PROSPECTUS SUPPLEMENT
(To prospectus dated May 17, 2005)
$75,000,000
PUBLIC SERVICE COMPANY OF OKLAHOMA
4.70% Senior Notes, Series E, due 2011
Interest on the Senior Notes is payable semi-annually on May 15 and
November 15 of each year, beginning November 15, 2005. The Senior Notes will
mature on May 15, 2011. We may redeem the Senior Notes in whole or in part at
our option at any time, and from time to time, at a redemption price equal to
100% of the principal amount of the Senior Notes being redeemed plus, if
applicable, a make-whole premium, together with accrued and unpaid interest to
the date of redemption. The Senior Notes do not have the benefit of a sinking
fund.
The Senior Notes are unsecured and rank equally with all of our other
unsecured and unsubordinated indebtedness from time to time outstanding and will
be effectively subordinated to all secured debt from time to time outstanding.
Per Note Total
Public offering price(1) . . . . . . . . . . 99.8610% $ 74,895,750
Underwriting discount . . . . . . . . . . . . 0.6125% $ 459,375
Proceeds, before expenses, to
Public Service Company of Oklahoma . . . . 99.2485% $ 74,436,375
(1)Plus accrued interest, if any, from May 20, 2005.
INVESTING IN THESE NOTES INVOLVES RISKS. SEE THE SECTION ENTITLED "RISK
FACTORS" BEGINNING ON PAGE S-3 OF THIS PROSPECTUS SUPPLEMENT FOR MORE
INFORMATION.
Neither the U.S. Securities and Exchange Commission nor any state
securities commission has approved or disapproved of the Senior Notes or
determined that this prospectus supplement or the accompanying prospectus is
accurate or complete. Any representation to the contrary is a criminal offense.
The Senior Notes will be ready for delivery in book-entry form only
through The Depository Trust Company on or about May 20, 2005.
____________________
Goldman, Sachs & Co.
Fifth Third Securities, Inc. SG Corporate & Investment Banking
The date of this prospectus supplement is May 17, 2005.
You should rely only on the information incorporated by reference or
provided in this prospectus supplement or the accompanying prospectus. We have
not authorized anyone to provide you with different information. We are not
making an offer of these securities in any state where the offer is not
permitted. You should not assume that the information in this prospectus
supplement is accurate as of any date other than the date on the front of the
document.
TABLE OF CONTENTS
Prospectus Supplement
RISK FACTORS............................................................. S-3
USE OF PROCEEDS.......................................................... S-3
SUPPLEMENTAL DESCRIPTION OF THE SENIOR NOTES............................. S-3
UNDERWRITING............................................................. S-7
Prospectus
THE COMPANY................................................................ 2
RISK FACTORS............................................................... 2
PROSPECTUS SUPPLEMENTS..................................................... 2
RATIO OF EARNINGS TO FIXED CHARGES......................................... 2
WHERE YOU CAN FIND MORE INFORMATION........................................ 3
USE OF PROCEEDS ........................................................... 4
DESCRIPTION OF THE NOTES .................................................. 4
PLAN OF DISTRIBUTION........................................................11
LEGAL OPINIONS............................................................. 12
EXPERTS.................................................................... 12
RISK FACTORS
Investing in the Senior Notes involves risk. Please see the risk factors
in our Annual Report on Form 10-K, as amended, for the fiscal year ended
December 31, 2004, along with disclosure related to the risk factors contained
in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2005, which
are incorporated by reference in this prospectus supplement and the accompanying
prospectus. Before making an investment decision, you should carefully consider
these risks as well as other information contained or incorporated by reference
in this prospectus supplement and the accompanying prospectus. The risks and
uncertainties not presently known to us or that we currently deem immaterial may
also impair our operations, our financial results and the value of the Senior
Notes.
USE OF PROCEEDS
We propose to use the net proceeds from the sale of the Senior Notes to
redeem or repurchase certain of our outstanding debt (including the repayment of
advances from affiliates), to fund our construction program and for other
corporate purposes. Our 6.50% Series of First Mortgage Bonds, $50,000,000
principal amount outstanding, will mature on June 1, 2005.
We estimate that our construction costs in 2005 will approximate $126
million. At May 11, 2005, we had approximately $17 million in advances from
affiliates outstanding.
SUPPLEMENTAL DESCRIPTION OF THE SENIOR NOTES
The following description of the particular terms of the Senior Notes
supplements and in certain instances replaces the description of the general
terms and provisions of the Senior Notes under "Description of the Notes" in the
accompanying Prospectus. We will issue the Senior Notes under an Indenture,
dated as of November 1, 2000, between us and The Bank of New York, as Trustee,
as supplemented and amended and as to be further supplemented and amended.
