Registration No. 333-81402
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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PRE-EFFECTIVE
AMENDMENT NO. 2
TO
FORM S-3
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
Appalachian Power Company
(Exact name of registrant as specified in its charter)
Virginia 54-0124790
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
1 Riverside Plaza
Columbus, Ohio 43215
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (614) 223-1000
ARMANDO A. PENA, Treasurer
JEFFREY D. CROSS, Senior Vice President and General Counsel
AMERICAN ELECTRIC POWER SERVICE CORPORATION
1 Riverside Plaza
Columbus, Ohio 43215
(614) 223-1580
(Name, address and telephone number, including
area code, of agent for service)
It is respectfully requested that the
Commission send copies of all notices,
orders and communications to:
Simpson Thacher & Bartlett Dewey Ballantine LLP
425 Lexington Avenue 1301 Avenue of the Americas
New York, NY 10017-3909 New York, NY 10019-6092
Attention: James M. Cotter Attention: E. N. Ellis, IV
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Approximate date of commencement of proposed sale to the public: As soon
as practicable after the effective date of the Registration Statement.
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If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box. [ ]
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, other than securities offered only in connection with dividend or
interest reinvestment plans, please check the following box. [x]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
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The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this
registration statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the registration statement
shall become effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.
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The information in this prospectus is not complete and may be changed. We
may not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an
offer to sell these securities and is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
SUBJECT TO COMPLETION, DATED APRIL 12, 2002
PROSPECTUS
APPALACHIAN POWER COMPANY
1 Riverside Plaza
Columbus, Ohio 43215
614-223-1000
$450,000,000
UNSECURED NOTES
TERMS OF SALE
A prospectus supplement or pricing supplement will include the final
terms for each note. If we decide to list upon issuance any note or notes on a
securities exchange, a prospectus supplement or pricing supplement will
identify the exchange and state when we expect trading could begin. The
following terms may apply to the notes that we may sell at one or more times.
- Mature 9 months to 50 years
- Fixed or floating interest rate
- Remarketing features
- Certificate or book-entry form
- Subject to redemption
- Not convertible, amortized or subject to a sinking fund
- Interest paid on fixed rate notes quarterly or semi-annually
- Interest paid on floating rate notes monthly, quarterly,
semi-annually, or annually
- Issued in multiples of a minimum denomination
- Issued with original issue discount
INVESTING IN THESE NOTES INVOLVES RISKS. SEE THE SECTION ENTITLED "RISK
FACTORS" BEGINNING ON PAGE 2 FOR MORE INFORMATION.
The notes have not been approved by the SEC or any state securities
commission, nor have these organizations determined that this prospectus is
accurate or complete. Any representation to the contrary is a criminal
offense.
The date of this prospectus is ____________, 2002.
THE COMPANY
We generate, sell, purchase, transmit and distribute electric power. We
serve approximately 909,000 retail customers in southwestern Virginia and
southern West Virginia. We also sell and transmit power at wholesale to other
electric utilities, municipalities, electric cooperatives and non-utility
entities engaged in the wholesale power market. Our principal executive
offices are located at 1 Riverside Plaza, Columbus, Ohio 43215 (telephone
number 614-223-1000). We are a subsidiary of American Electric Power Company,
Inc. ("AEP"), a public utility holding company, and we are a part of the
American Electric Power integrated utility system. The executive offices of
AEP are located at 1 Riverside Plaza, Columbus, Ohio 43215 (telephone number
614-223-1000).
RISK FACTORS
RISKS RELATED TO OUR POWER TRADING
AND WHOLESALE BUSINESSES
. Our revenues and results of operations are subject to market risks
that are beyond our control.
We sell power from our generation facilities into the spot market or
other competitive power markets or on a contractual basis. We also enter into
contracts to purchase and sell electricity as part of our power marketing and
trading operations. With respect to such transactions, we are not guaranteed
any rate of return on our capital investments through regulated rates, and our
revenues and results of operations are likely to depend, in large part, upon
prevailing market prices for power in our regional markets and other
competitive markets. These market prices may fluctuate substantially over
relatively short periods of time. It is reasonable to expect that trading
margins may erode as markets mature and that there may be diminished
opportunities for gain should volatility decline. In addition, the Federal
Energy Regulatory Commission (the "FERC"), which has jurisdiction over
wholesale power rates, as well as independent system operators that oversee
some of these markets, may impose price limitations, bidding rules and other
mechanisms to address some of the volatility in these markets. Fuel prices may
also be volatile, and the price we can obtain for power sales may not change
at the same rate as changes in fuel costs. These factors could reduce our
margins and therefore diminish our revenues and results of operations.
Volatility in market prices for fuel and power may result from:
- weather conditions;
- seasonality;
- power usage;
- illiquid markets;
- transmission or transportation constraints or inefficiencies;
- availability of competitively priced alternative energy sources;
- demand for energy commodities;
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- natural gas, crude oil and refined products, and coal production levels;
- natural disasters, wars, embargoes and other catastrophic events; and
- federal, state and foreign energy and environmental regulation and
legislation.
. Our power trading (including fuel procurement and power
marketing) and risk management policies cannot eliminate the
risk associated with these activities.
Our power trading (including fuel procurement and power marketing)
activities expose us to risks of commodity price movements. We attempt to
manage our exposure through enforcement of established risk limits and risk
management procedures. These risk limits and risk management procedures may
not always be followed or may not work as planned and cannot eliminate the
risks associated with these activities. As a result, we cannot predict the
impact that our power trading and risk management decisions may have on our
business, operating results or financial position.
We routinely have open trading positions in the market, within
established guidelines, resulting from the management of our trading
portfolio. To the extent open trading positions exist, fluctuating commodity
prices can improve or diminish our financial results and financial position.
