Registration No. 333-_____
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
Southwestern Electric Power Company
(Exact
(Exact name of registrant as specified in its charter)
Delaware 160; 72-0323455
(State
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
1 Riverside Plaza
Columbus, Ohio 43215
(Address of principal executive offices) (Zip Code)
Registrant's
Registrant’s telephone number, including area code: (614)223-1000
ARMANDO A. PENA, Treasurer
JEFFREY D. CROSS, Senior Vice President and 716-1000
THOMAS G. BERKEMEYER, Associate General Counsel
AMERICAN ELECTRIC POWER SERVICE CORPORATION
1 Riverside Plaza
Columbus, Ohio 43215
(614) 223-1580
(Name,716-1648
(Name, address and telephone number, including
area code, of agent for service)
It is respectfully requested that the Commission send copies
of all notices, orders and communications to:
Simpson Thacher & Bartlett
Dewey Ballantine LLP
425 Lexington Avenue
1301 Avenue of the Americas
New York, NY 10017-3909
New York, NY 10019-6092
Attention: James M. Cotter
Attention: E. N. Ellis, IV
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Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of the Registration Statement.
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If the only securities being registered on this Form are being offered pursuant to dividend or interest reinvestment plans, please check the following box. [ ]
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, please check the following box.[x]
[x]
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ]
If delivery ofthis Form is a registration statement pursuant to General Instruction I.D. or a post-effective amendment thereto that shall become effective upon filing with the prospectus is expected to be madeCommission pursuant to Rule 434,
please462(e) under the Securities Act, check the following box. [ ]
If this Form is a post-effective amendment to a registration statement filed pursuant to General Instruction I.D. filed to register additional securities or additional classes of securities pursuant to Rule 413(b) under the Securities Act, check the following box. [ ]
CALCULATION OF REGISTRATION FEE
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Title of
Each Class Proposed Proposed
Of Maximum Maximum
Securities Amount Offering Aggregate
to be to be Price Offering Amount of
Registered Registered Per Unit* Price* Registration Fee
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Unsecured
Notes $300,000,000 100% $300,000,000 $27,600
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*Estimated solely for purpose of calculating the registration fee.
Title of Each Class of Securities to be Registered | Amount to be Registered | Proposed Maximum Offering Price Per Unit (1) | Proposed Maximum Aggregate Offering Price (1) | Amount of Registration Fee |
Senior Notes | | 100% | | |
Junior Subordinated Debentures | | 100% | | |
Total | $660,000,000 | | $660,000,000 | $20,262 |
(1) | Estimated solely for purpose of calculating the registration fee pursuant to Rule 457(o) of the Securities Act, and exclusive of any accrued interest, if any. |
(2) | The registration fee has been calculated in accordance with Rule 457(o) under the Securities Act. |
The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, or until the registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.
The within Prospectusprospectus contains the information required by Rule 429 of the Commission under the Securities Act of 1933 with respect to $50,000,000$90,000,000 of Debt
SecuritiesSenior Notes and Junior Subordinated Debentures of the registrant remaining unsold under Registration Statement No. 333-87834,333-108045, declared effective May 21, 2002 for which a fee of $4,600 was paid.
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August 25, 2003.
The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.
SUBJECT TO COMPLETION, DATED OCTOBER 18, 2002
AUGUST ___, 2007
PROSPECTUS
SOUTHWESTERN ELECTRIC POWER COMPANY
1 Riverside Plaza
Columbus, OhioRIVERSIDE PLAZA
COLUMBUS, OHIO 43215
614-223-1000
$350,000,000
UNSECURED
(614) 716-1000
$750,000,000
SENIOR NOTES
JUNIOR SUBORDINATED DEBENTURES
TERMS OF SALE
The following
This prospectus contains summaries of the general terms may applyof the securities. You will find the specific terms of these securities, and the manner in which they are being offered, in supplements to this prospectus. You should read this prospectus and the $350,000,000 unsecured notes (the
"notes") that we may sell at one or more times. A pricing supplement oravailable prospectus supplement will include the final terms for each note. If we decide
to list upon issuance any note or notes on a securities exchange, a pricing
supplement or prospectus supplement will identify the exchange and state when we
expect trading could begin.
- Mature 9 months to 50 years - Fixed or floating interest rate -
Remarketing features - Certificate or book-entry form - Subject to
redemption
- Not convertible, amortized or subject to a sinking fund - Interest paid
on fixed rate notes quarterly or semi-annually - Interest paid on floating
rate notes monthly, quarterly, semi-annually, or annually - Issued in
multiples of a minimum denomination
carefully before you invest.
INVESTING IN THESE NOTESSECURITIES INVOLVES RISKS. SEE THE SECTION ENTITLED "RISK FACTORS" BEGINNING“RISK FACTORS” ON PAGE 2 FOR MORE INFORMATION.
The notessecurities have not been approved or disapproved by the Securities and Exchange Commission ("SEC") or any state securities commission, nor have these organizations determined that this prospectus is accurate or complete. Any representation to the contrary is a criminal offense.
The date of this prospectus is ____________, 2002.
________ ___, 2007.
THE COMPANY
We generate, sell, purchase, transmit and distribute electric power. We serve approximately 431,000456,000 retail customers in northeastern Texas, northwestern Louisiana and western Arkansas. We also sell and transmit power at wholesale to other electric utilities, municipalities, electric cooperatives and non-utility entities engaged in the wholesale power market. Our principal executive offices are located at 1 Riverside Plaza, Columbus, Ohio 43215 (telephone number 614-223-1000)614-716-1000). We are a subsidiary of American Electric Power Company, Inc., a public utility holding company, and we are a part of the American Electric Power integrated utility system. The executive offices of American Electric Power Company, Inc. are located at 1 Riverside Plaza, Columbus, Ohio 43215 (telephone number 614-223-1000)614-716-1000).
RISK FACTORS
RISKS RELATED TO OUR REGULATED
BUSINESS AND EVOLVING REGULATION
o Our rates are subject to regulation by three states and a federal agency
whose regulatory paradigms and goals may not be consistent.
We operate in, and are subject to the laws and regulations of, the states
of Texas, Louisiana and Arkansas. We are currently a vertically integrated
electric utility and most of our revenue results from the sale of electricity to
retail customers subject to bundled rates that are approved by the applicable
state utility commission and, to a certain extent, the Federal Energy Regulatory
Commission (the "FERC"). Texas has enacted electric utility restructuring
legislation ("Texas Restructuring Legislation") that requires the legal
separation and deregulation of generation assets from transmission and
distribution assets that will remain regulated. The implementation of such
legislation has been delayed in the portion of Texas in which we operate.
Arkansas approved an electric restructuring law which established the general
framework governing the retail electric market, but has delayed competition
until October 1, 2003, and the Arkansas Public Service Commission ("Arkansas
Commission") has the ability to further delay it for an additional two years.
The Arkansas Commission has recommended to the Arkansas General Assembly the
further delay or repeal of the electric restructuring law. Louisiana has not
enacted an electric restructuring law and has not announced any plans to do so,
and the Louisiana Public Service Commission ("Louisiana Commission") has
determined that retail competition is not in the public interest at this time.
FERC has pursued several regulatory initiatives, such as the formation and
operation of new regional transmission organizations, or "RTOs", which have been
designed to generally facilitate competition in the energy sector. States such
as Louisiana have questioned both the FERC's jurisdiction to pursue such
initiatives and their benefit, if any, to the ratepayers in their state. Our
state commissions generally have authority over the sale or other transfer of
control, of transmission assets to an RTO.
Exposure to inconsistent state and Federal regulatory standards may limit
our ability to operate profitably. Further alteration of the regulatory
landscape in which we operate may harm our financial condition and results of
operations.
o We are subject to the risk that our regulators will not permit recovery of
material amounts of our fuel costs.
Our retail rates currently in effect in Louisiana are adjusted based on
our cost of fuel in accordance with a fuel cost adjustment. The fuel cost
adjustment is applied to each billing month based on the second previous month's
average fuel cost. Provision for any over- or under-recovery of fuel costs is
allowed under an automatic fuel clause.
In Arkansas, a fuel adjustment rider is developed annually based on the
previous year's actual fuel cost. This factor is then applied to each billing
month's sales, allowing us to recover fuel costs from customers. Any difference
between actual fuel cost for the month and revenues collected from customers,
including interest, will be used in the determination of the annual factor for
the following year.
The Louisiana Commission and the Arkansas Commission may audit our fuel
costs to determine the reasonableness of the actual fuel costs. To the extent
these commissions do not permit us to recover fuel costs under the procedures
described above, our net income could be materially reduced.
We experienced significant natural gas price increases in the second half
of 2000 and early 2001 which resulted in under-recovery of fuel costs in Texas
and the need to seek increases in fuel rates and surcharges there to recover
these under-recoveries. During 2001, gas price declines and fuel rate and fuel
surcharge increases approved by the Public Utility Commission of Texas (PUCT)
lowered our unrecovered fuel balances at the end of 2001.
Fuel recovery for Texas utilities is a multi-step procedure. When fuel
costs change, utilities file with the PUCT for authority to adjust fuel factors.
If a utility's prior fuel factors result in an over- or under-recovery of fuel,
the utility will also request a surcharge factor to refund or collect that
amount. While fuel factors are intended to recover all fuel-related costs, final
settlement of these accounts are subject to reconciliation and approval by the
PUCT. Fuel reconciliation proceedings determine whether fuel costs incurred and
collected during the reconciliation period were reasonable and necessary. All
fuel costs incurred since the prior reconciliation date are subject to PUCT
review and approval. If material amounts are determined to be unreasonable and
ordered to be refunded to customers, results of operations and cash flows would
be diminished. As of December 31, 2001, the amount of fuel cost we have incurred
that is subject to reconciliation is $314 million; the amount that we have
under-recovered as of that date is $7 million. If PUCT does not reconcile and
permit recovery for these costs for any reason, our revenue and income would
suffer in a corresponding amount. Fuel cost recovery as described above will end
upon implementation of Texas Restructuring Legislation in our service area.
o The implementation of electric utility restructuring legislation in
Arkansas and Texas may limit our ability to pass on to our customers our
costs of production in those jurisdictions.
Arkansas
If and when Arkansas implements the electric restructuring law, the costs
that we incur to generate and sell electricity in Arkansas may not be eligible
for recovery through rates. While the electric restructuring law in Arkansas
established the general framework governing the retail electric market, the
Arkansas Commission has been charged with the task of addressing market power
issues, which have not yet been resolved. There can be no assurance that we will
be able to generate and sell electricity profitably in Arkansas following
implementation.
