THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS RELATE TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, BUT ARE NOT
COMPLETE AND MAY BE CHANGED. THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING
PROSPECTUS ARE NOT AN OFFER TO SELL THESE SECURITIES AND ARE NOT SOLICITING AN
OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT
PERMITTED.
FILED PURSUANT TO RULE 424(b)(5)
REGISTRATION NO. 333-58540
SUBJECT TO COMPLETION, DATED APRIL 24, 2001
PROSPECTUS SUPPLEMENT
(to Prospectus dated April 19, 2001)
$1,000,000,000
[LOGO]
AMERICAN ELECTRIC POWER COMPANY, INC.
$ % Senior Notes, Series A due May ,
$ % Putable Callable Notes, Series B
Putable Callable May ,
--------------------------
The Series A Notes and the Series B Notes (together, the "Securities") will
be our unsecured and unsubordinated obligations. The Securities are offered for
sale in the United States and Europe. Application has been made to list the
Securities on the Luxembourg Stock Exchange.
The Series A Notes will bear interest at the rate of % per year from
their date of issuance to, but excluding, May , . Interest on the Series A
Notes will be payable semi-annually on May and November of each year,
beginning November , 2001. We may redeem, at our option, the Series A Notes
prior to maturity to the extent described herein.
The Series B Notes will bear interest at the rate of % per year from
their date of issuance to but excluding May , , which is the Initial
Coupon Reset Date, and then at a fixed or floating rate as discussed under
"Description of the Securities--Series B Notes." Interest on the Series B Notes
will be payable on May and November of each year, beginning November ,
2001 and continuing to May , , and then at intervals as discussed under
"Description of the Securities--Series B Notes."
We have assigned to , as Callholder, the option to purchase all
of the Series B Notes on May , . If the Callholder chooses to purchase the
Series B Notes, we may choose to have the Series B Notes remarketed for a
floating rate period of up to one year. During the floating rate period, the
interest rate will be reset monthly. On the floating rate period termination
date, the Series B Notes will be remarketed at a fixed rate of interest that
will accrue until maturity or redemption.
On May , and at the end of the floating rate period, if any, the
Series B Notes will either be mandatorily tendered to and purchased by
, as Callholder, or mandatorily redeemed by us, in each case at
the prices discussed under "Description of the Securities--Series B Notes."
We may redeem the Series B Notes prior to maturity to the extent described
herein.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus supplement and the accompanying prospectus are truthful or complete.
Any representation to the contrary is a criminal offense.
PER SERIES A PER SERIES B
NOTE TOTAL NOTE TOTAL
------------ ------------ ------------ ------------
Public offering price (1).................. % $ % $
Underwriting commissions................... % $ % $
Proceeds, before expenses, to us (2)....... % $ % $
------------------------
(1) Plus accrued interest from May , 2001, if settlement occurs after that
date.
(2) Includes consideration for the Call Option related to the Series B
Notes.
The underwriters are offering the Securities subject to various conditions.
The underwriters expect to deliver the Securities in book-entry form only
through the facilities of The Depository Trust Company, including for the
accounts of Euroclear and Clearstream Luxembourg, against payment in New York,
New York on or about May , 2001.
JOINT-BOOK RUNNING MANAGERS
CREDIT SUISSE FIRST BOSTON MERRILL LYNCH & CO. UBS WARBURG
CO-MANAGERS
ABN AMRO Incorporated Lehman Brothers Salomon Smith Barney
Barclays Capital Banc of America Securities LLC BNY Capital Markets, Inc.
JPMorgan Tokyo-Mitsubishi International
plc
The date of this prospectus supplement is May , 2001.
No dealer, salesperson or other person is authorized to give any information
or to represent anything not contained or incorporated by reference in this
prospectus supplement and the accompanying prospectus. You must not rely on any
unauthorized information or representations. This prospectus supplement, and the
accompanying prospectus, is an offer to sell only the Securities offered hereby,
but only under circumstances and in jurisdictions where it is lawful to do so.
If the description of the Securities varies between this prospectus supplement
and the accompanying prospectus, you should rely on the information in the
prospectus supplement. The information contained in this prospectus supplement
and in the accompanying prospectus is current only as of their respective dates.
TABLE OF CONTENTS
PAGE
--------
PROSPECTUS SUPPLEMENT
Forward-Looking Statements.................................. S-3
About this Prospectus Supplement............................ S-4
Summary..................................................... S-5
Recent Results of Operations; Recent Developments........... S-9
Capitalization.............................................. S-10
Selected Consolidated Financial Information................. S-11
Use of Proceeds............................................. S-13
American Electric Power Company, Inc........................ S-14
Directors and Principal Executive Officers.................. S-20
Description of the Securities............................... S-21
United States Taxation...................................... S-36
Underwriting................................................ S-40
Listing and General Information............................. S-41
Documents Incorporated by Reference......................... S-42
Glossary of Defined Terms................................... S-43
PROSPECTUS
The Company................................................. 2
Where You Can Find More Information......................... 2
Prospectus Supplements...................................... 3
Ratio of Earnings to Fixed Charges.......................... 3
Use of Proceeds............................................. 3
Description of the Notes.................................... 3
Plan of Distribution........................................ 7
Legal Opinions.............................................. 8
Experts..................................................... 8
S-2
FORWARD-LOOKING STATEMENTS
Some statements contained or incorporated by reference in this prospectus
supplement, including the discussion of our plans and proposals under
"Summary--American Electric Power Company, Inc." and "American Electric Power
Company, Inc." are forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. These forward-looking statements are
subject to various risks and uncertainties. Actual results may vary materially.
Factors that could cause actual results to differ materially include, but are
not limited to:
- electric load and customer growth;
- abnormal weather conditions;
- available sources of and prices for coal and gas;
- availability of generating capacity;
- the impact of the merger with CSW, including the ability of the combined
companies to realize the synergies expected as a result of the
combination;
- the timing of the implementation of AEP's restructuring plan;
- risks related to energy trading and construction under contract;
- the speed and degree to which competition is introduced to our power
generation business;
- the structure and timing of a competitive market for electricity and its
impact on prices;
- the ability to recover net regulatory assets, other stranded costs and
implementation costs in connection with deregulation of generation in
certain states;
- new legislation and government regulations;
- the ability of AEP to successfully control its costs;
- the success of new business ventures;
- international developments affecting AEP's foreign investments;
- the effects of fluctuations in foreign currency exchange rates;
- the economic climate and growth in AEP's service and trading territories,
both domestic and foreign;
- the ability of AEP to comply with or to challenge successfully new
environmental regulations and to litigate successfully claims that AEP
violated the Clean Air Act;
- inflationary trends;
- changes in electricity and gas market prices;
- successful resolution of litigation regarding municipal franchise fees in
Texas;
- successful appeal of decision in connection with COLI litigation;
- interest rates; and
- other risks and unforeseen events.
In light of these risks, uncertainties and assumptions, the forward-looking
statements contained or incorporated by reference in this prospectus supplement
might not occur. Neither AEP nor the underwriters undertakes any obligation to
publicly update or revise any forward-looking statements, whether as a result of
new information, future events or otherwise.
S-3
ABOUT THIS PROSPECTUS SUPPLEMENT
This prospectus supplement and the accompanying prospectus include
information furnished in compliance with the rules governing the listing of
securities on the Luxembourg Stock Exchange for the purpose of giving
information with regard to American Electric Power Company, Inc. American
Electric Power Company, Inc. accepts responsibility for the information
contained in this prospectus supplement and the accompanying prospectus. The
Luxembourg Stock Exchange takes no responsibility for the contents of this
document, makes no representation as to its accuracy or completeness and
expressly disclaims any liability whatsoever for any loss howsoever arising from
or in reliance upon the whole or any part of the contents of this document.
Our Securities are offered globally for sale in those jurisdictions in the
United States and Europe where it is lawful to make such offers. Offers and
sales of the Securities are subject to restrictions in certain jurisdictions. We
urge you to inform yourself of these restrictions and observe them. The
distribution of this prospectus supplement and accompanying prospectus and the
offering of the Securities in certain other jurisdictions may also be restricted
by law. See "Underwriting."
We cannot guarantee that the application to the Luxembourg Stock Exchange
with respect to the Securities will be approved and the sale of the Securities
is not conditioned on obtaining such listing.
S-4
SUMMARY
THE FOLLOWING IS QUALIFIED IN ITS ENTIRETY BY, AND SHOULD BE READ TOGETHER
WITH, THE MORE DETAILED INFORMATION AND FINANCIAL STATEMENTS INCLUDED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING
PROSPECTUS.
AMERICAN ELECTRIC POWER COMPANY, INC.
GENERAL
American Electric Power Company, Inc. (AEP), which was incorporated in 1906,
is one of the largest investor owned electric public utility holding companies
in the United States serving over 4.8 million retail customers in eleven states
(Arkansas, Indiana, Kentucky, Louisiana, Michigan, Ohio, Oklahoma, Tennessee,
Texas, Virginia and West Virginia) and selling bulk power at wholesale both
within and beyond its domestic retail service area. AEP and Central and South
West Corporation (CSW) completed their merger on June 15, 2000 and as a result
AEP now has 38,000 megawatts of generation, over 38,000 miles of transmission
lines and 186,000 miles of distribution lines in the United States. Subsidiaries
own 544 megawatts as independent power producers in Colorado, Florida and Texas.
In recent years AEP has expanded its domestic operations to include gas
marketing, processing, storage and transportation operations, electric, gas and
coal trading operations and telecommunication services and invested in and
acquired foreign distribution operations in the U.K., Australia and Brazil and
electricity generating facilities in China and Mexico. Subsidiaries also provide
power engineering, generation and transmission plant maintenance and
construction, and energy management services worldwide. AEP is one of the
largest traders of electricity and gas in the U.S. In 2000, we established an
energy trading operation in Europe.
STRATEGY
AEP will continue to expand its competitive energy business by growing the
trading and marketing business through expanding operations to be a leading
trader in all energy commodities; optimizing the operations of its assets to
yield maximum value in competitive markets; and acquiring generation and natural
gas assets that complement this strategy.
On November 1, 2000, AEP filed a restructuring plan with the Securities and
Exchange Commission, (SEC) seeking approval to form two wholly owned holding
company subsidiaries of AEP to separately own AEP's regulated and non-regulated
subsidiaries and to structurally separate six of the electric utility operating
companies (Appalachian Power Company, Central Power and Light Company, Columbus
Southern Power Company, Ohio Power Company, Southwestern Electric Power Company
and West Texas Utilities Company) into separate legal entities along functional
lines (i.e. generation, transmission and distribution). One holding company will
hold the unbundled non-regulated electric generation subsidiaries and the
non-regulated domestic and foreign subsidiaries including the European trading
company and the foreign generating companies, while the other holding company
will hold the bundled domestic regulated electric utility companies, the
transmission and distribution assets of previously bundled domestic regulated
electric utility companies and the foreign distribution companies.
Our focus for 2001 will be on completing our corporate separation plan to
separate our regulated and non-regulated businesses. We believe that a
successful implementation of this plan will support our business objective of
unlocking shareholder value by providing managers with a simpler structure
through which business unit performance can be more easily anticipated and
monitored thereby focusing management attention; permitting more efficient
financing; and meeting the regulatory codes of conduct required as part of
industry restructuring.
S-5
THE OFFERING
THE FOLLOWING SUMMARY DOES NOT PURPORT TO BE COMPLETE AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO THE DETAILED INFORMATION APPEARING ELSEWHERE
HEREIN, INCLUDING UNDER "DESCRIPTION OF THE SECURITIES--SERIES A NOTES" AND
"DESCRIPTION OF THE SECURITIES--SERIES B NOTES." CERTAIN CAPITALIZED TERMS USED
HEREIN ARE DEFINED ELSEWHERE IN THIS PROSPECTUS SUPPLEMENT.
SERIES A NOTES
Series A Notes................ $ principal amount of % Senior Notes, Series A,
due May , .
Maturity Date................. The Series A Notes will mature on May , .
Interest Rate................. The Series A Notes will bear interest at the rate of %
per year.
Interest Payment Dates........ Interest on the Series A Notes will be payable on May and
November of each year beginning on November , 2001.
Redemption.................... We may redeem some or all of the Series A Notes at any time
at prices, plus accrued and unpaid interest, if any, to the
redemption date, as described in "Description of the
Securities--Series A Notes--Optional Redemption." Upon the
occurrence of certain taxation events described under
"Description of Securities--Series A Notes--Redemption for
Tax Reasons," we may also redeem the Series A Notes at a
redemption price equal to 100% of the principal amount
thereof, together with all accrued and unpaid interest, if
any.
Ranking....................... The Series A Notes will be unsecured and unsubordinated
obligations ranking equally with our other outstanding and
future unsecured and unsubordinated indebtedness.
Listing....................... Application has been made to list the Series A Notes on the
Luxembourg Stock Exchange.
Restrictive Covenants......... For a discussion of the restrictive covenants relating to
the Series A Notes, see "Limitation on Liens on Stock of
Certain Subsidiaries" and "Limitation upon Mergers,
Consolidations and Sale of Assets" under "Description of
Securities--Series A Notes--Restrictive Covenants."
CUSIP......................... for the Series A Notes.
Common Code................... for the Series A Notes.
ISIN.......................... for the Series A Notes.
S-6
SERIES B NOTES
Series B Notes................ $ principal amount of % Putable Callable Notes,
Series B, Putable Callable May , .
Maturity Date................. The Series B Notes will mature on May , unless
extended to the th anniversary of the end of the floating
rate period, if any, in which case the Series B Notes will
mature not later than May , ; however, under certain
circumstances we may redeem all the Series B Notes before
that date.
Mandatory Tender/Mandatory
Redemption.................... On May , , the Series B Notes will either be
mandatorily tendered to and purchased by , as
Callholder, or mandatorily redeemed by us.
Interest Rates................ The Series B Notes will bear interest at the rate of %
per year from their date of issuance to, but excluding, May
, , which is the Initial Coupon Reset Date, and then
at a fixed or floating rate as discussed under "Description
of the Securities--Series B Notes."
Interest Payment Dates........ Interest on the Series B Notes will be payable on May and
November of each year beginning on November , 2001 and
continuing to May , , and then at intervals as
discussed under "Description of the Securities--Series B
Notes."
Interest Accrual.............. From their date of issuance to, but excluding, May , ,
the Series B Notes will accrue interest at a fixed rate of
% per year computed on the basis of a 360-day year
consisting of twelve 30-day months. Assuming the Series B
Notes are not mandatorily redeemed on May , , the
Series B Notes will accrue interest from such date at a
fixed rate or at a floating rate, depending on whether we
choose to have the Series B Notes remarketed for a floating
rate period.
If we elect to have the Series B Notes remarketed for a
floating rate period, then at the end of such floating rate
period, we may choose to have Series B Notes remarketed at a
fixed rate.
If the rate is fixed, interest will be computed on the basis
of a 360-day year consisting of twelve 30-day months. If the
rate is floating, interest will be computed on the basis of
the actual number of days in the applicable floating rate
reset period over a 360-day year.
For a more detailed description of the payment of interest,
you should refer to "Description of the Securities--Series B
Notes--Interest and Interest Payment Dates" and "--Floating
Rate Period."
S-7
Call Option................... We have assigned to , as Callholder, the option to
purchase all of the Series B Notes on May , . If the
Callholder purchases the Series B Notes on May , and
we choose to have the Series B Notes remarketed for a
floating rate period, the Callholder must also purchase the
Series B Notes on the date on which the floating rate period
ends. The purchase price for the Series B Notes will be
equal to 100% of the aggregate principal amount outstanding
if they are purchased on May , or the Dollar Price if
they are purchased on the last day of the floating rate
period. The Callholder will then remarket the Series B Notes
at a fixed rate of interest that will accrue until
redemption or maturity.
For a more detailed description of the call option, you
should refer to "Description of the Securities--Series B
Notes--Call Option."
Put Option.................... If the Callholder does not purchase the Series B Notes on
May , , the Trustee, on behalf of the beneficial
owners, will require us to redeem all of the Series B Notes
for 100% of the aggregate principal amount outstanding plus
accrued and unpaid interest, if any. If we choose to have
the Series B Notes remarketed for a floating rate period and
the Callholder does not purchase the Series B Notes on the
last day of the floating rate period, the Trustee, on behalf
of the beneficial owners, will require us to redeem the
Series B Notes at the Dollar Price plus accrued and unpaid
interest, if any.
