PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED JULY 30, 1999)
$275,000,000
PENNSYLVANIA ELECTRIC COMPANY
MEDIUM-TERM NOTES, SERIES E
Pennsylvania Electric Company may use this prospectus supplement to offer
its medium-term notes, Series E from time to time.
The following terms may apply to the notes. We will provide the final
terms for each note in a pricing supplement.
o They may have maturities ranging from one year to thirty-five years.
o They may, if so specified in a pricing supplement, be subject to
redemption or repayment at the option of Pennsylvania Electric
Company.
o They will be denominated in U.S. dollars unless otherwise specified
by Pennsylvania Electric Company and described in a pricing
supplement.
o They may bear interest at a fixed or floating interest rate. Floating
interest rates may be based on LIBOR or on other interest rate
formulas specified in a pricing supplement.
o They will be issued in book-entry form, except under certain
circumstances.
o Interest will be paid on the notes on dates determined at the time of
issuance.
o They will be issued in minimum denominations of $1,000 and increased
in multiples of $1,000.
The mailing address and telephone number of Pennsylvania Electric
Company's principal executive offices are: 2800 Pottsville Pike, Reading,
Pennsylvania 19605, (610) 929-3601.
We will receive between $274,587,500 and $272,937,500 of the proceeds from
the sale of the notes after paying the Agents' commissions of between $412,500
and $2,062,500. The exact proceeds to Pennsylvania Electric Company will be set
at the time of issuance. We do not expect that any of the notes will be listed
on an exchange, and a market for any particular note may not develop.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities or determined if this
prospectus supplement or the related prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.
The notes are being offered on a continual basis by Pennsylvania Electric
Company through the Agents listed below. Each Agent has agreed to use its
reasonable best efforts to solicit purchases of the notes. In addition, the
notes may be sold to any Agent, as principal, for resale to investors or other
purchasers. Pennsylvania Electric Company reserves the right to withdraw, cancel
or modify the offer made here without notice. Pennsylvania Electric Company or
the Agent who solicits any offer may reject such offer in whole or in part.
SALOMON SMITH BARNEY BANC OF AMERICA SECURITIES LLC
July 30, 1999
You should rely on the information incorporated by reference or provided in this
prospectus supplement or the accompanying prospectus. Pennsylvania Electric
Company has not authorized anyone else to provide you with different
information. Neither Pennsylvania Electric Company nor the agents are making an
offer of these securities in any state where the offer is not permitted. You
should not assume that the information in this prospectus supplement or the
prospectus is accurate as of any date other than the date on the front of those
documents.
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
Page
----
Introductory Statement .................................................... S-3
Pennsylvania Electric Company ............................................. S-3
Use of Proceeds ........................................................... S-3
Description of the Notes .................................................. S-4
Plan of Distribution of Notes ............................................. S-15
PROSPECTUS
Available Information ..................................................... 2
Incorporation of Certain Documents
By Reference ............................................................ 3
Pennsylvania Electric Company ............................................. 4
Financing Program ......................................................... 4
Use of Proceeds ........................................................... 5
Company Coverage Ratios ................................................... 5
Description of Senior Notes ............................................... 6
Plan of Distribution ...................................................... 14
Legal Matters ............................................................. 15
Experts ................................................................... 15
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INTRODUCTORY STATEMENT
Pennsylvania Electric Company ("Penelec") is offering medium term notes
(the "Notes"), in the principal amount of $275,000,000. If Penelec sells other
Senior Notes as described in the accompanying prospectus, the aggregate
principal amount of Notes that Penelec may offer and sell under this prospectus
supplement would be reduced.
Penelec intends to use this prospectus supplement, the attached
prospectus and a related pricing supplement to offer the Notes from time to
time. This prospectus supplement provides you with certain terms of the Notes
and supplements the description of Senior Notes contained in the attached
prospectus. If any information in this prospectus supplement is inconsistent
with the prospectus, this prospectus supplement replaces the inconsistent
information. Each time Penelec issues Notes, Penelec will prepare a pricing
supplement that will contain additional terms of the offering and the
description of the specific Notes offered. The pricing supplement also may add,
update or change information in this prospectus supplement or the attached
prospectus, including provisions describing the calculation of interest and the
method of making payments under the terms of a Note. Any information in the
pricing supplement that is inconsistent with this prospectus supplement will
replace the inconsistent information in this prospectus supplement.
PENNSYLVANIA ELECTRIC COMPANY
Penelec, a public utility furnishing electric service within
Pennsylvania and a small portion of New York, is a wholly owned subsidiary of
GPU, Inc. ("GPU"), a holding company registered under the Public Utility Holding
Company Act of 1935. Penelec, which does business under the name "GPU Energy,"
provides electric service within a territory located in western, northern and
south central Pennsylvania having a population of about 1.2 million. Penelec, as
lessee of the property of The Waverly Electric Light and Power Company, a
subsidiary, also serves a population of about 13,700 in Waverly, New York.
Penelec's principal executive offices are located at 2800 Pottsville Pike,
Reading, Pennsylvania 19605, and its telephone number is (610) 929-3601.
USE OF PROCEEDS
Penelec will use the net proceeds from the sale of the Notes (1) to
redeem or repurchase other outstanding securities of Penelec, (2) to reduce
Penelec's short-term borrowings, (3) for construction purposes and (4) for other
corporate purposes, including to reimburse Penelec's treasury for funds
previously expended for the purposes described above.
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DESCRIPTION OF THE NOTES
The following is a summary of certain terms of the Notes, does not
purport to be complete, and is subject to, and qualified in its entirety by, the
description of Senior Notes in the accompanying prospectus, the Senior Note
Indenture (as defined below), a form of which is on file with the Securities and
Exchange Commission, and the Trust Indenture Act of 1939. Certain capitalized
terms used herein are defined in the Senior Note Indenture. The following
description of certain terms of the Notes supplements and, to the extent
inconsistent therewith, replaces the description of the general terms and
provisions of the Senior Notes set forth in the accompanying prospectus, to
which reference is hereby made. The following description will apply unless
otherwise specified in an applicable pricing supplement.
GENERAL
The Notes are being issued as a series of Senior Notes under the Senior
Note Indenture, dated as of April 1, 1999, as it may be amended or supplemented
from time to time (the "Senior Note Indenture") between Penelec and United
States Trust Company of New York (the "Senior Note Trustee"). All of the Senior
Notes, including the Notes, outstanding under the Senior Note Indenture will be
unsecured general obligations of Penelec and will rank equally with other
unsecured and unsubordinated indebtedness of Penelec. Other than as described in
the prospectus, Penelec will not issue any secured debt without securing the
Notes equally and ratably with such secured debt. See "Description of Senior
Notes -- Certain Covenants of the Company" in the accompanying prospectus.
The Senior Note Indenture provides that Penelec will not issue any
additional first mortgage bonds under its Mortgage and Deed of Trust.
For further information concerning the Notes, see "Description of Senior
Notes" in the accompanying prospectus.
The Notes will be offered on a continual basis and will mature on any
Business Day (as defined below) from one year to 35 years from the date of
issue, as selected by the purchaser and agreed to by Penelec. Prior to maturity,
the Notes may be subject to optional redemption by Penelec at the price or
prices set forth in the applicable pricing supplement. Each Note will bear
interest at a fixed or floating rate as specified in the applicable pricing
supplement.
The pricing supplement relating to each Note will describe the following
terms: (1) the title of such Notes; (2) the aggregate principal amount of such
Notes; (3) the date on which such Notes will be issued ("Original Issue Date"),
(4) the price (expressed as a percentage of principal amount) at which such
Notes will be issued; (5) the date or dates on which the principal of such Notes
is payable; (6) the rate or rates at which such Notes will bear interest, the
date or dates from which such interest will accrue, the dates on which such
interest will be payable ("Interest Payment Dates"), and the regular record
dates for the interest payable on such Interest Payment Dates; (7) the option,
if any, of Penelec to redeem such Notes and the period or periods within which,
or the date or dates on which, the prices at which and the terms and conditions
upon which, such Notes may be redeemed, in whole or in part, upon the exercise
of such option; (8) the obligation, if any, of Penelec to redeem or purchase
such Notes
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at the option of the registered holder or pursuant to any sinking fund or
analogous provisions and the period or periods within which, or the date or
dates on which, the price or prices at which and the terms and conditions upon
which, such Notes will be redeemed or purchased, in whole or in part, pursuant
to such obligation; (9) the denominations in which such Notes will be issuable,
if other than $1,000 and integral multiples thereof; and (10) any other terms of
such Notes, including with respect to any series, if applicable.
Except under certain circumstances, Penelec will issue the Notes in
book-entry form only.
PAYMENT OF PRINCIPAL AND INTEREST
Until the Notes are paid or payment thereof is provided for, Penelec
will, at all times, maintain a paying agent (the "Paying Agent") in The City of
New York capable of performing the duties described herein to be performed by
the Paying Agent. Penelec has initially appointed United States Trust Company of
New York, 114 West 47th Street, New York, New York 10036 as Paying Agent.
Penelec will notify the holders of the Notes in accordance with the Senior Note
Indenture of any change in the Paying Agent or its address.
