AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 24, 2003
Registration No. 333-105704
Registration No. 333-105704-01
Registration No. 333-105704-02
Registration No. 333-105704-03
Registration No. 333-105704-04
Registration No. 333-105704-05
Registration No. 333-105704-06
Registration No. 333-105704-07
Registration No. 333-105704-08
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT
TO
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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PSEG POWER LLC PSEG POWER CAPITAL TRUST I
(Exact name of registrant PSEG POWER CAPITAL TRUST II
as specified in charter) PSEG POWER CAPITAL TRUST III
PSEG POWER CAPITAL TRUST IV
PSEG POWER CAPITAL TRUST V
(Exact name of registrants
as specified in Trust Agreements)
DELAWARE (State or other DELAWARE
jurisdiction of 01-6175282
22-3663480 incorporation or 01-6175284
organization) 51-6541007
(I.R.S. Employer 51-6541008
Identification No.) 51-6541013
PSEG FOSSIL LLC PSEG NUCLEAR LLC
(Exact name of registrant (Exact name of registrant
as specified in charter) as specified in charter)
DELAWARE (State or other DELAWARE
jurisdiction of
22-3663481 incorporation or 22-3663482
organization)
(I.R.S. Employer
Identification No.)
PSEG ENERGY RESOURCES & TRADE LLC
(Exact name of registrant
as specified in charter)
DELAWARE (State or other jurisdiction of
incorporation or organization)
22-3663483 (I.R.S. Employer Identification No.)
80 PARK PLAZA
P.O. BOX 1171
NEWARK, NEW JERSEY 07101-1171
(973) 430-7000
(Address, including zip code, and telephone number, including area
code, of registrants' principal executive offices)
Thomas M. O'Flynn
Executive VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER
PSEG POWER LLC
80 PARK PLAZA
P.O. BOX 1171
NEWARK, NEW JERSEY 07101-1171
(973) 430-7000
(Name, address, including zip code, and telephone number, including
area code, of agent for service for each registrant)
WITH COPIES TO:
JAMES T. FORAN, ESQUIRE HOWARD G. GODWIN, JR., ESQUIRE
ASSOCIATE GENERAL COUNSEL SIDLEY AUSTIN BROWN & WOOD LLP
PUBLIC SERVICE ENTERPRISE 787 SEVENTH AVENUE
GROUP INCORPORATED NEW YORK, NEW YORK 10019
80 PARK PLAZA
P.O. BOX 1171
NEWARK, NEW JERSEY 07101-1171
(continued on following page)
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The Registrants hereby amend this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrants
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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================================================================================
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
From time to time, after the Registration Statement becomes effective, as
determined by market conditions and other factors.
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If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. |_|
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, other than securities offered only in connection with dividend or
interest reinvestment plans, please check the following box. |X|
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. |_|
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_|
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. |_|
CALCULATION OF REGISTRATION FEE
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Proposed Maximum Proposed Maximum
Title Of Each Class Of Amount To Be Offering Price Per Aggregate Offering Amount of
Securities To Be Registered (1) Registered (2) Unit (3)(4) Price (3)(4) Registration Fee
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PSEG Power LLC Senior Debt Securities ..............
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Guarantees with respect to Senior Debt .............
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Securities PSEG Power Capital Trust I, II, III, IV
and V Trust Preferred Securities .................
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PSEG Power LLC Guarantees with respect to Trust
Preferred Securities(5) ..........................
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PSEG Power LLC Deferrable Interest Subordinated
Debentures .......................................
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Total .............................................. $2,000,000,000 100% $2,000,000,000 $161,800(6)
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(1) Securities registered hereunder may be sold separately, together or as
units with other securities registered hereunder.
(2) There is being registered hereunder (a) a presently indeterminate
principal amount of PSEG Power LLC Senior Debt Securities and related
Guarantees of PSEG Fossil LLC, PSEG Nuclear LLC and PSEG Energy Resources
& Trade LLC for which no separate consideration will be received and (b) a
presently indeterminate number of Trust Preferred Securities of PSEG Power
Capital Trust I, II, III, IV and V and related Guarantees and Deferrable
Interest Subordinated Debentures of PSEG Power LLC for which no separate
consideration will be received. The initial offering price of the
registered securities hereunder will not exceed $2,000,000,000.
(3) Estimated solely for the purpose of determining the registration fee.
(4) Pursuant to Rule 457(n) and (o), the registration fee is calculated on the
basis of the proposed maximum offering price of the securities being
offered.
(5) This registration is deemed to include the rights of holders of the Trust
Preferred Securities under the Guarantees of PSEG Power LLC and certain
backup undertakings as described in the Registration Statement.
(6) Previously paid.
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EXPLANATORY NOTE
This Registration Statement contains the following two separate
prospectuses:
1. A form of prospectus to be used in connection with offerings by PSEG
Power LLC of its Senior Debt Securities together with related guarantees of PSEG
Fossil LLC, PSEG Nuclear LLC and PSEG Energy Resources & Trade LLC.
2. A form of prospectus to be used in connection with offerings by PSEG
Power Capital Trust I, PSEG Power Capital Trust II, PSEG Power Capital Trust
III, PSEG Power Capital Trust IV and PSEG Power Capital Trust V of Trust
Preferred Securities, together with related debt securities and guarantees of
PSEG Power LLC.
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and is not soliciting an offer to buy these securities
in any state where the offer or sale is not permitted.
Subject to Completion, Dated June 24, 2003
PROSPECTUS
PSEG Power LLC
80 Park Plaza, P.O. Box 1171
Newark, New Jersey 07101-1171
(973) 430-7000
$2,000,000,000
[LOGO] PSEG
Power LLC
Senior Debt Securities
We may offer from time to time, together or separately, one or more series
of our unsecured senior debt securities. The Debt Securities will rank equally
with all of our other unsubordinated and unsecured indebtedness. The Debt
Securities will be fully and unconditionally guaranteed jointly and severally by
our three principal operating subsidiaries as described in this prospectus. The
guarantees rank equally with these subsidiaries' unsecured and unsubordinated
indebtedness.
When a particular series of Debt Securities is offered, we will prepare a
prospectus supplement setting forth the particular terms of the offered Debt
Securities. You should read this prospectus and any prospectus supplement
carefully before you make any decision to invest in the Debt Securities.
The aggregate initial public offering price of all Debt Securities which
may be sold under this prospectus shall not exceed $2,000,000,000 less the
aggregate initial public offering price of any securities of certain of our
funding entities which are sold under a separate prospectus which also
constitutes a part of the registration statement of which this prospectus
constitutes a part.
We will sell the Debt Securities directly, through agents, underwriters or
dealers as designated from time to time, or through a combination of such
methods. If any such agents, underwriters or dealers are involved in the sale of
the Debt Securities in respect of which this prospectus is being delivered, the
names of such agents, underwriters or dealers and any applicable agent's
commission, underwriter's discount or dealer's purchase price and the net
proceeds to us from such sale will be set forth in, or may be calculated on the
basis set forth in, the applicable prospectus supplement. See "Plan of
Distribution" for possible indemnification arrangements for any such agents,
underwriters and dealers.
This prospectus may not be used to consummate sales of the Debt Securities
without the delivery of one or more prospectus supplements.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed on the
adequacy or accuracy of this prospectus. Any representation to the contrary is a
criminal offense.
Investing in our Debt Securities involves risks. You should carefully
review "Risk Factors" beginning on page 6 of this prospectus.
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The date of this prospectus is , 2003.
TABLE OF CONTENTS
Page
----
About this Prospectus ..................................................... 3
Where You Can Find More Information ....................................... 3
Forward-Looking Statements ................................................ 4
PSEG Power LLC ............................................................ 5
Risk Factors .............................................................. 6
Use of Proceeds ........................................................... 12
Description of Debt Securities ............................................ 12
Plan of Distribution ...................................................... 31
Legal Opinions ............................................................ 32
Experts ................................................................... 32
2
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that PSEG Power LLC
filed with the Securities and Exchange Commission (the "SEC") utilizing a
"shelf" registration process. Under this shelf process, we may, from time to
time, sell the Debt Securities described in this prospectus in one or more
offerings of one or more series. The aggregate principal amount of Debt
Securities which we may offer under this prospectus is $2,000,000,000 less the
aggregate initial public offering price of any securities of certain of our
funding entities which are sold under a separate prospectus filed with the same
registration statement. Each time we sell Debt Securities, we will provide a
prospectus supplement that will contain specific information about the terms of
that offering. The prospectus supplement may also add, update or change
information contained in this prospectus. You should read both this prospectus
and any prospectus supplement together with the additional information described
under the heading "Where You Can Find More Information".
We believe that we have included or incorporated by reference all
information material to investors in this prospectus, but certain details that
may be important for specific investment purposes have not been included. To see
more detail, you should read the exhibits filed with or incorporated by
reference into the registration statement.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports and other information with
the SEC. You may read and copy any material on file with the SEC at the SEC's
Public Reference Room at 450 Fifth Street, N.W., Judiciary Plaza, Washington,
D.C. 20549. Our filings are also available to the public over the Internet at
the SEC's web site at http://www.sec.gov. Please call the SEC at 1-800-SEC-0330
for further information on the Public Reference Room.
The SEC allows us to "incorporate by reference" information that we file
with it, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference or
deemed incorporated by reference is an important part of this prospectus, and
information that we file later with the SEC will be deemed to automatically
update and supersede this incorporated information. We incorporate by reference
the documents listed below and any future filings made with the SEC under
Sections 13(a), 13(c), 14, or 15(d) of the Securities Exchange Act of 1934 prior
to the termination of any particular offering of Debt Securities.
o Our Annual Report on Form 10-K for the year ended December 31, 2002;
o Our Quarterly Report on Form 10-Q for the quarter ended March 31,
2003; and
o Our Current Reports on Form 8-K dated January 28, 2003, April 15,
2003 and June 17, 2003.
You can get a free copy of any of the documents incorporated by reference
by making an oral or written request directed to:
J. Brian Smith
Director, Investor Relations
PSEG Services Corporation
80 Park Plaza, 6th Floor
Newark, NJ 07102
Telephone (973) 430-6564
You should rely only on the information contained or incorporated by
reference or deemed to be incorporated by reference in this prospectus or in the
prospectus supplement. We have not authorized anyone else to provide you with
different or additional information. You should not rely on any other
information or representations. Our affairs may change after this prospectus and
the prospectus supplement are distributed. You should not assume that the
information in this prospectus and the prospectus supplement are accurate as of
any date other than the dates on the front of those documents. You should read
all information supplementing this prospectus.
3
FORWARD-LOOKING STATEMENTS
This prospectus, including documents incorporated by reference or deemed
to be incorporated by reference, includes "forward-looking statements" within
the meaning of the Private Securities Litigation Reform Act of 1995. All
statements, other than statements of historical facts, included in this
prospectus that address activities, events or developments that we expect or
anticipate will or may occur in the future, including such matters as our
projections, future capital expenditures, business strategy, competitive
strengths, goals, expansion, market and industry developments and the growth of
our businesses and operations, are forward-looking statements. When used herein
or in documents incorporated by reference or deemed to be incorporated by
reference, the words "will", "anticipate", "intend", "estimate", "believe",
"expect", "plan", "hypothetical", "potential", "forecast", "project", variations
of such words and similar expressions are intended to identify forward-looking
statements. These statements are based on assumptions and analyses made by us in
light of our experience and our perception of historical trends, current
conditions and expected future developments as well as other factors we believe
are appropriate under the circumstances. However, actual results and
developments may differ materially from our expectations and predictions due to
a number of risks and uncertainties, many of which are beyond our control. The
following review of factors should not be construed as exhaustive:
o credit, commodity, interest rate, counterparty and other financial
market risks;
o liquidity and the ability to access capital and credit markets;
o acquisitions, divestitures, mergers, restructurings or strategic
initiatives that change our structure;
o business combinations among competitors and major customers that
could change our financial position, results of operations or net
cash flows;
o general economic conditions including inflation;
o changes to accounting standards or generally accepted accounting
principles, which may require adjustments to financial statements;
o changes in tax laws and regulations which could affect cash flows
and business prospects;
o energy obligations, available supply and trading risks;
o changes in the electric industry including changes to power pools;
o regulation and availability of power transmission facilities that
impact our ability to deliver output to customers;
o growth in costs and expenses;
o environmental regulation that significantly impacts operations;
o changes in rates of return on overall debt and equity markets and
their impact on the value of pension assets and our Nuclear
Decommissioning Trust Fund;
o changes in political conditions, recession, acts of war or
terrorism;
o insufficient insurance coverage;
o involvement in lawsuits including liability claims and commercial
disputes;
o inability to attract and retain management and other key employees;
o ability to service debt as a result of any of the aforementioned
events;
o adverse changes in the market place for energy prices;
o excess supply due to overbuild in the industry;
o generation operating performance that may fall below projected
levels;
4
o substantial competition from well capitalized participants in the
national and regional energy markets;
o inability to effectively manage trading risk;
o margin posting requirements;
o availability of fuel at reasonable prices;
o activities of competitors or major customers;
o changes in product or sourcing mix;
o tardy or unsuccessful acquisition, construction and development;
o changes in technology that make power generation assets less
competitive;
o changes in regulation and security measures at our nuclear
facilities;
o regulatory changes regarding the cost responsibility for nuclear
decommissioning; and
o other factors, many of which are beyond our control.
Consequently, all of the forward-looking statements made in this
prospectus are qualified by these cautionary statements and we cannot assure you
that the results or developments anticipated by us will be realized or, even if
realized, will have the expected consequences to or effects on us or our
business prospects, financial condition or results of operations. You should not
place undue reliance on these forward-looking statements in making your
investment decision. We expressly disclaim any obligation or undertaking to
release publicly any updates or revisions to these forward-looking statements to
reflect events or circumstances that occur or arise or are anticipated to occur
or arise after the date hereof. In making an investment decision regarding the
Debt Securities, we are not making, and you should not infer, any representation
about the likely existence of any particular future set of facts or
circumstances. The forward-looking statements contained in this prospectus, any
prospectus supplement and the documents incorporated by reference or deemed to
be incorporated by reference into this prospectus and any prospectus supplement
are intended to qualify for the safe harbor provisions of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities Exchange
Act of 1934, as amended.
PSEG POWER LLC
We are one of the largest independent electric generating and wholesale
energy marketing and trading companies in the United States. Through our three
principal operating subsidiaries, PSEG Fossil LLC ("Fossil"), which owns our
fossil generating facilities and operates a majority of them; PSEG Nuclear LLC
("Nuclear"), which owns our nuclear generating facilities and operates a
majority of them; and PSEG Energy Resources & Trade LLC ("ER&T"), which conducts
our wholesale energy marketing and trading activities, we generate and market
electricity, capacity, ancillary services and natural gas products on a
wholesale basis. As of March 31, 2003, our generation portfolio consisted of
approximately 13,055 megawatts ("MW") of installed capacity. Our target market,
which we refer to as the Super Region, extends from Maine to the Carolinas and
the Atlantic Coast to Indiana, encompassing approximately 36% of the nation's
power consumption. With approximately 20% of installed capacity, we are the
single largest power supplier in our primary market, the Pennsylvania-New
Jersey-Maryland Power Pool ("PJM"), which is one of the nation's largest and
most well developed energy markets.
We seek to continually maximize the value of our generation portfolio
through the centralized control of its operations and its integration with our
trading, fuel procurement, marketing and risk management expertise. Our electric
generation portfolio is diversified by fuel source and market segment and we
have demonstrated expertise in natural gas procurement.
We began operating as a deregulated energy supplier in 1999. On August 21,
2000, we acquired ownership of the electric generation portfolio of our utility
affiliate, Public Service Electric and Gas Company ("PSE&G"), New Jersey's
largest public utility. We sell energy on a wholesale basis under contract to
power marketers and load serving entities and we bid energy, capacity and
ancillary services into the wholesale energy market. For the period ending July
31, 2003, we have contracted to sell energy to various basic generation service
obligation ("BGS") suppliers in the New Jersey market. In addition, we are a
direct supplier to one utility, not PSE&G, for a limited portion of its retail
load.
5
As a result of the BGS auction held in February 2003, we entered into
hourly energy price contracts to be a direct supplier of certain large customers
for a ten-month period beginning August 1, 2003. We also entered into contracts
with third parties who are direct suppliers of New Jersey's electric
distribution companies. Through these seasonally-adjusted fixed price contracts,
we will indirectly serve New Jersey's smaller commercial and residential
customers for ten-month and 34-month periods beginning August 1, 2003. We
believe that our obligations under these contracts are reasonably balanced by
our available supply.
In addition to the BGS-related contracts noted above, we have various
contracts to provide service to municipal electric utilities that run through
2007, a contract to supply power through 2003 to Niagara Mohawk Power
Corporation from our Albany Steam Station and various supply contracts, ranging
from one through four years, related to our recently acquired Connecticut
generating stations.
We are a wholly-owned subsidiary of Public Service Enterprise Group
Incorporated ("PSEG"). PSEG is an exempt public utility holding company and one
of the leading providers of energy and energy-related services in the nation.
PSEG has three other direct, wholly-owned subsidiaries: PSE&G, PSEG Energy
Holdings L.L.C. ("Energy Holdings") and PSEG Services Corporation ("Services").
PSE&G is New Jersey's largest public utility and is engaged principally in the
transmission, distribution and sale of electric energy and gas service in New
Jersey. Energy Holdings participates nationally and internationally in
energy-related lines of business through its subsidiaries. Services provides
corporate support and managerial and administrative services to PSEG and its
affiliates.
We are a Delaware limited liability company located at 80 Park Plaza,
Newark, New Jersey 07102; our telephone number is 973-430-7000. In this
prospectus, unless otherwise indicated, "we", "our" and "us" refer to PSEG Power
LLC and its consolidated subsidiaries (for periods prior to August 21, 2000, "
Power," "we," "us" or "our" also includes PSE&G).
Consolidated Ratios of Earnings to Fixed Charges
Our consolidated ratios of earnings to fixed charges for each of the
periods indicated is as follows:
Years Ended December 31,
Three Months Ended -------------------------------------------------
March 31, 2003 2002 2001 2000 1999 1998
------------------ ---- ---- ---- ---- ----
Ratios of Earnings to
Fixed Charges(1) 5.69 4.10 3.73 3.42 7.29 2.46
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1 The term "earnings" shall be defined as pre-tax income from continuing
operations in accordance with Regulation S-K. Add to pre-tax income the
amount of fixed charges adjusted to exclude (a) the amount of any interest
capitalized during the period and (b) the actual amount of any preferred
stock dividend requirements of majority-owned subsidiaries which were
included in such fixed charges amount but not deducted in the
determination of pre-tax income.
You can obtain additional information about us in the reports and other
documents incorporated by reference in this prospectus. See "Where You Can Find
More Information."
RISK FACTORS
In addition to the information, including risk factors, contained in the
documents incorporated by reference or elsewhere in this prospectus, prospective
investors should carefully consider the risks described below before making a
decision to purchase the Debt Securities. Such factors could have a material
adverse effect on our business, prospects, financial condition, results of
operations or net cash flows. Such factors could affect actual results and cause
such results to differ materially from those expressed in any forward-looking
statements made by, or on behalf of us.
Credit, Commodity and Financial Market Risks May Have an Adverse Impact
The revenues generated by the operation of our generating stations are
subject to market risks that are beyond our control. Our generation output will
either be used to satisfy our wholesale contracts or be sold into the
competitive power markets or under other bilateral contracts. Participants in
the competitive power markets are not guaranteed any specified rate of return on
their capital investments through recovery of mandated rates payable by
purchasers of electricity. Although a majority of our revenue is generated by
the BGS contract with the various direct bidders of the New Jersey BGS Auction
and from bilateral contracts for the sale of electricity with third-party load
serving entities and power marketers, our revenues and results of operations
will be dependent upon prevailing market prices for energy, capacity and
ancillary services in the markets we serve.
6
Among the factors that will influence the market prices for energy,
capacity and ancillary services are:
o the extent of additional supplies of capacity, energy and ancillary
services from current competitors or new market entrants, including
the development of new generation facilities that may be able to
produce electricity less expensively;
o changes in the rules set by regulatory authorities with respect to
the manner in which electricity sales will be priced;
o transmission congestion and access in PJM and/or other competitive
markets;
o the operation of nuclear generation plants in PJM and other
competitive markets beyond their presently expected dates of
decommissioning;
o prevailing market prices for enriched uranium, fuel oil, coal and
natural gas and associated transportation costs;
o fluctuating weather conditions;
o reduced growth rate in electricity usage as a result of factors such
as national and regional economic conditions and the implementation
of conservation programs; and
o changes in regulations applicable to PJM and other ISOs.
As a result of the BGS auction, we have entered into contracts with the
direct suppliers of the New Jersey electric utilities, including PSE&G. These
bilateral contracts are subject to credit risk. This credit risk relates to the
ability of counterparties to meet their payment obligations for the power
delivered under each BGS contract. Any failure to collect these payments under
the BGS contracts with counterparties could have a material impact on our
results of operations, cash flows, and financial position.
Energy Obligations, Available Supply and Trading Risks May Have an Adverse
Impact
Our energy trading and marketing business frequently involves the
establishment of energy trading positions in the wholesale energy markets on
long-term and short-term bases. To the extent that we have forward purchase
contracts to provide or purchase energy in excess of demand, a downturn in the
markets is likely to result in a loss from a decline in the value of such long
positions as we attempt to sell energy in a falling market. Conversely, to the
extent that we enter into forward sales contracts to deliver energy we do not
own, or take short positions in the energy markets, an upturn in the energy
markets is likely to expose us to losses as we attempt to cover our short
positions by acquiring energy in a rising market.
If the strategy we utilize to hedge our exposures to these various risks
is not effective, we could incur significant losses. Our substantial energy
trading positions can also be adversely affected by the level of volatility in
the energy markets that, in turn, depends on various factors, including weather
in various geographical areas and short-term supply and demand imbalances, which
cannot be predicted with any certainty.
In addition, we are exposed to the risk that counterparties will not
perform their obligations. Although we have devoted significant resources to
develop our risk management policies and procedures and counterparty credit
requirements and will continue to do so in the future, we can give no assurance
that losses from our energy trading activities will not have a material adverse
effect on our business, prospects, results of operations, financial condition or
net cash flows.
In connection with our energy trading business, we must meet certain
credit quality standards as are required by counterparties. Standard industry
contracts generally require trading counterparties to maintain investment grade
ratings. These same contracts provide reciprocal benefits to us. If we lose our
investment grade credit rating, ER&T would have to provide collateral (letters
of credit or cash), which would significantly impact the energy trading
business. This would increase our costs of doing business and limit our ability
to successfully conduct our energy trading operations.
The Electric Energy Industry is Undergoing Substantial Change
The electric energy industry in the State of New Jersey and across the
country is undergoing major transformations. As a result of deregulation and the
unbundling of energy supplies and services, the gas and electric retail markets
are now open to competition from other suppliers. Increased competition from
these
7
suppliers could reduce the quantity of our wholesale sales and have a negative
impact on earnings and cash flows. We are affected by many issues that are
common to the electric industry such as:
o deregulation, the unbundling of energy supplies and services and the
establishment of a competitive energy marketplace for products and
services;
o the possibility of reregulation in some deregulated markets;
o energy sales retention and growth;
o revenue and price stability and growth;
o nuclear operations and decommissioning;
o increased capital investments attributable to environmental
regulations;
o managing energy trading operations;
o ability to complete development or acquisition of current and future
investments;
o managing electric generation operations in locations outside of our
traditional utility service territory;
o exposure to market price fluctuations and volatility;
o regulatory restrictions on affiliate transactions; and
o debt and equity market concerns.
Generation Operating Performance May Fall Below Projected Levels
The risks associated with operating power generation facilities (each of
which could result in performance below expected capacity levels) include:
o breakdown or failure of equipment or processes;
o disruptions in the transmission of electricity;
o labor disputes;
o fuel supply interruptions;
o limitations which may be imposed by environmental or other
regulatory requirements;
o permit limitations; and
o operator error or catastrophic events such as fires, earthquakes,
explosions, floods, acts of terrorism or other similar occurrences.
Operation below expected capacity levels may result in lost revenues,
increased expenses and penalties.
Individual facilities may be unable to meet operating and financial
obligations resulting in reduced cash flow.
We Are Subject to Substantial Competition From Well Capitalized Participants in
the National Energy Markets
We and our subsidiaries are subject to substantial competition in the
United States from merchant generators, domestic and multi-national utility
generators, fuel supply companies, engineering companies, equipment
manufacturers and affiliates of other industrial companies. Restructuring of
energy markets and the sale of utility-owned assets, is creating opportunities
for, and substantial competition from, well-capitalized entities which may
adversely affect our ability to make investments on favorable terms and achieve
our growth objectives. Increased competition could contribute to a reduction in
prices offered for power and could result in lower returns which may affect our
ability to service our outstanding indebtedness.
Deregulation may continue to accelerate the current trend toward
consolidation among domestic utilities and could also result in the splitting of
vertically-integrated utilities into separate generation, transmission and
distribution businesses. As a result, additional competitors could become active
in the independent power industry.
8
Because We are a Holding Company, our Ability to Service Our Debt Could Be
Limited
We are a holding company with no material assets other than the stock or
membership interests of our subsidiaries. Accordingly, all of our operations are
conducted by our subsidiaries. We depend on our subsidiaries' cash flow and our
access to capital in order to service our indebtedness. The project-related debt
agreements of subsidiaries generally restrict their ability to pay dividends,
make cash distributions or otherwise transfer funds to us. These restrictions
may include achieving and maintaining financial performance or debt coverage
ratios, absence of events of default, or priority in payment of other current or
prospective obligations.
Our subsidiaries have financed some investments using non-recourse project
level financing. Each non-recourse project financing is structured to be repaid
out of cash flows provided by the investment. In the event of a default under a
financing agreement which is not cured, the lenders would generally have rights
to the related assets. In the event of foreclosure after a default, our
subsidiary may lose its equity in the asset or may not be entitled to any cash
that the asset may generate.
We can give no assurances that our current and future capital structure,
operating performance or financial condition will permit us to access the
capital markets or to obtain other financing at the times, in the amounts and on
the terms necessary or advisable for us to successfully carry out our business
strategy or to service our indebtedness.
Power Transmission Facilities May Impact Our Ability to Deliver Our Output to
Customers
If transmission is disrupted, or if transmission capacity is inadequate,
our ability to sell and deliver our electric energy products may be adversely
impacted. If a region's power transmission infrastructure is inadequate, our
ability to generate revenues may be limited.
Regulatory Issues Significantly Impact Our Operations
The electric power generation business is subject to substantial
regulation and permitting requirements from federal, state and local
authorities. We are required to comply with numerous laws and regulations and to
obtain numerous governmental permits in order to operate our generation
stations.
We believe that we have obtained all material energy-related federal,
state and local approvals including those required by the Nuclear Regulatory
Commission (the "NRC"), currently required to operate our generation stations.
Although not currently required, additional regulatory approvals may be required
in the future due to a change in laws and regulations or for other reasons. No
assurance can be given that we will be able to obtain any required regulatory
approval that we may require in the future, or that we will be able to obtain
any necessary extension in receiving any required regulatory approvals. If we
fail to obtain or comply with any required regulatory approvals, there could be
a material adverse effect on our ability to operate our generation stations or
to sell electricity to third parties.
We are subject to pervasive regulation by the NRC with respect to the
operation of our nuclear generation stations. Such regulation involves testing,
evaluation and modification of all aspects of plant operation in light of NRC
safety and environmental requirements. Continuous demonstrations to the NRC that
plant operations meet applicable requirements are also required. The NRC has the
ultimate authority to determine whether any nuclear generation unit may operate.
We can give no assurance that existing regulations will not be revised or
reinterpreted, that new laws and regulations will not be adopted or become
applicable to us or any of our generation stations or that future changes in
laws and regulations will not have a detrimental effect on our business.
Environmental Regulation May Limit Our Operations
We are required to comply with numerous statutes, regulations and
ordinances relating to the safety and health of employees and the public, the
protection of the environment and land use. These statutes, regulations and
ordinances are constantly changing. While we believe that we have obtained all
material environmental-related approvals required as of the date hereof to own
and operate our facilities or that such approvals have been applied for and will
be issued in a timely manner, we may incur significant additional costs because
of compliance with these requirements. Failure to comply with environmental
statutes, regulations and ordinances could have a material effect on us,
including potential civil or criminal liability and the imposition of clean-up
liens or fines and expenditures of funds to bring our facilities into
compliance.
9
We can give no assurance that we will be able to:
o obtain all required environmental approvals that we do not yet have
or that may be required in the future;
o obtain any necessary modifications to existing environmental
approvals;
o maintain compliance with all applicable environmental laws,
regulations and approvals; or
o recover any resulting costs through future sales.
Delay in obtaining or failure to obtain and maintain in full force and
effect any such environmental approvals, or delay or failure to satisfy any
applicable environmental regulatory requirements, could prevent construction of
new facilities, operation of our existing facilities or sale of energy there
from or could result in significant additional cost to us.
We Are Subject to More Stringent Environmental Regulation than Many of Our
Competitors
Our facilities are subject to both federal and state pollution control
requirements. Most of our generating facilities are located in the State of New
Jersey. In particular, New Jersey's environmental programs are generally
considered to be particularly stringent in comparison to similar programs in
other states. As such, there may be instances where the facilities located in
New Jersey are subject to more stringent and therefore more costly pollution
control requirements than competitive facilities in other states.