Principal Amount, Maturity, Interest and Payment
The Senior Notes will initially be issued in an aggregate principal amount
of $75,000,000. We may from time to time, without consent of the holders of the
Senior Notes, issue additional notes having the same ranking, interest rate,
maturity and other terms as the Senior Notes. These notes, together with the
applicable Senior Notes, will be a single series of notes under the Indenture.
The Senior Notes will mature and become due and payable, together with any
accrued and unpaid interest, on May 15, 2011 and will bear interest at the rate
of 4.70% per year from May 20, 2005 until May 15, 2011. The Senior Notes are not
subject to any sinking fund provision.
Interest on each Senior Note will be payable semi-annually in arrears on
each May 15 and November 15 and at redemption, if any, or maturity. The initial
interest payment date is November 15, 2005. Each payment of interest shall
include interest accrued through the day before such interest payment date.
Interest on the Senior Notes will be computed on the basis of a 360-day year
consisting of twelve 30-day months.
We will pay interest on the Senior Notes (other than interest payable at
redemption, if any, or maturity) in immediately available funds to the owners of
the Senior Notes as of the Regular Record Date (as defined below) for each
interest payment date.
We will pay the principal of the Senior Notes and any premium and interest
payable at redemption, if any, or at maturity in immediately available funds at
the office of The Bank of New York, 101 Barclay Street in New York, New York.
If any interest payment date, redemption date or the maturity is not a
Business Day (as defined below), we will pay all amounts due on the next
succeeding Business Day and no additional interest will be paid, except that if
such Business Day is in the next succeeding calendar year, we will make payment
on the immediately preceding Business Day.
The "Regular Record Date" will be the April 30 or October 31 prior to the
relevant interest payment date.
"Business Day" means any day that is not a day on which banking
institutions in New York City are authorized or required by law or regulation to
close.
Optional Redemption
We may redeem the Senior Notes at our option at any time, upon no more
than 60 and not less than 30 days' notice. We may redeem the Senior Notes either
as a whole or in part at a redemption price equal to the greater of (1) 100% of
the principal amount of the Senior Notes being redeemed and (2) the sum of the
present values of the remaining scheduled payments of principal and interest on
the Senior Notes being redeemed (excluding the portion of any such interest
accrued to the date of redemption) discounted (for purposes of determining
present value) 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.
"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 Senior 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 Senior Notes.
"Comparable Treasury Price" means, with respect to any redemption date,
(1) the average of the Reference Treasury Dealer Quotations for such redemption
date, after excluding the highest and lowest such Reference Treasury Dealer
Quotations, or (2) if we obtain fewer than four such Reference Treasury Dealer
Quotations, the average of all such quotations.
"Independent Investment Banker" means one of the Reference Treasury
Dealers appointed by us and reasonably acceptable to the Trustee.
"Reference Treasury Dealer" means a primary U.S. Government Securities
Dealer selected by us and reasonably acceptable to the Trustee.
"Reference Treasury Dealer Quotations" means, with respect to each
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.
"Treasury Rate" means, with respect to any redemption date, the rate per
year 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.
Limitations on Liens
So long as any of our Senior Notes issued pursuant to this prospectus
supplement are outstanding, we will not create or suffer to be created or to
exist any additional mortgage, pledge, security interest, or other lien
(collectively "Liens") on any of our utility properties or tangible assets now
owned or hereafter acquired to secure any indebtedness for borrowed money
("Secured Debt"), without providing that such Senior Notes will be similarly
secured. This restriction does not apply to our subsidiaries, nor will it
prevent any of them from creating or permitting to exist Liens on their property
or assets to secure any Secured Debt. Further, this restriction on Secured Debt
does not apply to our existing first mortgage bonds that have previously been
issued under our mortgage indenture or any indenture supplemental thereto;
provided that this restriction will apply to future issuances thereunder (other
than issuances of refunding first mortgage bonds). In addition, this restriction
does not prevent the creation or existence of:
o Liens on property existing at the time of acquisition or construction of
such property (or created within one year after completion of such
acquisition or construction), whether by purchase, merger, construction or
otherwise, or to secure the payment of all or any part of the purchase
price or construction cost thereof, including the extension of any Liens
to repairs, renewals, replacements, substitutions, betterments, additions,
extensions and improvements then or thereafter made on the property
subject thereto;
o Financing of our accounts receivable for electric service;
o Any extensions, renewals or replacements (or successive extensions,
renewals or replacements), in whole or in part, of liens permitted by the
foregoing clauses; and
o The pledge of any bonds or other securities at any time issued under
any of the Secured Debt permitted by the above clauses.
