Filed Pursuant to Rule 424(b)(5)
Registration Nos: 33-49199
33-51749
33-64343
PROSPECTUS SUPPLEMENT
(To Prospectus dated November 22, 1995)
$100,000,000
Wisconsin Electric Power Company
ONE HUNDRED YEAR 6-7/8% DEBENTURES DUE DECEMBER 1, 2095
----------------
Interest payable June 1 and December 1
----------------
THE DEBENTURES WILL NOT BE REDEEMABLE PRIOR TO MATURITY. THE DEBENTURES WILL
BE ISSUED INITIALLY UNDER A BOOK-ENTRY ONLY SYSTEM AND WILL BE REPRE-
SENTED BY ONE OR MORE GLOBAL SECURITIES REGISTERED IN THE NAME OF THE
DEPOSITORY TRUST COMPANY ("DTC") OR ITS NOMINEE. BOOK-ENTRY INTER-
ESTS IN SUCH GLOBAL SECURITIES WILL BE SHOWN ON, AND TRANSFERS
THEREOF WILL BE EFFECTED ONLY THROUGH, RECORDS MAINTAINED BY
DTC OR ITS NOMINEE FOR SUCH GLOBAL SECURITIES AND ON THE
RECORDS OF DTC PARTICIPANTS. EXCEPT AS DESCRIBED HEREIN
AND IN THE ACCOMPANYING PROSPECTUS, DEBENTURES IN DE-
FINITIVE FORM WILL NOT BE ISSUED AND OWNERS OF BOOK-
ENTRY INTERESTS WILL NOT BE CONSIDERED THE HOLD-
ERS THEREOF. THE DEBENTURES WILL TRADE IN DTC'S
SAME-DAY FUNDS SETTLEMENT SYSTEM. ALL PAY-
MENTS OF PRINCIPAL AND INTEREST ON GLOBAL
SECURITIES WILL BE MADE BY THE COMPANY
IN IMMEDIATELY AVAILABLE FUNDS. SEE
"CERTAIN TERMS OF THE DEBENTURES"
HEREIN AND "DESCRIPTION OF DEBT
SECURITIES" AND "BOOK-ENTRY
ONLY SYSTEM" IN THE AC-
COMPANYING PROSPECTUS.
----------------
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 SUPPLEMENT OR THE PROSPECTUS TO WHICH IT RELATES.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
----------------
PRICE 97.990% AND ACCRUED INTEREST
----------------
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC(1) COMMISSIONS(2) COMPANY(1)(3)
----------- -------------- ------------- ---
Per Debenture...................... 97.990% 1.125% 96.865%
Total.............................. $97,990,000 $1,125,000 $96,865,000
- --------
(1) Plus accrued interest from December 1, 1995.
(2) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933.
(3) Before deduction of expenses payable by the Company estimated at
$187,500.
----------------
The Debentures are offered by the Underwriters named herein, subject to
prior sale, when, as and if accepted by the Underwriters and subject to
approval of certain legal matters by Cahill Gordon & Reindel, counsel for the
Underwriters. It is expected that delivery of the Debentures will be made on
or about December 8, 1995 through the book-entry facilities of DTC against
payment therefor in immediately available funds.
----------------
MORGAN STANLEY & CO. SALOMON BROTHERS INC
Incorporated
December 5, 1995
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN
THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS, AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. NEITHER THIS PROSPECTUS SUPPLEMENT NOR THE PROSPECTUS CONSTITUTES
AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER
THAN THE SECURITIES DESCRIBED IN THIS PROSPECTUS SUPPLEMENT OR AN OFFER TO
SELL OR THE SOLICITATION OF AN OFFER TO BUY SUCH SECURITIES IN ANY
CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL. NEITHER THE
DELIVERY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS NOR ANY SALE MADE
HEREUNDER OR THEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE
HEREOF OR THEREOF OR THAT THE INFORMATION HEREIN OR THEREIN IS CORRECT AS OF
ANY TIME SUBSEQUENT TO THE DATE OF SUCH INFORMATION.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE DEBENTURES AT
A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED IN THE OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
USE OF PROCEEDS AND CAPITAL REQUIREMENTS
The net proceeds from the sale of the Debentures offered hereby will be
added to the general funds of the Company and applied to the repayment of
short-term borrowings, which may include partial repayment of the loan under
the Company's Short Term Borrowing Agreement with Firstar Trust Company. See
"Description of New Bonds--Regarding the Trustee" in the accompanying
Prospectus. Short-term borrowings are expected to aggregate approximately $145
million prior to the receipt of the proceeds of this offering. The interest
rates on the short-term borrowings that the Company currently intends to repay
with proceeds of this offering range from approximately 5.75% to 5.85%.
The Company's estimated capital requirements for the two years ending
December 31, 1996 (excluding the amounts required for the September and
October 1995 refinancing of $98.350 million aggregate principal amount of tax
exempt securities described in the accompanying Prospectus under "Recent
Developments--1995 Tax Exempt Debt Refinancings") aggregate approximately $495
million (of which approximately $181 million has been met during the nine
months ended September 30, 1995), including $413 million for the Company's
continuing construction program, $51 million for contributions to the external
nuclear decommissioning trust fund, and $30 million for maturing long term
debt. These capital requirements for the Company exclude capital requirements
for Wisconsin Natural Gas Company ("Wisconsin Natural") and Northern States
Power Company, a Wisconsin corporation ("NSP-Wisconsin"). See "Recent
Developments--Wisconsin Energy's Merger Agreement with Northern States Power
Company" and "--Merger with Wisconsin Natural Gas Company" in the accompanying
Prospectus.
The Company anticipates that approximately $483 million of the estimated
capital requirements for such two-year period will be obtained from internal
operations. The Company's capital requirements are subject to revision from
time to time.
RECENT DEVELOPMENTS
Fitch Revises Company's Credit Trend: On December 5, 1995, Fitch Investors
Service Inc. announced that it affirmed its AA+ and AA ratings for the
Company's first mortgage bonds and preferred stock, respectively, but that it
changed the Company's credit trend to declining from stable to reflect cash
flow measures that are below the level required to maintain an AA+ rating.
S-2
CERTAIN TERMS OF THE DEBENTURES
The following description of the particular terms of the Debentures
supplements, and to the extent inconsistent therewith replaces, the
description of the general terms and provisions of the Debentures set forth in
the accompanying Prospectus under "Description of Debt Securities," to which
description reference is hereby made.
The Debentures will be unsecured general obligations of the Company and will
be issued as a separate series of securities under an Indenture dated as of
December 1, 1995 (the "Indenture") between the Company and Firstar Trust
Company, as Trustee. At September 30, 1995, the Company had $1,024,443,000 of
secured debt outstanding, Wisconsin Natural had $10,000,000 of secured debt
outstanding which will be assumed by the Company upon consummation of its
merger with Wisconsin Natural, and NSP-Wisconsin had $194,635,000 of secured
debt outstanding which will be assumed by the Company, to the extent
outstanding, upon consummation of the proposed merger between the Company and
NSP-Wisconsin. See "Description of New Bonds" in the accompanying Prospectus.
MATURITY AND INTEREST
The Debentures will be limited to $100,000,000 aggregate principal amount
and will mature on December 1, 2095. Each Debenture will bear interest from
December 1, 1995 or from the most recent interest payment date to which
interest has been paid, at the rate per annum specified on the cover page
hereof, payable semi-annually on June 1 and December 1, commencing June 1,
1996, to the person in whose name such Debenture is registered at the close of
business on the preceding May 15 and November 15, respectively.
NO REDEMPTION PRIOR TO MATURITY
The Debentures will not be redeemable prior to maturity at the option of the
Company or the holders thereof.
OTHER
The covenant described in the accompanying Prospectus under "Description of
Debt Securities--Certain Covenants--Limitations on Liens" will apply to the
Debentures. Future series of Securities issued under the Indenture may or may
not have different covenants.
The Debentures will be subject to defeasance under the conditions described
in the Prospectus.
On December 1, 1995, the Public Service Commission of Wisconsin amended its
order dated November 11, 1993, referred to in Note (D) under "Certain Summary
Financial Information" in the accompanying Prospectus, to specifically
authorize the issuance of long-term debt securities with maturities not to
exceed 100 years.
BOOK-ENTRY PROCEDURES
The Debentures will be represented by one or more global securities
registered in the name of DTC or its nominee. Book-Entry Interests in such
global securities will be shown on, and transfers thereof will be effected
only through, records maintained by DTC or its nominee for such global
securities and on the records of DTC Participants. Except as described below
and in the accompanying Prospectus, Debentures in definitive form will not be
issued and owners of Book-Entry Interests will not be considered the holders
thereof.
The laws of some states require that certain purchasers of securities take
physical delivery of such securities in definitive form. Such limits and such
laws may impair the ability to transfer beneficial interests in the global
securities.
S-3
In the event that the book-entry system is discontinued, including the event
that DTC is at any time unwilling or unable to continue as depository, and a
successor depository is not appointed by the Company, the Company will issue
individual Debentures to owners of Book-Entry Interests in exchange for the
Debentures held by DTC or its nominee.
Settlement for the Debentures will be made by the Underwriters in
immediately available funds. All payments of principal and interest on global
securities will be made by the Company in immediately available funds.
See "Book-Entry Only System" in the accompanying Prospectus.
UNDERWRITING
Under the terms and subject to the conditions in an Underwriting Agreement
dated December 5, 1995, the Underwriters named below have severally agreed to
purchase from the Company, and the Company has agreed to sell to them, the
respective principal amounts of the Debentures set forth below:
PRINCIPAL
UNDERWRITER AMOUNT
----------- ------------
Morgan Stanley & Co. Incorporated........................... $ 46,000,000
Salomon Brothers Inc........................................ 46,000,000
Chase Securities, Inc....................................... 8,000,000
------------
Total................................................... $100,000,000
============
The activities of the Underwriters in connection with this transaction are
jointly led by Morgan Stanley & Co. Incorporated and Salomon Brothers Inc. The
Underwriting Agreement provides that the obligations of the Underwriters
thereunder are subject to approval of certain legal matters by counsel and to
various other conditions. The nature of the Underwriters' obligations is such
that they are committed to take and pay for all of the Debentures if any are
taken.
