ML20147G415
| ML20147G415 | |
| Person / Time | |
|---|---|
| Site: | River Bend  |
| Issue date: | 10/16/1978 |
| From: | Humphreys L GULF STATES UTILITIES CO. |
| To: | Harold Denton Office of Nuclear Reactor Regulation |
| Shared Package | |
| ML20147G404 | List: |
| References | |
| NUDOCS 7812260170 | |
| Download: ML20147G415 (173) | |
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GULF STATES UTILITIES COMPANY n=
P O S T, OF FICE BCX 2951 . GEAUMONT. TEXAS 77704 AR EA COOE 7 13 83a 6631 October 16, 1978 RBG - 5751 File No. G9'5 Mr. Harold H. Denton, Director Office of Nuclear Reactor Regulation U. S. Nuclear Regulatory Commission Washington, DC 20555 .
River Bend Station - Units 1 and 2
- Docket Nos. 50-458 and 50-459
Dear Mr. Denton:
Your letter of Septembc:r 1,1978, to Gulf States Utilities Company (GSU) requested that we advise the Nuclear Regulatory Commission of the results of our study of the nuclear construc-tion program. Briefly, the comprehensive annysis noted in the Chairman of the Board's Interim Report to shareholders dated June 15, 1978, consisted of a review by Company management of current load growth projections, evaluations of various combin-ations of generation mix for meeting projected load growth with proper consideration given to projected revenues, financing options, availability and price of various fuels, system reliabil-ity and of other factors which affect.overall planning decisions.
The actions taken by the mangement cud Board of Directors of GSU as a result of the above mentioned review are described on pages 18 and 19 of the SEC Form S-7 Registration Statement which was filed on September 22, 1978. A copy of this Regis- l i
tration Statement is enclosed as responsive to your inquiry.
You also requested information relating CSU 2ntering into 7812260/7&
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l an agreement with General Electric Company and the Gideon Trust. .
l Pursuant to a Trust Agreement dated January 25, 1978, thc Gideon Trust was established by CSU for the sole purpose l
, of having the Trust obtain financing and acquiring the right to purchase, own and thereaf ter sell certain steam turbine / generator equipment to be installed as a part of River Bend Unit No. One to GSU. Under an Agreement of Assignment dated January 25, 1978, and executed with J. Henry Schroder Bank and Trust Company, ;
.. 1 acting as Trustee of the Gideon Trust, GSU assigned.to che Trust I all of GSU's right, title and interest in and to certain pur-chase orders relating to acquisition of the steam turbine /gener-l ator equipment from and storage of such equipment by General Electric Corporation pending GSU's purchase from the Trust.
Incident to execution of the Agreement of Assignment, GSU and the Trust also entered into an Agreement of Purchase dated January 25, 1978. This Agreement of Purchase provides for sale I to GT2U of all of the Trust's right', title and interest in and to the steam turbine / generator equipment and the related purchase orders at such time as GSU m.ey direct, but in no event later than
- January 2, 1981. If, for any reason, GSU does not acquire the d steam turbine / generator equipment by January 2, 1981, then on I,
4 A such date CSU will be obligated to make the acquisition pursuant f
i to the Agreement of Purchase. In any event, GSU will purchase i . this steam turbine / generator from the Trust prior to its delivery I
to the River Bend Site.
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4 Copies of the Trust ' Agreement, Agreement of Assignment, and Agreement of Purchase are attached in response to your request.
Yours very truly,
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- L. L. Humphreys Seaier Vice President Energy Development .
Enclosures 2 ,<
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- West / Richardson /Glazar/ Hudson / Walker / Reed /Leavin Watterhahn-CM&C/Eng. Files-Pet. S/Nuc. Records-Pet.
!! 3/Nuc. Records-Main 10/NRC Log J' -
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ATTACHMENT 1 Attachment 1 is composed of the following document herein enclosed:
FORM S-7 REGISTRATION STATEMENT l
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"!. c . As filed with the Securities and Exchange Commission on September 22,1978 Registration No.
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SECURITIES AND EXCHANGE COMMISSION hy/ Washington, D.C. 20549
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'k REGISTRATION STATEMENT
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.THE SECURITIES ACT OF 1933
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A j Gulf States Utilities Company
[. $ 's (Exact name of registrant as specified in charter)
- 9 N;3 ' Texas 74-0662730 l
'4 ] (State or other brisdiction of (1.R.S. Employer Identification No.) l h j incorporation or organization) j 51,,,, P.O. Box 2951 '
.ih.=e '{: Beaumont, Texas 77704 d
,pJ,hl ( Address of principal (Zip Code)
,.J esecutive otBees) tii *:
713-838-6631 Y.b (Resistrant's telephone number, including area code)
W. DONHAM CRAWFORD, Chairman of the Board EM - Gulf States Utilities Company fQ.]g P. O. Box 2951 M.B e Beaumont, Texas 77704
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f J**'? R. W. JACKSON, Vice President & Secretary j$N} If % Gulf States Utilities Company P. O. Box 2951
.; ,N Beaumont, Texas 77704
/ 3 (Names and addresses of agents for service)
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^; d Approximate date of proposed public ofering: As soon as practicable after the effective date of the ljg .j Registration Statement.
- r '. $ D CALCULATION OF REGISTRATION FEE 1e
- J,[ na 4.nD .- Proposed Proposed Amount maximum
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- j Title of each class of see irities to be ofering price maximum aggregate Amount of g , to be registered registered per unit ofering price registration fee
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, .,, Common Stock, without par value.. .... 5,000,000 shs. $ 13.00
- S65,000,000* S13,000.00
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- These amounts have been inserted solely for the purpose of calculating the filing fee.
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- . The registrant hereby amends this registration statement on such date or dates as may be necessary
- ,f g to delay its efective date until the registrant shall file a further amendment which specifically states that
. .,ty. this registration statement shall thereafter become efective in accordance with Section 8(a) of the
, ,, j Securities Act of 1933 or until the registration statement shall become efective on such date as the g Co:nmission, acting pursuant to said Section 8(a), may determine.
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CULF STATES UTILITIES COMPANY Cross Reference Sheet Pursuant to Rule 404(c) Between Registration Statement (Form S-7) and form of Prospectus i
Heading or Page Number Item Number and Caption In Prospectus l
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- l. Distribution Spread . . . . . . Cover '
- 2. Plan of Distribution ...... . . . . . . . . . . Underwriting j
- 3. Use of Proceeds to Registrant.......... .......... . . . . . . . Application o,f Proceeds Selling Security Holders ....... .... .. ...... . ...... .. . ... Not Applicable 4.
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- 5. Business- . . . . . . . . . . . . . . . . . . . . . . . . . . _ . . . . . . . The Company, Construetion and Financ-ing Program, Management's Discussion and Analysis of the Statements of In-come, Business, Present Generating Fa-cilities, Proposed Generating Facilities, Fuel Supply, Regulation and Rates, Employees, Litigation, Environmental l Matters l l
- 6. Statement ofIncome- . . . . . . . Statements of Income, Financial State- l ments
- 7. Capital Stock to be Registered.. .. ... . . ...... Description of Common Stock
- 8. Debt Securities to be Registered.......... .. .... Not Applicable
- 9. Other Securities to be Registered. . . . . . . . . . Not Applicable
- 10. Management and Others.. ....... ............-............ Not Applicable
! 1. Other Financial Statements and Schedules ...... . ..... .... . Financial Statements
- 12. Statement of Available Information - . Available Information
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.3N li. .s t. ' PRELIMINARY PROSPECTUS DATED SEPTEMBER 22,1978 19T p: PROSPECTUS
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?;,1 5,000,000 Shares an
.I i 5 Gulf States Utilities Company lWH j3j
Common Stock s- (Without Par Value) i ii .*4
~n aa 3 "'s!. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE 2$ 3 ~ SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION j't $43 a. PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
j $ ~3 ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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? El 30u Price to Underwriting Proceeds to j .]. Public Discounts (l) Company (2) ue$i Per Share...- .. .... . - . . . . . . . . . $ $ $
d'j33 Total -- - . . . . . . . . . . . . . . . . . . . . $ $ S 3 3 =3
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- t .2 (1) The Company has agreed to indemnify the several Underwriters against certain civil liabilities, including liabilities h$0 under the Securities Att of 1933.
I (2) Before deduction of expenses payable by the Company estimated at $113,000.
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~hj 3y The Common Stock is offered subject to prior sale, when, as and if delivered to and accepted by Ti a. the Underwriters, and subject to approval of certain legal matters by their counsel and counsel for the l 3 'i Company. The Underwriters reserve the right to withdraw, cancel or modify such offer and to reject 1$Q orders in whole or in part.
i' It is expected that delivery of the certificates for the Common Stock will be made in New York, 5sm N.l , i' N. Y., on or about October ,1978.
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jj{ "3.s Merrill Lynch White Weld Capital Markets Group Merrill Lynch, Pierce, Fenner & Srnith Incorporated
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- 3. . j .j Dean Witter Reynolds Inc.
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?,g g The date of this Prospectus is October ,1978.
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l IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT TliANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE u COMMON STOCK OF THE COMPANY AT A LEVEL ABOVE TIIAT WHICH MIGIIT OTHER- '
WISE PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON j' THE NEW YORK, MIDWEST AND PACIFIC STOCK EXCHANGES, IN THE OVER-THE-C.OUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE -
4.- DISCONTINUED AT ANY TIME. N 4
f; AVAILABLE INFORMATION +
Gulf States Utilities Company (the " Company") is subject to the informational requirements of the t 4
Securities Exchange Act of 1934 and in accordance therewith fdes reports and other information with the #
Securities and Exchange Commission (the " Commission"). Information, as of particular dates, L concerning directors and officers, their remuneration, the principal holders of securities of the Company, '
and any material interest of such persons in transactions with the Company is disclosed in proxy statements ,
filed with the Commission. The Company has not granted any stock options. i Such reports, proxy statements and other information can be inspected and copied at the ofEces of the ,
Commission at Room 6101, 1100 L Street, N. W., Washington, D. C.; Room 1204, Everett McKinley l Dirksen Building,219 South
Dearborn Street Chicago,
Illinois; Room i100, Federal Building,26 Federal i Plaza, New York, New York; and Suite 1710, Tishman Budding,10960 Wilshire Boulevard, Los Angeles, )l California. Copies of such material can also be obtained from the Commission at prescribed, rates at its principal omce at 500 N, Capitol St., N.W. Washington, D.C. 20549. In addition, reports, proxy material and other information concerning the Company may be inspected at the offices of the New York, Pacific and Midwest Stock Exchanges. ll l
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l No dealer, salesman or other person has been authorized to give any information or to make any representation, other than those contained in this Prospectus and, if given or made, such information or representation must not be relied upon as having been authorized by the Company or the Underwriters.
- This Prospectus does not constitute an offer to sell or a solicitation of an offer to buy any of the securities offered hereby in any jurisdiction to any person to whom it is unlawful to make such offer in such jurisdiction. Neither the delivery of this Prospectus nor any sale made hereunder shall, under any circumstances, create any implication that the information herein is correct as of any time subsequent to l Its date.
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Tile ISSUE IN BRIEF The following materialis qualified in its entirety by the detailed information and financial statements (including the notes thereto) appearing elsewhere in this Prospectus.
Tile OFFERING Proposed OtTering Date .. .. . .. . . . . . .. . . ... October 19,1978 Common Stock OtTered - . _.5,000,000 Shares Listing.... .. . . . . . . ... ... .... ..New York, Midwest and Pacific Stock Exchanges (Symbol: GTU) l 1978 Price Rar..e through September 21, 19 7 8.. . .... . .. .. ......................... .14 % 12 %
Closing Price on September 21, 19 78.. .. .. . . ....... . . . . . . . . . . . . . . . . . . . .. ... . .. 12 %
Application of Proceeds.. .... =To pay a portion of short-term notes l
GULF STATES UTILITIES COMPANY l l
Principal Business.- = Generation, purchase, transmission, distribution and sale of electric energy l Service Area... .. . ... Southeastern Texas and South Central Louisiana Customers (June 30,1978).. . .. . . . . .....Approximately 457,000 Source of Revenues (Twelve months ended June 30,1978). . . . . . . . .. ... Electric 90%,
Steam 7%, Gas 3% l Electric Revenues... ... . . .. ... . ... . . .. . . . .. Derived 54% from. Louisiana and 46% from Texas l FINANCIAL INFORM ATION (in thousands except per share amounts) l Twelve Months l Ended 1 June 30, Year Ended 1978 December 31, (Unaudited) 1977 Total operating revenues . . .. . . .. . ... . .. . . . . . . . . S659,363 $587,760 l Net income . .. . . . . .. . . . . . . . . . . . . S 65,949 S 65,650 income applicable to common stock.. . . . .. . . . S 54,959 $ 55,074 i Earnings per share of common stock:
Based on weighted average shares outstanding.. .. .. .. .. . . St.68 $1.69 Assuming conversion of convertible debentures. . . . . . . . . . $ 1.58 $1.65 Dividends per common share.. .. ... .. ... . . . . . . $ 1.21 $ 1.15 Current quarterly dividend per commori share-31c Capitaination at June 30,1978 (Unaudited)
Actual Adjusted *
(000) Percent (000) Percent Long. Term Debt... S 805,657 55.0 S 805,657 52.7 Preferred Stock. . . . . . . . . . . . . . . . . . . . . . . . . . 167,500 11.5 167,500 11.0 Common Stock Equity.. 490,718 33.5 555,718
. . . . . . . 36.3 Total Capitalization . . $1,463,875 100.0 $ 1.528,875 100.0
- Adjusted to give efTect to the estimated proceeds from the sale of the Additional Common Stock.
See " Capitalization."
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THE COMPANY The Company was incorporated in 1925 under the laws of the State of Texas and is engaged principally in the business of generating electric energy and transmitting, distributing and retailing such energy in a 28,000 square mile area in Southeastern Texas and in South Central Louisiana, extending a distance of over 350 miles in Texas and Louisiana, principally in the coasal area. The Company also sells electric energy at wholesale to various municipalities and rural electric cooperatives. The Company's ,p electric system is interconnected, and interconnections with other utilities are maintained for the exchange r of power. The Company also conducts a steam products business and sells natural gas in the Baton Rouge, i Louisiana area.
The Company's service area is a major producer of oil, gas, sulfur, refmed products, chemicals, g
, petrochemicals, steel products, oil tools and related manufacturing, processing and servicing activities. ;1 Paper, cement, building materials, cotton, rice, soybeans and cattle are also important products of the service area. It is characterized by a favorable year.round climate and ready access to air, land and water -
transportation. , ,
The Company has been experiencing, in varying degrees, some of the significant problems common to the electric utility industry in general, including (a) difficulties in obtaining adequate and timely rate relief and adequate rate of return on invested capital, particularly, in the case of the Company in Louisiana (see
" Regulation and Rates"), (b) regulation and increasing cost of fuels and need to convert to alternate fuels (see " Fuel Supply"), (c) greater construction costs, (d) longer licensing and construction periods necessitating substantial advance expenditures and commitments, with the attendant risk of cancellation charges and other losses, (e) increased amounts of external capital needed, (f) compliance with environmental requirements (see " Environmental Matters"), and (g) an unpredictable rate of peak load .
growth (see " Proposed Generating Facilities"). . ,
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APPLICATION OF PROCEEDS }
The net proceeds from the sale of the Common Stock offered hereby (tne " Additional Common g Stock"), assumed to be approximately $65,000,000, will be used by the Company to repay a portion ofits S then outstanding short. term notes, expected to be approximately S120,000,000. See " Underwriting" for l l
circumstances under which less than all the Additional Common Stock may be sold. ,
The funds obtained from the issuance of such short. term notes were used in connection with the '
l i Company's construction program and for other corporate purposes. The Company expects to continue to
.! raise funds for construction and other purposes through short. term borrowings and to arrange permanent .
financings to repay such borrowings. 1 -
1 CONSTRUCTION AND FINANCING PROGRAM The 1978 and 1979 construcdon programs are expected to consist of the following principal items: <
1978 1979 i
(In Thousands) ,
Electric production plant.____ _ . . .. $257,800* $281.000* "
Electric transmission and distribution facilities 47,300 101,300 <
Other electric, gas and steam plant.. .. ... 4,900 6,700 i l
c Total estimated expenditures.... ........... ... .... . $310,000" $389,000 y 1 ,
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- Including $31,600,000 toward the cost of nuclear fuel.
" Expenditures through June 30,1978, were approximately $154,000,000. j
- " Excludes expenditures budgeted for 1979 which are expected to be paid by j proposed joint participants in the River Bend Station (see " Proposed Generating Facilities-Nuclear Units.")
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The present estimate of construction expenditures by the Company in 1980 is $424,000,000.
Esdmated expenditures for 1978 80 include allowance for funds used during construction. The programs j ;
- for 1979 and 1980 are subject to substantial changes if proposed joint participation is not accomplished. i
{ For recent changes in and details of the programs, see " Proposed Generating Facilities." i 1
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i The Company's 1977 and 1978 construction programs were curtailed as a result of 1977 denials i whole in Louisiana and in part ;n Texas of requested electric service rate increases. (See " Regulation and }
g Rates.")
' Total gross additions to the plant account of the Company during the period June 30,1973, to June l 30,1978, amounted to approximately S917,834,000 and during the same period retirements from the {< pla amounted to approximately $22,733,000. Gross additions during the period amount to i account 30,1978. f approximately 42% of total net plant (excluding nuclear fuel) at June
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The principal sources of funds for the construction program and other capital requirements during! t balance of 1978 and 1979 are expected to be obtained from (i) the sale of the Additional Common Stock offered hereby, (ii) internally generated funds, (iii) funds from expected participation by others in the !
from the expected disposition, with Company's construction projects, (iv) approximately $55,000,000 l l
certain retained rights, of a portion of the Company's uranium inventory, and (v) short-term borrowings. J
' In addition, during 1979, it is anticipated that the Company will seek to reduce the level ofits short-term I borrowings through other permanent financings, the form, nature, time, and extent of which have not yet l l
been determined but are expected to include the sale of additional common and preferred stock and bonds l of the Company. It is presently anticipated that internally generated funds will account for an averat,e Ii of 4 approximately 32% of funds to meet construction requirements through 1980.
The Company must periodically obtain Federal Energy Regulatory Commission ("FERC") approval to make short-term borrowings in excess of certain levels. The Company has FERC authority to issue during 1978 shon-term notes in the form of commercial paper or notes to banks and others up to an i<
aggregate amount of $200,000,000 at any one time outstanding, and has applied for similar authority in I 1979. However, the Company has not attempted to make short-term credit arrangements for borrowing l up to the maximum amount. (See Note E to financial statements with respect to existing lines of credit.)
In f The Company's Mortgage places certain limitations upon the issuance of additional bonds. l addition, the Company's debenture indenture limits issuance of funded debt of the Company. On the basis l of the unaudited financial statements of the Company for the twelve months ended June 30,1978, the I l
' amount of additional funded indebtedness permitted to be issued under the more restrictive debenture indenture test (assuming an interest rate of 9%) would be approximately $295,000,000.
i The Company's Articles of Incorporation place certain limitations upon the issuance of additional preferred shares. On the basis of the unaudited financial statements of the Company for the twelve months ended June 30, 1978, the amount of additional preferred stock permitted to be issued under the most restrictive provision (at an assumed dividend rate of 9%) would be approximately $175,000,000. l l
I The Company's ability to meet the earnings coverage provisions necessary to issue additional funded '
debt or preferred stock depends primarily on the adequacy and timing of future rate relief (see
" Regulation and Rates"). The inability to obtain adequate and timely rate relief could force the Company to again curtail its construction program and therefore impair the quality and reliability of service to its customers.
l The Company, at the time ofissuance ofits First Mortgage Bonds,8%% Series due 2007, obtained the consent of the holders thereof to effect two amendments to its Mortgage. One amendment would change the aggregate limit on bonds outstanding from $1,000,000,000 to $100,000,000,000, and the other would modify the definition of" minimum provision for depreciation"in the Mortgage from 15% to 10% of total operating revenues, it is anticipated that efforts to obtain consents to these two amendments from holders l of other series of bunds will be initiated before the end of 1978. Based upon present estimates, the
$1,000,000,000 limitation could operate to restrict further financing under the Mortgage in 1980 if present '
. - financing practices and construcdon plans are continued and the present minimum depreciation provisions could under various circumstances impose material burdens on the Company in the early 1980's. If the Mortgage amendments are not approved, the Company would attempt to arrange other forms of financing i
' to avoid having to suspend, defer, or cancel needed construction, but can not give assurance that it will succeed in doing so. While the Company intends to use its best efforts to obtain bondholders' consents to l<
these amendments, there can be no assurance that the amendments will be approved.
