that a
particular Note will bear interest that is not qualified stated
interest.
In the case of a Note issued with de minimis OID (i.e.,
discount that is not OID because it is less than 0.25 percent of
the stated redemption price at maturity multiplied by the number
of complete years to maturity), the United States Holder
generally must include such de minimis OID in income as principal
payments on the Notes are made in proportion to the stated
principal amount of the Note. Any amount of de minimis OID that
has been included in income shall be treated as capital gain.
Certain of the Notes may be redeemed prior to their Stated
Maturity at the option of the Company. Original Issue Discount
Notes containing such feature may be subject to rules that differ
from the general rules discussed herein. Persons considering the
purchase of Original Issue Discount Notes with such feature
should carefully examine the applicable Pricing Supplement and
should consult their own tax advisors with respect to such
feature since the tax consequences with respect to OID will
depend, in part, on the particular terms and features of the
Notes.
United States Holders of Original Issue Discount Notes with
a maturity upon issuance of more than one year must, in general,
include OID in income in advance of the receipt of some or all of
the related cash payments. The amount of OID includible in
income by the initial United States Holder of an Original Issue
Discount Note is the sum of the "daily portions" of OID with
respect to the Note for each day during the taxable year or
portion of the taxable year in which such United States Holder
held such Note ("accrued OID"). The daily portion is determined
by allocating to each day in any "accrual period" a pro rata
portion of the OID allocable to that accrual period. The
"accrual period" for an Original Issue Discount Note may be of
any length and may vary in length over the term of the Note,
provided that each accrual period is no longer than one year and
each scheduled payment of principal or interest occurs on the
first day or the final day of an accrual period. The amount of
OID allocable to any accrual period is an amount equal to the
excess, if any, of (a) the product of the Note's adjusted issue
price at the beginning of such accrual period and its yield to
maturity (determined on the basis of compounding at the close of
each accrual period and properly adjusted for the length of the
accrual period) over (b) the sum of any qualified stated interest
allocable to the accrual period. OID allocable to a final
accrual period is the difference between the amount payable at
maturity (other than a payment of qualified stated interest) and
the adjusted issue price at the beginning of the final accrual
period. Special rules will apply for calculating OID for an
initial short accrual period. The "adjusted issue price" of a
Note at the beginning of any accrual period is equal to its issue
price increased by the accrued OID for each prior accrual period
(determined without regard to the amortization of any acquisition
or bond premium, as described below) and reduced by any payments
made on such Note (other than qualified stated interest) on or
before the first day of the accrual period. Under these rules, a
United States Holder will have to include in income increasingly
greater amounts of OID in successive accrual periods (assuming
that no payment other than of qualified stated interest is made
prior to maturity). The Company is required to provide
information returns stating the amount of OID accrued on Notes
held of record by persons other than corporations and other
exempt holders.
United States Holders may elect to treat all interest on any
Note as OID and calculate the amount includible in gross income
under the constant yield method described above. For the
purposes of this election, interest includes stated interest, OID
and de minimis OID. The election is to be made for the taxable
year in which the United States Holder acquired the Note, and may
not be revoked without the consent of the Internal Revenue
Service (the "IRS"). United States Holders should consult with
their own tax advisors about this election.
Short-term Notes. In the case of Notes having a term of one year
or less ("Short-Term Notes"), under the OID Regulations all
payments (including all stated interest) will be included in the
stated redemption price at maturity and, thus, United States
Holders will generally be taxable on the discount in lieu of
stated interest. The discount will be equal to the excess of the
stated redemption price at maturity over the issue price of a
Short-Term Note, unless the United States Holder elects to
compute this discount using tax basis instead of issue price. In
general, individuals and certain other cash method United States
Holders of a Short-Term Note are not required to include accrued
discount in their income currently unless they elect to do so
(but may be required to include any stated interest in income as
the interest is received). United States Holders that report
income for United States federal income tax purposes on the
accrual method and certain other United States Holders are
required to accrue discount on such Short-Term Notes (as ordinary
income) on a straight-line basis, unless an election is made to
accrue the discount according to a constant yield method based on
daily compounding. In the case of a United States Holder that is
not required, and does not elect, to include discount in income
currently, any gain realized on the sale, exchange or retirement
of the Short-Term Note will generally be ordinary income to the
extent of the discount accrued through the date of sale, exchange
or retirement. In addition, a United States Holder that does not
elect to currently include accrued discount in income may be
required to defer deductions for a portion of the United States
Holder's interest expense with respect to any indebtedness
incurred or continued to purchase or carry such Notes.
