PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED JULY 1, 2003
$500,000,000
[LOGO] PSEG
Power LLC
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$250,000,000 3.75% Senior Notes Due 2009
$250,000,000 5.00% Senior Notes Due 2014
We will pay interest on the 3.75% Senior Notes due 2009, the 2009 Senior
Notes, semi-annually on April 1 and October 1 of each year, beginning on October
1, 2004. The 2009 Senior Notes will mature at par on April 1, 2009, unless we
redeem them in accordance with their terms prior to such date.
We will pay interest on the 5.00% Senior Notes due 2014, the 2014 Senior
Notes, semi-annually on April 1 and October 1 of each year, beginning on October
1, 2004. The 2014 Senior Notes will mature at par on April 1, 2014, unless we
redeem them in accordance with their terms prior to such date. The 2009 Senior
Notes together with the 2014 Senior Notes are collectively referred to herein as
the Senior Notes.
The Senior Notes will rank equally with any of our other senior unsecured
indebtedness. Our subsidiaries, PSEG Fossil LLC, PSEG Nuclear LLC and PSEG
Energy Resources & Trade LLC, will fully and unconditionally guarantee the
Senior Notes on a joint and several basis. The guarantees will rank equally in
right of payment to all existing and future senior unsecured indebtedness of the
guarantors.
The Senior Notes are redeemable in whole or in part at any time at our
option at 100% of the outstanding principal amount plus accrued and unpaid
interest, if any, to the date of redemption plus a make whole premium, as more
fully described in this prospectus supplement under the caption "Description of
the Senior Notes -- Optional Redemption." There is no sinking fund for the
Senior Notes.
The Senior Notes will be issued only in registered form in denominations
of $1,000 and integral multiples thereof.
Investing in the Senior Notes involves risks. See "Risk Factors" beginning
on page 6 of the accompanying prospectus.
Per 2009 Per 2014
Senior Note Total Senior Note Total
----------- --------- ----------- ---------
Public Offering Price(1)................................... 99.928% $249,820,000 99.867% $249,667,500
Underwriting Discount...................................... 0.600% $ 1,500,000 0.650% $ 1,625,000
Proceeds, before expenses, to PSEG Power LLC(1)............ 99.328% $248,320,000 99.217% $248,042,500
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(1) Plus accrued interest, if any, from March 30, 2004.
The underwriters expect to deliver the Senior Notes in book-entry form
only through The Depository Trust Company on or about March 30, 2004.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus supplement or the accompanying prospectus is truthful or complete.
Any representation to the contrary is a criminal offense.
Joint Bookrunners
Barclays Capital JPMorgan
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Co-Managers
Scotia Capital UBS Investment Bank
McDonald Investments Inc. Wedbush Morgan Securities Inc.
The date of this prospectus supplement is March 25, 2004.
You should rely only on the information contained or incorporated by
reference in this prospectus supplement and the accompanying prospectus. We have
not, and the underwriters have not, authorized any other person to provide you
with different information. If anyone provides you with different or
inconsistent information, you should not rely on it. We are not, and the
underwriters are not, making an offer to sell these securities in any
jurisdiction where the offer or sale is not permitted.
You should assume that the information appearing in this prospectus
supplement and the accompanying prospectus is only accurate as of the respective
dates on the front covers hereof and thereof. Our business, financial condition,
results of operations and prospects may have changed since such dates.
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TABLE OF CONTENTS
Page
----
Prospectus Supplement
About this Prospectus Supplement .................... S-3
Incorporation of Certain Documents by Reference ..... S-3
Summary ............................................. S-4
Capitalization ...................................... S-7
Consolidated Ratios of Earnings to Fixed Charges .... S-7
Use of Proceeds ..................................... S-7
Description of the Senior Notes ..................... S-8
Underwriting ........................................ S-11
Legal Matters ....................................... S-12
Experts ............................................. S-12
Prospectus
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
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S-2
ABOUT THIS PROSPECTUS SUPPLEMENT
This document is in two parts. The first is this prospectus supplement,
which describes the specific terms of this offering of Senior Notes and certain
other matters relating to us and the underwriters. The second part, the
accompanying prospectus, gives more general information about securities we may
offer from time to time, some of which information may not apply to the Senior
Notes we are offering in this prospectus supplement.