The Underwriters propose to offer the Debentures in part to the public at
the public offering price set forth on the cover page of this Prospectus
Supplement and in part to certain dealers at such price less a concession not
in excess of .625% of their principal amount. The Underwriters may allow, and
such dealers may reallow, a concession not in excess of .375% of their
principal amount to certain other dealers. After the initial public offering,
the offering price and other selling terms may from time to time be varied by
the Underwriters named on the cover page hereof.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, or
contribute to the payments the Underwriters may be required to make in respect
thereto.
The Debentures are a new issue of securities with no established trading
market. The Company does not intend to apply for listing of the Debentures on
a national securities exchange. The Company has been advised by the
Underwriters that the Underwriters presently intend to make a market in the
Debentures but are not obligated to do so and may discontinue market making at
any time without notice. No assurance can be given as to the liquidity of the
trading market for the Debentures.
S-4
PROSPECTUS
WISCONSIN ELECTRIC POWER COMPANY
FIRST MORTGAGE BONDS
DEBT SECURITIES
----------------
Wisconsin Electric Power Company (the "Company") may offer from time to time
up to $400,000,000 aggregate principal amount of its First Mortgage Bonds (the
"New Bonds") or its unsecured debt securities (the "Debt Securities") in one
or more series in amounts, at prices and upon terms to be determined at the
time or times of sale. The title, aggregate principal amount, maturity,
interest rate, payment dates, redemption provisions, sinking fund, if any, and
other terms of each series of the New Bonds or the Debt Securities will be set
forth in a supplement to this Prospectus (a "Prospectus Supplement").
The Company may sell New Bonds or Debt Securities to or through underwriters
or dealers and also may sell New Bonds or Debt Securities directly to other
purchasers or through agents. The Prospectus Supplement relating to each
series of New Bonds or Debt Securities will set forth the terms of the
offering of the New Bonds or Debt Securities, including, to the extent
applicable, the initial offering price, the proceeds to the Company, the
underwriting discounts or commissions, and any other discounts or concessions
to be allowed or re-allowed to dealers. The principal underwriters with
respect to each series sold to or through underwriters will be named in the
Prospectus Supplement relating to such series.
----------------
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 NOVEMBER 22, 1995.
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS OR
A PROSPECTUS SUPPLEMENT AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY OR ANY UNDERWRITERS. NEITHER THIS PROSPECTUS NOR ANY PROSPECTUS
SUPPLEMENT CONSTITUTES AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY
ANY OF THE SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM
IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION IN SUCH JURISDICTION. THE
DELIVERY OF THIS PROSPECTUS OR ANY PROSPECTUS SUPPLEMENT AT ANY TIME DOES NOT
IMPLY THAT THE INFORMATION HEREIN OR THEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THEIR RESPECTIVE DATES.
----------------
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, information statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports,
statements and other information may be inspected and copied at the public
reference facilities maintained by the Commission at Room 1024, Judiciary
Plaza, 450 Fifth Street, N.W., Washington D.C. 20549, and at the Commission's
Regional Offices located at CitiCorp Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60621-2511 and 7 World Trade Center, Suite 1300, New
York, New York 10048 and copies of such material may also be obtained by mail
from the Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington D.C. 20549, at prescribed rates. This Prospectus omits certain
information contained in the Registration Statement on Form S-3 (the
"Registration Statement") which the Company has filed with the Commission
under the Securities Act of 1933, as amended (the "Securities Act"), and to
which reference is hereby made for further information with respect to the
Company, the New Bonds and the Debt Securities.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission pursuant to
the Exchange Act (File No. 1-1245) are incorporated in this Prospectus by
reference:
(a) Annual Report on Form 10-K for the year ended December 31, 1994.
(b) Quarterly Reports on Form 10-Q for the quarters ended March 31, 1995,
June 30, 1995 and September 30, 1995.
(c) Current Report on Form 8-K dated as of August 25, 1995.
All documents filed by the Company pursuant to sections 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior
to the termination of the offering hereunder shall be deemed to be
incorporated by reference in this Prospectus and to be a part of this
Prospectus from the date of the filing of such documents. Any statement
contained in a document incorporated or deemed to be incorporated by reference
in this Prospectus shall be deemed to be modified or superseded for purposes
of this Prospectus to the extent that a statement contained in this Prospectus
or in any other subsequently filed document which also is or is deemed to be
incorporated by reference in this Prospectus 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.
The Company will provide without charge to each person, including any
beneficial owner, to whom this Prospectus is delivered, on the written or oral
request of such person, a copy of any or all of the documents which are
incorporated herein by reference (other than exhibits not specifically
incorporated by reference into the text of such documents). Requests should be
directed to Wisconsin Electric Power Company, at its principal executive
office, 231 West Michigan Street, P.O. Box 2046, Milwaukee, Wisconsin 53201,
Attention: Ms. Ann Marie Brady, Secretary (telephone (800) 881-5882).
2
THE COMPANY
The Company is an operating public utility organized as a corporation under
the laws of the State of Wisconsin. The Company is a subsidiary of Wisconsin
Energy Corporation ("Wisconsin Energy"), which owns all of the Company's
Common Stock, and is an affiliated company to Wisconsin Natural Gas Company
("Wisconsin Natural"), the gas utility subsidiary of Wisconsin Energy. The
Company generates, transmits, distributes and sells electric energy in a
territory of approximately 12,000 square miles with an estimated population as
of December 31, 1994, of over 2,200,000 in southeastern (including the
Milwaukee area), east central and northern Wisconsin and in the Upper
Peninsula of Michigan. The Company also distributes and sells steam supplied
by one of its power plants to space heating and processing customers in
downtown Milwaukee. Wisconsin Energy is an exempt holding company by order of
the Commission under Section 3(a)(1) of the Public Utility Holding Company Act
of 1935, as amended, and accordingly is exempt from the provisions of that
Act, other than with respect to certain acquisitions of securities of a public
utility. The Company's principal executive offices are located at 231 West
Michigan Street, P.O. Box 2046, Milwaukee, Wisconsin 53201 (telephone (414)
221-2345). See "Recent Developments--Wisconsin Energy's Merger Agreement With
Northern States Power Company" and "--Merger With Wisconsin Natural Gas
Company" for discussions of pending business combinations.
USE OF PROCEEDS
The net proceeds from the sale of New Bonds and Debt Securities will be
added to the general funds of the Company and applied to the Company's
continuing construction program and other capital requirements or, depending
on market conditions, possible refunding of existing indebtedness. See note D
to "Certain Summary Financial Information." Short-term indebtedness
outstanding when net proceeds from the New Bonds and Debt Securities are
received may be reduced through application of such proceeds. Proceeds from
the New Bonds and Debt Securities may be temporarily invested pending
disposition. Further information concerning the use of proceeds from the sale
of each series of the New Bonds and Debt Securities will be set forth in the
Prospectus Supplement relating to such series.
3
CERTAIN SUMMARY FINANCIAL INFORMATION
The following summary financial information is qualified in its entirety by
the financial statements and other information included in the documents
incorporated by reference in this Prospectus.
CONDENSED INCOME AND RELATED INFORMATION
OF THE COMPANY FOR CERTAIN PERIODS
TWELVE MONTHS
YEAR ENDED DECEMBER 31, ENDED
------------------------------------------------------ SEPTEMBER 30,
1990 1991 1992 1993 1994 (A) 1995 (B)
---------- ---------- ---------- ---------- ---------- -------------
(IN THOUSANDS EXCEPT RATIOS)
Operating Revenues...... $1,220,171 $1,305,795 $1,311,816 $1,361,934 $1,417,843 $1,437,881
Operating Income........ $ 226,199 $ 233,044 $ 219,996 $ 242,837 $ 240,558 $ 294,767
Net Income.............. $ 185,918 $ 181,569 $ 161,742 $ 177,925 $ 166,945 $ 217,765
Ratio of Earnings to
Fixed Charges (C)...... 4.3x 4.2x 3.7x 3.7x 3.5x 4.2x
CAPITALIZATION OF THE COMPANY AT SEPTEMBER 30, 1995 AND
AS OF THAT DATE AS ADJUSTED FOR THE NEW BONDS AND DEBT SECURITIES
AS ADJUSTED (D)
---------------------
AMOUNT AMOUNT PERCENTAGE
---------- ---------- ----------
(IN THOUSANDS)
Long-Term Debt--due after one year (E)......... $1,157,682 $1,457,682 48.2%
Preferred Stock--redemption not required....... 30,451 30,451 1.0
Common Stock Equity............................ 1,534,392 1,534,392 50.8
---------- ---------- -----
Total Capitalization....................... $2,722,525 $3,022,525 100.0%
========== ========== =====
Short-Term Debt (E)(F)......................... $ 155,181 $ 50,000 --
========== ========== =====
- --------
(A) Income/earnings for the fiscal year ended December 31, 1994 includes a
pre-tax charge of $63.5 million for the Company's revitalization costs
recorded in the first quarter of 1994. The charge primarily reflects the
costs of severance and early retirement packages which are elements of a
revitalization program undertaken by the Company in 1993.
(B) See "Recent Developments--Financial Results for the Twelve Months Ended
September 30, 1995."
(C) For the purpose of computing this ratio, earnings consist of net income
(including total Allowances for Funds Used During Construction) plus
current and deferred income taxes, deferred investment tax credits and
fixed charges. Fixed charges consist of interest charges, amortization of
debt expenses, and amounts representing the interest factor of rental
expense.
(D) By order dated November 11, 1993, the Public Service Commission of
Wisconsin ("PSCW") authorized the issuance of up to $400 million aggregate
principal amount of debt securities (including New Bonds and Debt
Securities), subject to a condition that $100 million principal amount of
such securities may only be issued for the advance purchase or refunding
and/or provision for future refunding of currently outstanding debt
securities. In September and October 1995, the Company issued $98.350
million aggregate principal amount of promissory notes in connection with
the refunding of an equal amount of outstanding debt securities as
authorized by the PSCW order. See "Recent Developments--1995 Tax Exempt
Debt Refinancings." Consequently, the as adjusted amounts shown above
reflect the net issuance of $300 million of additional long-term debt,
which is also the approximate maximum amount of the securities covered by
this Prospectus which may be issued without further authorization. The
Company believes that, through a combination of Net Bondable Value of
Property Additions Not Subject to an Unfunded Prior Lien and the principal
amount of unutilized retired Bonds, it will have sufficient capacity under
the Mortgage (as defined
4
below) to issue all of the debt securities authorized by the PSCW order as
New Bonds, if so desired. See "Description of New Bonds--Additional Bonds."