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COMMON STOCK DIVIDENDS AND PRICE RANGE bi p ,
The Company has paid dividends on its Common Stock since 1947 when it first became a publicly-owned Company. In the years 1973-1977, the Company paid annual cash dividends per share of Common i Stock of $1.10, S1.12, $1.12, $1.12 and $1.15 respectively. A quarterly dividend of S.31 has been paid )
beginning in the last quarter of 1977. It is presently expected that the next q' arterly dividend will be l
! payable on December 15, 1978 to holders of record November 2,2, 1978. Holders of the Additional l Common Stock on the record date will be entitled to receive such dividend if declared. !
l It is the present policy of the Board of Directors to pay quarterly dividends on the Common Stock, but since dividends are necessarily dependent upon earnings, the financial condition of the Company and other relevant factors, the Board of Directors will determine from time to time the amount of dividends to be i paid. For restrictions as to the payment of dividends on the Common Stock, see " Limitation on Payment
- 1, of Dividends on Common Stock" under " Description of Common Stock."
The. Company t)ffers the holders of record of its Common and Preferred Stock the opportunity to purchase shares of its authorized but unissued Common Stock without payment of any brokerage commission or service charge through its Automatic Dividend Reinvestment and Stock Purchase Plan. A prospectus with full information on the terms and provisions of this .>lan is available from: Texas Commerce Bank, N.A., Dividend Reinvestment Depanment, P.O. Box 2558, Houston, Texas 77001.
g The shares of the Common Stock of the Company are listed on the New York, Midwest and Pacific l Stock Exchanges. Prices shown in the table below are the high and low sales prices, as reponed in the Wall Street Journal, on the New York Stock Exchange through January 23,1976 and thereafter on the composite tape. I 1
Year- High 1.aw Year High Low 1973... . 22% 13 1977 -
l 1974. 16 8% First Quarter.. . . . 14 % 13 1975... . . . . . . . . . 14 % 10 % Second Quaner. ... .. . 14 % 12 %
1976 Third Quarter.. . .. . 14% 13 .
First Quarter . 15 % 12 % Founh Quarter.... . ... . .. 14 % 13 ,
Second Quaner.. .. 14 11% 1978 I i
l Third Quarter . ... . .. 14 % 11 % First Quaner.... . . . 14 % 13 % !
l Founh Quaner.... . 15 % 13 % Second Quarter.. . . . . 13 % 12 % ; l I
Third Quaner i (through September l 21).. 14 % 12 %
f The closing sale price on September 21,1978, was 12%. As of June 30,1978, the book value per share of such Common Stock was $14.89.
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CAPITALIZATION
- The capitalization of the Company as of June 30,1978, and as adjusted to reflect the issuance of the Additional Common Stock,is set forth below:
Actual Adjusted Aut'.orked Outstanding Percent Outstanding Percent (Thousands of Dollars)
Long Term Debt (see the State-ments of Capitalization):
First Mongage Bonds.. . .. . $1,000,000,000 $ 700,000 $ 700,000 Debentures........ _ ... 8,625 8,625 Convertible Debentures . .......... 49,998 49,998
. Unamortized Premium, Dis.
count on De bt. net ......... ....... (966) (966)
Pollution Control Bonds and Industrial Development Bo nd s ... . .. . .... . . ..... .. . .... ... . . 48,000 48,000 Total Long-Term Debt.. . 805,657 55.0 805,657 52.7 Preferred Stock-$100 Par Value (see the Statements of Capital.
ization(a); . . . . . . . . . . 6,000,000 sh. 167,500 11.5 167,500 11.0 Authorized and unissued shares without par value. . . . . . 10,000,000 sh.
Common Stock-without par value (see the Statements of Capital.
ization):
32,956,997 and 37,956,997 shares outstanding, respec-tively ... ..... ... ... .. _ _ _ _ _.
100,000,000 sh. 280,380 345,380( b)
Premium and expense on Capital Stock ..................... 705 705 Retained Earnings ......... . ... .. ..... ... 209,633 209.633 Total Common Equity (a) . 490,718 33.5 555,718 36.3 !
Total Capitalization.... . . . . $1,463,875 100.0 $ 1,528,875 100.0
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Short-Term Notes Payable (see Note E of Notes to Financial S tat e me n ts .... ................ ... ............ S 101,875 S 55,000(c)
(a) The Company expects to file for FERC approval to issue a new series of preferred stock to be offered in exchange for cenain outstanding series of preferred stock bearing lower dividend rates than the new series. The exchange would result in a decreased number of outstanding shares of preferred stock but would increase preferred stock dividend requirements. If the transaction is approved and the offer made, then a portion of the preferred stock capital account attributable to the shares surrendered in exchange would be converted to common equity.
(b) Adjusted to give effect to the estimated proceeds from the issuance of the Additional Common Stock.
(c) After application of the net proceeds from the sale of the Additional Common Stock (assumed for purposes of this Prospectus to be $65,000,000) to the payment of a portion of the $120 million estimated to be outstanding at the time of such sale. Further substantial reducuon of the amount of short-term notes outstanding would result from the proposed disposition of uranium,if consummated.
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GULF STATES UTILITIES COMPANY STATEMENTS OF INCOME The following statements ofincome for the years 1973 through 1977 have been examined by Co
& Lybrand, independent certified public accountants, whose report appears elsewhere herein. The statements should be read in conjunction with the other financial statements and related notes included elsewhere in this Prospectus, The data for the twelve months ended Jur.a 30,1978 (not examined by independent certified public accountants), in the opinion of the Company, retlect all adjustments, consisting only of normal recurring accruals, necessary for a fair statement of the results of operation Twelve Months ,
Ended i
June 30, Years Ended December 31, 1978 '
I (Unaudited) 13 13 13 g g (In Thousands-Except Per Share Amounts) '
Orta ATING REVENUss (Note 1)
Electric . _ $$94,113 $534,351 l.
Steam . 5408,543 $332,330 $334,277 S261,886 43,865 37,838
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21.385 15,571 28,106 11,090 21,249 24,543 18,689 ', l 8,655 7,670 7.237 , t 659,363 587,760 447,739 362.234 366,490 287,812 OpEnATINa ExPENsts ANoTAXES Fuel ( Note 2 ) . 297,672 257,013 183,l 90 Purchased Power 125,007 137,307 82,75I 38,618 30.931 8,481 a Other Operations . 65,593 .5.982 4,691 4,949 56,956 46,774 41,577 36,968 Maintenance - 30,374 33,101 27.742 17,745 14,301 13,943 Depreciation (Notes A & 3) 61,896 $ 9,882 13.515 53,717 50,060 44,685 35,784 -
Taxes ( Notes A & 4)
Federallncome i Current - 12,905 7,804 12,540 11.306 22,460 21,097 Deferred. Net.- l2,693 12,485 8,375 8,629 6,494 Investment Credit 8.316 Deferred 19,481 20,263 !
11,303 8,422 Amortization of Prior Years' 3.457 1.361 Deferments - (2,035) (I,935)
State Income (1,528) (1,218) (937) (789)
Current .- !
2,10 8 2,:98 Deferred Net.- 858 666 1,233 939 418 358 748 312 671 '
Other Than income (Note H) - 25,161 23,633 71,279 206 !
18.984 17.618 18.228 566,300 497,911 363,152 284,074 289,568 217.368 OPER ArlNG INCOM8 x. . 93,063 89,849 84,587 78,160 76,922
' OTHER INCOME AND DIDUCTIONs.Ntf (Notes 5 70,444
& 8).- 2,568 4.443 (445) 970 866 Allowance for Equity Funds Used During Con. 746 struction ( Note 6) - 16.127 15,072 ,
13.110 8,161 5,798 5,749 INCOME BaroRE INTEREST CHARCEs . - 111,758 109,364 97,252 l 87,291 83,586 76,939 Intrauf CHARots Interest on i.ong. term Debt - 55,385 53,495 47,020 40,506 35,152 i
Amortization of Premium, Discount and 28,543 Expenses on Debs..
211 127 58 <
Other interest Charges _ 33 (4) '
- 1 3,951 2,931 4,403 6,796 (25) 6,185 2,986 I Allowance for Borrowed Funds . _ .Used i' Dunng Construction (Note 6)-- (13,738) (12,839) (10.640) ( 9,737) (5,715) (4.319) 45.809 43,714 40,841 37,598 35,618 27,185
! NaT INCOMt ( Note J ).- _ . . 65,949 65,650 g Partsnato DMDENo Rsouta MaNTs-- 56.411 49,693 47,968 49,754 10,990 10,576 6.730 6,730 6,730 6,730 I INCOMs APPLlCAtt.E TO COMMON STOCK-- $ 54,959 5 55,074 S 49,681 i
S 42,963 $ 41,238 3 43,024 AVERAct COMMON SH Ants OttrsTANDtNG.~ ....
EARNINos Pra SHARE OF COMMON Stocx (Note 7)
~I547 2 Y M .1 l Based on Average Shares Outstanding-- . _ . :l 11.68 51.69 51.54 51,56 Assuming Conversion of Convertible S t.61 S t.68 '
Debentures _ ,l.58
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DmoaNos Ptn COMMON SHARt l.21 1.65 1.15 1.12 1.12 1,12 1.10 The notes to the financial statements and the notes to the statements ofincome are integral parts of this statement. I
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CULF STATES UTILITIES COMPANY NOTT.S TO STATEMENTS OF INCOME (Informatloa relating to deles after December 31,1977, is unaudited.)
(!) The Company records revenues as billed to its customers on a cycle billing basis. Revenue is not recorded for energy delivered and unbilled at the end of each fiscal period. The costs of fuel and of gas distributed are charged to expense as used.
- Rate schedules of the Company provide for adjustments to substantially all rates for increases or decreases in the costs of fuel for generation and of gas dis.tributed.
(2) The Company's wholly-owned subsidiary, Varibus Corporation, supplied, at cost, a portion of the Company's fuel requirements amounting to $29,637,000 for the twelve months ended June 30,1978,and
$27,130,000, $48,671,000, $35,000,000 and $64,000,000 for the years ended December 31, 1977, 1976, 1975 and 1974, respectively.
(3) Effective January 1,1975, the Company began recognizing depreciation on easements for the first time. Effective January 1,1974, the Company adopted the practice of recognizing depreciation on new additions in the year in which they were placed in service rather than at the beginning of the following year. The effect of the two aforementioned changes reduced net income for 1975 and 1974 by $622,000 (S.02 per share) and $2,003,000 (S.08 per share), respectively.
The Company increased book depreciation rates in 1975 and 1974 on selected properties to reflect revised estimates of the remaining service lives. These changes in depreciation estimates had the effect of decreasing net income for 1975 and 1974 by $1,815,000 (S.07 per share) and $2,140,000 (S.08 per share),
respectively.
(4) The provisions for Federal income tax were less than the amount obtained by using the 48% 1 statutory rate primarily due to the following: l l
Twelve Meetes Eeded Years Ended December 31.
Jose 30, g g ty6, y5 1 13 4,
_ 133 Statutory rate . .. 48.0 % 48.0 % 48.0 % 48.0 % 48.0 % 48.0%
increases (decreases) resulting from:
Excluuons from taxable income of al-lowance for borrowed and equity Nnds used during cransuucti a (13.1) ( 12.8) ( 13.0) (10.9) (6.9) (6.1)
Items capitalized for book purposes but l expensed for tax purposes (2.7) (3.5) ( 3.5) (4.1) (3.6) (2.0) J EKect of excess book depreciation over I normalization basis 6.8 7.1 6.8 5.6 4.5 (0.9)
Otheritems 1.0 - ( l.7) (2.4) (4.0) ( 1.9) (2.5)
EKective tax rate 40 37.1% 35.9% 34.6 % 401% 36.5%
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CULF STATES UTILITIES COMPANY NOTES TO STATEMENTS OF INCOME-(Continued) 4 (Information relating to dates after December 31,1977, is unaudited.)
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Deferred Federalincome tax expense results from timing differences in the recognition of revenue and expense for tax and financial statement purposes. The sources of these differences and the tax effect of each were as follows:
Twelve Months Emded Years Ended December 31 Jane 30, 1978 1977 1976 1975 1974 1973 L
Excess of accelerated tax depreciation over (In Thousands) straight-line tax depreciation $9,965 $9,429 $8,894
$8,190 $8.599 $6,779 Sales tax deducted for tax purposes in 1975. but expensed in 1976 un books . . . . - -
(713) 713 - -
Accrued payroll expense deducted for tax pur+
poses in 1975, but expensed in 1976 on books - -
(73) 73 - -
Items expensed for tax purposes, capitalir d as depreciable plant on books. 1,715 2.002 632 - - -
less on pollution control bond refunding recog-nized currendy for tax purposes but amortized .
on books - 1,403 1,403 - - - -
Amortization of prior years deferments (390) (349) (365) (347) (283) (285) l'
$12,693 $12.485 $8.375 l'
$8.629 $8.316 $6.494 (5) The Company's equity in losses of its subsidiary were approximately $1,188,000, S2,238,000,
$740,000 and $233,000 for the twelve months ended June 30,1978, and the years ended December 31, 1977,1976 and- 1975, respectively, and has been included in "Other Income and Deductions-Net"in the statements ofincome. Prior to 1975, such amounts were not material.
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! (6) Allowance for funds used during construction ("AFUDC") is a non-cash item which is calculated under the FERC formula and is capitalized as part of the cost of utility plant. The composite rate used has been 7%%'since 1973. Such AFUDC has been segregated into two component parts: borrowed funds and
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equity funds. That portion allocated to borrowed funds is reflected as an adjustment ofinterest charges. ..,
2 :
The Company's wholly-owned subsidiary, Varibus Corporation, capitalizes interest incurred on '
certain mine projects prior to the production stage. l p 3 (7) Earnings per share of common stock assuming conversion of convertible debentures were based q .
upon the assumed conversion on the issue date, September 28,1977, of $50,000,000 of 7%% Convertible i Debentures ($49,998,000 currently outstanding), at a conversion price ofS!4.85 per share and after giv effect to the elimination ofinterest expense and amortization of discount and issuance expense (net of i
related income taxes). Had all the debentures been converted on the day ofissuance, approximately a
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CULF STATES UTILITIES COMPANY NOTES TO STATEMENTS OF INCOME. 2(Concluded)
(Information relating to dates al+er December 31,1977, is unaudited.)
3,367,000 additional shares of common stock assuming conversion of convertible debentures would have been issued. The following table details the computation of earnings per share of common stock assuming conversion of convertible debentures.
Twelve Months Ended Year Ended i June 30, December 31, 1978 1977 (In Thousands)
. Income applicable to common stock . ... . . . . . . . . S54,959 $55,074 Adjustment for interest expense and amortization of discount and issuance cgense, net of related income taxes, for the assumed conversion of convertible debentures . . . . . . . . 1,455 496 Income applicable to common stock assuming conversion of convertible debentures = . . . . $56,414 $55,570 Average shares ofcommon stock outstanding....... ~. . . . . . . . . .
. .. 32,797 32,637 l Adjustment for assumed conversion of convertible debentures. 2,806 1,123 ;
Average shares of common stock-assuming conversion of convertible debentures.. . .. . 35,603 33,760 Earnings per share of common stock assuming conversion of convertible l debentures..... . . -. .... . . . . . . . . . .. ... .. S 1.58 S 1.65 1 k
7 Id) Daring 1977, the Company sold certain equipment and a portion ofits uramum concentrates and ab2 .
- cd . certain property under construction. A net gain of $1,000,000 (S.03 per share) and $3,415,000 (S , .i share), net of related income taxes, for the twelve months ended June 30,1978, and for the year cr.. :d December 31,1977, respectively, is included in "Other Income and Deductions-Net".
(9) The quarterly data shown below are unaudited. In the opinion of the Company, all adjustments (consisting only of normal recurring accruals) necessary for a fair presentation of such amounts have been included (in thousands except for per share amounts).
Earninss Per Share of Common Stock Assuming Based on Conversion Average of
] Operating Operating Net Shares Convertible Revenues Income tacome Outstanding Debentures I 1978 First Quarter. . . . $160,134 S19,809 $11,693 S.27 S.26 Second Quarter = . 171,435 20,797 14,461 .36 .34 i
1977 First Q uarter.. ... .. .. .. . . $123,169 S18,421 $10,880 S.26 - !
'1 Second Quarter...... .... . . 136,797 18,971 14,975 .38 -
Third Quarter.... .... . .... I83,407 31,053 24,429 .66 S.64 i' 144,387 21,404 15,366
,i Fourth Quarter ..... ...... . .. .39 .37
? 1976 First Quarter. . . . . . .
S 91,050 $15,691 S 8,645 S.22 --
1 Second Quarter.. . . . . . 103,608 17,717 12,806 .32 -
Third Quarter . . .... . .... 134,923 28,273 21,251 .60 -
I18,158 22,906 14,429 .40
[ Fourth Quarter .. ......... ....
(10) See " Management's Discussion and Analysis of the Statements ofIncome" and " Regulation and 1
' Rates" for the effect of rate increases.
- (11) Alphabetical notes refer to notes to financial statements.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF TIIE STATEMENTS OF INCOME The fellowing discussion and analysis of the Company's operations set forth the factors the Company believes to be reasonable causes for the changes in revenue and expense items for the three most recent d periods presented on the accompanying statements ofincome. ,
I i Operating Revenues i
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The Company derived 90% ofits operating revenues from sales of electricity for the twelve months L ended June 30,1978 and 91% for each of the years ended December 31,1977 and 1976. The balance of Id operating revenues were derived from sales of steam and gas. The changes in operating revenues for the three periods were attributable to the following (in thousands): .
[k if.
Twelve Years Ended Moses Ended 6 . _ . ,
December 31.
June 30,
- , 1978 1977 ~1976 General rate increases S 3,634 S 10,566 S13,548 l
Fuelincluded in base.. . . . . . . . (484) 13,666 23,723 Fuel adjustment - . . . . 44,002 70,508 18,213 Sales volume ... .. 45,281 30,021 24.451- .
Net increase... S 71,603 S140,021 $85,505 l
Increase over previous period ....... .. .. .. 12 % 31% 24%
1 The sales volume increases for both the twelve months ended June 30,1978 and the year 1977, when compared to the previous periods, were due to unusually cold winter weather and warmer than normal summer temperatures. The increase in sales volume in 1976 from the previous period was due in large part to the rebounding national economy.
Operating Expenses increases in fuel expense for electric generation of $40,723,000, $74,043,000 and $57,705,000 for the twelve months ended June 30,1978 and the years ended December 31,1977 and 1976, respectively, when compared to the previous periods, were primarily due to increased generation requirements, changes in l fuel mix and increased unit fuel costs. The increases in sales volume discussed above brought about the increased generation requirements, while relatively fixed supplies of natural gas for boiler fuel required the use of more expensive oil.
Increases in purchased power expense of $7,687,000 and $22,450,000 for the twelve months ended l June 30,1978 and the year 1977, respectively, when compared to the previous periods, were principally ~
caused by a combination of forced outages, increased peak loads caused by the extreme weather, and ,
downtime of certain units due to conversion for heavy fuel oil burning capability.