In addition to the permitted issuances above, Secured Debt not otherwise
so permitted may be issued in an amount that does not exceed 15% of Net Tangible
Assets as defined below.
"Net Tangible Assets" means the total of all assets (including
revaluations thereof as a result of commercial appraisals, price level
restatement or otherwise) appearing on our balance sheet, net of applicable
reserves and deductions, but excluding goodwill, trade names, trademarks,
patents, unamortized debt discount and all other like intangible assets (which
term shall not be construed to include such revaluations), less the aggregate of
our current liabilities appearing on such balance sheet. For purposes of this
definition, our balance sheet does not include assets and liabilities of our
subsidiaries.
This restriction also will not apply to or prevent the creation or
existence of leases made, or existing on property acquired, in the ordinary
course of business.
UNDERWRITING
Goldman, Sachs & Co. is acting as representative of the underwriters named
below. Subject to the terms and conditions of the underwriting agreement, we
have agreed to sell to each of the underwriters named below and each of the
underwriters has severally and not jointly agreed to purchase from us the
respective principal amount of Senior Notes set forth opposite its name below:
Principal Amount
Underwriters of Senior Notes
------------ -----------------
Goldman, Sachs & Co............................. $60,000,000
Fifth Third Securities, Inc..................... $ 7,500,000
SG Americas Securities, LLC..................... $ 7,500,000
-----------
Total................................. $75,000,000
===========
In the underwriting agreement, the underwriters have agreed, subject to
the terms and conditions set forth therein, to purchase all of the Senior Notes
offered hereby if any of the Senior Notes are purchased.
The underwriters propose to offer the Senior Notes to the public initially
at the offering price set forth on the cover page of this prospectus supplement,
and to certain dealers initially at that price less a concession not in excess
of 0.375% per Senior Note. The underwriters may allow, and those dealers may
reallow, a concession to certain other dealers not in excess of 0.250% per
Senior Note. After the initial offering of the Senior Notes to the public, the
public offering price and the concession may be changed.
Prior to this offering, there has been no public market for the Senior
Notes. The Senior Notes will not be listed on any securities exchange. Certain
underwriters have advised us that they intend to make a market in the Senior
Notes. The underwriters will have no obligation to make a market in the Senior
Notes, however, and may cease market making activities, if commenced, at any
time. There can be no assurance of a secondary market for the Senior Notes, or
that the Senior Notes may be resold.
We have agreed to indemnify the underwriters against certain liabilities,
including liabilities under the Securities Act of 1933, as amended, or
contribute payments that each underwriter may be required to make in respect
thereof.
In connection with the offering, the underwriters may purchase and sell
the Senior Notes in the open market. These transactions may include
over-allotment and stabilizing transactions and purchases to cover syndicate
short positions created in connection with the offering. Stabilizing
transactions consist of certain bids or purchases for the purposes of preventing
or retarding a decline in the market price of the Senior Notes and syndicate
short positions involve the sale by the underwriters of a greater number of
Senior Notes than they are required to purchase from us in the offering. The
underwriters also may impose a penalty bid, whereby selling concessions allowed
to syndicate members or other broker dealers in respect of the securities sold
in the offering for their account may be reclaimed by the syndicate if such
Senior Notes are repurchased by the syndicate in stabilizing or covering
transactions. These activities may stabilize, maintain or otherwise affect the
market price of the Senior Notes, which may be higher than the price that might
otherwise prevail in the open market; and these activities, if commenced, may be
discontinued at any time. These transactions may be effected in the
over-the-counter market or otherwise.
The expenses associated with the offer and sale of the Senior Notes are
expected to be approximately $195,000.
Each underwriter has represented, warranted and agreed that: (i) it has
not offered or sold and, prior to the expiry of a period of six months from the
closing date, will not offer or sell any Senior Notes to persons in the United
Kingdom except to persons whose ordinary activities involve them in acquiring,
holding, managing or disposing of investments (as principal or agent) for the
purposes of their businesses or otherwise in circumstances which have not
resulted and will not result in an offer to the public in the United Kingdom
within the meaning of the Public Offers of Securities Regulations 1995; (ii) it
has only communicated or caused to be communicated and will only communicate or
cause to be communicated any invitation or inducement to engage in investment
activity (within the meaning of section 21 of the Financial Services and Markets
Act 2000 ("FSMA")) received by it in connection with the issue or sale of any
Senior Notes in circumstances in which section 21(1) of the FSMA does not apply
to us; and (iii) it has complied and will comply with all applicable provisions
of the FSMA with respect to anything done by it in relation to the Senior Notes
in, from or otherwise involving the United Kingdom.
