PROSPECTUS SUPPLEMENT Filed pursuant to Rule
(To Prospectus Dated February 23, 1994) 424 (b)(5) (Form S-3
$100,000,000 Registration No. 33-61228)
ARIZONA PUBLIC SERVICE COMPANY
FIRST MORTGAGE BONDS, 65/8% SERIES DUE 2004
The Offered Bonds will mature on March 1, 2004. Interest on the Offered Bonds
is payable semiannually on March 1 and September 1, commencing on September 1,
1994. For redemption provisions and other terms, see "Certain Terms of the
Offered Bonds" herein and "Description of New Bonds -- Redemption" in the
accompanying 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.
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PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC (1) DISCOUNT COMPANY (1)(2)
Per Bond.............. 99.531% .650% 98.881%
Total................. $99,531,000 $650,000 $98,881,000
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(1) Plus accrued interest from March 1, 1994 to date of delivery.
(2) Before deduction of expenses payable by the Company estimated at $150,000.
The Offered Bonds are offered subject to receipt and acceptance by the
Underwriters, to prior sale and to the Underwriters' right to reject any order
in whole or in part and to withdraw, cancel or modify the offer without
notice. It is expected that delivery of the Offered Bonds will be made at the
office of Salomon Brothers Inc, Seven World Trade Center, New York, New York,
or through the facilities of The Depository Trust Company, on or about March
2, 1994.
SALOMON BROTHERS INC
CS FIRST BOSTON
GOLDMAN, SACHS & CO.
The date of this Prospectus Supplement is February 23, 1994.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR
EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE
OFFERED BONDS AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
------------
APPLICATION OF PROCEEDS
The Company intends to use the net proceeds from the sale of the Offered
Bonds for the repayment of short-term borrowings incurred for (i) the assumed
redemption on March 1, 1994 of $14.21 million of the Company's $8.80
Cumulative Preferred Stock, Series K; and (ii) general corporate purposes. The
estimated average interest rate of the short-term borrowings to be retired is
3.4%. Any proceeds not immediately so applied will be invested temporarily,
pending such application, in United States government or agency obligations,
commercial paper, bank certificates of deposit, or repurchase agreements
collateralized by United States government or agency obligations, or will be
deposited with banks.
CERTAIN TERMS OF THE OFFERED BONDS
The Offered Bonds will bear interest from March 1, 1994 or from the most
recent Interest Payment Date (as defined below) to which interest has been
paid at the rate of 65/8% per annum, payable semiannually on March 1 and
September 1 of each year (each an "Interest Payment Date"), commencing
September 1, 1994, to the persons in whose names the respective Offered Bonds
shall have been registered at the close of business on the February 15 or
August 15 next preceding such Interest Payment Date. The Offered Bonds will
mature March 1, 2004, and will be limited to an aggregate principal amount of
$100,000,000. The Offered Bonds are issuable in denominations of $1,000 or any
integral multiple thereof.
The Offered Bonds will not be redeemable prior to maturity, except that
the Offered Bonds are subject to redemption at any time in whole, but only if
all other first mortgage bonds of the Company then outstanding are also
redeemed, within twelve months of (i) any merger or consolidation of the
Company into or with any other corporation, or (ii) certain other transactions
involving the transfer of substantially all of the property subject to the
lien of the Mortgage, as then amended. The Offered Bonds may be redeemed in
the circumstances described in the preceding sentence only at the applicable
special redemption prices (expressed as percentages of the principal amount
thereof) set forth in the table below, together with accrued interest to the
date of redemption.
SPECIAL REDEMPTION PRICES
IF REDEEMED DURING REDEMPTION IF REDEEMED DURING REDEMPTION
THE TWELVE MONTHS PRICE THE TWELVE MONTHS PRICE
BEGINNING MARCH 1, -------------- BEGINNING MARCH 1, -------------
1994................... 106.16% 1999.............. 103.08%
1995................... 105.54 2000.............. 102.46
1996................... 104.92 2001.............. 101.85
1997................... 104.31 2002.............. 101.23
1998................... 103.69 2003.............. 100.62
See "Description of New Bonds" in the Prospectus for additional interest
payment provisions and other terms of the Offered Bonds.