Insurance Coverage May Not Be Sufficient
We have insurance for our generation stations, including all-risk property
damage insurance, commercial general public liability insurance, boiler and
machinery coverage, nuclear liability and, for our nuclear units, replacement
power and business interruption insurance in amounts and with deductibles that
we consider appropriate. We can give no assurance that such insurance coverage
will be available in the future on commercially reasonable terms nor that the
insurance proceeds received for any loss of or any damage to any of the
generation stations will be sufficient to permit us to continue to make payments
on our debt. Additionally, certain properties that we own may not be insured in
the event of a terrorist activity.
Acquisition, Construction and Development Activities May Not Be Successful
We may seek to acquire, develop and construct new energy projects, the
completion of any of which is subject to substantial risk. Such activity can
require us to expend significant sums for preliminary engineering, permitting,
fuel supply, legal and other expenses in preparation for competitive bids or
before it can be established whether a project is economically feasible.
The construction, expansion or refurbishment of a power generation
facility may involve equipment and material supply interruptions, labor
disputes, unforeseen engineering, environmental and geological problems and
unanticipated cost overruns. The proceeds of any insurance, vendor warranties or
performance guarantees may not be adequate to cover lost revenues, increased
expenses or payments of liquidated damages. In addition, some power purchase
contracts permit the customer to terminate the related contract, retain security
posted by the developer as liquidated damages or change the payments to be made
to the subsidiary or the project affiliate in the event certain milestones, such
as commencing commercial operation of the project, are not met by specified
dates. If project start-up is delayed and the customer exercises these rights,
the project may be unable to fund principal and interest payments under our
project financing agreements. We can give no assurance that we will obtain
access to the substantial debt and equity capital required to develop and
construct new generation projects or to refinance existing projects to supply
anticipated future demand.
Changes in Technology May Make Our Power Generation Assets Less Competitive
A key element of our business plan is that generating power at central
power plants produces electricity at relatively low cost. There are other
technologies that produce electricity, most notably fuel cells, microturbines,
windmills and photovoltaic (solar) cells. It is possible that advances in
technology will reduce the cost of alternative methods of producing electricity
to a level that is competitive with that of most central station electric
production. If this were to happen, our market share could be eroded and the
value of our power plants
10
could be significantly impaired. Changes in technology could also alter the
channels through which retail electric customers buy electricity, thereby
affecting our financial results.
Recession, Acts of War, Terrorism Could Negatively Impact Our Business
The consequences of a prolonged recession and adverse market conditions
may include the continued uncertainty of energy prices and the capital and
commodity markets. We cannot predict the impact of any continued economic
slowdown or fluctuating energy prices; however, such impact could have a
material adverse effect on our financial condition, results of operations and
net cash flows.
Like other operators of major industrial facilities, our generation plants
may be targets of terrorist activities that could result in disruption of our
ability to produce or distribute some portion of our energy products. Any such
disruption could result in a significant decrease in revenues and/or significant
additional costs to repair, which could have a material adverse impact on our
financial condition, results of operation and net cash flows.
The Indenture Restricts Our Ability to Enter into Certain Transactions
The Indenture restricts our ability and the ability of our Restricted
Subsidiaries (as defined below under "Description of Debt Securities") to, among
other things:
o in the case of our Restricted Subsidiaries, incur certain
indebtedness;
o create or permit to exist liens;
o in the case of our Restricted Subsidiaries, create or permit to
exist dividend or payment restrictions with respect to us;
o sell assets; and
o engage in mergers and consolidations.
These restrictions may limit our ability to finance future operations,
respond to changing business and economic conditions, secure any needed
additional financing and engage in opportunistic transactions. See "Description
of Debt Securities -- Selected Indenture Covenants."
PSEG Could Exercise Its Control Over Us to the Detriment of Holders of the Debt
Securities
Our sole limited liability company member, PSEG, controls the election of
our directors and all other matters submitted for member approval and has
control over our management and affairs. In circumstances involving a conflict
of interest between PSEG, as the sole member, on the one hand, and our
creditors, on the other, we can give no assurance that PSEG would not exercise
its power to control us in a manner that would benefit PSEG to the detriment of
our creditors, including the holders of the Debt Securities.
The Indenture imposes no limitations on our ability to pay dividends or to
make other payments to PSEG or on our ability to enter into transactions with
PSEG or our other affiliates.
Fraudulent Transfer Statutes and Similar Limitations May Limit Your Rights as a
Holder
Each of our Restricted Subsidiaries will guarantee our obligations on the
Debt Securities (each a "Subsidiary Guarantee"). See "Description of Debt
Securities -- Guarantee of Debt Securities."
Under federal and state fraudulent transfer laws, a court could find that
the Subsidiary Guarantee provided by a Restricted Subsidiary constituted a
fraudulent conveyance by that Restricted Subsidiary. To do so, a court would
typically have to find that, at the time the Subsidiary Guarantee was issued,
the relevant Restricted Subsidiary:
o issued the Subsidiary Guarantee with the intent of hindering,
delaying or defrauding its current or future creditors; or
o (a) received less than fair consideration or reasonably equivalent
value for incurring the indebtedness represented by its Subsidiary
Guarantee; and (b) either (i) was insolvent or was rendered
insolvent by reason of the issuance of the Subsidiary Guarantee,
(ii) was engaged, or about to engage, in a business or transaction
for which its assets were unreasonably small or (iii) intended to
incur, or believed or should have believed it would incur, debts
beyond its ability to pay as such debts mature.
11
Many of the foregoing terms are defined in or interpreted under those
fraudulent transfer statutes.
Different jurisdictions define "insolvency" differently. However, an
entity generally would be considered insolvent at the time it incurred any
particular obligation if (1) its liabilities exceeded its assets, at a fair
valuation, or (2) the present saleable value of its assets is less than the
amount required to pay its total existing debts and liabilities (including any
probable liability related to contingent liabilities) as they become absolute or
matured. We cannot assure you of the standard a court would apply in order to
determine whether any Restricted Subsidiary was "insolvent" as of the date the
applicable Subsidiary Guarantee was issued, or that regardless of the method of
valuation, a court would not determine, regardless of whether such Restricted
Subsidiary was insolvent on the date the Subsidiary Guarantee was issued, that
the payments constituted fraudulent transfers on another ground.
If a court were to make any such finding, it could:
o avoid all or a portion of the relevant Restricted Subsidiary's
obligations on the Subsidiary Guarantees;
o subordinate the relevant Restricted Subsidiary's obligations on the
Subsidiary Guarantees to obligations owed to its other existing and
future creditors, entitling those creditors to be paid in full
before any payment is made on the relevant Subsidiary Guarantee;
and/or
o take other actions detrimental to you, including invalidating the
relevant Subsidiary Guarantee.
In that event, we cannot assure you that you would receive any payment
under the Subsidiary Guarantee of the relevant Restricted Subsidiary.
There is No Public Market for the Debt Securities
We do not intend to list any series of the Debt Securities on any U.S.
securities exchange. We can give no assurance concerning the liquidity of any
market that may develop for the Debt Securities, the ability of any investor to
sell the Debt Securities or the price at which investors would be able to sell
their Debt Securities.
USE OF PROCEEDS
Unless we state otherwise in the accompanying prospectus supplement, the
net proceeds from the sale of the Debt Securities will be added to our general
funds and will be used for general corporate purposes.
DESCRIPTION OF DEBT SECURITIES
We may issue our Debt Securities from time to time. The Debt Securities
will be issued under an Indenture dated as of April 16, 2001, as amended and
supplemented by the First Supplemental Indenture dated as of March 13, 2002 (the
"Indenture"), between us and The Bank of New York as Trustee (the "Trustee").
The Indenture is filed as an exhibit to the registration statement. The
Indenture is subject to and governed by the Trust Indenture Act of 1939, as
amended (the "TIA"). Selected provisions of the Indenture have been summarized
below. This summary is not complete. You should read the Indenture for
provisions that may be important to you. In the summary below, references to
section numbers of the Indenture are included so that you can easily locate
these provisions. Capitalized terms used in the summary have the meanings
specified in the Indenture. Parenthetical references below are to the Indenture
or to the TIA, as applicable.
General
The Debt Securities will be our senior unsecured obligations. They will
rank equally with all of our other unsecured and unsubordinated indebtedness.
Each series of Debt Securities will be guaranteed, jointly and severally, by
Fossil, Nuclear and ER&T (the "Subsidiary Guarantors") as described below. The
Subsidiary Guarantees will rank equally in right of payment to all existing and
future senior unsecured indebtedness of the Subsidiary Guarantors. Other than
intercompany debt, the Subsidiary Guarantors currently have no indebtedness
outstanding. As of March 31, 2003, we had issued under the Indenture and the
Subsidiary Guarantors had guaranteed senior indebtedness totaling $2.4 billion.
In addition, as of that date, we had issued and the Subsidiary Guarantors had
guaranteed an aggregate total of $124.0 million of our pollution control notes.
We have the ability to issue Debt Securities with terms different from
those of Debt Securities previously issued and, without the consent of the
holders thereof, to reopen a previous series of Debt Securities and issue
additional Debt Securities of such series (unless such reopening was restricted
when such series was created).
12
Provisions Applicable to Particular Series
The Indenture provides that any Debt Securities proposed to be sold
pursuant to this prospectus and an accompanying prospectus supplement (the
"Offered Securities"), as well as other of our unsecured debt securities, may be
issued under the Indenture in one or more series, as authorized by us from time
to time. The particular terms of such Offered Securities and any modifications
of or additions to the general terms of the Debt Securities as described in this
prospectus that may be applicable in the case of the Offered Securities will be
described in the applicable prospectus supplement. Accordingly, for a
description of the terms of any Offered Securities, you should refer to both the
prospectus supplement for that series and the description of Debt Securities set
forth in this prospectus.
You should refer to the prospectus supplement for the following
information for each particular series of Offered Securities:
o The title of such Debt Securities.
o The aggregate principal amount of such Debt Securities and any limit
on the aggregate principal amount of Debt Securities of such series.
o If other than the principal amount thereof, the portion of the
principal amount thereof payable upon declaration of acceleration of
the maturity thereof or the method by which such portion will be
determined.
o The date or dates, or the method by which such date or dates will be
determined or extended, on which the principal of such Debt
Securities will be payable.
o The rate or rates at which such Debt Securities will bear interest,
if any, or the method by which such rate or rates will be
determined, the date or dates from which such interest will accrue
or the method by which such date or dates will be determined, the
date or dates on which such interest, if any, will be payable and
the Regular Record Date or Dates, if any, for the interest payable
on any Registered Security on any Interest Payment Date, or the
method by which any such date will be determined, and the basis upon
which interest will be calculated if other than that of a 360-day
year of twelve 30-day months.
o The date or dates on which or the period or periods within which,
the price or prices at which and the other terms and conditions upon
which, such Debt Securities may be redeemed, in whole or in part, at
our option and whether we are to have that option.
o Our obligation, if any, to redeem, repay or purchase such Debt
Securities, in whole or in part, pursuant to any sinking fund or
analogous provision or at the option of a holder thereof and the
period or periods within which or the date or dates on which, the
price or prices at which and the other terms and conditions upon
which, such Debt Securities will be so redeemed, repaid or
purchased.
o Whether such Debt Securities are to be issuable as Registered
Securities, Bearer Securities (with or without coupons) or both, any
restrictions applicable to the offer, sale or delivery of Bearer
Securities and the terms, if any, upon which Bearer Securities of
the series may be exchanged for Registered Securities of the series
and vice versa (if permitted by applicable laws and regulations),
whether such Debt Securities will be issuable initially in temporary
global form, whether any such Debt Securities will be issuable in
permanent global form with or without coupons and, if so, whether
beneficial owners of interests in any such permanent global security
may exchange such interests for Debt Securities of such series in
certificated form and of like tenor of any authorized form and
denomination and the circumstances under which any such exchanges
may occur, if other than in the manner provided in the Indenture,
and, if Registered Securities are to be issuable as a global
security, the identity of the depositary for such Debt Securities.
o Whether the amount of payments of principal of (or premium, if any)
or interest, if any, on such Debt Securities may be determined with
reference to an index, formula or other method (which index, formula
or method may be based on one or more currencies, commodities,
equity indices or other indices) and the manner in which such
amounts will be determined.
o The place or places, if any, other than or in addition to The City
of New York, where the principal of (and premium, if any) and
interest, if any, on such Debt Securities will be payable, where any
Registered Securities may be surrendered for registration of
transfer, where such Debt Securities may be surrendered for
exchange, where Debt Securities of a series that are convertible or
exchangeable
13
may be surrendered for conversion or exchange, as applicable, and
where notices or demands to or upon us in respect of such Debt
Securities and the Indenture may be served.
o The denomination or denominations in which such Debt Securities will
be issuable, if other than $1,000, or any integral multiple thereof,
in the case of Registered Securities and $5,000 in the case of
Bearer Securities.
o If other than the Trustee, the identity of each Security Registrar
and/or Paying Agent.
o The date as of which any Bearer Securities of the series and any
temporary Debt Security issued in globalform representing
Outstanding Securities of the series will be dated if other than the
date of original issuance of the first Debt Security of the series
to be issued.
o The applicability, if at all, to such Debt Securities of the
provisions of Article Fourteen of the Indenture described under " --
Satisfaction and Discharge, Defeasance and Covenant Defeasance" and
any provisions in modification of, in addition to or in lieu of any
of the provisions of such Article.
o The Person to whom any interest on any Registered Security of the
series will be payable, if other than the Person in whose name such
Registered Security (or one or more Predecessor Securities) is
registered at the close of business on the Regular Record Date for
such interest, the manner in which, or the Person to whom, any
interest on any Bearer Security of the series shall be payable, if
otherwise than upon presentation and surrender of the coupons
appertaining thereto as they severally mature, and the extent to
which, or the manner in which, any interest payable on a temporary
Debt Security issued in global form will be paid if other than in
the manner provided in the Indenture.
o If such Debt Securities are to be issuable in definitive form
(whether upon original issue or upon exchange of a temporary Debt
Security of such series) only upon receipt of certain certificates
or other documents or satisfaction of other conditions, the form
and/or terms of such certificates, documents or conditions.
o Whether and under what circumstances we will pay Additional Amounts,
as contemplated by Section 1004 of the Indenture, on such Debt
Securities to any holder who is not a United States person
(including any modification to the definition of such term as
contained in the Indenture as originally executed) in respect of any
tax, assessment or governmental charge and, if so, whether we will
have the option to redeem such Debt Securities rather than pay such
Additional Amounts (and the terms of any such option).
o The provisions, if any, granting special rights to the holders of
such Debt Securities upon the occurrence of such events as may be
specified.
o Any deletions from, modifications of or additions to the Events of
Default or covenants with respect to such Debt Securities (which
Events of Default or covenants are consistent with the Events of
Default or covenants set forth in the general provisions of the
Indenture).
o Whether such Debt Securities will be convertible into or
exchangeable for any other securities and, if so, the terms and
conditions upon which such Debt Securities will be so convertible or
exchangeable.
o Any other terms of such Debt Securities.
If applicable, the prospectus supplement will also set forth a discussion
of federal income tax considerations relevant to the Debt Securities being
offered.
For purposes of this prospectus, any reference to the payment of principal
of (or premium, if any) or interest, if any, on such Debt Securities will be
deemed to include mention of the payment of any Additional Amounts required by
the terms of such Debt Securities.
Debt Securities may provide for less than the entire principal amount
thereof to be payable upon declaration of acceleration of the maturity thereof
("Original Issue Discount Securities"). Federal income tax and other
considerations pertaining to any such Original Issue Discount Securities will be
discussed in the applicable prospectus supplement.
The Indenture also provides that there may be more than one Trustee
thereunder, each with respect to one or more different series of Debt
Securities. See " -- The Trustee" herein. At a time when two or more Trustees
are acting under the Indenture, each with respect to only certain series, the
term Debt Securities, as used herein, will mean the one or more series with
respect to which each respective Trustee is acting. In the event that there is
more than one Trustee under the Indenture, the powers and trust obligations of
each Trustee as described herein will extend only to the one or more series of
Debt Securities for which it is Trustee. If two or more
14
Trustees are acting under the Indenture, then the Debt Securities for which each
Trustee is acting would in effect be treated as if issued under separate
indentures.
The general provisions of the Indenture do not contain any provisions that
would limit our ability to incur indebtedness or that would afford holders of
Debt Securities protection in the event of a highly leveraged or similar
transaction. Reference is made to the prospectus supplement for information with
respect to any deletions from, modifications of or additions to the Events of
Default or the covenants that are described below, including any addition of a
covenant or other provision providing event risk or similar protection.
Denominations, Registration and Transfer
Debt Securities of a series may be issuable solely as Registered
Securities, solely as Bearer Securities or as both Registered Securities and
Bearer Securities. The Indenture also provides that Debt Securities of a series
may be issuable in global form. (Section 203) See "-- Book-Entry Debt
Securities". Unless otherwise provided in the prospectus supplement, Debt
Securities denominated in U.S. dollars (other than Global Securities, which may
be of any denomination) are issuable in denominations of $1,000, or any integral
multiples of $1,000, in the case of Registered Securities and in the
denomination of $5,000 in the case of Bearer Securities. (Section 302) Unless
otherwise indicated in the prospectus supplement, Bearer Securities will have
interest coupons attached. (Section 201)
Registered Securities will be exchangeable for other Registered Securities
of the same series. If (but only if) provided in the prospectus supplement,
Bearer Securities (with all unmatured coupons, except as provided below, and all
matured coupons which are in default) of any series may be similarly exchanged
for Registered Securities of the same series of any authorized denominations and
of a like aggregate principal amount and tenor. If so provided, Bearer
Securities surrendered in exchange for Registered Securities between a Regular
Record Date or a Special Record Date and the relevant date for payment of
interest will be surrendered without the coupon relating to such date for
payment of interest, and interest will not be payable in respect of the
Registered Security issued in exchange for such Bearer Security, but will be
payable only to the holder of such coupon when due in accordance with the terms
of the Indenture. Unless otherwise specified in the prospectus supplement,
Bearer Securities will not be issued in exchange for Registered Securities.
(Section 305)
Registered Securities of a series may be presented for registration of
transfer and Debt Securities of a series may be presented for exchange
o at each office or agency required to be maintained by us for payment
of such series as described in "-- Payment and Paying Agents," and
o at each other office or agency that we may designate from time to
time for such purposes.
No service charge will be made for any transfer or exchange of Debt
Securities, but we may require payment of any tax or other governmental charge
payable in connection therewith. (Section 305)
We will not be required to:
o issue, register the transfer of or exchange Debt Securities during a
period beginning at the opening of business 15 days before any
selection of Debt Securities of that series to be redeemed and
ending at the close of business on (A) the day of mailing of the
relevant notice of redemption if Debt Securities of the series are
issuable only as Registered Securities and (B) if Debt Securities of
the series are issuable as Bearer Securities, the day of the first
publication of the relevant notice of redemption, or, if Debt
Securities of the series are also issuable as Registered Securities
and there is no publication, the day of mailing of the relevant
notice of redemption;
o register the transfer of or exchange any Registered Security, or
portion thereof, called for redemption, except the unredeemed
portion of any Registered Security being redeemed in part;
o exchange any Bearer Security called for redemption, except to
exchange such Bearer Security for a Registered Security of that
series and like tenor that is simultaneously surrendered for
redemption; or
o issue, register the transfer of or exchange any Debt Security which
has been surrendered for repayment at the option of the holder,
except the portion, if any, of such Debt Security not to be so
repaid. (Section 305)
15
Payment and Paying Agents
Unless otherwise provided in the prospectus supplement, premium, if any,
and interest, if any, and Additional Amounts, if any, on Registered Securities
will be payable at any office or agency to be maintained by us in Newark, New
Jersey and New York, New York, except that at our option interest (including
Additional Amounts, if any) may be paid (1) by check mailed to the address of
the Person entitled thereto as such address shall appear in the Security
Register or (2) by wire transfer to an account maintained by the Person entitled
thereto as specified in the Security Register. (Sections 301, 1001 and 1002)
Unless otherwise provided in the prospectus supplement, payment of any
installment of interest on Registered Securities will be made to the Person in
whose name such Registered Security is registered at the close of business on
the Regular Record Date for such interest. (Section 307)
If Debt Securities of a series are issuable solely as Bearer Securities or
as both Registered Securities and Bearer Securities, unless otherwise provided
in the prospectus supplement, we will be required to maintain an office or
agency (1) outside the United States at which, subject to any applicable laws
and regulations, the principal of (and premium, if any) and interest, if any, on
such series will be payable and (2) in The City of New York for payments with
respect to any Registered Securities of such series (and for payments with
respect to Bearer Securities of such series in the limited circumstances
described below, but not otherwise). (Section 1002) The initial locations of
such offices and agencies will be specified in the prospectus supplement. Unless
otherwise provided in the prospectus supplement, principal of (and premium, if
any) and interest, if any, on Bearer Securities may be paid by wire transfer to
an account maintained by the Person entitled thereto with a bank located outside
the United States. (Sections 307 and 1002) Unless otherwise provided in the
prospectus supplement, payment of installments of interest on any Bearer
Securities on or before Maturity will be made only against surrender of coupons
for such interest installments as they severally mature. (Section 1001) Unless
otherwise provided in the prospectus supplement, no payment with respect to any
Bearer Security will be made at any office or agency we maintain in the United
States or by check mailed to any address in the United States or by transfer to
an account maintained with a bank located in the United States. Notwithstanding
the foregoing, payments of principal of (and premium, if any) and interest, if
any, on Bearer Securities payable in U.S. dollars will be made at the office of
our Paying Agent in The City of New York if (but only if) payment of the full
amount thereof in U.S. dollars at all offices or agencies outside the United
States is illegal or effectively precluded by exchange controls or other similar
restrictions. (Section 1002)
We may from time to time designate additional offices or agencies, approve
a change in the location of any office or agency and, except as provided above,
rescind the designation of any office or agency.
Selected Indenture Covenants
Limitations on Obligations
Restricted Subsidiaries. We will not permit any Restricted Subsidiary to,
directly or indirectly, Incur any Obligations (including, without limitation,
Acquired Obligations), except for
o the Subsidiary Guarantees;
o Obligations existing on the date of the Indenture;
o Obligations of ER&T related to the purchase and sale of fuel,
capacity, energy (including, but not limited to, electric power,
natural gas and coal), environmental credits or entitlements,
utility services, fuel, water, related transportation services and
other similar or related products and services in the ordinary
course of business;
o Obligations of Nuclear related to the purchase and sale of fuel and
related transportation services in the ordinary course of business;
o Permitted Hedging Obligations;
o Obligations incurred in exchange for, or the net proceeds of which
are used to refund, refinance, or replace Obligations described
under this "Limitations on Obligations", provided that the average
life of the refinancing Obligations shall not be shorter than the
average life of the Obligations being refinanced and the principal
amount of the refinancing obligations shall not exceed the principal
amount of the Obligations being so refinanced; and
16
o Obligations to us or any other Restricted Subsidiary which are
subordinated to the Subsidiary Guarantee with respect to the
guaranteed Debt Securities of the Restricted Subsidiary incurring
the Obligations.
The foregoing notwithstanding, Restricted Subsidiaries may Incur
Obligations not otherwise permitted by the preceding paragraph in an aggregate
amount outstanding after giving effect to such Incurrence not to exceed at any
one time the greater of $250 million or 15% of Consolidated Net Tangible Assets
as of the last day of the preceding month.
Subsidiaries Other Than Restricted Subsidiaries. Except for parental
guarantees of debt service reserves, surety bonds, equity guarantees,
performance bonds and bid bonds entered into in the ordinary course of business
aggregating at any one time not more than $100 million, we shall not permit any
Subsidiary that is not a Restricted Subsidiary to, directly or indirectly, Incur
any Obligations (including, without limitation, Acquired Obligations) that are
recourse to us or any Restricted Subsidiary. For the purposes of this section,
preferred securities issued by our special purpose subsidiaries will not be
considered to be recourse to us. (Section 1008)
Limitation on Liens
We may not, and may not permit any Restricted Subsidiary to, directly or
indirectly, create, incur, assume or permit to exist any Lien of any kind on or
with respect to any Property or interest in our Property or that of any of our
Restricted Subsidiaries or any income or profits therefrom (in each case,
whether the Property is owned at the date of the Indenture or thereafter
acquired), unless the Debt Securities are secured equally and ratably with (or
prior to) any and all other Obligations secured by the Lien, provided, however,
that these restrictions shall not apply to or prevent the creation, incurrence,
assumption or existence of Permitted Liens.
Permitted Liens shall include:
o Liens existing on the date of the Indenture;
o Liens to secure or provide for the payment of all or part of the
purchase price of any Property or the cost of construction or
improvement thereof; provided that no such Lien shall extend to or
cover any other of our or our Restricted Subsidiaries' Property;
o Liens existing on Property at the time such Property is acquired by
us or any Restricted Subsidiary; provided that such Liens (i) are
not created, Incurred or assumed in contemplation of such Property
being acquired and (ii) do not extend to or cover any other of our
or our Restricted Subsidiaries' Property;
o Liens existing on Property of any entity at the time such entity is
merged with or into or consolidated with us or a Restricted
Subsidiary; provided that such Liens (i) are not created, Incurred
or assumed in contemplation of such merger or consolidation and (ii)
do not extend to any other of our or our Restricted Subsidiaries'
Property;
o Liens securing Permitted Hedging Obligations;
o Liens for taxes, assessments or governmental charges that are not
yet delinquent or that are being contested in good faith by any
appropriate legal proceedings promptly instituted and diligently
conducted and for which a reserve or other appropriate reserve
provision, if any, as is required in conformity with GAAP shall have
been made;
o Liens arising by reason of any judgment, decree or order of any
court, so long as any such Lien is being contested in good faith and
is bonded or such judgment, decree or order does not exceed $50
million, and any appropriate legal proceedings that may have been
duly initiated for the review of such judgment, decree or order have
not been finally terminated or the period within which such
proceedings may be initiated has not expired;
o Liens to secure pledges or deposits made in the ordinary course of
business in connection with bids, tenders or contracts (other than
for payment of indebtedness) or to secure guarantees, statutory or
regulatory obligations or surety or performance bonds each made in
the ordinary course of business;
o Liens imposed by law such as carriers', warehousemen's and
mechanics' Liens, in each case arising in the ordinary course of
business and with respect to amounts not yet due or being contested
in good faith by appropriate legal proceedings promptly instituted
and diligently conducted and for which a reserve or other
appropriate provision, if any, as is required in conformity with
GAAP shall have been made;
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o Survey exceptions, encumbrances, easements or reservations of, or
rights of others for, rights of way, sewers, electric lines,
telegraph and telephone lines and other similar purposes, or zoning
or other restrictions as to the use of real properties incidental to
the conduct of the business or to the ownership of Properties which
were not incurred in connection with indebtedness or other
extensions of credit and which do not in the aggregate materially
and adversely affect the value of the Properties or materially
impair their use in the operation of the business;
o Liens securing letters of credit entered into in the ordinary course
of business;
o Liens to secure pollution control revenue bonds or industrial
revenue bonds;
o Liens securing Non-Recourse Obligations of Unrestricted
Subsidiaries;
o Liens granted on the capital stock of Unrestricted Subsidiaries for
the purpose of securing the Obligations of such Unrestricted
Subsidiaries;
o Liens pursuant to Capitalized Leases or Synthetic Leases permitted
to be entered into under the "Limitation on Obligations" covenant;
o Liens arising by reason of leases and subleases of Property pursuant
to a Sale/Leaseback Transaction allowed pursuant to the "Limitation
on Sale of Assets" covenant that do not materially interfere with
the ordinary conduct of our or any of our Restricted Subsidiaries'
business;
o Liens created in connection with worker's compensation, unemployment
insurance and other social security statutes or regulations;
o Liens by a Wholly-Owned Subsidiary to us or any Restricted
Subsidiary;
o Liens on Property, other than Capital Stock of Restricted
Subsidiaries, to secure Obligations so long as the sum of the amount
of outstanding Obligations secured by Liens incurred pursuant to
this provision does not exceed the greater of $250 million or 15% of
Consolidated Net Tangible Assets as of the end of the most recent
fiscal quarter for which financial statements are available; and
o The replacement, extension or renewal (or successive replacements,
extensions or renewals), as a whole or in part, of any Lien or of
any agreement referred to above or the replacement, extension or
renewal (not exceeding the outstanding principal amount of
Indebtedness secured thereby together with any premium, interest,
fee or expense payable in connection with any such replacement,
extension or renewal) of Indebtedness secured thereby; provided that
such replacement, extension or renewal is limited to all or part of
the same Property that secured the Lien replaced, extended or
renewed (plus improvements thereon or additions or accessions
thereto).
Guarantee of Debt Securities
Each initial Subsidiary Guarantor and any subsequent Subsidiary Guarantor
shall execute a Subsidiary Guarantee of each series of Debt Securities in
substantially the form provided for by the Indenture at or before the time the
definition of Subsidiary Guarantor shall be applicable to it. (Section 1601)
Guarantee of ER&T Obligations
If the Debt Securities of a series so provide, we shall execute a
guarantee of the Obligations of ER&T substantially in the form provided for by
the Indenture at or prior to the date of issuance of such Debt Securities.