Each underwriter has represented and agreed that it has not, directly or
indirectly, offered or sold and will not, directly or indirectly, offer or sell
in the Netherlands any Senior Notes with a denomination of less than EUR50,000
(or its foreign currency equivalent) other than to persons who trade or invest
in securities in the conduct of a profession or business (which include banks,
stockbrokers, insurance companies, pension funds, other institutional investors
and finance companies and treasury departments of large enterprises) unless one
of the other exemptions from or exceptions to the prohibition contained in
article 3 of the Dutch Securities Transactions Supervision Act 1995 (Wet
toezicht effectenverkeer 1995) is applicable and the conditions attached to such
exemption or exception are complied with.
Some of the underwriters or their affiliates engage in transactions with,
and have performed services for, us and our affiliates in the ordinary course of
business and have, from time to time, performed, and may in the future perform,
various financial advisory and investment banking services for us, for which
they received or will receive customary fees and expenses. An affiliate of
Goldman, Sachs & Co. has agreed to acquire Zilkha Renewable Energy LLC
("Zilkha"), a privately held wind-energy development company based in Houston,
Texas. The transaction is expected to close in the second quarter of 2005. In
March 2005, we entered into two ten-year power purchase agreements with Zilkha
for up to 151.5 MW of wind-generated electricity.
PROSPECTUS
PUBLIC SERVICE COMPANY OF OKLAHOMA
1 Riverside Plaza
Columbus, Ohio 43215
614-716-1000
$150,000,000
UNSECURED NOTES
TERMS OF SALE
The following terms may apply to the $150,000,000 unsecured notes (the "notes")
that we may sell at one or more times. A pricing supplement or prospectus
supplement will include the final terms for each note. If we decide to list upon
issuance any note or notes on a securities exchange, a pricing supplement or
prospectus supplement will identify the exchange and state when we expect
trading could begin.
- Mature 9 months to 50 years
- Fixed or floating interest rate
- Remarketing features
- Certificate or book-entry form
- Subject to redemption
- Not convertible, amortized or subject to a sinking fund
- Interest paid on fixed rate notes quarterly or semi-annually
- Interest paid on floating rate notes monthly, quarterly, semi-annually,
or annually
- Issued in multiples of a minimum denomination
INVESTING IN THESE NOTES INVOLVES RISKS, SEE THE SECTION ENTITLED "RISK FACTORS"
BEGINNING ON PAGE 2 FOR MORE INFORMATION.
The notes have not been approved or disapproved by the Securities and
Exchange Commission ("SEC") or any state securities commission, nor have these
organizations determined that this prospectus is accurate or complete. Any
representation to the contrary is a criminal offense.
The date of this prospectus is May 17, 2005.
THE COMPANY
We generate, sell, purchase, transmit and distribute electric power. We
serve approximately 509,000 retail customers in eastern and southwestern
Oklahoma. We also sell and transmit power at wholesale to other electric
utilities, municipalities, electric cooperatives and non-utility entities
engaged in the wholesale power market. Our principal executive offices are
located at 1 Riverside Plaza, Columbus, Ohio 43215 (telephone number
614-716-1000). We are a subsidiary of American Electric Power Company, Inc., a
public utility holding company, and we are a part of the American Electric Power
integrated utility system. The executive offices of American Electric Power
Company, Inc. are located at 1 Riverside Plaza, Columbus, Ohio 43215 (telephone
number 614-716-1000).
RISK FACTORS
Investing in the notes involves risk. Please see the risk factors in our
Annual Report on Form 10-K, as amended, for the fiscal year ended December 31,
2004, along with disclosure related to the risk factors contained in our
Quarterly Report on Form 10-Q for the quarter ended March 31, 2005, which is
incorporated by reference in this prospectus. Before making an investment
decision, you should carefully consider these risks as well as other information
contained or incorporated by reference in this prospectus. The risks and
uncertainties not presently known to us or that we currently deem immaterial may
also impair our operations, our financial results and the value of the notes.
PROSPECTUS SUPPLEMENTS
We may provide information to you about the notes in up to three separate
documents that progressively provide more detail: (a) this prospectus provides
general information some of which may not apply to your notes, (b) the
accompanying prospectus supplement provides more specific terms of your notes,
and (c) if not in the accompanying prospectus supplement, the pricing supplement
will provide the final terms of your notes. It is important for you to consider
the information contained in this prospectus, the prospectus supplement and any
pricing supplement in making your investment decision.
