AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 3, 1999
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-4
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
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EDISON MISSION HOLDINGS CO.
(Exact name of Registrant as specified in its charter)
CALIFORNIA 4991 33-0826940
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD (I.R.S. EMPLOYER
OF INDUSTRIAL IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER)
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18101 VON KARMAN AVENUE, SUITE 1700
IRVINE, CALIFORNIA 92612
(949) 752-5588
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
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SEE TABLE OF ADDITIONAL REGISTRANTS
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STEVEN D. EISENBERG, ESQ.
EDISON MISSION HOLDINGS CO.
18101 VON KARMAN AVENUE, SUITE 1700
IRVINE, CALIFORNIA 92612
(949) 752-5588
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
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COPY TO:
ROBERT M. CHILSTROM, ESQ.
HAROLD F. MOORE, ESQ.
SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
919 THIRD AVENUE
NEW YORK, NEW YORK 10022
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
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If the securities being registered on this Form are to be offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration number of the earlier effective
registration statement for the same offering. / /______
If this form is a post-effective amendment filed pursuant to Rule 462(d)
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. / /______
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CALCULATION OF REGISTRATION FEE
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS AMOUNT TO BE OFFERING AGGREGATE AMOUNT OF
OF SECURITIES TO BE REGISTERED REGISTERED PRICE PER SHARE(1) OFFERING PRICE(1) REGISTRATION FEE
8.137% Senior Secured Bonds due
2019(2).............................. $300,000,000 100% $300,000,000 $79,200
8.734% Senior Secured Bonds due
2026(2).............................. $530,000,000 100% $530,000,000 $139,920
Guarantees of 8.137% Senior Secured
Bonds due 2019 and 8.734% Senior
Secured Bonds due 2026 of Registrants
other than Edison Mission Holdings
Co................................... -- -- -- None(3)
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(f) under the Securities Act of 1933, as amended.
(2) Issued by Edison Mission Holdings Co.
(3) Pursuant to Rule 457(n), no separate fee is paid in connection with these
guarantees.
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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 SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
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TABLE OF ADDITIONAL REGISTRANTS
PRIMARY STANDARD
STATE OF INCORPORATION INDUSTRIAL CLASSIFICATION I.R.S. EMPLOYER
NAME OR ORGANIZATION CODE NUMBER IDENTIFICATION NUMBER
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Edison Mission Finance Co............................ California 4991 33-0839202
18101 Von Karman Avenue, Suite 1700
Irvine, California 92612
(949) 752-5588
Homer City Property Holdings, Inc.................... California 4991 33-0851685
18101 Von Karman Avenue, Suite 1700
Irvine, California 92612
(949) 752-5588
Mission Energy Westside, Inc......................... California 4991 33-0550657
18101 Von Karman Avenue, Suite 1700
Irvine, California 92612
(949) 752-5588
Chestnut Ridge Energy Company........................ California 4991 33-0826590
18101 Von Karman Avenue, Suite 1700
Irvine, California 92612
(949) 752-5588
EME Homer City Generation L.P........................ Pennsylvania 4991 33-0826938
18101 Von Karman Avenue, Suite 1700
Irvine, California 92612
(949) 752-5588
Edison Mission Energy................................ California 4991 95-4031807
18101 Von Karman Avenue, Suite 1700
Irvine, California 92612
(949) 752-5588
SUBJECT TO COMPLETION, DATED DECEMBER 3, 1999
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.
PROSPECTUS
Offer to Exchange All 8.137% Senior Secured Bonds due 2019 and All 8.734% Senior
Secured Bonds due 2026 for 8.137% Senior Secured Bonds due 2019 and 8.734%
Senior Secured Bonds due 2026, Respectively, Which Have Been Registered Under
the Securities Act of 1933, As Amended, of
EDISON MISSION
[LOGO] HOLDINGS CO.
An EDISON MISSION ENERGY Company
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME, ON , 2000, UNLESS EXTENDED.
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Terms of the exchange offer:
- We will exchange all original bonds that are validly tendered and not
withdrawn prior to the expiration of the exchange offer.
- You may withdraw tenders of original bonds at any time prior to the
expiration of the exchange offer.
- We believe that the exchange of original bonds will not be a taxable event
for U.S. federal income tax purposes, but you should see "Certain United
States Federal Income Tax Considerations" on page 88 for more information.
- We will not receive any proceeds from the exchange offer.
- The terms of the exchange bonds are substantially identical to the
original bonds, except that the exchange bonds are registered under the
Securities Act and the transfer restrictions and registration rights
applicable to the original bonds do not apply to the exchange bonds.
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SEE "RISK FACTORS" BEGINNING ON PAGE 13 FOR A DISCUSSION OF CERTAIN RISKS THAT
SHOULD BE CONSIDERED BY HOLDERS PRIOR TO TENDERING THEIR ORIGINAL BONDS.
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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THE DATE OF THIS PROSPECTUS IS , 1999.
FORWARD-LOOKING STATEMENTS
This prospectus includes forward-looking statements. We have based these
forward-looking statements on our current expectations and projections about
future events based upon our knowledge of facts as of the date of this
prospectus and our assumptions about future events. These forward-looking
statements are subject to various risks and uncertainties that may be outside of
our control, including, among other things:
- governmental, statutory, regulatory or administrative initiatives
affecting our company, our subsidiaries that are guaranteeing the bonds,
the Homer City generating units or the United States electricity industry
generally;
- demand for the electric capacity and energy in the markets served by our
generating units;
- competition from other power plants, including new plants that may be
developed in the future; and
- the cost and availability of fuel and fuel transportation services for our
generating units.
We use words like "believes," "expects," "anticipates," "intends," "may,"
"will," "should," "estimate," "projected" and similar expressions to help
identify forward-looking statements in this prospectus.
For additional factors that could affect the validity of our forward-looking
statements, you should read "Risk Factors" beginning on page 13. In light of
these and other risks, uncertainties and assumptions, the actual events or
results may be very different from those expressed or implied in the
forward-looking statements in this prospectus or may not occur. We have no
obligation to publicly update or revise any forward-looking statement, whether
as a result of new information, future events or otherwise.
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NOTICE TO NEW HAMPSHIRE RESIDENTS
NEITHER THE FACT THAT A REGISTRATION STATEMENT OR AN APPLICATION FOR A
LICENSE HAS BEEN FILED UNDER RSA 421-B WITH THE STATE OF NEW HAMPSHIRE NOR THE
FACT THAT A SECURITY IS EFFECTIVELY REGISTERED OR A PERSON IS LICENSED IN THE
STATE OF NEW HAMPSHIRE CONSTITUTES A FINDING BY THE SECRETARY OF STATE THAT ANY
DOCUMENT FILED UNDER RSA 421-B IS TRUE, COMPLETE AND NOT MISLEADING. NEITHER ANY
SUCH FACT NOR THE FACT THAT AN EXEMPTION OR EXCEPTION IS AVAILABLE FOR A
SECURITY OR A TRANSACTION MEANS THAT THE SECRETARY OF STATE HAS PASSED IN ANY
WAY UPON THE MERITS OR QUALIFICATIONS OF, OR RECOMMENDED OR GIVEN APPROVAL TO,
ANY PERSON, SECURITY, OR TRANSACTION. IT IS UNLAWFUL TO MAKE, OR CAUSE TO BE
MADE, TO ANY PROSPECTIVE PURCHASER, CUSTOMER OR CLIENT ANY REPRESENTATION
INCONSISTENT WITH THE PROVISIONS OF THIS PARAGRAPH.
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PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY HIGHLIGHTS SELECTED INFORMATION FROM THIS PROSPECTUS
AND MAY NOT CONTAIN ALL OF THE INFORMATION THAT IS IMPORTANT TO YOU. THIS
PROSPECTUS INCLUDES SPECIFIC TERMS OF THE EXCHANGE BONDS WE ARE OFFERING, AS
WELL AS INFORMATION REGARDING OUR BUSINESS AND DETAILED FINANCIAL DATA. WE
ENCOURAGE YOU TO READ THIS PROSPECTUS IN ITS ENTIRETY. THE TERMS "THE COMPANY,"
"WE," "OURS," "OUR" OR "US" AS USED IN THIS PROSPECTUS REFER TO EDISON MISSION
HOLDINGS CO. AND ITS DIRECT AND INDIRECT SUBSIDIARIES, UNLESS THE CONTEXT
OTHERWISE REQUIRES. ALL CAPITALIZED TERMS USED IN THIS PROSPECTUS AND NOT
OTHERWISE DEFINED HEREIN HAVE THE MEANINGS GIVEN TO SUCH TERMS IN THE "GLOSSARY
OF DEFINED TERMS" ATTACHED HERETO AS APPENDIX A. YOU SHOULD PAY SPECIAL
ATTENTION TO THE "RISK FACTORS" SECTION BEGINNING ON PAGE 13 OF THIS PROSPECTUS.
SUMMARY OF THE EXCHANGE OFFER
On May 27, 1999, we completed the private offering of $300 million aggregate
principal amount of 8.137% Senior Secured Bonds due 2019 and $530 million
aggregate principal amount of 8.734% Senior Secured Bonds due 2026. As part of
that offering, we entered into a registration rights agreement with the initial
purchasers of these original bonds in which we agreed, among other things, to
deliver this prospectus to you and to complete an exchange offer for the
original bonds. Set forth below is a summary of that exchange offer.
Securities Offered................... We are offering up to $300,000,000 aggregate principal
amount of new 8.137% Senior Secured Bonds due 2019 and up to
$530,000,000 aggregate principal amount of new 8.734% Senior
Secured Bonds due 2026, which have been registered under the
Securities Act. The form and terms of these exchange bonds
are identical in all material respects to those of the
original bonds. The exchange bonds, however, will not
contain transfer restrictions and registration rights
applicable to the original bonds.
The Exchange Offer................... We are offering to exchange new $1,000 principal amount of
our 8.137% Senior Secured Bonds due 2019, which have been
registered under the Securities Act, for $1,000 principal
amount of our outstanding 8.137% Senior Secured Bonds due
2019, and to exchange new $1,000 principal amount of our
8.734% Senior Secured Bonds due 2026, which have been
registered under the Securities Act, for $1,000 principal
amount of our outstanding 8.734% Senior Secured Bonds due
2026.
In order to be exchanged, original bonds must be properly
tendered and accepted. All original bonds that are validly
tendered and not withdrawn will be exchanged. As of the date
of this prospectus, there are $830 million principal amount
of original bonds outstanding. We will issue exchange bonds
promptly after the expiration of the exchange offer.
Resales.............................. Based on interpretations by the staff of the SEC, as set
forth in a series of no-action letters issued to third
parties, we believe that the exchange bonds issued in the
exchange offer may be offered for resale, resold or
otherwise transferred by you without compliance with the
registration and prospectus delivery requirements of the
Securities Act provided that:
- you are acquiring the exchange bonds in the ordinary
course of your business;
1
- you are not participating, do not intend to participate
and have no arrangement or understanding with any person
to participate, in a distribution of the exchange bonds;
and
- you are not an "affiliate" of ours.
If you are an affiliate of ours, are engaged in or intend to
engage in or have any arrangement or understanding with any
person to participate in the distribution of the exchange
bonds:
(1) you cannot rely on the applicable interpretations of the
staff of the SEC and
(2) you must comply with the registration requirements of
the Securities Act in connection with any resale
transaction.
Each broker or dealer that receives exchange bonds for its
own account in exchange for original bonds that were
acquired as a result of market-making or other trading
activities must acknowledge that it will deliver this
prospectus in connection with any offer to resell, resale,
or other transfer of the exchange bonds issued in the
exchange offer.
Expiration Date...................... 5:00 p.m., New York City time, on , 2000, unless we
extend the expiration date.
Accrued Interest on the Exchange
Bonds and Original Bonds........... The exchange bonds will bear interest from the most recent
date to which interest has been paid on the original bonds
or, if no interest has been paid on the original bonds, from
May 27, 1999. If your original bonds are accepted for
exchange, then you will receive interest on the exchange
bonds and not on the original bonds.
Conditions to the Exchange Offer..... The exchange offer is subject to customary conditions. We
may assert or waive these conditions in our sole discretion.
If we materially change the terms of the exchange offer, we
will resolicit tenders of the original bonds. Please read
the section "The Exchange Offer--Conditions to the Exchange
Offer" of this prospectus for more information regarding
conditions to the exchange offer.
Procedures for Tendering Original
Bonds.............................. If you wish to tender your original bonds, you must
complete, sign and date the letter of transmittal, or a
facsimile of it, according to its instructions and transmit
the letter of transmittal, together with your original bonds
and any other required documentation to United States Trust
Company of New York. United States Trust Company of New
York, who is the exchange agent, must receive this
documentation at the address set forth in the letter of
transmittal by 5:00 p.m., New York City time, on the
expiration date. By executing the letter of transmittal, you
will represent to us that you are acquiring the exchange
bonds in the ordinary course of your business, that you are
not participating, do not intend to participate and have no
arrangement or understanding with any person to participate,
in the distribution of exchange bonds, and
2
that you are not an "affiliate" of ours. See "The Exchange
Offer--Procedures for Tendering."
Special Procedures for Beneficial
Holders............................ If you are the beneficial holder of original bonds that are
registered in the name of your broker, dealer, commercial
bank, trust company or other nominee, and you wish to tender
in the exchange offer, you should promptly contact the
person in whose name your original bonds are registered and
instruct that person to tender on your behalf. See "The
Exchange Offer--Procedures for Tendering."
Guaranteed Delivery Procedures....... If you wish to tender your original bonds and you cannot
deliver your bonds, the letter of transmittal or any other
required documents to the exchange agent before the
expiration date, you may tender your original bonds
according to the guaranteed delivery procedures set forth in
"The Exchange Offer--Guaranteed Delivery Procedures."
Withdrawal Rights.................... Tenders may be withdrawn at any time before 5:00 p.m., New
York City time, on the expiration date.
Acceptance of Original Bonds and
Delivery of Exchange Bonds......... Subject to the conditions set forth in the section "The
Exchange Offer--Conditions to the Exchange Offer" of this
prospectus, we will accept for exchange any and all original
bonds which are properly tendered in the exchange offer
before 5:00 p.m., New York City time, on the expiration
date. The exchange bonds will be delivered promptly after
the expiration date. See "The Exchange Offer--Terms of the
Exchange Offer."
Certain United States Federal Income
Tax Considerations................. We believe that your exchange of original bonds for exchange
bonds pursuant to the exchange offer will not result in any
gain or loss to you for U.S. federal income tax purposes.
See "Certain United States Federal Income Tax
Considerations" in this prospectus.
Exchange Agent....................... United States Trust Company of New York is serving as
exchange agent in connection with the exchange offer. The
address and telephone number of the exchange agent are set
forth in "The Exchange Offer--Exchange Agent" in this
prospectus.
Use of Proceeds...................... We will not receive any proceeds from the issuance of
exchange bonds pursuant to the exchange offer. We will pay
all expenses incident to the exchange offer. See "Use of
Proceeds."
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SUMMARY OF TERMS OF THE EXCHANGE BONDS
THE FORM AND TERMS OF THE EXCHANGE BONDS AND THE ORIGINAL BONDS ARE
IDENTICAL IN ALL MATERIAL RESPECTS, EXCEPT THAT TRANSFER RESTRICTIONS AND
REGISTRATION RIGHTS APPLICABLE TO THE ORIGINAL BONDS DO NOT APPLY TO THE
EXCHANGE BONDS. THE EXCHANGE BONDS WILL EVIDENCE THE SAME DEBT AS THE ORIGINAL
BONDS AND WILL BE GOVERNED BY THE SAME INDENTURE. WHERE WE REFER TO "BONDS" IN
THIS DOCUMENT, WE ARE REFERRING TO BOTH SERIES OF ORIGINAL BONDS AND EXCHANGE
BONDS.
Total Amount of Exchange
Bonds Offered...................... $300 million in aggregate principal amount of 8.137% Senior
Secured Bonds due 2019 (the "Series A bonds").
$530 million in aggregate principal amount of 8.734% Senior
Secured Bonds due 2026 (the "Series B bonds").
Maturity............................. Series A bonds: October 1, 2019.
Series B bonds: October 1, 2026.
Issue Price.......................... Par plus accrued interest from May 27, 1999.
Payment Dates........................ April 1 and October 1, beginning October 1, 1999.
Amortization......................... Principal of the bonds will be amortized in accordance with
the schedules set forth under "Description of the
Bonds--Amortization of the Bonds."
Initial Average Life................. Series A bonds: 13.9 years.
Series B bonds: 20.7 years.
Denominations........................ We will sell the exchange bonds in minimum denominations of
$100,000 or any integral multiple of $1,000 in excess
thereof.
Ratings.............................. "Baa3" by Moody's Investors Service, Inc. ("Moody's"),
"BBB-" by Standard & Poor's Rating Services ("S&P") and
"BBB" by Duff & Phelps Credit Rating Co. ("Duff & Phelps").
Subsidiary Guarantees................ Each guarantor is our wholly-owned subsidiary. If we cannot
make payments on the bonds when they are due, the subsidiary
guarantors must make them instead.
Optional Redemption.................. We may redeem any of the bonds at any time at a redemption
price equal to:
- 100% of the principal amount of the bonds being redeemed,
PLUS
- accrued interest on the bonds being redeemed, PLUS
- a yield maintenance premium based on rates of comparable
treasury securities PLUS 50 basis points.
Mandatory Redemption................. In the event of any damage to the Facilities (defined
below), governmental taking or other recovery event at the
Facilities, we must use any proceeds actually received by us
in excess of $5 million that are not used to repair or
replace the Facilities to redeem bonds and prepay our other
senior secured debt. In such event, the redemption price for
the bonds will be 100% of the principal amount of the bonds
being redeemed PLUS accrued interest.
Debt Service Reserve Account......... We will be required to establish a debt service reserve
account for the benefit of the holders of the bonds. This
account will be funded
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with enough money to pay the projected debt service on the
bonds due in the next six months (initially approximately
$35 million). We do not have to fund this account with cash
if we provide acceptable debt service credit support, which
may be either an undertaking of Edison Mission Energy
("EME"), which owns us (if EME is rated "Baa1" or better by
Moody's and "BBB+" or better by S&P) or a letter of credit
provided by a bank or trust company rated "A2" or better by
Moody's and "A" or better by S&P. The Collateral Agent will
disburse funds from this account or call upon the credit
support only to pay principal and interest on the bonds that
is past due.
Credit Support Guarantee............. If at any time before December 31, 2001 neither we nor the
subsidiary guarantors can make payments on the bonds or our
other senior secured debt and there is not enough money in
the revenue and other accounts to make such payments, EME
must make up to $42 million of these payments. EME will be
required to make payments on the bonds before money in the
debt service reserve account for the bonds or the acceptable
credit support contained in such account is used.
Ranking of the Bonds................. The bonds:
- are senior secured obligations;
- are equivalent in right of payment to all of our existing
and future senior indebtedness; and
- rank senior to all of our existing and future subordinated
indebtedness.
Collateral........................... The bonds and our other senior secured debt will be secured
by:
- a mortgage on our real property;
- a security interest in our insurance policies and all of
the money paid to us on such policies;
- a security interest in all of our governmental approvals,
if we are able to assign such approvals;
- a security interest in reserve and other accounts and all
money in such accounts; and
- a security interest in all of our other assets, including
our ownership interests in our subsidiaries.
Non-Recourse Obligations............. We are obligated to make payments on the bonds. Neither EME
nor any other affiliate of EME will guarantee payment of the
bonds or will have any obligation to make payments on the
bonds, other than EME's obligations under the Credit Support
Guarantee or any credit support that we use to satisfy the
debt service reserve requirement for the bonds.
Operating Flow of Funds.............. We will deposit all of our revenues into the revenue account
established for your benefit and for the benefit of the
holders of our other senior secured debt. These revenues
will be used to pay operating expenses, administrative fees
and expenses and debt service and to fund the debt service
reserve accounts for the bonds and our other senior secured
debt. Any money remaining after we
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make these payments will be transferred into an equity
account in order to make distributions to us if we satisfy
the distribution conditions described below under
"--Distributions."
Distributions........................ Other than as described below under "Use of Proceeds," we
can make distributions only with funds in the equity account
if the following conditions are satisfied on the quarterly
distribution date:
- no default or event of default under the indenture exists
or would result from the distribution;
- we have paid all amounts due on our senior debt and all
reimbursement obligations due in respect of our letters of
credit, if any, and have fully funded or provided
acceptable debt service credit support for our debt
service reserve accounts;
- we certify that the debt service coverage ratio for the
previous four quarters is at least 1.50 to 1.0 for any
period ending on or before December 31, 2001 or 1.70 to
1.0 for any period ending after December 31, 2001; and
- we certify that the projected debt service coverage ratio
for each four-quarter period during the next eight
quarters is at least 1.50 to 1.0 for any period ending on
or before December 31, 2001 or 1.70 to 1.0 for any period
ending after December 31, 2001.
Covenants............................ The terms of the bonds will require us to, among other
things: (1) provide financial statements, default notices
and other notices to the trustee and the rating agencies;
(2) comply with applicable laws; (3) obtain all necessary
governmental approvals; and (4) pay taxes and maintain books
and records.
The terms of the bonds will restrict our ability to, among
other things: (1) incur additional debt; (2) incur liens on
our property; (3) sell assets; (4) enter into certain
transactions with affiliates; and (5) create new
subsidiaries.
These limitations are subject to a number of important
qualifications and exceptions which are described in
"Description of Principal Financing Documents--Indenture."
Change of Control.................... It is an Event of Default under the bonds if EME's direct or
indirect beneficial ownership in us is reduced to less than
50% at any time, unless either:
- the bonds are rated at least investment grade by each
rating agency rating the bonds at that time and we receive
a confirmation of the ratings of the bonds; or
- the reduction in EME's voting interest is approved by
bondholders holding at least 66 2/3% in aggregate
principal amount of the outstanding bonds.
Governing Law........................ The bonds and the other Financing Documents (other than the
mortgage of our real property, which will be governed by the
laws of the Commonwealth of Pennsylvania) will be governed
by the laws of the State of New York.
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THE COMPANY
EDISON MISSION HOLDINGS CO.
We are a California corporation formed for the purpose of issuing the bonds
and, through its subsidiaries, acquiring, owning and operating three coal-fired
electric generating units (individually "Unit 1," "Unit 2" and "Unit 3" and,
collectively, the "Homer City Units" or the "Units") with an aggregate capacity
of 1,884 megawatts ("MW"), and related facilities (the Units and such related
facilities, the "Facilities"), located near Pittsburgh, Pennsylvania. EME owns
the Company.
On March 18, 1999, the Company's subsidiary, EME Homer City Generation L.P.
("EME Homer City"), completed its acquisition (the "Acquisition") of 100% of the
ownership interests in the Facilities from wholly-owned subsidiaries of
GPU Inc. and Energy East Corporation for approximately $1.8 billion. The Company
formed five subsidiaries, including EME Homer City, in order to effect the
acquisition, ownership, financing and operation of the Facilities. Each of these
subsidiaries is providing a guarantee with respect to the bonds as well as a
pledge of substantially all of its assets and cash flow as collateral for the
bonds.
The nameplate capacities of the Homer City Units are 620 MW (Unit 1), 614 MW
(Unit 2) and 650 MW (Unit 3) and the Units are among the lowest cost
fossil-fired generating units in the Northeastern United States. The Units
benefit from direct transmission access into both the Pennsylvania--New
Jersey--Maryland power market ("PJM") and the New York power market ("NYPP"). In
1998, the Units had fuel expenses and operating and maintenance costs of
approximately $17/megawatt-hour ("MWh") and were among the first fossil-fired
units in the merit order for dispatch within both PJM and NYPP.
EDISON MISSION ENERGY
EME is a leading global power producer. Through its subsidiaries, EME
engages in the business of developing, acquiring, owning and operating electric
power generation facilities worldwide. Edison International owns EME and also
owns Southern California Edison Company, one of the largest electric utilities
in the United States. At September 30, 1999, EME had consolidated assets of
approximetely $11 billion and total shareholder's equity of approximately
$2 billion. The bonds will be non-recourse to EME.
EME was formed in 1986 with two domestic operating projects. EME's business
has evolved from the development of contract-based domestic power projects to
the development of contract-based international power projects and the
acquisition of operating generating assets within developed and deregulating
power markets. Currently, EME owns interests in 58 domestic and international
operating power stations with an aggregate generating capacity of 16,443 MW, of
which EME's share is approximately 12,369 MW. One domestic acquisition of twelve
operating projects totaling approximately 9,510 MW of generating capacity (of
which EME's anticipated share is 100%) is currently pending. In addition, EME
owns interests in one domestic and five international projects which are under
construction. The capacity of these projects is expected to total 2,493 MW (of
which EME's anticipated share is approximately 891 MW).
EME's business goal is to be one of the leading owners and operators of
electric generating assets in the world. EME will play an active role, as a
long-term owner, in all phases of power generation, from planning and
development through construction and commercial operation. EME believes that
such involvement allows EME to better ensure, with its experienced personnel,
that its projects are well-planned, structured and managed, thereby maximizing
value creation.
In the United States, long-term contracts are likely to be the exception
rather than the rule. EME's strategy focuses primarily on three areas with
respect to uncontracted plants: valuation, trading and regulation. First, EME
continuously improves its valuation tools, enabling EME to bid effectively and
competitively on assets that will be sold over the next five years. Second, EME
strives to develop its trading skills to enhance the returns of its generating
assets. Third, EME's principal customers
7
continue to be regulated utilities; therefore, understanding the regulatory and
economic environment in which these utilities operate allows EME to better react
to what they will do.
In March 1999, EME entered into definitive acquisition documentation to
acquire 100% of the fossil-fuel generating assets of Commonwealth Edison Co.
("ComEd"), totaling approximately 9,510 MW of generating capacity. EME will
operate the plants, which are located in the Midwest. The closing of the
transaction is subject to various state and federal regulatory approvals and is
expected to be completed by year-end 1999. On May 14, 1999, EME acquired 40% of
Contact Energy Limited ("Contact Energy") from the government of New Zealand.
Contact Energy owns ten hydroelectric, geothermal and natural gas-fired power
generating plants in New Zealand (including two that are under construction),
with a total aggregate capacity of 2,371 MW, of which EME's share is 949 MW.
Contact Energy also supplies gas and electricity to customers in New Zealand and
has a minority interest in a power project currently under construction in
Australia. In July 1999, EME acquired two power plants in the United Kingdom
with a total generating capacity of 3,886 MW from PowerGen UK plc ("PowerGen").
These mid-merit plants will complement the pumped-storage hydroelectric power
plants EME already owns in the United Kingdom and sell power to the electricity
trading market there. Upon closing of the ComEd acquisition, EME will have an
interest in approximately 29,500 MW of generating capacity, of which EME's share
will be approximately 23,200 MW.
STRATEGIC OVERVIEW
Over the past two years, EME has shifted its primary focus to the
acquisition and operation of competitive generation, both domestically and
internationally. EME identifies high-quality generating assets that are
strategic to deregulated power markets. EME has participated in several auctions
in the PJM and NYPP power markets because of the stable and developed nature of
the regions served by those markets. EME believes that low-cost, base load
assets in those markets are attractive because they operate all of the time and
because they are difficult to displace in the merit order. The acquisition of
the Homer City Units represents EME's entry into the PJM and NYPP competitive
markets. The Units satisfy EME's competitive generation strategy as they:
- Are among the first fossil-fired plants to be dispatched in PJM and NYPP;
- Have the ability to access two competitive power markets, PJM and NYPP;
- Are located near large quantities of low-cost coal reserves;
- Are efficiently staffed and have an experienced workforce;
- Have a high average equivalent availability and efficient plant heat rate;
and
- Provide the opportunity to implement a proactive environmental upgrade
program.
POWER SALES STRATEGY
POWER MARKETS. EME Homer City sells output from the Homer City Units into
the PJM and NYPP competitive markets for capacity and energy and may also enter
into bilateral contracts for the sale of capacity and energy to power marketers
and load serving entities within PJM, NYPP and surrounding markets. PJM is
divided into three distinct locational marginal pricing zones and the Facilities
are located in the Western zone. PJM has been operating as an Independent System
Operator (an "ISO") since November 1997 and provides bid-based markets for
energy and installed capacity. PJM is characterized by predominantly coal-fired
base load and marginal units, a high concentration of nuclear facilities,
extensive regional transmission interconnections and retail competition in the
underlying Pennsylvania retail market.
NYPP is divided into eleven distinct locational marginal pricing zones and
the Facilities are located in the Western region. NYPP has received conditional
Federal Energy Regulatory Commission ("FERC") approval to become an ISO and has
proposed to provide bid-based markets for energy, installed capacity and
ancillary services. NYPP is characterized by predominantly coal-fired base load
and marginal units and transmission interconnections with the New England Power
Pool ("NEPOOL")
8
market, as well as with PJM and several Canadian transmission systems. Retail
customers in New York began to have the ability to choose their electric
supplier in 1998.
We can transmit 1,884 MW from the Homer City Units into NYPP through two 345
kilovolts ("kV") high voltage transmission lines and can transmit 1,884 MW into
PJM through two 230 kV lines. We will not incur any access or wheeling charges
for any energy delivered into PJM or for up to 942 MW of energy delivered into
NYPP. A 13-mile 230 kV line from the Homer City Units also provides an indirect
interconnection to the East Central Area Reliability ("ECAR") market.
POWER MARKETING ACTIVITIES. We have entered into a contract with a
marketing affiliate for the sale of energy and capacity produced by the Homer
City Units, which enables such marketing affiliate to engage in forward sales
and hedging transactions to manage our electricity price exposure. The marketing
affiliate has systems in place which monitor real-time spot and forward pricing
and perform option valuations. We will pay the marketing affiliate a nominal fee
for the performance of marketing services. All revenue from physical sales
transactions executed by the marketing affiliate will be deposited into the
revenue account established for the benefit of the bondholders and the holders
of our other senior secured debt. As of September 30, 1999, we had sold 82% of
the anticipated energy output of Units 1 and 2 for the remainder of 1999. These
forward energy sales average $22.00/MWh, compared to the Power Market
Consultant's base case projections of $19.14/MWh for PJM and $22.30/MWh for
NYPP. Also as of September 30, 1999, we had entered into forward energy sales
totaling 856 MW during on-peak hours in calendar year 2000 at an average price
of $40.90/MWh. The marketing affiliate has sold 99% of the remaining installed
capacity over the transition contract amounts through May 2000 at a weighted
average price of $65.00/MW-day.
TRANSITION CONTRACTS. We have entered into separate transition contracts
(the "Transition Contracts") with Pennsylvania Electric Company ("Penelec") and
New York State Electric & Gas Corporation ("NYSEG"), pursuant to which we may
exercise a put option to sell certain quantities of capacity to Penelec and
NYSEG, and Penelec and NYSEG may exercise call options to purchase certain
quantities of our capacity. The terms of the NYSEG Transition Contract and the
Penelec Transition Contract continue until April 30, 2001 and May 31, 2001,
respectively. We have exercised our put option to sell 942 MW of capacity to
Penelec for the first and second contract years under the Penelec Transition
Contract for a price of $49.90/MW-day for the first contract year and
$59.90/MW-day for the second contract year. We have entered into a letter
agreement with NYSEG to adjust the contract periods under the NYSEG Transition
Contract to conform to the PJM capacity planning cycle. We have also entered
into contractual arrangements with NYSEG to sell it 942 MW of capacity for the
period from March 18, 1999 to May 31, 1999 for a price of $55.00/MW-day and to
sell it 500 MW of capacity during the period from June 1, 1999 through May 31,
2000 for a price of $60.00/MW-day. The amount of capacity covered by these
Transition Contracts with respect to which a put or call option has not yet been
exercised is subject to reduction in the event that there is a decrease in the
amount by which NYSEG's and Penelec's projected load supply obligations exceed
the capacity available to be provided by their remaining owned generation and
existing power purchase entitlements.
ENVIRONMENTAL STRATEGY
We have contracted with a division of ABB Flakt, Inc. ("ABB") to make
environmental improvements to the Units. ABB will construct a limestone-based,
wet scrubber flue gas desulfurization ("FGD") system at Unit 3 and a selective
catalytic reduction ("SCR") system at each of the three Units (the
"Environmental Capital Improvements"). The Environmental Capital Improvements
are expected to enable the Homer City Units to comply with Phase II of Title IV
of the Clean Air Act regarding SO(2) emissions, the Pennsylvania NO(x) allowance
regulations and Pennsylvania's response to the Environmental Protection Agency's
("EPA") State Implementation Plan Call regarding NO(x) emissions. The
Environmental Capital Improvements will cost approximately $246 million, which
amount includes a fixed price, turnkey engineering, procurement and construction
contract, project
9
management costs and other project costs, and are scheduled to be installed
during 2000-2001. The Environmental Capital Improvements will be funded with
loans under an existing credit facility.
FUEL SUPPLY STRATEGY
The Homer City Units utilize coal as their primary source of fuel and
benefit from access by truck to significant native coal reserves located within
the western Pennsylvania portion of the Northern Appalachian region. Northern
Appalachian coal is relatively inexpensive and has a high heat content. We will
work with our affiliates to provide short-term and long-term market-based fuel
arrangements after the existing supply contracts expire and to minimize fuel
costs as enabled by the Environmental Capital Improvements. Up to 95% of the
coal used by Units 1 and 2 is supplied under existing contracts with regional
mines which are located within 50 miles of the Facilities, while the remainder
is purchased in the spot market. The coal for Units 1 and 2 is cleaned in our
coal cleaning facility (the "Coal Cleaning Plant") to reduce sulfur content.
Unit 3 utilizes lower sulfur coal which is blended at an on-site coal blending
facility.
OPERATION AND MAINTENANCE STRATEGY
We employ a skilled and disciplined workforce that is well prepared to
operate within a competitive and deregulated environment. We believe that our
staffing levels are comparable with benchmark standards for facilities of a
similar size and type. Employee headcount has been reduced by nearly 30% over
the past five years, while at the same time high standards for equivalent
availability and safety have been consistently maintained. The majority of the
technical staff at the Facilities has been retained after completing our
acquisition of the Homer City Units, thus providing us with a knowledgeable and
experienced base of employees which average over 22 years of experience in the
operation of the Homer City Units and similar facilities.
Our workforce is employed pursuant to a collective bargaining agreement
which was restructured in 1994. The collective bargaining agreement provides us
with a measure of labor cost certainty through 2002. The collective bargaining
agreement enables us to manage our workforce and to establish flexible work
rules going forward. We plan to cross-train our employees to perform different
functions, thus minimizing the use of more expensive or less efficient
subcontractors.
Our operating and maintenance plan, as well as several planned overhauls of
major equipment and controls, are consistent with our goal of extending the
remaining life of the Homer City Units for an additional 39 years. We utilize a
state-of-the-art computerized maintenance system to plan and schedule all
maintenance activities. We also employ a preventive maintenance program
complemented by new predictive maintenance technologies such as ferrography,
thermography, vibration analysis and acoustic analysis. Reliability-centered
maintenance techniques are currently being developed for critical systems to
better define condition monitoring parameters and redefine maintenance
strategies.
OFFERING OF ORIGINAL BONDS
On May 27, 1999, we issued and sold the original bonds. We used the net
proceeds of that offering, which were approximately $823 million, (1) to repay
the principal of loans outstanding under the Acquisition Facility and (2) to
repay a portion of EME's equity investment in us in the form of a distribution.
10
SOURCES AND USES OF FUNDS
FINANCING PLAN
We entered into a Credit Agreement, dated as of March 18, 1999 (the "Credit
Agreement"), with the banks and other financial institutions party thereto (the
"Banks"). The Credit Agreement provides for (1) a 364-day term loan facility in
an amount up to $800 million (the "Acquisition Facility"), (2) a five-year term
loan facility in an amount up to $250 million (the "Environmental Capital
Improvements Facility") and (3) a five-year revolving credit facility in an
amount up to $50 million (the "Working Capital Facility"). On March 18, 1999, we
borrowed $800 million of term loans under the Acquisition Facility and used the
proceeds of such loans, together with equity contributions from EME in the
amount of $1.06 billion, to fund the purchase price for the Facilities.
We used the net proceeds of the sale of the original bonds to repay the
outstanding principal of, and to permanently reduce the bank commitments
associated with, the term loans borrowed under the Acquisition Facility, and to
repay a portion of EME's equity investment in us in the form of a distribution.
We will use amounts available under the Environmental Capital Improvements
Facility to fund the Environmental Capital Improvements and will use amounts
available under the Working Capital Facility for general working capital
purposes. All outstanding amounts under the Working Capital Facility will be
repaid each year on the anniversary of the issuance of the original bonds. Under
certain conditions, we have access to additional liquidity in a debt service
reserve account and under a credit support guarantee provided by EME.
TABLE OF SOURCES AND USES OF FUNDS
The following table sets forth the approximate sources and uses of funds in
connection with the Acquisition.
AMOUNT
--------------
(IN THOUSANDS)
SOURCES OF FUNDS:
Equity.................................................... $1,030,000
----------
Debt:
Acquisition Facility.................................... --
Bonds................................................... 830,000
----------
Total Debt(1)............................................. 830,000
----------
TOTAL SOURCES OF FUNDS...................................... $1,860,000
USES OF FUNDS:
Acquisition Costs......................................... $1,801,000
Transaction Expenses, Inventories, Other.................. 59,000
----------
TOTAL USES OF FUNDS......................................... $1,860,000
- ------------------------
(1) Does not include amounts available for drawing under the $250 million
Environmental Capital Improvements Facility or the $50 million Working
Capital Facility.
11
SUMMARY CONSOLIDATED FINANCIAL DATA
The following table sets forth a summary of our consolidated financial data
for the period indicated. The summary consolidated financial data was derived
from the audited financial statements of the Company. The summary is qualified
in its entirety by the more detailed information and financial statements,
including the notes thereto, included herein or incorporated by reference.
NINE MONTHS
ENDED
SEPTEMBER 30,
1999
--------------
(IN
THOUSANDS)
INCOME STATEMENT DATA:
Operating revenues.......................................... $ 245,788
Operating expenses.......................................... 150,999
----------
Income from operations...................................... 94,789
Interest expense............................................ (35,506)
Interest and other income................................... 834
----------
Income before income taxes.................................. 60,117
Provision for income taxes.................................. 24,939
----------
Income before extraordinary loss............................ 35,178
Extraordinary loss on early extinguishment of debt, net of
income tax benefits....................................... (2,667)
----------
Net income.................................................. $ 32,511
==========
SEPTEMBER 30,
1999
--------------
BALANCE SHEET DATA:
Assets...................................................... 2,121,696
Current liabilities......................................... 60,263
Long-term obligations....................................... 992,004
Shareholders' equity........................................ 1,069,429
12
RISK FACTORS
IN ADDITION TO THE INFORMATION CONTAINED ELSEWHERE IN THIS PROSPECTUS, THE
FOLLOWING RISK FACTORS SHOULD BE CAREFULLY CONSIDERED BY EACH PROSPECTIVE
INVESTOR IN EVALUATING AN INVESTMENT IN THE BONDS. THE RISK FACTORS SET FORTH
BELOW, OTHER THAN "-YOU MAY EXPERIENCE ADVERSE CONSEQUENCES IF YOU FAIL TO
EXCHANGE YOUR ORIGINAL BONDS FOR EXCHANGE BONDS," GENERALLY APPLY TO THE
ORIGINAL BONDS AS WELL AS THE EXCHANGE BONDS.
YOU MAY EXPERIENCE ADVERSE CONSEQUENCES IF YOU FAIL TO EXCHANGE YOUR ORIGINAL
BONDS FOR EXCHANGE BONDS.
If you do not exchange your original bonds for exchange bonds pursuant to
the exchange offer, you will continue to be subject to the restrictions on
transfer of your original bonds described in the legend on your original bonds.
The restrictions on transfer of your original bonds arise because we issued the
original bonds pursuant to exemptions from, or in transactions not subject to,
the registration requirements of the Securities Act and applicable state
securities laws. In general, you may only offer or sell the original bonds if
they are registered under the Securities Act and applicable state securities
laws, or offered and sold pursuant to an exemption from such requirements. We do
not intend to register the original bonds under the Securities Act. In addition,
if you exchange your original bonds in the exchange offer for the purpose of
participating in a distribution of the exchange bonds, you may be deemed to have
received restricted securities and, if so, will be required to comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any resale transaction. To the extent original bonds are
tendered and accepted in the exchange offer, the trading market, if any, for the
original bonds would be adversely affected. See "The Exchange Offer--
Consequences of Exchanging or Failing to Exchange Original Bonds."
WE ARE THE ONLY ONES REQUIRED TO MAKE PAYMENTS ON THE BONDS AND OUR ABILITY TO
DO SO IS DEPENDENT ON CIRCUMSTANCES BEYOND OUR CONTROL.
We are the only ones required to make payments on the bonds. None of our
affiliates, shareholders, officers, directors or employees will be required to
make payments on the bonds, including EME, other than EME's obligations under
the Credit Support Guarantee or any guarantee provided by EME that we use to
satisfy our debt service reserve requirements. We are a special purpose finance
company and our only significant assets are our equity interests in our
subsidiaries. Our ability to make payments on the bonds is dependent on our
subsidiaries' ability to repay subordinated intercompany loans and make equity
distributions. Our subsidiaries' ability to repay the intercompany loans and
make equity distributions is dependent on revenues generated by the Facilities,
which is dependent on the Facilities' performance level and on market conditions
for the sale of capacity and energy.
THE OPERATION OF THE FACILITIES INVOLVES RISKS.
The operation of power generation facilities involves many operating risks,
including:
- performance below expected levels of output or efficiency;
- interruptions in fuel supply;
- disruptions in the transmission of electricity;
- breakdown or failure of equipment or processes;
- violation of permit requirements; and
- operator error or catastrophic events such as fires, earthquakes,
explosions, floods or other similar occurrences affecting power generation
facilities.
13
Although we employ experienced operating personnel to operate the Facilities
and will maintain insurance (including business interruption insurance) to
mitigate the effects of certain of the operating risks described above, we
cannot assure you that the occurrence of one or more of the events listed above
would not significantly decrease or eliminate revenues generated by the
Facilities or significantly increase the costs of operating the Facilities. A
decrease or elimination in revenues generated by the Facilities or an increase
in the costs of operating the Facilities could decrease or eliminate funds
available to us to make payments on the bonds.
THE REVENUES GENERATED BY THE OPERATION OF THE FACILITIES ARE SUBJECT TO MARKET
RISKS WHICH ARE BEYOND OUR CONTROL.
We may sell all or a portion of the Homer City Units' output into the PJM,
NYPP or other competitive power markets or on a bilateral basis and may also
sell such output to our marketing affiliate, which will in turn sell such output
into the PJM, NYPP or other markets. Participants in PJM and NYPP are not
guaranteed any specified rate of return on their capital investments through
recovery of mandated rates payable by purchasers of electricity. Therefore, with
the exception of revenue generated by the Transition Contracts (which expire in
2001) 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 PJM, NYPP and other competitive markets.
Among the factors that will influence the market prices for energy, capacity
and ancillary services in PJM and NYPP are:
- prevailing market prices for fuel oil, coal and natural gas and associated
transportation costs;
- 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;
- transmission congestion in PJM and/or NYPP;
- the extended operation of nuclear generating plants in PJM and NYPP beyond
their presently expected dates of decommissioning;
- weather conditions prevailing in PJM and NYPP from time to time;
- the possibility of a reduction in the projected rate of growth in
electricity usage as a result of factors such as regional economic
conditions and the implementation of conservation programs; and
- regulations, yet to be finalized, to take effect upon implementation of
the ISO in NYPP.
All of the factors listed above are beyond our control.
WE HAVE BEEN OPERATING THE FACILITIES FOR ONLY A SHORT PERIOD OF TIME.
Substantially all of our current business consists of owning and operating
the Facilities. Although the Homer City Units had a significant operating
history at the time we acquired them, we have a very limited history of owning
and operating the Homer City Units. In addition, the Units were operated as
integrated parts of regulated utilities prior to our acquisition and their
output of electricity was sold by NYSEG and Penelec at prices which were based
upon rates set by regulatory authorities. We cannot assure you that we will be
successful in operating the Homer City Units in a competitive environment in
which electricity rates will be set by the operation of market forces. We also
cannot assure you that the Homer City Units will perform as expected or that the
revenues generated by the Units will support our indebtedness, the cost of
operating the Facilities and the capital expenditures needed to
14
maintain the Facilities. Our historical consolidated financial data are not
helpful in predicting our future income because we have not been operating the
Facilities for a significant period of time.
OUR BUSINESS IS SUBJECT TO SUBSTANTIAL REGULATIONS AND PERMITTING REQUIREMENTS
AND MAY BE ADVERSELY AFFECTED BY OUR INABILITY TO COMPLY WITH EXISTING
REGULATIONS OR REQUIREMENTS OR CHANGES IN APPLICABLE REGULATIONS OR
REQUIREMENTS.
Our business is subject to extensive energy and environmental regulation by
federal, state and local authorities. We are required to comply with numerous
laws and regulations, and to obtain numerous governmental permits, in our
operation of the Facilities. We cannot assure you that existing regulations will
not be revised or reinterpreted, that new laws and regulations will not be
adopted or become applicable to us or the Facilities or that future changes in
laws and regulations will not have a detrimental effect on our business.
One of our strategies for compliance with federal regulations regarding
SO(2) emissions and federal and state regulations regarding NO(x) emissions is
the construction of the Environmental Capital Improvements. A delay in the
completion of the Environmental Capital Improvements or the failure of the
improvements to perform to their technical specifications could adversely affect
our compliance strategy and require us to purchase emissions allowances or
reduce the expected levels of operation of the Homer City Units. Although our
construction contract with ABB contains customary performance and completion
guarantees, we cannot assure you that the Environmental Capital Improvements
will be installed when anticipated or whether such systems will perform at the
expected levels.
We believe that we have obtained all material energy-related federal, state
and local approvals currently required to operate the Facilities. Although not
currently required, additional regulatory approvals may be required in the
future due to a change in laws and regulations, a change in our customers or for
other reasons. We cannot assure you that we will be able to obtain all required
regulatory approvals that we do not yet have or that we may require in the
future, or that we will be able to obtain any necessary modifications to
existing regulatory approvals or maintain all required regulatory approvals. If
there is a delay in obtaining any required regulatory approvals or if we fail to
obtain and comply with any required regulatory approvals, the operation of the
Facilities or the sale of electricity to third parties could be prevented or
subject to additional costs.
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. We may incur significant additional costs because of our
compliance with these requirements. If we fail to comply with these
requirements, we could be subject to civil or criminal liability and the
imposition of clean-up liens or fines. In acquiring the Facilities, we assumed,
subject to certain exceptions, all on-Site liabilities associated with the
environmental condition of the Facilities, regardless of when such liabilities
arose and whether known or unknown, and generally agreed to indemnify the former
owners of the Facilities for these liabilities. We cannot assure you that we
will at all times be in compliance with all applicable environmental laws and
regulations or that steps to bring the Facilities into compliance would not
materially and adversely affect our ability to make payments on the bonds.
THE INSURANCE COVERAGE FOR THE FACILITIES MAY NOT BE ADEQUATE.
We are required to have insurance for the Facilities, including all-risk
property damage insurance, commercial general public liability insurance, boiler
and machinery coverage and business interruption insurance. We cannot assure you
that the insurance coverage for the Facilities will be available in the future
on commercially reasonable terms. We also cannot assure you that the insurance
proceeds received for any loss of the Facilities or any damage to the Facilities
will be sufficient to permit us to make any payments on the bonds.
15
RISKS ASSOCIATED WITH THE YEAR 2000 PROBLEM COULD HAVE AN ADVERSE EFFECT ON OUR
BUSINESS.
We expect to implement successfully systems to address year 2000 issues. We
cannot assure you, however, that our year 2000 compliance will not be delayed or
require significant expenditures. Our inability to implement the appropriate
software on a timely basis could have an adverse effect on our business. We may
also suffer an adverse impact on our business if our suppliers, customers,
financial institutions, technical advisors and others with which we conduct
business are not year 2000 compliant.
YOU MAY FIND IT DIFFICULT TO SELL YOUR BONDS.
You may find it difficult to sell your bonds because an active trading
market for the bonds may not develop. The exchange bonds are being offered to
the holders of the original bonds. The original bonds were issued on May 27,
1999 primarily to a small number of institutional investors and overseas
investors. After the exchange offer, the trading market for the remaining
untendered original bonds could be adversely affected.