UNDERWRITING
The Underwriters named below, for whom Salomon Brothers Inc, CS First
Boston Corporation, and Goldman, Sachs & Co. are acting as Representatives,
have severally agreed to purchase from the Company the following respective
principal amounts of Offered Bonds:
Principal Amount
Underwriter --------------------
Salomon Brothers Inc ................................... $ 28,000,000
CS First Boston Corporation ............................ 28,000,000
Goldman, Sachs & Co. ................................... 28,000,000
Citicorp Securities, Inc. .............................. 5,500,000
J.P. Morgan Securities Inc. ............................ 5,500,000
Chemical Securities Inc................................. 5,000,000
------------------
Total........................................... $ 100,000,000
==================
The Underwriting Agreement provides that the obligations of the
Underwriters are subject to certain conditions precedent, and that the
Underwriters will be obligated to purchase all of the Offered Bonds if any are
purchased.
The Company has been advised by the Representatives that the Underwriters
propose to offer the Offered Bonds to the public initially at the public
offering price set forth on the cover page of this Prospectus Supplement and,
through the Representatives, to certain dealers at such price less a
concession of .40% of the principal amount of the Offered Bonds; that the
Underwriters and such dealers may reallow a discount of .25% of such principal
amount on sales to certain other dealers; and that after the initial public
offering, the public offering price and concession and discount to dealers may
be changed by the Representatives.
The Offered Bonds are a new issue of securities with no established
trading market. The Company has been advised by the Representatives that they
intend to make a market in the Offered Bonds 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 Offered Bonds.
Certain of the Underwriters have provided various investment banking
services, including serving as commercial paper dealers under the Company's
commercial paper program, to the Company and its affiliates from time to time,
for which they have received customary compensation. The Company is a borrower
under credit facilities pursuant to which Chemical Bank, Citibank, N.A. and
Morgan Guaranty Trust Company of New York, each an affiliate of an
Underwriter, are lenders. To the extent the proceeds from the sale of the
Offered Bonds are used to repay borrowings under such facilities, such banks
will receive their share of such payments. Chemical Bank, an affiliate of an
Underwriter, is the trustee with respect to secured lease obligation bonds
which are secured by the Company's rental payments. In addition, certain of
the Underwriters have provided various investment banking and commercial
banking services to Pinnacle West Capital Corporation, the Company's parent
("Pinnacle West"), from time to time, for which they have received customary
compensation.
The Company has agreed to indemnify the several Underwriters against
certain liabilities, including liabilities under the Securities Act of 1933.
ARIZONA PUBLIC SERVICE COMPANY
FIRST MORTGAGE BONDS
Arizona Public Service Company (the "Company") intends from time to time to
issue up to $200,000,000 aggregate principal amount of its First Mortgage
Bonds (the "New Bonds") on terms to be determined at the time of sale. For
each issue of the New Bonds for which this Prospectus is being delivered (the
"Offered Bonds"), there is an accompanying Prospectus Supplement (the
"Prospectus Supplement") that sets forth the aggregate principal amount,
maturity, rate and time of payment of interest, purchase price, any terms for
redemption, the names of any underwriters or agents, the principal amounts, if
any, to be purchased by the underwriters, and the compensation of such
underwriters or agents, and any other special terms of the Offered Bonds.
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 February 23, 1994.
AVAILABLE INFORMATION
Arizona Public Service Company (the "Company") is subject to the
informational requirements of the Securities Exchange Act of 1934, as amended
(the "1934 Act"), and in accordance therewith files reports, proxy statements,
and other information with the Securities and Exchange Commission (the
"Commission"). Such reports, proxy statements, and other information can be
obtained at prescribed rates from the Public Reference Section of the
Commission or may be inspected and copied at the public reference facilities
maintained by the Commission at 450 Fifth Street, N.W., Room 1024, Washington,
D.C. 20549 and at certain of its regional offices located at 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661; and 7 World Trade Center, 13th
Floor, New York, New York 10048. Certain securities of the Company are listed
on the New York Stock Exchange. Reports, proxy materials, and other
information concerning the Company can be inspected at the office of this
exchange at 20 Broad Street, 7th Floor, New York, New York 10005.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents previously filed with the Commission by the
Company (File No. 1-4473) are incorporated by reference in this Prospectus:
1. The Company's Form 10-K Report for the fiscal year ended December 31,
1992 (the "1992 10-K Report").