If the description of the Senior Notes varies between this prospectus
supplement and the accompanying prospectus, you should rely on the information
contained in or incorporated by reference into this prospectus supplement.
Unless we have indicated otherwise, or the context otherwise requires,
references in this prospectus supplement and the accompanying prospectus to
"PSEG Power," "we," "us" and "our" or similar terms are to PSEG Power LLC and
its consolidated subsidiaries.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
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
supplement, 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 in File No. 000-49614 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, as amended, prior to the termination of the
offering hereunder.
o Our Annual Report on Form 10-K for the year ended December 31, 2003;
and
o Our Current Report on Form 8-K filed with the SEC on February 2,
2004.
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
S-3
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SUMMARY
The following summary contains basic information about us and the
offering. It may not contain all of the information that may be important to you
in making a decision to purchase the Senior Notes. You should read this entire
prospectus supplement, the accompanying prospectus and the documents
incorporated by reference, before making your investment decision.
PSEG Power
We are a multi-regional, independent wholesale energy supply company that
integrates our generating asset operations with our wholesale energy, fuel
supply, energy trading and marketing and risk management function through three
principal direct wholly-owned subsidiaries: PSEG Nuclear LLC, which owns and
operates nuclear generating stations, PSEG Fossil LLC, which develops, owns and
operates domestic fossil generating stations and PSEG Energy Resources & Trade
LLC, which markets the capacity and production of Fossil's and Nuclear's
stations and manages the commodity price risks and market risks related to
generation. As of February 29, 2004, our generation portfolio consisted of
approximately 13,700 MW of installed capacity which is diversified by fuel
source and market segment. Our target market area extends from Maine to the
Carolinas and the Atlantic Coast to Indiana.
Recent Developments
On March 18, 2004, we closed a new $600 million 3-year revolving credit
facility that will be available to two co-borrowers: Public Service Enterprise
Group Incorporated, our parent company, and us. The obligations under the credit
agreement will be joint and several. This facility is expected to be utilized
primarily for letters of credit as well as for other general corporate purposes.
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S-4
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The Offering
The following summary of the terms of the offering is provided solely for
your convenience and is not intended to be complete. You should read and
consider the more specific details contained in this prospectus supplement prior
to investing in the Senior Notes. See "Description of the Senior Notes" in this
prospectus supplement and "Description of Debt Securities" in the accompanying
prospectus.
Issuer.................. PSEG Power LLC
Securities Offered...... $250,000,000 aggregate principal amount of 3.75%
Senior Notes due April 1, 2009 and $250,000,000
aggregate principal amount of 5.00% Senior Notes due
April 1, 2014.
Ranking................. The Senior Notes:
o are senior unsecured obligations;
o rank equally with all of our senior unsecured
indebtedness; and
o will rank senior to our subordinated unsecured
indebtedness.
At December 31, 2003, we had approximately $2.8
billion of outstanding indebtedness that ranks
equally with the Senior Notes.
Maturities.............. The 2009 Senior Notes will mature on April 1, 2009
and the 2014 Senior Notes will mature on April 1,
2014.
Optional Redemption..... We may redeem any or all of each series of the Senior
Notes at any time at a price equal to the sum of (i)
100% of the principal amount of the Senior Notes
being redeemed, (ii) a make whole premium and (iii)
unpaid interest accrued up to and including the
applicable redemption date. See "Description of the
Senior Notes -- Optional Redemption."
Interest Payments....... April 1 and October 1 of each year, beginning October
1, 2004.
Ratings................. Each series of the Senior Notes have been assigned
ratings of "Baa1" by Moody's Investors Service, Inc.,
"BBB+" by Fitch, Inc. and "BBB" by Standard & Poor's
Ratings Services, subject to final documentation.
A security rating is not a recommendation to buy,
sell or hold securities and may be subject to
revision or withdrawal at any time by the assigning
rating agency. Each rating should be evaluated
independently of any other rating.