Texas
While customer choice of electricity supplier began in much of Texas on
January 1, 2002, it has been delayed in our service area. Pursuant to
restructuring, delivery of electricity continues to be the responsibility of the
local electric transmission and distribution company at regulated prices. Once
customer choice is implemented, the protection afforded by retail fuel clause
recovery mechanisms will likely be eliminated. In view of the fact that higher
fuel prices and generating unit outage can only be partially passed through, and
then only with regulatory approval, we would bear the costs associated with
those events. At present, however, we are protected against market price changes
by an active fuel clause.
o The different regional power markets in which we compete or will compete
in the future have changing transmission regulatory structures, which
could affect our performance in these regions.
Our results are likely to be affected by differences in the market and
transmission regulatory structures in various regional power markets. Problems
or delays that may arise in the formation and operation of RTOs may restrict our
ability to sell power produced by our generating capacity to certain markets if
there is insufficient transmission capacity otherwise available. The rules
governing the various regional power markets may also change from time to time,
which could affect our costs or revenues. Because it remains unclear which
companies will be participating in the various regional power markets, or how
RTOs will develop or what regions they will cover, we are unable to assess fully
the impact that these power markets may have on our business.
We are currently a member of the Southwest Power Pool ("SPP"). The SPP has
agreed to merge with the Midwest Independent Transmission System Operator
("MISO"), an independent operator of transmission assets in the Midwest. We
provided notice that we will withdraw from the SPP effective October 31, 2002.
This action was taken to provide us additional flexibility in deciding which RTO
we will ultimately join.
Subsequent to this action, we have entered into a Memorandum Of
Understanding with MISO/SPP under conditions favorable to AEP. This agreement
also provides for a continuation of the services currently provided by the SPP
for us in the interim. Final decisions on this issue have not been made.
The Louisiana Commission is concerned about the effect on retail
ratepayers of utilities in Louisiana joining RTOs. The Commission has ordered
all utilities in Louisiana, including us, to perform and submit to the
Commission the costs and benefits of RTO options available to the utilities. The
Commission has also determined that certain RTO structures that contemplate
legally transferring transmission assets to it are presumptively not in the
public interest. To the extent we are faced with conflicting state and Federal
requirements as to our participation in RTOs, it could adversely affect our
ability to operate and recover transmission costs from retail customers.
Management is unable to predict the outcome of these transmission
regulatory actions and proceedings or their impact on the timing and operation
of RTOs, our transmission operations or future results of operations and cash
flows.
o AEP's merger with CSW may ultimately be found to violate the Public
Utility Holding Company Act of 1935 ("PUHCA").
AEP acquired CSW in a merger completed on June 15, 2000. As a result of
the merger AEP acquired four additional domestic electric utility companies,
including us. On January 18, 2002, the U.S. Court of Appeals for the District of
Columbia ruled that the SEC's June 14, 2000 order approving the merger failed to
properly find that the merger meets the requirements of PUHCA and sent the case
back to the SEC for further review. Specifically, the Court told the SEC to
revisit its conclusion that the merger met PUHCA's requirement that the electric
utilities be "physically interconnected" and confined to a "single area or
region."
We believe that the merger meets the requirements of PUHCA and expect the
matter to be resolved favorably. We intend to fully cooperate with the staff of
the SEC in supplementing the record, if necessary, to ensure the merger complies
with PUHCA. We can give no assurance, however, that: (i) the SEC or any
applicable court review will find that the merger complies with PUHCA, or (ii)
the SEC or any applicable court review will not impose material adverse
conditions on us in order to find that the merger complies with PUHCA. If the
merger were ultimately found to violate PUHCA, it may require AEP to take
remedial actions or divest assets, which may harm our results of operations or
financial condition.
RISKS RELATED TO OUR POWER TRADING
AND WHOLESALE BUSINESSES
o Our revenues and results of operations are subject to market risks that
are beyond our control.
We sell power from our generation facilities into the spot market or other
competitive power markets or on a contractual basis. We also enter into
contracts to purchase and sell electricity as part of our power marketing and
trading operations. With respect to such transactions, we are not guaranteed any
rate of return on our capital investments through regulated rates, and our
revenues and results of operations are likely to depend, in large part, upon
prevailing market prices for power in our regional markets and other competitive
markets. These market prices may fluctuate substantially over relatively short
periods of time. It is reasonable to expect that trading margins may erode as
markets mature and that there may be diminished opportunities for gain should
volatility decline. In addition, the FERC, which has jurisdiction over wholesale
power rates, as well as independent system operators that oversee some of these
markets, may impose price limitations, bidding rules and other mechanisms to
address some of the volatility in these markets. Fuel prices may also be
volatile, and the price we can obtain for power sales may not change at the same
rate as changes in fuel costs. These factors could reduce our margins and
therefore diminish our revenues and results of operations.
Volatility in market prices for fuel and power may result from:
- weather conditions;
- seasonality;
- power usage;
- illiquid markets;
- transmission or transportation constraints or
inefficiencies;
- availability of competitively priced alternative energy
sources;
- demand for energy commodities;
- natural gas, crude oil and refined products, and coal
production levels;
- natural disasters, wars, embargoes and other catastrophic
events; and
- federal, state and foreign energy and environmental
regulation and legislation.
o Our power trading (including fuel procurement and power marketing) and
risk management policies cannot eliminate the risk associated with these
activities.
Our power trading (including fuel procurement and power marketing)
activities expose us to risks of commodity price movements. We attempt to manage
our exposure through enforcement of established risk limits and risk management
procedures. These risk limits and risk management procedures may not always be
followed or may not work as planned and cannot eliminate the risks associated
with these activities. As a result, we cannot predict the impact that our power
trading and risk management decisions may have on our business, operating
results or financial position.
We routinely have open trading positions in the market, within established
guidelines, resulting from the management of our trading portfolio. To the
extent open trading positions exist, fluctuating commodity prices can improve or
diminish our financial results and financial position.
Our power trading and risk management activities, including our power
sales agreements with counterparties, rely on projections that depend heavily on
judgments and assumptions by management of factors such as the future market
prices and demand for power and other energy-related commodities. These factors
become more difficult to predict and the calculations become less reliable the
further into the future these estimates are made. Even when our policies and
procedures are followed and decisions are made based on these estimates, results
of operations may be diminished if the judgments and assumptions underlying
those calculations prove to be wrong or inaccurate.
o Parties with whom we have contracts may fail to perform their obligations,
which could harm our results of operations.
We are exposed to the risk that counterparties that owe us money or power
will breach their obligations. Should the counterparties to these arrangements
fail to perform, we may be forced to enter into alternative hedging arrangements
or honor underlying commitments at then-current market prices that may exceed
our contractual prices, which would cause our financial results to be diminished
and we might incur losses. Although our estimates take into account the expected
probability of default by a counterparty, our actual exposure to a default by a
counterparty may be greater than the estimates predict if defaults by
counterparties exceed our estimates.
o We rely on electric transmission facilities that we do not own or control.
If these facilities do not provide us with adequate transmission capacity,
we may not be able to deliver our wholesale electric power to the
purchasers of our power.
We depend on transmission facilities owned and operated by other
unaffiliated power companies to deliver the power we sell at wholesale. This
dependence exposes us to a variety of risks. If transmission is disrupted, or
transmission capacity is inadequate, we may not be able to sell and deliver our
wholesale power. If a region's power transmission infrastructure is inadequate,
our recovery of wholesale costs and profits may be limited. If restrictive
transmission price regulation is imposed, the transmission companies may not
have sufficient incentive to invest in expansion of transmission infrastructure.
The FERC has issued electric transmission initiatives that require
electric transmission services to be offered unbundled from commodity sales.
Although these initiatives are designed to encourage wholesale market
transactions for electricity, access to transmission systems may in fact not be
available if transmission capacity is insufficient because of physical
constraints or because it is contractually unavailable. We also cannot predict
whether transmission facilities will be expanded in specific markets to
accommodate competitive access to those markets.
o We do not fully hedge against price changes in commodities.
As part of our power marketing and trading operations, we routinely enter
into contracts to purchase and sell electricity and to procure fuel. In
connection with these trading activities, we routinely enter into financial
contracts, including futures and options, over-the counter options, swaps and
other derivative contracts. These activities expose us to risks from price
movements. If the values of the financial contracts change in a manner we do not
anticipate, it could harm our financial position or reduce the financial
contribution of our trading operations.
We manage our exposure by establishing risk limits and entering into
contracts to offset some of our positions (i.e., to hedge our exposure to
demand, market effects of weather and other changes in commodity prices).
However, we do not always hedge the entire exposure of our operations from
commodity price volatility. To the extent we do not hedge against commodity
price volatility, our results of operations and financial position may be
improved or diminished based upon our success in the market.
o We are unable to predict the course, results or impact, if any, of
current or future energy market investigations.
In February 2002, the FERC issued an order directing its staff to conduct
a fact-finding investigation into whether any entity, including Enron Corp.,
manipulated short-term prices in electric energy or natural gas markets in the
West or otherwise exercised undue influence over wholesale prices in the West,
for the period January 1, 2000, forward. In April 2002, AEP furnished certain
information to the FERC in response to their related data request.
Pursuant to the FERC's February order, on May 8, 2002, the FERC issued
further data requests, including requests for admissions, with respect to
certain trading strategies engaged in by Enron Corp. and, allegedly, traders of
other companies active in the wholesale electricity and ancillary services
markets in the West, particularly California, during the years 2000 and 2001.
This data request was issued to AEP as part of a group of over 100 entities
designated by the FERC as all sellers of wholesale electricity and/or ancillary
services to the California Independent System Operator and/or the California
Power Exchange.
The May 8, 2002 FERC data request required senior management to conduct an
investigation into AEP's trading activities during 2000 and 2001 and to provide
an affidavit as to whether AEP engaged in certain trading practices that the
FERC characterized in the data request as being potentially manipulative. AEP's
senior management complied with the order and denied its involvement with those
trading practices.
On May 21, 2002, the FERC issued a further data request with respect to
this matter to AEP and over 100 other market participants requesting information
for the years 2000 and 2001 concerning "wash", "round trip" or "sale/buy back"
trading in the Western System Coordinating Council ("WSCC"), which involves the
sale of an electricity product to another company together with a simultaneous
purchase of the same product at the same price (collectively, "wash sales").
Similarly, on May 22, 2002, the FERC issued an additional data request with
respect to this matter to AEP and other market participants requesting similar
information for the same period with respect to the sale of natural gas products
in the WSCC and Texas. After reviewing its records, AEP responded to the FERC
that it did not participate in any "wash sale" transactions involving power or
gas in the relevant market. AEP further informed the FERC that certain of its
traders did engage in trades on the Intercontinental Exchange, an electronic
electricity trading platform owned by a group of electricity trading companies,
including AEP, on September 21, 2001, the day on which all brokerage commissions
for trades on that exchange were donated to charities for the victims of the
September 11, 2001 terrorist attacks, which do not meet the FERC criteria for a
"wash sale" but do have certain characteristics in common with such sales.