RATIO OF EARNINGS TO FIXED CHARGES
The Ratio of Earnings to Fixed Charges for each of the periods indicated
is as follows:
Twelve Months
Period Ended Ratio
-------------- -----
December 31, 2000........3.26
December 31, 2001........3.00
December 31, 2002........2.49
December 31, 2003........2.96
December 31, 2004........2.14
March 31, 2005...........2.64
For current information on the Ratio of Earnings to Fixed Charges, please
see our most recent Form 10-K and Form 10-Q. See Where You Can Find More
Information.
WHERE YOU CAN FIND MORE INFORMATION
This prospectus is part of a registration statement we filed with the SEC.
We also file annual, quarterly and special reports and other information with
the SEC. You may read and copy any document we file at the SEC's Public
Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549. Please call
the SEC at 1-800-SEC-0330 for further information on the Public Reference Room.
You may also examine our SEC filings through the SEC's web site at
http://www.sec.gov.
The SEC allows us to "incorporate by reference" the information we file
with them, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
considered to be part of this prospectus, and later information that we file
with the SEC will automatically update and supersede this information. We
incorporate by reference the document listed below and any future filings made
with the SEC under Sections 13(a), 13(c), 14, or 15(d) of the Securities
Exchange Act of 1934 until we sell all the notes.
Annual Report on Form 10-K for the year ended December 31, 2004, as
amended by Form 10-K/A; and
Quarterly Report on Form 10-Q for the quarter ended March 31, 2005.
You may request a copy of these filings, at no cost, by writing or
telephoning us at the following address:
Financial Reporting
American Electric Power Service Corporation
1 Riverside Plaza
Columbus, Ohio 43215
614-716-1000
You should rely only on the information incorporated by reference or
provided in this prospectus or any supplement. We have not authorized anyone
else to provide you with different information. We are not making an offer of
these notes in any state where the offer is not permitted. You should not assume
that the information in this prospectus or any supplement is accurate as of any
date other than the date on the front of those documents.
USE OF PROCEEDS
Unless otherwise stated in a prospectus supplement, the net proceeds from
the sale of the notes will be used for general corporate purposes relating to
our utility business. These purposes include redeeming or repurchasing
outstanding debt or preferred stock and replenishing working capital. If we do
not use the net proceeds immediately, we temporarily invest them in short-term,
interest-bearing obligations.
DESCRIPTION OF THE NOTES
General
We will issue the notes under the Indenture dated November 1, 2000 (as
previously supplemented and amended) between us and the Trustee, The Bank of New
York. This prospectus briefly outlines some provisions of the Indenture. If you
would like more information on these provisions, you should review the Indenture
and any supplemental indentures that we have filed or will file with the SEC.
See Where You Can Find More Information on how to locate these documents. You
may also review these documents at the Trustee's offices at 101 Barclay
Street-8W, New York, New York 10286.
The Indenture does not limit the amount of notes that may be issued. The
Indenture permits us to issue notes in one or more series or tranches upon the
approval of our board of directors pursuant to any supplemental indentures. Each
series of notes may differ as to their terms.
The notes are unsecured and will rank equally with all our unsecured
unsubordinated debt. Substantially all of our fixed properties and franchises
are subject to the lien of our first mortgage bonds issued under and secured by
a Mortgage and Deed of Trust, dated as of July 1, 1945 (as previously
supplemented and amended) between us and The Bank of New York, successor to
Liberty Bank and Trust Company of Tulsa, National Association, successor to The
First National Bank and Trust Company of Tulsa, as trustee. For current
information on our debt outstanding see our most recent Form 10-K and Form 10-Q.
See Where You Can Find More Information.
The notes will be denominated in U.S. dollars and we will pay principal
and interest in U.S. dollars. Unless an applicable pricing or prospectus
supplement states otherwise, the notes will not be subject to any conversion,
amortization, or sinking fund. We expect that the notes will be "book-entry,"
represented by a permanent global note registered in the name of The Depository
Trust Company, or its nominee. We reserve the right, however, to issue note
certificates registered in the name of the noteholders.
In the discussion that follows, whenever we talk about paying principal on
the notes, we mean at maturity or redemption. Also, in discussing the time for
notices and how the different interest rates are calculated, all times are New
York City time and all references to New York mean the City of New York, unless
otherwise noted.
The following terms may apply to each note as specified in the applicable
pricing or prospectus supplement and the note.
Redemptions
If we issue redeemable notes, we may redeem such notes at our option
unless an applicable pricing or prospectus supplement states otherwise. The
pricing or prospectus supplement will state the terms of redemption. We may
redeem notes in whole or in part by delivering written notice to the noteholders
no more than 60, and not less than 30, days prior to redemption. If we do not
redeem all the notes of a series at one time, the Trustee selects the notes to
be redeemed in a manner it determines to be fair.