2. The Company's Form 10-Q Reports for the fiscal quarters ended March 31,
June 30, and September 30, 1993 (the "September 10-Q Report").
3. The Company's Form 8-K Reports, dated February 2, March 1, June 2, June
25, July 18, July 31, August 1, August 3, September 1, September 24, October
4, and December 15, 1993 (the "December 8-K Report").
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14,
or 15(d) of the 1934 Act after the filing date of the December 8-K Report and
prior to the termination of the offering of the securities offered hereby
shall be deemed to be incorporated by reference in this Prospectus and to be a
part hereof from the date of filing of such documents.
Any statement contained in a document incorporated by reference herein
shall be deemed to be modified or superseded for purposes of this Prospectus
to the extent that a statement contained herein or in any other subsequently
filed document which is also incorporated by reference herein modifies or
supersedes such statement. Any statement so modified or superseded shall not
be deemed, except as 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 a copy of this Prospectus is delivered, upon the
oral or written request of such person, a copy of any or all of the documents
referred to above which have been or may be incorporated in this Prospectus by
reference, other than exhibits to such documents. Request for such copies
should be directed to Arizona Public Service Company, Office of the Secretary,
Station 9068, P.O. Box 53999, Phoenix, Arizona 85072-3999, (602) 250-3252.
SELECTED INFORMATION
The following material is qualified in its entirety by reference to
the detailed information and financial statements incorporated by
reference in this Prospectus.
THE OFFERING
Security Offered......................... Up to $200,000,000 of First Mortgage Bonds.
Application of Proceeds.................. Except as otherwise described in the Prospectus Supplement,
the net proceeds of the First Mortgage Bonds will be applied
primarily to the redemption, repurchase, repayment, or
retirement of outstanding indebtedness; and temporary
investment pending such application.
THE COMPANY
Business................................. Electric utility servicing approximately 654,000 customers
in an area that includes all or part of 11 of Arizona's 15
counties.
Generating Fuel Mix (estimated for the
twelve months ended December 31, 1993).
Coal -- 62.3%; Nuclear -- 32.4%; Gas -- 5.1%; Other -- 0.2%.
FINANCIAL DATA (THOUSANDS OF DOLLARS):
Twelve Months Ended
-----------------------------------------------
December 31,
-----------------------------------------------
1993 1992 1991
-------------- -------------- ---------------
Electric Operating Revenues......................... $ 1,686,290 $ 1,669,679 $ 1,515,289
Refund Obligation (1)............................... -- -- (53,436)
-------------- -------------- ---------------
Net Operating Revenues............................ $ 1,686,290 $ 1,669,679 $ 1,461,853
============== ============== ===============
Net Income (Loss)................................... $ 250,386 $ 246,805 $ (222,649)
============== ============== ===============
Ratio of Earnings to Fixed Charges.................. 2.99 2.73 (2)
CAPITALIZATION DATA (THOUSANDS OF DOLLARS):
As Adjusted(3)
As of ------------------------------
December 31, 1993 Amount Percentage
------------------------ -------------- --------------
Long-Term Debt (excluding current maturities). $ 2,124,654 $ 2,224,654 53.9%
Redeemable Preferred Stock.................... 197,610 183,400 4.5
Non-Redeemable Preferred Stock................ 193,561 193,561 4.7
Common Stock Equity........................... 1,522,941 1,522,941 36.9
------------------- -------------- ------------
Total Capitalization...................... $ 4,038,766 $ 4,124,556 100.0%
=================== ============== ============
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(1) The Company recorded a refund obligation to customers relating to and
included in the write-off described in "Regulatory Matters -- Rate Case
Settlement" in Note 2 of Notes to Financial Statements in Part II, Item
8 of the 1992 10-K Report and in Note 5 of Notes to Financial Statements
in Part I, Item 1 of the September 10-Q Report.
(2) The write-off resulting from the Arizona Corporation Commission order
settling the Company's rate case (see "Regulatory Matters -- Rate Case
Settlement" in Note 2 of Notes to Financial Statements in Part II,
Item 8 of the 1992 10-K Report and in Note 5 of Notes to Financial
Statements in Part I, Item 1 of the September 10-Q Report) resulted in
a negative coverage ratio and an earnings coverage deficiency of
approximately $317 million for the twelve months ended December 31,
1991. Excluding the effects of the write-off, the coverage ratio would
have been 2.11 for the same period.
