P R O S P E C T U S S U P P L E M E N T
(TO PROSPECTUS DATED JULY 15, 1999)
$250,000,000
NORTHERN STATES POWER COMPANY
(A MINNESOTA CORPORATION)
6.875% SENIOR NOTES, SERIES DUE 2009
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We will pay interest on the Senior Notes, 6.875% Series due 2009, on
February 1 and August 1 of each year, commencing February 1, 2000. We may redeem
the Senior Notes at a redemption price equal to the greater of (i) the principal
amount or (ii) the sum of the present values of the remaining scheduled payments
of principal and interest on the Senior Notes, discounted to the date of
redemption on a semiannual basis (assuming a 360-day year consisting of twelve
30-day months) at the Treasury Yield as defined below plus 15 basis points, plus
in each case accrued interest to the date of redemption. The Senior Notes will
not be listed on any securities exchange or included in any automated quotation
system. Please read the information described under the headings "Supplemental
Description of Debt Securities" in this Prospectus Supplement and "Description
of Debt Securities" in the accompanying Prospectus for a more detailed
description of the terms of the Senior Notes.
The Senior Notes are unsecured and rank equally with all of Northern States
Power Company's other unsecured indebtedness.
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Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities or passed upon the
accuracy or adequacy of this Prospectus Supplement or the accompanying
Prospectus. Any representation to the contrary is a criminal offense.
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PER SENIOR NOTE TOTAL
---------------- ------------------------
Public Offering Price 99.279% $ 248,197,500
Underwriting Discount 0.650% $ 1,625,000
Proceeds to NSP (before expenses) 98.629% $ 246,572,500
Interest on the Senior Notes will accrue from July 26, 1999.
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The underwriters are offering the Senior Notes subject to various
conditions. The underwriters expect to deliver the Senior Notes to purchasers on
or about July 26, 1999.
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SALOMON SMITH BARNEY
GOLDMAN, SACHS & CO.
LEHMAN BROTHERS
MERRILL LYNCH & CO.
July 21, 1999
YOU SHOULD RELY ONLY ON THE INFORMATION INCORPORATED BY REFERENCE OR
PROVIDED IN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS. WE HAVE
NOT AUTHORIZED ANYONE ELSE TO PROVIDE YOU WITH DIFFERENT INFORMATION. WE ARE NOT
MAKING AN OFFER OF THESE SECURITIES IN ANY STATE WHERE THE OFFER IS NOT
PERMITTED. YOU SHOULD NOT ASSUME THAT THE INFORMATION IN THIS PROSPECTUS
SUPPLEMENT IS ACCURATE AS OF ANY DATE OTHER THAN THE DATE ON THE FRONT OF THOSE
DOCUMENTS.
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TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
PAGE
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Prospectus Supplement Summary............................................. S-1
Use Of Proceeds........................................................... S-7
Supplemental Description Of Debt Securities............................... S-7
Underwriting.............................................................. S-10
PROSPECTUS
PAGE
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About This Prospectus..................................................... 2
Where You Can Find More Information....................................... 2
NSP....................................................................... 3
Proposed Merger........................................................... 3
Use Of Proceeds........................................................... 5
Ratio Of Earnings To Fixed Charges........................................ 5
Securities................................................................ 5
Description Of New Bonds.................................................. 5
Description Of Debt Securities............................................ 13
Book-Entry System......................................................... 16
Legal Opinions............................................................ 18
Experts................................................................... 18
Plan Of Distribution...................................................... 18
i
PROSPECTUS SUPPLEMENT SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY AND SHOULD BE READ
TOGETHER WITH THE MORE DETAILED INFORMATION AND FINANCIAL STATEMENTS INCLUDED OR
INCORPORATED BY REFERENCE IN THIS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS.
THE COMPANY
Directly and through our wholly-owned subsidiary, Northern States Power
Company, a Wisconsin corporation, we provide electricity to about 1.5 million
customers in portions of Minnesota, Wisconsin, North Dakota, Michigan and South
Dakota. We also distribute natural gas to more than 475,000 customers in
Minnesota, Wisconsin, North Dakota, South Dakota, Michigan and Arizona. Our
wholly-owned subsidiary, NRG Energy Inc., operates and has ownership interests
in non-regulated energy businesses around the world, with major projects in the
United States, Australia and Germany.
RECENT DEVELOPMENTS
For the three months ended June 30, 1999, our utility operating revenues
were approximately $659 million as compared to $639 million for the three months
ended June 30, 1998. For the twelve months ended June 30, 1999 and 1998, our
utility operating revenues were approximately $2.9 billion and $2.7 billion.
Utility operating income for the three months ended June 30, 1999 and 1998 was
approximately $66 million and $65 million, and approximately $374 and $352
million for the twelve months ended June 30, 1999 and 1998.
Our net income for the three months ended June 30, 1999 was approximately
$11.5 million, compared to $35 million for the same period in 1998. Net income
for 1999 reflects a $35 million (pretax) charge or 14 cents per share (after
tax) related to conservation program incentives due to an adverse decision by
the Minnesota Public Utilities Commission (see below). Our net income for the
twelve months ended June 30, 1999 and 1998 was approximately $254 million and
$246 million.
Our consolidated earnings for the three months ended June 30, were $0.06 per
share in 1999 and $0.23 per share in 1998. Our earnings for the 12 months ended
June 30, were $1.63 per share in 1999 and $1.62 per share in 1998.
Our nonregulated earnings for the three months ended June 30, were $0.01 per
share in 1999 and $0.03 per share in 1998. Our nonregulated earnings for the 12
months ended June 30, were $0.17 per share in 1999 and $0.11 per share in 1998.
On June 24, 1999, the MPUC voted 3-2 to deny us recovery of 1998 lost
margins, load management discounts and incentives associated with state-mandated
programs for electric energy conservation. The MPUC's decision appears to
contradict previous orders and reduce our 1998 rates retroactively. We plan to
challenge the MPUC's decision. Due to the uncertain outcome of the challenge, we
have established a regulatory reserve for recovery of 1998 conservation program
incentives. This reserve reduced our second quarter earnings by $35 million
(before tax). The MPUC decision did not address 1999 conservation incentives.
PROPOSED MERGER
As we discuss in more detail elsewhere in the Prospectus, we have entered
into an Agreement and Plan of Merger with New Century Energies, Inc. providing
for a strategic business combination of the two companies. In order to separate
our utility businesses from our non-utility businesses and to streamline the
regulatory treatment under the Public Utility Holding Company Act of 1935, we
expect that at the time that we complete the Merger, we will contribute all of
our assets (other than the shares we own in our subsidiaries) to a newly-formed,
wholly-owned subsidiary ("New NSP Utility Sub"). At the same time, New NSP
Utility Sub will assume all of our liabilities associated with the assets it
receives. New NSP Utility Sub
S-1
is expected to include our electric and gas utility operations in Minnesota,
South Dakota and North Dakota, but is not expected to include our utility
operations in Wisconsin or Michigan which are conducted through our Wisconsin
subsidiary. New NSP Utility Sub also is not expected to include our
non-regulated businesses currently conducted by NRG and our other subsidiaries.
The merger agreement requires us to take this action unless doing so would
materially adversely effect us. If this is the case, we may negotiate a mutually
acceptable alternative with NCE.
The Merger was approved by the shareholders of both NSP and NCE on June 28,
1999. Consummation of the Merger is subject to the satisfaction or waiver of
certain closing conditions, including, among others, the receipt of government
and other authorizations. The Merger is expected to take from 12 to 18 months to
complete.
S-2
THE OFFERING
Securities Offered................ $250,000,000 principal amount of 6.875% Senior Notes due
2009.
Maturity Date..................... August 1, 2009.
Interest Payment Dates............ February 1 and August 1, commencing February 1, 2000.
Ranking........................... The Senior Notes will be senior unsecured obligations
and will rank equally with all of our senior unsecured
indebtedness.
Ratings........................... The Senior Notes have been assigned ratings of "A+" by
Standard & Poor's Ratings Group and "A1" by Moody's
Investors Service, Inc.
Optional Redemption............... We may redeem the Senior Notes at any time, at a
redemption price equal to the greater of (i) the
principal amount or (ii) the sum of the present values
of the remaining scheduled payments of principal and
interest on the Senior Notes, discounted to the date of
redemption on a semiannual basis (assuming a 360-day
year consisting of twelve 30-day months) at the Treasury
Yield as defined below plus 15 basis points, plus in
each case accrued interest to the date of redemption.
Sinking Fund...................... None.
Use of Proceeds................... The net proceeds from the sale of the Senior Notes is
estimated to be approximately $246.3 million. We will
add the net proceeds to our general funds and apply them
to the repayment of outstanding short-term borrowings.
S-3
SUMMARY FINANCIAL INFORMATION
NORTHERN STATES POWER--CONSOLIDATED
In the table below, we provide you with the selected historical consolidated
financial data of Northern States Power. We derived the consolidated income
statement data below for each of the five years ended December 31, 1998, and the
consolidated balance sheet data at December 31, 1998, 1997, 1996, 1995 and 1994,
from audited consolidated financial statements. We derived the unaudited
consolidated income statement data for the three-month period ended March 31,
1999 and 1998 and the unaudited consolidated balance sheet data at March 31,
1999 from unaudited consolidated financial statements.
When you read this selected historical financial information, you should
consider reading along with it the historical financial statements and
accompanying notes that we have included in our Quarterly Report on Form 10-Q
for the quarter ended March 31, 1999 and our Annual Report on Form 10-K for the
year ended December 31, 1998. You can obtain this report by following the
instructions we provide under, "Where You Can Find More Information" on page 2
of the Prospectus.
Our earnings for 1997 include a write-off of deferred costs incurred in
connection with our terminated merger with Wisconsin Energy Corporation, which
reduced earnings by approximately $29 million (before tax), or 12 cents per
share, in 1997.