Remarketed Notes
If we issue notes with remarketing features, an applicable pricing or
prospectus supplement will describe the terms for the notes including: interest
rate, remarketing provisions, our right to redeem notes, the holders' right to
tender notes, and any other provisions.
Book-Entry Notes - Registration, Transfer, and Payment of Interest and
Principal
Unless otherwise stated in a prospectus supplement, the Depository Trust
Company ("DTC"), New York, New York, will act as securities depository for the
notes. The notes will be issued as fully-registered securities registered in the
name of Cede & Co. (DTC's partnership nominee) or such other name as may be
requested by an authorized representative of DTC. One fully-registered note
certificate will be issued for each issue of the notes, each in the aggregate
principal amount of such issue, and will be deposited with DTC.
DTC, the world's largest depository, 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 and provides asset
servicing for over 2 million issues of U.S. and non-U.S. equity issues,
corporate and municipal debt issues, and money market instruments from over 85
countries that DTC's participants ("Direct Participants") deposit with DTC. DTC
also facilitates the post-trade settlement among Direct Participants of sales
and other securities transactions in deposited securities, through electronic
computerized book-entry transfers and pledges between Direct Participants'
accounts. This eliminates the need for physical movement of securities
certificates. Direct Participants include both U.S. and non-U.S. securities
brokers and dealers, banks, trust companies, clearing corporations, and certain
other organizations. DTC is a wholly-owned subsidiary of The Depository Trust &
Clearing Corporation ("DTCC"). DTCC , in turn, is owned by a number of Direct
Participants of DTC and Members of the National Securities Clearing Corporation,
Government Securities Clearing Corporation, MBS Clearing Corporation, and
Emerging Markets Clearing Corporation, (NSCC, GSCC, MBSCC and EMCC, also
subsidiaries of DTCC), as well as by the New York Stock Exchange, Inc., the
American Stock Exchange LLC and the National Association of Securities Dealers,
Inc. Access to the DTC system is also available to others such as both U.S. and
non-U.S. securities brokers and dealers, banks, trust companies and clearing
corporations that clear through or maintain a custodial relationship with a
Direct Participant, either directly or indirectly ("Indirect Participants"). DTC
has Standard & Poor's highest rating: AAA. The DTC Rules applicable to its
Participants are on file with the Securities and Exchange Commission. More
information about DTC can be found at http://www.dtcc.com.
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. Beneficial Owners are, however, 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
Direct and Indirect 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.
To facilitate subsequent transfers, all notes deposited by Direct
Participants with DTC are registered in the name of DTC's partnership nominee,
Cede & Co., or such other name as may be requested by an authorized
representative of DTC. The deposit of notes with DTC and their registration in
the name of Cede & Co. or such other DTC nominee do not effect any 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 Direct and Indirect 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 and Indirect 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. Beneficial Owners of notes may wish to take
certain steps to augment the transmission to them of notices of significant
events with respect to the notes, such as redemptions, tenders, defaults and
proposed amendments to the note documents. For example, Beneficial Owners of
notes may wish to ascertain that the nominee holding the notes for their benefit
has agreed to obtain and transmit notices to Beneficial Owners. In the
alternative, Beneficial Owners may wish to provide their names and addresses to
the registrar and request that copies of notices by provided directly to them.
Redemption notices shall be sent to DTC. If less than all of the notes
within an issue are being redeemed, DTC's practice is to determine by lot the
amount of the interest of each Direct Participant in such issue to be redeemed.
Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or
vote with respect to notes unless authorized by a Direct Participant in
accordance with DTC's Procedures. Under its usual procedures, DTC mails an
Omnibus Proxy to us 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 notes are credited on the record date (identified in a listing
attached to the Omnibus Proxy).
Principal and interest payments on the notes will be made to Cede & Co.,
or such other nominee as may be requested by an authorized representative of
DTC. DTC's practice is to credit Direct Participants' accounts upon DTC's
receipt of funds and corresponding detail information from us or our agent on
the payable date in accordance with their respective holdings shown on DTC's
records. Payments by Participants to Beneficial Owners will be governed by
standing instructions and customary practices, as is the case with securities
held for the accounts of customers in bearer form or registered in "street
name", and will be the responsibility of such Participant and not of DTC, our
agent or us, subject to any statutory or regulatory requirements as may be in
effect from time to time. Payment of principal and interest payments to Cede &
Co. (or such other nominee as may be requested by an authorized representative
of DTC) is our or our agent's responsibility, disbursement of such payments to
Direct Participants will be the responsibility of DTC, and disbursement of such
payments to the Beneficial Owners will be the responsibility of Direct and
Indirect Participants.