Unless otherwise specified in a pricing supplement, each Note will bear
interest from its Original Issue Date until the principal amount thereof is paid
or made available for payment. Unless otherwise specified in a pricing
supplement, interest on each Note will be payable on the Interest Payment Date
as set forth in a related pricing supplement and at maturity or upon earlier
redemption; provided, however, that the first payment of interest on any Note
with an Original Issue Date between a Record Date (as defined below) and an
Interest Payment Date will be made on the succeeding Interest Payment Date to
the registered holder. Each payment of interest in respect of an Interest
Payment Date will include interest accrued to but excluding such Interest
Payment Date.
Interest payable on any Interest Payment Date will be paid to the person
in whose name a Note is registered at the close of business on the Record Date
immediately preceding such Interest Payment Date; provided, however, that
interest payable at maturity or upon earlier redemption will be payable to the
person to whom principal shall be payable. Unless Penelec otherwise specifies in
the applicable pricing supplement, the "Record Date" with respect to any
Interest Payment Date will be the fifteenth day of the calendar month
immediately preceding such Interest Payment Date (whether or not a Business
Day).
"Business Day" shall mean each day that is not a day on which banking
institutions or trust companies in the Borough of Manhattan, the City and State
of New York, or in the city where the corporate trust office of the Senior Note
Trustee is located, are obligated or authorized by law or executive order to
close; provided that with respect to Notes for which interest is based on the
LIBOR index, such day is also a London Business Day. "London Business Day" means
a day on which commercial banks are open for business (including dealings in
United States dollars) in London.
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INTEREST AND INTEREST RATES
GENERAL
In the related pricing supplement, Penelec will designate each Note as a
Fixed Rate Note or a Floating Rate Note and describe the method of determining
the interest rate, including any Spread and/or Spread Multiplier. Penelec may
also specify a maximum and a minimum interest rate in the related pricing
supplement.
Interest rates on the Notes that Penelec offers may differ depending
upon, among other things, the aggregate principal amount of Notes purchased in
any single transaction. Penelec may offer Notes with similar variable terms but
different interest rates, as well as Notes with different variable terms,
concurrently to different investors. Penelec may, from time to time, change the
interest rates or formulas and other terms of Notes, but no such change will
affect any Note already issued or as to which an offer to purchase has been
accepted.
FIXED RATE NOTES
In the pricing supplement for Fixed Rate Notes, Penelec will specify a
fixed interest rate per annum payable in arrears on the Interest Payment Dates.
The Interest Payment Dates for Fixed Rate Notes will be August 1 and February 1
of each year or on such other date(s) specified in the applicable pricing
supplement. Interest on Fixed Rate Notes will be computed on the basis of a
360-day year of twelve 30-day months. If the maturity date or an Interest
Payment Date for any Fixed Rate Note is not a Business Day, Penelec will pay
principal, any premium, and any interest for that Note on the next Business Day
with the same force and effect as if made on such date, and no interest will
accrue from and after the maturity date or Interest Payment Date.
FLOATING RATE NOTES
Unless otherwise specified in a pricing supplement, each Floating Rate
Note will have an interest rate basis or formula based on LIBOR.
In the pricing supplement, Penelec will indicate the Index Maturity as
well as any Spread and/or Spread Multiplier which would be applied to the
interest rate formula to determine the interest rate. Any Floating Rate Note may
have a maximum or minimum interest rate limitation. In addition to any maximum
interest rate limitation, the interest rate on the Floating Rate Notes will in
no event be higher than the maximum rate permitted by New York law, as the same
may be modified by United States law of general application.
The "Spread" is the number of basis points (one one-hundredth of a
percentage point) to be added to or subtracted from the related basis or bases
applicable to such Floating Rate Note. The "Spread Multiplier" is the percentage
of the related basis or bases applicable to such Floating Rate Note and by which
such basis or bases will be multiplied to determine the applicable interest rate
on such Floating Rate Note. The "Index Maturity" is the period to maturity of
the instrument or obligation with respect to which the related basis or bases
will be calculated.
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Penelec will appoint a calculation agent to calculate interest rates on
the Floating Rate Notes. Unless Penelec identifies a different party in the
pricing supplement, the Paying Agent will be the calculation agent for each
Note. Each Floating Rate Note will have a specified "Interest Reset Date",
"Interest Determination Date" and, where applicable, "Calculation Date"
associated with it. An "Interest Reset Date" is the date on which the interest
rate on the Note is subject to change. An "Interest Determination Date" is the
date as of which the new interest rate is determined for a particular Interest
Reset Date, based on the applicable interest rate basis or formula as of that
Interest Determination Date. The "Calculation Date" is the date by which the
calculation agent will determine the new interest rate that became effective on
a particular Interest Reset Date based on the applicable interest rate basis or
formula on the Interest Determination Date. The interest rate determined by the
calculation agent, absent manifest error, shall be binding and conclusive upon
beneficial owners and holders of Floating Rate Notes and on Penelec. Promptly on
such determination, the calculation agent will notify the Senior Note Trustee
and the Paying Agent (if the calculation agent is not the Paying Agent) of the
new interest rate.
CHANGE OF INTEREST RATE. Penelec may reset the interest rate on each
Floating Rate Note daily, weekly, monthly, quarterly, semi-annually, annually or
on some other basis that Penelec specifies. The Interest Reset Date will be
specified in the pricing supplement.
The related pricing supplement will describe the initial interest rate
or interest rate formula on each Note. That rate is effective until the
following Interest Reset Date. Thereafter, the interest rate will be the rate
determined on each Interest Determination Date. Each time a new interest rate is
determined, it becomes effective on the subsequent Interest Reset Date. Unless
otherwise specified in a pricing supplement, if any Interest Reset Date is not a
Business Day, then the Interest Reset Date is postponed to the next Business
Day, except if the next Business Day is in the next calendar month, the Interest
Reset Date will be the immediately preceding Business Day.
DATE INTEREST RATE IS DETERMINED. Unless otherwise specified in a
pricing supplement, the Interest Determination Date will be the second London
Business Day immediately preceding the applicable Interest Reset Date.
CALCULATION DATE. Unless Penelec specifies a different date in a pricing
supplement, the "Calculation Date", where applicable, relating to an Interest
Determination Date will be the earlier of
(1) the tenth calendar day after such Interest Determination Date or, if
such day is not a Business Day, the next succeeding Business Day, or
(2) the Business Day immediately preceding the relevant Interest Payment
Date or the maturity date, as the case may be.
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Upon the request of the beneficial holder of any Floating Rate Note, the
calculation agent will provide the interest rate then in effect and, if
different, the interest rate that will become effective on the next Interest
Reset Date for the Floating Rate Note.
PAYMENT OF INTEREST. Penelec will pay installments of interest on
Floating Rate Notes as specified in the applicable pricing supplement.
Penelec will also pay interest at maturity, redemption or repurchase.
If an Interest payment Date is not a Business Day, such Interest Payment
Date will be postponed to the next succeeding Business Day, except that in the
case of a Floating Rate Note as to which LIBOR is the applicable interest rate
basis and such Business Day falls in the next succeeding calendar month, such
Interest Payment Date will be the immediately preceding Business Day. If the
maturity date or date of redemption or repurchase of any Floating Rate Note is
not a Business Day, principal, premium, if any, and interest for that Note will
be paid on the next Business Day, and no interest will accrue from and after the
maturity date or date of redemption or repurchase.
Penelec will calculate accrued interest on a Floating Rate Note by
multiplying the principal amount of a Note by an accrued interest factor. The
accrued interest factor is the sum of the interest factors calculated for each
day in the period for which accrued interest is being calculated. Unless
otherwise specified in the applicable pricing supplement, the interest factor
for each day is computed by dividing the interest rate in effect on that day by
360. All percentages resulting from any calculation are rounded to the nearest
one hundredth of a percentage point, with five one-thousandths of a percentage
point rounded upward. For example, 9.875% (or .09875) will be rounded to 9.88%
(or .0988). Dollar amounts used in the calculation are rounded to the nearest
cent (with one-half cent being rounded upward).
CALCULATION OF INTEREST
On each Interest Determination Date, the calculation agent will
determine LIBOR as follows:
- If the pricing supplement specifies "LIBOR Telerate", LIBOR on
any Interest Determination Date will be the rate for deposits in
United States dollars having the Index Maturity described in the
related pricing supplement on the applicable Interest Reset Date,
as such rate appears on the Designated LIBOR Page as of 11:00
A.M., London time, on that Interest Determination Date.
- If the pricing supplement specifies "LIBOR Reuters", LIBOR on
any Interest Determination Date will be the average of the
offered rates for deposits in United States dollars having the
Index Maturity described in the related pricing supplement on the
applicable Interest Reset Date, as such rates appear on the
Designated LIBOR Page as of 11:00 A.M., London time, on that
Interest
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Determination Date, if at least two such offered rates appear on
the Designated LIBOR Page.
- If the pricing supplement does not specify "LIBOR Telerate" or
"LIBOR Reuters", the LIBOR Rate will be LIBOR Telerate. In
addition, if the Designated LIBOR Page by its terms provides only
for a single rate, that single rate will be used regardless of
the foregoing provisions requiring more than one rate.