There is no existing trading market for the exchange bonds. We do not intend
to apply for listing or quotation of the exchange bonds on any exchange.
Therefore, we do not know the extent to which investor interest will lead to the
development of a trading market or how liquid that market might be. Although the
initial purchasers of the original bonds have informed us that they currently
intend to make a market in the exchange bonds, they are not obligated to do so,
and any market-making may be discontinued at any time without notice. As a
result, the market price of the exchange bonds could be adversely affected.
FEDERAL AND STATE STATUTES ALLOW COURTS, UNDER SPECIFIC CIRCUMSTANCES, TO VOID
SUBSIDIARY GUARANTEES AND REQUIRE BONDHOLDERS TO RETURN PAYMENTS RECEIVED FROM
SUBSIDIARY GUARANTORS.
Under the federal bankruptcy law and comparable provisions of state
fraudulent transfer laws, our subsidiaries' guarantees of the bonds could be
voided, or claims in respect thereof could be subordinated to all other debts of
a subsidiary guarantor, if, among other things, such guarantor, at the time it
incurred the indebtedness evidenced by its guarantee:
- received less than fair consideration or reasonably equivalent value for
the guarantee;
- was insolvent or rendered insolvent by reason of such issuance;
- was engaged in a business or transaction for which its remaining assets
constituted unreasonably small capital; or
- intended to incur, or believed that it would incur, debts beyond its
ability to pay such debts as they mature.
In addition, any payment by such subsidiary guarantor pursuant to its
guarantee could be voided and required to be returned to such subsidiary
guarantor, or to a fund for the benefit of the creditors of the guarantor. Our
subsidiaries' liabilities under their guarantees are contractually limited to
the maximum amount they could pay without the guarantees being deemed to be
fraudulent transfers. We cannot assure you, however, that this limitation would
be effective and, if it was effective, if the limited amount would be sufficient
to pay the bonds in full.
IT MAY BE DIFFICULT TO REALIZE THE VALUE OF THE COLLATERAL PLEDGED TO SECURE THE
BONDS AND THE PROCEEDS RECEIVED FROM A SALE OF THE COLLATERAL MAY BE
INSUFFICIENT TO REPAY THE BONDS.
Our obligation to make payments on the bonds is secured only by the
collateral described in this offering circular. The Collateral Agent's ability
to foreclose on the collateral on your behalf may be subject to perfection and
priority issues and to practical problems associated with the realization of the
Collateral Agent's security interest in the collateral. For example, the
Collateral Agent may need to obtain the consent of a third party prior to
transferring an asset upon foreclosure. We cannot assure
16
you that the Collateral Agent will be able to obtain such consent. Further, we
cannot assure you that foreclosure on the collateral would provide sufficient
funds to repay all amounts due on the bonds. In addition, senior debt
outstanding under the existing bank credit facilities and certain types of other
debt that we are permitted to incur will rank equally with the bonds and share
ratably in the collateral which secures the bonds. This would reduce the
benefits of the collateral to you and your ability to control certain actions
taken with respect to the collateral.
USE OF PROCEEDS
We will not receive any proceeds from the exchange offer. In consideration
for issuing the exchange bonds, we will receive in exchange original bonds of
like principal amount, the terms of which are identical in all material respects
to the exchange bonds. The original bonds surrendered in exchange for exchange
bonds will be retired and canceled and cannot be reissued. Accordingly, issuance
of the exchange bonds will not result in any increase in our indebtedness. We
have agreed to bear the expenses of the exchange offer. No underwriter is being
used in connection with the exchange offer.
On May 27, 1999, we issued and sold the original bonds. We used the net
proceeds of that offering (1) to repay the principal of loans outstanding under
the Acquisition Facility and (2) to repay a portion of EME's equity investment
in us in the form of a distribution.
CAPITALIZATION
The following table sets forth the consolidated capitalization of the
Company as of September 30, 1999, and reflects the issuance of the original
bonds and the application of the approximate proceeds therefrom as described in
"Use of Proceeds."
CAPITALIZATION AS OF SEPTEMBER 30, 1999
(UNAUDITED, IN THOUSANDS)
Short-Term Indebtedness..................................... $ 60,263
Long-Term Indebtedness:
Bonds Payable............................................. 885,000
----------
Total Long-Term Indebtedness............................ $ 885,000
Shareholders' Equity........................................ $1,069,429
----------
Total Capitalization.................................... $1,954,429
==========
17
SELECTED CONSOLIDATED FINANCIAL DATA
The following table sets forth a summary of our consolidated financial data
for the period indicated. The summary consolidated financial data was derived
from the audited financial statements of the Company. The summary is qualified
in its entirety by the more detailed information and financial statements,
including the notes thereto, included herein or incorporated by reference.
NINE MONTHS
ENDED
SEPTEMBER 30,
1999
--------------
(IN
THOUSANDS)
INCOME STATEMENT DATA:
Operating revenues.......................................... $ 245,788
Operating expenses.......................................... 150,999
----------
Income from operations...................................... 94,789
Interest expense............................................ (35,506)
Interest and other income................................... 834
----------
Income before income taxes.................................. 60,117
Provision for income taxes.................................. 24,939
----------
Income before extraordinary loss............................ 35,178
Extraordinary loss on early extinguishment of debt, net of
income tax benefit........................................ (2,667)
----------
Net income.................................................. $ 32,511
==========
SEPTEMBER 30,
1999
--------------
BALANCE SHEET DATA:
Assets...................................................... $2,121,696
Current liabilities......................................... 60,263
Long-term obligations....................................... 992,004
Shareholders' equity........................................ 1,069,429
OTHER DATA:
Ratio of earnings to fixed charges(1)....................... 2.65
- ------------------------
(1) For purposes of computing the ratio of earnings to fixed charges, earnings
are divided by fixed charges. "Earnings" represent the aggregate of income
before taxes and extraordinary income and fixed charges, net of capitalized
interest. "Fixed charges" represent interest expense (prior to capitalized
interest).
18
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
THE FOLLOWING DISCUSSION CONTAINS FORWARD-LOOKING STATEMENTS REGARDING THE
COMPANY. THESE STATEMENTS ARE BASED ON THE CURRENT PLANS AND EXPECTATIONS OF THE
COMPANY AND INVOLVE RISKS AND UNCERTAINTIES THAT COULD CAUSE ACTUAL FUTURE
ACTIVITIES AND RESULTS OF OPERATIONS TO BE MATERIALLY DIFFERENT FROM THOSE SET
FORTH IN THE FORWARD-LOOKING STATEMENTS. IMPORTANT FACTORS THAT COULD CAUSE
ACTUAL RESULTS TO DIFFER INCLUDE RISKS SET FORTH IN "RISK FACTORS."
GENERAL
The Company is a special-purpose California corporation formed on
October 7, 1998 for the purpose of facilitating the financing of the acquisition
and, through its wholly-owned subsidiaries, acquiring, making improvements to
and operating the three coal-fired electric generating units and related
facilities. EME Homer City, an indirect subsidiary of the Company, acquired the
Facilities on March 18, 1999 for a purchase price of approximately
$1.8 billion, with adjustments for changes in the book value of inventories and
prorations related to certain items including but not limited to taxes, rents
and fees under transferred permits.
EME Homer City derives revenue from the sale of energy and capacity into PJM
and NYPP and from bilateral contracts with power marketers and load serving
entities within PJM, NYPP and the surrounding markets. EME Homer City has
entered into a contract with a marketing affiliate for the sale of energy and
capacity produced by the Facilities, which enables such marketing affiliate to
engage in forward sales and hedging. EME Homer City will pay the marketing
affiliate a nominal fee currently set at $0.02/MWh (approximately $0.1 million
for the period).
EME Homer City believes there may also be opportunities to derive revenue
from the sale of installed capacity and ancillary services. Under the terms of
the Penelec Transition Contract and the NYSEG Transition Contract, EME Homer
City has elected to exercise certain options to sell capacity. These contracts
expire mid-year 2001. EME Homer City also has the option to sell non-contracted
capacity in PJM and NYPP. It is believed the Units should be capable of
producing revenues from the sale of voltage support based on previous
utilization of the Units.
RESULTS OF OPERATIONS
Results of operations from March 18, 1999 through September 30, 1999:
OPERATING REVENUES
Revenues for the period from March 18, 1999 through September 30, 1999 were
$245.8 million. Revenues primarily consist of energy revenue of $222.3 million,
capacity revenue of $22.0 million and sale of emission credits of $1.5 million.
These sales were made through a contract with a marketing affiliate, which
enables the affiliate to engage in forward sales and hedging transactions. Due
to warmer weather during the summer months, electric revenues generated from EME
Homer City are substantially higher during the third quarter. The Facilities
generated 6,624 GWhr of electricity since they were acquired and had an
availability factor of 85.4%. The weighted average price for energy was
$33.30/MWh.
OPERATING EXPENSES
Operating expenses consisted of expenses for fuel, plant operations,
depreciation and amortization and administrative and general expenses. Fuel
expense of $84.4 million included $84.0 million of coal for the period at an
average price of $31.04 per ton. The Units benefit from access by truck to
significant native coal reserves located within the western Pennsylvania portion
of the North Appalachian region. Up to 95% of the coal used by Units 1 and 2 is
supplied under existing contracts
19
with regional mines which are located within 50 miles of the facility, while the
remainder is purchased on the spot market. The coal for Units 1 and 2 is cleaned
by the coal cleaning facility to reduce sulfur content. Unit 3 utilizes lower
sulfur coal which is blended at an on-site coal blending facility.
Plant operations expense was $40.8 million, which included labor and
overhead of $11.2 million, outside services of $18.8 million, parts and supplies
of $5.6 million, and other administrative costs of $5.2 million.
Depreciation and amortization expenses were $25.3 million. Depreciation
expense primarily relates to the acquisition of the Facilities which is being
depreciated over thirty-nine years.
Administrative and general expenses of $0.5 million were due to an
allocation of EME corporate overhead costs.
OTHER INCOME (EXPENSE)
Interest expense was $35.5 million, which included interest on the
$800 million Acquisition Facility of $9.6 million (retired with proceeds from
the Bonds), interest on the $830 million Bonds of $24.4 million, amortization of
deferred financing costs of $1.2 million, and Credit Facility fees of
approximately $0.3 million. The average interest rate on outstanding
indebtedness was 8.39% at September 30, 1999.
Interest and other income of $0.8 million was earned on cash and cash
equivalents.
PROVISION FOR INCOME TAXES
The Company had an effective tax rate before extraordinary item of 41.5%.
The effective tax rate was higher than the federal statutory rate of 35% due to
state income taxes.
EXTRAORDINARY LOSS
The early repayment of the $800 million Acquisition Facility in May 1999
resulted in an extraordinary loss of $2.7 million (net of income tax benefit of
$2.3 million) attributable to the write-off of unamortized debt issue costs.
LIQUIDITY AND CAPITAL EXPENDITURES
Net cash flow provided by Operating Activities from March 18, 1999 through
September 30, 1999 was $113.8 million. Net working capital was $132.3 million
which included $102.2 million of cash that was restricted by the trust agreement
associated with the Company's senior secured bonds.
In March 1999, EME Homer City completed the acquisition of the 1,884 MW
Homer City Electric Generating Station and related facilities from GPU, Inc.,
New York State Electric & Gas Corporation and their respective affiliates.
Consideration for the purchase was a cash payment of approximately
$1.8 billion.
In order to finance the acquisition, EME Homer City entered into a Credit
Agreement, dated as of March 18, 1999 with banks and other financial
institutions party thereto (the "Banks"). The Credit Agreement provides for
(1) a 364-day term loan facility in an amount up to $800 million ("Acquisition
Facility"), (2) a five-year term loan facility in an amount up to $250 million
("Environmental Capital Improvements Facility") and (3) a five-year revolving
credit facility in an amount up to $50 million ("Working Capital Facility"). On
March 18, 1999, the Company borrowed $800 million of term loans under the
Acquisition Facility and used the proceeds of such loans, together with equity
contributions from EME of approximately $1 billion, to fund the purchase price
for the Facilities.
20
On May 27, 1999, the Company completed a private offering of $300 million
aggregate principal amount of the Series A bonds and $530 million aggregate
principal amount of the Series B bonds. The net proceeds of the sale of the
Bonds were used to repay the outstanding principal of, and to permanently reduce
the bank commitments associated with the term loans borrowed under the
Acquisition Facility, and to repay a portion of EME's equity investment in the
Company in the form of a distribution. The Company intends to use amounts
available under the Environmental Capital Improvements Facility to fund the
Environmental Capital Improvements; the Company had drawn $55 million under the
facility at September 30, 1999. The Company may use amounts available under the
Working Capital Facility for general working capital purposes. All outstanding
amounts under the Working Capital Facility will be repaid each year on the
anniversary of the issuance of the Bonds. Under certain conditions, the Company
may have access to additional liquidity in a debt service reserve account and
under a credit support guarantee provided by EME.
The Company intends to invest approximately $246 million for the
Environmental Capital Improvements, including a SCR on all three Units and a
fuel gas desulfurization system ("FGD") system on Unit 3, pursuant to a fixed
price, turnkey engineering, procurement and construction contract. The SCR on
Unit 2 is expected to be installed by September 2000, the SCRs on Units 1 and 3
are expected to be installed by May 2001 and the FGD system is expected to be
installed by September 2001. Capital expenditures for the nine month period
ended September 30, 1999 were $74.1 million, primarily related to the FGD. The
environmental improvements will enhance the economics of the Units by reducing
fuel costs, NO(X) allowance purchases and SO(2) allowance purchases. These
capital expenditures will be financed through the Company's $250 million
Environmental Capital Improvements Facility. The Company also has access to the
$50 million Working Capital Facility that is available for five years from the
date of acquisition.
OTHER COMMITMENTS AND CONTINGENCIES
The Company's parent, EME, has entered into the Credit Support Guarantee,
which, under certain conditions, must make up to $42 million in payments. The
Credit Support Guarantee is available until December 31, 2001 as additional
cashflow to support shortfalls in the payment of the Bonds and other senior
secured debt. EME has also provided a guarantee as of the date of the offering
to satisfy the Company's debt service reserve requirement with respect to the
Bonds. Similar guarantees have been extended by EME with respect to the
obligations in the Credit Agreement.
Prior to March 18, 1999, the Company had engaged in no operations since its
formation in October 1998. There are no separate financial statements available
with regard to the Facilities because their operations were fully integrated
with, and their results of operations were consolidated into, the former owners
of the Facilities. In addition, the electric output of the Units was sold based
on rates set by regulatory authorities. As a result thereof and because
electricity rates will now be set by the operation of market forces, the
historical financial data with respect to the Facilities are not meaningful or
indicative of the Company's future results. The Company's results of operations
in the future will depend primarily on revenues from the sale of energy,
capacity and other related products, and the level of its operating expenses.
CHANGES IN INTEREST RATES, CHANGES IN ELECTRICITY MARKET PRICING AND OTHER
OPERATING RISKS
Changes in interest rates and changes in electricity pool pricing can have a
significant impact on the Company's results of operations. Interest rate changes
affect the cost of capital needed to operate the Facilities. The Company has
mitigated the risk of interest rate fluctuations by arranging for fixed rate
financing for the majority of its project financings. The Company does not
believe that interest rate fluctuations will have a materially adverse effect on
its financial position or results of operations.
21
With the exception of revenue generated by the Transition Contracts (which
expire in 2001) and from bilateral contracts for the sale of electricity with
third-party load serving entities and power marketers, the Company's revenues
and results of operations are dependent upon prevailing market prices for
energy, capacity, ancillary services in PJM, NYPP and other competitive markets.
Among the factors that will influence the market prices for energy, capacity and
ancillary services in PJM and NYPP are:
- prevailing market prices for fuel oil, coal and natural gas and associated
transportation costs;
- 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 at a lower cost;
- transmission congestion in PJM and/or NYPP;
- the extended operation of nuclear generating plants in PJM and NYPP beyond
their presently expected dates of decommissioning;
- weather conditions prevailing in PJM and NYPP from time to time;
- the possibility of a reduction in the projected rate of growth in
electricity usage as a result of factors such as regional economic
conditions and the implementation of conservation programs; and
- regulations, yet to be finalized, to take effect upon implementation of
the ISO in NYPP.
EME Homer City derives revenues from sales of electric energy. Pricing
provisions are individually negotiated with customers by its marketing affiliate
and may include fixed prices or prices based on a daily or monthly market index.
EME Homer City may benefit from forward energy sales contracts entered into by
its marketing affiliate depending on market conditions. As of September 30,
1999, we had sold 82% of the anticipated energy output of Units 1 and 2 for the
remainder of 1999. These forward energy sales average $22.00/MWh, compared to
the Power Market Consultant's base case projections of $19.14/MWh for PJM and
$22.30/MWh for NYPP. Also as of September 30, 1999, we had entered into forward
energy sales totaling 856 MW during on-peak hours in calendar year 2000 at an
average price of $40.90/MWh. The marketing affiliate has sold 99% of the
remaining installed capacity over the transition contract amounts through May
2000 at a weighted average price of $65.00/MW-day.
The Company provides credit support for an affiliate that enters into
various electric energy transactions, including futures and swap agreements. The
Company could be exposed to the risk of higher electric energy prices in the
event of non-performance by a counterparty. However, the Company does not
anticipate non-performance by a counterparty and the marketing affiliate.
ENVIRONMENTAL MATTERS OR REGULATIONS
The Company is subject to environmental regulation by federal, state and
local authorities in the U.S. The Company believes that it is in substantial
compliance with environmental regulatory requirements and that maintaining
compliance with current requirements will not materially affect its financial
position or results of operations.
YEAR 2000 ISSUE
The Company, as part of EME, has a comprehensive program in place to
remediate potential Year 2000 impact on critical systems. EME divided its Year
2000 Issue activities into five phases: inventory, impact assessment,
remediation, documentation and certification. A critical system was defined as
those applications and systems, including embedded processor technology, which
if not appropriately
22
remediated might have had a significant impact on customers, the revenue stream,
regulatory compliance, or the health and safety of personnel.
The other essential component of the Company's Year 2000 readiness program
was to identify and assess vendor products and business partners for Year 2000
readiness. The Company put a process in place to identify and contact vendors
and business partners to determine their Year 2000 status, and has evaluated the
responses. The Company's general policy requires that all newly purchased
products be Year 2000 ready or otherwise designed to allow the Company to
determine whether such products present Year 2000 issues.
Plant contingency plans have been developed and reviewed for any significant
issues and to schedule appropriate testing and/or training. Such contingency
plans include developing strategies for dealing with Year 2000-related
processing failures or malfunctions due to the Company's internal systems or
from external parties. The Company's contingency plans evaluate reasonably
likely worst case scenarios or conditions. The Company does not expect the Year
2000 issue to have a material adverse effect on its results of operations or
financial position. However, if not effectively remediated, negative effects
from Year 2000 issues, including those related to external systems, vendors,
business partners, the independent system operator, the power exchange or
customers, could cause results to differ.
STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 133
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities", which, as amended, will be effective in January 2001.
The Statement establishes accounting and reporting standards requiring that
every derivative instrument be recorded in the balance sheet as either an asset
or liability measured at its fair value. The Statement requires that changes in
the derivative's fair value be recognized currently in earnings unless specific
hedge accounting criteria are met. A derivative's gains and losses for
qualifying hedges offset related results on the hedged item in the income
statement and a company must formally document, designate and assess the
effectiveness of transactions that receive hedge accounting. The impact of
adopting Statement 133 on the Company's financial statements has not been
quantified at this time.
23
THE EXCHANGE OFFER
TERMS OF THE EXCHANGE OFFER
Upon the terms and conditions set forth in this prospectus and in the
accompanying letter of transmittal, which together constitute the exchange
offer, we will accept for exchange original bonds which are properly tendered on
or before the expiration date and not withdrawn as permitted below. As used in
this prospectus, the term "expiration date" means 5:00 p.m., New York City time,
on , 2000. However, if we, in our sole discretion, have extended the
period of time for which the exchange offer is open, the term "expiration date"
means the latest time and date to which we extend the exchange offer.
As of the date of this prospectus, $300 million aggregate principal amount
of the Series A original bonds and $530 million aggregate principal amount of
the Series B original bonds are outstanding. This prospectus, together with the
letter of transmittal, is first being sent on or about , 1999, to all
holders of original bonds known to us. Our obligation to accept original bonds
for exchange pursuant to the exchange offer is subject to the conditions set
forth below under "--Conditions to the Exchange Offer."
We reserve the right to extend the period of time during which the exchange
offer is open. We would then delay acceptance for exchange of any original bonds
by giving oral or written notice of an extension to the holders of original
bonds as described below. During any extension period, all original bonds
previously tendered will remain subject to the exchange offer and may be
accepted for exchange by us. Any original bonds not accepted for exchange will
be returned to the tendering holder after the expiration or termination of the
exchange offer.
Original bonds tendered in the exchange offer must be in denominations of
principal amount of $1,000 and any integral multiple of $1,000.
We reserve the right to amend or terminate the exchange offer, and not to
accept for exchange any original bonds not previously accepted for exchange,
upon the occurrence of any of the conditions of the exchange offer specified
below under "--Conditions to the Exchange Offer." We will give oral or written
notice of any extension, amendment, non-acceptance or termination to the holders
of the original bonds as promptly as practicable. If we materially change the
terms of the exchange offer, we will resolicit tenders of the original bonds. We
will notify you of any extension by means of a press release or other public
announcement no later than 9:00 a.m., New York City time on that date.
Our acceptance of the tender of original bonds by a tendering holder will
form a binding agreement upon the terms and subject to the conditions provided
in this prospectus and in the accompanying letter of transmittal.
PROCEDURES FOR TENDERING
Except as described below, a tendering holder must transmit a properly
completed and duly executed letter of transmittal, including all other documents
required by the letter of transmittal, to United States Trust Company of New
York, the exchange agent, on or before the expiration date. In addition, the
exchange agent must receive, on or before the expiration date:
- certificates for the original bonds; or
- a timely confirmation of book-entry transfer of the original bonds into
the exchange agent's account at The Depository Trust Company, the
book-entry transfer facility, in accordance with the procedures for
book-entry described below.
The method of delivery of original bonds, letters of transmittal and all
other required documents is at your election and risk. If the delivery is by
mail, we recommend that you use registered mail,
24
properly insured, with return receipt requested. In all cases, you should allow
sufficient time to assure timely delivery. You should not send letters of
transmittal or original bonds to us.
If you are a beneficial owner whose original bonds are registered in the
name of a broker, dealer, commercial bank, trust company or other nominee, and
wish to tender, you should promptly instruct the registered holder to tender on
your behalf. Any registered holder that is a participant in The Depository Trust
Company's book-entry transfer facility system may make book-entry delivery of
the original bonds by causing The Depository Trust Company to transfer the
original bonds into the exchange agent's account. The Depository Trust Company
will be referred to as "DTC" in this prospectus.
Signatures on a letter of transmittal or a notice of withdrawal must be
guaranteed unless the original bonds surrendered for exchange are tendered:
- by a registered holder of the original bonds who has not completed the box
entitled "Special Issuance Instructions" or "Special Delivery
Instructions" on the letter of transmittal, or
- for the account of an "eligible institution."
If signatures on a letter of transmittal or a notice of withdrawal are
required to be guaranteed, the guarantees must be by an "eligible institution."
An "eligible institution" is a financial institution--including most banks,
savings and loan associations and brokerage houses--that is a participant in the
Securities Transfer Agents Medallion Program, the New York Stock Exchange
Medallion Signature Program or the Stock Exchanges Medallion Program.
We will determine in our sole discretion all questions as to the validity,
form and eligibility of original bonds tendered for exchange. This discretion
extends to the determination of all questions concerning the timing of receipts
and acceptance of tenders. These determinations will be final and binding.
We reserve the right to reject any particular original bond not properly
tendered or any which acceptance might, in our judgment or our counsel's
judgment, be unlawful. We also reserve the right to waive any defects or
irregularities or conditions of the exchange offer as to any particular original
bond either before or after the expiration date, including the right to waive
the ineligibility of any tendering holder. Our interpretation of the terms and
conditions of the exchange offer as to any particular original bond either
before or after the expiration date, including the letter of transmittal and the
instructions to the letter of transmittal, shall be final and binding on all
parties. Unless waived, any defects or irregularities in connection with tenders
of original bonds must be cured within a reasonable period of time. Neither we,
the exchange agent nor any other person will be under any duty to give
notification of any defect or irregularity in any tender of original bonds. Nor
will we, the exchange agent or any other person incur any liability for failing
to give notification of any defect or irregularity.
If the letter of transmittal is signed by a person other than the registered
holder of original bonds, the letter of transmittal must be accompanied by a
written instrument of transfer or exchange in satisfactory form duly executed by
the registered holder with the signature guaranteed by an eligible institution.
The original bonds must be endorsed or accompanied by appropriate powers of
attorney. In either case, the original bonds must be signed exactly as the name
of any registered holder appears on the original bonds.
If the letter of transmittal or any original bonds or powers of attorney are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing. Unless waived by us,
proper evidence satisfactory to us of their authority to so act must be
submitted.
By tendering, each holder will represent to us that, among other things,
25
- the exchange bonds are being acquired in the ordinary course of business
of the person receiving the exchange bonds, whether or not that person is
the holder and
- neither the holder nor the other person has any arrangement or
understanding with any person to participate in the distribution of the
exchange bonds.
In the case of a holder that is not a broker-dealer, that holder, by
tendering, will also represent to us that the holder is not engaged in and does
not intend to engage in a distribution of the exchange bonds.
If any holder or other person is an "affiliate" of ours, as defined under
Rule 405 of the Securities Act, or is engaged in, or intends to engage in, or
has an arrangement or understanding with any person to participate in, a
distribution of the exchange bonds, that holder or other person can not rely on
the applicable interpretations of the staff of the SEC and must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any resale transaction.
Each broker-dealer that receives exchange bonds for its own account in
exchange for original bonds, where the original bonds were acquired by it as a
result of market-making activities or other trading activities, must acknowledge
that it will deliver a prospectus that meets the requirements of the Securities
Act in connection with any resale of the exchange bonds. The letter of
transmittal states that by so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act. See "Plan of Distribution."
ACCEPTANCE OF ORIGINAL BONDS FOR EXCHANGE; DELIVERY OF EXCHANGE BONDS
Upon satisfaction or waiver of all of the conditions to the exchange offer,
we will accept, promptly after the expiration date, all original bonds properly
tendered. We will issue the exchange bonds promptly after acceptance of the
original bonds. See "--Conditions to the Exchange Offer" below. For purposes of
the exchange offer, we will be deemed to have accepted properly tendered
original bonds for exchange when, as and if we have given oral or written notice
to the exchange agent, with prompt written confirmation of any oral notice.
For each original bond accepted for exchange, the holder of the original
bond will receive an exchange bond having a principal amount equal to that of
the surrendered original note. The exchange bonds will bear interest from the
most recent date to which interest has been paid on the original bonds or, if no
interest has been paid on the original bonds, from May 27, 1999. Accordingly,
registered holders of exchange bonds on the relevant record date for the first
interest payment date following the completion of the exchange offer will
receive interest accruing from the most recent date to which interest has been
paid or, if no interest has been paid, from May 27, 1999. Original bonds
accepted for exchange will cease to accrue interest from and after the date of
completion of the exchange offer. Holders of original bonds whose original bonds
are accepted for exchange will not receive any payment for accrued interest on
the original bonds otherwise payable on any interest payment date the record
date for which occurs on or after completion of the exchange offer and will be
deemed to have waived their rights to receive the accrued interest on the
original bonds.
In all cases, issuance of exchange bonds for original bonds will be made
only after timely receipt by the exchange agent of:
- certificates for the original bonds, or a timely book-entry confirmation
of the original bonds, into the exchange agent's account at the book-entry
transfer facility,
- a properly completed and duly executed letter of transmittal and
- all other required documents.
26
Unaccepted or non-exchanged original bonds will be returned without expense
to the tendering holder of the original bonds. In the case of original bonds
tendered by book-entry transfer pursuant to the book-entry procedures described
below, the non-exchanged original bonds will be credited to an account
maintained with the book-entry transfer facility, as promptly as practicable
after the expiration or termination of the exchange offer.
BOOK-ENTRY TRANSFER
The exchange agent will make a request to establish an account for the
original bonds at the book-entry transfer facility for purposes of the exchange
offer within two business days after the date of this prospectus. Any financial
institution that is a participant in the book-entry transfer facility's systems
may make book-entry delivery of original bonds by causing the book-entry
transfer facility to transfer the original bonds into the exchange agent's
account at the facility. However, although delivery of the original bonds may be
made through the book-entry transfer facility, the letter of transmittal or a
facsimile of the letter of transmittal, with any required signature guarantees
and any other required documents, must, in any case, be transmitted to, and
received by, the exchange agent on or before the expiration date, unless the
holder has strictly complied with the guaranteed delivery procedures described
below.
GUARANTEED DELIVERY PROCEDURES
If a registered holder of original bonds desires to tender the original
bonds, and the original bonds are not immediately available, or time will not
permit the holder's original bonds or other required documents to reach the
exchange agent before the expiration date, or the procedure for book-entry
transfer described above cannot be completed on a timely basis, a tender may
nonetheless be made if:
- the tender is made through an eligible institution;
- prior to the expiration date, the exchange agent received from an eligible
institution a properly completed and duly executed letter of transmittal,
or a facsimile of the letter of transmittal, and notice of guaranteed
delivery, substantially in the form provided by us, by facsimile
transmission, mail or hand delivery,
(a) setting forth the name and address of the holder of original bonds and
the amount of original bonds tendered,
(b) stating that the tender is being made and
(c) guaranteeing that within three NYSE trading days after the expiration
date, the certificates for all physically tendered original bonds, in
proper form for transfer, or a book-entry confirmation, as the case may
be, and any other documents required by the letter of transmittal will
be deposited by the eligible institution with the exchange agent; and
- the certificates for all physically tendered original bonds, in proper
form for transfer, or a book-entry confirmation, as the case may be, and
all other documents required by the letter of transmittal, are received by
the exchange agent within three NYSE trading days after the expiration
date.
WITHDRAWAL RIGHTS
Tenders of original bonds may be withdrawn at any time before 5:00 p.m., New
York City time, on the expiration date.
For a withdrawal to be effective, the exchange agent must receive a written
notice of withdrawal at the address or, in the case of eligible institutions, at
the facsimile number, set forth below under
27
"--Exchange Agent" before 5:00 p.m., New York City time, on the expiration date.
Any notice of withdrawal must:
- specify the name of the person, referred to as the depositor, having
tendered the original bonds to be withdrawn;
- identify the bonds to be withdrawn, including the certificate number or
numbers and principal amount of the original bonds;
- contain a statement that the holder is withdrawing his election to have
the original bonds exchanged;
- be signed by the holder in the same manner as the original signature on
the letter of transmittal by which the original bonds were tendered,
including any required signature guarantees, or be accompanied by
documents of transfer to have the trustee with respect to the original
bonds register the transfer of the original bonds in the name of the
person withdrawing the tender; and
- specify the name in which the original bonds are registered, if different
from that of the depositor.
If original bonds have been tendered pursuant to the procedure for
book-entry transfer described above, any notice of withdrawal must specify the
name and number of the account at the book-entry transfer facility to be
credited with the withdrawn original bonds. We will determine all questions as
to the validity, form and eligibility, including time of receipt, of notices of
withdrawal. Any original bonds so withdrawn will be deemed not to have been
validly tendered for exchange. No exchange bonds will be issued unless the
original bonds so withdrawn are validly retendered. Any original bonds that have
been tendered for exchange, but which are not exchanged for any reason, will be
returned to the tendering holder without cost to the holder. In the case of
original bonds tendered by book-entry transfer, the original bonds will be
credited to an account maintained with the book-entry transfer facility for the
original bonds. Properly withdrawn original bonds may be retendered by following
the procedures described under "--Procedures for Tendering" above at any time on
or before 5:00 p.m., New York City time, on the expiration date.
CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provision of the exchange offer, we shall not be
required to accept for exchange, or to issue exchange bonds in exchange for, any
original bonds, and may terminate or amend the exchange offer, if at any time
before the acceptance of the original bonds for exchange or the exchange of the
exchange bonds for the original bonds, any of the following events shall occur:
- there shall be threatened, instituted or pending any action or proceeding
before, or any injunction, order or decree shall have been issued by, any
court or governmental agency or other governmental regulatory or
administrative agency or commission:
(1) seeking to restrain or prohibit the making or completion of the
exchange offer or any other transaction contemplated by the exchange
offer, or assessing or seeking any damages as a result of such
transaction,
(2) resulting in a material delay in our ability to accept for exchange or
exchange some or all of the original bonds pursuant to the exchange
offer; or any statute, rule, regulation, order or injunction shall be
sought, proposed, introduced, enacted, promulgated or deemed applicable
to the exchange offer or any of the transactions contemplated by the
exchange offer by any governmental authority, domestic or foreign, or
(3) any action shall have been taken, proposed or threatened, by any
governmental authority, domestic or foreign, that in our sole judgment
might directly or indirectly result in any of
28
the consequences referred to in clauses (1) or (2) above or, in our sole
judgment, might result in the holders of exchange bonds having
obligations with respect to resales and transfers of exchange bonds
which are greater than those described in the interpretation of the SEC
referred to above, or would otherwise make it inadvisable to proceed
with the exchange offer; or
- there shall have occurred:
(1) any general suspension of or general limitation on prices for, or
trading in, securities on any national securities exchange or in the
over-the-counter market;
(2) any limitation by a governmental authority which may adversely affect
our ability to complete the transactions contemplated by the exchange
offer;
(3) a declaration of a banking moratorium or any suspension of payments in
respect of banks in the United States or any limitation by any
governmental agency or authority which adversely affects the extension
of credit; or
(4) a commencement of a war, armed hostilities or other similar
international calamity directly or indirectly involving the United
States, or, in the case of any of the foregoing existing at the time of
the commencement of the exchange offer, a material acceleration or
worsening of such calamities; or
- any change, or any development involving a prospective change, shall have
occurred or be threatened in our business, financial condition, operations
or prospects and those of our subsidiaries taken as a whole that is or may
be adverse to us, or we shall have become aware of facts that have or may
have an adverse impact on the value of the original bonds or the exchange
bonds; which in our sole judgment in any case makes it inadvisable to
proceed with the exchange offer and/or with such acceptance for exchange
or with such exchange.
These conditions to the exchange offer are to our sole benefit and may be
asserted by us regardless of the circumstances giving rise to any of these
conditions, or may be waived by us in whole or in part in our sole discretion.
Our failure at any time to exercise any of the foregoing rights will not be
deemed a waiver of any right.
In addition, we will not accept for exchange any original bonds tendered,
and no exchange bonds will be issued in exchange for any original bonds, if at
such time any stop order is threatened or in effect relating to the registration
statement of which this prospectus constitutes a part or the qualification of
the indenture under the Trust Indenture Act of 1939.
29
EXCHANGE AGENT
We have appointed United States Trust Company of New York as the exchange
agent for the exchange offer. You should direct all executed letters of
transmittal to the exchange agent at the address set forth below. You should
direct questions and requests for assistance, requests for additional copies of
this prospectus or of the letter of transmittal and requests for notices of
guaranteed delivery to the exchange agent addressed as follows:
DELIVERY TO: United States Trust Company of New York, EXCHANGE AGENT
BY HAND BEFORE 4:30 P.M.: BY REGISTERED OR CERTIFIED MAIL:
United States Trust Company of New York United States Trust Company of New York
111 Broadway P.O. Box 848 Cooper Station
New York, NY 10006 New York, NY 10276
Attention: Lower Level Corporate Trust Window Attention: Corporate Trust Services
BY HAND OR OVERNIGHT DELIVERY AFTER
4:30 P.M. ON THE EXPIRATION DATE:
United States Trust Company of New York
770 Broadway, 13(th) Floor
New York, NY 10003
FOR INFORMATION CALL:
(800) 548-6565
BY FACSIMILE TRANSMISSION
(FOR ELIGIBLE INSTITUTIONS ONLY):
(212) 420-6211
Attention: Customer Service
CONFIRM BY TELEPHONE:
(800) 548-6565
IF YOU DELIVER THE LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET
FORTH ABOVE OR TRANSMIT INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH
ABOVE, THEN YOUR DELIVERY OR TRANSMISSION WILL NOT CONSTITUTE A VALID DELIVERY
OF THE LETTER OF TRANSMITTAL.
FEES AND EXPENSES
We will not make any payment to brokers, dealers, or others soliciting
acceptances of the exchange offer. The estimated cash expenses to be incurred in
connection with the exchange offer will be paid by us. We estimate these
expenses in the aggregate to be approximately $500,000.
ACCOUNTING TREATMENT
We will not recognize any gain or loss for accounting purposes upon the
consummation of the exchange offer. We will amortize the expense of the exchange
offer over the term of the exchange bonds under generally accepted accounting
principles.
30
TRANSFER TAXES
Holders who tender their original bonds for exchange will not be obligated
to pay any related transfer taxes, except that holders who instruct us to
register exchange bonds in the name of, or request that original bonds not
tendered or not accepted in the exchange offer be returned to, a person other
than the registered tendering holder will be responsible for the payment of any
applicable transfer taxes.
CONSEQUENCES OF EXCHANGING OR FAILING TO EXCHANGE ORIGINAL BONDS
Holders of original bonds who do not exchange their original bonds for
exchange bonds pursuant to the exchange offer will continue to be subject to the
provisions in the indenture regarding transfer and exchange of the original
bonds and the restrictions on transfer of the original bonds as set forth in the
legend on the bonds as a consequence of the issuance of the original bonds
pursuant to exemptions from, or in transactions not subject to, the registration
requirements of the Securities Act and applicable state securities laws. In
general, the original bonds may not be offered or sold, unless registered under
the Securities Act, except pursuant to an exemption from, or in a transaction
not subject to, the Securities Act and applicable state securities laws. As
discussed in "Exchange Offer; Registration Rights," we do not currently
anticipate that we will register original bonds under the Securities Act.
Based on interpretations by the staff of the SEC, as set forth in no-action
letters issued to third parties, we believe that exchange bonds issued pursuant
to the exchange offer in exchange for original bonds may be offered for resale,
resold or otherwise transferred by holders of the original bonds, other than any
holder which is an "affiliate" of ours within the meaning of Rule 405 under the
Securities Act, without compliance with the registration and prospectus delivery
provisions of the Securities Act, provided that the exchange bonds are acquired
in the ordinary course of the holders' business and the holders have no
arrangement or understanding with any person to participate in the distribution
of the exchange bonds. However, the SEC has not considered the exchange offer in
the context of a no-action letter. We cannot assure you that the staff of the
SEC would make a similar determination with respect to the exchange offer as in
the other circumstances. Each holder, other than a broker-dealer, must
acknowledge that it is not engaged in, and does not intend to engage in, a
distribution of exchange bonds and has no arrangement or understanding to
participate in a distribution of exchange bonds. If any holder is an affiliate
of ours, is engaged in or intends to engage in or has any arrangement or
understanding with any person to participate in the distribution of the exchange
bonds to be acquired in the exchange offer, that holder:
(1) could not rely on the applicable interpretations of the staff of the
SEC, and
(2) must comply with the registration and prospectus delivery requirements
of the Securities Act in connection with any resale transaction.
Each broker-dealer that receives exchange bonds for its own account in
exchange for original bonds must acknowledge that the original bonds were
acquired by the broker-dealer as a result of market-making activities or other
trading activities and that it will deliver a prospectus in connection with any
resale of the exchange bonds. See "Plan of Distribution." In addition, to comply
with state securities laws, the exchange bonds may not be offered or sold in any
state unless they have been registered or qualified for sale in such state or an
exemption from registration or qualification, with which there has been
compliance, is available. The offer and sale of the exchange bonds to "qualified
institutional buyers," as defined under Rule 144A of the Securities Act, is
generally exempt from registration or qualification under the state securities
laws. We currently do not intend to register or qualify the sale of exchange
bonds in any state where an exemption from registration or qualification is
required and not available.
31
THE COMPANY AND EME
THE COMPANY
The Company is a special-purpose California corporation formed on
October 7, 1998 to facilitate the financing of the Acquisition. The indenture
limits the Company's business activities to the ownership and operation of the
Facilities, any expansion of the facilities or improvements thereto, and matters
reasonably incidental thereto. See "Description of Principal Financing
Documents--Indenture--Negative Covenants--Limitation on Business Activities."
The only income available to the Company to pay principal of, premium, if any,
and interest on the bonds will be repayments of subordinated loans and equity
distributions from its subsidiaries.
As of the date of this prospectus, the authorized capital stock of the
Company consisted of 10,000 shares of common stock, no par value, of which 100
shares were issued and outstanding. There is no public trading market for the
common stock of the Company. All of such common stock is owned by EME. The
address of the principal executive offices of the Company is 18101 Von Karman
Avenue, Suite 1700, Irvine, California 92612-1046, telephone (949) 752-5588.
EME
EME is a leading global power producer. Through its subsidiaries, EME
engages in the business of developing, acquiring, owning and operating electric
power generation facilities worldwide. Edison International owns EME and also
owns Southern California Edison Company, one of the largest electric utilities
in the United States. At September 30, 1999, EME had consolidated assets of
approximately $11 billion and total shareholders' equity of approximately
$2 billion. The bonds will be non-recourse to EME.
EME was formed in 1986 with two domestic operating projects. EME's business
has evolved from the development of contract-based domestic power projects to
the development of contract-based international power projects and the
acquisition of operating generating assets within developed and deregulating
power markets. Currently, EME owns interest in 58 domestic and international
operating power stations with an aggregate generating capacity of 16,443 MW, of
which EME's share is approximately 12,369 MW. One domestic acquisition of twelve
operating projects totaling approximately 9,510 MW of generating capacity (of
which EME's anticipated share is 100%) is currently pending. In addition, EME
owns interests in one domestic and five international projects which are under
construction. The capacity of these projects is expected to total 2,493 MW (of
which EME's anticipated share is approximately 891 MW).
EME's business goal is to be one of the leading owners and operators of
electric generating assets in the world. EME will play an active role, as a
long-term owner, in all phases of power generation, from planning and
development through construction and commercial operation. EME believes that
such involvement allows EME to better ensure, with its experienced personnel,
that its projects are well-planned, structured and managed, thereby maximizing
value creation.
In the United States, long-term contracts are likely to be the exception
rather than the rule. EME's strategy focuses primarily on three areas with
respect to uncontracted plants: valuation, trading and regulation. First, EME
continuously improves its valuation tools, enabling EME to bid effectively and
competitively on assets that will be sold over the next five years. Second, EME
strives to develop its trading skills to enhance the returns of its generating
assets. Third, EME's principal customers continue to be regulated utilities;
therefore, understanding the regulatory and economic environment in which these
utilities operate allows EME to better react to what they will do.
In March 1999, EME entered into definitive acquisition documentation to
acquire 100% of the fossil-fuel generating assets of ComEd, totaling
approximately 9,510 MW of generating assets. EME will operate the plants, which
are located in the Midwest. The closing of the transaction is subject to various
state and federal regulatory approvals and is expected to be completed by
year-end 1999. On May 14, 1999, EME acquired 40% of Contact Energy from the
government of New Zealand. Contact
32
Energy owns ten hydroelectric, geothermal and natural gas-fired power generating
plants in New Zealand (including two that are under construction), with a total
aggregate capacity of 2,371 MW, of which EME's share is 949 MW. Contact Energy
also supplies gas and electricity to customers in New Zealand and has a minority
interest in a power project currently under construction in Australia. In July
1999, EME acquired two power plants in the United Kingdom with a total
generating capacity of 3,886 MW from PowerGen. These mid-merit plants will
complement the pumped-storage hydroelectric power plants EME already owns in the
United Kingdom and sell power to the electricity trading market there. Upon
closing of the ComEd acquisition, EME will have an interest in approximately
29,500 MW of generating capacity, of which EME's share is approximately 23,200
MW.
THE COMPANY'S SUBSIDIARIES
The direct and indirect wholly-owned subsidiaries of the Company consist of
EME Homer City, Edison Mission Financing Co. ("FinanceCo"), Homer City Property
Holdings, Inc. ("PropertyCo"), Mission Energy Westside, Inc. ("ME Westside") and
Chestnut Ridge Energy Company ("Chestnut Ridge" and, collectively with EME Homer
City, FinanceCo, PropertyCo and ME Westside, the "Guarantors"). The Guarantors
will guarantee the Company's obligations in respect of the bonds. EME Homer City
is a Pennsylvania limited partnership and each of FinanceCo, PropertyCo, ME
Westside and Chestnut Ridge is a California corporation. The Financing Documents
limit the Guarantors' activities to the ownership and operation of the
Facilities, any expansion of the facilities or improvements thereto, and matters
reasonably incidental thereto. See "Description of Principal Financing
Documents--Indenture--Negative Covenants--Limitation on Business Activities."
Following is a chart illustrating our ownership structure.
[LOGO]
33
BUSINESS
INDUSTRY OVERVIEW
The United States electric industry, including companies engaged in
providing generation, transmission, distribution and ancillary services, has
undergone significant change over the last several years, leading to significant
deregulation and increased competition. The FERC, pursuant to Order No. 888 and
Order No. 889 (the "Open Access Rules"), requires the owners and operators of
electric transmission facilities to make those facilities available for
transmission on a non-discriminatory basis to all wholesale generators, sellers
and buyers of electricity ("wholesale wheeling"). In addition to wholesale
wheeling, throughout the United States there has been an increasing number of
proposals at the state level to allow retail customers to choose their
electricity suppliers, with incumbent utilities required to deliver that
electricity over their transmission and distribution systems ("retail
wheeling"). Numerous electric utilities nationwide are in the process of
divesting all or a portion of their electricity generation business or are
expected to commence such process in the foreseeable future, as legislative and
regulatory developments drive the industry to disaggregate. EME, through the
Company and its other subsidiaries, is among a group of companies actively
pursuing opportunities created by the deregulating domestic electric markets to
operate as competitive electric generation and wholesale supply companies in a
deregulated marketplace.
POWER MARKETS
PJM. PJM is the largest centrally-dispatched power pool in North America
and the fourth largest in the world, consisting of over 540 generating units
with a total installed capacity of 56,709 MW. PJM serves 8.7% of the United
States population and covers portions of Pennsylvania, New Jersey, Maryland,
Delaware, the District of Columbia and Virginia. PJM was recently restructured
as a competitive, non-discriminatory market in response to the Open Access Rules
and includes bid-based energy and capacity markets. The PJM ISO operates the
spot energy market and determines the market-clearing price for each hour based
on bids submitted by participating generators which indicate the minimum prices
a bidder is willing to accept to be dispatched at various incremental generation
levels. A transmission charge based on the location of the energy purchaser is
added to the energy price if the transmission system becomes constrained and
generators with higher bids are dispatched prior to those with lower bids. PJM
has a day-ahead installed capacity market and monthly installed capacity markets
extending twelve months in the future. Each installed capacity market has a
single market-clearing price for each day during which the market is in
operation.
NYPP. NYPP includes 34,881 MW of installed capacity and serves over 99% of
New York State's electric power requirements. The current NYPP members are the
seven New York investor-owned utilities and the New York Power Authority. NYPP
has received conditional FERC approval to restructure NYPP as a competitive,
non-discriminatory market similar to PJM. NYPP's restructuring proposal
includes, among other things, the establishment of an ISO and the creation of
bid-based markets for energy, capacity and ancillary services. FERC
conditionally approved the establishment of the NYPP ISO in an order issued on
June 30, 1998 and conditionally approved the proposed rules governing the NYPP
bid-based markets in an order issued on January 27, 1999. The market-clearing
price for NYPP's day-ahead and real-time energy markets is expected to be
calculated by the NYPP ISO in a manner similar to the PJM ISO's determination of
the market-clearing price for transactions in the PJM spot energy market.
THE ACQUISITION
On March 18, 1999, EME Homer City acquired ownership of the Facilities for a
purchase price of approximately $1.8 billion pursuant to an Asset Purchase
Agreement dated August 1, 1998 (as amended, the "Asset Purchase Agreement") with
Penelec, NYSEG and NGE Generation, Inc. ("NGE"
34
and, collectively with Penelec and NYSEG, the "Sellers"). See "Description of
Principal Contracts--Asset Purchase Agreement." Penelec is a wholly-owned
subsidiary of GPU Inc. and NYSEG and NGE are wholly-owned subsidiaries of Energy
East Corporation. Prior to the sale, Penelec and NGE each owned 50% of the
beneficial ownership interests in the Facilities. In addition to the Asset
Purchase Agreement, EME Homer City has entered into the Transition Contracts, an
interconnection agreement and an easement agreement with the Sellers. See
"Description of Principal Contracts--Transition Contracts," "--Interconnection
Agreement" and "--Easement Agreement."