A Beneficial Owner shall give notice to elect to have its notes purchased
or tendered, through its Participant, to the Tender/Remarketing Agent, and shall
effect delivery of such notes by causing the Direct Participant to transfer the
Participant's interest in the notes, on DTC's records, to the Tender/Remarketing
Agent. The requirement for physical delivery of notes in connection with an
optional tender or a mandatory purchase will be deemed satisfied when the
ownership rights in the notes are transferred by Direct Participants on DTC's
records and followed by a book-entry credit of tendered notes to the
Tender/Remarketing Agent's DTC account.
DTC may discontinue providing its services as depository with respect to
the notes at any time by giving reasonable notice to our agent or us. Under such
circumstances, in the event that a successor depository is not obtained, note
certificates are required to be printed and delivered.
We may decide to discontinue use of the system of book-entry transfers
through DTC (or a successor securities depository). In that event, note
certificates will be printed and delivered.
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that we believe to be reliable, but we take no
responsibility for the accuracy thereof.
Note Certificates-Registration, Transfer, and Payment of Interest and
Principal
If we issue note certificates, they will be registered in the name of the
noteholder. The notes may be transferred or exchanged, pursuant to
administrative procedures in the indenture, without the payment of any service
charge (other than any tax or other governmental charge) by contacting the
paying agent. Payments on note certificates will be made by check.
Interest Rate
The interest rate on the notes will either be fixed or floating. The
interest paid will include interest accrued to, but excluding, the date of
maturity or redemption. Interest is generally payable to the person in whose
name the note is registered at the close of business on the record date before
each interest payment date. Interest payable at maturity or redemption, however,
will be payable to the person to whom principal is payable.
If we issue a note after a record date but on or prior to the related
interest payment date, we will pay the first interest payment on the interest
payment date after the next record date. We will pay interest payments by check
or wire transfer, at our option.
Fixed Rate Notes
A pricing or prospectus supplement will designate the record dates,
payment dates and the fixed rate of interest payable on a note. We will pay
interest quarterly or semi-annually, and upon maturity or redemption. Unless an
applicable pricing or prospectus supplement states otherwise, if any payment
date falls on a day that is not a business day, we will pay interest on the next
business day and no additional interest will be paid. Interest payments will be
the amount of interest accrued to, but excluding, each payment date. Interest
will be computed using a 360-day year of twelve 30-day months.
Floating Rate Notes
Each floating rate note will have an interest rate formula. The applicable
pricing supplement will state the initial interest rate or interest rate formula
on each note effective until the first interest reset date. The applicable
pricing or prospectus supplement will state the method and dates on which the
interest rate will be determined, reset and paid.
Events of Default
"Event of Default" means any of the following:
- failure to pay the principal of (or premium, if any, on) any note of a
series for three days after payment is due;
- failure to pay any interest on any note of any series for 30 days after
payment is due;
- failure to perform any other requirements in such notes, or in the
Indenture in regard to such notes, for 90 days after notice;
- failure to pay any sinking fund installment for three days after
payment is due;
- certain events of bankruptcy or insolvency; or
- any other event of default specified in a series of notes.
An Event of Default for a particular series of notes does not necessarily
mean that an Event of Default has occurred for any other series of notes issued
under the Indenture. If an Event of Default occurs and continues, the Trustee or
the holders of at least 33% of the principal amount of the notes of the series
affected may require us to repay the entire principal of the notes of such
series within ten days after the date of such notice ("Repayment Acceleration").
In most instances, the holders of at least a majority in aggregate principal
amount of the notes of the affected series may rescind a previously triggered
Repayment Acceleration if we have first cured our default by depositing with the
Trustee enough money to pay all (unaccelerated) past due amounts and penalties,
if any.
The Trustee must within 90 days after a default occurs, notify the holders
of the notes of the series of default unless such default has been cured or
waived. We are required to file an annual certificate with the Trustee, signed
by an officer, concerning any default by us under any provisions of the
Indenture.
Subject to the provisions of the Indenture relating to its duties in case
of default, the Trustee shall be under no obligation to exercise any of its
rights or powers under the Indenture at the request, order or direction of any
holders unless such holders offer the Trustee reasonable indemnity. Subject to
the provisions for indemnification, the holders of a majority in principal
amount of the notes of any series may direct the time, method and place of
conducting any proceedings for any remedy available to, or exercising any trust
or power conferred on, the Trustee with respect to such notes.