- Increases in other operations expense of $8,637,000 and $10,182,000 for the twelve months ended )
June 30,1978 and the year 1977, respectively, when compared to the previous periods, were principally i due to increases in gas purchased for resale (primarily caused by price increases) and payroll charged to '
operations'(due principally to contract wage escalations),
- Maintenance expense increased $2,632,000 for the twelve months ended June 30,1978 over the year -
l j 1977 and 59,997,000 for 1977 over the year 1976 due primarily to increased maintenance of generating
{u '
, i j equipment necessitated by the above mentioned forced outages. .
- Depreciation expense increases of $2,014,000, $6,165,000 and $3,657,000 for the twelve months i
ended June 30,1978, and the years 1977 and 1976, respectively, when compared to the previous periods, ,
- were principally caused by additions to plants and increases in the composite depreciation ra'e.
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Increases in taxes for the twelve months ended June 30,1978 and the years 1977 and 1976 over the previous periods were principally the result ofincreased pretax income between the periods. The pretax income increases were primarily caused by the revenue increases detailed above.
Other income A!!owance for equity funds used during construction increased $1,055,000 for the twelve months ended June 30, 1978 over the year 1977 primarily due to the additional expenditures made on the '
Company's Sabine unit. See Note 6 to the statements ofincome.
The decrease in Other Income and Deductions-Net of $1,875,000 for the twelve months ended June 30,1978 over the year 1977 was primarily due to the gain on the sale of certain equipment and a portion of the Company's uranium concentrates and a loss on abandonment of certain property under construction which occurred in June,1977. See Note 8 to the statements ofincome. y s
Interest Charges Interest charges increased $2,095,000 for the twelve months ended June 30,1978 over the year 1977 primarily due to the issuance of the convertible debentures in September of 1977. Interest on long-term debt for the years 1977 and 1976 increased when compared to prior periods primarily due to the issuance of additional securities.
Interest charges of the Company do not include interest incurred by the Gideon Trust. See Note F to the financial statements.
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! The AFUDC reflected in the financial statements does not represent funds received. However, the
$ inclusion of AFUDC as an item of income is in accordance with the Uniform System of Accounts prescribed by the FERC, the Louisiana Public Service Commission, the Public Utility Commission of Texas and with generally accepted accounting principles. See Note 6 to the statements ofincome.
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GULF STATES UTILITIES COMPANY 1 OPERATING STATISTICS AND CERTAIN DETAILS OF REVENUES Twelve Months Ended Years Ended December 31 y
June 30, -
1978 1977 1976 1975 1974 1973 ELECTRIC Number of customers at month end- ..
Residential -. 398,433 391,031 377,302 Commercial 365,335 356,649 349,292 I
48.371 47,352 45,752 44,281 Industrial. 42,871 41,986 3,443 3,379 3,455 5,970 ' 5,309' f Temporary Consuuction . 4,856 5,602*
4,389 3,404 Other.. n . -
- 1,736 1,690 1,626 1.552 1,509 1,433 Tota! g 456,839 y
Sales-kilowa tt-hours ( thousands ):
_ 447,841 417.138 406,338 y ,
Residential... ... 5,040.928 4,789,630 4,198,447 4,004,403' 3,724,192 Commercial . 3,632,981 3,730,837 3,486,193 3,170,084 2,949.455 2,684,199
~ Industrial - -
13.842,465 2,579,961 13,216,824 11,886,799 10,530,108' i1,304,846' Temporary Construcdon. 32,379 I l 001,560' 23,017 14,269 Other 2.221,732 2,025,933 1,713,762 1,583,054 1,458.972 Total Sales.- 1.519.578
. 24.770,485 23,541,597 20,981,361 19,067,020 19,172,209 18,831,936 Revenues (thousands): = - - - =
Residential -
S 169.359 1 156,078 3 123,984 S 108,089 5 105,851 Commercia! . . . . - -
111.313 S 91,355 I 102.276 83,005 70,999 67,685
' Industrial _ 266,051 235,516 55,659 173,947 Temporary Construction 133,055' I40,698' 99,231' l,026 783 488 Other-- - - -
46.364 39.698 27,119 20,187 20.043 15,641 Total Electric Revenues. S 594,113' 3 534,351 3 408,543 $ 332,330
[
$ 334,277 $ 261,886 Average KWH Use Per Customer-Residential 12,876 j f .. 12,480 11,303 11,0 %
Commercial- 76,606 10,549 10,819 '
74,785 Industrial - 70,370 67,754 63,196 4,066,529 3,858,927 62,120 Revenue per KWH-Cents:
3,477,705 1,879,705' 2,054,679* I,830,542' Residential.. .. m 3.36 Commercial -- 3.26 2.95 2.70 2.84 2.45 3.06 2.93 2.62 Industrial - 2.41 2.52 2,16 ;
l.92 1.78 1.46 1.26' l.24' Electric Department Enern Generated and Pur. .90 '
chased ( mdlions of KWW); '
Net KWH Generated 26,349 25,165 23,135 20,741 20,950 Net KWH Purchased and laterchanged. 20,430 ,
1.675 1,604 789 884 790 918 l Total Output 28,024 26,769 23,924 21,625 2L,740 Interdepartmental _ Sales, Line 21,348 Loss, Etc. 3,254 3.227 2,941 2,558 2,568 1
2,516 ;
Total Sales 24,770 23,542 20,983 19,067 19.l72 18,832 System Peak Load-lacluding Interruptible Load (MW)- 4,969 4,657 4,161 3,977 3,896 Total Capability (including Contract Purchases) 3,782 ,
-At Tirne of System Peak Load (MW) 5,620 5,734 5,686 j
' STEAM: 5,250 4,707 4,732 d Steam Revenues (thousands) - ._ . $ 43,865 $ 37,838 I 3 28,106 3 21.249 3 24,543 S 18,689 Steam Sales-KWH (millbns)
Sicam Sales-millions ofpounds -
3,006 2,9% 2,819 2,514 2,856 2.880 l {a
.... 16,709 16,987 19,346 l
, CAS: 18,772 23,829 25,723 <l 4
Gas Revenues (thousands)-- $ 21,385 5 15,571 5 11,090 $ 8,655 S 7,670 7,237 ll Number of customers.. .. . 80,917 80,116 $
77,260 74,350 72,900 Output-MM /cu. ft. of natural gas purchased .. II,024 10,072 71,854 l 10,074 8,997 8,420 S.iles-M M /cu. ft... . . . 10,512 9,866 9,503 '
. Weather Data: 9,782 8,443 8,462
- 9,115 Cooling degree days ( Normal 2.74i)- 2,945 2,918 Percentage change from normal - 2,286 2,636 2,686 7.4 6.5 2.734 Heating degree days ( Normal I,544) . ( 16.6) (3.8) (2.0) 1 2,0l2 I,655 1,782 1,472
(.3 ) .
Percentage change from normal- 1,256 1,551
- 30.3 7.2 15.4
\ (4.7) ( 18.7) .5
- For the years prior to 1976 both industrial and temporary construction were classified as industrial customers.
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BUSINESS For the twelve months ended June 30,1978,907o of the Company's operating revenues were derived from the electric utility business,77o from the steam business and 37o from the gas business. Of the electric operating revenues,547o were derived from within Lousiana and 467o from within Texas. The gas and l steam products businesses were conducted entirely in Louisiana.
Additional information about the principal classes of service and the operating revenues therefrom are provided under" Operating Statistic '
and Certain Details of Revenues."
The Company has The Company generates substantially all of the electric energy it sells.
interconnection agreements with Central Louisiana Electric Company, Inc., Louisiana Power & Light 1 Company, the cities of Lafayette and Plaquemine, Louisiana, and Cajun Electric Power Cooperative,' Inc.,
which contain terms'upon which the parties may provide each other emergency, economy, maintenance and other types of electric service. Through such interconnections, the Company also participates in a diversity interchange with the Tennessee Valley Authority. The Company's participation in such interchange, presently 215,000 kilowatts, is to be reduced under contract in the latter parts of 1979 and 1980 to 158,000 and 100,000 kilowatts respectively. The Company also has an interconnection j
arrangement with Houston Lighting & Power Company providing the Company with a minor amount of
' emergency service only. The Company and Central & South West Corporation are proceeding with plans for interconnection of their systems.
.)
I The Company's three steam products customers are large industrial corporations which use process !
steam and by product electricity supplied from the Company's specially designed steam-clectric extraction f plants. The customers have been supplying the great majority of the fuel requirements for these plants.
3 While the Company does not have long. term contracts with such customers at this time, the Company does t
expect to continue supplying such customers until at least the early to mid 1980's either pursuant to new contracts being negotiated, or on an interim basis until such time as the customers complete alternative 4 facilities now being considered by them.
The Company distributes natural gas in Baton Rouge and its environs, which have an estimated ~
population of 285,850. Such gas is purchased under an agreement with a single supplier, which contract can be cancelled on one year's notice by either party, subject to regulatory approval.
There are 21 rural electric cooperatives sponsored by the Rural Electrification Administration,21 .
municipal electric systems, and five investor-owned utilities operating within or adjacent to the service area 3
of the Company. Their operation in certain areas and required regulatory certification for extension of a
' service tend to re trict expansion of the Company's system in such areas. However, the Company is j )
continuing to extend its service into areas around such municipalities, areas adjacent to such other utilities, l
and into rural areas. 1 )
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PRESENT GENERATING FACILITIES l \
l The following table sets forth information with respect to the present generating stations of the y l Company. Information with respect to capability is based on current operating conditions, June 30.1978 l Fuel Capability Years placed -,
Generating Capsbuity (Messwetts) in service Station I i
$ In Louisiana: 147 1930-54 l LoUISLAN A No.1 ( 9 Units) . ... . . . . ... . . . . Gas 154 1950-53 l
- LoUl$1AN A No. 2 (3 Units).. ......... Gas I
} Wit.t.ow Gt.EN 1960-64 344 1 U nits 1 2 . . . . . ... . . . . . . . .. ... . . . . . . . . . .. ... .. . . Gas I968 580/522' i Unit 3....................,....................... Gas / Oil 1973 Gas / Oil 580/522*
1 U nit 4 .. . .. . . .. ... . .. . ..... .. .. .. .. . ... . . . . . . . . .
Oil / Gas 550 1976
- U nit 5 . ... ...... ........ .... .
RoY S. NEl. SON Gas 346 1959-60 Units 1 3. ....... . . . . . . . . . . . . . . . . . . . . . . . . . f l Gas / Oil 580/522* 1970 1
Unit 4.; _ . . . . . ..
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J2ne 30,1978 Centra ting Fuel Capability Station Years placed Capability (Megawa tts) in service in Texas:
NECifES Units 3-8..... .. .. .. Gas 427 1938-59 lewis CREEK Units 1-2... .. . . Gas 530 1970 71 SABINE Units 1-4.. .. . . . . . . . . . .. ., . . . . Gas 1,458 1962-74
- The Company is currently evaluating the results of tests of the capabstity of these units when operated with oil as h
- l{, fuel. l'reliminary analysis indicates a funher loss of capability (de-ration), as compared to their gas fired capability, from that indicated in the table.
Willow Glen Unit No. 5 was constructed for continuous opcration with either natural gas or heavy (No. 6) c<il as fuel, or a combination of both (split firing). Ah of the other generating stations were originally constructed for continuous operation only with natural gas as fuel; however, Willow Glen Units Nos. 3 and 4 and Roy S. Nelson Unit No. 4 have been adapted to continuous No. 6 oil burning capability and may also be split-fired. - All units except Neches Units-3-6 and Sabine Units I and 4 are capable of burning light (No. 2) fuel oil for at least short periods.
PROPOSED GENERATING FACILITIES For several years the construction program of the Company hn been under continual review and change principally because ofinadequate rate relief, particularly in Louisiana (see "Regu-lation and Ratt:s"), regulatory requirements and delays (see " Nuclear Units" and " Fuel Supply"), fluctuating peak load growth, substantial increases in construction costs, delay in .
' obtaining joint participation by others in the nuclear projects, and uncertain national energy policies.
Annual peak load growth has fluctuated substantially. Historic growth in the range of 9-11%
fell during the period 1974-76 to a range of 2-4% and has in 1977-78 returned to a level of
- ) approximately 12% and 10%, respectively. (See " Operating Statistics and Certain Details of Revenues.") The Company's system peak load during 1978 was approximately 5,138 megawatts through August 31, at which time the Company had a generating reserve capacity of approxi-mately 14%. The Company believes that the lower rate ofload growth experienced during 1974-
- j 76 was attributable principally to mild weather conditions, conservation programs,' the impact t upon consumption levels of higher prices charged for electricity, and generally uncertain economic conditions. Based upon its most recent studies the Company is now planning its constructiort g
program for an anticipated average annual load growth of approximately 6% and reserve capacity p including purchased power of a minimum of 12%.
j The Company's present plans for construction of additional generating facilities as outlined below, are subject to continuing review and change, particularly in the light of the uncertainties
. mentioned above.
? Plammed a Scheduled Expenditures Expenditures Estimated Generating Fuel CapaWinty Station in-Service Through Budgeted Total CapaWilty (Megawatts) i Date 13 For 1978' Cost' (la Thousands)
In Louisiana:
1 RoY S. NELSON
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nit 6".'.', .".'.'. on S 33,341 S 37,356 $ 701,289 RIVER BEND '
4 Unit 1....... ... Nuclear 940 1984 $232,695 S124,418 SI,333,193
, Unit 2... ... .. Nuclear 940 (a) $ 27,099 S 16,509 in Texas: (b) :
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Unit 5.... .. .. Oil / Gas 480 1979 S 75,443 $ 29,119 S 120,311 a
(a) A specinc in service date has not yet been set.
(b) The Company cannot make a reasonably reliable estimate of the total cost of such unit at this time because of the 'extended in servke date.
Y ' Updated as of August.1978.
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The costs in the above table include allowance for funds used during construction and presently I planned environmental control facilities; Costs of nuclear facilities exclude expenditures toward the cost of nuclear fuel. (See " Fuel Supply Nuclear Fuel").
In addition to the proposed generating facilities set forth in the table above, the Company's present estimates indicate the r ced for the construction of additional units having an aggregate capability of at !
least 2,400 megawatts in the period 1985-1988 based upon 6% load growth and 12% geurating reserves.
The Company has been negotiating with Cajun Electric Power Cooperative, Inc. and more recently with Sam Rayburn Dam Electric Cooperative, Inc. with reipect to their participation in the owaership of River Bend Station to the extent of 40% While negotiations are proceeding toward such participation, thtre can be no assurance that it will be accomplished. If such participation is not secured by early 1979 or alternative arrangements made for participations by others, the Company would either have to undertake >
construction of River Bend Unit No. I without other participants and procure the necessary funds for such L.
construction or if unable to do so to further delay construction of such unit, which would result in substantial increases in its ultimate cost and impair the Company's ability to serve its anticipated load.
There is no present assurance that such alternative arrangements can be accomplished.
Current guidelines of the Southwest Power Pool, with which the Company is interconnected, provide for maintenance of a minimum generating capacity reserve of 12% This guideline is taken into account in the Company's plans; however, based upon present plans and the derating of units which the Company is experiencing and expects to experience upon operation of units fueled with oil (See " Fuel Supply-Conversion of Units"), the current construction program is not expected to provide such minimum reserves consistently throughout the construction period reflected in the table above without purchases of power from others. If actual load growth should exceed present estimates, further deficiencies in reserves or even shortages of capacity could occur. Further, prehminary studies indicate that during certain years in the early 1980's the Company may not meet the Pool guidelines required to l qualify for the minimum reserve of 12% and may instead be subject to the Pool guideline requiring 15%
riserves. To the extent that deficiencies in reserves should occur, the Company would attempt to obtain l ,
any needed capacity or energy through purchases from others, but cannot be assured that supplies in '
' needed amounts will be available. Current information available to the Company indicates that the i Southwest Power Pool may in the aggregate have a significant reserve shortage during the same period which will limit supplies available for purchase. l' To the extent it should become necessary to cover deficiencies and to the extent sufficient lead time is '
available, the Cornpany may also install gas / oil-fueled turbine units. No material amounts are presently included in the construction program for these units. The Company believes such units would take L
approximately two years to install and could be in service by mid 1981, presently estimated as the time at l' which reserve deficiencies may occur. The number of such units,if any, which may be installed has not 300,000 kilowatt been determined, but the Company estimates that six of such units having an aggregate
' capacity would have an aggregate cost of approximtstely $55,000,000 (including allowance for funds used l, during construction). For limitations on use of gas in Texas for such units under existing and proposed Texas Railroad Commission ("TRC") orders, see " Fuel Supply-Natural Gas."If the turbine units were {l to be located in Texas, approval of the Public Utility Commission of Texas would have to be obtained and g
there can be no assurance that it would be granted, I
The Company's plan for future peak loads and its presently scheduled construction program may change because of rate and financial limitations, load growth changes, construction and regulatory ii contingencies, and the effects of various programs which may be adopted or imposed to conserve electricity '
and fuel (see below and " Fuel Supply"). The Company is keeping its construction plans as flexible as !
practicable with the intention of accommodating any further changes that may develop. Actual
[
expenditures and estimates may be affected by greater than anticipated escalation in costs, additional i expenditures for environmental and other factors, and further acceleration or delay of portio'ts of such
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program.
With respect to the planned units, the Company has in the ordinary course of business entered into i
contracts and letters orintent and made substantial financial commitments relating to the construction and
' equipping of the units. If at some point in the future any planned units or applications for permits should j 1
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be cancelled or abandoned and if and to the extent that costs expended thereon cannot be properly assigned to the sites retained for future use or transferred to other projects, such costs, the amount of which cannot presently be estirnated, may then have to be written off or amortized over an appropriate period.
(See " Nuclear Units" with respect to disposition of certain costs related to cancelladon of previously planned construction at the Blue Hills Station.)
R w
For discussion of the possible impact oflimitations on financing and fuel usage upon the operations of existing units and construction of planned generating units, see " Construction and Financing Program," w"
" Regulation and Rates," and " Fuel Supply."
3 Nuclear Units Since 1973 the Company has been pursuing the licensing and construction of four nuclear fueled units }
for service during the mid-1980's and early 1990's, consisting of River Bend Units 1 and 2 to be built near St. Francisville, Louisiana, and Blue Hills Units I and 2 in Newton County, Texas. g. ,
Construction and operation of nuclear-fueled units are subject to regulation by appropriate governmental agencies, including the issuing of permits and licenses by the Nuclear Regulatory Commission ("NRC"). In September,1973, the Company applied for construction permits for the two
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River Bend units. The NRC issued construction permits to the Company on March 25,1977, authorizing the construction of these two units. Because of two court decisions adversely affecting all pending applications for construction permits, the NRC issued these permits on a conditional basis pending ,
adoption of a rule concerning reprocessing of spent nuclear fuel and waste dispon1. The U.S. Supreme Court has reversed these decisions and remanded them to the U.S. Court of Appeals for further consideration. Such permits are subject to the final outcome of the proceedings resulting from such court decisions. Because of the conditional basis of such construction permits, further delays may be .
J encountered which could result in additional revisions of the anticipated in-service dates. Actual site i ;
preparadon work for the River Bend units commenced on September 15,1975, pursuant to a limited work I '
authorization issued by the NRC.
Although expenditures have continued for equipment and contracts, construction work on River Bend : :
j Units I and 2 at the site was temporarily suspended in March,1977 due to the absence of favorable rate i relief in Louisiana and pending negotiations for 40% participation in such units by one or more neighboring rural electric cooperatives and utility companies. Present plans are to reactivate construction
[j l of River Bend Unit I in early 1979 with a proposed in-service date of 1984. Through June 30,1978, costs 1 of approximately $305 million had been incurred on River Bend Unit 1, including approximately $32.9 million in allowance for funds used during construction.