On any Interest Determination Date on which fewer than the
required number of applicable rates appear or no rate appears on the applicable
Designated LIBOR Page, the calculation agent will determine LIBOR as follows:
- LIBOR will be determined on the basis of the offered rates at
which deposits in United States dollars having the Index Maturity
described in the related pricing supplement on the Interest
Determination Date and in a principal amount that is
representative of a single transaction in that market at that
time are offered by four major banks in the London interbank
market at approximately 11:00 A.M., London time, on the Interest
Determination Date to prime banks in the London interbank market.
The calculation agent will select the four banks and request the
principal London office of each of those banks to provide a
quotation of its rate for deposits in United States dollars. If
at least two quotations are provided, LIBOR for that Interest
Determination Date will be the average of those quotations.
- If fewer than two quotations are provided as mentioned above,
LIBOR will be the average of the rates quoted by three major
banks in the City of New York selected by the calculation agent
at approximately 11:00 A.M. in the City of New York on the
Interest Determination Date for loans to leading European banks
in United States dollars having the Index Maturity designated in
the pricing supplement and in a principal amount that is
representative for a single transaction in United States dollars
in that market at that time. The calculation agent will select
the three banks referred to above.
- If fewer than three banks selected by the calculation agent are
quoting as mentioned above, LIBOR will remain LIBOR then in
effect on that Interest Determination Date.
"Designated LIBOR Page" means:
- If the pricing supplement specifies "LIBOR Reuters", the
display on the Reuters Monitor Money Rates Service (or any
successor service) on the page specified in such pricing
supplement (or any other page as may replace such page on such
service) for the purpose of displaying the London interbank rates
of major banks for United States dollars; or
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- If the pricing supplement specifies "LIBOR Telerate" or neither
"LIBOR Reuters" nor "LIBOR Telerate" is specified in the
applicable pricing supplement as the method of calculating LIBOR,
the display on Bridge Telerate, Inc. (or any successor service,
"Telerate") on the page specified in such pricing supplement (or
any other page as may replace such page on such service) for the
purpose of displaying the London interbank rates of major banks
for United States dollars.
REDEMPTION AND REPURCHASE
The pricing supplement relating to each Note will describe the option,
if any, of Penelec to redeem such Notes and the period or periods within which,
or the date or dates on which, the prices at which and the terms and conditions
upon which, such Notes may be redeemed, in whole or in part, upon the exercise
of such option. Unless Penelec otherwise specifies in the applicable pricing
supplement, the Notes will be redeemable only upon at least 30 days, but not
more than 60 days, prior notice mailed to the registered address of each holder
of the Notes. See "Description of Senior Notes - Redemption Provisions" in the
accompanying prospectus. Penelec's redemption options may include redemptions at
par, redemptions pursuant to a declining redemption price schedule and
redemptions pursuant to a make-whole formula (a "Make-Whole Redemption"), in
each case subject to the terms and conditions of such option set forth in a
related pricing supplement or herein. If the applicable pricing supplement for
the Notes states that such Notes are redeemable under a Make-Whole Redemption
provision, such Notes will be redeemable, as a whole or in part, at Penelec's
option, at any time or from time to time at a redemption price equal to the
greater of (1) 100% of the principal amount of the Notes to be redeemed or (2)
the sum of the present values of the Remaining Scheduled Payments (as defined
below) discounted, on a semiannual basis (assuming a 360-day year consisting of
twelve 30-day months), at a rate equal to the sum of the Treasury Rate (as
defined below) and a number of basis points to be set forth in the applicable
pricing supplement.
In each case accrued interest will be payable to the redemption date.
"Treasury Rate" means, with respect to any redemption date, the rate per
annum equal to the semiannual equivalent yield to maturity of the Comparable
Treasury Issue, assuming a price for the Comparable Treasury Issue (expressed as
a percentage of its principal amount) equal to the Comparable Treasury Price for
such redemption date.
"Comparable Treasury Issue" means the United States Treasury security
selected by an Independent Investment Banker as having a maturity comparable to
the remaining term of the Notes to be redeemed that would be utilized, at the
time of selection and in accordance with customary financial practice, in
pricing new issues of corporate debt securities of comparable maturity to the
remaining term of such Notes. "Independent Investment Banker" means one of the
Reference Treasury Dealers appointed by Penelec.
"Comparable Treasury Price" means, with respect to any redemption date,
(1) the average of the Reference Treasury Dealer Quotations for such redemption
date after excluding the highest
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and lowest of such Reference Treasury Dealer Quotations, or (2) if the Senior
Note Trustee obtains fewer than five such Reference Treasury Dealer Quotations,
the average of all such quotations. "Reference Treasury Dealer Quotations"
means, with respect to each Reference Treasury Dealer and any redemption date,
the average, as determined by the Senior Note Trustee, of the bid and asked
prices for the Comparable Treasury Issue (expressed in each case as a percentage
of its principal amount) quoted in writing to the Senior Note Trustee by such
Reference Treasury Dealer at 3:30 p.m., New York City time, on the third
Business Day preceding such redemption date.
"Reference Treasury Dealer" means each of Salomon Smith Barney Inc.,
Bank of America Securities LLC and their respective successors and such other
three (3) Primary U.S. Government securities dealers ("Primary Treasury Dealer")
selected by Penelec. If any of the foregoing shall cease to be a Primary
Treasury Dealer, Penelec shall substitute another nationally recognized
investment banking firm that is a Primary Treasury Dealer.
"Remaining Scheduled Payments" means, with respect to each Note to be
redeemed, the remaining scheduled payments of principal of and interest on such
Note that would be due after the related redemption date but for such
redemption. If such redemption date is not an Interest Payment Date with respect
to such Note, the amount of the next succeeding scheduled interest payment on
such Note will be reduced by the amount of interest accrued on such Note to such
redemption date.
Penelec may at any time purchase Notes at any price in the open market
or otherwise. Notes so purchased by Penelec will be surrendered to the Senior
Note Trustee for cancellation.
BOOK-ENTRY NOTES
The Notes will be issued in book-entry form (a Note so represented, a
"Book-Entry Note"), and any Note so issued will be issued in the form of one or
more fully registered Global Securities (each a "Global Security") that will be
deposited with, or on behalf of, The Depository Trust Company, New York, New
York ("DTC") or such other Depositary which may replace DTC as Depositary for
the Book-Entry Notes (the "Depositary"), and registered in the name of a nominee
of the Depositary.
Upon issuance, all Book-Entry Notes of the same series will be
represented by one or more Global Securities. Except under the circumstances
described below, Book-Entry Notes will not be exchangeable for Notes in
certificated form and will not otherwise be issuable in certificated form.
If the Depositary is at any time unwilling or unable to continue as
Depositary and a successor Depositary is not appointed, Penelec will issue Notes
in certificated form ("Certificated Notes") in exchange for the Global Security
or Global Securities representing the corresponding Book-Entry Notes. In
addition, Penelec may at any time and in its sole discretion determine not to
have any Book-Entry Notes represented by one or more Global Securities and, in
such event, will issue individual Certificated Notes in exchange for the Global
Security or Global Securities
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representing the corresponding Book-Entry Notes. In any such instance, an owner
of a Book-Entry Note represented by a Global Security will be entitled to
physical delivery of individual Certificated Notes equal in principal amount to
such Book-Entry Notes and to have such Certificated Notes registered in its
name. Individual Certificated Notes will be issued as registered notes in
denominations of $1,000 or any higher integral multiple of $1,000.
The following is based on information furnished by DTC:
DTC is a limited-purpose trust company organized under the New
York Banking Law, a "banking organization" within the meaning of the New
York Banking Law, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code,
and a "clearing agency" registered pursuant to the provisions of Section
17A of the Securities Exchange Act of 1934 (the "Exchange Act"). DTC
holds securities that its participants ("Participants") deposit with
DTC. DTC also facilitates the settlement among Participants of
securities transactions, such as transfers and pledges, in deposited
securities through electronic computerized book-entry changes in
Participants' accounts, thereby eliminating the need for physical
movement of securities certificates. Direct Participants of DTC ("Direct
Participants") include securities brokers and dealers, banks, trust
companies, clearing corporations, and certain other organizations. DTC
is owned by a number of its Direct Participants and by the New York
Stock Exchange, Inc., the American Stock Exchange, Inc., and the
National Association of Securities Dealers, Inc. Access to the DTC
system is also available to others such as securities brokers and
dealers, banks, and trust companies that clear through or maintain a
custodial relationship with a Direct Participant, either directly or
indirectly ("Indirect Participants"). The rules applicable to DTC and
its Participants are on file with the Securities and Exchange
Commission.
Purchases of Book-Entry Notes under the DTC system must be made
by or through Direct Participants, which will receive a credit for the
Book-Entry Notes on DTC's records. The ownership interest of each actual
purchaser of each Book-Entry Note ("Beneficial Owner") is in turn to be
recorded on the Direct and Indirect Participants' records. Beneficial
Owners will not receive written confirmation from DTC of their purchase,
but Beneficial Owners are expected to receive written confirmations
providing details of the transaction, as well as periodic statements of
their holdings, from the Direct or Indirect Participant through which
the Beneficial Owner entered into the transaction. Transfers of
ownership interests in the Book-Entry Notes are to be accomplished by
entries made on the books of Participants acting on behalf of Beneficial
Owners. Beneficial Owners will not receive certificates representing
their ownership interests in Book-Entry Notes, except in the event that
use of the book-entry system for the Book-Entry Notes is discontinued.