Modification of Indenture
Under the Indenture, our rights and obligations and the rights of the
holders of any notes may be changed. Any change affecting the rights of the
holders of any series of notes requires the consent of the holders of not less
than a majority in aggregate principal amount of the outstanding notes of all
series affected by the change, voting as one class. However, we cannot change
the terms of payment of principal or interest, or a reduction in the percentage
required for changes or a waiver of default, unless the holder consents. We may
issue additional series of notes and take other action that does not affect the
rights of holders of any series by executing supplemental indentures without the
consent of any noteholders.
Consolidation, Merger or Sale
We may merge or consolidate with any entity or sell our assets
substantially as an entirety as long as the successor or purchaser expressly
assumes the payment of principal, and premium, if any, and interest on the
notes.
Legal Defeasance
We will be discharged from our obligations on the notes of any series on
the 91st day after the date of the deposit referred to in the first item below
if, among other things:
- we deposit with the Trustee sufficient cash or government securities to
pay (i) the principal, interest, any premium and any other sums due to the
stated maturity date or a redemption date of the note of the series and
(ii) any applicable mandatory sinking fund payments on the day such
payments are due;
- we deliver to the Trustee an opinion of counsel to the effect that such
provision would not cause any outstanding notes then listed on a national
security exchange to be delisted; and
- we deliver to the Trustee an opinion of counsel stating that the federal
income tax obligations of noteholders of that series will not change as a
result of our performing the action described above.
If this happens, the noteholders of the series will not be entitled to the
benefits of the Indenture except for registration of transfer and exchange of
notes and replacement of lost, stolen or mutilated notes.
Covenant Defeasance
We will be discharged from our obligations under certain restrictive
covenants applicable to the notes of a particular series if, among other things,
we perform all of the actions described above. See Legal Defeasance. If this
happens, any later breach of that particular restrictive covenant will not
result in Repayment Acceleration. If we cause an Event of Default apart from
breaching that restrictive covenant, there may not be sufficient money or
government obligations on deposit with the Trustee to pay all amounts due on the
notes of that series. In that instance, we would remain liable for such amounts.
Governing Law
The Indenture and notes of all series will be governed by the laws of the
State of New York.
Concerning the Trustee
We and our affiliates use or will use some of the banking services of the
Trustee and other services of its affiliates in the normal course of business.
PLAN OF DISTRIBUTION
We may sell the notes (a) through agents; (b) through underwriters or
dealers; or (c) directly to one or more purchasers.
By Agents
Notes may be sold on a continuing basis through agents designated by us.
The agents will agree to use their reasonable efforts to solicit purchases for
the period of their appointment.
The Agents will not be obligated to make a market in the notes. We cannot
predict the amount of trading or liquidity of the notes.
By Underwriters
If underwriters are used in the sale, the underwriters will acquire the
notes for their own account. The underwriters may resell the notes in one or
more transactions, including negotiated transactions, at a fixed public offering
price or at varying prices determined at the time of sale. The obligations of
the underwriters to purchase the notes will be subject to certain conditions.
The underwriters will be obligated to purchase all the notes of the series
offered if any of the notes are purchased. Any initial public offering price and
any discounts or concessions allowed or re-allowed or paid to dealers may be
changed from time to time.
Direct Sales
We may also sell notes directly. In this case, no underwriters or agents
would be involved.
General Information
Underwriters, dealers, and agents that participate in the distribution of
the notes may be underwriters as defined in the Securities Act of 1933 (the
"Act"), and any discounts or commissions received by them from us and any profit
on the resale of the notes by them may be treated as underwriting discounts and
commissions under the Act.
We may have agreements with the underwriters, dealers and agents to
indemnify them against certain civil liabilities, including liabilities under
the Act.
Underwriters, dealers and agents may engage in transactions with, or
perform services for, us or our affiliates in the ordinary course of their
businesses.
LEGAL OPINIONS
One of our lawyers, Jeffrey D. Cross, Esq. or Thomas G. Berkemeyer, Esq.,
Deputy General Counsel and Associate General Counsel, respectively, of American
Electric Power Service Corporation, our service company affiliate, will issue an
opinion about the legality of the securities for us. Dewey Ballantine LLP, New
York, NY will issue an opinion for the agents or underwriters. From time to
time, Dewey Ballantine LLP acts as counsel to our affiliates for some matters.
EXPERTS
The financial statements and the related financial statement schedules
incorporated in this prospectus by reference from the Company's Annual Report on
Form 10-K, for the year ended December 31, 2004, have been audited by Deloitte &
Touche LLP, an independent registered public accounting firm, as stated in their
reports (which reports as to the financial statements of the Company express an
unqualified opinion and include an explanatory paragraph concerning the adoption
of new accounting pronouncements in 2003 and 2004), 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.