FACILITY OVERVIEW
The Homer City Units are among the lowest cost generating facilities in the
Northeast region. In 1998, the Units had fuel expenses and operating and
maintenance costs of approximately $17/MWh, and are among the first coal-fired
units in the merit order for dispatch within both NYPP and PJM. The Facilities
are located on a 2,413-acre site (the "Site") approximately 45 miles northeast
of Pittsburgh within Indiana County, Pennsylvania. The Facilities consist of the
Homer City Units, the Coal Cleaning Plant, Two Lick Dam and associated support
facilities. The Homer City Units benefit from direct transmission access to both
PJM and NYPP through four high voltage lines which interconnect through a
switchyard located on the Site.
The Homer City Units are coal-fired boiler and steam generating units. Units
1 and 2, which are essentially identical to one another, were constructed as
positive pressure units, placed into commercial operation in 1969 and converted
to balanced draft units in 1976 and 1977, respectively. Unit 1 has an installed
capacity of 620 MW and Unit 2 has an installed capacity of 614 MW. The steam
turbines and generators for Units 1 and 2 were manufactured by Westinghouse
Electric Corporation ("Westinghouse") and the boilers for such Units were
manufactured by Foster Wheeler Energy Corporation ("Foster Wheeler"). The
Unit 1 and 2 boilers have been retrofitted with Foster Wheeler dual air register
and internal flame staging low NO(x) burners to meet Phase I NO(x) Clean Air Act
standards. In addition, both boilers have supplemental over-fired air ("SOFA")
systems to further reduce NO(x) emissions to satisfy Pennsylvania Title I
(ozone) requirements.
Unit 3 commenced commercial operation in 1977 and has an installed capacity
of 650 MW. The steam turbine and generator for Unit 3 were manufactured by
General Electric Corporation ("General Electric") and the Unit 3 boiler was
manufactured by Babcock & Wilcox. The boiler for Unit 3 was originally
constructed with Babcock & Wilcox low NO(x) burners which satisfied Phase I
NO(x) Clean Air Act standards, and a SOFA system was installed in 1995 at
Unit 3 to further reduce NO(x) emissions.
The following table summarizes specific design details for the Units.
UNIT 1 UNIT 2 UNIT 3
-------------------------- -------------------------- -------------------
CAPACITY (MW) 620 614 650
COMMERCIAL OPERATION 1969 1969 1977
BOILER MANUFACTURER Foster Wheeler Foster Wheeler Babcock & Wilcox
BOILER TYPE Once thru Supercritical Once thru Supercritical Natural Circulation
STEAM FLOW (LBS/HOUR) 4,613,000 4,613,000 4,750,000
OPERATING PRESSURE (PSI) 3,600 3,600 2,600
TURBINE MANUFACTURER Westinghouse Westinghouse General Electric
THROTTLE PRESSURE (PSI) 3,500 3,500 2,400
STEAM TEMPERATURE
( DEG.F) 1,000 1,000 1,000
SALES STRATEGY
EME Homer City sells capacity, energy and voltage support from the Homer
City Units into PJM's and NYPP's centralized power markets. The Units comprise
the second largest coal-fired facility
35
within PJM and the largest coal-fired facility servicing NYPP. EME Homer City
may also enter into bilateral contracts for the sale of capacity and energy to
power marketers and load serving entities within PJM, NYPP and surrounding
markets.
MARKETING AND TRADING. EME Homer City has entered into a contract with a
marketing affiliate for the sale of energy and capacity produced by the Homer
City Units, which enables such marketing affiliate to engage in forward sales
and hedging transactions to manage EME Homer City's electricity price exposure.
The terms of the Financing Documents do not permit EME Homer City to take
speculative futures positions by selling capacity and energy in excess of its
anticipated output. It is the policy of the marketing affiliate to make sales
only to entities which have an investment grade rating or whose obligations are
guaranteed by an entity with an investment grade rating. The forward sales and
trading positions taken by the marketing affiliate relating to the Units have
the benefit of credit support from the Company.
The marketing organization is divided into front-, middle- and back-office
segments, with certain duties segregated for control purposes. The risk
management personnel have a high level of knowledge of utility operations, fuels
procurement, energy marketing and futures and options trading. The marketing
affiliate has systems in place which monitor real-time spot and forward pricing
and perform option valuations and has a wholesale power scheduling group that
operates on a 24-hour basis. EME Homer City pays the marketing affiliate a fee
of $0.02/MWh (approximately $300,000 per year), and all revenue from the
physical sales transactions executed by the marketing affiliate will be
deposited into the revenue account established for the benefit of the
bondholders and the holders of other Senior Debt.
As of September 30, 1999, we had sold 82% of the anticipated output of Units
1 and 2 for the remainder of 1999. These forward energy sales average
$22.00/MWh, compared to the Power Market Consultant's base case projections of
$19.14/MWh for PJM and $22.30/MWh for NYPP. Also as of September 30, 1999, we
had entered into forward energy sales totaling 856 MW during on-peak hours in
2000 at an average price of $40.90/MWh. The marketing affiliate has also sold
99% of the remaining installed capacity over the transition contract amounts
through May 2000 at a weighted average price of $65.00/MW-day.
TRANSITION CONTRACTS. NYSEG and Penelec have entered into separate
Transition Contracts with EME Homer City, pursuant to which EME Homer City has a
put option to sell certain quantities of capacity to NYSEG and Penelec, and
NYSEG and Penelec have call options to purchase certain quantities of capacity
from EME Homer City. The term of the NYSEG Transition Contract continues until
April 30, 2001 and the term of the Penelec Transition Contract continues until
May 31, 2001. EME Homer City has exercised its put option to sell 942 MW of
capacity to Penelec for the first and second contract years under the Penelec
Transition Contract for a price of $49.90/MW-day for the first contract year and
$59.90/MW-day for the second contract year. EME Homer City entered into a letter
agreement with NYSEG to adjust the contract periods under the NYSEG Transition
Contract to conform to the PJM capacity planning cycle. EME Homer City also
entered into contractual arrangements with NYSEG to sell 942 MW of capacity to
NYSEG for the period from March 18, 1999 to May 31, 1999 for a price of
$55.00/MW-day and to sell 500 MW of capacity to NYSEG during the period from
June 1, 1999 through May 31, 2000 for a price of $60.00/MW-day. The amount of
capacity covered by these Transition Contracts with respect to which a put or
call option has not yet been exercised is subject to a reduction in the event
that there is a decrease in the amount by which Penelec's and NYSEG's projected
load supply obligations exceed the capacity available to be provided by their
remaining owned generation and existing power purchase entitlements. See
"Description of Principal Contracts--Transition Contracts."
36
FUEL SUPPLY
UNITS 1 AND 2. Units 1 and 2 consume approximately 4,200,000 tons of
mid-range sulfur coal per year. Approximately 90% to 95% of such coal is
obtained under contracts with local suppliers within approximately 50 miles of
the Facilities and the remainder of such coal is purchased in the spot market.
All of such coal is delivered to the Site by truck. The existing coal supply
contracts for Units 1 and 2 currently provide for the supply of a minimum of
approximately 348,000 tons of coal per month at prices ranging from $19.00/ton
to $26.75/ton. See "Description of Principal Contracts--Fuel Agreements--Coal
Supply Agreements."
The coal purchased for consumption by Units 1 and 2 is cleaned in the Coal
Cleaning Plant, which has the capacity to clean up to 5,000,000 tons of coal per
year. The Coal Cleaning Plant utilizes heavy media cyclones, froth floatation
and spiral separators to reduce the ash and sulfur content of the raw coal to
meet both combustion and environmental requirements. The Coal Cleaning Plant is
operated by Homer City Coal Processing Corporation ("Homer City Coal") pursuant
to a Coal Cleaning Agreement dated August 8, 1990 (the "Coal Cleaning
Agreement") which is scheduled to expire on August 31, 2002. See "Description of
Principal Contracts--Fuel Agreements--Coal Cleaning Agreement."
UNIT 3. Unit 3 consumes approximately 1,600,000 tons of compliance coal per
year. EME Homer City purchases approximately 75% of such coal from Tanoma Coal
Sales, Inc. ("Tanoma") at approximately $37.00/ton (FOB Unit 3) pursuant to a
coal sales agreement expiring on December 31, 2002, and such coal is blended by
Tanoma at the coal blending facility pursuant to an Operating Agreement dated
March 1, 1997 (the "Operating Agreement") which is coterminous with the Tanoma
coal sales agreement. EME Homer City obtains the remainder of the coal needed
for Unit 3 in the spot market. All coal purchased for Unit 3 is delivered to the
Site by truck. See "Description of Principal Contracts--Fuel Agreements--Coal
Supply Agreements." Upon completion of the FGD system for Unit 3, the Unit is
expected to be able to burn less expensive, higher sulfur coal.
ENVIRONMENTAL CAPITAL IMPROVEMENTS
EME Homer City has contracted with a division of ABB to make environmental
improvements to the Units. ABB will construct a limestone-based, wet scrubber
flue gas desulfurization system at Unit 3 and a selective catalytic reduction
system at each of the three Units. The Environmental Capital Improvements are
expected to enable the Homer City Units to comply with Phase II of Title IV of
the Clean Air Act regarding SO(2) emissions, the Pennsylvania NO(x) allowance
regulations and Pennsylvania's response to the EPA's State Implementation Plan
Call regarding NO(x) emissions. The Environmental Capital Improvements will cost
approximately $246 million, which includes a fixed price, turnkey engineering,
procurement and construction contract, project management costs and other
project costs, and are scheduled to be installed during 2000-2001. The
Environmental Capital Improvements will be funded with loans under an existing
credit facility. See "Description of Principal Contracts--EPC Contract."
37
OPERATING PERFORMANCE
The Homer City Units have historically had high equivalent availability,
efficient heat rates and low costs. The following charts set forth certain
historical operating data for the Units as a whole and for each Unit
individually.
FUEL AND
EQUIVALENT NET HEAT RATE O&M COSTS
AVAILABILITY FACTOR (%) (BTU/KWH) ($/MWH)
----------------------- ------------- -----------------------
Homer City Units--1,884 MW
1998 89.79 9,793 17.12
1997 85.83 9,804 18.17
1996 85.04 9,718 18.00
1995 80.12 9,644 19.87
1994 76.41 9,653 21.37
5-Year Average 83.44 9,722 18.79
Unit 1--620 MW
1998 85.01 9,902 17.17
1997 92.05 9,963 18.44
1996 72.27 9,764 18.05
1995 88.68 9,644 20.08
1994 57.87 9,671 21.88
5-Year Average 79.18 9,789 18.97
Unit 2--614 MW
1998 91.15 9,607 17.17
1997 74.63 9,618 18.44
1996 90.21 9,621 18.05
1995 66.95 9,590 20.08
1994 85.42 9,575 21.88
5-Year Average 81.67 9,602 18.97
Unit 3--650 MW
1998 93.07 9,882 17.01
1997 90.47 9,794 17.65
1996 92.33 9,777 17.92
1995 84.42 9,689 19.47
1994 85.57 9,725 20.45
5-Year Average 89.17 9,773 18.44
38
OPERATION AND MAINTENANCE
The Facilities are operated by employees of EME Homer City who were
recruited and selected in accordance with the Asset Purchase Agreement and are
former employees of GPU Generation, Inc. ("GPU Genco"). EME Homer City employs a
skilled and disciplined workforce that is well prepared to operate within a
competitive and deregulated environment. We believe that our staffing levels are
comparable with benchmark standards for facilities of a similar size and type.
Employee headcount has been reduced by nearly 30% over the past five years,
while, at the same time, high standards for equivalent availability and safety
have been consistently maintained. The majority of the technical staff at the
Facilities has been retained after completing the Acquisition thus providing us
with a knowledgeable and experienced base of employees which average over 22
years of experience in the operation of the Homer City Units and similar
facilities.
EME Homer City's workforce is employed pursuant to a collective bargaining
agreement which was restructured in 1994. The collective bargaining agreement
provides EME Homer City with a measure of labor cost certainty through 2002. The
collective bargaining agreement enables us to manage our workforce and to
establish flexible work rules going forward. EME Homer City's plans to
cross-train its employees to perform different functions, thus minimizing the
use of more expensive or less efficient subcontractors.
EME Homer City's operating and maintenance plan, as well as several planned
overhauls of major equipment and controls, are consistent with EME Homer City's
goal of extending the remaining life of the Units for an additional 39 years.
EME Homer City utilizes a state-of-the-art computerized maintenance system to
plan and schedule all maintenance activities. EME Homer City also employs a
preventative maintenance program complemented by new predictive maintenance
technologies such as ferrography, thermography, vibration analysis and acoustic
analysis. Reliability-centered maintenance techniques are currently being
developed for critical systems to better define condition monitoring parameters
and redefine maintenance strategies.
The EME Homer City employees will provide engineering, maintenance,
operation and facility management services and will receive functional direction
from, and be held to the operating standards and guidelines of, EME's operation
and maintenance organization, which, together with EME's operating affiliates,
provide operation and maintenance services at 36 operating plants in Australia,
Spain, the United Kingdom and the United States and are the contracted operator
for three projects under construction or commissioning in Indonesia, Italy and
Turkey. EME and its operating affiliates manage over 7,000 MW of operating
plants and over 2,000 MW of plants under construction. The operating facilities
managed by EME's operating affiliates have an average lifetime availability
factor of over 94%.
TRANSMISSION AND INTERCONNECTION
Existing transmission lines leaving the Units are interconnected with both
PJM and NYPP. EME Homer City is able to transmit into PJM full plant output of
up to 1,884 MW through a 126-mile 345 kV line owned by Penelec and a 19-mile and
15-mile 230 kV lines owned by Penelec. EME Homer City has the right to transmit
into NYPP full plant output of up to 1,884 MW through 175-mile and 207-mile
345 kV lines owned by NYSEG. In addition, a 13-mile 230 kV line from the Homer
City Units provides an indirect interconnection to the ECAR market. The points
of interconnection with the Homer City Units include (1) the 230 kV circuit from
the Unit 1 main power transformer, (2) the 345 kV circuit from the Unit 2 main
power transformer, (3) the 345 kV circuit from the Unit 3 main power
transformer, (4) the 345/230/23 kV north and south autotransformers and
(5) substation services No. 1 and No. 2 (clauses (1) through (5), collectively,
the "Facility Interconnection Points"). The ownership of the transmission and
distribution assets for the Facilities, including the site switchyard,
substation and support equipment, remained with Penelec and NYSEG following the
Acquisition.
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Penelec and NYSEG have agreed to provide EME Homer City with all services
necessary to interconnect the Homer City Units with the Penelec and NYSEG
transmission systems (other than services provided under existing tariffs)
pursuant to the Interconnection Agreement. See "Description of Principal
Contracts--Interconnection Agreement."
WATER SUPPLY AND OTHER SUPPORT FACILITIES
The Homer City Units receive their water supply from Two Lick Creek. The
water supply to Two Lick Creek is regulated by releases from Two Lick Dam, which
is located approximately eight miles upstream of the Units and is owned,
operated and maintained by EME Homer City in accordance with a dam safety permit
and a drought management plan and related consent order and agreement with the
Pennsylvania Department of Environmental Protection (the "PADEP"). Each of the
Homer City Units has a natural draft cooling tower. A portion of the waste heat
in the water leaving the Units' condensers is diverted from such towers to a
fourteen-acre polyethylene roofed greenhouse complex located adjacent to the
Homer City Units (the "Greenhouse"). After the water passes through the
Greenhouse, it is returned to the basin of the cooling towers for reuse.
Other support facilities located on the Site include an ash disposal area, a
coal refuse disposal area, coal receiving and storage facilities and water
treatment and pumping facilities.
PROPERTIES
EME Homer City owns a fee interest in the 2,413-acre site on which the Homer
City Units, Two Lick Dam and the other Facilities are located. The Site is
approximately 45 miles northeast of Pittsburgh, Pennsylvania in Indiana County.
EME Homer City leases portions of the Site to third parties, which leases are
described below.
EME Homer City leases the surface of an approximately 14-acre parcel to
Tanoma upon which the coal blending facility is located. In lieu of rental
payments, Tanoma blends the first 30,000 tons of coal per month in the coal
blending facility at no charge. EME Homer City also leases an office building
located on the Site to Tanoma, which Tanoma uses for administrative activities
associated with the coal blending facility. Each of the Tanoma leases expires on
December 31, 2002.
EME Homer City has granted Cabot Oil & Gas Corporation ("Cabot") the right
to operate and produce gas from existing wells located on the Site, provided
that gas is found in paying quantities. EME Homer City receives 16% of the
market value of the gas at the well head as royalties and also receives gas of
250,000 cubic feet at no charge from each well per annum. Cabot currently
purchases such gas from EME Homer City at the market value at the well head.
PropertyCo leases a 34.15-acre parcel upon which the Greenhouse was
constructed to Green Leaf Enterprises, Inc. The Greenhouse produces wholesale
perennials, bedding and starter plants in addition to special holiday crops for
sale to other greenhouses in the eastern United States.
COMPETITION
FEDERAL. The Energy Policy Act of 1992 (the "Energy Policy Act") laid the
groundwork for a competitive wholesale market for electricity. Among other
things, the Energy Policy Act expanded the FERC's authority to order electric
utilities to transmit, or "wheel," third-party electricity over their
transmission lines, thus allowing qualifying facilities under the Public Utility
Regulatory Policies Act of 1978 ("PURPA"), power marketers and exempt wholesale
generators ("EWGs") to more effectively compete in the wholesale market.
In April 1996, the FERC issued the Open Access Rule, which requires
utilities to offer eligible wholesale transmission customers non-discriminatory
open access on utility transmission lines on a comparable basis to the
utilities' own use of the lines. In addition, the Open Access Rule directed the
40
regional power pools (including PJM and NYPP) that control the major electric
transmission networks to file uniform, non-discriminatory open access tariffs.
The Open Access Rule has been the subject of rehearing at the FERC and now is
undergoing judicial review.
Over the past few years, Congress and the Clinton Administration have
considered various pieces of legislation to restructure the electric industry
that would require, among other things, customer choice, repeal the Public
Utility Holding Company Act of 1935 ("PUHCA") and PURPA. The debate is likely to
continue, and perhaps intensify. The effect of enacting such legislation cannot
be predicted with any degree of certainty.
STATE. The Energy Policy Act did not preempt state authority to regulate
retail electric service. Historically, in most states, competition for retail
customers is limited by statutes or regulations granting existing electric
utilities exclusive retail franchises and service territories. Since the passage
of the Energy Policy Act, the advisability of retail competition has been the
subject of intense debate in federal and state legislative and regulatory
forums. Many states have taken steps to facilitate retail competition as a means
to stimulate competitive generation rates. Retail competition commenced in New
York in 1998. Retail competition in Pennsylvania commenced on January 1, 1999
and Pennsylvania is expected to be fully competitive by January 2, 2000.
INSURANCE
EME Homer City maintains insurance coverages consistent with those normally
carried by companies engaged in similar businesses and owning similar
properties. The insurance program includes all-risk insurance and covers
commercial general public liability, replacement value of all real and personal
property, including losses from boiler and machinery breakdowns, and the perils
of earthquake and flood, subject to certain sublimits. EME Homer City also
carries general liability insurance covering liabilities to third parties for
bodily injury or property damage resulting from operations, automobile liability
insurance and excess liability insurance. Further, EME Homer City has the
benefit of title insurance and business interruption insurance. Limits and
deductibles in respect of these insurance policies are comparable to those
carried by other electric generating facilities of similar size.
LEGAL PROCEEDINGS
No material legal proceedings are presently pending against the Company or
any of the Guarantors.
ENVIRONMENTAL MATTERS
ENVIRONMENTAL AND LAND USE PERMIT AND APPROVAL STATUS
As of the date of this prospectus, all material environmental and land use
permits required in order to own and operate the Facilities as they are
currently operated have been transferred or reissued to EME Homer City and all
permits required to begin construction of the Environmental Capital Improvements
have been issued by the PADEP.
ENVIRONMENTAL CONDITIONS AND COMPLIANCE
GENERAL
Under various federal, state and local environmental laws and regulations, a
current or previous owner or operator of any facility, including an electric
generating facility, may be required to investigate and remediate releases or
threatened releases of hazardous or toxic substances or petroleum products
located at such facility, and may be held liable to a governmental entity or to
third parties for property damage, personal injury and investigation and
remediation costs incurred by such parties in connection with such releases or
threatened releases. Many such laws, including the Comprehensive
41
Environmental Response, Compensation and Liability Act of 1980, as amended by
the Superfund Amendments and Reauthorization Act of 1986, impose liability
without regard to whether the owner knew of or caused the presence of the
hazardous substances, and courts have interpreted liability under such laws to
be strict and joint and several. The cost of investigation, remediation or
removal of such substances may be substantial. In connection with its ownership
and operation of the Facilities, EME Homer City may be liable for such costs.
EME Homer City, in the course of operating the Facilities, must comply with
all applicable environmental laws and regulations, including numerous federal
and state statutes and regulations. These requirements include, but are not
limited to, the federal Clean Water Act, the Clean Air Act, the Resources
Conservation and Recovery Act and similar state requirements.
In addition, persons who arrange for the disposal or treatment of hazardous
or toxic substances at a disposal or treatment facility may be liable for the
costs of removal or remediation of a release or threatened release of hazardous
or toxic substances at such disposal or treatment facility, whether or not such
facility is owned or operated by such person. Some environmental laws and
regulations create a lien on a contaminated site in favor of the government for
damages and costs it incurs in connection with the contamination. The owner of a
contaminated site and persons who arrange for the disposal of hazardous
substances at such site also may be subject to common law claims by third
parties based on damages and costs resulting from environmental contamination
emanating from such site. In connection with its ownership and operation of the
Facilities, EME Homer City may be liable for such costs.
Certain federal, state and local laws, regulations and ordinances also
govern the removal, encapsulation or disturbance of asbestos-containing
materials ("ACMs") when such materials are in poor condition or in the event of
construction, remodeling, renovation or demolition of a building. Such laws and
regulations may impose liability for release of ACMs and may provide for the
ability of third parties to seek recovery from owners or operators of such
properties for personal injury associated with ACMs. In connection with its
ownership and operation of the Facilities, EME Homer City may be liable for such
costs.
AIR QUALITY
GENERAL. EME Homer City believes that the Facilities are in material
compliance with applicable state and federal air quality requirements. Further
reductions in the Units' emissions may be required for the achievement and
maintenance of National Ambient Air Quality Standards for ozone, fine
particulate matter and regional haze. In August 1995, the Sellers submitted a
Title V operating permit application to the PADEP for review. EME Homer City
expects such permit to be issued by mid-1999. A continuous emissions monitoring
system was installed at the Homer City Units in 1993 for measuring SO(2), NO(x),
CO(2), and exhaust gas flow on a real-time basis, in order to comply with
regulatory requirements.
NITROGEN OXIDES ("NO(X)"). All three Units must comply with Reasonably
Available Control Technology requirements for NO(x) that result in a limit of
0.5 lbs/MMBtu on a 30-day rolling average. In order to comply with such
requirements, the Sellers installed low NO(x) burners and SOFA systems on Units
1 and 2 and a SOFA system on Unit 3. Low NO(x) burners were installed on Unit 3
when it was first constructed. The three Units have routinely operated below the
0.5 lbs/MMBtu limit.
The Units' current NO(x) emission rates are 0.47 lbs/MMBtu for Unit 1,
0.44 lbs/MMBtu for Unit 2 and 0.41 lbs/MMBtu for Unit 3. Pursuant to the Ozone
Transport Commission Memorandum of Understanding, the PADEP has allocated 10,085
tons of ozone season NO(x) allowances to the Homer City Units each year from
1999 through 2002. At projected capacity factors, the Units will generate 13,500
tons of NO(x) during the 1999 ozone season and 10,200 tons of NO(x) during the
2000 ozone season. EME Homer City expects to install an SCR system on each of
the three Units, which will reduce NO(x) emissions to 0.1 lbs/MMBtu per Unit.
The SCR for Unit 2 is expected to be in service
42
during the 2000 ozone season and the SCRs for Units 1 and 3 are expected to be
in service for the 2001 ozone season. NO(x) production during the 2001 and 2002
ozone seasons will average 3,110 tons and as such the Units will have a surplus
of 6,975 tons of NO(x) allowances to sell. In 2003, the Homer City Units' NO(x)
allowance is reduced to 4,740 tons per ozone season. From and after 2003,
average production is anticipated to be 3,080 tons per ozone season resulting in
a projected surplus of 1,660 tons to sell each year. EME Homer City currently
has 2,365 tons of banked NO(x) allowances from 1997 and 1998 which will offset
purchases of NO(x) allowances in 1999.
The Sellers obtained EPA approval for the Clean Air Act Amendment Title IV
Early Election Program for NO(x) with an annual average NO(x) emission limit of
0.5 lbs/MMBtu through 2007. In 2008, the Units become subject to Phase II
emission rate limitations under Title IV for wall-fired dry bottom boilers of
0.46 lbs/MMBtu on an annual average basis. The Homer City Units' annual average
NO(x) emissions for 1997 were well below the current Title IV requirements.
SULFUR DIOXIDE ("SO(2)"). Unit 3 is subject to New Source Performance
Standards and, therefore, has an SO(2) emission limit of 1.2 lbs/MMBtu on a
three-hour and a 24-hour average. Units 1 and 2 are "existing" boilers with a
PADEP SO(2) emission limit of 3.7 lbs/MMBtu on a 30-day rolling average, a daily
average limit of 4.0 lbs/MMBtu (up to two exceedances per 30 days) and a
not-to-be-exceeded limit of 4.8 lbs/MMBtu. To control SO(2) emissions, EME Homer
City relies on the Coal Cleaning Plant to manage the sulfur content of a
significant amount of the coal feedstock for Units 1 and 2. Unit 3 relies on the
use of low-sulfur coal. In 1997, the annual average SO(2) emissions were
2.73 lbs/MMBtu for Unit 1, 2.72 lbs/MMBtu for Unit 2 and 1.13 lbs/MMBtu for
Unit 3.
All three Units are Phase II Acid Rain Program-affected units. Accordingly,
beginning in 2000, all of the Units will be required to obtain sufficient SO(2)
allowances to account for the total SO(2) emissions from the Units. EME Homer
City believes that it will be able to obtain such SO(2) allowances for the Homer
City Units at a reasonable cost prior to the time required. In addition, EME
Homer City will install a system on Unit 3 which will reduce SO(2) emissions to
0.4 lbs/MMBtu. The system is expected to be installed by September 2001.
EMISSION REDUCTION CREDITS. The Homer City Units have a number of Emission
Reduction Credits ("ERCs") that were generated through the retirement of dryers
A and B at the Coal Cleaning Plant. Such ERCs are pending PADEP approval, and
EME Homer City believes that once approved they will not expire until 2006. The
ERCs have not been included in the projections prepared by the Independent
Engineer.
PARTICULATE MATTER ("PM"). Particulate matter is regulated through two
separate and distinct methods: mass emissions and visual opacity. The Homer City
Units' recent PM stack tests show that emissions are well below regulatory
limits. All three Units control PM through the use of electrostatic
precipitators; Units 1 and 2 also utilize an SO(2) flue gas injection
conditioning system. To improve precipitator performance, capital improvements
were made in 1997 and 1998 for Units 1 and 2. Recent modifications to the Coal
Cleaning Plant have also resulted in reduced particulate emissions from Units 1
and 2.
WATER QUALITY
The Facilities are subject to regulations regarding the quality of surface
water, ground water and drinking water. To protect surface water quality, the
Facilities rely on an industrial wastewater treatment system, on-site sewage
treatment and a number of settling ponds and impoundments. The Facilities'
surface water discharges are governed by two, five-year National Pollutant
Discharge Elimination System ("NPDES") permits issued in 1994 and 1995. Modeling
results indicate that PADEP may impose more stringent discharge limits for
certain contaminants at the time of NPDES
43
permit renewal, which may require upgrade of the Facilities' wastewater
treatment systems with such approaches as reverse osmosis, ozonation,
dechlorination and/or recycling of water.
EME Homer City conducts ground water monitoring in a number of areas
throughout the Site, including active and former ash disposal sites, wastewater
and runoff settling and drainage ponds, coal refuse disposal sites, the coal
pile and present and former underground storage tank locations. A pump-and-treat
ground water treatment system is in operation for the industrial wastewater flow
ponds. To date, the PADEP has not requested that any additional remediation
actions be performed at the Site. The Facilities have a drinking water treatment
system designed to meet applicable potable water standards. Recent tests
indicate that the Facilities' drinking water supply meets these standards.
SOLID AND HAZARDOUS WASTE
Both ash from the Homer City Units and coal refuse from the Coal Cleaning
Plant are disposed of on-Site in separate, permitted disposal areas. EME Homer
City has entered into a joint services agreement with Helvetia for the treatment
and disposal of leachate and runoff water from EME Homer City's coal refuse
disposal facility. Approximately 600,000 tons of ash and 1,000,000 tons of coal
refuse are disposed of annually. In 1997, the PADEP issued a 10-year permit for
operation of the ash disposal site. A five-year permit for the operation of the
coal refuse disposal site was issued by the Pennsylvania Bureau of Mining and
Reclamation in 1994. For the past several years, the Facilities have undergone a
program for the removal of equipment with polychlorinated biphenyl ("PCB")
levels of over 500 ppm. As of Spring of 1998, all PCB transformers had been
removed.
MINING ACTIVITIES
The Homer City Units were originally constructed as a mine-mouth generating
station, where coal produced from two adjacent deep mines was delivered directly
to the Units by coal conveyors. The two adjacent deep mines were owned by Helen
Mining Company ("Helen"), a subsidiary of the Quaker State Corporation, and the
Helvetia Mining Company ("Helvetia"), a subsidiary of the Rochester and
Pittsburgh Coal Company. Both Helen and Helvetia developed mine refuse sites,
water treatment facilities and other mine related facilities on the Site. The
Helen mine was closed in the early 1990s and the mine surface operations and
maintenance shop areas were restored before Helen left the Site. Helen has
continuing mine water and refuse site leachate treatment obligations and remains
obligated to perform any clean-up required with respect to its refuse site.
Helvetia's on-Site mine was closed in 1995. As a result of the cessation of its
on-Site mining activities, Helvetia has continuing mine discharge and refuse
site leachate discharge treatment obligations which it performs using water
treatment facilities owned by Helvetia and located on the Site. Bonds posted by
Helvetia may not be sufficient to fund Helvetia's obligations in the event of
Helvetia's failure to comply with its mine-related permits at the Site. Current
annual operating costs for Helvetia's treatment systems are estimated to be
approximately $372,500. Should Helvetia default on its treatment obligations,
the government may look to EME Homer City to fund these commitments.
REGULATION
STATE LAW
PENNSYLVANIA. Pursuant to the Pennsylvania Public Utility Law (the "PPUL"),
the PPUC regulates all "public utilities" operating in the Commonwealth. A
"public utility" under the PPUL includes any entity which owns or operates
equipment or facilities for the production, generation, transmission or
distribution of gas, electricity or steam for the production of light, heat or
power to the public for consumption. The PPUL does not specifically address the
utility status of entities selling electricity at wholesale within Pennsylvania
(e.g., EWGs). Because of EME Homer City's status as an EWG which sells
electricity exclusively in the wholesale market and does not hold itself out to
the public generally
44
as a supplier of utility service, it is not likely to be regulated as a public
utility under the PPUL. If, however, EME Homer City were deemed to be a
Pennsylvania public utility, the PPUC could retroactively apply certain
provisions of the PPUL to the Homer City Units. One such provision requires
every public utility to obtain a certificate of public convenience and necessity
("CPCN") from the PPUC as evidence of its approval prior to rendering service as
a public utility. If the PPUC were to require EME Homer City to obtain a CPCN,
EME Homer City might be required to discontinue operation of the Homer City
Units pending application for, and receipt of, a CPCN. Another such provision
requires every public utility to obtain PPUC approval before it issues or
guarantees securities. If EME Homer City were found to be a public utility, its
failure to have obtained this approval could call into question the validity of
EME Homer City's obligations under the Guarantee and Collateral Agreement. In
addition, EME Homer City would be subject to other laws and regulations (other
than rate regulation) applicable to Pennsylvania public utilities. EME Homer
City's rates, however, would remain subject to the jurisdiction of the FERC.
NEW YORK. Pursuant to the New York Public Service Law (the "NYPSL"), the
New York Public Service Commission ("NYPSC") regulates all "public utility
companies" or "utility companies" operating in New York. A "public utility
company" or "utility company" under the NYPSL includes, among other things, any
entity engaged in the production, transmission or distribution of electricity to
the public for light, heat or power purposes. EME Homer City, as an EWG, will
not provide electricity directly to the public and plans to sell only to power
marketers and energy service companies. Although the NYPSL is silent with
respect to the utility status of electric corporations selling wholesale within
New York, EME Homer City will not likely be subject to regulation as a New York
public utility. If, however, EME Homer City were deemed to be a public utility
under the NYPSL, the NYPSC could retroactively apply certain provisions of the
statute to the Homer City Units. EME Homer City would also be subject to other
laws and regulations (other than rate regulation) applicable to New York public
utility companies. EME Homer City's rates, however, would remain subject to the
jurisdiction of the FERC.
FEDERAL LAW
FEDERAL POWER ACT. The Federal Power Act gives the FERC exclusive
rate-making jurisdiction over wholesale sales of electricity and the
transmission of electricity in interstate commerce. Pursuant to the Federal
Power Act, all public utilities subject to the FERC's jurisdiction are required
to file rate schedules with the FERC prior to commencement of wholesale sales or
transmission of electricity. Because it will be selling power in the wholesale
market, EME Homer City is deemed to be a public utility for purposes of the
Federal Power Act. In November 1998, EME Homer City filed a rate schedule with
the FERC requesting authority to sell power and ancillary services at
market-based rates. On January 13, 1999, the FERC accepted the rate schedule for
filing with respect to sales of power, thereby authorizing EME Homer City to
make sales of power at market-based rates. The FERC deferred consideration of
EME Homer City's request to sell anciliary services at market-based rates. The
FERC also granted EME Homer City waivers of certain of the accounting,
record-keeping and reporting requirements that are imposed on utilities with
cost-based rate schedules.
In addition, the FERC's order, as is customary with market-based rate
schedules, reserved the right to revoke EME Homer City's market-based rate
authority on a prospective basis if it is subsequently determined that EME Homer
City or any of its Affiliates possesses excessive market power. If the FERC were
to revoke EME Homer City's market-based rate authority, it would be necessary
for EME Homer City to file, and obtain FERC acceptance of, its rate schedule as
a cost-of-service rate schedule. In addition, the loss of market-based rate
authority would subject EME Homer City to the accounting, record-keeping and
reporting requirements that are imposed on utilities with cost-based rate
schedules.
45
PUHCA. PUHCA provides that any corporation, partnership or other entity or
organized group that owns, controls or holds power to vote 10% or more of the
outstanding voting securities of a "public utility company" or a company that is
a "holding company" of a public utility company is subject to pervasive
regulation under PUHCA as a registered holding company, unless an exemption is
established or an order is issued by the Securities and Exchange Commission
declaring it not to be a holding company. Registered holding companies under
PUHCA are required to limit their utility operations to a single integrated
utility system and to divest any other operations not functionally related to
the operation of the utility system. In addition, a public utility company that
is a subsidiary of a registered holding company under PUHCA is subject to
financial and organization regulation, including approval by the Securities and
Exchange Commission of certain of its financing transactions. However, under the
Energy Policy Act, a company engaged exclusively in the business of owning
and/or operating a facility used for the generation of electric energy
exclusively for sale at wholesale may be exempted from PUHCA regulation as an
EWG. On March 12, 1999, the General Counsel of the FERC issued a letter
determining that, based on the facts set forth in its application, EME Homer
City is an EWG. If there occurs a "material change" in facts which might affect
EME Homer City's continued eligibility for EWG status, within 60 days of such
material change EME Homer City must (1) file a written explanation of why the
material change does not affect its EWG status, (2) file a new application for
EWG status or (3) notify the FERC that it no longer wishes to maintain EWG
status. If EME Homer City were to lose its EWG status, it and its affiliates
would be subject to regulation under PUHCA that would be difficult to comply
with absent a restructuring.
46
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
The directors of the Company (the "Board of Directors") are elected by, and
serve until their successors are elected by, the Company's sole stockholder. The
officers of the Company are elected from time to time by the Board of Directors
and hold office at the discretion of the Board of Directors. The Company's Board
of Directors currently contains five members. The Board of Directors or the
Company's sole stockholder may elect to appoint additional directors from time
to time.
Set forth below are the current directors and executive officers of the
Company and their positions with the Company.
NAME POSITION
- ---- --------
James V. Iaco, Jr.................... Director and President
Kevin M. Smith....................... Director, Senior Vice President, Chief Financial Officer and
Treasurer
Martha A. Spikes..................... Director, Vice President and Secretary
Raymond W. Vickers................... Director
Paul R. Gillespie.................... Director and Vice President
Mark E. Irwin........................ Vice President
Steven D. Eisenberg.................. Vice President and General Counsel
Mary Ellen Olson..................... Vice President and Assistant General Counsel
Michael P. Childers.................. Vice President
John K. Deshong...................... Vice President
Set forth below are the principal occupations and business activities of the
directors and executive officers of the Company for the past five years, in
addition to their positions described above.
JAMES V. IACO, JR. has been Senior Vice President and Division President of
EME's Americas region since May 1998. Mr. Iaco served as Chief Financial Officer
of EME from January 1994 to May 1999.
KEVIN M. SMITH has been Senior Vice President and Chief Financial Officer of
EME since May 1999 and Regional Vice President--Finance of EME's Americas region
since March 1998. Mr. Smith has served as Treasurer of EME since
September 1992.
MARTHA A. SPIKES has been Corporate Secretary of EME since July 1996.
Ms. Spikes has served as corporate and project counsel to EME since 1991.
RAYMOND W. VICKERS has been Senior Vice President and General Counsel of EME
since March 1, 1999. Prior to joining EME, Mr. Vickers was a partner with the
law firm of Skadden, Arps, Slate, Meagher & Flom LLP since 1989.
PAUL R. GILLESPIE has been Vice President--Tax of EME since May 1996. Prior
to joining EME, Mr. Gillespie was Senior Tax Counsel for Mobil Corporation from
January 1996 to May 1996 and Manager, Tax Planning of Mobil Corporation since
July 1991.
MARK E. IRWIN has been Vice President--Business Management of EME's Americas
region since July 1995. Mr. Irwin has served as Vice President of EME since
July 1995.
STEVEN D. EISENBERG has been Vice President and Associate General Counsel of
EME and Regional Vice President--Legal of EME's Americas region since
January 1999. Prior to joining EME, Mr. Eisenberg was a partner with the law
firm of Morgan, Lewis & Bockius from September 1997 to December 1998. Prior to
that, Mr. Eisenberg was Vice President and General Counsel of Diamond
47
Energy, Inc. from January 1995 to September 1997 and Vice President and
Associate General Counsel of Diamond Energy, Inc. from September 1992 to
January 1995.
MARY ELLEN OLSON has been Vice President and Assistant General Counsel of
EME and Regional Vice President--Legal of EME's Americas region since
December 1997. Ms. Olson served as Regional Vice President and Assistant General
Counsel of EME since February 1997. Ms. Olson has served as corporate and
project counsel to EME since 1988.
MICHAEL P. CHILDERS has been Vice President of EME and Regional Vice
President--Development of EME's Americas region since October 1997. Prior to
joining EME, Mr. Childers was a Director at Enron Corporation from April 1996 to
September 1997. Prior to that, Mr. Childers was Senior Manager of Business
Development at Diamond Energy, Inc. from May 1994 to April 1996.
JOHN K. DESHONG has been Regional Vice President--Tax of EME's Americas
region since November, 1998. Mr. Deshong has served as Director, Tax Planning &
Special Projects to EME since 1997. Prior to joining EME, Mr. Deshong was
Director of Tax at United States Enrichment Corporation from December 1995 to
April 1997. Prior to that, Mr. Deshong was Senior Tax Advisor at Mobil
Corporation from April 1993 to December 1995.
EXECUTIVE COMPENSATION
The officers of the Company receive compensation from EME and receive no
compensation from the Company. For information concerning the compensation of
the Chief Executive Officer and four most highly paid executive officers, other
than the Chief Executive Officer, of EME, see EME's Form 10-K for the year ended
December 31, 1998, which is incorporated by reference herein. For information
concerning the benefit plans maintained by EME for the officers and employees of
the Company, see EME's Form 10-K for the year ended December 31, 1998, which is
incorporated by reference herein.
DIRECTORS COMPENSATION
The directors of the Company receive no compensation for their service as
directors.
48
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
ENERGY SALES AGREEMENT
EME Homer City has entered into a contract with a marketing affiliate for
the sale of energy and capacity produced by the Homer City Units, which enables
such marketing affiliate to engage in forward sales and hedging transactions.
EME Homer City will pay the marketing affiliate a nominal fee currently set at
$0.02/MWh (approximately $300,000 per year), and all revenue from physical sales
transactions executed by the marketing affiliate will be deposited into the
Revenue Account. See "Description of Principal Contracts--Energy Sales
Agreement."
INTERCOMPANY LOANS
The Company has entered into an intercompany loan agreement with FinanceCo
pursuant to which it has agreed to make loans to FinanceCo from time to time
with the proceeds of loans made to the Company under the Credit Agreement.
FinanceCo has entered into a corresponding intercompany loan agreement with EME
Homer City pursuant to which it has agreed to make loans to EME Homer City from
time to time with the proceeds of loans made to FinanceCo by the Company. The
loans described in this paragraph, and all other obligations owed by a Guarantor
to another Guarantor or to the Company, are subordinated to all of the
Guarantors' obligations under the Financing Documents. See "Description of
Principal Financing Documents--Subordination Agreement."
RELATIONSHIP OF THE COMPANY AND THE GUARANTORS TO EME
Each of the Company and each Guarantor has been organized and operated as a
legal entity separate and apart from EME, Edison International and any other
affiliates of EME or Edison International, and, accordingly, the assets of the
Company and the Guarantors will not be generally available to satisfy the
obligations of EME, Edison International or any other affiliates of EME or
Edison International; PROVIDED, HOWEVER, that unrestricted cash of the Company
and the Guarantors or other assets which are available for distribution may,
subject to applicable law and the terms of financing arrangements of such
parties, be advanced, loaned, paid as dividends or otherwise distributed or
contributed to Edison International, EME or affiliates thereof. The bonds are
non-recourse to EME and Edison International. See "Description of the
Bonds--Nature of Recourse."
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DESCRIPTION OF PRINCIPAL CONTRACTS
THE FOLLOWING IS A SUMMARY OF CERTAIN FEATURES OF THE FACILITIES AND
SELECTED PROVISIONS OF CERTAIN PRINCIPAL AGREEMENTS RELATED TO THE FACILITIES
AND THE BUSINESS OF THE COMPANY AND THE GUARANTORS, AND IS NOT CONSIDERED TO BE
A FULL STATEMENT OF THE TERMS OF SUCH AGREEMENTS. ACCORDINGLY, THE FOLLOWING
SUMMARIES OF SUCH AGREEMENTS ARE QUALIFIED BY REFERENCE TO EACH AGREEMENT AND
ARE SUBJECT TO THE TERMS OF THE FULL TEXT OF EACH AGREEMENT. UNLESS OTHERWISE
STATED, ANY REFERENCE IN THIS PROSPECTUS TO ANY AGREEMENT SHALL MEAN SUCH
AGREEMENT AND ALL SCHEDULES, EXHIBITS AND ATTACHMENTS THERETO AS AMENDED,
SUPPLEMENTED OR OTHERWISE MODIFIED AND IN EFFECT AS OF THE DATE HEREOF. COPIES
OF ALL SUCH AGREEMENTS MAY BE OBTAINED FROM THE COMPANY, SUBJECT TO CERTAIN
CONFIDENTIALITY RESTRICTIONS. SEE "AVAILABLE INFORMATION."
SUMMARY
EME Homer City is party to various agreements related to the operation of
the Homer City Units. EME Homer City purchased the Facilities from the Sellers
on March 18, 1999 pursuant to the Asset Purchase Agreement. In connection with
the Acquisition, NYSEG and Penelec entered into the Transition Contracts, the
Interconnection Agreement and the Easement Agreement with ME Westside, and ME
Westside subsequently assigned these contracts to EME Homer City. The Transition
Contracts provide NYSEG and Penelec with an option to buy, and EME Homer City
with an option to sell, certain quantities of capacity from the Units. Pursuant
to the Interconnection Agreement, NYSEG and Penelec have agreed to provide the
services necessary to interconnect the Homer City Units with NYSEG's and
Penelec's transmission systems. The Easement Agreement is intended to provide
the use and access rights to EME Homer City, NYSEG and Penelec necessary for the
performance of their respective obligations under the Interconnection Agreement.
EME Homer City has also entered into the Energy Sales Agreement with one of its
affiliates, pursuant to which such affiliate will purchase capacity and energy
produced by the Homer City Units for sale to third parties.
NYSEG and Penelec entered into several fuel supply agreements to obtain the
coal requirements for the Homer City Units. NGE and GPU Genco entered into the
Coal Cleaning Agreement to provide for the operation and maintenance of the Coal
Cleaning Plant, and NYSEG and Penelec entered into the Operating Agreement to
provide for the blending of coal for Unit 3. All of these agreements were
assigned to EME Homer City in connection with the Acquisition.
EME Homer City has also entered into an agreement with ABB for the provision
of all engineering, procurement and construction services necessary to complete
the Environmental Capital Improvements.
Unless otherwise indicated herein, each of the agreements described below
contains the following customary indemnification, force majeure and assignment
provisions:
- an agreement by each party to indemnify the other party and such other
party's affiliates, successors, officers, directors, employees and agents
for all claims, losses, damages and expenses for damage to property or
injury to or death of any person to the extent caused by an act or
omission of the indemnifying party or its officers, directors, employees
or agents in connection with the contract;
- a force majeure clause excusing a party's performance under the contract
if performance is prevented by a cause beyond the reasonable control of
the party which is unable to perform; and
- a provision stating that a party may not assign its rights or obligations
under the contract without the prior consent of the other party.
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ASSET PURCHASE AGREEMENT
ME Westside entered into the Asset Purchase Agreement with the Sellers on
August 1, 1998 and assigned the contract to EME Homer City on November 6, 1998.
Pursuant to the Asset Purchase Agreement, EME Homer City purchased the assets
constituting the Facilities on the Acquisition Effective Date, including, but
not limited to, certain specified real property, inventories of raw materials
and fuels, machinery and equipment, real property leases, agreements, permits,
easements and emission reduction credits (collectively, the "Purchased Assets"),
and excluding the related electrical transmission and distribution facilities
(collectively, the "Transmission Assets" and, together with all other assets not
transferred, the "Excluded Assets"). The purchase price was $1,801 million with
adjustments for certain differences in book value of inventories.
ASSUMPTION OF LIABILITIES. Pursuant to the Asset Purchase Agreement, and
subject to certain exceptions, EME Homer City agreed to assume and discharge
certain of the Sellers' liabilities and obligations, including all liabilities
and obligations to be paid or performed on or after the Acquisition Effective
Date under the following: (1) the contracts, agreements, licenses and leases
relating to the ownership, operation and maintenance of the Facilities which
were assigned to EME Homer City; (2) the leases, contracts and other agreements
entered into by the Sellers with respect to the Purchased Assets after the
execution of the Asset Purchase Agreement; (3) those permits which are
transferable from the Sellers to EME Homer City; (4) all liabilities and
obligations with respect to transferred employees; (5) taxes incurred in
connection with the Acquisition; and (6) subject to certain exceptions, any
liability related to violations of environmental laws, tort claims and
remediation procedures with respect to the ownership or operation of the
Purchased Assets.
REPRESENTATIONS AND WARRANTIES. Each Seller makes certain representations
and warranties to EME Homer City in the Asset Purchase Agreement which survive
for 18 months after the Acquisition Effective Date, including that: (1) such
Seller is duly incorporated, existing and in good standing; (2) such Seller has
the full power and authority to enter into the Asset Purchase Agreement and the
Asset Purchase Agreement is enforceable in accordance with its terms; and
(3) subject to obtaining the Sellers' required regulatory approvals, no consent
or approval is necessary for the execution of the Asset Purchase Agreement other
than such filings or consents which if not obtained will not prevent such Seller
from performing its material obligations thereunder. Certain claims under the
Asset Purchase Agreement also survive for 18 months after the Acquisition
Effective Date. Such claims include those which arise from the Sellers'
noncompliance with the covenants regarding the conduct of business and filings
with tax authorities in jurisdictions in which a portion of the purchase price
may be required to be withheld or EME Homer City would be liable for tax
liabilities of the Sellers.