To facilitate subsequent transfers, all Book-Entry Notes
deposited with, or on behalf of, DTC are registered in the name of DTC's
partnership nominee, Cede & Co. The deposit of Book-Entry Notes with DTC
and their registration in the name of Cede & Co. effect no change in
beneficial ownership. DTC has no knowledge of the actual
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Beneficial Owners of the Book-Entry Notes; DTC's records reflect only
the identity of the Direct Participants to whose accounts such
Book-Entry Notes are credited which may or may not be the Beneficial
Owners. The Participants will remain responsible for keeping account of
their holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants, and by
Direct Participants and Indirect Participants to Beneficial Owners will
be governed by arrangements among them, subject to any statutory or
regulatory requirements as may be in effect from time to time.
Redemption notices shall be sent to Cede & Co. If less than all
of the Book-Entry Notes having the same Original Issue Date and other
terms are being redeemed, DTC's practice is to determine by lot the
amount of the interest of each Direct Participant to be so redeemed.
Neither DTC nor Cede & Co. will consent or vote with respect to
the Book-Entry Notes. Under its usual procedures, DTC mails an Omnibus
Proxy to Penelec as soon as possible after the record date. The Omnibus
Proxy assigns Cede & Co.'s consenting or voting rights to those Direct
Participants to whose accounts the Book-Entry Notes are credited on the
applicable record date (identified in a listing attached to the Omnibus
Proxy).
Principal and any premium and/or interest payments on the
Book-Entry Notes will be made to DTC. DTC's practice is to credit Direct
Participants' accounts on the date on which interest is payable in
accordance with the respective holdings shown on DTC's records unless
DTC has reason to believe that it will not receive payment on such date.
Payments by Participants to Beneficial Owners will be governed by
standing instructions and customary practices, as is the case with
securities held for the accounts of customers in bearer form or
registered in "street name", and will be the responsibility of such
Participant and not of DTC, the underwriters or Penelec, subject to any
statutory or regulatory requirements as may be in effect from time to
time. Payment of principal and any premium and/or interest to DTC is the
responsibility of Penelec and the Senior Note Trustee. Disbursement of
such payments to Direct Participants shall be the responsibility of DTC,
and disbursement of such payments to the Beneficial Owners shall be the
responsibility of Direct and Indirect Participants.
DTC may discontinue providing its services as securities
Depositary with respect to the Book-Entry Notes at any time by giving
reasonable notice to Penelec and the Senior Note Trustee. Under such
circumstances, in the event that a successor securities Depositary is
not obtained, Notes in certificated form are required to be printed and
delivered in exchange for Book-Entry Notes held by DTC.
Penelec may decide to discontinue use of the system and
book-entry transfers through DTC (or a successor securities Depositary).
In that event, Notes in certificated form will be printed and delivered
in exchange for Book-Entry Notes held by DTC.
S-13
Management of DTC is aware that some computer applications,
systems and the like for processing data ("Systems") that are dependent
upon calendar dates, including dates before, on, and after January 1,
2000, may encounter "Year 2000 problems." DTC has informed Direct
Participants and Indirect Participants and other members of the
financial community (the "Industry") that it has developed and is
implementing a program so that its Systems, as the same relate to the
timely payment of distributions (including principal and interest
payments) to securityholders, book-entry deliveries, and settlement of
trades within DTC ("Depositary Services"), continue to function
appropriately. This program includes a technical assessment and a
remediation plan, each of which is complete. Additionally, DTC's plan
includes a testing phase, which is expected to be completed within
appropriate time frames.
However, DTC's ability to perform properly its services is also
dependent upon other parties, including, but not limited to, issuers and
their agents, as well as DTC's Direct Participants and Indirect
Participants, third party vendors from whom DTC licenses software and
hardware, and third party vendors on whom DTC relies for information or
the provision of services, including telecommunication and electrical
utility service providers, among others. DTC has informed the Industry
that it is contacting (and will continue to contact) third party vendors
from whom DTC acquires services to: (1) impress upon them the importance
of such services being Year 2000 compliant; and (2) determine the extent
of their efforts for Year 2000 remediation (and, as appropriate,
testing) of their services. In addition, DTC is in the process of
developing such contingency plans as it deems appropriate.
According to DTC, the information in the preceding two paragraphs
with respect to DTC has been provided to the Industry for informational
purposes only and is not intended to serve as a representation,
warranty, or contract modification of any kind.
The information in this section concerning DTC and DTC's book-entry
system has been obtained from sources (including DTC) that Penelec believes to
be reliable, but Penelec takes no responsibility for the accuracy thereof.
If the Depositary is at any time unwilling or unable to continue as
Depositary or ceases to be a clearing agency registered under the Exchange Act
and a successor Depositary is not appointed by Penelec, Penelec will issue
Certificated Notes in exchange for the Notes of the same series represented by
the Global Securities held by the Depositary. In addition, Penelec may at any
time and in its sole discretion determine not to have Notes represented by a
Global Security and, in such event, will issue individual Certificated Notes in
fully registered form, without coupons, in exchange for the Book-Entry Notes
represented by the Global Security.
NONE OF PENELEC, THE SENIOR NOTE TRUSTEE, THE AGENTS OR ANY UNDERWRITERS
OR ANY AGENT FOR PAYMENT ON OR REGISTRATION OF TRANSFER OR EXCHANGE OF ANY
GLOBAL SECURITY WILL HAVE ANY RESPONSIBILITY OR LIABILITY FOR ANY ASPECT OF THE
RECORDS RELATING TO OR PAYMENTS MADE ON ACCOUNT OF BENEFICIAL INTERESTS IN SUCH
GLOBAL SECURITY OR FOR MAINTAINING, SUPERVISING OR REVIEWING ANY RECORDS
RELATING TO SUCH BENEFICIAL INTERESTS.
S-14
PLAN OF DISTRIBUTION OF NOTES
The Notes are being offered on a continual basis by Penelec through
Salomon Smith Barney Inc. and Banc of America Securities LLC (the "Agents"),
each of which has agreed to use its reasonable best efforts to solicit purchases
of the Notes. The Notes will be issued at 100% of the principal amount thereof
unless otherwise specified in the applicable pricing supplement. Penelec will
pay each Agent a commission of 0.150% to .750% of the principal amount of the
Notes, depending on their maturity, sold through such Agent. Penelec may also
sell Notes to an Agent acting as principal or to a group of underwriters named
in the applicable pricing supplement for whom such Agent will act as
representative, unless otherwise specified in the applicable pricing supplement,
at a discount equal to the commission applicable to an agency sale of a Note of
identical maturity. Such Notes may be resold by each Agent or such underwriters
for resale to one or more investors or other purchasers at varying prices
related to prevailing market prices at the time of such resale, as determined by
such Agent. Such Notes may also be resold by an Agent or such underwriters to
certain securities dealers at the public offering price set forth in the
applicable pricing supplement less a concession equal to all or any portion of
the discount received by such Agent or underwriter. In connection with the
purchase of Notes by any Agent as principal, such Agent may use a selling group
and may reallow any portion of the discount or commission payable to such Agent
to other dealers or purchasers. The offering price and other selling terms for
such resales may from time to time be varied by such Agent.
Penelec will have the sole right to accept offers to purchase Notes in
whole or in part. Each Agent will have the right, in its discretion reasonably
exercised, to reject any offer to purchase Notes received by it in whole or in
part. Penelec reserves the right to withdraw, cancel or modify the offer made
hereby without notice.
The Notes will not have an established trading market when issued. The
Notes will not be listed on any securities exchange. Each Agent may make a
market in the Notes, but such Agent is not obligated to do so and may
discontinue any market-making at any time without notice. There can be no
assurance of a secondary market for any Notes, or that the Notes will be sold.
In connection with an offering of Notes purchased by one or more Agents
as principal on a fixed-price basis, such Agent(s) will be permitted to engage
in certain transactions that stabilize the price of such Notes. Such
transactions may consist of bids or purchases for the purpose of pegging, fixing
or maintaining the price of such Notes. If the Agent or Agents creates or
create, as the case may be, a short position in such Notes (i.e., if it sells or
they sell Notes in an aggregate principal amount exceeding that set forth in the
applicable pricing supplement), such Agent(s) may reduce that short position by
purchasing Notes in the open market. In general, purchases of Notes for the
purpose of stabilization or to reduce a short position could cause the price of
Notes to be higher than it might be in the absence of such purchases.
Neither Penelec nor any of the Agents make any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of the Notes. In addition, neither Penelec
nor any of the Agents make any representation that the
S-15
Agents will engage in any such transactions or that such transactions, once
commenced, will not be discontinued.
The Agents and affiliates thereof engage in transactions with and
perform services for Penelec and its affiliates in the ordinary course of
business.