The Public Utilities Commission of Texas, which has jurisdiction over
several of our affiliates, also issued similar data requests to AEP and other
power marketers. AEP responded to such data request by the July 2, 2002 response
date. We understand that the SEC and US Commodity Futures Trading Commission
("CFTC") are also looking into "wash sale" trading practices. The CFTC issued a
subpoena to AEP on June 17, 2002 requesting information with respect to these
matters. AEP responded to CFTC. In addition, the US Department of Justice made a
civil investigation demand to AEP and other electric generating companies
concerning their investigation of the Intercontinental Exchange. In August 2002,
AEP received an informal data request from the SEC asking it to voluntarily
provide documents related to "round-trip" or "wash" trades and AEP has provided
the requested information to the SEC. AEP recently completed a review of its
trading activities in the United States for the last three years involving
sequential trades with the same terms and counterparties. The revenue from such
trading is not material to either our financial statements or AEP's. We believe
that substantially all these transactions involve economic substance and risk
transference and do not constitute "wash sales".
Management is unable to predict the course or outcome of these or any
future energy market investigations or their impact, if any, on power commodity
trading generally or, more specifically, on our trading operations or future
results of operations and cash flows.
o Diminished liquidity in the wholesale power markets could negatively
impact our earnings.
The Enron Corp. bankruptcy and enhanced regulatory scrutiny have
contributed to more rigorous credit rating review of wholesale power market
participants. Credit downgrades and financial difficulties of certain other
market participants have significantly reduced such participants' participation
in the wholesale power markets. These events are causing a decrease in the
number of significant participants in the wholesale power markets, at least
temporarily, which could result in a decrease in the volume and liquidity in the
wholesale power markets. We are unable to predict the impact of such
developments on our power marketing and trading business.
o Uncertainty exists regarding FERC proposed security standards.
In July 2002, the FERC published for comment its proposed security
standards as part of the Standard Electricity Market Design ("SMD"). These
standards are intended to ensure all market participants have a basic security
program that effectively protects the electric grid and related market
activities and require compliance by January 1, 2004. The impact of these
proposed standards is far-reaching and has significant penalties for
non-compliance. These standards apply to marketers, transmission owners, and
power producers, including us. Compliance with these standards would represent a
significant effort that will impact us. Unless the cost of compliance can be
recovered from customers, results of operations and cash flows would be
adversely affected.
o Potential for disruption exists if the delay of a FERC market power
mitigation order is lifted.
A FERC order on AEP's triennial market based wholesale power rate
authorization update required certain mitigation actions that certain AEP
subsidiaries, including us, would need to take for sales/purchases within its
control area and required AEP to post information on its website regarding its
power systems status. As a result of a request for rehearing filed by AEP and
other market participants, FERC issued an order delaying the effective date of
the mitigation plan until after a planned technical conference on market power
determination. No such conference has been held and management is unable to
predict the timing of any further action by the FERC or its affect on future
results of our operations and cash flows.
RISKS RELATED TO MARKET OR ECONOMIC VOLATILITY
o We are subject to risks associated with a changing economic environment.
In response to the occurrence of several recent events, including the
September 11, 2001 terrorist attack on the United States, the ongoing war
against terrorism by the United States, and the bankruptcy of Enron Corp., the
financial markets have been disrupted in general, and the availability and cost
of capital for our business and that of our competitors has been at least
temporarily harmed. In addition, following the bankruptcy of Enron Corp., the
credit ratings agencies initiated a thorough review of the capital structure and
earnings power of energy companies, including us. These events could constrain
the capital available to our industry and could limit our access to funding for
our operations. Our business is capital intensive, and we are dependent upon our
ability to access capital at rates and on terms we determine to be attractive.
If our ability to access capital becomes significantly constrained, our interest
costs will likely increase and our financial condition could be harmed and
future results of operations could be significantly diminished.
The insurance industry has also been disrupted by these events. As a
result, the availability of insurance covering risks we and our competitors
typically insure against may decrease. In addition, the insurance we are able to
obtain may have higher deductibles, higher premiums and more restrictive policy
terms.
o A downgrade in our credit rating could negatively affect our ability to
access capital and/or to operate our power trading businesses.
Standard & Poor's and Moody's rate our senior, unsecured debt at BBB+ and
A2, respectively. If Moody's or Standard & Poor's were to downgrade our
long-term rating, particularly below investment grade, our borrowing costs would
increase, which would diminish our financial results. In addition, we would
likely be required to pay a higher interest rate in future financings, and our
potential pool of investors and funding sources could decrease. Further, if
AEP's short-term rating were to fall below P-2 or A-2, the current ratings
assigned by Standard & Poor's and Moody's, respectively, it would significantly
limit its access to the commercial paper market and would increase our
short-term borrowing costs because we conduct our short-term borrowing through
AEP, and on the same terms available to AEP.
On April 19, 2002, Moody's Investor Service ("Moody's") placed our credit
ratings on review for possible downgrade. The review could conclude with more
than a one notch downgrade. Currently, Moody's rates our senior unsecured debt
at A2.
Our power trading business relies on the investment grade ratings of our
senior, unsecured debt. Most of our counterparties require the creditworthiness
of an investment grade entity to stand behind transactions. If our rating were
to decline below investment grade, our ability to profitably operate our power
trading business would be diminished because we would likely have to deposit
cash or cash related instruments, which would reduce our profits.
o Our operating results may fluctuate on a seasonal and quarterly basis.
Electric power generation is generally a seasonal business. In many parts
of the country, demand for power peaks during the hot summer months, with market
prices also peaking at that time. In other areas, power demand peaks during the
winter. As a result, our overall operating results in the future may fluctuate
substantially on a seasonal basis. The pattern of this fluctuation may change
depending on the terms of power sale contracts we enter into. In addition, we
have historically sold less power, and consequently earned less income, when
weather conditions are milder. We expect that unusually mild weather in the
future could diminish our results of operations and harm our financial
condition.
o Changes in technology may significantly affect our business by making our
power plants less competitive.
A key element of our business model is that generating power at central
power plants achieves economies of scale and produces power at relatively low
cost. There are other technologies that produce power, most notably fuel cells,
microturbines, windmills and photovoltaic (solar) cells. It is possible that
advances in technology will reduce the cost of alternative methods of producing
power to a level that is competitive with that of most central power station
electric production. If this were to happen and if these technologies achieved
economies of scale, our market share could be eroded, and the value of our power
plants could be reduced. Changes in technology could also alter the channels
through which retail electric customers buy power, thereby harming our financial
results.
o Changes in commodity prices may increase our cost of producing power or
decrease the amount we receive from selling power, harming our financial
performance.
We are exposed to changes in the price and availability of coal and
natural gas because a significant portion of our generating capacity is
coal-fired with the remainder using natural gas as fuel. We have contracts of
varying durations for the supply of fuel for most of our existing generation
capacity, but as these contracts end, we may not be able to purchase fuel on
terms as favorable as the current contracts. Our exposure to such changes in
fuel costs is mitigated in part by our ability to recover fuel costs from
regulated customers pursuant to state and Federal fuel recovery provisions,
subject to applicable review by these regulatory bodies.
Changes in the cost of fuel and changes in the relationship between such
cost and the market price of power will affect our financial results. Since the
price we obtain for power may not change at the same rate as the change in fuel
costs, we may be unable to pass on the changes in costs to our customers in the
future.
Actual power prices and fuel costs will differ from those assumed in
financial projections used to initially value our trading and marketing
transactions, and those differences may be material. As a result, our financial
results may be diminished in the future as those transactions are marked to
market.
o Demand for power could exceed our supply capacity.
We are currently obligated to supply power to our regulated retail and
wholesale customers. At peak times, the demand for power required to meet this
obligation may exceed our available generation capacity. Until recently, we have
had little need to purchase power in the market for our retail customers. If
current consumption trends continue in the future, we may be required to buy
more power on the market or build additional generation. Either the market or
regulators (through rate recovery) may not permit us to pass all of these
purchase or construction costs on to our customers. To the extent regulators do
not permit timely recovery of the base rate portion of these costs, we have
exposure to regulatory lag associated with the time between the incurrence of
costs of purchased or constructed capacity and their recovery in customers'
rates.
RISKS RELATED TO ENVIRONMENTAL REGULATION
o Our costs of compliance with environmental laws are significant, and the
cost of compliance with future environmental laws could harm our cash flow
and profitability.
Our operations are subject to extensive federal, state and local
environmental statutes, rules and regulations relating to air quality, water
quality, waste management, natural resources and health and safety. Compliance
with these legal requirements requires us to commit significant capital toward
environmental monitoring, installation of pollution control equipment, emission
fees and permits at all of our facilities. These expenditures have been
significant in the past and we expect that they will increase in the future.
Costs of compliance with environmental regulations could harm our industry, our
business and our results of operations and financial position, especially if
emission and/or discharge limits are tightened, more extensive permitting
requirements are imposed, additional substances become regulated and the number
and types of assets we operate increase.
o Governmental authorities may assess penalties on us for failures to comply
with environmental laws and regulations.
If we fail to comply with environmental laws and regulations, even if
caused by factors beyond our control, that failure may result in the assessment
of civil or criminal penalties and fines against us. Recent lawsuits by the EPA
and various states filed against certain of our affiliate utility companies
highlight the environmental risks faced by generating facilities, in general,
and coal-fired generating facilities, in particular.
PROSPECTUS SUPPLEMENTS
We may provide information to you about the notessecurities in up to three separate documents that progressively provide more detail: (a) this prospectus provides general information some of which may not apply to your notes,securities; (b) the accompanying prospectus supplement provides more specific terms of your notes,securities; and (c) if not included in the accompanying prospectus supplement, thea pricing supplement will provide the final terms of your notes.securities. It is important for you to consider the information contained in this prospectus, the prospectus supplement and any pricing supplement in making your investment decision.
RATIO OF EARNINGS TO FIXED CHARGES
The Ratio of Earnings to Fixed Charges for each of
RISK FACTORS
Investing in our securities involves risk. Please see the periods indicated
is as follows:
Twelve Months
Period Ended Ratio
December 31, 1997 3.46
December 31, 1998 3.52
December 31, 1999 2.95
December 31, 2000 2.56
December 31, 2001 3.20
June 30, 2002 3.01
For current information on the Ratio of Earnings to Fixed Charges, please
seerisk factors described in our most recent Annual Report on Form 10-K and 10-Q. See Where You Can Find More Information.
all subsequent Quarterly Reports on Form 10-Q, which are incorporated by reference in this prospectus. Before making an investment decision, you should carefully consider these risks as well as other information contained or incorporated by reference in this prospectus. The risks and uncertainties described are those presently known to us. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also impair our business operations, our financial results and the value of our securities.