For a more detailed description of the put option, you
should refer to "Description of the Securities--Series B
Notes--Put Option."
Optional Tax Redemption....... We may redeem the Series B Notes at any time upon the
occurrence of certain taxation events as described under
"Description of the Securities--Series B Notes--Redemption
for Tax Reasons."
Post-Coupon Reset Optional
Redemption.................... We may redeem some or all of the Series B Notes at any time
on or after the later of May , or the end of the
floating rate period, in each case at the prices, plus
accrued and unpaid interest, if any, to the redemption date,
as described in "Description of the Securities--Series B
Notes--Post-Coupon Reset Optional Redemption."
Ranking....................... The Series B Notes will be unsecured and unsubordinated
obligations ranking equally with our other outstanding and
future unsecured and unsubordinated indebtedness.
Listing....................... Application has been made to list the Series B Notes on the
Luxembourg Stock Exchange.
Restrictive Covenants......... For a discussion of the restrictive covenants relating to
the Series B Notes, see "Limitation on Liens on Stock of
Certain Subsidiaries" and "Limitation upon Mergers,
Consolidations and Sale of Assets" under "Description of
Securities--Series B Notes--Restrictive Covenants."
CUSIP......................... for the Series B Notes.
Common Code................... for the Series B Notes.
ISIN.......................... for the Series B Notes.
S-8
RECENT RESULTS OF OPERATIONS; RECENT DEVELOPMENTS
For the three months ended March 31, 2001, "Operating Revenues," "Income
Before Interest, Preferred Dividends and Income Taxes" and "Net Income" were (in
millions) $13,542, $705 and $266, respectively. In the opinion of AEP's
management, the above amounts for the three months ended March 31, 2001 reflect
all adjustments necessary to present fairly the results of operations for such
period. AEP has reclassified certain settled forward energy transactions of its
trading operation from a net to a gross basis of presentation. The
reclassification is intended to reflect the scope and nature of AEP's energy
sales and purchases. As a result, the following amounts were reclassified from
revenues to purchased power expense (in millions): $22,700, $12,400 and $6,700
for the years ended December 31, 2000, 1999 and 1998, respectively. AEP
continues to report all financially net settled trading transactions, such as
swaps, futures, and unexercised options, on a net basis reflecting the financial
nature of these transactions.
On March 15, 2001, AEP sold its 500-megawatt Frontera power plant to TECO
Power Services for approximately $265 million in cash. On April 3, 2001, AEP
sold its interest in Yorkshire Power Group Ltd. to Innogy Holdings plc for
approximately $383 million in cash. Innogy also assumed all of Yorkshire's debt
of approximately $2 billion.
S-9
CAPITALIZATION
The following table sets forth our capitalization as of December 31, 2000:
- on an actual basis; and
- on an as adjusted basis to give effect to the sale of the $1,000,000,000
aggregate principal amount of Series A Notes and Series B Notes and the
application of the net proceeds from these sales (including the
consideration paid to us by the Callholder for the option to purchase the
Series B Notes for remarketing), after deducting the underwriting discount
and estimated offering expenses.
Since December 31, 2000, there has not been any material change in the
information set forth below, except as may be described elsewhere in this
prospectus supplement, in the accompanying prospectus or in any of the documents
incorporated by reference therein. You should read the information in this table
along with the financial information included or incorporated by reference in
this prospectus supplement and the accompanying prospectus.
DECEMBER 31, 2000
----------------------
ACTUAL AS ADJUSTED
-------- -----------
(IN MILLIONS)
Debt:
Short-term debt, including commercial paper............... $ 4,333 $
Long-term debt of subsidiaries, including current
maturities.............................................. 10,754
Notes offered hereby...................................... --
------- -------
Total debt............................................ 15,087
------- -------
Certain subsidiary obligated, mandatorily redeemable,
preferred securities of subsidiary trusts holding solely
junior subordinated debentures of such subsidiaries..... 334
------- -------
Cumulative preferred stock of subsidiaries................ 161
------- -------
Common shareholders' equity:
Common stock, par value $6.50; 600 million shares
authorized, 331,019,146 shares issued (8,999,992
shares were held in treasury at 12/31/00);............ 2,152
Paid-in capital......................................... 2,915
Accumulated other comprehensive income (loss)........... (103)
Retained earnings....................................... 3,090
------- -------
Total common shareholders' equity..................... 8,054
------- -------
Total capitalization................................ $23,636
======= =======
S-10
SELECTED CONSOLIDATED FINANCIAL INFORMATION
The following table sets forth selected consolidated financial information
for each of the periods indicated. You should read the information in this table
together with our consolidated financial statements and other financial
information incorporated by reference in this prospectus supplement and the
accompanying prospectus.
YEARS ENDED DECEMBER 31,
------------------------------
2000 1999 1998
-------- -------- --------
(IN MILLIONS)
CONSOLIDATED STATEMENTS OF INCOME DATA:
Operating revenues (1)...................................... $36,431 $24,766 $18,502
Operating expenses (1)...................................... 34,405 22,441 16,222
------- ------- -------
Operating income.......................................... 2,026 2,325 2,280
Other income, net........................................... 33 139 95
------- ------- -------
Income before interest, preferred dividends and income
taxes..................................................... 2,059 2,464 2,375
Interest and preferred dividends............................ 1,160 996 898
Income tax.................................................. 597 482 502
------- ------- -------
Income before extraordinary item............................ 302 986 975
Extraordinary loss
Discontinued of regulatory accounting for generation...... (35) (8) --
Loss on reacquired debt................................... -- (6) --
------- ------- -------
Net income (2).............................................. $ 267 $ 972 $ 975
======= ======= =======
AS OF DECEMBER 31,
------------------------------
2000 1999 1998
-------- -------- --------
(IN MILLIONS)
CONSOLIDATED BALANCE SHEET DATA:
Total current assets........................................ $22,031 $ 4,998 $ 3,859
Net property, plant and equipment........................... 22,393 21,865 21,519
Regulatory assets........................................... 3,698 3,464 2,964
Investments and other assets................................ 6,426 5,392 5,076
------- ------- -------
Total assets................................................ $54,548 $35,719 $33,418
======= ======= =======
YEARS ENDED DECEMBER 31,
------------------------------
2000 1999 1998
-------- -------- --------
CAPITALIZATION
Total debt.................................................. $15,087 $14,536 $13,322
Certain subsidiary obligated, mandatorily redeemable,
preferred securities of subsidiary trusts holding solely
junior subordinated debentures of such subsidiaries....... 334 335 335
Cumulative preferred stock of subsidiaries.................. 161 182 350
Total common shareholders' equity........................... 8,054 8,673 8,452
------- ------- -------
Total capitalization.................................... $23,636 $23,726 $22,459
======= ======= =======
------------------------
(1) For a description of certain numbers that have been reclassified, see
"Recent Results of Operations; Recent Developments."
(2) Net income for the fiscal year ended December 31, 2000 included charges for
the disallowance of a tax deduction for corporate owned life insurance,
merger costs, the non-regulated subsidiary write offs, write down in the
value of our United Kingdom investment and an extraordinary loss from
discontinuance of regulatory accounting for generation in certain states.
S-11
YEARS ENDED DECEMBER 31,
----------------------------------------------------
2000 1999 1998 1997 1996
-------- -------- -------- -------- --------
OTHER FINANCIAL DATA
EBITDA (in millions)(a)................................... $3,121 3,475 3,364 3,266 3,231
Ratio of earnings to fixed charges(b)..................... 1.59 2.14 2.25 2.22 2.22
------------------------
(a) EBITDA is defined as the measurement of earnings before interest, preferred
dividends, taxes, depreciation of fixed assets and amortization. EBITDA
should not be considered a substitute for net income or cash flow as
indicators of financial performance or a company's ability to generate
liquidity. EBITDA as presented may not be comparable to other similarly
titled measures used by other companies.
(b) For purposes of computing the ratio of earnings to fixed charges, (i)
earnings consist of income before provision for income taxes and fixed
charges less undistributed earnings in equity investments and (ii) fixed
charges consist of interest expense, amortization of debt expense, estimated
interest element in lease rentals and pretax preferred stock dividend
requirements.
SEGMENT DATA (in millions)
DOMESTIC ELECTRIC FOREIGN ENERGY WORLDWIDE ENERGY AEP
YEAR UTILITIES DELIVERY INVESTMENTS OTHER CONSOLIDATED
---- ----------------- -------------- ---------------- -------- ------------
2000
Total Revenues............ $23,174 $1,934 $836 $10,487 $36,431
Net Income................ 211 125 (56) (13) 267
1999
Total Revenues............ $17,787 $2,023 $583 $ 4,373 $24,766
Net Income................ 794 170 34 (26) 972
1998
Total Revenues............ $15,207 $1,769 $183 $ 1,343 $18,502
Net Income................ 884 155 (26) (38) 975
S-12
USE OF PROCEEDS
We estimate that the net proceeds from the sale of the Series A Notes and
the Series B Notes and from the consideration paid to us by the Callholder for
the option to purchase the Series B Notes for remarketing will be approximately
$ billion. We intend to use the net proceeds to:
- Repay up to $ million of our short-term indebtedness, and
- For other general corporate purposes, which may include, but are not
limited to, working capital and capital expenditures.
S-13
AMERICAN ELECTRIC POWER COMPANY, INC.
The following discussion highlights certain important facts regarding us and
our subsidiaries and does not contain all of the information that may be
important to you. We encourage you to read the documents referred to in the
accompanying prospectus under "Where You Can Find More Information," which
contain more complete descriptions of us and our business. In this prospectus
supplement and the base prospectus, "we," "us" and "our" refer to American
Electric Power Company, Inc. ("AEP") and all of its subsidiaries.
GENERAL
American Electric Power Company, Inc., which was incorporated in 1906, is
one of the largest investor owned electric public utility holding companies in
the U.S. serving over 4.8 million retail customers in eleven states (Arkansas,
Indiana, Kentucky, Louisiana, Michigan, Ohio, Oklahoma, Tennessee, Texas,
Virginia and West Virginia) and selling bulk power at wholesale both within and
beyond its domestic retail service area. AEP and Central and South West (CSW)
completed their merger on June 15, 2000 and as a result, AEP now has 38,000
megawatts of generation, over 38,000 miles of transmission lines and 186,000
miles of distribution lines in the U.S. Subsidiaries own 544 megawatts as
independent power producers in Colorado, Florida and Texas.
In recent years AEP has expanded its domestic operations to include gas
marketing, processing, storage and transportation operations, electric, gas and
coal trading operations and telecommunication services and invested in and
acquired foreign distribution operations in the U.K., Australia and Brazil and
electricity generating facilities in China and Mexico. Subsidiaries also provide
power engineering, generation and transmission plant maintenance and
construction, and energy management services worldwide. AEP is one of the
largest traders of electricity and gas in the U.S. In 2000 we established an
energy trading operation in Europe.
[CHART]
S-14
REGULATED BUSINESSES
The electric utility subsidiaries of AEP, which do business as "American
Electric Power," have traditionally provided electric service, consisting of
generation, transmission and distribution, on an integrated basis to their
retail customers. The operating subsidiaries of AEP are:
Appalachian Power Company (APCO) is engaged in the generation, sale,
purchase, transmission and distribution of electric power to approximately
909,000 retail customers in the southwestern portion of Virginia and southern
West Virginia, and in supplying electric power at wholesale to other electric
utility companies and municipalities in those states and in Tennessee. APCo
currently owns 5,858 MW of generation capacity.
Central Power and Light Company (CPL) is engaged in the generation, sale,
purchase, transmission and distribution of electric power to approximately
680,000 customers in southern Texas, and in supplying electric power at
wholesale to other utilities, municipalities and rural electric cooperatives.
CPL currently owns 4,497 MW of generation capacity.
Columbus Southern Power Company (CSPCo) is engaged in the generation, sale,
purchase, transmission and distribution of electric power to approximately
668,000 customers in Ohio, and in supplying electric power at wholesale to other
electric utilities and to municipally owned distribution systems within its
service area. CSPCo currently owns 2,595 MW of generation capacity.
Indiana Michigan Power Company (I&M) is engaged in the generation, sale,
purchase, transmission and distribution of electric power to approximately
565,000 customers in northern and eastern Indiana and southwestern Michigan, and
in supplying electric power at wholesale to other electric utility companies,
rural electric cooperatives and municipalities. I&M currently owns or leases
4,416 MW of generation capacity.
Kentucky Power Company (KEPCo) is engaged in the generation, sale, purchase,
transmission and distribution of electric power to approximately 172,000
customers in an area in eastern Kentucky, and in supplying electric power at
wholesale to other utilities and municipalities in Kentucky. KEPCo currently
owns 1,060 MW of generation capacity.
Ohio Power Company (OPCo) is engaged in the generation, sale, purchase,
transmission and distribution of electric power to approximately 696,000
customers in the northwestern, east central, eastern and southern sections of
Ohio, and in supplying electric power at wholesale to other electric utility
companies and municipalities. OPCo currently owns 8,512 MW of generation
capacity.
Public Services Company of Oklahoma (PSO) is engaged in the generation,
sale, purchase, transmission and distribution of electric power to approximately
499,000 customers in eastern and southwestern Oklahoma, and in supplying
electric power at wholesale to other utilities, municipalities and rural
electric cooperatives. PSO currently owns 3,916 MW of generation capacity.
Southwestern Electric Power Company (SWEPCo) is engaged in the generation,
sale, purchase, transmission and distribution of electric power to approximately
428,000 customers in northeastern Texas, northwestern Louisiana, and western
Arkansas, and in supplying electric power at wholesale to other utilities,
municipalities and rural electric cooperatives. SWEPCo currently owns 4,487 MW
of generation capacity.
West Texas Utilities Company (WTU) is engaged in the generation, sale,
purchase, transmission and distribution of electric power to approximately
190,000 customers in west and central Texas, and in supplying electric power at
wholesale to other utilities, municipalities and rural electric cooperatives.
WTU currently owns 1,392 MW of generation capacity.
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Kingsport Power Company provides electric service to approximately 45,000
customers in Kingsport and eight neighboring communities in northeastern
Tennessee. Kingsport Power Company has no generating facilities of its own. It
purchases electric power distributed to its customers from APCo.
Wheeling Power Company provides electric service to approximately 42,000
customers in northern West Virginia. Wheeling Power Company has no generating
facilities of its own. It purchases electric power distributed to its customers
from OPCo.
AEP Generating Company (AEGCo) was organized in Ohio in 1982 as an electric
generating company. AEGCo sells power at wholesale to I&M and KEPCo. AEGCo
currently owns or leases 1,300 MW of generation capacity.
NON-REGULATED BUSINESSES
AEP has expanded its business to non-regulated activities through several
subsidiaries. AEP is active in wholesale businesses via AEP Energy
Services, Inc. (AEPES), AEP Resources, Inc. (Resources) and AEP Pro Serv, Inc.
(formerly AEP Resources Service Company) (Pro Serv). AEP is active in
telecommunications via AEP Communications, LLC (AEP Communications).
WHOLESALE BUSINESS OPERATIONS
AEP's wholesale business integrates generation and natural gas assets,
technical and operational expertise, and trading and marketing. Various AEP
subsidiaries engage in wholesale business operations that focus primarily upon
the following activities:
- Trade and market energy commodities in North America and Europe, including
electric power, natural gas, natural gas liquids, oil, coal, and SO2
allowances.
- Provide price-risk management services and liquidity through a variety of
energy-related financial instruments, including exchange-traded futures
and over-the-counter forward, option, and swap agreements.
- Enter into long-term transactions to buy or sell capacity, energy, and
ancillary services of electric generating facilities, either existing or
to be constructed, at various locations in North America and Europe.
- Optimize trading and marketing through a diversified portfolio of owned
assets and structured third party arrangements.
- Acquire, develop, engineer, construct, operate and maintain owned and
third party exempt wholesale generation and cogeneration facilities and
ancillary energy-related assets.
The assets AEP employs in pursuing the above strategic activities include:
- Domestic power plants and generation assets
- Midstream assets (gas, liquids, NGLs, and storage)
- International assets and investments
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DOMESTIC POWER PLANTS AND GENERATION ASSETS
AEP's power plant and generation assets include up to 38,000 MW of oil, gas,
coal, and nuclear generation in North America. Subject to regulatory approval,
it is expected that up to 21,000 MW will be deregulated by the end of calendar
year 2001.