(3) For the Company's (i) assumed issuance of $100 million of New Bonds;
and (ii) assumed redemption on March 1, 1994 of $14.21 million of the
Company's $8.80 Cumulative Preferred Stock, Series K. It is assumed
that all or a substantial portion of the net proceeds of the issuance
of $100 million of the New Bonds (the balance of the New Bonds
remaining after the assumed issuance of New Bonds referenced in the
preceding sentence) will be used for the redemption, repurchase,
repayment, or retirement of a similar amount of outstanding long-term
debt.
THE COMPANY
The Company was incorporated in 1920 under the laws of Arizona and is
principally engaged in providing electricity in the State of Arizona. The
principal executive offices of the Company are located at 400 North Fifth
Street, Phoenix, Arizona 85004 and its telephone number is (602) 250-1000.
APPLICATION OF PROCEEDS
Except as otherwise described in the Prospectus Supplement, the net
proceeds of the New Bonds will be applied primarily to the redemption,
repurchase, repayment, or retirement of outstanding indebtedness. Any proceeds
not immediately so applied when received may be invested temporarily, pending
such application, in United States government or agency obligations,
commercial paper, bank certificates of deposit, or repurchase agreements
collateralized by United States government or agency obligations, or will be
deposited with banks.
CONSTRUCTION AND FINANCING PROGRAMS
The major components of the Company's capital requirements are refunding
obligations and anticipated construction expenditures. Construction
expenditures are anticipated to be $279 million, $302 million, and $293
million for 1994, 1995, and 1996, respectively. These amounts include nuclear
fuel expenditures, but exclude capitalized property taxes and capitalized
interest costs. For the period 1994 through 1996, the Company currently
estimates that it will fund substantially all of its capital expenditures with
internally generated funds, after the payment of dividends. In addition to
funds required for construction expenditures, refunding obligations for
preferred stock, long-term debt, a capitalized lease obligation, and certain
anticipated early redemptions are expected to total approximately $187
million, $135 million, and $4 million for the years 1994, 1995, and 1996,
respectively. For additional details with respect to the Company's
construction and financing programs, see "Management's Discussion and Analysis
of Financial Condition and Results of Operations -- Liquidity and Capital
Resources" in Part II, Item 7 of the 1992 10-K Report and in Part I, Item 2 of
the September 10-Q Report.
EARNINGS RATIOS
The following table sets forth the Company's historical ratio of earnings
to fixed charges for each of the indicated periods:
Twelve months ended
- ----------------------------------------------------
December 31,
- ----------------------------------------------------
1993 1992 1991 1990 1989
2.99 2.73 (1) 2.05 2.29
- ----------
(1) The write-off resulting from the Arizona Corporation Commission ("ACC")
order settling the Company's rate case (see "Regulatory Matters -- Rate
Case Settlement" in Note 2 of Notes to Financial Statements in Part II,
Item 8 of the 1992 10-K Report and in Note 5 of Notes to Financial
Statements in Part I, Item 1 of the September 10-Q Report) resulted in a
negative coverage ratio and an earnings coverage deficiency of
approximately $317 million for the twelve months ended December 31, 1991.
Excluding the effects of the write-off, the coverage ratio would have been
2.11 for the same period.
For the purposes of these computations, "earnings" are defined as the sum
of pre-tax income plus fixed charges of the Company and its subsidiaries;
"fixed charges" consist of interest on debt, amortization of debt discount,
premium, and expense and an estimated interest factor in rentals.
DESCRIPTION OF NEW BONDS
GENERAL
The New Bonds will be issued in one or more new series under the Mortgage
and Deed of Trust dated as of July 1, 1946 between the Company and Bank of
America National Trust and Savings Association, as successor by merger to
Security Pacific National Bank, as Trustee ("Trustee"), which as heretofore
amended and supplemented is herein referred to as the "Mortgage," and which is
to be further amended and supplemented by appropriate Supplemental Indentures
("Supplemental Indentures"). The statements herein concerning the New Bonds,
the Mortgage, and the Supplemental Indentures are a summary and do not purport
to be complete. They make use of terms defined in the Mortgage and are
qualified in their entirety by reference to such documents.