(Section 1009)
Payment of Dividends by ER&T to Us
If and for so long as we guarantee the Obligations of ER&T, we shall cause
ER&T, to the extent permitted by applicable law, to pay, at least quarterly,
dividends or distributions to us of the excess cash not then required for its
business operations. (Section 1010)
Limitation on Dividends and Other Payment Restrictions
Other than pursuant to the Indenture or as otherwise may be required by
law, we will not, and will not permit any Restricted Subsidiary to, directly or
indirectly, create or cause to become, or as a result of the acquisition of any
Person or Property, or upon any Person becoming a Restricted Subsidiary, remain
subject to, any consensual encumbrance or consensual restriction of any kind on
the ability of any Restricted Subsidiary to:
o pay dividends or make any other distributions on its Capital Stock;
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o make payments on any Obligations owed to us or any of our Restricted
Subsidiaries;
o make loans or advances to us or to any of our Restricted
Subsidiaries;
o transfer any of its Property to us or to any of our Restricted
Subsidiaries; or
o make payments under a Subsidiary Guarantee with respect to the Debt
Securities.
The foregoing shall not prohibit:
o encumbrances and restrictions resulting from customary provisions
relating to (i) transfers of Property that restrict the subletting
or assignment of any lease or (ii) transfers of Property that are
contained in licenses and that relate to the Property covered
thereby, in each case entered into in the ordinary course of
business;
o encumbrances and restrictions on transfers of Property existing on
any assets at the time such assets are acquired (or the entity
owning such assets is acquired) by any Restricted Subsidiary,
whether by merger, consolidation, purchase of such assets or
otherwise; provided that such restrictions and encumbrances (i) are
not created, Incurred or assumed in contemplation of such assets or
entity being acquired by the Restricted Subsidiary and (ii) do not
extend to any other assets of the Restricted Subsidiary; and
o restrictions on transfers of Property created in connection with
sales or purchases of electricity, energy, capacity, natural gas,
coal, ancillary services, environmental credits and/or entitlements,
utility services, fuel, water, related transportation services and
other similar products and services, in each case, in the ordinary
course of business; provided that restrictions arising from any
transaction or series of related transactions pursuant to this
clause (c) shall not be materially more restrictive, taken as a
whole, than encumbrances and restrictions customarily accepted as
industry standard for similar transactions. (Section 1007)
Limitation on Sale of Assets
Except for a sale of all or substantially all of our assets, as provided
in the "Merger, Consolidation or Sale of Assets" covenant, and other than
o assets required to be sold to conform with government regulations,
laws or impositions,
o sales or dispositions of surplus, obsolete or worn out equipment,
o sales or dispositions of ownership interests in Unrestricted
Subsidiaries, or
o any other sale or disposition so long as after giving effect to such
events, the Rating Agencies shall have confirmed their ratings on
our debt securities in effect immediately prior to such sale or
disposition,
we may not, and may not permit any Restricted Subsidiary to, make any Asset Sale
(other than short-term, readily marketable investments purchased for cash
management purposes with funds not representing the proceeds of other Asset
Sales) if, on a pro forma basis, the aggregate net book value of all such Asset
Sales during the most recent 12-month period would exceed 15% of Consolidated
Net Tangible Assets computed as of the most recent quarter preceding such sale;
provided, however, that any such Asset Sale shall be disregarded for purposes of
this 15% limitation if the Net Cash Proceeds are within 270 days thereafter (i)
invested in a Permitted Business, (ii) used to purchase and retire Obligations
ranking equal in right of payment to the Debt Securities or (iii) used to redeem
the Debt Securities at a redemption price equal to 100% of the principal amount
of the Debt Securities to be redeemed, plus accrued and unpaid interest thereon
up to and including the applicable redemption date, plus a make-whole premium.
In addition, on a cumulative basis we may not sell or otherwise dispose of
more than 25% of the assets or Capital Stock in Fossil, unless Net Cash Proceeds
from such sale are invested in other non-nuclear generation assets or the
capital stock of entities engaged in fossil generation and related businesses.
(Section 1006)
Definitions
"Acquired Obligations" means, with respect to any Person, (1) Obligations
of any other Person existing at the time the other Person is merged with or into
or became a Subsidiary of the Person, including, without limitation, Obligations
Incurred in connection with, or in contemplation of, the other Person merging
with or into or becoming a Subsidiary of the Person; and (2) Obligations secured
by a Lien encumbering any asset acquired by the Person at the time the asset is
acquired by the Person.
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"Asset Sale" means any sale, transfer, conveyance, lease or other
disposition (including by way of merger, consolidation or sale-leaseback) by us
or any of our Restricted Subsidiaries to any Person (other than to us or a
Restricted Subsidiary of ours and other than in the ordinary course of business)
of any Capital Stock or other Property of ours or of any of our Restricted
Subsidiaries (including Capital Stock of Subsidiaries). The term "Asset Sale"
will not include (1) any sale, transfer, conveyance, lease or other disposition
of Property governed by the "Merger, Consolidation or Sale of Assets" covenant
and (2) any transaction or series of related transactions consisting of the
sale, transfer, conveyance, lease or other disposition of Capital Stock or other
Property with a Fair Market Value aggregating less than $50 million in any
fiscal year. The term "Asset Sale" also will not include (i) the grant of or
realization upon a Lien permitted under the "Limitation on Liens" covenant or
the exercise of remedies thereunder and (ii) sales of fuel, capacity, energy
(including, but not limited to, electric power, natural gas and coal),
environmental credits or entitlements, related transportation services and other
related services by ER&T and its Permitted Hedging Obligations as permitted by
the "Limitation on Obligations" covenant.
"Attributable Debt" means with respect to any Sale/Leaseback Transaction,
at the time of determination, the present value (discounted at a rate per annum
equal to the weighted average interest rate of all Debt Securities outstanding
under the Indenture, compounded semi-annually) of the total obligations of the
lessee for rental payments during the remaining term of the lease included in
the Sale/Leaseback Transaction (including any period for which the lease has
been extended).
"Board of Directors" means either the Board of Directors of PSEG Power LLC
or any duly authorized committee of such Board.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday
which is not a day on which banking institutions in Newark, New Jersey and The
City of New York are authorized or obligated by law or executive order to close.
"Capital Stock" means (1) in the case of a corporation, corporate stock,
(2) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock, (3) in the case of a partnership or limited liability company,
partnership or membership interests (whether general or limited) and (4) any
other interest or participation that confers on a Person the right to receive a
share of the profits and losses of, or distributions of assets of, the issuing
Person.
"Capitalized Lease" means as applied to any Person, any lease of any
Property of which the discounted present value of the rental obligations of such
Person as lessee, in conformity with GAAP, is required to be capitalized on the
balance sheet of such Person, and "Capitalized Lease Obligation" means the
rental obligations, as aforesaid, under such lease.
"Commodity Trading Obligations," with respect to any Person, means the
Obligations of such Person under (1) any commodity swap agreement, commodity
future agreement, commodity option agreement, commodity cap agreement, commodity
floor agreement, commodity collar agreement, commodity hedge agreement, and any
put, call or other agreement or arrangement, or combination thereof, designed to
protect such Person against fluctuations in commodity prices or (2) any
commodity swap agreement, commodity future agreement, commodity option
agreement, commodity hedge agreement, and any put, call or other agreement or
arrangement, or combination thereof (including an agreement or arrangement to
hedge foreign exchange risks) in respect of commodities entered into by us
pursuant to asset optimization and risk management policies and procedures
adopted in good faith by the Board of Directors.
"Consolidated Current Liabilities," as of the date of determination, means
the aggregate amount of our and our Restricted Subsidiaries' liabilities on a
consolidated basis which may properly be classified as current liabilities
(including taxes accrued as estimated), after eliminating (1) all inter-company
items between us and any consolidated Restricted Subsidiary, (2) all current
maturities of long-term indebtedness, all as determined in accordance with GAAP
and (3) all liabilities attributable to Subsidiaries that are not Restricted
Subsidiaries.
"Consolidated Net Tangible Assets" means, as of any date of determination,
the total amount of assets (less accumulated depreciation or amortization,
allowances for doubtful receivables, other applicable reserves and other
properly deductible items) of us and our Restricted Subsidiaries, determined on
a consolidated basis in accordance with GAAP, consistently applied, and after
giving effect to purchase accounting and after deducting therefrom, to the
extent otherwise included, the amounts of:
o Consolidated Current Liabilities;
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o excess of cost over fair value of assets of businesses acquired, as
determined in good faith by the Board of Directors;
o unamortized debt discount and expense and other unamortized deferred
charges, goodwill, patents, trademarks, service marks, trade names,
copyrights, licenses, organization or developmental expenses and
other intangible items;
o treasury stock;
o any cash set apart and held in a sinking or other analogous fund
established for the purpose of redemption or other retirement of
Capital Stock to the extent such obligation is not reflected in
Consolidated Current Liabilities; and
o all assets attributable to Subsidiaries that are not Restricted
Subsidiaries (including Capital Stock thereof), except to the extent
of dividends or distributions received from such Subsidiaries.
"Default" means any event, act or condition that is, or after notice or
the passage of time or both would be, an Event of Default.
"Event of Default" has the meaning specified in Section 501 of the
Indenture.
"Fair Market Value" means the price that would be paid by a purchaser to a
seller in an arm's-length transaction.
"GAAP" means generally accepted accounting principles in the United States
applied on a basis consistent with the principles, methods, procedures and
practices employed in the preparation of our audited financial statements,
including, without limitation, those set forth in the opinions and
pronouncements of the Accounting Principles Board of the American Institute of
Certified Public Accountants and statements and pronouncements of the Financial
Accounting Standards Board or in such other statements by such other entity as
approved by a significant segment of the accounting profession.
"Hedging Obligations" means, with respect to any Person, the obligations
of such Person under any interest rate or currency swap agreement, interest rate
or currency future agreement, interest rate cap or collar agreement, interest
rate or currency hedge agreement, and any put, call or other agreement or
arrangement designed to protect such Person against fluctuations in interest
rates or currency exchange rates.
"Incur" means, with respect to any Obligation, to directly or indirectly
create, incur, issue, assume, guarantee or otherwise become directly or
indirectly liable for or with respect to, or become responsible for payment of,
contingently or otherwise, such Obligation. The term "Incurrence" has a
corresponding meaning.
"Lien" means any mortgage, pledge, hypothecation, charge, assignment,
deposit arrangement, encumbrance, security interest, lien (statutory or other),
or preference, priority, or other security or similar agreement or preferential
arrangement of any kind or nature whatsoever (including, without limitation, any
agreement to give or grant a Lien or any lease, conditional sale or other title
retention agreement having substantially the same economic effect as any of the
foregoing).
"Net Cash Proceeds" from an Asset Sale is defined to mean cash payments
received (including any cash payments received by way of a payment of principal
pursuant to a note or installment receivable or otherwise, but only as and when
received (including any cash received upon sale or disposition of any such note
or receivable), excluding any other consideration received in the form of
assumption by the acquiring Person of Obligations relating to the Property
disposed of in such Asset Sale or received in any form other than cash)
therefrom, in each case, net of (1) all legal, title and recording tax expenses,
commissions and other fees and expenses of any kind (including consent and
waiver fees and any applicable premiums, earn-out or working interest payments
or payments in lieu or in termination thereof) Incurred, (2) all federal, state,
provincial, foreign and local taxes and other governmental charges required to
be accrued as a liability under GAAP as a consequence of such Asset Sale, (3) a
reasonable reserve for the after-tax cost of any indemnification payments (fixed
and contingent) attributable to seller's indemnities to the purchaser undertaken
by us or any of our Subsidiaries in connection with such Asset Sale, (4) all
payments made on any Obligation that is secured by such Property, in accordance
with the terms of any Lien upon or with respect to such Property, or that must
by its terms or by applicable law or in order to obtain a required consent or
waiver be repaid out of the proceeds from or in connection with such Asset Sale
and (5) all distributions and other payments made to holders of Capital Stock of
Subsidiaries (other than us or our Restricted Subsidiaries) as a result of such
Asset Sale.
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"Non-Recourse Obligation" means, with respect to any Person, any financing
that is or was Incurred with respect to the development, acquisition, design,
engineering, procurement, construction, operation, ownership, servicing or
management of one or more facilities used or useful in a Permitted Business in
respect of which such Person has a direct or indirect interest, provided that
such financing is without recourse to any Person or Property other than to (1)
the Property that constitutes such facilities together with contracts, permits,
licenses, reserves and other items related to such facilities, (2) the income
from and proceeds of such facilities, (3) the Capital Stock of, and other
investments in, the Person that owns the Property that constitutes any such
facilities and (4) the Capital Stock of, and other investments in, any Person
obligated with respect to such financing and of any Subsidiary of such Person
that owns a direct or indirect interest in any such facilities.
"Obligations" of any Person shall mean at any date, without duplication,
o all obligations of such Person for borrowed money,
o all obligations of such Person evidenced by bonds, debentures, notes
or other similar instruments,
o all obligations of such Person arising under any conditional sale or
other title retention arrangement or otherwise to pay the deferred
purchase price of Property or services,
o all obligations of such Person Incurred in respect of Attributable
Debt associated with any Sale/Leaseback Transaction, Capitalized
Lease or Synthetic Lease,
o all obligations of such Person under letters of credit,
o all obligations of such Person under trade or bankers' acceptances,
o all obligations of such Person under Hedging Obligations and
Commodity Trading Obligations,
o trade payables in respect of fuel, labor, supplies or other
materials or services or the obligation to provide power,
o Preferred Stock and Redeemable Stock issued to any Person other than
us or a Restricted Subsidiary,
o all obligations of others secured by a Lien on any asset of such
Person, whether or not such obligations are assumed by such Person
and
o all obligations of others to the extent guaranteed by such Person.
The amount of any obligation shall be deemed to be the amount equal to the
stated or determinable amount thereof or, if not stated or determinable, the
maximum probable liability thereunder as determined by us in good faith.
"Permitted Business" means any business in which we or any of our
Subsidiaries are engaged on the date of the Indenture or any other power or
energy-related business, including the business of acquiring, developing, owning
or operating electric power or thermal energy generation or cogeneration
facilities, electric power transmission, fuel supply and fuel transportation
facilities, together with their related power supply, thermal energy and fuel
contracts and other facilities, services or goods that are ancillary,
incidental, complementary or reasonably related to the marketing, trading,
development, construction or management servicing, ownership or operation of the
foregoing.
"Permitted Hedging Obligations" of any Person shall mean (1) Hedging
Obligations entered into in the ordinary course of business and in accordance
with such Person's established risk management policies that are designed to
protect such Person against, among other things, fluctuations in interest rates
or currency exchange rates and which in the case of agreements relating to
interest rates shall have a notional amount no greater than the payments due
with respect to the Obligations being hedged thereby and (2) Commodity Trading
Obligations.
"Person" means an individual, a corporation, a limited liability company,
a partnership, an association, a trust or any other entity or organization,
including a government or political subdivision or an agency or instrumentality
thereof.
"Preferred Stock" means, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated, whether
voting or non-voting) or preferred or preference stock of such Person that is
outstanding or issued on or after the date of original issuance of the Debt
Securities under the Indenture.
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"Property" of any Person is defined to mean all types of real, personal,
tangible or mixed property owned by such Person whether or not included in the
most recent consolidated balance sheet of such Person under GAAP.
"Rating Agencies" means Moody's Investors Service Inc., Standard & Poor's
Ratings Services, Fitch Inc. and any successor thereof.
"Redeemable Stock" is defined to mean any class or series of Capital Stock
of any Person that by its terms or otherwise is (1) required to be redeemed
prior to the Stated Maturity of the Debt Securities, (2) redeemable at the
option of the holder of such Capital Stock at any time prior to the Stated
Maturity of the Debt Securities or (3) convertible into or exchangeable for
Capital Stock referred to in clause (1) or (2) above or Obligations having a
scheduled maturity prior to the Stated Maturity of the Debt Securities.
"Restricted Subsidiary" means only PSEG Fossil LLC, PSEG Nuclear LLC, PSEG
Energy Resources & Trade LLC and each other of our Subsidiaries that executes a
Subsidiary Guarantee with respect to the Debt Securities and is subsequently
designated by the Board of Directors by written notice to the Trustee as a
Restricted Subsidiary.
"Sale/Leaseback Transaction" means an arrangement relating to Property now
owned or hereafter acquired whereby we or one of our Subsidiaries transfers the
Property to a Person and leases it back from that Person, other than leases for
a term of not more than 12 months or between us and one of our Wholly-Owned
Subsidiaries that is a Restricted Subsidiary or between Wholly-Owned
Subsidiaries that are Restricted Subsidiaries.
"Stated Maturity" means with respect to any Debt Security or any
installment of interest thereon, the date specified in such Debt Security as the
fixed date on which any principal of such Debt Security or any such installment
of interest is due and payable.
"Subsidiary" means, with respect to any Person, (1) any corporation,
limited liability company, association or other business entity of which more
than 50% of the total voting power of Voting Stock is at the time owned or
controlled, directly or indirectly, by such Person or one or more of the other
Subsidiaries of that Person (or a combination thereof) and (2) any partnership
(i) the sole general partner or the managing general partner of which is such
Person or a Subsidiary of such Person or (ii) the only general partners of which
are such Person or one or more Subsidiaries of such Person (or any combination
thereof).
"Subsidiary Guarantor" means all current and subsequently designated
Restricted Subsidiaries.
"Subsidiary Guarantee" means a guarantee of a Subsidiary Guarantor in
favor of the Trustee for the benefit of the holders of the Debt Securities in
substantially the form provided for by the Indenture or a guarantee of a
Subsidiary Guarantor of any other of our Obligations.
"Synthetic Lease" means (1) a lease pursuant to which the lessee is
treated as the owner of the Property subject to the lease for tax purposes,
whether or not such lease is treated as an operating lease for accounting
purposes or (2) a lease treated as an operating lease for accounting purposes
but having at least three of the following characteristics, (i) the term of the
lease, inclusive of all renewal periods at the lessee's option, is greater than
75% of the useful life of the Property subject to the lease as estimated at the
inception of the Lease, (ii) the lessee has the right to purchase such Property
at a fixed price, (iii) the lessee's payments under the lease are calculated to
amortize and service the debt of the lessor incurred in order to acquire the
asset and (iv) the lessor obtains 80% or more of the cost of the asset from
borrowed funds.
"Unrestricted Subsidiary" means a Subsidiary that is not a Restricted
Subsidiary.
"Voting Stock" means any class or classes of Capital Stock pursuant to
which the holders thereof have the general voting power under ordinary
circumstances to elect at least a majority of the Board of Directors, managers
or trustees of any Person (irrespective of whether or not, at the time, stock of
any other class or classes shall have, or might have, voting power by reason of
the happening of any contingency).
"Weighted Average Life to Maturity" means, when applied to any Obligations
at any date, the number of years obtained by dividing (1) the then outstanding
principal amount of such Obligations into (2) the total of the product obtained
by multiplying (i) the amount of each then remaining installment, sinking fund,
serial maturity or other required payments of principal, including payment at
final maturity, in respect thereof, by (ii) the
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numbers of years (calculated to the nearest one-twelfth) that will elapse
between such date and the making of such payment.
"Wholly-Owned Subsidiary" means a Subsidiary all the Capital Stock of
which (other than directors' qualifying shares) is owned by us and/or one or
more of our Wholly-Owned Subsidiaries.
Events of Default and Remedies
The following constitute Events of Default in respect to each series of
Debt Securities under the Indenture (Section 501):
o default for five days in the payment when due of interest on any of
the Debt Securities of such series;
o default in the payment when due of the principal of, or premium, if
any, or make-whole amount, if any, on any of the Debt Securities of
such series;
o default in the deposit of any sinking fund payment, when due by the
terms of the Debt Securities of such series;
o failure by us or any Restricted Subsidiary to comply with the
provisions described under "Limitation on Sale of Assets" or
"Merger, Consolidation or Sale of Assets";
o failure by us or any Restricted Subsidiary for 60 days after notice
by the Trustee to us or to us and the Trustee by the holders of 25%
or more in aggregate principal amount of the Debt Securities of such
series to comply with any of our agreements in the Indenture or the
Debt Securities of such series that are not otherwise covered in
this section;
o default under any mortgage, indenture or instrument under which
there may be issued or by which there may be secured or evidenced
any of our or any of our Subsidiaries' indebtedness (including
indebtedness represented by any other series of Debt Securities
under the Indenture or the payment of which is guaranteed by us or
by any of our Restricted Subsidiaries) (but other than Non-Recourse
Obligations) whether such indebtedness or guarantee now exists or is
created after the date of the Indenture, which default (a) is caused
by a failure to pay the principal of such indebtedness at the Stated
Maturity of such indebtedness after the expiration of grace periods
provided in the indebtedness (a "Payment Default") or (b) has
resulted in the acceleration of the indebtedness prior to its Stated
Maturity; and, in each case the principal amount of the
indebtedness, together with the principal amount of any other
indebtedness under which there has been a Payment Default or the
maturity of which has been so accelerated, aggregates $50.0 million
or more;
o failure by us or any of our Restricted Subsidiaries to pay one or
more final judgments not otherwise covered by insurance aggregating
in excess of $50.0 million, which judgments are not paid, discharged
or stayed for a period of 60 days; and
o certain events of bankruptcy or insolvency with respect to us or any
of our Restricted Subsidiaries.
Additional series of Debt Securities issued under the Indenture may
specify other events of default for such series of Debt Securities.
We are required to file with the Trustee, annually, an officer's
certificate as to our compliance with all conditions and covenants under the
Indenture. (Section 1011) The Indenture provides that the Trustee may withhold
notice to the holders of Debt Securities of a series of any default (except
payment defaults on the Debt Securities of that series) if it considers it in
the interest of the holders of Debt Securities of the series to do so. (Section
515)
If an Event of Default (other than an Event of Default occasioned by our
or any of our Restricted Subsidiaries' bankruptcy or insolvency) with respect to
Debt Securities of a series has occurred and is continuing, the Trustee or the
holders of not less than 25% in principal amount of outstanding Debt Securities
of that series may declare the principal (or, if the Debt Securities of that
series are issued with original issue discount or are "indexed debt securities"
(i.e., Debt Securities, the interest and principal payments on which are
determined by reference to a particular index, such as a foreign currency or
commodity), such portion of the principal as may be specified in the terms of
those Debt Securities) of all of the Debt Securities of that series to be due
and payable immediately, by a notice in writing to us. (Section 502)
24
If an Event of Default occasioned by our or any of our Restricted
Subsidiaries' bankruptcy or insolvency occurs, the principal of and interest on
all Debt Securities shall ipso facto become and be immediately due and payable
without any declaration or other act on the part of the Trustee or any holders
of Debt Securities.
Subject to the provisions of the Indenture relating to the duties of the
Trustee, in case an Event of Default with respect to Debt Securities of any
series has occurred and is continuing, the Trustee is under no obligation to
exercise any of its rights or powers under the Indenture at the request, order
or direction of the holders of Debt Securities of that series, unless those
holders have offered the Trustee indemnity satisfactory to the Trustee against
the expenses and liabilities which might be incurred by it in compliance with
such request. (Section 602)
Subject to such provisions for the indemnification of the Trustee, the
holders of a majority in principal amount of the outstanding Debt Securities of
any series of Debt Securities will have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the Trustee, or
exercising any trust or power conferred on the Trustee with respect to the Debt
Securities of that series. (Section 512)
The holders of a majority in principal amount of the outstanding Debt
Securities of a series may, on behalf of the holders of all Debt Securities of
such series and any related coupons, waive any past default under the Indenture
with respect to such series and its consequences, except a default (i) in the
payment of the principal of (or premium, if any) or interest, if any, on any
Debt Security of such series or any related coupons or (ii) in respect of a
covenant or provision that cannot be modified or amended without the consent of
the holder of each outstanding Debt Security of such series affected thereby.
(Section 513)
Merger, Consolidation or Sale of Assets
We may not, directly or indirectly, consolidate or merge with or into
(whether or not we are the surviving entity) any other corporation, association,
company, business trust or limited liability company, or sell, assign, transfer,
lease, convey or otherwise dispose of all or substantially all of our assets, in
one or more related transactions, to another Person unless:
o the Person formed by the consolidation or surviving the merger or
the Person that acquires by sale, assignment, transfer, conveyance
or other disposition, or that leases, the assets (if other than us)
(in each such case, the "Successor Entity"), is a corporation or
limited liability company organized and existing under the laws of
the United States, any State thereof or the District of Columbia and
expressly assumes our obligations under the Indenture and the Debt
Securities;
o if any of our or a Restricted Subsidiary's Property or assets would
become subject to a Lien other than a Permitted Lien under the
"Limitation on Liens" covenant, the Debt Securities shall be equally
and ratably secured in accordance with such covenant;
o immediately after such transaction no event exists that is or with
the passage of time or the giving of notice or both would be an
Event of Default under the Indenture; and
o each Subsidiary Guarantor shall have by amendment to its Subsidiary
Guarantee with respect to the Debt Securities confirmed that its
Subsidiary Guarantee shall apply to the obligations of the Successor
Entity under the Indenture and each series of the Debt Securities.
(Section 801)
Modification or Waiver
Modification and amendment of the Indenture may be made by us and the
Trustee with the consent of the holders of a majority in principal amount of all
Outstanding Debt Securities that are affected by such modification or amendment;
provided that no such modification or amendment may, without the consent of the
holder of each Outstanding Debt Security affected thereby, among other things:
o change the Stated Maturity of the principal of (or premium, if any,
on) or any installment of principal of or interest on any such Debt
Security;
o reduce the principal amount of, or the rate (or change the manner of
calculating the rate) or amount of interest in respect of, or any
premium payable upon the redemption of, any such Debt Security;
o change any of our obligations to pay Additional Amounts in respect
of any such Debt Security;
25
o reduce the portion of the principal of an Original Issue Discount
Security or Indexed Security that would be due and payable upon a
declaration of acceleration of the Maturity thereof or provable in
bankruptcy;
o adversely affect any right of repayment at the option of the holder
of any such Debt Security;
o change the place or currency of payment of principal of, or any
premium or interest on, any such Debt Security;
o impair the right to institute suit for the enforcement of any such
payment on or after the Stated Maturity thereof or on or after any
Redemption Date or Repayment Date, as the case may be;
o adversely affect any right to convert or exchange any Debt Security;
o reduce the percentage in principal amount of such Outstanding Debt
Securities, the consent of whose holders is required to amend or
waive compliance with certain provisions of the Indenture or to
waive certain defaults thereunder;
o reduce the requirements for voting or quorum described below; or
o modify any of the foregoing requirements or any of the provisions
relating to waiving past defaults or compliance with certain
restrictive provisions, except to increase the percentage of holders
required to effect any such waiver or to provide that certain other
provisions of the Indenture cannot be modified or waived without the
consent of the holder of each Debt Security affected thereby.