MW
--------
IPP......................................................... 544
Ohio........................................................ 11,107
Texas....................................................... 5,889
Virginia.................................................... 3,398
------
20,938
======
In addition to the generation assets outlined above, AEP has entered into an
agreement with (i) Eastman Chemical Company to construct and operate a 440 MW
cogeneration facility in Longview, Texas with expected operation in the second
or third quarter of 2001, (ii) The Dow Chemical Company to construct a 900 MW
cogeneration facility in Louisiana with expected commercial operation in 2003,
(iii) Buckeye Power, Inc. (an Ohio electric cooperative) to construct and
operate a 510 MW peaking facility in Ohio (which entitles AEP to 100% of the
facility's capacity and energy in the upfront operating years through 2005) with
expected commercial operation in 2002, and (iv) a subsidiary of Orion Power
Holdings, Inc., to engineer, procure and construct a 500 MW peaking facility in
West Virginia with expected commercial operation in May 2001.
MIDSTREAM ASSETS
AEP's midstream assets provide valuable market intelligence, optionality and
an ability to customize products. The assets include the Louisiana Intrastate
Gas System (LIG) and we have recently agreed to acquire Houston Pipeline Company
(HPL).
The LIG assets, acquired in 1998, consist of a 2,000-mile intrastate
pipeline system in Louisiana, four natural gas processing plants that straddle
the pipeline and a ten billion cubic foot underground natural gas storage
facility directly connected to the Henry Hub, the most active gas trading area
in North America. The LIG pipeline and storage facilities are interconnected to
15 interstate and 23 intrastate pipelines.
In early 2001, AEP subsidiaries reached agreement to acquire HPL and its
Bammel Storage Facility (one of the largest natural gas storage facilities in
North America). HPL owns, or leases, and operates one of the most extensive and
flexible natural gas gathering, transportation and storage operations in Texas.
HPL's intrastate system includes more than 4,000 miles of pipe with capacity of
approximately 2.4 billion cubic feet per day (Bcf/d) and the operation of the
Bammel Storage Facility, with a capacity of approximately 118 billion cubic
feet.
HPL and LIG assets will provide a daily gas capacity of approximately
3.5 billion cubic feet, more than 6,400 miles of natural gas pipeline and a
total storage capacity of approximately 128 billion cubic feet of high injection
and withdrawal capabilities.
INTERNATIONAL ASSETS AND INVESTMENTS
Via various subsidiaries, AEP owns electric generation and distribution
facilities and natural gas transmission and distribution facilities in the
United Kingdom, Asia and Australia.
In April of 1996, CSW (now AEP) acquired indirect control of SEEBOARD, one
of the 12 regional electricity companies formed as a result of the restructuring
and subsequent privatization of
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the United Kingdom electricity industry in 1990, for $2.1 billion. SEEBOARD's
principal businesses are the distribution and supply of electricity. In
addition, SEEBOARD is engaged in other businesses, including gas supply,
electricity generation, and electrical contracting. SEEBOARD's service area
covers approximately 3,000 square miles in Southeast England. The area has a
population of approximately 4.7 million people with significant portions of the
area, such as south London, having a high population density.
In December of 1998, AEP Resources acquired CitiPower, an Australian
electricity distribution and retail company for approximately $1.1 billion.
CitiPower serves approximately 250,000 customers in the city of Melbourne. With
about 3,100 miles of distribution lines in a service area that covers
approximately 100 square miles, CitiPower distributes about 4,800 gigawatt-hours
annually.
TELECOMMUNICATIONS
AEP Communications markets wholesale, high capacity, fiber optic services,
colocation, and wireless tower infrastructure services under the C3 brand. C3
has approximately 5,300 route miles of fiber optic network.
COMPANY STRATEGY AND RESTRUCTURING PLAN
COMPANY STRATEGY
AEP will continue to expand its competitive energy business by growing the
trading and marketing business through expanding operations to be a leading
trader in all energy commodities; optimizing the operations of its assets to
yield maximum value in competitive markets; and acquiring generation and natural
gas assets that complement this strategy.
In line with pursuing its strategy, AEP is in the process of restructuring
its assets and operations to separate the regulated operations from the
non-regulated operations and to functionally and, where permitted by law,
structurally unbundle its domestic vertically integrated electric utility
business into separate generation, transmission and distribution businesses. The
purpose of this restructuring is to focus our management and technical expertise
to maximize the potential for growth of both non-regulated and regulated
operations, to evaluate the performance of these separate and different
businesses and to meet the separation requirements of federal and state
restructuring legislation and codes of conduct.
Our focus for 2001 will be on completing our corporate separation plan to
separate our regulated and non-regulated businesses. We believe that a
successful implementation of this plan will support our business objective of
unlocking shareholder value by providing managers with a simpler structure
through which business unit performance can be more easily anticipated and
monitored thereby focusing management attention; permitting more efficient
financing; and meeting the regulatory codes of conduct required as part of
industry restructuring.
AEP RESTRUCTURING PLAN
As a result of deregulating legislation that has been enacted or is being
considered in most of the states in which the AEP public utility subsidiaries
provide service, AEP has reassessed the corporate ownership of its public
utility subsidiaries' assets. Deregulating legislation in some of the states
requires the separation of generation assets from transmission and distribution
assets. On November 1, 2000, AEP filed with the SEC under the Public Utility
Holding Company Act of 1935 for approval of a restructuring plan in part to meet
the requirements of this legislation.
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AEP's restructuring plan is designed to align its legal structure and
business activities with the requirements of deregulation. AEP's plan
contemplates the formation of two first tier subsidiaries that would hold the
following public utility assets:
- A subsidiary would hold the assets of (i) public utility subsidiaries that
remain subject to regulation by at least one state utility commission and
(ii) foreign utility subsidiaries subject to regulation as to rates or
tariffs. AEP intends for this subsidiary ultimately to hold all
transmission and distribution assets.
- A subsidiary would hold public utility and non-utility subsidiaries that
derive their revenues from competitive activity. AEP intends for this
subsidiary to ultimately hold all generation assets not subject to
regulation.
The restructuring will facilitate management's strategy to grow the
deregulated wholesale electricity supply and electric and gas trading business
and to evaluate the other business operations to explore ways to improve their
results of operations and to continuously evaluate and, where necessary, reshape
our business to grow earnings and improve shareholder value. The legal transfer
of assets and structural separation plans as set forth below will require FERC,
SEC, certain state and other regulatory approvals.
[LOGO]
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DIRECTORS AND PRINCIPAL EXECUTIVE OFFICERS
The following individuals are our principal executive officers and
directors:
E. Linn Draper, Jr. Chairman of the Board, President and Chief Executive Officer
Thomas V. Shockley, III Vice Chairman of the Board
Henry W. Fayne Vice President and Chief Financial Officer
Susan Tomasky Secretary
Armando A. Pena Treasurer
E. R. Brooks Director
Donald M. Carlton Director
John P. DesBarres Director
Robert W. Fri Director
William R. Howell Director
Lester A. Hudson, Jr. Director
Leonard J. Kujawa Director
James L. Powell Director
Richard L. Sandor Director
Donald G. Smith Director
Linda Gillespie Stuntz Director
Kathryn D. Sullivan Director
Morris Tanenbaum Director
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DESCRIPTION OF THE SECURITIES
The following description of the particular terms of the Securities, which
are referred to in the accompanying prospectus as "notes," supplements and, to
the extent it is inconsistent with the description in the accompanying
prospectus, replaces the description of the general terms and provisions of the
notes in the prospectus. The Securities will be issued under an Indenture dated
as of May 1, 2001 between us and The Bank of New York, as trustee, as
supplemented by supplemental indentures and references in this prospectus
supplement to the Indenture will mean the Indenture as so supplemented. This
summary is qualified in its entirety by reference to the Indenture.
Please see "Glossary of Defined Terms" for the definitions of some of the
terms used in this prospectus supplement.
The Securities will be our unsecured and unsubordinated obligations ranking
equally with our other outstanding unsecured and unsubordinated indebtedness. At
March 31, 2001, we had $3.988 billion outstanding unsecured and unsubordinated
indebtedness. The Indenture contains no restrictions on the amount of additional
indebtedness that we may issue.
Because we are a holding company, the claims of creditors of our
subsidiaries will have a priority over our equity rights and the rights of our
creditors (including holders of the Securities) to participate in the assets of
the subsidiary upon the subsidiary's liquidation. As of March 31, 2001, our
subsidiaries had approximately $9.336 billion of outstanding long-term debt
(including debt due within one year).
The Trustee will act as our U.S. paying agent, our authenticating agent and
registrar, and, if and when such notes are issued in definitive form, our U.S.
transfer agent.
In addition to the Trustee, Kredietbank S.A., Luxembourgeois will act as our
Luxembourg Stock Exchange listing agent, our Luxembourg paying agent, and, if
and when the Securities are issued in definitive form, our Luxembourg transfer
agent. As long as the Securities are listed on the Luxembourg Stock Exchange, we
will maintain a paying agent and a transfer agent in Luxembourg, and any change
in the identity of the Luxembourg paying agent will be published in Luxembourg
in the manner described below under "Book-Entry, Delivery and Form--Notices."
Any money that we deposit with the Trustee or any paying agent for the
payment of principal, premium, if any, or any interest on the Securities that
remains unclaimed for two years after the date upon which the principal,
premium, if any, and interest are due and payable, will be repaid to us upon our
request unless otherwise required by mandatory provisions of any applicable
unclaimed property law. After that time, unless otherwise required by mandatory
provisions of any applicable unclaimed property law, the holder of Securities
will be able to seek any payment to which that holder may be entitled to collect
only from us.
SERIES A NOTES
GENERAL
The Series A Notes will be initially issued in aggregate principal amount of
$ . We may issue additional Series A Notes in the future at our
discretion.
The Series A Notes will mature and become due and payable, together with any
accrued and unpaid interest, on May , and will bear interest at the rate
of % per year from May , 2001 until maturity. The Series A Notes are not
subject to any sinking fund provision.
Interest on each Series A Note will be payable semi-annually in arrears on
each May and November and at redemption, if any. The initial interest
payment date is November , 2001. Each payment of interest shall include
interest accrued through the day before such interest payment date.
S-21
Interest on Series A Notes will be computed on the basis of a 360-day year
consisting of twelve 30-day months.
We will pay interest on the Series A Notes (other than interest payable at
redemption, if any, or maturity) in immediately available funds to the owners of
the Series A Notes as of the or prior to the relevant interest
payment date for each interest payment date.
We will pay the principal of the Series A Notes and any premium and interest
payable at redemption, if any, or at maturity in immediately available funds at
the office of The Bank of New York, 101 Barclay Street in New York, New York.
If any interest payment date, redemption date or the maturity is not a
Business Day, we will pay all amounts due on the next succeeding Business Day
and no additional interest will be paid.
OPTIONAL REDEMPTION
The Series A Notes will be redeemable as a whole or in part, at our option
at any time, at a redemption price equal to the greater of (i) 100% of the
principal amount of such Series A Notes and (ii) the sum of the present values
of the remaining scheduled payments of principal and interest thereon (exclusive
of interest accrued to the date of redemption) discounted to the redemption date
on a semiannual basis (assuming a 360 day year consisting of twelve 30-day
months) at the Series A Treasury Rate plus basis points, plus in each case
accrued interest thereon to the date of redemption.
"Series A Treasury Rate" means, with respect to any redemption date for the
Series A Notes, the rate per annum equal to the semiannual equivalent yield to
maturity or interpolated (on a day count basis) of the Series A Comparable
Treasury Issue, assuming a price for the Series A Comparable Treasury Issue
(expressed as a percentage of its principal amount) equal to the Series A
Comparable Treasury Price for such redemption date.
"Series A Comparable Treasury Issue" means the United States Treasury
security or securities selected by a Series A Independent Investment Banker as
having an actual or interpolated maturity comparable to the remaining term of
the Series A Notes to be redeemed that would be utilized, at the time of
selection and in accordance with customary financial practice, in pricing new
issues of corporate debt securities of a comparable maturity to the remaining
term of such Series A Notes.
"Series A Independent Investment Banker" means one of the Series A Reference
Treasury Dealers appointed by the Trustee after consultation with us.
"Series A Comparable Treasury Price" means, with respect to any redemption
date for the Series A Notes, (A) the average of the Series A Reference Treasury
Dealer Quotations for such redemption date, after excluding the highest and
lowest such Series A Reference Treasury Dealer Quotations, or (B) if the Trustee
obtains fewer than four such Series A Reference Treasury Dealer Quotations, the
average of all such quotations.
"Series A Reference Treasury Dealer Quotations" means, with respect to each
Series A Reference Treasury Dealer and any redemption date for the Series A
Notes, the average, as determined by the Trustee, of the bid and asked prices
for the Series A Comparable Treasury Issue (expressed in each case as a
percentage of its principal amount) quoted in writing to the Trustee by such
Series A Reference Treasury Dealer at 3:30 p.m. New York time on the third
Business Day preceding such redemption date.
"Series A Reference Treasury Dealer" means each of Credit Suisse First
Boston Corporation, Merrill Lynch, Pierce, Fenner & Smith Incorporated and UBS
Warburg LLC, or their affiliates which are primary U.S. Government securities
dealers, and their respective successors and two other primary U.S. Government
securities dealers selected by the Trustee; provided, however, that if any of
the
S-22
foregoing or their affiliates shall cease to be a primary U.S. Government
securities dealer in The City of New York (a "Primary Treasury Dealer"), we
shall substitute therefor another Primary Treasury Dealer.
Notice of any redemption will be mailed at least 30 days but not more than
60 days before the redemption date to each holder of Series A Notes to be
redeemed. If we elect to partially redeem the Series A Notes, selection of the
Series A Notes for redemption will be made by the Trustee by lot or by such
other method as the Trustee in its sole discretion deems to be fair and
appropriate.
Unless we default in payment of the redemption price, on and after the
redemption date, interest will cease to accrue on the Series A Notes or portions
thereof called for redemption.
DENOMINATION
The Series A Notes will initially be issued only in registered, book-entry
form, in denominations of $1,000 and any integral multiples of $1,000 as
described under "Book-Entry, Delivery and Form" below. We will issue global
securities in denominations that together equal the total principal amount of
the outstanding Series A Notes.
PAYMENT OF ADDITIONAL AMOUNTS
We will, subject to the exceptions and limitations set forth below, pay as
additional interest on the Series A Notes, such additional amounts as are
necessary in order that the net payment by us or a paying agent of the principal
of and interest on the Series A Notes to a holder who is a Non-U.S. Holder (as
defined under "United States Taxation"), after deduction for any present or
future tax, assessment or other governmental charge of the United States or a
political subdivision or taxing authority thereof or therein, imposed by
withholding with respect to the payment, will not be less than the amount
provided in the Series A Notes to be then due and payable; provided, however,
that the foregoing obligation to pay additional amounts shall not apply:
(1) to any tax, assessment or other governmental charge that is imposed or
withheld solely by reason of the holder, or a fiduciary, settlor, beneficiary,
member or shareholder of the holder if the holder is an estate, trust,
partnership or corporation, or a person holding a power over an estate or trust
administered by a fiduciary holder, being considered as:
(a) being or having been present or engaged in a trade or business in the
United States or having had a permanent establishment in the United
States;
(b) having a current or former relationship with the United States,
including a relationship as a citizen or resident thereof;
(c) being or having been a foreign or domestic personal holding company, a
passive foreign investment company or a controlled foreign corporation
with respect to the United States or a corporation that has accumulated
earnings to avoid United States federal income tax;
(d) being or having been a "10-percent shareholder" of ours as defined in
Section 871(h)(3) of the United States Internal Revenue Code of 1986, as
amended, or any successor provision; or
(e) being a bank receiving payments on an extension of credit made pursuant
to a loan agreement entered into in the ordinary course of its trade or
business;
(2) to any holder that is not the sole beneficial owner of a Series A Note,
or a portion thereof, or that is a fiduciary or partnership, but only to the
extent that a beneficiary or settlor with respect to the fiduciary, a beneficial
owner or member of the partnership would not have been entitled to the payment
of an additional amount had the beneficiary, settlor, beneficial owner or member
received directly its beneficial or distributive share of the payment;
S-23
(3) to any tax, assessment or other governmental charge that is imposed or
withheld by reason of the failure of the holder or any other person to comply
with certification, identification or information reporting requirements
concerning the nationality, residence, identity or connection with the United
States, or otherwise with respect to the status, of the holder or beneficial
owner of such Series A Note (or any beneficiary, settlor, beneficial owner or
member thereof), if compliance is required by statute, by regulation of the
United States Treasury Department or by an applicable income tax treaty to which
the United States is a party, or by any official interpretation or ruling
promulgated pursuant to any of the foregoing, as a precondition to exemption
from such tax, assessment or other governmental charge;
(4) to any tax, assessment or other governmental charge that is imposed
otherwise than by withholding by us or a paying agent from the payment;
(5) to any tax, assessment or other governmental charge that is imposed or
withheld solely by reason of a change in law, regulation, or administrative or
judicial interpretation that becomes effective more than 30 days after the
payment becomes due or is duly provided for, whichever occurs later;
(6) to any estate, inheritance, gift, sales, excise, transfer, wealth or
personal property tax or similar tax, assessment or other governmental charge;
(7) to any tax, assessment or other governmental charge required to be
withheld by any paying agent from any payment of principal of or interest on any
Series A Notes, if such payment can be made without such withholding by any
other paying agent; or
(8) in the case of any combination of items (1), (2), (3), (4), (5), (6) and
(7).