Penelec has agreed to indemnify each Agent against certain civil
liabilities, including liabilities under the Securities Act of 1933, as amended
(the "Act"), or to contribute to payments such Agent may be required to make in
respect thereof.
Each Agent may be deemed to be an "underwriter" within the meaning of
the Act with respect to Notes sold through it.
S-16
PROSPECTUS $275,000,000
PENNSYLVANIA ELECTRIC COMPANY
SENIOR NOTES
--------------------
Pennsylvania Electric Company, a Pennsylvania corporation (the
"Company"), may offer, from time to time in one or more series, up to
$275,000,000 aggregate principal amount of Senior Notes (the "Senior Notes") in
amounts, at prices and on terms to be determined at or prior to the time or
times of sale. The Senior Notes will be unsecured general obligations of the
Company, and will rank on a parity with other unsecured and unsubordinated
indebtedness of the Company (except to the extent such indebtedness may be
secured under the limited circumstances described under the caption "Description
of Senior Notes - Certain Covenants of the Company - Limitations on Liens").
Certain specific terms of the Senior Notes in respect of which this
Prospectus is being delivered will be set forth in an accompanying Prospectus
Supplement or Supplements, together with the terms of the particular Senior
Notes, the initial price thereof and the net proceeds from the sale thereof. The
Prospectus Supplement will set forth the designation, aggregate principal
amount, maturity date or dates, interest rate or rates (or method of calculation
thereof) and times of payment of interest, the terms of any redemption, exchange
or sinking fund provisions, the purchase price and any other specific terms of
the offering.
The Senior Notes may be sold to or through underwriters, through dealers
or agents, directly to purchasers or through a combination of such methods. See
"Plan of Distribution". The names of any underwriters, dealers or agents
involved in the sale of the Senior Notes in respect of which this Prospectus is
being delivered and any applicable fee, commission or discount arrangements with
them, will be set forth in the related Prospectus Supplement. See "Plan of
Distribution" for possible indemnification and contribution arrangements for
dealers, underwriters and agents.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
--------------------
The date of this Prospectus is July 30, 1999.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports and other information with the Securities and
Exchange Commission (the "SEC") and the New York Stock Exchange. Such reports
and other information can be inspected and copied at the public reference
facilities maintained by the SEC at Room 1024, Judiciary Plaza, 450 Fifth
Street, NW, Washington, D.C., and at the following regional offices of the SEC:
New York Regional Office, 13th Floor, Seven World Trade Center, New York, New
York and Chicago Regional Office, 14th Floor, 500 West Madison Street, Chicago,
Illinois. Copies of such materials can also be obtained at prescribed rates from
the Public Reference Section of the SEC at its principal office at Judiciary
Plaza, 450 Fifth Street, NW, Washington, D.C. 20549. Such material is also
available from the SEC's Web site at "http//www.sec.gov". Certain of the
Company's securities are listed on the New York Stock Exchange and such reports
and other information can also be inspected and copied at the office of such
exchange on the 7th Floor, 20 Broad Street, New York, New York.
This Prospectus constitutes a part of a Registration Statement on Form
S-3 (together with all amendments and exhibits thereto, the "Registration
Statement") filed by the Company with the SEC under the Securities Act of 1933,
as amended (the "Securities Act"), with respect to the Senior Notes. This
Prospectus does not contain all of the information set forth in the Registration
Statement, certain parts of which are omitted in accordance with the rules and
regulations of the SEC. Reference is made to the Registration Statement and to
the exhibits relating thereto for further information with respect to the
Company and the Senior Notes. Any statements contained herein concerning the
provisions of any document filed as an exhibit to the Registration Statement or
otherwise filed with the SEC or incorporated by reference herein are not
necessarily complete, and in each instance reference is made to the copy of such
document so filed for a more complete description of the matter involved. Each
such statement is qualified in its entirety by such reference.
- 2 -
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company hereby incorporates herein by reference the following
documents which have been filed by the Company with the SEC pursuant to the
Exchange Act:
1. The Company's Annual Report on Form 10-K for the year ended
December 31, 1998;
2. The Company's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1999; and
3. The Company's Current Reports on Form 8-K dated April 26, 1999
and June 17, 1999.
All documents subsequently filed by the Company with the SEC pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act prior to the termination
of the offering made hereby shall be deemed to be incorporated herein by
reference and to be a part hereof from the respective dates of filing thereof.
The documents incorporated or deemed to be incorporated herein by reference are
sometimes hereinafter called the "Incorporated Documents". Any statement
contained herein or in an Incorporated Document shall be deemed to be modified
or superseded for all purposes to the extent that a statement contained herein
or in any Prospectus Supplement or in any subsequently filed Incorporated
Document modifies or supersedes such statement. Any statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus or any Prospectus Supplement.
The Company will provide without charge to each person to whom this
Prospectus is delivered, upon written or oral request of any such person, a copy
of any or all of the Incorporated Documents, excluding the exhibits thereto
unless such exhibits are specifically incorporated by reference into such
documents. Requests for such documents should be directed to Pennsylvania
Electric Company, 2800 Pottsville Pike, Reading, Pennsylvania 19605, attention:
Secretary. The Company's telephone number is (610) 929-3601.
In addition to the historical information contained or incorporated by
reference herein, this Prospectus contains or incorporates by reference a number
of "forward-looking statements" within the meaning of the Exchange Act. Such
statements address future events and conditions concerning capital expenditures,
resolution and impact of litigation, regulatory matters, liquidity and capital
resources and accounting matters. Actual results in each case could differ
materially from those projected in such statements due to a variety of factors
including, without limitation, restructuring of the utility industry; future
economic conditions; earnings retention and dividend payout policies;
developments in the legislative, regulatory and competitive environments in
which the Company operates; and other circumstances that could affect
anticipated revenues and costs, such as compliance with laws and regulations.
These and other factors are discussed in the Company's filings with the SEC.
- 3 -
PENNSYLVANIA ELECTRIC COMPANY
Pennsylvania Electric Company (the "Company"), a public utility
furnishing electric service within the Commonwealth of Pennsylvania and a small
portion of New York State, is a subsidiary of GPU, Inc. ("GPU"), a holding
company registered under the Public Utility Holding Company Act of 1935. The
Company provides electric service within a territory located in western,
northern and south central Pennsylvania having a population of about 1,500,000.
The Company, as lessee of the property of The Waverly Electric Light and Power
Company, a subsidiary, also serves a population of about 13,700 in Waverly, New
York. The Company's principal executive offices are located at 2800 Pottsville
Pike, Reading, Pennsylvania 19605, and its telephone number is (610) 929-3601.
For the year 1998, residential sales accounted for about 35% of the
Company's operating revenues from customers and 27% of kilowatt-hour sales to
customers; commercial sales accounted for about 33% of the Company's operating
revenues from customers and 31% of kilowatt-hour sales to customers; industrial
sales accounted for about 28% of the Company's operating revenues from customers
and 37% of kilowatt-hour sales to customers; and sales to rural electric
cooperatives, municipalities (primarily for street and highway lighting) and
others accounted for about 4% of the Company's operating revenues from customers
and 5% of kilowatt-hour sales to customers. The revenues derived from the 25
largest customers in the aggregate accounted for approximately 12% of operating
revenues from customers for the year 1998. The Company also makes interchange
and spot market sales of electricity to other utilities.
The electric generating and transmission facilities of the Company and
its affiliates, Metropolitan Edison Company and Jersey Central Power & Light
Company (collectively doing business as "GPU Energy"), are physically
interconnected and are operated as a single integrated and coordinated system.
The transmission facilities of the integrated system are physically
interconnected with neighboring nonaffiliated utilities in Pennsylvania, New
Jersey, Maryland, New York and Ohio. The Company is a member of the
Pennsylvania-New Jersey-Maryland Interconnection ("PJM") and the Mid-Atlantic
Council, an organization providing coordinated review of the planning by
utilities in the PJM area. The interconnection facilities are used for
substantial capacity and energy interchange and purchased power transactions as
well as emergency assistance.
FINANCING PROGRAM
Depending upon market conditions, during the next two years the Company
expects to offer pursuant to one or more separate offerings, up to $275,000,000
aggregate principal amount of Senior Notes. The Company also expects to have
short-term borrowings outstanding from time to time during such period.
- 4 -
USE OF PROCEEDS
Unless otherwise indicated in the accompanying Prospectus Supplement,
the Company intends to use the net proceeds from the sale of the Senior Notes
offered hereby (i) to redeem other outstanding securities of the Company, (ii)
to repay outstanding short-term bank loans or other unsecured indebtedness,
(iii) for construction purposes and (iv) for other corporate purposes, including
to reimburse the Company's treasury for funds previously expended therefrom for
the above purposes. Any specific allocation of the proceeds to a particular
purpose that has been made at the date of any Prospectus Supplement will be
described therein.
COMPANY COVERAGE RATIOS
The Company's Ratio of Earnings to Fixed Charges for each of the periods
indicated was as follows:
TWELVE MONTHS
ENDED YEARS ENDED DECEMBER 31,
MARCH 31, 1999 --------------------------------------------------------
(UNAUDITED) 1998 1997 1996 1995 1994
- -------------- ---- ---- ---- ---- ----
2.61 2.44 3.35 2.64 3.51 1.69
The Ratio of Earnings to Fixed Charges represents, on a pre-tax basis,
the number of times earnings cover fixed charges. Earnings consist of net income
to which has been added fixed charges and taxes based on income of the Company.