THREE MONTHS
ENDED MARCH 31,
YEAR ENDED DECEMBER 31,
-------------------- -----------------------------------------------------
1999 1998 1998 1997 1996 1995 1994
--------- --------- --------- --------- --------- --------- ---------
(DOLLARS IN MILLIONS)
INCOME STATEMENT DATA:
Utility operating revenues..................... $ 743 $ 701 $ 2,819 $ 2,734 $ 2,654 $ 2,569 $ 2,487
Utility operating income....................... 88 79 364 362 366 346 308
Financing charges.............................. 46 45 186 169 142 133 115
Net income..................................... 52 57 282 237 275 276 243
MARCH 31, DECEMBER 31,
----------- -----------------------------------------------------
1999 1998 1997 1996 1995 1994
----------- --------- --------- --------- --------- ---------
(DOLLARS IN MILLIONS)
BALANCE SHEET DATA:
Total assets....................................... $ 7,379 $ 7,396 $ 7,144 $ 6,637 $ 6,229 $ 5,950
Long-term debt..................................... 1,844 1,851 1,879 1,593 1,542 1,463
Preferred stock.................................... 105 105 200 240 240 240
Mandatorily redeemable preferred securities of
subsidiary trust................................. 200 200 200 -- -- --
Common stockholders' equity........................ 2,496 2,481 2,372 2,136 2,027 1,897
Total capitalization............................... 4,645 4,637 4,651 3,969 3,809 3,600
Short-term debt including current maturities....... 538 609 425 630 384 396
Percentage of long-term debt to capitalization..... 40% 40% 40% 40% 40% 41%
S-4
SUMMARY FINANCIAL INFORMATION (CONTINUED)
UNAUDITED PRO FORMA NEW NSP UTILITY SUB
The unaudited pro forma financial information in the table below assumes the
Merger had been completed on January 1, 1994 for income statement purposes and
on December 31, 1994 for balance sheet purposes. The information is based on
adjustments to our historical financial statements to give effect to the
transfer of ownership of all our utility assets (other than investments in and
assets of subsidiaries) to New NSP Utility Sub and the assumption by New NSP
Utility Sub of all of our liabilities associated with the assets transferred.
This unaudited pro forma financial information is based on the assumptions set
forth in the accompanying notes. The unaudited pro forma condensed financial
statements do not necessarily indicate what New NSP Utility Sub's financial
position or operating results would have been if the Merger had been completed
on the assumed completion dates and they do not necessarily indicate future
operating results of New NSP Utility Sub.
THREE MONTHS
ENDED MARCH 31,
YEAR ENDED DECEMBER 31,
-------------------- -----------------------------------------------------
1999 1998 1998 1997 1996 1995 1994
--------- --------- --------- --------- --------- --------- ---------
(DOLLARS IN MILLIONS)
INCOME STATEMENT DATA:
Utility operating revenues..................... $ 667 $ 636 $ 2,604 $ 2,516 $ 2,433 $ 2,356 $ 2,283
Utility operating income....................... 66 61 304 300 303 284 250
Financing charges.............................. 28 27 110 115 102 102 87
Net income..................................... 40 41 209 182 218 203 173
MARCH 31, DECEMBER 31,
--------- -----------------------------------------------------
1999 1998 1997 1996 1995 1994
--------- --------- --------- --------- --------- ---------
(DOLLARS IN MILLIONS)
BALANCE SHEET DATA:
Total assets......................................... $ 4,989 5,029 4,927 4,992 4,838 4,699
Long-term debt....................................... 1,235 1,228 1,287 1,079 1,184 1,119
Preferred stock...................................... 0 0 0 0 0 0
Mandatorily redeemable preferred securities of
subsidiary trust................................... 0 0 0 0 0 0
Common stockholders' equity.......................... 1,431 1,539 1,659 1,557 1,565 1,529
Total capitalization................................. 2,666 2,767 2,946 2,636 2,749 2,648
Short-term debt including current maturities......... 448 411 242 575 325 342
Percentage of long-term debt to capitalization....... 46% 44% 44% 41% 43% 42%
NOTES TO UNAUDITED PRO FORMA FINANCIAL INFORMATION.
(1) At the time the Merger is completed, we will contribute all of our utility
assets (other than investments in and assets of subsidiaries) to a newly
formed, wholly owned utility operating subsidiary, New NSP Utility Sub,
which will be a Minnesota corporation. At the same time, the new subsidiary
will assume all of our liabilities associated with the assets that it
receives in the contribution. Our preferred stock and trust-originated
preferred securities will remain in the holding company. Common stock of New
NSP Utility Sub, at a par value and share level which have not yet been
determined, will be wholly-owned by the holding company. The resulting
capitalization of New NSP Utility Sub will therefore include short-term
debt, first mortgage bonds and other long-term debt associated with utility
operations, and common equity issued to the holding company (net of
adjustments described in Note 2).
(2) The assets, liabilities, equity and results of operations of all our
subsidiaries have been eliminated from consolidated NSP amounts to reflect
the transfer of ownership and control of such subsidiaries to the holding
company as a result of the Merger. The holding company's equity investment
in New NSP Utility Sub, and the corresponding common equity of New NSP
Utility Sub, are assumed to reflect the reduction in net assets of New NSP
Utility Sub related to the transfer of ownership of investments in NSP
subsidiaries to the holding company as a result of the Merger.
S-5
(3) Our financing of subsidiary capital and cash flow requirements has been
adjusted to reflect the transfer of such items to the holding company,
except for immaterial financing of refuse-derived fuel operations previously
transferred to NRG Energy, Inc. Pro forma adjustments have been made to
reflect the elimination of (a) notes receivable and advances from
subsidiaries; (b) NSP debt incurred to finance the notes and advances; (c)
interest income earned on the notes and advances; and (d) interest expense
accrued on the debt incurred to finance the notes and advances.
(4) After the Merger, New NSP Utility Sub will not retain ownership of
subsidiaries currently being consolidated. Consequently, intercompany
transactions between NSP and its current subsidiaries have not been
eliminated in the pro forma financial information. The most significant
intercompany transactions are power sales to and purchases from our
Wisconsin subsidiary pursuant to an interchange agreement with the Company.
Although the interchange pricing and cost sharing arrangements may be
restructured as a result of the Merger, at this time the amount of any
changes to interchange power purchases or sales is expected to be
immaterial. Consequently, no pro forma adjustments have been made for the
effects of interchange restructuring.
(5) The allocation between NSP and NCE and their customers of the estimated cost
savings resulting from the Merger, net of the costs incurred to achieve such
savings, will be subject to regulatory review and approval. None of these
estimated cost savings, the costs to achieve such savings, or the
transaction costs have been reflected in the pro forma financial
information.
S-6
USE OF PROCEEDS
We will add the net proceeds from the sale of $250 million in aggregate
principal amount of our 6.875% Senior Notes, Series due 2009 to our general
funds and will apply them to the repayment of outstanding short-term borrowings.
In February 1999, we incurred $200 million of short-term borrowings to pay at
maturity $200 million of our first mortgage bonds. Also in February 1999, we
made an additional $100 million investment in our subsidiary NRG. As of March
31, 1999, we had an aggregate of approximately $370 million of outstanding
short-term borrowings.
SUPPLEMENTAL DESCRIPTION OF DEBT SECURITIES
Please read the following information concerning the Senior Notes in
conjunction with the statements under "Description of Debt Securities" in the
accompanying Prospectus, which the following information supplements and, in the
event of any inconsistencies, supersedes. The following description does not
purport to be complete and is subject to, and is qualified in its entirety by
reference to, the description in the accompanying Prospectus and the Indenture
dated as of July 1, 1999, as supplemented (the "Debt Indenture"), that we have
entered into with Norwest Bank Minnesota, National Association, as trustee (the
"Debt Trustee").
GENERAL
We will offer $250 million amount of Senior Notes, 6.875% Series due 2009 as
a series of Securities under the Debt Indenture.
INTEREST PAYMENTS
The entire principal amount of the Senior Notes will mature and become due
and payable, together with any accrued and unpaid interest thereon, on August 1,
2009. Each Senior Note will bear interest at the annual rate set forth on the
cover page of this Prospectus Supplement from July 26, 1999, payable semi-
annually on February 1 and August 1, commencing February 1, 2000, to the person
in whose name the Senior Note is registered at the close of business on January
15 or July 15 immediately preceding such February 1 or August 1. The amount of
interest payable will be computed on the basis of a 360-day year of twelve
30-day months.
REDEMPTION PROVISION
We may redeem the Senior Notes at any time, in whole or in part, at a
redemption price equal to the greater of (1) the principal amount being redeemed
or (2) the sum of the present values of the remaining scheduled payments of
principal and interest on the Senior Notes being redeemed, discounted to the
redemption date on a semiannual basis (assuming a 360-day year consisting of
twelve 30-day months) at the Treasury Yield plus 15 basis points, plus in each
case accrued interest to the redemption date.
"Treasury Yield" means, with respect to any redemption date, the rate per
annum equal to the semiannual equivalent yield to maturity of the Comparable
Treasury Issue, assuming a price for the Comparable Treasury Issue (expressed as
a percentage of its principal amount) equal to the Comparable Treasury Price for
the redemption date.
"Comparable Treasury Issue" means the United States Treasury security
selected by an Independent Investment Banker as having a maturity comparable to
the remaining term of the Senior Notes that would be utilized, at the time of
selection and in accordance with customary financial practice, in pricing new
issues of corporate debt securities of comparable maturity to the remaining term
of the Senior Notes.
"Independent Investment Banker" means Salomon Smith Barney Inc. or its
successor or, if such firm is unwilling or unable to select the Comparable
Treasury Issue, one of the remaining Reference Treasury Dealers appointed by the
Debt Trustee after consultation with us.
S-7
"Comparable Treasury Price" means, with respect to any redemption date, (i)
the average of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) on the third
business day preceding such redemption date, as set forth in the daily
statistical release (or any successor release) published by the Federal Reserve
Bank of New York and designated "Composite 3:30 p.m. Quotations for U.S.
Government Securities" or (ii) if that release (or any successor release) is not
published or does not contain such prices on such business day, (A) the average
of the Reference Treasury Dealer Quotations for such redemption date, after
excluding the highest and lowest such Reference Treasury Dealer Quotations for
such redemption date, or (B) if we obtain fewer than four such Reference
Treasury Dealer Quotations, the average of all such Quotations.
"Reference Treasury Dealer Quotations" means, with respect to each Reference
Treasury Dealer and any redemption date, the average, as determined by the Debt
Trustee, of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) quoted in
writing to the Debt Trustee by such Reference Treasury Dealer at 5:00 p.m. on
the third business day preceding such redemption date.