(Section 902)
The holders of a majority in aggregate principal amount of Outstanding
Debt Securities have the right to waive our compliance with certain covenants in
the Indenture. (Section 1012)
Modification and amendment of the Indenture may be made by us and the
Trustee thereunder, without the consent of any holder, for any of the following
purposes:
o to evidence the succession of another Person to us and the
assumption by any successor of our covenants under the Indenture and
the Debt Securities;
o to add to our covenants for the benefit of the holders of all or any
series of Debt Securities issued under the Indenture and any related
coupons or to surrender any right or power conferred upon us by the
Indenture;
o to add Events of Default for the benefit of the holders of all or
any series of Debt Securities issued under the Indenture;
o to add to or change any provisions of the Indenture to facilitate
the issuance of, or to liberalize the terms of, Bearer Securities,
or to permit or facilitate the issuance of Debt Securities in
uncertificated form, provided that any such actions do not adversely
affect the holders of such Debt Securities or any related coupons in
any material respect;
o to change or eliminate any provisions of the Indenture, provided
that any such change or elimination will become effective only when
there are no Debt Securities Outstanding of any series created prior
thereto which are entitled to the benefit of such provisions;
o to secure the Debt Securities under the Indenture pursuant to the
"Merger, Consolidation or Sale of Assets" covenant of the Indenture,
or otherwise;
o to establish the form or terms of the Debt Securities of any series
and any related coupons;
o to evidence and provide for the acceptance of appointment by a
successor Trustee or facilitate the administration of the trusts
under the Indenture by more than one Trustee;
o to cure any ambiguity, defect or inconsistency in the Indenture,
provided such action does not adversely affect the interests of
holders of Debt Securities of any series issued under the Indenture
or any related coupons in any material respect; or
o to supplement any of the provisions of the Indenture to the extent
necessary to permit or facilitate the defeasance and discharge of
any series of Debt Securities, provided that such action shall not
adversely affect the interests of the holders of any such Debt
Securities and any related coupons in any material respect. (Section
901)
26
In determining whether the holders of the requisite principal amount of
Outstanding Debt Securities have given any request, demand, authorization,
direction, notice, consent or waiver under the Indenture or whether a quorum is
present at a meeting of holders of Debt Securities, (1) the principal amount of
an Original Issue Discount Security that will be deemed to be outstanding will
be the amount of the principal thereof that would be due and payable as of the
date of such determination upon acceleration of the Maturity thereof, (2) the
principal amount of an Indexed Security that may be counted in making such
determination or calculation and that will be deemed outstanding for such
purpose will be equal to the principal face amount of such Indexed Security at
original issuance, unless otherwise provided with respect to such Indexed
Security pursuant to Section 301 of the Indenture; and (3) Debt Securities owned
by us or any other obligor upon the Debt Securities or any Affiliate of ours or
of such other obligor shall be disregarded. (Section 101)
The Indenture contains provisions for convening meetings of the holders of
Debt Securities of a series if Debt Securities of that series are issuable as
Bearer Securities. (Section 1501) A meeting may be called at any time by the
Trustee, and also, upon request, by us or the holders of at least 10% in
principal amount of the Outstanding Debt Securities of that series, in any such
case upon notice given as provided in the Indenture. (Section 1502) Except for
any consent that must be given by the holder of each Debt Security affected
thereby, as described above, any resolution presented at a meeting (or an
adjourned meeting duly reconvened) at which a quorum is present may be adopted
by the affirmative vote of the holders of a majority in principal amount of the
Outstanding Debt Securities of that series; provided, however, that any
resolution with respect to any request, demand, authorization, direction,
notice, consent, waiver or other action that may be made, given or taken by the
holders of a specified percentage which is less than a majority in principal
amount of the Outstanding Debt Securities of a series may be adopted at a
meeting (or an adjourned meeting duly reconvened) at which a quorum is present
by the affirmative vote of the holders of such specified percentage in principal
amount of the Outstanding Debt Securities of that series. Any resolution passed
or decision taken at any meeting of holders of Debt Securities of a series duly
held in accordance with the Indenture will be binding on all holders of Debt
Securities of that series and any related coupons. The quorum at any meeting
called to adopt a resolution will be persons holding or representing a majority
in principal amount of the Outstanding Debt Securities of a series; provided,
however, that, if any action is to be taken at such meeting with respect to a
consent or waiver which may be given by the holders of not less than a specified
percentage in principal amount of the Outstanding Debt Securities of a series,
the persons holding or representing such specified percentage in principal
amount of the Outstanding Debt Securities of that series will constitute a
quorum. (Section 1504)
Notwithstanding the foregoing provisions, if any action is to be taken at
a meeting of holders of Debt Securities of a series with respect to any request,
demand, authorization, direction, notice, consent, waiver or other action that
the Indenture expressly provides may be made, given or taken by the holders of a
specified percentage in principal amount of all Outstanding Debt Securities
affected thereby or of the holders of such series and one or more additional
series: (1) there shall be no minimum quorum requirement for such meeting and
(2) the principal amount of the Outstanding Debt Securities of such series that
vote in favor of such request, demand, authorization, direction, notice,
consent, waiver or other action will be taken into account in determining
whether such request, demand, authorization, direction, notice, consent, waiver
or other action has been made, given or taken under the Indenture. (Section
1504)
Satisfaction and Discharge, Legal Defeasance and Covenant Defeasance
We may discharge certain obligations to holders of Debt Securities of a
series that have not already been delivered to the Trustee for cancellation and
that either have become due and payable or are by their terms due and payable
within one year (or scheduled for redemption within one year) by irrevocably
depositing with the Trustee, in trust, funds in an amount sufficient to pay the
entire indebtedness on such Debt Securities for principal (and premium, if any)
and interest, if any, and any Additional Amounts with respect thereto, to the
date of such deposit (if such Debt Securities have become due and payable) or to
the Stated Maturity or Redemption Date, as the case may be. (Section 401)
The Indenture provides that, if the provisions of Article Fourteen are
made applicable to the Debt Securities of or within any series and any related
coupons pursuant to Section 301 thereunder, we may elect either
o to defease and be discharged from any and all obligations with
respect to such Debt Securities and any related coupons (except for
the obligations to pay Additional Amounts, if any, upon the
occurrence of certain events of tax, assessment or governmental
charge with respect to payments on such Debt
27
Securities and the obligations to register the transfer or exchange
of such Debt Securities and any related coupons, to replace
temporary or mutilated, destroyed, lost or stolen Debt Securities
and any related coupons, to maintain an office or agency in respect
of such Debt Securities and any related coupons, and to hold moneys
for payment in trust) (defeasance) (Section 1402) or
o to be released from our obligations under any covenant specified
pursuant to Section 301 with respect to such Debt Securities and any
related coupons, and any omission to comply with such obligations
shall not constitute a default or an Event of Default with respect
to such Debt Securities and any related coupons (covenant
defeasance) (Section 1403), in either case upon the irrevocable
deposit by us with the Trustee (or other qualifying trustee), in
trust, of:
o an amount in U.S. dollars;
o Government Obligations (as defined below) applicable to such
Debt Securities and coupons that through the payment of
principal and interest in accordance with their terms will
provide money in an amount; or
o a combination thereof in an amount
sufficient to pay the principal of (and premium, if any) and
interest, if any, on such Debt Securities and any related coupons,
and any mandatory sinking fund or analogous payments thereon, on the
scheduled due dates therefor.
Such a trust may only be established if, among other things, we have
delivered to the Trustee an Opinion of Counsel (as specified in the Indenture)
to the effect that the holders of such Debt Securities and any related coupons
will not recognize income, gain or loss for United States federal income tax
purposes as a result of such defeasance or covenant defeasance and will be
subject to United States federal income tax on the same amounts, in the same
manner and at the same times as would have been the case if such defeasance or
covenant defeasance had not occurred, and such Opinion of Counsel, in the case
of defeasance under the first clause above, must refer to and be based upon a
ruling of the Internal Revenue Service or a change in applicable United States
federal income tax law occurring after the date of the Indenture. (Section 1404)
Government Obligations means securities which are (1) direct obligations
of the United States or (2) obligations of a Person controlled or supervised by
and acting as an agency or instrumentality of the United States, the payment of
which is unconditionally guaranteed as a full faith and credit obligation by the
United States, which are not callable or redeemable at the option of the issuer
thereof. Government Obligations also include a depositary receipt issued by a
bank or trust company as custodian with respect to any such Government
Obligation or a specific payment of interest on or principal of any such
Government Obligation held by such custodian for the account of the holder of a
depositary receipt; provided that (except as required by law) such custodian is
not authorized to make any deduction from the amount payable to the holder of
such depositary receipt from the amount received by the custodian in respect of
the Government Obligation or the specific payment of interest on or principal of
the Government Obligation evidenced by such depositary receipt. (Section 101)
In the event we effect covenant defeasance with respect to any Debt
Securities and any related coupons and such Debt Securities and coupons are
declared due and payable because of the occurrence of any Event of Default,
other than the Events of Default described in clauses 4, 5 or 6 under Events of
Default (Section 501) with respect to any covenant of which there has been
defeasance, the amount of Government Obligations and funds on deposit with the
Trustee will be sufficient to pay amounts due on such Debt Securities and
coupons at the time of their Stated Maturity but may not be sufficient to pay
amounts due on such Debt Securities and coupons at the time of the acceleration
resulting from such Event of Default. In such case, we would remain liable to
make payment of such amounts due at the time of acceleration. (Section 501)
If the Trustee or any Paying Agent is unable to apply any money in
accordance with the Indenture by reason of any order or judgment of any court or
governmental authority enjoining, restraining or otherwise prohibiting such
application, then our obligations under the Indenture and such Debt Securities
and any related coupons shall be revived and reinstated as though no deposit had
occurred pursuant to the Indenture, until such time as such Trustee or Paying
Agent is permitted to apply all such money in accordance with the Indenture;
provided, however, that if we make any payment of principal of (or premium, if
any) or interest, if any, on any such Debt Security or any related coupon
following the reinstatement of its obligations, we shall be subrogated to the
rights of the holders of such Debt Securities and any related coupons to receive
such payment from the money held by the Trustee or Paying Agent.
28
The prospectus supplement may further describe the provisions, if any,
permitting such defeasance or covenant defeasance, including any modifications
to the provisions described above, with respect to the Debt Securities of or
within a particular series and any related coupons.
Book-Entry Debt Securities
Debt Securities of a series may be issued, in whole or in part, in global
form that will be deposited with, or on behalf of, a depositary identified in
the prospectus supplement. Global securities may be issued in either registered
or bearer form and in either temporary or permanent form (a "Global Security").
Unless otherwise provided in the prospectus supplement, Debt Securities that are
represented by a Global Security will be issued in denominations of $1,000 and
any integral multiple thereof, and will be issued in registered form only,
without coupons. Payments of principal of (and premium, if any) and interest, if
any, on Debt Securities represented by a Global Security will be made by us to
the Trustee, and then by such Trustee to the depositary.
We anticipate that any Global Securities will be deposited with, or on
behalf of, The Depository Trust Company (the "DTC"), New York, New York, that
such Global Securities will be registered in the name of DTC's nominee, and that
the following provisions will apply to the depositary arrangements with respect
to any such Global Securities. Additional or differing terms of the depositary
arrangements will be described in the prospectus supplement.
So long as DTC or its nominee is the registered owner of a Global
Security, DTC or its nominee, as the case may be, will be considered the sole
holder of the Debt Securities represented by such Global Security for all
purposes under the Indenture. Except as provided below, owners of beneficial
interests in a Global Security will not be entitled to have Debt Securities
represented by such Global Security registered in their names, will not receive
or be entitled to receive physical delivery of Debt Securities in certificated
form and will not be considered the owners or holders thereof under the
Indenture. The laws of some states require that certain purchasers of securities
take physical delivery of such securities in certificated form; such laws may
limit the transferability of beneficial interests in a Global Security.
If (1) DTC is at any time unwilling, unable or ineligible to continue as
depositary and a successor depositary is not appointed by us within 90 days
following notice to us; (2) we determine, in our sole discretion, not to have
any Debt Securities represented by one or more Global Securities, or (3) an
Event of Default under the Indenture has occurred and is continuing, then we
will issue individual Debt Securities in certificated form in exchange for the
relevant Global Securities. In any such instance, an owner of a beneficial
interest in a Global Security will be entitled to physical delivery of
individual Debt Securities in certificated form of like tenor and rank, equal in
principal amount to such beneficial interest and to have such Debt Securities in
certificated form registered in its name. Unless otherwise provided in the
prospectus supplement, Debt Securities so issued in certificated form will be
issued in denominations of $1,000 or any integral multiple thereof and will be
issued in registered form only, without coupons.
The following is based on information furnished by DTC and applies to the
extent that it is the depositary, unless otherwise provided in the prospectus
supplement:
Registered Owner. The Debt Securities will be issued as fully registered
securities in the name of Cede & Co., which is DTC's partnership nominee. The
Trustee will deposit the Global Securities with the depositary. The deposit with
the depositary and its registration in the name of Cede & Co. will not change
the nature of the actual purchaser's ownership interest in the Debt Securities.
DTC's Organization. DTC is a limited-purpose trust company organized under
the New York Banking Law, a "banking organization" within the meaning of that
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 is owned by a number of its direct participants and the New York Stock
Exchange, the American Stock Exchange, Inc. and the National Association of
Securities Dealers, Inc. Direct participants include securities brokers and
dealers, banks, trust companies, clearing corporations and some other
organizations who directly participate in DTC. Other entities may access DTC's
system by clearing transactions through or maintaining a custodial relationship
with direct participants. The rules applicable to DTC and its participants are
on file with the SEC.
29
DTC's Activities. DTC holds securities that its participants deposit with
it. 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. Doing so
eliminates the need for physical movement of securities certificates.
Participants' Records. Except as otherwise provided in this prospectus or
a prospectus supplement, purchases of Debt Securities must be made by or through
a direct participant, which will receive a credit for the Debt Securities on the
depositary's records. The purchaser's interest is in turn to be recorded on the
participants' records. Actual purchasers will not receive written confirmation
from the depositary of their purchase, but they generally receive confirmations
along with periodic statements of their holdings from the participants through
which they entered into the transaction.
Transfers of interest in the Global Securities will be made on the books
of the participants on behalf of the actual purchasers. Certificates
representing the interest in Debt Securities will not be issued unless the use
of Global Securities is suspended.
The depositary has no knowledge of the actual purchasers of Global
Securities. The depositary's records only reflect the identity of the direct
participants, who are responsible for keeping account of their holdings on
behalf of their customers.
Notices Among the Depositary, Participants and Actual Purchasers. Notices
and other communications by the depositary, its participants and the actual
purchasers will be governed by arrangements among them, subject to any legal
requirements in effect. Any redemption notices will be sent to DTC. If less than
all of the securities 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.
Voting Procedures. Neither DTC nor Cede & Co. will give consents for or
vote the Global Securities. The depositary generally mails an omnibus proxy to
us just after the applicable record date. That proxy assigns Cede & Co.'s voting
rights to the direct participants to whose accounts the Debt Securities are
credited at that time.
Payments. Principal and interest payments made by us will be delivered to
the depositary. DTC's practice is to credit direct participants' accounts on the
applicable payment date unless it has reason to believe that it will not receive
payment on that date. Payments by participants to actual purchasers will be
governed by standing instructions and customary practices, as is the case with
securities held for customers in bearer form or registered in "street name."
Those payments will be the responsibility of that participant and not the
depositary, the Trustee or us, subject to any legal requirements in effect at
that time.
We are responsible for payment of principal, interest and premium, if any,
to the Trustee who is responsible for paying it to the depositary. The
depositary is responsible for disbursing those payments to direct participants.
The participants are responsible for disbursing payments to the actual
purchasers.
DTC may discontinue providing its services as securities depositary with
respect to the Debt Securities at any time by giving reasonable notice to the
applicable Paying Agent or us. Under such circumstances, in the event that a
successor securities depositary is not appointed, Debt Security 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 depositary). In that event, Debt Security
certificates will be printed and delivered.
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources (including DTC) that we believe to be reliable,
but we take no responsibility for the accuracy thereof.
Unless stated otherwise in the prospectus supplement, the underwriters or
agents with respect to a series of Debt Securities issued as Global Securities
will be direct participants in DTC.
None of any underwriter or agent, the Trustee, any applicable Paying Agent
or us will have any responsibility or liability for any aspect of the records
relating to or payments made on account of beneficial interests in a Global
Security, or for maintaining, supervising or reviewing any records relating to
such beneficial interests.
30
The Trustee
We maintain ordinary banking relationships with The Bank of New York,
including credit facilities and lines of credit. The Bank of New York also
serves as trustee under other indentures under which we or our affiliates are
the obligor.
The Trustee may resign or be removed with respect to one or more series of
Debt Securities and a successor Trustee may be appointed to act with respect to
such series. (Section 608) In the event that two or more persons are acting as
Trustee with respect to different series of Debt Securities under the Indenture,
each such Trustee shall be a Trustee of a trust thereunder separate and apart
from the trust administered by any other such Trustee (Section 609), and any
action described herein to be taken by the Trustee may then be taken by each
such Trustee with respect to, and only with respect to, the one or more series
of Debt Securities for which it is Trustee.
Governing Law
The Indenture and the Debt Securities shall be governed by and construed
in accordance with the laws of the State of New York without regard to
principles of conflicts of laws.
PLAN OF DISTRIBUTION
We may sell the Debt Securities to or through underwriters, dealers, or
agents or directly to one or more other purchasers.
The prospectus supplement will set forth the terms of the offering of the
particular series or issue of Debt Securities to which such prospectus
supplement relates, including, as applicable:
o the name or names of any underwriters or agents with whom we have
entered into arrangements with respect to the sale of such Debt
Securities;
o the initial public offering or purchase price of such Debt
Securities;
o any underwriting discounts, commissions and other items constituting
underwriters' compensation from us and any other discounts,
concessions or commissions allowed or reallowed or paid by any
underwriters to other dealers;
o any commissions paid to any agents;
o the net proceeds to us; and
o the securities exchanges, if any, on which such Debt Securities will
be listed.
Unless otherwise set forth in the prospectus supplement relating to a
particular series or issue of Debt Securities, the obligations of the
underwriters to purchase such Debt Securities will be subject to certain
conditions precedent and each of the underwriters with respect to such Debt
Securities will be obligated to purchase all of the Debt Securities of such
series or issue allocated to it if any such Debt Securities are purchased. Any
initial public offering price and any discounts or concessions allowed or
reallowed or paid to dealers may be changed from time to time.
The Debt Securities may be offered and sold by us directly or through
agents designated by us from time to time. Any agent involved in the offer or
sale of the Debt Securities in respect of which this prospectus is delivered
will be named in, and any commissions payable by the Company to such agent will
be set forth in, the applicable prospectus supplement. Unless otherwise
indicated in the applicable prospectus supplement, each such agent will be
acting on a best efforts basis for the period of its appointment.
Some of the underwriters, dealers or agents and some of their affiliates
who participate in the distribution of Debt Securities may engage in other
transactions with, and perform other services for, us and our affiliates in the
ordinary course of business.
We will set forth in the relevant prospectus supplement the anticipated
delivery date of the Debt Securities and the prospectus delivery obligations of
any underwriters, dealers or agents.
31
Any underwriters, dealers or agents participating in the distribution of
the Debt Securities may be deemed to be underwriters, and any discounts or
commissions received by them on the sale or resale of Debt Securities may be
deemed to be underwriting discounts and commissions, under the Securities Act of
1933, as amended (the "Securities Act"). Underwriters, dealers and agents may be
entitled, under agreements entered into with us, to indemnification by us
against certain civil liabilities, including liabilities under the Securities
Act.
LEGAL OPINIONS
The validity of the Debt Securities will be passed upon for us by James T.
Foran, Esquire, Associate General Counsel of PSEG or R. Edwin Selover, Esquire,
Senior Vice President and General Counsel of PSEG, and for any underwriters,
dealers or agents by Sidley Austin Brown & Wood LLP, New York, New York. Messrs.
Selover and Foran are also employees of our affiliate, Services.
EXPERTS
The financial statements and the related financial statement schedule
incorporated in this prospectus by reference from our Annual Report on Form 10-K
for the year ended December 31, 2002, have been audited by Deloitte & Touche
LLP, independent auditors, as stated in their report which is incorporated
herein by reference and have been so incorporated in reliance upon the report of
such firm given upon their authority as experts in accounting and auditing.
32
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and is not soliciting an offer to buy these securities
in any state where the offer or sale is not permitted.
Subject to Completion, Dated June 24, 2003
PROSPECTUS
$2,000,000,000
PSEG POWER CAPITAL TRUST I
PSEG POWER CAPITAL TRUST II
PSEG POWER CAPITAL TRUST III
PSEG POWER CAPITAL TRUST IV
PSEG POWER CAPITAL TRUST V
TRUST PREFERRED SECURITIES
Guaranteed to the Extent the Issuer thereof has
Available Funds as set forth herein by
PSEG POWER LLC
PSEG Power Capital Trust I, PSEG Power Capital Trust II, PSEG Power
Capital Trust III, PSEG Power Capital Trust IV and PSEG Power Capital Trust V
may severally offer, from time to time, their respective trust preferred
securities (the "Preferred Securities") representing undivided beneficial
interests in the assets of such Issuer. PSEG Power LLC ("PSEG Power") will be
the owner of beneficial interests represented by the common securities of each
Issuer.
Pursuant to a guarantee agreement to be entered into by PSEG Power with
respect to each series of Preferred Securities (each, a "Guarantee"), PSEG Power
will agree to make payments of cash distributions with respect to the Preferred
Securities of each Issuer and payments on liquidation or redemption with respect
to such Preferred Securities but only to the extent that such Issuer holds funds
available therefor and has not made such payments as more fully described
herein.
The Preferred Securities may be offered in amounts, at prices and on terms
to be determined at the time of offering; provided, however, that the aggregate
initial public offering price of all Preferred Securities issued pursuant to the
registration statement of which this prospectus forms a part shall not exceed
$2,000,000,000, less the aggregate initial public offering price of any senior
debt securities of PSEG Power which are sold under a separate prospectus which
also constitutes a part of the registration statement of which this prospectus
constitutes a part. Certain specific terms of an Issuer's Preferred Securities
will be set forth in an accompanying prospectus supplement.
The Preferred Securities may be sold in a public offering to or through
underwriters or dealers designated from time to time. See "Plan of
Distribution". The names of any such underwriters or dealers involved in the
sale of the Preferred Securities of a particular Issuer, the number of Preferred
Securities to be purchased by any such underwriters or dealers and any
applicable commissions or discounts will be set forth in the accompanying
prospectus supplement. The net proceeds to each Issuer will also be set forth in
the accompanying prospectus supplement.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary is a
criminal offense.
Investing in the Preferred Securities involves risks. You should carefully
review "Risk Factors" beginning on page 6 of this prospectus.
The date of this prospectus is _________, 2003.
TABLE OF CONTENTS
Page
----
About this Prospectus ..................................................... 3
Where You Can Find More Information ....................................... 3
Forward-Looking Statements ................................................ 4
The Issuers ............................................................... 4
PSEG Power LLC ............................................................ 5
Risk Factors .............................................................. 6
Use of Proceeds ........................................................... 13
Accounting Treatment Relating to the Preferred Securities ................. 13
Description of the Preferred Securities ................................... 13
Description of the Guarantees ............................................. 23
Description of the Debentures ............................................. 25
Relationship Among the Preferred Securities,
the Debentures and the Guarantees ....................................... 29
Plan of Distribution ...................................................... 30
Legal Opinions ............................................................ 31
Experts ................................................................... 31
2
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that PSEG Power LLC
("PSEG Power") and the Issuers filed with the Securities and Exchange Commission
(the "SEC") utilizing a "shelf" registration process. Under this shelf process,
the Issuers may, from time to time, sell any amount of the Preferred Securities
described in this prospectus in one or more offerings of one or more series. The
aggregate principal amount of Preferred Securities that the Issuers may offer
under this prospectus is $2,000,000,000 less the aggregate principal amount of
any PSEG Power debt securities that are sold under a separate prospectus filed
with the same registration statement. Each time the Issuers sell Preferred
Securities, they will provide a prospectus supplement that will contain specific
information about the terms of that offering. The prospectus supplement may also
add, update or change information contained in this prospectus. You should read
both this prospectus and any prospectus supplement together with the additional
information described under the heading "Where You Can Find More Information".
The Issuers believe that they have included or incorporated by reference
all information material to investors in this prospectus, but certain details
that may be important for specific investment purposes have not been included.
To see more detail, you should read the exhibits filed with or incorporated by
reference into this registration statement.
WHERE YOU CAN FIND MORE INFORMATION
PSEG Power files annual, quarterly and special reports, proxy statements
and other information with the SEC. PSEG Power's filings are also available to
the public over the Internet at the SEC's web site at http://www.sec.gov. You
may read and copy any material on file with the SEC at the SEC's Public
Reference Room at 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C.
20549. Please call the SEC at 1-800-SEC-0330 for further information on the
Public Reference Room.
The SEC allows the Issuers to "incorporate by reference" information that
PSEG Power files with the SEC, which means that the Issuers can disclose
important information to you by referring you to those documents. The
information incorporated by reference or deemed incorporated by reference is an
important part of this prospectus, and information that PSEG Power files later
with the SEC will be deemed to automatically update and supersede this
incorporated information. PSEG Power incorporates by reference the documents
listed below and any future filings made with the SEC under Sections 13(a),
13(c), 14, or 15(d) of the Securities Exchange Act of 1934 prior to the
termination of any particular offering of Preferred Securities.
o PSEG Power's Annual Report on Form 10-K for the year ended December
31, 2002;
o PSEG Power's Quarterly Report on Form 10-Q for the quarter ended
March 31, 2003; and
o PSEG Power's Current Reports on Form 8-K dated January 28, 2003,
April 15, 2003 and June 17, 2003.
You can get a free copy of any of the documents incorporated by reference
by making an oral or written request directed to:
J. Brian Smith
Director, Investor Relations
PSEG Services Corporation
80 Park Plaza, 6th Floor
Newark, NJ 07102
Telephone (973) 430-6564
You should rely only on the information contained or incorporated by
reference or deemed to be incorporated by reference in this prospectus or in the
prospectus supplement. Neither the Issuers nor PSEG Power have authorized anyone
else to provide you with different or additional information. You should not
rely on any other information or representations. PSEG Power's affairs may
change after this prospectus and any prospectus supplement is distributed. You
should not assume that the information in this prospectus or any prospectus
supplement is accurate as of any date other than the date on the front of those
documents. You should read all information supplementing this prospectus.
3
FORWARD-LOOKING STATEMENTS
This prospectus, any prospectus supplement and the documents incorporated
by reference or deemed to be incorporated by reference into this prospectus
include certain forward-looking statements. The forward-looking statements
reflect the Issuers' and PSEG Power's expectations, objectives and goals with
respect to future events and financial performance and are based on assumptions
and estimates that the Issuers and PSEG Power believe are reasonable. However,
actual results could differ materially from anticipated results. Important
factors which may affect the actual results include, but are not limited to,
commodity prices, political developments, market and economic conditions,
industry competition, the weather, changes in financial markets and changing
legislation and regulations. The forward-looking statements contained in this
prospectus, any prospectus supplement and the documents incorporated by
reference or deemed to be incorporated by reference into this prospectus and any
prospectus supplement are intended to qualify for the safe harbor provisions of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended.
THE ISSUERS
Each of PSEG Power Capital Trust I, PSEG Power Capital Trust II, PSEG
Power Capital Trust III, PSEG Power Capital Trust IV and PSEG Power Capital
Trust V (each, an "Issuer" and jointly, the "Issuers") is a statutory trust
created under Delaware law pursuant to (1) a trust agreement executed by PSEG
Power, as depositor, and the Issuer Trustees (as defined below) and (2) the
filing of a certificate of trust with the Delaware Secretary of State. Each
trust agreement will be amended and restated in its entirety (each, as so
amended and restated, a "Trust Agreement") substantially in the form filed as an
exhibit to the Registration Statement of which this prospectus forms a part.
Each Trust Agreement will be qualified as an indenture under the Trust Indenture
Act of 1939, as amended (the "Trust Indenture Act").
Each Issuer exists for the exclusive purposes of issuing and selling its
Trust Securities and using the proceeds from the sale of its Trust Securities to
acquire a corresponding series of PSEG Power's deferrable interest subordinated
debentures (the "Debentures"), maintaining the status of the Issuer as a grantor
trust for federal income tax purposes and engaging in those activities
necessary, convenient or incidental to the foregoing. All of the beneficial
interests represented by common securities (the "Common Securities") of each
Issuer will be owned by PSEG Power. The Common Securities of an Issuer will rank
pari passu, and payments will be made thereon pro rata, with the Preferred
Securities of that Issuer, except that upon the occurrence and continuance of an
event of default with respect to the corresponding series of Debentures (a
"Debenture Event of Default") under the Indenture dated as of the date of
issuance of such Debentures (as amended and supplemented from time to time, the
"Indenture") between PSEG Power and The Bank of New York, as trustee (the
"Debenture Trustee"), the rights of the holders of such Common Securities to
payment of cash distributions ("Distributions") and payments upon redemption and
liquidation will be subordinated to the rights of the holders of such Preferred
Securities. The Indenture will be qualified as an indenture under the Trust
Indenture Act.
Each Issuer's business and affairs are conducted by three trustees, each
appointed by PSEG Power as holder of the Common Securities: (1) The Bank of New
York (the "Property Trustee"); (2) an affiliate of the Property Trustee that has
its principal place of business in the State of Delaware (the "Delaware
Trustee"); and (3) one individual trustee who is an employee or officer of or
affiliated with PSEG Power (the "Administrative Trustee", and collectively with
the Property Trustee and the Delaware Trustee, the "Issuer Trustees"). The
holder of the Common Securities, or the holders of at least a majority in
aggregate liquidation amount of an Issuer's Preferred Securities if an event of
default under the Trust Agreement (a "Trust Agreement Event of Default") has
occurred and is continuing, will be entitled to remove and replace the Property
Trustee and the Delaware Trustee. In no event will the holders of the Preferred
Securities have the right to vote to appoint, remove or replace the
Administrative Trustee, which voting rights are vested exclusively in the holder
of the Common Securities. The duties and obligations of each of the Issuer
Trustees are governed by the applicable Trust Agreement.
Pursuant to the Trust Agreement of each Issuer, PSEG Power will pay all
fees and expenses related to that Issuer and the offering of its Preferred
Securities and will pay, directly or indirectly, all ongoing costs, expenses and
liabilities of that Issuer except such Issuer's obligations under its Preferred
Securities and Common Securities.
The principal place of business of each Issuer is 80 Park Plaza, Newark,
New Jersey 07102, and its telephone number is (973) 430-7000.
4
PSEG POWER LLC
PSEG Power is one of the largest independent electric generating and
wholesale energy marketing and trading companies in the United States. Through
its three principal operating subsidiaries, PSEG Fossil LLC ("Fossil"), which
operates PSEG Power's fossil generating facilities; PSEG Nuclear LLC
("Nuclear"), which operates PSEG Power's nuclear generating facilities; and PSEG
Energy Resources & Trade LLC ("ER&T"), which conducts PSEG Power's wholesale
energy marketing and trading activities, PSEG Power generates and markets
electricity, capacity, ancillary services and natural gas products on a
wholesale basis. As of March 31, 2003, PSEG Power's generation portfolio
consisted of approximately 13,055 megawatts ("MW") of installed capacity. Its
target market, which it refers to as the Super Region, extends from Maine to the
Carolinas and the Atlantic Coast to Indiana, encompassing approximately 36% of
the nation's power consumption. With approximately 20% of installed capacity,
PSEG Power is the single largest power supplier in its primary market, the
Pennsylvania-New Jersey-Maryland Power Pool ("PJM"), which is one of the
nation's largest and most well-developed energy markets.