The Company has requested a two-year extension of the scheduled December
31, 1995 expiration date of the PSCW order, and of the related order of the
Michigan Public Service Commission, to December 31, 1997.
(E) Does not include $50.8 million of long-term debt due currently.
(F) The "as adjusted" amount includes the $50 million loan under the Short
Term Borrowing Agreement described in "Description of New Bonds--Regarding
the Trustee."
RECENT DEVELOPMENTS
Financial Results for the Twelve Months Ended September 30, 1995: Net income
for the twelve months ended September 30, 1995 increased $50.8 million
compared to the calendar year 1994 reflecting primarily the $63.5 million pre-
tax ($39 million after-tax) charge for the Company's revitalization costs
recorded in the first quarter of 1994 as described above. The results of
operations for the twelve months ended September 30, 1995 are not necessarily
indicative of the results which may be expected for the fiscal year ending
December 31, 1995 because of seasonal and other factors.
Wisconsin Energy's Merger Agreement with Northern States Power Company: On
April 28, 1995, Wisconsin Energy, the Company's parent company, and Northern
States Power Company, a Minnesota corporation ("Northern States"), entered
into an Agreement and Plan of Merger, which was amended and restated as of
July 26, 1995 (the "Merger Agreement"). The Merger Agreement provides for a
strategic business combination involving Northern States and Wisconsin Energy
in a "merger-of-equals" transaction. As a result, Wisconsin Energy will become
a registered public utility holding company under the Public Utility Holding
Company Act of 1935, as amended, and will change its name to Primergy
Corporation ("Primergy"). Primergy will be the parent company of Northern
States (which, for regulatory reasons, will reincorporate in Wisconsin), the
Company (which will be renamed Wisconsin Energy Company) and the other
subsidiaries of Northern States and Wisconsin Energy. The business combination
is intended to be tax-free for income tax purposes and to be accounted for as
a "pooling of interests."
Under the terms of the Merger Agreement, based upon the capitalization of
Wisconsin Energy and Northern States at the time the Merger Agreement was
entered into, and the exchange ratio of 1.626 shares of Primergy common stock
for each share of Northern States common stock, the transaction would result
in the common shareholders of Northern States, as a group, receiving
approximately 50% of the common equity of Primergy in exchange for their
Northern States common stock and the common shareholders of Wisconsin Energy,
as a group, owning the other 50% of the common equity of Primergy. The
Company's outstanding Preferred Stock, which is publicly held, and Common
Stock, all of which will continue to be owned by Primergy, will be unchanged
in the transaction.
Wisconsin Energy Company will include the operations of Wisconsin Natural,
which is intended to be merged into the Company by January 1, 1996, as
previously planned. See "--Merger With Wisconsin Natural Gas Company."
Following the consummation of the transactions contemplated by the Merger
Agreement, the headquarters of Primergy will be in Minneapolis, Minnesota. The
headquarters of its two utility subsidiaries will remain in their current
locations, Northern States' in Minneapolis, Minnesota and Wisconsin Energy
Company's in Milwaukee, Wisconsin.
Northern States is predominantly an operating public utility engaged, along
with its most significant subsidiary, Northern States Power Company, a
Wisconsin corporation ("NSP-Wisconsin"), in the generation, transmission and
distribution of electricity throughout a 49,000 square mile service area and
the distribution of natural gas in approximately 148 communities within this
area. Northern States serves customers in Minnesota, North Dakota and South
Dakota. NSP-Wisconsin provides electric and natural gas utility service to
customers in Wisconsin and the Upper Peninsula of Michigan. Of the
approximately 3,000,000 people served by Northern States and NSP-Wisconsin,
the majority are concentrated in the Minneapolis-St. Paul, Minnesota
metropolitan
5
area. Northern States has several other subsidiaries including Viking Gas
Transmission Company, a Delaware corporation, and NRG Energy, Inc., a Delaware
corporation ("NRG"). NRG manages many of Northern States' non-utility energy
subsidiaries. It is expected that NSP-Wisconsin will be merged into the
Company (renamed Wisconsin Energy Company) and the remaining subsidiaries of
Northern States will become subsidiaries of Primergy. As a result of such
merger, the Company will assume NSP-Wisconsin's outstanding indebtedness on
the effective date of the merger. See "Description of New Bonds--NSP-Wisconsin
Mortgage." Pursuant to the Merger Agreement, Northern States,
contemporaneously with its reincorporation in Wisconsin, will acquire certain
utility assets from NSP-Wisconsin.
Wisconsin Energy and Northern States recognize that the divestiture of their
existing gas operations and certain non-utility operations is a possibility
under the new registered holding company structure contemplated by the Merger
Agreement, but will seek approval from the Commission to maintain such
businesses. If divestiture is ultimately required, the Commission has
historically allowed companies sufficient time to accomplish divestitures in a
manner that protects shareholder value.
The Merger Agreement is subject to various conditions, including the
approval of various regulatory agencies. On July 10, 1995 Wisconsin Energy and
Northern States filed an application and supporting testimony with the Federal
Energy Regulatory Commission ("FERC") seeking approval of the proposed
business combination. FERC has received a number of protests about and
requests for hearings on the application to which Wisconsin Energy and
Northern States have responded. The matter is pending. Applications for
approval of the mergers contemplated by the Merger Agreement and related
transactions, including, in the case of certain commissions, the issuance of
securities in connection therewith, were filed in early August, 1995 with the
Minnesota, Wisconsin, North Dakota and Michigan utility commissions. An
application for disclaimer of jurisdiction was filed with the South Dakota
utility commission concurrently with the other state applications. The PSCW
has determined that it needs a full review of the Company's rates for the 1997
test year in connection with the consideration of the application for approval
of the mergers contemplated by the Merger Agreement and related transactions.
The Merger Agreement and certain related matters were approved by shareholders
of Wisconsin Energy and Northern States at their respective meetings of
shareholders held on September 13, 1995. Applications for license amendments
and approvals relating to the proposed merger were filed with the Nuclear
Regulatory Commission in late October 1995. Subject to obtaining all requisite
approvals, Wisconsin Energy and Northern States anticipate completing this
business combination late in 1996.
Further information concerning the Merger Agreement and the transactions
contemplated thereby is contained in the documents incorporated herein by
reference. See "Incorporation Of Certain Documents By Reference." Detailed
information with respect thereto is contained in the Joint Proxy
Statement/Prospectus dated August 7, 1995 (contained in Wisconsin Energy's
Registration Statement on Form S-4, Registration No. 33-61619) relating to the
meetings of the shareholders of Northern States and Wisconsin Energy to vote
on the Merger Agreement and related matters. Pro forma financial information
related to the Company's pending business combinations with Wisconsin Natural
and NSP-Wisconsin is included in the Company's Current Report on Form 8-K
dated as of August 25, 1995, and the Company's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1995, which are incorporated by reference
in this Prospectus. Information in or incorporated in this Prospectus with
respect to Northern States, its subsidiaries and the NSP-Wisconsin Mortgage
(defined below) is based on or taken from public disclosures made by Northern
States.
Merger with Wisconsin Natural Gas Company: Wisconsin Energy intends to merge
Wisconsin Natural, a wholly-owned subsidiary of Wisconsin Energy, into the
Company to form a single combined utility subsidiary. All required regulatory
approvals for the merger of Wisconsin Natural and the Company have been
received. Completion of the planned Wisconsin Natural merger with the Company
is expected to occur by January 1, 1996. Wisconsin Natural purchases,
distributes, and sells natural gas to retail customers and transports
customer-owned gas in three distinct service areas in Wisconsin: west and
south of the City of Milwaukee; the Appleton area; and the Prairie du Chien
area. Wisconsin Natural's service territory has an estimated population of
over 1,100,000 and is largely within the electric service area of the Company.
As a result of the merger, the Company
6
will assume Wisconsin Natural's outstanding indebtedness on the effective date
of the merger. See "Description of New Bonds--Wisconsin Natural Debt
Indentures."
1995 Tax Exempt Debt Refinancings: On August 29, 1995, the Company called
for optional redemption $98.350 million aggregate principal amount of fixed
rate tax exempt bonds issued by three political jurisdictions on the Company's
behalf that were secured by issues of the Company's First Mortgage Bonds with
terms corresponding to the tax exempt bonds called for redemption. During
September and October 1995, the three political jurisdictions issued $98.350
million aggregate principal amount of new tax exempt bonds on behalf of the
Company, collateralized by unsecured variable rate promissory notes issued by
the Company with terms corresponding to the respective issues of the refunding
tax exempt bonds, the proceeds of which were used to finance such optional
redemptions. The First Mortgage Bonds which collateralized the redeemed tax
exempt bonds have also been cancelled.
DESCRIPTION OF NEW BONDS
The New Bonds will be issued under the Mortgage and Deed of Trust dated
October 28, 1938 between the Company and Firstar Trust Company (formerly First
Wisconsin Trust Company), as Trustee, as amended and supplemented and as to be
supplemented by one or more Supplemental Indentures creating series of New
Bonds (collectively, the "Mortgage"). At September 30, 1995, the aggregate
principal amount of Bonds outstanding under the Mortgage was $1,024,443,000.
The following statements about the Mortgage and the New Bonds are summary
outlines of provisions contained therein, do not purport to be complete and
are qualified by reference thereto. The specific references below are to
provisions of the Mortgage unless otherwise indicated. Certain terms used
below are defined in the Mortgage. The term "Bonds" refers to Bonds issued
under the Mortgage, as amended and supplemented from time to time. Copies of
the documents constituting the Mortgage are filed as exhibits to the
Registration Statement or documents incorporated by reference in this
Prospectus.