"Reference Treasury Dealer" means (i) each of Salomon Smith Barney Inc. and
any other primary U.S. Government Securities dealer in New York City (a "Primary
Treasury Dealer") designated by, and not affiliated with, Salomon Smith Barney
Inc., provided, however, that if Salomon Smith Barney Inc. or any of its
designees shall cease to be a Primary Treasury Dealer, we will appoint another
Primary Treasury Dealer as a substitute for such entity and (ii) any other
Primary Treasury Dealer selected by us.
If we elect to redeem less than all of the Senior Notes, the Debt Trustee
will select, in such manner as it deems fair and appropriate, the particular
Senior Notes or portions of them to be redeemed. Notice of redemption will be
given by mail not less than 30 nor more than 60 days prior to the date fixed for
redemption to the holders of Senior Notes to be redeemed (which, as long as the
Senior Notes are held in the book-entry only system, will be the Depository, its
nominee or a successor depository). On and after the date fixed for redemption
(unless we default in the payment of the redemption price and interest accrued
thereon to such date), interest on the Senior Notes or the portions of them so
called for redemption will cease to accrue.
The Senior Notes do not provide for any sinking fund.
SUMMARY OF KEY COVENANTS
LIMITATION ON LIENS
The Supplemental Indenture provides that, so long as there remain
outstanding any Senior Notes, we will not create or suffer to be created or to
exist any mortgage, pledge, security interest, or other lien (collectively,
"Lien") on any of our utility properties or assets now owned or hereafter
acquired to secure any indebtedness, without providing that the Senior Notes
will be equally and ratably secured. This restriction does not apply to our
subsidiaries nor will it prevent any of them, including NRG and NSP-Wisconsin,
from creating or permitting to exist any Liens on their property or assets.
Further, this restriction on Liens does not apply to or prevent the creation or
existence of (1) the Mortgage Indenture securing our 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 Debt 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 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 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 3.01 of the
Supplemental Indenture)
S-8
"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 at the time a person
consolidates with or merges into, or transfers all or substantially all of its
assets to, the Company, 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 Permitted
Encumbrances 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 3.02
of the Supplemental Indenture)
This restriction also 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 3.01 of the Supplemental Indenture)
CONSOLIDATION, MERGER AND SALE OF ASSETS
We will not merge into any other corporation or sell or otherwise transfer
all or substantially all our assets unless (i) the successor or transferee
corporation assumes by supplemental indenture our obligations to pay the
principal and premium and interest on all the Debt Securities and our obligation
to perform every covenant of the Debt Indenture to be performed or observed by
the Company and (ii) we or the successor or transferee corporation, as
applicable, are not immediately following such merger, sale or transfer in
default in the performance of any such covenant. Upon any such merger, sale or
transfer of all or substantially all of the assets of the Company, the successor
or transferee corporation will succeed to, and be substituted for, and may
exercise every right and power of, the Company under the Debt Indenture with the
same effect as if such successor corporation had been named as the Company
therein and the Company will be released from all obligations under the Debt
Indenture. The Debt Indenture defines all or substantially all of the assets of
the Company as being 50% or more of the total assets of the Company as shown on
the balance sheet of the Company as of the end of the prior year and
specifically permits any such sale, transfer or conveyance during a calendar
year of less than 50% of total assets without the consent of the holders of the
Debt Securities. (Sections 11.01 and 11.02.)
FORM AND DENOMINATION
The Senior Notes will be issued as one or more global notes in the name of a
nominee of the Depository Trust Company New York, New York and will be available
only in book-entry form. See "Book-Entry System" in the accompanying prospectus.
The Senior Notes are available for purchase in denominations of $1,000 and
integral multiples thereof.
SAME-DAY SETTLEMENT AND PAYMENT
Settlement for the Senior Notes will be made by the Underwriters in
immediately available funds. All payments of principal and interest will be made
by the Company in immediately available funds.
Secondary trading in long-term notes and debentures of corporate issuers is
generally settled in clearinghouse or next-day funds. In contrast, the Senior
Notes will trade in the DTC's Same-Day Funds Settlement System until maturity or
until the Senior Notes are issued in certificated form, and secondary market
trading activity in the Senior Notes will therefore be required by DTC to settle
in immediately available funds. No assurance can be given as to the effect, if
any, of settlement in immediately available funds on trading activity in the
Senior Notes.
S-9
UNDERWRITING
Subject to the terms and conditions set forth in an Underwriting Agreement
dated July 21, 1999 (the "Underwriting Agreement"), we have agreed to sell to
each of the Underwriters named below, and each of the Underwriters has severally
agreed to purchase, the principal amount of Senior Notes set forth opposite its
name below:
PRINCIPAL AMOUNT
NAME OF NOTES
- ---------------------------------------------------------------------------- ----------------
Salomon Smith Barney Inc.................................................... $ 100,000,000
Goldman, Sachs & Co......................................................... 50,000,000
Lehman Brothers Inc......................................................... 50,000,000
Merrill Lynch, Pierce, Fenner & Smith
Incorporated...................................................... 50,000,000
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Total................................................................... $ 250,000,000
----------------
----------------
The Underwriting Agreement provides that the obligations of the several
Underwriters to purchase the Senior Notes offered by this Prospectus Supplement
are subject to the approval of certain legal matters by their counsel and
certain other conditions. If any of the Senior Notes are purchased by the
Underwriters pursuant to the Underwriting Agreement, then all of the Senior
Notes must be purchased.
The Underwriters have advised the Company that they propose initially to
offer some of the Senior Notes to the public at the public offering price set
forth on the cover page of this Prospectus Supplement, and some of the Senior
Notes to certain dealers at this public offering price less a concession not in
excess of 0.400% the principal amount of the Senior Notes. The Underwriters may
allow, and such dealers may reallow, a concession not in excess of 0.250% of the
principal amount of the Senior Notes on sales to certain other dealers. After
the initial offering of the Senior Notes to the public, the Underwriters may
change the offering price and other selling terms.
The following table shows us the underwriting discounts and commission to be
paid to the Underwriters by us in connection with this offering (expressed as a
percentage of the principal amount of the Senior Notes)
PAID BY NSP
------------
Per Note........................................................................ 0.650%
Prior to this offering, there has been no public market for the Senior
Notes. The Underwriters have informed us that they may make a market in the
Senior Notes from time to time. The Underwriters are not obligated to do this,
and they may discontinue this market making at any time without notice.
Therefore, no assurance can be given concerning the liquidity of the trading
market for the Senior Notes or that an active market will develop. We do not
intend to apply for the Senior Notes to be listed on any national securities
exchange or national securities quotation system.
In connection with the offering, Salomon Smith Barney Inc., on behalf of the
Underwriters, may overallot, or engage in syndicate covering transactions,
stabilizing transactions and penalty bids. Over-allotment involves syndicate
sales of Senior Notes in excess of the principal amount of the Senior Notes to
be purchased by the Underwriters in the offering, which creates a syndicate
short position. Syndicate covering transactions involve purchases of the Senior
Notes in the open market after the distribution has been completed in order to
cover syndicate short positions. Stabilizing transactions consist of certain
bids or purchases of Senior Notes made for the purpose of preventing or
retarding a decline in the market price of the Senior Notes while the offering
is in progress. Penalty bids permit the Underwriters to reclaim a selling
concession from a syndicate member when Salomon Smith Barney Inc., in covering
syndicate short positions or making stabilizing purchases, repurchases Senior
Notes originally sold by that syndicate
S-10
member. These activities may cause the price of the Senior Notes to be higher
than the price that otherwise would exist in the open market in the absence of
such transaction. These transactions may be effected in the over-the-counter
market or otherwise and, if commenced, may be discontinued at any time.
We estimate that our total expenses for this offering, not including the
underwriting discount, will be $300,000.
We have agreed to indemnify the Underwriters against certain liabilities,
including liabilities under the Securities Act of 1933. Alternatively, we may
contribute to payments that the Underwriters may be required to make as a result
of these liabilities.
In the ordinary course of their respective businesses, certain of the
Underwriters and their affiliates have engaged, and may in the future engage, in
investment banking or commercial banking transactions with us or our affiliates.
S-11
PROSPECTUS
[LOGO]
NORTHERN STATES POWER COMPANY
414 Nicollet Mall
Minneapolis, Minnesota 55401
(612) 330-7550
FIRST MORTGAGE BONDS
DEBT SECURITIES
------------------
We may offer for sale from time to time up to $400,000,000 aggregate
principal amount of our first mortgage bonds or unsecured debt securities. In
addition, we may offer for sale from time to time up to an additional
$50,000,000 aggregate principal amount of first mortgage bonds. We refer to the
first mortgage bonds being offered by this prospectus as "New Bonds" and we
refer to these New Bonds and Debt Securities collectively as "Securities." We
may sell the Securities in one or more series through (i) underwriters or
dealers, (ii) directly to a limited number of institutional purchasers, or (iii)
agents. See "Plan of Distribution." The particular type of security being sold
as well as the amount and terms of the sale of such Securities will be
determined at the time of sale and included in a prospectus supplement that will
accompany this Prospectus. Such Prospectus Supplement will include if
applicable:
- The names of any underwriters, dealers or agents involved in the
distribution of the Securities;
- Any applicable commissions or discounts and the net proceeds to the
Company from such sale;
- The aggregate principal amount and offering price of the Securities;
- The rate or rates (or method of calculation) of interest;
- The time or times and place of payment of interest;
- The maturity date or dates; and
- Any redemption terms or other specific terms of such series of Securities.
------------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED
OR DISAPPROVED THESE SECURITIES OR PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
The date of this Prospectus is July 15, 1999.
ABOUT THIS PROSPECTUS
This Prospectus is part of a registration statement that we filed with the
SEC utilizing a "shelf" registration process. Under this shelf process, we may,
over the next two years, sell any combination of the Securities described in
this prospectus in one or more offerings up to a total dollar amount of
$400,000,000. In addition, using a prior shelf registration, we may also sell up
to an additional $50,000,000 of first mortgage bonds. This Prospectus provides
you with a general description of the Securities we may offer. Each time we sell
Securities, we will provide a Prospectus Supplement that will contain specific
information about the terms of that offering. The Prospectus Supplement may also
add, update or change information contained in this Prospectus. You should read
both this Prospectus and any Prospectus Supplement together with additional
information described under the heading "WHERE YOU CAN FIND MORE INFORMATION."