The Series A Notes are subject in all cases to any tax, fiscal or other law
or regulation or administrative or judicial interpretation applicable thereto.
Except as specifically provided under this heading "Payment of Additional
Amounts" and under the heading "Description of Securities--Series A
Notes--Redemption for Tax Reasons," we shall not be required to make any payment
with respect to any tax, assessment or other governmental charge imposed by any
government or a political subdivision or taxing authority thereof or therein.
As used under this heading and under the heading "Redemption for Tax
Reasons", the terms "United States" and "U.S." means the United States of
America (including the States and the District of Columbia) and its territories,
its possessions and other areas subject to its jurisdiction, and the term "U.S.
Holder" has the meaning described under "United States Taxation". "Non-U.S.
Holder" means a person who is not a U.S. Holder.
In particular, we will not pay additional amounts on any Series A Notes:
- where withholding or deduction is imposed on a payment to an individual
and is required to be made pursuant to any European Union Directive on the
taxation of savings implementing the conclusions of the ECOFIN Council
meeting of November 26 and 27, 2000 or any law implementing or complying
with, or introduced in order to conform to, that Directive, or
- presented for payment by or on behalf of a beneficial owner who would have
been able to avoid the withholding or deduction by presenting the relevant
Series A Note to another paying agent in a member state of the European
Union (Member State).
The European Union is currently considering a proposal for a new directive
regarding the taxation of savings income. Subject to a number of important
conditions being met, it is proposed that Member States will be required to
provide the tax authorities of another Member State details of payments of
interest or other similar income paid by a person within its jurisdiction to an
individual resident in that other Member State, subject to the right of certain
Member States to opt instead for a withholding system for a transitional period
in relation to these payments.
S-24
REDEMPTION FOR TAX REASONS
If, as a result of any change in, or amendment to, the laws (or any
regulations or rulings promulgated thereunder) of the United States (or any
political subdivision or taxing authority thereof or therein), or any change in,
or amendments to, an official position regarding the application or
interpretation of such laws, regulations or rulings, which change or amendment
is announced or becomes effective on or after the date of this prospectus
supplement, we become or, based upon a written opinion of independent counsel
selected by us, will become obligated to pay additional amounts as described
herein under the heading "Description of Securities--Series A Notes--Payment of
Additional Amounts" with respect to the Series A Notes, we may, at our option,
redeem, as a whole, but not in part, the Series A Notes on not less than 30 nor
more than 60 days' prior notice, at a redemption price equal to 100% of their
principal amount together with interest accrued but unpaid thereon to the date
fixed for redemption.
RESTRICTIVE COVENANTS
Limitation upon Liens on Stock of Certain Subsidiaries
For so long as any Series A Notes remain outstanding, we will not create or
incur or allow any of our subsidiaries to create or incur any pledge or security
interest on any of the capital stock of a Public Utility Subsidiary held by us
or one of our subsidiaries or a Significant Subsidiary.
For purposes of this covenant, a Public Utility Subsidiary means, at any
particular time, a direct or indirect subsidiary of ours that, as a substantial
part of its business, distributes or transmits electric energy to retail or
wholesale customers at rates or tariffs that are regulated by either a state or
Federal regulatory authority.
For purposes of this covenant, Significant Subsidiary means, at any
particular time, any direct subsidiary of ours whose consolidated gross assets
or consolidated gross revenues (having regard to our direct beneficial interest
in the shares, or the like, of that subsidiary) represent at least 25% of our
consolidated gross assets or our consolidated gross revenues.
Limitation upon Mergers, Consolidations and Sale of Assets
Nothing in the Indenture or the Series A Notes prevents us from
consolidating or merging with or into, or selling or otherwise disposing of all
or substantially all of our property to another entity, provided that (1) we
agree to obtain a supplemental indenture pursuant to which the surviving entity
or transferee agrees to assume our obligations relating to all outstanding debt
securities issued under the Indenture and (2) the surviving entity or transferee
is organized under the laws of the United States, any state thereof or the
District of Columbia.
SERIES B NOTES
GENERAL
The Series B Notes will mature on May , unless extended to the th
anniversary of the Floating Period Termination Date, in which case the Series B
Notes will mature not later than May , . We may be required to redeem the
Series B Notes before that maturity date as described in "Put Option" below. We
may also redeem some or all of the Series B Notes after the Fixed Rate Coupon
Reset Date as described in "Post-Coupon Reset Optional Redemption" below. We may
also redeem at any time all of the Series B Notes under the circumstances
described in "Redemption for Tax Reasons" below. The Series B Notes may also be
purchased by the Callholder as described in "Call Option" below.
If any interest, principal or other payment date of the Series B Notes
(including any payment date in connection with the Call Option or the Put Option
as described below) does not fall on a Business
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Day, a payment otherwise payable on that day will be made on the next succeeding
Business Day and no interest will accrue in respect of the amounts which payment
is so delayed for the period from and after such interest payment date, maturity
date or other payment date, except that, in the case of an interest payment date
or other payment date occurring during the Floating Rate Period, interest on
principal will continue to accrue until the next succeeding Business Day.
We may issue additional Series B Notes in the future at our discretion.
INTEREST AND INTEREST PAYMENT DATES
The Series B Notes will bear interest at the rate of % per annum from
their date of issuance to, but excluding, May , . During that period, we
will pay interest semi-annually on May and November of each year, beginning
on November , 2001. The Series B Notes are not subject to any sinking fund
provision.
We will pay interest on the Series B Notes, accruing from the Fixed Rate
Coupon Reset Date, semi-annually on each day that is a six-month anniversary of
that date. Interest on the Series B Notes from the Fixed Rate Coupon Reset Date
will be computed on the basis of a 360-day year consisting of twelve 30-day
months.
Interest on the Series B Notes accruing during any Floating Rate Reset
Period will be payable on the next following Reference Rate Reset Date if such
date is a Business Day or, if not, then on the next following Business Day.
Interest on the Series B Notes during the Floating Rate Period will be computed
on the basis of the actual number of days in the applicable Floating Rate Reset
Period over a 360-day year.
As long as the Series B Notes remain registered in the name of DTC's
nominee, interest payable on any interest payment date will be payable to the
persons in whose names the Series B Notes are registered at the close of
business on the Business Day immediately preceding the related interest payment
date.
Interest payments will be in the amount of interest accrued from and
including the next preceding interest payment date (or from and including the
date of issuance if no interest has been paid or duly provided for with respect
to the Series B Notes) to but excluding the relevant interest payment date,
Coupon Reset Date, redemption date or the maturity date, as the case may be.
Interest to be payable from and including each Coupon Reset Date will be
calculated by , as the Calculation Agent appointed by us pursuant to
the Indenture. We will agree to indemnify the Calculation Agent against certain
liabilities arising out of or in connection with its duties under the Indenture.
The Indenture provides that the Calculation Agent may resign at any time as
Calculation Agent effective 10 Business Days after the delivery of written
notice to us and the Trustee. In such case, we may appoint a successor
Calculation Agent.
The Calculation Agent, in its individual capacity, may buy, sell, hold and
deal in Series B Notes and may exercise any vote or join in any action which any
holder of Series B Notes may be entitled to exercise or take as if it were not
the Calculation Agent. The Calculation Agent, in its individual capacity, may
also engage in any transaction with us or any of our subsidiaries as if it were
not the Calculation Agent.
If the Callholder elects to purchase the Series B Notes, then by 3:30 p.m.,
New York City time, on the third Business Day immediately preceding any
applicable Coupon Reset Date, the Calculation Agent will determine either (a)
the Floating Rate Spread, in the case of the Initial Coupon Reset Date where we
have elected to exercise our Floating Period Option, or (b) the Interest Rate to
Maturity, to the nearest one hundredth of one percent per annum, unless we are
required to redeem the Series B
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Notes. Each Floating Period Interest Rate will equal the sum of the Reference
Rate and the Floating Rate Spread, and the Interest Rate to Maturity will equal
the sum of the Base Rate and the Applicable Spread. Both the Floating Rate
Spread and the Applicable Spread will be based on the Dollar Price of the Series
B Notes. The Floating Period Interest Rate, the Interest Rate to Maturity and
the Dollar Price for the Series B Notes as announced by the Calculation Agent,
absent manifest error, will be binding and conclusive upon the beneficial
owners, us and the Trustee.
FLOATING RATE PERIOD
Following the Callholder's election to purchase the Series B Notes in
connection with the Initial Coupon Reset Date, but prior to the Floating Period
Notification Date, which will be the fourth Business Day prior to the Initial
Coupon Reset Date, we may elect to exercise our Floating Period Option. If we so
elect, the Series B Notes will bear interest at the Floating Period Interest
Rate until the Floating Period Termination Date, which will be the earlier of
May , , or the date which otherwise would be the Reference Rate Reset Date
following the Floating Period Termination Notification Date. The Floating Period
Termination Notification Date will be at least four Business Days prior to such
Reference Rate Reset Date. In the event that we exercise our Floating Period
Option, the maturity date of the Series B Notes will be extended to the th
anniversary of the Floating Period Termination Date, in which case the Series B
Notes will mature not later than May , . If maturity is extended as
discussed in the previous sentence and as long as the Series B Notes are listed
on the Luxembourg Stock Exchange, we shall notify the Luxembourg Stock Exchange
of such extension and publish a notice thereof in accordance with the conditions
described under "Notices."
During any Floating Rate Period, interest will be payable on the next
following Reference Rate Reset Date as described under "--Interest and Interest
Payment Dates." The amount of interest payable for each day that the Series B
Notes are outstanding during the Floating Rate Period will be calculated by
dividing the Floating Period Interest Rate in effect for such day by 360 and
multiplying the result by the Dollar Price. The amount of interest payable for
any Floating Rate Reset Period will be calculated by adding the interest payable
for each day in the Floating Rate Reset Period. During any Floating Rate Period,
the interest rate, amount of interest to be paid on the Series B Notes and each
Floating Rate Interest Period will be determined by the Calculation Agent. As
long as the Series B Notes are listed on the Luxembourg Stock Exchange, the
Calculation Agent will communicate such information to the holders of the
Series B Notes and to the Luxembourg Stock Exchange no later than the first day
of each relevant Floating Rate Interest Period.
COUPON RESET PROCESS
If the Callholder has exercised the Call Option as set forth below under
"Call Option," we and the Calculation Agent will complete the following steps in
order to determine each Coupon Reset Rate. We and the Calculation Agent will use
reasonable efforts to cause the actions contemplated below to be completed in as
timely a manner as possible.
(a) We will provide the Calculation Agent with a list, no later than five
Business Days prior to the applicable Coupon Reset Date, containing the names
and addresses of up to five Reference Corporate Dealers or Reference Money
Market Dealers, as the case may be, from which we would like the Calculation
Agent to obtain Fixed Rate Bids or Floating Rate Bids for the purchase of the
Series B Notes.
(b) Within one Business Day following receipt by the Calculation Agent of
the dealer list referred to above, the Calculation Agent will provide to each
dealer on that list:
- a copy of the accompanying prospectus and a copy of this prospectus
supplement relating to the offering of the Series B Notes;
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- a copy of the form of the Series B Notes; and
- a written request that each dealer submit a Fixed Rate Bid or Floating
Rate Bid, as the case may be, to the Calculation Agent by 3:30 p.m., New
York City time (the "Bid Deadline"), on the third Business Day prior to
the Coupon Reset Date (the "Bid Date").
Each dealer will be provided with:
- the name of American Electric Power Company, Inc.;
- an estimate of the Dollar Price;
- the principal amount and maturity of the Series B Notes; and
- the method by which interest will be calculated on the Series B Notes.
(c) Following receipt of the bids, the Calculation Agent will provide
written notice to us of:
- the name of each of the dealers from whom the Calculation Agent received
bids on the Bid Date;
- the bid submitted by each of those dealers; and
- the Dollar Price.
(d) Immediately after calculating the Coupon Reset Rate, the Calculation
Agent will provide written notice of that Coupon Reset Rate to us, the Trustee
and the dealer submitting the lowest applicable bid.
CALL OPTION
On a Business Day not earlier than 20 Business Days prior to the Initial
Coupon Reset Date, and not later than 4:00 p.m., New York City time, on the 15th
Business Day prior to the Initial Coupon Reset Date, the Callholder will notify
us and the Trustee as to whether it elects to purchase the Series B Notes for
remarketing.
If the Callholder so elects, the Series B Notes will be subject to mandatory
tender, and will be deemed tendered, to the Callholder for purchase and
remarketing, and the Callholder will be obligated to purchase and remarket the
Series B Notes, on the Initial Coupon Reset Date and, if we choose to exercise
our Floating Period Option, on the Floating Period Termination Date, in
accordance with the terms and subject to the conditions described in the
Indenture; PROVIDED, HOWEVER, that if the Initial Coupon Reset Date or Floating
Period Termination Date is not a Business Day, the foregoing actions will be
postponed to and taken on the next succeeding Business Day.
On the Fixed Rate Coupon Reset Date, the Series B Notes will be remarketed
by the Callholder at a fixed rate of interest equal to the Interest Rate to
Maturity. If the Callholder elects to purchase the Series B Notes and if we
exercise our Floating Period Option, the maturity of the Series B Notes will be
automatically extended to the th anniversary of the Floating Period
Termination Date. If we so elect, the Series B Notes will bear interest at the
Floating Period Interest Rate until the Floating Period Termination Date, at
which time the Series B Notes will be remarketed at a fixed rate of interest
equal to the Interest Rate to Maturity unless we are required to redeem the
Series B Notes.
The call price of the tendered Series B Notes will be equal to 100% of their
aggregate principal amount on the Initial Coupon Reset Date, or the Dollar Price
on the Floating Period Termination Date. In the event of exercise of the Call
Option, then (i) not later than 12:00 noon, New York City time, on the Initial
Coupon Reset Date or the Floating Period Termination Date, as the case may be,
the Callholder will deliver the call price in immediately available funds to the
Trustee for payment of the call price on that Coupon Reset Date and (ii) the
holders of the Series B Notes will be required to
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deliver the Series B Notes to the Callholder against payment therefor on that
Coupon Reset Date through the facilities of DTC; PROVIDED, HOWEVER, that if any
Coupon Reset Date is not a Business Day, the actions required by the foregoing
clauses will be taken on the next succeeding Business Day.
If the Callholder elects to exercise the Call Option, the obligation of the
Callholder to pay the call price is subject to various conditions precedent. In
addition, the Call Option may be terminated in certain circumstances prior to
the time the Callholder exercises the Call Option. No holder of Series B Notes
shall have any rights or claims against the Callholder as a result of the
Callholder purchasing or not purchasing the Series B Notes.
If the Callholder elects to exercise the Call Option, on the applicable
Coupon Reset Date, or if such Coupon Reset Date is not a Business Day, on the
next succeeding Business Day, the Callholder will sell the aggregate principal
amount of the Series B Notes at the Dollar Price to the Reference Corporate
Dealer or to the Reference Money Market Dealer, whichever is applicable,
providing the lowest Fixed or Floating Rate Bid, in the case of the Initial
Coupon Reset Date, or the lowest Fixed Rate Bid, in the case of the Floating
Period Termination Date. If the lowest applicable Bid is submitted by two or
more of the applicable reference dealers, the Callholder will sell the Series B
Notes to one or more of such reference dealers, as it will determine in its sole
discretion.