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The Coard of Directors of the Company at its May,1978 meeting accepted management's ) l recommendations to consider the uncoupling of construc* ion of River Bend Unit 2 from Unit 1. River I Bend Unit 2 was scheduled for operation in the mid 1980's. Based upon consultation with suppliers and l agreement on extension of major contracts, the Board of Directors, at its August,1978 meeting, decided ]
i that River Bend Unit 2 will be retained as a future generating unit and a final decision on its construction j
schedule will be deferred until the end of 1980. Approximately 535.6 million had been expended on River Bend Unit 2 through June 30,1978, including $29.5 million in related equipment contracts, $3.1 million in 4
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related engineering, $2.7 million in allowance for funds used during construction and S.3 million in I l miscellaneous charges. From June 30, 1978, through the end of 1980, additional expenditures and commitments of approximately $46 million to $56 million are expected with respect to this unit. Of this j l g
amount, approximately $1 million relates to engineering, $5 million to allowance for funds used during construction, $28 538 million to related equipment contracts and purchase orders and $12 million to future 4 '
comnutments on eqmpment contracts. 4 2
j In August,1974, the Company filed its application for permits to construct the two Blue Hills nuclear 5 i
units to be built in Texas. To date the Company has not received notice of any intervention having been b
filed in such proceeding, except that the State of Texas, acting through its Attorney-General, has filed a j request to intervene as an interested state. At its May,1978 meeting, the Board of Directors accepted
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management's recommendations to consider an indefinite deferral of further planning and construction of
{ the Blue Hills Units. After study, the Board of Directors authorized the cancellation of the Blue Hills Units a
at its August,1978 meeting. The Company will retain the Blue Hills site, attempt to secure approvals from
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the NRC for future use of the site for nuclear generation purposes, and maintain it as a site for future nuclear generating units.
Through June 30,1978, approximately S47.3 million had been expended on Blue Hills Units I and 2, including approximately S5.8 million in related equipment contracts, $27.8 million in related engineering, _
S2.2 million in land and easements,59.2 million in allowance for funds used during construction and S2.3 million in miscellaneous charges. After June 30, 1978, an additional $8.5 million will be expended to cancel equipment commitments previously made by the Company bringing total expenditures to -
approximately S55.8 million. Assuming that the Company obtains requisite NRC site approval, approximately S30.8 million of such total expenditures is assignable to the site retained for future nuclear generation, leaving cancellation costs of approximately $25 million. Of the $25 million, approximately 514.3 million relates to cancellation of equipment contracts, $7.8 million to related engineering and $2.9 .
l million to related miscellaneous charges and allowance for funds used during construction. The Company i plans to request authority from the Public Utility Commission of Texas, the Louisiana Public Service l Commission and the Federal Energy Regulatory Commission to allow such cancellation costs to be recovered through increased rates by amortir.ing them as cost-of-service items over a reasonable period of time. It would expect decisions from the Commissions on the rate treatment for such costs in late 1978 or 1979. There can be no assurance that the regulatory commissions will grant such rate relief. The 1 Company presently proposes to commence amortizing these cancellation costs over a five. year period beginning in January,1979, although rate orders may not have been received by that time. In the event ,
one or more of the Commissions refuses the Company's request to recover such costs through the l Company's rates for service, the applicable portion of such costs will be written off against income at that !
time which would have an adverse effect on the results of operations of the Company. I 1
The expenditure of funds, as well as execution of contracts for the construction of nuclear units and 1 the purchase of equipment and fuel therefor, prior to assurance that unconditional construction permits and operating and other related permits will be obtained, has been deemed necessary by the Company to l
put it in a position to make application for the regulatory approvals required and to enable it to complete ..
construction within the time necessary to meet estimated future load plans. .
l l
l FUEL SUPPLY i l
The Company used natural gas almost exclusively as fuel through 1972. Since that time the l
Company's use of fuel oil has substantially increased. During the six months ended June 30, 1978 ;
approximately 30% of total generation by the Company was produced with fuel oil. l During the periods indicated below, the Company's total generation (excluding generation from its steam products units) was provided by various fuels approximately as follows:
6 mos.
ended June 30 T'. T* l l' By gas under contracts then having a term of five years or .
longer:
from Exxon Company, U.S.A. ....... .... ..
48% 43%
from United Gas Pipeline Co...... ..... ... .. .. . . . . . . . . . . 7 3 from Texas intrastate Gas Co. . . . . . . . . . . . . . . . 3 3 By gas under contract with Monterey Pipeline Co.*.. . .. .... 5 5 By gas under short-term or interruptible contracts . .. .. .... 12 16 By fuei oil ..... . . . . . . . . . . . . . . . . . . . . . 25 30 i
100 % 100 % d :
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- Contract expires January 1,1981. _
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Natural Gas Boiler gas for the Company's Texas units is provided under contracts with Exxon Company, U.S.A.,
(" Exxon") and Texas intrastate Gas Company (" Texas Intrastate"), both running until January 1,1985.
Exxon (which supplies fuel for approximately 44% of the total generating capability of the Company -
which was responsible for 45% of total generation in the twelve months ended June 30,1978), has stated i
to the TRL that it has suflicient gas reserves to supply the aggregate quantities of gas contracted, bat at i Exxon's request negotiations are being conducted with the Company to discuss possible deliverability problems during the later contract years. Gradual reduction of deliveries and extension of the contract s term (which are expected to require TRC approval under its existing orders) and price increases over the i contract terms as extended are being discussed.
Texas Intrastate (which supplies fuel for approximately 2% of the total generating capability of the Company)is not presently delivering the quantities required by its contract. However, arrangements have --
been made, which will run to April 1,1979, which have resulted in an increase in the deliveries of gas to the Company over the quantities which Texas Intrastate had actually been delivering, an increase in price, and a reservation of rights under the existing contract with such supplier. '
These existing supplies of natural gas in Texas and any future arrangements for additional supplies in Texas during or after the period of existing contracts are subject to present and future rules and orders of the TRC. These rules and orders presently provide for a phase out of natural gas as a boiler fuel in Texas; ,
restrictions on sales and transportation by gas utilities subject to TRCjurisdiction of natural gas for such use (including use in gas turbines) for the generation of steam or electricity; and statewide priorities upon ,
curtailment that would cause deliveries to large industrial customers such as the Company to be curtailed before deliveries to other customers. If the TRC phase-out order remains in effect, it would effectively 1
prevent the Company from obtaining natural gas in quantities needed to fuelits Texas units when existing !
supply contracts terminate.
However, in its order the TRC has reserved the right to grant exceptions in 1 particular circumstances where it determines that it is in the public interest for natural gas to be used as a boiler fuel, and the TRC has under advisement proposed rules which would permit the Company to obtain '
additional supplies of natural gas. Except to the extent the Company is successful in obtaining additional ,
gas supplies pursuant to exceptions granted by the TRC or under future TRC rules, or that gas fired .
generation in Texas is replaced by other generation in the system, the Company will be required to convert '_ {
some ofits Texas units to other fossil fuel capability earlier than would have been necessary by reason of '
the expiration of existing coritracts (see " Conversion of Units" below.) These rules may also affect the l
Company's consideration ofinstalling gas / oil burning turbines. Except as indicated herein the Company is presently unable to predict the effect that present or future TRC rules or orders will have on its operations. '
l I Boiler gas is provided in Louisiana under a contract running until January 1,1981, with Montereyj Pipeline Company and under a contract running until 1987 with United Gas Pipe Line Company .
(" United"). United provides gas to the Company's Willow Glen (other than Units Nos. 4 and 5) and Roy S. Nelson power stations in Louisiana. Curtailments of gas deliveries by United since November,. 1
)
1970, at which time United was supplying approximately 52% of the Company's fuel requirements, have I reduced it to a relatively small supplier at this time and further curtailment is expected. There are numerous FERC proceedings and related court appeals now in various stages involving the Company, >
United, and other customers of United. Such proceedings involve numerous questions affecting United's gas supply service to the Company. An existing FERC order provides that if it is necessary for the :
Company to avoid shedding firm electric load, United is authorized to deliver additional gas to the Company to the extent required to avoid such load shedding, but any such additional deliveries are to be offset against subsequent gas allotments from United. The Company cannc,t at this time anticipate the final outcome or the overall impact of such proceedings upon its gas supply from United or the operation ofits generating units served by United. tbe I
1 In order to obtain gas to offset the effect of existing gas curtailment, the Company and its wholly- .
1 owned subsidiary, Varibus Corporation ("Varibus") (see below), have been purchasing gas on a ! l temporary,interruptible basis and on a firm short-term basis from severalintrastate suppliers in Louisiana, e 20
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and expect to continue to purchase gas on such bases to the extent available. Such gas is currently available but there can be no assurance that supplies will remain available. The Company is continuing its efforts to purchase additional gas.
Different versions of a National Energy Act have been passed by the House of Representatives and the Senate and have been and are presently being considered by a House-Senate conference committee.
The conference committee has reached agreement in principle on provisions of the legislation involving dl 0
energy conservation, public utility regulatory reform and natural gas pricing and allocation, including the I following: granting the federal government the right to intervene in state and local rate making !
proceedings for gas and electric utilities under certain conditions; granting the FERC authority to order mandatory interconnection, pooling and wheeling of power under certain conditions; granting the federal -
government the authority to allocate certain supplies ofintrastate natural gas to interstate pipelines under certain conditions; placing federal ceiling prices on natural gas produced and sold in the same state; 7 f
exempung from federaljurisdiction certain short term sales of gas by intrasti.te and interstate pipelines to e other intrastate and interstate pipelines and their customers; and phasing out c ver a period of seven to nine years the federal price controls on certain categories of natural gas. Coal conversion legislation approved by the conference committee granting the Department of Energy authority to prohibit the use of oil and -
natural gas as a boiler fuel in most new electric power plants and generally prohibiting the use of natural gas and oil as fuels in any existing power plant aner 1990, has recently been passed by the Senate and awaits House consideration. This legislation provides incentives for conversion of facilities to the use of coal and penalties for the use of oil and gas as fuel. Legislative proposals that would impose federal excise taxes on certain uses of oil and natural gas and on the wellhead price of crude oil and natural gas liquids j ,
have yet to be resolved by the conference committee. It is not possible to predict the ultimate content of any such legislation that may be enacted. If adopted, however, some of the proposed measures would adversely affect the Company. h:
Conversion of Units. By reason of existing and proposed legal restrictions upon the use of natural gas as boiler fuel described above, most of the 59 percent of total generating capability of the Company not presently able to burn oil on a continuous basis will have to be adapted to have a continuous heavy oil, -
- coal, or lignite burning capability. Depending upon the legal restriction which may apply, such conversions could be required by 1985 or 1990.
The capital costs of conversion to oil of the Texas units which are economically susceptible of such
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conversion, stated in 1978 costs, are presently estimated at approximately $200 million and such conversion would result in increased operating costs, but estimates of such costs are not presently available.
Such conversion work has not commenced. To meet the problems anticipated from curtailment of gas deliveries by United, the Company has adapted two ofits gas fired units served by United in Louisiana to o enable them to have a continuous heavy oil burning and gas burning capability at a cost of $105 million
! including emission control equipment and incidental supply facilities. The Company has abandoned conversion work on other Louisiana units, principally because the Company is currently able :o purchase adequate supplies of gas on a short term basis to permit it to burn gas and split fire such units with gas and No. 2 oil to the extent required. It is estimated that the capital costs of conversion to oil of the remaining
~i Louisiana units which are economically susceptible of such conversion would be approximately $70 i million, stated in 1978 costs.
After conversion to the capability of continuously using oil as fuel, the Company's equipment is
{ expected to need more maintenance than when operated with natural gas. Adaption of units to use heavy i fuel oil on a continuous basis has resulted in a greater than anticipated reduction in the capability of such I
i units. Actual experience to date has indicated a substantial reduction in capability (see the table under "Present Generating Facilities ") In addition, conversion work has resulted in units being out of service for l long periods causing significant loss of available generating reserves during such periods and resulting in higher than normal purchases of power from other systems. Also, more problems may be experienced with air pollution in using oil and coal as fuel than the Company presently experiences in using gas.
Iflegal restrictions are imposed on the use of both gas and oil for boiler fuel use, conversion to fueling j by coal or lignite, directly or through gasification (if determined to be commercially feasible), would be
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i required. The Company has scheduled the construction of new coal units in the future (see " P '
Generating Units"). Construction of such units together with nuclear units presently under cons was planned to give the Company a balanced fuel mix. However, due to various factors, inclu others, the anticipated high cost of conversion, the Company is not presently converting its e generating units to coal. The cost of converting or replacing the Company's present generating ! --
of 5,522 megawatts from gas and oil to coal has been estimated to be approximately $5.7 billion. C estimates for conversion to fueling by gasification processes are not available.
Fuel Oil ,f D
The Company has experienced no reduction or interruption in service to the Company's custome because of fuel supply shortages or fuel allocation. However, the ability of the Company-(to avoid f interruptions and curtailments will depend upon the success ofits effons to continue -)
- y to obta fuel to supplement its curtailed gas supply under then existing market conditions and applicable '
governmental allocation and rationing programs.
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The Company has been purchasing fuel oil on the spot market as required but neither the C nor Varibus has as yet obtained substantial long-term contracts for fuel oil. However, the Compa attempting to secure a portion ofits fuel oil under short. term contracts. The Company has been able to obtain, and expects to continue to be able at least during the balance of 1978 to obtain, an a of fuel oil, but cannot be assured of being able to obtain its total future fuel oil requirements. The Fed Energy Administration ("FEA") allocated fuel oil to users from 1973 until July 1,1976, but is not presently doing so.
The Company owns and maintains storage facilities for No. 6 fuel oil, principally at its Willow Glen and Roy S. Nelson stations. On June 30,1978, the Company had an oilinventory on hand at these sta which was in excess of the largest monthly requirements for the supply of oil expected during 19 Company stations. plans to maintain an inventory of oil which approximately equals a 30 days' supply f The Company maintains the capability for using No. 2 fuel oil alone in its gas fired units for sho periods. The Company has burned substantial quantities of No. 2 fuel oilin conjunction with ga load demand at certain times and may burn larger quantities of such oil to meet future load dem such oil is available.
Gas and Oil Costs The Company's rate schedules and contracts covering substantially all kilowatt-hour sales con adjustment provisions making automatic adjustments for changes in fuel costs. (See " Regulation and Rates" with respect to the effect oflags in such adjustments and " Management's Discuss of the Statements of Income.") ,
The cost of natural gas and fuel oil experienced since 1972 has been as follows: ,
Weighted Average t Combined Natural Gas Costper Fuet Oil Cost per Cost per KWH KWH KWit 1977........ .......... .237e .232c 1 9 7 3 . . . .. .. .. . . . . . . . . . ... . . ......
.78tc
. . . . .398e .287c 1.078e 1 9 74... .. .......... . ............ .647c .402e 2.759e 1975........................-...........-.. . . . . . . . . . .593e .515e 2.653e 1976.. ...... ................ .78Ie .648e 1.8644 1977....................................... . . . . . . ,
1.012e .630c 2.092e '
Twelve Months Ended June 30,1978... 1.121e
.745c 2.091c :
For the twelve months ended June 30.1978, the system-wide average fuel cost was 104.2 Btu as compared to 94.8e per million Btu for the year 1977. The Exxon contract price is 21.5 '
Btu while short. term and interruptible gas prices to the Company as of June 30,1978, ranged between
$1.81 and $2.15 per million Btu. Through June 30, 1978, the most recent price l. per barre transportation, paid by the Company for open market purchases of No. 6 fuel oil was $10 85 and for N .
fuel oil was $13.86, amounting on the aversge to S1.75 and $2.35 per million Btu respectiv j
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Coal The Company has contracted with Kerr-McGee Coal Corporation for a supply of 50 million tens of low sulfur Wyoming coal over a 20-year period. The Company's current projections indicate such c,uantity ,
of coal will only be sumcient to satisfy slightly more than the fuel requi;ement of one of the coal-fired units for this period. The contract provides that the coal is to have an average sulfur content (as received) of approximately .48% by weight.
Recent federal legislation affecting surface mining of coal would result in an increase in the cost of coal from such supplier, but, based on the information from such supplier, is not presently expected to make the coal from this source unavailable. a' The Company expects to be able to make arrangements for transportation of the Wyoming coal in ,
time for new in-service dates proposed for the new coal units. Wlule the cost of transporting such coal approximately 1,500 miles will be substantial, the Company deems the use of such coal, including transportation costs, to be economically feasible in view of the high cost and availability problems of alternative fossil fuels, t
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Due to projecMd fuel needs in the 1980's, the Company is currently evaluating other sources of coal supply.
Nuclear Fuel The Company has contracts with Gulf Oil Corporation (since assigned by Gulf to General Atomic Company, a partnership between Gulf and Scallop Nuclear, Inc.) and Ranchers Exploration and Development Corporation and HNG Oil Comp.oy for the purchase by the Company of approximately l 5,000,000 {
pounds of uranium concentrates. Under such contracts, approximately 2,250,000 pounds have '
been delivered through June 30, 1978, at prices averaging $21.25 per pound. Aporoximately 650,000 pounds of the amount remaining to be delivered under the contracts are subject to certain disputes as to [i li; l
price and delivery has been put in doubt by a suit inste.uted in September,1977, by Reserve Oil & Minerals Corporation in the U. S. District Court in Albuquerque, New Mexico, against Gulf, et al. The suit seeks to s
( I have the contract under which Reserve and Sohio Petroleum Company were to supply concentrates to Gulf ' 4 for delivery to the Company declared void because of cenain alleged violations of federal and state antitrust laws. . !
Except to the extent that uranium may be available through these contracts or may be ;
discovered in the Company's exploration efforts (see "Varibus Corporation"), additional concentrates will ,
have to be acquired by the Company for the long term operation of the nuclear units. The market price of j concentrates on June 30,1978, was approximately S43.40 per pound. '
Because of the rescheduling of the in-service dates of the River Bend units (see " Proposed Generating .
Facilities-Nuclear Units") in 1977, the Company sold 500,000 pounds of concentrates previously i delivered to it. The Company is considering the sale of approximately 2,000,000 pounds of concentrates, k
with certain repurchase rights (see " Construction and Financing Program"). Due to the rescheduling of j the River Bend units, the Company may consider deferring deliveries or making sales of additional concentrates. The 4,500,000 pounds still on hand or to be delivered under such contracts would be a &g, sumcient quantity to provide the initial core for the first River Bend unit and to provide fuel for approximately eight years' operation of such unit.
j The Company entered into thirty year fixed-commitment contracts with the Energy Research and d*
j ' Development Administration for enrichment of the fuel for four proposed nuclear units, and a contract has been entered into for conversion of eight million pounds of uranium. The Company sold all ofits rights for enrichment services with respect to one of the Blue Hills units and sold the first ten years' rights with respect to the other Blue Hills unit. Since construction of these two units has been abandoned (see "Pmposed Generating Facilities-Nuclear Units"), the Company intends to attempt to sell its remaining rights under this contract,
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Varibus Corporation The Company's wholly-owned subsidiary, Varibus Corporation, has supplied and will continue to
)
suppl.y at cost a portion of the Company's natural gas fuel requirements. During the years 1976 and 1977, 13.1% and 5.5% of the natural gas used was supplied by Varibus. The gas supplied by Varibus has been; , ;
purchased by it under both short term firm and interruptible arrangements.
l
' Varibus is involved in programs to prospect for and develop fossil fuel resomes as well as other "
l sources of fuel. Substamially all of the cash requirements of Varibus for these programs borrowed by Varibus ,or advanced by the Company. From early 1970 to date, approximat million has been expended in oil and gas lease acquisitions and associated exploration and development :
programs. An additional $13.89 million (subject to adjustments for title defects) has been invested in ' l lignite lease acquisitions with a balance of approximately S7.1 million, including interest payable over the <
next twc years, and $1.47 million has been invested in uranium exploration and other related activities for '
the benefit of the Company as more fully explained in the following paragraphs.
Oil and gas exploration programs in Mississippi have resulted in some commercial production but are
- not presently expected to provide the Company a direct source of fuel. Production from these programs is being marketed in the areas of discovery. Varibus has written off approximately $1,880,000 of lease '
acquisition costs and $1,597,000 of exploration costs for these projects through June 30,1978. Varibus may make material expenditures in the future to develop such properties and process production, and the Company may deem it advisable to make funds available to Varibus for such purcose. In the event exploration or development of any prospect is abandoned, it is anticipated that certain costs associated therewith may either be mitten off at the time of abandonment or amortized against production.