Fixed charges consist of interest on funded indebtedness, other interest
(including distributions on Company-Obligated Mandatorily Redeemable Preferred
Securities), amortization of net gain on reacquired debt and net discount on
debt and interest portion of all rentals charged to income.
The Company's Ratio of Earnings to Combined Fixed Charges and Preferred Stock
Dividends for each of the periods indicated was as follows:
TWELVE MONTHS
ENDED YEARS ENDED DECEMBER 31,
MARCH 31, 1999 --------------------------------------------------------
(UNAUDITED) 1998 1997 1996 1995 1994
----------- ---- ---- ---- ---- ----
2.56 2.40 3.29 2.55 3.39 1.59
The Ratio of Earnings to Combined Fixed Charges and Preferred Stock
Dividends represents, on a pre-tax basis, the number of times earnings cover
fixed charges and preferred stock dividends. Earnings consist of net income to
which has been added fixed charges and taxes based on income of the Company.
Combined fixed charges and preferred stock dividends consist
- 5 -
of interest on funded indebtedness, other interest (including distribution on
Company-Obligated Mandatorily Redeemable Preferred Securities), amortization of
net gain on reacquired debt and net discount on debt, preferred stock dividends
(increased to reflect the pre-tax earnings required to cover such dividend
requirements) and the interest portion of all rentals charged to income.
DESCRIPTION OF SENIOR NOTES
The following is a summary of certain terms and provisions of the Senior
Notes and the Senior Note Indenture (as defined below). Reference is made to the
Senior Note Indenture which is an exhibit to the Registration Statement of which
this Prospectus forms a part.
GENERAL
The Senior Notes may be issued from time to time in one or more series
in amounts and on terms to be determined at or prior to the time or times of
sale, under the Senior Note Indenture, as it may be amended or supplemented (the
"Senior Note Indenture") between the Company and United States Trust Company of
New York (the "Senior Note Trustee").
THE SENIOR NOTES WILL BE UNSECURED GENERAL OBLIGATIONS OF THE COMPANY
AND WILL RANK ON A PARITY WITH OTHER UNSECURED AND UNSUBORDINATED INDEBTEDNESS
OF THE COMPANY.
There is no requirement under the Senior Note Indenture that future
issues of debt securities of the Company be issued exclusively under the Senior
Note Indenture; accordingly, the Company will be free to employ other indentures
or documentation, containing provisions different from those included in the
Senior Note Indenture or applicable to one or more issues of Senior Notes, in
connection with future issues of other debt securities. There is no limitation
on the amount of Senior Notes that may be issued under the Senior Note
Indenture. Notwithstanding the foregoing, the Senior Note Indenture contains
certain restrictive covenants, including a restriction that the Company may not
issue, assume, guarantee or permit to exist, so long as any Senior Notes are
outstanding any debt that ranks senior to the Senior Notes, subject to certain
exceptions. In addition, the Senior Note Indenture also provides that so long as
any Senior Notes are outstanding, certain sale/leaseback arrangements are
restricted.
There is no provision in the Senior Note Indenture or the Senior Notes
that requires the Company to redeem, or permit the holders to cause a redemption
of, the Senior Notes or that otherwise protects the holders in the event that
the Company incurs substantial additional indebtedness, whether or not in
connection with a change in control of the Company.
Reference is made to the Prospectus Supplement for a description of the
following terms of the series of Senior Notes in respect of which this
Prospectus is being delivered: (i) the title of such Senior Notes; (ii) the
aggregate principal amount of such Senior Notes; (iii) the price (expressed as a
percentage of principal amount) at which such Senior Notes will be issued; (iv)
the date or dates on which the principal of such Senior Notes is payable; (v)
the rate or rates at which such Senior Notes will bear interest, the date or
dates from which such interest will accrue, the dates on which such interest
will be payable ("Interest Payment Dates"), and the regular
- 6 -
record dates for the interest payable on such Interest Payment Dates; (vi) the
option, if any, of the Company to redeem such Senior Notes and the period or
periods within which, or the date or dates on which, the prices at which and the
terms and conditions upon which, such Senior Notes may be redeemed, in whole or
in part, upon the exercise of such option; (vii) the obligation, if any, of the
Company to redeem or purchase such Senior Notes at the option of the registered
holder or pursuant to any sinking fund or analogous provisions and the period or
periods within which, or the date or dates on which, the price or prices at
which and the terms and conditions upon which, such Senior Notes will be
redeemed or purchased, in whole or in part, pursuant to such obligation; (viii)
the denominations in which such Senior Notes will be issuable, if other than
$1,000 and integral multiples thereof; (ix) whether such Senior Notes are to be
issued in whole or in part in book-entry form and represented by one or more
global Senior Notes and, if so, the identity of the depository for such global
Senior Notes and the specific terms of the depository arrangements therefor; and
(x) any other terms of such Senior Notes, including with respect to any series,
if applicable.
REDEMPTION PROVISIONS
Any terms for the optional or mandatory redemption of the Senior Notes
will be set forth in the Prospectus Supplement or Supplements. Except as shall
otherwise be provided in the applicable Prospectus Supplement or Supplements,
the Senior Notes will be redeemable only upon notice by mail not less than 30
nor more than 60 days prior to the date fixed for redemption, and, if less than
all the Senior Notes of a series, or any tranche thereof, are to be redeemed,
the particular Senior Notes to be redeemed will be selected by the Senior Note
Trustee in such a manner as it shall deem appropriate and fair.
Any notice of redemption at the option of the Company may state that
such redemption will be conditional upon receipt by the Senior Note Trustee, on
or prior to the date fixed for such redemption, of money sufficient to pay the
principal of and premium, if any, and interest on such Senior Notes and that if
such money has not been so received, such notice will be of no force and effect
and the Company will not be required to redeem such Senior Notes.
EVENTS OF DEFAULT
The following constitute events of default under the Senior Note
Indenture: (a) default in the payment of principal of or premium, if any, on any
Senior Note when due and payable; (b) default in the payment of interest on any
Senior Note when due which continues for 60 days; (c) default in the performance
or breach of any other covenant or agreement of the Company in the Senior Notes
or in the Senior Note Indenture and the continuation thereof for 90 days after
written notice thereof to the Company by the Senior Note Trustee or the holders
of at least 33% in aggregate principal amount of the outstanding Senior Notes;
and (d) certain events of bankruptcy, insolvency, reorganization, assignment or
receivership of the Company.
If an event of default occurs and is continuing, either the Senior Note
Trustee or the holders of a majority in aggregate principal amount of the
outstanding Senior Notes may declare the principal amount of all of the Senior
Notes to be due and payable immediately. At any time after an acceleration of
the Senior Notes has been declared, if the Company pays or deposits with the
Senior Note Trustee a sum sufficient to pay all matured installments of interest
and the
- 7 -
principal and any premium which has become due on the Senior Notes otherwise
than by acceleration and all defaults shall have been cured or waived, then such
payment or deposit will cause an automatic rescission and annulment of the
acceleration of the Senior Notes.
The Senior Note Indenture provides that the Senior Note Trustee
generally will be under no obligation to exercise any of its rights or powers
under the Senior Note Indenture at the request or direction of any of the
holders of the Senior Notes unless such holders have offered to the Senior Note
Trustee reasonable security or indemnity. Subject to such provisions for
indemnity and certain other limitations contained in the Senior Note Indenture,
the holders of a majority in aggregate principal amount of the outstanding
Senior Notes generally will have the right to direct the time, method and place
of conducting any proceeding for any remedy available to the Senior Note
Trustee, or of exercising any trust or power conferred on the Senior Note
Trustee. The holders of a majority in aggregate principal amount of the
outstanding Senior Notes generally will have the right to waive any past default
or event of default (other than a payment default) on behalf of all holders of
the Senior Notes. The Senior Note Indenture provides that no holder of the
Senior Notes may institute any action against the Company under the Senior Note
Indenture unless such holder previously shall have given to the Senior Note
Trustee written notice of an event of default and continuance thereof and unless
the holders of not less than a majority in aggregate principal amount of the
Senior Notes then outstanding affected by such event of default shall have
requested the Senior Note Trustee to institute such action and shall have
offered the Senior Note Trustee reasonable indemnity, and the Senior Note
Trustee shall not have instituted such action within 60 days of such request.
Furthermore, no holder of the Senior Notes will be entitled to institute any
such action if and to the extent that such action would disturb or prejudice the
rights of other holders of the Senior Notes. Notwithstanding that the right of a
holder of the Senior Notes to institute a proceeding with respect to the Senior
Note Indenture is subject to certain conditions precedent, each holder of a
Senior Note has the right, which is absolute and unconditional, to receive
payment of the principal of, and premium, if any, and interest on such Senior
Note when due and to institute suit for the enforcement of any such payment, and
such rights may not be impaired without the consent of such holders of Senior
Notes. The Senior Note Indenture provides that the Senior Note Trustee, within
90 days after the occurrence of a default with respect to the Senior Notes, is
required to give holders of the Senior Notes notice of any default known to the
Senior Note Trustee, unless cured or waived, but, except in the case of default
in the payment of principal of, or premium, if any, or interest on, any Senior
Notes, the Senior Note Trustee may withhold such notice if it determines in good
faith that it is in the interest of such holders to do so. The Company is
required to deliver to the Senior Note Trustee each year an officer's
certificate as to whether or not the Company is in compliance with the
conditions and covenants under the Senior Note Indenture.