We believe we have included all information material to investors but
certain details that may be important for specific investment purposes have not
been included. To see more detail, you should read the exhibits filed with this
registration statement.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the SEC. Our SEC filings are available to the public over the
Internet at the SEC's web site at http://www.sec.gov. You may also read and copy
any document we file at the SEC's public reference room at 450 Fifth Street,
N.W., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further
information on the public reference room.
The SEC allows us to "incorporate by reference" the information we file with
them, which means that we can disclose important information to you by referring
you to those documents. The information incorporated by reference is an
important part of this prospectus, and information that we file later with the
SEC will automatically update and supersede this information. We incorporate by
reference the documents listed below and any future filing made with the SEC
under Sections 13(a), 13(c), 14, or 15(d) of the Securities Exchange Act of 1934
until we sell all of the securities.
- The Company's Annual Report on Form 10-K for the year ended December 31,
1998;
- The Company's Quarterly Report on Form 10-Q for the quarter ended March
31, 1999; and
- The Company's Current Reports on Form 8-K dated March 24, 1999, March 26,
1999, April 6, 1999, April 23, 1999, June 24, 1999, June 28, 1999 and July
15, 1999.
We are not required to, and do not, provide annual reports to holders of our
debt securities unless specifically requested by a holder.
You may request a copy of these filings at no cost, by writing or
telephoning us at the following address:
Corporate Secretary
Northern States Power Company
414 Nicollet Mall
Minneapolis, MN 55401
(612) 330-7550
You should rely only on the information incorporated by reference or
provided in this Prospectus or any Prospectus Supplement. We have not authorized
anyone else to provide you with different information. We are not making an
offer of these securities in any state where the offer is not permitted. You
should not assume that the information in this Prospectus or any Prospectus
Supplement is accurate as of any date other than the date on the front of those
documents.
2
[LOGO]
Northern States Power Company, a Minnesota corporation (the "Company"), is
an operating public utility engaged in the generation, transmission and
distribution of electricity in Minnesota, North Dakota and South Dakota. The
Company also distributes natural gas in Minnesota, North Dakota, South Dakota
and Arizona. Through our wholly-owned subsidiary, Northern States Power Company,
a Wisconsin corporation, we also engage in the generation, transmission and
distribution of electricity and the distribution of natural gas in Wisconsin and
Michigan.
Of the approximately 3.4 million people served by the Company and
NSP-Wisconsin, the majority are concentrated in the Minneapolis-St. Paul
Metropolitan area. In 1998, the Company and NSP-Wisconsin derived about 63
percent of their combined electric retail revenue from sales in the
Minneapolis-St. Paul Metropolitan area and about 53 percent of their gas
revenues from sales in the St. Paul area. The Company's and NSP-Wisconsin's
combined electric generation for 1998 was provided for by coal (60%), nuclear
(35%), and renewable and other fuels (5%). The Company currently operates three
nuclear units that were placed in service in 1971, 1973 and 1974. The Company
has no additional nuclear units under construction.
The Company's other primary subsidiaries include:
- NRG Energy, Inc. ("NRG"), which operates and owns interests in
independent, non-regulated power and energy businesses in the United
States and other countries.
- Viking Gas Transmission Company ("Viking"), which owns and operates a
500-mile interstate natural gas pipeline providing gas transportation
services to customers in the Upper Midwest from connections with three
major pipelines in the United States and Canada.
- Eloigne Company ("Eloigne"), which owns interests in affordable housing
projects, principally within the Company's service territory.
- Energy Masters International Inc. (formerly Cenerprise, Inc.) ("Energy
Masters"), which delivers natural gas and electric products and services
to commercial and industrial customers, utilities, municipalities and
energy marketers, and offers performance contracting to customers
nationwide.
The Company and its subsidiaries collectively are referred to herein as NSP.
NSP reported assets of $7.4 billion as of December 31, 1998, and revenues of
approximately $2.8 billion, operating income of $364 million and earnings per
common share from ongoing operations of $1.84 for the year ended December 31,
1998. For this same period, the earnings (loss) contributions of NRG, Eloigne
and Energy Masters were $.28, $.04 and $(.05) per common share.
The Company was incorporated in 1909 under the laws of Minnesota.
PROPOSED MERGER
We have entered into an Agreement and Plan of Merger with New Century
Energies, Inc., a Delaware corporation ("NCE"), dated as of March 24, 1999 (the
"Merger Agreement"), providing for a strategic business combination of the two
companies. Pursuant to the Merger Agreement, NCE will be merged with and into
NSP, with NSP as the surviving corporation in the merger (the "Merger"). In
order to separate our utility businesses from our non-utility businesses and to
streamline the regulatory treatment under the Public Utility Holding Company Act
of 1935, we expect that at the time that we complete the Merger, we will
contribute all of our assets (other than the shares we own in our subsidiaries)
to a newly-formed, wholly-owned subsidiary ("New NSP Utility Sub"). New NSP
Utility Sub is expected to include our electric and gas utility operations in
Minnesota, South Dakota and North Dakota, but is not expected to include our
utility operations in Wisconsin or Michigan which are conducted through our
Wisconsin subsidiary.
3
New NSP Utility Sub also is not expected to include our non-regulated businesses
currently conducted by NRG and our other subsidiaries. At the same time, New NSP
Utility Sub will assume all of our liabilities associated with the assets it
receives. The Merger Agreement requires us to take this action unless doing so
would materially adversely effect us. If this is the case, we may negotiate a
mutually acceptable alternative with NCE.
The Merger was approved by the shareholders of both NSP and NCE on June 28,
1999. Consummation of the Merger is subject to the satisfaction or waiver of
certain closing conditions, including, among others, the receipt of government
and other authorizations. The Merger is expected to take from 12 to 18 months to
complete.
Following the completion of the Merger, and assuming transfer of our assets
to New NSP Utility Sub as described above, New Bonds or Debt Securities issued
pursuant to this Prospectus and the Company's other outstanding securities,
including its first mortgage bonds will be obligations of New NSP Utility Sub.
However, as described above, New NSP Utility Sub is not expected to retain any
of the Company's subsidiaries. For the twelve months ended March 31, 1999 and
the year ended December 31, 1998, the Company's subsidiaries constituted 25% and
26% of NSP's consolidated net income, respectively, and represented 32% of NSP's
consolidated assets and 22% of NSP's consolidated liabilities including long-
term debt at March 31, 1999.
Additional information concerning the Merger and the Merger Agreement,
including pro forma combined financial information and pro forma financial
information for the Company without its subsidiaries (New NSP Utility Sub), is
included in our Current Report on Form 8-K dated April 23, 1999 and in our
Quarterly Report on Form 10-Q for the quarter ended March 31, 1999 filed with
the Commission and incorporated by reference into this Prospectus.
4
USE OF PROCEEDS
We will add the net proceeds from the sale of the Securities to our general
funds and use such proceeds for general corporate purposes, which may include
the payment at maturity or the redemption, refunding, refinancing or purchase of
one or more series of outstanding first mortgage bonds, and the repayment of
outstanding short-term borrowings incurred in connection with our continuing
construction program. Our short-term borrowings aggregated approximately $370
million as of March 31, 1999. The specific allocation of the proceeds of a
particular series of the Securities will be described in the Prospectus
Supplement.
RATIO OF EARNINGS TO FIXED CHARGES
12 MONTHS
ENDED YEAR ENDED DECEMBER 31,
MARCH 31, ---------------------------------------------------------------
1999 1998 1997 1996 1995 1994
--------------- ----- ----- ----- ----- -----
(UNAUDITED)
NSP's Ratio of Earnings to Fixed
Charges............................... 3.0 3.0 2.9 3.8 3.9 4.0
New NSP's Pro Forma Ratio of Earnings to
Fixed Charges......................... 3.9 4.0 3.7 4.4 4.2 4.2
For purposes of computing the ratio of earnings to fixed charges, (i)
earnings consist of income from continuing operations plus fixed charges,
federal and state income taxes, deferred income taxes and investment tax credits
and less undistributed equity in earnings of unconsolidated investees; and (ii)
fixed charges consist of interest on long-term debt, other interest charges, the
interest component on leases and amortization of debt discount, premium and
expense.
Assuming that variable interest rate debt continues at interest rates in
effect on March 31, 1999, the annual interest requirement on long-term debt of
NSP outstanding at March 31, 1999, was $141,544,000.
SECURITIES
We may issue the Securities in one or more series as (i) first mortgage
bonds (referred to as New Bonds in this Prospectus), or (ii) unsecured debt
securities (referred to as Debt Securities). The New Bonds and Debt Securities
are described below under the applicable headings. The descriptions contain
summaries of selected provisions of the indentures under which the Securities
will be issued. These summaries are not complete. The forms of the indentures
have been filed as exhibits to the registration statement and you should read
the indentures for provisions that may be important to you. In the summaries
below, we have included references to section numbers of the applicable
indentures so that you can easily locate these provisions. Capitalized terms
used in the summaries have the meanings specified in the applicable indenture.
We are not required to issue future issues of debt securities under the
indentures described in this Prospectus, and we are free to use other indentures
or documentation, containing provisions different from those described in this
Prospectus, in connection with future issues of other debt securities.
The Securities will be represented either by Global Securities registered in
the name of The Depository Trust Company ("DTC"), as depository ("Depository"),
or its nominee, or by securities in certificate form issued to the registered
owners, as set forth in the applicable Prospectus Supplement. See "Book-Entry
System" herein.
DESCRIPTION OF NEW BONDS
The New Bonds will be a new series of first mortgage bonds issued under the
Trust Indenture dated February 1, 1937 (the "1937 Indenture") as supplemented by
46 supplemental trust indentures, a Supplemental and Restated Trust Indenture
dated May 1, 1988 (the "Restated Indenture") and a new
5
supplemental trust indenture for such series of New Bonds (the "New Supplemental
Indenture"), all from the Company to Harris Trust and Savings Bank, as trustee
(the "Mortgage Trustee"). The 1937 Indenture, as supplemented by the
supplemental indentures, the Restated Indenture and the New Supplemental
Indenture herein are referred to collectively as the "Mortgage Indenture."