Varibus has acquired lignite leases on approximately 17,500 acres of land in Texas near the Company's service area. 'If Varibus should develop such deposits, it would be obligated to provide or arrange for such financing, presently expected to exceed $50 million, primarily for mining equipment, as
- g may be needed to obtain production in the mid-1980's. The Company is currently evaluating these lignite deposits and others for possible future use. Varibus has been advised that the existence of certain hi
', pressure natural gas reserves, not owned by Varibus, under a significant portion of the leases could affect
- ' the recoverability of the lignite. The significance of this situation is under investigation at this time. If the Company chooses to use the lignite to meet planned generation requirements, all or a portion of the leases may be assigned to the Company.
S In May,1976, Varibus entered into contracts with the Felmont Oil Corporation for two uranium exploration projects. The arrangements call for Varibus to advance funds over periods up to three yea ,
which, in the aggregate, are not presently expected to exceed approximately $2.4 million for the pu exploratory drilling to test prospects and prospect and search for deposits of uranium-bearing cres.
Varibus' participation may earn it an interest in discoveries and a limited call upon Felmont's share. There inno assurance that this effort will be successfulin locating any deposits. If any of the efforts are suc before the ores could be available as a new source of fuel for the Company's nuclear units, they woul have to be mined and milled.
See Note (5) to Statements orincome for the Company's equity in Varibus' losses.
' REGULATION AND RATES i
The retail rates and services of the Company in Texas are subject to regulation by municipal t authorities or the Public Utility Commission of Texas (the "PUCT"). Texas law also requires utilities ;
to obtain initially from the PUCT certificates of public convenience and necessity to authorize operations '
areas already served and thereafter to authorize extensions of service into certain new areas.
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i The Company filed for a $24,300,000 retail rate increase on December 30,1977 with the PUCT and with the cities the Company serves. Tids increase was based on an average 1976 level of business, a requested 15% return on equity and the inclusion of all construction work in progress in rate base and the elimination of all AFUDC from income. The PUCT granted a revenue increase to:aling $10,693,159. The revised tariffs became effective on June 28,1978 in unincorporated areas and in cities which had approved the same increase as the PUCT, and in July,1978 in those cities which had failed to act. Temporary rates, Q at the level approved by the PUCT for rural areas, were implemented in thirteen cities by the Company ? ,
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with PUCT approval in July,1978, subject to refund after heatings expected in October,1978. The PUCT allowed 71.57% of construction work in progress t,n rate base, eliminating the related AFUDC from income, and allowed a 9.209% return on rate base, equivalent to 14% return on equity.
fI The Louisiana Public Service Commission ("LPSC") hasjudsdiction over the retail rates and services b !
of the Company. On December 31,1975, the Company filed with the LPSC a general electric rate increase application which, if granted in full, would have produced additional annual revenues of $23,800,000 / l based on the 1975 level of business. At the same time the Company also filed with the LPSC rn I l
application for general gas rate increases which,if granted in full, would have produced additional annual '
revenues of $2,100,000 based on the 1975 level of business. On February 4,1977, the LPSC denied in full I the Company's application for increased electric rates and granted a gas rate increase, whi:h hns been in j effect since February 16,1977, sufficient to produce $717,575 of operating income after taxes. j The Company appealed the order of the LPSC to a state district court which remanded the case back to the LPSC to determine rates using an AFUDC rate of 7.5% rather than 8.7% and based upon attrition ,
since January 1,1976. The LPSC, after hearings, returned the matter to the District Court which ordered j j an increase based on attrition of $1,253,000, effective February 6,1978. The Company's appeal of this t
8 case to the Louisiana State Supreme Court is pending. ; ;
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The Company also filed on December 19,1977 for a $42,956,463 increase in Louisiana retail electric i )
rates based on an average 1976 level of business with the same assumpdons as'the case filed in Texas. j' (
s Updated data for a 1977 level of business, as requested by the Commission, now indicate a revenue deficiency based on 1977 of $65,743,169, plus attrition since June,1977 in the atnount of $9,914,000 for a i total revenue deficiency of $75,657,169. The LPSC is expected to act on this case by the end of the year. {
l-Both state commissions have been reviewing rate design of all electric utilities subject to their jurisdiction. Generic rate hearings were recently concluded in Texas, and the LPSC has issued a genera! !'
order for all utilities to submit restructured rates which consider (!) utilization of rate forms other than I declining block, (2) marginal or long run incremental costs, and ( 3) other rate forms deemed appropriate; with such restructured rates providing neither a revenue increase nor a revenue decrease. The impact of [
these hearings on the Company is not determinable at this time. j in certain of its activities, including its wholesale sales of electric energy in interstate commerce and $
the rates therefor, transmission of electric energy i.n interstate commerce, and the issuance and sale of I securities, including the Additional Common Stock, the Company is subject to thq jurisdiction of the f FERC. A FERC order authorizing the Company to issue such Additional Common Stock has been i applied for, .
Effective September 2,1976 as to certain rural electric cooperative customers and December 1,1976 . i.
as to certain municipti customers, the FERC authorized the Company to charge, subject ta hearings and f refund, increased rates of approximately $1,000,000 on an annual basis. The Company and its wholesale P i
customers agreed to a reduction in the filed rates of approximately $173,000 on an annual basis based on ,f
.k the 1975 level of business with a " moratorium" on future increases in such wholesale rates until April 1, j j
1979. The agreed reduction will be subject to refund, with interest, up m approval of the settlement now &
1 i
pending before the FERC.
.j The Company's fuel adjustment clauses involve tags in collection of two months in Louisiana and one ,
month in wholesale for resale rates subject to FERC jurisdiction, while in Texas the fuel adjustment clause ,
l is billed on an estimated basis with a subsequent correction factor for over or under recovery of fuel costs.
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f While the operation of the Texas and FERC clauses resulted in recovery of substantially all fuel cos 1977, the Company failed to recover approximately $4,682,000 of fuel costs under the Louisiana cl The Company is not a holding company or member of a holding company system subject to the Public Utility Holding Company Act of 1935.
EMPLOYEES The Company has approximately 3,450 employees as ofJune 30,1978.
Of these, approximately 2,393 operating personnel are represented by the International Brotherhood of Electrical Workers. On 19,78, the Cornpany and such union reached agreement on a new two-year contract providing f wage increase of approximately 9% during the first year and 8% durihi; the second year.
The Company has received notice that there are at least !! charges of discrimination presen pending against it before the Equal Employment Opportunity Commission. These charges concern var procedures and practices of the Company that allegedly discriminate against the charging parties on '
3 basis of race or sex. The limits of the potential classes, the remedies to be sought, and the amount an materiality of monetary claims, if any, which may arise therefrom are not presently known. ,
LITIGATION
.On August 5,1974, the Company filed a $225 million damage suit in the Civil District Court for the Parish of Orleans. New Orleans, Louisiana against United Gas Pipe Line Company alleging Un failure to fulfill its contractual obligations to supply natural gas to the Company. The Company h filed with the LPSC a petition for a declaratory order providing a method whereby that part of the damages, recovered from United in such suit attributable to increased cost of fuel passed throu Company's customers under fuel adjustment clauses, would be made available to customers who r service under the jurisdictional authority of the LPSC, less an appropriate portion of the co
'these proceedings, together with related proceedings before the FERC, are still pending and th outcome cannot presently be predicted.
i In 1975, Varibus received initial notificat on from the FEA allegi,g that certain sales of oil by to the Company and to certain other purchasers, were subject to the FEA's Mandatory Petroleum Regulations.
Pursuant to court order and upon instruction from the FEA, Varibus' will refund approximately $307,944 plus interest to customers other than the Company. The FEA has also advised Varibus and the Company that cumulative overcharges of approximately $3,250,000 resulted .
to the Company and that the FEA may iaue a remedial order requiring Varibus to refund these
. overcharges to the Company Varibus and the Com--
FEA may issue as to sales to the Company, but can . o contest any remedial order that the
.mu that any such contest will be successful.
Upon receipt of a refund from Varibus, if ordered anu upheld, the Company exp.ects that it wou treated as a reduction of the cost of oil then in its inventory, thereby resulting in a decrease of the ra charged to its customers over the period in which such oil is burned.
In January,1976, Varibus gave notice of cancellation of a contract for the purchase of fuel oil fr South Hampton Co. based upon a failure of the supplier to provide certain facilities by the stip .
The supplier filed suit against Varibus in February,1976, in a District Court of Jefferson ; ,'
Co alleging a breach of the contract by Varibus and asserting claim for $13,000,000 in damages. The Company believes the suit can be successfully defended. )
)c ENVIRONMENTAL MATTERS ,
)\
The application of federal and state restrictions to protect the environment involves or may in review, certification or issuance of permits by various state or federal authorities, including th Administrator of the Environmental Protection Agency (" EPA"), the Corps of Engineers and t
'with respect or continued to conttruction operation of facilities. of new facilities or modification of existing facilities and with respect The Company believes that it is in compliance with all presently 26 l
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L applicable requirements and is not involved in pending proceedings (other than the proceedings in the NRC relating to the construction permits discussed above under " Proposed Generating Facilities") and does not know of any threatened proceeding in which the Company is or will be charged with material violation of such requirements, except that to comply with EPA requirements the Company will construct a However, environmental ,
new settling pond at the Sabine Station at a cost of approximately $50n000.
restrictions, particularly in regard to emissions into the air and water, may increase the cost ofoperations t of i the Company's generating installations and may in the future require substantial investments in new !
equipment at existing installations and significant increases in the cost of proposed new facilities. The} -
l Company believes that the capital expenditures and operating costs incurred in response to environmental ; i I
considerations will be fully allowable for rate. making purposes. However, there can be no assurance that this will be the case. Depending upon certain regulatory developments, the Company presently anticipates
[
for additional H that it may be necessary to make expenditures on its present units of up to $10,000,000 [
environmental control facilities. In addition, substantial portions of the Company's construction program i Of the estimated for new generating units are expected to be for environmental control facilities. -
construction costs for 1978 and 1979,it is estimated that an aggregate of approximately $10,800,000 and
$25,500,000, respectively, are for environmental control facilities at existing and planned units. (See
" Construction and Financing Program".)
DESCRIPTION OF COMMON STOCK The information set forth below is summarized from the Articles ofIncorporation of the Company as !
amended, and from the indentures relating to the Company's debentures and mortgage bonds, which are Exhibits to the Registration Statement. The statements and descriptions hereinafter contained do not l j
purport to be complete, and are qualified in their entirety by general reference to said documents, as '
l amended.
l The Articles ofIncorporation provide that the number of authorized shares of the capital stock of the Company shall be i16,000,000 shnes, divided into 6,000,000 shares of Preferred Stock-S100 Par Value, 1 ,
10.000,000 shares of Preferred Stock-without par value, and 100,000,000 shares of Common Stock, ,
without par value. The holders of the Common Stock have no pre-emptive rights.
The pres-ntly outstanding Common Stock is, and the Additional Common Stock will be, listed on the l New York, Midwest and Pacific stock exchanges. The Transfer Agents for the Common Stock are The ,
j American Nadonal Bank of Beaumont, Beaumont, Texas. The Chase Manhattan Bank N.A., New York, New York, and the First National Bank of Chicago, Chicago, Illinots. ,
1 DWidend Rights The holders of the Common Stock shall be entitled to receive such dividends as may be declared by.
the Board of Directors, subject to the rights of creditors and of the holders of the Preferred Stock to receive cumulative quarterly dividends at the rates set forth in the titles of each series thereof, respectively, before L
any dividends are paid to holders of the Common Stock. For the amount of present Common Stock ]u dividends, see " Common Stock Dividends and Price Range" and " Statements of Income."
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Limitation on Payment of Dividends on Common Stock h, Certain limitations on the payment of dividends on Common Stock are contained in the Company's A Restated Articles of Incorporation, as amended, and indentures. The most restrictive limitation is that h
.q contained in the Trust Indenture dated as of September 1,1977 Such Trust Indenture provides that amounts which may be paid as dividends on Common Stock after December 31,1976, shall be limited to }y the sum of $100,000,000 plus (or minus in the case of a deficit) the aggregate amount of the Company's 3
net income available for dividends (as defined in such Indenture) accumulated after December 31,1976, as defined. The retained earnings available for payment of dividends under such Indenture as of June 30, 9 -
U 1978, amounted to SI!!,927,000.
Other less restrictive limitations are contained in the Restated Articles ofIncorporation, as amended.
and the indentures covering the first mortgage bonds and the 4%% Debentures of the Company due in }l p
1981, p 27 7
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Voting Rights and Non-Cumulative Voting The holders of the Common Stock shall possess one vote per share for the election of directors a '
all other corporate purposes, subject, however, to the voting rights of the holders of the Preferred S ;
The shares of Common Stock do not have cumulative voting rights which means that the holders of than 50% of the shares voting for the election of directors can elect 100% of the directors if th do so, and in such event, the holders of the remaining less than 50% of the shares voting* for the e ,
directors will not be able to elect any person or persons to the Board of Directors.
h' The Articles of Incorporation expressly confer upon all series of the Preferred Stock, acting I,Q as o class, voting power, by plurality vote, to elect the smallest number of directors of the Comp . l to constitute a majority of the Board,in case the Company shall fail to declare and pay or set aside for payment in fuh any quarterly dividend on any of the Preferred Stock and shall not on or before (
', the fou I
succeeding quarterly dividend date declare and pay or set aside for payments in full said dividend x in l arrears and also all dividends which shallin the meantime have become due and payable on all of the - - l cutstanding Preferred Stock. In addition, the Preferred Stock and each class thereof has certain class ~~
voting rights for certain protective purposes including, but not limited to, rights to approve any consolidation, certain reductions of capital, and creation of stock of equal or prior rank to the Preferre Stock.
Liquidation Rights In the event of any liquidation, dissolution or winding up of the Company, or any reduction or decrease ofits capital stock resulting in a distribution of assets to the holders ofits Common Stock o than %
Stock by w v of dividends out of the net profits or the surplus of the Company, the holders of the Co 4
aftt -ntitled to receive pro rata all assets of the Company distributable to shareholders, but o th '.in all cases plus accrued and unpaid dividends) to the holders of the Preferred Stock of ulated in the Company's Articles of Incorporation for each series.
For the amounts to m Preferred Stock would be entitled on voluntary liquidation, see Note B to the Financial LEGAL OPINIONS The legality of the Additional Common Stock will be passed on by Messrs. Orgain, Bell &
Beaumont, Texas, counsel for the Company and by Messrs. Beekman & Bogue, New York counsel for the Undenvriters. All matters pertaining to conformity to Texas laws will be pass .
Messrs. Orgain, Bell & Tucker. All matters pertaining to conformity to Loudiana laws will b Messrs. Taylor, Porter, Brooks & Phillips, Baton Rouge, Louisiana. Messrs Beekman :3 & Bog to matters of Texas and Louisiana law, respectively, upon the opinions of Messrs. Orgain Bell
' & Tucke and Messrs. Taylor, Porter, Brooks & Phillips. Partners and associates of Messrs. Orgain, Bell &
and Messrs. Taylor, Porter, Brooks & Phillips beneficially own, respectively, by firms, ap 19,000 shares of Common Stock and 3 shares of Preferred Stock of the Company; and 1,570 Common Stock and 100 shares of Preferred Stock of the Company, i
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l EXPERTS The fmancial statements which appear in the Prospectus and in the Registration Statement have been l examined by Coopers & Lybrand, independent certified public accountants, to the extent indicated by their
- report. Such financial statements have been included in reliance upon such report of said firm and upon y the authority of said firm as experts in accountmg and auditing. 7.,
1
' :1 The statements of legal conclusions made herein under " Regulation and Rates,"" Litigation" and <
" Description of Common Stock" have been prepared or reviewed (a) as to all matters, except those !
governed by the laws of Louisiana, by Messrs. Orgain, Bell & Tucker, and (b) as to all matters governed l l by the laws of Louisiana, by Messrs. Taylor, Porter, Brooks & Phillips, both counsel for the Company. All y such statements are, as to matters oflaw, made on the authority of said respective counsel as experts. .1 L
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_________.________________.__.________.__.___2____.
I MANAGEMENT The directors and omcers of the Company are as follows:
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Directors ,
JoKN W. BARTON.
President ofJack's Cookie Company, Baton Rouge, Louisiana, W. DonnAM CRAwroRo... . . . . . . . .
y Chairman Company, of the Board Beaumont, and Chief Executive Ofcer of the ;
EowsN W. Htru... . . . . . . . . . . . . . Investment Adviser, Boston, Massachusetts. '
WLLuAM H. LEBLANc,1R. . . . . . . . .
President, Baton Rouge Supply Co., Inc., Baton Rouge, Louisiana. b NORMAN R. LEE.. . . . . . . . . . . . . . . '
, President and Chief Operating Oficer of the Company, Beaumont, i Texas.
JOSEPH R. MURPnv .. .
Senior Vice President of Production of the Company, Beaumont, Texas.
ALytN T. RAET2sCH, SR. . . . . ..
.lssistant to the Vice President & General Manager Chemical Division- U.S. PPG Industries, Inc., Lake Charles, Louisiana.
Monroe 1. RATusoNE,1R. .
Medical Doctor and Partner, The Surgical Clinic, Baton Rouge, Louisiana.
LORENE L. RooERs.. ... . . . . .
President, The University of Texas, Austin, Texas.
BtsMARn A. STEINHAoEN... . . .
Partner, Steinhagen Oil Company, Beaumont, Texas.
J AMEs E. TAusslo 11. ..
Realtor and Real Estate Developer, Lake Charles, Louisiana.
ARTuuR TEMPLs . . . . . . ..
Chairrr an of the Board, President and Chief Executive Ofcer of Temple-Eastex, Inc., Diboll, Texas. \
(
Cn ARLEs P. M ANsulP,1R.*.. . .
President and Director, Capital City Press, Baton Rouge,
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BENJAMIN D. ORoAsu* . . . .
1 Member of the Law Firm of Orgain, Bell & Tucker, General
. Counselfor the Company, Beaumont, Texas. .
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- Advisory Directors 1:
Omcers W, DonHAu CRAwrono.. ... . . . .
NORM AN R. LEt.. ..-.. .. Chairman of the Board and Chief Executive Ofcer President and Chief 0perating Ofcer JOSEPH E. BosouRANT.. . . . . . .
Senior Vice President-Division Operations and .$ystem Engl.
neering JosEPu R. MURPHY , .. . . . . . . . . . . .
Senior Vice President-Production LAWRENCE L. HuMPnREYs... . . .. ..
Senior Vice President-Energy Development TuoMAs H. BunBANK.... . . . . . . . . . ..
Vice President-Rates andEconomic Analysis 1AMss H. OERR,3R.
CuARLEs D. glass . . . Vice President-Power Plant Engineering and Design Vice President-Beaumont Division WnturM E. HEANER,1R. ... . . .. .. Vice President-LegalServices RoaERT W.1AcnsoN... . . . . . . . . . . . .
Vice President-FinancialServices & Secretary EuwARD M. Loootns,la. . .. . . . .
Vice President-Personnel '
LEsLIE M. Moor, la.
Vice President-Administrative Services ALsERT A. PoLLANs . . . . . .
'i AuaREY D. SPRAWLS., ...
..... Vice President-Accounting Services Vice President--Consumer Services JAsrta F. W ORTuv.. .. . . . . . . . . . . .
Vice President-Public Afairs JAMES L. BRAsWELL.. .. . . . . . .. Controller PATRICIA P. BRoussARD.... . . . . . . . . . Assistant Secretary W(LuAM A. CROPPER . . ... . .