MODIFICATION WITH APPROVAL
Modification and amendment of the Senior Note Indenture may be effected
by the Company and the Senior Note Trustee with the consent of the holders of a
majority in aggregate principal amount of the outstanding Senior Notes affected
thereby, provided that no such modification or amendment may, without the
consent of the holder of each outstanding Senior Note affected thereby, (a)
change the maturity date of any Senior Note; (b) reduce the rate (or change the
method of calculation thereof) or extend the time of payment of interest on any
Senior Note; (c) reduce the principal amount of, or premium payable on, any
Senior Note; (d) change
- 8 -
the coin or currency of any payment of principal of, or premium, if any, or
interest on, any Senior Note; (e) change the date on which any Senior Note may
be redeemed or repaid at the option of the holder thereof or adversely affect
the rights of a holder to institute suit for the enforcement of any payment on
or with respect to any Senior Note; or (f) modify the foregoing requirements or
reduce the percentage of outstanding Senior Notes necessary to modify or amend
the Senior Note Indenture or to waive any past default to less than a majority.
MODIFICATION WITHOUT APPROVAL
Modification and amendment of the Senior Note Indenture may be effected
by the Company and the Senior Note Trustee without the consent of the holders
(a) to add to the covenants of the Company for the benefit of the holders or to
surrender a right conferred on the Company in the Senior Note Indenture; (b) to
add security for the Senior Notes; (c) to supply omissions, cure ambiguities or
correct defects, which actions, in each case, are not prejudicial to the
interest of the holders in any material respect; or (d) to make any other change
that is not prejudicial to the holders of the Senior Notes in any material
respect.
A supplemental indenture which changes or eliminates any covenants or
other provision of the Senior Note Indenture (or any supplemental indenture)
which has expressly been included solely for the benefit of one or more series
of the Senior Notes, or which modifies the rights of the holders of the Senior
Notes of such series with respect to such covenant or provision, will be deemed
not to affect the rights under the Senior Note Indenture of the holders of the
Senior Notes of any other series.
DEFEASANCE AND DISCHARGE
The Senior Note Indenture provides that the Company will be discharged
from any and all obligations in respect to the Senior Notes and the Senior Note
Indenture (except for certain obligations such as obligations to register the
transfer or exchange of the Senior Notes, replace stolen, lost or mutilated
Senior Notes and maintain paying agencies) if, among other things, the Company
irrevocably deposits with the Senior Note Trustee, in trust for the benefit of
the holders of Senior Notes, money or certain United States government
obligations, or any combination thereof, which will provide money in an amount
sufficient, without reinvestment, to make all payments of principal of, premium,
if any, and interest on, the Senior Notes on the dates such payments are due in
accordance with the terms of the Senior Note Indenture and the Senior Notes;
provided that unless all of the Senior Notes mature within 90 days of such
deposit by redemption or otherwise, the Company shall also have delivered to the
Senior Note Trustee an opinion of counsel to the effect that the holders of the
Senior Notes will not recognize income, gain or loss for federal income tax
purposes as a result of such defeasance or discharge of the Senior Note
Indenture. Thereafter, the holders of the Senior Notes may look only to such
deposit for payment of the principal of, and interest and any premium on, the
Senior Notes.
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CONSOLIDATION, MERGER AND SALE OR DISPOSITION OF ASSETS
The Company may not consolidate with or merge into any other corporation
or sell or otherwise dispose of its properties as or substantially as an
entirety unless (i) the successor or transferee corporation shall be a
corporation or other entity organized and existing under the laws of the United
States or any state thereof or the District of Columbia; and (ii) the successor
or transferee corporation assumes by supplemental indenture the due and punctual
payment of the principal of and premium, if any, and interest on all the Senior
Notes and the performance of every covenant of the Senior Note Indenture to be
performed or observed by the Company. Upon any such consolidation, merger, sale,
transfer or other disposition of the properties of the Company substantially as
an entirety, the successor entity formed by such consolidation or into which the
Company is merged or to which such transfer is made shall succeed to, and be
substituted for, and may exercise every right and power of, the Company under
the Senior Note Indenture with the same effect as if such successor entity had
been named as the Company therein, and the Company will be released from all
obligations under the Senior Note Indenture. For purposes of the Senior Note
Indenture, the conveyance or other transfer by the Company of (a) all or any
portion of its facilities for the generation of electric energy or (b) all of
its facilities for the transmission of electric energy, in each case considered
alone or in any combination with properties described in the other clause, shall
in no event be deemed to constitute a conveyance or other transfer of all the
properties of the Company, as or substantially as an entirety.
CERTAIN COVENANTS OF THE COMPANY
Limitations on Liens
The Senior Note Indenture provides that, so long as any such Senior
Notes are outstanding, the Company may not issue, assume, guarantee or permit to
exist any Debt (as defined below) that is secured by any mortgage, security
interest, pledge or lien ("Lien") of or upon any Operating Property of the
Company (as defined below), whether owned at the date of the Senior Note
Indenture or thereafter acquired, without in any such case effectively securing
the Senior Notes (together with, if the Company shall so determine, any other
indebtedness of the Company ranking equally with the Senior Notes) equally and
ratably with such Debt (but only so long as such Debt is so secured).
The foregoing restriction will not apply to: (1) Liens on any Operating
Property existing at the time of its acquisition (which Liens may also extend to
subsequent repairs, alterations and improvements to such Operating Property);
(2) Liens on Operating Property of an entity existing at the time such entity is
merged into or consolidated with, or such entity disposes of its properties (or
those of a division) as or substantially as an entirety to, the Company; (3)
Liens on Operating Property to secure the costs of acquisition, construction,
development or substantial repair, alteration or improvement of property or to
secure indebtedness incurred to provide funds for any such purpose or for
reimbursement of funds previously expended for any such purpose, provided such
Liens are created or assumed contemporaneously with, or within 18 months after,
such acquisition or the completion of substantial repair or alteration,
construction, development or substantial improvement; (4) Liens in favor of any
state or any department, agency or instrumentality or political subdivision of
any state, or for the benefit of holders of securities issued by any such entity
(or providers of credit enhancement with respect to such securities), to
- 10 -
secure any Debt (including, without limitation, obligations of the Company with
respect to industrial development, pollution control or similar revenue bonds)
incurred for the purpose of financing all or any part of the purchase price or
the cost of substantially repairing or altering, constructing, developing or
substantially improving Operating Property of the Company; (5) Liens under the
Company's Mortgage and Deed of Trust dated as of January 1, 1942 between the
Company and United States Trust Company of New York, as successor trustee (the
"Mortgage Trustee"), as heretofore amended and supplemented (collectively, the
"Mortgage"), where such Debt has been issued for purposes of any transactions
described in (4) above; (6) Liens to compensate the Senior Note Trustee as
provided in the Senior Note Indenture; (7) any extension, renewal or replacement
(or successive extensions, renewals or replacements), in whole or in part, of
any Lien referred to in clauses (1) through (6), provided, however, that the
principal amount of Debt secured thereby and not otherwise authorized by said
clauses (1) to (6), inclusive, shall not exceed the principal amount of Debt,
plus any premium or fee payable in connection with any such extension, renewal
or replacement, so secured at the time of such extension, renewal or
replacement. However, the foregoing restriction will not apply to the issuance,
assumption or guarantee by the Company of Debt secured by a Lien which would
otherwise be subject to the foregoing restriction up to an aggregate amount
which, together with all other secured Debt of the Company (not including
secured Debt permitted under any of the foregoing exceptions) and the Value (as
defined below) of Sale and Lease-Back Transactions (as defined below) existing
at such time (other than Sale and Lease-Back Transactions the proceeds of which
have been applied to the retirement of certain indebtedness, Sale and Lease-Back
Transactions in which the property involved would have been permitted to be
subjected to a Lien under any of the foregoing exceptions in clauses (1) to (7)
and Sale and Lease-Back Transactions that are permitted by the first sentence of
"Limitations on Sale and Lease-Back Transactions" below), does not exceed the
greater of 15% of Tangible Assets or 15% of Capitalization (as such terms are
defined below).