WHERE YOU CAN FIND MORE INFORMATION
This prospectus is part of a registration statement we filed with the SEC.Securities and Exchange Commission (“SEC”). We also file annual, quarterly and special reports and other information with the SEC. You may read and copy any document we file at the SEC'sSEC’s Public Reference Room at 450 Fifth100 F Street N.W.N.E., Room 1580, Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the Public Reference Room.public reference rooms. You may also examine our SEC filings through the SEC'sSEC’s web site at http://www.sec.gov.
The SEC allows us to "incorporate“incorporate by reference"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 considered to be part of this prospectus, and later information that we file with the SEC will automatically update and supersede this information. We incorporate by reference the documentdocuments listed below and any future filings made with the SEC under Sections 13(a), 13(c), 14, or 15(d) of the Securities Exchange Act of 1934 (including any documents filed after the date of the initial registration statement and prior to its effectiveness) until we sell all the notes.
Annual Report on Form 10-K for the year ended December 31, 2001.
Quarterly Reports on Form 10-Q for the quarters ended March 31, 2002 and
June 30, 2002; and
Current Report on Form 8-K dated June 20, 2002.
· | Annual Report on Form 10-K for the year ended December 31, 2006; |
· | Quarterly Reports on Form 10-Q for the quarters ended March 31, 2007 and June 30, 2007; and |
· | Current Report on Form 8-K filed January 12, 2007. |
You may request a copy of these filings, at no cost, by writing or telephoning us at the following address:
Mr.
Ms. R. Todd Rimmer
Buonavolonte
American Electric Power Service Corporation
1 Riverside Plaza
Columbus, Ohio 43215
614-223-1000
614-716-1000
You should rely only on the information incorporated by reference or provided in this prospectus or any supplement.supplement and in any written communication from us or any underwriter specifying the final terms of the particular offering. We have not authorized anyone else to provide you with different information. We are not making an offer of these notes in any state where the offer is not permitted. You should not assume that the information in this prospectus or any supplement is accurate as of any date other than the date on the front of those documents.
RATIO OF EARNINGS TO FIXED CHARGES
The Ratio of Earnings to Fixed Charges for each of the periods indicated is as follows:
Twelve Months Period Ended | Ratio |
| |
December 31, 2002 | 2.95 |
December 31, 2003 | 3.12 |
December 31, 2004 | 3.19 |
December 31, 2005 | 3.04 |
December 31, 2006 | 3.18 |
June 30, 2007 | 2.16 |
| |
The Ratio of Earnings to Fixed Charges for the six months ended June 30, 2007 was 1.35. For current information on the Ratio of Earnings to Fixed Charges, please see our most recent Form 10-K and 10-Q. See Where You Can Find More Information on page 2.
USE OF PROCEEDS
Unless otherwise stated in a prospectus supplement, the net proceeds from the sale of the notessecurities will be used for funding our construction program and for other general corporate purposes relating to our utility business. These purposes may include redeeming or repurchasing outstanding debt (including the repayment of advances from affiliates) or preferred stock and replenishing working capital. If we do not use the net proceeds immediately, we will temporarily invest them in short-term, interest-bearing obligations. We estimate that our construction costs in 20022007 will approximate $111,900,000.$537 million. At June 30, 2002, our outstanding short-term debt
was $65,073,000.
August 14, 2007, we had $74,000,000 in advances from affiliates outstanding.
DESCRIPTION OF THE SENIOR NOTES
General
We will issue the notesSenior Notes under the Indenture dated February 25, 2000 (as previously supplemented and amended) between us and the Trustee, The Bank of New York. This prospectus briefly outlines some provisions of the Indenture. If you would like more information on these provisions, you should review the Indenture and any supplemental indentures that we have filed or will file with the SEC. See Where You Can Find More Information on how to locate these documents. You may also review these documents at the Trustee's offices at 5 Penn Plaza,101 Barclay Street, New York, New York.
The Indenture does not limit the amount of notesSenior Notes that may be issued. The Indenture permits us to issue notesSenior Notes in one or more series or tranches upon the approval of our board of directors pursuant to anyand as described in one or more company orders or supplemental indentures. Each series of notesSenior Notes may differ as to their terms. The notesIndenture also gives us the ability to reopen a previous issue of a series of Senior Notes and issue additional Senior Notes of such series.
The Senior Notes are unsecured and will rank equally with all our unsecured unsubordinated debt. Substantially all of our fixed properties and franchises
are subject to the lien of our first mortgage bonds issued under and secured by
a Mortgage and Deed of Trust, dated as of February 1, 1940 (as previously
supplemented and amended) between us and The Bank of New York, as trustee. For current information on our debt outstanding see our most recent Form 10-K and Form 10-Q. See Where You Can Find More Information.
Information.
The notesSenior Notes will be denominated in U.S. dollars and we will pay principal and interest in U.S. dollars. Unless an applicable pricing or prospectus supplement states otherwise, the notesSenior Notes will not be subject to any conversion, amortization, or sinking fund. We expect that the notesSenior Notes will be "book-entry,"“book-entry,” represented by a permanent global note registered in the name of The Depository Trust Company, or its nominee. We reserve the right, however, to issue noteSenior Note certificates registered in the name of the noteholders.
In the discussion that follows, whenever we talk about paying principal on the notes,Senior Notes, we mean at maturity or redemption. Also, in discussing the time for notices and how the different interest rates are calculated, all times are New York City time and all references to New York mean the City of New York, unless otherwise noted.
The following terms may apply to each noteSenior Note as specified in the applicable pricing or prospectus supplement and the note.
Senior Note. If we decide to list upon issuance any Senior Note or Senior Notes on a securities exchange, a prospectus supplement or pricing supplement will identify the exchange and state when we expect trading could begin.
| - | Mature 9 months to 50 years |
| - | Fixed or floating interest rate |
| - | Remarketing features |
| - | Certificate or book-entry form |
| - | Subject to redemption |
| - | Not convertible, amortized or subject to a sinking fund |
| - | Interest paid on fixed rate Senior Notes quarterly or semi-annually |
| - | Interest paid on floating rate Senior Notes monthly, quarterly, semi-annually, or annually |
| - | Issued in multiples of a minimum denomination |
Redemptions
If we issue redeemable notes,Senior Notes, we may redeem such notesSenior Notes at our option unless an applicable pricing or prospectus supplement states otherwise. The pricing or prospectus supplement will state the terms of redemption. We may redeem notesSenior Notes in whole or in part by delivering written notice to the noteholders no more than 60, and not less than 30, days prior to redemption. If we do not redeem all the notesSenior Notes of a series at one time, the Trustee selects the notesSenior Notes to be redeemed in a manner it determines to be fair.
Remarketed Senior Notes
If we issue notesSenior Notes with remarketing features, an applicable pricing or prospectus supplement will describe the terms for the notesSenior Notes including: interest rate, remarketing provisions, our right to redeem notes,Senior Notes, the holders'holders’ right to tender notes,Senior Notes, and any other provisions.
Book-Entry Notes - Registration, Transfer, and Payment of
Interest and Principal
Unless otherwise stated in a prospectus supplement, book-entry notes of a
series will be issued in the form of a global note that the Trustee will deposit
with The Depository Trust Company, New York, New York ("DTC"). This means that
we will not issue note certificates to each holder. One or more global notes
will be issued to DTC who will keep a computerized record of its participants
(for example, your broker) whose clients have purchased the notes. The
participant will then keep a record of its clients who purchased the notes.
Unless it is exchanged in whole or in part for a note certificate, a global note
may not be transferred; except that DTC, its nominees, and their successors may
transfer a global note as a whole to one another.
Beneficial interests in global notes will be shown on, and transfers of
global notes will be made only through, records maintained by DTC and its
participants.
DTC has provided us the following information: 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 United States
Federal Reserve System, a "clearing corporation" within the meaning of the New
York Uniform Commercial Code and a "clearing agency" registered under the
provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds
securities that its participants ("Direct Participants") deposit with DTC. DTC
also records the settlement among Direct Participants of securities
transactions, such as transfers and pledges, in deposited securities through
computerized records for Direct Participants' accounts. This eliminates the need
to exchange note certificates. Direct Participants include securities brokers
and dealers, banks, trust companies, clearing corporations and certain other
organizations.
Other organizations such as securities brokers and dealers, banks and
trust companies that work through a Direct Participant also use DTC's book-entry
system. The rules that apply to DTC and its participants are on file with the
SEC.
A number of its Direct Participants and the New York
Stock Exchange, Inc., The American Stock Exchange, Inc. and
the National Association of Securities Dealers, Inc. own DTC.
We will wire principal and interest payments to DTC's nominee. We and the
Trustee will treat DTC's nominee as the owner of the global notes for all
purposes. Accordingly, we, the Trustee and any paying agent will have no direct
responsibility or liability to pay amounts due on the global notes to owners of
beneficial interests in the global notes.
It is DTC's current practice, upon receipt of any payment of principal or
interest, to credit Direct Participants' accounts on the payment date according
to their respective holdings of beneficial interests in the global notes as
shown on DTC's records. In addition, it is DTC's current practice to assign any
consenting or voting rights to Direct Participants whose accounts are credited
with notes on a record date. The customary practices between the participants
and owners of beneficial interests will govern payments by participants to
owners of beneficial interests in the global notes and voting by participants,
as is the case with notes held for the account of customers registered in
"street name." However, payments will be the responsibility of the participants
and not of DTC, the Trustee or us.
According to DTC, the foregoing information with respect to DTC has been
provided to the Direct Participants and other members of the financial community
for informational purposes only and is not intended to serve as a
representation, warranty or contract modification of any kind.
Notes represented by a global note will be exchangeable for note
certificates with the same terms in authorized denominations only if:
- - DTC notifies us that it is unwilling or unable to continue as depositary
or if DTC ceases to be a clearing agency registered under applicable law
and a successor depositary is not appointed by us within 90 days; or
- - we determine not to require all of the notes of a series
to be represented by a global note and notify the Trustee
of our decision.
Note Certificates-Registration, Transfer, and Payment of Interest and Principal
If we issue noteSenior Note certificates, they will be registered in the name of the noteholder. The notesSenior Notes may be transferred or exchanged, pursuant to administrative procedures in the indenture,Indenture, without the payment of any service charge (other than any tax or other governmental charge) by contacting the paying agent. Payments on noteSenior Note certificates will be made by check.
Interest Rate
The interest rate on the notesSenior Notes will either be fixed or floating. The interest paid will include interest accrued to, but excluding, the date of maturity or redemption. Interest is generally payable to the person in whose name the noteSenior Note is registered at the close of business on the record date before each interest payment date. Interest payable at maturity or redemption, however, will be payable to the person to whom principal is payable.