Excluding the New Bonds, as of March 31, 1999, there were 15 series of first
mortgage bonds in an aggregate principal amount of $1.1 billion outstanding
under the Mortgage Indenture.
The Restated Indenture amends and restates the 1937 Indenture and the
supplemental indentures. The Restated Indenture will become effective and
operative on the Effective Date, which will be the date that all first mortgage
bonds of each series issued under the Mortgage Indenture prior to May 1, 1988
have been retired through payment or redemption (including those first mortgage
bonds "deemed to be paid" within the meaning of that term as used in Article
XVII of the 1937 Indenture) or (except as described below) the holders of the
requisite principal amount of such first mortgage bonds consent to the
amendments contained in the Restated Indenture. Holders of the New Bonds and of
each other series of first mortgage bonds issued under the Mortgage Indenture
after May 1, 1988 likewise will be bound by the amendments contained in the
Restated Indenture when they become effective and operative. Unless the consent
of the holders of first mortgage bonds of each series issued prior to May 1,
1988 is obtained or such first mortgage bonds are retired prior to their
maturity, the Company presently expects the Restated Indenture to become
effective no earlier than March 1, 2011.
TERMS OF NEW BONDS
We will issue the New Bonds as fully registered bonds without coupons in
denominations of multiples of $1,000. We may issue New Bonds in temporary form
if, for any reason, we are unable to deliver New Bonds in definitive form.
Principal and interest are to be payable in Chicago, Illinois, at Harris Trust
and Savings Bank or in New York, New York at Harris Trust Company of New York.
New Bonds will be interchangeable in the manner provided in Article II of the
New Supplemental Indenture.
You will not be charged for any exchange or transfer of New Bonds, other
than for any taxes or other governmental charges.
The terms and other specific information applicable to the series of New
Bonds in respect of which this Prospectus is being delivered will be set forth
in the Prospectus Supplement that will accompany this Prospectus. Such terms and
other information will include:
- the designation, aggregate principal amount and offering price of such
series of New Bonds;
- the rate or rates per annum (or method of calculation) at which such
series of New Bonds will bear interest and the date from which interest
will accrue;
- the dates on which interest will be payable;
- the record dates for payments of interest;
- the date or dates on which such series of New Bonds will mature; and
- any optional or mandatory redemption terms or other specific terms
applicable to such series of New Bonds.
The holders of the outstanding first mortgage bonds do not, and the holders
of the New Bonds will not, have the right to require us to repurchase such first
mortgage bonds if we become involved in a highly leveraged or change in control
transaction. The Mortgage Indenture does not have any provision that is designed
specifically in response to highly leveraged or change in control transactions.
However, bondholders would have the security afforded by the first mortgage lien
on substantially all the Company's property as described below under the
subcaption "Security for New Bonds." In addition, any change in control
6
transaction and any incurrence of substantial additional indebtedness (as first
mortgage bonds or otherwise) by the Company in such a transaction would require
approval of state utility regulatory authorities and, possibly, of federal
utility regulatory authorities. Management believes that such approvals would be
unlikely in any transaction that would result in the Company, or a successor to
the Company, having a highly leveraged capital structure.
SECURITY FOR NEW BONDS
In the opinion of counsel for the Company, the New Bonds will be secured
equally and ratably, except as to sinking fund provisions, with all of the
Company's other outstanding first mortgage bonds by a valid and direct first
mortgage lien on all of the real and fixed properties, leasehold rights,
franchises and permits then owned by the Company subject only (a) to Permitted
Liens and (b) as to parts of the Company's property, to certain easements,
conditions, restrictions, leases and similar encumbrances which do not affect
the Company's use of such property in the usual course of its business, to
certain minor defects in titles which are not material and to defects in titles
to certain properties not essential to the Company's business.
The Mortgage Indenture subjects to the lien thereof all property, rights and
franchises (except as otherwise expressly provided) acquired by the Company
after the date of the 1937 Indenture. Such provisions might not be effective as
to property acquired within 90 days prior and subsequent to the filing of a
case, with respect to the Company, under the United States Bankruptcy Code. The
opinion of counsel does not cover titles to easements for water flowage purposes
or rights-of-way for electric and gas transmission and distribution facilities,
steam mains and telephone lines. However, the Company has the power of eminent
domain in the states in which it operates.
The Mortgage Indenture provides that no prior liens, other than Permitted
Liens, may be created or permitted to exist upon the mortgaged and pledged
property whether now owned or hereafter acquired. (Section 4 of Article VIII of
the 1937 Indenture.) Following the retirement of the first mortgage bonds of
each series issued prior to May 1, 1988, the Restated Indenture will amend the
foregoing provisions to allow Permitted Encumbrances on the mortgaged and
pledged property.
Permitted Encumbrances include:
- Permitted Liens
- Rights of parties to agreements with the Company relating to property
owned or used jointly with such party, provided such rights:
- do not materially impair the use of such property in the normal course
of the Company's business;
- do not materially affect the security provided by the Mortgage
Indenture; and
- are not inconsistent with the remedies of the Mortgage Trustee upon a
Completed Default.
- Leases existing on the Effective Date of the Restated Indenture affecting
property owned by the Company on the Effective Date.
- Leases which do not interfere in any material respect with the use by the
Company of the property for its intended purpose and which will not have a
material adverse impact on the security provided by the Mortgage
Indenture.
- Other leases relating to 5% or less of the sum of the Company's
Depreciable Property and Land.
- Any mortgage, lien, charge or other encumbrance prior or equal to the Lien
of the Indenture (other than a Prepaid Lien) existing on the date the
property is acquired by the Company, provided that on such acquisition
date:
7
- no Default has occurred and is continuing;
- the principal amount secured by such mortgage, lien, charge or
encumbrance does not exceed 66 2/3% of the lesser of the Cost or Fair
Value of the property; and
- such mortgage shall apply only to the property originally subject
thereto, the Company shall close the mortgage and the Company shall not
issue additional indebtedness thereunder.
(Section 1.03 of the Restated Indenture)
Following the retirement of the first mortgage bonds of each series issued
prior to May 1, 1988, the holders of 66 2/3% of the principal amount of first
mortgage bonds Outstanding may (a) consent to the creation or existence of a
Prior Lien with respect to up to 50% of the sum of the Company's Depreciable
Property and Land, after giving effect to such Prior Lien or (b) terminate the
Lien of the Indenture with respect to up to 50% of the sum of the Company's
Depreciable Property and Land. (Section 18.02(e) of the Restated Indenture.)
The Mortgage Indenture is not a lien on the properties of NSP-Wisconsin, nor
is the stock of NSP-Wisconsin, NRG, Viking or any other subsidiary owned by the
Company pledged thereunder.
SINKING FUND PROVISIONS
The sinking fund redemption provision, if any, for each series of the New
Bonds will be set forth in the related Prospectus Supplement. As an annual
sinking fund, we have agreed to pay to the Mortgage Trustee on each October 1 an
amount sufficient to redeem, for sinking fund purposes, 1% of the highest
amount, at any time outstanding, of each outstanding series of first mortgage
bonds, other than Bonds of the Series due December 1, 2000, Bonds of the Series
due October 1, 2001, Bonds of the Series due March 1, 2003, Bonds of the Series
due April 1, 2003, Bonds of the Series due December 1, 2005, Bonds of the Series
due July 1, 2025, Bonds of the Series due March 1, 2028, and other than
Pollution Control Series J, K, L, M, N, O, P, and Resource Recovery Series Q. We
may offset sinking fund payments by (a) application of net Permanent Additions
of a Cost or Fair Value, whichever is less, equal to 150% of the principal
amount of first mortgage bonds which otherwise would be required to be retired
by the sinking fund or (b) retirement or delivery to the Mortgage Trustee of
first mortgage bonds of the series for which the sinking fund is applicable. The
Mortgage Trustee is required to apply sinking fund money to the purchase or
redemption of first mortgage bonds of the series for which such money is
applicable. (Article III of each Supplemental Indenture except those dated June
1, 1942, February 1, 1944, October 1, 1945, July 1, 1948, August 1, 1949, August
1, 1957, October 1, 1992, April 1, 1993, December 1, 1993, February 1, 1994,
October 1, 1994, June 1, 1995, March 1, 1998 and those relating to each
Pollution Control Series and to Resource Recovery Series Q.)
MAINTENANCE PROVISIONS
As a Maintenance Fund for the first mortgage bonds, we have agreed to pay to
the Mortgage Trustee on each May 1 an amount equal to 15% of the Consolidated
Gross Operating Revenues of the Company for the preceding calendar year, after
deducting from such revenues: (a) cost of electricity and gas purchased for
resale, (b) rentals paid for utility property, less credits at the Company's
option for (i) maintenance, (ii) property retirements offset by Permanent
Additions, (iii) retirements of first mortgage bonds and (iv) Cost or Fair
Value, whichever is less, of Permanent Additions after deducting property
retirements. We may withdraw moneys from the Maintenance Fund in amounts equal
to retirements of first mortgage bonds and net Permanent Additions. Cash in
excess of $100,000 remaining on deposit in the Maintenance Fund for more than
three years must be used for the purchase or redemption of first mortgage bonds.
Any such redemption would be at the applicable regular redemption price of the
first mortgage bonds to be redeemed and subject to any restrictions on the
redemption of such first mortgage bonds. (Article IX of the 1937 Indenture;
Article IV of the Supplemental Indenture dated June 1, 1952.)
8
The Restated Indenture will amend the foregoing provisions of the Mortgage
Indenture by replacing the current Maintenance Fund deposit formula with the
requirement that we pay to the Mortgage Trustee on each May 1 an amount equal to
2.50% of our Completed Depreciable Property as of the end of the preceding
calendar year, after deducting credits at the Company's option for (a)
maintenance, (b) property retirements offset by Permanent Additions, (c)
retirements of first mortgage bonds and (d) Amounts of Established Permanent
Additions. (Section 9.01 of the Restated Indenture.) The Restated Indenture
further provides that to the extent that Maintenance Fund credits exceed 2.50%
of Completed Depreciable Property for any year after 1987, such excess credits
may be applied in future years (a) to offset any Maintenance Fund deficiency or
(b) to increase the Amount of Established Permanent Additions available for use
under the Mortgage Indenture. (Section 9.05 of the Restated Indenture.) In
addition, the Restated Indenture eliminates the requirement that cash in excess
of $100,000 remaining on deposit in the Maintenance Fund for more than three
years be used for the purchase or redemption of first mortgage bonds.