If for any reason the Callholder does not purchase the Series B Notes on the
relevant Coupon Reset Date, or if such Coupon Reset Date is not a Business Day,
on the next succeeding Business Day, we will be required to redeem the Series B
Notes at a price equal to 100% of their aggregate principal amount, plus accrued
and unpaid interest, if any, if such Coupon Reset Date is the Initial Coupon
Reset Date, or at the Dollar Price, plus accrued and unpaid interest, if any, if
such Coupon Reset Date is the Floating Period Termination Date. See "Put Option"
below.
PUT OPTION
If the Call Option has not been exercised, or in the event the Callholder is
not required or fails to deliver the call price to the Trustee by 12:00 noon,
New York City time, on the relevant Coupon Reset Date, or if such Coupon Reset
Date is not a Business Day at such time on the next succeeding Business Day, the
Trustee will be required for and on behalf of the holders of the Series B Notes
to exercise the option to put the Series B Notes to us pursuant to the
Indenture. Upon exercise of the Put Option, we will be required to redeem all of
the Series B Notes on the applicable Coupon Reset Date at a redemption price
equal to 100% of the aggregate principal amount of the Series B Notes, if such
Coupon Reset Date is the Initial Coupon Reset Date, or at the Dollar Price on
the Floating Period Termination Date (in each case, the "Put Redemption Price").
The Put Option will be exercised automatically by the Trustee, on behalf of
holders, if the Call Option has not been exercised, or in the event the
Callholder is not required or fails to deliver the call price to the Trustee. If
the Trustee exercises the Put Option, we will deliver the Put Redemption Price
to the Trustee, together with the accrued and unpaid interest due on the
applicable Coupon Reset Date, by no later than 2:00 p.m., New York City time, on
such Coupon Reset Date, or if such Coupon Reset Date is not a Business Day at
such time on the next succeeding Business Day, and the holders of the Series B
Notes will be required to deliver the Series B Notes to us against payment
therefor on such Coupon Reset Date through the facilities of DTC. No holder of
any Series B Notes or interest therein has the right to consent or object to the
Trustee's duty to exercise the Put Option.
POST-COUPON RESET OPTIONAL REDEMPTION
After the Fixed Rate Coupon Reset Date, the Series B Notes will be
redeemable as a whole or in part, at our option at any time, at a redemption
price equal to the greater of (i) 100% of the principal amount of such Series B
Notes and (ii) the sum of the present values of the remaining scheduled payments
of principal and interest thereon (exclusive of interest accrued to the date of
redemption)
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discounted to the redemption date on a semiannual basis (assuming a 360 day year
consisting of twelve 30-day months) at the Series B Treasury Rate plus basis
points, plus in each case accrued interest thereon to the date of redemption.
"Series B Treasury Rate" means, with respect to any redemption date for the
Series B Notes, the rate per annum equal to the semiannual equivalent yield to
maturity or interpolated (on a day count basis) of the Series B Comparable
Treasury Issue, assuming a price for the Series B Comparable Treasury Issue
(expressed as a percentage of its principal amount) equal to the Series B
Comparable Treasury Price for such redemption date.
"Series B Comparable Treasury Issue" means the United States Treasury
security or securities selected by a Series B Independent Investment Banker as
having an actual or interpolated maturity comparable to the remaining term of
the Series B Notes to be redeemed that would be utilized, at the time of
selection and in accordance with customary financial practice, in pricing new
issues of corporate debt securities of a comparable maturity to the remaining
term of such Series B Notes.
"Series B Independent Investment Banker" means one of the Series B Reference
Treasury Dealers appointed by the Trustee after consultation with us.
"Series B Comparable Treasury Price" means, with respect to any redemption
date for the Series B Notes, (A) the average of the Series B Reference Treasury
Dealer Quotations for such redemption date, after excluding the highest and
lowest such Series B Reference Treasury Dealer Quotations, or (B) if the Trustee
obtains fewer than four such Series B Reference Treasury Dealer Quotations, the
average of all such quotations.
"Series B Reference Treasury Dealer Quotations" means, with respect to each
Series B Reference Treasury Dealer and any redemption date for the Series B
Notes, the average, as determined by the Trustee, of the bid and asked prices
for the Series B Comparable Treasury Issue (expressed in each case as a
percentage of its principal amount) quoted in writing to the Trustee by such
Series B Reference Treasury Dealer at 3:30 p.m. New York time on the third
business day preceding such redemption date.
"Series B Reference Treasury Dealer" means each of Credit Suisse First
Boston Corporation, Merrill Lynch, Pierce, Fenner & Smith Incorporated and UBS
Warburg LLC, or their affiliates which are primary U.S. Government securities
dealers, and their respective successors and two other primary U.S. Government
securities dealers selected by the Trustee; provided, however, that if any of
the foregoing or their affiliates shall cease to be a Primary Treasury Dealer,
we shall substitute therefor another Primary Treasury Dealer.
We will mail notice of redemption at least 30 days but not more than 60 days
before the applicable redemption date to each holder of the Series B Notes to be
redeemed. If we elect to partially redeem the Series B Notes, the Trustee will
select in a fair and appropriate manner the Series B Notes to be redeemed.
Unless we default in payment of the redemption price, on and after the date
of redemption, interest will cease to accrue on the Series B Notes or portions
thereof called for redemption.
PAYMENT OF ADDITIONAL AMOUNTS
We will pay additional amounts on the Series B Notes under the same
circumstances and subject to the same exceptions and limitations as described
under "Description of the Securities--Series A Notes--Payment of Additional
Amounts."
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REDEMPTION FOR TAX REASONS
If, as a result of any change in, or amendment to, the laws (or any
regulations or rulings promulgated thereunder) of the United States (or any
political subdivision or taxing authority thereof or therein), or any change in,
or amendments to, an official position regarding the application or
interpretation of such laws, regulations or rulings, which change or amendment
is announced or becomes effective on or after the date of this prospectus
supplement, we become or, based upon a written opinion of independent counsel
selected by us, will become obligated to pay additional amounts as described
herein under the heading "Description of Securities--Series B Notes--Payment of
Additional Amounts" with respect to Series B Notes, we may, at our option,
redeem, as a whole, but not in part, the Series B Notes on not less than 30 nor
more than 60 days' prior notice, at redemption price equal to 100% of their
principal amount together with interest accrued but unpaid thereon to the date
fixed for redemption.
RESTRICTIVE COVENANTS
Limitation upon Liens on Stock of Certain Subsidiaries
For so long as the Series B Notes are outstanding, we will be subject to the
same restriction as described in "Limitation upon Liens on Stock of Certain
Subsidiaries" under "--Series A Notes--Restrictive Covenants."
Limitation upon Mergers, Consolidations and Sale of Assets
For so long as the Series B Notes are outstanding, we will be subject to the
same restriction as described in "Limitation upon Mergers, Consolidations and
Sale of Assets" under "--Series A Notes--Restrictive Covenants."
SETTLEMENT
In the event that the Series B Notes are purchased by the Callholder, the
Callholder will pay to the Trustee, in same day funds not later than 12:00 noon,
New York City time, on the Initial Coupon Reset Date, or if such Coupon Reset
Date is not a Business Day at such time on the next succeeding Business Day, an
amount equal to 100% of the aggregate principal amount of the Series B Notes or
on the Floating Period Termination Date, an amount equal to the Dollar Price.
On any such Coupon Reset Date, or if such Coupon Reset Date is not a
Business Day, on the next succeeding Business Day, the Callholder will cause the
Trustee to make payment of the purchase price for the tendered Series B Notes
that have been purchased for remarketing by the Callholder to DTC for payment to
the DTC participant of each tendering beneficial owner of Series B Notes. This
payment will be made against delivery through DTC of the beneficial owner's
Series B Notes by book-entry through DTC by the close of business on the Coupon
Reset Date or if such Coupon Reset Date is not a Business Day, on the next
succeeding Business Day.
We will also make, or cause the Trustee to make, payment of interest to DTC
for payment to the DTC participant of each beneficial owner of Series B Notes,
due on a Coupon Reset Date by book-entry through DTC, by the close of business
on such Coupon Reset Date, or if such Coupon Reset Date is not a Business Day,
on the next succeeding Business Day.
The transactions described above will be executed on the applicable Coupon
Reset Date, through DTC or if such Coupon Reset Date is not a Business Day, on
the next succeeding Business Day, in accordance with the procedures of DTC, and
the accounts of the respective Participants will be debited and credited, and
the Series B Notes delivered by book-entry as necessary to effect the purchases
and sales thereof.
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All payments of principal and interest in respect of the Series B Notes in
book-entry form will be made in immediately available funds. The Series B Notes
will trade in DTC's Same-Day Funds Settlement System until the maturity date, as
it may be extended, or the redemption date, as the case may be, or until the
Series B Notes are issued in certificated form.
The tender and settlement procedures described above, including the
provisions for payment to selling beneficial owners of tendered Series B Notes,
or for payment by the purchasers of Series B Notes, in a remarketing, may be
modified to the extent required by DTC or, if the book-entry system is no longer
available for the Series B Notes at the time of a remarketing, to the extent
required to facilitate the tendering and remarketing of the Series B Notes in
certificated form. In addition, the Callholder may modify the settlement
procedures set forth above in order to facilitate the settlement process.
As long as DTC or its nominee holds a certificate representing the Series B
Notes in the book-entry system of DTC, no certificates for the Series B Notes
will be delivered to any beneficial owner. In addition, under the terms of the
Series B Notes, the Indenture and the underwriting agreement, we have agreed
that (1) we will use our reasonable best efforts to maintain the Series B Notes
in book-entry form with DTC or any successor thereto, and to appoint a successor
depositary to the extent necessary to maintain the Series B Notes in book-entry
form, and (2) we will (except as described below) waive any discretionary right
we otherwise have under the Indenture to cause the Series B Notes to be issued
in certificated form.
CALLHOLDER
If the Callholder elects to purchase the Series B Notes, the Callholder will
not receive any fees or reimbursement of expenses from us in connection with the
purchase and remarketing of the Series B Notes, except under certain
circumstances.
On or after the Fixed Rate Coupon Reset Date, we may at any time purchase
any Series B Notes at any price in the open market or otherwise. The Series B
Notes so purchased by us may, at our discretion, be held, resold or surrendered
to the Trustee for cancellation.
DENOMINATION
The Series B Notes will initially be issued only in registered, book-entry
form, in denominations of $1,000 and any integral multiples of $1,000 as
described under "Book-Entry, Delivery and Form" below. We will issue global
securities in denominations that together equal the total principal amount of
the outstanding Series B Notes.
RECENT ACCOUNTING DEVELOPMENTS
For purposes of financial accounting and reporting, for publicly held
companies the Securities and Exchange Commission (the "SEC") may require
prospective investors to separately account for the Callholder's option to
purchase and to remarket the Series B Notes on the Initial Coupon Reset Date.
Persons considering investing in the Series B Notes, who are required to file
financial reports with the SEC pursuant to the Securities Exchange Act of 1934,
as amended, should consult their own accounting advisors concerning potential
reporting requirements.
BOOK-ENTRY, DELIVERY AND FORM
GENERAL
We will issue the Securities in the form of one or more fully registered
global notes, which we refer to as the "Global Notes," which will be deposited
with, or on behalf of, DTC, and registered in the name of DTC's nominee.
Beneficial interests in the Global Notes will be represented through
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book-entry accounts of financial institutions acting on behalf of beneficial
owners as direct and indirect participants in DTC. Investors may elect to hold
interests in the Global Notes through DTC, Clearstream Banking, societe anonyme,
which we refer to as "Clearstream Luxembourg," or Euroclear Bank S.A./N.V., as
operator of the Euroclear System, which we refer to as "Euroclear," if they are
participants of such systems, or indirectly through organizations which are
participants in such systems. Clearstream Luxembourg and Euroclear will hold
interests on behalf of their participants through customers' securities accounts
in Clearstream Luxembourg's and Euroclear's names on the books of their
respective depositaries, which in turn will hold such interests in customers'
securities accounts in the depositaries' names on the books of DTC. At the
present time, Citibank, N.A. acts as depositary for Clearstream Luxembourg and
The Chase Manhattan Bank acts as depositary for Euroclear, which we refer to in
such capacities as the "U.S. Depositaries." Beneficial owners will not receive
certificates representing their ownership interests in the Global Notes, except
in the event that use of the book-entry system for such notes is discontinued
under the circumstances described below. Except as set forth below, the Global
Notes may be transferred, in whole and not in part, only to another nominee of
DTC or to a successor of DTC or its nominee.
Clearstream Luxembourg advises that it is incorporated under the laws of
Luxembourg as a professional depositary. Clearstream Luxembourg holds securities
for its customers, which we refer to as "Clearstream Luxembourg Customers," and
facilitates the clearance and settlement of securities transactions between
Clearstream Luxembourg Customers through electronic book-entry transfers between
their accounts. Clearstream Luxembourg provides to Clearstream Luxembourg
Customers, among other things, services for safekeeping, administration,
clearance and settlement of internationally traded securities and securities
lending and borrowing. Clearstream Luxembourg interfaces with domestic
securities markets in several countries through established depositary and
custodial relationships. As a professional depositary, Clearstream Luxembourg is
subject to regulation by the Luxembourg Commission for the Supervision of the
Financial Sector, also known as the Commission de Surveillance du Secteur
Financier. Clearstream Luxembourg Customers are recognized financial
institutions around the world, including underwriters, securities brokers and
dealers, banks, trust companies, clearing corporations and certain other
organizations. Clearstream Luxembourg's U.S. customers are limited to securities
brokers and dealers and banks. Indirect access to Clearstream Luxembourg is also
available to other institutions such as banks, brokers, dealers and trust
companies that clear through or maintain a custodial relationship with a
Clearstream Luxembourg Customer. Clearstream Luxembourg is an indirect
participant in DTC.
Distributions with respect to the Securities held through Clearstream
Luxembourg will be credited to cash accounts of Clearstream Luxembourg Customers
in accordance with its rules and procedures, to the extent received by the U.S.
Depositary for Clearstream Luxembourg.
Euroclear advises that it was created in 1968 to hold securities for its
participants, which we refer to as "Euroclear Participants," and to clear and
settle transactions between Euroclear Participants through simultaneous
electronic book-entry delivery against payment, thereby eliminating the need for
physical movement of certificates and any risk from lack of simultaneous
transfers of securities and cash. Euroclear provides various other services,
including securities lending and borrowing and interfaces with domestic markets
in several countries. Euroclear is operated by the Euroclear Bank S.A./N.V.,
which we refer to as the "Euroclear Operator," under contract with Euroclear
Clearance Systems S.C., a Belgian cooperative corporation, which we refer to as
the "Cooperative." All operations are conducted by the Euroclear Operator, and
all Euroclear securities clearance accounts and Euroclear cash accounts are
accounts with the Euroclear Operator, not the Cooperative. The Cooperative
establishes policy for Euroclear on behalf of Euroclear Participants. Euroclear
Participants include banks, including central banks, securities brokers and
dealers and other professional financial intermediaries and may include the
underwriters. Indirect access to Euroclear is also available to other
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firms that clear through or maintain a custodial relationship with a Euroclear
Participant, either directly or indirectly. Euroclear is an indirect participant
in DTC.
Securities clearance accounts and cash accounts with the Euroclear Operator
are governed by the Terms and Conditions Governing Use of Euroclear and the
related Operating Procedures of the Euroclear System, and applicable Belgian
law, which we refer to collectively as the "Terms and Conditions." The Terms and
Conditions govern transfers of securities and cash within Euroclear, withdrawals
of securities and cash from Euroclear, and receipts of payments with respect to
securities in Euroclear. All securities in Euroclear are held on a fungible
basis without attribution of specific certificates to specific securities
clearance accounts. The Euroclear Operator acts under the Terms and Conditions
only on behalf of Euroclear Participants and has no record of or relationship
with persons holding through Euroclear Participants.
Distributions with respect to the Securities held beneficially through
Euroclear will be credited to the cash accounts of Euroclear Participants in
accordance with the Terms and Conditions, to the extent received by the U.S.
Depositary for Euroclear.
Euroclear further advises that investors that acquire, hold and transfer
interests in the Securities by book-entry through accounts with the Euroclear
Operator or any other securities intermediary are subject to the laws and
contractual provisions governing their relationship with their intermediary, as
well as the laws and contractual provisions governing the relationship between
such an intermediary and each other intermediary, if any, standing between
themselves and the Global Notes.