Our power trading and risk management activities, including our power
sales agreements with counterparties, rely on projections that depend heavily
on judgments and assumptions by management of factors such as the future
market prices and demand for power and other energy-related commodities. These
factors become more difficult to predict and the calculations become less
reliable the further into the future these estimates are made. Even when our
policies and procedures are followed and decisions are made based on these
estimates, results of operations may be diminished if the judgments and
assumptions underlying those calculations prove to be wrong or inaccurate.
. Parties with whom we have contracts may fail to perform their
obligations, which could harm our results of operations.
We are exposed to the risk that counterparties that owe us money or power
will breach their obligations. Should the counterparties to these arrangements
fail to perform, we may be forced to enter into alternative hedging
arrangements or honor underlying commitments at then-current market prices
that may exceed our contractual prices, which would cause our financial
results to be diminished and we might incur losses. Although our estimates
take into account the expected probability of default by a counterparty, our
actual exposure to a default by a counterparty may be greater than the
estimates predict if defaults by counterparties exceed our estimates.
. We rely on electric transmission facilities that we do not own or
control. If these facilities do not provide us with adequate
transmission capacity, we may not be able to deliver our wholesale
electric power to the purchasers of our power.
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We depend on transmission facilities owned and operated by other
unaffiliated power companies to deliver the power we sell at wholesale. This
dependence exposes us to a variety of risks. If transmission is disrupted, or
transmission capacity is inadequate, we may not be able to sell and deliver
our wholesale power. If a region's power transmission infrastructure is
inadequate, our recovery of wholesale costs and profits may be limited. If
restrictive transmission price regulation is imposed, the transmission
companies may not have sufficient incentive to invest in expansion of
transmission infrastructure.
The FERC has issued electric transmission initiatives that require
electric transmission services to be offered unbundled from commodity sales.
Although these initiatives are designed to encourage wholesale market
transactions for electricity, access to transmission systems may in fact not
be available if transmission capacity is insufficient because of physical
constraints or because it is contractually unavailable. We also cannot predict
whether transmission facilities will be expanded in specific markets to
accommodate competitive access to those markets.
. We do not fully hedge against price changes in commodities.
We routinely enter into contracts to purchase and sell electricity as
part of our power marketing and trading operations and to procure fuel. In
connection with these trading activities, we routinely enter into financial
contracts, including futures and options, over-the-counter options, swaps and
other derivative contracts. These activities expose us to risks from price
movements. If the values of the financial contracts change in a manner we do
not anticipate, it could harm our financial position or reduce the financial
contribution of our trading operations.
We manage our exposure by establishing risk limits and entering into
contracts to offset some of our positions (i.e., to hedge our exposure to
demand, market effects of weather and other changes in commodity prices).
However, we do not always hedge the entire exposure of our operations from
commodity price volatility. To the extent we do not hedge against commodity
price volatility, our results of operations and financial position may be
improved or diminished based upon our success in the market.
RISKS RELATED TO OUR REGULATED
BUSINESS AND EVOLVING REGULATION
. The laws and regulations governing restructuring of the wholesale
generation market in Virginia and West Virginia have not yet been
interpreted or adopted and could harm our business, operating results
and financial condition.
While the electric restructuring law in Virginia established the general
framework governing the retail electric market, the law requires us to make
compliance filings with the Virginia State Corporation Commission ("VSCC") to
implement the law. Our compliance filing is pending but we are unable to
predict the outcome of the VSCC's review of our filing. It is possible that
the VSCC could limit our ability to transfer generation assets in connection
with corporate separation. The West Virginia legislature has approved
electricity restructuring; however, the West Virginia Public Service
Commission ("WVPSC") cannot implement the
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restructuring plan until the legislature makes tax law changes necessary to
preserve the revenues of state and local governments. We cannot predict the
timing of the passage of such legislation. Therefore, it is also possible that
the legislation could be revisited. We cannot predict the impact of such a
development.
. The different regional power markets in which we compete or will
compete in the future have changing transmission regulatory
structures, which could affect our performance in these regions.
Our results are likely to be affected by differences in the market and
transmission regulatory structures in various regional power markets. Problems
or delays that may arise in the formation and operation of new regional
transmission organizations, or "RTOs", may restrict our ability to sell power
produced by our generating capacity to certain markets if there is
insufficient transmission capacity otherwise available. The rules governing
the various regional power markets may also change from time to time which
could affect our costs or revenues. Because it remains unclear which companies
will be participating in the various regional power markets, or how RTOs will
develop or what regions they will cover, we are unable to assess fully the
impact that these power markets may have on our business.
We are participating with four unaffiliated utilities in the formation of
the Alliance RTO (the "Alliance RTO"). In 2001 the Alliance companies and
MISO, an independent operator of transmission assets in the Midwest ("MISO")
entered into a settlement addressing transmission pricing and other "seam"
issues between the two RTOs. On December 19, 2001 the FERC approved the
proposal of the MISO for a regional transmission organization and instructed
the Alliance companies, which had submitted a separate RTO proposal, to
explore joining the MISO organization. The FERC's order is intended to
facilitate the establishment of a single RTO in the Midwest and support the
establishment of viable for-profit transmission companies under an RTO
umbrella. In its order, the FERC concluded that the proposed Alliance RTO
lacks sufficient scope to exist as a stand-alone RTO and directed the Alliance
companies to explore how their business plan can be accommodated within MISO.
Management is unable to predict the outcome of these transmission
regulatory actions and proceedings or their impact on the timing and operation
of RTOs, our transmission operations or future results of operations and cash
flows.
RISKS RELATED TO MARKET OR ECONOMIC VOLATILITY
. We are subject to risks associated with a changing economic
environment.