Assistant Treasurer ROY E. EYLu
... . . . . . . .. Assistant Secretary
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REPORT OF INDEPENDENT PUllLIC ACCOUNTANTS To the Shareholders of GULF STATLs UTILITIES COMPANY:
We have examined the balance sheet and statement of capitalization of GutF STATES UTILITIES CouPANY as of December 31,1977, and the related statements ofincome, retained earnings and sources of funds invested in utility and other plant for each of the five years in the period ended December 31,1977. I i
Our examinations were made in accordance with generally accepted auditing stanitards and, accordingly, included such tests of the accounting records and such other auditing procedures as we considered j necessary in the circumstances.
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In our opinion, the financial statements referred to above present fairly the financial position of gut.F STATES UTILITIES COMPANY as of December 31,1977, and the results ofits operations and sources ofits (
funds invested in utility and other plant for each of the five years in the period ended December 31,1977, in conformity with generally accepted accounting principles consistently applied during the periods except for the changes adopted on January 1,1975 and 1974, with which we concur,in the method of computing depreciation as described in Note 3 to the statements ofincome.
As discussed in Note I to the financial statements, the Company has cancelled plans to construct two nuclear units in Texas. At this time,it is uncertain what part of the project costs and the cost to be incurred in cancelling equipment contracts will be recoverable.
i Coorsas & LYbRAND l
Houston, Texas l
6 January 31,1978, i except for Note I an'd the last paragraph above as to which the date is September 6,1978.
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- GULF STATES UTILITIES COMPANY l l
BALANCE SHEETS j ASSETS I June 30, 1978 December 31, 4 (Unaudited) 1977 ,
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1 UT!!.!TY AND OTHER PLANT, at original cost Plant in service Electric . . . .. . . . . . S1,566,704 S1,555,579 l f Steam....................................... .......................... 55,098 55,124
- Gas........................ . . . . . . . . . . . . . . . 23,885 23,772 f 1,645,687 1,634,475 i
Less: Accumulated provision for depreciadon. .. .. . .. 519,448 488,814
- 1,126,239 1,145,661 l Construction work in progress .. . . . . . . . . . . 563,218 441,206 I Nuclear fuel.. . . . . . . . . . . . . . . . . . . . . . . . . . . 48.055 28,856 i
1 1,737,512 1,615,723
)
i OTHER PP.OPERTY AND INVESTMENTS i Construction funds held by Trustee (Note C)........ . . . 2,273
.. 4,846
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! Subsidiary company (Note A). . . . . . . . .. 14,664 27,116-l 0ther, a t cost... .... .. .... ..... .. . . . . . . 740 909 1
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17,677 32,871
.) CURRENT As3ETS j Cash. . . . . . . . . . . . . . . . . . . . . 13,052 7,726 Receivables,less provision for uncollectible accounts
, Customers .. . . ... .. . . . . . ... 65,096 46,948
- Other. . . . . . - . . . . . . . . . . . . . . .... .... . . . . . . . . . . . . 2,146 4,752 1
Materials and supplies, at average cost.. . . . . . . . . - . . 6,616 6,308
, Fuel stock, at average cost ( Note F).. .. . ..... ... . .. ..... ...... ... . 34,157 35,613 Prepayments and other m..... ..... . 4,244 3,029 125,311 104.376 DEFERRED CH ARGES 1
Unamortized debt expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,753 2,808 1 Other= . . . . . . . . . . . . . . . ... .. . .. 4,706 2,796 i 7,459 5,604 i
$ 1,887,959 S1,758,574 l
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The accompanying notes are an integral part of the fmancial statements.
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l GULF STATES UTILITIES COMPANY BA1.ANCE SHEETS C A PIT ALIZ ATION A N D LI A BILITIES June 30, I
.M8 December 31
- P (Unauen..9 1977 ;
i (la Tb - inds) l C ApriAuzATioN (See Statements of Capitalization) $ 488,343 S 490,718 Common shareholders' equity. ...... ...... ... ... ..... . . .
167,500 167,500 l
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Preferred stock. .
805,657 805,656
................ s Long. term debt .... ........ .... '
1,463,875 1,461,499 CuRaswr LtAnn.mES - 12,099 Long-term debt due within one year .......... ..... ........ . ... . . .
Notes payable (Note E) 10,000 j.
Bank ..... .. .. ................................ i, I8,586 15,252 ,..
Master notes = .......
83,289 5,012 ;b , l Commercial paper.. . . . . . .
Accounts payable fg , i, 66,797 52,915 h'j f Trade ( Note F) ...
3,650 6,043 %V l I
Subsidiary . .. .. 2,396 4'
,l 14,561 Taxes accrued . .. . 15,379 15,648 l
. .......... e ,;
Interest accrued . ... . .. . . . ... .. .. I5.280 13,659 9
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, I O th e r . .. .. . . .. .. ... . .. . . .. . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
133,024 f.l i
' 217,542 i.-
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DEFERRED CREDIT 5 60,638 57,357 iF Inyestment tax credit..... .............................
- I10,323 103,718 e
...............................,.... i Accumulated deferred income taxes . 2,976 ;
) Other.. , . - . . . . . . . . . .............................................
3,236 1
174,197 164,051 8
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32,345 -
Equipment purchase obligations (Note F) .. . . ......... ........ ..........
j $1,887,959 $1,758,574 l
The accompanying notes are an integral part of the financial statements.
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GULF STATES UTILITIES COMPANY j.,
STATEMENTS OF CAPITAllZATION g
June 30, k
. 1978 December 31, (Unaudited) 1977 ',
- (In Thousands)
CoswoN SHAREHOLDER $' EQUITY (Nee B)
Com. mon stock
- j Authorized 100,000,000 shares without par value j Outstanding 32,956,997 and 32,795,552 shares, respectively... .... S 280,380 S 278,229
.)
i Premium and expense on capital stock.. ... .. . .... .. 705 754 Retained earnings.... ..... .. . . . 209,633 209,360 490,718 488.343
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PREFERRED STocx ( Note B)
A
$100 par value Authorized 6,000,000 shares j
Outstanding 1,675,000 shares . . . . . . . . . 167,500. 167,500
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Authorized and unissued 10,000,000 shares without par value... - -
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167,500 167,500 i LONG-TERM Dear ( Note C) -
3 First mor: gage bonds (authorized $1,000,000,000) ~
hiaturing 1979 through 1982 ^
2M% due December 1,1979.. . .. . . . 10,000 10,000 2%% due June 1,1980. {.
. . . . . . . . . . . . . . . . 13,000 13,000 j
- 3%% due November 1,1981. ... . . . . . . . . . . . . . . . . 10,000 10,000 i 3%% due December 1,1982.. . . . . . . . . . . . .. .. 10,000 10,000
' l Af aturing 1983 through 1992-3%% to 5%%. .. . 122,000 122,000 hiaturing 1993 through 2002-5% to 8%%. . . . . . 265,000 265,000 ;
Af aturing 2003 through 2007-8%% to 10.15% .. 270,000 270,000 ,
Pollution control and industrial development bonds-due 2006 and 2007-5.9% to 7% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. .. !
48,000 48,000 i De bentu res-d ue 19 81 -4 %% .. .. . ... . .... ... ...... . .. . . . . . . . .. .... 8,625 8,625 I Convertible debentures-due 1992-7%%,. . . . 49,998 50,000 ,
806,623 806,625 Unamortized premium and discount on debt-net. . . ... ...
+
3 (966) (969) 3, 805,657 805,656 8 i
l S1,463.875 1
S 461.499 ?
t!, The accompanying notes are an integral part of the financial statements. ~
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' tr,?f GULF STATES UTILITIES COMPANY h.
STATEMENTS OF RETAINEn EARNINGS +
Twelve l Months Ended
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June 30, Years Ended December 31. [
l ms 1976 1975 1974 1973 y (Unaudhed) 1977 , .
g (in Thousands) j B ALANcE, beginning of period... ... .... .. $194,355 $191,816 S178,588 . $166,758 $154,133 S139,211 AcorrioNS 65,949 65,650 56,411 49.693 47,968 49,754
- j Ne t inco me ... ...... .. . ...................... 3. !
l 260,304 257,466 234.999 216.451 202,101 188.965 DsouctioNs
' ',! Cash dividends
., Preferred stock (at annual 1 j ratesindicated below) 528 528 528 528 528 528 f
$4.40 dividend.... ... .. . n
- i 225 225 225 225 225 225 ,f
'i $4.50 dividend.. . . ... ... .
$4.40 dividend-1949 '{
264 264 264 264 264 264 ,
Se ri es... . ........... .. .. ...
294 294 294 294 294 294, l 54.20 dividend........... .. .
222 222 222 222 222 222
$4.44 dividend.... ..... . ....
2 375 375 375 375 375 375
$5.00 dividend.:
508 508 508 508 508 508
$5.08 dividend..... . . .
452 452 452 452 452 452
$4.52 dividend.... ... ... ..,
i 1,216 1,216 1,216 1,216 1,216 1,216
$6.08 dividend...... . ... ....
2,646 2,646 2,646 2,646 2,646 !'
$7.56 dividend.. .... .. .. ... 2,646 I
$8.52 dividend.... ..... .. ... 4,260 3,846 - - -
36,453 31,133 28,613 28.102 I Com mon stock .................. .... 39,681 , 37,530 50,671 48,106 43,183 37,863 35,343 34,832
'i- B A1.ANCE, end or period (Note B) . .. ... 5209,633 $209,3p S191,816 S178,588 S166,758 $154,133 The accompanying notes are an integral part of the financial statements.
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t GULF STATES UTILITIES COMPANY l
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SOURCES OF FUNDS INVESTED IN UTILITY AND OTIIER P! ANT [$
. Twelve Months Ended *y Ju ne 30, For the Years Ended December 31, ,
1978 (Unaudited) 1977 1976 1975 1974 1973 (.
(In Thousands) N Paovioso raow OnnarroNs Net income $ 65,949 $ 65,650 $ $6.411 5 49,693 $ 47,968 $ 49,754 Less-Preferred dividends .. .. .. - 10.990 10,576 6,730 6.730 6,730 6,730 a Common dividends 39,681 37,530 36,453 31,133 28,613 28,102 Earnings reinvested.. . 15,278 17,544 13,228 11,830 12,625 14,922 Principal income items not requiring current funds Depreciation - 61,896 59,882 53,717 50,060 44,685 35,784 Deferred income taxes-net 13,926 13,424 8,793 8,987 8,62il 6,700 Investment tax credits-net 17.447 18.328 9,775 7,204 2,520 572 Equity component of allowance for funds used during construction - (16.127) (15,072) (13,110)- (8.161) (5,798) (5,749) y Net gain on sales of nuclear fuel and other property:- (l.000) (6.052) - - - -
P Total provided from operations 91,420 88,054 72.403 69,920 62,660 52,229 6
Paovioso taow FIN ANCINo '
Sales of secunties .
Common stock 4,855 3,385 56,124 31,140 - -
Preferred stock . . - 50,000 - - - -
First mortgage bonds (principal amount) - 60,000 60,000 40,000 60,000 50,000 I Convertible debentures ( principal a mount ) . 50,000 50,000 - - - -
Pollution control and ladustrial devel.
opment bonds Proceeds on issuance - 23,000 23,000 25,000 - 20,000 - ;"
Change in escrow deposic 4,722 8,854 5,599 I (278) (19,021) -
Net change in short. term borrowings.... 38,113 (82,246) 13,683 19,972 36,409 (30,796)
Reduction oflong term debt - (32,377) (20,375) (27,375) (375) (375) (375)
Total provided from anancing - 88.313 92.618 127,154 96,336 97,013 18,829 OTHsa Souncts )<
Provided from sales of nuclear fuel and other property - . 13,008 34,259 - - - -
Equipment purchase obligations. 32,345 - - - - -
Other- net -
14.556 (4,988) (2,000) (1,493) 2,263 30,427 Total provided from other sources , .. 59,909 29,271 (2.000) (l493) 2.263 30,427 Exnso:Tuats rom UTittiv AND OTHEa PLANT... 239,642 209,943 197,557 164,763 161,936 10l,485 Equity con ponent of allowance for funds used I during construction.-- . 16.127 15.072 13,110 8,161 5.798 5.749
)
INVtsito IN UrlLITY AHo OTHfa Pt. ANT $255,769 $225,015 $_210,667
- - 51 _72._92_4$_167,734- _ . $_107,2,3,,4 2 ! 1 f
The accompanying notes are an integral part of the financial statements. ? eI lQ
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GULF STATES UTILITIES COMPANY NOTES TO FINANCI AL STATEMENTS (Information relating to dates after December 31,1977, is unaudited.)
i i
A. StJMMARY OF SIGNIFICANT ACCOUNTING Potic!ES i
System of Accounts and Reclassifcation The accounting records of the Company are maintained in accordance with the Uniform System of ';
- Accounts as prescribed by the Federal Energy Regulatory Commission ("FERC") and adopt- Ty the Louisiana Public Service Commission and the Public Utility Commission of Texas.
[
Certain amounts included in the financial statements for the five years ended December 31,1977 have f been reclassified to conform with the 1978 presentation with no effect on net income. )
- I Utility and Other Plant h c
Utility and other plant is stated at original cost when first dedicated to public service. Costs of repairs 0 and minor replacements are charged to expense as incurred. The original cost of depreciable utility plant redred and cost of removal,less salvage, are charged to accumulated provision for depreciation.
The provision for depreciation is computed using the straight line method at rates which will amortize the unrecovered cost of depreciable plant over the estimated remaining service life. The average ,
depreciation rates for the twelve months ended June 30,1978, were equivalent to: electric 3.92%, steam 3.00% and gas 3.58%.
, income Taxes !
The Company follows a policy of comprehensive interperiod income tax allocation where such . _
treatment is permitted for rate-making purposes by regulatory bodies. Deferred Federal income taxes, which result from timing differences in the recognition of revenue and expense for tax and financial !
statement purposes, are charged to income and concurrently credited to accumulated deferred income '
I taxes.
The Company defers investment tax credits and amortizes the accumulated balance ovgr the useful i lives of the property which gave rise to such credits. Effective January 1,1976, the Company claimed an h i additional 1% investment tax credit under provisions of the Tax Reduction Act of 1975 for the Tax Reduction Act Stock Ownership Plan ("TRASOP").
Subsidiary Company l
The Company has made investments in and advances to Varibus Corporation and accounts for its >
investments on the equity basis.
Employee Benefts The Company has a contributory pension plan covering all employees who meet certain age and service requirements, the accrued cost of which is being funded. Past service costs are being funded by the Company over a thirty year period.
The Company has a TRASOP under which contribudons may be made by the Company to the !
Trustee either in cash or the Company's common stock in amounts equal to an additional 1% of the l Company's qualified investments as defined in the Internal Revenue Code. The TRASOP was amended, j effective January 1,1977, to permit the Company to claim up to an additional % of 1% ofits qualified investments as defined by the Internal Revenue Code to the extent the Company's contribution is matched j by the TRASOP participants' contributions. The contributions have no significant effect on net income.
t 37 i
_ _ _ _ _ _ _ . _ . _ _ _ _ _ _ _ _ _ . _ _ _ _ . _ _ _ _ _ _ _ _ _ _ _ _ _ . _ _ _ . . . _ . _ _ _ _ _ _ . _ . _ _ . _ _ . _ _ . _ _ .J
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GULF STATES UTILITIES COMPANY T
NOTES TO FINANCIAL STATEMENTS-(Continued)
(Inbrmation relating to dales after December 31,1977,is unsudited.)
B. CAprTAL stock AND RETAINED EARNINGS l The common stock issued through the Employees Thrift Plan (" Thrift"), Automatic Dividend i
Reinvestment and Stock Purchase Plan (" DRIP"), TRASOP and on conversion of the convertible '
debentures for the six months ended June 30,1978, and the year ended December 31,1977,is detailed below: ,
1978 1977 h
Number of Amount Number of Amount Shares (In Thousands) Shares (In Thousands) .
Th rift.. ...... .... 72,874 $ 981 61,729 D RI P .. . .... . ... ..
83,539 3 854 1,103 117,222 1,594 TRAS O P. . ....... ........ . . . ..... . 4,898 65 69,273 937 '
Conversion of Debentures.. ... 134 2 - -
i 161,445 $2,151 248,224 $3,385 The Company sold 4,000,000 and 3,000,000 shares of common stock through public offerings in February,1976, and May,1975, respectively.
As of Jane 30,1978, the Company had reserved 1,490,465 shares of common stock to be issued in connection with the Thrin Plan, the DRIP and the TRASOP.
The redemption and liquidation prices of all preferred stock issues, in the aggregate, were
$ 178.436,510 at June 30,1978. .
Certain limitations on the payment of cash dividends on common stock are contained in the .
Company's Restated Articles of Incorporation and indentures, the most restrictive presently being that >
contained in the Trust Indenture, dated as of September 1,1977, which limits the amounts which may be 4 paid after December 31,1976, to the sum of $100,000,000 plus (or minus in the case of a deficit) the aggregate amount of net income available for dividends, as defined, accumulated aRer December 31, 4 1976. Retained earnings available for payment of dividends on common stock as of June 30,1978 and -
December 31,1977, amounted to St i1,927,000 and Si11,739,000, respectively. .
At June 30, 1978, 6,000,000 shares of preferred stock, S100 par value, cumulative, were authorized with 1,675,000 shares outstanding as follows: '4' 120,000 shares $4.40 dividend, entitled upon redemption to $108 per !
s h a re ..... ........... ---....................
-_.......................... S 12,000,000 <
50,000 shares $4.50 dividend, entitled upon redemption to $105 per i
share......................................................................._. . 5,000,000 60,000 shares S4.40 dividend,1949 series, entitled upon redemption to S 10 3 pc r s h are ... .......... ...... ... .. .... - - - - . _ .
. . . . . . . . .. .._._.___-._.. 6,000,000 . -
70,000 shares S4.20 dividend, entitled upon redemption to $102.818 per sha re ..... !
- . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7,000,000 50,000 shares $4.44 dividend, entitled upon redemption to $103.75 per 75 Eras"55.UU"5EIeI
.........................I,' e'n5Eed upon rede$p' tion to $ 104.3IpN share ........ ..................~
7,500,000 100,000 shares $5.08 dividend, entitled upon redemption to $104.63 per ,
share...................................... . _ . __
__............... 10,000,000 3
j 100,000 shares $4.52 dividend, entitled upon redemption to $103.57 per s h a re . . .. .. . .. . . . . .. . . .. . . . . _ _ _ ____ . . . . . . .__
................... 10,000,000 3 200.000 shares $6.08 dividend, entitled upon redemption to $103.34 per s h a re ....... j
.- _ _ _ . . . . . . 20,000,000 <
350,000 shares S7.56 dividend, entitled upon redemption to S106.80 per share prior to September 1,1982, then until September 1 1987 to i
.' $ 103.80 per share, and thereafter to $101.80 per share...........,.........., ;
. . . . 35,000,000 :
500,000 shares $8.52 dividend, entitled upon redemption to $109.95 per share prior to January 1,1982, then until January 1,1987, to $106.43 i t 6 per share, then until January 1,1992, to $104.43 per share, and i theteafter to S102.43 per share .. . . ... . . . . . . . . 50,000.000 l
S167,500,000 j j
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h4 GULF STATES UTILITIES COMPANY NOTES TO FINANCIAL STATEMENTS-(Continued) ;,
(inrormenon relatins to dates arter Duember 31,1977, is uns.udited.) p{
C. LoNo TERM DEDT The Company's mortgage contains sinking fund provisions which require, generally, that the b Company make annual cash deposits equal to 1.2% of the greatest aggregate principal amount of first h
mortgage bonds subsequently authenticated and delivered; or,in lieu thereof, to apply property addidons ig or reacquired first mortgage bonds for that purpose. The Company has satisfied the mortgage ; g requirements in past years by certifying to the trustee "available net additions", w The Trust Indenture for the 4%% debentures requires annual redemption for sinking fund purposes of
$375,000 principal amount through 1980.
The Convertible Debentures may be converted into the Company's common stock at a price of $14.85 per share. The closing price of the Company's common stock at June 30,1978, was $12%.