If
Unless an applicable pricing or prospectus supplement states otherwise, if we issue a noteSenior Note after a record date but on or prior to the related interest payment date, we will pay the first interest payment on the interest payment date after the next record date. We will pay interest payments by check or wire transfer, at our option.
Fixed Rate Notes
A pricing or prospectus supplement will designate the record dates, payment dates and the fixed rate of interest payable on a note.Senior Note. We will pay interest monthly, quarterly or semi-annually, and upon maturity or redemption. Unless an applicable pricing or prospectus supplement states otherwise, if any payment date falls on a day that is not a business day, we will pay interest on the next business day and no additional interest will be paid. Interest payments will be the amount of interest accrued to, but excluding, each payment date. Interest will be computed using a 360-day year of twelve 30-day months.
Floating Rate Notes
Each floating rate Senior Note will have an interest rate formula. The applicable pricing supplement will state the initial interest rate or interest rate formula on each Senior Note effective until the first interest reset date. The applicable pricing or prospectus supplement will state the method and dates on which the interest rate will be determined, reset and paid.
Events of Default
"Event of Default" means any of the following:
| - | failure to pay the principal of (or premium, if any, on) any Senior Note of a series for three days after payment is due; |
- | failure to pay any interest on any Senior Note of any series for 30 days after payment is due; |
- | failure to perform any other requirements in such Senior Notes, or in the Indenture in regard to such Senior Notes, for 90 days after notice; |
| - | failure to pay any sinking fund installment for three days after payment is due; |
- | certain events of bankruptcy or insolvency; or |
- | any other event of default specified in a series of Senior Notes. |
An Event of Default for a particular series of Senior Notes does not necessarily mean that an Event of Default has occurred for any other series of Senior Notes issued under the Indenture. If an Event of Default occurs and continues, the Trustee or the holders of at least 33% of the principal amount of the Senior Notes of the series affected may require us to repay the entire principal of the Senior Notes of such series within ten days after the date of such notice ("Repayment Acceleration"). In most instances, the holders of at least a majority in aggregate principal amount of the Senior Notes of the affected series may rescind a previously triggered Repayment Acceleration if we have first cured our default by depositing with the Trustee enough money to pay all (unaccelerated) past due amounts and penalties, if any.
The Trustee must within 90 days after a default occurs, notify the holders of the Senior Notes of the series of default unless such default has been cured or waived. We are required to file an annual certificate with the Trustee, signed by an officer, concerning any default by us under any provisions of the Indenture.
Subject to the provisions of the Indenture relating to its duties in case of default, the Trustee shall be under no obligation to exercise any of its rights or powers under the Indenture at the request, order or direction of any holders unless such holders offer the Trustee reasonable indemnity. Subject to the provisions for indemnification, the holders of a majority in principal amount of the Senior Notes of any series may direct the time, method and place of conducting any proceedings for any remedy available to, or exercising any trust or power conferred on, the Trustee with respect to such Senior Notes.
Modification of Indenture
Under the Indenture, our rights and obligations and the rights of the holders of any Senior Notes may be changed. Any change affecting the rights of the holders of any series of Senior Notes requires the consent of the holders of not less than a majority in aggregate principal amount of the outstanding Senior Notes of all series affected by the change, voting as one class. However, we cannot change the terms of payment of principal or interest, or a reduction in the percentage required for changes or a waiver of default, unless the holder consents. We may issue additional series of Senior Notes and take other action that does not affect the rights of holders of any series by executing supplemental indentures without the consent of any noteholders.
Consolidation, Merger or Sale
We may merge or consolidate with any entity or sell substantially all of our assets as an entirety as long as the successor or purchaser expressly assumes the payment of principal, and premium, if any, and interest on the Senior Notes.
Legal Defeasance
We will be discharged from our obligations on the Senior Notes of any series on the 91st day after the date of the deposit referred to in the first item below if, among other things:
- | we deposit with the Trustee sufficient cash or government securities to pay (i) the principal, interest, any premium and any other sums due to the stated maturity date or a redemption date of the Senior Note of the series and (ii) any applicable mandatory sinking fund payments on the day such payments are due; |
- | we deliver to the Trustee an opinion of counsel to the effect that such provision would not cause any outstanding Senior Notes then listed on a national security exchange to be delisted; and |
- | we deliver to the Trustee an opinion of counsel stating that the federal income tax obligations of noteholders of that series will not change as a result of our performing the action described above. |
If this happens, the noteholders of the series will not be entitled to the benefits of the Indenture except for registration of transfer and exchange of Senior Notes and replacement of lost, stolen or mutilated Senior Notes.
Covenant Defeasance
We will be discharged from our obligations under any restrictive covenant applicable to the Senior Notes of a particular series if we perform both actions described above. See Legal Defeasance. If this happens, any later breach of that particular restrictive covenant will not result in Repayment Acceleration. If we cause an Event of Default apart from breaching that restrictive covenant, there may not be sufficient money or government obligations on deposit with the Trustee to pay all amounts due on the Senior Notes of that series. In that instance, we would remain liable for such amounts.
Governing Law
The Indenture and Senior Notes of all series will be governed by the laws of the State of New York.
Concerning the Trustee
We and our affiliates use or will use some of the banking services of the Trustee and other services of its affiliates in the normal course of business.
DESCRIPTION OF THE JUNIOR SUBORDINATED DEBENTURES
General
We will issue the Junior Subordinated Debentures under the Indenture dated September 1, 2003 (as previously supplemented and amended) between us and the Subordinated Indenture Trustee, The Bank of New York. This prospectus briefly outlines some provisions of the Subordinated Indenture. If you would like more information on these provisions, you should review the Subordinated Indenture and any supplemental indentures or company orders that we will file with the SEC. See Where You Can Find More Information on how to locate these documents.
The Junior Subordinated Debentures are unsecured obligations and are junior in right of payment to “Senior Indebtedness”. You may find a description of the subordination provisions of the Junior Subordinated Debentures, including a description of Senior Indebtedness under Subordination.
The Subordinated Indenture does not limit the amount of Junior Subordinated Debentures that we may issue under it. We may issue Junior Subordinated Debentures from time to time under the Subordinated Indenture in one or more series by entering into supplemental indentures or by our Board of Directors or a duly authorized committee authorizing the issuance. The Subordinated Indenture also gives us the ability to reopen a previous issue of a series of Junior Subordinated Debentures and issue additional Junior Subordinated Debentures of such series.
A prospectus supplement will include the final terms for each Junior Subordinated Debenture. If we decide to list upon issuance any Junior Subordinated Debenture or Junior Subordinated Debentures on a securities exchange, a prospectus supplement or pricing supplement will identify the exchange and state when we expect trading could begin. The following terms of the Junior Subordinated Debentures that we may sell at one or more times will be established in a prospectus supplement:
- Maturity
- Fixed or floating interest rate
- Remarketing features
- Certificate or book-entry form
- Redemption
- Not convertible, amortized or subject to a sinking fund
| - | Interest paid on fixed rate Junior Subordinated Debentures quarterly or semi-annually |
| - | Interest paid on floating rate Junior Subordinated Debentures monthly, quarterly, semi-annually, or annually |
- Issued in multiples of a minimum denomination
- Ability to defer interest payments
- Any other terms not inconsistent with the Subordinated Indenture
- Issued with Original Issue Discount
The interest rate and interest and other payment dates of each series of Junior Subordinated Debentures issued to a trust will correspond to the rate at which distributions will be paid and the distribution and other payment dates of the Trust Preferred Securities.
The Subordinated Indenture does not protect the holders of Junior Subordinated Debentures if we engage in a highly leveraged transaction.
Redemption
Provisions relating to the redemption of Junior Subordinated Debentures will be set forth in the applicable prospectus supplement. Unless we state otherwise in the applicable prospectus supplement, we may redeem Junior Subordinated Debentures only upon notice mailed at least 30 but not more than 60 days before the date fixed for redemption. If we do not redeem all the Junior Subordinated Debentures of a series at one time, the Subordinated Indenture Trustee selects those to be redeemed in a manner it determines to be fair.
Remarketed Junior Subordinated Debentures
If we issue Junior Subordinated Debentures with remarketing features, an applicable pricing or prospectus supplement will describe the terms for the Junior Subordinated Debentures including: interest rate, remarketing provisions, our right to purchase or redeem Junior Subordinated Debentures, the holders’ right to tender Junior Subordinated Debentures, and any other provisions.
Junior Subordinated Debenture Certificates-Registration, Transfer, and Payment of Interest and Principal
Unless otherwise indicated in the applicable prospectus supplement, each series of Junior Subordinated Debentures issued to the public initially will be in the form of one or more global Junior Subordinated Debentures, in registered form, without coupons, as described under Book-Entry System. However, if we issue Junior Subordinated Debenture certificates, they will be registered in the name of the Junior Subordinated Debentureholder. The Junior Subordinated Debentures may be transferred or exchanged, pursuant to administrative procedures in the Subordinated Indenture, without the payment of any service charge (other than any tax or other governmental charge) by contacting the paying agent. Payments to public holders of Junior Subordinated Debenture certificates will be made by check.
Original Issue Discount
We may issue the Junior Subordinated Debentures at an original issue discount, bearing no interest or bearing interest at a rate that, at the time of issuance, is below market rate, to be sold at a substantial discount below their stated principal amount. Generally speaking, if the Junior Subordinated Debentures are issued at an original issue discount and there is an event of default or acceleration of their maturity, holders will receive an amount less than their principal amount. Tax and other special considerations applicable to original issue discount debt will be described in the prospectus supplement in which we offer those Junior Subordinated Debentures.
Interest Rate
The interest rate on the Junior Subordinated Debentures will either be fixed or floating. The interest paid will include interest accrued to, but excluding, the date of maturity or redemption. Interest is generally payable to the person in whose name the Junior Subordinated Debenture is registered at the close of business on the record date before each interest payment date. Interest payable at maturity or redemption, however, will be payable to the person to whom principal is payable.
If we issue a Junior Subordinated Debenture after a record date but on or prior to the related interest payment date, we will pay the first interest payment on the interest payment date after the next record date. We will pay interest payments by check or wire transfer, at our option.
For a discussion of our ability to defer interest payments on the Junior Subordinated Debentures, see Description of Trust Preferred Securities–Option to Extend Interest Payment Period.
Fixed Rate Junior Subordinated Debentures
A pricing or prospectus supplement will designate the record dates, payment dates, our ability to defer interest payments and the fixed rate of interest payable on a Junior Subordinated Debenture. We will pay interest quarterly or semi-annually, and upon maturity or redemption. Unless an applicable pricing or prospectus supplement states otherwise, if any payment date falls on a day that is not a business day, we will pay interest on the next business day and no additional interest will be paid. Interest payments will be the amount of interest accrued to, but excluding, each payment date. Interest will be computed using a 360-day year of twelve 30-day months.