The New Bonds. The New Bonds of any series will be issued in aggregate
principal amount, will mature and bear interest, and will be redeemable (if
issued with redemption provisions) at the option of the Company, at the prices
and on the other terms as to be set forth in the Prospectus Supplement
relating to such series. The Prospectus Supplement will also indicate whether
the New Bonds of such series will be originally issued solely in book-entry
form as described under "Book-Entry Only System" below.
The New Bonds will be available only in fully registered form, without
coupons, in the denomination of $1,000 or any multiple thereof. The Company
will not impose charges for exchanges of New Bonds.
Principal and interest on the New Bonds will be payable in lawful money of
the United States, at the agency of the Company in the City of Milwaukee;
provided, however, at the option of the Company, payment of interest on any
New Bond may be made by check, mailed to the person entitled thereto at such
address as shall appear on the transfer register, or as otherwise may be
provided for in the Supplemental Indenture creating a series of New Bonds. The
interest paid on a New Bond on any interest payment date will, with certain
exceptions, be payable to the person in whose name such New Bond is registered
at the close of business on the last business day which is more than ten days
prior to such date.
Security. In the opinion of Walter T. Woelfle, Director-Legal Services
Department of the Company, the New Bonds will be secured, together with all
other Bonds now or hereafter issued under the Mortgage, by a valid and direct
first lien (subject to certain leases, Permitted Liens and other minor
matters) on substantially all the properties and franchises of the Company,
other than cash, accounts receivable and other liquid assets, securities not
specifically pledged, and electric energy, materials, supplies or other
products produced or purchased by the Company for use, sale or lease. At
September 30, 1995, the gross amount (before depreciation) at which the
properties subject to the lien of the Mortgage were carried in the Company's
utility plant accounts was
7
approximately $4,569,541,000. The Mortgage contains provisions subjecting to
the lien thereof after-acquired property (other than property of types
excepted as indicated above). (Granting Clauses and Excepted Property)
Additional Bonds. Additional Bonds ranking equally with the New Bonds may be
issued for an aggregate principal amount up to (i) 60% of the amount of Net
Bondable Value of Property Additions Not Subject to an Unfunded Prior Lien
which the Company elects to use for such purpose, (ii) the amount of cash
which the Company deposits with the Trustee for such purpose, and (iii) the
previously unutilized amount of Bonds retired or to be retired (except out of
trust moneys). (Art. III, Sections 4, 5 and 6) Cash so deposited may be
withdrawn upon the bases and up to the amounts indicated in the foregoing
clauses (i) and (iii). (Art. VIII, Section 3)
Additional Bonds may not be issued unless Net Earnings of the Company
Available for Interest for a specified twelve-month period shall have been at
least equal to the greater of twice the annual interest charges on, or 10% of
the principal amount of, all Bonds and Prior Lien Bonds then outstanding and
then being issued, unless (i) such Additional Bonds are being issued to refund
Bonds or to refund a Prior Lien which simultaneously becomes a Funded Prior
Lien on Property Additions used for such issuance, and (ii) application to
issue Additional Bonds for either of these refunding purposes is made within
two years prior to the maturity of the Bonds or Prior Lien Bonds being
refunded. (Art. III, Sections 3, 4(h) and 6(b); Fifth Supp. Ind., Art. VI)
The New Bonds are to be issued against 60% of the Net Bondable Value of
Property Additions Not Subject to an Unfunded Prior Lien or the principal
amount of unutilized retired Bonds. Before reflecting the assumed issuance of
any of the New Bonds, as of September 30, 1995, the amount of such Property
Additions available for issuance of Bonds under the Mortgage was approximately
$529,762,000, sufficient under this 60% provision for the issuance of
approximately $317,857,000 principal amount of Additional Bonds. In addition,
approximately $1,146,407,000 of Additional Bonds could be issued under the
Mortgage on the basis of Bonds retired on or before that date.
Prior Lien Bonds secured by an Unfunded Prior Lien may be issued under the
circumstances and subject to the limitations provided in the Mortgage. (Art.
IV, Section 16)
Dividend Restriction. So long as any New Bonds are outstanding, the Company
may not declare any dividend on its Common Stock (other than in Common Stock)
or make any other distribution on, or acquire for value any shares of its
Common Stock (except in exchange for Common Stock), if after giving effect
thereto the aggregate of all such dividends, distributions or acquisitions
during the period commencing October 1, 1995 and ending on the last day of the
third month preceding the month in which any such dividend, distribution or
acquisition is paid or made shall exceed the sum of $1,000,935,697 plus the
net income of the Company during such period applicable to its Common Stock.
(Art. IV or other designated article of each Supplemental Indenture creating
series of New Bonds)
Default. Events of default under the Mortgage are: (i) default in the
payment of the principal of any Bond; (ii) default in the payment of any
installment of interest on any Bond or in the payment or satisfaction of any
sinking, improvement, maintenance or analogous fund and the continuation
thereof for a period of 30 days; (iii) default by the Company in the
performance or observance of any of the covenants, agreements or conditions in
the Mortgage or Bonds and the continuation thereof for 60 days after written
notice from the Trustee or the holders of 15% in amount of the outstanding
Bonds; (iv) default in the payment of principal of or interest on any Prior
Lien Bonds and the continuation thereof beyond the period of grace in such
Bonds; (v) certain events in bankruptcy, assignments for the benefit of
creditors and establishments of receiverships or similar arrangements; (vi)
failure to discharge or provide for the discharge of a final judgment in
excess of $100,000 within 30 days of the rendering thereof or affirmance
thereof on appeal; and (vii) termination of the Company's corporate franchise
without transferring its assets before or within 120 days after such
termination to a successor corporation. (Art. IX, Section 1) The Company is
required to furnish the Trustee, not less than annually, a brief certificate
as to the Company's compliance with all conditions and covenants under the
Mortgage.
In case of an event of default, either the Trustee or the holders of 25% in
amount of the outstanding Bonds may declare the principal of all Bonds due and
payable, but the holders of a majority may, under certain
8
circumstances, rescind such acceleration if such event of default has been
cured. No holder of Bonds may enforce the lien of the Mortgage unless such
holder has given the Trustee written notice of default and unless the holders
of 25% in amount of the outstanding Bonds have requested the Trustee in
writing to act, such holder or holders have offered the Trustee security and
indemnity satisfactory to it and the Trustee has not acted within a reasonable
time. (Art. IX, Sections 1 and 12)
Modification of Mortgage. With the consent of holders of 66 2/3% in amount
of the Bonds entitled to vote then outstanding, and holders of 66 2/3% in
amount of the Bonds of each series entitled to vote then outstanding and
affected if less than all of such series are affected, the Mortgage may be
changed, except to affect the terms of payment of the principal or interest on
any Bond or to reduce the percentage in amount of Bonds required to effect any
change. (Art. XV, Section 6, as amended by Twenty-Second Supp. Ind., effective
October 5, 1995)
Certain additional modifications of the Mortgage set forth in the Twenty-
Second Supplemental Indenture were made effective by a resolution adopted at a
meeting of Bondholders called at the Company's request and held on October 23,
1992, following approval by the Board of Directors of the Company on October
28, 1992. The amendments, in general terms: amend the definition of "Board of
Directors" to include a Committee of the Board; broaden the definition of
"Property Additions" by adding the phrase "gas (either natural or artificial)"
so that such definition refers in part to property "used or useful for the
business of generating, manufacturing, transmitting, distributing or supplying
electricity, gas (either natural or artificial) or steam," by deleting a
requirement that the properties be located in, or directly connected with
properties located in, Wisconsin, by including certain leasehold interests in
electric and gas plants and other properties, and by deleting an exclusion for
gas properties and adding a definition of transportation properties; require
certain opinions of counsel to refer to pipelines; increase to $250,000 the
amount above which certain insured losses must be payable to the Trustee;
permit the issuance of certain prior lien bonds secured by purchase money
mortgage on certain conditions; and permit Bondholders' action by written
consent.
Certain further modifications of the Mortgage set forth in the Twenty-Sixth
Supplemental Indenture became effective on October 5, 1995 when the last Bonds
of any series created prior to January 15, 1988 were redeemed and ceased to be
outstanding. (Twenty-Sixth Supp. Ind., Art. VI) These amendments provide more
flexibility in setting forth in an engineer's certificate the time period
during which gross property additions were purchased, constructed or otherwise
acquired by the Company in connection with a Company request to withdraw
monies held by the Trustee, and alter the ratio used to determine the dollar
amount of funds that the Company may request the Trustee to pay over to the
Company on the basis of refundable Bonds.
Certain additional modifications of the Mortgage set forth in Art. VII of
the Thirty-Third Supplemental Indenture will become effective upon the earlier
of the date when no Bonds of any series created prior to October 1, 1992
remain outstanding or the date such modifications are consented to by
Bondholders. Such modifications will, in general, (i) allow for the issuance
of Additional Bonds for an aggregate principal amount of up to 70% of the
amount of Net Bondable Value of Property Addition Not Subject to an Unfunded
Prior Lien, as compared with the limitation of 60% now set forth in the
Mortgage, (ii) permit the issuance of Prior Lien Bonds for an aggregate
principal amount of up to 70% of the amount of Net Bondable Value of Property
Additions Subject to an Unfunded Prior Lien, as compared with the limitation
of 60% now set forth in the Mortgage, (iii) allow the Company to acquire
property subject to any Unfunded Prior Lien, if at the time of acquisition the
principal amount of outstanding indebtedness subject to such lien or liens
does not exceed 70% (as compared to 60% currently) of the lesser of the cost
or fair value to the Company of the property of the nature of Property
Additions subject to such lien or liens, (iv) amend the definitions of "Net
Bondable Value of Property Additions Not Subject to an Unfunded Prior Lien"
and "Net Bondable Value of Property Additions Subject to an Unfunded Prior
Lien" by changing the ratio to be applied to certain dollar amounts in each
definition's calculation from ten-sixths to ten-sevenths, (v) provide that, in
the case of a proposed merger in which the Company would not be the survivor,
such a transaction may not occur if the principal amount of indebtedness
outstanding immediately after the merger subject to a lien or liens prior to
that of the Company's exceeds 70% (as compared to 60% currently) of the lesser
of cost or fair value of the property of the nature of Property Additions then
owned by the survivor, and (vi) make certain conforming and other changes.