In response to the occurrence of several recent events, including the
September 11, 2001 terrorist attack on the United States, the ongoing war
against terrorism by the United States, and the bankruptcy of Enron Corp., the
financial markets have been disrupted in general, and the availability and
cost of capital for our business and that of our competitors has been at least
temporarily harmed. In addition, following the bankruptcy of Enron Corp., the
credit ratings agencies initiated a thorough review of the capital structure
and earnings power of energy
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companies, including us. These events could constrain the capital available to
our industry and could limit our access to funding for our operations. Our
business is capital intensive, and we are dependent upon our ability to access
capital at rates and on terms we determine to be attractive. If our ability to
access capital becomes significantly constrained, our interest costs will
likely increase and our financial condition could be harmed and future results
of operations could be significantly harmed.
The insurance industry has also been disrupted by these events. As a
result, the availability of insurance covering risks we and our competitors
typically insure against may decrease. In addition, the insurance we are able
to obtain may have higher deductibles, higher premiums and more restrictive
policy terms.
. A downgrade in our credit rating could negatively affect our ability
to access capital and/or to operate our power trading businesses.
Standard & Poor's and Moody's rate our senior, unsecured debt at BBB+ and
Baa1, respectively. If Moody's or Standard & Poor's were to downgrade our
long-term rating, particularly below investment grade, our borrowing costs
would increase which would diminish our financial results. In addition, we
would likely be required to pay a higher interest rate in future financings,
and our potential pool of investors and funding sources could decrease.
Further, if AEP's short-term rating were to fall below P-2 or A-2, the current
ratings assigned by Standard & Poor's and Moody's, respectively, it would
significantly limit its access to the commercial paper market and would
increase our short-term borrowing costs because we conduct our short-term
borrowing through AEP, and on the same terms available to AEP.
Our power trading business relies on the investment grade ratings of our
senior, unsecured debt. Most of our counterparties require the
creditworthiness of an investment grade entity to stand behind transactions.
If our rating were to decline below investment grade, our ability to
profitably operate our power trading business would be diminished because we
would likely have to deposit cash or cash related instruments which would
reduce our profits.
. Our operating results may fluctuate on a seasonal and quarterly basis.
Electric power generation is generally a seasonal business. In many parts
of the country, demand for power peaks during the hot summer months, with
market prices also peaking at that time. In other areas, power demand peaks
during the winter. As a result, our overall operating results in the future
may fluctuate substantially on a seasonal basis. The pattern of this
fluctuation may change depending on the terms of power sale contracts we enter
into. In addition, we have historically sold less power, and consequently
earned less income, when weather conditions are milder. We expect that
unusually mild weather in the future could diminish our results of operations
and harm our financial condition.
. Changes in technology may significantly affect our business
by making our power plants less competitive.
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A key element of our business model is that generating power at central
power plants achieves economies of scale and produces power at relatively low
cost. There are other technologies that produce power, 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 power to a level that is competitive with that of most central power
station electric production. If this were to happen and if these technologies
achieved economies of scale, our market share could be eroded, and the value
of our power plants could be reduced. Changes in technology could also alter
the channels through which retail electric customers buy power, thereby
harming our financial results.
. Changes in commodity prices may increase our cost of producing power
or decrease the amount we receive from selling power, harming our
financial performance.
We are heavily exposed to changes in the price and availability of coal
because most of our generating capacity is coal-fired. We have contracts of
varying durations for the supply of coal for most of our existing generation
capacity, but as these contracts end, we may not be able to purchase coal on
terms as favorable as the current contracts.
Changes in the cost of coal and changes in the relationship between such
cost and the market price of power will affect our financial results. Since
the price we obtain for power may not change at the same rate as the change in
coal costs, we may be unable to pass on the changes in costs to our customers.
In addition, the price we can charge our retail customers in West Virginia is
currently frozen.
In addition, actual power prices and fuel costs will differ from those
assumed in financial projections used to initially value our trading and
marketing transactions, and those differences may be material. As a result,
our financial results may be diminished in the future as those transactions
are marked to market.
. At times, demand for power could exceed our supply capacity.
We are currently obligated to supply power to our customers. At peak
times, the demand for power required to meet this obligation will exceed our
available generation capacity. In the past, we have had little need to
purchase power in the market for our retail customers. In the future, we may
be required to buy more power on the market. We may not always have the
ability to pass these market purchase costs to our customers. For example, we
are protected from increased fuel cost charges in Virginia. In West Virginia,
such increases will affect our earnings currently because we will not be able
to adjust our rates to recover any increases.
RISKS RELATED TO ENVIRONMENTAL REGULATION
. Our costs of compliance with environmental laws are significant, and
the cost of compliance with future environmental laws could harm our
cash flow and profitability.
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Our operations are subject to extensive federal, state and local
environmental statutes, rules and regulations relating to air quality, water
quality, waste management, natural resources and health and safety. Compliance
with these legal requirements requires us to commit significant capital toward
environmental monitoring, installation of pollution control equipment,
emission fees and permits at all of our facilities. These expenditures have
been significant in the past and we expect that they will increase in the
future. Costs of compliance with environmental regulations could harm our
industry, our business and our results of operations and financial position,
especially if emission and/or discharge limits are tightened, more extensive
permitting requirements are imposed, additional substances become regulated
and the number and types of assets we operate increase.
. We anticipate that we will incur considerable capital costs for
compliance.
Most of our generating capacity is coal burning. We plan to install new
emissions control equipment and may be required to upgrade existing equipment,
purchase emissions allowances or reduce operations. We expect to spend
approximately $365 million (of which $130 million has already been expended)
in connection with the installation of emission control equipment at our
facilities to comply with the new NOx rule and the Section 126 Rule. Moreover,
environmental laws are subject to change, which may materially increase our
costs of compliance or accelerate the timing of these capital expenditures. Our
compliance strategy, although reasonably based on the information available to
us today, may not successfully address the relevant standards and
interpretations of the future.