PSEG Power seeks to continually maximize the value of its generation
portfolio through the centralized control of its operations and its integration
with its trading, fuel procurement, marketing and risk management expertise.
PSEG Power's electric generation portfolio is diversified by fuel source and
market segment and it has demonstrated expertise in natural gas procurement.
PSEG Power began operating as a deregulated energy supplier in 1999. On
August 21, 2000, it acquired ownership of the electric generation portfolio of
its utility affiliate, Public Service Electric and Gas Company ("PSE&G"), New
Jersey's largest public utility. PSEG Power sells energy on a wholesale basis
under contract to power marketers and load serving entities and it bids energy,
capacity and ancillary services into the wholesale energy market. For the period
ending July 31, 2003, PSEG Power has contracted to sell energy to various basic
generation service ("BGS") suppliers in the New Jersey market. In addition, PSEG
Power is a direct supplier to one utility, not PSE&G, for a limited portion of
its retail load.
As a result of the BGS auction held in February 2003, PSEG Power entered
into hourly energy price contracts to be a direct supplier of certain large
customers for a ten-month period beginning August 1, 2003. Power also entered
into contracts with third parties who are direct suppliers of New Jersey's
electric distribution companies. Through these seasonally-adjusted fixed price
contracts, PSEG Power will indirectly serve New Jersey's smaller commercial and
residential customers for ten-month and 34-month periods beginning August 1,
2003. PSEG Power believes that its obligations under these contracts are
reasonably balanced by its available supply.
In addition to the BGS-related contracts noted above, PSEG Power has
various contracts to provide service to municipal electric utilities that run
through 2007, a contract to supply power through 2003 to Niagara Mohawk Power
Corporation from its Albany Steam Station and various supply contracts, ranging
from one through four years, related to our recently acquired Connecticut
generating stations.
PSEG Power is a wholly-owned subsidiary of Public Service Enterprise Group
Incorporated ("PSEG"). PSEG is an exempt public utility holding company and one
of the leading providers of energy and energy-related services in the nation.
PSEG has three other direct, wholly-owned subsidiaries: PSE&G, PSEG Energy
Holdings L.L.C. ("Energy Holdings") and PSEG Services Corporation ("Services").
PSE&G is New Jersey's largest public utility and is engaged principally in the
transmission, distribution and sale of electric energy and gas service in New
Jersey. Energy Holdings participates nationally and internationally in
energy-related lines of business through its subsidiaries. Services provides
corporate support and managerial and administrative services to PSEG and its
affiliates.
PSEG Power is a Delaware limited liability company located at 80 Park
Plaza, Newark, New Jersey 07102; its telephone number is 973-430-7000.
You can obtain additional information about PSEG Power in the reports and
other documents incorporated by reference in this prospectus. See "Where You Can
Find More Information."
5
Consolidated Ratios of Earnings to Fixed Charges and Consolidated Ratios of
Earnings to Fixed Charges and Preference Dividends
PSEG Power's consolidated ratios of earnings to fixed charges and its
consolidated ratio of earnings to combined fixed charges and preference
dividends for each of the periods indicated are identical and are as follows:
Years Ended December 31,
Three Months Ended ---------------------------------------
March 31, 2003 2002 2001 2000 1999 1998
------------------ ---- ---- ---- ---- ----
Ratios of Earnings to Combined Fixed
Charges and Preference Dividends(1) 5.69 4.10 3.73 3.42 7.29 2.46
- ----------
1 The term "earnings" shall be defined as pre-tax income from continuing
operations in accordance with Regulation S-K. Add to pre-tax income the
amount of fixed charges adjusted to exclude (a) the amount of any interest
capitalized during the period and (b) the actual amount of any preferred
stock dividend requirements of majority-owned subsidiaries which were
included in such fixed charges amount but not deducted in the
determination of pre-tax income.
RISK FACTORS
In addition to the information, including risk factors, contained in the
documents incorporated by reference or elsewhere in this prospectus, prospective
investors should consider carefully the risks described below before making a
decision to purchase any series of the Preferred Securities:
Obligations under the Guarantees and the Debentures are subordinate to all of
PSEG Power's general liabilities
PSEG Power's obligations under the Guarantees to be issued for the benefit
of the holders of the Preferred Securities to be issued by the Issuers are
unsecured and rank subordinate and junior in right of payment to all of PSEG
Power's general liabilities. PSEG Power's obligations under its Debentures to be
issued pursuant to the Indenture between it and The Bank of New York, as
trustee, will be unsecured and rank subordinate and junior in right of payment
to all of PSEG Power's senior indebtedness. At March 31, 2003, PSEG Power's
senior indebtedness aggregated approximately $2.5 billion. None of the terms of
the Preferred Securities, the Debentures or the Guarantees will limit PSEG
Power's ability to incur additional indebtedness, including indebtedness that
will rank senior to the Debentures and the Guarantees. See "Description of the
Guarantees -- Status of the Guarantees" and "Description of the Debentures --
Subordination."
PSEG Power is a holding company whose assets consist principally of the
limited liability company interests in its wholly owned subsidiaries, Fossil,
Nuclear and ER&T. Therefore, PSEG Power's rights and the rights of its
creditors, including the holders of Debentures, to participate in the assets of
any subsidiary upon the latter's liquidation or recapitalization or otherwise
will be subject to the prior claims of the subsidiary's creditors, except to the
extent that PSEG Power's claims as a creditor of the subsidiary may be
recognized.
The ability of an Issuer to pay cash distributions ("Distributions") on
its Preferred Securities and the redemption price or liquidation amount of such
Preferred Securities is solely dependent upon PSEG Power making the payments on
the related series of Debentures when due.
The tax consequences of the Debentures' option to extend the interest payment
period may result in you incurring income tax liability before cash payments are
made
So long as no Debenture Event of Default has occurred and is continuing
with respect to such series of Debentures, PSEG Power has the right at any time
and from time to time to defer payments of interest on such series of Debentures
by extending the interest payment period on such series of Debentures for up to
the maximum Extension Period provided for such series of Debentures, but not
beyond the maturity or any redemption date of such series of Debentures. At the
end of the Extension Period, PSEG Power shall be obligated to pay all interest
then accrued and unpaid (together with interest thereon to the extent permitted
by applicable law). During any Extension Period, PSEG Power may not declare or
pay any distribution on, or redeem, purchase, acquire, or make a liquidation
payment with respect to, any of its limited liability company interests. Prior
to the termination of any Extension Period, PSEG Power may shorten or further
extend the interest payment period, provided that such Extension Period,
together with all such previous and further extensions thereof, may not exceed
the maximum Extension Period for such series of Debentures or extend beyond the
maturity or any redemption date of such series of Debentures. Upon the
termination of any
6
Extension Period and the payment of all amounts then due, PSEG Power may elect
to begin a new Extension Period, subject to the above requirements. PSEG Power
shall be required to give notice to the Debenture Trustee and cause the
Debenture Trustee to give notice to the holders of the applicable series of
Debentures of its election to begin an Extension Period, or any shortening or
extension thereof, at least one Business Day prior to the date the notice of the
record or payment date of the related Distribution on the corresponding series
of Preferred Securities or payment of interest on such Debentures is required to
be given to any national securities exchange on which such Debentures or such
Preferred Securities are then listed or other applicable self-regulatory
organization but in any event not less than two Business Days prior to such
record date. See "Description of the Debentures -- Option to Extend Interest
Payment Period."
As a consequence, owners of Preferred Securities during an Extension
Period will be required to include accrued interest in gross income but will not
receive the related cash payment until the date on which the related Debentures
mature or are called and any owners of Preferred Securities who dispose of
Preferred Securities prior to such date will be required to include the accrued
interest in gross income, but will not receive any cash related thereto. The tax
basis of the Debentures represented by such series of Preferred Security will be
increased by the amount of any original issue discount that is included in
income without a receipt of cash and will be decreased when and if such cash is
subsequently received by the owner of that series of Preferred Security.
Should PSEG Power exercise its right to defer payments of interest by
extending the interest payment period on the Debentures, the market price of the
Preferred Securities is likely to be affected. An owner who disposes of
Preferred Securities during an Extension Period might not receive the same
return on investment as an owner who continues to hold Preferred Securities. In
addition, as a result of the mere existence of PSEG Power's right to defer
interest payments on the Debentures, the market price of the Preferred
Securities may be more volatile than other securities on which original issue
discount accrues that are not subject to such deferrals.
If you sell the Preferred Securities you may incur additional taxes
The Preferred Securities may trade at a price that does not fully reflect
the value of accrued but unpaid interest with respect to the Debentures. An
owner of Preferred Securities who disposes of Preferred Securities prior to the
record date for the payment of Distributions will nevertheless be required to
include accrued but unpaid interest on the Debentures through the date of
disposition in income as ordinary income and to add such amount to its adjusted
tax basis of the Preferred Securities so disposed. Such owner will recognize a
capital loss to the extent the selling price (which may not fully reflect the
value of accrued but unpaid interest) is less than its adjusted tax basis (which
will include accrued but unpaid interest). Subject to certain limited
exceptions, capital losses cannot be applied to offset ordinary income for
Federal income tax purposes.
Special Event Redemption
Upon the occurrence and continuation of certain adverse changes in tax
treatment (a "Tax Event") or in treatment under the Investment Company Act (an
"Investment Company Event"), PSEG Power will have the right to redeem a series
of Debentures, in whole but not in part, and therefore cause a mandatory
redemption of the related series of Preferred Securities and common securities
of the Issuer at a redemption price equal to the liquidation amount plus
accumulated and unpaid Distributions, within 90 days following the occurrence of
such Tax Event or Investment Company Event. The accompanying prospectus
supplement will contain a description of these circumstances.
You may be forced to accept a distribution of the Debentures in exchange for
your Preferred Securities
At any time, PSEG Power may, in its sole discretion, dissolve an Issuer
and, after satisfaction of liabilities to creditors of the related trust as
provided by applicable law, cause the related Debentures to be distributed to
the holders of the related Preferred Securities, provided that PSEG Power shall
have delivered to the Issuer Trustees an opinion of nationally recognized tax
counsel (which may be regular tax counsel to PSEG Power or an affiliate but not
an employee thereof and which must be acceptable to The Bank of New York, as the
Property Trustee) that any such distribution will not be a taxable event to the
owners of the Preferred Securities. Although PSEG Power will agree to use its
best efforts to list the Debentures on a national securities exchange, to the
extent that the preferred securities are so listed, there can be no assurance
that such Debentures will be approved for listing or that a trading market will
exist for them.
7
There can be no assurance as to the market prices for the Debentures that
may be distributed in exchange for Preferred Securities if a dissolution of the
related Issuer were to occur. Accordingly, the Debentures that a holder of a
series of Preferred Securities may receive upon such a distribution, or the
Preferred Securities held pending such a distribution, may trade at a discount
to the price that the investor paid to purchase such Preferred Securities.
Because holders of Preferred Securities may receive Debentures at PSEG Power's
sole discretion, prospective purchasers of Preferred Securities are also making
an investment decision with regard to the related series of Debentures and
should carefully review all the information regarding the Debentures contained
in the prospectus and prospectus supplement. See "Description of the
Debentures."
Your rights under the Guarantees are limited
Each Guarantee will be qualified as an indenture under the Trust Indenture
Act of 1939, as amended (the "Trust Indenture Act"). The Bank of New York will
be the indenture trustee under each Guarantee for the purposes of compliance
with the Trust Indenture Act and will hold each Guarantee for the benefit of the
holders of the related series of Preferred Securities. Under a Guarantee, PSEG
Power will agree to make the following payments to the holders of the related
series of Preferred Securities, to the extent not paid by the related Issuer:
(i) any accumulated and unpaid Distributions on the Preferred Securities to the
extent that the Issuer has funds available therefor, (ii) the redemption price
of any Preferred Securities called for redemption to the extent that the Issuer
has funds available therefor, and (iii) upon a voluntary or involuntary
dissolution and liquidation of the Issuer (unless the related series of
Debentures are distributed to holders of the Preferred Securities), the lesser
of (a) the liquidation amount of the Preferred Security plus accumulated and
unpaid Distributions to the date of payment, and (b) the amount of assets of the
related Issuer available for distribution to holders of Preferred Securities
upon such dissolution and liquidation of the Issuer. See "Description of the
Guarantees -- General." The holders of at least a majority in aggregate
liquidation amount of a series of Preferred Securities have the right to direct
the time, method and place of conducting any proceeding for any remedy available
to the Trustee in respect of a related Guarantee and to direct the exercise of
any trust power conferred upon the Trustee under such Guarantee. Any holder of a
series of Preferred Securities may institute a legal proceeding directly against
PSEG Power to enforce its rights under the related Guarantee without first
instituting a legal proceeding against the related Issuer, the Trustee or any
other person or entity. If PSEG Power defaults on its obligation to pay amounts
payable on the related series of Debentures, the Issuer will not have sufficient
funds for the payment of Distributions, amounts payable on redemption of the
Preferred Securities or amounts payable upon liquidation of the Issuer and,
accordingly, holders of the related series of Preferred Securities will not be
able to rely upon the Guarantee for payment of such amounts. Instead, the
Property Trustee or holders of the related series of Preferred Securities may
enforce the rights of the Issuer under the Related Debentures against PSEG Power
pursuant to the terms of those Debentures. The proposed form of Amended and
Restated Trust Agreement provides that each holder of Preferred Securities, by
acceptance thereof, agrees to these provisions of the Trust Agreement, the
Guarantee and the Indenture.
You have limited voting rights as a holder of Preferred Securities
Holders of Preferred Securities will have limited voting rights under the
related Trust Agreement. Holders of Preferred Securities will not be entitled to
vote to appoint, remove or replace the Issuer Trustees, which voting rights are
vested exclusively in PSEG Power as the holder of the Common Securities, except
that upon the occurrence of an event of default under the Trust Agreement, the
holders of at least a majority in aggregate liquidation amount of a series of
Preferred Securities may replace the Property Trustee and the Delaware Trustee
(as defined herein). See "Description of the Preferred Securities -- Voting
Rights; Amendment of Trust Agreement" and "-- Removal of Issuer Trustees."
Credit, Commodity and Financial Market Risks May Have an Adverse Impact
The revenues generated by the operation of PSEG Power's generating
stations are subject to market risks that are beyond its control. PSEG Power's
generation output will either be used to satisfy its wholesale contracts or be
sold into the competitive power markets or under other bilateral contracts.
Participants in the competitive power markets are not guaranteed any specified
rate of return on their capital investments through recovery of mandated rates
payable by purchasers of electricity. Although a majority of PSEG Power's
revenue is generated by the BGS contract with the various direct bidders of the
New Jersey BGS Auction and from
8
bilateral contracts for the sale of electricity with third-party load serving
entities and power marketers, its revenues and results of operations will be
dependent upon prevailing market prices for energy, capacity and ancillary
services in the markets it serves.
Among the factors that will influence the market prices for PSEG Power's
energy, capacity and ancillary services are:
o the extent of additional supplies of capacity, energy and ancillary
services from current competitors or new market entrants, including
the development of new generation facilities that may be able to
produce electricity less expensively;
o changes in the rules set by regulatory authorities with respect to
the manner in which electricity sales will be priced;
o transmission congestion and access in PJM and/or other competitive
markets;
o the operation of nuclear generation plants in PJM and other
competitive markets beyond their presently expected dates of
decommissioning;
o prevailing market prices for enriched uranium, fuel oil, coal and
natural gas and associated transportation costs;
o fluctuating weather conditions;
o reduced growth rate in electricity usage as a result of factors such
as national and regional economic conditions and the implementation
of conservation programs; and
o changes in regulations applicable to PJM and other ISOs.
As a result of the BGS auction, PSEG Power has entered into contracts with
the direct suppliers of the New Jersey electric utilities, including PSE&G.
These bilateral contracts are subject to credit risk. This credit risk relates
to the ability of counterparties to meet their payment obligations for the power
delivered under each BGS contract. Any failure to collect these payments under
the BGS contracts with counterparties could have a material impact on PSEG
Power's results of operations, cash flows, and financial position.
Energy Obligations, Available Supply and Trading Risks May Have an Adverse
Impact
PSEG Power's energy trading and marketing business frequently involves the
establishment of energy trading positions in the wholesale energy markets on
long-term and short-term bases. To the extent that PSEG Power has forward
purchase contracts to provide or purchase energy in excess of demand, a downturn
in the markets is likely to result in a loss from a decline in the value of such
long positions as it attempts to sell energy in a falling market. Conversely, to
the extent that PSEG Power enters into forward sales contracts to deliver energy
it does not own, or take short positions in the energy markets, an upturn in the
energy markets is likely to expose it to losses as it attempts to cover its
short positions by acquiring energy in a rising market.
If the strategy PSEG Power utilizes to hedge its exposures to these
various risks is not effective, it could incur significant losses. Its
substantial energy trading positions can also be adversely affected by the level
of volatility in the energy markets that, in turn, depends on various factors,
including weather in various geographical areas and short-term supply and demand
imbalances, which cannot be predicted with any certainty.
In addition, PSEG Power is exposed to the risk that counterparties will
not perform their obligations. Although it has devoted significant resources to
develop its risk management policies and procedures and counterparty credit
requirements and will continue to do so in the future, it can give no assurance
that losses from its energy trading activities will not have a material adverse
effect on its business, prospects, results of operations, financial condition or
net cash flows.
In connection with its energy trading business, PSEG Power must meet
certain credit quality standards as are required by counterparties. Standard
industry contracts generally require trading counterparties to maintain
investment grade ratings. These same contracts provide reciprocal benefits. If
PSEG Power loses its investment grade credit rating, ER&T would have to provide
collateral (letters of credit or cash), which would significantly impact the
energy trading business. This would increase its costs of doing business and
limit its ability to successfully conduct its energy trading operations.
9
The Electric Energy Industry is Undergoing Substantial Change
The electric energy industry in the State of New Jersey and across the
country is undergoing major transformations. As a result of deregulation and the
unbundling of energy supplies and services, the gas and electric retail markets
are now open to competition from other suppliers. Increased competition from
these suppliers could reduce the quantity of PSEG Power's wholesale sales and
have a negative impact on earnings and cash flows. PSEG Power is affected by
many issues that are common to the electric industry such as:
o deregulation, the unbundling of energy supplies and services and the
establishment of a competitive energy marketplace for products and
services;
o the possibility of reregulation in some deregulated markets;
o energy sales retention and growth;
o revenue and price stability and growth;
o nuclear operations and decommissioning;
o increased capital investments attributable to environmental
regulations;
o managing energy trading operations;
o ability to complete development or acquisition of current and future
investments;
o managing electric generation operations in locations outside of its
traditional utility service territory;
o exposure to market price fluctuations and volatility;
o regulatory restrictions on affiliate transactions; and
o debt and equity market concerns.
Generation Operating Performance May Fall Below Projected Levels
The risks associated with operating power generation facilities (each of
which could result in performance below expected capacity levels) include:
o breakdown or failure of equipment or processes;
o disruptions in the transmission of electricity;
o labor disputes;
o fuel supply interruptions;
o limitations which may be imposed by environmental or other
regulatory requirements;
o permit limitations; and
o operator error or catastrophic events such as fires, earthquakes,
explosions, floods, acts of terrorism or other similar occurrences.
Operation below expected capacity levels may result in lost revenues,
increased expenses and penalties.
Individual facilities may be unable to meet operating and financial
obligations resulting in reduced cash flow.
PSEG Power is Subject to Substantial Competition From Well Capitalized
Participants in the National Energy Markets
PSEG Power and its subsidiaries are subject to substantial competition in
the United States from merchant generators, domestic and multi-national utility
generators, fuel supply companies, engineering companies, equipment
manufacturers and affiliates of other industrial companies. Restructuring of
energy markets and the sale of utility-owned assets, is creating opportunities
for, and substantial competition from, well-capitalized entities which may
adversely affect PSEG Power's ability to make investments on favorable terms and
achieve its growth objectives. Increased competition could contribute to a
reduction in prices offered for power and could result in lower returns which
may affect its ability to service its outstanding indebtedness.
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Deregulation may continue to accelerate the current trend toward
consolidation among domestic utilities and could also result in the splitting of
vertically-integrated utilities into separate generation, transmission and
distribution businesses. As a result, additional competitors could become active
in the independent power industry.
Because It is a Holding Company, PSEG Power's Ability to Service Its Debt Could
Be Limited
PSEG Power is a holding company with no material assets other than the
stock or membership interests of its subsidiaries. Accordingly, all of its
operations are conducted by its subsidiaries. It depends on its subsidiaries'
cash flow and its access to capital in order to service its indebtedness. The
project-related debt agreements of subsidiaries generally restrict their ability
to pay dividends, make cash distributions or otherwise transfer funds to PSEG
Power. These restrictions may include achieving and maintaining financial
performance or debt coverage ratios, absence of events of default, or priority
in payment of other current or prospective obligations.
PSEG Power's subsidiaries have financed some investments using
non-recourse project level financing. Each non-recourse project financing is
structured to be repaid out of cash flows provided by the investment. In the
event of a default under a financing agreement which is not cured, the lenders
would generally have rights to the related assets. In the event of foreclosure
after a default, PSEG Power's subsidiary may lose its equity in the asset or may
not be entitled to any cash that the asset may generate.
PSEG Power can give no assurances that its current and future capital
structure, operating performance or financial condition will permit it to access
the capital markets or to obtain other financing at the times, in the amounts
and on the terms necessary or advisable for it to successfully carry out its
business strategy or to service its indebtedness.
Power Transmission Facilities May Impact PSEG Power's Ability to Deliver Its
Output to Customers
If transmission is disrupted, or if transmission capacity is inadequate,
PSEG Power's ability to sell and deliver its electric energy products may be
adversely impacted. If a region's power transmission infrastructure is
inadequate, PSEG Power's ability to generate revenues may be limited.
Regulatory Issues Significantly Impact PSEG Power's Operations
The electric power generation business is subject to substantial
regulation and permitting requirements from federal, state and local
authorities. PSEG Power is required to comply with numerous laws and regulations
and to obtain numerous governmental permits in order to operate its generation
stations.
PSEG Power believes that it has obtained all material energy-related
federal, state and local approvals including those required by the Nuclear
Regulatory Commission (the "NRC"), currently required to operate its generation
stations. Although not currently required, additional regulatory approvals may
be required in the future due to a change in laws and regulations or for other
reasons. No assurance can be given that PSEG Power will be able to obtain any
required regulatory approval that it may require in the future, or that it will
be able to obtain any necessary extension in receiving any required regulatory
approvals. If it fails to obtain or comply with any required regulatory
approvals, there could be a material adverse effect on its ability to operate
its generation stations or to sell electricity to third parties.
PSEG Power are subject to pervasive regulation by the NRC with respect to
the operation of its nuclear generation stations. Such regulation involves
testing, evaluation and modification of all aspects of plant operation in light
of NRC safety and environmental requirements. Continuous demonstrations to the
NRC that plant operations meet applicable requirements are also required. The
NRC has the ultimate authority to determine whether any nuclear generation unit
may operate.
PSEG Power can give no assurance that existing regulations will not be
revised or reinterpreted, that new laws and regulations will not be adopted or
become applicable to it or any of its generation stations or that future changes
in laws and regulations will not have a detrimental effect on its business.
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Environmental Regulation May Limit PSEG Power's Operations
PSEG Power is required to comply with numerous statutes, regulations and
ordinances relating to the safety and health of employees and the public, the
protection of the environment and land use. These statutes, regulations and
ordinances are constantly changing. While PSEG Power believes that it has
obtained all material environmental-related approvals required as of the date
hereof to own and operate its facilities or that such approvals have been
applied for and will be issued in a timely manner, it may incur significant
additional costs because of compliance with these requirements. Failure to
comply with environmental statutes, regulations and ordinances could have a
material effect on it, including potential civil or criminal liability and the
imposition of clean-up liens or fines and expenditures of funds to bring its
facilities into compliance.
PSEG Power can give no assurance that it will be able to:
o obtain all required environmental approvals that it does not yet
have or that may be required in the future;
o obtain any necessary modifications to existing environmental
approvals;
o maintain compliance with all applicable environmental laws,
regulations and approvals; or
o recover any resulting costs through future sales.
Delay in obtaining or failure to obtain and maintain in full force and
effect any such environmental approvals, or delay or failure to satisfy any
applicable environmental regulatory requirements, could prevent construction of
new facilities, operation of its existing facilities or sale of energy there
from or could result in significant additional cost.
PSEG Power is Subject to More Stringent Environmental Regulation than Many of
Its Competitors
PSEG Power's facilities are subject to both federal and state pollution
control requirements. Most of its generating facilities are located in the State
of New Jersey. In particular, New Jersey's environmental programs are generally
considered to be particularly stringent in comparison to similar programs in
other states. As such, there may be instances where the facilities located in
New Jersey are subject to more stringent and therefore more costly pollution
control requirements than competitive facilities in other states.
Insurance Coverage May Not Be Sufficient
PSEG Power has insurance for its generation stations, including all-risk
property damage insurance, commercial general public liability insurance, boiler
and machinery coverage, nuclear liability and, for its nuclear units,
replacement power and business interruption insurance in amounts and with
deductibles that it considers appropriate. PSEG Power can give no assurance that
such insurance coverage will be available in the future on commercially
reasonable terms nor that the insurance proceeds received for any loss of or any
damage to any of the generation stations will be sufficient to permit it to
continue to make payments on its debt. Additionally, certain properties that it
owns may not be insured in the event of a terrorist activity.
Acquisition, Construction and Development Activities May Not Be Successful
PSEG Power may seek to acquire, develop and construct new energy projects,
the completion of any of which is subject to substantial risk. Such activity can
require it to expend significant sums for preliminary engineering, permitting,
fuel supply, legal and other expenses in preparation for competitive bids or
before it can be established whether a project is economically feasible.
The construction, expansion or refurbishment of a power generation
facility may involve equipment and material supply interruptions, labor
disputes, unforeseen engineering, environmental and geological problems and
unanticipated cost overruns. The proceeds of any insurance, vendor warranties or
performance guarantees may not be adequate to cover lost revenues, increased
expenses or payments of liquidated damages. In addition, some power purchase
contracts permit the customer to terminate the related contract, retain security
posted by the developer as liquidated damages or change the payments to be made
to the subsidiary or the project affiliate in the event certain milestones, such
as commencing commercial operation of the project, are not met by specified
dates. If project start-up is delayed and the customer exercises these rights,
the project may be unable
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to fund principal and interest payments under project financing agreements. PSEG
Power can give no assurance that it will obtain access to the substantial debt
and equity capital required to develop and construct new generation projects or
to refinance existing projects to supply anticipated future demand.
Changes in Technology May Make PSEG Power's Power Generation Assets Less
Competitive
A key element of PSEG Power's business plan is that generating power at
central power plants produces electricity at relatively low cost. There are
other technologies that produce electricity, most notably fuel cells,
microturbines, windmills and photovoltaic (solar) cells. It is possible that
advances in technology will reduce the cost of alternative methods of producing
electricity to a level that is competitive with that of most central station
electric production. If this were to happen, PSEG Power's market share could be
eroded and the value of its power plants could be significantly impaired.
Changes in technology could also alter the channels through which retail
electric customers buy electricity, thereby affecting its financial results.
Recession, Acts of War, Terrorism Could Negatively Impact PSEG Power's Business
The consequences of a prolonged recession and adverse market conditions
may include the continued uncertainty of energy prices and the capital and
commodity markets. PSEG Power cannot predict the impact of any continued
economic slowdown or fluctuating energy prices; however, such impact could have
a material adverse effect on its financial condition, results of operations and
net cash flows.
Like other operators of major industrial facilities, PSEG Power's
generation plants may be targets of terrorist activities that could result in
disruption of its ability to produce or distribute some portion of its energy
products. Any such disruption could result in a significant decrease in revenues
and/or significant additional costs to repair, which could have a material
adverse impact on its financial condition, results of operation and net cash
flows.
USE OF PROCEEDS
The proceeds to be received by the Issuers from the sale of the Preferred
Securities offered hereby will be used by the Issuers to purchase Debentures
from PSEG Power. Unless otherwise specified in the applicable prospectus
supplement, the proceeds from the sale of the Debentures will be added to PSEG
Power's general funds and used by PSEG Power for general corporate purposes.
ACCOUNTING TREATMENT RELATING TO THE PREFERRED SECURITIES
The financial statements of the Issuers will be consolidated with PSEG
Power's financial statements, with the Preferred Securities shown on its
consolidated financial statements as liabilities and will present the Preferred
Securities as shares subject to mandatory redemption. PSEG Power's financial
statements will include a footnote that discloses, among other things, that the
assets of the trust consist of its debt securities and will specify the
designation, principal amount, interest rate and maturity date of the debt
securities.
DESCRIPTION OF THE PREFERRED SECURITIES
Pursuant to the terms of each Trust Agreement, the Issuers will issue the
Preferred Securities and the Common Securities. The Preferred Securities of an
Issuer will represent undivided beneficial interests in the assets of such
Issuer and the holders thereof will be entitled to a preference in certain
circumstances with respect to the payment of Distributions and amounts payable
on redemption or liquidation over the Common Securities of such Issuer, as well
as other benefits as described in the applicable Trust Agreement. Each of the
Issuers is a legally separate entity and the assets of one are not available to
satisfy the obligations of the other.