Guarantees.............. Each series of the Senior Notes will be fully and
unconditionally guaranteed by our subsidiaries, PSEG
Nuclear LLC, PSEG Fossil LLC and PSEG Energy
Resources & Trade LLC, on a joint and several basis.
The guarantees will rank equally in right of payment
to all existing and future senior unsecured
indebtedness of the guarantors. We have issued a
guarantee of the obligations of PSEG Energy Resources
& Trade LLC, which guarantee is subordinated to the
Senior Notes.
Certain Covenants....... The Indenture contains covenants restricting us and
the above-referenced restricted subsidiaries. See
"Description of the Senior Notes -- Certain
Covenants" in this prospectus supplement and
"Description of the Debt Securities -- Selected
Indenture Covenants" in the accompanying prospectus.
These covenants limit our ability, and the ability of
our restricted subsidiaries to, among other things:
o in the case of our restricted subsidiaries,
incur certain indebtedness;
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S-5
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o create 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.
In addition, the Indenture contains a covenant
requiring one of our restricted subsidiaries, PSEG
Energy Resources & Trade LLC, to pay periodic
dividends or distributions to us of the excess cash
not required for its business operations. Each of
these covenants is subject to a number of important
qualifications and exceptions. See "Description of
the Senior Notes -- Certain Covenants" in this
prospectus supplement and "Description of the Debt
Securities -- Selected Indenture Covenants" in the
accompanying prospectus.
Use of Proceeds......... The net proceeds from the sale of the Senior Notes
will be used to make loans to subsidiaries which, in
turn, will be used by the subsidiaries to repay
certain construction financing. See "Use of
Proceeds."
Trustee................. Each series of the Senior Notes will be issued under
an Indenture with The Bank of New York, as Trustee.
The Trustee will also act as paying agent and
registrar for each series of the Senior Notes.
Risk Factors............ An investment in the Senior Notes involves certain
risks relating to our business, prospects, financial
condition and results of operations and the terms of
the Senior Notes. These risks are described in "Risk
Factors" beginning on page 6 of the accompanying
prospectus.
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S-6
CAPITALIZATION
The following table sets forth our consolidated capitalization as of
December 31, 2003 and as adjusted to give effect to the issuance of the Senior
Notes offered hereby and the application of the proceeds thereof together with
operating funds to make loans to our subsidiaries, who will use such funds to
repay certain non-recourse construction financing as described under "Use of
Proceeds" below. The following data is qualified in its entirety by reference to
and, therefore, should be read together with the detailed information and
financial statements appearing in the documents incorporated herein by
reference.
As of December 31, 2003
-------------------------
Actual As Adjusted
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(Unaudited)
(in millions)
SHORT-TERM INVESTMENTS
Short-Term Loan to Affiliate................ $ 77 $ --
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Total Short-Term Investments.............. 77 --
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DEBT
Senior Notes................................ 2,700 3,200
Project Level, Non-Recourse Debt............ 800 --
Pollution Control Notes..................... 124 124
Net Unamortized Discount.................... (8) (8)
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Total Debt................................ 3,616 3,316
MEMBER'S EQUITY(1)
Contributed Capital......................... 1,700 1,700
Basis Adjustment............................ (986) (986)
Retained Earnings........................... 1,810 1,810
Accumulated Other Comprehensive Income...... 81 81
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Total Member's Equity..................... 2,605 2,605
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TOTAL CAPITALIZATION.................... $6,221 $5,921
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(1) We are a limited liability company of which Public Service Enterprise
Group Incorporated is the sole owner and member.
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,
------------------------------------
2003 2002 2001 2000 1999
---- ---- ---- ---- ----
Ratios of Earnings to Fixed Charges(1) 4.07 4.13 3.73 3.44 7.29
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(1) The term "earnings" is defined as pre-tax income from continuing
operations in accordance with Regulation S-K. Added to pre-tax income is
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.
USE OF PROCEEDS
The net proceeds from the sale of the Senior Notes, estimated to be
approximately $496,012,500, after deducting underwriting discounts and
commissions and other expenses of the this offering, will be added to our
general funds and used, along with operating funds, to make loans to our
subsidiaries. Our subsidiaries will use the proceeds of these loans to repay
certain non-recourse construction financing in the amount of $800 million. Such
financing carries an interest rate of LIBOR plus 1.5%, currently 2.62%, and has
a maturity date of August 22, 2005. Affiliates of two of the underwriters of
this offering, Scotia Capital (USA) Inc. and Wedbush Morgan Securities Inc., are
members of the lending group under such construction financing.