INDEMNIFICATION. Pursuant to the Asset Purchase Agreement, the Sellers and
EME Homer City agreed to customary indemnification provisions. The Asset
Purchase Agreement contains certain limitations on the Sellers' indemnity
obligations, including a release from liability for any environmental condition
or violation of environmental law related to the Purchased Assets other than
liabilities not assumed by EME Homer City under the Asset Purchase Agreement.
ENERGY SALES AGREEMENT
EME Homer City entered into the Energy Sales Agreement dated as of March 18,
1999 (the "Energy Sales Agreement") with Edison Mission Marketing & Trading Co.
("EMMT"). The Energy Sales Agreement provides for the sale by EME Homer City and
the purchase by EMMT of capacity and energy produced by the Homer City Units up
to the capacity of the Units. The transactions executed pursuant to the Energy
Sales Agreement may not be for speculative purposes.
TERM. The Energy Sales Agreement will remain in effect unless terminated by
either party upon 90 days prior written notice to the other party.
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PAYMENTS. EMMT will make payments to EME Homer City for capacity and energy
delivered to the bus bar at the Units at a price equal to (i) the price which a
third-party purchaser of the capacity or energy has agreed to pay to EMMT less
(ii) $0.02 per MWh of capacity or energy. If EME Homer City fails to deliver
capacity or energy to EMMT as agreed, EME Homer City will be required to pay
EMMT an amount equal to (1) $0.02 per MWh of capacity or energy purchased by
EMMT to replace the capacity or energy that EME Homer City failed to deliver
plus (2) the price at which EMMT, acting in a commercially reasonable manner,
purchases replacement capacity or energy or, if EMMT does not purchase
replacement capacity or energy, the market price for replacement capacity or
energy as determined by EMMT in a commercially reasonable manner.
TRANSITION CONTRACTS
NYSEG TRANSITION CONTRACT
ME Westside entered into the NYSEG Transition Contract with NYSEG on
August 1, 1998, and subsequently assigned the NYSEG Transition Contract to EME
Homer City on November 6, 1998. The NYSEG Transition Contract provides NYSEG
with a call option to buy, and EME Homer City with a put option to sell, certain
quantities of electric generating capacity from the Homer City Units.
TERM. The NYSEG Transition Contract will expire on April 30, 2001 unless
terminated earlier in accordance with its terms. NYSEG may terminate the NYSEG
Transition Contract prior to its stated expiration date by providing 25 days
notice to EME Homer City upon an event of default of EME Homer City thereunder.
LETTER AGREEMENTS. EME Homer City entered into a letter agreement with
NYSEG to adjust the contract periods under the NYSEG Transition Contract to
conform to the PJM capacity planning cycle. EME Homer City also entered into
contractual arrangements with NYSEG to sell 942 MW of capacity to NYSEG for the
period from March 18, 1999 to May 31, 1999 for a price of $55/MW-day and to sell
500 MW of capacity to NYSEG during the period from June 1, 1999 through May 31,
2000 for a price of $60/MW-day.
OPTIONS. NYSEG and EME Homer City may exercise their options to purchase
and sell capacity during the periods from June 1, 2000 through October 31, 2000
(the "Third Contract Period") and from November 1, 2000 to April 30, 2001 (the
"Fourth Contract Period"). EME Homer City may exercise its put option to sell to
NYSEG up to an amount of capacity (the "NYSEG Option Capacity") equal to the
lesser of (1) 942 MW and (2) one half of NYSEG's projected load supply
obligations to NYPP less the capacity available to be provided by its remaining
owned generation and existing power purchase entitlements. NYSEG may exercise
its call option to purchase from EME Homer City up to an amount of capacity
equal to equal to (1) the NYSEG Option Capacity less (2) the amount of capacity
which EME Homer City has elected to sell to NYSEG pursuant to its put option.
PAYMENTS. If either EME Homer City or NYSEG exercises its option, NYSEG
will make monthly payments to EME Homer City equal to the sum of (1) (x) $72.30
per MW of capacity for the Third Contract Period or (y) $77.20 per MW of
capacity for the Fourth Contract Period, in each case sold pursuant to EME Homer
City's put option, multiplied by the number of days in the month or portion
thereof and (2) (x) $91.70 per MW of capacity for the Third Contract Period or
(y) $103.00 per MW of capacity for the Fourth Contract Period, in each case sold
pursuant to NYSEG's call option, multiplied by the number of days in the month
or portion thereof.
PENELEC TRANSITION CONTRACT
ME Westside entered into the Penelec Transition Contract with Penelec on
August 1, 1998, and subsequently assigned the Penelec Transition Contract to EME
Homer City on November 6, 1998. The
52
Penelec Transition Contract provides Penelec with a call option to buy, and EME
Homer City with a put option to sell, certain quantities of electric generating
capacity from the Homer City Units.
TERM. The Penelec Transition Contract will expire on May 31, 2001 unless
terminated earlier in accordance with its terms.
OPTIONS. EME Homer City has exercised its put option to sell 942 MW of
capacity to Penelec during the period which commenced on the Acquisition
Effective Date and ends on May 31, 1999 (the "First Contract Period") and during
the period which commences on June 1, 1999 and ends on May 31, 2000 (the "Second
Contract Period"). Penelec and EME Homer City may exercise their remaining
options to purchase and sell capacity during the period from June 1, 2000 to
May 31, 2001 (the "Third Contract Period"). EME Homer City may exercise its put
option to sell to Penelec up to an amount of capacity (the "Penelec Option
Capacity") equal to the lesser of (1) 942 MW and (2) GPU's projected load supply
obligations to PJM less the capacity available to be provided by its remaining
owned generation and existing power purchase entitlements. Penelec may exercise
its call option to purchase from EME Homer City up to an amount of capacity
equal to (1) the Penelec Option Capacity less (2) the amount of capacity which
EME Homer City has elected to sell to Penelec pursuant to its put option.
PAYMENTS. During the First Contract Period, Penelec will make monthly
payments to EME Homer City equal to the product of (1) $47,005.80, (2) the
number of days in the relevant month or portion thereof and (3) a fraction (not
greater than 1) the numerator of which is one minus the forced outage rate of
the Units (calculated pursuant to the PJM rules) for the relevant month and the
denominator of which is 0.91. During the Second Contract Period, Penelec will
make monthly payments to EME Homer City equal to the product of (1) $56,425.80,
(2) the number of days in the relevant month or portion thereof and (3) a
fraction (not greater than 1), the numerator of which is the "unforced capacity"
(installed capacity rated at summer conditions that is not on average
experiencing a forced outing or forced derating) attributable to the installed
capacity provided by EME Homer City and the denominator of which is 91% of such
installed capacity. If either EME Homer City or Penelec exercises its option for
the Third Contract Period, Penelec will make monthly payments to EME Homer City
equal to the product of (1) $77.40 per MW of capacity sold pursuant to EME Homer
City's put option plus $100.90 per MW of capacity sold pursuant to Penelec's
call option, (2) the number of days in the month or portion thereof and (3) a
fraction (not greater than 1), the numerator of which is the "unforced capacity"
attributable to the installed capacity provided by EME Homer City and the
denominator of which is 91% of such installed capacity.
INDEMNIFICATION. The indemnification obligations of EME Homer City and
Penelec under the Penelec Transition Contract arise only upon the negligence or
willful misconduct of the indemnifying party.
EPC CONTRACT
EME Homer City entered into the Turnkey Engineering, Procurement and
Construction Contract dated as of April 7, 1999 (the "EPC Contract") with ABB
Environmental Systems, a division of ABB (the "Contractor"). The Contractor has
agreed to complete the work necessary to add selective catalytic reduction
("SCR") systems to each of the Units and to add a limestone based, wet scrubber
flue gas desulfurization ("FGD") system to Unit 3 (collectively, the "Project").
CONTRACTOR'S DUTIES. The EPC Contract requires the Contractor to, among
other things, (1) procure all labor, materials, tools, equipment, insurance,
security, supplies, manufacturing and related services and certain permits
necessary for the completion of the work, (2) provide monthly progress reports,
damage reports and other reports to EME Homer City, (3) coordinate the
procurement of spare parts for the Project, (4) train EME Homer City's personnel
in the operation of
53
the Project and supervise start-up and testing activities and (5) perform all
guaranteed performance tests specified in the EPC Contract.
CONTRACT PRICE. The contract price for completion of the work under the EPC
Contract is $233,849,804, which is to be paid by EME Homer City in installments
upon completion of certain milestones to the Contractor. EME Homer City is
entitled to retain 10% of the contract price as security until the Contractor
has performed all of its obligations under the EPC Contract.
GUARANTEED MECHANICAL COMPLETION DATES. The guaranteed mechanical
completion dates under the EPC Contract are as follows: (1) June 1, 2000 for
installation of the SCR system at Unit 2; (2) May 1, 2001 for installation of
the SCR systems at Units 1 and 3; and (3) September 20, 2001 for installation of
the FGD system at Unit 3. The guaranteed mechanical completion dates are subject
to extension pursuant to the terms of the EPC Contract.
PERFORMANCE GUARANTEES AND LIQUIDATED DAMAGES. The Contractor is required
to pay EME Homer City liquidated damages for failure of the Project to meet
certain performance guarantees and for excess outages at the Units and delay in
completion of the Project. Liquidated damages for failure to satisfy the
performance guarantees are limited to 15% of the contract price and liquidated
damages for excess outages and delay in completion are limited to 15% of the
contract price. The total amount of performance, excess outage and delay
liquidated damages cannot exceed 25% of the contract price.
PERFORMANCE SECURITY. The EPC Contract requires the Contractor to provide a
performance and payment bond in the full amount of the contract price in order
to secure the Contractor's obligations under the EPC Contract. To satisfy this
requirement, the Contractor has provided performance and payment bonds from
Federal Insurance Company and American Home Assurance Company.
FUEL AGREEMENTS
COAL SUPPLY AGREEMENTS
NYSEG and Penelec entered into several coal supply agreements with local
suppliers to obtain the coal requirements for the Homer City Units. These
agreements were assigned to EME Homer City in connection with the Acquisition.
Following is a table summarizing the key terms of the existing coal supply
agreements. All of the coal supply agreements other than the Tanoma agreement
terminating on December 31, 2002 are for Units 1 and 2.
MINIMUM QUANTITY MAXIMUM QUANTITY BASE PRICE
SUPPLIER TERMINATION DATE (TONS PER MONTH) (TONS) ($/TON)
- -------- ---------------- ---------------- ----------------------- ----------
Canterbury Coal Company..... 12/31/03 28,000 40,000/month 21.33(1)
Mears Enterprises, Inc...... 12/31/00 30,000 35,000/month 21.41
Rosebud Mining Company...... 12/31/00 25,000 1,050,000/contract term 21.42
Helvetia Coal Company....... (2) 1,800,000/year None 26.75(3)
Unionvale Coal Company...... 12/31/07 (4) (5) (6)
Tanoma Coal Sales, Inc...... 12/31/04 25,000 (7) (8)
12/31/99 10,000 25,000 (9)
12/31/99 15,000 None 21.40
12/31/02 85,000 95,000/month 37.00(10)
Kajon Materials, Inc........ 5/31/00 10,000 360,000/contract term 20.37
DLR Coal Company............ 12/31/04 20,000 1,500,000/contract term 19.00
Britt Resources, Inc........ 4/30/03 15,000 65,000/month (11)
- ------------------------
(1) The base price under the Canterbury Coal Company agreement will increase to
$22.05 on January 1, 2000 and to $22.30 on January 1, 2002.
54
(2) The Helvetia agreement will terminate when 16 million tons of raw coal have
been delivered thereunder. At current delivery rates, the contract will
expire in 2002.
(3) The base price for coal delivered under the Helvetia agreement was $26.75
per ton as of January 1995 and is adjusted quarterly in accordance with a
cost index and a market index.
(4) The minimum monthly quantities under the Unionvale Coal Company agreement
are as follows: (1) through July 31, 1999, 30,000 tons; (2) from August 1,
1999 through December 31, 2000, 35,000 tons; (3) from January 1, 2001
through December 31, 2001, 45,000 tons; and (4) from January 1, 2002 through
December 31, 2007, 60,000 tons.
(5) The maximum monthly quantities under the Unionvale Coal Company agreement
are as follows: (1) through July 31, 1999, 45,000 tons; (2) from August 1,
1999 through December 31, 2000, 50,000 tons; (3) from January 1, 2001
through December 31, 2001, 60,000 tons; and (4) from January 1, 2002 through
December 31, 2007, 67,500 tons.
(6) The price paid for coal under the Unionvale Coal Company agreement is as
follows: (1) through December 31, 2000, $21.50/ton; (2) from January 1,
2001 through December 31, 2001, $21.93/ton; (3) from January 1, 2002 through
December 31, 2002, $22.37/ton; (4) from January 1, 2003 through
December 31, 2005, as determined in good faith between the parties to the
agreement, not to exceed the price specified in clause (3) plus 5%;
(5) from January 1, 2006 through December 31, 2006, the price specified in
clause (4) plus 2% thereof; and (6) from January 1, 2007 through
December 31, 2007, the price specified in clause (5) plus 2% thereof.
(7) Under the Tanoma agreement terminating on December 31, 2004, EME Homer City
can receive up to 35,000 tons of coal per month on and after July 1, 1999
if it notifies Tanoma by February 1, 1999, and can receive up to 45,000 tons
of coal per month on and after October 1, 2000 if it notifies Tanoma by
May 1, 2000.
(8) The price paid for coal under the Tanoma agreement terminating on
December 31, 2004 is as follows: (1) through December 31, 2000, $21.30/ton;
and (2) from January 1, 2001 through December 31, 2004, as determined in
accordance with a combination of (a) good faith negotiations between the
parties, (b) changes in the prices under other coal supply agreements for
the Homer City Units and (c) changes in the economic dispatch rates for
Units 1 and 2.
(9) The price paid for coal under the Tanoma agreement terminating on
December 31, 1999 is as follows: (1) for the first 10,000 tons, $22.05/ton;
(2) for the next 10,000 tons, $22.89/ton; and (3) for the final 5,000 tons,
$22.47/ton.
(10) The price paid for coal under the Tanoma agreement terminating on December
31, 2002 is subject to adjustment for certain factors, including the
economic dispatch rate for Unit 3 and the market price of similar low sulfur
coal.
(11) The price paid for coal under the Britt Resources, Inc. agreement is as
follows: (1) up to 25,000 tons, $21.00/ton; (2) from 25,001 to 40,000 tons,
$22.00/ton; and (3) from 40,001 to 65,000 tons, $23.00/ton.
PRICE ADJUSTMENTS. The base price paid for coal under EME Homer City's coal
supply agreements will be increased if the heat content of the coal delivered
thereunder is greater than the applicable guaranteed heat content and will be
decreased if the heat content of the coal delivered is less than the applicable
guaranteed heat rate. The base price under the Tanoma, Britt Resources, Inc.,
Unionvale Coal Company, Mears Enterprises, Inc. and Rosebud Mining Company
agreements will also be decreased if the sulfur content of the coal delivered is
in excess of the levels specified in such agreements.
55
DELIVERY. All coal procured under the coal supply agreements for the Homer
City Units is obtained from mines designated by EME Homer City and is delivered
to the Units on the suppliers' trucks. All coal deliveries are FOB the Homer
City Units, freight prepaid and allowed.
INDEMNIFICATION. The indemnification obligations under the coal supply
agreements run only from the suppliers to EME Homer City.
COAL CLEANING AGREEMENT
NGE and GPU Genco entered into the Coal Cleaning Agreement with Homer City
Coal on August 8, 1990. NGE and GPU Genco assigned their rights and obligations
under the Coal Cleaning Agreement to EME Homer City in connection with the
Acquisition. The Coal Cleaning Agreement provides for the operation and
maintenance of the Coal Cleaning Plant by Homer City Coal.
TERM. The Coal Cleaning Agreement will expire on August 31, 2002 unless
terminated earlier in accordance with the terms thereof. Either EME Homer City
or Homer City Coal may terminate the Coal Cleaning Agreement prior to the
contract's stated expiration date upon prior notice to the other party.
OPERATION AND MAINTENANCE SERVICES. Homer City Coal is obligated to operate
and maintain the Coal Cleaning Plant in accordance with the Operating
Specification dated January 4, 1990 and reissued as Revision 2 on January 28,
1998. The operation and maintenance services provided by Homer City Coal include
the completion of periodic performance tests, the provision of administrative
support staff, the monitoring of inventory, the preparation of an annual budget
for proposed capital expenditures and operating expenses for the Coal Cleaning
Plant and the procurement of materials required for operation and maintenance of
the Coal Cleaning Plant up to $25,000.
PAYMENTS. EME Homer City is required to reimburse Homer City Coal for the
actual costs incurred in the operation and maintenance of the Coal Cleaning
Plant. EME Homer City is also required to pay to Homer City Coal (1) an annual
fixed general and administrative services fee of $260,200 ($173,467 in 2002),
payable monthly, and (2) an operating fee ranging from $0.20 to $0.35 per ton of
coal cleaned depending on the level of tonnage.
OPERATING AGREEMENT
NYSEG and Penelec entered into the Operating Agreement with Tanoma on
March 1, 1997 and assigned the contract to EME Homer City in connection with the
Acquisition. The Operating Agreement provides for the blending of coal for Unit
3 at the coal blending facility.
TERM. Unless terminated earlier in accordance with its terms, the Operating
Agreement will terminate upon termination of the coal supply agreement under
which Tanoma supplies coal for Unit 3 (the "Unit 3 Coal Supply Agreement"). Such
coal supply agreement is currently scheduled to expire on December 31, 2002. See
"--Coal Supply Agreements" above.
COAL BLENDING SERVICES. Tanoma is required to store, blend, crush and
process raw coal at the coal blending facility in an amount sufficient to
satisfy its delivery obligations under the Unit 3 Coal Supply Agreement and any
other agreement between Tanoma and EME Homer City for the supply of coal for
Unit 3. The Operating Agreement requires EME Homer City to provide power,
filtered water, storm water treatment and fugitive dust control services for the
coal blending facility.
PAYMENTS. EME Homer City is obligated to reimburse Tanoma for the actual
cost of transporting coal to the Facilities' coal storage area. EME Homer City
also pays a fee of $1.00 per ton of coal in excess of 30,000 tons per month. The
first 30,000 tons per month of coal is deemed consideration for the lease of the
coal blending facility site to Tanoma. See "Business--Properties."
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INTERCONNECTION AGREEMENT
ME Westside entered into the Interconnection Agreement with NYSEG and
Penelec on August 1, 1998, and subsequently assigned the Interconnection
Agreement to EME Homer City on November 6, 1998. Pursuant to the Interconnection
Agreement, NYSEG and Penelec have agreed to provide the services necessary to
interconnect the Homer City Units with NYSEG's and Penelec's transmission
systems.
TERM. Unless terminated earlier in accordance with the terms thereof, the
Interconnection Agreement will terminate on a date mutually agreed to by EME
Homer City, NYSEG and Penelec not to exceed the retirement date for the Homer
City Units.
REGULATORY AMENDMENTS. Upon changes in the regulatory environment affecting
Penelec's or NYSEG's ability to perform under the Interconnection Agreement,
NYSEG, Penelec and EME Homer City are required to negotiate in good faith any
amendments to the Interconnection Agreement required to adapt the terms thereof
to such changes. If the parties to the Interconnection Agreement are unable to
reach agreement on such amendments, NYSEG and Penelec have the right to make a
unilateral filing with the FERC to modify the Interconnection Agreement as
appropriate. EME Homer City has the right to oppose any such filing and to
participate fully in any related FERC proceeding.
INTERCONNECTION SERVICES. NYSEG and Penelec have agreed to provide EME
Homer City with interconnection services at the Homer City Units'
interconnection points in order to interconnect the Units, and any addition to
or upgrade or repowering of the Units, with NYSEG's and Penelec's transmission
systems. EME Homer City is required to compensate NYSEG and Penelec for all
reasonable costs associated with any modifications, additions or replacements
made to NYSEG's and Penelec's interconnection facilities or transmission systems
in connection with any addition to or upgrade or repowering of the Homer City
Units. The interconnection services provided by NYSEG and Penelec may be
interrupted or discontinued if, in the reasonable judgment of NYSEG and Penelec
(or the transmission operator designated by NYSEG or Penelec), the operation of
the Homer City Units would have an adverse impact on the quality of service
rendered by NYSEG and Penelec (including transmission or distribution services
and services provided to end users) or interfere with the safe and reliable
operation of NYSEG's and Penelec's transmission systems, until the condition has
been corrected.
PAYMENTS. EME Homer City is required to compensate NYSEG and Penelec for
all reasonable costs and fees incurred by the Sellers in the provision of
interconnection services to EME Homer City, including, without limitation, any
tax liabilities, any costs of acquiring land necessary for NYSEG's and Penelec's
interconnection facilities and the costs and fees of all permits, licenses,
franchises and regulatory or other approvals necessary for the construction,
maintenance and operation of NYSEG's and Penelec's interconnection facilities.
Reimbursement payments are made on a monthly basis.
STEP-IN RIGHTS. NYSEG and Penelec have a right to assume operational
control of certain of EME Homer City's communication facilities, metering
facilities, transformers, building facilities and other facilities necessary for
NYSEG's and Penelec's maintenance of their transmission systems in the event of
(1) a voluntary or involuntary bankruptcy or insolvency of EME Homer City,
(2) a cessation of operations by EME Homer City for more than 30 days or (3) a
failure of EME Homer City to perform its material obligations under the
Interconnection Agreement for more than two days if such failure adversely
affects NYSEG's and Penelec's transmission systems. NYSEG and Penelec are
required to return control of such facilities to EME Homer City after the event
permitting the exercise of step-in rights has ceased or has been cured.
LOCAL SERVICES. NYSEG and Penelec have also agreed to provide EME Homer
City with the following local services: (1) at no charge, secondary system
(below 600 volts) substation service power
57
to the extent provided immediately prior to the Acquisition Effective Date;
(2) at no charge, heating, ventilation, air conditioning, lighting and other
building services to the extent provided immediately prior to the Acquisition
Effective Date; (3) at no charge, a security system for the substation control
building, as in existence immediately prior to the Acquisition Effective Date;
and (4) for the reimbursement of reasonable costs, metering services. EME Homer
City has agreed to provide NYSEG and Penelec with the following local services:
(1) at no charge, secondary system (below 600 volts) substation service power to
the extent provided from the Homer City Units immediately prior to the
Acquisition Effective Date; (2) at no charge, building services, potable water
for NYSEG's and Penelec's substation control building, treatment for the sewage
released from NYSEG's and Penelec's substation and a plant paging system in
NYSEG's and Penelec's substation, in each case to the extent provided
immediately prior to the Acquisition Effective Date; (3) at mutually agreed upon
costs, substation operating and maintenance services; and (4) at no charge,
office and storage space at the locations in place immediately prior to the
Acquisition Effective Date.
ASSIGNMENT. EME Homer City may assign its rights and obligations under the
Interconnection Agreement to any of its majority-owned subsidiaries and may
assign its rights and interests under the Interconnection Agreement to any party
(or trustee therefor) providing financing for the Facilities.
LIMITATION ON LIABILITY. NYSEG and Penelec will not be liable to EME Homer
City under the Interconnection Agreement for damages exceeding $5 million in any
12-month period, whether such liability arises out of negligence, gross
negligence, willful misconduct, breach of warranty, strict liability or breach
of contract.
EASEMENT AGREEMENT
EME Homer City entered into the Easement, License and Attachment Agreement
(the "Easement Agreement") with NYSEG and Penelec on March 18, 1999. The
Easement Agreement is intended to provide the use and access rights to EME Homer
City, NYSEG and Penelec necessary for the performance of their respective
obligations under the Interconnection Agreement.
EASEMENTS. EME Homer City has granted to NYSEG and Penelec the following
easements, among others, on its property: (1) an easement permitting all
electrical substations, communications equipment, drainage pipes and systems,
transmission facilities, revenue meters, remote terminal units and distribution
facilities owned by NYSEG and Penelec (either jointly or individually) to remain
in place and permitting NYSEG and Penelec to operate, upgrade, replace or
otherwise use such structures; (2) an easement for all purposes necessary for
NYSEG and Penelec to exercise their rights and perform their obligations under
the Interconnection Agreement; (3) an easement to use the existing railroad
siding located on EME Homer City's property; (4) an easement to install
supporting structures, cables, wires and other equipment within the main
substation area at the Site; and (5) an easement of access to EME Homer City's
property for the purposes of exercising any of NYSEG's and Penelec's rights
under the Easement Agreement. EME Homer City has retained the right to keep the
portion of its property located in the main substation area at the Site in its
present location and to use such property in the manner described in the
Interconnection Agreement.
ASSIGNMENT. The parties to the Easement Agreement may assign all or any
part of their rights thereunder, provided that for so long as the
Interconnection Agreement is in effect, such assignment (other than with respect
to rights relating to distribution facilities and communication equipment) may
be made only in connection with an assignment of rights and obligations under
the Interconnection Agreement in accordance with the terms thereof.
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DESCRIPTION OF THE BONDS
THE FORM AND TERMS OF THE EXCHANGE BONDS AND THE ORIGINAL BONDS ARE
IDENTICAL IN ALL MATERIAL RESPECTS, EXCEPT THAT TRANSFER RESTRICTIONS AND
REGISTRATION RIGHTS APPLICABLE TO THE ORIGINAL BONDS DO NOT APPLY TO THE
EXCHANGE BONDS. THE FOLLOWING IS A DESCRIPTION OF CERTAIN PROVISIONS OF THE
BONDS OFFERED HEREBY. THE FOLLOWING INFORMATION DOES NOT PURPORT TO BE A
COMPLETE DESCRIPTION OF THE BONDS AND IS SUBJECT TO, AND QUALIFIED IN ITS
ENTIRETY BY, REFERENCE TO THE BONDS AND THE INDENTURE. UNLESS OTHERWISE
SPECIFIED, THE FOLLOWING DESCRIPTION APPLIES TO ALL OF THE BONDS.
GENERAL
The original bonds were issued, and the exchange notes will be issued,
pursuant to an indenture by and between the Company and the trustee, dated as of
May 27, 1999. References to the bonds include the exchange bonds unless the
context otherwise requires. The terms of the bonds include those stated in the
indenture and those made part of the indenture by reference to the Trust
Indenture Act of 1939 (the "Trust Indenture Act"). The bonds, together with all
other secured Senior Debt, are senior secured obligations of the Company and
will rank PARI PASSU in right of payment with all other existing and future
Senior Debt of the Company, and senior in right of payment to all existing and
future Indebtedness of the Company that is designated as subordinate or junior
in right of payment to the bonds. See "Description of Principal Financing
Documents--Indenture." For purposes of this summary, references to the "Company"
do not include the Guarantors.
PRINCIPAL, MATURITY AND INTEREST
The Series A bonds were issued in aggregate principal amount of
$300 million and will mature on October 1, 2019. The Series B bonds were issued
in aggregate principal amount of $530 million and will mature on October 1,
2026. Interest on the bonds will be payable semiannually in arrears on each
April 1 and October 1, commencing on October 1, 1999. Interest will accrue on
the basis of a 360-day year consisting of 12 months of 30 days each at a rate of
8.137% in the case of the Series A bonds and 8.734% in the case of the Series B
bonds. Principal, premium, if any, and interest on the bonds will be payable at
the office or agency of the Company maintained for such purpose within the City
and State of New York or, at the option of the Company, payment of interest may
be made by check mailed to the bondholders at their respective addresses set
forth in the register of bondholders; PROVIDED that all payments of principal,
premium, if any, and interest with respect to bonds for which bondholders have
given wire transfer instructions to the Company will be required to be made by
wire transfer of immediately available funds to the accounts specified by the
relevant bondholders. Until otherwise designated by the Company, the Company's
office or agency in New York will be the office of the trustee maintained for
such purpose. The original bonds are, and the exchange bonds will be, issued in
denominations of $100,000 or any multiple of $1,000 in excess thereof.
AMORTIZATION OF THE BONDS
Principal of the bonds is payable in semiannual installments on each
April 1 and October 1 occurring on or after April 1, 2004 to the registered
holder thereof on the immediately preceding Regular Record Date, such that the
weighted average life of the Series A bonds is 13.9 years and the weighted
average life of the Series B bonds is 20.7 years. The following table shows the
percentage of principal of the bonds which is payable on each semiannual
Principal Payment Date.
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PERCENTAGE OF PERCENTAGE OF
PRINCIPAL PRINCIPAL PRINCIPAL
PAYMENT AMOUNT PAYABLE AMOUNT PAYABLE
DATES ON SERIES A BONDS ON SERIES B BONDS
- --------- ----------------- -----------------
April 1 and October 1, 2004................................. 1.000% 0.055%
April 1 and October 1, 2005................................. 2.000% 0.480%
April 1 and October 1, 2006................................. 2.000% 0.590%
April 1 and October 1, 2007................................. 2.500% 0.375%
April 1 and October 1, 2008................................. 3.000% 0.375%
April 1 and October 1, 2009................................. 3.000% 0.415%
April 1 and October 1, 2010................................. 3.000% 1.000%
April 1 and October 1, 2011................................. 3.000% 1.750%
April 1 and October 1, 2012................................. 3.000% 2.000%
April 1 and October 1, 2013................................. 3.000% 1.250%
April 1 and October 1, 2014................................. 3.000% 1.500%
April 1 and October 1, 2015................................. 4.000% 2.000%
April 1 and October 1, 2016................................. 4.000% 2.000%
April 1 and October 1, 2017................................. 5.000% 2.000%
April 1 and October 1, 2018................................. 5.000% 2.000%
April 1 and October 1, 2019................................. 3.500% 2.500%
April 1 and October 1, 2020................................. -- 3.500%
April 1 and October 1, 2021................................. -- 3.500%
April 1 and October 1, 2022................................. -- 3.500%
April 1 and October 1, 2023................................. -- 4.000%
April 1 and October 1, 2024................................. -- 4.000%
April 1 and October 1, 2025................................. -- 5.000%
April 1 and October 1, 2026................................. -- 6.210%
NATURE OF RECOURSE
Recourse for payment or performance of any obligations of the Company in
respect of the bonds will be limited solely to the Company and the Guarantors.
Neither any Affiliate of the Company (other than the Guarantors) nor any
officer, director or stockholder of the Company or any Affiliate of the Company,
will be liable for the payment of the principal of, premium, if any, or interest
on the bonds, and bondholders will have no claim against or recourse to (whether
by operation of law or otherwise) such entities or persons or their Affiliates,
other than with respect to the Credit Support Guarantee and any guarantee by EME
issued to satisfy the Bond Debt Service Reserve Requirement. See "Description of
Principal Financing Documents--Other Security Documents."
RATINGS
Moody's has assigned the bonds a long-term senior secured debt rating of
"Baa3," S&P has assigned the bonds a long-term senior secured debt rating of
"BBB-" and Duff & Phelps has assigned the bonds a long-term senior secured debt
rating of "BBB". Such expectations reflect only the views of Moody's, S&P and
Duff & Phelps, respectively, at the time the rating is issued, and any
explanation of the significance of such ratings may be obtained only from the
rating agency. There is no assurance that such ratings will remain in effect for
any given period of time or that such ratings will not be lowered, suspended or
withdrawn entirely by Moody's, S&P or Duff & Phelps, if, in such rating agency's
judgment, circumstances so warrant. Any such lowering, suspension or withdrawal
of such ratings may have an adverse effect on the market price or marketability
of the bonds.
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REDEMPTION AND REPURCHASE
MANDATORY REDEMPTION
The bonds will be subject to mandatory redemption, ratably with all other
Senior Debt in existence at such time, upon the occurrence of a Recovery Event
with respect to the Facilities, other than with respect to amounts received by
the Company and the Guarantors in connection with a Recovery Event for which the
Company elects to restore or replace the asset or assets in respect of which
such Recovery Event occurred and a Reinvestment Notice is provided within
45 days of such Recovery Event (provided that, with respect to any Recovery
Event of $50 million or more, the Independent Engineer shall have certified as
to the reasonableness of the Company's repair and replacement plans as set forth
in the Company's Reinvestment Notice relating to such Recovery Event). Any
mandatory redemption of the bonds will be without premium or penalty at a
Redemption Price equal to the unpaid principal amount thereof plus accrued and
unpaid interest thereon to the Redemption Date.
OPTIONAL REDEMPTION
The bonds shall be subject to optional redemption at any time at a
Redemption Price equal to the outstanding principal amount of the bonds to be
redeemed plus all accrued and unpaid interest thereon to the Redemption Date,
plus the Yield Maintenance Premium, if any.
"Yield Maintenance Premium" means, with respect to any bond to be redeemed
on any Redemption Date, an amount calculated by the Company as of such date
equal to the excess, if any, of (1) the net present value of the then remaining
scheduled installments of principal and payments of interest (but excluding that
portion of any scheduled installment of principal or payment of interest that is
actually due and paid on the Redemption Date) in respect of such bond calculated
using a discount factor equal to the sum of the Treasury Yield plus 50 basis
points over (2) the unpaid principal amount of such bond. Such Yield Maintenance
Premium shall be determined in accordance with the following provisions:
(a) the average life of the remaining scheduled installments of principal in
respect of such bond (the "Remaining Average Life") shall be calculated
as of such Redemption Date; and
(b) the "Treasury Yield" shall be calculated for the United States Treasury
security having an average life equal to the Remaining Average Life and
trading in the secondary market at the price closest to par (the "Primary
Issue"); PROVIDED, HOWEVER, that, if no United States Treasury security
has an average life equal to the Remaining Average Life, the yields (the
"Other Yields") for maturities of the two United States Treasury
securities having average lives most closely corresponding to such
Remaining Average Life and trading in the secondary market at the price
closest to par shall be calculated, and the yield to maturity for the
Primary Issue shall be the yield interpolated or extrapolated from such
Other Yields on a straight-line basis, rounding in each of such relevant
periods to the nearest month.
SELECTION AND NOTICE
If less than all of the bonds are to be redeemed at any time, selection of
bonds for redemption will be made by the trustee on a PRO RATA basis, by lot or
by such method as the trustee shall deem fair and appropriate; PROVIDED THAT no
less than $1,000 of any bonds shall be redeemed in part. Notices of redemption
shall be mailed by first class mail at least 30 but not more than 60 days before
the Redemption Date to each bondholder at its registered address. Notices of
redemption may not be conditional. If any bond is to be redeemed in part only,
the notice of redemption that relates to such bond shall state the portion of
the principal amount thereof to be redeemed. A new bond in principal amount
equal to the unredeemed portion thereof will be issued in the name of the holder
thereof upon cancellation of the original bond. Bonds called for redemption
become due on the date fixed for
61
redemption. On and after the Redemption Date, interest ceases to accrue on bonds
or portions of them called for redemption.
BOOK-ENTRY, DELIVERY AND FORM
The certificates representing the exchange bonds will be issued in fully
registered form. Except as described below, the exchange bonds initially will be
represented by one or more global bonds, in definitive, fully registered form
without interest coupons. The global bonds will be deposited with the trustee as
custodian for DTC and registered in the name of Cede & Co. or another nominee as
DTC may designate.
DTC has advised us as follows:
- DTC is a limited purpose trust company organized under the laws of the
State of New York, a "banking organization" within the meaning of the New
York Banking Law, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the Uniform Commercial Code and a
"clearing agency" registered pursuant to the provision of Section 17A of
the Exchange Act.
- DTC was created to hold securities for its participants and to facilitate
the clearance and settlement of securities transactions between
participants through electronic book-entry changes in accounts of its
participants, thereby eliminating the need for physical movement of
certificates. Participants include securities brokers and dealers, banks,
trust companies and clearing corporations and other organizations.
Indirect access to the DTC system is available to others, including banks,
brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a participant, either directly or indirectly.
- Upon the issuance of the global bonds, DTC or its custodian will credit,
on its internal system, the respective principal amounts of the exchange
bonds represented by the global bonds to the accounts of persons who have
accounts with DTC. Ownership of beneficial interests in the global bonds
will be limited to persons who have accounts with DTC or persons who hold
interests through the persons who have accounts with DTC. Persons who have
accounts with DTC are referred to as "participants." Ownership of
beneficial interests in the global bonds will be shown on, and the
transfer of that ownership will be effected only through, records
maintained by DTC or its nominee, with respect to interests of
participants, and the records of participants, with respect to interests
of persons other than participants.
So long as DTC or its nominee is the registered owner or holder of the
global bonds, DTC or the nominee, as the case may be, will be considered the
sole record owner or holder of the exchange bonds represented by the global
bonds for all purposes under the indenture and the exchange bonds. No beneficial
owners of an interest in the global bonds will be able to transfer that interest
except according to DTC's applicable procedures, in addition to those provided
for under the indenture. Owners of beneficial interests in the global bonds will
not:
- be entitled to have the exchange bonds represented by the global bonds
registered in their names,
- receive or be entitled to receive physical delivery of certificated bonds
in definitive form, and
- be considered to be the owners or holders of any exchange bonds under the
global bonds.
Accordingly, each person owning a beneficial interest in the global bonds
must rely on the procedures of DTC and, if a person is not a participant, on the
procedures of the participant through which that person owns its interests, to
exercise any right of a holder of exchange bonds under the global bonds. We
understand that under existing industry practice, in the event an owner of a
beneficial interest in the global bonds desires to take any action that DTC, as
the holder of the global bonds, is
62
entitled to take, DTC would authorize the participants to take that action, and
that the participants would authorize beneficial owners owning through the
participants to take that action or would otherwise act upon the instructions of
beneficial owners owning through them.
Payments of the principal of, premium, if any, and interest on the exchange
bonds represented by the global bonds will be made to DTC or its nominee, as the
case may be, as the registered owner of the global bonds. Neither we, the
trustee, nor any paying agent will have any responsibility or liability for any
aspect of the records relating to or payments made on account of beneficial
ownership interests in the global bonds or for maintaining, supervising or
reviewing any records relating to the beneficial ownership interests.
We expect that DTC or its nominee, upon receipt of any payment of principal
of, premium, if any, or interest on the global bonds will credit participants'
accounts with payments in amounts proportionate to their respective beneficial
ownership interests in the principal amount of the global bonds, as shown on the
records of DTC or its nominee. We also expect that payments by participants to
owners of beneficial interests in the global bonds held through these
participants will be governed by standing instructions and customary practices,
as is now the case with securities held for the accounts of customers registered
in the names of nominees for these customers. These payments will be the
responsibility of these participants.
Transfer between participants in DTC will be effected in the ordinary way in
accordance with DTC rules. If a holder requires physical delivery of bonds in
certificated form for any reason, including to sell bonds to persons in states
which require the delivery of the bonds or to pledge the bonds, a holder must
transfer its interest in the global bonds in accordance with the normal
procedures of DTC and the procedures set forth in the indenture.
Unless and until they are exchanged in whole or in part for certificated
exchange bonds in definitive form, the global bonds may not be transferred
except as a whole by DTC to a nominee of DTC or by a nominee of DTC to DTC or
another nominee of DTC.
Beneficial owners of exchange bonds registered in the name of DTC or its
nominee will be entitled to be issued, upon request, exchange bonds in
definitive certificated form.
DTC has advised us that DTC will take any action permitted to be taken by a
holder of bonds, including the presentation of bonds for exchange as described
below, only at the direction of one or more participants to whose account the
DTC interests in the global bonds are credited. Further, DTC will take any
action permitted to be taken by a holder of bonds only in respect of that
portion of the aggregate principal amount of bonds as to which the participant
or participants has or have given that direction.
Although DTC has agreed to these procedures in order to facilitate transfers
of interests in the global bonds among participants of DTC, it is under no
obligation to perform these procedures, and may discontinue them at any time.
Neither we nor the trustee will have any responsibility for the performance by
DTC or its participants or indirect participants of their respective obligations
under the rules and procedures governing their operations.
Subject to specified conditions, any person having a beneficial interest in
the global bonds may, upon request to the trustee, exchange the beneficial
interest for exchange bonds in the form of certificated bonds. Upon any issuance
of certificated bonds, the trustee is required to register the certificated
bonds in the name of, and cause the same to be delivered to, the person or
persons, or the nominee of these persons. In addition, if DTC is at any time
unwilling or unable to continue as a depositary for the global bonds, and a
successor depositary is not appointed by us within 90 days, we will issue
certificated bonds in exchange for the global bonds.
63
DESCRIPTION OF PRINCIPAL FINANCING DOCUMENTS
THE FOLLOWING SUMMARIES OF CERTAIN PROVISIONS OF THE FINANCING DOCUMENTS DO
NOT PURPORT TO BE COMPLETE AND ARE SUBJECT TO, AND ARE QUALIFIED IN THEIR
ENTIRETY BY REFERENCE TO, ALL OF THE PROVISIONS THEREOF, INCLUDING DEFINITIONS
THEREIN OF CERTAIN TERMS. COPIES OF THE FINANCING DOCUMENTS WILL BE PROVIDED FOR
INSPECTION UPON WRITTEN REQUEST OF ANY POTENTIAL INVESTOR TO THE COMPANY,
SUBJECT TO APPROPRIATE CONFIDENTIALITY RESTRICTIONS. SEE "AVAILABLE
INFORMATION." CAPITALIZED TERMS USED HEREIN AND NOT OTHERWISE DEFINED IN THIS
PROSPECTUS HAVE THE MEANINGS ASCRIBED TO SUCH TERMS IN THE FINANCING DOCUMENTS.
INDENTURE
GENERAL
The bonds will be issued under the indenture and, together with all other
secured Senior Debt, will be senior secured obligations of the Company and will
rank PARI PASSU in right of payment with all other existing and future Senior
Debt of the Company, and senior in right of payment to all existing and future
Indebtedness of the Company that is designated as subordinate or junior in right
of payment to the bonds. The bonds, together with all other secured Senior Debt,
will be fully and unconditionally guaranteed by each Guarantor and secured by,
INTER ALIA, a mortgage and first priority lien on all of the Company's and the
Guarantors' tangible and intangible assets. As a result, the bonds will
effectively rank PARI PASSU with all secured Senior Debt of the Company and the
Guarantors and senior to all other Indebtedness except Indebtedness permitted to
be incurred pursuant to the indenture and secured by Permitted Liens. Any right
of the Company to receive assets of any of the Guarantors upon the latter's
liquidation or reorganization (and the consequent right of the bondholders and
the other Secured Parties to participate in the receipt of those assets) will be
effectively senior to the claims of that Guarantor's creditors, except with
respect to Permitted Liens.
AFFIRMATIVE COVENANTS
Following is a description of certain affirmative covenants in favor of the
trustee and the bondholders with which the Company will be obligated to comply
under the indenture so long as any bonds remain outstanding.
INFORMATION REQUIREMENTS
The Company shall furnish or cause to be furnished to the trustee, each of
the Rating Agencies and, with respect to clauses (1) and (2) below, upon written
request (which may be a single continuing request), any bondholder or beneficial
owner or prospective bondholder or beneficial owner:
(1) as soon as available and in any event within 60 days after the end
of the Company's first, second and third fiscal quarters of each fiscal year
(commencing with the fiscal quarter ending June 30, 1999), unaudited
financial statements of the Company as of the end of such fiscal quarter,
together with an Officer's Certificate of the Company stating that such
financial statements fairly present the financial condition and results of
operations of the Company on the dates and for the periods indicated in
accordance with GAAP;
(2) as soon as available and in any event within 120 days after the end
of each fiscal year of the Company (commencing with the fiscal year ending
December 31, 1999), audited financial statements of the Company, together
with an Officer's Certificate of the Company stating that no Default or
Event of Default has occurred and is continuing, or that if a Default or an
Event of Default has occurred and is continuing, a statement as to the
nature thereof;
(3) within 10 days after an authorized officer of the Company obtains
actual knowledge thereof, written notice of the occurrence of any event or
condition which constitutes a Default or
64
an Event of Default, specifically stating that such event or condition has
occurred and describing it and any action being or proposed to be taken with
respect thereto;
(4) within 15 days after an authorized officer of the Company has
actual knowledge thereof, written notice of any pending or threatened
material litigation which has or could reasonably be expected to have a
Material Adverse Effect; and
(5) at any time when the Company is subject to the reporting
requirements of Section 13 or Section 15(d) of the Exchange Act, copies of
any filing made with the Securities and Exchange Commission thereunder,
within five days after such filing is made.
At any time when the Company is not subject to the reporting requirements of
Section 13 or Section 15(d) of the Exchange Act, upon the request of any
bondholder or beneficial owner or prospective bondholder or beneficial owner,
the Company shall promptly furnish to such bondholder or beneficial owner or
prospective bondholder or beneficial owner the information required to be
delivered pursuant to Rule 144A(d)(4) under the Securities Act in order to
permit compliance with Rule 144A in connection with a resale or other permitted
transfer of any bond.
The Company shall also provide to the trustee and the Rating Agencies annual
operational and construction reports, updated Power Market Consultant reports,
any Officer's Certificates provided by the Company relating to the incurrence of
Indebtedness under clause (6) or (7) under "--Negative Covenants--Limitation on
Incurrence of Indebtedness" below (at least 30 days' prior to the incurrence of
such Indebtedness) and notice of any transfers of assets permitted by
clause (1) under "--Negative Covenants--Limitation on Sale of Assets" below.
MAINTENANCE OF EXISTENCE; COMPLIANCE WITH LAWS
The Company shall, and shall cause each of the Guarantors to, at all times
(1) maintain their respective existence in good standing under the laws of their
respective jurisdictions of organization and (2) maintain and renew all of their
respective rights, powers, privileges and franchises except where the failure to
do so could not reasonably be expected to result in a Material Adverse Effect.
The Company shall, and shall cause each of the Guarantors to, comply with
all applicable laws, acts, rules, regulations, permits, orders and requirements
of any legislative, executive, administrative or judicial body relating to the
Company and the Guarantors, except where (1) the failure to do so could not
reasonably be expected to have a Material Adverse Effect or (2) the Company is
disputing in good faith any such law, act, rule, regulation, permit, order or
requirement and (A) the Company has established or accrued adequate cash
reserves in accordance with GAAP or provided other appropriate assurances
against any liabilities arising from such dispute and (B) the Company's action
to dispute such law, act, rule, regulation, permit, order or requirement could
not reasonably be expected to have a Material Adverse Effect.
GOVERNMENT APPROVALS
The Company shall, and shall cause each of the Guarantors to, obtain and
maintain in full force and effect all governmental approvals required under
applicable laws to be obtained by or on behalf of the Company and the Guarantors
to conduct their respective businesses pursuant to and perform their obligations
under the Financing Documents to which each of them is a party, except where the
failure to do so could not reasonably be expected to have a Material Adverse
Effect.
MAINTENANCE OF PROPERTY; INSURANCE
The Company shall cause EME Homer City to (1) keep and maintain all property
useful and necessary in its business in good working order and condition
consistent with Prudent Industry Practice and (2) maintain good and valid title
to its properties and assets (subject to no Liens other than
65
Permitted Liens), except where the failure to do so could not reasonably be
expected to have a Material Adverse Effect.
The Company shall cause EME Homer City to maintain with financially sound
and reputable insurance companies, insurance for such amounts against such
risks, loss, damage and liability as are customarily insured against by other
enterprises of like size and type as that of the Facilities, subject to the
availability of such coverage on commercially reasonable terms, all on terms and
conditions which are in accordance with Prudent Industry Practice.
OTHER AFFIRMATIVE COVENANTS
The indenture also contains certain other covenants of the Company,
including obligations of the Company to, and to cause each of the Guarantors to:
(1) make all payments on the bonds;
(2) pay all taxes and claims;
(3) maintain books and records;
(4) maintain a paying agent office with respect to the bonds; and
(5) maintain the perfection of the security interests created by the
Security Documents.
NEGATIVE COVENANTS
Following is a description of certain negative covenants in favor of the
trustee and the bondholders with which the Company will be obligated to comply
under the indenture so long as any bonds remain outstanding.
LIMITATION ON INCURRENCE OF INDEBTEDNESS
The Company will not, directly or indirectly, create, incur, issue, assume,
guarantee or otherwise become directly or indirectly liable, contingently or
otherwise, with respect to (collectively, "incur") any Indebtedness other than
Permitted Indebtedness.