General
The Preferred Securities of each Issuer will rank pari passu, and payments
will be made thereon pro rata, with the Common Securities of that Issuer except
as described under "-- Subordination of Common Securities." The proceeds from
the sale of the Preferred Securities and the Common Securities will be used by
the related Issuer to purchase a corresponding series of Debentures from PSEG
Power. The Debentures will be held in trust by the Property Trustee for the
benefit of the holders of the related Trust Securities. Each Guarantee
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Agreement executed by PSEG Power for the benefit of the holders of each Issuer's
Preferred Securities (each, a "Guarantee") will be subordinate and junior in
right of payment to all general liabilities of PSEG Power. Pursuant to each
Guarantee, PSEG Power will agree to make payments of Distributions and payments
on redemption or liquidation with respect to such Preferred Securities, but only
to the extent the related Issuer holds funds available therefor and has not made
such payments. See "Description of the Guarantees."
It is anticipated that the assets of each Issuer available for
distribution to the holders of its Preferred Securities will be limited to
payments from PSEG Power under the corresponding series of Debentures in which
such Issuer will invest the proceeds from the issuance and sale of its Trust
Securities. See "Description of the Debentures." If PSEG Power fails to make a
payment on a series of Debentures, the related Issuer will not have sufficient
funds to make related payments, including Distributions, on its Preferred
Securities.
Distributions
Distributions on the Preferred Securities of each Issuer will be payable
at a rate specified (or at a rate whose method of determination is described) in
the accompanying prospectus supplement for such Preferred Securities. Unless
otherwise specified in such prospectus supplement, the amount of Distributions
payable for any period will be computed on the basis of a 360-day year of twelve
30-day months.
Unless otherwise specified in such prospectus supplement, distributions on
the Preferred Securities will be cumulative and will accumulate from the date of
original issuance and will be payable in arrears on the dates specified in the
applicable prospectus supplement except as otherwise described below. Unless
otherwise specified in such prospectus supplement, in the event that any date on
which Distributions are otherwise payable on the Preferred Securities is not a
Business Day (as defined below), payment of such Distributions will be made on
the next succeeding day that is a Business Day (and without any interest or
other payment in respect of any such delay), except that if such Business Day is
in the next succeeding calendar year, payment of such Distributions shall be
made on the immediately preceding Business Day, in each case with the same force
and effect as if made on such date (each date on which Distributions are payable
in accordance with the foregoing is referred to herein as a "Distribution
Date"). Unless otherwise specified in such prospectus supplement, a "Business
Day" shall mean any day other than a Saturday, Sunday or a day on which banking
institutions in The City of New York or the State of New Jersey are required by
law or executive order to remain closed.
Distributions on the Preferred Securities will be payable to the holders
thereof as they appear on the securities register of the related Issuer on the
relevant record date, which, as long as the Preferred Securities remain in
book-entry-only form, will be one Business Day prior to the relevant
Distribution Date. Subject to any applicable laws and regulations and the
provisions of the applicable Trust Agreement, each such payment will be made as
described under "-- Book-Entry-Only Issuance -- The Depository Trust Company."
In the event that any Preferred Securities are not in book-entry-only form, the
relevant record date for such Preferred Securities will be specified in the
applicable prospectus supplement.
So long as no Debenture Event of Default has occurred and is continuing
with respect to a series of Debentures, PSEG Power will have the right at any
time and from time to time to defer payments of interest by extending the
interest payment period on such series of Debentures for up to the maximum
period specified in the accompanying prospectus supplement for such series of
Debentures (each, an "Extension Period"), provided that any such Extension
Period shall not extend beyond the maturity or any redemption date of the
Debentures of such series. As a consequence, Distributions on the corresponding
Preferred Securities would be deferred by the Issuer thereof during such
Extension Period, but the amount of Distributions to which holders of the
Preferred Securities would be entitled will continue to accumulate at the annual
rate applicable to Distributions thereon, compounded with the same frequency
with which Distributions are payable. During any Extension Period, PSEG Power
may not declare or pay any distribution on, or redeem, purchase, acquire, or
make a liquidation payment with respect to, any of its limited liability company
interests. Prior to the termination of any Extension Period, PSEG Power may
shorten or further extend the interest payment period on a series of Debentures,
provided that such Extension Period, together with all such previous and further
extensions thereof, may not exceed the maximum Extension Period or extend beyond
the maturity or any redemption date of such Debentures. Upon the termination of
any Extension Period and the payment of all amounts then due, PSEG Power may
elect to begin a new Extension Period, subject to the above requirements. See
"Description of the Debentures -- Option to Extend Interest Payment Period."
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Redemption
Upon the payment of a series of Debentures held by an Issuer at maturity
or upon redemption, the proceeds from such payment will be applied by the
Property Trustee to redeem a like amount of the corresponding Trust Securities
of the Issuer thereof at a redemption price (the "Redemption Price") equal to
the liquidation amount of such Trust Securities plus all accumulated and unpaid
Distributions to the redemption date (the "Redemption Date"). The redemption
terms of a particular series of Debentures and the corresponding Trust
Securities will be set forth in the accompanying prospectus supplement.
If less than all the Trust Securities of the Issuer thereof are to be
redeemed on a Redemption Date, then the aggregate amount of such Trust
Securities to be redeemed shall be selected by the Property Trustee among such
Issuer's Preferred Securities and Common Securities pro rata based on the
respective aggregate liquidation amounts of such Preferred Securities and Common
Securities, subject to the provisions of "-- Subordination of Common
Securities."
Redemption Procedures
Notice of any redemption of Trust Securities will be given by the Property
Trustee to the holders of such Trust Securities to be redeemed not less than 30
nor more than 60 days prior to the Redemption Date. If a notice of redemption is
given with respect to any Trust Securities, then, to the extent funds are
available therefor, the Issuer thereof will irrevocably deposit with the paying
agent for such Trust Securities funds sufficient to pay the applicable
Redemption Price for the Trust Securities being redeemed on the Redemption Date
and will give such paying agent irrevocable instructions and authority to pay
the Redemption Price to the holders of such Trust Securities upon surrender
thereof. Notwithstanding the foregoing, Distributions payable on or prior to the
Redemption Date for any Trust Securities called for redemption shall be payable
to the holders of such Trust Securities on the relevant record dates for the
related Distribution Dates.
If notice of redemption shall have been given and funds irrevocably
deposited as required, then upon the date of such deposit, all rights of the
holders of such Trust Securities so called for redemption will cease, except the
right of the holders of such Trust Securities to receive the Redemption Price,
but without interest thereon, and such Trust Securities will cease to be
outstanding. In the event that any Redemption Date for Trust Securities is not a
Business Day, then the Redemption Price will be payable on the next succeeding
day that is a Business Day (and without any interest or other payment in respect
of any such delay), except that if such Business Day is in the next succeeding
calendar year, the Redemption Price will be payable on the immediately preceding
Business Day, in each case with the same force and effect as if made on such
date. In the event that payment of the Redemption Price in respect of any Trust
Securities called for redemption is improperly withheld or refused and not paid
either by the Issuer thereof or by PSEG Power pursuant to the Guarantee as
described under "Description of the Guarantees," Distributions on such Trust
Securities will continue to accumulate at the then applicable rate from the
original Redemption Date to the date of payment, in which case the actual
payment date will be considered the Redemption Date for purposes of calculating
the Redemption Price.
Subject to applicable law, PSEG Power or its subsidiaries may at any time
and from time to time purchase outstanding Preferred Securities by tender, in
the open market or by private agreement.
If Preferred Securities of an Issuer are partially redeemed on a
Redemption Date, a corresponding percentage of the Common Securities of that
Issuer will also be redeemed. The particular Preferred Securities to be redeemed
will be selected by the Property Trustee of that Issuer by such method as the
Property Trustee shall deem fair and appropriate. The Property Trustee will
promptly notify the Security Registrar in writing of the Preferred Securities
selected for redemption and, where applicable, the partial amount to be
redeemed.
Subordination of Common Securities
Payment of Distributions on, and the Redemption Price of, each Issuer's
Trust Securities, as applicable, shall be made pro rata based on the respective
aggregate liquidation amounts of such Trust Securities; provided, however, that
if a Debenture Event of Default has occurred and is continuing with respect to
the corresponding series of Debentures, no payment of any Distribution on, or
Redemption Price of, any of such Issuer's Common
15
Securities, and no other payment on account of the liquidation of such Common
Securities, shall be made unless payment in full in cash of all accumulated and
unpaid Distributions on all of such Issuer's outstanding Preferred Securities
for all Distribution periods terminating on or prior thereto, or in the case of
a redemption, the full amount of such Redemption Price on all of such Issuer's
outstanding Preferred Securities shall have been made or provided for, and all
funds available to the Property Trustee shall first be applied to the payment in
full in cash of all Distributions on, or the Redemption Price of, all of such
Issuer's outstanding Preferred Securities then due and payable.
If a Debenture Event of Default has occurred and is continuing with
respect to a series of Debentures, the holder of the related Issuer's Common
Securities will be deemed to have waived any right to act with respect to such
Debenture Event of Default until the effect of such Debenture Event of Default
has been cured, waived or otherwise eliminated with respect to the Preferred
Securities. Until any such Debenture Event of Default has been so cured, waived
or otherwise eliminated, the Property Trustee shall act solely on behalf of the
holders of the corresponding Preferred Securities and not on behalf of PSEG
Power, as holder of such Common Securities, and only the holders of such
Preferred Securities will have the right to direct the Property Trustee to act
on their behalf.
Liquidation Distribution upon Dissolution
Pursuant to its Trust Agreement, each Issuer shall be dissolved on the
earliest to occur of:
(1) the expiration of the term of such Issuer;
(2) the bankruptcy, dissolution or liquidation of PSEG Power or an
acceleration of the maturity of the corresponding series of
Debentures held by such Issuer;
(3) if provided for in the accompanying prospectus supplement, upon PSEG
Power's election to dissolve such Issuer and, after satisfaction of
liabilities to creditors of such Issuer, cause the distribution of
the corresponding series of Debentures to the holders of such
Issuer's Trust Securities;
(4) the redemption of all of such Issuer's Trust Securities; and
(5) an order for the dissolution of such Issuer shall have been entered
by a court of competent jurisdiction.
PSEG Power's election pursuant to clause (3) above shall be made by giving
written notice to the Issuer Trustees not less than 30 days prior to the date of
distribution of the corresponding series of Debentures and shall be accompanied
by an opinion of counsel that such event will not be a taxable event to the
holders of the Trust Securities for federal income tax purposes.
If a dissolution event occurs as described in clause (1), (2) or (5) above
with respect to any Issuer, such Issuer shall be liquidated by the Issuer
Trustees as expeditiously as the Issuer Trustees determine to be possible by
distributing, after satisfaction of liabilities to creditors of such Issuer as
provided by applicable law, to the holders of its Trust Securities a like amount
of the corresponding series of Debentures, unless such distribution is
determined by the Property Trustee not to be practical, in which event such
holders will be entitled to receive out of the assets of such Issuer available
for distribution to holders, after satisfaction of liabilities to creditors of
such Issuer as provided by applicable law, an amount equal to, in the case of
holders of Trust Securities, the aggregate liquidation amount per Trust Security
specified in the applicable prospectus supplement plus accumulated and unpaid
Distributions thereon to the date of payment (such amount, the "Liquidation
Distribution"). If the Liquidation Distribution with respect to an Issuer's
Preferred Securities can be paid only in part because such Issuer has
insufficient assets available to pay in full the aggregate Liquidation
Distribution, then the amounts payable by such Issuer on such Preferred
Securities shall be paid on a pro rata basis. The holders of such Issuer's
Common Securities will be entitled to receive the Liquidation Distribution upon
any such liquidation pro rata with the holders of its Preferred Securities,
except that if a Debenture Event of Default has occurred and is continuing the
Preferred Securities shall have a priority over the Common Securities with
respect to payment of such Liquidation Distribution.
Trust Agreement Event of Default; Notice
A Debenture Event of Default shall constitute a Trust Agreement Event of
Default with respect to the Preferred Securities issued by the related Issuer
under its Trust Agreement.
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Within 90 days after the occurrence of any Trust Agreement Event of
Default actually known to the Property Trustee, the Property Trustee shall
transmit notice of such Trust Agreement Event of Default to the holders of the
corresponding Trust Securities, the Administrative Trustee and PSEG Power,
unless such Trust Agreement Event of Default shall have been cured or waived.
PSEG Power and the Administrative Trustee are required to file annually with the
Property Trustee a certificate as to whether or not they are in compliance with
all the conditions and covenants applicable to them under each Trust Agreement.
Under each Trust Agreement, if the Property Trustee has failed to enforce
its rights under the Trust Agreement or the Indenture to the fullest extent
permitted by law and subject to the terms of the Trust Agreement and the
Indenture, any holder of the corresponding Preferred Securities may institute a
legal proceeding directly to enforce the Property Trustee's rights under the
Trust Agreement or the Indenture with respect to Debentures having a principal
amount equal to the aggregate liquidation amount of the Preferred Securities of
such holder without first instituting a legal proceeding against the Property
Trustee or any other person. To the extent that any action under the Indenture
is entitled to be taken by the holders of at least a specified percentage of the
principal amount of a series of Debentures, holders of the corresponding
Preferred Securities may take such action if such action is not taken by the
Property Trustee. Notwithstanding the foregoing, if a Trust Agreement Event of
Default attributable to PSEG Power's failure to pay principal of or premium, if
any, or interest on the Debentures of any series has occurred and is continuing,
then each holder of Preferred Securities of the corresponding series may
institute a legal proceeding directly against PSEG Power for enforcement of any
such payment to such holder, all as provided in the Indenture.
If a Debenture Event of Default has occurred and is continuing with
respect to a series of Debentures, the corresponding Preferred Securities shall
have a preference over the related Issuer's Common Securities with respect to
the payment of Distributions and amounts payable on redemption and liquidation
as described above. See "-- Liquidation Distribution Upon Dissolution" and "--
Subordination of Common Securities."
Removal of Issuer Trustees
Unless a Trust Agreement Event of Default has occurred and is continuing,
any Issuer Trustee may be removed and replaced at any time by the holder of the
Common Securities. If a Trust Agreement Event of Default has occurred and is
continuing, the Property Trustee and the Delaware Trustee may be removed and
replaced at such time only by the holders of at least a majority in aggregate
liquidation amount of the outstanding Preferred Securities. In no event will the
holders of the Preferred Securities have the right to vote to appoint, remove or
replace the Administrative Trustee, which voting rights are vested exclusively
in the holder of the Common Securities. No resignation or removal of an Issuer
Trustee and no appointment of a successor trustee shall be effective until the
acceptance of appointment by the successor trustee in accordance with the
provisions of the applicable Trust Agreement.
Co-Trustees and Separate Property Trustee
Unless a Trust Agreement Event of Default has occurred and is continuing,
at any time and from time to time, for the purpose of meeting the legal
requirements of the Trust Indenture Act or of any jurisdiction in which any part
of the Trust Property (as defined in each Trust Agreement) may at such time be
located, the holder of the Common Securities and the Administrative Trustee
shall have the power (1) to appoint one or more persons approved by the Property
Trustee either to act as co-trustee, jointly with the Property Trustee, of all
or any part of such Trust Property, or to act as separate trustee of any such
Trust Property, in either case with such powers as may be provided in the
instrument of appointment, and (2) to vest in such person or persons in such
capacity any property, title, right or power deemed necessary or desirable,
subject to the provisions of the applicable Trust Agreement. If a Trust
Agreement Event of Default has occurred and is continuing, only the Property
Trustee shall have power to make such appointment.
Merger or Consolidation of Issuer Trustees
Any corporation or other entity into which any Issuer Trustee may be
merged or converted or with which it may be consolidated, or any corporation or
other entity resulting from any merger, conversion or consolidation
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to which any Issuer Trustee shall be a party, or any corporation or other entity
succeeding to all or substantially all the corporate trust business of any
Issuer Trustee, shall be the successor of such Issuer Trustee under the
applicable Trust Agreement, provided such corporation or other entity shall be
otherwise qualified and eligible.
Mergers, Consolidations, Amalgamations or Replacements of the Issuers
An Issuer may not merge with or into, consolidate, amalgamate, or be
replaced by, or convey, transfer or lease its properties and assets as an
entirety or substantially as an entirety to any corporation or other entity,
except as described below or in "-- Liquidation Distribution Upon Dissolution."
An Issuer may, at PSEG Power's request, with the consent of the Administrative
Trustee and without the consent of the holders of its Preferred Securities,
merge with or into, consolidate, amalgamate, or be replaced by a trust organized
as such under the laws of any state, provided that:
o such successor entity either (a) expressly assumes all of the
obligations of such Issuer with respect to such Preferred Securities
or (b) substitutes for such Preferred Securities other securities
substantially similar to such Preferred Securities (the "Successor
Securities") so long as the Successor Securities rank the same as
such Preferred Securities rank with respect to the payment of
Distributions and payments upon redemption and liquidation;
o PSEG Power expressly appoints a trustee of such successor entity
possessing the same powers and duties as the Property Trustee with
respect to the corresponding series of Debentures;
o the Successor Securities are listed, or any Successor Securities
will be listed upon notification of issuance, on any national
securities exchange or other organization on which such Preferred
Securities are then listed;
o such merger, consolidation, amalgamation or replacement does not
cause such Preferred Securities (including any Successor Securities)
to be downgraded by any nationally recognized statistical rating
organization;
o such merger, consolidation, amalgamation or replacement does not
adversely affect the rights, preferences and privileges of the
holders of such Preferred Securities (including any Successor
Securities) in any material respect;
o such successor entity has a purpose substantially similar to that of
such Issuer;
o prior to such merger, consolidation, amalgamation or replacement,
PSEG Power has received an opinion of counsel to such Issuer to the
effect that (a) such merger, consolidation, amalgamation or
replacement does not adversely affect the rights, preferences and
privileges of the holders of such Preferred Securities (including
any Successor Securities) in any material respect, and (b) following
such merger, consolidation, amalgamation or replacement, neither
such Issuer nor such successor entity will be required to register
as an investment company under the Investment Company Act of 1940,
as amended (the "Investment Company Act"); and
o PSEG Power or any permitted successor assignee owns all of the
common securities of such successor entity and guarantees the
obligations of such successor entity under the Successor Securities
at least to the extent provided by the related Guarantee and Trust
Agreement.
Notwithstanding the foregoing, an Issuer shall not, except with the
consent of all holders of its Preferred Securities, consolidate, amalgamate,
merge with or into, or be replaced by, any other entity, or permit any other
entity to consolidate, amalgamate, merge with or into, or replace it if such
consolidation, amalgamation, merger or replacement would cause such Issuer or
the successor entity not to be classified as a grantor trust for federal income
tax purposes.
Voting Rights; Amendment of Trust Agreement
Except as provided below and under "-- Mergers, Consolidations,
Amalgamations or Replacements of the Issuers" and "Description of the Guarantee
- -- Amendments and Assignment" and as otherwise required by law and the
applicable Trust Agreement, the holders of the Preferred Securities will have no
voting rights.
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A Trust Agreement may be amended from time to time by PSEG Power and the
Issuer Trustees, without the consent of the holders of the corresponding
Preferred Securities, (1) to cure any ambiguity, defect or inconsistency or (2)
to make any other change that does not adversely affect in any material respect
the interests of any holder of such Preferred Securities.
A Trust Agreement may be amended by PSEG Power and the Issuer Trustees in
any other respect, with the consent of the holders of at least a majority in
aggregate liquidation amount of such Preferred Securities, except to:
o change the amount, timing or currency or otherwise adversely affect
the method of payment of any Distribution or Liquidation
Distribution,
o restrict the right of a holder of any such Preferred Security to
institute suit for enforcement of any Distribution, Redemption Price
or Liquidation Distribution,
o change the purpose of the related Issuer,
o authorize the issuance of any additional beneficial interests in the
related Issuer,
o change the redemption provisions,
o change the conditions precedent for PSEG Power to elect to dissolve
the related Issuer and distribute the corresponding series of
Debentures to the holders of such Preferred Securities or
o affect the limited liability of any holder of such Preferred
Securities,
which amendment requires the consent of each holder of the related Preferred
Securities affected thereby.
Notwithstanding the foregoing, no amendment may be made without receipt by
the related Issuer of an opinion of counsel to the effect that such amendment
will not affect such Issuer's status as a grantor trust for federal income tax
purposes or its exemption from regulation as an investment company under the
Investment Company Act.
The Issuer Trustees shall not:
o direct the time, method and place of conducting any proceeding for
any remedy available to the Debenture Trustee or executing any trust
or power conferred on the Debenture Trustee with respect to the
corresponding series of Debentures,
o waive any past default under the Indenture,
o exercise any right to rescind or annul an acceleration of the
principal of the corresponding series of Debentures or
o consent to any amendment or modification of the Indenture, where
such consent shall be required,
without, in each case, obtaining the consent of the holders of at least a
majority in aggregate liquidation amount of all outstanding Preferred Securities
of the related Issuer; provided, however, that where a consent under the
Indenture would require the consent of each holder of Debentures affected
thereby, no such consent shall be given by the Property Trustee without the
prior consent of each holder of the corresponding Preferred Securities. The
Issuer Trustees shall not revoke any action previously authorized or approved by
a vote of the holders of such Preferred Securities except by subsequent vote of
the holders thereof. The Property Trustee shall notify all holders of Preferred
Securities of any notice received from the Debenture Trustee as a result of the
Issuer thereof being the holder of the corresponding Debentures. In addition to
obtaining the consent of the holders of the Preferred Securities of the
corresponding series, prior to taking any of the foregoing actions, the Issuer
Trustees shall obtain an opinion of counsel to the effect that the related
Issuer will not be classified as an association taxable as a corporation or a
partnership for federal income tax purposes on account of such action and will
continue to be classified as a grantor trust for federal income tax purposes.
Any required consent of holders of Preferred Securities may be given at a
meeting of holders of such Preferred Securities convened for such purpose or
pursuant to written consent. The Property Trustee will cause a notice of any
meeting at which holders of Preferred Securities are entitled to vote, or of any
matter upon which action by written consent of such holders is to be taken, to
be given to each holder of record of such Preferred Securities in the manner set
forth in the applicable Trust Agreement.
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Notwithstanding that holders of Preferred Securities are entitled to vote
or consent under certain circumstances, any Preferred Securities that are owned
by PSEG Power, the Issuer Trustees or any affiliate of PSEG Power or any Issuer
Trustee shall, for purposes of such vote or consent, be treated as if they were
not outstanding.
Book-Entry-Only Issuance -- The Depository Trust Company
The Depository Trust Company (the "DTC") will act as securities depositary
for all of the Preferred Securities. The Preferred Securities will be issued
only as fully registered securities registered in the name of Cede & Co. (DTC's
nominee) as the holder thereof. One or more fully registered global securities
will be issued for the Preferred Securities of each Issuer, representing in the
aggregate the total number of such Issuer's Preferred Securities, and will be
deposited with DTC. The Issuers anticipate that the following provisions will
apply to the depositary arrangements with respect to any such global securities.
Additional or differing terms of the depositary arrangements will be described
in the prospectus supplement.
So long as DTC or its nominee is the registered owner of a global
security, DTC or its nominee, as the case may be, will be considered the sole
holder of the Preferred Securities represented by such global security for all
purposes under the applicable Trust Agreement. Except as provided below, owners
of beneficial interests in a global security will not be entitled to have
Preferred Securities represented by such global security registered in their
names, will not receive or be entitled to receive physical delivery of Preferred
Securities in certificated form and will not be considered the owners or holders
thereof under the applicable Trust Agreement. The laws of some states require
that certain purchasers of securities take physical delivery of such securities
in certificated form; such laws may limit the transferability of beneficial
interests in a global security.
The following is based on information furnished by DTC and applies to the
extent that it is the depositary, unless otherwise provided in the prospectus
supplement:
Registered Owner. The Preferred Securities will be issued as fully
registered securities in the name of Cede & Co., which is DTC's partnership
nominee. The Trustee will deposit the global securities with the depositary. The
deposit with the depositary and its registration in the name of Cede & Co. will
not change the nature of the actual purchaser's ownership interest in the
Preferred Securities.
DTC's Organization. DTC is a limited-purpose trust company organized under
the New York Banking Law, a "banking organization" within the meaning of that
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 is owned by a number of its direct participants and the New York Stock
Exchange, the American Stock Exchange, Inc. and the National Association of
Securities Dealers, Inc. Direct participants include securities brokers and
dealers, banks, trust companies, clearing corporations and some other
organizations who directly participate in DTC. Other entities may access DTC's
system by clearing transactions through or maintaining a custodial relationship
with direct participants. The rules applicable to DTC and its participants are
on file with the SEC.
DTC's Activities. DTC holds securities that its participants deposit with
it. 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. Doing so
eliminates the need for physical movement of securities certificates.
Participants' Records. Except as otherwise provided in this prospectus or
a prospectus supplement, purchases of Preferred Securities must be made by or
through a direct participant, which will receive a credit for the Preferred
Securities on the depositary's records. The purchaser's interest is in turn to
be recorded on the participants' records. Actual purchasers will not receive
written confirmation from the depositary of their purchase, but they generally
receive confirmations along with periodic statements of their holdings from the
participants through which they entered into the transaction.
Transfers of interest in the global securities will be made on the books
of the participants acting on behalf of the actual purchasers. Certificates
representing the interest of the actual purchasers in Preferred Securities will
not be issued unless the use of global securities is suspended.
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The depositary has no knowledge of the actual purchasers of the Preferred
Securities. The depositary's records only reflect the identity of the direct
participants who are responsible for keeping account of their holdings on behalf
of their customers.
Notices Among the Depositary, Participants and Actual Purchasers. Notices
and other communications by the depositary, its participants and the actual
purchasers will be governed by arrangements among them, subject to any legal
requirements in effect. Redemption notices shall be sent to Cede & Co. as the
registered holder of the Preferred Securities. If less than all of an Issuer's
Preferred Securities are being redeemed, DTC's practice is to determine by lot
the amount of the interest of each Direct Participant to be redeemed. Any
redemption notices will be sent to DTC. If less than all of the securities
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.
Voting Procedures. Neither DTC nor Cede & Co. will give consents for or
vote the Preferred Securities. The depositary generally mails an omnibus proxy
to the Issuer just after the applicable record date. That proxy assigns Cede &
Co.'s voting rights to the direct participants to whose accounts the Preferred
Securities are credited at that time.
Payments. Payments in respect of the Preferred Securities made by us will
be delivered to the depositary. DTC's practice is to credit direct participants'
accounts on the applicable payment date unless it has reason to believe that it
will not receive payment on that date. Payments by participants to actual
purchasers will be governed by standing instructions and customary practices, as
is the case with securities held for customers in bearer form or registered in
"street name." Those payments will be the responsibility of that participant,
not the depositary, the Issuer Trustees or us, subject to any legal requirements
in effect at that time.
PSEG Power is responsible for payment in respect of the Preferred
Securities to the Issuer Trustees who are responsible for payment to the
depositary. The depositary is responsible for disbursing those payments to
direct participants. The participants are responsible for disbursing payments to
the actual purchasers.
DTC may discontinue providing its services as securities depositary with
respect to any series of Preferred Securities at any time by giving reasonable
notice to the Property Trustee and PSEG Power. In the event that a successor
securities depositary is not obtained, definitive Preferred Security
certificates representing such Preferred Securities are required to be printed
and delivered. PSEG Power, at its option, may decide to discontinue use of the
system of book-entry transfers through DTC (or a successor depositary) as a
result of such discontinuance or as a result of DTC's ineligibility to so act,
in which case definitive certificates for such Preferred Securities will be
issued. After a Trust Agreement Event of Default, the related Issuer will issue
definitive certificates for such Issuer's Preferred Securities. Upon
distribution of definitive Preferred Securities certificates, owners of such
Preferred Securities will become the registered holders of such Preferred
Securities.
The information set forth above concerning DTC and DTC's book-entry system
has been obtained from sources that the Issuers and PSEG Power believe to be
accurate, but the Issuers and PSEG Power assume no responsibility for the
accuracy thereof. Neither the Issuers nor PSEG Power has any responsibility for
the performance by DTC or its Participants of their respective obligations as
described herein or under the rules and procedures governing their respective
operations.
In the event that the book-entry-only system is discontinued, the payment
of any Distribution, Redemption Price and Liquidation Distribution in respect of
such Preferred Securities will be payable in the manner described in the
accompanying prospectus supplement, and the following provisions would apply.
The Property Trustee shall keep the registration books for such Preferred
Securities at its corporate office. Such Preferred Securities may be transferred
or the Preferred Securities certificates representing such Preferred Securities
may be exchanged for one or more Preferred Securities certificates upon
surrender thereof at the corporate office of the Property Trustee by the holders
or their duly authorized attorneys or legal representatives. Upon surrender of
any Preferred Securities or certificates for Preferred Securities to be
transferred or for Preferred Securities certificates to be exchanged, the
Property Trustee shall record the registration of transfer or exchange in the
registration books and shall deliver new Preferred Securities appropriately
registered. The Property Trustee shall not be required to register the transfer
of any Preferred Securities that have been called for redemption or on or after
the liquidation date. The Issuers and the Property Trustee shall be entitled to
treat the holders of the related Preferred Securities, as their names appear in
the registration books, as the owners of those Preferred Securities for all
purposes under the applicable Trust Agreement.