S-7
DESCRIPTION OF THE SENIOR NOTES
Set forth below is a description of the specific terms of the 2009 Senior
Notes and the 2014 Senior Notes (together, referred to as the "Senior Notes").
This description supplements, and should be read together with, the description
of the general terms and provisions of Debt Securities set forth in the
accompanying prospectus under the caption "Description of Debt Securities." The
following description does not purport to be complete and is subject to, and is
qualified in its entirety by reference to, the description in the accompanying
prospectus and the 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 and among us, our subsidiaries, PSEG Fossil LLC, PSEG
Nuclear LLC and PSEG Energy Resources & Trade LLC (the "Subsidiary Guarantors")
and The Bank of New York, as trustee (the "Trustee"). The Trustee's address is
101 Barclay Street, Floor 8 West, New York, NY 10286.
General
We will issue the Senior Notes under the Indenture. The terms of the
Senior Notes are stated in the Indenture and include terms made part of the
Indenture by reference to the Trust Indenture Act of 1939, as amended (the
"Trust Indenture Act"). You should refer to the Indenture and the Trust
Indenture Act for a statement of these terms. The Indenture is governed by New
York law.
Principal, Maturity and Interest
The Indenture does not limit the aggregate principal amount of debt
securities that we may issue under it and provides that debt securities may be
issued under it up to the principal amount as we may authorize from time to
time. The debt securities may be issued from time to time in one or more series.
We may "reopen" any series of debt securities, including the Senior Notes, and
issue additional debt securities of that series without the consent of existing
holders.
The 2009 Senior Notes and the 2014 Senior Notes will each initially be
limited to $250 million. The Senior Notes will be issued in registered form
only, without coupons, in minimum denominations of $1,000 and integral multiples
of $1,000 in excess thereof. The 2009 Senior Notes will mature at par on April
1, 2009 (the "2009 Stated Maturity Date") and the 2014 Senior Notes will mature
at par on April 1, 2014 (the "2014 Stated Maturity Date") unless, in either
case, we redeem them in accordance with their terms prior to such date.
Interest on the 2009 Senior Notes will accrue at the rate of 3.75% per
annum and interest on the 2014 Senior Notes will accrue at the rate of 5.00%,
per annum, and, in each case, will be payable semi-annually in arrears on April
1 and October 1 of each year (each an "Interest Payment Date") commencing
October 1, 2004. We will make each interest payment to the persons in whose
names the Senior Notes are registered at the close of business on the 15th day
immediately preceding the applicable Interest Payment Date.
Interest on the Senior Notes will accrue from March 30, 2004 or, if
interest has already been paid, from the most recent Interest Payment Date to
which interest was paid or duly provided for. Interest will be computed on the
basis of a 360-day year comprised of twelve 30-day months.
If any Interest Payment Date or the 2009 Stated Maturity Date, the 2014
Stated Maturity Date or date of earlier redemption is not a Business Day, the
required payment shall be made on the next succeeding day that is a Business
Day, without any interest or other payment in respect of the payment subject to
delay, with the same force and effect as if made on the Interest Payment Date or
the 2009 Stated Maturity Date, the 2014 Stated Maturity Date or date of earlier
redemption. "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.
Ranking
The Senior Notes will be our senior unsecured obligations. They will rank
equally in right of payment to all of our existing and future senior unsecured
indebtedness. At December 31, 2003, we had approximately $2.8 billion of senior
indebtedness outstanding. The Senior Notes will rank junior to secured
indebtedness to the extent of related collateral. Other than certain
construction financing at certain second-tier subsidiaries, we currently do not
have any outstanding secured indebtedness.
S-8
Guarantees
The Senior Notes will be guaranteed, jointly and severally, by the
Subsidiary Guarantors. 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.