Limitation on Sale and Lease-Back Transactions
The Senior Note Indenture provides that so long as any Senior Notes are
outstanding, the Company may not enter into or permit to exist any Sale and
Lease-Back Transaction with respect to any Operating Property (except for
transactions involving leases for a term, including renewals, of not more than
48 months), if the purchasers' commitment is obtained more than 18 months after
the later of the completion of the acquisition, construction or development of
such Operating Property or the placing in operation of such Operating Property
or of such Operating Property as constructed or developed or substantially
repaired, altered or improved. This restriction will not apply if (a) the
Company would be entitled pursuant to any of the provisions described in clauses
(1) to (7) of the first sentence of the second paragraph under "Limitation on
Liens" above to issue, assume, guarantee or permit to exist Debt secured by a
Lien on such Operating Property without equally and ratably securing the Senior
Notes, (b) after giving effect to such Sale and Lease-Back Transaction, the
Company could incur pursuant to the provisions described in the second sentence
of the second paragraph under "Limitation on Liens", at least $1.00 of
additional Debt secured by Liens (other than Liens permitted by clause (a)), or
(c) the Company applies within 180 days an amount equal to, in the case of a
sale or transfer for cash, the net proceeds (not exceeding the net book value),
and, otherwise, an amount equal to the fair value (as determined by its Board of
Directors) of the Operating Property so leased, to the retirement of Senior
Notes or other Debt of the Company ranking equally with the Senior Notes,
- 11 -
subject to reduction for Senior Notes and such Debt retired during such 180-day
period otherwise than pursuant to mandatory sinking fund or prepayment
provisions and payments at stated maturity.
Certain Definitions
"Capitalization" means the total of all the following items appearing
on, or included in, the consolidated balance sheet of the Company: (i)
liabilities for indebtedness maturing more than 12 months from the date of
determination; and (ii) common stock, preferred stock, Hybrid Preferred
Securities (as defined in the Senior Note Indenture), premium on capital stock,
capital surplus, capital in excess of par value and retained earnings (however
the foregoing may be designated), less, to the extent not otherwise deducted,
the cost of shares of capital stock reacquired by the Company.
"Debt" means any outstanding debt for money borrowed evidenced by notes,
debentures, bonds or other securities, or guarantees of any thereof.
"Operating Property" means (i) any interest in real property owned by
the Company and (ii) any asset owned by the Company that is depreciable in
accordance with generally accepted accounting principles ("GAAP") excluding, in
either case, any interest of the Company as lessee under any lease (except for a
lease that results from a Sale and Lease-Back Transaction) which has been or
would be capitalized on the books of the lessee in accordance with GAAP.
"Sale and Lease-Back Transaction" means any arrangement with any person
providing for the leasing to the Company of any Operating Property (except for
leases for a term, including any renewals thereof, of not more than 48 months),
which Operating Property has been or is to be sold or transferred by the Company
to such person; provided, however, Sale and Lease-Back Transaction does not
include any arrangement first entered into prior to the date of the Senior Note
Indenture.
"Tangible Assets" means the amount shown as total assets on the
consolidated balance sheet of the Company, less the following: (i) intangible
assets including, but without limitation, such items as goodwill, trademarks,
trade names, patents, and unamortized debt discount and expense, and (ii)
appropriate adjustments, if any, on account of minority interests. Tangible
Assets shall be determined in accordance with GAAP and practices applicable to
the type of business in which the Company is engaged and that are approved by
the independent accountants that are regularly retained by the Company, and may
be determined as of a date not more than 60 days prior to the happening of the
event for which such determination is being made.
"Value" means, with respect to a Sale and Lease-Back Transaction, as of
any particular time, the amount equal to the greater of (i) the net proceeds to
the Company from the sale or transfer of the property leased pursuant to such
Sale and Lease-Back Transaction, or (ii) the net book value of such property, as
determined by the Company in accordance with GAAP, in either case multiplied by
a fraction, the numerator of which shall be equal to the number of full years of
the term of the lease that is part of such Sale and Lease-Back Transaction
remaining at the time of determination and the denominator of which shall be
equal to the number of full years of such term, without regard, in any case, to
any renewal or extension options contained in such lease.
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RESIGNATION OR REMOVAL OF SENIOR NOTE TRUSTEE
The Senior Note Trustee may resign at any time upon written notice to
the Company specifying the day upon which the resignation is to take effect and
such resignation will take effect immediately upon the later of the appointment
of a successor Senior Note Trustee and such specified day.
The Senior Note Trustee may be removed at any time by an instrument or
concurrent instruments in writing filed with the Senior Note Trustee and signed
by the holders, or their attorneys-in-fact, of at least a majority in aggregate
principal amount of the then outstanding Senior Notes. In addition, so long as
no event of default under the Senior Note Indenture or event which, with the
giving of notice or lapse of time or both, would become an event of default has
occurred and is continuing, the Company may remove the Senior Note Trustee upon
written notice to the holder of each Senior Note outstanding and the Senior Note
Trustee, and appointment of a successor Senior Note Trustee.
CONCERNING THE SENIOR NOTE TRUSTEE
The United States Trust Company of New York is the Senior Note Trustee
under the Senior Note Indenture and the Mortgage Trustee under the Mortgage. The
Senior Note Indenture provides that the Company's obligations to compensate the
Senior Note Trustee and reimburse the Senior Note Trustee for expenses,
disbursements and advances will constitute indebtedness which will be secured by
a lien generally prior to that of the Senior Notes upon all property and funds
held or collected by the Senior Note Trustee as such. The Senior Note Indenture
provides that the Senior Note Trustee shall be subject to and shall comply with
the provisions of Section 310(b) of the Trust Indenture Act of 1939, as amended,
and that nothing in the Senior Note Indenture shall be deemed to prohibit the
Senior Note Trustee or the Company from making any application permitted
pursuant to such section. The Senior Note Trustee is also a depositary of the
Company and certain of its affiliates and has in the past made, and may in the
future make, periodic loans to the Company and certain of its affiliates.
GOVERNING LAW
The Senior Note Indenture and each Senior Note will be governed by New
York law.
- 13 -
PLAN OF DISTRIBUTION
The Company may sell the Senior Notes: (i) directly to purchasers; (ii)
to or through underwriters; or (iii) through agents or dealers. The Prospectus
Supplement with respect to the each series of Senior Notes will set forth the
terms of the offering thereof, including the name or names of any such
underwriters, agents or dealers; the purchase price of and the net proceeds to
the Company from such sale; any underwriting discounts and commissions or agency
fees and other items constituting underwriters' or agents' compensation; the
initial public offering price; any discounts or concessions allowed or reallowed
or paid to dealers and any securities exchange on which such series of Senior
Notes may be listed. Any initial public offering price and any discounts or
concessions allowed or reallowed or paid to dealers may be changed from time to
time.
If underwriters are used in any sale, the Senior Notes will be acquired
by such underwriters for their own account and may be resold from time to time
in one or more transactions, including negotiated transactions, at a fixed
public offering price or at varying prices determined at the time of sale. The
Senior Notes may be offered to the public either through underwriting syndicates
represented by one or more managing underwriters or directly by one or more
firms acting as underwriters. The underwriter or underwriters with respect to a
particular underwritten offering will be named in the Prospectus Supplement
relating to such offering and, if an underwriting syndicate is used, the
managing underwriter or underwriters will be set forth on the cover of such
Prospectus Supplement. Unless otherwise set forth in the Prospectus Supplement
relating thereto, the obligations of the underwriters to purchase the Senior
Notes will be subject to certain conditions precedent, and the underwriters will
be obligated to purchase all such series of Senior Notes if any are purchased.
If dealers are utilized in a sale of Senior Notes, the Company will sell
such securities to the dealers as principal. The dealers may then resell such
Senior Notes to the public at varying prices to be determined by such dealers at
the time of resale. The names of the dealers and the terms of the transaction
will be set forth in the Prospectus Supplement relating thereto.
The Senior Notes may be sold directly by the Company or through agents
designated by the Company from time to time. Any agent involved in the offer or
sale of the Senior Notes with respect to which this Prospectus is delivered will
be named, and any commissions payable by the Company to such agent will be set
forth, in the Prospectus Supplement relating thereto. Unless otherwise indicated
in the Prospectus Supplement, any such agent will be acting on a best efforts
basis for the period of its appointment.
Agents, dealers and underwriters may be entitled under agreements with
the Company to indemnification by the Company against certain civil liabilities,
including liabilities under the Securities Act, or to contribution with respect
to payments which such agents, dealers or underwriters may be required to make
in respect thereof. Agents, dealers and underwriters may be customers of, engage
in transactions with, or perform services for the Company in the ordinary course
of business.
- 14 -
LEGAL MATTERS
Certain legal matters will be passed upon for the Company by Berlack,
Israels & Liberman LLP, New York, New York and Ryan, Russell, Ogden & Seltzer
LLP, Reading, Pennsylvania and for the agents and underwriters by Thelen Reid &
Priest LLP, New York, New York. Berlack, Israels & Liberman LLP and Thelen Reid
& Priest LLP may rely on the opinion of Ryan, Russell, Ogden & Seltzer LLP as to
matters of Pennsylvania law. Attorneys of Berlack, Israels & Liberman LLP own an
aggregate of 14,560 shares of the Common Stock of the Company's parent, GPU,
Inc.
EXPERTS
The consolidated financial statements and financial statement schedule,
included in the Company's Annual Report on Form 10-K for the year ended December
31, 1998, are incorporated herein by reference in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting.
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$275,000,000
PENNSYLVANIA ELECTRIC COMPANY
MEDIUM TERM NOTES, SERIES E
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PROSPECTUS SUPPLEMENT
JUNE 30, 1999
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SALOMON SMITH BARNEY
BANC OF AMERICA SECURITIES LLC
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