The New Bonds will be limited to a principal amount of $200 million.
Reference is made to the Prospectus Supplement relating to any particular
issue of Offered Bonds for the following terms: (i) the aggregate principal
amount of the Offered Bonds; (ii) the date on which such Offered Bonds mature;
(iii) the rate per annum at which such Offered Bonds will bear interest;
(iv) the times at which such interest will be payable; (v) the date, if any,
after which such Offered Bonds may be redeemed at the option of the Company
and the redemption price; and (vi) any other special terms. Interest will be
paid to the person in whose names the Offered Bonds are registered at the
close of business on the record date, as established in the Supplemental
Indenture relating thereto, preceding the interest payment date in respect
thereof. The New Bonds will be issued as fully registered bonds, without
coupons, in denominations of $1,000 and multiples thereof. The New Bonds will
be transferable at any time without any service or other charge, except
transfer taxes and other governmental charges, if any.
Except as otherwise described under "Issuance of Additional Bonds" or in
the Prospectus Supplement, the covenants contained in the Mortgage and the New
Bonds would not afford holders of the New Bonds protection in the event of a
highly-leveraged transaction involving the Company.
REDEMPTION
The Offered Bonds are redeemable as set forth in the Prospectus Supplement
relating thereto and, subject to any qualifications or variations set forth in
any such Prospectus Supplement, are also subject to redemption, in each case
at the principal amount of the Offered Bonds to be redeemed together with
accrued interest to the date fixed for redemption, (i) in whole or in part
with the proceeds from mortgaged property of the Company taken under eminent
domain by, or otherwise sold to, a governmental body or agency; (ii) in whole
or in part with the Proceeds of Released Property, including proceeds from the
sale or other disposition (including a sale and leaseback) of property
released from the lien of the Mortgage as specified in section (b) of the
second to the last paragraph under "Security" below; and (iii) in whole,
together with all other first mortgage bonds of the Company then outstanding,
within twelve months of certain mergers or other transactions involving the
transfer of substantially all of the property subject to the lien of the
Mortgage, as then amended. In addition, after the date and at the price set
forth in the Prospectus Supplement, Offered Bonds may be redeemed in whole or
in part with cash deposited in the replacement fund discussed below.
SECURITY
The New Bonds will rank pari passu, except as to any sinking fund or
similar fund provided for a particular series, with all bonds at any time
outstanding under the Mortgage. The Mortgage constitutes a first mortgage lien
on substantially all the fixed property owned by the Company (which does not
include a combined cycle plant or certain interests in Unit 2 of the Palo
Verde Nuclear Generating Station being leased), other than property
specifically excepted by the Mortgage. Such lien and the Company's title to
certain of its properties are subject to Excepted Encumbrances, to minor
leases, defects, irregularities, and deficiencies, and to the considerations
discussed below with respect to the Four Corners and Navajo Plant locations.
The lien of the Mortgage will also extend to all after-acquired property
(other than the excepted classes) located in the jurisdictions in which the
necessary recordations or filings have been accomplished, subject to Excepted
Encumbrances and to liens existing or placed on such property at the time of
its acquisition by the Company.
Both the Four Corners and the Navajo Plants are located on property held
by the plant participants under leases from the Navajo Tribe and easements
from the Secretary of the Interior. The leases extend from their respective
effective dates in 1966 and 1969 for terms of 50 years with rights of renewal
for up to 25 additional years. The easements are for 50-year terms from the
same effective dates. While the Company owns the rights conferred upon it by
the leases from the Navajo Tribe, the Company does not make any representation
with respect to the Tribe's title to the lands leased (but is not aware of any
assertion of a contesting claim to such lands) or with respect to the
enforceability of the leases against the Tribe.
The Mortgage requires the Company to keep the property encumbered thereby
as an operating system or systems in good repair and working order, but
permits the permanent discontinuance or reduction in capacity of any such
properties which, in the judgment of the Board of Directors of the Company, is
desirable in the conduct of its business or which is ordered by a regulatory
authority or which properties are to be sold or disposed of by the Company.