Sale, Exchange and Retirement of Notes. Upon the sale, exchange
or retirement of a Note, a United States Holder will recognize
gain or loss equal to the difference between the amount realized
upon the sale, exchange or retirement (excluding any amount
attributable to accrued but unpaid "qualified stated interest")
and the adjusted tax basis of the Note. A United States Holder's
tax basis in a Note will, in general, be the United States
Holder's cost therefor, increased by any OID included in income
by the United States Holder and reduced by any cash payments on
the Note other than "qualified stated interest" payments. Except
as described above with respect to certain Short-Term Notes and
except to the extent of any accrued but unpaid qualified stated
interest, such gain or loss will be capital gain or loss. Under
recently enacted legislation, capital gains of individuals
derived in respect of capital assets held for more than one year
are eligible for reduced rates of taxation which may vary
depending upon the holding period of such capital assets.
Prospective investors should consult their own tax advisors with
respect to the tax consequences of the new legislation. The
deductibility of capital losses is subject to limitations.
Non-United States Holders
Non-United States Holders will not be subject to United States
federal income taxes, including withholding taxes, on the
interest income (including any OID) on, or gain from the sale or
disposition of, any Note provided that (1) the interest income or
gain is not effectively connected with the conduct by the
Non-United States Holder of a trade or business within the United
States, (2) the Non-United States Holder is not a controlled
foreign corporation related to the Company through stock
ownership, (3) the Non-United States Holder is not a bank whose
receipt of interest on a Note is described in Code Section
881(c)(3)(A), (4) with respect to any gain, the Non-United States
Holder, if an individual, is not present in the United States for
183 days or more during the taxable year and (5) the Non-United
States Holder provides the correct certification of his status
(which may generally be satisfied by providing an IRS Form W-8
certifying that the beneficial owner is not a United States
Holder and providing the name and address of the beneficial
owner).
An individual holder of a Note who is a Non-United States Holder
at the time of the holder's death will not be subject to United
States federal estate tax as a result of the holder's death, as
long as any interest received on the Note, if received by the
holder at the time of the holder's death, would not be effective-
ly connected with the conduct of a trade or business by such
individual in the United States.
Backup Withholding
In general, if a holder other than a corporate holder fails to
furnish a correct taxpayer identification number or certification
of foreign or other exempt status, fails to report dividend and
interest income in full, or fails to certify that such holder has
provided a correct taxpayer identification number and that the
holder is not subject to backup withholding, a 31 percent federal
backup withholding tax may be withheld from amounts paid to such
holder. An individual's taxpayer identification number is such
individual's social security number. The backup withholding tax
is not an additional tax and may be credited against a holder's
regular federal income tax liability or refunded by the IRS where
applicable.
PLAN OF DISTRIBUTION
The Notes are being offered on a continuous basis by the Company
through the Agents, which have agreed to use their reasonable
best efforts to solicit offers to purchase Notes. Initial
purchasers may propose certain terms of the Notes, but the
Company will have the right to accept offers to purchase Notes
and may reject proposed purchases in whole or in part. The
Agents will have the right, in their discretion reasonably
exercised and without notice to the Company, to reject any
proposed purchase of Notes in whole or in part. The Company will
pay each Agent a commission of from .125% to .750% of the
principal amount of Notes sold through it, depending upon Stated
Maturity. The Company also may sell Notes to any Agent, acting
as principal, at a discount to be agreed upon at the time of
sale, for resale to one or more investors or to another broker-
dealer (acting as principal for purposes of resale) at varying
prices related to prevailing market prices at the time of such
resale, as determined by such Agent. An Agent may resell a Note
purchased by it as principal to another broker-dealer at a
discount, provided such discount does not exceed the commission
or discount received by such Agent from the Company in connection
with the original sale of such Note. The Company may also sell
Notes directly to investors on its own behalf at a price to be
agreed upon at the time of sale or through negotiated underwrit-
ten transactions with one or more underwriters. In the case of
sales made directly by the Company, no commission or discount
will be paid or allowed.