Aggregate sinking fund requirements of bonds and debentures outstanding, for the remaining six months of 1978 and each of the five years subsequent to December 31,1978 are as 611ows:
1978... . . . . . . . . . . . . . . $2,616,000 1979.. ...... ... . .. 8,775,000 1980.. .... .. .. . . . . . . ... . . 8,655,000 ,
1981.. ... 8,124.000 1982= . . . . . 8,004,000 q;.,
1983. .. 7,884,000 g The payment of the principal and interest on 323,000,000 of 5.9% Pollution Control Revenue g Refunding Bonds due 2007 issued in septei.Wer,1977, by the Parish of Calcasieu, Louisiana, was y unconditionally guaranteed by the Company, with 'uthorization from the FERC. Under the terms of the D Trust Indenture, the net proceeds of $22,470,000 from be issuance thereof were deposited with the Trustee 3 to be utilized for the payment of interest on the $20,0tA000 Pollution Control Revenue Bonds (Gulf States Utilities Company Project) Series 1974 and the retirement of these bonds on December 1,1984. j]
The Trust Indentures of the pollution control and industrial development bonds provide that the 4 proceeds from the issuance thereof be deposited with the Trustee who disburses amounts to the Company %
as the various pollution control projects are constructed.
D. EMPLOYEs pension PLAN At December 31, 1977, unfunded past service cost under the Company's pension plan was <
approximately $14,300,000 and the actuarially computed value of vested benefits exceeded plan assets by g approximately S$,400,000.
g The annual contributions made by the Company for the twelve months ended June 30,1978 and for u the years 1973 through 1977 were allocated as follows:
Twelve f
Men &s Ended Years Ended December 31, Jose 30, %
197s 1977 1976 1975 1974 1973 L}
(la muunds) k Charged to income ...... ... . ..... $2,164 $2,040 S1,450 S t,633 $1,286 S1,147 h
Charged to construction and N other accounts.. . . . . . . . . . . . 922 870 770 555 547 487 %
To tal .. . .... . .. . . . ... $3,086 $2,910 S2,220 S2,188 S1,833 S1,634
- }
fg E. SuonT TEnM BonnowtNos At June 30,1978, the Company had agreements with numerous banks providing for borrowings of up to $117,825,000 at the prime commercial lending rate in effect from time to time without payment of a commitment fee. These agreements will terminate at various dates. The Company maintains non- ,
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a kl GULF STATES UTILITIES COMPANY .
NOTES TO FINANCIAL STATEMENTS-(Continued) /*
(Information relatins to dates af ter. December 31,1977, is unaudited.) !
- segregated working cash balances which generally average, over the life of the agreements, approximately
, 10% of the commitment.
In addition, the Company had agreements with several banks providing for borrowings of up to
$26,000,000 at i15% of the prime commerciallending rate in effect from time to time with payment of an annual fee of 5% of the prirne lending rate on the commitment.
The weighted av: rage interest rate of the aggregate short term borrowings was 7.67% and 6.29% at j
June 30,1978, and December 31,1977, respectively. The maximum aggregate short-term borrowings i ,
outstanding at any one time (notes payable to banks and to holders of commercial paper) were 5102,707,000 and $114,595,000 for the twelve months ended June 30, 1978 and for the year ended December 31,1977, respectively. For the twelve months ended June 30,1978, the average monthly short-
' term borrowings approximated S55,435,000 and the average interest rate was approximately 6.44%. The ;
average monthly short-term borrowings during 1977 approximated $40,895,000 and the average interest .
j rate was approximately 6.24%. Average monthly short term borrowings represent the sum of the ending monthly borrowings outstanding dividend by 12 and the average interest rate is determined by dividing accrued interest during the year by this average.
The average interest rates at June 30,1978, and December 31,1977, on $18,586,000 and S15,252,000 g of demand master notes outstanding were approximately 7.3% and 6.5%, respectively.
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F. CowurTMENTs AND CONTINGENCIES !
i Various state and Federallaws require governmental permits prior to construction and operation of i g certain facilities. Substantial expenditures and commitments are made prior to obtaining such permits.
Unless and until events occur making such permits unobtainable, no provision is made in the financial statements for possible losses which could occur if such permits should not be obtained.
The Company's fuel supply arrangements include commitments to purcliase fuel oil from the Spindletop Trust which purchases fuel oil for resale to the Company. Purchases of the Trust are assumed L to have been made on behalf of the Company. Accordingly, the balance sheet at June 30,1978 and i.
December 31, 1977, included $26,824,000 and $14,174,000, respectively, recorded in " Current As-y sets-Fuel Stock, at average cost" and " Current Liabilities-Accounts Payable-Trade", reflecting the Company's commitments to purchase the Trust's fuel oilinventory.
On January 25,1978, the Company entered into an agreement with General Electric Corporation and h the Gideon Trust whereby the Company assigned to the Trust its right to purchase from General Electric a a
turbine generator to be used in the Company's River Bend Station. The Trust made the required payment '
l for 1978 of approximately $32,600,000 to General Electric. The Company has agreed to purchase the ,
turbin~e generator from the Trust on or before January 2,1981. >
On June 15,1978, the Company entered into an agreement with Westinghouse Corporation and the '
q Tur-Gen Trust whereby the Company assigned to the Trust its right to purchase from Westinghouse a -
turbine generator to be used in the Company's Nelson Station coal unit. The Trust will make the required
][
q payment for 1978 of approximately $17,000,000 to Westinghouse commencing in September,1978. The Company has agreed to purchase the turbine generator from the Trust on or before June 30,1982.
[ The 1978 construction program is estimated to be $310,000,000 and, in that connection, the Company -
has incurred substantial commitments.
See "1.itigation" for discussion of assertions by the Federal Energy Administration that Varibus must '
i reibnd overcharges with respect to certain sales of fuel oil. I 4
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i GULF STATES UTILITIES COMPANY NOTES TO FINANCIAL STATEMENTS-(Continued)
. .m (Ireformation relating to dates after December 31,1977, it unaudited.) .;}
O Varibus is a defendant in a lawsuit filed February 17,1976, involving an alleged breach of contract whereby the plaintiff is seeking damages of $13,000,000. In the opinion of management and the preliminary opinion of counsel, the subsidiary's position can be successfully defended.
l' The Company, at the time ofissuance ofits First Mortgage Bonds,8%% Series due 2007, obtained the consent of the holders thereof to effect two amendments to its Mortgage so that fmancing will not be restricted in the early 1980's as present estimates indicate. One amendment would change the aggregate limit on bonds outstandin'g from $1,000,000,000 to $100,000,000,000, and the other would modify the definition of" minimum provision for depreciation"in the Mortgage. It is anticipated that efforts to obtain consents to these two amendments from holders of other series of bonds will be initiated before the end of 1978.
G. CURRENT REPt.ACEMENT COST INFORMATION-(Unaudited) l The following replacement cost information for certain of the Company's assets and related depreciation is presented to comply with the reporting requirements of the Securities and Exchange Commission as set forth in their Accounting Series Release No.190.
The Company advises readers of the imprecise nature of these data and of the subjective judgments required in the replacement cost estimation.
This information does not represent the current value or reproduction costs of the assets or the '
amounts which could be realized if the assets were sold. Rather, replacement cost generally represents the estimated amount that would be required to replace, at today's prices, the productive capacity of certain existing assets with assets of a modern type including additional pollution control equipment presently required under environmental regulations.
As these data are limited to selected categories of assets and related depreciation and does not relate 4 to other asset, liability and equity accounts, or to other expense and revenue accounts, there are significant
- limitations in using this information to evaluate the effect ofinflation on the Company. They should not be ,I used to adjust and compare this Company's balance sheet or income statement with any other company's financial statements.
i Subject to these limitations and the imprecise and subjective nature of the data, these data and related disclosures are provided in good faith in compliance with the Commission's rules and regulations.
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GULF STATES UTILITIES COMPANY -
- y. 1 NOTES TO FINANCIAL STATEMENTS-(Continued)
(Information relating to dates after December 31.1977,is unaamfited.)
- The computed replacement costs of the Company's productive capacity, depreciated replacement cost i and related depreciation expense with comparative historical costs are presented below:
Computed Actual Replacement llistorical Cost Cost (Inhousands) l At December 31,1977: '
Total Utility Plant in Service........... . .. .......... $2,982,445 S I,631,263 Property Held for Future Use . .... 3,212 3,212
' Total Plant in Service... . . . . . . . . . . 2,985,657 1,634,475 Less: Accumulated Provision for Deprecia- ;
tion.. . . . . . . . . . . . . . . . . 1,031,147 488,814 Total Plant in Service less Accumulated Pro-vision for Depreciation - . . . . - . . 1,954,510 1,145,661 '
Construction Work in Progress . . .. 441,206 441,206 Nuclear Fuel . . . . . . . . . . . . . . . . 28,856 28,856 il i Total Utility and Other Plant $2,424,572 $ 1,615,723 l For the Year Ended December 31,1977:
Depreciation Expense.. - . . .
$ 105,091 S 59,882 Land and land rights, property held for future use, construction work in progress, and nuclear fuel are ;
included in the above data at original cost.
The Company's productive capacity was interpreted to relate to Total Plant in Service as of December ,
31,1977. '
It was assumed that plant would be replaced substantially in kind and in place with allowances for technological changes and environmental requirements. Broad classes and sub-classes of plant were ,
utilized to facilitate the use of available unit cost figures. Replacement cost figures were developed by applying to the various categories of plant a combination of unit costs based on engineering cost estimates and the standard Handy Whitman indices.
The replacement cost of generating facilities is based on the current unit costs of various types of )
capacity which would be installed if replacement of all existing capacity were to be required at year end
- 1 including provision for all pollution control equipment required by current regulations.
e J The Handy Whitman Index of Public Utility Construction Costs was applied to the original cost of surviving transmission plant, distribution plant, general plant, and gas plant properties. The reason.
i ableness of the conclusions was tested by current engineering judgment of unit cost. Replacement costs of i steam products facilities were based on current unit costs of an equivalent facility with the same steam and power output.
The related accumulated depreciation based on the replacement cost was developed by applying the t same percentage relationship that existed between gross plant and accumulated depreciation by functional l groups on an historical cost basis to the replacement cost.
1 Depreciation expense for the replacement cost was developed by applying the actual fur.ctional class depredation rates in use to the respective functional class average replacement cost figures.
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i GULF STATES UTILITIES COMPANY i i i NOTES TO FINANCIAL STATEMENTS-(Concluded) "
b (Informalion relating to dates after December 31,1977, is unaudited.) ,
I II, . SUPPLEMENTARY STATEMENTS OF INCOME INFORMATION -
i The amounts of maintenance, repairs and depreciation, other than those shown in the statements of ,
income, and the amounts of royalties, advertising costs, and research and development costs have been ;
omitted as each is less than one percent of total revenue and sales. Taxes, other than Federal and State income taxes, are set forth by classes as follows (in thousands): ;
Twive Months ['
Ended Years Ended Decernber 31. l l June 30, f 1978 1977 1976 1975 1978 1973 >
Real estate and property.. .... . $12,866 $12,365 SI 1,606 $10,746 S 9,108 $ 8,696 Gross receipts . ... ......... 4,560 4,239 3,517 2,978 3,469* 5,538 [-
Pa y roll .. .... .. .. ...... .. . . . . . . . 2,127 1,90$ 1,647 1,218 1,440 1,282 !
Street rental . ... ... . .... . 1,464 1,307 1,155 1,104 975 837 Other.. . . .. 4,144 3,817 3,354 2,933
{
. . . . . . . . . 2,626 1,875 ,
Total . S25,161 $23,633 $21,279 S18,984 $ 17,618 $18.228
[
Taxes, other than income, #
were also charged to van.
ous other accounts (stores
(
and transportation, expenses , j cleanng, construction, etc.) +
in the amounts of.. . S 1,696 S 1,078 $ 916 S 969 S 867 $ 1,620 l
- l Rents charged to income".. .. S 2,424 5 2,211 S 2,078 S 2,110 $ 1,995 S 1,764 t l
l
- The Louisiana electric generation tax was repealed effective January 1,1974. 'l
" The Company's lease agreements at June 30, 1978, and December 31, 1977, generally do not h d
contain options to extend the lease terms or to purchase the lease properties. The present value, as of June 30,1978, and December 31,1977, of minimum lease commitr-ents is less than five percent oflong-j term debt and shareholders' equity. The effect on net income if all financing leases were to be capitalized i
is less than three percent of the average net income for the most recent three years and therefore is not '
significant.
I. SUBSEQUENT EVENTS q At the August,1978 Board of Directors' meeting, the Company cancelled construction of its two planned nuclear units at the Blue Hills site in East Texas. These units had been planned for completion in the late 1980's and early 1990's. The cancellation costs of these units amount to approximately $25 million and consist of project costs incurred through June 30,1978 not assignable to the site and additional costs to be incurred to cancel equipment contracts. The Company plans to seek proper rate treatment from the Public Utility Commission of Texas, the Louisiana Public Service Commission, and the FERC. There can be no assurance that the regulatory commissions having jurisdiction will authorize the costs of cancelling such units as cost-of-service items to be amortized over a reasonable period of time. The Company would expect decisions from the Commissions on the rate treatnient for such costs in late 1978 or 1979. The Company presently proposes to commence amortizing these cancellation costs over a five-year period beginning in January,1979, although rate orders may rat have been received by that time.
In the event one or more of the Commissions refuses the Company's request to recover such costs i through the Company's rates for service, the applicable portion of such costs will be charged against income at that time, which charge would have a significant effect on the results of operations of the f Company. See " Proposed Generating Facilities-Nuclear Units" for a further discussion thereof.
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UNDERWRITING ,
The Underwriters named below have severally agreed to purchase from the Company the following numbers of shares of the Additional Common Stock: ;
! Number Underwriter of .
Shares i-
' Merrill Lynch, Pierce, Fenner & Smith Incor ;
Kidder, PeabodyCo. &porated ........... ....... .. .. -
, Incor l
- Dean Witter Reynolds !nc.. ....porated .. .. . .. .. . ... . . . . . . . . . . . .. . . . ! <
. . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . j.
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e
$1 I :
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. . . . _ _ . . . ._. . _ . . . . . .....u.._.___ __ ___.~_.a.- ,
. . e .. . u __.a.4 w _____ _ _ - c l
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Niunber '
Underwriter of '
1 l Sliares .
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Total., . . .. ,, , , . . ,
. . . , {o00,000 i '
The Purchase Agreement provides that the obligations of the Underwriters are subject to certain conditions precedent and that the Underwriters will be obligated to purchase all of the shares of the Additional Common Stock if any are purchased. However, under certain circumstances involving defaults by Undetwriters,less than all of the Additional Common Stock may be purchased. 'i The Company has been advised by Merrill Lynch, ?ierce, Fenner & Smith Incorporated, Kidder, f.abody & Co. Incorporated and Dean Witter Reynolds Inc., as Representatives of the Underwriters, that the Underwriters propose to offer the shares of the Additional Common Stock to the public initially at the offering price set forth on the cover page of this Prospectus and to certain dealers at such price less a concession of e per shate; that the Underwriters and such dealers may allow a discount not in excess of a per share on sales to other dealers; and that the public offering price and concessions and discounts to dealers may be changed by the Representatives, !
The Purchase Agreement further provides that the Company willindemnify the several Underwriters t against certain civil liabilities, including liabilities under the Securities Act of 1933.
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TABLE OF CONTENTS 1
Page 5,000,000 Shares <
'1 Available Information-. . . . . 2 e
The issue in Brief 3 Gulf States Utilities Company i.
The Company... . 4
, Application of Proceeds - . 4 l
Construction and Financing. Program.. 4 Common Stock h.
) i Common Stock Dividends and Price 1 i e i Range. 6 4
Capitalization.. (Without Par Value) f ,
.. .. . . . . 7 , ,1 Statements ofIncome. . . . . 8 1 g i Management's Discussion and Analysis of the Statements ofIncome. 12 j l Operating Statistics and Certain Details of (
Revenues.. . . . . . 14 PROSPECTUS {; 4
< i Business... .. .. . 15
,.t l
Present Generating Facilities. . 15 i.
Proposed Generating Facilities..
j.
16 Fuel Supply.. .
19 } '
Regulation and Rates.. . . . . . .... .. 24 ) ,
- t Employees.. . . . . . . . 26 Litigation.. . .. .. . 26
.g Environmental Matters.. ... . 26 g !
. Description of Common Stock. . . . . . 27 i
I Legal Opinions.. . . . . . . . . . . . . . . . . . . . . 28 y ,
Experts . . .. . 29 h
!l
,\
Management...... .. ..... 30 Report of Independent Public Account. ['
""' " ' " 31
, .a n ts '. Dated October 1978 S Financial Statements. . . . . . 32 ,
Underwriting . . .... .. .. 44 a.
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PART II. INFORMATION NOT REQUIRED IN PROSPECTUS.
Item 13. Other Expenses ofIssuance and Distribution.
Securities and Exchange Commission registration fee. . . . . . . . . . . . S 13,000 Federal Energy Regulatory Commission filing fee . . . . . . . . . . . . 500 Qualification under Blue Sky laws... .. .. . . . . . . . . . . . . . . . . . . . . . . . , 1,700*
Printing and engraving expenses......... . . . . . . . . . . . . . . . . . . . . 34,000*
Transfer Agent's and Registrar's charges.... .. .. . . . . . 15,000*
CounseI fees .. . ........ ... . . . . . . . . . - - ............ I4,000*
Accountant's fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,500*
Co s t o f lis tin g ...... ........ ... . ........ .. .......... . . I3,000*
Miscellaneous expenses ofissue:
Telephone, telegraph, traveling and incidental expenses... ..... ..... 7,300*
Total......................................................... $113,000
- Esdmated.
Item 14. Relationship with Registrant of Expens Named in Registration Statement.
None.
Item 15. Indemnification of Directors and Opicers.
Article IX of the Articles of Incorporation of the Company, as amended effective May 13, 1976, provides that the Company will indemnify, on certain conditions, each present and future director and omcer of the Company (i) against expenses, judgments, fines and amounts paid in settlement of civil, criminal, administrative or investigative suits or proceedings (other than actions by or in the right of the Company) if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Company, and with respect to criminal proceedings,if he had no reasonable cause to believe his conduct was unlawful, and (ii) against expenses in defending or settling actions by or in the right of the Company if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Company and is not adjudged liable for negligence or misconduct.
Said Article is included in the Articles of Incorporation of the Company filed as an exhibit to the Registration Statement and is incorporated herein by reference.
The Company has procured Directors and Officers liability insurance with a limit of $15,000,000 with a $5,000 retention for each Director or each Omcer, subject to an aggregate maximum of $20,000 for any one loss; as respects corporate reimbursement, a $20,000 retention per loss is applicable. There is a 5%
participadon by the insured on the first $1,000,000 of any one loss after application of the S20,000 retention. The insurer will pay on behalf of the insured 100% of that portion of any loss in excess of S 1,000,000 up to the policy limit of $15,000,000. This is a professional liability policy for the Directors and Officers and an indemnity policy for the corporation to protect it for liability assumed or incurred in behalf of the Directors and Omcers including defense provisions. The Directors and Officers are insured against loss arising from any civil claim or claims by reason of breach of duty, neglect, error, misstatement, misleading statement, omission, or act done or wrongfully attempted or alleged to have been done while acting in their respective capacities as Directors or Officers. It does not insure against libel or stander or lawsuits arising out ofillegal acts. It also insures the corporation against loss incurred by it pursuant to the indemnity provision of the Articles of Incorporation of the Company for indemnifying the Directors or Officers for damages, cost or expenses incurred by them.
Item 16. Treatment of Proceedsfrom Stock to be Registered.
The consideration received for the Common Stock is to be credited to the Company's Capital Stock account entitled " Common Stock, without par value."
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Item 17. Other Documents filed as a part of the Registration Statement. {
(a) Statement of eligibility and qualification of each person designated to act as trustee under an indenture to be quallfled under the Trust Indenture Act.of 1939.