Optional Redemption
We may redeem the Senior Notes at any time, in whole or in part, upon not
less than 30 nor more than 60 days' prior written notice, as more fully
described under "-- Selection and Notice" below, at a price equal to the greater
of:
(a) 100 percent of the principal amount of the Senior Notes being
redeemed, or
(b) as determined by the calculation agent, the sum of the present
values of the remaining scheduled payments of principal and interest
on the Senior Notes being redeemed not including any portion of such
payment of interest accrued on the date of redemption, from the
redemption date to the maturity date, discounted to the redemption
date on a semi-annual basis (assuming a 360-day year consisting of
twelve 30-day months) at the treasury rate plus 20 basis points for
the 2009 Senior Notes and 25 basis points for the 2014 Senior Notes.
plus, in either case, any accrued and unpaid interest on the principal amount
being redeemed to the date of redemption and liquidated damages, if any, and
additional amounts, if any.
"Treasury rate" means, with respect to any redemption date for any of the
Senior Notes being redeemed:
(a) the yield for the maturity corresponding to the comparable treasury
issue (as defined below), under the heading that represents the
average for the immediately preceding week, appearing in the most
recently published statistical release designated "H.15(519)" or any
successor publication that is published weekly by the Board of
Governors of the Federal Reserve System and that establishes yields
on actively traded United States Treasury securities adjusted to
constant maturity under the caption "Treasury Constant Maturities,"
provided, that if no maturity is within three months before or after
the maturity date for any of the Senior Notes being redeemed the
yields for the two published maturities most closely corresponding
to the comparable treasury issue will be determined and the treasury
rate shall be interpolated or extrapolated from those yields on a
straight line basis, rounding to the nearest month; or
(b) if the release referred to in (a) (or any successor release) is not
published during the week preceding the calculation date or does not
contain the yields referred to above, the rate per annum equal to
the semi-annual equivalent yield to maturity of the comparable
treasury issue, calculated using a price for the comparable treasury
issue (expressed as a percentage of its principal amount) equal to
the comparable treasury price for that redemption date.
The treasury rate will be calculated on the third business day preceding
the redemption date.
"Comparable treasury issue" means, with respect to any redemption date for
any of the Senior Notes being redeemed, the United States Treasury security
selected by an "independent investment banker" as having the maturity comparable
to the remaining term of the Senior Notes to be redeemed that would be utilized,
at the time of selection and in accordance with the customary financial
practice, in pricing new issues of corporate debt securities of comparable
maturity to the remaining term of such Senior Notes. "Independent investment
banker" means one of the reference treasury dealers appointed by the Trustee
after consultation with us.
"Comparable treasury price" means with respect to any redemption date for
any of the Senior Notes being redeemed:
(a) the average of four reference treasury dealer quotations (as defined
below) for the redemption date, after excluding the highest and
lowest of those reference treasury dealer quotations obtained by the
calculation agent, or
(b) if the calculation agent obtains fewer than four reference treasury
dealer quotations, the average of all reference treasury dealer
quotations obtained.
S-9
"Reference treasury dealer" means each of four primary U.S. Government
securities dealers in New York City selected by the Trustee in consultation with
us and initially will include Barclays Capital Inc. and J.P. Morgan Securities
Inc. and their respective successors. If any reference treasury dealer ceases to
be a primary U.S. Government securities dealer, the Trustee will substitute
another primary U.S. Government securities dealer for that dealer.
"Reference treasury dealer quotations" means, with respect to each
reference treasury dealer and any redemption date, the average, as determined by
the calculation agent, of the bid and asked prices for the comparable treasury
issue (expressed in each case as a percentage of its principal amount) quoted to
the calculation agent by that reference treasury dealer at 5:00 p.m. New York
time on the third business day preceding the redemption date.
Unless we default in payment of the redemption price, on and after the
redemption date, interest will cease to accrue on the Senior Notes called for
redemption.