No Note will have an established trading market when issued. The
Notes will not be listed on any securities exchange. The Agents
may make a market in the Notes, but the Agents are not obligated
to do so and may discontinue any market-making at any time
without notice. There can be no assurance of a secondary market
for any Notes, or that the Notes will be sold.
The Agents, whether acting as agent or principal, may be deemed
to be "underwriters" within the meaning of the Securities Act of
1933, as amended (the "Securities Act"). The Company has agreed
to indemnify the Agents against certain liabilities, including
certain liabilities under the Securities Act.
Morgan Stanley & Co. Incorporated and Salomon Brothers Inc and
certain affiliates thereof engage in transactions with and
perform services for the Company and its affiliates in the
ordinary course of business.
In connection with the offering of the Notes, the Agents may
engage in overallotment, stabilizing transactions and syndicate
covering transactions in accordance with Regulation M under the
1934 Act. Overallotment involves sales in excess of the offering
size, which creates a short position for the Agents. Stabilizing
transactions involve bids to purchase the Notes in the open
market for the purpose of pegging, fixing or maintaining the
price of the Notes. Syndicate covering transactions involve
purchases of the Notes in the open market after the distribution
has been completed in order to cover short positions. Such
stabilizing transactions and syndicate covering transactions may
cause the price of the Notes to be higher than it would otherwise
be in the absence of such transactions. Such activities, if
commenced, may be discontinued at any time.
PROSPECTUS
OHIO POWER COMPANY
$150,000,000
Debt Securities
Ohio Power Company (the "Company") intends to offer, from
time to time, up to $150,000,000 aggregate principal amount of
its unsecured debt securities, consisting of debentures, notes or
other unsecured evidences of indebtedness (collectively, the "New
Notes"). The New Notes will be offered in one or more series in
amounts, at prices and on terms to be determined at the time or
times of sale. The title, aggregate principal amount, denomina-
tion, interest rate or rates (or manner of calculation thereof),
maturity or maturities, initial public offering price, if any,
redemption provisions, if any, any listing on a national
securities exchange and other specific terms of each series of
New Notes in respect of which this Prospectus is being delivered
will be set forth in an accompanying prospectus supplement and/or
pricing supplement thereto ("Prospectus Supplement").
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 Company may sell the New Notes through underwriters,
dealers or agents, or directly to one or more institutional
purchasers. A Prospectus Supplement will set forth the names of
underwriters or agents, if any, any applicable commissions or
discounts and the net proceeds to the Company from any such sale.
See "Plan of Distribution" herein.
The date of this Prospectus is September 17, 1997.
No dealer, salesperson or other person has been authorized
to give any information or to make any representation not
contained in this Prospectus in connection with the offer made by
this Prospectus or any Prospectus Supplement relating hereto,
and, if given or made, such information or representation must
not be relied upon as having been authorized by the Company or
any underwriter, agent or dealer. Neither this Prospectus nor
this Prospectus as supplemented by any Prospectus Supplement
constitutes an offer to sell, or a solicitation of an offer to
buy, by any underwriter, agent or dealer in any jurisdiction in
which it is unlawful for such underwriter, agent or dealer to
make such an offer or solicitation. Neither the delivery of this
Prospectus or this Prospectus as supplemented by any Prospectus
Supplement nor any sale made thereunder shall, under any
circumstances, create any implication that there has been no
change in the affairs of the Company since the date hereof or
thereof.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of
the Securities Exchange Act of 1934 (the "1934 Act") and in
accordance therewith files reports and other information with the
Securities and Exchange Commission (the "SEC"). Such reports and
other information may be inspected and copied at the public
reference facilities maintained by the SEC at 450 Fifth Street,
N.W., Washington, D.C., 20549; Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois, 60661; and 7 World Trade
Center, 13th Floor, New York, New York 10048. Copies of such
material can be obtained from the Public Reference Section of the
SEC, 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed
rates. The SEC maintains a Web site at http://www.sec.gov
containing reports, proxy statements and information statements
and other information regarding registrants that file electroni-
cally with the SEC, including the Company. Certain of the
Company's securities are listed on the New York Stock Exchange,
where reports and other information concerning the Company may
also be inspected.