"Permitted Indebtedness" shall mean any of the following items of
Indebtedness:
(1) Indebtedness incurred in respect of the original bonds and the
exchange bonds;
(2) Indebtedness outstanding on the Closing Date;
(3) Indebtedness incurred under the Credit Agreement;
(4) Capital Lease Obligations and purchase money indebtedness entered
into in the ordinary course of business in an amount not to exceed
$10 million outstanding at any one time;
(5) Indebtedness to any wholly-owned Subsidiary of the Company (so long
as such Indebtedness is held by such Subsidiary);
(6) Indebtedness in respect of Required Capital Improvements, PROVIDED
that (a) the Company delivers to the trustee an Officer's Certificate
stating that the Indebtedness is being incurred to fund a Required
Capital Improvement and (b) after giving effect to the incurrence of
such Indebtedness, either (1) the average projected Debt Service
Coverage Ratio through the final maturity date of the bonds shall not
be less than 1.75 to 1.0 and the minimum projected Debt Service
Coverage Ratio for any four quarters through the final maturity date
of the bonds, taken as one accounting period, shall not be less than
1.50 to 1.0 or (2) a Ratings Reaffirmation is obtained;
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(7) Indebtedness so long as, after giving effect to the incurrence of
such Indebtedness, the Company delivers to the trustee an Officer's
Certificate stating that (a) the average projected Debt Service
Coverage Ratio through the final maturity date of the bonds shall not
be less than 2.50 to 1.0 and the minimum projected Debt Service
Coverage Ratio for any four quarters through the final maturity date
of the bonds, taken as one accounting period, shall not be less than
2.00 to 1.0 (PROVIDED that if the proceeds of such Indebtedness are
to be applied to construct a new facility, the bonds must be rated
Investment Grade after giving effect to the incurrence of such
Indebtedness) or (b) the bonds are rated at least Investment Grade by
each Rating Agency then rating the bonds;
(8) Indebtedness incurred for working capital purposes only and not in
excess of $50 million at any one time outstanding (with such amount
to be escalated annually in accordance with increases in the Consumer
Price Index), PROVIDED that the outstanding principal amount of such
Indebtedness on each anniversary of the Closing Date shall be $0;
(9) Indebtedness represented by Interest Rate Hedging Obligations, so
long as such Interest Rate Hedging Obligations relate to Indebtedness
otherwise permitted to be incurred by the Company;
(10) Reimbursement obligations or other Indebtedness relating to
reimbursement under any letter of credit issued to satisfy any Debt
Service Reserve Requirement;
(11) Subordinated Indebtedness to Affiliates of the Company, PROVIDED
that the incurrence of such Indebtedness satisfies the covenant
described below under "--Limitation on Restricted Payments";
(12) Indebtedness in the form of guarantees entered into by the Company
in the ordinary course of business in connection with fuel
procurement or sales, purchases or exchanges by Affiliates of the
Company related to physical or financial capacity, energy and
emissions credits related to the Facilities, so long as such
activities are not for speculative purposes;
(13) Indebtedness in respect of letters of credit, surety bonds or
performance bonds issued in the ordinary course of the Company's
business;
(14) Indebtedness incurred in exchange for, or the net proceeds of which
are used to refund, refinance or replace, indebtedness of the Company
incurred under clause (3) above, PROVIDED that (a) the principal
amount (net of expenses) of such new Indebtedness shall not exceed
the principal amount of the old Indebtedness and (b) either (1) the
average life of such new Indebtedness shall not be shorter than the
remaining average life of the Securities or (2) such new Indebtedness
shall be rated at least Investment Grade by each Rating Agency then
rating such Indebtedness; and
(15) other senior Indebtedness not to exceed $20 million at any one time
outstanding.
For purposes of incurring Indebtedness under clauses (6), (7) and
(14) above, the Power Market Consultant will provide updated electricity price
projections to allow the Company to provide the requisite certification.
For purposes of determining compliance with this covenant, in the event that
an item of proposed Indebtedness meets the criteria of more than one of the
categories of Permitted Indebtedness described in clauses (1) through
(15) above as of the date of incurrence thereof, the Company shall, in its sole
discretion, be entitled to classify or reclassify such item of Indebtedness in
any manner that complies with this covenant. Accrual of interest, the accretion
of accreted value and the payment of interest in the form of additional
Indebtedness will not be deemed to be an incurrence of Indebtedness for purposes
of this covenant.
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LIMITATION ON INCURRENCE OF GUARANTOR INDEBTEDNESS
The Company will not permit any Guarantor to, directly or indirectly,
create, incur, issue, assume, guarantee or otherwise become directly or
indirectly liable, contingently or otherwise, with respect to any Indebtedness
other than (1) Subordinated Indebtedness or (2) Indebtedness in respect of
letters of credit, surety bonds or performance bonds issued, or purchase money
or trade indebtedness incurred, in the ordinary course of business and in an
aggregate amount not to exceed $15 million at any one time outstanding.
LIMITATION ON RESTRICTED PAYMENTS
The Company will not, and will not permit any of the Guarantors to, directly
or indirectly:
(1) declare or pay any dividend or make any other payment or distribution on
account of the Company's or any of the Guarantors' Equity Interests
(including, without limitation, any payment in connection with any merger
or consolidation involving the Company or any Guarantor) or to the direct
or indirect holders of the Company's or any of the Guarantors' Equity
Interests in their capacity as such, other than (A) dividends or
distributions payable in Equity Interests of the Company, (B) dividends
or distributions payable to the Company or another Subsidiary of the
Company or (C) dividends payable to EME with respect to the equity
distribution described above under "Use of Proceeds";
(2) purchase, redeem or otherwise acquire or retire for value (including
without limitation, in connection with any merger or consolidation
involving the Company or any Guarantor) any Equity Interests of the
Company or any direct or indirect parent of the Company or other
Affiliate of the Company;
(3) make any payment on or with respect to, or purchase, redeem, defease or
otherwise acquire or retire for value any Subordinated Indebtedness,
except a payment of interest or principal at Stated Maturity, or a
payment of interest made through the issuance of additional Indebtedness
of the same kind as the Indebtedness on which such interest shall have
accrued; or
(4) make any Restricted Investment
(all such payments and other actions set forth in clauses (1) through (4) above
being collectively referred to as "Restricted Payments"), unless, at the time of
and after giving effect to such Restricted Payment:
(a) no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence of such Restricted Payment; and
(b) the amount on deposit in each Accrued Interest Account and in each
Principal Account shall be equal to or greater than the amount then required
to be on deposit in such Accrued Interest Account or Principal Account, as
the case may be, in accordance with priority THIRD or FOURTH, as the case
may be, under "--Security Deposit Agreement--Priority of Payments";
(c) the Debt Service Reserve Accounts are each fully funded;
(d) the Debt Service Coverage Ratio for the preceding four quarters,
taken as one accounting period, is equal to or greater than 1.50 to 1.0 in
the case of any such period ending on or prior to December 31, 2001 or 1.70
to 1.0 in the case of any such period ending thereafter, as set forth in an
Officer's Certificate; and
(e) the projected Debt Service Coverage Ratio for each four-quarter
period, taken as one accounting period, during the next eight quarters is
equal to or greater than 1.50 to 1.0 in the case
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of any such period ending on or prior to December 31, 2001 or 1.70 to 1.0 in
the case of any such period ending thereafter, as set forth in an Officer's
Certificate.
At intervals not to exceed every three years, the Power Market Consultant
will provide updated electricity price projections to allow the Company
certification for purposes of making Restricted Payments.
LIMITATION ON LIENS
The Company will not, and will not permit any of the Guarantors to, create,
incur, assume or otherwise cause or suffer to exist or become effective any Lien
of any kind upon any of their property or assets, now owned or hereafter
acquired, other than Permitted Liens.
The provisions of the first paragraph of this covenant shall not apply to
the incurrence of any of the following types of Liens (collectively, "Permitted
Liens"):
(1) Liens existing on the Closing Date;
(2) Liens created under the Security Documents;
(3) carriers', warehousemen's, mechanics', landlords' materialmen's,
repairmen's or other like Liens arising in the ordinary course of
business in respect of obligations not yet due and payable or which
are being contested in good faith by appropriate proceedings promptly
instituted and diligently prosecuted; PROVIDED that any reserve or
other appropriate provision as shall be required to conform with GAAP
shall have been made therefor;
(4) Liens for taxes, assessments or governmental charges or levies that
are not yet delinquent and remain payable without penalty or that are
being contested in good faith by appropriate proceedings promptly
instituted and diligently prosecuted; PROVIDED that any reserve or
other appropriate provision as shall be required to conform with GAAP
shall have been made therefor;
(5) Liens that are incidental to the business of the Company and the
Guarantors, are not for borrowing money and are not material, taken
as a whole, to the business of the Company and the Guarantors; and
(6) Liens to secure Indebtedness permitted under clauses (3), (4), (6),
(7), (8), (9), (10), (14) and (15) of the covenant described above
under "--Limitation on Incurrence of Indebtedness."
LIMITATION ON SUBSIDIARIES AND INVESTMENTS
The Company shall not create or acquire any Subsidiary unless (1) such
Subsidiary shall become an additional Guarantor under the Security Documents,
and (2) at the time of the creation or acquisition of such Subsidiary, such
Subsidiary shall have no Indebtedness outstanding other than Indebtedness
permitted under the Financing Documents. The Company will retain 100% direct or
indirect beneficial ownership in its Subsidiaries for so long as the bonds
remain outstanding. The Company will not, nor will it permit any of the
Guarantors to, make any investment other than Permitted Investments.
LIMITATION ON MERGER, CONSOLIDATION AND SALE OF SUBSTANTIALLY ALL ASSETS
The Company will not, directly or indirectly, consolidate or merge with or
into any other person (whether or not the Company is the surviving corporation),
or sell, assign, convey, lease, transfer or otherwise dispose of, all or
substantially all of its properties or assets in one or a series of
transactions, to any Person or Persons, except that the Company may consolidate
with or merge into any other
69
Person so long as (1) the Company is the surviving corporation and (2) both
immediately before and after giving effect to such transaction, no Default or
Event of Default shall have occurred and be continuing.
Notwithstanding the foregoing, the Company may merge or consolidate with or
transfer substantially all of its assets to an Affiliate that has no significant
assets or liabilities and was formed solely for the purpose of changing the
jurisdiction of organization of the Company or the form of organization of the
Company; PROVIDED that the amount of Indebtedness of the Company and the
Guarantors is not increased thereby; and PROVIDED, FURTHER that the successor
assumes all obligations of the Company under the indenture and the registration
rights agreement. Upon any such consolidation or merger, or any such sale,
assignment, transfer, lease, conveyance or other disposition of all or
substantially all of the properties or assets of the Company in accordance with
the immediately preceding sentence, the successor corporation formed by such
consolidation or into or with which the Company is merged or to which such sale,
assignment, transfer, lease, conveyance or other disposition is made shall
succeed to, and be substituted for and may exercise every right and power of the
Company under the indenture with the same effect as if such successor Person had
been named as the Company therein (so that from and after the date of such
consolidation, merger, sale, lease, conveyance or other disposition, the
provisions of the indenture referring to the "Company" shall refer instead to
the successor corporation and not to the Company), and may exercise every right
and power of the Company under the indenture with the same effect as if such
successor Person had been named as the Company therein; PROVIDED, HOWEVER, that
the predecessor Company shall not be relieved from the obligation to pay the
principal of and interest on the bonds except in the case of a sale, assignment,
transfer, conveyance or other disposition of all or substantially all of the
properties or assets of the Company on a combined basis that meets the
requirements of this paragraph.
The Company will not permit any of the Guarantors to, directly or
indirectly, consolidate or merge with or into any other Person (whether or not
or such Guarantor is the surviving corporation), or sell, assign, convey, lease,
transfer or otherwise dispose of, all or substantially all of its properties or
assets in one or a series of transactions, to any Person or Persons, other than
a merger with or into the Company or, in the case of any wholly-owned
Subsidiary, a merger with or into any other wholly-owned Subsidiary, a merger of
any other wholly-owned Subsidiary into such wholly-owned Subsidiary or a
transfer or disposition of substantially all of its properties or assets to the
Company or any other wholly-owned Subsidiary.
LIMITATION ON SALE OF ASSETS
Except in connection with a merger, consolidation or sale of substantially
all of its properties or assets, which is covered by the covenant described
above under "--Limitation on Merger, Consolidation and Sale of Substantially All
Assets," the Company will not, and will not permit any of the Guarantors to,
sell or otherwise dispose of any assets or enter into Sale-Leaseback
Transactions (including by way of the issue or sale by the Company or any of the
Guarantors of Equity Interests in such Guarantors) other than
(1) transfers of assets among the Company and the Guarantors, so long as
a Ratings Reaffirmation is obtained,
(2) sales and dispositions in the ordinary course of business not in
excess of $10 million in any fiscal year,
(3) any sales or dispositions of surplus, obsolete or worn out equipment,
and
(4) any sales or dispositions required for compliance with applicable law
or necessary governmental approvals.
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LIMITATION ON BUSINESS ACTIVITIES
The Company will not, nor will it permit any Guarantor to, engage in any
business or conduct any activities other than the ownership and operation of the
Facilities, any expansion of facilities or improvements thereto, and matters
reasonably incidental thereto. The Company and the Guarantors may enter into
fuel procurement or sales, purchases or exchanges related to physical or
financial capacity, energy and emissions credits related to the Facilities, so
long as such activities are not for speculative purposes.
LIMITATION ON TRANSACTIONS WITH AFFILIATES
Subject to certain conditions contained in the indenture, the Company will
not, and will not permit any of the Guarantors to, enter into any transaction or
arrangement, whether or not in the ordinary course of business, with any
Affiliate (other than the Company and its Subsidiaries), other than
(1) management, operating, marketing, trading or other similar services
agreements between and among the Company and its Affiliates in existence on the
Closing Date and (2) any transaction which is on terms that are no less
favorable to the Company or the relevant Guarantor than those that would have
been obtained in a comparable arm's-length transaction by the Company or such
Guarantor with an unrelated Person.
EVENTS OF DEFAULT
The indenture provides that each of the following constitutes an Event of
Default:
(1) default for 15 days in the payment when due of any principal of,
premium, if any, or interest on the bonds;
(2) failure by the Company or any of the Guarantors to comply with the
provisions described above under the captions "--Negative
Covenants--Limitation on Incurrence of Indebtedness," "--Negative
Covenants--Limitation on Incurrence of Guarantor Indebtedness,"
"--Negative Covenants--Limitation on Liens," "--Negative Covenants--
Limitation on Restricted Payments," "--Negative Covenants--Limitation
on Asset Sales," "--Negative Covenants--Limitation on Business
Activities," "--Negative Covenants--Limitation on Merger,
Consolidation and Sale of Substantially All Assets" or "--Affirmative
Covenants--Maintenance of Existence," and such failure shall continue
uncured for 30 or more days from the date an authorized officer of
the Company receives actual notice thereof;
(3) failure by the Company or any of the Guarantors to comply with any of
its other agreements in the indenture, the bonds or the Security
Documents and such failure shall continue uncured for 60 or more days
from the date an authorized officer of the Company receives actual
notice thereof (or to the extent such Default is curable but cannot
be cured within such 60 day period, so long as the Company provides
an Officer's Certificate to the trustee stating that it is diligently
pursuing a cure, such longer period of time which may be necessary in
good faith to cure the same, but in no event to exceed 90 days);
(4) the occurrence of a Change of Control;
(5) any portion of the security interests granted under the Security
Documents ceasing to be a senior security interest in full force and
effect, which cessation has a Material Adverse Effect; PROVIDED that
the Company shall have 10 days to cure any such cessation;
(6) default under any mortgage, indenture or instrument under which there
may be issued or by which there may be secured or evidenced any
Indebtedness for money borrowed by
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the Company or any of the Guarantors (or the payment of which is
guaranteed by the Company or any of the Guarantors) whether such
Indebtedness or guarantee now exists, or is created after the Closing
Date, which default results in the acceleration of such Indebtedness
prior to its express maturity and, in each case, the principal amount
of any such Indebtedness, together with the principal amount of any
other such Indebtedness the maturity of which has been so
accelerated, aggregates without duplication $15 million or more;
(7) failure by the Company or any of the Guarantors to pay final,
non-appealable judgments aggregating in excess of $15 million
(excluding amounts covered by insurance), which judgments are not
paid, discharged or stayed for a period of 90 days; and
(8) certain events of bankruptcy or insolvency with respect to the
Company or any of the Guarantors (including any involuntary
proceeding that continues unstayed and undismissed for a period of 60
or more consecutive days).
ENFORCEMENT
Subject to the Intercreditor Agreement, if any Event of Default occurs and
is continuing, the trustee may, and upon written direction of bondholders
holding not less than 33 1/3% (in the case of any Event of Default specified in
clause (1) under "--Events of Default" above) or 50% (in the case of any other
Event of Default) of the aggregate principal amount of the bonds shall,
(1) declare, by written notice, the entire outstanding principal amount of the
bonds, accrued interest thereon, premium (if any) and other amounts payable with
respect thereto to be due and payable immediately; PROVIDED THAT in the case of
an Event of Default arising from certain events of bankruptcy or insolvency with
respect to the Company or any of the Guarantors, all outstanding principal,
accrued interest and premium (if any) and other amounts payable with respect to
the bonds will become due and payable without further action or notice; and
(2) proceed to enforce all remedies available to the trustee under the indenture
and the other documents to which the trustee is a party or available under
applicable law. Bondholders may not enforce the indenture or the bonds except as
provided in the indenture. Subject to certain limitations, bondholders holding a
majority in principal amount at maturity of the then outstanding bonds may
direct the trustee in its exercise of any trust or power. The trustee may
withhold from bondholders notice of any continuing Default or Event of Default
(except a Default or an Event of Default relating to the payment of principal or
interest) if it determines that withholding notice is in their interest.
Bondholders holding a majority (or, with respect to the Event of Default
specified in item (4) under "--Events of Default" above, 66 2/3%) in aggregate
principal amount at maturity of the bonds then outstanding by notice to the
trustee may on behalf of all the bondholders waive any existing Default or Event
of Default and its consequences under the indenture except a continuing Default
or Event of Default specified in item (1) or (8) under "--Events of Default"
above.
No bondholder shall have any right to institute any proceeding for a remedy
under the indenture unless
(1) such bondholder has previously given to the trustee written notice of
the occurrence of an Event of Default,
(2) the bondholders holding a majority in aggregate principal amount of
the Outstanding bonds have made written request to the trustee to
institute such proceeding,
(3) the bondholders have offered to the trustee adequate security and
indemnity against costs and liabilities associated with such
proceeding,
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(4) the trustee has failed to institute such proceeding within 60 days
after the receipt of such notice and
(5) no direction inconsistent with such written request has been given to
the trustee during such 60 day period.
The right of any bondholder, which is absolute and unconditional, to receive
payment of the principal of, premium, if any, and interest on its bonds on or
after the due date therein expressed, or to institute suit for the enforcement
of such payment on or after such due date, or the obligation of the Company,
which is also absolute and unconditional, to pay the principal of, premium, if
any, and interest on each of such bonds to such bondholder thereof at the time
and place set forth in the bonds, shall not be impaired or affected without the
consent of such bondholder.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
Legal and covenant defeasance shall be permitted upon terms and conditions
customary for transactions of this nature.
SATISFACTION AND DISCHARGE
The Company may terminate the indenture by delivering all outstanding bonds
to the trustee for cancellation and by paying all other sums payable under the
indenture.
AMENDMENT, SUPPLEMENT AND WAIVER
Except as provided in the next two succeeding paragraphs, subject to the
Intercreditor Agreement, the indenture or the bonds may be amended or
supplemented with the consent of bondholders holding at least a majority in
principal amount at maturity of the bonds then outstanding (including, without
limitation, consents obtained in connection with a purchase of, or tender offer
or exchange offer for, bonds), and any existing default or compliance with any
provision of the indenture or the bonds may be waived with the consent of
bondholders holding at least a majority in principal amount at maturity of the
then outstanding bonds (including consents obtained in connection with a tender
offer or exchange offer for bonds).
Without the consent of each bondholder affected, an amendment or waiver may
not (with respect to any bonds held by a non-consenting bondholder):
(1) reduce the principal amount of bonds whose holders must consent to an
amendment, supplement or waiver;
(2) reduce the principal of or change the fixed maturity of any bond or
alter the provisions with respect to the redemption of the bonds;
(3) reduce the rate of or change the time for payment of interest on any
bond;
(4) waive a default or an Event of Default in the payment of principal
of, premium, if any, or interest on the bonds (except a rescission of
acceleration of the bonds by bondholders holding at least 66 2/3% in
aggregate principal amount at maturity of the bonds and a waiver of
the Default that resulted from such acceleration);
(5) make any bond payable in money other than that stated in the bonds;
(6) make any change in the provisions of the indenture relating to
waivers of past Defaults or the rights of bondholders to receive
payments of principal of, premium, if any, or interest on the bonds;
(7) waive a redemption payment with respect to any bond; or
(8) make any change in the foregoing amendment and waiver provisions.
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Notwithstanding the foregoing, without the consent of any bondholder, the
Company and the trustee may amend or supplement the indenture or the bonds to
cure any ambiguity, omission, defect or inconsistency, to provide for
uncertificated bonds in addition to or in place of certificated bonds, to
provide for the assumption of the Company's obligations to bondholders in the
case of a merger, consolidation or asset transfer, to make any change that would
provide any additional rights or benefits to the bondholders or that does not
adversely affect the legal rights under the indenture of any such bondholder, or
to comply with requirements of the Securities and Exchange Commission in order
to effect or maintain the qualification of the indenture under the Trust
Indenture Act.
CONCERNING THE TRUSTEE
The indenture contains certain limitations on the rights of the trustee,
should it become a creditor of the Company, to obtain payment of claims in
certain cases, or to realize on certain property received in respect of any such
claim as security or otherwise. The trustee will be permitted to engage in other
transactions; HOWEVER, if it acquires any conflicting interest it must eliminate
such conflict within 90 days or resign.
Bondholders holding a majority in principal amount of the then outstanding
bonds will have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy available to the trustee, subject to
certain exceptions. The indenture provides that in case an Event of Default
shall occur (which shall not be cured), the trustee will be required, in the
exercise of its power, to use the degree of care of a prudent man in the conduct
of his own affairs. Subject to such provisions, the trustee will be under no
obligation to exercise any of its rights or powers under the indenture at the
request of any bondholder, unless such bondholder shall have offered to the
trustee security and indemnity satisfactory to it against any loss, liability or
expense.
TRANSFER AND EXCHANGE
A bondholder may transfer or exchange bonds in accordance with the
indenture. The Registrar and the trustee may require a bondholder, among other
things, to furnish appropriate endorsements and transfer documents and the
Company may require a bondholder to pay any taxes and fees required by law or
permitted by the indenture. The Company is not required to transfer or exchange
any bond selected for redemption. Also, the Company is not required to transfer
or exchange any bond for a period of 15 days before a selection of bonds to be
redeemed.
The registered bondholder will be treated as the owner of it for all
purposes.
SECURITY DEPOSIT AGREEMENT
GENERAL
The Company, each of the Guarantors and the Collateral Agent entered into a
Security Deposit Agreement, dated as of March 18, 1999 (the "Security Deposit
Agreement"), pursuant to which (1) certain accounts (the "Accounts") of the
Company and the Guarantors were established with the Collateral Agent,
(2) instructions for deposits into, and payments from, each of the Accounts were
established and (3) the Company and each of the Guarantors pledged and assigned
to the Collateral Agent, and created in favor of the Collateral Agent, for the
benefit of the Secured Parties, a security interest in each such party's
interest in and to Revenues received by such party, the Accounts, all amounts on
deposit from time to time in the Accounts and all proceeds of the foregoing.
ESTABLISHMENT OF ACCOUNTS
The following Accounts have been, or will be, established by the Collateral
Agent:
- Revenue Account;
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- Accrued Interest Accounts;
- Principal Accounts;
- Debt Service Reserve Accounts;
- Environmental Capital Expenditure Account;
- Recovery Event Proceeds Account; and
- Equity Account.
The Company and the Guarantors have granted a security interest in the
Accounts to the Collateral Agent for the benefit of the Secured Parties. The
Accounts will at all times be in the name of the Collateral Agent. The Company
and the Guarantors will not have any right to withdraw monies from the Accounts
or any other rights with respect to the Accounts other than as set forth in the
Security Deposit Agreement.
REVENUE ACCOUNT
All Revenues received by the Company or the Guarantors shall be deposited
into the Revenue Account. Funds on deposit in the Revenue Account shall be
transferred on each Monthly Transfer Date as set forth under "--Priority of
Payments" below.
ACCRUED INTEREST ACCOUNTS; PRINCIPAL ACCOUNTS
Accrued Interest Accounts and Principal Accounts will be established for
each class of Senior Debt entitled to the benefits of the Security Documents.
Such Accounts shall be funded from funds on deposit in the Revenue Account on
each Monthly Transfer Date as set forth below under "--Priority of Payments."
Amounts on deposit in the Accrued Interest Accounts and Principal Accounts will
be utilized by the Secured Parties' Representatives to pay when due amounts
owing from time to time under Senior Debt.
DEBT SERVICE RESERVE ACCOUNTS
Debt Service Reserve Accounts will be established for each class of Senior
Debt that, pursuant to the terms of the Financing Document governing such Senior
Debt, requires the Company to satisfy a Debt Service Reserve Requirement for
such Senior Debt. Any DSR Credit Instrument delivered to the Collateral Agent
pursuant to any Debt Service Reserve Requirement will be deposited in the
related Debt Service Reserve Account.
ENVIRONMENTAL CAPITAL EXPENDITURE ACCOUNT
All proceeds of the Construction Term Loans issued under the Credit
Agreement will be deposited into the Environmental Capital Expenditure Account.
Except during a Default Period, as specified in a letter from the Company to the
Collateral Agent requesting a transfer (a "Request Letter"), the Collateral
Agent will transfer to the Company or any of the Guarantors, from the funds on
deposit in the Environmental Capital Expenditure Account, the amount certified
in such Request Letter to be the aggregate amount then due and payable in
respect of Environmental Capital Expenditures.
RECOVERY EVENT PROCEEDS ACCOUNT
All Recovery Event Proceeds will be deposited into the Recovery Event
Proceeds Account. Except during a Default Period, funds on deposit in the
Recovery Event Proceeds Account shall be utilized as follows, in each case
pursuant to the terms of the Financing Documents governing Senior Debt: either
(1) the Collateral Agent shall transfer to the Company or any of the Guarantors,
from the funds on
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deposit in the Recovery Event Proceeds Account, the amount certified in the
related Request Letter to be the aggregate amount then due and payable in
respect of restoration of the asset or assets pursuant to which Recovery Event
Proceeds have been received; or (2) the Collateral Agent shall transfer to the
Secured Parties' Representative for Senior Debt required to be repaid from such
Recovery Event Proceeds the amount certified in the related Request Letter to be
the aggregate amount of principal, premium and interest then due and payable in
respect of such Senior Debt.
EQUITY ACCOUNT
The Equity Account will be funded from amounts on deposit in the Revenue
Account on each Monthly Transfer Date as set forth below under "--Priority of
Payments." Except during a Default Period, on each Restricted Payment Date, the
Collateral Agent shall transfer, from the funds on deposit in the Equity
Account, the amount certified by the Company in the Request Letter delivered in
connection with such Restricted Payment Date to be then available for use in
making Restricted Payments in accordance with the terms of the Financing
Documents.
PRIORITY OF PAYMENTS
Except during a Default Period, on each Monthly Transfer Date the Collateral
Agent shall transfer, from the funds on deposit in the Revenue Account, the
following amounts in the following order of priority:
(1) FIRST, to the operating account established by the Company for such
purpose, the amount certified in the related Request Letter to be the
excess, if any, of the aggregate amount of operating expenses then
due and payable or projected to become due and payable in the next
succeeding month over the balance then on deposit in such account;
(2) SECOND, to the Collateral Agent and each Secured Parties'
Representative, the amount certified in the related Request Letter to
be the sum of the unpaid fees, indemnities, costs and expenses then
due and payable to the Collateral Agent and such Secured Parties'
Representatives in respect of their respective services in such
capacities;
(3) THIRD, (1) into each Accrued Interest Account, the Accrued Interest
Amount calculated for such Accrued Interest Account, together with
the amount of all deficiencies, if any, with respect to deposits of
Accrued Interest Amounts required in all prior months, as certified
in the related Request Letter, (2) into each Principal Account (other
than (A) the Principal Account relating to the Loans and any other
Principal Account established in respect of non-amortizing Senior
Debt, (B) any Principal Account established for non-amortizing DSR
Letter of Credit Indebtedness or Ordinary Course Letter of Credit
Indebtedness (or, so long as any Loans or related commitments remain
outstanding, any DSR Letter of Credit Indebtedness) and (C) any
Principal Account relating to Swap Indebtedness), an amount equal to
1/6th of the principal amount, if any, which is payable on or within
six months following such Monthly Transfer Date on account of the
Senior Debt with respect to which such Principal Account was
established, together with the amount of all deficiencies, if any,
with respect to deposits of principal required in all prior months,
as certified in the related Request Letter, (3) into each Principal
Account relating to non-amortizing Ordinary Course Letter of Credit
Indebtedness, the amount certified in such Request Letter to be
sufficient to repay in full the related Ordinary Course Letter of
Credit Indebtedness then outstanding, (4) into each Swap Indebtedness
Termination Payment Account, the amount certified in the related
Request Letter to be sufficient to repay in full the related
termination payment then due and payable and (5) to the
Administrative Agent, the amount specified in the related Request
Letter to be applied to the repayment of Revolving Loans;
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(4) FOURTH, into each Principal Account relating to non-amortizing DSR
Letter of Credit Indebtedness (or, so long as any Loans or related
commitments remain outstanding, any DSR Letter of Credit
Indebtedness), the amount certified in the related Request Letter to
be sufficient to repay in full the related DSR Letter of Credit
Indebtedness then outstanding;
(5) FIFTH, into each Debt Service Reserve Account, the amounts certified
in the related Request Letter to be necessary to cause the amount on
deposit (in the form of one or more DSR Credit Instruments, cash,
Permitted Investments or a combination thereof) in such Debt Service
Reserve Account to be equal to the related Debt Service Reserve
Requirement; and
(6) SIXTH, into the Equity Account, the balance remaining in the Revenue
Account.
If, on any Monthly Transfer Date, the funds on deposit in the Revenue
Account are insufficient to make in full any transfer required pursuant to
clause FIRST, SECOND, THIRD or FOURTH above, the Collateral Agent shall make
such transfer with funds then on deposit in the Equity Account. If, on any
Senior Debt Payment Date, after giving effect to any transfer to be made on such
date from funds on deposit in the Revenue Account or Equity Account as specified
above, the funds on deposit in the Accrued Interest Account for any Senior Debt
for which Debt Service is payable on such date are less than such Debt Service,
the Collateral Agent shall demand payment under the Credit Support Guarantee.
The Collateral Agent shall allocate the proceeds of such payment received under
the Credit Support Guarantee among all Accrued Interest Accounts (without regard
to whether there is any shortfall therein) PRO RATA based on the principal
amount of all Senior Debt outstanding or committed on such date. If on any
Senior Debt Payment Date, after giving effect to any transfer to be made on such
date from funds on deposit in the Revenue Account or Equity Account, or from
payments under the Credit Support Guarantee, in each case as specified above,
the funds on deposit in the Accrued Interest Account or Principal Account for
any Senior Debt for which Debt Service is payable on such date are less than
such Debt Service, the Collateral Agent shall obtain the funds necessary to pay
such Debt Service: FIRST, from funds in the Debt Service Reserve Account with
respect to such Senior Debt, if any, including funds obtained from drawings
under any DSR Credit Instrument (other than any Debt Service Reserve Guarantee)
held by the Collateral Agent in respect of such Senior Debt; and, SECOND, from
the proceeds of any Debt Service Reserve Guarantee held by the Collateral Agent
in respect of such Senior Debt.
PRIORITY OF PAYMENTS DURING AN EVENT OF DEFAULT
During a Default Period, the Company will be entitled to issue Request
Letters and otherwise direct the transfer of funds from the Accounts until the
Collateral Agent receives a Notice of Action directing that action be taken. See
"Intercreditor Agreement--Default; Acceleration; Exercise of Remedies."
At any time after the Collateral Agent receives a Notice of Action
specifying that action be taken pursuant to the Security Deposit Agreement, the
Collateral Agent shall:
(1) transfer all amounts in the Environmental Capital Expenditure Account
to the Administrative Agent (and such transfer shall be deemed to be
a payment made on account of the Debt Service then due and payable in
respect of the Construction Term Loans);
(2) with respect to any Senior Debt, transfer all amounts in the Debt
Service Reserve Account with respect to such Senior Debt, including
amounts obtained from drawings under any DSR Credit Instrument held
by the Collateral Agent in respect of such Senior Debt, to the
Secured Parties' Representative for such Senior Debt (and such
transfer shall
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be deemed to be a payment made on account of the Debt Service then
due and payable in respect of such Senior Debt); and
(3) with respect to any Senior Debt, transfer all amounts in the Accrued
Interest Account and the Principal Account with respect to such
Senior Debt to the Secured Parties' Representative for such Senior
Debt (and such transfer shall be deemed to be a payment made on
account of the Debt Service then due and payable in respect of such
Senior Debt).
After making the transfers specified by the immediately preceding clauses
(1), (2) and (3), the Collateral Agent shall take or discontinue to take all
actions specified in such Notice of Action and/or shall transfer all amounts
remaining in the Accounts in the following order of priority:
(1) FIRST, to the Collateral Agent and each Secured Parties'
Representative, the amount certified by such Person to be the sum of the
unpaid fees, indemnities, costs and expenses then due and payable to such
Person for its services in such capacity;
(2) SECOND, to each Secured Parties' Representative for Senior Debt,
the amount certified by such Secured Parties' Representative to be the
aggregate amount of principal, premium and interest then due and payable in
respect of such Senior Debt under the related Financing Documents;
(3) THIRD, to each Secured Parties' Representative for Senior Debt, the
amount certified by such Secured Parties' Representative to be the aggregate
amount of all Debt Service (other than principal, premium and interest) then
due and payable in respect of such Senior Debt under the related Financing
Documents; and
(4) FOURTH, any surplus then remaining shall be paid to the Company or
its successors or assigns or to whomsoever may be lawfully entitled to
receive the same or as a court of competent jurisdiction may direct.
INTERCREDITOR AGREEMENT
GENERAL
The Company, each of the Guarantors, the Administrative Agent and the
Collateral Agent, together with other Secured Parties' Representatives from time
to time party thereto, entered into a Collateral Agency and Intercreditor
Agreement, dated as of March 18, 1999 (the "Intercreditor Agreement"), pursuant
to which (1) the Collateral Agent was appointed by the Secured Parties'
Representatives as collateral agent for such parties under the Security
Documents and (2) the Secured Parties' Representatives agreed as to certain
procedures regarding the sharing of Collateral. Upon the issuance of the bonds,
the trustee will also become a party to the Intercreditor Agreement as a Secured
Parties' Representative.
Pursuant to the Intercreditor Agreement, all secured Senior Debt incurred by
the Company from time to time shall be entitled to the benefits of the Security
Documents and rank PARI PASSU without any preference among such obligations by
reason of date of incurrence or otherwise.
DEFAULT; ACCELERATION; EXERCISE OF REMEDIES
The Intercreditor Agreement permits holders of Senior Debt to declare
defaults and events of default with respect to the Financing Document governing
such Senior Debt, and to accelerate such Senior Debt upon the occurrence of an
event of default, pursuant to the provisions set forth in such Financing
Document. Notice of any such event of default or acceleration of Senior Debt
must be provided by the applicable Secured Parties' Representative to the
Collateral Agent, who shall promptly forward such notice to the Company and each
other Secured Parties' Representative.
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Following the delivery of a notice of acceleration of Senior Debt to the
Collateral Agent, during any period during which an event of default under
Senior Debt shall have occurred and be continuing, the Required Secured Parties
may deliver a notice (any such notice, a "Notice of Action") to the Collateral
Agent directing the Collateral Agent to exercise one or more of the rights and
remedies available to the Collateral Agent under the Security Documents. The
Collateral Agent shall exercise the rights and remedies and take the other
actions described in such Notice of Action at the time or times specified in
such Notice of Action.
AMENDMENT OF FINANCING DOCUMENTS
Pursuant to the Intercreditor Agreement, in addition to any consent
requirement contained in any Financing Document, the consent of each Secured
Parties' Representative shall be required
(1) in connection with any amendment, supplement or other modification of
any Financing Document that would increase the amount of or change
the scheduled date of maturity of any Senior Debt or the scheduled
date of any installment of principal payable on any such Senior Debt,
or increase the stated rate of any interest, premium, fee or other
amount payable in respect thereof or change the scheduled date of any
payment thereof, or provide for any additional mandatory prepayment
of any such Senior Debt,
(2) to release all or any material portion of the Collateral from the
Liens of the Security Documents,
(3) to release any of the Company or any of the Guarantors from its
obligations under the Security Documents,
(4) to release EME from its obligations under the Credit Support
Guarantee,
(5) to amend, modify or waive any provision of the Security Documents
relating to the order of priority or amounts of transfers of cash and
other property to be made thereunder or to amend or modify the
definitions of "Obligations" or "Senior Debt" thereunder, or
(6) to amend or modify the definition of "Required Secured Parties" under
the Security Documents or the percentages required for any action to
be taken under the Security Documents.
AMENDMENT OF INTERCREDITOR AGREEMENT
With the written consent of the Required Secured Parties, the Collateral
Agent, the Company and the Guarantors may, from time to time, enter into an
amendment, supplement, waiver or other modification of the Intercreditor
Agreement or change in any manner the rights of the Collateral Agent, the
Secured Parties or the Company thereunder; PROVIDED that (1) any amendment,
supplement, waiver or other modification of the provisions set forth therein
relating to amendments of Financing Documents shall require the consent of each
Secured Parties' Representative and the Collateral Agent and (2) any amendment,
supplement, waiver or other modification of the provisions relating to
amendments of the Intercreditor Agreement set forth therein shall require the
consent of each Secured Parties' Representative, the Collateral Agent, the
Company and each of the Guarantors.
Notwithstanding the foregoing, without the consent of any Secured Party, the
Collateral Agent, the Company and, as long as any obligations are outstanding
under the Credit Agreement, the Administrative Agent, at any time and from time
to time, may enter into one or more agreements supplemental to the Intercreditor
Agreement, in form satisfactory to the Collateral Agent, (1) to add to the
covenants of the Company and the Guarantors for the benefit of the Secured
Parties or to surrender any right or power therein conferred upon the Company or
any of the Guarantors, (2) to mortgage or pledge to the Collateral Agent, or
grant a security interest in favor of the Collateral Agent
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in, any property or assets as security or additional security for the
obligations under secured Senior Debt or (3) to cure any ambiguity, defect or
inconsistency or to make any other change that would provide any additional
rights or benefits to the Secured Parties or that does not adversely affect the
legal rights under the Financing Documents of any Secured Party.
OTHER SECURITY DOCUMENTS
GUARANTEE AND COLLATERAL AGREEMENT
Pursuant to the Guarantee and Collateral Agreement, (1) the Secured Parties
will have a security interest in certain collateral, including all tangible and
intangible property of the Company and each Guarantor, all proceeds and products
of any and all of the foregoing, all collateral security and guarantees given by
any Person with respect to any of the foregoing and the books and records
pertaining to the above securing, in the case of the Company, the Obligations of
the Company under Senior Debt and, in the case of the Guarantors, the
Obligations of the Guarantors under the Guarantor Guarantees, and (2) each
Guarantor will fully and unconditionally guarantee the Obligations of the
Company under the Senior Debt (the "Guarantor Guarantees").
The Obligations of each Guarantor under its respective Guarantor Guarantee
will be limited to the maximum amount as will, after giving effect to all other
contingent and fixed liabilities of such Guarantor (including, without
limitation, any obligations under any Senior Debt) and after giving effect to
any collections from or payments made by or on behalf of any other Guarantor in
respect of the obligations of such Guarantor under its Guarantor Guarantee,
result in the Obligations of such Guarantor under its Guarantor Guarantee not
constituting a fraudulent conveyance or fraudulent transfer under federal or
state law.
MORTGAGE
Pursuant to the Mortgage, the Secured Parties will have a Lien on all of the
real property interests of EME Homer City now held or after acquired as security
for the Company's Obligations under Senior Debt and EME Homer City's Obligations
under its Guarantor Guarantee.
CREDIT SUPPORT GUARANTEE
Pursuant to the Credit Support Guarantee, EME unconditionally and
irrevocably guarantees to the Collateral Agent, for the benefit of the Secured
Parties, the prompt and complete payment and performance by the Company when due
of all of the Company's Obligations under the Senior Debt up to an amount of
$42 million. Pursuant to the Security Deposit Agreement, the Credit Support
Guarantee would be utilized for payments on Senior Debt prior to amounts
available in the Debt Service Reserve Accounts. Amounts under the Credit Support
Guarantee will be available until December 31, 2001.
BOND DEBT SERVICE RESERVE ACCOUNT
A Debt Service Reserve Account will be established with the Collateral Agent
for the benefit of the bondholders. Amounts on deposit in the Bond Debt Service
Reserve Account will be used to pay the Company's scheduled installments of
principal and interest on the bonds in the event that the Company's cash flow
from operations is inadequate therefor. The required balance of Bond Debt
Service Reserve Account (the "Bond Debt Service Reserve Requirement") on any
date of determination will be 100% of the projected debt service on the bonds
for the succeeding six-month period. The Bond Debt Service Reserve Requirement
may be satisfied by one or a combination of the following: (1) cash; (2) a
letter of credit that constitutes Acceptable Credit Support; or (3) a guarantee
of the Company's obligations with respect to the Bond Debt Service Reserve
Requirement, in the form
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set forth in the indenture, made by EME in favor of the Collateral Agent for the
benefit of the bondholders (so long as such guarantee constitutes Acceptable
Credit Support).
SUBORDINATION AGREEMENT
The Company, each Guarantor and the Collateral Agent entered into the
Intercompany Loan Subordination Agreement on March 18, 1999 (the "Subordination
Agreement"), pursuant to which any and all obligations owed by the Company or
any Guarantor to the Company or any Guarantor are subordinated to the Company's
and the Guarantors' obligations under the Financing Documents. The Subordination
Agreement includes customary "deep subordination" terms, including without
limitation (1) an agreement by the subordinated parties not to exercise any
remedies in respect of subordinated claims until all of the senior claims have
been indefeasibly paid in full, (2) an obligation of the subordinated parties to
turn over any payments received in respect of the subordinated claims in
violation of the Subordination Agreement and (3) a right of the holders of
senior claims to enforce subordinated claims in a bankruptcy proceeding of the
borrower.
CREDIT AGREEMENT
GENERAL
On March 18, 1999, the Company executed the Credit Agreement, under which
the Banks agreed to provide the following credit facilities: (1) the Acquisition
Facility in an amount of up to $800 million (the loans thereunder, the
"Acquisition Loans"); (2) the Environmental Capital Improvements Facility in an
amount of up to $250 million (the loans thereunder, the "Environmental Capital
Improvements Loans"); and (3) the Working Capital Facility in an amount of up to
$50 million (the loans thereunder, the "Working Capital Loans"). The Acquisition
Facility will be eliminated upon issuance of the bonds.
Proceeds of the Acquisition Loans were used to finance a portion of the
Acquisition, proceeds of the Environmental Capital Improvements Loans will be
used as necessary to finance costs associated with the Environmental Capital
Improvements and proceeds of the Working Capital Loans will be used for the
Company's and the Guarantors' general working capital purposes.
INTEREST
The Company will pay interest on the unpaid principal amount of the Loans
(1) with respect to Base Rate Loans, at a rate per annum equal to the Base Rate,
and (2) with respect to LIBO Rate Loans, at a rate per annum equal to LIBOR plus
an applicable margin, which will be variable depending on the Company's debt
rating. The Company will also pay facility fees on the Construction Term Loan
Commitments and the Revolving Loan Commitments.
CONDITIONS PRECEDENT
Each loan under the Credit Agreement shall be subject to the satisfaction of
the following conditions precedent:
(1) certain representations and warranties previously made by the Company
shall continue to be true and correct in all material respects with
the same effect as if then made (unless stated to relate solely to an
earlier date, in which case such representations and warranties shall
be true and correct as of such earlier date);
(2) no default or event of default under the Credit Agreement shall have
occurred and be continuing or would result from such loans;
(3) the Administrative Agent shall have received a borrowing request for
such loans (where each of the delivery of a borrowing request and the
acceptance by the Company of the
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proceeds of such loans shall constitute a representation and warranty
by the Company that on the date of such loans, both immediately
before and after giving effect to such loans and the application of
the proceeds thereof, the statements made in clauses (1) and
(2) above are true and correct); and
(4) all documents executed or submitted pursuant to the Credit Agreement
by or on behalf of the Company shall be satisfactory in form and
substance to the Administrative Agent and its counsel.
AFFIRMATIVE COVENANTS
Until all Obligations under the Credit Agreement are paid in full and the
Commitments are terminated, the Company shall:
(1) deliver to the Administrative Agent (a) unaudited quarterly
consolidated financial statements and (b) audited annual consolidated
financial statements of the Company (which will include results for
its consolidated Subsidiaries), together with an unqualified opinion
of Arthur Andersen & Co. (or other internationally recognized
independent auditors);
(2) at the time of delivery of the audited financial statements, deliver
to the Administrative Agent either (a) the annual report provided to
senior management and shareholders of the Company for the preceding
calendar year with respect to the Facilities or (b) a report
including certain information with respect to the Facilities;
(3) at the time of delivery of the audited financial statements, deliver
to the Administrative Agent an operating budget for the Facilities
for the current calendar year, together with, in the case of each
calendar year beginning with the year 2000, an "income statement
variance report" showing the actual experience for the preceding
calendar year (or portion thereof) against the income statement
projections for the preceding calendar year (or portion thereof);
(4) within 60 days of each quarterly payment date on which the Company
intends to make certain investments or restricted payments, deliver
to the Administrative Agent a certificate showing certain actual and
projected Debt Service Coverage Ratios of the Company;
(5) deliver to the Administrative Agent notices of defaults under
material agreements of the Company or any of the Guarantors, material
litigation, certain ERISA events and other material events;
(6) deliver to the Administrative Agent all reports and registration
statements which the Company files with the Securities and Exchange
Commission or any national securities exchange;
(7) deliver to the Administrative Agent notices of any change in the
Company's debt rating;
(8) deliver to the Administrative Agent notices of casualty or damage or
loss to the Facilities involving a probable loss of $3 million or
more and the occurrence of the cancellation or other material change
regarding the insurance policies required to be maintained;
(9) deliver to the Administrative Agent notice of any material
modification of its environmental capital expenditure program;
(10) deliver to the Administrative Agent notice that any material
governmental approval may be revoked, fail to be granted or renewed,
or materially modified;
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(11) continue its business and maintain its existence and its material
rights and privileges;
(12) comply with applicable laws and contractual obligations, except to
the extent non-compliance would not have a Material Adverse Effect;
(13) maintain in good repair property and equipment, ordinary wear and
tear excepted, to the extent that is necessary to do business;
(14) maintain certain insurance against casualties and contingencies;
(15) maintain books and records;
(16) implement a Year 2000 plan;
(17) comply with environmental laws;
(18) perform any and all acts required to maintain perfection of the
Collateral including after-acquired property covered by the relevant
Security Documents; and
(19) in relation to any Recovery Event, provide the Administrative Agent
and the Collateral Agent with a Reinvestment Notice; PROVIDED, THAT
if the settlement or payment related to such Recovery Event is
$50 million or more, the Company shall either make a prepayment of
the net proceeds of such Recovery Event (with a corresponding
reduction in the amount of the Commitments) or, if such net proceeds
are to be used for restoration or replacement, the Independent
Engineer shall have certified as to the Company's restoration or
replacement plan and the feasibility thereof as set forth in the
Company's Reinvestment Notice relating to such Recovery Event.