DTC has advised that pursuant to procedures established by it (i) upon the
issuance by us of the Securities, DTC will credit the accounts of participants
designated by the underwriters with the principal amount of the Securities
purchased by the underwriters and (ii) ownership of beneficial interests in the
Securities will be shown on, and the transfer of that ownership will be effected
only through, records maintained by DTC (with respect to participants'
interests), the participants and the indirect participants. Accordingly, each
beneficial owner must rely on the procedures of DTC to exercise their rights
under the Securities. The laws of some jurisdictions require that certain
persons take physical delivery in definitive form of securities which they own.
Consequently, the ability to transfer beneficial interests in the Global Notes
is limited to such extent.
So long as a nominee of DTC is the registered owner of the Global Notes,
such nominee will be considered the sole owner or holder of the Global Notes for
all purposes under the Indenture. Except as provided below, owners of beneficial
interests in the Global Notes will not be entitled to have the Securities
registered in their names, will not receive or be entitled to receive physical
delivery of the Securities in definitive form and will not be considered the
owners or holders thereof under the Indenture. 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 the Securities are
credited, which may or may not be the beneficial owners. The participants will
remain responsible for keeping account of their holdings on behalf of their
customers.
Neither we, the Trustee, any paying agent nor the registrar will have any
responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests in the Global Notes,
or for maintaining, supervising or reviewing any records relating to such
beneficial ownership interests.
Title to book-entry interests in the Securities will pass by book-entry
registration of the transfer within the records of Clearstream Luxembourg,
Euroclear or DTC, as the case may be, in accordance with their respective
procedures. Book-entry interests in the Securities may be transferred within
Clearstream Luxembourg and within Euroclear and between Clearstream Luxembourg
and Euroclear in accordance with procedures established for these purposes by
Clearstream Luxembourg and Euroclear. Book-entry interests in the Securities may
be transferred within DTC in accordance with procedures
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established for this purpose by DTC. Transfers of book-entry interests in the
Securities among Clearstream Luxembourg and Euroclear and DTC may be effected in
accordance with procedures established for this purpose by Clearstream
Luxembourg, Euroclear and DTC.
If DTC is at any time unwilling, unable or ineligible to continue as
depositary and a successor depositary is not appointed by us within 90 days, we
will issue the Securities in definitive form in exchange for the Global Notes.
We will also issue securities in definitive form in exchange for Global Notes if
an event of default has occurred with regard to the Securities and has not been
cured or waived. In addition, we may at any time determine not to have the
Securities represented by Global Notes and, in such event, will issue the
Securities in definitive form in exchange for the Global Notes. In either
instance, an owner of a beneficial interest in the Global Notes will be entitled
to have Securities equal in principal amount to such beneficial interest
registered in its name and will be entitled to physical delivery of such notes
in definitive form. The Securities so issued in definitive form will be issued
in denominations of $1,000 and integral multiples thereof and will be issued in
registered form only, without coupons. The Trustee or American Electric Power
Company, Inc. may require Securities surrendered for exchange or transfer to be
accompanied by satisfactory instruments of transfer. If at any time the
Securities are issued in definitive form, interest will be paid by check mailed
on or before the payment date, by first class mail, to the holders thereof or by
any alternative method of payment we elect, as to which we will notify such
holders. Interest payments on definitive Securities will also be made at the
offices of the Luxembourg paying agent. Payments of principal on definitive
Securities will be made against surrender of the Securities at the principal
office in the United States of the Trustee, as U.S. paying agent, or at the
offices in Luxembourg of our Luxembourg paying agent.
If the Securities are issued in definitive form, holders of the notes will
be able to effect exchanges or transfers of the notes, in principal
denominations of $1,000 and integral multiples thereof, at the offices of the
Trustee, as our U.S. transfer agent, or at the offices in Luxembourg of
Kredietbank S.A., Luxembourgeois as our Luxembourg transfer agent, in either
case upon surrender of the certificates representing such notes, together with
appropriate transfer documentation. Definitive notes to be exchanged or
transferred will be made available to holders as soon as they are available to
the applicable transfer agent. No service charge will be made for any
registration of transfer of our Securities, but we may generally require payment
of a sum sufficient to cover any tax or other governmental charge payable in
connection therewith. For additional information on transfer procedures, see the
accompanying prospectus.
GLOBAL CLEARANCE AND SETTLEMENT PROCEDURES
Initial settlement for the Securities will be made in immediately available
funds. Secondary market trading between DTC participants will occur in the
ordinary way in accordance with DTC's rules and will be settled in immediately
available funds using DTC's Same-Day Funds Settlement System. Secondary market
trading between Clearstream Luxembourg Customers and Euroclear Participants will
occur in the ordinary way in accordance with the applicable rules and operating
procedures of Clearstream Luxembourg and Euroclear and will be settled using the
procedures applicable to conventional Eurobonds in immediately available funds.
Cross-market transfers between persons holding directly or indirectly
through DTC on the one hand, and directly or indirectly through Clearstream
Luxembourg Customers or Euroclear Participants, on the other, will be effected
in DTC in accordance with DTC's rules on behalf of the relevant European
international clearing system by its U.S. Depositary; however, such cross-market
transactions will require delivery of instructions to the relevant European
international clearing system by the counterparty in such system in accordance
with its rules and procedures and within its established deadlines, in European
time. The relevant European international clearing system will, if the
transaction meets its settlement requirements, deliver instructions to its U.S.
depositary to take action to effect final settlement on its behalf by delivering
interests in the Securities to or receiving interests
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in the Securities from DTC, and making or receiving payment in accordance with
normal procedures for same-day funds settlement applicable to DTC. Clearstream
Luxembourg Customers and Euroclear Participants may not deliver instructions
directly to the respective U.S. Depositaries.
Because of time-zone differences, credits of interests in the Securities
received in Clearstream Luxembourg or Euroclear as a result of a transaction
with a DTC participant will be made during subsequent securities settlement
processing and dated the business day following the DTC settlement date. Such
credits or any transactions involving interests in such Securities settled
during such processing will be reported to the relevant Clearstream Luxembourg
Customers or Euroclear Participants on such business day. Cash received in
Clearstream Luxembourg or Euroclear as a result of sales of interests in the
Securities by or through a Clearstream Luxembourg Customer or a Euroclear
Participant to a DTC participant will be received with value on the DTC
settlement date but will be available in the relevant Clearstream Luxembourg or
Euroclear cash account only as of the business day following settlement in DTC.
Although DTC, Clearstream Luxembourg and Euroclear have agreed to the
foregoing procedures in order to facilitate transfers of interests in the
Securities among participants of DTC, Clearstream Luxembourg and Euroclear, they
are under no obligation to perform or continue to perform such procedures and
such procedures may be changed or discontinued at any time.
NOTICES
Notices to holders of the Securities will be sent by mail to the registered
holders and will be published, whether the Securities are in global or
definitive form, and if the Securities are listed on the Luxembourg Stock
Exchange, in a daily newspaper of general circulation in Luxembourg. It is
expected that publication will be made in Luxembourg in the LUXEMBURGER WORT.
Any such notice shall be deemed to have been given on the date of such
publication or, if published more than once, on the date of the first such
publication. If the Securities are listed on the Luxembourg Stock Exchange, any
appointment of or change in the Calculation Agent, Luxembourg paying agent and
transfer agent will be published in Luxembourg in the manner set forth above.
UNITED STATES TAXATION
The following summary describes the material United States federal income
tax considerations with respect to the purchase, ownership and disposition of
Securities as of the date hereof. Except where noted, it deals only with U.S.
Holders (as defined below).
A "U.S. Holder" means a beneficial holder of Securities that is:
- a citizen or resident of the United States,
- a corporation or partnership created or organized in or under the laws of
the United States or any political subdivision thereof,
- an estate the income of which is subject to United States federal income
taxation regardless of its source, or
- a trust that (i) is subject to the supervision of a court within the
United States and the control of one or more United States persons as
described in section 7701(a)(30) of the Code or (ii) has a valid election
in effect under applicable U.S. Treasury regulations to be treated as a
United States person.
A "non-U.S. Holder" is a holder of Securities that is not a U.S. Holder.
This summary deals only with Securities purchased on original issue at their
issue price and held as capital assets and does not deal with special
situations, such as those of dealers in securities or
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currencies, traders in securities that elect to use a mark-to-market method of
accounting for their securities holdings, financial institutions, tax-exempt
entities, insurance companies, persons holding Securities as part of a hedging,
integrated, conversion or constructive sale transaction or a straddle, persons
owning 10% or more of our voting stock, or persons whose "functional currency"
is not the United States dollar. Furthermore, the discussion below is based upon
the provisions of the Internal Revenue Code of 1986, as amended (the "Code"),
and regulations, rulings and judicial decisions thereunder as of the date
hereof, and such authorities may be repealed, revoked or modified so as to
result in United States federal income tax consequences different from those
discussed below.
IF YOU ARE CONSIDERING THE PURCHASE, OWNERSHIP OR DISPOSITION OF SECURITIES,
YOU SHOULD CONSULT YOUR OWN TAX ADVISORS CONCERNING THE UNITED STATES FEDERAL
INCOME TAX CONSEQUENCES IN LIGHT OF YOUR PARTICULAR SITUATION AS WELL AS ANY
CONSEQUENCES ARISING UNDER THE LAWS OF ANY OTHER TAXING JURISDICTION.
If a partnership holds Securities, the tax treatment of a partner will
generally depend upon the status of the partner and the activities of the
partnership. If you are a partner of a partnership holding Securities, you are
urged to consult your tax advisors.
U.S. HOLDERS
SERIES A NOTES
Interest on the Series A Notes should constitute qualified stated interest
and generally should be taxable to a U.S. Holder as ordinary interest income at
the time such payments are accrued or received, in accordance with your regular
method of tax accounting.
Your tax basis in Series A Notes will, in general, be your cost therefor.
Upon the sale, exchange, retirement or other disposition of Series A Notes, you
will recognize gain or loss equal to the difference between the amount realized
upon the sale, exchange, retirement or other disposition (less any accrued
qualified stated interest not previously included in income, which will be
taxable as ordinary income) and your adjusted tax basis in the Series A Notes.
Such gain or loss will be capital gain or loss. Capital gain of individuals
derived in respect of capital assets held for more than one year is eligible for
reduced rates of taxation. The deductibility of capital losses is subject to
limitations.
SERIES B NOTES
The United States federal income tax treatment of debt obligations such as
the Series B Notes is not entirely certain. Because the Series B Notes are
subject to mandatory tender on the Initial Coupon Reset Date, we intend to treat
the Series B Notes, for United States federal income tax purposes, as maturing
on the Initial Coupon Reset Date. By purchasing the Series B Notes, you agree to
such treatment for United States federal income tax purposes. Based on such
treatment, interest on the Series B Notes will constitute "qualified stated
interest" and generally will be taxable to you as ordinary interest income at
the time such payments are accrued or received (in accordance with your regular
method of tax accounting).
Under the foregoing treatment, your tax basis in Series B Notes will, in
general, be your cost therefor. Upon the sale, exchange, retirement or other
disposition of Series B Notes, you will recognize gain or loss equal to the
difference between the amount realized upon the sale, exchange, retirement or
other disposition (less any accrued qualified stated interest not previously
included in income, which will be taxable as ordinary income) and your adjusted
tax basis in the Series B Notes. Such gain or loss will be capital gain or loss.
Capital gain of individuals derived in respect of capital assets held for more
than one year is eligible for reduced rates of taxation. The deductibility of
capital losses is subject to limitations.
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There can be no assurance that the Internal Revenue Service (the "IRS") will
agree with the manner in which we intend to treat the Series B Notes for United
States federal income tax purposes. Among other possibilities, the IRS could
seek to treat the Series B Notes as maturing on the maturity date, in which
event (i) the Series B Notes would be subject to the Treasury Regulations
governing debt instruments that provide for contingent payments (the "Contingent
Payment Regulations"), (ii) the issue price of the Series B Notes would be
treated as including the value of the mandatory tender right, (iii) we would be
required to construct a projected payment schedule for the Series B Notes based
upon our current borrowing costs for comparable debt instruments of ours, from
which an estimated yield on the Series B Notes would be calculated. You would be
required to include in income original issue discount ("OID") in an amount equal
to the product of the adjusted issue price of the Series B Notes at the
beginning of each interest accrual period and the estimated yield of the Series
B Notes. In general, for these purposes, the Series B Notes' adjusted issue
price would equal the Series B Notes' issue price increased by the interest
previously accrued on the Series B Notes, and reduced by all payments made on
the Series B Notes. As a result of the application of the Contingent Payment
Regulations, it is possible that you would be required to include interest in
income in excess of actual cash payments received for certain taxable years.
The character of any gain or loss on a sale or exchange of Series B Notes
(including a sale pursuant to the mandatory tender on the Initial Coupon Reset
Date) would also differ if the Series B Notes were treated as contingent payment
obligations. Any such taxable gain generally would be treated as ordinary
income. Any such taxable loss generally would be ordinary to the extent of
previously accrued original issue discount, and any excess would generally be
treated as capital loss.
NON-U.S. HOLDERS
U.S. FEDERAL WITHHOLDING TAX
The 30% U.S. federal withholding tax will not apply to any payment of
principal or interest (including OID) on a particular series of Securities
provided that:
- you do not actually (or constructively) own 10% or more of the total
combined voting power of all classes of our voting stock within the
meaning of the Code and applicable U.S. Treasury Regulations;
- you are not a controlled foreign corporation that is related to us through
stock ownership;
- you are not a bank whose receipt of interest on the Securities is
described in section 881(c)(3)(A) of the Code; and
- (a) you provide your name and address on an IRS Form W-8BEN (or successor
form), and certify, under penalty of perjury, that you are not a U.S.
Holder or (b) you hold your Securities through certain foreign
intermediaries and you satisfy the certification requirements of
applicable U.S. Treasury regulations. Special certification rules apply to
certain non-U.S. Holders that are entities rather than individuals.
If you cannot satisfy the requirements described above, payments of premium
and interest (including original issue discount) made to you will be subject to
the 30% U.S. federal withholding tax, unless you provide us with a properly
executed (1) IRS Form W-8BEN (or other applicable form) claiming an exemption
from or reduction in withholding under the benefit of an applicable tax treaty
or (2) IRS Form W-8ECI stating that interest paid on Securities is not subject
to withholding tax because it is effectively connected with your conduct of a
trade or business in the United States.
The 30% U.S. federal withholding tax generally will not apply to any gain
that you realize on the sale, exchange, retirement or other disposition of
Securities.
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U.S. FEDERAL ESTATE TAX
Your estate will not be subject to U.S. federal estate tax on Securities of
a series beneficially owned by you at the time of your death, provided that (1)
you do not own 10% or more of the total combined voting power of all classes of
our voting stock (within the meaning of the Code and the U.S. Treasury
Regulations) and (2) interest on those Securities would not have been, if
received at the time of your death, effectively connected with the conduct by
you of a trade or business in the United States.
U.S. FEDERAL INCOME TAX
If you are engaged in a trade or business in the United States and interest
on the Securities is effectively connected with the conduct of that trade or
business, you will be subject to U.S. federal income tax on that interest
(although exempt from the 30% withholding tax) on a net income basis in the same
manner as if you were a U.S. person as defined under the Code. In addition, if
you are a foreign corporation, you may be subject to a branch profits tax equal
to 30% (or lower applicable treaty rate) of your earnings and profits for the
taxable year, subject to adjustments, that are effectively connected with the
conduct by you of a trade or business in the United States.
Any gain realized on the disposition of Securities generally will not be
subject to U.S. federal income tax unless the gain is effectively connected with
the conduct of a trade or business in the United States by you, or you are an
individual who is present in the United States for 183 days or more in the
taxable year of that disposition, and certain other conditions are met.
INFORMATION REPORTING AND BACKUP WITHHOLDING
U.S. HOLDERS
In general, information reporting requirements will apply to certain
payments of principal, interest, OID and premium paid on notes and to the
proceeds of sale of a note made to you (unless you are an exempt recipient such
as a corporation). A 31% backup withholding tax will apply to such payments if
you fail to provide a taxpayer identification number, a certification of exempt
status, or fail to report in full dividend and interest income.
NON-U.S. HOLDERS
In general, you will not be subject to backup withholding and information
reporting with respect to payments that we make to you provided that we do not
have actual knowledge that you are a U.S. Holder and we have received from you
the statement described above under "U.S. Federal Withholding Tax."
In addition, you will not be subject to backup withholding or information
reporting with respect to the proceeds of the sale of Securities within the
United States or conducted through certain U.S.-related financial
intermediaries, if the payor receives the statement described above and does not
have actual knowledge that you are a U.S. Holder or you otherwise establish an
exemption.