DOCUMENTS INCORPORATED BY REFERENCE
The following documents filed by the Company with the SEC
are incorporated in this Prospectus by reference:
-- The Company's Annual Report on Form 10-K for the year
ended December 31, 1996; and
-- The Company's Quarterly Reports on Form 10-Q for the
periods ended March 31, 1997 and June 30, 1997.
All documents subsequently filed by the Company pursuant to
Section 13(a), 13(c), 14 or 15(d) of the 1934 Act after the date
of this Prospectus and prior to the termination of the offering
made by this Prospectus shall be deemed to be incorporated by
reference in this Prospectus and to be a part hereof from the
date of filing of such documents.
Any statement contained in a document incorporated or deemed
to be incorporated by reference herein shall be deemed to be
modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any other
subsequently filed document which is deemed to be incorporated by
reference herein or in a Prospectus Supplement modifies or
supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or
superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person to
whom a copy of this Prospectus has been delivered, on the written
or oral request of any such person, a copy of any or all of the
documents described above which have been incorporated by
reference in this Prospectus, other than exhibits to such
documents. Written requests for copies of such documents should
be addressed to Mr. G. C. Dean, American Electric Power Service
Corporation, 1 Riverside Plaza, Columbus, Ohio 43215 (telephone
number: 614-223-1000). The information relating to the Company
contained in this Prospectus or any Prospectus Supplement
relating hereto does not purport to be comprehensive and should
be read together with the information contained in the documents
incorporated by reference.
TABLE OF CONTENTS
Page
Available Information . . . . . . . . . . . . . . . . . . . . . 2
Documents Incorporated by Reference . . . . . . . . . . . . . . 2
Table of Contents . . . . . . . . . . . . . . . . . . . . . . . 3
The Company . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . 4
Ratio of Earnings to Fixed Charges . . . . . . . . . . . . . . 4
Description of New Notes . . . . . . . . . . . . . . . . . . . 4
Recent Developments . . . . . . . . . . . . . . . . . . . . . 9
Legal Opinions . . . . . . . . . . . . . . . . . . . . . . . 10
Experts . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Plan of Distribution . . . . . . . . . . . . . . . . . . . . 10
THE COMPANY
The Company is engaged in the generation, purchase,
transmission and distribution of electric power to approximately
673,000 customers in Ohio, and in supplying electric power at
wholesale to other electric utility companies and municipalities
in Ohio. Its principal executive offices are located at 301
Cleveland Avenue, S.W., Canton, Ohio 44702 (telephone number:
330-456-8173). The Company is a subsidiary of American Electric
Power Company, Inc. ("AEP") and is a part of the American
Electric Power integrated utility system (the "AEP System"). The
executive offices of AEP are located at 1 Riverside Plaza,
Columbus, Ohio 43215 (telephone number: 614-223-1000).
USE OF PROCEEDS
The Company proposes to use the net proceeds from the sale
of the New Notes to redeem or repurchase certain of its
outstanding debt and/or preferred stock, to fund its construction
program, to repay short-term indebtedness incurred in connection
with such purchase or its construction program and for other
corporate purposes. Proceeds may be temporarily invested in
short-term instruments pending their application to the foregoing
purposes.