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Information Concerning the Property Trustee
The Property Trustee is the sole Trustee under each Trust Agreement for
purposes of the Trust Indenture Act and shall have and be subject to all of the
duties and responsibilities specified with respect to an indenture trustee under
the Trust Indenture Act. The Property Trustee, other than during the occurrence
and continuance of a Trust Agreement Event of Default, undertakes to perform
only such duties as are specifically set forth in each Trust Agreement and, upon
a Trust Agreement Event of Default, must use the same degree of care and skill
in the exercise thereof as a prudent person would exercise or use in the conduct
of his or her own affairs. Subject to this provision, the Property Trustee is
under no obligation to exercise any of the powers vested in it by any Trust
Agreement at the request of any holder of Preferred Securities unless it is
offered reasonable security or indemnity against the costs, expenses and
liabilities that might be incurred thereby. If no Trust Agreement Event of
Default has occurred and is continuing, and the Property Trustee is required to
decide between alternative courses of action, construe ambiguous provisions in a
Trust Agreement or is unsure of the application of any provision of a Trust
Agreement, and the matter is not one on which holders of Preferred Securities
are entitled under such Trust Agreement to vote, then the Property Trustee shall
take such action as is directed by PSEG Power and, if not so directed, may take
such action as it deems advisable and in the best interests of the holders of
the corresponding Trust Securities and will have no liability except for its own
negligent action, negligent failure to act or willful misconduct.
Miscellaneous
The Administrative Trustee is authorized and directed to conduct the
affairs of and to operate the Issuers in such a way that
o no Issuer will be deemed to be an investment company required to be
registered under the Investment Company Act or to be taxed as a
corporation or partnership for federal income tax purposes,
o each Issuer will be classified as a grantor trust for federal income
tax purposes and
o the Debentures held by such Issuers will be treated as PSEG Power's
indebtedness for federal income tax purposes.
In this connection, PSEG Power and the Administrative Trustee are
authorized to take any action, not inconsistent with applicable law, the
applicable certificate of trust of the related Issuer or the applicable Trust
Agreement, that PSEG Power and the Administrative Trustee determine in their
discretion to be necessary or desirable for such purposes, even if such action
adversely affects the interests of the holders of the corresponding Preferred
Securities.
Holders of the Preferred Securities have no preemptive or similar rights.
No Issuer may borrow money, issue debt, execute mortgages or pledge any of
its assets.
Except as otherwise provided in the Trust Agreements, any action requiring
the consent or vote of the Issuer Trustees shall be approved by the
Administrative Trustee.
Governing Law
The Trust Agreements, the Preferred Securities of each Issuer and the
Common Securities of each Issuer provide that they will be governed by and
construed in accordance with the laws of the State of Delaware.
Certain United States Federal Income Tax Consequences.
A discussion of certain United States federal income tax considerations
that may be applicable to the purchase, ownership and disposition of a Preferred
Securities may be included the prospectus supplement related to the issuance of
such Preferred Securities. Please refer to any discussion of the taxation of the
Issuers, Debentures or Preferred Securities provided in the applicable
prospectus supplement.
It is expected that, in connection with the issuance of the Preferred
Securities, Ballard Spahr Andrews & Ingersoll LLP, tax counsel to PSEG Power and
to the Issuers, will render its opinion that, under then current law and subject
to certain assumptions, the Issuers will be characterized for United States
federal income tax purposes as a "grantor trust" and not as an association or
publicly traded partnership taxable as a corporation. If
22
an Issuer is properly characterized as a grantor trust, the Issuer will not be
subject to United States federal income taxes and each beneficial owner of
Preferred Securities will be treated for such purposes as owning a pro rata
undivided interest in the Debentures, and will be required to include in income
any income with respect to the owner's allocable share of those Debentures.
Distributions on the Preferred Securities are not dividends and will not qualify
for the corporate dividends received deduction or be taxable at the new lower
rates applicable to dividends paid by corporations to individuals.
Potential purchasers of Preferred Securities should be aware that a
Debenture might be treated as having been issued with original issue discount
("OID"). In general, a Debenture will be treated as having been issued with OID
if, among other possibilities:
o the Debenture has an issue price (determined under applicable
regulations) that is less than the Debenture's principal amount, or
o interest on the Debenture is not considered to be unconditionally
payable at least annually during the entire term of the Debenture at
a single fixed rate or, subject to certain exceptions, at one or
more variable rates.
PSEG Power's ability to defer interest payments on the Debentures,
described in "-- Distributions" and "Description of the Debentures -- Option to
Extend Interest Payment Period" might result in the Debentures having OID. A
beneficial owner of Preferred Securities evidencing an interest in Debentures
with OID generally will be required to include that OID in income as it accrues,
regardless of the owner's method of accounting for United States federal income
tax purposes, before receipt of cash payments attributable to that income.
If relevant, the applicable prospectus supplement will contain a more
complete discussion of the rules governing the treatment of OID, including a
discussion of the consequences under those rules of our ability to defer
interest payments on the Debentures.
The United States federal income tax discussion set forth above is
included for general information only and does not purport to be a complete
discussion of the United States federal income tax considerations that may be
applicable to the purchase, ownership and disposition of Preferred Securities.
Prospective purchasers of Preferred Securities should consult the prospectus
supplement related to the issuance of the Preferred Securities they are
considering purchasing and their own tax advisors with respect to the tax
consequences to them of the purchase, ownership and disposition of Preferred
Securities.
DESCRIPTION OF THE GUARANTEES
Each Guarantee will be executed and delivered by PSEG Power concurrently
with the issuance by each Issuer of its Preferred Securities for the benefit of
the holders from time to time of such Preferred Securities. Each Guarantee will
be qualified as an indenture under the Trust Indenture Act and The Bank of New
York will act as indenture trustee (the "Guarantee Trustee") under each
Guarantee for the purposes of compliance with the Trust Indenture Act. Reference
under this caption to Preferred Securities means the Preferred Securities to
which a Guarantee relates. The Guarantee Trustee will hold each Guarantee for
the benefit of the holders of the related Issuer's Preferred Securities.
General
PSEG Power will irrevocably agree, to the extent set forth in each
Guarantee, to pay in full, to the holders of the related Issuer's Preferred
Securities, the Guarantee Payments (as defined below) (except to the extent
previously paid), as and when due, regardless of any defense, right of set-off
or counterclaim which such Issuer may have or assert. The following payments, to
the extent not paid by an Issuer (the "Guarantee Payments"), will be subject to
the applicable Guarantee (without duplication):
o any accumulated and unpaid Distributions required to be paid on such
Preferred Securities, to the extent that such Issuer has funds
available therefor,
o the Redemption Price to the extent that such Issuer has funds
available therefor, and
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o upon a voluntary or involuntary dissolution and liquidation of such
Issuer (unless the corresponding series of Debentures are
distributed to holders of such Preferred Securities), the lesser of
(a) the aggregate of the liquidation amount specified in the
prospectus supplement per Preferred Security plus all accumulated
and unpaid Distributions on the Preferred Securities to the date of
payment, to the extent the Issuer has funds available therefor and
(b) the amount of assets of such Issuer remaining available for
distribution to holders of Preferred Securities upon a dissolution
and liquidation of such Issuer.
PSEG Power's obligation to make a Guarantee Payment may be satisfied by
direct payment by it of the required amounts the holders of the corresponding
Preferred Securities or by causing the related Issuer to pay such amounts to
such holders. While PSEG Power's assets will not be available pursuant to the
Guarantees for the payment of any Distribution, Liquidation Distribution or
Redemption Price on any Preferred Securities if the related Issuer does not have
funds available therefor as described above, PSEG Power has agreed under the
applicable Trust Agreement to pay all expenses of such Issuer except such
Issuer's obligations under its Trust Securities. Accordingly, the applicable
Guarantee, together with the backup undertakings consisting of PSEG Power's
obligations under the applicable Trust Agreement, the corresponding series of
Debentures and the Indenture, provide for PSEG Power's full, irrevocable and
unconditional guarantee of the Preferred Securities.
No single document executed by PSEG Power in connection with the issuance
of a series of Preferred Securities will provide for PSEG Power's full,
irrevocable and unconditional guarantee of the Preferred Securities. It is only
the combined operation of PSEG Power's obligations under the applicable
Guarantee, the applicable Trust Agreement, the corresponding series of
Debentures and the Indenture that has the effect of providing a full,
irrevocable and unconditional guarantee of an Issuer's obligations under its
Preferred Securities. See "Relationship Among the Preferred Securities, the
Debentures and the Guarantees."
Status of the Guarantees
Each Guarantee will constitute PSEG Power's unsecured obligation and will
rank subordinate and junior in right of payment to all of PSEG Power's general
liabilities. The Trust Agreements provide that each holder of Preferred
Securities by acceptance thereof agrees to the subordination provisions and
other terms of the related Guarantee. Each Guarantee will rank pari passu with
all other Guarantees issued by PSEG Power. Each Guarantee will constitute a
guarantee of payment and not of collection (i.e., the guaranteed party may
institute a legal proceeding directly against PSEG Power to enforce its rights
under the Guarantee without first instituting a legal proceeding against any
other person or entity). Each Guarantee will not be discharged except by payment
of the Guarantee Payments in full to the extent not previously paid or upon
distribution to the holders of the Preferred Securities of the corresponding
series of Debentures pursuant to the applicable Trust Agreement.
Amendments and Assignment
Except with respect to any changes which do not materially adversely
affect the rights of holders of the corresponding Preferred Securities (in which
case no consent of the holders will be required), no Guarantee may be amended
without the prior approval of the holders of at least a majority in aggregate
liquidation amount of such Preferred Securities (excluding any Preferred
Securities held by PSEG Power or an affiliate thereof). The manner of obtaining
any such approval will be as set forth under "Description of the Preferred
Securities -- Voting Rights; Amendment of Trust Agreement". All agreements
contained in each Guarantee shall bind the successors, assigns, receivers,
trustees and representatives of PSEG Power and shall inure to the benefit of the
holders of the corresponding Preferred Securities.
Guarantee Events of Default
An event of default under a Guarantee (a "Guarantee Event of Default")
will occur upon the failure of PSEG Power to perform any of its payment or other
obligations thereunder, provided that except with respect to a Guarantee Event
of Default resulting from a failure to make any of the Guarantee Payments, PSEG
Power shall have received notice of such Guarantee Event of Default from the
Guarantee Trustee and shall not have cured such Guarantee Event of Default
within 60 days after receipt of such notice. The holders of at least a majority
in aggregate liquidation amount of the corresponding Preferred Securities
(excluding any Preferred Securities held by PSEG Power or an affiliate thereof)
will have the right to direct the time, method and place of conducting any
proceeding for any remedy available to the Guarantee Trustee in respect of such
Guarantee or to direct the exercise of any trust or power conferred upon the
Guarantee Trustee under such Guarantee.
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Any holder of the corresponding Preferred Securities may institute a legal
proceeding directly against PSEG Power to enforce such holder's rights under
such Guarantee without first instituting a legal proceeding against the related
Issuer, the Guarantee Trustee or any other person or entity.
PSEG Power, as guarantor, will be required to file annually with the
Guarantee Trustee a certificate as to whether or not it is in compliance with
all the conditions and covenants applicable to it under each Guarantee.
Information Concerning the Guarantee Trustee
The Guarantee Trustee, other than during the occurrence and continuance of
a Guarantee Event of Default, undertakes to perform only such duties as are
specifically set forth in each Guarantee and, upon a Guarantee Event of Default,
must exercise such of the rights and powers vested in it by the Guarantee and to
use the same degree of care and skill in the exercise thereof as a prudent
person would exercise or use in the conduct of his or her own affairs. Subject
to this provision, the Guarantee Trustee is under no obligation to exercise any
of the powers vested in it by any Guarantee at the request of any holder of
Preferred Securities unless it is offered reasonable indemnity against the
costs, expenses and liabilities that might be incurred thereby.
Termination of the Guarantees
Each Guarantee will terminate and be of no further force and effect upon
full payment of the Redemption Price or Liquidation Distribution for the
corresponding Preferred Securities or upon distribution of the corresponding
series of Debentures to the holders of the corresponding Preferred Securities.
Each Guarantee will continue to be effective or will be reinstated, as the case
may be, if at any time any holder of the corresponding Preferred Securities must
restore payment of any sums paid under such Preferred Securities or such
Guarantee.
Governing Law
Each Guarantee will be governed by and construed in accordance with the
laws of the State of New York.
DESCRIPTION OF THE DEBENTURES
General
The Debentures will be issued in one or more series under the Indenture.
Each series of Debentures will rank pari passu with all other series of
Debentures. Each series of Debentures will be unsecured and will rank
subordinate and junior in right of payment, to the extent and in the manner set
forth in the Indenture, to all of PSEG Power's Senior Indebtedness (as defined
below). See "-- Subordination". The Indenture does not limit the incurrence or
issuance of Senior Indebtedness by PSEG Power.
The accompanying prospectus supplement will describe the following terms
of any series of Debentures:
o the title of such series of Debentures;
o the aggregate principal amount of such series of Debentures;
o the date or dates on which the principal of such series of
Debentures shall be payable or the method of determination thereof;
o the rate or rates, if any, at which such series of Debentures shall
bear interest, the interest payment dates on which any such interest
shall be payable or the method by which any of the foregoing shall
be determined;
o any terms regarding redemption;
o the maximum Extension Period for such series of Debentures; and
o any other terms of such series of Debentures not inconsistent with
the provisions of the Indenture.
Certain federal income tax consequences and special considerations
relating to the applicable series of Debentures will be described in the
accompanying prospectus supplement.
Option to Extend Interest Payment Period
Under the Indenture, PSEG Power shall have the right at any time and from
time to time, so long as no Debenture Event of Default has occurred and is
continuing with respect to such series of Debentures, to defer
25
payments of interest by extending the interest payment period for such series of
Debentures for up to the maximum Extension Period provided for such series of
Debentures, provided that no Extension Period shall extend beyond the maturity
or any redemption date of such series of Debentures. At the end of the Extension
Period, PSEG Power shall be obligated to pay all interest then accrued and
unpaid (together with interest thereon to the extent permitted by applicable
law). During any Extension Period, PSEG Power may not declare or pay any
distribution on, or redeem, purchase, acquire, or make a liquidation payment
with respect to, any of its limited liability company interests. Prior to the
termination of any Extension Period, PSEG Power may shorten or further extend
the interest payment period, provided that such Extension Period, together with
all such previous and further extensions thereof, may not exceed the maximum
Extension Period for such series of Debentures or extend beyond the maturity or
any redemption date of such series of Debentures. Upon the termination of any
Extension Period and the payment of all amounts then due, PSEG Power may elect
to begin a new Extension Period, subject to the above requirements. PSEG Power
shall be required to give notice to the Debenture Trustee and cause the
Debenture Trustee to give notice to the holders of the applicable series of
Debentures of its election to begin an Extension Period, or any shortening or
extension thereof, at least one Business Day prior to the date the notice of the
record or payment date of the related Distribution on the corresponding series
of Preferred Securities or payment of interest on such Debentures is required to
be given to any national securities exchange on which such Debentures or such
Preferred Securities are then listed or other applicable self-regulatory
organization but in any event not less than two Business Days prior to such
record date.
Subordination
All payments by PSEG Power in respect of the Debentures shall be
subordinated to the prior payment in full of all amounts payable on Senior
Indebtedness. The term "Senior Indebtedness" means:
o the principal of and premium, if any, in respect of (a) indebtedness
of PSEG Power for money borrowed and (b) indebtedness evidenced by
securities, debentures, bonds or other similar instruments issued by
PSEG Power;
o all capital lease obligations of PSEG Power;
o all obligations of PSEG Power issued or assumed as the deferred
purchase price of property, all conditional sale obligations of PSEG
Power and all obligations of PSEG Power under any title retention
agreement (but excluding trade accounts payable arising in the
ordinary course of business);
o certain obligations of PSEG Power for the reimbursement of any
obligation, any letter of credit, banker's acceptance, security
purchase facility or similar credit transaction entered into in the
ordinary course of business of PSEG Power;
o all obligations of the type referred to in the first through fourth
clauses of this list of other persons and all dividends of other
persons (other than the Preferred Securities or similar securities)
for the payment of which, in either case, PSEG Power is responsible
or liable as obligor, guarantor or otherwise (other than each
Guarantee and obligations ranking pari passu with such Guarantee);
and
o certain obligations of the type referred to in the first through
fifth clauses of this list of other persons secured by any lien on
any property or asset of PSEG Power (whether or not such obligation
is assumed by PSEG Power), except for any such indebtedness that is
by its terms subordinated to or pari passu with the Debentures and
for indebtedness between or among PSEG Power and its affiliates.
Upon any payment or distribution of PSEG Power's assets or securities,
upon any dissolution or winding-up or total or partial liquidation or
reorganization of PSEG Power, whether voluntary or involuntary, or in
bankruptcy, insolvency, receivership or other proceedings, all amounts payable
on Senior Indebtedness (including any interest accruing on such Senior
Indebtedness subsequent to the commencement of a bankruptcy, insolvency or
similar proceeding) shall be paid in full before the holders of the Debentures
or the Debenture Trustee on behalf of such holders shall be entitled to receive
from PSEG Power any payment of principal of, premium, if any, or interest on,
the Debentures or distributions of any assets or securities.
No direct or indirect payment by or on behalf of PSEG Power of principal
of, premium, if any, or interest on, the Debentures, whether pursuant to the
terms of the Debentures or upon acceleration or otherwise, shall be made if, at
the time of such payment, there exists (1) a default in the payment of all or
any portion of any Senior
26
Indebtedness or (2) any other default pursuant to which the maturity of Senior
Indebtedness has been accelerated and, in either case, requisite notice has been
given to the Debenture Trustee and such default shall not have been cured or
waived by or on behalf of the holders of such Senior Indebtedness.
If the Debenture Trustee or any holder of the Debentures shall have
received any payment on account of the principal of, premium, if any, or
interest on, the Debentures when such payment is prohibited and before all
amounts payable on Senior Indebtedness are paid in full, then such payment shall
be received and held in trust for the holders of Senior Indebtedness and shall
be paid to the holders of the Senior Indebtedness remaining unpaid to the extent
necessary to pay such Senior Indebtedness in full.
Nothing in the Indenture shall limit the right of the Debenture Trustee or
the holders of the Debentures to take any action to accelerate the maturity of
the Debentures or to pursue any rights or remedies against PSEG Power, provided
that all Senior Indebtedness shall be paid before holders of the Debentures are
entitled to receive any payment from PSEG Power of principal of, premium, if
any, or interest on, the Debentures.
Upon the payment in full of all Senior Indebtedness, the holders of the
Debentures shall be subrogated to the rights of the holders of such Senior
Indebtedness to receive payments or distributions of assets of PSEG Power made
on such Senior Indebtedness until the Debentures shall be paid in full.
Certain PSEG Power Covenants
PSEG Power will covenant that it may not declare or pay any distribution
on, or redeem, purchase, acquire or make a liquidation payment with respect to,
any of its limited liability company interests (1) during an Extension Period,
(2) if there has occurred and is continuing any event that is, or, with the
giving of notice or the lapse of time or both would constitute, a Debenture
Event of Default or (3) if it is in default with respect to its payment or other
obligations under any Guarantee. See "-- Debenture Events of Default and
Description of the Guarantee -- Guarantee Events of Default."
Any waiver of any Debenture Event of Default will require the approval of
at least a majority of the aggregate principal amount of the corresponding
series of Debentures or, if such Debentures are held by an Issuer, the approval
of the holders of at least a majority in aggregate liquidation amount of the
Preferred Securities of such Issuer; provided, however, that a Debenture Event
of Default resulting from the failure to pay the principal of, premium, if any,
or interest on, such Debentures may not be waived.
Modification of the Indenture
From time to time, PSEG Power and the Debenture Trustee, without notice to
or the consent of any holders of Debentures, may amend or supplement the
Indenture for any of the following purposes:
o to cure any ambiguity, defect or inconsistency;
o to comply with the provisions of the Indenture regarding
consolidation, merger or sale, conveyance, transfer or lease of the
properties as an entirety or substantially as an entirety of PSEG
Power;
o to provide for uncertificated Debentures in addition to or in place
of certificated Debentures;
o to make any other change that does not in PSEG Power's reasonable
judgment adversely affect the rights of any holder of the
Debentures;
o to comply with any requirement of the SEC in connection with the
qualification of the Indenture under the Trust Indenture Act; or
o to set forth the terms and conditions, which shall not be
inconsistent with the Indenture, of any series of Debentures and the
form of Debentures of such series.
In addition, PSEG Power and the Debenture Trustee may modify the Indenture
or any supplemental indenture or waive future compliance by PSEG Power with the
provisions of the Indenture, with the consent of the holders of at least a
majority of the aggregate principal amount of the Debentures of each series
affected thereby, provided that no such modification, without the consent of
each holder of such Debentures, may:
o reduce the principal amount of such Debentures,
27
o reduce the principal amount of outstanding Debentures of any series
the holders of which must consent to an amendment of the Indenture
or a waiver,
o change the stated maturity of the principal of, or interest on, or
the rate of interest on, such Debentures,
o change the redemption provisions applicable to such Debentures
adversely to the holders thereof,
o impair the right to institute suit for the enforcement of any
payment with respect to such Debentures,
o change the currency in which payments with respect to such
Debentures are to be made, or
o change the subordination provisions applicable to such Debentures
adversely to the holders thereof,
provided that if such Debentures are held by an Issuer, no modification shall be
made that adversely affects the holders of the Preferred Securities of such
Issuer, and no waiver of any Debenture Event of Default with respect to such
Debentures or compliance with any covenant under the Indenture shall be
effective, without the prior consent of the holders of at least a majority of
the aggregate liquidation amount of the Preferred Securities of such Issuer or
the holder of each such Preferred Security, as applicable.
Debenture Events of Default
The following are Debenture Events of Default with respect to the
Debentures of any series:
o default for 30 days in payment of any interest on any Debenture of
that series (other than the payment of interest during an Extension
Period);
o default in payment of principal of or premium, if any, on any
Debenture of that series when the same becomes due and payable;
o default for 60 days after receipt by PSEG Power of a Notice of
Default in the performance of or failure to comply with any other
covenant or agreement for such series of Debentures or in the
Indenture or any supplemental indenture under which such series of
Debentures may have been issued; or
o certain events of bankruptcy, insolvency or reorganization of PSEG
Power.
In case a Debenture Event of Default has occurred and is continuing, other
than one relating to bankruptcy, insolvency or reorganization of PSEG Power in
which case the principal of, premium, if any, and any interest on, all of the
Debentures of the applicable series shall become immediately due and payable,
the Debenture Trustee or the holders of at least 25% in aggregate principal
amount of the Debentures of that series may declare the principal, together with
interest accrued thereon, of all the Debentures of that series to be due and
payable; provided, however, that if a Debenture Event of Default has occurred
and is continuing with respect to such Debentures and the Debenture Trustee or
the holders of at least 25% in aggregate principal amount of such series of
Debentures fail to declare the principal of such series of Debentures to be
immediately due and payable, then, if such Debentures are held by an Issuer, the
holders of at least 25% in aggregate liquidation amount of the corresponding
Preferred Securities shall have such right by written notice to PSEG Power and
the Debenture Trustee. The holders of at least a majority in aggregate principal
amount of such series of Debentures, by notice to the Debenture Trustee, may
rescind an acceleration, provided that if the principal of such Debentures has
been declared due and payable by the holders of the corresponding Preferred
Securities, no rescission of such acceleration will be effective unless
consented to by the holders of at least a majority in aggregate liquidation
amount of the corresponding Preferred Securities.
PSEG Power will be required to furnish to the Debenture Trustee annually a
statement as to the compliance by PSEG Power with all conditions and covenants
under the Indenture and the Debentures and as to any Debenture Event of Default.
Consolidation, Merger, Sale or Conveyance
PSEG Power may not consolidate with or merge with or into any other person
or sell, convey, transfer or lease its properties and assets as an entirety or
substantially as an entirety to any person, unless (1) the successor person
shall be organized and existing under the laws of the United States or any state
thereof or the District of Columbia and shall expressly assume by a supplemental
indenture all of PSEG Power's obligations under the
28
Debentures, the Guarantees and the Indenture; (2) immediately after giving
effect to such transaction, no Debenture Event of Default, and no event which
after notice or lapse of time or both would become a Debenture Event of Default,
has occurred and is continuing; and (3) certain other conditions prescribed in
the Indenture are met.
Defeasance and Discharge
Under the terms of the Indenture, PSEG Power will be discharged from any
and all obligations in respect of the Debentures of any series if PSEG Power
deposits with the Debenture Trustee, in trust, (1) cash and/or (2) United States
Government Obligations (as defined in the Indenture), which through the payment
of interest thereon and principal thereof in accordance with their terms will
provide cash in an amount sufficient to pay all the principal of, premium, if
any, and interest on, the Debentures of such series on the dates such payments
are due in accordance with the terms of such Debentures.
Information Concerning the Debenture Trustee
Subject to the provisions of the Indenture relating to its duties, the
Debenture Trustee will be under no obligation to exercise any of its rights or
powers under the Indenture at the request, order or direction of the holders of
any series of Debentures or the holders of the corresponding Preferred
Securities, unless such holders shall have offered to the Debenture Trustee
reasonable security and indemnity. Subject to such provision for
indemnification, the holders of at least a majority in aggregate principal
amount of any series of Debentures affected or the holders of at least a
majority in aggregate liquidation amount of the corresponding Preferred
Securities (with each such series voting as a class), as applicable, will have
the right to direct the time, method and place of conducting any proceeding for
any remedy available to the Debenture Trustee with respect to such series of
Debentures or exercising any trust or power conferred on the Debenture Trustee.
The Indenture will contain limitations on the right of the Debenture
Trustee, as a creditor of PSEG Power, to obtain payment of claims in certain
cases, or to realize on certain property received in respect of any such claim
as security or otherwise. In addition, the Debenture Trustee may be deemed to
have a conflicting interest and may be required to resign as Debenture Trustee
if at the time of a Debenture Event of Default (1) it is a creditor of PSEG
Power or (2) there is a default under the indenture(s) referred to below.
The Bank of New York is the Trustee under PSEG Power's Indenture dated
April 16, 2001, as amended and supplemented by the First Supplemental Indenture,
dated as of March 13, 2002, with respect to PSEG Power's Senior Debt Securities
and on various indentures relating to its subsidiaries and its affiliates. PSEG
Power, its subsidiaries and its affiliates maintain other normal banking
relationships, including credit facilities and lines of credit, with The Bank of
New York.
Governing Law
The Indenture will be governed by and construed in accordance with the
laws of the State of New York.
RELATIONSHIP AMONG THE PREFERRED SECURITIES,
THE DEBENTURES AND THE GUARANTEES
Payments of Distributions and redemption and liquidation payments due on
the Preferred Securities (to the extent the Issuer thereof has funds available
for such payments) will be guaranteed by PSEG Power as and to the extent set
forth under "Description of the Guarantee". No single document executed by PSEG
Power in connection with the issuance of the Preferred Securities will provide
for PSEG Power's full, irrevocable and unconditional guarantee of the Preferred
Securities. It is only the combined operation of PSEG Power's obligations under
the applicable Guarantee, the applicable Trust Agreement, the corresponding
series of Debentures and the Indenture that has the effect of providing a full,
irrevocable and unconditional guarantee of an Issuer's obligations under its
Preferred Securities.
A holder of any Preferred Security may institute a legal proceeding
directly against PSEG Power to enforce its rights under the applicable Trust
Agreement, Indenture or Guarantee without first instituting a legal proceeding
against the Property Trustee, Debenture Trustee or Guarantee Trustee, the
related Issuer or any other person or entity if the applicable Trustee fails to
enforce that particular holder's rights thereunder.
29
As long as PSEG Power makes payments of interest and other payments when
due on a series of Debentures, such payments will be sufficient to cover the
payment of Distributions and redemption and Liquidation Distributions due on the
corresponding Preferred Securities, primarily because
o the aggregate principal amount of such series of Debentures will be
equal to the sum of the aggregate liquidation amount of the
corresponding Preferred Securities and Common Securities,
o the interest rate and interest and other payment dates on such
series of Debentures will match the Distribution rate and
Distribution and other payment dates for the corresponding Preferred
Securities,
o the applicable Trust Agreement provides that PSEG Power shall pay
for all and any costs, expenses and liabilities of the Issuer of
such Preferred Securities except such Issuer's obligations under its
Preferred Securities and Common Securities, and
o the applicable Trust Agreements provide that no Issuer will engage
in any activity that is not consistent with the limited purposes of
such Issuer.
If and to the extent that PSEG Power does not make payments on any series
of Debentures, such Issuer will not have funds available to make payments of
Distributions or other amounts due on the corresponding Preferred Securities.
A principal difference between the rights of a holder of a Preferred
Security (which represents an undivided beneficial interest in the assets of the
Issuer thereof) and a holder of a Debenture is that a holder of a Debenture will
accrue, and (subject to the permissible extension of the interest payment
period) is entitled to receive, interest on the principal amount of Debentures
held, while a holder of Preferred Securities is entitled to receive
Distributions only if and to the extent such Issuer has funds available for the
payment of such Distributions.