Each holder of a
9
New Bond shall be deemed to have consented to all such modifications. An
aggregate of $303,443,000 principal amount of Bonds of series created prior to
October 1, 1992 were outstanding as of October 5, 1995.
Wisconsin Natural Debt Indentures. In conjunction with the anticipated
merger of Wisconsin Natural with and into the Company (see "Recent
Developments--Merger With Wisconsin Natural Gas Company"), the Company will
assume Wisconsin Natural's outstanding indebtedness under, and agree to abide
by all of the applicable terms and conditions of, the Mortgage and Deed of
Trust dated June 1, 1950 between Wisconsin Natural and Firstar Trust Company,
as Trustee, as amended and supplemented (the "Wisconsin Natural Mortgage"),
and the Debt Securities Indenture dated as of September 1, 1992 between
Wisconsin Natural and Firstar Trust Company, as Trustee, as supplemented (the
"Wisconsin Natural DSI"). At September 30, 1995, the aggregate principal
amounts of First Mortgage Bonds outstanding under the Wisconsin Natural
Mortgage and Debentures outstanding under the Wisconsin Natural DSI were
$10,000,000 and $57,000,000, respectively. After such merger, the lien of the
Wisconsin Natural Mortgage will continue to constitute a prior lien upon all
the properties and franchises acquired by the Company that were subject to the
lien of the Wisconsin Natural Mortgage immediately prior to the merger, and
upon all additions, extensions, improvements, repairs and replacements to the
properties included in Wisconsin Natural's trust estate immediately prior to
the merger. The lien of the Wisconsin Natural Mortgage will not extend to the
other assets of the Company after the merger unless the Company issues
additional First Mortgage Bonds or exercises certain other privileges under
the Wisconsin Natural Mortgage. The Company does not expect to take any action
which would extend the lien of the Wisconsin Natural Mortgage to Company
property not acquired from Wisconsin Natural in the merger. Under the terms of
the Wisconsin Natural DSI, which does not currently subject any property to a
lien, certain restrictive covenants setting forth limitations on the existence
and creation of liens, the issuance of First Mortgage Bonds and the entering
into sale and leaseback transactions will terminate upon consummation of the
merger with the Company.
NSP-Wisconsin Mortgage. In conjunction with the anticipated merger of NSP-
Wisconsin into the Company (see "Recent Developments--Wisconsin Energy's
Merger Agreement With Northern States Power Company"), the Company will assume
NSP-Wisconsin's outstanding indebtedness under, and agree to abide by all of
the applicable terms and conditions of, the Supplemental and Restated Trust
Indenture dated March 1, 1991 between NSP-Wisconsin and Firstar Trust Company,
as Trustee, as supplemented (the "NSP-Wisconsin Mortgage"). At September 30,
1995, the aggregate principal amount of First Mortgage Bonds outstanding under
the NSP-Wisconsin Mortgage was $194,635,000. After such merger, the lien of
the NSP-Wisconsin Mortgage will continue to constitute a prior lien upon all
the properties and franchises acquired by the Company that were subject to the
lien of the NSP-Wisconsin Mortgage immediately prior to the merger, and upon
all extensions and additions appurtenant to the property acquired from NSP-
Wisconsin, as well as such franchises, repairs and additional properties as
may be acquired by the Company pursuant to covenants contained in the NSP-
Wisconsin Mortgage to maintain, renew and preserve the franchises covered by
the NSP-Wisconsin Mortgage and to maintain such mortgaged and pledged property
in adequate repair, working order and condition. The lien of the NSP-Wisconsin
Mortgage will not extend to other assets of the Company after the merger
unless the Company issues additional First Mortgage Bonds under the NSP-
Wisconsin Mortgage. The Company does not expect to issue additional First
Mortgage Bonds under the NSP-Wisconsin Mortgage after consummation of the
merger.
Regarding the Trustee. The Trustee provides services for the Company and
certain affiliates, including its parent, Wisconsin Energy, and Wisconsin
Energy's other utility subsidiary, Wisconsin Natural, as a depository of
funds, registrar, trustee under other indentures and similar services. The
Trustee or certain affiliates of the Trustee may make loans to the Company
from time to time. The Company and the Trustee have entered into a Short Term
Borrowing Agreement providing for the Trustee to make loans to the Company
from time to time. The aggregate principal balance outstanding at any time on
all loans made pursuant to the Short Term Borrowing Agreement may not exceed
$50,000,000. As of September 30, 1995, a loan for $50,000,000 was outstanding
under the Short Term Borrowing Agreement. Firstar Trust Company is also the
trustee under the Indenture (as
10
defined below) providing for the Debt Securities. See "Description of Debt
Securities--Regarding the Trustee." The Trustee also presently acts as trustee
for the Company's and Wisconsin Natural's master pension trust, the
decommissioning trust fund for the Company's Point Beach Nuclear Plant and
certain other employee benefit trusts. The Trustee also serves as trustee
under the Wisconsin Natural Mortgage and NSP-Wisconsin Mortgage. Geneva B.
Johnson, a director of the Company and Wisconsin Energy, is also a director of
an affiliate of the Trustee.
The holders of a majority of the outstanding Bonds have the right to direct
the time, method and place of conducting any proceeding for any remedy open to
the Trustee and of exercising any power or trust conferred upon the Trustee
under the Mortgage. (Art. IX, Section 11) Subject to the duty of the Trustee
to act with the required standard of care during a default, the Trustee is
under no obligation to exercise any trust or power of the Mortgage at the
request, order or direction of any of the Bondholders unless such Bondholders
provide security or indemnity satisfactory to the Trustee against any costs,
expenses and liabilities to be incurred. (Art. XIII, Sections 1(d) and 2)
DESCRIPTION OF DEBT SECURITIES
The Debt Securities will be issued in one or more series under an Indenture
(the "Indenture") between the Company and Firstar Trust Company, as Trustee,
the form of which is filed as an exhibit to the Registration Statement. The
following summaries of certain provisions of the Indenture do not purport to
be complete and are qualified in their entirety by express reference to the
Indenture and the Securities Resolutions or the indentures supplemental
thereto (copies of which have been or will be filed with the Commission).
Certain terms defined in the Indenture are used in this summary without
definition.
The term "Securities," as used under this caption, refers to all Securities
issued under the Indenture and includes the Debt Securities.
General. The Indenture will not limit the amount of Securities that can be
issued thereunder and provides that the Securities may be issued from time to
time in one or more series pursuant to the terms of one or more Securities
Resolutions or supplemental indentures creating such series. As of the date of
this Prospectus, there were no Securities outstanding under the Indenture. The
Debt Securities will be unsecured and will rank on a parity with all other
unsecured and unsubordinated debt of the Company. Although the Indenture
provides for the possible issuance of Securities in other forms or currencies,
the only Securities covered by this Prospectus will be Securities denominated
in U.S. dollars in registered form without coupons.
Substantially all of the fixed properties and franchises of the Company are
subject to the lien of the Mortgage under which the Company's First Mortgage
Bonds are outstanding. See "Description of New Bonds."
Terms. Reference is made to the Prospectus Supplement for the following
terms, if applicable, of the Securities offered thereby: (1) the designation,
aggregate principal amount, currency or composite currency and denominations;
(2) the price at which such Securities will be issued and, if an index formula
or other method is used, the method for determining amounts of principal or
interest; (3) the maturity date and other dates, if any, on which principal
will be payable; (4) the interest rate (which may be fixed or variable), if
any; (5) the date or dates from which interest will accrue and on which
interest will be payable, and the record dates for the payment of interest;
(6) the manner of paying principal and interest; (7) the place or places where
principal and interest will be payable; (8) the terms of any mandatory or
optional redemption by the Company; (9) the terms of any redemption at the
option of Holders; (10) whether such Securities are to be issuable as
registered Securities, bearer Securities, or both, and whether and upon what
terms any registered Securities may be exchanged for bearer Securities and
vice versa; (11) whether such Securities are to be represented in whole or in
part by a Security in global form and, if so, the terms thereof and the
identity of the depositary ("Depositary") for any global Security; (12) any
tax indemnity provisions; (13) if the Securities provide that payments of
principal or interest may be made in a currency other than that in which
Securities are denominated, the manner for
11
determining such payments; (14) the portion of principal payable upon
acceleration of a Discounted Security (as defined below); (15) whether and
upon what terms Securities may be defeased; (16) whether the covenant referred
to below under "Certain Covenants--Limitations on Liens" applies, and any
events of default or restrictive covenants in addition to or in lieu of those
set forth in the Indenture; (17) provisions for electronic issuance of
Securities or for Securities in uncertificated form; and (18) any additional
provisions or other special terms not inconsistent with the provisions of the
Indenture, including any terms that may be required or advisable under United
States or other applicable laws or regulations, or advisable in connection
with the marketing of the Securities. (Section 2.01)
The Securities of a series may be issued in whole or in part in the form of
one or more global Securities that will be deposited with, or on behalf of, a
Depositary identified in the Prospectus Supplement relating to the series.
Global Securities may be issued in registered, bearer or uncertificated form
and in either temporary or permanent form. Unless and until it is exchanged in
whole or in part for Securities in definitive form, a global Security may not
be transferred except as a whole by the Depositary to a nominee or a successor
depositary. (Section 2.12) The specific terms of the depositary arrangement
with respect to any Securities of a series will be described in the Prospectus
Supplement relating to the series.