When not in default under the Mortgage, the Company may obtain the release
from the lien thereof of (a) property that has become unserviceable, obsolete,
or unnecessary for use in the Company's operations, provided that it replaces
such property with, or substitutes for the same, an equal value of other
property, and (b) other property that has been sold or otherwise disposed of,
provided that the Company deposits with the Trustee cash in an amount, waives
the right to issue additional bonds on the basis of retired bonds previously
issued in an amount, or utilizes as a credit net Property Additions acquired
by the Company within the preceding five years and having a fair value (not
more than Cost), equal to the fair value of the property to be released.
The Trustee may, and upon request of the Company shall, cancel and
discharge the lien of the Mortgage and all indentures supplemental thereto
whenever all indebtedness secured by the Mortgage has been paid.
ISSUANCE OF ADDITIONAL BONDS
Additional bonds may be issued under the Mortgage in a principal amount
equal to (a) 60% of net Property Additions, (b) the principal amount of
certain redeemed or retired bonds previously issued, and/or (c) deposited
cash, provided that the Company's Adjusted Net Earnings over a twelve-month
period are at least two times the annual interest on all bonds to be
outstanding under the Mortgage after the issuance and on indebtedness secured
by prior liens. Exceptions to this earnings coverage requirement apply to
bonds issued on the basis of redeemed or retired bonds where the redeemed or
retired bonds bore a higher rate of interest and where certain other
conditions are satisfied. In addition, the Company's articles of incorporation
allow the Company to issue additional preferred stock when certain earnings
coverage requirements are met. Exceptions to this earnings coverage
requirement apply to preferred stock issued for the purpose of redeeming or
retiring other preferred stock.
Assuming 8% as the rate of interest on bonds that might have been issued
on December 31, 1993, and the issuance on that date of $200 million in
aggregate principal amount of the New Bonds, the coverage afforded by earnings
for the twelve months ended December 31, 1993, would have allowed the issuance
of approximately $2.22 billion in aggregate principal amount of additional
bonds, as compared to approximately $282 million of first mortgage bonds on
the basis of property additions and approximately $819 million of first
mortgage bonds on the basis of redeemed or retired bonds.
In addition to the Mortgage restrictions on the Company's issuance of
additional bonds, the Company must obtain ACC approval before issuing equity
securities or incurring long-term debt. Existing ACC orders allow the Company
to have approximately $501 million in aggregate par value of preferred stock
and approximately $2.6 billion in principal amount of long-term debt
outstanding at any one time. The Company does not expect these provisions or
authorizations to limit the Company's ability to meet its capital
requirements.
Property Additions, and in many instances redeemed or retired bonds, as
well as deposited cash, may be used for certain alternative purposes under the
Mortgage, including the release of property from the lien thereof or the
satisfaction of sinking or replacement fund requirements. The Mortgage
contains restrictions on the issuance of bonds, withdrawal of cash, or release
of property on the basis of property subject to prior liens. Property located
on leaseholds or easements (as, for example, the Four Corners and Navajo
Plants) will constitute fundable Property Additions if the leasehold or
easement has an unexpired term of, or the term is extendable at the Company's
option for, at least 30 years after the time of funding, or if the property
may be removed by the Company without compensation.
REPLACEMENT FUND
So long as any of the New Bonds are outstanding, the Company is required
for each calendar year to deposit with the Trustee cash in a formularized
amount related to net additions to the Company's mortgaged utility plant;
however, the Company may satisfy all or any part of the requirement by
utilizing redeemed or retired bonds, net Property Additions, or property
retirements. For 1993 such requirement amounted to approximately $122,000,000.
Any cash that may be deposited by the Company pursuant to the requirement may,
upon request by the Company, be applied to the redemption or purchase of bonds
and, if not withdrawn against Property Additions or retired bonds within five
years, must be so applied, subject in each case to any restrictions on any
such redemption or purchase as set forth in the Prospectus Supplement relating
to the issue of bonds to be redeemed or purchased. For example, the cash
deposited with the Trustee by the Company in partial satisfaction of its 1992
replacement fund requirements was used to redeem $47,430,000 in aggregate
principal amount of the Company's First Mortgage Bonds, 9% Series due 2017, at
their principal amount plus accrued interest, on April 30, 1993.