The Company has estimated that its consolidated construction
costs (inclusive of allowance for funds used during construction)
for 1997 will be approximately $154,000,000. At August 31, 1997,
the Company had approximately $70,000,000 of short-term unsecured
indebtedness outstanding.
RATIO OF EARNINGS TO FIXED CHARGES
Below is set forth the ratio of earnings to fixed charges
for each of the twelve month periods ended December 31, 1992
through 1996 and June 30, 1997:
12-Month
Period Ended Ratio
December 31, 1992 2.71
December 31, 1993 3.14
December 31, 1994 3.28
December 31, 1995 2.95
December 31, 1996 3.40
June 30, 1997 3.60
DESCRIPTION OF NEW NOTES
The New Notes will be issued in one or more series under an
Indenture to be entered into between the Company and Bankers
Trust Company, as Trustee (the "Trustee"), as may be supplemented
and amended from time to time by one or more supplemental
indentures (the "Indenture"). Section and Article references
used herein are references to provisions of the Indenture unless
otherwise noted.
All Notes (including the New Notes) to be issued under the
Indenture are herein sometimes referred to as "Notes". Copies of
the Indenture, including the form of supplemental indenture and
Company Order pursuant to which each series of the New Notes may
be issued, are filed as exhibits to the Registration Statement.
The following statements include brief summaries of certain
provisions of the Indenture under which Notes will be issued.
Such summaries do not purport to be complete and reference is
made to the Indenture for complete statements of such provisions.
Such summaries are qualified in their entirety by such reference
and do not relate or give effect to provisions of statutory or
common law.
General
The New Notes will be unsecured obligations of the Company
and will rank pari passu with all other unsecured debt of the
Company, except debt that by its terms is subordinated to the
unsecured debt of the Company. The Indenture provides that Notes
may be issued thereunder without limitation as to aggregate
principal amount and may be issued thereunder from time to time
in one or more series or one or more Tranches thereof, as
authorized by a Board Resolution and as set forth in a Company
Order or one or more supplemental indentures creating such
series. (Section 2.01).
Substantially all of the fixed properties and franchises of
the Company are subject to the lien of its first mortgage bonds
(the "Bonds") issued under and secured by a Mortgage and Deed of
Trust, dated as of October 1, 1938, as previously supplemented
and amended by supplemental indentures, between the Company and
Central Hanover Bank and Trust Company (now The Chase Manhattan
Bank), as trustee.
The New Notes are not convertible into any other security of
the Company. Except as may otherwise be described in a
prospectus supplement, the covenants contained in the Indenture
do not limit the amount of other debt, secured or unsecured,
which may be issued by the Company. In addition, the Indenture
does not contain any provisions that afford holders of Notes
protection in the event of a highly leveraged transaction
involving the Company.
Maturity, Interest, Redemption, Covenants and Restrictions and
Payment
Information concerning the maturity, interest, if any,
redemption provisions, if any, sinking fund, if any, any
covenants or restrictions, such as limitations on liens or
dividend restrictions, and payment with respect to any series of
the New Notes will be contained in a Prospectus Supplement.
Form, Exchange, Registration and Transfer
Unless otherwise specified in a Prospectus Supplement, New
Notes in definitive form will be issued only as registered Notes
without coupons in denominations of $1,000 and in integral
multiples thereof authorized by the Company. New Notes may be
presented for registration of transfer (with the form of transfer
endorsed thereon duly executed) or exchange, at the office of the
Security Registrar, without service charge and upon payment of
any taxes and other governmental charges as described in the
Indenture. Such transfer or exchange will be effected upon the
Company or the Security Registrar being satisfied with the
documents of title and identity of the person making the request.
The Company has appointed the Trustee as Security Registrar with
respect to New Notes. The Company may change the place for
registration of transfer and exchange of the New Notes and may
designate one or more additional places for such registration and
exchange. (Sections 2.05 and 4.02).