Securities of any series may be issued as registered Securities, bearer
Securities or uncertificated Securities, as specified in the terms of the
series. (Section 2.01) Unless otherwise indicated in the Prospectus
Supplement, registered Securities will be issued in denominations of $1,000
and whole multiples thereof and bearer Securities will be issued in
denominations of $5,000 and whole multiples thereof. One or more global
Securities will be issued in a denomination or aggregate denominations equal
to the aggregate principal amount of outstanding Securities of the series to
be represented by such global Security or Securities. (Section 2.12)
In connection with its original issuance, no bearer Security will be
offered, sold, resold, or mailed or otherwise delivered to any location in the
United States and a bearer Security in definitive form may be delivered in
connection with its original issuance only if the person entitled to receive
the bearer Security furnishes certification as described in United States
Treasury regulation section 1.163-5(c)(2)(i)(D)(3). (Section 2.04)
For purposes of this Prospectus, unless otherwise indicated, "United States"
means the United States of America (including the States and the District of
Columbia), its territories and possessions and all other areas subject to its
jurisdiction. "United States person" means a citizen or resident of the United
States, any corporation, partnership or other entity created or organized in
or under the laws of the United States or a political subdivision thereof or
any estate or trust the income of which is subject to United States federal
income taxation regardless of its source. Any special United States federal
income tax considerations applicable to bearer Securities will be described in
the Prospectus Supplement relating thereto.
To the extent set forth in the Prospectus Supplement, except in special
circumstances set forth in the Indenture, principal and interest on bearer
Securities will be payable only upon surrender of bearer Securities and
coupons at a paying agency of the Company located outside of the United
States. During any period thereafter for which it is necessary in order to
conform to United States tax law or regulations, the Company will maintain a
paying agent outside the United States to which the bearer Securities and
coupons may be presented for payment and will provide the necessary funds
therefor to the paying agent upon reasonable notice. (Section 2.04)
Registration of transfer of registered Securities may be requested upon
surrender thereof at any agency of the Company maintained for that purpose and
upon fulfillment of all other requirements of the agent. (Sections 2.03 and
2.07) Bearer Securities and the coupons related thereto will be transferable
by delivery.
Securities may be issued under the Indenture as Discounted Securities to be
offered and sold at a substantial discount from the principal amount thereof.
Special United States federal income tax and other considerations applicable
thereto will be described in the Prospectus Supplement relating to such
Discounted Securities. "Discounted Security" means a Security where the amount
of principal due upon acceleration is less than the stated principal amount.
12
Certain Covenants. The Debt Securities will not be secured by any properties
or assets and will represent unsecured debt of the Company. The Indenture does
not limit the amount of unsecured debt that the Company can incur. As
indicated under "General" above, substantially all of the fixed properties and
franchises of the Company are subject to the lien of the Mortgage securing the
Company's First Mortgage Bonds.
As discussed below, the Indenture includes certain limitations on the
Company's ability to create liens. Such limitations will apply if the
Securities Resolution establishing the terms of a series so provides. If
applicable, the limitations are subject to a number of qualifications and
exceptions. The Indenture does not limit the Company's ability to issue
additional First Mortgage Bonds or to enter into sale and leaseback
transactions.
The covenant described below will apply if so indicated in a Prospectus
Supplement. Any obligations thereunder are subject to termination upon
defeasance. See "Legal Defeasance and Covenant Defeasance" below. Also, unless
otherwise indicated in a Prospectus Supplement, such covenant, if applicable,
does not afford holders of the Securities protection in the event of a highly
leveraged or other transaction involving the Company that may adversely affect
holders of the Securities.
Limitations on Liens. The Indenture provides that, so long as there remain
outstanding any Securities of any series to which this limitation applies, and
subject to termination as referred to above, the Company will not, and will
not permit any Subsidiary to, create or suffer to be created or to exist any
mortgage, pledge, security interest, or other lien (collectively, "Lien") on
any of its properties or assets now owned or hereafter acquired to secure any
indebtedness, without making effective provision whereby the Securities of
such series shall be equally and ratably secured. (At the date of this
Prospectus, the Company had no Subsidiaries.) This restriction does not apply
to or prevent the creation or existence of (1) the Mortgage securing the
Company's First Mortgage Bonds or any indenture supplemental thereto
subjecting any property to the Lien thereof or confirming the Lien thereof
upon any property, whether owned before or acquired after the date of the
Indenture; (2) Liens on property existing at the time of acquisition or
construction of such property (or created within one year after completion of
such acquisition or construction), whether by purchase, merger, construction
or otherwise (or on the property of a Subsidiary at the date it became a
Subsidiary), or to secure the payment of all or any part of the purchase price
or construction cost thereof, including the extension of any such Liens to
repairs, renewals, replacements, substitutions, betterments, additions,
extensions and improvements then or thereafter made on the property subject
thereto; (3) any extensions, renewals or replacements (or successive
extensions, renewals or replacements), in whole or in part, of Liens
(including, without limitation, the Mortgage) permitted by the foregoing
clauses (1) and (2); (4) the pledge of any bonds or other securities at any
time issued under any of the Liens permitted by clauses (1), (2) or (3) above;
or (5) Permitted Encumbrances. (Section 4.07)
"Permitted Encumbrances" include, among other items, (a) the pledge or
assignment in the ordinary course of business of electricity, gas (either
natural or artificial) or steam, accounts receivable or customers' installment
paper, (b) Liens affixing to property of the Company or a Subsidiary at the
time a Person consolidates with or merges into, or transfers all or
substantially all of its assets to, the Company or a Subsidiary, provided that
in the opinion of the Board of Directors of the Company or Company management
(evidenced by a certified Board resolution or an Officers' Certificate
delivered to the Trustee) the property acquired pursuant to the consolidation,
merger or asset transfer is adequate security for the Lien; and (c) Liens or
encumbrances not otherwise permitted if, at the incurrence of and after giving
effect thereto, the aggregate of all obligations of the Company and its
Subsidiaries secured thereby does not exceed 10% of Tangible Net Worth.
"Tangible Net Worth" means (i) common stockholders' equity appearing on the
most recent balance sheet of the Company (or consolidated balance sheet of the
Company and its Subsidiaries if the Company then has one or more consolidated
Subsidiaries) prepared in accordance with generally accepted accounting
principles less (ii) intangible assets (excluding intangible assets
recoverable through rates as prescribed by applicable regulatory authorities).
(Section 4.06)
Further, this restriction will not apply to or prevent the creation or
existence of leases made, or existing on property acquired, in the ordinary
course of business. (Section 4.07)
13
Other Covenants. Any other restrictive covenants which may apply to a
particular series of Securities will be described in the Prospectus Supplement
relating thereto.
Successor Obligor. The Indenture provides that, unless otherwise specified
in the Securities Resolution establishing a series of Securities, the Company
will not consolidate with or merge into, or transfer all or substantially all
of its assets to, any person, unless (1) the Person is organized under the
laws of the United States or a State thereof; (2) the Person assumes by
supplemental indenture all the obligations of the Company under the Indenture,
the Securities and any coupons; and (3) immediately after the transaction no
Default (as defined) exists. The successor will be substituted for the
Company, and thereafter all obligations of the Company under the Indenture,
the Securities and any coupons shall terminate. (Section 5.01)
Exchange of Securities. Registered Securities may be exchanged for an equal
aggregate principal amount of registered Securities of the same series and
date of maturity in such authorized denominations as may be requested upon
surrender of the registered Securities at an agency of the Company maintained
for such purpose and upon fulfillment of all other requirements of the agent.
(Section 2.07)
To the extent permitted by the terms of a series of Securities authorized to
be issued in registered form and bearer form, bearer Securities may be
exchanged for an equal aggregate principal amount of registered or bearer
Securities of the same series and date of maturity in such authorized
denominations as may be requested upon surrender of the bearer Securities with
all unpaid coupons relating thereto (except as may otherwise be provided in
the Securities) at an agency of the Company maintained for such purpose and
upon fulfillment of all other requirements of the agent. (Section 2.07) As of
the date of this Prospectus, it is expected that the terms of a series of
Securities will not permit registered Securities to be exchanged for bearer
Securities.
Defaults and Remedies. Unless the Securities Resolution establishing the
series otherwise provides, an "Event of Default" with respect to a series of
Securities will occur if:
(1) the Company defaults in any payment of interest on any Securities of
the series when the same becomes due and payable and the Default continues
for a period of 60 days;
(2) the Company defaults in the payment of the principal of any
Securities of the series when the same becomes due and payable at maturity
or upon redemption, acceleration or otherwise;
(3) the Company defaults in the payment or satisfaction of any sinking
fund obligation with respect to any Securities of a series as required by
the Securities Resolution establishing such series and the Default
continues for a period of 60 days;
(4) the Company defaults in the performance of any of its other
agreements applicable to the series and the Default continues for 90 days
after the notice specified below;
(5) the Company pursuant to or within the meaning of any Bankruptcy Law:
(A) commences a voluntary case,
(B) consents to the entry of an order for relief against it in an
involuntary case,
(C) consents to the appointment of a Custodian for it or for all or
substantially all of its property, or
(D) makes a general assignment for the benefit of its creditors;
(6) a court of competent jurisdiction enters an order or decree under any
Bankruptcy Law that:
(A) is for relief against the Company in an involuntary case,
(B) appoints a Custodian for the Company or for all or substantially
all of its property, or
(C) orders the liquidation of the Company, and the order or decree
remains unstayed and in effect for 60 days; or
(7) there occurs any other Event of Default provided for in the series.
(Section 6.01)
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The term "Bankruptcy Law" means Title 11, U.S. Code or any similar Federal
or State law for the relief of debtors. The term "Custodian" means any
receiver, trustee, assignee, liquidator or a similar official under any
Bankruptcy Law. (Section 6.01)
"Default" means any event which is, or after notice or passage of time would
be, an Event of Default. A Default under subparagraph (4) above is not an
Event of Default until the Trustee or the Holders of at least 25% in principal
amount of the series notify the Company of the Default and the Company does
not cure the Default within the time specified after receipt of the notice.
(Section 6.01) The Trustee may require indemnity satisfactory to it before it
enforces the Indenture or the Securities of the series. (Section 7.01) Subject
to certain limitations, Holders of a majority in principal amount of the
Securities of the series may direct the Trustee in its exercise of any trust
or power. (Section 6.05) The Trustee may withhold from Securityholders of the
series notice of any continuing Default (except a Default in payment of
principal or interest) if it determines that withholding notice is in their
interest. (Section 7.04) The Company is required to furnish the Trustee, not
less than annually, a brief certificate as to the Company's compliance with
all conditions and covenants under the Indenture. (Section 4.04)
The failure to redeem any Securities subject to a Conditional Redemption (as
defined) is not an Event of Default if any event on which such redemption is
so conditioned does not occur before the redemption date. (Section 6.01)
The Indenture does not have a cross-default provision. Thus, a default by
the Company on any other debt would not constitute an Event of Default.