NEGATIVE COVENANTS
Until all Obligations under the Credit Agreement are paid in full and the
Commitments are terminated, the Company agrees, and agrees to cause the
Guarantors:
(1) not to suffer to exist any Indebtedness other than certain permitted
Indebtedness;
(2) not to suffer to exist any Liens granted by the Company and the
Guarantors other than certain permitted Liens;
(3) not to consolidate with or merge into any other Person or sell,
convey or lease all or substantially all of its assets to any Person
unless (a) no default or event of default shall occur and be
continuing prior to and after such consolidation, merger or sale and
(b) the Company or the relevant Guarantor is the surviving entity;
(4) not to undertake the sale of assets subject to certain exceptions;
(5) not to create or acquire Subsidiaries;
(6) not to make investments in any other Person subject to certain
exceptions (such exceptions include investments in EME Homer City to
implement its environmental capital expenditure program and
investments in EME Homer City to make capital expenditures for
improvements to the Facilities; PROVIDED, in the latter case, that
all amounts due and payable in respect of the Senior Debt has been
paid, there is no default or event of default under the Credit
Agreement, certain Debt Service Coverage Ratios are above certain
specified levels and the Debt Service Reserve Requirement for the
Loans is satisfied);
(7) not to enter into transactions with Affiliates subject to certain
exceptions;
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(8) not to make distributions, dividend payments or other restricted
payments subject to certain exceptions (such exceptions include
restricted payments by the Company, PROVIDED THAT there is no default
or event of default under the Credit Agreement, certain Debt Service
Coverage Ratios are above certain specified levels and the Debt
Service Reserve Requirement for the Loans is satisfied);
(9) not to enter into any agreement prohibiting the ability of the
Company to amend or otherwise modify the Credit Agreement or any
related agreement, or the ability of any Guarantor to make dividend
payments and other payments to the Company;
(10) not to engage in any business other than the ownership, maintenance
and operation of the Facilities, the sale of wholesale electric power
therefrom and related products and services and other incidental
businesses;
(11) not to take any action which may subject the Company or any of the
Guarantors to certain governmental regulation or cause the Company or
any of the Guarantors to lose certain rights to sell electric power
and related products and services; and
(12) not to engage in speculative transactions.
EVENTS OF DEFAULT
The following constitute events of default under the Credit Agreement:
(1) nonpayment of principal when due;
(2) nonpayment of interest, fees or other amounts within five business
days of the date when due;
(3) inaccuracy in any material respect of representations and warranties
when made;
(4) violation of covenants (subject, in the case of certain affirmative
covenants, to a 30-day grace period);
(5) cross-default with respect to other indebtedness of the Company or
any of the Guarantors of at least $15 million in principal amount;
(6) bankruptcy events with respect to the Company or any of the
Guarantors;
(7) certain ERISA events;
(8) judgments in excess of $15 million in the aggregate not discharged,
stayed or bonded within 60 days;
(9) EME shall cease to own, directly or indirectly, 50% of the economic
equity interests in the Company and each of the Guarantors or cease
to maintain equivalent voting control of the Company and each of the
Guarantors, or EME shall cease, directly or through a Guarantor, to
be in control of the operation of the Facilities, or the Company
shall cease to own, directly or indirectly, 100% of the general and
limited partnership interests in EME Homer City; and
(10) until the termination of the Credit Support Guarantee or while any
guarantee of EME is being used to satisfy the Debt Service Reserve
Requirement for the Loans, (a) bankruptcy events with respect to EME
and (b) cross-default with respect to Indebtedness of EME of at least
$20 million in principal amount.
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REMEDIES
Except as may be otherwise agreed among the Banks, upon the occurrence and
during the continuance of an event of default under the Credit Agreement other
than bankruptcy events with respect to the Company, the majority Banks may
exercise any or all of the following remedies: (1) declaration of all or any
portion of the outstanding principal amount under the Credit Agreement to be
immediately due and payable; or (2) termination of their Commitments. In case of
a bankruptcy event with respect to the Company, the Commitments shall
automatically terminate and the outstanding principal amount under the Credit
Agreement shall automatically and immediately become due and payable, without
notice or demand.
BANK DEBT SERVICE RESERVE ACCOUNT
A Debt Service Reserve Account was established with the Collateral Agent for
the benefit of the Banks to be used to pay the Company's scheduled Debt Service
for the Loans in the event that the Company's cash flow from operations is
inadequate therefor.
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EXCHANGE OFFER; REGISTRATION RIGHTS
As part of the sale of the original bonds and pursuant to a registration
rights agreement dated as of May 27, 1999, the Company agreed with the initial
purchasers, for the benefit of the holders of the bonds, that the Company will
file and use its reasonable best efforts to cause to become effective, at its
cost, a registration statement with respect to a registered offer to exchange
the original bonds for the exchange bonds which are in all material respects
substantially identical to the original bonds. Upon such registration statement
being declared effective, the Company shall offer the exchange bonds in return
for surrender of the original bonds. Such offer shall remain open for no less
than 30 days after the date notice of the exchange offer is mailed to the
bondholders. For each original bond surrendered to the Company under the
exchange offer, the bondholder will receive exchange bonds aggregating an equal
principal amount. Interest on each exchange bond shall accrue from the last
Interest Payment Date on which interest was paid on the original bond so
surrendered or, if no interest has been paid, since May 27, 1999.
In the event that the Company determines in good faith that applicable
interpretations of the staff of the Securities and Exchange Commission or other
circumstances specified in the registration rights agreement do not permit the
Company to effect such an exchange offer, the Company shall, at its cost, use
its reasonable best efforts (subject to customary representations and agreements
of the bondholders) to have a shelf registration statement covering resale of
the original bonds declared effective and kept effective until two years after
the Closing Date, subject to certain exceptions. The Company shall, in the event
of such a shelf registration, provide to each bondholder copies of the
prospectus, notify each bondholder when a registration statement for the
original bonds has become effective and take certain other actions as are
appropriate to permit resale of the original bonds.
In the event that such exchange offer is not commenced or such registration
statement is not declared effective by February 21, 2000, the respective annual
interest rates on the original bonds shall increase by one-half of one percent
(50 basis points) effective on the 271(st) day following the Closing Date until
the date on which such exchange offer is commenced or such registration
statement shall have become effective.
Each bondholder (other than certain specified holders) who wishes to
exchange the original bonds for exchange bonds in the exchange offer shall be
required to represent that any exchange bonds to be received by it shall be
acquired in the ordinary course of business and that at the time of the
commencement of the exchange offer it shall have no arrangement with any person
to participate in the distribution (within the meaning of the Securities Act) of
the exchange bonds.
A bondholder that sells such original bonds pursuant to a shelf registration
generally would be required to be named as a selling holder in the related
prospectus and to deliver a prospectus to purchasers, will be subject to certain
of the civil liability provisions under the Securities Act in connection with
such sale and will be required to agree in writing to be bound by the provisions
of the registration rights agreement which are applicable to such bondholder
(including certain indemnification obligations).
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PLAN OF DISTRIBUTION
Each broker-dealer that receives exchange bonds for its own account in the
exchange offer must acknowledge that it will deliver a prospectus in connection
with any resale of the exchange bonds. This prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of exchange bonds received in exchange for original bonds where the
original bonds were acquired as a result of market-making activities or other
trading activities. The Company has agreed that, for a period of 180 days after
the expiration date of the exchange offer, it will make this prospectus
available to any broker-dealer for use in connection with any resale. In
addition, until , 2000, all dealers effecting transactions in the exchange
bonds may be required to deliver a prospectus.
The Company will not receive any proceeds from any sale of exchange bonds by
broker-dealers. Exchange bonds received by broker-dealers for their own account
in the exchange offer may be sold from time to time in one or more transactions
in the over-the-counter market, in negotiated transactions, through the writing
of options on the exchange bonds or a combination of these methods of resale.
These resales may be made at market prices prevailing at the time of resale, at
prices related to these prevailing market prices or negotiated prices. Any
resale may be made directly to purchasers or to or through brokers or dealers
who may receive compensation in the form of commissions or concessions from any
broker-dealer or the purchasers of any of the exchange bonds. Any broker-dealer
that resells exchange bonds that were received by it for its own account in the
exchange offer and any broker or dealer that participates in a distribution of
the exchange bonds may be deemed to be an underwriter within the meaning of the
Securities Act, and any profit on the resale of exchange bonds and any
commission or concessions received by those persons may be deemed to be
underwriting compensation under the Securities Act. The letter of transmittal
states that, by acknowledging that it will deliver and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
underwriter within the meaning of the Securities Act.
For a period of 180 days after the expiration date of the exchange offer,
the Company will promptly send additional copies of this prospectus and any
amendment or supplement to this prospectus to any broker-dealer that requests
these documents in the letter of transmittal. The Company has agreed to pay all
expenses incident to the exchange offer, including the expenses of one counsel
for the holders of the bonds, other than commissions or concessions of any
brokers or dealers. The Company will indemnify the holders of the bonds,
including any broker-dealers, against various liabilities, including liabilities
under the Securities Act.
In addition, all reports and other documents we subsequently file under
Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act will be deemed to be
incorporated by reference into this prospectus and to be part of this prospectus
from the date we subsequently file the reports and documents.
Any statements contained in a document incorporated or deemed to be
incorporated by reference into this prospectus are deemed to be modified or
superseded for purposes of this prospectus to the extent modified or superseded
by another statement contained in any subsequently filed document also
incorporated by reference in this prospectus. Any statement so modified or
superseded will not be deemed, except as so modified or superseded, to
constitute part of this prospectus.
You may request a copy of any of these filings, at no cost, by writing or
telephoning us at the following address or phone number:
Edison Mission Holdings Co.
18101 Von Karman Avenue, Suite 1700
Irvine, California 92612
(949) 752-5588
Attention: Corporate Secretary
87
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following summary describes certain material United States federal
income tax considerations that may be relevant to beneficial owners of the
bonds. The summary is based on the Internal Revenue Code of 1986, as amended
(the "Code"), and regulations, rulings and judicial decisions as of the date
hereof, all of which may be repealed, revoked or modified with possible
retroactive effect. This discussion does not deal with holders that may be
subject to special tax rules (including, but not limited to, insurance
companies, tax-exempt organizations, financial institutions, dealers in
securities or currencies, holders whose functional currency is not the United
States dollar or holders who will hold the bonds as a hedge against currency
risks or as part of a straddle, synthetic security, conversion transaction or
other integrated investment comprised of the bonds and one or more other
investments). The summary is applicable only to purchasers that acquire the
bonds pursuant to the offering at the initial offering price and who will hold
the bonds as capital assets within the meaning of Section 1221 of the Code. This
summary is for general information only and does not address all aspects of
United States federal income taxation that may be relevant to holders of the
bonds in light of their particular circumstances, and it does not address any
tax consequences arising under the laws of any state, local or foreign taxing
jurisdiction. Prospective holders should consult their own tax advisors as to
the particular tax consequences to them of acquiring, holding or disposing of
the bonds.
As used herein, the term "United States Holder" means a beneficial owner of
a bond that is (1) a citizen or resident of the United States for United States
federal income tax purposes, (2) a corporation created or organized under the
laws of the United States, any state thereof or the District of Columbia,
(3) an estate the income of which is subject to United States federal income tax
without regard to its source or (4) a trust if (x) a court within the United
States is able to exercise primary supervision over the administration of the
trust and one or more United States persons have the authority to control all
substantial decisions of the trust or (y) the trust has a valid election in
effect under applicable United States Treasury regulations to be treated as a
United States Holder. A "Non-United States Holder" is any beneficial holder of a
bond that is not a United States Holder.
UNITED STATES HOLDERS
THE EXCHANGE
For United States federal income tax purposes, a beneficial owner of a bond
will not recognize any taxable gain or loss on the exchange of the original
bonds for exchange bonds pursuant to the exchange offer, and a United States
Holder's tax basis and holding period in the exchange bonds will be the same as
in the original bonds.
STATED INTEREST ON EXCHANGE BONDS
Stated interest on an exchange bond generally will be taxable to a United
States Holder as ordinary income at the time it accrues or is received in
accordance with the United States Holder's method of accounting for United
States federal income tax purposes.
DISPOSITION OF AN EXCHANGE BOND
Upon the sale, exchange, redemption, retirement or other disposition of an
exchange bond, a United States Holder generally will recognize gain or loss
equal to the difference between the amount realized upon the sale, exchange,
redemption, retirement or other disposition (not including amounts attributable
to accrued but unpaid interest, which will be taxable as such) and such United
States Holder's adjusted tax basis in the exchange bond. A United States
Holder's tax basis in an exchange bond will, in general, be the United States
Holder's basis in the bond exchanged therefor. Such gain or loss will be capital
gain or loss. Capital gain recognized by an individual investor upon a
disposition of an exchange bond that has been held for more than 12 months will
generally be subject to a maximum
88
tax rate of 20% or, in the case of an exchange bond that has been held for
12 months or less, will be subject to tax at ordinary income tax rates.
MARKET DISCOUNT
United States Holders other than original purchasers of the bonds in the
offering of the original bonds should be aware that the sale of the exchange
bonds may be affected by the market discount provisions of the Code. The market
discount rules generally provide that if a United States Holder purchased the
bond, after the original offering, at a "market discount" (i.e., at an amount
less than the adjusted issue price of the bond as determined on the date of such
purchase) exceeding a statutorily-defined DE MINIMIS amount, and thereafter
recognized gain upon a disposition, including a partial redemption, of the
exchange bond received in exchange for an original bond, the lesser of such gain
or the portion of the market discount that accrued while the original bond and
exchange bond were held by such United States Holder will be treated as ordinary
interest income at the time of disposition. The rules also provide that a United
States Holder who acquires a bond at a market discount may be required to defer
a portion of any interest expense that may otherwise be deductible on any
indebtedness incurred or maintained to purchase or carry the bond until the
United States Holder disposes of such bond in a taxable transaction. If a holder
of a bond elects to include market discount in income currently, both of the
foregoing rules would not apply.
NON-UNITED STATES HOLDERS
Under present United States federal income tax law, subject to the
discussion of backup withholding and information reporting below:
(a) payments of principal and interest on the exchange bonds to any
Non-United States Holder will not be subject to United States federal
income or withholding tax provided that (1) the Non-United States Holder
does not actually or constructively own 10% or more of the total combined
voting power of all classes of stock of the Company entitled to vote,
(2) the Non-United States Holder is not a bank receiving interest
pursuant to a loan agreement entered into in the ordinary course of its
trade or business, (3) the Non-United States Holder is not a controlled
foreign corporation that is related to the Company (directly or
indirectly) through stock ownership, (4) such interest payments are not
effectively connected with a United States trade or business and
(5) certain certification requirements are met. Such certification will
be satisfied if the beneficial owner of the exchange bond certifies on
IRS Form W-8 or a substantially similar substitute form, under penalties
of perjury, that it is not a United States person and provides its name
and address, and (x) such beneficial owner files such form with the
withholding agent or (y) in the case of an exchange bond held by a
securities clearing organization, bank or other financial institution
that holds customers' securities in the ordinary course of its trade or
business (a "financial institution") and holds the exchange bond, such
financial institution certifies to the Company or its agent under
penalties of perjury that such statement has been received from the
beneficial owner by it or by a financial institution between it and the
beneficial owner and furnishes the withholding agent with a copy thereof;
and
(b) a Non-United States Holder will not be subject to United States
federal income tax on gain realized on the sale, exchange, redemption,
retirement or other disposition of an exchange bond, unless (1) the gain
is effectively connected with a trade or business carried on by such
holder within the United States or, if a treaty applies, is generally
attributable to a United States permanent establishment maintained by the
holder, or (2) the holder is an individual who is present in the United
States for 183 days or more in the taxable year of disposition and
certain other requirements are met.
89
BACKUP WITHHOLDING AND INFORMATION REPORTING
In general, payments of interest and the proceeds of the sale, exchange,
redemption, retirement or other disposition of the exchange bonds payable by a
United States paying agent or other United States intermediary will be subject
to information reporting. In addition, backup withholding at a rate of 31% will
apply to these payments if the holder fails to provide an accurate taxpayer
identification number in the case of a United States Holder or the certification
described above (in the case of a Non-United States Holder) or other evidence of
exempt status or fails to report all interest and dividends required to be shown
on its United States federal income tax returns. Certain United States Holders
(including, among others, corporations) and Non-United States Holders that
comply with certain certification requirements are not subject to backup
withholding. Any amount paid as backup withholding will be creditable against
the holder's United States federal income tax liability provided that the
required information is timely furnished to the IRS. Holders of exchange bonds
should consult their tax advisors as to their qualification for exemption from
backup withholding and the procedure for obtaining such an exemption. On
October 6, 1997, new Treasury Regulations were issued that generally modify the
information reporting and backup withholding rules applicable to certain
payments made after December 31, 2000. In general, the new regulations would not
significantly alter the present rules discussed above, except in certain special
situations.
90
LEGAL MATTERS
Certain legal matters with respect to the exchange bonds and the guarantees
(other than the guarantee of EME Homer City Generation L.P.) will be passed upon
for the Company by Skadden, Arps, Slate, Meagher & Flom LLP, 919 Third Avenue,
New York, New York. Certain legal matters with respect to the guarantee of EME
Homer City Generation L.P. will be passed upon for the Company by Morgan,
Lewis & Bockius LLP, 1701 Market Street, Philadelphia, Pennsylvania.
EXPERTS
The consolidated financial statements of Edison Mission Holdings Co. and
subsidiaries for the nine months ended September 30, 1999, which are included in
this prospectus and the consolidated financial statements of Edison Mission
Energy and subsidiaries for the fiscal year ended December 31, 1998, included in
Edison Mission Energy's Annual Report on Form 10-K for the fiscal year ended
December 31, 1998, which are incorporated by reference in this Prospectus have
been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their reports with respect thereto, and are included herein in
reliance upon the authority of said firm as experts in giving said reports. The
audited special-purpose combined accounts of Fiddlers Ferry and Ferrybridge C
Power Stations for the year ended March 29, 1998 and the nine month period ended
January 3, 1999 incorporated in this prospectus by reference to the Form 8-K/A
dated July 19, 1999 of Edison Mission Energy have been so incorporated in
reliance on the report of PricewaterhouseCoopers, Chartered Accountants, given
the authority of said firm as experts in auditing and accounting.
AVAILABLE INFORMATION
EME is subject to the informational requirements of the Exchange Act and, in
accordance therewith, files reports and information statements and other
information with the Securities and Exchange Commission. Such reports and
information statements and other information filed by EME with the Securities
and Exchange Commission can be inspected and copied at the Public Reference
Section of the Securities and Exchange Commission at Room 1024, Judiciary Plaza,
450 Fifth Street, N.W., Washington, D.C. 20549, and at the regional offices of
the Securities and Exchange Commission located at Seven World Trade Center,
13(th) Floor, New York, New York 10048 and 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. Copies of such material can be obtained from the Public
Reference Section of the Securities and Exchange Commission at Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed
rates. The Securities and Exchange Commission maintains a Web site that contains
reports, proxy and information statements and other materials that are filed
through the Securities and Exchange Commission's Electronic Data Gathering,
Analysis and Retrieval (EDGAR) system. This Web site can be accessed at
http://www.sec.gov.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Securities and Exchange Commission
are incorporated by reference into this prospectus:
(i) EME's Annual Report on Form 10-K for the year ended December 31, 1998;
(ii) EME's Current Reports on Form 8-K dated March 18, 1999, Form 8-K dated
July 19, 1999 and Form 8-K/A dated August 2, 1999; and
(iii) EME's Quarterly Reports on Form 10-Q for the quarters ended March 31,
1999, June 30, 1999 and September 30, 1999.
Any statement contained in a document incorporated by reference herein will
be deemed to be modified or superceded for purposes of this prospectus to the
extent that a statement contained herein modifies or supersedes such statement.
Any such statement so modified or superseded will not be deemed to constitute a
part of this prospectus except as so modified or superseded.
91
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE
--------
EDISON MISSION HOLDINGS CO.
Report of Independent Public Accountants.................... F-2
Consolidated Balance Sheet--September 30, 1999.............. F-3
Consolidated Statement of Operations--Nine Months Ended
September 30, 1999......................................... F-4
Consolidated Statement of Changes in Shareholder's
Equity--Nine Months Ended
September 30, 1999......................................... F-5
Consolidated Statement of Cash Flows--Nine Months Ended
September 30, 1999........................................ F-6
Notes to Consolidated Financial Statements--September 30,
1999....................................................... F-7
F-1
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
Edison Mission Holdings Co.:
We have audited the accompanying consolidated balance sheet of Edison
Mission Holdings Co. and subsidiaries (the Company), a wholly owned subsidiary
of Edison Mission Energy, as of September 30, 1999, and the related consolidated
statements of operations, shareholders equity and cash flows for the nine months
ended September 30, 1999. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Edison
Mission Holdings Co. as of September 30, 1999, and the results of its operations
and its cash flows for the nine months ended September 30, 1999, in conformity
with generally accepted accounting principles.
Los Angeles, California
November 5, 1999
F-2
EDISON MISSION HOLDINGS CO.
CONSOLIDATED BALANCE SHEET--SEPTEMBER 30, 1999
1999
--------------
(IN THOUSANDS)
ASSETS
Current assets
Cash and cash equivalents................................. $ 125,204
Due from Edison Mission Energy and Affiliates............. 21,053
Fuel inventory............................................ 21,315
Spare parts inventory..................................... 23,647
Other current assets...................................... 1,376
----------
Total current assets.................................. 192,595
----------
Operating facility and equipment
Property, plant & equipment............................... 1,942,667
Accumulated depreciation.................................. (25,280)
----------
Net property, plant & equipment........................... 1,917,387
Other assets
Deferred financing charges, net........................... 11,714
----------
Total assets........................................ $2,121,696
==========
LIABILITIES AND EQUITY
Current liabilities
Accounts payable.......................................... $ 8,497
Accrued liabilities....................................... 26,910
Interest Payable.......................................... 24,856
----------
Total current liabilities............................. 60,263
----------
Long-term debt.............................................. 885,000
Deferred taxes.............................................. 14,623
Benefits plans.............................................. 17,150
Maintenance accrual......................................... 75,231
----------
Total liabilities..................................... 1,052,267
----------
Commitments and contingencies (Note 7)
Shareholder's equity
Common stock, no par value; 10,000 shares authorized; 100
shares issued and outstanding........................... --
Additional paid-in-capital................................ 1,036,921
Retained Earnings......................................... 32,508
----------
Total shareholder's equity............................ 1,069,429
----------
Total liabilities and shareholder's equity.......... $2,121,696
==========
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
EDISON MISSION HOLDINGS CO.
CONSOLIDATED STATEMENT OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1999
1999
--------------
(IN THOUSANDS)
Operating revenues from marketing affiliate
Capacity revenues....................................... $ 22,010
Energy revenues......................................... 223,778
--------
Total operating revenues.................................... 245,788
--------
Operating expenses
Fuel.................................................... 84,391
Plant operations........................................ 40,786
Depreciation and amortization........................... 25,280
Administrative and general.............................. 542
--------
Total operating expenses.................................... 150,999
--------
Income from operations...................................... 94,789
--------
Other income (expense)
Interest and other income............................... 834
Interest expense........................................ (35,506)
--------
Total other expense......................................... (34,672)
--------
Income before income taxes and extraordinary loss........... 60,117
Provision for income taxes before extraordinary loss........ 24,939
--------
Income before extraordinary loss............................ 35,178
--------
Extraordinary loss on early extinguishment of debt,
net of income tax benefit of $2,280....................... (2,667)
--------
NET INCOME.................................................. $ 32,511
========
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
EDISON MISSION HOLDINGS CO.
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDER'S EQUITY
NINE MONTHS ENDED SEPTEMBER 30, 1999
COMMON ADDITIONAL RETAINED SHAREHOLDER'S
STOCK PAID-IN-CAPITAL EARNINGS EQUITY
-------- --------------- -------- -------------
(IN THOUSANDS)
Balance at January 1, 1999....................... $ -- $ 3 $ (3) $ --
------- ---------- ------- ----------
Net income....................................... -- -- 32,511 32,511
Cash contribution................................ -- 1,066,917 -- 1,066,917
Cash dividends................................... -- (29,999) -- (29,999)
------- ---------- ------- ----------
Balance at September 30, 1999.................... $ -- $1,036,921 $32,508 $1,069,429
======= ========== ======= ==========
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
EDISON MISSION HOLDINGS CO.
CONSOLIDATED STATEMENT OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1999
1999
--------------
(IN THOUSANDS)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income................................................ $ 32,511
Adjustments to reconcile net income to net cash provided
by operating activities:
Extraordinary loss on early extinguishment of debt,
net of tax.......................................... 2,667
Depreciation and amortization......................... 26,434
Deferred tax provision................................ 14,623
Increase in due from Edison Mission Energy and
Affiliates.......................................... (18,773)
Increase in inventory................................. (3,541)
Increase in prepaid and other assets.................. (1,376)
Increase in payables.................................. 8,498
Increase in accrued liabilities....................... 26,134
Increase in interest payable.......................... 24,856
Increase in other liabilities......................... 1,804
-----------
Net cash provided by operating activities............... 113,837
-----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of Homer City facility....................... (1,818,631)
Capital expenditures.................................. (74,105)
-----------
Net cash used in investing activities................... (1,892,736)
-----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Capital contribution from parent...................... 1,066,917
Borrowings on long-term obligations................... 885,000
Borrowings under Acquisition Facility................. 800,000
Repayments on debt obligations........................ (800,000)
Financing costs....................................... (17,815)
Cash dividends to parent.............................. (29,999)
-----------
Net cash provided by financing activities............... 1,904,103
-----------
NET INCREASE IN CASH........................................ 125,204
CASH AND CASH EQUIVALENTS, beginning of period.............. --
-----------
CASH AND CASH EQUIVALENTS, at end of period................. $ 125,204
===========
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
EDISON MISSION HOLDINGS CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
1. GENERAL
Edison Mission Holdings Co. (the "Company"), a wholly owned subsidiary of
Edison Mission Energy ("EME"), an indirect wholly owned subsidiary of Edison
International("EIX"), is a California corporation formed for the purpose of
issuing the bonds and, through its subsidiaries, acquiring, owning and operating
three coal-fired electric generating units (collectively, the "Homer City Units"
or the "Units") and related facilities (the Units and such related facilities,
the "Facilities") located in Indiana County, Pennsylvania for the purpose of
producing electric energy.
On March 18, 1999, the Company's subsidiary, EME Homer City Generation L.P.
completed its acquisition (the "Acquisition") of 100% of the ownership interests
in the Facilities and assumed certain liabilities of the former owners. The
accompanying financial statements reflect the operations of the Facilities
commencing from the date of acquisition. The acquisition has been accounted for
utilizing the purchase method. The purchase price was allocated to the assets
acquired and liabilities assumed based upon a preliminary assessment of their
respective fair market values. This allocation may change as the fair market
valuation is finalized.
The acquisition was financed through a capital contribution by EME of
approximately $1.1 billion and a short-term loan of approximately $800 million.
The short-term loan was subsequently replaced by $830 million of senior secured
bonds.
The Facilities consist of three coal fired steam turbine units, one coal
preparation facility, an 1,800 acre dam site and associated support facilities.
Units 1 and 2 are essentially identical steam turbine generators with net summer
capacities of 620 MW and 614 MW, respectively. Units 1 and 2 began commercial
operation in 1969. Unit 3 is also a steam turbine generator with a net summer
capacity of 650 MW. Unit 3 began commercial operations in 1977. The Station
benefits from direct transmission access into both the Pennsylvania-New
Jersey-Maryland power market (the "PJM") and the New York power market ("NYPP").
The Company has entered into a contract with a marketing affiliate for the
sale of energy and capacity produced by the Facilities, which enables such
marketing affiliate to engage in forward sales and hedging transactions to
manage electricity price exposure. The marketing affiliate has systems in place
which monitor real-time spot and forward pricing and perform options valuations.
The Company pays the marketing affiliate a nominal fee for the performance of
marketing services. All revenues from physical sales transactions executed by
the marketing affiliate are deposited into a revenue account established for the
benefit of the holders of the Company's senior secured debt. Additionally, the
Company has entered into separate transition contracts (the "Transition
Contracts") with Pennsylvania Electric Company ("Penelec") and New York State
Electric & Gas Corporation ("NYSEG"), pursuant to which EME Homer City may
exercise a put option to sell certain quantities of capacity to Penelec and
NYSEG, and Penelec and NYSEG may exercise call options to purchase certain
quantities of capacity. The terms of the NYSEG Transition Contract and the
Penelec Transition Contract continue until April 30, 2001 and May 31, 2001,
respectively. EME Homer City has exercised a put option to sell 942 MW of
capacity to Penelec for the period from March 18, 1999 through May 31, 2000
under the Penelec Transition Contract for a price of $49.90/MW-day from
March 18, 1999 through May 31, 1999 and $59.90/MW-day for the year ending
May 31, 1999. EME Homer City has also entered into contractual arrangements with
NYSEG to sell 942 MW of capacity for the period from March 18, 1999 to May 31,
1999 for a price of $55.00/MW-day and sell 99% of the remaining installed
capacity over the transition contracts through May 31, 2000 at a weighted
average price of $65.00/MW-day.
F-7
EDISON MISSION HOLDINGS CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1999
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
USE OF ESTIMATES IN FINANCIAL STATEMENTS
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.
NEW ACCOUNT PRONOUNCEMENT
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133 (SFAS 133) "Accounting for Derivative
Instruments and Hedging Activities". SFAS 133, as amended, will become effective
on January 1, 2001. This statement establishes accounting and reporting
standards requiring that every derivative instrument be recorded in the balance
sheet as either an asset or liability measured at its fair value. It also
requires that changes in the derivative's fair value be recognized currently in
earnings unless specific hedge accounting criteria are met. A derivative's gains
and losses for qualifying hedges offset related results on the hedged item in
the income statement and a company must formally document, designate and assess
the effectiveness of transactions that receive hedge accounting. The impact of
adopting Statement 133 on the Company's financial statements has not been
quantified at this time.
CASH AND CASH EQUIVALENTS
The Company considers cash and cash equivalents to include cash and
short-term investments with original maturities of three months or less.
RESTRICTED CASH
A portion of the Company's cash balance, totaling $102.2 million at
September 30, 1999, was restricted as to use. Permitted use for such cash
includes payment of operating costs and other current items, as defined in the
trust agreement associated with the Company's senior secured bonds.
INVENTORY
Inventory consists of spare parts, coal and fuel oil and is stated at the
lower of weighted average cost or market.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost. Depreciation is computed
on a straight-line basis over the following estimated useful lives:
Power plant facilities...................................... 39 years
Furniture, office equipment, and vehicles................... 5 to 7 years
F-8
EDISON MISSION HOLDINGS CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1999
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
At September 30, 1999, property, plant and equipment consisted of the
following:
(IN THOUSANDS)
Land........................................................ $ 4,500
Power plant facilities...................................... 1,862,458
Construction in progress.................................... 71,816
Equipment, furniture, and fixtures.......................... 3,893
----------
1,942,667
----------
Accumulated depreciation.................................... (25,280)
----------
Property, plant and equipment, net.......................... $1,917,387
==========
DEFERRED COSTS
Deferred costs at September 30, 1999 consisted of the following:
(IN THOUSANDS)
Deferred financing costs.................................... $12,233
Accumulated amortization.................................... (519)
-------
Net deferred financing costs................................ $11,714
=======
Deferred financing costs consist of legal and other costs incurred by the
Company to obtain long-term financing (Note 3). These costs are being amortized
over the life of the related long-term debt using the effective interest method.
REVENUE RECOGNITION
Revenue and related costs are recorded as electricity is generated or
services are provided.
POWER MARKETING ACTIVITIES
The Company has entered into a contract with a marketing affiliate for the
sale of energy and capacity produced by the Station, which enables such
marketing affiliate to engage in forward sales and hedging transactions to
manage the Company's electricity price exposure. Net gains or losses on hedges
by the marketing affiliate which are physically settled are recognized in the
same manner as the hedged item. The Company receives the net transaction price
on all contracts that are physically settled by its marketing affiliate. Another
marketing affiliate of the Company enters into option contacts using the credit
of the Company. Options written and premiums received by this affiliate are not
transferred to the Company.
INCOME TAXES
The Company is included in the consolidated federal income tax and combined
state franchise tax returns of EIX. The Company calculates its income tax
provision on a separate company basis under a tax sharing arrangement with an
affiliate of EIX, which in turn has an agreement with EIX. Tax
F-9
EDISON MISSION HOLDINGS CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1999
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
benefits generated by the Company and used in the EIX consolidated tax return
are recognized by the Company without regard to separate company limitations.
The Company accounts for income taxes using the asset-and-liabilities
method, wherein deferred tax assets and liabilities are recognized for future
tax consequences of temporary differences between the carrying amounts and the
tax bases of assets and liabilities using enacted rates.
MAINTENANCE ACCRUAL
Each of the Facility's major pieces of equipment (e.g. boiler and turbine)
requires major maintenance on a periodic basis ranging from three to thirty
years. These costs are being accrued on a straight-line basis over the
respective periods.
The maintenance accrual is based on management's estimates of what these
events will cost at the time the events occur. Due to fluctuations in prices and
changes in the scope and timing of the work to be performed, the actual amounts
expended, may differ from the amounts estimated for these events.
3. LONG-TERM DEBT
On March 18, 1999 the Company entered into a debt agreement (the "Initial
Financing") with a bank for a combination of loan and line of credit agreements
aggregating $1.1 billion. The Initial Financing consisted of a short-term loan
for $800 million for the initial financing of the acquisition (the "Acquisition
Facility"), a $250 million construction loan (the "Environmental Capital
Improvements Facility") that would be drawn on when needed, and a $50 million
line of credit (the "Working Capital Facility"). Amounts outstanding under the
Initial Financing bear interest at variable Eurodollar rates or Base rates as
defined in the Agreement, at the option of the Partnership. If the Company
elects to pay Eurodollar rates, interest costs include a margin of 0.85% to
2.50% depending on the Company's current debt rating. At September 30, 1999 the
margin was 1.00%. Additionally, the Company pays a facility fee of .0015% to
.0050%, depending on the Company's current debt rating, on the total outstanding
commitment irrespective of usage. At September 30, 1999 the facility fee was
.0025%. The Company also pays an agent bank fee of $50,000 per year.
On May 27, 1999, the Company completed a private offering of $300 million
aggregate principal amount of 8.137% Senior Secured Bonds due 2019 and
$530 million aggregate principal amount of 8.734% Senior Secured Bonds due 2026
(collectively the "Senior Secured Bonds"). The net proceeds from the Senior
Secured Bonds were used to repay the outstanding principal of, and to
permanently reduce the bank commitments associated with, the Acquisition
Facility and to repay a portion of EME's equity investment in the form of a
dividend. As a result of the early extinguishment of the Acquisition Facility,
the Company wrote off unamortized deferred financing costs which were reported
as an extraordinary loss of $4.9 million ($2.7 million after tax).
At September 30, 1999, the Company had drawn $55 million on the
Environmental Capital Improvements Facility and had not drawn on the Working
Capital Facility. The Environmental Capital Improvements Facility matures on
March 18, 2004. Interest on the Initial Financing is indexed at LIBOR (5.387% at
September 30, 1999). Interest paid under the Initial Financing and Senior
Secured Bonds was $9.6 million and $24.4 million, respectively for the nine
months ended September 30, 1999.
F-10
EDISON MISSION HOLDINGS CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1999
3. LONG-TERM DEBT (CONTINUED)
At September 30, 1999, the future maturities of the debt are as follows:
PERIOD ENDING SEPTEMBER 30,
- --------------------------- (IN THOUSANDS)
October 1999-September 2000................................. $ --
October 2000-September 2001................................. --
October 2001-September 2002................................. --
October 2002-September 2003................................. --
October 2003-September 2004................................. 58,292
Thereafter.............................................. 826,708
--------
Total................................................... $885,000
========
The Company has certain financial and non-financial debt covenants
associated with its debt that may limit distributions. With the exception of the
initial $30 million distribution from the net proceeds of the Senior Secured
Bonds, the Company, in order to make distributions, must maintain a specified
debt service coverage ratio, net cash flows over the aggregate principal,
interest, and fixed charges for a period, ranging from 1.5 to 1.7 over the life
of the debt. The Company is also limited in obtaining new debt including capital
lease obligations in excess of $10 million, working capital loans in excess of
$50 million (with such amount to be escalated annually in accordance with the
consumer price index), and other senior indebtedness in excess of $20 million.
The collateral for the Bonds includes all assets, whether now owned or
thereafter acquired.
The Company's parent, EME, has entered into the Credit Support Guarantee,
which, under certain conditions, must make up to $42 million in payments. The
Credit Support Guarantee is available until December 31, 2001 as additional
cashflow to support shortfalls in the payment of the Bonds and other senior
secured debt. EME has also provided a guarantee as of the date of the offering
to satisfy the Company's debt service reserve requirement with respect to the
Bonds. Similar guarantees have been extended by EME with respect to the
obligations in the Credit Agreement.
4. RELATED-PARTY TRANSACTIONS
Certain administrative services such as payroll, employee benefit programs,
and information technology, all performed by EIX or EME, are shared among all
affiliates of EIX and the costs of these corporate support services are
allocated to all affiliates, including the Company. Costs are allocated based on
one of the following formulas: percentage of time worked, equity in investment
and advances, number of employees, or multi-factor (operating revenues,
operating expenses, total assets and number of employees). In addition, services
of EIX or EME are sometimes directly requested by the Company and such services
are performed for the Company's benefit. Labor and expenses of these directly
requested services are specifically identified and billed at cost. Management
believes the allocation methodologies utilized are reasonable. The Company made
reimbursements for the cost of these programs and other services, which amounted
to $520,000 for the period ended September 30, 1999.
F-11
EDISON MISSION HOLDINGS CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1999
4. RELATED-PARTY TRANSACTIONS (CONTINUED)
The Company pays its trading affiliate a two-cent per mega-watt hour
commission fee for all power sold under power marketing arrangements. For the
period ended September 30, 1999, commission fees totaled $131,000.
5. INCOME TAXES
Income tax expense includes the current tax benefit from the operating loss
and the change in deferred income taxes during the year. The components of the
net accumulated deferred income tax liability were:
NINE MONTHS ENDED SEPTEMBER 30, 1999
- ------------------------------- --------------
(IN THOUSANDS)
Deferred tax assets
Loss carryforwards........................................ $ 1,226
State tax deduction..................................... 834
Other................................................... 225
-------
$ 2,285
-------
Deferred tax liabilities
Accumulated depreciation difference....................... $16,908
-------
Deferred taxes, net......................................... $14,623
=======
F-12
EDISON MISSION HOLDINGS CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1999
5. INCOME TAXES (CONTINUED)
Loss carryforwards represent Pennsylvanian state tax losses totaling
$12.3 million at September 30, 1999, which would expire in 2009 and are limited
in use to $2.0 million per year.
The provision for income taxes is comprised of the following:
NINE MONTHS ENDED SEPTEMBER 30, 1999
- ------------------------------- -----------
(IN
THOUSANDS)
Current
Federal................................................... $ 6,522
State..................................................... 1,514
-------
Total current........................................... 8,036
-------
Deferred
Federal................................................... 10,984
State..................................................... 3,639
-------
Total deferred.......................................... 14,623
-------
Provision for income taxes.................................. $22,659
=======
Income tax provision (benefit) is included in the statement of operations as
follows:
Income before extraordinary loss............................ $24,939
Extraordinary loss.......................................... (2,280)
-------
Total................................................... $22,659
=======
The components of the deferred tax provision, which arise from timing
differences between financial and tax reporting, are presented below:
NINE MONTHS ENDED SEPTEMBER 30, 1999
- ------------------------------- --------
Accumulated depreciation difference......................... $16,908
Loss carryforwards.......................................... (1,226)
State tax deduction......................................... (834)
Other....................................................... (225)
-------
Total deferred provision................................ $14,623
=======
F-13
EDISON MISSION HOLDINGS CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1999
5. INCOME TAXES (CONTINUED)
Variations from the 35% federal statutory rate are as follows:
NINE MONTHS ENDED SEPTEMBER 30, 1999
- ------------------------------- --------
Expected provision for federal income taxes................. $21,041
Decrease in taxes from:
State tax--net of federal benefit......................... 3,898
-------
Total provision for income taxes........................ $24,939
=======
Effective tax rate.......................................... 41.48%
=======
6. EMPLOYEE BENEFITS PLANS
Employees of the Company are eligible for various benefit plans of EIX.
PENSION PLANS
The Company maintains a pension plan specifically for the benefit of its
union employees. The Company's non-union employees participate in the EIX
pension plan. Both plans are noncontributory, defined benefit pension plans and
cover employees who fulfill minimum service requirements. There are no prior
service costs for the plans.
F-14
EDISON MISSION HOLDINGS CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1999
6. EMPLOYEE BENEFITS PLANS (CONTINUED)
Information on plan assets and benefits obligations is shown below:
NINE MONTHS ENDED SEPTEMBER 30, UNION PLAN NON-UNION
- ------------------------------- ---------- ---------
(IN THOUSANDS)
Change in Benefit Obligation
Benefit obligation at beginning of period............ $ -- $ --
Benefit obligation acquired.......................... (6,000) (800)
Service cost......................................... (344) (94)
Interest cost........................................ (241) (28)
Actuarial gain....................................... -- 122
------- -------
Benefit obligation at end of period................ $(6,585) $ (800)
------- -------
Change in Plan Assets
Fair value of plan assets at beginning of period..... $ -- $ --
Actual return on plan assets......................... 2 --
Employer contributions............................... 100 --
------- -------
Fair value of plan assets at end of period......... $ 102 $ --
------- -------
Funded status.......................................... $(6,484) $ (800)
Unrecognized net loss (gain)........................... 3 (122)
------- -------
Pension liability.................................... $(6,481) $ (922)
======= =======
Discount rate.......................................... 7.50% 7.0-7.5%
Rate of compensation increase.......................... 5.00% 5.00%
Expected return on plan assets......................... 6.75% 7.50%
Components of pension expense were:
Service cost........................................... $344 $ 94
Interest cost obligation............................... 241 28
Expected return on plan assets......................... (4) --
---- ----
Net pension expense.................................... $581 $122
==== ====
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
The Company's employees retiring at or after age 55 with at least 10 years
of service are eligible for postretirement health care, dental, life insurance
and other benefits.
F-15
EDISON MISSION HOLDINGS CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1999
6. EMPLOYEE BENEFITS PLANS (CONTINUED)
Information on plan assets and benefit obligations is shown below:
NINE MONTHS ENDED SEPTEMBER 30, 1999 UNION PLAN NON-UNION
- ------------------------------------ ---------- ---------
(IN THOUSANDS)
Change in Benefit Obligation
Benefit obligation at beginning of period............ $ -- $ --
Benefit obligation acquired.......................... (7,500) (1,600)
Service cost......................................... (233) (47)
Interest cost........................................ (301) (66)
Actuarial loss (gain)................................ -- 185
Benefits paid........................................ -- --
------- --------
Benefit obligation at end of period................ $(8,034) $ (1,528)
------- --------
Change in Plan Assets
Fair Value of plan assets at beginning of period..... $ -- $ --
Employer contributions............................... -- --
Benefits paid........................................ -- --
------- --------
Fair value of plan assets at end of period......... $ -- $ --
------- --------
Funded status.......................................... $(8,034) $ (1,528)
Unrecognized net loss (gain)........................... -- (185)
------- --------
Recorded liability................................... $(8,034) $ (1,713)
======= ========
Discount rate.......................................... 6.75% 7.0-7.5%
The components of post-retirement benefits other than pension expense were:
Service cost........................................... $ 233 $ 47
Interest cost.......................................... 301 66
------- --------
Total expense.......................................... $ 534 $ 113
======= ========
For the non-union plan, the assumed rate of future increases in the
per-capita cost of health care benefits is 8.25% for 1999, gradually decreasing
to 5.0% for 2009 and beyond. Increasing the health care cost trend rate by one
percentage point would increase the accumulated obligation as of September 30,
1999, by $400,000 and annual aggregate service and interest costs by $15,000.
Decreasing the health care cost trend rate by one percentage point would
decrease the accumulated obligation as of September 30, 1999, by $300,000 and
annual aggregate service and interest costs by $10,000.
For the union plan, the assumed rate of future increases in the per-capita
cost of health care benefits is 8.60% for 1999, gradually decreasing to 5.0% for
2009 and beyond. Increasing the health care cost trend rate by one percentage
point would increase the accumulated obligation as of September 30, 1999, by
$1.9 million and annual aggregate service and interest costs by $230,000.
Decreasing the health care cost trend rate by one percentage point would
decrease the accumulated obligation as of June 30, 1999, by $1.5 million and
annual aggregate service and interest costs by $180,000.
F-16
EDISON MISSION HOLDINGS CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1999
6. EMPLOYEE BENEFITS PLANS (CONTINUED)
EMPLOYEE STOCK PLANS
A 401(k) plan is maintained to supplement eligible employees' retirement
income. The Company matches 100 percent of non-union employee contributions up
to 6 percent of such employees' annual compensation. The Company also matches
65 percent of contributions made by union employees, up to 2.6 percent of annual
compensation. Employer contributions vest 20 percent per year.
7. COMMITMENTS AND CONTINGENCIES
ASH DISPOSAL SITE
Pennsylvania Department of Environmental Protection ("PaDEP") regulations
governing ash disposal sites require, among other things, groundwater
assessments of landfills if existing groundwater monitoring indicates the
possibility of degradation. The assessments could lead to the installation of
additional monitoring wells and if degradation of the groundwater is discovered,
the Company would be required to develop abatement plans, which may include the
lining of unlined sites. To date, the Facilities' ash disposal site has not
shown any signs that would require abatement. Management does not believe that
the costs of maintaining and abandoning the ash disposal site will have a
material impact on the Company's results of operations or financial position.
TWO LICK CREEK RESERVOIR DEEP MINE DISCHARGES
In connection with its purchase of the Facilities on March 18, 1999, the
Company acquired the Two Lick Creek Dam and Reservoir. Acid discharges from two
inactive deep mines were being collected and partially treated on the reservoir
property by a mining company before being pumped off the property for additional
treatment at a nearby treatment plant. The mining company, which filed for
bankruptcy, operated the collection and treatment system until May 1999, when
its assets were allegedly depleted.
The PaDEP initially advised the Company that it was potentially responsible
for treating the discharges by virtue of its alleged ownership of the property
of which the discharges allegedly emanated. Without any admission of its
liability, the Company voluntarily agreed through a Letter Agreement to fund the
operation of the treatment plant (approximately $11,000 per month) for an
interim period while PaDEP continued its investigation. The agency has recently
notified the Company that it is responsible for treatment of one of the
discharges. It has also advised the owner of the mineral rights and three former
operators of the mine that they are liable and has requested them to
cooperatively develop and implement a plan with the Company to treat the
discharge. The Company estimates the cost of a passive treatment system to be
approximately $750,000. The cost of operating a passive treatment system would
be considerably less than the cost of operating the current treatment plant.
FUEL CONTRACTS COMMITMENT
The Company has entered into several fuel purchase agreements with various
third party suppliers for the purchase of bituminous steam coal. These contracts
call for the purchase of a minimum quantity of coal over the term of the
contracts, which extend from three months to 8.5 years from
F-17
EDISON MISSION HOLDINGS CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1999
7. COMMITMENTS AND CONTINGENCIES (CONTINUED)
September 30, 1999, with an option at the Company's discretion to purchase
additional amounts of coal as stated in the agreements. The minimum quantity of
coal to be purchased through these contracts is 19.9 million tons over the terms
of the respective contracts. Pricing is based on fixed prices per ton with
various methods of escalation as defined in the agreements. The escalation is
generally based on market conditions. These agreements may be terminated by
notice to the seller. If notice of termination is filed at the Company's
convenience, the Company would be liable for unpaid amounts for coal already
delivered and the seller's incidental costs of closing out the agreement. In no
event shall the Company be liable for lost anticipated profit or for any charges
for coal not delivered.
PLANT IMPROVEMENTS
Upon acquisition, the Company began major plant improvements consisting
primarily of a turnkey pollution control retrofit project ("Environmental
Capital Improvements"). The estimated cost of this project is $233.8 million.
LEASES
At September 30, 1999 the Company had no capital leases, however, the
Company did have several operating leases in place relating mainly to flue gas
conditioning equipment and trucks. At September 30, 1999, the future operating
lease commitments were as follows:
PERIOD ENDING SEPTEMBER 30,
- --------------------------- (IN THOUSANDS)
October 1999-September 2000................................. $ 811
October 2000-September 2001................................. 132
October 2001-September 2002................................. 131
October 2002-September 2003................................. 126
October 2003-September 2004................................. 75
------
Total................................................... $1,275
======
8. SUPPLEMENTAL STATEMENTS OF CASH FLOWS INFORMATION
NINE MONTHS ENDED SEPTEMBER 30, 1999
- ------------------------------- --------------
(IN THOUSANDS)
Cash paid:
Interest.................................................... $10,131
NINE MONTHS ENDED SEPTEMBER 30, 1999
- ------------------------------- ----------
Details of facility acquisition:
Fair value of assets acquired............................... $1,909,983
Liabilities assumed......................................... 91,352
----------
Net cash paid for acquisition............................... $1,818,631
==========
F-18
EDISON MISSION HOLDINGS CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1999
9. YEAR 2000 COMPLIANCE (UNAUDITED)
The Year 2000 ("Y2K") problem concerns the inability of information and
technology-based operating systems to properly recognize and process
date-sensitive information beyond December 31, 1999. This could result in
systems failures and miscalculations, which could cause business disruptions.