Selection and Notice
The Trustee will select the Senior Notes for redemption on a pro rata
basis or in accordance with any other method the Trustee considers fair and
appropriate. Senior Notes in denominations of $1,000 or less may not be redeemed
in part. Notices of redemption will be mailed by first class mail at least 30
but not more than 60 days prior to the redemption date to each holder of Senior
Notes to be redeemed at its registered address. The notice of redemption will
state the portion of the principal amount to be redeemed if the Senior Note is
to be redeemed in part. An applicable Senior Note in principal amount equal to
the unredeemed portion will be issued in the name of the holder upon
cancellation of the original Senior Note. On and after the redemption date,
interest will no longer accrue on those Senior Notes or portions of Senior Notes
called for redemption (unless we default in the payment of any amount payable by
us upon such redemption).
Notices to the holders of the Senior Notes shall be given by first class
mail, postage prepaid, to the registered holders of such Senior Notes at their
addresses appearing in the note register.
Certain Covenants
The Indenture under which the Senior Notes will be issued contains the
covenants described in the "Description of Debt Securities -- Selected Indenture
Covenants" section of the accompanying prospectus, including covenants with
respect to limitations on obligations, limitations on liens, Subsidiary
Guarantees, guarantee of PSEG Energy Resources & Trade LLC ("ER&T") obligations,
payment of dividends by ER&T to us, limitations on dividends and other payment
restrictions, and limitations on sales of assets, all as more fully described in
the accompanying prospectus.
Book-Entry Only Issuance--The Depository Trust Company
The Depository Trust Company ("DTC") will act as the initial securities
depositary for the Senior Notes. The Senior Notes will be issued only as fully
registered securities registered in the name of Cede & Co., DTC's nominee. One
or more fully registered global Senior Note certificates for each series will be
issued, representing in the aggregate the total principal amount of Senior Notes
of such series, and will be deposited with DTC. See "Description of Debt
Securities -- Book-Entry Debt Securities" in the accompanying prospectus.
S-10
UNDERWRITING
Subject to the terms and conditions set forth in the underwriting
agreement dated the date hereof, we have agreed to sell to each of the
underwriters, and each of the underwriters has severally agreed to purchase from
us, the aggregate principal amount of 2009 Senior Notes and 2014 Senior Notes
set forth opposite the name of such underwriter:
Principal Principal
Amount Amount
of 2009 of 2014
Underwriters Senior Notes Senior Notes
------------ -------------- -------------
Barclays Capital Inc.............. $ 87,500,000 $ 87,500,000
J.P. Morgan Securities Inc........ 87,500,000 87,500,000
Scotia Capital (USA) Inc.......... 25,000,000 25,000,000
UBS Securities LLC................ 25,000,000 25,000,000
McDonald Investments Inc.......... 12,500,000 12,500,000
Wedbush Morgan Securities Inc..... 12,500,000 12,500,000
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$ 250,000,000 $ 250,000,000
============== =============
The underwriting agreement provides that the obligations of the
underwriters to pay for and accept delivery of the Senior Notes are subject to,
among other things, the approval of certain legal matters by their counsel and
certain other conditions. The underwriters are obligated to take and pay for all
the Senior Notes if any are taken.
UBOC Investment Services, Inc., an NASD member and an affiliate of Union
Bank of California, is being paid a referral fee by Wedbush Morgan Securities
Inc. Union Bank of California is a syndicate member under the construction
financing of our subsidiaries referred to in "Use of Proceeds" above.
In the event of default by one or more underwriters, the underwriting
agreement provides that the commitment of each non-defaulting underwriter shall
be increased by up to 10%. However, if the default involves more than 10% of the
aggregate principal amount of the Senior Notes, the non-defaulting underwriters
will have the right to purchase all, but will not be under any obligation to
purchase any of the Senior Notes, and if such non-defaulting underwriters do not
purchase all of the Senior Notes, the underwriting agreement will terminate
without liability to any non-defaulting underwriter or the issuer.
The underwriters propose initially to offer all or part of the Senior
Notes to the public at the initial public offering prices set forth on the cover
page of this prospectus supplement and to certain dealers at such price less a
concession not in excess of 0.35% of the principal amount of the 2009 Senior
Notes and 0.40% of the principal amount of the 2014 Senior Notes. The
underwriters may allow, and such dealers may reallow, a discount not in excess
of 0.25% of the principal amount of the 2009 Senior Notes and 0.25% of the
principal amount of the 2014 Senior Notes. After the initial public offering,
the public offering prices, concessions and discounts may be changed.