Floating Rate Notes
Junior Subordinated Debentures
Each floating rate noteJunior Subordinated Debenture will have an interest rate formula. The applicable prospectus supplement or pricing supplement will state the initial interest rate or interest rate formula on each noteJunior Subordinated Debenture effective until the first interest reset date. The applicable pricing or prospectus supplement will state the method and dates on which the interest rate will be determined, reset and paid.
Events of Default
"Event
The following are events of Default" means any ofdefault under the following:
failureSubordinated Indenture with respect to pay the principal of (or premium, if any, on)
any note of a series for three days after payment is due;
failure to pay any interest on any note of any series for
30 days after payment is due;
failure to perform any other requirements in such notes,
orof Junior Subordinated Debentures, unless we state otherwise in the Indenture in regard to such notes, for 90 days
after notice;
failure to pay any sinking fund installment for three
days after payment is due;
applicable prospectus supplement:
- | failure to pay for three business days the principal of (or premium, if any, on) any Junior Subordinated Debenture of a series when due and payable; |
- | failure to pay for 30 days any interest on any Junior Subordinated Debenture of any series when due and payable; |
- | failure to perform any other requirements in such Junior Subordinated Debentures, or in the Subordinated Indenture, for 90 days after notice; |
- | certain events of our bankruptcy or insolvency; or |
- any other event of default specified in a series of notes.
Junior Subordinated Debentures.
An Eventevent of Defaultdefault for a particular series of notesJunior Subordinated Debentures does not necessarily mean that an Eventevent of Defaultdefault has occurred for any other series of notesJunior Subordinated Debentures issued under the Subordinated Indenture. If an Eventevent of Defaultdefault occurs and continues, the Subordinated Indenture Trustee or the holders of at least 33% of the principal amount of the notesJunior Subordinated Debentures of the series affected may require us to repay the entire principal of the notesJunior Subordinated Debentures of such series within ten days after the date of such notice ("immediately (“Repayment Acceleration"Acceleration”). In most instances, the holders of at least a majority in aggregate principal amount of the notesJunior Subordinated Debentures of the affected series may rescind a previously triggered Repayment Acceleration. However, if we cause an event of default because we have failed to pay (unaccelerated) principal, premium, if any, or interest, Repayment Acceleration may be rescinded only if we have first cured our default by depositing with the Subordinated Indenture Trustee enough money to pay all (unaccelerated) past due amounts and penalties, if any.
The Subordinated Indenture Trustee must within 90 days after a default occurs, notify the holders of the notesJunior Subordinated Debentures of the series of default unless such default has been cured or waived. We are required to file an annual certificate with the Subordinated Indenture Trustee, signed by an officer, concerning any default by us under any provisions of the Subordinated Indenture.
In the case of Junior Subordinated Debentures issued to a trust, a holder of Trust Preferred Securities may institute a legal proceeding directly against us without first instituting a legal proceeding against the Property Trustee of the trust by which those Trust Preferred Securities were issued or any other person or entity, for enforcement of payment to that holder of principal or interest on an equivalent amount of Junior Subordinated Debentures of the related series on or after the due dates specified in those Junior Subordinated Debentures.
Subject to the provisions of the Subordinated Indenture relating to its duties in case of default, the Subordinated Indenture Trustee shall be under no obligation to exercise any of its rights or powers under the Subordinated Indenture at the request, order or direction of any holders unless such holders offer the Subordinated Indenture Trustee reasonable indemnity. Subject to the provisions for indemnification, the holders of a majority in principal amount of the notesJunior Subordinated Debentures of any series may direct the time, method and place of conducting any proceedings for any remedy available to, or exercising any trust or power conferred on, the Subordinated Indenture Trustee with respect to such notes.
Junior Subordinated Debentures.
Modification of Subordinated Indenture
Under the Subordinated Indenture, our rights and obligations and the rights of the holders of any notesJunior Subordinated Debentures may be changed. Any change affecting the rights of the holders of any series of notesJunior Subordinated Debentures requires the consent of the holders of not less than a majority in aggregate principal amount of the outstanding notesJunior Subordinated Debentures of all series affected by the change, voting as one class. However, we cannot change the terms of payment of principal or interest, or a reduction in the percentage required for changes or a waiver of default, unless the holder consents. We may issue additional series of notesJunior Subordinated Debentures and take other action that does not affect the rights of holders of any series by executing supplemental indentures without the consent of any noteholders.
debentureholders.
Consolidation, Merger or Sale
We may merge or consolidate with any entity or sell substantially all of our assets
substantially as an entirety as long as the successor or purchaser expressly assumes the payment of principal, and premium, if any, and interest on the notes.
Junior Subordinated Debentures.
Legal Defeasance
We will be discharged from our obligations on the notesJunior Subordinated Debentures of any series on
the 91st day after the date of the deposit referred to in the first item below
if, among other things:
- - we deposit with the Trustee sufficient cash or government securities to
pay (i) the principal, interest,at any premium and any other sums due to the
stated maturity date or a redemption date of the note of the series and
(ii) any applicable mandatory sinking fund payments on the day such
payments are due;
- - we deliver to the Trustee an opinion of counsel to the effect that such
provision would not cause any outstanding notes then listed on a national
security exchange to be delisted; and
- - we deliver to the Trustee an opinion of counsel stating that the federal
income tax obligations of noteholders of that series will not change as a
result of our performing the action described above.
time if:
- | we deposit with the Trustee sufficient cash or government securities to pay the principal, interest, any premium and any other sums due to the stated maturity date or a redemption date of the Junior Subordinated Debenture of the series, and |
- | we deliver to the Trustee an opinion of counsel stating that the federal income tax obligations of debentureholders of that series will not change as a result of our performing the action described above. |
If this happens, the noteholdersdebentureholders of the series will not be entitled to the benefits of the Subordinated Indenture except for registration of transfer and exchange of notesJunior Subordinated Debentures and replacement of lost, stolen or mutilated notes.
Junior Subordinated Debentures.
Covenant Defeasance
We will be discharged from our obligations under certainany restrictive covenantscovenant applicable to the notesJunior Subordinated Debentures of a particular series if among other things,
we perform all of theboth actions described above. See Legal Defeasance.Defeasance. If this happens, any later breach of that particular restrictive covenant will not result in Repayment Acceleration. If we cause an Eventevent of Defaultdefault apart from breaching that restrictive covenant, there may not be sufficient money or government obligations on deposit with the Subordinated Indenture Trustee to pay all amounts due on the notesJunior Subordinated Debentures of that series. In that instance, we would remain liable for such amounts.
Junior Subordinated Debentures issued to a trust will not be subject to covenant defeasance.
Subordination
Each series of Junior Subordinated Debentures will be subordinate and junior in right of payment, to the extent set forth in the Subordinated Indenture, to all Senior Indebtedness as defined below. If:
- | we make a payment or distribution of any of our assets to creditors upon our dissolution, winding-up, liquidation or reorganization, whether in bankruptcy, insolvency or otherwise; |
- | a default beyond any grace period has occurred and is continuing with respect to the payment of principal, interest or any other monetary amounts due and payable on any Senior Indebtedness; or |
| - | the maturity of any Senior Indebtedness has been accelerated because of a default on that Senior Indebtedness, |
then the holders of Senior Indebtedness generally will have the right to receive payment, in the case of the first instance, of all amounts due or to become due upon that Senior Indebtedness, and, in the case of the second and third instances, of all amounts due on that Senior Indebtedness, or we will make provision for those payments, before the holders of any Junior Subordinated Debentures have the right to receive any payments of principal or interest on their Junior Subordinated Debentures.
“Senior Indebtedness” means, with respect to any series of Junior Subordinated Debentures, the principal, premium, interest and any other payment in respect of any of the following:
- | all of our indebtedness that is evidenced by notes, debentures, bonds or other securities we sell for money or other obligations for money borrowed, other than outstanding junior subordinated debentures issued pursuant to the Indenture dated as of September 1, 2003; |
- | all indebtedness of others of the kinds described in the preceding category which we have assumed or guaranteed or which we have in effect guaranteed through an agreement to purchase, contingent or otherwise; and |
| - | all renewals, extensions or refundings of indebtedness of the kinds described in either of the preceding two categories. |
Any such indebtedness, renewal, extension or refunding, however, will not be Senior Indebtedness if the instrument creating or evidencing it or the assumption or Guarantee of it provides that it is not superior in right of payment to or is equal in right of payment with those Junior Subordinated Debentures. Senior Indebtedness will be entitled to the benefits of the subordination provisions in the Subordinated Indenture irrespective of the amendment, modification or waiver of any term of the Senior Indebtedness.
The Subordinated Indenture does not limit the amount of Senior Indebtedness that we may issue. As of June 30, 2007, our Senior Indebtedness (which includes our first mortgage bonds) totaled approximately $856 million.
Governing Law
The Subordinated Indenture and notesJunior Subordinated Debentures of all series will be governed by the laws of the State of New York.
Concerning the Trustee
We and our affiliates use or will use some of the banking services of the Subordinated Indenture Trustee and other services of its affiliates in the normal course of business. The Subordinated Trustee is also the Trustee under the Indenture relating to the Senior Notes.
BOOK-ENTRY SECURITIES – REGISTRATION,
TRANSFER, AND PAYMENT OF INTEREST AND PRINCIPAL
Unless otherwise stated in a prospectus supplement, the Depository Trust Company (“DTC”), New York, New York, will act as securities depository for the securities. The securities will be issued as fully-registered securities registered in the name of Cede & Co. (DTC’s partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully-registered security certificate will be issued for each issue of the securities, each in the aggregate principal amount of such issue, and will be deposited with DTC.
DTC is a limited-purpose trust company organized under the New York Banking Law, a “banking organization” within the meaning of the New York Banking Law, a member of the Federal Reserve System, a “clearing corporation” within the meaning of the New York Uniform Commercial Code, and a “clearing agency” registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934, as amended. DTC holds and provides asset servicing for over 2.2 million issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market instruments from over 100 countries that DTC’s participants (“Direct Participants”) deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between Direct Participants’ accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation (“DTCC”). DTCC, in turn, is owned by a number of Direct Participants of DTC and Members of the National Securities Clearing Corporation, Fixed Income Clearing Corporation, and Emerging Markets Clearing Corporation, (NSCC, FICC and EMCC, also subsidiaries of DTCC), as well as by the New York Stock Exchange, Inc., the American Stock Exchange LLC and the National Association of Securities Dealers, Inc. Access to the DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly (“Indirect Participants”, and together with Direct Participants, “Participants”). DTC has Standard & Poor’s highest rating: AAA. The DTC Rules applicable to DTC and its Participants are on file with the SEC. More information about DTC can be found at www.dtcc.com and www.dtc.org.