Equipment that uses a date, such as computers and operating control systems, may
be affected. This includes not only the Company's equipment but that used by the
Company's customers and suppliers.
The Company has completed its assessment of the implication Y2K will have on
its own equipment and is nearing completion in its remediation efforts. The
total costs incurred to date as well as the additional costs associated with the
remaining remediation efforts related to plant equipment as well as management
information systems is anticipated to be immaterial. The Company is also well
into its program to identify and assess the Y2K readiness of its critical and
important suppliers and customers. In addition, the Station is well underway in
development of contingency plans to address unforeseen problems both with the
Company's own equipment and also that of their customers and suppliers. While
there can be no assurance that the Company's remediation and contingency plans
will be successful, management does not expect that any disruptions will have a
material adverse effect on the Station's overall financial position or results
of operations; however, if not effectively remediated, negative effects from the
Y2K issues, including those related to internal systems, vendors, business
partners, or other customers, could cause results to differ.
F-19
APPENDIX A
GLOSSARY OF DEFINED TERMS
Unless the context requires otherwise, any reference in this prospectus to
any agreement shall mean such agreement and all schedules, exhibits and
attachments thereto as amended, supplemented or otherwise modified and in effect
as of the date of this prospectus. All terms defined herein used in the singular
shall have the same meanings when used in the plural and vice versa.
CERTAIN TERMS DEFINED BELOW ARE SUMMARIES OF TERMS DEFINED IN, AND ARE
DEFINED MORE SPECIFICALLY IN, THE OPERATIVE CONTRACTS AND THE FINANCING
DOCUMENTS. SUCH SUMMARIES DO NOT PURPORT TO BE COMPLETE AND ARE SUBJECT TO, AND
QUALIFIED IN THEIR ENTIRETY BY REFERENCE TO, ALL OF THE PROVISIONS OF THE
OPERATIVE CONTRACTS AND THE FINANCING DOCUMENTS. COPIES OF THE OPERATIVE
CONTRACTS AND THE FINANCING DOCUMENTS REASONABLY REQUESTED ARE AVAILABLE FOR
INSPECTION, SUBJECT TO APPROPRIATE CONFIDENTIALITY RESTRICTIONS, AT THE
CORPORATE OFFICE OF THE COMPANY. SEE "AVAILABLE INFORMATION."
"Acceptable Credit Provider" means a bank or trust company with a combined
capital and surplus of at least $1 billion whose long term unsecured debt is
rated "A2" or higher by Moody's or "A" or higher by S&P.
"Acceptable Credit Support" means (1) an unconditional guarantee by EME or
any other Affiliate of the Company, with such entity in each case being rated
"Baa1" or higher by Moody's and "BBB+" or higher by S&P or (2) an irrevocable
letter of credit from an Acceptable Credit Provider. In the event of a downgrade
of any Acceptable Credit Provider by Moody's or S&P to below the minimum
criteria specified above, substitute Acceptable Credit Support must be provided
within 30 days of such event. Otherwise, the Trustee shall draw down the then
outstanding amount of the Acceptable Credit Support and deposit such monies into
the Debt Service Reserve Accounts.
"Accounts" means, collectively, the Accrued Interest Accounts, the Debt
Service Reserve Accounts, the Equity Account, the Environmental Capital
Expenditures Account, the Principal Accounts, the Recovery Event Proceeds
Account and the Revenue Account.
"Accrued Interest Account" means, for each class of Senior Debt, the account
established by the Collateral Agent for such Senior Debt pursuant to the
Security Deposit Agreement into which amounts shall be deposited for the purpose
of making payments when due of accrued interest on such Senior Debt.
"Accrued Interest Amount" means, with respect to any Accrued Interest
Account, as of any date of calculation, an amount sufficient to cause the
balance of such Accrued Interest Account to equal the sum of (1) all accrued and
unpaid interest and fees in respect of the related Indebtedness on such date,
(2) all amounts in respect of funding losses, increased capital costs, taxes,
indemnities, costs and expenses associated with such Indebtedness due and
payable on such date and (3) if the next succeeding interest payment date with
respect to such Indebtedness will occur prior to the next succeeding Monthly
Transfer Date, all interest and fees projected to accrue in respect of such
Indebtedness from the date of calculation to but excluding such interest payment
date and all amounts in respect of funding losses, increased capital costs,
taxes, indemnities, costs and expenses associated with such Indebtedness
projected to be due and payable on such interest payment date.
"Acquisition Effective Date" means March 18, 1999.
"Additional Bonds" means any bonds issued pursuant to the indenture other
than the original bonds.
"Administrative Agent" means Citicorp USA, Inc., in its capacity as
administrative agent for the Bank Lenders, and includes each other Person as may
have subsequently been appointed as the successor Administrative Agent pursuant
to the Credit Agreement.
A-1
"Affiliate" means, with respect to any specified Person, any other Person
which, directly or indirectly, controls, is controlled by or is under common
control with such Person. A Person shall be deemed to be "controlled by" any
other Person if such other Person possesses, directly or indirectly, power to
direct or cause the direction of the management and policies of such Person
whether by contract or otherwise.
"Alternate Base Rate" means, on any date and with respect to all Base Rate
Loans, a fluctuating rate of interest per annum equal to the higher of (1) the
"base rate" of the Administrative Agent and (2) the Federal Funds Rate most
recently determined by the Administrative Agent plus 1/2 of 1%.
"Bank Debt Service Reserve Account" means the Debt Service Reserve Account
established for the benefit of the Banks under the Security Deposit Agreement.
"Banks" means the banks and other financial institutions party to the Credit
Agreement.
"Base Rate Loans" means all Loans bearing interest based on the Alternate
Base Rate.
"Beneficial Owner" means any person who holds a beneficial ownership
interest in a bond.
"Bond Debt Service Reserve Account" means the Debt Service Reserve Account
established for the benefit of the bondholders under the Security Deposit
Agreement.
"Bondholders" means the registered holder of any bond from time to time.
"Bonds" means the original bonds and any Additional Bonds.
"Business Day" means a day other than a Saturday, Sunday or other day on
which commercial banks in New York City are authorized or required by law to
close.
"Capital Lease Obligation" means, as to any Person, all monetary obligations
of such Person under any leasing or similar arrangement which, in accordance
with GAAP, would be classified as capitalized leases, and, for purposes of the
indenture, the amount of such obligations shall be the capitalized amount
thereof, determined in accordance with GAAP.
"Capital Stock" means any and all shares, interests, participations or other
equivalents (however designated) of capital stock of a corporation, any and all
equivalent ownership interests in a Person (other than a corporation).
"Cash Equivalents" means, at any time: (1) any evidence of Indebtedness,
maturing not more than one year after such time, issued or guaranteed by the
United States Government or an agency thereof; (2) other investments in
securities or bank instruments rated at least "A" by S&P and "A2" by Moody's or
"A-1" by S&P and "P-1" by Moody's and with maturities of less than 366 days; or
(3) other securities as to which the Company has demonstrated, to the
satisfaction of the trustee, adequate liquidity through secondary markets or
deposit agreements.
"Change of Control" means the reduction in EME's direct or indirect
beneficial ownership in the Company to less than 50% at any time unless at such
time either (1) the bonds are rated at least Investment Grade by each Rating
Agency then rating the bonds and a Ratings Reaffirmation is obtained or (2) the
reduction in EME's voting interest has been approved by a vote of more than
66 2/3% of the bondholders.
"Closing Date" means May 27, 1999.
"Collateral Agent" means United States Trust Company of New York, as
collateral agent for the benefit of the Secured Parties under the Guarantee and
Collateral Agreement, together with its successors and assigns.
"Commitments" means the collective reference to the 364-Day Term Loan
Commitments, the Construction Term Loan Commitments and the Revolving Loan
Commitments.
A-2
"Consumer Price Index" means the consumer price index as published by the
United States Department of Labor, Bureau of Labor Statistics.
"Credit Support Guarantee" means the Credit Support Guarantee, dated as of
March 18, 1999, as amended, made by EME in favor of the Collateral Agent.
"Debt Service" means, with respect to any Senior Debt, principal (or, in the
case of Swap Indebtedness, amounts payable on early termination of the related
Interest Rate Hedging Obligation), interest (or, in the case of any Swap
Indebtedness, fixed payments in respect of the related Interest Rate Hedging
Obligation), fees and amounts in respect of funding losses, increased capital
costs, taxes, indemnities, costs and expenses, in each case payable in respect
of such Senior Debt.
"Debt Service Coverage Ratio" means, for any period, a ratio the numerator
of which is Net Cashflow for such period, and the denominator of which is the
aggregate of all principal, interest and other fixed charges payable during such
period on the bonds or on other Permitted Indebtedness which is PARI PASSU with
the bonds.
"Debt Service Reserve Accounts" means, collectively, (1) the Bond Debt
Service Reserve Account, (2) the Bank Debt Service Reserve Account and (3) any
similar debt service reserve accounts established for the benefit of holders of
other secured Senior Debt.
"Debt Service Reserve Guarantee" means the Debt Service Reserve Guarantee,
dated as of March 18, 1999, made by EME in favor of the Collateral Agent for the
benefit of the Banks.
"Debt Service Reserve Requirement," with respect to any Indebtedness, has
the meaning ascribed to the term "Debt Service Reserve Requirement" in the
Financing Documents relating to such Indebtedness.
"Default" means an event or condition that, with the giving of notice or the
lapse of time, or both, would become an Event of Default.
"DSR Credit Instrument" means, with respect to any Senior Debt, a letter of
credit, guarantee or other instrument that under the Financing Documents
relating to such Senior Debt may be delivered to the Collateral Agent in total
or partial satisfaction of the Debt Service Reserve Requirement relating to such
Senior Debt.
"DSR Letter of Credit Indebtedness" means any indebtedness incurred under an
agreement relating to letters of credit issued to satisfy a Debt Service Reserve
Requirement.
"Environmental Capital Improvements" means capital improvements in
furtherance of the Company's proposed schedule and budget for the installation
of a flue gas desulfurization unit and three selective catalytic reduction units
at the Homer City Units.
"Environmental Capital Improvements Facility" means the $250 million
five-year term loan facility provided under the Credit Agreement, the proceeds
of which will be used for the Environmental Capital Improvements.
"Equity Account" means the account of such name established under the
Security Deposit Agreement.
"Equity Interests" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"Event of Default" means an "Event of Default" under the indenture.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
A-3
"Final Maturity Date" means the last stated maturity date of any series of
the bonds.
"Financing Documents" means, collectively, the indenture, the bonds, the
Purchase Agreement, the registration rights agreement, the Credit Agreement and
the Security Documents.
"GAAP" means generally accepted accounting principles as in effect in the
United States from time to time.
"Governmental Authority" means any nation or government, any state,
provincial or other political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government.
"Guarantee" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part of any
Indebtedness.
"Guarantee and Collateral Agreement" means the Guarantee and Collateral
Agreement, dated as of March 18, 1999, by the Company and the Guarantors in
favor of the Collateral Agent.
"Guarantor Guarantee" means the guarantee obligations of each Guarantor
under the Guarantee and Collateral Agreement.
"Indebtedness" of any Person means, without duplication: (1) all
indebtedness for borrowed money; (2) all obligations issued, undertaken or
assumed as the deferred purchase price of property or services which purchase
price is due more than six months from the date of incurrence of the obligation
in respect thereof or is evidenced by a note or other instrument, except trade
accounts arising in the ordinary course of business; (3) all reimbursement
obligations with respect to surety bonds, letters of credit (to the extent not
collateralized with cash or Cash Equivalents), bankers' acceptances and similar
instruments (in each case, whether or not matured); (4) all obligations
evidenced by notes, bonds, debentures or similar instruments, including
obligations so evidenced incurred in connection with the acquisition of
property, assets or businesses; (5) all indebtedness created or arising under
any conditional sale or other title retention agreement, or incurred as
financing, in either case with respect to property acquired by the Person (even
though the rights and remedies of the seller or bank under such agreement in the
event of default are limited to repossession or sale of such property); (6) all
Capital Lease Obligations; (7) all Interest Rate Hedging Obligations; (8) all
indebtedness referred to in clauses (1) through (7) above secured by (or for
which the holder of such indebtedness has an existing right, contingent or
otherwise, to be secured by) any Lien upon or in property (including accounts
and contracts rights) owned by such Person, even though such Person has not
assumed or become liable for the payment of such Indebtedness; and (9) all
contingent liabilities.
"Independent Engineer" means Stone and Webster Management Consultants, Inc.
or another nationally recognized independent engineering and consulting firm
which, as Independent Engineer, will independently review the technical aspects
of the project, analyze the contractual structure and create financial
projections for the benefit of the bondholders.
"Indenture" means the indenture, dated as of the Closing Date, between the
Company and the trustee.
"Original Bonds" means the $300,000,000 8.137% Senior Secured Bonds due 2019
and the $530,000,000 8.734% Senior Secured Bonds due 2026 issued by the Company.
"Initial Purchasers" means, collectively, Lehman Brothers Inc., Credit
Suisse First Boston Corporation, Salomon Smith Barney Inc. and SG Cowen
Securities Corp.
A-4
"Intercreditor Agreement" means the Collateral Agency and Intercreditor
Agreement, dated as of March 18, 1999, among the Company, the Guarantors, the
Secured Parties' Representatives, the Administrative Agent and the Collateral
Agent.
"Interest Payment Date" means (1) with respect to the bonds, each April 1
and October 1, commencing on October 1, 1999 and concluding on the Final
Maturity Date and each other date on which interest on the bonds becomes due and
payable, whether on a Redemption Date, the Final Maturity Date, declaration of
acceleration or otherwise, and (2) with respect to any other Secured
Obligations, each regularly scheduled date on which interest is due and payable
with respect to such Secured Obligations, as such date may be established from
time to time, and any date on which interest on such Secured Obligations becomes
due and payable, whether at redemption, the final maturity date or declaration
of acceleration or otherwise.
"Interest Rate Hedging Obligations" means, as to any Person, the net payment
Obligations of all interest rate swaps, caps or collar agreements or similar
arrangements entered into by such Person in order to protect against
fluctuations in interest rates or the exchange of nominal interest obligations,
either generally or under specific contingencies, and, in any event, not for
speculative purposes.
"Interest Rate Protection Agreement" means any agreement providing for
swaps, ceiling rates, ceiling and floor rates, contingent participation or other
hedging mechanisms with respect to the payment of interest.
"Investment Grade" means a rating of at least "Baa3" from Moody's, at least
"BBB-" from S&P and at least "BBB-" from Duff & Phelps.
"Investments" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including Guarantees of Indebtedness or other Obligations),
advances of assets or capital contributions (excluding commission, travel and
entertainment, moving, and similar advances to officers and employees made in
the ordinary course of business), purchases or other acquisitions for
consideration of Indebtedness, Equity Interests or other securities, together
with all items that are or would be classified as investments on a balance sheet
prepared in accordance with GAAP.
"LIBO Rate Loans" means all Loans bearing interest based upon a rate
determined in the London Interbank Market.
"Loans" means the collective reference to Acquisition Loans, Environmental
Capital Improvements Loans and Working Capital Loans.
"Monthly Transfer Date" means the last Business Day of each month.
"Mortgage" means the Mortgage and Security Agreement, dated as of March 18,
1999, as amended, by EME Homer City in favor of the Collateral Agent.
"Net Cash Flow" means, for any period, (1) all Revenues for such period,
MINUS (2) the sum of (a) all amounts paid by or on behalf of the Company and the
Guarantors during such period in respect of fuel, administration, operation,
maintenance, repairs and overhead, but excluding all subordinated payments made
to Affiliates and capital expenditures which are funded with Permitted
Indebtedness PLUS (b) all taxes paid by the Company and the Guarantors during
such period, PLUS (c) all fees paid by the Company and the Guarantors relating
to financing activities during such period.
"Obligations" means any principal, premium, if any, interest (including
interest accruing on or after the filing of any petition in bankruptcy or for
reorganization relating to the Company or any of the Guarantors whether or not a
claim for post-filing interest is allowed in such proceeding), penalties, fees,
charges, expenses, indemnifications, reimbursement obligations, damages,
guarantees and other
A-5
liabilities or amounts payable under the documentation governing any
Indebtedness or in respect thereof.
"Officer" means, with respect to any Person, any Chairman of the Board,
President, Chief Executive Officer, Chief Operating Officer, Chief Financial
Officer, Senior Vice President, Vice President, Treasurer or Secretary of such
Person.
"Officer's Certificate" means a certificate signed by an Officer of the
Company.
"Operative Contracts" means, collectively, the Transition Contracts, the
Interconnection Agreement, the Easement Agreement, the Coal Supply Agreements,
the Coal Cleaning Agreement, the Operating Agreement, the Joint Services
Agreement, the Leases and any other material agreement entered into by the
Company or any of the Guarantors with respect to the operation, maintenance,
management, repair or improvement of the Facilities.
"Opinion of Counsel" means a written opinion of counsel for any Person
either expressly referred to in the indenture or otherwise reasonably
satisfactory to the trustee which may include, without limitation, counsel for
the Company, whether or not such counsel is an employee of the Company.
"Ordinary Course Letter of Credit Indebtedness" means any indebtedness
incurred in the form of reimbursement obligations relating to letters of credit,
surety bonds and performance bonds used by the Company and the Guarantors in the
ordinary course of their business.
"Outstanding" means when used with respect to the bonds, shall mean, as of
the date of determination, all bonds theretofore authenticated and delivered
under the indenture, except: (1) bonds theretofore canceled by the trustee or
delivered to the trustee for cancellation; (2) bonds or portions thereof deemed
to have been paid within the meaning set forth in the indenture; and (3) bonds
in exchange for or in lieu of which other bonds have been authenticated and
delivered pursuant to the indenture; PROVIDED, HOWEVER, that in determining
whether the holders of the requisite principal of bonds outstanding have given
any request, demand, authorization, direction, notice, consent or waiver under
the indenture or the Security Documents or whether or not a quorum is present at
a meeting of bondholders, bonds owned by the Company or any Affiliate thereof
shall be disregarded and deemed not to be outstanding as provided in the
indenture.
"Permitted Investments" means (1) obligations issued or guaranteed as to
principal and interest (including money market securities) by (a) the United
States of America or (b) any agency thereof for which its obligations are backed
by the full faith and credit of the United States of America, and certificates
evidencing ownership of the right to the payment of the principal of and
interest on such obligations, provided that such obligations are held in the
custody of an Acceptable Credit Provider in a special account separate from the
general assets of such custodian; (2) certificates of deposit or other
interest-bearing obligations of the Collateral Agent, an Acceptable Credit
Provider or other bank with long-term unsecured debt rated either "AAA" by S&P
or "Aaa" by Moody's, or "A" or higher by S&P and "A2" or higher by Moody's; and
(3) commercial paper, money market securities and other corporate debt
securities rated, on the date of purchase, "A-1" by S&P or "P-1" by Moody's or
higher for securities with original maturities of less than one year and "AAA"
by S&P or "Aaa" by Moody's, or "A" or higher by S&P and "A2" or higher by
Moody's, for securities with original maturities of one year or greater and
maturing not more than one year from the date of acquisition thereof.
"Person" means any individual, corporation, partnership, limited liability
company, joint venture, association, joint-stock company, trust, unincorporated
organization, Governmental Authority or any other entity.
"Power Market Consultant" means PHB Hagler Bailly, Inc. or another
nationally recognized power market consulting firm which, as Power Market
Consultant, which will perform a market study of
A-6
certain markets relating to the Facilities and develop independent electricity
price forecasts for the benefit of the bondholders.
"Principal Account" means, for each class of Senior Debt, the account
established by the Collateral Agent for such Senior Debt pursuant to the
Security Deposit Agreement into which amounts shall be deposited for the purpose
of making payments when due of the principal amount of such Senior Debt.
"Principal Payment Date" means (1) with respect to the bonds, the date on
which all or a portion of the principal of such bonds becomes due and payable as
provided therein or in the indenture, whether on a scheduled date for payment of
principal, at a Redemption Date, the Final Maturity Date, declaration of
acceleration or otherwise and (2) with respect to any other Secured Obligations,
the date on which all or a portion of the principal of such Secured Obligations
becomes due and payable pursuant to the terms thereof, whether on a scheduled
date for payment of principal, at a Redemption Date, a final maturity date,
declaration of acceleration or otherwise.
"Prudent Industry Practice" means any of the practices, methods, standards
and acts (including but not limited to the practices, methods and acts engaged
in or approved by a significant portion of the electric power generation
industry in the United States) that, at a particular time, in the exercise of
reasonable judgment in light of the facts known or that should reasonably have
been known at the time a decision was made, could have been expected to
accomplish the desired result consistent with good business practices,
reliability, economy, safety and expedition, and which practices generally
conform to applicable law and governmental approvals.
"Qualified Institutional Buyer" means a "qualified institutional buyer" as
defined in Rule 144A under the Securities Act.
"Rating Agencies" means each of Moody's, S&P and Duff & Phelps, together
with any other nationally recognized credit rating agency of similar standing if
any such entity is not then currently rating the bonds.
"Ratings Reaffirmation" means, with respect to a specified event, a written
confirmation from two or more Rating Agencies that a lowering of the
then-current credit ratings of the bonds will not result from such event.
"Recovery Event" means any settlement of or payment of $5,000,000 or more in
respect of (1) any property or casualty insurance claim relating to any asset of
the Company or any of the Guarantors or (2) any seizure, condemnation,
confiscation or taking of, or requisition of title or use of, the Facilities or
any part thereof by any Governmental Authority.
"Recovery Event Proceeds" means proceeds received in respect of a Recovery
Event.
"Redemption Date" means a date set forth for redemption of bonds pursuant to
the indenture.
"Redemption Price" means the price to be paid by the Company for the bonds
that are redeemed pursuant to the indenture.
"Regular Record Date" means, with respect to any scheduled payment date of
any installment of principal of any bond, or payment of interest thereon, shall
mean the 15th day (whether or not a Business Day) next preceding such payment
date.
"Reinvestment Notice" means a notice executed by an authorized Officer of
the Company to the Collateral Agent and the trustee (1) setting forth in
reasonable detail the nature of the proposed restoration or replacement relating
thereto and the estimated cost and time to complete such restoration or
replacement and (2) stating that (a) no Default or Event of Default has occurred
and is continuing, (b) such restoration or replacement is technologically and
economically feasible, (c) the net cash proceeds of such Recovery Event,
together with other resources available to the Company and the
A-7
Guarantors, are sufficient to pay the estimated cost of completing such
restoration or replacement and (d) the Company has sufficient resources (through
business interruption insurance or otherwise) to pay all principal, interest and
other fixed charges projected to become due and payable with respect to Senior
Debt prior to the completion of such restoration or replacement.
"Required Capital Improvements" means capital improvements to the Facilities
which are either required by applicable law or which the Company reasonably
believes are appropriate in response to enacted or anticipated changes in
applicable law or the interpretation thereof.
"Redemption Date" means the date on which the Company elects or is required
to redeem all or a portion of the bonds in accordance with the indenture.
"Required Secured Parties" shall mean, at any time, holders of Senior Debt
that at such time hold greater than 50% of the sum of all such Senior Debt
outstanding at such time (which amount shall include, (1) in the case of the
Loans, DSR Letter of Credit Indebtedness and Ordinary Course Letter of Credit
Indebtedness, the commitments with respect thereto at such time and (2) in the
case of Swap Indebtedness, (a) prior to the occurrence of an event of default
under any Senior Debt, zero, and (b) after the occurrence of an event of default
under any Senior Debt, the termination value of the Interest Rate Hedging
Obligation underlying such Swap Indebtedness).
"Restricted Investment" means any Investment other than a Permitted
Investment.
"Restricted Payment Date" means the Closing Date and the first Business Day
of each January, April, July and October.
"Revenue Account" means the account of such name established under the
Security Deposit Agreement.
"Revenues" means (1) all revenues received from the operation of the
Facilities, (2) all proceeds from business interruption or other insurance and
(3) all other amounts received in respect of the Facilities.
"Sale-Leaseback Transaction" means an arrangement relating to property now
owned or hereafter acquired whereby the Company or a Guarantor transfers such
property to a Person and the Company or a Guarantor leases it from such Person.
"Secured Parties" means the bondholders, the Banks, the Collateral Agent,
the Secured Parties' Representatives and any other person that becomes a secured
party under any Financing Document.
"Secured Parties' Representatives" means the Administrative Agent and each
Person that serves as indenture trustee, collateral agent, lender's
representative or in any similar capacity for Persons that provide any Senior
Debt.
"Securities Act" means the Securities Act of 1933, as amended.
"Security Deposit Agreement" means the Security Deposit Agreement, dated as
of March 18, 1999, as amended, among the Company, the Guarantors and the
Collateral Agent.
"Security Documents" means (1) the Guarantee and Collateral Agreement, the
Mortgage, the Subordination Agreement, the Intercreditor Agreement, the Security
Deposit Agreement and (2) the Credit Support Guarantee and any other guarantee
or instrument hereafter entered into by the Company or any other Person which
guarantees or secures payment of the indebtedness evidenced by the bonds or
payment or performance of any other Obligation.
"Senior Debt" means (1) the Company's Indebtedness under the bonds, (2) the
Company's Indebtedness under the Credit Agreement, (3) any additional senior
Indebtedness incurred by the Company which is permitted under the terms of any
Senior Debt, (4) the Company's Interest Rate Hedging Obligations to any lender
under the Credit Agreement with respect to the loans thereunder
A-8
and (5) the Company's Indebtedness as set forth above in clauses (10) and
(13) of the covenant described under the caption under "Description of Principal
Financing Documents--Indenture--Limitation on the Incurrence of Indebtedness".
"Senior Debt Payment Date" means each date on which any Debt Service in
respect of any Senior Debt is due and payable, including without limitation any
Interest Payment Date or Principal Payment Date.
"Stated Maturity" means, with respect to any installment of interest or
principal on any series of Indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the credit agreement or other
original documentation governing such Indebtedness, and shall not include any
contingent obligations to repay, redeem or repurchase any such interest or
principal prior to the date originally scheduled for the payment thereof.
"Subordinated Indebtedness" means (1) with respect to Indebtedness of the
Company or any Guarantor to any entity other than the Company or any Guarantor,
Indebtedness that is (a) payable solely and exclusively from the funds that
would otherwise have been available to make Restricted Payments from the
Company, (b) fully subordinated in all rights and remedies to the bonds and
(c) unsecured, or (2) with respect to Indebtedness from the Company to any
Guarantor or from any Guarantor to the Company or any other Guarantor,
Indebtedness for which payments of principal and interest are included in cash
flow available to pay senior Indebtedness.
"Subordination Agreement" means the Subordination Agreement, dated as of
March 18, 1999, among the Company, the Guarantors and the Collateral Agent.
"Subsidiary" means, with respect to any Person, any corporation,
partnership, limited liability company or other entity of which more than 50% of
the outstanding capital stock, partnership interests or other equity interests
having ordinary voting power to elect a majority of the board of directors of
such corporation (irrespective of whether at the time capital stock of any other
class or classes of such corporation shall or might have voting power upon the
occurrence of any contingency) or to control the management of such partnership,
limited liability company or other entity is at the time directly or indirectly
owned by such Person, by such Person and one or more other Subsidiaries of such
Person, or by one or more other Subsidiaries of such Person.
"Swap Indebtedness" means any indebtedness incurred under Interest Rate
Hedging Obligations of the Company and the Guarantors.
"Trustee" means United States Trust Company of New York, as trustee for the
benefit of the bondholders under the indenture, together with its successors and
assigns.
A-9
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We have not authorized any dealer, salesperson or other person to give any
information or represent anything not contained in this prospectus. You must not
rely on unauthorized information. This prospectus does not offer to sell or buy
any shares in any jurisdiction where it is unlawful. The information in this
prospectus is current as of , 1999. However, you should realize that
our affairs may have changed since the date of this prospectus.
-------------------
TABLE OF CONTENTS
Page
--------
Forward-Looking Statements............. i
Notice to New Hampshire Residents...... i
Prospectus Summary..................... 1
Summary Consolidated Financial Data.... 12
Risk Factors........................... 13
Use of Proceeds........................ 17
Capitalization......................... 17
Selected Consolidated Financial Data... 18
Management's Discussion and Analysis of
Financial Condition.................. 19
The Exchange Offer..................... 24
The Company and EME.................... 32
Business............................... 34
Management............................. 47
Certain Relationships and Related
Transactions......................... 49
Description of Principal Contracts..... 50
Description of the Bonds............... 59
Description of Principal Financing
Documents............................ 64
Exchange Offer; Registration Rights.... 86
Plan of Distribution................... 87
Certain United States Federal Income
Tax Considerations................... 88
Legal Matters.......................... 91
Experts................................ 91
Available Information.................. 91
Incorporation of Certain Documents by
Reference............................ 91
Index to Consolidated Financial
Statements........................... F-1
Appendix A--Glossary of Defined
Terms................................ A-1
$830,000,000
EDISON MISSION
[LOGO] HOLDINGS CO.
An EDISON MISSION ENERGY
Company
8.173% SENIOR SECURED BONDS DUE 2019
8.734% SENIOR SECURED BONDS DUE 2026
-------------------
PROSPECTUS
, 1999
-----------------
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
I. EDISON MISSION HOLDINGS CO., EDISON MISSION FINANCE CO., HOMER CITY PROPERTY
HOLDINGS, INC., MISSION ENERGY WESTSIDE, INC., CHESTNUT RIDGE ENERGY COMPANY
AND EDISON MISSION ENERGY.
Edison Mission Holdings Co. (the "Company"), Edison Mission Finance Co.,
Homer City Property Holdings, Inc., Mission Energy Westside, Inc. and Chestnut
Ridge Energy Company, is each a California corporation. Article VI of each of
the Company's, Edison Mission Finance Co.'s, Homer City Property Holdings,
Inc.'s, Mission Energy Westside, Inc.'s, Chestnut Ridge Energy Company's and
Edison Mission Energy's respective Bylaws provide, in effect, that, to the
extent and under the circumstances permitted by Section 317 of the California
Corporations Code, each such company shall indemnify any person who was or is a
party or is threatened to be made a party to any action, suit or proceeding of
the type described in that section by reason of the fact that he or she is or
was a director of officer of the applicable company.
Section 317 of the California Corporations Code empowers a corporation to
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative (other than in certain actions
by or in the right of the corporation as described below), by reason of the fact
that he or she is or was a director, officer, employee or other agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, or was a director, officer, employee or
agent of a corporation that was a predecessor corporation of the corporation or
of another enterprise at the request of the predecessor corporation, against
expenses (including attorneys' fees), judgments, fines, settlements and other
amounts actually or reasonably incurred by such person in connection with such
action, suit or proceeding if such person acted in good faith and in a manner he
or she reasonably believed to be in the best interests of the corporation, and,
with respect to any criminal action or proceeding, had no reasonable cause to
believe that his or her conduct was unlawful. In the case of an action by or in
the right of the corporation, no indemnification shall be made in respect to any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the corporation in the performance of his or her duty to the
corporation and its shareholders unless and only to the extent that the court in
which such action or suit is or was pending shall determine that, in view of all
of the circumstances of the case, such person is fairly and reasonably entitled
to indemnify for such expenses which such court shall deem proper. Section 317
further provides that to the extent that such director, officer, employee or
agent of a corporation has been successful on the merits in defense of any
action, suit or proceeding referred to above or in the defense of any claim,
issue or matter therein, such person shall be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by him or her in
connection therewith.
Article V of each of the Company's, Edison Mission Finance Co.'s, Homer City
Property Holdings, Inc.'s, Mission Energy Westside, Inc.'s, and Chestnut Ridge
Energy Company's respective Articles of Incorporation and Article IV of Edison
Mission Energy's Articles of Incorporation relieve their respective directors
from monetary damages to their respective companies or their respective
shareholders for any breach of such director's fiduciary duty as a director to
the extent permitted by the California Corporations Code. Under
Section 204(a)(10) of the California Corporations Code, a corporation may
relieve its directors from personal liability to such corporation or its
shareholders for monetary damages for any breach of their fiduciary duty as
directors except (i) for acts or omissions that show a reckless disregard for
the director's duty to the corporation or its shareholders in circumstances in
which the director was unaware, or should have been aware, in the ordinary
course of
II-1
performing his or her duties, of a risk of serious injury to the corporation or
its shareholders, (ii) for any act or omission not in good faith or that a
director believes to be contrary to the best interests of the corporation or its
shareholders, (iii) for any intentional misconduct or knowing and culpable
violation of law, (iv) for any willful or negligent violation of certain
provisions of the California Corporations Code imposing certain requirements
with respect to the making of loans or guarantees and the payment of dividends,
(v) for any transaction from which the director derived an improper personal
benefit or (vi) for acts or omissions that constitute an unexcused pattern of
inattention that amounts to an abdication of the director's duty to the
corporation or its shareholders.
II. EME HOMER CITY GENERATION L.P.
EME Homer City Generation L.P. (the "Partnership") is a limited partnership
organized under the laws of the State of Pennsylvania. Section 8510 of the
Pennsylvania Revised Uniform Limited Partnership Act provides that, subject to
such standards and restrictions, if any, as are set forth in its partnership
agreement, a limited partnership may, and shall have the power to, indemnify and
hold harmless any partner or other persons from and against any and all claims
and demands whatsoever; provided, however, that such indemnification shall not
be made in any case where the act or failure to act giving rise to the claim for
indemnification is determined by a court to have constituted willful misconduct
or recklessness.
Section 8.7 of the Partnership's Agreement of Limited Partnership (the
"Agreement") provides that the General Partner (as defined in the Agreement)
will not be liable to the Partnership or the Limited Partners (as defined in the
Agreement) for any act or omission by the General Partner pursuant to the
authority granted to it by the Agreement, except by reason of fraud, bad faith,
willful misfeasance, gross negligence or any act in breach of the Agreement. The
General Partner will indemnify and save harmless the Partnership and the Limited
Partners from any loss or liability arising out of its fraud, bad faith, willful
misfeasance, gross negligence or breach of the Agreement. Moreover, the
Partnership will indemnify and save harmless the General Partner from any loss
or liability incurred by the General Partner by reason of any act performed by
the General Partner on behalf of the Partnership or in furtherance of the
Partnership's interest other than by reason of the General Partner's fraud, bad
faith, willful misfeasance, negligence or breach of the Agreement. In the event
the General Partner is found personally liable for any debts of the Partnership
(other than any debt or liability incurred by reason of the General Partner's
fraud, bad faith, willful misfeasance, negligence or breach of the Agreement)
and is required to and does satisfy a Partnership liability out of its personal
assets, the General Partner will have a right of reimbursement out of the assets
of the Partnership (the "Right of Reimbursement"). The Right of Reimbursement
will accrue to the General Partner 30 days after written notice thereof is given
to each of the other Partners. Upon such accrual of the Right of Reimbursement,
the General Partner will be reimbursed out of the assets of the Partnership in
the order of priority specified in Section 8.7 of the Agreement, but only to the
extent necessary to satisfy such Right of Reimbursement. To the extent not
reimbursed as provided in the Agreement, the General Partner will have no right
of contribution from the Limited Partners.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
EXHIBIT NO. DESCRIPTION
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3.1 Articles of Incorporation of the Company.*
3.2 Certificate of Amendment of Articles of Incorporation of the
Company.*
3.3 By-Laws of the Company.*
3.4 Articles of Incorporation of Edison Mission Finance Co.*
3.5 By-Laws of Edison Mission Finance Co.*
II-2
EXHIBIT NO. DESCRIPTION
- ----------- -----------
3.6 Articles of Incorporation of Homer City Property
Holdings, Inc.*
3.7 By-Laws of Homer City Property Holdings, Inc.*
3.8 Articles of Incorporation of Mission Energy Westside, Inc.*
3.9 Certificate of Amendment to Articles of Incorporation of
Mission Energy Westside, Inc.*
3.10 By-Laws of Mission Energy Westside, Inc.*
3.11 Articles of Incorporation of Chestnut Ridge Energy Company.*
3.12 By-Laws of Chestnut Ridge Energy Company.*
3.13 EME Homer City Generation L.P. Agreement of Limited
Partnership.*
3.14 Amended and Restated Articles of Incorporation of EME,
incorporated by reference to Exhibit 3.1 to EME's Current
Report on Form 8-K, dated January 30, 1996.
3.15 By-Laws of EME, incorporated by reference to Exhibit 3.2 to
EME's Registration Statement on Form 10 filed with the
Securities and Exchange Commission on November 21, 1994
("Form 10").
4.1 Indenture, dated as of May 27, 1999, between the Company and
United States Trust Company of New York, as Trustee.*
5.1 Opinion of Skadden, Arps, Slate, Meagher & Flom LLP, special
counsel to the Company.*
5.2 Opinion of Morgan, Lewis & Bockius LLP, special Pennsylvania
counsel to EME Homer City Generation L.P.**
10.1 Exchange and Registration Rights Agreement, dated as of May
27, 1999, by and among the Initial Purchasers, the
Guarantors and the Company.*
10.2 Power Purchase Contract between Southern California Edison
Company and Champlin Petroleum Company, dated March 8, 1985,
incorporated by reference to Exhibit 10.2 to EME's Form 10.
10.2.1 Amendment to Power Purchase Contract between Southern
California Edison Company and Champlin Petroleum Company,
dated July 29, 1985, incorporated by reference to Exhibit
10.2.1 to EME's Form 10.
10.2.2 Amendment No. 2 to Power Purchase Contract between Southern
California Edison Company and Champlin Petroleum Company,
dated October 29, 1985, incorporated by reference to Exhibit
10.2.2 to EME's Form 10.
10.3 Power Purchase Contract between Southern California Edison
Company and Imperial Energy Company, dated February 22,
1984, incorporated by reference to Exhibit 10.4 EME's Form
10.
10.3.1 Amendment to Power Purchase Contract between Southern
California Edison Company and Imperial Energy Company, dated
November 13, 1984, incorporated by reference to Exhibit
10.4.1 to EME's Form 10.
10.4 Power Purchase Contract between Southern California Edison
Company and Imperial Energy Company Niland No. 2, dated
April 16, 1985, incorporated by reference to Exhibit 10.6 to
EME's Form 10.
10.5 Power Purchase Contract between Southern California Edison
Company and Chevron U.S.A. Inc., dated November 9, 1984,
incorporated by reference to Exhibit 10.7 to EME's Form 10.
II-3
EXHIBIT NO. DESCRIPTION
- ----------- -----------
10.5.1 Amendment No. 1 to Power Purchase Contract between Southern
California Edison Company and Chevron U.S.A. Inc., dated
March 29, 1985, incorporated by reference to Exhibit 10.7.1
to EME's Form 10.
10.5.2 Amendment No. 2 to Power Purchase Contract between Southern
California Edison Company and Chevron U.S.A. Inc., dated
November 21, 1985, incorporated by reference to Exhibit
10.7.2 to EME's Form 10.
10.5.3 Amendment No. 3 to Power Purchase Contract between Southern
California Edison Company and Chevron U.S.A. Inc., dated
November 21, 1985, incorporated by reference to Exhibit
10.7.3 to EME's Form 10.
10.6 Power Purchase Contract between Southern California Edison
Company and Arco Petroleum Products Company (Watson
Refinery), incorporated by reference to Exhibit 10.8 to
EME's Form 10.
10.7 Power Supply Agreement between State Electricity Commission
of Victoria, Loy Yang B Power Station Pty. Ltd. and the
Company Australia Pty. Ltd., as managing partner of the
Latrobe Power Partnership, dated December 31, 1992,
incorporated by reference to Exhibit 10.9 to EME's Form 10.
10.8 Power Purchase Agreement between P.T. Paiton Energy Company
as Seller and Perusahaan Umum Listrik Negara as Buyer, dated
February 12, 1994, incorporated by reference to Exhibit
10.10 to EME's Form 10.
10.9 Amended and Restated Power Purchase Contract between
Southern California Energy Company and Midway-Sunset
Cogeneration Company, dated May 5, 1988, incorporated by
reference to Exhibit 10.11 to EME's Form 10.
10.10 Parallel Generation Agreement between Kern River
Cogeneration Company and Southern California Energy Company,
dated January 6, 1984, incorporated by reference to Exhibit
10.12 to EME's Form 10.
10.11 Parallel Generation Agreement between Kern River
Cogeneration (Sycamore Project) Company and Southern
California Energy Company, dated December 18, 1984,
incorporated by reference to Exhibit 10.13 to EME's Form 10.
10.12 Amendment No. 2 to Power Purchase Agreement between Southern
California Energy Company and Vulcan/BN Geothermal Power
Company, dated April 1, 1986, incorporated by reference to
Exhibit 10.14 to EME's Form 10.
10.13 U.S. $325 million Bank of Montreal Revolver, dated October
29, 1993, incorporated by reference to Exhibit 10.15 to
EME's Form 10.
10.13.1 U.S. $400 million Bank of America National Trust and Savings
Association Credit Agreement, dated October 27, 1994,
incorporated by reference to Exhibit 10.15.1 to EME's Form
10.
10.13.2 Conformed copy of the Amended and Restated U.S. $400 million
Bank of America National Trust and Savings Association
Credit Agreement, dated as of November 17, 1994,
incorporated by reference to Exhibit 10.15.2 to EME's Annual
Report on Form 10-K for the year ended December 31, 1994.
10.13.3 Conformed copy of the Second Amended and Restated U.S. $400
million Bank of America National Trust and Savings
Association Credit Agreement, dated as of October 11, 1996,
incorporated by reference to Exhibit 10.15.3 to EME's Form
10-K for the year ended December 31, 1996.
II-4
EXHIBIT NO. DESCRIPTION
- ----------- -----------
10.14 Amended and Restated Ground Lease Agreement between Texaco
Refining and Marketing Inc. and March Point Cogeneration
Company, dated August 21, 1992, incorporated by reference to
Exhibit 10.16 to EME's Form 10.
10.14.1 Amendment No. 1 to Amended and Restated Ground Lease
Agreement between Texaco Refining and Marketing Inc. and
March Point Cogeneration Company, dated August 21, 1992,
incorporated by reference to Exhibit 10.16 to EME's Form 10.
10.15 Memorandum of Agreement between Atlantic Richfield Company
and Products Cogeneration Company, dated September 17, 1987,
incorporated by reference to Exhibit 10.17 to EME's Form 10.
10.16 Memorandum of Ground Lease between Texaco Producing Inc. and
Sycamore Cogeneration Company, dated January 19, 1987,
incorporated by reference to Exhibit 10.18 to EME's Form 10.
10.17 Amended and Restated Memorandum of Ground Lease between
Getty Oil Company and Kern River Cogeneration Company, dated
November 14, 1984, incorporated by reference to Exhibit
10.19 to EME's Form 10.
10.18 Memorandum of Lease between Sun Operating Limited
Partnership and Midway-Sunset Cogeneration Company,
incorporated by reference to Exhibit 10.20 to EME's Form 10.
10.19 Executive Supplemental Benefit Program, incorporated by
reference to Exhibits to Forms 10-K filed by SCEcorp (File
No. 1-2313).
10.20 1981 Deferred Compensation Agreement, incorporated by
reference to Exhibits to Forms 10-K filed by SCEcorp (File
No. 1-2313).
10.21 1985 Deferred Compensation Agreement for Executives,
incorporated by reference to Exhibits to Forms 10-K filed by
SCEcorp (File No. 1-2313).
10.22 1987 Deferred Compensation Plan for Executives, incorporated
by reference to Exhibits to Forms 10-K filed by SCEcorp
(File No. 1-2313).
10.23 1988 Deferred Compensation Plan for Executives, incorporated
by reference to Exhibits to Forms 10-K filed by SCEcorp
(File No. 1-2313).
10.24 1989 Deferred Compensation Plan for Executives, incorporated
by reference to Exhibits to Forms 10-K filed by SCEcorp
(File No. 1-9936).
10.25 1990 Deferred Compensation Plan for Executives, incorporated
by reference to Exhibits to Forms 10-K filed by SCEcorp
(File No. 1-9936).
10.26 Annual Deferred Compensation Plan for Executives,
incorporated by reference to Exhibits to Forms 10-K filed by
SCEcorp (File No. 1-9936).
10.27 Executive Retirement Plan for Executives, incorporated by
reference to Exhibits to Forms 10-K filed by SCEcorp (File
No. 1-2313).
10.28 Long-Term Incentive Plan for Executive Officers,
incorporated by reference to the Registration Statement
(File No. 33-19541) under which SCEcorp registered
securities to be offered pursuant to the Plan under the
Securities Act of 1933.
10.29 Estate and Financial Planning Program for Executive
Officers, incorporated by reference to Exhibits to Forms
10-K filed by SCEcorp (File No. 1-9936).
10.30 Letter Agreement with Edward R. Muller, incorporated by
reference to Exhibit 10.32 to EME's Form 10.
II-5
EXHIBIT NO. DESCRIPTION
- ----------- -----------
10.31 Agreement with James S. Pignatelli, incorporated by
reference to Exhibit 10.33 to EME's Form 10.
10.32 Conformed copy of the Guarantee Agreement dated as of
November 30, 1994, incorporated by reference to Exhibit
10.34 to EME's Form 10.
10.33 Indenture of Lease between Brooklyn Navy Yard Development
Corporation and Cogeneration Technologies, Inc., dated as of
December 18, 1989, incorporated by reference to Exhibit
10.35 to EME's Form 10-K for the year ended December 31,
1994.
10.33.1 First Amendment to Indenture of Lease between Brooklyn Navy
Yard Development Corporation and Cogeneration Technologies,
Inc., dated November 1, 1991, incorporated by reference to
Exhibit 10.35.1 to EME's Form 10-K for the year ended
December 31, 1994.
10.33.2 Second Amendment to Indenture of Lease between Brooklyn Navy
Yard Development Corporation and Cogeneration Technologies,
Inc., dated June 3, 1994, incorporated by reference to
Exhibit 10.35.2 to EME's Form 10-K for the year ended
December 31, 1994.
10.33.3 Third Amendment to Indenture of Lease between Brooklyn Navy
Yard Development Corporation and Cogeneration Technologies,
Inc., dated December 12, 1994, incorporated by reference to
Exhibit 10.35.3 to EME's Form 10-K for the year ended
December 31, 1994.
10.34 Conformed copy of A$200 million Bank of America National
Trust and Savings Association Credit Agreement, dated
November 22, 1994, incorporated by reference to Exhibit
10.36 to EME's Form 10-K for the year ended December 31,
1994.
10.34.1 Conformed copy of the Amended and Restated A$200 million
Bank of America National Trust and Savings Associated Credit
Agreement, dated December 12, 1994, incorporated by
reference to Exhibit 10.36.1 to EME's Form 10-K for the year
ended December 31, 1994.
10.34.2 Conformed copy of First Amendment to Amended and Restated
A$200 million Bank of America National Trust and Savings
Associated Credit Agreement, dated June 7, 1995,
incorporated by reference to Exhibit 10.36.2 to EME's Form
10-Q for the quarter ended September 30, 1995.
10.35 Amended and Restated Limited Partnership Agreement of
Mission Capital, L.P., dated as of November 30, 1994,
incorporated by reference to Exhibit 10.37 to EME's Form
10-K for the year ended December 31, 1994.
10.36 Action of General Partner of Mission Capital, L.P. creating
the 9 7/8% Cumulative Monthly Income Preferred Securities,
Series A, dated as of November 30, 1994, incorporated by
reference to Exhibit 10.38 to EME's Form 10-K for the year
ended December 31, 1994.
10.37 Action of General Partner of Mission Capital, L.P. creating
the 8 1/2% Cumulative Monthly Income Preferred Securities,
Series B, dated as of August 8, 1995, incorporated by
reference to Exhibit 10.39 to EME's Form 10-Q for the
quarter ended June 30, 1995.
10.38 Power Purchase Contract between ISAB Energy, S.r.l. as
Seller and Enel, S.p.A. as Buyer, dated June 9, 1995,
incorporated by reference to Exhibit 10.40 to EME's Form
10-Q for the quarter ended June 30, 1995.