Upon any voluntary or involuntary dissolution or liquidation of any Issuer
not involving a distribution of any series of Debentures, after satisfaction of
liabilities to creditors of such Issuer, the holders of the corresponding
Preferred Securities will be entitled to receive, out of assets held by such
Issuer, the Liquidation Distribution in cash. See "Description of the Preferred
Securities -- Liquidation Distribution Upon Dissolution". Upon any voluntary
liquidation or bankruptcy of PSEG Power, each Issuer, as holder of the
Debentures, would be a creditor of PSEG Power, subordinated in right of payment
to all Senior Indebtedness, but entitled to receive payment in full of
principal, premium, if any, and interest, before any members of PSEG Power
receive payments or distributions. Since PSEG Power will be the guarantor under
each Guarantee and has agreed to pay for all costs, expenses and liabilities of
each Issuer (other than an Issuer's obligations to the holders of its Preferred
Securities and Common Securities), the positions of a holder of such Preferred
Securities and a holder of such Debentures relative to other creditors and to
the members of PSEG Power in the event of liquidation or bankruptcy of PSEG
Power would be substantially the same.
A default or event of default under any Senior Indebtedness would not
constitute a Debenture Event of Default. In the event of payment defaults under,
or acceleration of, Senior Indebtedness, the subordination provisions of the
Debentures provide that no payments may be made in respect of the Debentures
until such Senior Indebtedness has been paid in full or any payment default
thereunder has been cured or waived. Failure to make required payments on any
series of Debentures would constitute a Debenture Event of Default.
The Issuers believe that the above mechanisms and obligations, taken
together, are the equivalent of a full and unconditional guarantee by PSEG Power
of payments due in respect of the Preferred Securities of each Issuer.
PLAN OF DISTRIBUTION
The Issuers may sell the Preferred Securities to or through underwriters,
dealers, or agents or directly to one or more other purchasers.
The prospectus supplement will set forth the terms of the offering of the
particular series or issue of Preferred Securities to which such prospectus
supplement relates, including, as applicable:
o the name or names of any underwriters or agents with whom we have
entered into arrangements with respect to the sale of such Preferred
Securities;
30
o the initial public offering or purchase price of such Preferred
Securities;
o any underwriting discounts, commissions and other items constituting
underwriters' compensation from the Issuers and any other discounts,
concessions or commissions allowed or reallowed or paid by any
underwriters to other dealers;
o any commissions paid to any agents;
o the net proceeds to the Issuers; and
o the securities exchanges, if any, on which such Preferred Securities
will be listed.
Any underwriting compensation paid by PSEG Power on behalf of the Issuers
to underwriters in connection with the offering of Preferred Securities, and any
discounts, concessions or commissions allowed by underwriters to participating
dealers, will be set forth in a prospectus supplement. Underwriters and dealers
participating in the distribution of the Preferred Securities may be deemed to
be underwriters, and any discounts and commissions received by them and any
profit realized by them on resale of the Preferred Securities may be deemed to
be underwriting discounts and commissions, under the Securities Act of 1933, as
amended (the "Securities Act"). Underwriters and dealers may be entitled, under
agreement with PSEG Power and the Issuers, to indemnification against and
contribution toward certain civil liabilities, including liabilities under the
Securities Act, and to reimbursement by PSEG Power for certain expenses.
Underwriters and dealers and their affiliates may engage in transactions
with, or perform services for, the Issuers and PSEG Power and/or their
affiliates in the ordinary course of business.
The anticipated delivery date of the Preferred Securities and the
prospectus delivery obligations of underwriters and dealers will be set forth in
the relevant prospectus supplement.
The Preferred Securities of each Issuer will be a new issue of securities
and will have no established trading market. Any underwriters to whom Preferred
Securities are sold by the Issuers for public offering and sale may make a
market in such Preferred Securities but such underwriters will not be obligated
to do so and may discontinue any market making at any time without notice. The
Preferred Securities may or may not be listed on a national securities exchange.
No assurance can be given as to the liquidity of or the existence of trading
markets for any Preferred Securities.
LEGAL OPINIONS
Certain legal matters will be passed upon for PSEG Power by James T.
Foran, Esquire, Associate General Counsel of PSEG or R. Edwin Selover, Esquire,
Senior Vice President and General Counsel of PSEG, by Ballard Spahr Andrews &
Ingersoll, LLP, Philadelphia, Pennsylvania, special tax counsel to PSEG Power
and the Issuers, and by Richards, Layton & Finger, P.A., special Delaware
counsel to PSEG Power and the Issuers, and for any underwriters, dealers or
agents by Sidley Austin Brown & Wood LLP, New York, New York, who may rely on
the opinion of Mr. Selover or Mr. Foran as to matters of New Jersey law. Mr.
Selover or Mr. Foran and Sidley Austin Brown & Wood LLP may rely on the opinion
of Richards, Layton & Finger, P.A. as to matters of Delaware law. Messrs.
Selover and Foran are also employees of PSEG Power's affiliate, PSEG Services
Corporation.
EXPERTS
The financial statements, and the related financial statement schedule
relating to PSEG Power and incorporated in this prospectus by reference from
PSEG Power's Annual Report on Form 10-K for the year ended December 31, 2002
have been audited by Deloitte & Touche LLP, independent auditors, as stated in
their report which is incorporated herein by reference and have been so
incorporated in reliance upon the report of such firm given upon their authority
as experts in accounting and auditing.
31
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The following table sets forth the expenses in connection with the
issuance and distribution of the securities being registered, other than
underwriting discounts and commissions. All of the amounts shown are estimates,
except the SEC registration fee.
SEC registration fee ........................................ $161,800
Printing and engraving ...................................... 75,000
Legal fees and expenses ..................................... 200,000
Fees of accountants ......................................... 30,000
Fees of trustees and transfer agents ........................ 40,000
Blue sky fees and expenses .................................. 10,000
NYSE Listing Fee ............................................ 60,000
Rating agency fees .......................................... 200,000
Miscellaneous ............................................... 23,200
--------
Total ....................................................... $800,000
========
Item 15. Indemnification of Directors and Officers.
Article 18 of the limited liability company agreement of each of PSEG
Power LLC, PSEG Fossil LLC, PSEG Nuclear LLC and PSEG Energy Resources & Trade
LLC (each a "Company" and collectively, the "Companies") provides, as follows:
o No Member, Officer, Director, employee or agent of each Company and
no employee, representative, agent or Affiliate of the member of
each Company (collectively, the "Covered Persons") shall be liable
to the Company or any other Person who has an interest in or claim
against PSEG Power for any loss, damage or claim incurred by reason
of any act or omission performed or omitted by such Covered Person
in good faith on behalf of the Company and in a manner reasonably
believed to be within the scope of the authority conferred on such
Covered Person by the Company's limited liability company agreement,
except that a Covered Person shall be liable for any such loss,
damage or claim incurred by reason of such Covered Person's willful
misconduct.
Article 18 also provides as follows:
o To the fullest extent permitted by applicable law, a Covered Person
shall be entitled to indemnification from the Company for any loss,
damage or claim incurred by such Covered Person by reason of any act
or omission performed or omitted by such Covered Person in good
faith on behalf of the Company and in a manner reasonably believed
to be within the scope of the authority conferred on such Covered
Person by the Company's limited liability company agreement, except
that no Covered Person shall be entitled to be indemnified in
respect of any loss, damage or claim incurred by such Covered Person
by reason of such Covered Person's willful misconduct with respect
to such acts or omissions; provided, however, that any indemnity
under this Section 18 shall be provided out of and to the extent of
the Company's assets only, and no member shall have personal
liability on account thereof.
The amended and restated trust agreements for Trusts provide that no
trustee, affiliate of any trustee or agents of any trustee (each, an
"Indemnified Person") shall be liable, responsible or accountable in damages or
otherwise to any employee or agent of the respective Trust or its affiliates, or
any officers, directors, stockholders, employees, representatives or agents of
us or our affiliates or to any holders of preferred trust securities of the
respective Trust for any loss, damage or claim incurred by reason of any act or
omission performed or omitted by such Indemnified Person in good faith on behalf
of the respective Trust and in a manner such Indemnified Person reasonably
believed to be within the scope of the authority conferred on such Indemnified
Person by the amended and restated trust agreement or by law, except that an
Indemnified Person shall be liable for any such loss, damage or claim incurred
by reason of such Indemnified Person's gross negligence (or, in the case of the
property trustee, negligence) or willful misconduct with respect to such acts or
omissions. The respective amended and restated trust agreement also provides
that, to the fullest extent permitted by applicable law, each Trust shall
indemnify and hold harmless each Indemnified Person from and against any loss,
damage or claim incurred by
II-1
such Indemnified Person by reason of any act or omission performed or omitted by
such Indemnified Person in good faith on behalf of the respective Trust and in a
manner such Indemnified Person reasonably believed to be within the scope of
authority conferred on such Indemnified Person by the respective amended and
restated trust agreement, except that no Indemnified Person shall be entitled to
be indemnified in respect of any loss, damage or claim incurred by such
Indemnified Person by reason of gross negligence (or, in the case of the
property trustee, negligence) or willful misconduct with respect to such acts or
omissions. The respective amended and restated trust agreement further provides
that to the fullest extent permitted by applicable law, the respective trust
shall, from time to time, advance (including legal fees) incurred by an
Indemnified Person in defending any claim, demand, action, suit or the final
disposition of such claim, demand, action, suit or proceeding prior to the final
disposition of such claim, demand, action, suit or proceeding upon our receipt
of an undertaking by or on behalf of the Indemnified Person to repay such amount
if it shall be determined that the Indemnified Person is not entitled to be
indemnified pursuant to the amended and restated trust agreement.
Each form of Underwriting Agreement between a registrant and any
underwriters contains a provision under which each underwriter agrees to
indemnify the directors and officers of such registrant who signed the
registration statement against certain liabilities which might arise under the
Securities Act of 1933 (the "1933 Act") from information furnished to it in
writing by or on behalf of such underwriter.
The directors and officers of the registrants are insured under policies
of insurance, within the limits and subject to the limitations of the policies,
against claims made against them for acts in the discharge of their duties, and
each registrant is insured to the extent that it is required or permitted by law
to indemnify the directors and officers for such loss. The premiums for such
insurance are paid by the respective registrant.
Item 16. List of Exhibits.
Exhibit
- -------
1-1 Form of Underwriting Agreement for Debt Securities.*
1-2 Form of Underwriting Agreement for Trust Preferred Securities.*
3-1 Certificate of Trust for PSEG Power Capital Trust I.*
3-2 Certificate of Trust for PSEG Power Capital Trust II.*
3-3 Certificate of Trust for PSEG Power Capital Trust III.*
3-4 Certificate of Trust for PSEG Power Capital Trust IV.*
3-5 Certificate of Trust for PSEG Power Capital Trust V.*
3-6 Trust Agreement for PSEG Power Capital Trust I.*
3-7 Trust Agreement for PSEG Power Capital Trust II.*
3-8 Trust Agreement for PSEG Power Capital Trust III.*
3-9 Trust Agreement for PSEG Power Capital Trust IV.*
3-10 Trust Agreement for PSEG Power Capital Trust V.*
3-11 Form of Amended and Restated Trust Agreement to be used in connection with
the issuance of preferred securities.*
4-1 Form of Preferred Security Certificate (included in Exhibit 3-11).
4-2 Form of Deferrable Interest Subordinated Debenture (included in Exhibit
4-4).
4-3 Form of Deferrable Interest Subordinated Debenture Indenture.*
4-4 Form of Deferrable Interest Subordinated Debenture Supplemental
Indenture.*
4-5 Indenture dated as of April 16, 2001 between PSEG Power LLC and The Bank
of New York, as Trustee, providing for Senior Debt Securities.(1)
4-6 Supplemental Indenture dated as of March 13, 2002.(2)
4-7 Form of Senior Debt Security.*
4-8 Form of Guarantee Agreement for preferred securities.*
5-1 Opinion of James T. Foran, Esquire relating to the validity of the Debt
Securities, the Debentures and the Guarantees, including consent.*
II-2
Exhibit
- -------
5-2 Opinion of Richards, Layton & Finger, P.A., special Delaware counsel,
relating to the validity of the Preferred Securities of PSEG Power Capital
Trust I, including consent.*
5-3 Opinion of Richards, Layton & Finger, P.A., special Delaware counsel,
relating to the validity of the Preferred Securities of PSEG Power Capital
Trust II, including consent.*
5-4 Opinion of Richards, Layton & Finger, P.A., special Delaware counsel,
relating to the validity of the Preferred Securities of PSEG Power Capital
Trust III, including consent.*
5-5 Opinion of Richards, Layton & Finger, P.A., special Delaware counsel,
relating to the validity of the Preferred Securities of PSEG Power Capital
Trust IV, including consent.*
5-6 Opinion of Richards, Layton & Finger, P.A., special Delaware counsel,
relating to the validity of the Preferred Securities of PSEG Power Capital
Trust V, including consent.*
8 Opinion of Ballard Spahr Andrews & Ingersoll, LLP, special tax counsel, as
to tax matters, including consent.*
12 Computation of Ratio of Earnings to Fixed Charges.(3)
23-1 Independent Auditors' Consent.
23-2 Consent of James T. Foran, Esquire (included in Exhibit 5-1).
23-3 Consents of Richards, Layton & Finger, P.A. (included in Exhibits 5-2,
5-3, 5-4, 5-5 and 5-6).
23-4 Consent of Ballard Spahr Andrews & Ingersoll, LLP (included in Exhibit 8).
24 Power of Attorney.*
25-1 Statement of Eligibility under the Trust Indenture Act of 1939 of The Bank
of New York, as Trustee under the Senior Indenture for PSEG Power LLC.*
25-2 Statement of Eligibility under the Trust Indenture Act of 1939 of The Bank
of New York, as Indenture Trustee under the Deferrable Interest
Subordinated Debenture Indenture and Deferrable Interest Subordinated
Debenture Supplemental Indenture.*
25-3 Statement of Eligibility under the Trust Indenture Act of 1939 of The Bank
of New York, as Property Trustee under the Amended and Restated Trust
Agreement for PSEG Power Capital Trust I.*
25-4 Statement of Eligibility under the Trust Indenture Act of 1939 of The Bank
of New York, as Property Trustee under the Amended and Restated Trust
Agreement for PSEG Power Capital Trust II.*
25-5 Statement of Eligibility under the Trust Indenture Act of 1939 of The Bank
of New York, as Property Trustee under the Amended and Restated Trust
Agreement for PSEG Power Capital Trust III.*
25-6 Statement of Eligibility under the Trust Indenture Act of 1939 of The Bank
of New York, as Property Trustee under the Amended and Restated Trust
Agreement for PSEG Power Capital Trust IV.*
25-7 Statement of Eligibility under the Trust Indenture Act of 1939 of The Bank
of New York, as Property Trustee under the Amended and Restated Trust
Agreement for PSEG Power Capital Trust V.*
25-8 Statement of Eligibility under the Trust Indenture Act of 1939 of The Bank
of New York, as Guarantee Trustee under the Guarantee Agreement for PSEG
Power Capital Trust I.*
25-9 Statement of Eligibility under the Trust Indenture Act of 1939 of The Bank
of New York, as Guarantee Trustee under the Guarantee Agreement for PSEG
Power Capital Trust II.*
25.10 Statement of Eligibility under the Trust Indenture Act of 1939 of The Bank
of New York, as Guarantee Trustee under the Guarantee Agreement for PSEG
Power Capital Trust III.*
25.11 Statement of Eligibility under the Trust Indenture Act of 1939 of The Bank
of New York, as Guarantee Trustee under the Guarantee Agreement for PSEG
Power Capital Trust IV.*
25.12 Statement of Eligibility under the Trust Indenture Act of 1939 of The Bank
of New York, as Guarantee Trustee under the Guarantee Agreement for PSEG
Power Capital Trust V.*
- ----------
* Previously filed with this registration statement.
1 Previously filed as Exhibit 4.1 to Registration Statement on Form S-4, No.
333-69228, and incorporated herein by reference.
2 Previously filed as Exhibit 4.7 to Amended Quarterly Report on Form 10-Q/A
for the Quarter ended March 31, 2002, File No. 000-49614, and incorporated
herein by reference.
3 Previously filed as Exhibit 12-3 to Quarterly Report on Form 10-Q for the
Quarter ended March 31, 2003, File No. 000-49614, and incorporated herein
by reference.
II-3
Item 17. Undertakings.
The undersigned registrants hereby undertake:
(a)(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by section 10(a)(3)
of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement
(or the most recent post-effective amendment thereof)
which, individually or in the aggregate, represent a
fundamental change in the information set forth in the
registration statement;
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the
registration statement or any material change to such
information in the registration statement;
PROVIDED, HOWEVER, that paragraphs (a)(1)(i) and (a)(1)(ii) do
not apply if the information required to be included in a
post-effective amendment by those paragraphs is contained in
periodic reports filed by the registrants pursuant to section 13
or section 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall
be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide
offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of the offering.
(b) That, for purposes of determining any liability under the
Securities Act of 1933, each filing of the registrants' annual
report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by
reference in this registration statement shall be deemed to be a
new registration statement relating to the securities offered
thereby, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers
and controlling persons of the registrants pursuant to the
provisions referred to in Item 15 of this registration
statement, or otherwise, the registrants have been advised that
in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the
Securities Act of 1933 and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities
(other than the payment by a registrant of expenses incurred or
paid by a director, officer or controlling person of such
registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, such
registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in
the Act and will be governed by the final adjudication of such
issue.
(d) The registrants hereby undertake to provide to the underwriter
at the closing specified in the underwriting agreement
certificates in such denominations and registered in such names
as required by the underwriter to permit prompt delivery to each
purchaser.
(e) The registrants hereby undertake that:
(1) For purposes of determining any liability under the Securities
Act of 1933, the information omitted from the form of prospectus
filed as part of this registration statement in reliance upon
Rule 430A and contained in a form of prospectus filed by the
registrants pursuant to Rule 424(b)(1) or (4) or 497(h) under
the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that
contains a form of prospectus shall be deemed to be a new
registration statement relating to the securities offered
therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
II-4
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrants, PSEG Power Capital Trust I, PSEG Power Capital Trust II, PSEG Power
Capital Trust III, PSEG Power Capital Trust IV and PSEG Power Capital Trust V
each certifies that it has reasonable grounds to believe it meets all of the
requirements for filing on Form S-3 and has duly caused this Amendment to the
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Newark, State of New Jersey, on this 24th day of
June 2003.
PSEG Power Capital Trust I
By: PSEG Power LLC, as Depositor
BY: /S/ MORTON A. PLAWNER
------------------------------------
PSEG Power Capital Trust II
By: PSEG Power LLC, as Depositor
BY: /S/ MORTON A. PLAWNER
------------------------------------
PSEG Power Capital Trust III
By: PSEG Power LLC, as Depositor
BY: /S/ MORTON A. PLAWNER
------------------------------------
PSEG Power Capital Trust IV
By: PSEG Power LLC, as Depositor
BY: /S/ MORTON A. PLAWNER
------------------------------------
PSEG Power Capital Trust V
By: PSEG Power LLC, as Depositor
BY: /S/ MORTON A. PLAWNER
------------------------------------
II-5
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant, PSEG Fossil LLC, certifies that it has reasonable grounds to believe
it meets all of the requirements for filing on Form S-3 and has duly caused this
Amendment to the Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Newark, State of New
Jersey, on this 24th day of June, 2003.
PSEG Fossil LLC
BY: /S/ MORTON A. PLAWNER
----------------------------
Morton A. Plawner
Vice President and Treasurer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed by Thomas M. O'Flynn,
Attorney-In-Fact, on behalf of the following persons in the capacities indicated
on June 24, 2003.
Name Capacity
---- --------
FRANK CASSIDY Principal Executive
Officer, Principal Financial
Officer and Director
PATRICIA A. RADO Principal Accounting Officer
ROY A. ANDERSON Director
STEVEN R. TEITELMAN Director
BY: /S/ THOMAS M. O'FLYNN
----------------------------
Thomas M. O'Flynn
Attorney-In-Fact
II-6
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant, PSEG Nuclear LLC, certifies that it has reasonable grounds to
believe it meets all of the requirements for filing on Form S-3 and has duly
caused this Amendment to the Registration Statement to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of Newark, State of
New Jersey, on this 24th day of June, 2003.
PSEG Nuclear LLC
BY: /S/ MORTON A. PLAWNER
----------------------------
Morton A. Plawner
Vice President and Treasurer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed by Thomas M. O'Flynn,
Attorney-In-Fact, on behalf of the following persons in the capacities indicated
on June 24, 2003.
Name Capacity
---- --------
ROY A. ANDERSON Principal Executive
Officer, Principal Financial
Officer and Director
PATRICIA A. RADO Principal Accounting Officer
FRANK CASSIDY Director
STEVEN R. TEITELMAN Director
BY: /S/ THOMAS M. O'FLYNN
----------------------------
Thomas M. O'Flynn
Attorney-In-Fact
II-7
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant, PSEG Energy Resources & Trade LLC, certifies that it has reasonable
grounds to believe it meets all of the requirements for filing on Form S-3 and
has duly caused this Amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Newark,
State of New Jersey, on this 24th day of June, 2003.
PSEG Energy Resources & Trade LLC
BY: /S/ MORTON A. PLAWNER
----------------------------
Morton A. Plawner
Vice President and Treasurer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed by Thomas M. O'Flynn,
Attorney-In-Fact, on behalf of the following persons in the capacities indicated
on June 24, 2003.
Name Capacity
---- --------
STEVEN R. TEITELMAN Principal Executive
Officer, Principal Financial
Officer and Director
PATRICIA A. RADO Principal Accounting Officer
ROY A. ANDERSON Director
FRANK CASSIDY Director
BY: /S/ THOMAS M. O'FLYNN
----------------------------
Thomas M. O'Flynn
Attorney-In-Fact
II-8
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant, PSEG Power LLC, certifies that it has reasonable grounds to believe
it meets all of the requirements for filing on Form S-3 and has duly caused this
Amendment to the Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Newark, State of New
Jersey, on this 24th day of June, 2003.
PSEG Power LLC
BY: /S/ MORTON A. PLAWNER
----------------------------
Morton A. Plawner
Vice President and Treasurer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed by the following person in the
capacities and on the date indicated.
Signature Capacity Date
--------- -------- ----
/s/ THOMAS M. O'FLYNN Principal Financial Officer June 24, 2003
- ------------------------- and Director
Thomas M. O'Flynn
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed by Thomas M. O'Flynn,
Attorney-In-Fact, on behalf of the following persons in the capacities indicated
on June 24, 2003.
Name Capacity
----- --------
E. JAMES FERLAND Principal Executive
Officer and Director
PATRICIA A. RADO Principal Accounting Officer
ROBERT E. BUSCH Director
FRANK CASSIDY Director
ROBERT J. DOUGHERTY, JR. Director
R. EDWIN SELOVER Director
MICHAEL J. THOMSON Director
BY: /S/ THOMAS M. O'FLYNN
----------------------------
Thomas M. O'Flynn
Attorney-In-Fact
II-9
EXHIBIT INDEX
Exhibit
- ------
1-1 Form of Underwriting Agreement for Debt Securities.*
1-2 Form of Underwriting Agreement for Trust Preferred Securities.*
3-1 Certificate of Trust for PSEG Power Capital Trust I.*
3-2 Certificate of Trust for PSEG Power Capital Trust II.*
3-3 Certificate of Trust for PSEG Power Capital Trust III.*
3-4 Certificate of Trust for PSEG Power Capital Trust IV.*
3-5 Certificate of Trust for PSEG Power Capital Trust V.*
3-6 Trust Agreement for PSEG Power Capital Trust I.*
3-7 Trust Agreement for PSEG Power Capital Trust II.*
3-8 Trust Agreement for PSEG Power Capital Trust III.*
3-9 Trust Agreement for PSEG Power Capital Trust IV.*
3-10 Trust Agreement for PSEG Power Capital Trust V.*
3-11 Form of Amended and Restated Trust Agreement to be used in connection with
the issuance of preferred securities.*
4-1 Form of Preferred Security Certificate I (included in Exhibit 3-11).
4-2 Form of Deferrable Interest Subordinated Debenture (included in Exhibit
4-4).
4-3 Form of Deferrable Interest Subordinated Debenture Indenture.*
4-4 Form of Deferrable Interest Subordinated Debenture Supplemental
Indenture.*
4-5 Indenture dated as of April 16 2001 between PSEG Power LLC and The Bank of
New York, as Trustee, providing for Senior Debt Securities.(1)
4-6 First Supplemental Indenture dated as of March 13, 2002.(2)
4-7 Form of Senior Debt Security.*
4-8 Form of Guarantee Agreement for preferred securities.*
5-1 Opinion of James T. Foran, Esquire relating to the validity of the Debt
Securities, the Debentures and the Guarantees, including consent.*
5-2 Opinion of Richards, Layton & Finger, P.A., special Delaware counsel,
relating to the validity of the Preferred Securities of PSEG Power Capital
Trust I, including consent.*
5-3 Opinion of Richards, Layton & Finger, P.A., special Delaware counsel,
relating to the validity of the Preferred Securities of PSEG Power Capital
Trust II, including consent.*
5-4 Opinion of Richards, Layton & Finger, P.A., special Delaware counsel,
relating to the validity of the Preferred Securities of PSEG Power Capital
Trust III, including consent.*
5-5 Opinion of Richards, Layton & Finger, P.A., special Delaware counsel,
relating to the validity of the Preferred Securities of PSEG Power Capital
Trust IV, including consent.*
5-6 Opinion of Richards, Layton & Finger, P.A., special Delaware counsel,
relating to the validity of the Preferred Securities of PSEG Power Capital
Trust V, including consent.*
8 Opinion of Ballard Spahr Andrews & Ingersoll, LLP, special tax counsel, as
to tax matters, including consent.*
12 Computation of Ratio of Earnings to Fixed Charges.(3)
23-1 Independent Auditors' Consent.
23-2 Consent of James T. Foran, Esquire (included in Exhibit 5-1).
23-3 Consents of Richards, Layton & Finger, P.A. (included in Exhibits 5-2,
5-3, 5-4, 5-5 and 5-6).
23-4 Consent of Ballard Spahr Andrews & Ingersoll, LLP (included in Exhibit 8).
24 Power of Attorney.*
25-1 Statement of Eligibility under the Trust Indenture Act of 1939 of The Bank
of New York, as Trustee under the Senior Indenture for PSEG Power LLC.*
25-2 Statement of Eligibility under the Trust Indenture Act of 1939 of The Bank
of New York, as Indenture Trustee under the Deferrable Interest
Subordinated Debenture Indenture and Deferrable Interest Subordinated
Debenture Supplemental Indenture.*
25-3 Statement of Eligibility under the Trust Indenture Act of 1939 of The Bank
of New York, as Property Trustee under the Amended and Restated Trust
Agreement for PSEG Power Capital Trust I.*
25-4 Statement of Eligibility under the Trust Indenture Act of 1939 of The Bank
of New York, as Property Trustee under the Amended and Restated Trust
Agreement for PSEG Power Capital Trust II.*
Exhibit
- -------
25-5 Statement of Eligibility under the Trust Indenture Act of 1939 of The Bank
of New York, as Property Trustee under the Amended and Restated Trust
Agreement for PSEG Power Capital Trust III.*
25-6 Statement of Eligibility under the Trust Indenture Act of 1939 of The Bank
of New York, as Property Trustee under the Amended and Restated Trust
Agreement for PSEG Power Capital Trust IV.*
25-7 Statement of Eligibility under the Trust Indenture Act of 1939 of The Bank
of New York, as Property Trustee under the Amended and Restated Trust
Agreement for PSEG Power Capital Trust V.*
25-8 Statement of Eligibility under the Trust Indenture Act of 1939 of The Bank
of New York, as Guarantee Trustee under the Guarantee Agreement for PSEG
Power Capital Trust I.*
25-9 Statement of Eligibility under the Trust Indenture Act of 1939 of The Bank
of New York, as Guarantee Trustee under the Guarantee Agreement for PSEG
Power Capital Trust II.*
25-10 Statement of Eligibility under the Trust Indenture Act of 1939 of The Bank
of New York, as Guarantee Trustee under the Guarantee Agreement for PSEG
Power Capital Trust III.*
25-11 Statement of Eligibility under the Trust Indenture Act of 1939 of The Bank
of New York, as Guarantee Trustee under the Guarantee Agreement for PSEG
Power Capital Trust IV.*
25-12 Statement of Eligibility under the Trust Indenture Act of 1939 of The Bank
of New York, as Guarantee Trustee under the Guarantee Agreement for PSEG
Power Capital Trust V.*
- ----------
* Previously filed with this registration statement.
1 Previously filed as Exhibit 4.1 to Registration Statement on Form S-4, No.
333-69228, and incorporated herein by reference.
2 Previously filed as Exhibit 4.7 to Amended Quarterly Report on Form 10-Q/A
for the Quarter ended March 31, 2002, File No. 000-49614, and incorporated
herein by reference.
3 Previously filed as Exhibit 12-3 to Quarterly Report on Form 10-Q for the
Quarter ended March 31, 2003, File No. 000-49614, and incorporated herein
by reference.