Amendments and Waivers. The Indenture and the Securities or any coupons of
the series may be amended, and any default may be waived as follows: The
Securities and the Indenture may be amended with the consent of the Holders of
a majority in principal amount of the Securities of all series affected voting
as one class. (Section 9.02) A Default on a series may be waived with the
consent of the holders of a majority in principal amount of the Securities of
the series. (Section 6.04) However, without the consent of each Securityholder
affected, no amendment or waiver may (1) reduce the amount of Securities whose
Holders must consent to an amendment or waiver, (2) reduce the interest on or
change the time for payment of interest on any Security, (3) change the fixed
maturity of any Security, (4) reduce the principal of any non-Discounted
Security or reduce the amount of principal of any Discounted Security that
would be due on acceleration thereof, (5) change the currency in which
principal or interest on a Security is payable, or (6) waive any Default in
payment of interest on or principal of a Security. (Sections 6.04 and 9.02)
Without the consent of any Securityholder, the Indenture, the Securities or
any coupons may be amended to cure any ambiguity, omission, defect or
inconsistency; to provide for assumption of Company obligations to
Securityholders in the event of a merger or consolidation requiring such
assumption; to provide that specific provisions of the Indenture shall not
apply to a series of Securities not previously issued; to create a series and
establish its terms; to provide for a separate Trustee for one or more series;
or to make any change that does not materially adversely affect the rights of
any Securityholder. (Section 9.01)
Legal Defeasance and Covenant Defeasance. Securities of a series may be
defeased in accordance with their terms and, unless the Securities Resolution
establishing the terms of the series otherwise provides, as set forth below.
The Company at any time may terminate as to a series all of its obligations
(except for certain obligations, including obligations with respect to the
defeasance trust and obligations to register the transfer or exchange of a
Security, to replace destroyed, lost or stolen Securities and coupons and to
maintain agencies in respect of the Securities) with respect to the Securities
of the series and any related coupons and the Indenture ("legal defeasance").
The Company at any time may terminate as to a series its obligations with
respect to the Securities and coupons of the series under the covenant
described under "Certain Covenants--Limitations on Liens" and any other
restrictive covenants which may be applicable to a particular series
("covenant defeasance").
The Company may exercise its legal defeasance option notwithstanding its
prior exercise of its covenant defeasance option. If the Company exercises its
legal defeasance option, a series may not be accelerated because
15
of an Event of Default. If the Company exercises its covenant defeasance
option, a series may not be accelerated by reference to the covenant described
under "Certain Covenants--Limitations on Liens" or any other restrictive
covenants which may be applicable to a particular series. (Section 8.01)
To exercise either defeasance option as to a series, the Company must
deposit in trust (the "defeasance trust") with the Trustee money or U.S.
Government Obligations for the payment of principal, premium, if any, and
interest on the Securities of the series to redemption or maturity and must
comply with certain other conditions. In particular, the Company must obtain
an opinion of tax counsel that the defeasance will not result in recognition
of any gain or loss to holders for Federal income tax purposes. "U.S.
Government Obligations" are direct obligations of the United States of America
which have the full faith and credit of the United States of America pledged
for payment and which are not callable at the issuer's option, or certificates
representing an ownership interest in such obligations. (Section 8.02)
Regarding the Trustee. Firstar Trust Company will act as Trustee and
Registrar for Securities issued under the Indenture and, unless otherwise
indicated in a Prospectus Supplement, the Trustee will also act as Transfer
Agent and Paying Agent with respect to the Securities. (Section 2.03) The
Company may remove the Trustee with or without cause if the Company so
notifies the Trustee six months in advance and if no Default occurs during the
six-month period. (Section 7.07) The Trustee is also trustee under the
Mortgage for the Company's First Mortgage Bonds, including the New Bonds, and
provides services for the Company and certain affiliates, including Wisconsin
Energy and Wisconsin Natural, as a depository of funds, registrar, trustee
under other indentures and similar services. See "Description of New Bonds--
Regarding the Trustee."
BOOK-ENTRY ONLY SYSTEM
The New Bonds and Debt Securities of any series may be issued initially in
the form of one or more global securities under a book-entry only system
operated by a securities depository. Unless otherwise specified in the
Prospectus Supplement, The Depository Trust Company ("DTC") will act as
securities depository for the New Bonds and Debt Securities, which would be
registered in the name of CEDE & Co., as registered securityholder and nominee
for DTC. Individual purchases of Book-Entry Interests (as herein defined) in
any such New Bonds or Debt Securities will be made in book-entry form.
Purchasers of Book-Entry Interests in such New Bonds or Debt Securities will
not receive certificates representing their interests in such New Bonds or
Debt Securities. So long as CEDE & Co., as nominee of DTC, is the
securityholder, references herein to holders of the Bonds or Debt Securities
or registered owners will mean CEDE & Co., rather than the owners of Book-
Entry Interests in New Bonds or Debt Securities.
DTC is a limited purpose trust company organized under the banking laws of
the State of New York and a "banking organization" within the meaning of that
law, a member of the Federal Reserve System, a "clearing corporation" within
the meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act. DTC
holds securities deposited by its participants (the "DTC Participants") and
facilitates the settlement of securities transactions among DTC Participants
in such securities through electronic computerized book-entry changes in
accounts of the DTC Participants, thereby eliminating the need for physical
movement of securities certificates. Direct DTC Participants include
securities brokers and dealers, banks, trust companies, clearing corporations
and certain other organizations, some of whom (including, possibly, the
underwriters with respect to the New Bonds or Debt Securities), together with
the New York Stock Exchange, Inc., the American Stock Exchange, Inc. and the
National Association of Securities Dealers, Inc., own DTC. Access to the DTC
system is also available to others such as banks, brokers, dealers and trust
companies that clear through or maintain a custodial relationship with a DTC
Participant, either directly or indirectly (the "Indirect Participants").
DTC Participants purchasing Book-Entry Interests (as defined below) in any
New Bonds or Debt Securities will not receive certificates. Each DTC
Participant will receive a credit balance in the records of DTC in the amount
of such DTC Participant's interest in such New Bonds or Debt Securities, which
will be confirmed in
16
accordance with DTC's standard procedures. The ownership interest of each
actual purchaser of a Book-Entry Interest in a New Bond or Debt Security (the
"Book-Entry Interests") will be recorded through the records of the DTC
Participant or through the records of the Indirect Participant. Owners of
Book-Entry Interests should receive from the DTC Participant or Indirect
Participant a written confirmation of their purchase providing details of the
Book-Entry Interests acquired. Transfers of Book-Entry Interests will be
accomplished by book entries made by the DTC Participants or Indirect
Participants who act on behalf of the owners of Book-Entry Interests. Owners
of Book-Entry Interests will not receive certificates representing their
ownership of Book-Entry Interests with respect to any New Bonds or Debt
Securities except as described below upon the resignation of DTC.
Under the Mortgage and Indenture, payments made by the respective Trustee to
DTC or its nominee will satisfy the Company's obligations under the Mortgage
or Indenture, as the case may be, to the extent of the payments so made.
Owners of Book-Entry Interests will not be or be considered by the Company or
the respective Trustee to be, and will not have any rights as, holders of New
Bonds under the Mortgage or Debt Securities under the Indenture, as the case
may be.
NEITHER THE COMPANY NOR THE TRUSTEE UNDER THE MORTGAGE AND INDENTURE WILL
HAVE ANY RESPONSIBILITY OR OBLIGATION TO ANY DTC PARTICIPANT, INDIRECT
PARTICIPANT OR ANY OWNER OF A BOOK-ENTRY INTEREST OR ANY OTHER PERSON NOT
SHOWN ON THE REGISTRATION BOOKS OF SUCH TRUSTEE AS BEING A HOLDER OF NEW BONDS
OR DEBT SECURITIES WITH RESPECT TO: (1) ANY NEW BONDS OR DEBT SECURITIES, AS
THE CASE MAY BE; (2) THE ACCURACY OF ANY RECORDS MAINTAINED BY DTC OR ANY DTC
PARTICIPANT OR INDIRECT PARTICIPANT; (3) THE PAYMENT BY DTC OR ANY DTC
PARTICIPANT OR INDIRECT PARTICIPANT OF ANY AMOUNT DUE TO ANY OWNER OF A BOOK-
ENTRY INTEREST IN RESPECT OF THE PRINCIPAL OR REDEMPTION PRICE OF OR INTEREST
ON SUCH NEW BONDS OR DEBT SECURITIES; (4) THE DELIVERY BY DTC OR ANY DTC
PARTICIPANT OR INDIRECT PARTICIPANT OF ANY NOTICE TO ANY OWNER OF A BOOK-ENTRY
INTEREST WHICH IS REQUIRED OR PERMITTED UNDER THE TERMS OF THE MORTGAGE OR
INDENTURE TO BE GIVEN TO HOLDERS OF NEW BONDS OR DEBT SECURITIES; (5) THE
SELECTION OF THE OWNERS OF A BOOK-ENTRY INTEREST TO RECEIVE PAYMENT IN THE
EVENT OF ANY PARTIAL REDEMPTION OF ANY NEW BONDS OR DEBT SECURITIES; OR (6)
ANY CONSENT GIVEN OR OTHER ACTION TAKEN BY DTC OR ITS NOMINEE AS HOLDER OF NEW
BONDS OR DEBT SECURITIES.
Principal and redemption price of, and interest payments on, New Bonds and
Debt Securities registered in the name of DTC or its nominee will be made to
DTC or such nominee, as registered owner of such New Bonds or Debt Securities.
DTC is responsible for disbursing such payments to the appropriate DTC
Participants and such DTC Participants, and any Indirect Participants, are in
turn responsible for disbursing the same to the owners of Book-Entry
Interests. Unless it has reason to believe it will not receive payment, DTC's
current practice is to credit the accounts of the DTC Participants on a
payment date in accordance with their respective holdings shown on the records
of DTC. Payments by DTC Participants and Indirect Participants to owners of
Book-Entry Interests will be governed by standing instructions and customary
practices, as is now 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 DTC Participant or Indirect Participant and not of DTC,
the Company or the respective Trustee, subject to any statutory and regulatory
requirements as may be in effect from time to time.