10.39 400 million sterling pounds Barclays Bank Plc Credit
Agreement, dated December 18, 1995, incorporated by
reference to Exhibit 10.41 to EME's Form 8-K, dated December
21, 1995.
10.40 Guarantee by EME, dated December 1, 1995 supporting Letter
of Credit issued by Bank of America National Trust and
Savings Association to secure payment of bonds issued
pursuant to the Brooklyn Navy Yard project tax-exempt bond
financing, incorporated by reference to Exhibit 10.42 to
EME's Form 10-K for the year ended December 31, 1995.
II-6
EXHIBIT NO. DESCRIPTION
- ----------- -----------
10.41 Guarantee by EME, dated December 1, 1995, supporting Letter
of Credit issued by Bank of America National Trust and
Savings Association to secure Brooklyn Navy Yard's indemnity
to the New York City Industrial Development Agency pursuant
to the Brooklyn Navy Yard project tax-exempt bond financing,
incorporated by reference to Exhibit 10.43 to EME's Form
10-K for the year ended December 31, 1995.
10.42 Guarantee by EME, dated December 20, 1996, in favor of The
Fuji Bank, Limited, Los Angeles Agency, to secure Camino
Energy Company's payments pursuant to Camino Energy
Company's Credit Agreement and Defeasance Agreement,
incorporated by reference to Exhibit 10.44 to EME's Form
10-K for the year ended December 31, 1996.
10.43 Power Purchase Agreement between National Power Corporation
and San Pascual Cogeneration Company International B.V.,
dated September 10, 1997, incorporated by reference to
Exhibit 10.45 to EME's Form 10-K for the year ended December
31, 1997.
10.44 Power Purchase Agreement between Gulf Power Generation Co.,
LTD., and Electricity Generating Authority of Thailand,
dated December 22, 1997, incorporated by reference to
Exhibit 10.46 to EME's Form 10-K for the year ended December
31, 1997.
10.45 Guarantee by EME, dated June 30, 1998, in favor of Tri
Energy Company Limited and the Sanwa Bank, Limited to
guarantee payment of 25% of Tri Energy Company Limited's
aggregate capital contributions under the Equity Bridge
Loan, incorporated by reference to Exhibit 10.47 to EME's
Form 10-Q for the quarter ended September 30, 1998.
10.46 Guarantee by EME, dated June 30, 1998, in favor of Tri
Energy Company Limited and the Sanwa Bank, Limited to
guarantee payment of 37.5% of Tri Energy Company Limited's
aggregate capital contributions attributable to Banpu Gas
and BANPU, incorporated by reference to Exhibit 10.48 to
EME's Form 10-Q for the quarter ended September 30, 1998.
10.47 Equity Support Guarantee by EME, dated December 23, 1998, in
favor of ABN AMRO Bank N.V., and the Chase Manhattan Bank to
guarantee certain equity funding obligations of EcoElectrica
Ltd. and EcoElectrica Holdings Ltd. pursuant to EcoElectrica
Ltd.'s Credit Agreement dated as of October 31, 1997,
incorporated by reference to Exhibit 10.49 to EME's Form
10-K for the year ended December 31, 1998.
10.48 Master Guarantee and Support Instrument by EME, dated
December 23, 1998, in favor of ABN AMRO Bank N.V., and the
Chase Manhattan Bank to guarantee the availability of funds
to purchase fuel for the EcoElectrica project pursuant to
EcoElectrica Ltd.'s Credit Agreement dated as of October 31,
1997 and Intercreditor Agreement dated as of October 31,
1997, incorporated by reference to Exhibit 10.50 to EME's
Form 10-K for the year ended December 31, 1998.
10.49 Guarantee Assumption Agreement from EME, dated December 23,
1998, under EME assumed all of the obligations of KENETECH
Energy Systems, Inc. to Union Carbide Caribe Inc., under the
certain Guaranty dated November 25, 1997, incorporated by
reference to Exhibit 10.51 to EME's Form 10-K for the year
ended December 31, 1998.
10.50 Transition Power Purchase Agreement, dated August 1, 1998,
between New York State Electric & Gas Corporation and
Mission Energy Westside, Inc, incorporated by reference to
Exhibit 10.52 to EME's Form 10-K for the year ended December
31, 1998.
10.51 Transition Power Purchase Agreement, dated August 1, 1998,
between Pennsylvania Electric Company and Mission Energy
Westside, Inc., incorporated by reference to Exhibit 10.53
to EME's Form 10-K for the year ended December 31, 1998.
II-7
EXHIBIT NO. DESCRIPTION
- ----------- -----------
10.52 Guarantee, dated August 1, 1998, between Edison Mission
Energy, Pennsylvania Electric Company, NGE Generation, Inc.
and New York State Electric & Gas Corporation, incorporated
by reference to Exhibit 10.54 to EME's Form 10-K for the
year ended December 31, 1998.
10.53 Second Amended and Restated Credit Agreement among EME and
Bank of America, dated as of October 11, 1996, US$400
million Bank of America Revolver, incorporated by reference
to Exhibit 10.15.3 to EME's Form 10-K for the year ended
December 31, 1996.
10.54 Sale, Purchase and Leasing Agreements between Edison First
Power Limited and PowerGen UK plc for the purchase of the
Ferrybridge C and Fiddler's Ferry Power Stations;
incorporated by reference to Exhibits 2.7 and 2.8 to EME's
Form 8-K/A, dated August 2, 1999.
10.55 Credit Agreement, dated March 18, 1999, among Edison Mission
Holdings Co. and Certain Commercial Lending Institutions,
and Citicorp USA, Inc., incorporated by reference to Exhibit
10.55 to EME's Form 8-K dated March 18, 1999.
10.56 Guarantee and Collateral Agreement made by Edison Mission
Holdings Co., Edison Mission Finance Co., Homer City
Property Holdings, Inc., Chestnut Ridge Energy Co., Mission
Energy Westside, Inc., EME Homer City Generation L.P. and
Edison Mission Energy in favor of United States Trust
Company of New York, dated as of March 18, 1999,
incorporated by reference to Exhibit 10.56 to EME's Form 8-K
dated March 18, 1999.
10.57 Collateral Agency and Intercreditor Agreement among Edison
Mission Holdings Co., Edison Mission Finance Co., Homer City
Property Holdings, Inc., Chestnut Ridge Energy Co., Mission
Energy Westside, Inc., EME Homer City Generation L.P., The
Secured Parties' Representatives, Citicorp USA, Inc. as
Administrative Agent and United States Trust Company of New
York, as Collateral Agent, dated as of March 18, 1999,
incorporated by reference to Exhibit 10.57 to EME's Form 8-K
dated March 18, 1999.
10.58 Security Deposit Agreement among Edison Mission Holdings
Co., Edison Mission Finance Co., Homer City Property
Holdings, Inc., Chestnut Ridge Energy Co., Mission Energy
Westside, Inc., EME Homer City Generation L.P. and United
States Trust Company of New York, as Collateral Agent, dated
as of Marcy 18, 1999, incorporated by reference to Exhibit
10.58 to EME's Form 8-K dated March 18, 1999.
10.59 Credit Support Guarantee, dated as of March 18, 1999, made
by Edison Mission Energy in favor of United States Trust
Company of New York, incorporated by reference to Exhibit
10.59 to EME's Form 8-K dated March 18, 1999.
10.60 Debt Service Reserve Guarantee, dated as of March 18, 1999,
made by Edison Mission Energy in favor of United States
Trust Company of New York on behalf of the various financial
institutions (Lenders) as are or may become parities to the
Credit Agreement, dated as of March 18, 1999, among Edison
Mission Holdings Co., the Lenders and Citicorp USA, Inc.,
incorporated by reference to Exhibit 10.60 to EME's Form 8-K
dated March 18, 1999.
10.61 Credit Agreement, dated March 18, 1999, among Edison Mission
Energy and Certain Commercial Lending Institutions, and
Citicorp USA, Inc., incorporated by reference to Exhibit
10.61 to EME's Form 8-K dated March 18, 1999.
10.62 Agreement for the sale and purchase of shares in First Hydro
Limited, dated December 21, 1995, between PSB Holding
Limited and First Hydro Finance Plc, incorporated by
reference to Exhibit 2.1 to EME's Current Report on Form
8-K, No. 1-13434 dated January 4, 1996.
II-8
EXHIBIT NO. DESCRIPTION
- ----------- -----------
10.63 Transaction Implementation Agreement, dated March 29, 1997,
between The State Electricity Commission of Victoria, Edison
Mission Energy Australia Limited, Loy Yang B Power Station
Pty Ltd, Loy Yang Power Limited, The Honourable Alan Robert
Stockdale, Leanne Power Pty Ltd and EME, incorporated by
reference to Exhibit 2.2 to EME's Current Report on Form
8-K, No. 1-13434 dated May 22, 1997.
10.64 Stock Purchase and Assignment Agreement, dated December 23,
1998, between KES Puerto Rico, L.P., KENETECH Energy
Systems, Inc., KES Bermuda, Inc. and EME del Caribe for the
(i) sale and purchase of KES Puerto Rico, L.P.'s shares in
EcoElectrica Holdings Ltd.; (ii) assignment of KENETECH
Energy Systems' rights and interests in that certain Project
Note from the Partnership; and (iii) assignment of KES
Bermuda, Inc.'s rights and interests in that certain
Administrative Services Agreement dated October 31, 1997,
incorporated by reference to Exhibit 2.3 to EME's 10-K for
the year ended December 31, 1998.
10.65 Asset Purchase Agreement, dated August 1, 1998, between
Pennsylvania Electric Company, NGE Generation, Inc., New
York State Electric & Gas Corporation and Mission Energy
Westside, Inc, incorporated by reference to Exhibit 2.4 to
EME's 10-K for the year ended December 31, 1998.
10.66 Asset Sale Agreement, dated March 22, 1999 between
Commonwealth Edison Company and Edison Mission Energy as to
the Fossil Generating Assets, incorporated by reference to
Exhibit 2.5 to EME's 10-K for the year ended December 31,
1998.
10.67 Agreement for the Sale and Purchase of Shares in Contact
Energy Limited, dated March 10, 1999, between Her Majesty
the Queen in Right of New Zealand, Edison Mission Energy
Taupo Limited and Edison Mission Energy, incorporated herein
by reference to Exhibit 2.6 to the EME's Form 10-Q for the
quarter ended March 31, 1999.
10.68 Copy of the Global Debenture representing EME's 9 7/8%
Junior Subordinated Deferrable Interest Debentures, Series
A, Due 2024, incorporated by reference as Exhibit 4.1 to
EME's Form 10-K for the year ended December 31, 1994.
10.69 Conformed copy of the Indenture, dated as of November 30,
1994, between EME and The First National Bank of Chicago, as
Trustee, incorporated by reference as Exhibit 4.2 to EME's
Form 10-K for the year ended December 31, 1994.
10.70 First Supplemental Indenture, dated as of November 30, 1994,
to Indenture dated as of November 30, 1994 between EME and
The First National Bank of Chicago, as Trustee, incorporated
by reference as Exhibit 4.2.1 to EME's Form 10-K for the
year ended December 31, 1994.
10.71 Indenture, dated as of June 28, 1999, between EME and The
Bank of New York, as Trustee.*
10.72 First Supplemental Indenture, dated as of June 28, 1999, to
Indenture dated as of June 28, 1999, between EME and The
Bank of New York, as Trustee.*
10.73 Registration Rights Agreement, dated as of June 23, 1999,
between EME and the Initial Purchasers specified therein.*
12.1 Statement regarding the computation of ratio of earnings to
fixed charges for EME.*
21.1 List of Subsidiaries.*
23.1 Consent of Arthur Andersen LLP.*
23.2 Consent of PricewaterhouseCoopers.*
II-9
EXHIBIT NO. DESCRIPTION
- ----------- -----------
23.3 Consent of Skadden, Arps, Slate Meagher & Flom LLP (included
in Exhibit 5.1).
23.4 Consent of Morgan, Lewis & Bockius LLP (included in Exhibit
5.2).
25.1 Statement of Eligibility and Qualification on Form T-1 of
United States Trust Company of New York, as Trustee, under
the Indenture filed as Exhibit 4.1 hereto.*
99.1 Form of Letter of Transmittal.*
99.2 Form of Notice of Guaranteed Delivery.*
99.3 Form of Letter to Clients.*
99.4 Form of Letter to Brokers, Dealers, Commercial Banks, Trust
Companies and Other Nominees.*
- ------------------------
*Filed herewith
**To be filed by amendment
ITEM 22. UNDERTAKINGS
(a) The undersigned Registrants hereby undertake:
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers, and controlling persons of the
Registrants pursuant to the foregoing provisions, or otherwise, the Registrants
have been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrants of expenses
incurred or paid by a director, officer or controlling person of the Registrants
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrants 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 of whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
The undersigned Registrants hereby undertake:
(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 securities offered (if the total dollar value of
securities 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 SEC
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than 20 percent 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.
II-10
(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.
The undersigned Registrants hereby undertake that:
(1) For purposes of determining any liability under the Securities Act,
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.
(2) For the purpose of determining any liability under the Securities
Act, 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.
(3) 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 (and,
where applicable, each filing of an employee benefit plan's annual report
pursuant to section 15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in the registration statement 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.
(b) The undersigned Registrants hereby undertake to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11, or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
(c) The undersigned Registrants hereby undertake to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
(d) The undersigned Registrants hereby undertake 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 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration statement 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-11
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Irvine, State of
California, on the 3rd day of December, 1999.
EDISON MISSION HOLDINGS CO.
(REGISTRANT)
By: /s/ KEVIN M. SMITH
-----------------------------------------
Kevin M. Smith
VICE PRESIDENT AND TREASURER
POWER OF ATTORNEY
KNOWN TO ALL THESE PERSONS BY THESE PRESENTS, that each person whose
signature appears below constitutes and appoints Kevin M. Smith and Steven D.
Eisenberg his attorneys-in-fact, with the power of substitution, for him in any
and all capacities, to sign any amendments to this registration statement
(including post-effective amendments), and to file the same, with exhibits
thereto and other documents in connection therewith, with the Securities and
Exchange Commission, hereby ratifying and confirming all that each of said
attorneys-in-fact, or their substitute or substitutes, may do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ JAMES V. IACO, JR.
---------------------------- President and Director December 3, 1999
James V. Iaco, Jr. (Principal Executive Officer)
Vice President, Treasurer
/s/ KEVIN M. SMITH and Director
---------------------------- (Principal Financial and Accounting December 3, 1999
Kevin M. Smith Officer)
/s/ MARTHA A. SPIKES
---------------------------- Director December 3, 1999
Martha A. Spikes
/s/ RAYMOND W. VICKERS
---------------------------- Director December 3, 1999
Raymond W. Vickers
/s/ PAUL R. GILLESPIE
---------------------------- Director December 3, 1999
Paul R. Gillespie
II-12
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Irvine, State of
California, on the 3rd day of December, 1999.
EDISON MISSION FINANCE CO.
(REGISTRANT)
By: /s/ KEVIN M. SMITH
-----------------------------------------
Kevin M. Smith
VICE PRESIDENT AND TREASURER
POWER OF ATTORNEY
KNOWN TO ALL THESE PERSONS BY THESE PRESENTS, that each person whose
signature appears below constitutes and appoints Kevin M. Smith and Steven D.
Eisenberg his attorneys-in-fact, with the power of substitution, for him in any
and all capacities, to sign any amendments to this registration statement
(including post-effective amendments), and to file the same, with exhibits
thereto and other documents in connection therewith, with the Securities and
Exchange Commission, hereby ratifying and confirming all that each of said
attorneys-in-fact, or their substitute or substitutes, may do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ JAMES V. IACO, JR.
---------------------------- President and Director December 3, 1999
James V. Iaco, Jr. (Principal Executive Officer)
Vice President, Treasurer
/s/ KEVIN M. SMITH and Director
---------------------------- (Principal Financial and Accounting December 3, 1999
Kevin M. Smith Officer)
/s/ MARTHA A. SPIKES
---------------------------- Director December 3, 1999
Martha A. Spikes
/s/ RAYMOND W. VICKERS
---------------------------- Director December 3, 1999
Raymond W. Vickers
/s/ PAUL R. GILLESPIE
---------------------------- Director December 3, 1999
Paul R. Gillespie
II-13
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Irvine, State of
California, on the 3rd day of December, 1999.
HOMER CITY PROPERTY HOLDINGS, INC.
(REGISTRANT)
By: /s/ KEVIN M. SMITH
----------------------------------------------
Kevin M. Smith
VICE PRESIDENT AND TREASURER
POWER OF ATTORNEY
KNOWN TO ALL THESE PERSONS BY THESE PRESENTS, that each person whose
signature appears below constitutes and appoints Kevin M. Smith and Steven D.
Eisenberg his attorneys-in-fact, with the power of substitution, for him in any
and all capacities, to sign any amendments to this registration statement
(including post-effective amendments), and to file the same, with exhibits
thereto and other documents in connection therewith, with the Securities and
Exchange Commission, hereby ratifying and confirming all that each of said
attorneys-in-fact, or their substitute or substitutes, may do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ JAMES V. IACO, JR.
---------------------------- President and Director December 3, 1999
James V. Iaco, Jr. (Principal Executive Officer)
Vice President, Treasurer
/s/ KEVIN M. SMITH and Director
---------------------------- (Principal Financial and Accounting December 3, 1999
Kevin M. Smith Officer)
/s/ MARTHA A. SPIKES
---------------------------- Director December 3, 1999
Martha A. Spikes
/s/ RAYMOND W. VICKERS
---------------------------- Director December 3, 1999
Raymond W. Vickers
/s/ PAUL R. GILLESPIE
---------------------------- Director December 3, 1999
Paul R. Gillespie
II-14
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Irvine, State of
California, on the 3rd day of December, 1999.
MISSION ENERGY WESTSIDE, INC.
(REGISTRANT)
By: /s/ KEVIN M. SMITH
-----------------------------------------
Kevin M. Smith
VICE PRESIDENT AND TREASURER
POWER OF ATTORNEY
KNOWN TO ALL THESE PERSONS BY THESE PRESENTS, that each person whose
signature appears below constitutes and appoints Kevin M. Smith and Steven D.
Eisenberg his attorneys-in-fact, with the power of substitution, for him in any
and all capacities, to sign any amendments to this registration statement
(including post-effective amendments), and to file the same, with exhibits
thereto and other documents in connection therewith, with the Securities and
Exchange Commission, hereby ratifying and confirming all that each of said
attorneys-in-fact, or their substitute or substitutes, may do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ JAMES V. IACO, JR.
---------------------------- President and Director December 3, 1999
James V. Iaco, Jr. (Principal Executive Officer)
Vice President, Treasurer
/s/ KEVIN M. SMITH and Director
---------------------------- (Principal Financial and Accounting December 3, 1999
Kevin M. Smith Officer)
/s/ MARTHA A. SPIKES
---------------------------- Director December 3, 1999
Martha A. Spikes
/s/ RAYMOND W. VICKERS
---------------------------- Director December 3, 1999
Raymond W. Vickers
/s/ PAUL R. GILLESPIE
---------------------------- Director December 3, 1999
Paul R. Gillespie
II-15
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Irvine, State of
California, on the 3rd day of December, 1999.
CHESTNUT RIDGE ENERGY COMPANY
(REGISTRANT)
By: /s/ KEVIN M. SMITH
-----------------------------------------
Kevin M. Smith
VICE PRESIDENT AND TREASURER
POWER OF ATTORNEY
KNOWN TO ALL THESE PERSONS BY THESE PRESENTS, that each person whose
signature appears below constitutes and appoints Kevin M. Smith and Steven D.
Eisenberg his attorneys-in-fact, with the power of substitution, for him in any
and all capacities, to sign any amendments to this registration statement
(including post-effective amendments), and to file the same, with exhibits
thereto and other documents in connection therewith, with the Securities and
Exchange Commission, hereby ratifying and confirming all that each of said
attorneys-in-fact, or their substitute or substitutes, may do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ JAMES V. IACO, JR.
---------------------------- President and Director December 3, 1999
James V. Iaco, Jr. (Principal Executive Officer)
Vice President, Treasurer
/s/ KEVIN M. SMITH and Director
---------------------------- (Principal Financial and Accounting December 3, 1999
Kevin M. Smith Officer)
/s/ MARTHA A. SPIKES
---------------------------- Director December 3, 1999
Martha A. Spikes
/s/ RAYMOND W. VICKERS
---------------------------- Director December 3, 1999
Raymond W. Vickers
/s/ PAUL R. GILLESPIE
---------------------------- Director December 3, 1999
Paul R. Gillespie
II-16
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Irvine, State of
California, on the 3rd day of December, 1999.
EME HOMER CITY GENERATION L.P. (REGISTRANT)
By: /s/ KEVIN M. SMITH
-----------------------------------------
Kevin M. Smith
VICE PRESIDENT AND TREASURER
POWER OF ATTORNEY
KNOWN TO ALL THESE PERSONS BY THESE PRESENTS, that each person whose
signature appears below constitutes and appoints Kevin M. Smith and Steven D.
Eisenberg his attorneys-in-fact, with the power of substitution, for him in any
and all capacities, to sign any amendments to this registration statement
(including post-effective amendments), and to file the same, with exhibits
thereto and other documents in connection therewith, with the Securities and
Exchange Commission, hereby ratifying and confirming all that each of said
attorneys-in-fact, or their substitute or substitutes, may do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ JAMES V. IACO, JR.
---------------------------- President and Director December 3, 1999
James V. Iaco, Jr. (Principal Executive Officer)
Vice President, Treasurer
/s/ KEVIN M. SMITH and Director
---------------------------- (Principal Financial and Accounting December 3, 1999
Kevin M. Smith Officer)
/s/ MARTHA A. SPIKES
---------------------------- Director December 3, 1999
Martha A. Spikes
/s/ RAYMOND W. VICKERS
---------------------------- Director December 3, 1999
Raymond W. Vickers
/s/ PAUL R. GILLESPIE
---------------------------- Director December 3, 1999
Paul R. Gillespie
II-17
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Irvine, State of
California, on the 3rd day of December, 1999.
EDISON MISSION ENERGY
(REGISTRANT)
By: /s/ KEVIN M. SMITH
-----------------------------------------
Kevin M. Smith
SENIOR VICE PRESIDENT, CHIEF
FINANCIAL OFFICER AND TREASURER
POWER OF ATTORNEY
KNOWN TO ALL THESE PERSONS BY THESE PRESENTS, that each person whose
signature appears below constitutes and appoints Kevin M. Smith and Steven D.
Eisenberg his attorneys-in-fact, with the power of substitution, for him in any
and all capacities, to sign any amendments to this registration statement
(including post-effective amendments), and to file the same, with exhibits
thereto and other documents in connection therewith, with the Securities and
Exchange Commission, hereby ratifying and confirming all that each of said
attorneys-in-fact, or their substitute or substitutes, may do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ EDWARD R. MULLER President and Chief Executive
---------------------------- Officer, Director December 3, 1999
Edward R. Muller (Principal Executive Officer)
/s/ KEVIN M. SMITH
---------------------------- December 3, 1999
Kevin M. Smith Senior Vice President, Chief
Financial Officer and Treasurer
(Principal Financial and Accounting
Officer)
/s/ ALAN J. FOHRER
---------------------------- Chairman of the Board December 3, 1999
Alan J. Fohrer
/s/ BRYANT C. DANNER
---------------------------- Director December 3, 1999
Bryant C. Danner
/s/ ROBERT M. EDGELL
---------------------------- Director December 3, 1999
Robert M. Edgell
II-18
INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION
- ----------- -----------
3.1 Articles of Incorporation of the Company.*
3.2 Certificate of Amendment of Articles of Incorporation of the
Company.*
3.3 By-Laws of the Company.*
3.4 Articles of Incorporation of Edison Mission Finance Co.*
3.5 By-Laws of Edison Mission Finance Co.*
3.6 Articles of Incorporation of Homer City Property
Holdings, Inc.*
3.7 By-Laws of Homer City Property Holdings, Inc.*
3.8 Articles of Incorporation of Mission Energy Westside, Inc.*
3.9 Certificate of Amendment to Articles of Incorporation of
Mission Energy Westside, Inc.*
3.10 By-Laws of Mission Energy Westside, Inc.*
3.11 Articles of Incorporation of Chestnut Ridge Energy Company.*
3.12 By-Laws of Chestnut Ridge Energy Company.*
3.13 EME Homer City Generation L.P. Agreement of Limited
Partnership.*
3.14 Amended and Restated Articles of Incorporation of EME,
incorporated by reference to Exhibit 3.1 to EME's Current
Report on Form 8-K, dated January 30, 1996.
3.15 By-Laws of EME, incorporated by reference to Exhibit 3.2 to
EME's Registration Statement on Form 10 filed with the
Securities and Exchange Commission on November 21, 1994
("Form 10").
4.1 Indenture, dated as of May 27, 1999, between the Company and
United States Trust Company of New York, as Trustee.*
5.1 Opinion of Skadden, Arps, Slate, Meagher & Flom LLP, special
counsel to the Company.*
5.2 Opinion of Morgan, Lewis & Bockius LLP, special Pennsylvania
counsel to EME Homer City Generation L.P.**
10.1 Exchange and Registration Rights Agreement, dated as of May
27, 1999, by and among the Initial Purchasers, the
Guarantors and the Company.*
10.2 Power Purchase Contract between Southern California Edison
Company and Champlin Petroleum Company, dated March 8, 1985,
incorporated by reference to Exhibit 10.2 to EME's Form 10.
10.2.1 Amendment to Power Purchase Contract between Southern
California Edison Company and Champlin Petroleum Company,
dated July 29, 1985, incorporated by reference to Exhibit
10.2.1 to EME's Form 10.
10.2.2 Amendment No. 2 to Power Purchase Contract between Southern
California Edison Company and Champlin Petroleum Company,
dated October 29, 1985, incorporated by reference to Exhibit
10.2.2 to EME's Form 10.
10.3 Power Purchase Contract between Southern California Edison
Company and Imperial Energy Company, dated February 22,
1984, incorporated by reference to Exhibit 10.4 EME's Form
10.
10.3.1 Amendment to Power Purchase Contract between Southern
California Edison Company and Imperial Energy Company, dated
November 13, 1984, incorporated by reference to Exhibit
10.4.1 to EME's Form 10.
10.4 Power Purchase Contract between Southern California Edison
Company and Imperial Energy Company Niland No. 2, dated
April 16, 1985, incorporated by reference to Exhibit 10.6 to
EME's Form 10.
10.5 Power Purchase Contract between Southern California Edison
Company and Chevron U.S.A. Inc., dated November 9, 1984,
incorporated by reference to Exhibit 10.7 to EME's Form 10.
EXHIBIT NO. DESCRIPTION
- ----------- -----------
10.5.1 Amendment No. 1 to Power Purchase Contract between Southern
California Edison Company and Chevron U.S.A. Inc., dated
March 29, 1985, incorporated by reference to Exhibit 10.7.1
to EME's Form 10.
10.5.2 Amendment No. 2 to Power Purchase Contract between Southern
California Edison Company and Chevron U.S.A. Inc., dated
November 21, 1985, incorporated by reference to Exhibit
10.7.2 to EME's Form 10.
10.5.3 Amendment No. 3 to Power Purchase Contract between Southern
California Edison Company and Chevron U.S.A. Inc., dated
November 21, 1985, incorporated by reference to Exhibit
10.7.3 to EME's Form 10.
10.6 Power Purchase Contract between Southern California Edison
Company and Arco Petroleum Products Company (Watson
Refinery), incorporated by reference to Exhibit 10.8 to
EME's Form 10.
10.7 Power Supply Agreement between State Electricity Commission
of Victoria, Loy Yang B Power Station Pty. Ltd. and the
Company Australia Pty. Ltd., as managing partner of the
Latrobe Power Partnership, dated December 31, 1992,
incorporated by reference to Exhibit 10.9 to EME's Form 10.
10.8 Power Purchase Agreement between P.T. Paiton Energy Company
as Seller and Perusahaan Umum Listrik Negara as Buyer, dated
February 12, 1994, incorporated by reference to Exhibit
10.10 to EME's Form 10.
10.9 Amended and Restated Power Purchase Contract between
Southern California Energy Company and Midway-Sunset
Cogeneration Company, dated May 5, 1988, incorporated by
reference to Exhibit 10.11 to EME's Form 10.
10.10 Parallel Generation Agreement between Kern River
Cogeneration Company and Southern California Energy Company,
dated January 6, 1984, incorporated by reference to Exhibit
10.12 to EME's Form 10.
10.11 Parallel Generation Agreement between Kern River
Cogeneration (Sycamore Project) Company and Southern
California Energy Company, dated December 18, 1984,
incorporated by reference to Exhibit 10.13 to EME's Form 10.
10.12 Amendment No. 2 to Power Purchase Agreement between Southern
California Energy Company and Vulcan/BN Geothermal Power
Company, dated April 1, 1986, incorporated by reference to
Exhibit 10.14 to EME's Form 10.
10.13 U.S. $325 million Bank of Montreal Revolver, dated October
29, 1993, incorporated by reference to Exhibit 10.15 to
EME's Form 10.
10.13.1 U.S. $400 million Bank of America National Trust and Savings
Association Credit Agreement, dated October 27, 1994,
incorporated by reference to Exhibit 10.15.1 to EME's Form
10.
10.13.2 Conformed copy of the Amended and Restated U.S. $400 million
Bank of America National Trust and Savings Association
Credit Agreement, dated as of November 17, 1994,
incorporated by reference to Exhibit 10.15.2 to EME's Annual
Report on Form 10-K for the year ended December 31, 1994.
10.13.3 Conformed copy of the Second Amended and Restated U.S. $400
million Bank of America National Trust and Savings
Association Credit Agreement, dated as of October 11, 1996,
incorporated by reference to Exhibit 10.15.3 to EME's Form
10-K for the year ended December 31, 1996.
10.14 Amended and Restated Ground Lease Agreement between Texaco
Refining and Marketing Inc. and March Point Cogeneration
Company, dated August 21, 1992, incorporated by reference to
Exhibit 10.16 to EME's Form 10.
10.14.1 Amendment No. 1 to Amended and Restated Ground Lease
Agreement between Texaco Refining and Marketing Inc. and
March Point Cogeneration Company, dated August 21, 1992,
incorporated by reference to Exhibit 10.16 to EME's Form 10.
EXHIBIT NO. DESCRIPTION
- ----------- -----------
10.15 Memorandum of Agreement between Atlantic Richfield Company
and Products Cogeneration Company, dated September 17, 1987,
incorporated by reference to Exhibit 10.17 to EME's Form 10.
10.16 Memorandum of Ground Lease between Texaco Producing Inc. and
Sycamore Cogeneration Company, dated January 19, 1987,
incorporated by reference to Exhibit 10.18 to EME's Form 10.
10.17 Amended and Restated Memorandum of Ground Lease between
Getty Oil Company and Kern River Cogeneration Company, dated
November 14, 1984, incorporated by reference to Exhibit
10.19 to EME's Form 10.
10.18 Memorandum of Lease between Sun Operating Limited
Partnership and Midway-Sunset Cogeneration Company,
incorporated by reference to Exhibit 10.20 to EME's Form 10.
10.19 Executive Supplemental Benefit Program, incorporated by
reference to Exhibits to Forms 10-K filed by SCEcorp (File
No. 1-2313).
10.20 1981 Deferred Compensation Agreement, incorporated by
reference to Exhibits to Forms 10-K filed by SCEcorp (File
No. 1-2313).
10.21 1985 Deferred Compensation Agreement for Executives,
incorporated by reference to Exhibits to Forms 10-K filed by
SCEcorp (File No. 1-2313).
10.22 1987 Deferred Compensation Plan for Executives, incorporated
by reference to Exhibits to Forms 10-K filed by SCEcorp
(File No. 1-2313).
10.23 1988 Deferred Compensation Plan for Executives, incorporated
by reference to Exhibits to Forms 10-K filed by SCEcorp
(File No. 1-2313).
10.24 1989 Deferred Compensation Plan for Executives, incorporated
by reference to Exhibits to Forms 10-K filed by SCEcorp
(File No. 1-9936).
10.25 1990 Deferred Compensation Plan for Executives, incorporated
by reference to Exhibits to Forms 10-K filed by SCEcorp
(File No. 1-9936).
10.26 Annual Deferred Compensation Plan for Executives,
incorporated by reference to Exhibits to Forms 10-K filed by
SCEcorp (File No. 1-9936).
10.27 Executive Retirement Plan for Executives, incorporated by
reference to Exhibits to Forms 10-K filed by SCEcorp (File
No. 1-2313).
10.28 Long-Term Incentive Plan for Executive Officers,
incorporated by reference to the Registration Statement
(File No. 33-19541) under which SCEcorp registered
securities to be offered pursuant to the Plan under the
Securities Act of 1933.
10.29 Estate and Financial Planning Program for Executive
Officers, incorporated by reference to Exhibits to Forms
10-K filed by SCEcorp (File No. 1-9936).
10.30 Letter Agreement with Edward R. Muller, incorporated by
reference to Exhibit 10.32 to EME's Form 10.
10.31 Agreement with James S. Pignatelli, incorporated by
reference to Exhibit 10.33 to EME's Form 10.
10.32 Conformed copy of the Guarantee Agreement dated as of
November 30, 1994, incorporated by reference to Exhibit
10.34 to EME's Form 10.
10.33 Indenture of Lease between Brooklyn Navy Yard Development
Corporation and Cogeneration Technologies, Inc., dated as of
December 18, 1989, incorporated by reference to Exhibit
10.35 to EME's Form 10-K for the year ended December 31,
1994.
10.33.1 First Amendment to Indenture of Lease between Brooklyn Navy
Yard Development Corporation and Cogeneration Technologies,
Inc., dated November 1, 1991, incorporated by reference to
Exhibit 10.35.1 to EME's Form 10-K for the year ended
December 31, 1994.
10.33.2 Second Amendment to Indenture of Lease between Brooklyn Navy
Yard Development Corporation and Cogeneration Technologies,
Inc., dated June 3, 1994, incorporated by reference to
Exhibit 10.35.2 to EME's Form 10-K for the year ended
December 31, 1994.
EXHIBIT NO. DESCRIPTION
- ----------- -----------
10.33.3 Third Amendment to Indenture of Lease between Brooklyn Navy
Yard Development Corporation and Cogeneration Technologies,
Inc., dated December 12, 1994, incorporated by reference to
Exhibit 10.35.3 to EME's Form 10-K for the year ended
December 31, 1994.
10.34 Conformed copy of A$200 million Bank of America National
Trust and Savings Association Credit Agreement, dated
November 22, 1994, incorporated by reference to Exhibit
10.36 to EME's Form 10-K for the year ended December 31,
1994.
10.34.1 Conformed copy of the Amended and Restated A$200 million
Bank of America National Trust and Savings Associated Credit
Agreement, dated December 12, 1994, incorporated by
reference to Exhibit 10.36.1 to EME's Form 10-K for the year
ended December 31, 1994.
10.34.2 Conformed copy of First Amendment to Amended and Restated
A$200 million Bank of America National Trust and Savings
Associated Credit Agreement, dated June 7, 1995,
incorporated by reference to Exhibit 10.36.2 to EME's Form
10-Q for the quarter ended September 30, 1995.
10.35 Amended and Restated Limited Partnership Agreement of
Mission Capital, L.P., dated as of November 30, 1994,
incorporated by reference to Exhibit 10.37 to EME's Form
10-K for the year ended December 31, 1994.
10.36 Action of General Partner of Mission Capital, L.P. creating
the 9 7/8% Cumulative Monthly Income Preferred Securities,
Series A, dated as of November 30, 1994, incorporated by
reference to Exhibit 10.38 to EME's Form 10-K for the year
ended December 31, 1994.
10.37 Action of General Partner of Mission Capital, L.P. creating
the 8 1/2% Cumulative Monthly Income Preferred Securities,
Series B, dated as of August 8, 1995, incorporated by
reference to Exhibit 10.39 to EME's Form 10-Q for the
quarter ended June 30, 1995.
10.38 Power Purchase Contract between ISAB Energy, S.r.l. as
Seller and Enel, S.p.A. as Buyer, dated June 9, 1995,
incorporated by reference to Exhibit 10.40 to EME's Form
10-Q for the quarter ended June 30, 1995.
10.39 400 million sterling pounds Barclays Bank Plc Credit
Agreement, dated December 18, 1995, incorporated by
reference to Exhibit 10.41 to EME's Form 8-K, dated December
21, 1995.
10.40 Guarantee by EME, dated December 1, 1995 supporting Letter
of Credit issued by Bank of America National Trust and
Savings Association to secure payment of bonds issued
pursuant to the Brooklyn Navy Yard project tax-exempt bond
financing, incorporated by reference to Exhibit 10.42 to
EME's Form 10-K for the year ended December 31, 1995.
10.41 Guarantee by EME, dated December 1, 1995, supporting Letter
of Credit issued by Bank of America National Trust and
Savings Association to secure Brooklyn Navy Yard's indemnity
to the New York City Industrial Development Agency pursuant
to the Brooklyn Navy Yard project tax-exempt bond financing,
incorporated by reference to Exhibit 10.43 to EME's Form
10-K for the year ended December 31, 1995.
10.42 Guarantee by EME, dated December 20, 1996, in favor of The
Fuji Bank, Limited, Los Angeles Agency, to secure Camino
Energy Company's payments pursuant to Camino Energy
Company's Credit Agreement and Defeasance Agreement,
incorporated by reference to Exhibit 10.44 to EME's Form
10-K for the year ended December 31, 1996.
10.43 Power Purchase Agreement between National Power Corporation
and San Pascual Cogeneration Company International B.V.,
dated September 10, 1997, incorporated by reference to
Exhibit 10.45 to EME's Form 10-K for the year ended December
31, 1997.
10.44 Power Purchase Agreement between Gulf Power Generation Co.,
LTD., and Electricity Generating Authority of Thailand,
dated December 22, 1997, incorporated by reference to
Exhibit 10.46 to EME's Form 10-K for the year ended December
31, 1997.
EXHIBIT NO. DESCRIPTION
- ----------- -----------
10.45 Guarantee by EME, dated June 30, 1998, in favor of Tri
Energy Company Limited and the Sanwa Bank, Limited to
guarantee payment of 25% of Tri Energy Company Limited's
aggregate capital contributions under the Equity Bridge
Loan, incorporated by reference to Exhibit 10.47 to EME's
Form 10-Q for the quarter ended September 30, 1998.
10.46 Guarantee by EME, dated June 30, 1998, in favor of Tri
Energy Company Limited and the Sanwa Bank, Limited to
guarantee payment of 37.5% of Tri Energy Company Limited's
aggregate capital contributions attributable to Banpu Gas
and BANPU, incorporated by reference to Exhibit 10.48 to
EME's Form 10-Q for the quarter ended September 30, 1998.
10.47 Equity Support Guarantee by EME, dated December 23, 1998, in
favor of ABN AMRO Bank N.V., and the Chase Manhattan Bank to
guarantee certain equity funding obligations of EcoElectrica
Ltd. and EcoElectrica Holdings Ltd. pursuant to EcoElectrica
Ltd.'s Credit Agreement dated as of October 31, 1997,
incorporated by reference to Exhibit 10.49 to EME's Form
10-K for the year ended December 31, 1998.
10.48 Master Guarantee and Support Instrument by EME, dated
December 23, 1998, in favor of ABN AMRO Bank N.V., and the
Chase Manhattan Bank to guarantee the availability of funds
to purchase fuel for the EcoElectrica project pursuant to
EcoElectrica Ltd.'s Credit Agreement dated as of October 31,
1997 and Intercreditor Agreement dated as of October 31,
1997, incorporated by reference to Exhibit 10.50 to EME's
Form 10-K for the year ended December 31, 1998.
10.49 Guarantee Assumption Agreement from EME, dated December 23,
1998, under EME assumed all of the obligations of KENETECH
Energy Systems, Inc. to Union Carbide Caribe Inc., under the
certain Guaranty dated November 25, 1997, incorporated by
reference to Exhibit 10.51 to EME's Form 10-K for the year
ended December 31, 1998.
10.50 Transition Power Purchase Agreement, dated August 1, 1998,
between New York State Electric & Gas Corporation and
Mission Energy Westside, Inc, incorporated by reference to
Exhibit 10.52 to EME's Form 10-K for the year ended December
31, 1998.
10.51 Transition Power Purchase Agreement, dated August 1, 1998,
between Pennsylvania Electric Company and Mission Energy
Westside, Inc., incorporated by reference to Exhibit 10.53
to EME's Form 10-K for the year ended December 31, 1998.
10.52 Guarantee, dated August 1, 1998, between Edison Mission
Energy, Pennsylvania Electric Company, NGE Generation, Inc.
and New York State Electric & Gas Corporation, incorporated
by reference to Exhibit 10.54 to EME's Form 10-K for the
year ended December 31, 1998.
10.53 Second Amended and Restated Credit Agreement among EME and
Bank of America, dated as of October 11, 1996, US$400
million Bank of America Revolver, incorporated by reference
to Exhibit 10.15.3 to EME's Form 10-K for the year ended
December 31, 1996.
10.54 Sale, Purchase and Leasing Agreements between Edison First
Power Limited and PowerGen UK plc for the purchase of the
Ferrybridge C and Fiddler's Ferry Power Stations;
incorporated by reference to Exhibits 2.7 and 2.8 to EME's
Form 8-K/A, dated August 2, 1999.
10.55 Credit Agreement, dated March 18, 1999, among Edison Mission
Holdings Co. and Certain Commercial Lending Institutions,
and Citicorp USA, Inc., incorporated by reference to Exhibit
10.55 to EME's Form 8-K dated March 18, 1999.
10.56 Guarantee and Collateral Agreement made by Edison Mission
Holdings Co., Edison Mission Finance Co., Homer City
Property Holdings, Inc., Chestnut Ridge Energy Co., Mission
Energy Westside, Inc., EME Homer City Generation L.P. and
Edison Mission Energy in favor of United States Trust
Company of New York, dated as of March 18, 1999,
incorporated by reference to Exhibit 10.56 to EME's Form 8-K
dated March 18, 1999.
EXHIBIT NO. DESCRIPTION
- ----------- -----------
10.57 Collateral Agency and Intercreditor Agreement among Edison
Mission Holdings Co., Edison Mission Finance Co., Homer City
Property Holdings, Inc., Chestnut Ridge Energy Co., Mission
Energy Westside, Inc., EME Homer City Generation L.P., The
Secured Parties' Representatives, Citicorp USA, Inc. as
Administrative Agent and United States Trust Company of New
York, as Collateral Agent, dated as of March 18, 1999,
incorporated by reference to Exhibit 10.57 to EME's Form 8-K
dated March 18, 1999.
10.58 Security Deposit Agreement among Edison Mission Holdings
Co., Edison Mission Finance Co., Homer City Property
Holdings, Inc., Chestnut Ridge Energy Co., Mission Energy
Westside, Inc., EME Homer City Generation L.P. and United
States Trust Company of New York, as Collateral Agent, dated
as of Marcy 18, 1999, incorporated by reference to Exhibit
10.58 to EME's Form 8-K dated March 18, 1999.
10.59 Credit Support Guarantee, dated as of March 18, 1999, made
by Edison Mission Energy in favor of United States Trust
Company of New York, incorporated by reference to Exhibit
10.59 to EME's Form 8-K dated March 18, 1999.
10.60 Debt Service Reserve Guarantee, dated as of March 18, 1999,
made by Edison Mission Energy in favor of United States
Trust Company of New York on behalf of the various financial
institutions (Lenders) as are or may become parities to the
Credit Agreement, dated as of March 18, 1999, among Edison
Mission Holdings Co., the Lenders and Citicorp USA, Inc.,
incorporated by reference to Exhibit 10.60 to EME's Form 8-K
dated March 18, 1999.
10.61 Credit Agreement, dated March 18, 1999, among Edison Mission
Energy and Certain Commercial Lending Institutions, and
Citicorp USA, Inc., incorporated by reference to Exhibit
10.61 to EME's Form 8-K dated March 18, 1999.
10.62 Agreement for the sale and purchase of shares in First Hydro
Limited, dated December 21, 1995, between PSB Holding
Limited and First Hydro Finance Plc, incorporated by
reference to Exhibit 2.1 to EME's Current Report on Form
8-K, No. 1-13434 dated January 4, 1996.
10.63 Transaction Implementation Agreement, dated March 29, 1997,
between The State Electricity Commission of Victoria, Edison
Mission Energy Australia Limited, Loy Yang B Power Station
Pty Ltd, Loy Yang Power Limited, The Honourable Alan Robert
Stockdale, Leanne Power Pty Ltd and EME, incorporated by
reference to Exhibit 2.2 to EME's Current Report on Form
8-K, No. 1-13434 dated May 22, 1997.
10.64 Stock Purchase and Assignment Agreement, dated December 23,
1998, between KES Puerto Rico, L.P., KENETECH Energy
Systems, Inc., KES Bermuda, Inc. and EME del Caribe for the
(i) sale and purchase of KES Puerto Rico, L.P.'s shares in
EcoElectrica Holdings Ltd.; (ii) assignment of KENETECH
Energy Systems' rights and interests in that certain Project
Note from the Partnership; and (iii) assignment of KES
Bermuda, Inc.'s rights and interests in that certain
Administrative Services Agreement dated October 31, 1997,
incorporated by reference to Exhibit 2.3 to EME's 10-K for
the year ended December 31, 1998.
10.65 Asset Purchase Agreement, dated August 1, 1998, between
Pennsylvania Electric Company, NGE Generation, Inc., New
York State Electric & Gas Corporation and Mission Energy
Westside, Inc, incorporated by reference to Exhibit 2.4 to
EME's 10-K for the year ended December 31, 1998.
10.66 Asset Sale Agreement, dated March 22, 1999 between
Commonwealth Edison Company and Edison Mission Energy as to
the Fossil Generating Assets, incorporated by reference to
Exhibit 2.5 to EME's 10-K for the year ended December 31,
1998.
10.67 Agreement for the Sale and Purchase of Shares in Contact
Energy Limited, dated March 10, 1999, between Her Majesty
the Queen in Right of New Zealand, Edison Mission Energy
Taupo Limited and Edison Mission Energy, incorporated herein
by reference to Exhibit 2.6 to the EME's Form 10-Q for the
quarter ended March 31, 1999.
EXHIBIT NO. DESCRIPTION
- ----------- -----------
10.68 Copy of the Global Debenture representing EME's 9 7/8%
Junior Subordinated Deferrable Interest Debentures, Series
A, Due 2024, incorporated by reference as Exhibit 4.1 to
EME's Form 10-K for the year ended December 31, 1994.
10.69 Conformed copy of the Indenture, dated as of November 30,
1994, between EME and The First National Bank of Chicago, as
Trustee, incorporated by reference as Exhibit 4.2 to EME's
Form 10-K for the year ended December 31, 1994.
10.70 First Supplemental Indenture, dated as of November 30, 1994,
to Indenture dated as of November 30, 1994 between EME and
The First National Bank of Chicago, as Trustee, incorporated
by reference as Exhibit 4.2.1 to EME's Form 10-K for the
year ended December 31, 1994.
10.71 Indenture, dated as of June 28, 1999, between EME and The
Bank of New York, as Trustee.*
10.72 First Supplemental Indenture, dated as of June 28, 1999, to
Indenture dated as of June 28, 1999, between EME and The
Bank of New York, as Trustee.*
10.73 Registration Rights Agreement, dated as of June 23, 1999,
between EME and the Initial Purchasers specified therein.*
12.1 Statement regarding the computation of ratio of earnings to
fixed charges for EME.*
21.1 List of Subsidiaries.*
23.1 Consent of Arthur Andersen LLP.*
23.2 Consent of PricewaterhouseCoopers.*
23.3 Consent of Skadden, Arps, Slate, Meagher & Flom LLP
(included in Exhibit 5.1).
23.4 Consent of Morgan, Lewis & Bockius LLP (included in Exhibit
5.2).
25.1 Statement of Eligibility and Qualification on Form T-1 of
United States Trust Company of New York, as Trustee, under
the Indenture filed as Exhibit 4.1 hereto.*
27.1 Financial Data Schedule.*
99.1 Form of Letter of Transmittal.*
99.2 Form of Notice of Guaranteed Delivery.*
99.3 Form of Letter to Clients.*
99.4 Form of Letter to Brokers, Dealers, Commercial Banks, Trust
Companies and Other Nominees.*
* Filed herewith
** To be filed by amendment