. Governmental authorities may assess penalties on us for failures
to comply with environmental laws and regulations.
If we fail to comply with environmental laws and regulations, even if
caused by factors beyond our control, that failure may result in the
assessment of civil or criminal penalties and fines against us. Recent
lawsuits by the EPA and various states filed against us highlight the
environmental risks faced by generating facilities, in general, and coal-fired
generating facilities, in particular.
Since 1999, we and some of our affiliates have been involved in
litigation regarding generating plant emissions under the Clean Air Act.
Federal EPA and a number of states alleged that we and eleven unaffiliated
utilities modified certain units at coal-fired generating plants in violation
of the Clean Air Act. Federal EPA filed complaints against us and some of our
affiliated public utility subsidiaries in U.S. District Court for the Southern
District of Ohio. A separate lawsuit initiated by certain special interest
groups was consolidated with the Federal EPA case. The alleged modification of
the generating units occurred over a 20 year period.
If these actions are resolved against us, substantial modifications of
our existing coal-fired power plants would be required. In addition, we could
be required to invest significantly in additional emission control equipment,
accelerate the timing of capital expenditures, pay penalties and/or halt
operations. Moreover, our results of operations could be reduced and our
financial position could suffer due to the consequent distraction of
management and the expense of ongoing litigation.
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. We are unlikely to be able to pass on the cost of environmental
compliance to our customers.
Most of our contracts with wholesale customers do not permit us to
recover additional capital and other costs incurred by us to comply with new
environmental regulations. Due to the deregulation of generation in Virginia,
we cannot recover through rates additional capital and other costs incurred by
us to comply with new environmental regulations with respect to our generation
previously regulated in Virginia.
PROSPECTUS SUPPLEMENTS
We may provide information to you about the notes in up to three separate
documents that progressively provide more detail: (a) this prospectus provides
general information some of which may not apply to your notes, (b) the
accompanying prospectus supplement provides more specific terms of your notes,
and (c) if not in the accompanying prospectus supplement, the pricing
supplement will provide the final terms of your notes. It is important for you
to consider the information contained in this prospectus, the prospectus
supplement and the pricing supplement in making your investment decision.
RATIO OF EARNINGS TO FIXED CHARGES
The Ratio of Earnings to Fixed Charges for each of the periods indicated
is as follows:
Twelve Months
Period Ended Ratio
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December 31, 1997 2.44
December 31, 1998 2.07
December 31, 1999 2.43
December 31, 2000 2.26
December 31, 2001 2.98
For current information on the Ratio of Earnings to Fixed Charges, please
see our most recent Form 10-K and 10-Q. See Where You Can Find More
Information.
WHERE YOU CAN FIND MORE INFORMATION
This prospectus is part of a registration statement we filed with the
SEC. We also file annual, quarterly and special reports and other information
with the SEC. You may read and copy any document we file at the SEC's Public
Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549. Please call
the SEC at 1-800-SEC-0330 for further information on the Public Reference
Room. You may also examine our SEC filings through the SEC's web site at
http://www.sec.gov.
The SEC allows us to "incorporate by reference" the information we file
with them,
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which means that we can disclose important information to you by referring you
to those documents. The information incorporated by reference is considered to
be part of this prospectus, and later information that we file with the SEC
will automatically update and supersede this information. We incorporate by
reference the 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 until we sell all the notes.
Annual Report on Form 10-K for the year ended December 31, 2001.
You may request a copy of these filings, at no cost, by writing or
telephoning us at the following address:
Mr. G. C. Dean
American Electric Power Service Corporation
1 Riverside Plaza
Columbus, Ohio 43215
614-223-1000
You should rely only on the information incorporated by reference or
provided in this prospectus or any supplement. We have not authorized anyone
else to provide you with different information. We are not making an offer of
these notes in any state where the offer is not permitted. You should not
assume that the information in this prospectus or any supplement is accurate
as of any date other than the date on the front of those documents.
USE OF PROCEEDS
Unless otherwise stated in a prospectus supplement, the net proceeds from
the sale of the notes will be used for general corporate purposes relating to
our utility business. These purposes include redeeming or repurchasing
outstanding debt or preferred stock and replenishing working capital. If we do
not use the net proceeds immediately, we temporarily invest them in
short-term, interest-bearing obligations. We estimate that our construction
costs in 2002 will approximate $258,200,000. At December 31, 2001, our
outstanding short-term debt was $291,817,000.
DESCRIPTION OF THE NOTES
General
We will issue the notes under the Indenture dated January 1, 1998 (as
previously supplemented and amended) between us and the Trustee, The Bank of
New York. This prospectus briefly outlines some provisions of the Indenture.
If you would like more information on these provisions, you should review the
Indenture and any supplemental indentures or company orders that we have filed
or will file with the SEC. See Where You Can Find More Information on how to
locate these documents. You may also review these documents at the Trustee's
offices at 5 Penn Plaza, New York, New York.
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The Indenture does not limit the amount of notes that may be issued. The
Indenture permits us to issue notes in one or more series or tranches upon the
approval of our board of directors and as described in one or more company
orders or supplemental indentures. Each series of notes may differ as to their
terms. The Indenture also gives us the ability to reopen a previous issue of a
series of notes and issue additional notes of such series.
The notes are unsecured and will rank equally with all our unsecured
unsubordinated debt. Substantially all of our fixed properties and franchises
are subject to the lien of our first mortgage bonds issued under and secured
by a Mortgage and Deed of Trust, dated as of December 1, 1940 (as previously
supplemented and amended) between us and Bankers Trust Company, as trustee.
For current information on our debt outstanding see our most recent Form 10-K
and 10-Q. See Where You Can Find More Information.