We have agreed to maintain our properties in adequate repair, working order
and condition. (Section 6 of Article VIII of the 1937 Indenture; Section 8.06 of
the Restated Indenture.)
ISSUANCE OF ADDITIONAL BONDS
The maximum principal amount of first mortgage bonds that we may issue under
the Mortgage Indenture is not limited, except as described below. We may issue
additional first mortgage bonds in amounts equal to (a) 60% of the Cost or Fair
Value, whichever is less, of Permanent Additions after deducting retirements
(Article V of the 1937 Indenture; also Sections 1 and 3 of Article III of the
Supplemental Indenture dated February 1, 1944); (b) retired first mortgage
bonds, which have not been otherwise used under the Mortgage Indenture (Article
VI of the 1937 Indenture); or (c) the amount of cash deposited with the Mortgage
Trustee, which cash may be withdrawn on the same basis as additional first
mortgage bonds may be issued under clauses (a) and (b) above. (Article VII of
the 1937 Indenture; Section 2 of Article III of the Supplemental Indenture dated
February 1, 1944; and Article IV of the Supplemental Indenture dated June 1,
1952.) The Restated Indenture will amend the foregoing provisions of the
Mortgage Indenture by increasing the percentage in clause (a) above from 60% to
66 2/3%. (Section 5.03 of the Restated Indenture.)
We will issue the New Bonds under clause (a) and/or (b) above. At March 31,
1999, the amount of net Permanent Additions available for the issuance of Bonds
exceeded $4.2 billion, of which $415 million could be used to authenticate the
$250 million principal amount of the New Bonds. As of March 31, 1999, $548
million of retired first mortgage bonds were available to authenticate up to
$548 million of New Bonds.
We may not issue any additional first mortgage bonds on the basis of clause
(a), clause (b) under specified conditions, or clause (c), unless the Earnings
Applicable to Bond Interest for a specified twelve-month period are equal to
twice the annual interest requirements on the first mortgage bonds, including
those about to be issued. (Section 4 of Article V, Section 2 of Article VI, and
Section 1 of Article VII of the 1937 Indenture.)
Permanent Additions include: the Company's electric and steam generating,
transmission and distribution properties; the Company's gas storage and
distribution properties; construction work-in-progress; and fractional and
undivided property interests of the Company. (Section 4 of Article I of the 1937
Indenture; Section 1.03 of the Restated Indenture.) Under the Restated
Indenture, Permanent Additions also will include property used for providing
telephone or other communication services and engineering, financial, economic,
environmental, geological and legal or other studies, surveys or reports
associated with the acquisition or construction of any Depreciable Property.
(Section 1.03 of the Restated Indenture.)
Assuming that the interest cost on variable rate first mortgage bonds is at
the maximum allowable rate, Earnings Applicable to Bond Interest for the twelve
months ended March 31, 1999, would be 5.5 times the annual interest requirements
on the first mortgage bonds. Additional first mortgage bonds
9
may vary as to maturity, interest rate, redemption prices, and sinking fund, and
in certain other respects. (Article II of the 1937 Indenture and Article II of
the Restated Indenture.) The Restated Indenture will amend the Mortgage
Indenture by requiring that Earnings Applicable to Bond Interest for a specified
twelve-month period be equal to twice the annual interest requirements on the
first mortgage bonds, including those about to be issued, and any obligations
secured by Prior Liens and any indebtedness secured by Permitted Encumbrances.
(Sections 1.03 and 5.04 of the Restated Indenture.) Under the Restated
Indenture, the calculation of Earnings Applicable to Bond Interest will include
all non-utility revenues of the Company. (Section 1.03 of the Restated
Indenture.)
PROVISION LIMITING DIVIDENDS ON COMMON STOCK
We have agreed that the sum of (i) all dividends and distributions on our
common stock after September 30, 1954 (other than in common stock), and (ii) the
cost of all shares of our common stock acquired by us after that date shall not
exceed the sum of (a) the earned surplus of the Company and our Qualified
Subsidiary Companies, consolidated, at September 30, 1954, and (b) an amount
equal to the consolidated net income of the Company and our Qualified Subsidiary
Companies, earned after September 30, 1954, after making provision for all
dividends accruing after that date on preferred stock of the Company and after
taking into consideration all proper charges and credits to earned surplus made
after that date. In computing net income for the purpose of this covenant, we
will deduct an amount, if any, by which 15% of the Consolidated Gross Operating
Revenues of such companies, after certain deductions, exceeds the aggregate of
the amounts expended for maintenance and appropriated for reserves for renewals,
replacements, retirements, depreciation or depletion. (Article IV of the
Supplemental Indenture dated October 1, 1954.) As of 1957, the Company no longer
had any Qualified Subsidiary Companies. This provision has not impaired our
ability to pay dividends in the past and is not expected to do so in the future.
The Restated Indenture will replace the dividend restriction described above
with the requirement that (a) the sum of: (i) all dividends and distributions on
our common stock after the Effective Date of the Restated Indenture (other than
in common stock) and (ii) the amount, if any, by which the Considerations given
by us for the purchase or other acquisition of our common stock after the
Effective Date exceeds the Considerations received by us after the Effective
Date from the sale of common stock, shall not exceed (b) the sum of (i) the
retained earnings of the Company at the Effective Date, and (ii) an amount equal
to the net income of the Company earned after the Effective Date, after
deducting all dividends accruing after the Effective Date on all classes and
series of our preferred stock and after taking into consideration all proper
charges and credits to earned surplus made after the Effective Date. In
computing net income for the purpose of this amended covenant, we will deduct
the amount, if any, by which, after the date commencing 365 days prior to the
Effective Date, the actual expenditures or charges for ordinary repairs and
maintenance and the charges for reserves, renewals, replacements, retirements,
depreciation and depletion are less than 2.50% of the Company's Completed
Depreciable Property. (Section 8.07 of the Restated Indenture.)
RELEASE PROVISIONS
The Mortgage Indenture permits the release from its lien of any property
upon depositing or pledging cash or certain other property of comparable Fair
Value. The Mortgage Indenture also permits the sale or other disposal of
securities not pledged under the Mortgage Indenture, contracts, accounts, motor
cars, and certain equipment and supplies; the cancellation, change or alteration
of leases, rights-of-way and easements; and the surrender and modification of
any franchise or governmental consent subject to certain restrictions; in each
case without any release or consent by the Mortgage Trustee or accountability
thereto for any consideration received by the Company. (Article XI of the 1937
Indenture and Article XI of the Restated Indenture.)
10
Following the retirement of the first mortgage bonds of each series issued
prior to May 1, 1988, (a) we may sell or otherwise dispose of, free of the Lien
of the Indenture, all motor vehicles, vessels and marine equipment, railroad
cars, engines and related equipment, airplanes, office furniture and leasehold
interests in property owned by third parties and (b) we may enter into leases
with respect to the property subject to the Lien of the Indenture which do not
interfere in any material respect with the use of such property for the purpose
for which it is held by us and will not have a material adverse impact on the
security afforded by the Mortgage Indenture. (Section 11.02(b) of the Restated
Indenture.)
Following the retirement of the first mortgage bonds of each series issued
prior to May 1, 1988, any of the mortgaged and pledged property may be released
from the Lien of the Indenture if, after such release, the Fair Value of the
remaining mortgaged and pledged property equals or exceeds a sum equal to 150%
of the aggregate principal amount of first mortgage bonds Outstanding. (Section
11.03(k) of the Restated Indenture.) When effective and upon satisfaction of the
requirements set forth in the Mortgage Indenture, this provision would permit us
to spin-off or otherwise dispose of a substantial amount of assets or a line of
business without depositing cash or property with the Mortgage Trustee or
obtaining the consent of the bondholders.
MODIFICATION OF THE MORTGAGE INDENTURE
With the consent of the Company, the provisions of the Mortgage Indenture
may be changed by the affirmative vote of the holders of 80% in principal amount
of the first mortgage bonds Outstanding except that, among other things, the
maturity of a first mortgage bond may not be extended, the interest rate
reduced, nor the terms of payment of principal or interest changed without the
consent of the holder of each first mortgage bond so affected. (Article XVIII of
the 1937 Indenture.)
The Supplemental Indenture dated May 1, 1985 amended the foregoing
provisions of the Mortgage Indenture by reducing the 80% requirement to 66 2/3%.
This amendment will not become effective and operative until all first mortgage
bonds of each series issued prior to May 1, 1985 have been retired or until all
the holders thereof have consented to such amendment. Holders of the New Bonds
and of each subsequent series issued under the Mortgage Indenture will likewise
be bound by the amendment when it becomes effective and operative. (Article VI
of the Supplemental Indenture dated May 1, 1985 and Section 18.02 of the
Restated Indenture.)
CONCERNING THE MORTGAGE TRUSTEE
In case of a Completed Default either the Mortgage Trustee or the holders of
25% in principal amount of (i) the first mortgage bonds Outstanding or (ii) the
first mortgage bonds affected by such default, may declare the first mortgage
bonds due and payable, subject to the right of the holders of a majority of the
first mortgage bonds then Outstanding to rescind or annul such action. Further,
the Mortgage Trustee is obligated to take the actions provided in the Mortgage
Indenture to enforce payment of the first mortgage bonds and the Lien of the
Indenture upon being requested to do so by the holders of a majority in
principal amount of the first mortgage bonds. However, the holders of a majority
in principal amount of the first mortgage bonds may direct the taking of any
such action or the refraining therefrom as is not contrary to law or the
Mortgage Indenture. Before taking certain actions, the Mortgage Trustee may
require adequate indemnity against the costs, expenses and liabilities to be
incurred therein or thereby. (Article XIII of the 1937 Indenture; Section 6 of
Article VI of Supplemental Indenture dated February 1, 1944; Section 4.03 of
Supplemental Indenture dated October 1, 1945 and Article XIII of the Restated
Indenture.)