The Company shall not be required to (i) issue, register the
transfer of or exchange any New Note during a period beginning at
the opening of business 15 days before the day of the mailing of
a notice of redemption of less than all the outstanding New Notes
and ending at the close of business on the day of such mailing or
(ii) register the transfer of or exchange any New Notes or
portions thereof called for redemption in whole or in part.
(Section 2.05).
Payment and Paying Agents
Unless otherwise indicated in a Prospectus Supplement,
payment of principal of and premium, if any, on any New Note will
be made only against surrender to the Paying Agent of such New
Note. Principal of and any premium and interest on New Note will
be payable at the office of such Paying Agent or Paying Agents as
the Company may designate from time to time, except that at the
option of the Company payment of any interest may be made by
check mailed to the address of the person entitled thereto as
such address shall appear in the Security Register with respect
to such New Note.
Unless otherwise indicated in a Prospectus Supplement, the
Trustee initially will act as Paying Agent with respect to New
Notes. The Company may at any time designate additional Paying
Agents or rescind the designation of any Paying Agents or approve
a change in the office through which any Paying Agent acts.
(Sections 4.02 and 4.03).
All moneys paid by the Company to a Paying Agent for the
payment of the principal of and premium, if any, or interest, if
any, on any New Notes that remain unclaimed at the end of two
years after such principal, premium, if any, or interest shall
have become due and payable, subject to applicable law, will be
repaid to the Company and the holder of such New Note will
thereafter look only to the Company for payment thereof. (Section
11.04).
Modification of the Indenture
The Indenture contains provisions permitting the Company and
the Trustee, with the consent of the holders of not less than a
majority in principal amount of Notes of each series that are
affected by the modification, to modify the Indenture or any
supplemental indenture affecting that series or the rights of the
holders of that series of Notes; provided, that no such
modification may, without the consent of the holder of each
outstanding Note affected thereby, (i) extend the fixed maturity
of any Notes of any series, or reduce the principal amount
thereof, or reduce the rate or extend the time of payment of
interest thereon, or reduce any premium payable upon the
redemption thereof, or reduce the amount of the principal of a
Discount Security (as defined in the Indenture) that would be due
and payable upon a declaration of acceleration of the maturity
thereof pursuant to the Indenture, (ii) reduce the percentage of
Notes, the holders of which are required to consent to any such
supplemental indenture, or (iii) reduce the percentage of Notes,
the holders of which are required to waive any default and its
consequences. (Section 9.02).
In addition, the Company and the Trustee may execute,
without the consent of any holder of Notes, any supplemental
indenture for certain other usual purposes including the creation
of any new series of Notes. (Sections 2.01, 9.01 and 10.01).
Events of Default
The Indenture provides that any one or more of the following
described events, which has occurred and is continuing,
constitutes an "Event of Default" with respect to each series of
Notes:
(a) failure for 30 days to pay interest on Notes of
that series when due and payable; or
(b) failure for 3 Business Days to pay principal or
premium, if any, on Notes of that series when due and
payable whether at maturity, upon redemption, pursuant to
any sinking fund obligation, by declaration or otherwise; or
(c) failure by the Company to observe or perform any
other covenant (other than those specifically relating to
another series) contained in the Indenture for 90 days after
written notice to the Company from the Trustee or the
holders of at least 33% in principal amount of the outstand-
ing Notes of that series; or
(d) certain events involving bankruptcy, insolvency or
reorganization of the Company; or
(e) any other event of default provided for in a series
of Notes. (Section 6.01).
The Trustee or the holders of not less than 33% in aggregate
outstanding principal amount of any particular series of Notes
may declare the principal due and payable immediately upon an
Event of Default with respect to such series, but the holders of
a majority in aggregate outstanding principal amount of such
series may annul such declaration and waive the default with
respect to such series if the default has been cured and a sum
sufficient to pay all matured installments of interest and
principal otherwise than by acceleration and any premium has been
deposited with the Trustee. (Sections 6.01 and 6.06).
The holders of a majority in aggregate outstanding principal
amount of any series of Notes have the right to direct the time,
method and place of conducting any proceeding for any remedy
available to the Trustee for that series. (Section 6.06).