The notes will be denominated in U.S. dollars and we will pay principal
and interest in U.S. dollars. Unless an applicable pricing or prospectus
supplement states otherwise, the notes will not be subject to any conversion,
amortization, or sinking fund. We expect that the notes will be "book-entry,"
represented by a permanent global note registered in the name of The
Depository Trust Company, or its nominee. We reserve the right, however, to
issue note certificates registered in the name of the noteholders.
In the discussion that follows, whenever we talk about paying principal
on the notes, we mean at maturity or redemption. Also, in discussing the time
for notices and how the different interest rates are calculated, all times are
New York City time and all references to New York mean the City of New York,
unless otherwise noted.
The following terms may apply to each note as specified in the applicable
pricing or prospectus supplement and the note.
Redemptions
If we issue redeemable notes, we may redeem such notes at our option
unless an applicable pricing or prospectus supplement states otherwise. The
pricing or prospectus supplement will state the terms of redemption. We may
redeem notes in whole or in part by delivering written notice to the
noteholders no more than 60, and not less than 30, days prior to redemption.
If we do not redeem all the notes of a series at one time, the Trustee selects
the notes to be redeemed in a manner it determines to be fair.
Remarketed Notes
If we issue notes with remarketing features, an applicable pricing or
prospectus supplement will describe the terms for the notes including:
interest rate, remarketing provisions, our right to redeem notes, the holders'
right to tender notes, and any other provisions.
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Book-Entry Notes - Registration, Transfer, and Payment of Interest and Principal
Unless otherwise stated in a prospectus supplement, book-entry notes of a
series will be issued in the form of a global note that the Trustee will
deposit with The Depository Trust Company, New York, New York ("DTC"). This
means that we will not issue note certificates to each holder. One or more
global notes will be issued to DTC who will keep a computerized record of its
participants (for example, your broker) whose clients have purchased the
notes. The participant will then keep a record of its clients who purchased
the notes. Unless it is exchanged in whole or in part for a note certificate,
a global note may not be transferred; except that DTC, its nominees, and their
successors may transfer a global note as a whole to one another.
Beneficial interests in global notes will be shown on, and transfers of
global notes will be made only through, records maintained by DTC and its
participants.
DTC has provided us the following information: DTC is a limited-purpose
trust company organized under the New York Banking Law, a "banking
organization" within the meaning of the New York Banking Law, a member of the
United States Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code and a "clearing agency"
registered under the provisions of Section 17A of the Securities Exchange Act
of 1934. DTC holds securities that its participants ("Direct Participants")
deposit with DTC. DTC also records the settlement among Direct Participants of
securities transactions, such as transfers and pledges, in deposited
securities through computerized records for Direct Participants' accounts.
This eliminates the need to exchange note certificates. Direct Participants
include securities brokers and dealers, banks, trust companies, clearing
corporations and certain other organizations.
Other organizations such as securities brokers and dealers, banks and
trust companies that work through a Direct Participant also use DTC's
book-entry system. The rules that apply to DTC and its participants are on
file with the SEC.
A number of its Direct Participants and the New York Stock Exchange,
Inc., The American Stock Exchange, Inc. and the National Association of
Securities Dealers, Inc. own DTC.
We will wire principal and interest payments to DTC's nominee. We and the
Trustee will treat DTC's nominee as the owner of the global notes for all
purposes. Accordingly, we, the Trustee and any paying agent will have no
direct responsibility or liability to pay amounts due on the global notes to
owners of beneficial interests in the global notes.
It is DTC's current practice, upon receipt of any payment of principal or
interest, to credit Direct Participants' accounts on the payment date
according to their respective holdings of beneficial interests in the global
notes as shown on DTC's records. In addition, it is DTC's current practice to
assign any consenting or voting rights to Direct Participants whose accounts
are credited with notes on a record date. The customary practices between the
participants and
12
owners of beneficial interests will govern payments by participants to owners
of beneficial interests in the global notes and voting by participants, as is
the case with notes held for the account of customers registered in "street
name." However, payments will be the responsibility of the participants and
not of DTC, the Trustee or us.
According to DTC, the foregoing information with respect to DTC has been
provided to the Direct Participants and other members of the financial
community for informational purposes only and is not intended to serve as a
representation, warranty or contract modification of any kind.
Notes represented by a global note will be exchangeable for note
certificates with the same terms in authorized denominations only if:
. DTC notifies us that it is unwilling or unable to continue as
depositary or if DTC ceases to be a clearing agency registered under
applicable law and a successor depositary is not appointed by us
within 90 days; or
. we determine not to require all of the notes of a series to be
represented by a global note and notify the Trustee of our decision.
Note Certificates-Registration, Transfer, and Payment of Interest and Principal
If we issue note certificates, they will be registered in the name of the
noteholder. The notes may be transferred or exchanged, pursuant to
administrative procedures in the indenture, without the payment of any service
charge (other than any tax or other governmental charge) by contacting the
paying agent. Payments on note certificates will be made by check.
Original Issue Discount
We may issue the notes at an original issue discount, bearing no interest
or bearing interest at a rate that, at the time of issuance, is below market
rate, to be sold at a substantial discount below their stated principal
amount. Generally speaking, if the notes are issued at an original issue
discount and there is an event of default or acceleration of their maturity,
holders will receive an amount less than their principal amount. Tax and other
special considerations applicable to original issue discount debt will be
described in the prospectus supplement in which we offer those notes.
Interest Rate
The interest rate on the notes will either be fixed or floating. The
interest paid will include interest accrued to, but excluding, the date of
maturity or redemption. Interest is generally payable to the person in whose
name the note is registered at the close of business on the record date before
each interest payment date. Interest payable at maturity or redemption,
however, will be payable to the person to whom principal is payable.