MODIFICATION OF THE MORTGAGE
The Mortgage and the rights of bondholders may be modified with the
consent of the Company, and of the Trustee if deemed affected, and the vote or
assent of the holders of not less than 70% in principal amount of the Eligible
bonds, and of not less than 70% in principal amount of the Eligible bonds of
any one or more series (less than all) affected by any such modification;
except that the bondholders, without the consent of the holder of each bond
affected, have no power to (a) reduce the principal thereof, or the premium,
if any, or rate of interest thereon or otherwise modify the terms of payment
of principal, premium, or interest, or extend the maturity of any bonds,
(b) permit the creation of any lien ranking prior to or on a parity with the
lien of the Mortgage with respect to any of the mortgaged property,
(c) deprive any nonassenting bondholder of a lien upon the mortgaged property
for the security of his bonds, or (d) reduce the percentage of bondholders
authorized to effect any such modification.
EVENTS OF DEFAULT
The following are defaults under the Mortgage: (a) failure to pay the
principal of any bond outstanding under the Mortgage when due and payable;
(b) failure to pay interest on any bond outstanding under the Mortgage within
60 days after the same is due and payable; (c) failure to pay any installment
of any fund required to be applied to the purchase or redemption of bonds
outstanding under the Mortgage within 60 days after the same is due and
payable; (d) certain events in bankruptcy, insolvency, or reorganization; and
(e) failure to perform any other covenant of the Mortgage continuing for 90
days after notice by the Trustee or holders of 15% in principal amount of
Eligible bonds. The Mortgage allows the Trustee to withhold notice of certain
defaults, not including any default in the payment of principal of, or
interest on, any bond outstanding, or in the payment of any sinking,
improvement, replacement, or purchase fund installment, if it in good faith
determines that the withholding of such notice is in the interests of the
bondholders.
The holders of not less than a majority in principal amount of Eligible
bonds may direct the time, method, and place of conducting any proceeding for
any remedy available to the Trustee under the Mortgage; provided, however,
that the Trustee may decline to follow any such direction under certain
circumstances, including a determination made in good faith by the Trustee
that it will not be sufficiently indemnified for any expenditures, including
its own charges, in any action or proceeding so directed. The Company is
required to file with the Trustee, on or before July 1 of each year, a
certificate to the effect that, except as otherwise stated therein, the
Company has complied with all of the provisions of the Mortgage and is not
then in default thereunder.
OTHER
The Mortgage restricts the payment of dividends on common stock of the
Company under certain conditions which have not existed in the past and do not
currently exist.
The Trustee under the Mortgage is Bank of America National Trust and
Savings Association ("Bank of America"), Los Angeles, California. The Transfer
Agent and Paying Agents are Bank of America and BankAmerica National Trust
Company, New York, New York. The Company maintains normal banking arrangements
with Bank of America, which include (i) a commitment by Bank of America to
lend the Company up to $25 million under a revolving credit agreement, none of
which was outstanding at December 31, 1993, and (ii) two commitments in the
aggregate principal amount of approximately $140 million by Bank of America
pursuant to reimbursement agreements related to letters of credit issued on
behalf of the Company in connection with issuances of tax exempt bonds, the
proceeds of which were made available to the Company, none of which was
outstanding at December 31, 1993. In addition, Pinnacle West maintains normal
banking arrangements with Bank of America.
PLAN OF DISTRIBUTION
The Company intends to sell up to $200 million in aggregate principal
amount of the New Bonds to or through underwriters or dealers, and may also
sell the New Bonds directly to other purchasers or through agents, as
described in the Prospectus Supplement relating to an issue of Offered Bonds.
The distribution of the Offered Bonds 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 the Offered Bonds, underwriters may receive
compensation from the Company or from purchasers of Offered Bonds for whom
they may act as agents in the form of discounts, concessions, or commissions.
Underwriters may sell Offered Bonds to or through dealers, and such dealers
may receive compensation in the form of discounts, concessions, or commissions
from the underwriters and/or commissions from the purchasers for whom they may
act as agents. Underwriters, dealers, and agents that participate in the
distribution of Offered Bonds may be deemed to be underwriters, and any
discounts or commissions received by them from the Company and any profit on
the resale of Offered Bonds by them may be deemed to be underwriting discounts
and commissions under the Securities Act of 1933 (the "1933 Act"). Any such
person who may be deemed to be an underwriter will be identified, and any such
compensation received from the Company will be described, in the Prospectus
Supplement.