The underwriting discount to be paid by us to the underwriters will be
0.60% per 2009 Senior Note and 0.65% per 2014 Senior Note, for a total of
$3,125,000. In addition, we estimate that we will incur other offering expenses
of approximately $350,000.
Neither series of Senior Notes will have an established trading market
when issued. There can be no assurance of a secondary market for either series
of Senior Notes or the continued liquidity of such market if one develops. It is
not anticipated that either series of Senior Notes will be listed on any
securities exchange.
In connection with the offering, the underwriters may engage in
transactions that stabilize, maintain or otherwise affect the price of the
Senior Notes. Specifically, the underwriters may over-allot in connection with
this offering, creating short positions in the Senior Notes for their own
account. In addition, to cover over-allotments or to stabilize the price of the
Senior Notes, the underwriters may bid for and purchase Senior Notes in the open
market. Finally, the underwriters may reclaim selling concessions allowed to a
dealer for distributing Senior Notes in this offering, if the underwriters
repurchase previously distributed Senior Notes in transactions that cover
syndicate short positions, in stabilization transactions or otherwise. Any of
these activities may stabilize or maintain the market price of the Senior Notes
above independent market levels. The underwriters are not required to engage in
these activities and may end any of these activities at any time and, in any
case, will end these activities after a limited period.
Neither we nor the underwriters make any representation or prediction as
to the direction or magnitude of any effect that the transactions described
above may have on the price of the Senior Notes. In addition, neither we nor the
underwriters make any representation that such transactions will be engaged in
or that such transactions, once commenced, will not be discontinued without
notice.
S-11
We have agreed to indemnify the underwriters against certain liabilities,
including liabilities under the Securities Act of 1933, as amended, or to
contribute to payments required to be made in respect thereof.
Certain of the underwriters and their affiliates engage in transactions
with and perform services for us in the ordinary course of business and have
engaged, and may in the future engage, in commercial banking and/or investment
banking transactions with us or our affiliates for which they are paid customary
fees and expenses. Affiliates of two of the underwriters of this offering,
Scotia Capital (USA) Inc. and Wedbush Morgan Securities Inc., are members of the
lending group under the construction financing that is to be repaid by our
subsidiaries to whom we will lend the proceeds of this offering. The offering of
Senior Notes will conform to the requirements set forth in the applicable
sections of Rule 2720 of the Conduct Rules of the National Association of
Securities Dealers, Inc.
Certain of the underwriters will make the Senior Notes available for
distribution on the Internet through a proprietary Web site and/or a third-party
system operated by MarketAxess Corporation, an Internet-based communications
technology provider. MarketAxess Corporation is providing the system as a
conduit for communications between such underwriters and their customers and is
not a party to any transactions. MarketAxess Corporation, a registered
broker-dealer, will receive compensation from certain of the underwriters based
on transactions they conduct through the system. Such underwriters will make the
Senior Notes available to their customers through the Internet distributions,
whether made through a proprietary or third party system, on the same terms as
distributions made through other channels.
LEGAL MATTERS
Certain legal matters with respect to the offering of the Senior Notes
will be passed on for us by James T. Foran, Esq., Associate General Counsel of
PSEG or R. Edwin Selover, Esq., Senior Vice President and General Counsel of
PSEG, and for the underwriters by Sidley Austin Brown & Wood LLP, New York, New
York. Sidley Austin Brown & Wood LLP will rely upon the opinion of Mr. Foran or
Mr. Selover as to all matters of New Jersey law.
EXPERTS
The financial statements and the related financial statement schedule,
incorporated by reference in this prospectus supplement and the accompanying
prospectus from our Annual Report on Form 10-K for the year ended December 31,
2003 have been audited by Deloitte & Touche LLP, independent auditors, as stated
in their report (which expresses an unqualified opinion and includes an
explanatory paragraph referring to our adoption of Statement of Accounting
Standards No. 143, Accounting for Asset Retirement Obligations), 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.
S-12
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.
----------
The date of this prospectus is July 1, 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:
Three Months Ended Years Ended December 31,
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
- ----------
(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 global form 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;
17
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)
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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)
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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.
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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.
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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.
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