DEFAULTS
The following is a summary of events defined in the Mortgage Indenture as
Completed Defaults:
- default in payment of principal of any first mortgage bond,
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- default continued for 90 days in payment of interest on any first mortgage
bond,
- default in the covenant contained in Section 11 of Article VIII of the
Mortgage Indenture (Section 8.11 of the Restated Indenture) with respect
to bankruptcy, insolvency, assignment or receivership; and
- default continued for 90 days after notice in the performance of any other
covenant, agreement or condition.
(Section 4.02 of the Supplemental Indenture dated October 1, 1945 and Section
13.01 of the Restated Indenture.)
The Mortgage Trustee is required to give notice to bondholders (1) within 90
days after the occurrence of a default known to the Mortgage Trustee, or (2) if
the Mortgage Trustee is unaware of a default during such 90 day period, then,
within 30 days after the Mortgage Trustee knows of such default, unless such
default has been cured before giving such notice. However, in the case of a
default resulting from the failure to make any payment of principal of or
interest on any first mortgage bonds or to make any sinking fund payment, the
Mortgage Trustee may withhold such notice if its board of directors, executive
committee or a trust committee of directors or responsible officers determines
in good faith that withholding such notice is in the interest of the
bondholders. (Section 4 of Article V of the Supplemental Indenture dated
February 1, 1944 and Section 16.02 of the Restated Indenture.)
The Company is required to file with the Mortgage Trustee such information,
documents and reports with respect to compliance by the Company with the
conditions and covenants of the Mortgage Indenture as may be required by the
rules and regulations of the SEC including a certificate, furnished not less
frequently than annually, as to the Company's compliance with all of the
conditions and covenants under the Mortgage Indenture. (Section 8 of Article III
of the Supplemental Indenture dated February 1, 1944 and Section 8.18 of the
Restated Indenture.)
GENERAL
Whenever all indebtedness secured by the Mortgage Indenture has been paid,
or adequate provision for such payment has been made, the Mortgage Trustee shall
cancel and discharge the Mortgage Indenture. (Article XVII of the 1937 Indenture
and Article XVII of the Restated Indenture.) After the Effective Date, we may
deposit with the Mortgage Trustee any combination of cash or Government
Obligations in order to provide for the payment of any series or all of the
first mortgage bonds Outstanding. The Mortgage Indenture also provides that we
must furnish, to the Mortgage Trustee, Officers' Certificates, certificates of
an Engineer, Appraiser or other expert and, in certain cases, Accountants'
Certificates in connection with the authentication of first mortgage bonds, the
release or release and substitution of property and certain other matters, and
Opinions of Counsel as to the Lien of the Indenture and certain other matters.
(Article IV of the Supplemental Indenture dated February 1, 1944; Articles IV,
V, VI, VII, XI and XVII and Section 20.08 of the Restated Indenture.)
12
DESCRIPTION OF DEBT SECURITIES
GENERAL
The Debt Securities may be issued in one or more new series under an
indenture (the "Debt Indenture") between the Company and Norwest Bank Minnesota,
National Association, or any other trustee to be named, as trustee (the "Debt
Trustee"). The Debt Securities will be unsecured obligations of the Company and
will rank on a parity with other unsecured indebtedness of the Company. The
amount of Debt Securities that we may issue under the Debt Indenture is not
limited.
The Debt Securities may be issued in one or more series, may be issued at
various times, may have differing maturity dates and may bear interest at
differing rates. The Prospectus Supplement applicable to each issue of Debt
Securities will specify:
- the title, aggregate principal amount and offering price of such Debt
Securities;
- the interest rate or rates, or method of calculation of such rate or
rates, on such Debt Securities, and the date from which such interest will
accrue;
- the dates on which such interest will be payable;
- the record dates for payments of interest;
- the date on which such Debt Securities will mature;
- any redemption terms;
- the period or periods within which, the price or prices at which and the
terms and conditions upon which such Debt Securities may be repaid, in
whole or in part, at the option of the holder thereof; and
- other specific terms applicable to such Debt Securities.
The applicable Prospectus Supplement also may describe certain special
United States federal income tax considerations (if any) applicable to Debt
Securities sold at an original issue discount and certain special United States
federal income tax or other considerations (if any) applicable to any Debt
Securities which are denominated in a currency or currency unit other than
United States dollars.
Unless otherwise indicated in the applicable Prospectus Supplement, the Debt
Securities will be denominated in United States currency in minimum
denominations of $1,000 and integral multiples thereof, except that the
denomination of any Debt Security issued in the form of a Global Security will
not exceed $200,000,000 without the approval of the Depository.
Unless otherwise indicated in the applicable Prospectus Supplement, there
are no provisions in the Debt Indenture or the Debt Securities that require us
to redeem, or permit the holders to cause a redemption of, the Debt Securities
or that otherwise protect the holders in the event that we incur substantial
additional indebtedness, whether or not in connection with a change in control
of the Company. However, any change in control transaction that involves the
incurrence of substantial additional long-term indebtedness (as notes, first
mortgage bonds or otherwise) by us in such a transaction would require approval
of state utility regulatory authorities and, possibly, of federal utility
regulatory authorities. Management believes that such approvals would be
unlikely in any transaction that would result in the Company, or a successor to
the Company, having a highly leveraged capital structure.
REGISTRATION, TRANSFER AND EXCHANGE
Debt Securities of any series may be exchanged for other Debt Securities of
the same series of any authorized denominations and of a like aggregate
principal amount and kind. (Section 2.06.)
13
Unless otherwise indicated in the applicable Prospectus Supplement, Debt
Securities may be presented for registration of transfer (duly endorsed or
accompanied by a duly executed written instrument of transfer), at the office of
the Debt Trustee maintained for such purpose with respect to any series of Debt
Securities and referred to in the applicable Prospectus Supplement, without
service charge and upon payment of any taxes and other governmental charges as
described in the Debt Indenture. Such transfer or exchange will be effected upon
being satisfied with the documents of title and indemnity of the person making
the request. (Sections 2.06 and 2.07.)
In the event of any redemption of Debt Securities of any series, the Debt
Trustee will not be required to exchange or register a transfer of any Debt
Securities of such series selected, called or being called for redemption
except, in the case of any Debt Security to be redeemed in part, the portion
thereof not to be so redeemed. (Section 2.06.) See "BOOK-ENTRY SYSTEM."
PAYMENT AND PAYING AGENTS
Principal of and interest and premium, if any, on Debt Securities issued in
the form of Global Securities will be paid in the manner described below under
the caption "BOOK-ENTRY SYSTEM." Unless otherwise indicated in the applicable
Prospectus Supplement, interest on Debt Securities that are in the form of
certificated securities will be paid by check mailed to the holder at such
person's address as it appears in the register for the Debt Securities
maintained by the Debt Trustee; however, a holder of $10,000,000 or more Debt
Securities having the same interest payment dates will be entitled to receive
payments of interest by wire transfer, if appropriate wire transfer instructions
have been received by the Debt Trustee on or prior to the applicable record
date. (Section 2.12.) Unless otherwise indicated in the applicable Prospectus
Supplement, the principal of, and interest at maturity and premium, if any, on
Debt Securities in the form of certificated securities will be payable in
immediately available funds at the office of the Debt Trustee. (Section 2.12.)
All monies paid by the Company to a paying agent for the payment of
principal of, interest or premium, if any, on any Debt Security which remain
unclaimed at the end of two years after such principal, interest or premium
shall have become due and payable will be repaid to the Company and the holder
of such Debt Security will thereafter look only to the Company for payment
thereof. (Section 4.04.)
EVENTS OF DEFAULT
The following constitute events of default under the Debt Indenture:
- default in the payment of principal of and premium, if any, on any Debt
Security when due and payable whether at the stated maturity thereof, upon
redemption thereof (provided that such redemption is not conditioned upon
the deposit of sufficient moneys for such redemption) or upon declaration
of acceleration or otherwise;
- default in the payment of interest on any Debt Security when due which
continues for 30 days;
- default in the performance or breach of any other covenant or warranty of
the Company in the Debt Indenture and the continuation thereof for 60 days
after written notice to the Company as provided in the Debt Indenture; and
- certain events of bankruptcy, insolvency or reorganization of the Company.
(Section 7.01.)
If an event of default occurs and is continuing, either the Debt Trustee or
the holders of a majority in principal amount of the outstanding Debt Securities
may declare the principal amount of all Debt Securities to be due and payable
immediately. At any time after an acceleration of the Debt Securities has been
declared, but before a judgment or decree of the immediate payment of the
principal amount of the Debt Securities has been obtained, if the Company pays
or deposits with the Debt Trustee a sum sufficient
14
to pay all matured installments of interest and the principal and any premium
which has become due otherwise than by acceleration and all defaults shall have
been cured or waived, then such payment or
deposit will cause an automatic rescission and annulment of the acceleration of
the Debt Securities. (Section 7.01.)
The Debt Trustee generally will be under no obligation to exercise any of
its rights or powers under the Debt Indenture at the request or direction of any
of the holders unless such holders have offered acceptable indemnity to the Debt
Trustee. (Section 9.02.) The holders of a majority in principal amount of the
outstanding Debt Securities generally will have the right to direct the time,
method and place of conducting any proceeding for any remedy available to the
Debt Trustee, or of exercising any trust or power conferred on the Debt Trustee,
with respect to the Debt Securities. (Section 7.07.) Each holder of any Debt
Security has the right to institute a proceeding with respect to the Debt
Indenture, but such right is subject to certain conditions precedent specified
in the Debt Indenture. (Section 7.07.) The Debt Indenture provides that the Debt
Trustee, within 90 days after the occurrence of a default with respect to the
Debt Securities, is required to give the holders of the Debt Securities notice
of such default, unless cured or waived, but, except in the case of default in
the payment of principal of, or premium, if any, or interest on any Debt
Securities, the Debt Trustee may withhold such notice if it determines in good
faith that it is in the interest of such holders to do so. (Section 7.08.) The
Company is required to deliver to the Debt Trustee each year a certificate as to
whether or not, to the knowledge of the officers signing such certificate, the
Company is in compliance with the conditions and covenants under the Debt
Indenture. (Section 5.05.)