Any amounts withheld under the backup withholding rules will be allowed as a
refund or a credit against your U.S. federal income tax liability provided the
required information is furnished to the IRS.
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UNDERWRITING
Subject to the terms and conditions set forth in the underwriting agreement
relating to each series, each dated May , 2001, among us and the underwriters
named below, we have agreed to sell to the underwriters, and the underwriters
have severally agreed to purchase, the following respective principal amounts of
the Securities:
PRINCIPAL PRINCIPAL
AMOUNT AMOUNT
UNDERWRITER OF SERIES A NOTES OF SERIES B NOTES
----------- ----------------- -----------------
Credit Suisse First Boston Corporation $ $
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
UBS Warburg LLC
ABN AMRO Incorporated
Lehman Brothers Inc.
Salomon Smith Barney Inc.
Barclays Capital Inc.
Banc of America Securities LLC
BNY Capital Markets, Inc.
Chase Securities Inc.
Tokyo-Mitsubishi International plc
------------ ------------
Total.................................. $ $
============ ============
In each underwriting agreement, the underwriters have agreed, subject to the
terms and conditions set forth therein, to purchase all of the Series A Notes
and Series B Notes offered hereby if any Series A Notes or Series B Notes,
respectively, are purchased.
The underwriters have advised us that the underwriters propose to offer the
Securities to the public initially at the offering prices set forth on the cover
page of this prospectus supplement, and to certain dealers initially at that
price less a discount not in excess of % and % of the principal amount of
the Series A Notes and Series B Notes, respectively. The underwriters may allow,
and those dealers may reallow, a concession to certain other dealers not in
excess of % and % of the principal amount of the Series A Notes and Series
B Notes, respectively. After the initial offering of the Securities to the
public, the public offering prices and these concessions may be changed.
We have agreed to indemnify the underwriters against payments the
underwriters may be required to make in respect of, certain liabilities,
including liabilities under the Securities Act or contribute to payments the
underwriters may be required to make in respect of any of these liabilities.
Although application has been made to list the Securities on the Luxembourg
Stock Exchange, the Securities have no established trading market. We have been
advised by the underwriters that they intend to make a market in the Securities
as permitted by applicable laws and regulations. The underwriters are not
obligated, however, to make a market in the Securities, and any market making
may be discontinued at any time without notice. No assurance can be given as to
the liquidity of the trading market for the Securities.
In connection with the offering the underwriters may purchase and sell the
Securities in the open market. These transactions may include over-allotment,
syndicate covering transactions and stabilizing transactions. Over-allotment
involves syndicate sales of Securities in excess of the principal amount of the
Securities creating a syndicate short position. Syndicate covering transactions
involve purchases of the Securities in the open market after the distribution
has been completed in order to cover syndicate short positions. Stabilizing
transactions consist of certain bids or purchases of Securities made for the
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purpose of preventing or retarding a decline in the market price of the
Securities while the offering is in progress.
The underwriters may also impose a penalty bid. A penalty bid permits the
underwriters to reclaim a selling concession from a syndicate member when the
Securities originally sold by that syndicate member are purchased in a syndicate
transaction.
Any of these activities may cause the price of the Securities to be higher
than the price that otherwise would exist in the open market in the absence of
such transactions. Neither we nor the underwriters make any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of the Securities. In addition, neither we
nor the underwriters make any representation that the underwriters will engage
in such transactions or that such transactions, once commenced, will not be
discontinued without notice.
Purchasers of the Securities may be required to pay stamp taxes and other
charges in accordance with the laws and practices of the country of purchase in
addition to the issue prices set forth on the cover page hereof.
We estimate that our total expenses of this offering will be $1,174,000.
The underwriters and their affiliates engaged in, and may from time to time
in the future engage in, and performed, and may from time to time in the future
perform, services on our behalf and on behalf of our subsidiaries in the
ordinary course of business.
The Securities are offered for sale in those jurisdictions where it is
lawful to make such offers.
Each of the underwriters has represented and agreed that it has not and will
not offer, sell or deliver any of the Securities directly or indirectly, or
distribute this prospectus supplement or the accompanying prospectus or any
other offering material relating to the Securities, in or from any jurisdiction
except under circumstances that will result in compliance with the applicable
laws and regulations thereof.
In particular, each underwriter has represented and agreed that:
- It has not offered or sold and will not offer or sell any Securities to
persons in the United Kingdom prior to the expiry of the period of six
months from the issue date of the Securities except to persons whose
ordinary activities involve them in acquiring, holding, managing or
disposing of investments (as principal or agent) for the purpose of their
businesses or otherwise in circumstances which have not resulted and will
not result in an offer to the public in the United Kingdom within the
meaning of the Public Offers of Securities Regulations 1995.
- It has only issued or passed on and will only issue or pass on in the
United Kingdom any document received by it in connection with the issue of
the Securities to a person who is of a kind described in Article 11(3) of
the Financial Services Act 1986 (Investment Advertisements) (Exemptions)
Order 1996 (as amended) or is a person to whom such document may otherwise
lawfully be issued or passed on.
- It has complied and will comply with all applicable provisions of the
Financial Services Act 1986 with respect to anything done by it in
relation to any Securities in, from or otherwise involving the United
Kingdom.
LISTING AND GENERAL INFORMATION
Application has been made to list our Securities on the Luxembourg Stock
Exchange. There can be no assurance that we will obtain such listing. In
connection with the listing application, the amended and restated articles of
incorporation and the by-laws of American Electric Power Company, Inc. and a
legal notice relating to the issuance of the Securities have been deposited
prior to listing with the Chief
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Registrar of the District Court of Luxembourg, where copies thereof may be
obtained upon request. Copies of the above documents together with this
prospectus supplement, the accompanying prospectus, our Indenture dated as of
May 1, 2001, our Annual Reports on Form 10-K for the fiscal years ending
December 31, 1999 and 2000 (each of which contains audited consolidated
financial information as of and for the fiscal years then ended) and our current
Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, as well as all
such future reports, so long as any of the Securities are outstanding, will be
made available free of charge at the main office of Kredietbank S.A.,
Luxembourgeois, 43 Boulevard Royal, L-2955 Luxembourg. Kredietbank S.A.,
Luxembourgeois, will act as intermediary between the holders of the Securities
and us.
Our independent accountants are Deloitte & Touche LLP, Columbus, OH.
Other than as disclosed or contemplated herein or in the documents
incorporated herein by reference, there has been no material adverse change in
our financial position since December 31, 2000.
Other than as disclosed or contemplated herein or in the documents
incorporated herein by reference, neither we nor any of our subsidiaries is
involved in litigation, arbitration or administrative proceedings relating to
claims or amounts that are material in the context of the issue of the
Securities and we are not aware of any such litigation, arbitration or
administrative proceedings pending or threatened.
Resolutions relating to the issue and sale of the Securities were adopted by
the Board of Directors of American Electric Power Company, Inc. on February 28,
2001.
The Securities have been accepted for clearance by Euroclear and Clearstream
Luxembourg. With respect to the Series A Notes, the CUSIP number is , the
Common Code is , and the International Security Identification Number
(ISIN) is . With respect to the Series B Notes, the CUSIP number is
, the Common Code is , and the International Security Identification
Number (ISIN) is .
DOCUMENTS INCORPORATED BY REFERENCE
We file annual, quarterly and special reports, proxy statements and other
information with the SEC. Our SEC filings are available to the public over the
Internet at the SEC's web site at http://www.sec.gov. You may also read and copy
any document we file at the SEC's Public Reference Room at 450 Fifth Street,
N.W., Washington, D.C. 20549. You can call the SEC at 1-800-732-0330 for further
information about the Public Reference Room.
The SEC allows us to "incorporate by reference" the information we file with
them, which means we are assumed to have disclosed important information to you
when we refer you to documents that are on file with the SEC. Please refer to
"Where You Can Find More Information" in the accompanying prospectus. At the
date of this prospectus supplement, the documents specifically incorporated by
reference in the prospectus and this prospectus supplement are our:
- Annual Report on Form 10-K for the fiscal year ended December 31, 2000.
- Current Report on Form 8-K dated April 24, 2001.
So long as the Securities are listed on the Luxembourg Stock Exchange, the
above documents will be made available free of charge at the main office of
Kredietbank S.A., Luxembourgeois, 43 Boulevard Royal, L-2955 Luxembourg.
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GLOSSARY OF DEFINED TERMS
Set forth below are some of the definitions of the defined terms used in
this prospectus supplement.
"Applicable Spread" means the lowest Fixed Rate Bid, expressed as a spread
(in the form of a percentage or in basis points) above the Base Rate for the
Series B Notes, obtained by the Calculation Agent by 3:30 p.m., New York City
time, on the Fixed Rate Determination Date, from the Fixed Rate Bids quoted to
the Calculation Agent by up to five Reference Corporate Dealers.
"Base Rate" means %.
"Business Day" means any day other than a Saturday or Sunday or a day on
which banking institutions in New York City are authorized or obligated by law
or executive order to close.
"Calculation Agent" means the Calculation Agent appointed pursuant to the
Indenture, initially .
"Call Notice" means notice by the Callholder to us and the Trustee that it
elects to purchase the Series B Notes for remarketing on the Initial Coupon
Reset Date.
"Call Option" means the option of the Callholder which, if exercised,
results in the obligation of the Callholder to purchase the Series B Notes for
remarketing on the Initial Coupon Reset Date and, if we exercise our Floating
Period Option, to purchase the Series B Notes for remarketing on the Fixed Rate
Coupon Reset Date, as described under "Description of the Securities--Series B
Notes--Call Option."
"Comparable Treasury Issues" for the Series B Notes means the U.S. Treasury
security or securities selected by the Calculation Agent, as of the first
Determination Date, as having an actual or interpolated maturity or maturities
comparable to the remaining term of the Series B Notes being purchased by the
Callholder.
"Comparable Treasury Price" means, with respect to the Initial Coupon Reset
Date:
- the offer prices for the Comparable Treasury Issues (expressed, in each
case, as a percentage of its principal amount) at 12:00 noon, New York
City time, on the first Determination Date, as set forth on "Telerate Page
500" (or such other page as may replace "Telerate Page 500") or
- if such page (or any successor page) is not displayed or does not contain
such offer prices on such Determination Date, the average of the Reference
Treasury Dealer Quotations for such Determination Date, after excluding
the highest and lowest such Reference Treasury Dealer Quotations, or if
the Calculation Agent obtains fewer than four such Reference Treasury
Dealer Quotations, the average of all such Reference Treasury Dealer
Quotations.
"Coupon Reset Date(s)" means (1) May , , assuming the Callholder has
elected to purchase the Series B Notes and we have not elected to exercise our
Floating Period Option, or (2) May , and the Floating Period Termination
Date, if, in the case of the Floating Period Termination Date, we have elected
to exercise our Floating Period Option.
"Coupon Reset Rate" means the interest rate to be paid on the Series B Notes
from and including each Coupon Reset Date.
"Determination Date" means each of the Floating Rate Spread Determination
Date or Fixed Rate Determination Date.
"Dollar Price" means, with respect to the Series B Notes and as determined
by the Calculation Agent, (1) the principal amount of the Series B Notes, plus
(2) the premium equal to the excess, if any, of (A) the present value, as of the
Initial Coupon Reset Date, of the Remaining Scheduled Payments
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for such Series B Notes, discounted to the Initial Coupon Reset Date on a
semi-annual basis (assuming a 360-day year consisting of twelve 30-day months)
at the Treasury Rate, over (B) the principal amount of the Series B Notes. The
Dollar Price will be determined on the third Business Day prior to the Coupon
Reset Date.
"Fixed Rate Bid" means an irrevocable offer to purchase the aggregate
outstanding principal amount of the Series B Notes at the Dollar Price, but
assuming:
- a settlement date that is the Fixed Rate Coupon Reset Date applicable to
such Series B Notes, without accrued interest;
- a maturity date that is the th anniversary of the Fixed Rate Coupon
Reset Date;
- a stated annual interest rate equal to the Base Rate plus the spread bid
by the applicable Reference Corporate Dealer;
- that the Series B Notes are callable by us pursuant to the make-whole
redemption provisions described under "Description of
Securities--Series B Notes--Post-Coupon Reset Optional Redemption;" and
- that the interest is payable semi-annually, with such interest payment
dates to be determined.
"Fixed Rate Coupon Reset Date" means May , , assuming the Callholder
has elected to purchase the Series B Notes and we have not elected to exercise
our Floating Period Option, or the Floating Period Termination Date if we have
elected to exercise our Floating Period Option.
"Fixed Rate Determination Date" means the third Business Day prior to the
Fixed Rate Coupon Reset Date.
"Floating Period Interest Rate" means the sum of the Reference Rate and the
Floating Rate Spread.
"Floating Period Notification Date" means the fourth Business Day prior to
the Initial Coupon Reset Date.
"Floating Period Option" means our right, on any date after the Callholder
elects to purchase the Series B Notes but prior to the fourth Business Day prior
to the Initial Coupon Reset Date, to require the Callholder to remarket the
Series B Notes at the Floating Period Interest Rate.
"Floating Period Termination Date" means the earlier of May , or the
date which otherwise would be the first Reference Rate Reset Date following the
Floating Period Termination Notification Date.
"Floating Period Termination Notification Date" means the date on which we
give notice to the Callholder and the Trustee of our election to terminate the
Floating Rate Period which shall be at least four Business Days prior to the
next Reference Rate Reset Date.
"Floating Rate Bid" means an irrevocable offer to purchase the aggregate
outstanding principal amount of the Series B Notes at the Dollar Price, but
assuming:
- a settlement date that is the Floating Rate Coupon Reset Date;
- a maturity date equal to the Floating Period Termination Date;
- a stated annual interest rate equal to the Reference Rate (which will be
adjusted monthly) plus the Floating Rate Spread;
- that interest will be payable each month on the Reference Rate Reset Date;
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- that the Series B Notes are subject to mandatory tender to and purchase by
the Callholder at the Dollar Price on the Floating Period Termination
Date; and
- that we will redeem the Series B Notes at the Dollar Price on the Floating
Period Termination Date, if not previously purchased by the Callholder.
"Floating Rate Coupon Reset Date" means May , in the event we have
elected to exercise our Floating Period Option.
"Floating Rate Interest Payment Date" means the Floating Period Termination
Date and each Reference Rate Reset Date during the Floating Rate Period, except
the First Reference Rate Reset Date.
"Floating Rate Period" means the period from and including the Floating Rate
Coupon Reset Date to but excluding the Floating Period Termination Date.
"Floating Rate Reset Period" means the period from and including the first
Reference Rate Reset Date, to but excluding the next following Reference Rate
Reset Date, and thereafter the period from and including a Reference Rate Reset
Date to but excluding the next following Reference Rate Reset Date; provided
that the final Floating Rate Reset Period will run to but exclude the Floating
Period Termination Date.
"Floating Rate Spread" means the lowest Floating Rate Bid expressed as a
spread (in the form of a percentage or in basis points) above the Reference Rate
for the Series B Notes obtained by the Calculation Agent by 3:30 p.m., New York
City time, on the Floating Rate Spread Determination Date, from the Floating
Rate Bids quoted to the Calculation Agent by up to five Reference Money Market
Dealers
"Floating Rate Spread Determination Date" means the third Business Day prior
to the Floating Rate Coupon Reset Date.
"Initial Coupon Reset Date" means May , .
"Interest Rate to Maturity" means the sum of the Base Rate and the
Applicable Spread, which will be based on the Dollar Price of the Series B
Notes.
"London Business Day" means any day on which dealings in U.S. dollars are
transacted in the London Inter-Bank Market.
"Post-Coupon Reset Redemption Date" means any date after the Fixed Rate
Coupon Reset Date on which we elect to redeem the Series B Notes, in whole or in
part.
"Put Option" means the obligation of the Trustee to put the Series B Notes
to us as described under "Description of the Securities--Series B Notes--Put
Option."
"Reference Corporate Dealer" means each of up to five leading dealers of
publicly traded debt securities, including our debt securities, which shall be
selected by us and agreed to by the Callholder, such consent not to be
unreasonably withheld. We will advise the Calculation Agent of our selection of
Reference Corporate Dealers no later than five Business Days prior to the Fixed
Rate Coupon Reset Date. One of the Reference Corporate Dealers we select will be
, if is then the Callholder.