Subject to the provisions of the Indenture relating to the duties
of the Trustee in case an Event of Default shall occur and be
continuing, the Trustee will be under no obligation to exercise
any of its rights or powers under the Indenture at the request or
direction of any of the holders of the Notes, unless such holders
shall have offered to the Trustee indemnity satisfactory to it.
(Section 7.02).
The holders of a majority in aggregate outstanding principal
amount of any series of Notes affected thereby may, on behalf of
the holders of all Notes of such series, waive any past default,
except a default in the payment of principal, premium, if any, or
interest when due otherwise than by acceleration (unless such
default has been cured and a sum sufficient to pay all matured
installments of interest and principal otherwise than by
acceleration and any premium has been deposited with the Trustee)
or a call for redemption of Notes of such series. (Section
6.06). The Company is required to file annually with the Trustee
a certificate as to whether or not the Company is in compliance
with all the conditions and covenants under the Indenture.
(Section 5.03(d)).
Consolidation, Merger and Sale
The Indenture does not contain any covenant that restricts
the Company's ability to merge or consolidate with or into any
other corporation, sell or convey all or substantially all of its
assets to any person, firm or corporation or otherwise engage in
restructuring transactions, provided that the successor
corporation assumes due and punctual payment of principal or
premium, if any, and interest on the Notes. (Section 10.01).
Legal Defeasance and Covenant Defeasance
Notes of any series may be defeased in accordance with their
terms and, unless the supplemental indenture or Company Order
establishing the terms of such series otherwise provides, as set
forth below. The Company at any time may terminate as to a
series all of its obligations (except for certain obligations,
including obligations with respect to the defeasance trust and
obligations to register the transfer or exchange of a Note, to
replace destroyed, lost or stolen Notes and to maintain agencies
in respect of the Notes) with respect to the Notes of such series
and the Indenture ("legal defeasance"). The Company at any time
also may terminate as to a series its obligations with respect to
the Notes of that series under any restrictive covenant which may
be applicable to that particular series ("covenant defeasance").
The Company may exercise its legal defeasance option
notwithstanding its prior exercise of its covenant defeasance
option. If the Company exercises its legal defeasance option,
the particular series may not be accelerated because of an Event
of Default. If the Company exercises its covenant defeasance
option, a series may not be accelerated by reference to any
restrictive covenant which may be applicable to that particular
series.
To exercise either of its defeasance options as to a series,
the Company must deposit with the Trustee or any paying agent, in
trust: moneys or Eligible Obligations, or a combination thereof,
in an amount sufficient to pay when due the principal of and
premium, if any, and interest, if any, due and to become due on
the Notes of such series that are Outstanding (as defined in the
Indenture). Such defeasance or discharge may occur only if,
among other things, the Company has delivered to the Trustee an
Opinion of Counsel to the effect that the holders of such Notes
will not recognize gain, loss or income for federal income tax
purposes as a result of the satisfaction and discharge of the
Indenture with respect to such series and that such holders will
realize gain, loss or income on such Notes, including payments of
interest thereon, in the same amounts and in the same manner and
at the same time as would have been the case if such satisfaction
and discharge had not occurred. (Section 11.01).
In the event the Company exercises its option to effect a
covenant defeasance with respect to the Notes of any series and
the Notes of that series are thereafter declared due and payable
because of the occurrence of any Event of Default other than an
Event of Default caused by failing to comply with the covenants
which are defeased, the amount of money and Eligible Obligations
on deposit with the Trustee may not be sufficient to pay amounts
due on the Notes of that series at the time of the acceleration
resulting from such Event of Default. However, the Company would
remain liable for such payments. (Section 11.01).
Governing Law
The Indenture and Notes will be governed by, and construed
in accordance with, the laws of the State of New York. (Section
13.05).
Concerning the Trustee
AEP System companies, including the Company, utilize or may
utilize some of the banking services offered by Bankers Trust
Company in the normal course of their businesses. Among such
services are the making of short-term loans, generally at rates
related to the prime commercial interest rate.