13
If we issue a note after a record date but on or prior to the related
interest payment date, we will pay the first interest payment on the interest
payment date after the next record date. We will pay interest payments by
check or wire transfer, at our option.
Fixed Rate Notes
A pricing or prospectus supplement will designate the record dates,
payment dates and the fixed rate of interest payable on a note. We will pay
interest monthly, quarterly or semi-annually, and upon maturity or redemption.
Unless an applicable pricing or prospectus supplement states otherwise, if any
payment date falls on a day that is not a business day, we will pay interest
on the next business day and no additional interest will be paid. Interest
payments will be the amount of interest accrued to, but excluding, each
payment date. Interest will be computed using a 360-day year of twelve 30-day
months.
Floating Rate Notes
Each floating rate note will have an interest rate formula. The
applicable pricing supplement will state the initial interest rate or interest
rate formula on each note effective until the first interest reset date. The
applicable pricing or prospectus supplement will state the method and dates on
which the interest rate will be determined, reset and paid.
Events of Default
"Event of Default" means any of the following:
- - failure to pay for three business days the principal of (or premium, if any,
on) any note of a series when due and payable;
- - failure to pay for 30 days any interest on any note of any series when due
and payable;
- - failure to perform any other requirements in such notes, or in the Indenture
in regard to such notes, for 90 days after notice;
- certain events of bankruptcy or insolvency; or any other event of default
specified in a series of notes.
An Event of Default for a particular series of notes does not necessarily
mean that an Event of Default has occurred for any other series of notes
issued under the Indenture. If an Event of Default occurs and continues, the
Trustee or the holders of at least 33% of the principal amount of the notes of
the series affected may require us to repay the entire principal of the notes
of such series immediately ("Repayment Acceleration"). In most instances, the
holders of at least a majority in aggregate principal amount of the notes of
the affected series may rescind a previously triggered Repayment Acceleration.
However, if we cause an Event of Default because we have failed to pay
(unaccelerated) principal, premium, if any, or interest, Repayment
Acceleration may be rescinded only if we have first cured our default by
depositing with the Trustee enough money to pay all (unaccelerated) past due
amounts and penalties, if any.
14
The Trustee must within 90 days after a default occurs, notify the
holders of the notes of the series of default unless such default has been
cured or waived. We are required to file an annual certificate with the
Trustee, signed by an officer, concerning any default by us under any
provisions of the Indenture.
Subject to the provisions of the Indenture relating to its duties in case
of default, the Trustee shall be under no obligation to exercise any of its
rights or powers under the Indenture at the request, order or direction of any
holders unless such holders offer the Trustee reasonable indemnity. Subject to
the provisions for indemnification, the holders of a majority in principal
amount of the notes of any series may direct the time, method and place of
conducting any proceedings for any remedy available to, or exercising any
trust or power conferred on, the Trustee with respect to such notes.
Modification of Indenture
Under the Indenture, our rights and obligations and the rights of the
holders of any notes may be changed. Any change affecting the rights of the
holders of any series of notes requires the consent of the holders of not less
than a majority in aggregate principal amount of the outstanding notes of all
series affected by the change, voting as one class. However, we cannot change
the terms of payment of principal or interest, or a reduction in the
percentage required for changes or a waiver of default, unless the holder
consents. We may issue additional series of notes and take other action that
does not affect the rights of holders of any series by executing supplemental
indentures without the consent of any noteholders.
Consolidation, Merger or Sale
We may merge or consolidate with any corporation or sell substantially
all of our assets as an entirety as long as the successor or purchaser
expressly assumes the payment of principal, and premium, if any, and interest
on the notes.
Legal Defeasance
We will be discharged from our obligations on the notes of any series at
any time if:
. we deposit with the Trustee sufficient cash or government
securities to pay the principal, interest, any premium and any other
sums due to the stated maturity date or a redemption date of the
note of the series, and
. we deliver to the Trustee an opinion of counsel stating that the
federal income tax obligations of noteholders of that series will
not change as a result of our performing the action described above.
15
If this happens, the noteholders of the series will not be entitled to the
benefits of the Indenture except for registration of transfer and exchange of
notes and replacement of lost, stolen or mutilated notes.
Covenant Defeasance
We will be discharged from our obligations under any restrictive covenant
applicable to the notes of a particular series if we perform both actions
described above. See Legal Defeasance. If this happens, any later breach of
that particular restrictive covenant will not result in Repayment
Acceleration. If we cause an Event of Default apart from breaching that
restrictive covenant, there may not be sufficient money or government
obligations on deposit with the Trustee to pay all amounts due on the notes of
that series. In that instance, we would remain liable for such amounts.
Governing Law
The Indenture and notes of all series will be governed by the laws of the
State of New York.
Concerning the Trustee
We and our affiliates use or will use some of the banking services of the
Trustee and other services of its affiliates in the normal course of business.
PLAN OF DISTRIBUTION
We may sell the notes (a) through agents; (b) through underwriters or
dealers; or (c) directly to one or more purchasers.
By Agents
Notes may be sold on a continuing basis through agents designated by us.
The agents will agree to use their reasonable efforts to solicit purchases for
the period of their appointment.
Unless the prospectus supplement or any pricing supplement states
otherwise, the notes will be sold to the public at 100% of their principal
amount. Agents will receive commissions from .125% to .750% of the principal
amount per note depending on the maturity of the note they sell.
The Agents will not be obligated to make a market in the notes. We cannot
predict the amount of trading or liquidity of the notes.
16
By Underwriters
If underwriters are used in the sale, the underwriters will acquire the
notes for their own account. The underwriters may resell the notes in one or
more transactions, including negotiated transactions, at a fixed public
offering price or at varying prices determined at the time of sale. The
obligations of the underwriters to purchase the notes will be subject to
certain conditions. The underwriters will be obligated to purchase all the
notes of the series offered if any of the notes are purchased. Any initial
public offering price and any discounts or concessions allowed or re-allowed
or paid to dealers may be changed from time to time.