Purchases of securities under the DTC system must be made by or through Direct Participants, which will receive a credit for the securities on DTC’s records. The ownership interest of each actual purchaser of each security (“Beneficial Owner”) is in turn to be recorded on the Direct and Indirect Participants’ records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the securities are to be accomplished by entries made on the books of Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in securities, except in the event that use of the book-entry system for the securities is discontinued.
To facilitate subsequent transfers, all securities deposited by Direct Participants with DTC are registered in the name of DTC’s partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of securities with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the securities; DTC’s records reflect only the identity of the Direct Participants to whose accounts such securities are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of securities may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the securities, such as redemptions, tenders, defaults and proposed amendments to the securities documents. For example, Beneficial Owners of securities may wish to ascertain that the nominee holding the securities for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the registrar and request that copies of notices by provided directly to them.
Redemption notices shall be sent to DTC. If less than all of the securities are being redeemed, DTC’s current practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed.
Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to the securities unless authorized by a Direct Participant in accordance with DTC’s procedures. Under its usual procedures, DTC mails an Omnibus Proxy to us as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.’s consenting or voting rights to those Direct Participants to whose accounts the securities are credited on the record date (identified in a listing attached to the Omnibus Proxy).
Principal and interest payments on the securities will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC’s practice is to credit Direct Participants’ accounts upon DTC’s receipt of funds and corresponding detail information from us or the Trustee on the payable date in accordance with their respective holdings shown on DTC’s records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in “street name”, and will be the responsibility of such Participant and not of DTC, the Trustee or us, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of principal and interest payments to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is our or the Trustee’s responsibility, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants.
A Beneficial Owner shall give notice to elect to have its securities purchased or tendered, through its Participant, to the Tender/Remarketing Agent, and shall effect delivery of such securities by causing the Direct Participant to transfer the Participant’s interest in the securities, on DTC’s records, to the Tender/Remarketing Agent. The requirement for physical delivery of the securities in connection with an optional tender or a mandatory purchase will be deemed satisfied when the ownership rights in the securities are transferred by Direct Participants on DTC’s records and followed by a book-entry credit of tendered securities to the Tender/Remarketing Agent’s DTC account.
DTC may discontinue providing its services as depository with respect to the securities at any time by giving reasonable notice to us. Under such circumstances, in the event that a successor depository is not obtained, security certificates are required to be printed and delivered.
We may decide to discontinue use of the system of book-entry transfers through DTC (or a successor securities depository). In that event, security certificates will be printed and delivered.
The information in this section concerning DTC and DTC’s book-entry system has been obtained from sources that we believe to be reliable, but we take no responsibility for the accuracy thereof.
PLAN OF DISTRIBUTION
We may sell the notessecurities (a) through agents; (b) through underwriters or dealers; or (c) directly to one or more purchasers.
By Agents
Notes
Securities may be sold on a continuing basis through agents designated by us. The agents will agree to use their reasonable efforts to solicit purchases for the period of their appointment.
The Agents will not be obligated to make a market in the notes.securities. We cannot predict the amount of trading or liquidity of the notes.
securities.
By Underwriters
If underwriters are used in the sale, the underwriters will acquire the notessecurities for their own account. The underwriters may resell the notessecurities in one or more transactions, including negotiated transactions, at a fixed public offering price or at varying prices determined at the time of sale. The obligations of the underwriters to purchase the notessecurities will be subject to certain conditions. The underwriters will be obligated to purchase all the notessecurities of the series offered if any of the notessecurities are purchased. Any initial public offering price and any discounts or concessions allowed or re-allowed or paid to dealers may be changed from time to time.
Direct Sales
We may also sell notessecurities directly. In this case, no underwriters or agents would be involved.
General Information
Underwriters, dealers, and agents that participate in the distribution of the notessecurities may be underwriters as defined in the Securities Act of 1933 (the "Act"“Act”), and any discounts or commissions received by them from us and any profit on the resale of the notessecurities by them may be treated as underwriting discounts and commissions under the Act.
We may have agreements with the underwriters, dealers and agents to indemnify them against certain civil liabilities, including liabilities under the Act.
Act or to contribute to payments that each underwriter, dealer or agent may be required to make in respect thereto.
Underwriters, dealers and agents and their respective affiliates may engage in transactions with, or perform services for, us or our affiliates in the ordinary course of their businesses.
LEGAL OPINIONS
Our counsel, Simpson Thacher & Bartlett, New York, NY,
Jeffrey D. Cross or Thomas G. Berkemeyer, Deputy General Counsel and oneAssociate General Counsel, respectively, of American Electric Power Service Corporation, our lawyersservice company affiliate, will each issue an opinion about the legality of the notessecurities for us. Dewey Ballantine LLP, New York, NY will issue an opinion for the agents or underwriters. From time to time, Dewey Ballantine LLP acts as counsel to our affiliates for some matters.
EXPERTS
The consolidated financial statements and the related consolidated financial statement schedule as of December 31, 2001 and 2000 and for the years
then ended incorporated by reference in this prospectus from the Southwestern Electric Power Company Consolidated Annual Report on Form 10-K for the year ended December 31, 2006 have been audited by Deloitte & Touche LLP, an independent auditors,registered public accounting firm, as stated in their reports (which reports express an unqualified opinion and, as to the report related to the consolidated financial statements, includes an explanatory paragraph concerning the adoption of new accounting pronouncements in 2004 and 2006), which are incorporated herein by reference, herein, and have been so incorporated in reliance upon the reports of such firm given upon their authority as experts in accounting and auditing.
In connection with the audit by Arthur Andersen LLP ("Andersen") of our
consolidated financial statements for the year ended December 31, 1999
incorporated by reference in this prospectus, there were no disagreements
between Andersen and us on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure, which
disagreements if not resolved to the satisfaction of Andersen would have caused
them to make reference thereto in their report on the financial statements for
such year.
We have not been able to obtain, after reasonable efforts, a consent from
Andersen to the inclusion of its report in this prospectus, and we have
dispensed with the requirement to file their consent in reliance upon Rule 437a
of the Securities Act. Because Andersen has not consented to the inclusion of
its report in this prospectus, you will not be able to recover against Andersen
under Section 11 of the Securities Act for any untrue statements of a material
fact contained in the financial statements audited by Andersen or any omissions
to state a material fact required to be stated therein.
Table of Contents
THE COMPANY................... 2
RISK FACTORS.................. 2
PROSPECTUS SUPPLEMENTS........ 13
RATIO OF EARNINGS TO
FIXED CHARGES.............. 13
WHERE YOU CAN FIND MORE
INFORMATION .............. 13
USE OF PROCEEDS .............. 14 $350,000,000 UNSECURED NOTES
DESCRIPTION OF THE NOTES ..... 14
General .................. 14
Redemptions ............... 15
Remarketed Notes........... 15
Book-Entry Notes -
Registration,
Transfer, and Payment of PROSPECTUS
Interest and Principal .. 15
Note Certificates -
Registration,
Transfer, and Payment of
Interest and Principal 17 The date of this
Interest Rate ............. 17 Prospectus is ________ __, 2002
Fixed Rate Notes ....... 17
Floating Rate Notes .... 18
Events of Default.......... 18
Modification of Indenture.. 19
Consolidation,
Merger or Sale.......... 19
Legal Defeasance........... 19
Covenant Defeasance........ 19
Governing Law.............. 20
Concerning the Trustee..... 20
PLAN OF DISTRIBUTION.......... 20
By Agents.................. 20
By Underwriters............ 20
Direct Sales............... 20
General Information........ 21
LEGAL OPINIONS................ 21
EXPERTS....................... 21
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.*
Item 14. | Other Expenses of Issuance and Distribution.* |
Estimation based upon the issuance of all of the unsecured notessecurities in twofour issuances:
Securities and Exchange Commission Filing Fees...........$ 27,600
Printing Registration Statement, Prospectus, etc......... 60,000
Independent Auditors' fees............................... 70,000
Charges of Trustee (including counsel fees).............. 25,000
Legal fees............................................... 160,000
Rating Agency fees....................................... 181,000
Miscellaneous expenses................................... 45,000
Total...............................................$ 568,600
Securities and Exchange Commission Filing Fees | | $ | 20,262 | |
Printing Registration Statement, Prospectus, etc | | | 30,000 | |
Independent Registered Public Accounting Firm | | | 60,000 | |
Charges of Trustee (including counsel fees) | | | 20,000 | |
Legal fees | | | 80,000 | |
Rating Agency fees | | | 280,000 | |
Miscellaneous expenses | | | 25,000 | |
Total | | $ | 515,262 | |
* Estimated, except for filing fees.
Item 15. Indemnification of Directors and Officers.
Item 15. | Indemnification of Directors and Officers. |
The Bylaws of the Company provide that the Company shall indemnify each person who is, was or has agreed to become a director or officer of the Company, or who has agreed to serve as a director, officer, employee or agent of the Company (or any other person or entity) at the request of the Board of Directors against all loss, liability and expenses to the fullest extent permitted by the General Corporation Law of Delaware. Notwithstanding the foregoing, no person shall be indemnified for amounts paid in settlement unless the terms and conditions of such settlement have been consented to by the Company, and no indemnification for employees or agents shall be made without the express authorization of the Board of Directors.
Section 145 of the Delaware General Corporation Law provides that a Delaware corporation may indemnify any persons, including officers and directors, who are, or are threatened to be made, parties to any threatened, pending or completed legal action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of such corporation), by reason of the fact that such person was an officer or director of such corporation, or is or was serving at the request of such corporation as a director, officer, employee or officeragent of another corporation or enterprise. The indemnity may include expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such action, suit or proceeding, provided such officer or director acted in good faith and in a manner he reasonably believed to be in or not opposed to the corporation's best interests and, for criminal proceedings, had no reasonable cause to believe that his conduct was illegal. A Delaware corporation may indemnify officers and directors and in an action by or in the right of the corporation under the same conditions, except that no indemnification is permitted without judicial approval if the officer or director is adjudged to be liable to the corporation. Where an officer or director is successful on the merits or otherwise in the defense of any action referred to above, the corporation must indemnify him against the expenses (including attorney's fees)
which such officer or director actually and reasonably incurred in connection
with such action or proceeding.
incurred.
The above is a general summary of certain provisions of the Company's Bylaws and the Delaware General Corporation Law and is subject in all respects to the specific and detailed provisions of the Company's Bylaws and the Delaware General Corporation Law.
Reference is made to the Selling Agency Agreement and the Underwriting Agreement filed as ExhibitsExhibit 1(a) and 1(b) hereto respectively, which provideprovides for indemnification of the Company, certain of its directors and officers, and persons who control the Company, under certain circumstances.