RECENT DEVELOPMENTS
On or about August 14, 1997, eight northeast states filed
petitions with the United States Environmental Protection Agency
("Federal EPA") under Section 126 of the Clean Air Act alleging
that nitrogen oxides ("NOx") emissions from sources in upwind
midwestern states are significantly contributing to non-
attainment of the ambient air quality standards for ozone in the
petitioning states. These petitions seek the development of
controls for the upwind sources in a rulemaking to be undertaken
by Federal EPA. The Company's fossil-fired steam generating
plants are included (directly or indirectly) as sources in each
of these petitions and the rulemaking could require significant
reductions of NOx emissions at such plants. The Company believes
that these petitions are without merit and will take appropriate
steps to challenge any adverse actions taken with respect to
these petitions.
LEGAL OPINIONS
Opinions with respect to the legality of the Notes will be
rendered by Simpson Thacher & Bartlett (a partnership which
includes professional corporations), 425 Lexington Avenue, New
York, New York and 1 Riverside Plaza, Columbus, Ohio, counsel for
the Company, and by Dewey Ballantine, 1301 Avenue of the
Americas, New York, New York, counsel for any underwriters or
agents. Additional legal opinions in connection with the
offering of the Notes may be given by John M. Adams, Jr. or David
C. House, counsel for the Company. Mr. Adams is Assistant
General Counsel, and Mr. House is an Attorney, in the Legal
Department of American Electric Power Service Corporation, a
wholly owned subsidiary of AEP. From time to time, Dewey
Ballantine acts as counsel to affiliates of the Company in
connection with certain matters.
EXPERTS
The financial statements and related financial statement
schedule incorporated in this prospectus by reference from the
Company's Annual Report on Form 10-K 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.
PLAN OF DISTRIBUTION
The Company may sell the New Notes in any of three ways or
in any combination of such ways: (i) through underwriters or
dealers; (ii) directly to a limited number of purchasers or to a
single purchaser; or (iii) through agents. The Prospectus
Supplement relating to a series of the New Notes will set forth
the terms of the offering of the New Notes, including the name or
names of any underwriters, dealers or agents, the purchase price
of such New Notes and the proceeds to the Company from such sale,
any underwriting discounts or agency fees and other items
constituting underwriters' or agents' compensation, any initial
public offering price and any discounts or concessions allowed or
reallowed or paid to dealers. Any initial public offering price
and any discounts or concessions allowed or reallowed or paid to
dealers may be changed from time to time after the initial public
offering.
If underwriters are used in the sale, the New Notes 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 the sale. The
underwriters with respect to a particular underwritten offering
of New Notes will be named in the Prospectus Supplement relating
to such offering and, if an underwriting syndicate is used, the
managing underwriters will be set forth on the cover page of such
Prospectus Supplement. Unless otherwise set forth in the
Prospectus Supplement, the several obligations of the underwrit-
ers to purchase the New Notes will be subject to certain
conditions precedent, and the underwriters will be obligated to
purchase all such New Notes if any are purchased.
New Notes 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 New Notes in respect of
which the Prospectus Supplement is delivered as well as any
commissions payable by the Company to such agent. Unless
otherwise indicated in the Prospectus Supplement, any such agent
will be acting on a reasonable best efforts basis for the period
of its appointment.
If so indicated in the Prospectus Supplement, the Company
will authorize agents, underwriters or dealers to solicit offers
by certain specified institutions to purchase New Notes from the
Company at the public offering price set forth in the Prospectus
Supplement pursuant to delayed delivery contracts providing for
payment and delivery on a specified date in the future. Such
contracts will be subject to those conditions set forth in the
Prospectus Supplement, and the Prospectus Supplement will set
forth the commission payable for solicitation of such contracts.
Subject to certain conditions, the Company may agree to
indemnify any underwriters, dealers, agents or purchasers and
their controlling persons against certain civil liabilities,
including certain liabilities under the Securities Act of 1933,
as amended.