Direct Sales
We may also sell notes directly. In this case, no underwriters or agents
would be involved.
General Information
Underwriters, dealers, and agents that participate in the distribution of
the notes may be underwriters as defined in the Securities Act of 1933 (the
"Act"), and any discounts or commissions received by them from us and any
profit on the resale of the notes by them may be treated as underwriting
discounts and commissions under the Act.
We may have agreements with the underwriters, dealers and agents to
indemnify them against certain civil liabilities, including liabilities under
the Act.
Underwriters, dealers and agents may engage in transactions with, or
perform services for, us or our affiliates in the ordinary course of their
businesses.
LEGAL OPINIONS
Our counsel, Simpson Thacher & Bartlett, New York, NY, and one of our
lawyers will each issue an opinion about the legality of the notes for us.
Dewey Ballantine LLP, New York, NY will issue an opinion for the agents or
underwriters. From time to time, Dewey Ballantine LLP acts as counsel to our
affiliates for some matters.
EXPERTS
The financial statements and the related financial statement schedule
incorporated in this prospectus by reference from the Company's Annual Report
on Form 10-K for the year ended December 31, 2001 have been audited by
Deloitte & Touche LLP, independent auditors, as stated in their reports, which
are incorporated herein by reference, and have been so incorporated in
reliance upon the reports of such firm given upon their authority as experts
in accounting and auditing.
17
Table of Contents
THE COMPANY........................................ 2
RISK FACTORS....................................... 2
PROSPECTUS SUPPLEMENTS............................. 9
RATIO OF EARNINGS TO
FIXED CHARGES................................... 9
WHERE YOU CAN FIND MORE
INFORMATION..................................... 9
USE OF PROCEEDS.................................... 10
DESCRIPTION OF THE NOTES........................... 10
General....................................... 10
Redemptions................................... 11
Remarketed Notes.............................. 11
Book-Entry Notes - Registration,
Transfer, and Payment of
Interest and Principal................... 12
Note Certificates - Registration,
Transfer, and Payment of
Interest and Principal................... 13
Original Issue Discount....................... 13
Interest Rate................................. 13
Fixed Rate Notes......................... 14
Floating Rate Notes...................... 14
Events of Default............................. 14
Modification of Indenture..................... 15
Consolidation, Merger or Sale................. 15
Legal Defeasance.............................. 15
Covenant Defeasance........................... 16
Governing Law................................. 16
Concerning the Trustee........................ 16
PLAN OF DISTRIBUTION............................... 16
By Agents.................................... 16
By Underwriters.............................. 17
Direct Sales................................. 17
General Information.......................... 17
LEGAL OPINIONS..................................... 17
EXPERTS............................................ 17
$450,000,000 Unsecured Notes
PROSPECTUS
The date of this
Prospectus is __________, 2002
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.*
Estimation based upon the issuance of all of the unsecured notes in two
issuances:
Securities and Exchange Commission Filing Fees.................$ 41,400
Printing Registration Statement, Prospectus, etc............... 60,000
Independent Auditors' fees..................................... 34,000
Charges of Trustee (including counsel fees).................... 45,000
Legal fees..................................................... 160,000
Rating Agency fees............................................. 189,750
Miscellaneous expenses......................................... 75,000
----------
Total..................................................... $605,150
==========
* Estimated, except for filing fees.
Item 15. Indemnification of Directors and Officers.
The Bylaws of the Company provide that the Company shall indemnify any person
who was or is a party to any threatened, pending or completed action, suit or
proceeding because such person is or was a director, officer or employee of
the Company or is or was serving at the request of the Company as a director,
officer, partner, trustee, employee or agent of another foreign or domestic
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise, against any liability in connection with such proceeding if (a)
such person conducted him or herself in good faith; (b) such person believed,
in the case of conduct in such person's official capacity with the Company (as
defined), that his or her conduct was in the best interests of the Company,
and, in all other cases, that his or her conduct was at least not opposed to
its best interests; (c) with respect to any criminal action or proceeding,
such person had no reasonable cause to believe his or her conduct was
unlawful; and (d) such person was not grossly negligent or guilty of willful
misconduct. Such indemnification in connection with a proceeding by or in the
right of the Company is limited to reasonable expenses incurred in connection
with the proceeding. Any such indemnification (unless ordered by a court)
shall be made by the Company only as authorized in the specific case upon a
determination that indemnification of the director is proper in the
circumstances because such person has met the applicable standard of conduct.
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Section 13.1-698 of the Code of Virginia provides that unless limited by
the articles of incorporation, a corporation shall indemnify a director who
entirely prevails in the defense of any proceeding to which such person was a
party because such person is or was a director of the corporation against
reasonable expenses incurred in connection with such proceeding. Section
13.1-699 provides that a corporation may pay for or reimburse reasonable
expenses incurred by a director who is a party to such a proceeding in advance
of final disposition of such proceeding if (a) the director furnishes a
written statement of his or her good faith belief that the standard of conduct
described in Section 13.1-697 has been met; (b) the director furnishes the
corporation a written undertaking by or on behalf of the director to repay the
advance if it is ultimately determined that such person did not meet the
standard of conduct; and (c) a determination is made that the facts then known
to those making the determination would not preclude indemnification. Section
13.1-700.1 provides procedures which allow directors to apply to a court for
an order directing advances or indemnification.