DTC Participants and Indirect Participants carry the "position" of the
ultimate Book-Entry Interest owner on their records, and will be responsible
for providing information to the ultimate Book-Entry Interest owner as to the
New Bonds or Debt Securities in which the Book-Entry Interest is held, debt
service payments received, and other information. Each person for whom a DTC
Participant or Indirect Participant acquires an interest in New Bonds or Debt
Securities, as nominee, may desire to make arrangements with such DTC
Participant or Indirect Participant to receive a credit balance in the records
of such DTC Participant or Indirect Participant, to have all notices of
redemption or other communications to or by DTC which may affect such persons
forwarded
17
in writing by such DTC Participant or Indirect Participant, and to have
notification made of all debt service payments.
Purchases, transfers and sales of Book-Entry Interests by the ultimate Book-
Entry Interest owners may be made through book entries made by DTC
Participants or Indirect Participants or others who act for the ultimate Book-
Entry Interest owner. The Trustee under the Mortgage and Indenture, the
Company and the underwriters, as such, have no role in those purchases,
transfers or sales.
Owners of Book-Entry Interests may be charged a sum sufficient to cover any
tax, fee, or other governmental charge that may be imposed in relation to any
transfer or exchange of a Book-Entry Interest.
Each Trustee will recognize and treat DTC (or any successor securities
depository) or its nominee as the holder of New Bonds and Debt Securities
registered in its name or the name of its nominee for all purposes, including
payment of debt service, notices, enforcement of remedies and voting. Under
DTC's current practice, a proxy will be given to the DTC Participants holding
Book-Entry Interests in New Bonds and Debt Securities in connection with any
matter on which holders of such New Bonds or Debt Securities are asked to vote
or give their consent. Crediting of debt service payments and transmittal of
notices and other communications by DTC to DTC Participants, by DTC
Participants to Indirect Participants and by DTC Participants and Indirect
Participants to the ultimate Book-Entry Interest owners are the responsibility
of those persons and will be handled by arrangements among them and are not
the responsibility of either Trustee, the Company or any underwriter, as such.
Each Trustee, so long as a book-entry system is used for any series of New
Bonds or Debt Securities, will send any notice of redemption and any other
notices required by the Mortgage or Indenture to be sent to holders of such
New Bonds or Debt Securities, respectively, only to DTC (or such successor
securities depository) or its nominee. Any failure of DTC to advise any DTC
Participant, or of any DTC Participant or Indirect Participant to notify the
Book-Entry Interest owner, of any such notice and its content or effect will
not affect the validity of the redemption of the New Bonds or Debt Securities
called for redemption, or any other action premised on that notice. In the
event of a call for redemption, the Trustee's notification to DTC will
initiate DTC's standard call process, and, in the event of a partial call, its
lottery process by which the call will be randomly allocated to DTC
Participants holding positions in the New Bonds or Debt Securities to be
redeemed. When DTC and DTC Participants allocate the call for redemption, the
owners of the Book-Entry Interests that have been called should be notified by
the broker or other person responsible for maintaining the records of those
interests and subsequently credited by that person with the proceeds once such
New Bonds or Debt Securities are redeemed.
The Company, the Trustee under the Mortgage and Indenture and any
underwriter or agent cannot and do not give any assurances that DTC, DTC
Participants or others will distribute payments of debt service on New Bonds
or Debt Securities made to DTC or its nominee as the registered owner, or any
redemption or other notices, to the Book-Entry Interest owners, or that they
will do so on a timely basis, or that DTC will serve and act in the manner
described in this Prospectus.
The Company understands that the current "Rules" applicable to DTC are on
file with the Commission, and that the current "Procedures" of DTC to be
followed in dealing with DTC Participants are on file with DTC.
If DTC is at any time unwilling or unable to continue as depository, and a
successor depository is not appointed by the Company within 90 days, the
Company will issue individual certificates to owners of Book-Entry Interests
in exchange for the New Bonds or Debt Securities held by DTC or its nominee,
as the case may be. In such instance, an owner of a Book-Entry Interest will
be entitled to physical delivery of certificates equal in principal amount to
such Book-Entry Interest and to have such certificates registered in its name.
Individual certificates so issued will be issued in denominations of $1,000 or
any multiple thereof.
Neither the Company, the Trustee under the Mortgage and Indenture nor any
underwriter makes any representation as to the accuracy of the above
description of DTC's business, organization and procedures, which is based
upon information furnished by DTC.
18
PLAN OF DISTRIBUTION
The Company may sell New Bonds and Debt Securities to or through
underwriters or dealers and also may sell New Bonds and Debt Securities
directly to other purchasers or through agents.
The distribution of New Bonds and Debt Securities of any series may be
effected from time to time in one or more transactions at a fixed price or
prices, which may be changed, or at market prices prevailing at the time of
sale, at prices related to such prevailing market prices or at negotiated
prices.
In connection with the sale of New Bonds and Debt Securities, underwriters
may receive compensation from the Company or from purchasers of New Bonds and
Debt Securities for whom they may act as agents, in the form of discounts,
concessions or commissions. Underwriters, dealers and agents that participate
in the distribution of New Bonds and Debt Securities may be deemed to be
"underwriters", and any discounts or commissions received by them from the
Company and any profit on the resale of New Bonds and Debt Securities by them
may be deemed to be underwriting discounts and commissions, under the
Securities Act.
The Prospectus Supplement relating to each series of New Bonds will also set
forth the terms of the offering of the New Bonds of each series, including, to
the extent applicable, the initial offering price, the proceeds to the
Company, the underwriting discounts or commissions, and any other discounts or
concessions to be allowed or re-allowed to dealers. The principal underwriters
with respect to each series sold to or through underwriters will be named in
the Prospectus Supplement relating to such series and only the underwriters
named in such Prospectus Supplement are deemed to be underwriters in
connection with the New Bonds offered thereby.
The Prospectus Supplement relating to each series of Debt Securities will
also set forth the terms of the offering of the Debt Securities of each
series, including, to the extent applicable, the initial offering price, the
proceeds to the Company, the underwriting discounts or commissions and any
other discounts or concessions to be allowed or re-allowed to dealers. The
principal underwriters with respect to each series sold to or through
underwriters will be named in the Prospectus Supplement relating to such
series and only the underwriters named in such Prospectus Supplement are
deemed to be underwriters in connection with the Debt Securities offered
thereby.
If so indicated in the Prospectus Supplement, the Company will authorize
agents, underwriters or dealers to solicit offers by certain specified
institutions to purchase New Bonds or Debt Securities from the Company at the
public offering price set forth in the Prospectus Supplement pursuant to
delayed delivery contracts providing for payment and delivery on a specified
date in the future. Such contracts will be subject only to those conditions
set forth in the Prospectus Supplement and the Prospectus Supplement will set
forth the commission payable for the solicitation of such contracts.
Under agreements which may be entered into by the Company, underwriters,
dealers and agents who participate in the distribution of New Bonds and Debt
Securities may be entitled to indemnification by the Company against certain
liabilities, including liabilities under the Securities Act, or to
contribution with respect to payments which the agents, underwriters or
dealers may be required to make in respect thereto. Agents, underwriters and
dealers may be customers of, engage in transactions with or perform services
for the Company in the ordinary course of business.
The New Bonds and Debt Securities are not proposed to be listed on a
securities exchange, and any underwriters will not be obligated to make a
market in the New Bonds and Debt Securities. The Company cannot predict the
activity or liquidity of any trading in the New Bonds and Debt Securities.
19
EXPERTS
The financial statements incorporated in this Prospectus by reference to the
Company's Annual Report on Form 10-K for the year ended December 31, 1994 have
been so incorporated in reliance on the report of Price Waterhouse LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
Future audited financial statements incorporated in this Prospectus by
reference to future filings under the Exchange Act, as provided under
"Incorporation of Certain Documents by Reference" above, will be so
incorporated in reliance on the related report or reports of the firm of
independent accountants auditing such financial statements, given on such
authority of such firm, if and to the extent such filings include the consent
of such firm to the incorporation of such report or reports herein.
LEGAL OPINIONS
Certain legal matters in connection with the New Bonds and Debt Securities
will be passed upon for the Company by Walter T. Woelfle, Director-Legal
Services Department of the Company, James D. Zakrajsheck, Counsel of the
Company, or A. William Finke, Counsel of the Company, and by Quarles & Brady,
411 East Wisconsin Avenue, Milwaukee, Wisconsin. Certain legal matters in
connection with the New Bonds and Debt Securities will be passed upon for the
underwriters by Cahill Gordon & Reindel (a partnership including a
professional corporation), 80 Pine Street, New York, New York. Quarles & Brady
and Cahill Gordon & Reindel will not pass upon the incorporation of the
Company, franchise matters, questions of title or the lien of the Mortgage.
Cahill Gordon & Reindel will rely upon the opinion of Mr. Woelfle, Mr.
Zakrajsheck or Mr. Finke as to all matters of Wisconsin law. Cahill Gordon &
Reindel and Quarles & Brady will rely upon such opinion as to matters of
Michigan law and the exempt status of the Company and Wisconsin Energy under
the Public Utility Holding Company Act of 1935, as amended. Also, such firms,
Mr. Woelfle, Mr. Zakrajsheck and Mr. Finke will rely on the opinion of Loomis,
Ewert, Parsley, Davis & Gotting, P.C., 232 South Capitol Avenue, Lansing,
Michigan, as to matters of Michigan law relating to authority to do business
and regulatory approval for the New Bonds and Debt Securities in Michigan.
The statements as to matters of law and legal conclusions under "Description
of New Bonds--Security" have been prepared under the supervision of, and
reviewed by, Walter T. Woelfle, Director-Legal Services Department of the
Company, and such statements are made on his authority. As of September 30,
1995, Mr. Woelfle, Mr. Zakrajsheck and Mr. Finke owned beneficially 5,955
shares, 1,279 shares and 14,218 shares of Common Stock of Wisconsin Energy,
respectively.
20