MODIFICATION
The Company and the Debt Trustee may modify and amend the Debt Indenture
with the consent of the holders of a majority in principal amount of the
outstanding Debt Securities affected thereby, provided that no such modification
or amendment may, without the consent of the holder of each outstanding Debt
Security affected thereby, (a) change the stated maturity of any installment of
principal of, or interest on, any Debt Security or any premium payable on the
redemption thereof, or change the redemption price; (b) reduce the principal
amount of, or the interest or premium payable on, any Debt Security or reduce
the amount of principal that could be declared due and payable prior to the
stated maturity; (c) change the coin or currency of any payment of principal of,
or any premium or interest on, any Debt Security; (d) impair the right of a
holder to institute suit for the enforcement of any payment on or with respect
to any Debt Security; (e) reduce the percentage in principal amount of
outstanding Debt Securities, the consent of the holders of which is required to
modify or amend the Debt Indenture; or (f) modify the foregoing requirements or
reduce the percentage of outstanding Debt Securities necessary to waive any past
default to less than a majority. The Company and the Debt Trustee may modify and
amend the Debt Indenture without the consent of the holders (a) to add to the
covenants of the Company for the benefit of the holders or to surrender a right
conferred on the Company in the Debt Indenture; (b) to add security for the Debt
Securities; or (c) to make certain other modifications, generally of a
ministerial or immaterial nature. (Sections 12.01 and 12.02.)
DEFEASANCE AND DISCHARGE
We may be discharged from all obligations in respect to the Debt Securities
and the Debt Indenture (except for certain obligations such as obligations to
register the transfer or exchange of Debt Securities, replace stolen, lost or
mutilated Debt Securities and maintain paying agencies) if we irrevocably
deposit with the Debt Trustee, in trust for the benefit of holders of Debt
Securities, money or United States government obligations (or any combination
thereof) which will provide enough money to make all payments of principal of,
and any premium and interest on, the Debt Securities on the dates such payments
are due. In order to discharge such obligations, we must deliver to the Debt
Trustee an opinion of counsel to the effect that the holders of the Debt
Securities will not recognize income, gain or loss for federal income tax
purposes as a result of such defeasance or discharge of the Debt Indenture. Upon
any
15
discharge of our obligations as described above, the holders of Debt Securities
must look only to such trust fund, and not us, for payments on the Debt
Securities. (Section 4.01.)
CONSOLIDATION, MERGER AND SALE OF ASSETS
We will not merge into any other corporation or sell or otherwise transfer
all or substantially all our assets unless (i) the successor or transferee
corporation assumes by supplemental indenture our obligations to pay the
principal and premium and interest on all the Debt Securities and our obligation
to perform every covenant of the Debt Indenture to be performed or observed by
the Company and (ii) we or the successor or transferee corporation, as
applicable, are not immediately following such merger, sale or transfer in
default in the performance of any such covenant. Upon any such merger, sale or
transfer of all or substantially all of the assets of the Company, the successor
or transferee corporation will succeed to, and be substituted for, and may
exercise every right and power of, the Company under the Debt Indenture with the
same effect as if such successor corporation had been named as the Company
therein and the Company will be released from all obligations under the Debt
Indenture. The Debt Indenture defines all or substantially all of the assets of
the Company as being 50% or more of the total assets of the Company as shown on
the balance sheet of the Company as of the end of the prior year and
specifically permits any such sale, transfer or conveyance during a calendar
year of less than 50% of total assets without the consent of the holders of the
Debt Securities. (Sections 11.01 and 11.02.)
RESIGNATION OR REMOVAL OF DEBT TRUSTEE
The Debt Trustee may resign at any time by notifying the Company in writing
and specifying the day upon which the resignation is to take effect. Such
resignation will not take effect, however, until a successor trustee has been
appointed. (Section 8.10.)
The holders of a majority in principal amount of the outstanding Debt
Securities may remove the Debt Trustee at any time. In addition, so long as no
event of default or event which, with the giving of notice or lapse of time or
both, would become an event of default has occurred and is continuing, we may
remove the Debt Trustee upon notice to the holder of each Debt Security
outstanding, and appointment of a successor Debt Trustee. (Section 8.10.)
CONCERNING THE DEBT TRUSTEE
Norwest Bank Minnesota, National Association is the Debt Trustee. We
maintain banking relationships with the Debt Trustee in the ordinary course of
business. The Debt Trustee also acts as trustee for certain of our pollution
control and resource recovery bonds.
BOOK-ENTRY SYSTEM
Each series of Securities may be issued in the form of one or more Global
Securities representing all or part of such series of Securities. This means
that we will not issue certificates for such series of Securities to the
holders. Instead a Global Security representing such series will be deposited
with, or on behalf of, The Depository Trust Company ("DTC"), or its successor as
depository (the "Depository") and registered in the name of the Depository or a
nominee of the Depository.
The Depository will keep a computerized record of its participants (for
example, your broker) whose clients have purchased the Securities. Unless it is
exchanged in whole or in part for a certificated Security, a Global Security may
not be transferred, except that the Depository, its nominees and their
successors may transfer a Global Security as a whole to one another.
Beneficial interests in Global Securities will be shown on, and transfers of
interests will be made only through, records maintained by the Depository and
its participants. The laws of some jurisdictions require that certain purchasers
take physical delivery of securities in definitive form. These laws may impair
the ability to transfer beneficial interests in a Global Security.
16
We will wire principal, interest and any premium payments to the Depository
or its nominee. We and the trustee will treat the Depository or its nominee as
the owner of the Global Security for all purposes, including any notices and
voting. Accordingly, we, the trustee and any paying agent will have no direct
responsibility or liability to pay amounts due on a Global Security to owners of
beneficial interests in a Global Security.
Unless otherwise specified in the Prospectus Supplement, DTC will act as
Depository for those Securities issued as Global Securities. The Securities will
be registered in the name of Cede & Co. (DTC's partnership nominee).
DTC is a limited-purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Securities Exchange
Act of 1934. DTC holds securities that its participants ("Participants") deposit
with DTC. DTC also facilitates the settlement among Participants of securities
transactions, such as transfers and pledges, in deposited securities through
electronic computerized book-entry changes in Participants' accounts. This
eliminates the need for physical movement of securities certificates. Direct
Participants include securities brokers and dealers, banks, trust companies,
clearing corporations, and certain other organizations. DTC is owned by a number
of its direct Participants and by the New York Stock Exchange, Inc., the
American Stock Exchange, Inc., and the National Association of Securities
Dealers, Inc. Access to the DTC system is also available to others such as
securities brokers and dealers, banks, and trust companies that clear through or
maintain a custodial relationship with a direct Participant, either directly or
indirectly. The Rules that apply to DTC and its Participants are on file with
the SEC.
It is DTC's current practice, upon receipt of any payment of principal or
interest, to credit Participants' accounts on the payment date according to
their respective holdings of beneficial interests in the Global Security as
shown on DTC's records. In addition, it is DTC's current practice to assign any
consenting or voting rights to Participants whose accounts are credited with
Securities on a record date, by using an omnibus proxy. Payments by Participants
to owners of beneficial interests in a Global Security, and voting by
Participants, will be governed by the customary practices between the
Participants and owners of beneficial interests, as is the case with securities
held for the account of customers registered in "street name." However, payments
will be the responsibility of the Participants and not our responsibility or
that of DTC or the trustee.
Securities represented by a Global Security will be exchangeable for
certificated securities with the same terms in authorized denominations only if:
(a) DTC notifies us that it is unwilling or unable to continue as Depository
or if DTC ceases to be a clearing agency registered under applicable law
and a successor Depository is not appointed by us within 90 days; or
(b) we determine not to require all of the Securities of a series to be
represented by a Global Security and notify the trustee of our decision.
The information in this section concerning DTC and DTC's book-entry system
has been obtained from DTC, and the Company and any underwriters, dealers or
agents take no responsibility for the accuracy thereof.
Any underwriters, dealers or agents of any Securities may be Direct
Participants of DTC.
17
LEGAL OPINIONS
Legal opinions relating to the Securities will be rendered by Gary R.
Johnson, 414 Nicollet Mall, Minneapolis, Minnesota, counsel for the Company, and
by Gardner, Carton & Douglas, 321 North Clark Street, Chicago, Illinois, counsel
for any underwriters, dealers or agents named in a Prospectus Supplement. Gary
R. Johnson is Vice President and General Counsel of the Company and is the
beneficial owner of 14,353 shares of the Company's Common Stock. Matters
pertaining to local laws will be passed upon by counsel for the Company and as
to these matters Gardner, Carton & Douglas will rely on their opinions. The
opinion contained in this Prospectus under "Description of New Bonds-Security
for New Bonds," is the opinion of Gary R. Johnson. Gardner, Carton & Douglas has
acted from time to time as special counsel for NSP in connection with certain
matters, including the proposed Merger with New Century Energies.
EXPERTS
The consolidated financial statements of the Company as of December 31, 1998
and 1997 and for each of the three years in the period ended December 31, 1998
incorporated in this Prospectus by reference to the Company's Annual Report on
Form 10-K for the year ended December 31, 1998, have been so incorporated in
reliance upon the report of PricewaterhouseCoopers LLP, independent accountants,
given on the authority of said firm as experts in auditing and accounting.
PLAN OF DISTRIBUTION
The Company intends to sell the Securities to or through underwriters or
dealers, and may also sell the Securities directly to other purchasers or
through agents, as described in the Prospectus Supplement relating to an issue
of Securities.
The distribution of the Securities 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 Securities, underwriters may receive
compensation from the Company or from purchasers of Securities for whom they may
act as agents in the form of discounts, concessions, or commissions.
Underwriters may sell Securities 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 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 Securities 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 Securities may be
entitled to indemnification by the Company against certain liabilities,
including liabilities under the 1933 Act.
No person has been authorized to give any information or to make any
representation not contained in this Prospectus and, if given or made, such
information or representation must not be relied upon as having been authorized.
This Prospectus does 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 nor any sale made hereunder shall, under any
circumstances, create any 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.
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$250,000,000
NORTHERN STATES POWER COMPANY
(A MINNESOTA CORPORATION)
6.875% SENIOR NOTES, SERIES DUE 2009
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P R O S P E C T U S S U P P L E M E N T
JULY 21, 1999
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SALOMON SMITH BARNEY
GOLDMAN, SACHS & CO.
LEHMAN BROTHERS
MERRILL LYNCH & CO.
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