Section 13.1-702 provides that unless limited by the articles of
incorporation, (a) officers are entitled to mandatory indemnification under
Section 13.1-698 and to apply for court ordered indemnification under Section
13.1-700.1 to the same extent as a director, and (b) that a corporation may
indemnify and advance expenses to an officer, employee or agent to the same
extent as to a director. Section 13.1-704 provides that any corporation shall
have the power to make any further indemnity to any director, officer,
employee or agent that may be authorized by the articles of incorporation or
any bylaw made by the stockholders or any resolution adopted, before or after
the event, by the stockholders, except an indemnity against willful misconduct
or a knowing violation of criminal law.
The above is a general summary of certain provisions of the
Company's Bylaws and the Code of Virginia and is subject in all respects to
the specific and detailed provisions of the Company's Bylaws and the Code of
Virginia.
Reference is made to the Selling Agency Agreement and the Underwriting
Agreement filed as Exhibits 1(a) and 1(b) hereto, respectively, which provide
for indemnification of the Company, certain of its directors and officers, and
persons who control the Company, under certain circumstances.
The Company maintains insurance policies insuring its directors and
officers against certain obligations that may be incurred by them.
Item 16. Exhibits.
Reference is made to the information contained in the Exhibit Index filed
as part of this Registration Statement.
II-2
Item 17. Undertakings.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in
the registration statement. Notwithstanding the foregoing, any increase
or decrease in volume of unsecured notes offered (if the total dollar
value of unsecured notes offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) of the Securities Act of 1933
if, in the aggregate, the changes in volume and price represent no more
than a 20% change in the maximum aggregate offering price set forth in
the "Calculation of Registration Fee" table in the effective registration
statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement;
Provided, however, that (i) and (ii) do not apply if the registration
statement is on Form S-3, Form S-8 or Form F-3, and the information required
to be included in a post-effective amendment by those paragraphs is contained
in periodic reports filed with or furnished to the Commission by the
registrant pursuant to section 13 or section 15(d) of the Securities Exchange
Act of 1934 that are incorporated by reference in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination
of the offering.
(4) That, for purposes of determining any liability under the Securities
Act of 1933, each filing of the registrant's annual report pursuant to section
13(a) or section 15(d) of the Securities Exchange Act of 1934 that is
incorporated by reference in this registration statement shall be deemed to be
a new registration statement relating to the unsecured notes offered, and the
offering thereof at that time shall be deemed to be the initial bona fide
offering thereof.
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(5) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the laws of the Commonwealth of
Virginia, the registrant's bylaws, or otherwise, the registrant has been
advised that in the opinion of the SEC such indemnification is against public
policy as expressed in said Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director, officer
or controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the unsecured notes, the registrant
will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in said Act and will be governed by the final adjudication of such
issue.
(6) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(7) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-4
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable cause to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this amendment
to registration statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Columbus and State of Ohio, on the
12th day of April, 2002.
APPALACHIAN POWER COMPANY
E. Linn Draper, Jr.*
Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
amendment to registration statement has been signed below by the following
persons in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
(i) Principal Executive
Officer Chairman of the Board
and Chief Executive
E. Linn Draper, Jr.* Officer April 12, 2002
(ii) Principal Financial
Officer:
/s/ Susan Tomasky
- -----------------------
Susan Tomasky Vice President April 12, 2002
(iii) Principal Accounting
Officer:
/s/ Joseph M. Buonaiuto
- ------------------------ Controller and Chief
Joseph M. Buonaiuto Accounting Officer April 12, 2002
(iv) A Majority of the
Directors:
E. Linn Draper, Jr.*
H. W. Fayne*
A. A. Pena*
Robert P. Powers*
Thomas V. Shockley, III*
Susan Tomasky
J. H. Vipperman* April 12, 2002
*By /s/ Susan Tomasky
------------------------------
(Susan Tomasky, Attorney-in-Fact)
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EXHIBIT INDEX
Certain of the following exhibits, designated with an asterisk (*), were
previously filed under this file. Other exhibits, designated with an "x", are
filed herewith. The exhibits not so designated have heretofore been filed with
the Commission and, pursuant to 17 C.F.R. Sections 201.24 and 230.411, are
incorporated herein by reference to the documents indicated following the
descriptions of such exhibits.
Exhibit No. Description
- ----------- -----------
* 1(a) - Copy of proposed form of Selling Agency Agreement for the
unsecured notes.
* 1(b) - Copy of proposed form of Underwriting Agreement for the unsecured
notes.
4(a) - Copy of Indenture, dated as of January 1, 1998, between the
Company and The Bank of New York, as Trustee [Registration
Statement No. 333-45927, Exhibits 4(a) and 4(b); Registration
Statement No. 333-49071, Exhibit 4(b); Registration Statement
No. 333-84061, Exhibits 4(b) and 4(c)].
* 4(b) - Copy of Company Order and Officers' Certificate, dated October
19, 1999, establishing certain terms of the 7.45% Senior Notes,
Series D, Due 2004.
* 4(c) - Copy of Company Order and Officers' Certificate, dated June
27, 2000, establishing certain terms of the Floating Rate Notes,
Series A, Due 2001.
* 4(d) - Copy of Company Order and Officers' Certificate, dated August
20, 2001, establishing certain terms of the Floating Rate Notes,
Series B, Due 2003.
* 4(e) - Copy of proposed form of Company Order for the unsecured notes.
* 5 - Opinion of Simpson Thacher & Bartlett with respect to the
unsecured notes.
12 - Statement re Computations of Ratios [Annual Report on Form 10-K
of the Company for the year ended December 31, 2001, File
No. 1-3457, Exhibit 12].
x23(a) - Consent of Deloitte & Touche LLP.
23(b) - Consent of Simpson Thacher & Bartlett (included in Exhibit 5
filed herewith).
*24 - Powers of Attorney and resolutions of the Board of Directors of
the Company.
*25 - Form T-1 re eligibility of The Bank of New York to act as Trustee
under the Indenture.
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