"Reference Money Market Dealer" means each of up to five leading dealers of
publicly traded debt securities, including our debt securities, which we shall
select, who are also leading dealers in money market instruments, and agreed to
by the Callholder, such consent not to be unreasonably withheld. We will advise
the Calculation Agent of our selection of Reference Money Market Dealers no
later than five Business Days prior to the Floating Rate Coupon Reset Date. One
of the Reference Money Market Dealers we select will be , if
is then the Callholder.
S-45
"Reference Rate" means:
- The rate for each Floating Rate Reset Period which will be the rate for
deposits in U.S. dollars for a period of one month which appears on the
Telerate Page 3750 (or any successor page) as of 11:00 a.m., London time,
on the applicable Reference Rate Determination Date.
- If no rate appears on Telerate Page 3750 on the Reference Rate
Determination Date, the Calculation Agent will request the principal
London offices of four major reference banks in the London Inter-Bank
Market, to provide the Calculation Agent, in the case of each such bank,
with its offered quotation for deposits in U.S. dollars for the period of
one month, commencing on the first day of the Floating Rate Reset Period,
to prime banks in the London Inter-Bank Market at approximately 11:00
a.m., London time, on that Reference Rate Determination Date and in a
principal amount that is representative for a single transaction in U.S.
dollars in that market at that time. If at least two quotations are
provided, then the Reference Rate will be the average of those quotations.
If fewer than two quotations are provided, then the Reference Rate will be
the average (rounded, if necessary, to the nearest one hundredth of a
percent) of the rates quoted at approximately 11:00 a.m., New York City
time, on the Reference Rate Determination Date by three major banks in New
York City selected by the Calculation Agent for loans in U.S. dollars to
leading European banks, having a one-month maturity and in a principal
amount that is representative for a single transaction in U.S. dollars in
that market at that time. If the banks selected by the Calculation Agent
are not providing quotations in the manner described in this paragraph,
the rate for the Floating Rate Reset Period following the Reference Rate
Determination Date will be the rate in effect on that Reference Rate
Determination Date.
"Reference Rate Determination Date" will be the second London Business Day
preceding each Reference Rate Reset Date.
"Reference Rate Reset Date" means May , and the th day of each
month thereafter until, but excluding, the Floating Period Termination Date;
provided, however, if such Reference Rate Reset Date is not a Business Day, the
Reference Rate Reset Date will be postponed until the next following Business
Day.
"Reference Treasury Dealer" means each of up to five dealers to be selected
by us, and their respective successors; provided that if any of the foregoing
ceases to be, and has no affiliate that is, a primary U.S. Government securities
dealer ("Primary Treasury Dealer"), we will substitute for it another Primary
Treasury Dealer. One of the Reference Treasury Dealers we select will be ,
if is then the Callholder.
"Reference Treasury Dealer Quotations" means, with respect to each Reference
Treasury Dealer, the offer prices for the Comparable Treasury Issues (expressed
in each case as a percentage of its principal amount) quoted in writing to the
Calculation Agent by such Reference Treasury Dealer, by 12:00 noon, New York
City time, on the first Determination Date.
"Remaining Scheduled Payments" means, with respect to the Series B Notes,
the remaining scheduled payments of the principal and interest thereon,
calculated at the Base Rate applicable to such Series B Notes, that would be due
from but excluding the Initial Coupon Reset Date to and including the maturity
date.
"Telerate Page 500" means the display designated as "Telerate Page 500" on
Dow Jones Markets (or such other page as may replace "Telerate Page 500" on such
service) or such other service displaying the offer prices for the Comparable
Treasury Issues, as may replace Dow Jones Markets.
"Telerate Page 3750" means the display page so designated on the Dow Jones
Markets Limited (or such other page as may replace that page on that service) or
such other service or services as may be
S-46
nominated by the British Bankers' Association for the purpose of displaying
London interbank offered rates for U.S. dollars deposits.
"Treasury Rate" for the Series B Notes means, with respect to the Initial
Coupon Reset Date, the rate per annum equal to the semiannual equivalent yield
to maturity or interpolated (on a day count basis) yield to maturity of the
Comparable Treasury Issues, assuming a price for the Comparable Treasury Issues
(expressed as a percentage of their principal amounts) equal to the Comparable
Treasury Price for such Coupon Reset Date.
S-47
PROSPECTUS
AMERICAN ELECTRIC POWER COMPANY, INC.
1 RIVERSIDE PLAZA
COLUMBUS, OHIO 43215
(614) 223-1000
$1,500,000,000
UNSECURED NOTES
TERMS OF SALE
The following terms may apply to the notes that we may sell at one or more
times. A prospectus supplement or pricing 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 prospectus supplement or pricing supplement will identify
the exchange and state when we expect trading could begin.
- Maturity date or dates
- 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 daily, weekly, monthly, quarterly,
semi-annually, or annually
- Issued in multiples of a minimum denomination
THE NOTES HAVE NOT BEEN APPROVED 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 April 19, 2001.
THE COMPANY
We are a public utility holding company that owns, directly or indirectly,
all of the outstanding common stock of our domestic electric utility
subsidiaries and varying degrees of other subsidiaries. Substantially all of our
operating revenues derive from the furnishing of electric service. In addition,
in recent years we have been pursuing various unregulated business opportunities
in the U.S. and worldwide. We were incorporated under the laws of New York in
1906 and reorganized in 1925. Our principal executive offices are located at 1
Riverside Plaza, Columbus, Ohio 43215, and our telephone number is (614)
223-1000.
We own, directly or indirectly, all the outstanding common stock of the
following operating public utility companies: Appalachian Power Company, Central
Power and Light Company, Columbus Southern Power Company, Indiana Michigan Power
Company, Kentucky Power Company, Kingsport Power Company, Ohio Power Company,
Public Service Company of Oklahoma, Southwestern Electric Power Company, West
Texas Utilities Company and Wheeling Power Company. These operating public
utility companies supply electric service in portions of Arkansas, Indiana,
Kentucky, Louisiana, Michigan, Ohio, Oklahoma, Tennessee, Texas, Virginia and
West Virginia. We also own all of the outstanding common stock of American
Electric Power Service Corporation, which provides accounting, administrative,
information systems, engineering, financial, legal, maintenance and other
services to us and our subsidiaries.
On June 15, 2000, one of our wholly-owned subsidiaries merged with and into
Central and South West Corporation, a publicly owned electric utility holding
company whose public utility companies supply electric service in portions of
Arkansas, Louisiana, Oklahoma and Texas. As a result of the merger, the
shareholders of Central and South West Corporation became shareholders of us and
we became the sole owner of Central and South West Corporation.
WHERE YOU CAN FIND MORE INFORMATION
This prospectus is part of a registration statement we filed with the 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's Public
Reference Room at 450 Fifth Street, N. W., Washington, D.C. 20549. Please call
the SEC at 1-800-SEC-0330 for further information on the public reference rooms.
You may also examine our SEC filings through the SEC's web site at
http://www.sec.gov.
The SEC allows us to "incorporate by reference" the information we file with
them, which means that we can disclose important information to you by referring
you to those documents. The information incorporated by reference is 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 document 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
until we sell all the notes:
- Annual Report on Form 10-K for the year ended December 31, 2000.
You may request a copy of these filings, at no cost, by writing or
telephoning us at the following address:
Mr. G. C. Dean
American Electric Power Service Corporation
1 Riverside Plaza
Columbus, Ohio 43215
(614) 223-1000
You should rely only on the information incorporated by reference or
provided in this prospectus or any supplement. 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.
2
PROSPECTUS SUPPLEMENTS
We will provide information to you about the notes 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, (b) the
accompanying prospectus supplement provides more specific terms of your notes,
and (c) the pricing supplement, if any, provides the final terms of your notes.
It is important for you to consider the information contained in this
prospectus, the prospectus supplement, and the pricing supplement, if any, in
making your investment decision.
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, 1996..................... 2.22
December 31, 1997..................... 2.22
December 31, 1998..................... 2.25
December 31, 1999..................... 2.14
December 31, 2000..................... 1.59
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.
USE OF PROCEEDS
The net proceeds from the sale of the notes will be used for general
corporate purposes relating to our business. Unless stated otherwise in a
prospectus supplement, these purposes include redeeming or repurchasing
outstanding debt, replenishing working capital, financing our subsidiaries'
ongoing construction and maintenance programs. If we do not use the net proceeds
immediately, we temporarily invest them in short-term, interest-bearing
obligations. At April 3, 2001, our outstanding short-term debt was
$3,691,000,000.
DESCRIPTION OF THE NOTES
GENERAL
We will issue the notes under an Indenture to be entered into by 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 or company orders
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 101 Barclay Street, New York, New York.
The Indenture does not limit the amount of notes that may be issued. The
Indenture permits us to issue notes in one or more series or tranches upon the
approval of our board of directors and as described in one or more company
orders or supplemental indentures. Each series of notes may differ as to their
terms. The Indenture also gives us the ability to reopen a previous issue of a
series of notes and issue additional notes of such series.
Because we are a holding company, the claims of creditors of our
subsidiaries will have a priority over our equity rights and the rights of our
creditors (including the holders of the notes) to participate in the assets of
the subsidiary upon the subsidiary's liquidation.
The notes are unsecured and will rank equally with all our unsecured
unsubordinated debt. For current information on our debt outstanding see our
most recent Form 10-K and 10-Q. See WHERE YOU CAN FIND MORE INFORMATION.
The 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 notes will not be subject to any conversion, amortization,
or sinking fund. We expect that the notes will be "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 note certificates
registered in the name of the noteholders.
3
In the discussion that follows, whenever we talk about paying principal on
the 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 Indenture does not protect holders of the notes if we engage in a highly
leveraged transaction.
The following terms may apply to each note as specified in the applicable
pricing or prospectus supplement and the note:
REDEMPTIONS
If we issue redeemable notes, we may redeem such 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 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
notes of a series at one time, the Trustee selects the notes to be redeemed in a
manner it determines to be fair.
REMARKETED NOTES
If we issue notes with remarketing features, an applicable pricing or
prospectus supplement will describe the terms for the notes including: interest
rate, remarketing provisions, our right to purchase or redeem notes, the
holders' right to tender 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 Participant's 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
4
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 note certificates, they will be registered in the name of the
noteholder. The notes may be transferred or exchanged, pursuant to
administrative procedures in the indenture, without the payment of any service
charge (other than any tax or other governmental charge) by contacting the
paying agent. Payments on note certificates will be made by check.
INTEREST RATE
The interest rate on the 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 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 we issue a 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. 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
Each floating rate note 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 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.
5
EVENTS OF DEFAULT
"Event of Default" means any of the following:
- failure to pay for three business days the principal of (or premium, if
any, on) any note of a series when due and payable;
- failure to pay for 30 days any interest on any note of any series when due
and payable;
- failure to perform any other requirements in such notes, or in the
Indenture in regard to such notes, for 90 days after notice;
- certain events of bankruptcy or insolvency; or
- any other event of default specified in a series of notes.
An Event of Default for a particular series of notes does not necessarily
mean that an Event of Default has occurred for any other series of 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 notes of the series
affected may require us to repay the entire principal of the notes of such
series immediately ("Repayment Acceleration"). In most instances, the holders of
at least a majority in aggregate principal amount of the notes 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 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 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 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 notes.
MODIFICATION OF INDENTURE
Under the Indenture, our rights and obligations and the rights of the
holders of any notes may be changed. Any change affecting the rights of the
holders of any series of notes requires the consent of the holders of not less
than a majority in aggregate principal amount of the outstanding 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 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 (i) is organized and
existing under the laws of the United States, any state thereof or the District
of Columbia and (ii) expressly assumes the payment of principal, premium, if
any, and interest on the notes.
LEGAL DEFEASANCE
We will be discharged from our obligations on the notes of any series at any
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
6
date or a redemption date of the note of the series, 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
notes and replacement of lost, stolen or mutilated notes.
COVENANT DEFEASANCE
We will be discharged from our obligations under any restrictive covenant
applicable to the 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 notes of that series. In that instance, we
would remain liable for such amounts.
GOVERNING LAW
The Indenture and 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 in the normal course of business.
PLAN OF DISTRIBUTION
We may sell the notes (a) through agents; (b) through underwriters or
dealers; or (c) directly to one or more purchasers.
BY AGENTS
Notes 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.
Unless the pricing or prospectus supplement states otherwise, the notes will
be sold to the public at 100% of their principal amount. Agents will receive
commissions from .125% to .750% of the principal amount per note depending on
the maturity of the note they sell.
The Agents will not be obligated to make a market in the notes. We cannot
predict the amount of trading or liquidity of the notes.
BY UNDERWRITERS
If underwriters are used in the sale, the underwriters will acquire the
notes for their own account. The underwriters may resell the notes 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 notes will be subject to certain conditions.
The underwriters will be obligated to purchase all the notes of the series
offered if any of the notes 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 notes directly. In this case, no underwriters or agents
would be involved.
GENERAL INFORMATION
Underwriters, dealers, and agents that participate in the distribution of
the notes may be underwriters as defined in the Securities Act of 1933 (the
"Act"), and any discounts or commissions received by them from us and any profit
on the resale of the notes 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.
Underwriters, dealers and agents may engage in transactions with, or perform
services for, us or our affiliates in the ordinary course of their businesses.
7
LEGAL OPINIONS
Our counsel, Simpson Thacher & Bartlett, New York, NY, and one of our
lawyers will each issue an opinion about the legality of the notes 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 financial statements of the Company and its subsidiaries (including
Central and South West Corporation and its subsidiaries, as of December 31,
2000, and for the year then ended) and the related financial statement schedule
incorporated in this prospectus by reference from the Company's Annual Report on
Form 10-K for the year ended December 31, 2000 have been audited by Deloitte &
Touche LLP, as stated in their reports dated February 26, 2001 (which report on
the financial statements expresses an unqualified opinion and includes an
explanatory paragraph referring to the restatement of the 1999 and 1998
financial statements to give retroactive effect to the conforming change in the
method of accounting for vacation pay accruals), which are incorporated herein
by reference.
The financial statements of Central and South West Corporation and its
subsidiaries (excluding CSW UK Holdings and CSW UK Finance Company), as of
December 31, 1999 and 1998, and for each of the two years ended December 31,
1999, have been audited by Arthur Andersen LLP, as stated in their reports,
which are incorporated herein by reference. The financial statements of CSW UK
Holdings, as of December 31, 1999, and the year then ended, and CSW UK Finance
Company, as of December 31, 1998, and the year then ended, have been audited by
KPMG Audit Plc, as stated in their reports, which are incorporated herein by
reference.
Such financial statements of the Company and its subsidiaries are included
herein in reliance upon the respective reports of such firms given upon their
authority as experts in accounting and auditing. All of the foregoing firms are
independent auditors.
8
PRINCIPAL OFFICES OF AMERICAN ELECTRIC POWER COMPANY, INC.
1 RIVERSIDE PLAZA
COLUMBUS, OHIO 43215
TRUSTEE
THE BANK OF NEW YORK
101 BARCLAY STREET
NEW YORK, NEW YORK 10286
LUXEMBOURG STOCK EXCHANGE LISTING AGENT
AND LUXEMBOURG PAYING AND TRANSFER AGENT
KREDIETBANK S.A., LUXEMBOURGEOIS
43, BOULEVARD ROYAL
L-2955 LUXEMBOURG
LEGAL ADVISORS
TO AMERICAN ELECTRIC POWER COMPANY, INC. TO THE UNDERWRITERS
AS TO UNITED STATES LAW: AS TO UNITED STATES LAW:
SIMPSON THACHER & BARTLETT DEWEY BALLANTINE LLP
425 LEXINGTON AVENUE 1301 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10017 NEW YORK, NEW YORK 10019
AUDITORS
DELOITTE & TOUCHE LLP
155 EAST BROAD STREET
COLUMBUS, OHIO 43215
$1,000,000,000
[LOGO]
AMERICAN ELECTRIC POWER COMPANY, INC.
$ % Senior Notes, Series A due May ,
$ % Putable Callable Notes, Series B
Putable Callable May ,
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Prospectus Supplement
May , 2001
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JOINT BOOK-RUNNING MANAGERS
CREDIT SUISSE FIRST BOSTON
MERRILL LYNCH & CO.
UBS WARBURG
CO-MANAGERS
ABN AMRO Incorporated Lehman Brothers Salomon Smith Barney
Barclays Capital Banc of America Securities LLC BNY Capital Markets, Inc.
JPMorgan Tokyo-Mitsubishi International plc