The Company maintains insurance policies insuring its directors and officers against certain obligations that may be incurred by them.
Item 16. Exhibits.
Reference is made to the information contained in the Exhibit Index filed as part of this Registration Statement.
Item 17. Undertakings.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by section
10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of unsecured notes offered (if the total dollar value
of unsecured notes offered would not exceed that which was registered) and
any deviation from the low or high end of the estimated maximum offering
range may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) of the Securities Act of 1933 if, in the
aggregate, the changes in volume and price represent no more than a 20%
change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective registration
statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement;
Provided, however, that (i) and (ii) do not apply if the registration
statement is on Form S-3, Form S-8 or Form F-3, and the information required to
be included in a post-effective amendment by those paragraphs is contained in
periodic reports filed with or furnished to the Commission by the registrant
pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934
that are incorporated by reference in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
(4) That, for purposes of determining any liability under the Securities
Act of 1933, each filing of the registrant's annual report pursuant to Section
13(a) or Section 15(d) of the Securities Exchange Act of 1934 that is
incorporated by reference in this registration statement shall be deemed to be a
new registration statement relating to the unsecured notes offered, and the
offering thereof at that time shall be deemed to be the initial bona fide
offering thereof.
(5) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the laws of the State of Delaware, the
registrant's bylaws, or otherwise, the registrant has been advised that in the
opinion of the SEC such indemnification is against public policy as expressed in
said Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the unsecured notes, the registrant will, unless in the opinion
of its counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in said Act and will be governed by the
final adjudication of such issue.
(6) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(7) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
SIGNATURES
| (a) | The undersigned registrant hereby undertakes: |
| | | |
| | (1) | To file, during any period in which offers or sales are being made, a post-effective amendment to this Registration Statement: |
| | | | | |
| | | (i) | to include any prospectus required by Section 10(a)(3) of the Securities Act of 1933; | |
| | | | | |
| | | (ii) | to reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement; and | |
| | | | | |
| | | (iii) | to include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement; | |
| | | | | |
| | | provided, however, that (i), (ii) and (iii) do not apply if the information required to be included in a post-effective amendment by those paragraphs is contained in reports filed with or furnished to the Commission by the registrant pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that are incorporated by reference in the registration statement, or is contained in a form of prospectus filed pursuant to Rule 424(b) that is part of the registration statement. |
| | | | | |
| | (2) | That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. | |
| | | | | |
| | (3) | To remove from registration by means of post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. | |
| | | | |
| | (4) | That, for the purpose of determining liability under the Securities Act of 1933 to any purchaser: | |
| | | | | |
| | | (i) | Each prospectus filed by the registrant pursuant to Rule 424(b)(3) shall be deemed to be part of the registration statement as of the date the filed prospectus was deemed part of and included in the registration statement; and | |
| | | | | |
| | | (ii) | Each prospectus required to be filed pursuant to Rule 424(b)(2), (b)(5), or (b)(7) as part of a registration statement in reliance on Rule 430B relating to an offering made pursuant to Rule 415(a)(1)(i), (vii) or (x) for the purpose of providing the information required by Section 10(a) of the Securities Act of 1933 shall be deemed to be part of and included in the registration statement as of the earlier of the date such form of prospectus is first used after effectiveness or the date of the first contract of sale of securities in the offering described in the prospectus. As provided in Rule 430B, for liability purposes of the issuer and any person that is at that date an underwriter, such date shall be deemed to be a new effective date of the registration statement relating to the securities in the registration statement to which that prospectus relates, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such effective date, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such effective date. | |
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| | (5) | That, for the purpose of determining liability of the registrant under the Securities Act of 1933 to any purchaser in the initial distribution of the securities, the undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser: | |
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| | | (i) | Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424; | |
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| | | (ii) | Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant; | |
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| | | (iii) | The portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and | |
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| | | (iv) | Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser. | |
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| (b) | The undersigned registrant hereby undertakes that, for purposes of determining any liability under the Securities Act of 1933, each filing of the registrant’s annual report pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 that is incorporated by reference in this registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. |
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| (c) | Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. |
Pursuant to the requirements of the Securities Act of 1933, the registrant certifies that it has reasonable cause to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Columbus and State of Ohio, on the 18th23rd day of October, 2002.
SOUTHWESTERN ELECTRIC POWER COMPANY
E. Linn Draper, Jr.*
Chairman of the Board and
Chief Executive Officer
August, 2007.
| SOUTHWESTERN ELECTRIC POWER COMPANY |
| |
| Michael G. Morris* |
| Chairman of the Board |
| and Chief Executive Officer |
Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed below by the following persons in the capacities and on the dates indicated.
Signature Title Date
(i) Principal Executive
Officer Chairman of the Board
and Chief Executive
E. Linn Draper, Jr.* Officer October 18, 2002
(ii) Principal Financial
Officer:
_/s/Susan Tomasky_____
Susan Tomasky Vice President October 18, 2002
(iii) Principal Accounting
Officer:
_/s/ Joseph M. Buonaiuto Controller and Chief
Joseph M. Buonaiuto Accounting Officer October 18, 2002
(iv) A Majority of the
Directors:
E. Linn Draper, Jr.*
H. W. Fayne*
T. M. Hagan
A. A. Pena*
Robert P. Powers*
Thomas V. Shockley, III*
Susan Tomasky October 18, 2002
*By_/s/ Susan Tomasky__
(Susan Tomasky, Attorney-in-Fact)
Signature | Title | Date |
| | |
(i) Principal Executive Officer: | | |
Michael G. Morris * | Chairman of the Board and Chief Executive Officer | August 23, 2007 |
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(ii) Principal Financial Officer: | | |
| | |
/s/ Holly Keller Koeppel | Vice President | August 23, 2007 |
Holly Keller Koeppel | and Chief Financial Officer | |
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(iii) Principal Accounting Officer: | | |
| | |
/s/ Joseph M. Buonaiuto | Controller and Chief Accounting Officer | August 23, 2007 |
Joseph M. Buonaiuto | | |
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(iv) A Majority of the Directors: | | |
| | |
Michael G. Morris* | | |
Nicholas K. Akins | | |
Carl L. English* | | |
Thomas M. Hagan | | |
John B. Keane* | | |
Holly K. Koeppel* | | |
Stephen P. Smith* | | |
Susan Tomasky* | | |
Dennis E. Welch* | | |
* By /s/ Stephan T. Haynes | | August 23, 2007 |
(Stephan T. Haynes, Attorney-in-Fact) | | |
EXHIBIT INDEX
Certain of the following exhibits, designated with an asterisk (*asterisk(*), are
filed herewith. The exhibits not so designated have heretofore been filed with the Commission and, pursuant to 17 C.F.R. Sections 201.24 and 230.411, are incorporated herein by reference to the documents indicated following the descriptions of such exhibits.
Exhibit No. Description
* 1(a) Copy of proposed form of Selling Agency Agreement for the
unsecured notes.
* 1(b) Copy of proposed form of Underwriting Agreement for the
unsecured notes.
4(a) Copy of Indenture, dated as of February 25, 2000, between the
Company and The Bank of New York, as Trustee [Registration
Statement No. 333-87834, Exhibits 4(a) and 4(b)].
4(b) Copy of Second Supplemental Indenture, dated June 26, 2002,
establishing certain terms of the 4.50% Senior Notes, Series B,
Due 2005 [Form 8-K of the Company filed on June 26, 2002, File
No. 1-3146, Exhibit 4 (b)].
* 4(c) Copy of proposed form of Third Supplemental Indenture for the
unsecured notes.
* 5 Opinion of Simpson Thacher & Bartlett with respect to the
unsecured notes.
12 Statement re Computations of Ratios [Quarterly Report on Form
10-Q of the Company for the period ended June 30, 2002,
File No. 1-3146, Exhibit 12].
*23(a) Consent of Deloitte & Touche LLP.
23(b) Consent of Simpson Thacher & Bartlett (included in Exhibit 5
filed herewith).
*24 Powers of Attorney and resolutions of the Board of Directors
of the Company.
*25 Form T-1 re eligibility of The Bank of New York to act as
Trustee under the Indenture.
Exhibit No. | Description |
| |
1(a) | Copy of proposed form of Underwriting Agreement for the securities. |
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*4(a) | Indenture (for unsecured debt securities), dated as of February 25, 2000, between the Company and The Bank of New York, as Trustee [Registration Statement No. 333-87834, Exhibits 4(a) and 4(b); Registration Statement No. 333-100632, Exhibit 4(b); Registration Statement No. 333-108045, Exhibit 4(b)] |
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4(b) | Company-obligated, mandatorily redeemable preferred securities of subsidiary trust holding solely Junior Subordinated Debentures of the Company 1)Subordinated Indenture, dated as of September 1, 2003, between the Company and the Bank of New York, as Trustee. 2)Amended and Restated Trust Agreement of the Company, as Depositor, the Bank of New York, as Property Trustee, The Bank of New York (Delaware), as Delaware Trustee, and the Administrative Trustees. 3)Guarantee Agreement, dated as of September 1, 2003, delivered by the Company for the benefit of the holders of SWEPCo Capital Trust I’s Preferred Securities. 4)First Supplemental Indenture dated as of October 1, 2003, providing for the issuance of Series B Junior Subordinated Debentures between the Company, as Issuer and the Bank of New York, as Trustee 5)Agreement as to Expenses and Liabilities, dated as of October 1, 2003 between the Company and SWEPCo Capital Trust I (included in Item (4) above as Ex 4(f)(i)(A). |
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4(c) | Company Order and Officers' Certificate to The Bank of New York, dated June 28, 2005, establishing certain terms of the 4.90% Senior Notes, Series D, due 2015. |
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4(d) | Company Order and Officers' Certificate to The Bank of New York, dated January 11, 2007, establishing certain terms of the 5.55% Senior Notes, Series E due 2017. |
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4(e) | Copy of proposed form of Company Order for the Senior Notes. |
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4(f) | Copy of Proposed form of Supplemental Indenture for the Junior Subordinated Debentures |
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5 | Opinion of Thomas G. Berkemeyer, Esq. regarding the validity of the securities. |
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*12 | Statement re Computations of Ratios [Quarterly Report on Form 10-Q of the Company for the period ended June 30, 2007, File No. 1-3146, Exhibit 12]. |
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23(a) | Consent of Deloitte & Touche LLP. |
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23(b) | Consent of Thomas G. Berkemeyer, Esq. (included in Exhibit 5). |
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24 | Powers of Attorney and resolutions of the Board of Directors of the Company. |
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25(a) | Form T-1 re eligibility of The Bank of New York to act as Trustee under the Indenture for the Senior Notes. |
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25(b) | Form T-1 re eligibility of The Bank of New York to act as Subordinated Indenture Trustee under the Subordinated Indenture for the Junior Subordinated Debentures |