Under agreements which may be entered into by the Company, underwriters,
dealers, and agents who participate in the distribution of the Offered Bonds
may be entitled to indemnification by the Company against certain liabilities,
including liabilities under the 1933 Act.
EXPERTS
The financial statements and the related financial statement schedules
incorporated in this Prospectus by reference to the Company's 1992 Annual
Report on Form 10-K have been audited by Deloitte & Touche, independent
auditors, as stated in their report, which is incorporated herein by
reference, and have been so incorporated in reliance upon the report of such
firm given upon their authority as experts in accounting and auditing.
With respect to the unaudited interim financial information for the
periods ended March 31, June 30, and September 30, 1993 and 1992, which is
incorporated herein by reference, Deloitte & Touche have applied limited
procedures in accordance with professional standards for a review of such
information. However, as stated in their reports included in the Company's
Quarterly Reports on Form 10-Q for the quarters ended March 31, June 30, and
September 30, 1993, and incorporated by reference herein, they did not audit
and they do not express an opinion on that interim financial information.
Accordingly, the degree of reliance on their reports on such information
should be restricted in light of the limited nature of the review procedures
applied. Deloitte & Touche are not subject to the liability provisions of
Section 11 of the Securities Act of 1933 for their reports on the unaudited
interim financial information because those reports are not "reports" or a
"part" of the registration statement prepared or certified by an accountant
within the meaning of Sections 7 and 11 of the Act.
LEGAL OPINIONS
The validity of the New Bonds offered hereby will be passed upon for the
Company by Snell & Wilmer, One Arizona Center, Phoenix, Arizona 85004, and, it
is currently anticipated, for any underwriters of New Bonds by Sullivan &
Cromwell, 444 South Flower Street, Los Angeles, California 90071. In giving
their opinions, Sullivan & Cromwell and Snell & Wilmer may rely as to matters
of New Mexico law upon the opinion of Keleher & McLeod, P.A., 1200 Public
Service Building, Albuquerque, New Mexico 87102, and Sullivan & Cromwell may
rely as to all matters of Arizona law upon the opinion of Snell & Wilmer.
NO DEALER, SALESMAN OR OTHER
PERSON HAS BEEN AUTHORIZED TO
GIVE ANY INFORMATION OR TO
MAKE ANY REPRESENTATION NOT
CONTAINED IN THIS PROSPECTUS
SUPPLEMENT OR THE ACCOMPANYING
PROSPECTUS, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE
RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR
ANY UNDERWRITER. THIS
PROSPECTUS SUPPLEMENT AND THE
ACCOMPANYING PROSPECTUS DO NOT
CONSTITUTE 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 IN SUCH
JURISDICTION. NEITHER THE
DELIVERY OF THIS PROSPECTUS
SUPPLEMENT OR THE ACCOMPANYING
PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE AN
IMPLICATION THAT THE
INFORMATION HEREIN IS CORRECT
AS OF ANY TIME SUBSEQUENT TO
THE DATE HEREOF OR THAT THERE
HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE
SUCH DATE.
----------
TABLE OF CONTENTS
PAGE
--------
PROSPECTUS SUPPLEMENT
Application of Proceeds.......... S-2
Certain Terms of the Offered
Bonds.......................... S-2
Underwriting..................... S-3
PROSPECTUS
Available Information............ 2
Incorporation of Certain
Documents by Reference......... 2
Selected Information............. 3
The Company...................... 4
Application of Proceeds.......... 4
Construction and Financing
Programs....................... 4
Earnings Ratios.................. 4
Description of New Bonds......... 5
Plan of Distribution............. 8
Experts.......................... 9
Legal Opinions................... 9
$100,000,000
ARIZONA PUBLIC
SERVICE COMPANY
FIRST MORTGAGE BONDS,
65/8% SERIES DUE 2004
[LOGO]
SALOMON BROTHERS INC
CS FIRST BOSTON
GOLDMAN, SACHS & CO.
PROSPECTUS SUPPLEMENT
DATED FEBRUARY 23, 1994