Not applicable.
(b) Exhibits:
. The Exhibits designated by an asterisk are filed herewith. Certain other of the following exhibits have heretofore been filed with the SEC under the Securities Act of 1933 or the Securities Exchange Act of 1934 and are incorporated herein by reference as indicated. The Exhibits designated with a dagger have ;
heretofore been classified as basic documents under Rate 24(b) of the SEC Rules of Practice. I r.shinae l
- l A -Form of Agreement Among Underwriters ,l
- l B -Form of Purchase Agreement :
- l-C -Form ofSelected Dealers Agreement !
2Al -Form of Certificate for Common Stock. (Exhibit 2-A to Registration No. 2 57930.) !
[2A2 -Indenture of Mortgage dated September 1,1926. (Exhibit B a I-l to Registration l
. No. 2 2449.)
2A3 -SupplementalIndentures to Mortgage:
Nussber Desed as of File Reference Exhibit tFirst May 1,1929 2 2449 Bat 2 tSecond June 1,1931 2 2449 B a-I 3 4 third October 1,1936 2 3666 B-a t 4 '
tFourth September 1,1938 2 4076 B-a I 5 tFiAh May 1,1939 Form 8-A July 7,1939 B a-I 7 tSixth August 1,1944 2 5457 7-A-8 tSeventh May 1,1946 2-6893 7A9 tEighth April 1,1948 2 7770 7 A-10 '
tNinth December 1,1949 Form 8-A December 19,1949 lk tTenth June 1,1950 2 8452 7-A 12 tEleventh November 1,1951 Form 8 K December 6,1951 B ;
tTwelfth December 1,1952 Form 8 A December 15,1952 1-n ,
tThirteenth December 1,1953 Form 8 A December 14,1953 1-o o tFourteenth September 1,1956 Form 8 K October 1,1956 C ,
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tFineenth October 1,1957 Form 8 K November 1,1957 C l tSixteenth May 1,1958 Form 8 K June 2,1958 D tSeventeenth January 1,1959 Form 8 K February 2,1959 D tEighteenth August 12,1959 Form 8-K September I,1959 B tNineteenth December 1,1959 Form 8 K January 4,1960 B tTwentieth July 1,1960 Form 8.K August 1,1960 B --
tTwenty first May 1,1962 Form 8 K June 1,1962 B l
l tTwenty second January 1,1966 Form 8 K February 1,1966 B l tTwenty third February 1,1967 Form 8 K March 1,1967 B l tTwenty fourth February 1,1968 Form 8-K March 1,1968 C tTwenty flAh October 1,1968 Form 8 K November 1,1968 tTwenty-sixth March 1,1969 Form 8 K April 1,1969 B
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tTwenty-seventh September 1,1969 Form 8-K October 1,1969 B )
tTwenty-eighth February 1,1970 Form 8 K March 2,1970 C j' '
tTwenty ninth tThirtieth December 1,1970 November 1,1971 Form 8.K January 4,1971 Form 8 K December 1,1971 B
C fl tThirty first August 1,1973 Form 8 K September 4,1973 B
{j l thirty-second March 1,1974 Form 8 K April 5,1974 B tThirty third May 1,1975 Form 8.K June 2,1975 l
C thiny fourtt. February 1,1976 Form 8 K March 1,1976 C thirty fifth January 1,1977 Form 8-K February 7,1977 C
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12 A 3 -Indenture dated March 21,1939, accepting resignation of The Chase National Bank ,
l of the City of New York as Trustee and appointing Central Hanover Bank and Trust Company as Successor Trustee, (Exhibit B a-t-6 to Registration No. 2-4076.) j 2A4 -Trust Indenture, dated as of September 1,1977, between the Company and '
Chemical Bank,Tntstee. (Exhibit 2 B 4 to Registration No.2 59739.)
12 A 5 -Trust indenture, dated as of October I,1961, between the Company and The l American National Bank of Beaumont, Beaumont Texas, as Trustee, relating to an ,
issue of 4%% Debentures due 1981. (Exhibit A to Form 8 K, dated November 1, 1961,)
, 2A6 -Restated Articles of Incorporation, as amended. (Exhibit A to Form 8 K, dated June 7,1976; Exhibit D to Form 8 K, dated February 7.1977.)
- 2 A 7 -Bylaws, as amended August 10,1978.
- 31 -Opinion of Messrs. Orgaln, Bell & Tucker.
- 32 -Opinion of Messrs. Taylor, Porter, Brooks & Phillips.
4 -Reference is made to Article IX of the Restated Articles of Incorporation of the Company (Exhibit A to Form 8 K, dated June 7,1976) and to the insurance policy refbrred to in Exhibit 5-14.
5-1 -Contract effective January 1,1968, between the Company and Humble Oil &
Refining Company and Enjay Chemical Company. (Exhibit A to Form 8-K, dated January 7,1969.)
52 -Contract effective October 1,1968, between the Company and Ethyl Corporation. .
(Exhibit B to Form 8 K, dated January 7,1969.)
5-3
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-Agreement dated September 8,1967, between the Company and Allied Chemical ;
Corporation. (Exhibit C to Form 8 K, dated October 5,1967.)
j 5-4 -SCEC/TVA Diversity Exchange Interconnection ar.d Amendatory Agreements and g Allied Service Schedules. (Exhibit 1315 to Registration No. 2 21712.) ;
55 -Agreement effective February 1,1964, between Sabine River Authority, State of -
1 Louisiana, and Sabine River Authority of Texas, and Gulf States Utilities Company, !
Central Louisiana Electric Company, Inc., and Louisiana Power & Light Company, as supplemented. (Exhibit B to Form 8 K, dated May 6,1964, Exhibit A to Form 8 K, dated October 5,1967 Exhibit A to Form 8 K, dated May 5,1969, and ,
Exhibit A to Form 8 K, dated December 1,1969.)
(
56 -Agreement dated April 10,1964, between the Company and Humble Oil & Refining Company (now Exxon Company, U.S.A.), as sup,plemented. (Exhibit A to Form ,
8-K, dated May 6,1964. Exhibit 4-10 to Registration No. Pi and Ethibit B to :
Form 8 K, dated December 6,1976.)
5-7 -Agreement dated August 15,1968, between the Company and Texas Intrastate Gas ll Company, as supplemented. (Exhibit 4-11 to Registration No. 2 30101, Exhibit 5 7 a to Registration No. 2 59739, Exhibit A to Form 8 K, dated June 7, 1978, and Exhibit A to Form 8 K, dated July 5,1978.)
58 -Agreement dated August 24,1965, between the Company and United Gas Pipe Line Company, as supplemented. Exhibit A to Form 8.K. dated September 1,1965, 1 Exhibit B to Form 8 K, dated (July 1,1969, Exhibit C to Form 8-K, dated July 6, ,
', 1972, Exhibit B to Form 8 K, dated August 1,1972, and Exhibits B and D to Form
? 8.K, dated December 1,1972 and Exhibit F to Form 8 K, dated August 6,1976.)
- 59. -Agreement dated July 6,1972, between the Company and Sugar Bowl Industrial '
Gas Corporation, as supplemented. (Exhibit A to Form 8 K, dated August 1,1972,
- Exhibit A to Form 8 K, dated December 1,1972. Exhibit A to Form 8 K, dated l March 5,1973. Exhibit A to Form 8 K, dated October 5,1973, Exhibit B to Form 8- '
K, dated November 6,1973, Exhibit C to Form 8-K, dated April 5,1974, Exhibit C .
to Form 8 K, dated February 6,1975 Exhibit A to Form 8.K, dated August 6,1975,
, Exhibit A to Form 8-K, dated November 6,1975, Exhibit A to Form 8 K, dated
- February 5,1976, Exhibit E to Form 8 K, dated February 7,1977, Exhibit B to Form 8.K. dated August 5,1977, and Exhibit C to Form 8 K, dated February 6, ,
1978.) l 5 10 -Agreement with Mid Louisiana Gas Company (formerly Humble Gas Transmission l Company) dated December 6,1973. (Exhibit A to Form 8.K, dated January 7, ,
1974.) ,
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Exhibit 5 11 -Agreement dated August 3,1971, between the Company and Central Louisian'a Electric Company, Inc., Louisiana Power & Light Company, and Louisiana Electric Cooperative,Inc. (Exhibit 513 to Registration No. 2-42051.)
5 12 -Agreement dated December 12,1972, between the Company and Cajun Electric Power Cooperative, Inc. ( Exhibit A to Form 8.K, dated February 5,1973.)
5 13 -Agreement dated May 30,1973 between the Company and Exxon Company, U.S;A.
(formerly Humble Oil & Refining Company). (Exhibit 518 to Registrauon No.2 48460.)
5 14 -Insurance Policy dated June 1,1977, between the Company and American Home Assurance Company, New York, as supplemented. (Exhibit 514 to Registration No. 2 59739.)
5 15 -Agreement dated January 8,1974, between the Company and the City of Lafayette, Louisiana. (Exhibit A to Form 8 K, dated February 7,1974.)
5 16 -Agreement dated January 8,1974, between the Company and the City of Plaque-nune, Louisiana. (Exhibit B to Form 8 K. dated February 7,1974.)
5 17 -Agreements dated April 22, 1974, between Company and AEC for enrichment services. (Exhibits A, B, C, and D to Form 8.K, dated August 7,1974 and Exhibit B to Form 8.K dated July 7,1976.)
5-18 -Agreements dated December 19,1974, between Varibus Corporation (Varibus) and Saga Petroleum U.S. Inc., et al. (Exhibits A and D to Form 8-K, dated February 6, 1975.)
5 19 -Agreement dated September 14, 1967, between the Company and Monterey Pipeline Company, successor to Humble Gas Transmission Company, as supple-mented. Exhibit B to Form 8 K, dated October 5,1967, Exhibit B to Form 8-K, dated Apn(l 6,1973, Exhibit C to Form 8.K, dated September 4,1973, and to Form 8 K, dated January 7,1974.)
5 20 -Agreement ~ dated January 14, 1975 between Varibus and South Hampton Co.
1 (Exhibit B to Form 8 K, dated February 6,1975, cancelled by Varibus on January 14,1976.)
5 21 -Agreement dated February 11,1975 between Company and Kerr-McGee Nuclear Corporation. (Exhibit 5 25 to Registration No. 2 52878.)
- 5 22 -Guaranty Agreement dated as of December 1,1974, relating to Pollution Control Revenue Bonds of the Industrial Development Board of tne Parish of Calcasieu,Inc.
(Louisiana). (Exhibit 5 26 to Registration No. 2 52878.)
5 23 -Agreement dated April 4,1975, between Varibus and Energy Consultants, Inc. as supplemented. (Exhibit A to Form 8 K, dated May 6,1975, Exhibit A to Form 8 K, dated April 5,1976 and Exhibit E to Form 8 K, dated August 6,1976.)
5 24 -Agreement dated December 11, 1973, between the Company and Gulf Oil Corporation. (Amendment No I on Form 8, dated August i1,1975, to Form 8.K, dated January 7,1974 and Exhibit B to Form 8-K, dated September 7,1976.)
5 25 -Agreement dated April 30, 1976, between Varibus and Felmont Oil Corporation. ;
(Exhibit B to Form 8 K, dated May 6,1976.)
5 26 -Aareement dated May 20, 1976, between Varibus and Felmont Oil Corporation.
(Exhibit B to Form 8 K, dated June 7,1976.) ,
5 27 -Agreement dated December 22,1975, between Varibus and Consolidation Coal Co.
(Exhibit B to Form 8 K, dated January 2,1976.) j 5 28 -Agreement dated June 14,1976, between the Cornpany and Ranchers Exploration j and Development Corp. and HNG Oil Co. (Exhibit D to Form 8-K, dated July 7, 1976.)
5 29 {
' -Agreement dated July 22,1976, between the Company and Varibus. (Exhibit C to ;
Form 8.K, dated September 7,1976.)
5-30 -Agreement dated July 22,1976, between the Company and Varibus. (Exhibit D to Form 8-K, dated September 7,1976.)
g 5-31 -Agreement dated September 22,1976, between Varibus and Louisiana Intrastate i Gas Corp. (Exhibit A to Form 8 K, dated October 5,1976 and Exhibit F to .
Form 8-K, dated February 7,1977.)
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ExWW 5-32 -Agreement dated September 30, 1976, between the Company and Ranchers -
Exploration and Development Corp. and HNG Oil Co. (Exhibit B to Form 8 K, dated October 5,1976 and Exhibit A to Form 8-K, dated December 6,1976.)
5 33 -Guaranty Agreement dated July 1,1976, between the Company and the Parish of Iberville, Lotdsiana. (Exhibits C and D to Form 8 K, dated August 6,1976.)
, 5 34 -Agreement dated August 30,1976, between Varibus and Louisiana Intrastate Gas Corporation. (Exhibit A to Form 8-K, dated November 5,1976.)
5 35. -Agreement dated March 30,1976, between Varibus and Continental Oil Company.
(Exhibit A to Form 8-K, dated May 6,1976, and Exhibit A to Form 8-K, dated August 5,1977.)
5 -Agreement dated December 30, 1976, between the Company and Sam Rayburn Dam Electric Cooperative, Inc. ( Exhibit G to Form 8-K, dated January 6,1977.)
5-37 -Agreemrat dated December 30,1976, between Varibus and the American National Bank of beaumoet. (Exhibit F to Form 8 K, dated January 6,1977, and Exhibit B to Form 8 K, dated March 7,1977.)
5-38 -Agreements dated December 30, 1976, between the Company and Varibus.
(Exhibits D and E to Form 8 K, dated January 6,1977.) 1 5-39 -Agreements dated December 8,1976, between the Gmpany, Varibus, and Marine l Midland Bank. (Exhibits A, B, and C to Form 8-K, dated January 6,1977.)
5-40 -Agreement dated January 29, 1977, between the Company and Cajun Electric Power Cooperative, Inc. (Exhibit A to Form 8 K, dated March 7,1977.)
541 -Agreement dated March 10, 1977, between Varibus and Energy Consultants, Inc.
(Exhibit A to Form 8.K. dated April 7,1977.)
5 42 -Agreement dated September 16, 1977, between Varibus and Louisiana Resources Company (Exhibit A to Form 8-K, dated October 3,1977, Exhibit A to Form 8 K, dated December 6,1977, Exhibit A to Form 8-K, dated April 5,1978. Exhibit A to
' Form 8 K, dated May 5,1978, Exhibit C to Forto 8-K, dated June 7,1978, and '
Exhibit E to Form 8-K, dated July 5,1978.)
543 -Agreement dated November 15,1977, between the Company and Varibus (Exhibit B to Form 8-K, dated December 6,1977.)
5-44 * -Agreement dated October 31,1977, between the Company and Louisiana Intrastate 1 Gas Corporation (Exhibit A to Form 8.K, dated January 6,1978.) l 5-45 -Agreement dated December 9,1977, between the Company and Kerr McGee Coal 1 Corporation (Exhibit B to Form 8-K, dated January 6,1978.)
l 5-46 -Agreement dated September 29, 1977, between the Company and Ranchers I Exploration and Development Corporation, HNG Oil Company, General Atomic l Company, Gulf Oil Corporation, and Scallop Nuclear, Inc. (Exhibit A to Form 8-K, dated February 6,1978.)
5-47 -Agreement dated October 7,1977, between Varibus and International Minerals Corporation and Mitchell Energy Corporation, et al (Exhibit B to Form 8 K, dated )
February 6,1978.)
i 5-48 -Agreements dated January 25,1978, between the Company and J. Henry Schroder l
Bank and Trust Company and Chemical Bank (Exhibits A, B, and C to Form 8-K, I dated March 6,1978.) l
-5 49. -Agreements dated February 14, 1978, between Varibus and Continental Oil Company (Exhibits D and E to Form 8-K, dated March 6,1978, Exhibit D to Form 8 K, dated June 7,1978, and Exhibit A to Form 8-K, dated August 7,1978.)
l
.5 50 - -Agreements. dated June 15,'1978,' between the Company and The American l
- National Bank of Beaumont and Bank of America Nauonal Trust and Savings !
Association (Exhibits B, C, and D to Form 8-K, dated July 5,1978.)
, 5-51 -Agreement dated November 15,1973, between Varibus, Exxon Company, U. S. A.,
and Louisiana Intrastate Gas Corporation (Exhibit B to Form 8-K, dated May 6 1974, and Exhibit B to Form 8 K, dated August 7,1978.)
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UNDERTAKINGS A. Each person whose signature appears on the signature page hereby authorizes any agent for service named in the registration statement to execute in the name of each such person, and to file, an amendment to the registration statement pursuant to the above undertaking, which amendment may make such other changes in the registration statement as the registrant deems appropriate.
B. Directors and officers of the undersigned registrant are in certain cases entitled, pursua'it to provisions in the Restated Articles of Incorporation to indemniilcation against expenses and liabilities under judgments and reimbursements of amounts paid in settlement. The registrant also has an lasurance policy covering directors and olBcers and covering the liability of the registrant under such previsions. Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be-permitted to directors, ofBeers and controlling persons of the registrant pursuant to such provisicns, insurance policy or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnincation is against public policy as expressed in the Act and is, therefor 4 unenforceable. In the event that a c,8 alm for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person 3 of the registrant in the successful defense of any action, suit or proceeding) or for reimbursement of '
amounts paid in settlement is asserted, under such provisions, insurance policy or otherwise, by such director, ofBeer or controlling g,erson in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and wil! be governed by the final adjudication of such issue. l l
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SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement or amendment thereto to be signed on its behalf by the undersigned, thereunto duly authorized,in the City of Beaumont and State of Texas, on the 22nd day of September,1978. j i
GULF STATES UTILITIES COMPANY
- l By: W. DONH AM CRAWFORD ;
(W. Douharn Crawford, '
Chairman of the Board) l l
l Pursuant to the requirements of the Securities Act of 1933, this registration statement or j amendment thereto has been signed below by the following persons in the capacities, with regard to Gulf l States Utilities Company, and on the date indicated. ;
l (Sienature) (Title) 7 (Dars)
I Chairman of the Board (Chief Executive Omcer W. DONHAM CRAWFORD and Director)
(W. Douham Crawford)
Vice President & Secretary
, (Principal Financial R. W. JAcxsON Officer) l (R. W. Jacksen)
Vice President (Principal A. 4. Pou.ANs Accounting Officer)
( A. A. Pollens)
- September 22,1978
- JOHN W. BARTON, EDWtN W. HtAM, WILUAM H.
LEBLANC, JR., NORMAN R. LEE, JOSEPH R.
MURPHY, ALvrw T. RstrzscH, SR., MONROE J.
RATHBONE, JR., LORENE L. RooERs, BISMARK A.
Directors STEINHAGEN, JAMES E. TAUS3to II, ARTHUR TEMPLE
!
- By: R. W. JACKSON
- f (R. W. Jackson, Attorney-la. Fact)
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CONSENTS OF EXPEltTS '
The consent of Messrs. Orgain, Bell & Tucker, Beaumont, Texas, is contained in their opinion filed as Exhibit 3-1 to this Registration Statement.
The consent of Messrs. Taylor, Porter, Brooks & Phillips, Baton Rouge, Louisiana, is contained in their opinion filed as Exhibit 3-2 to this Registration Statement.
CONSENT OF INDEFENDENT CERTIFIED PUBLIC ACCOUNTANTS We consent to the inclusion of our report, dated January 31,1978, except for Note I and the last paragraph of our report as to which the date is September 6,1978, which appears in the prospectus in the registration statement to be 0. sed in registering, under the Securities Act of 1933, 5,000,000 shares of '
, Additional Common Stock, without par value, of Guty STATES Uru.mES COMPANY.
We further consent to the references to our firm under the captions " STATEMENTS OF INCOME" and '
"ExrEars"in the prospectus. '
l ll CoorEas & LYBRAND Houston, Texas September 22,1978 ll
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ATTACHMENT 2
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Attachment 2 is composed at the following 4
three documents'herein enclosed:
- 1) Trust Agreetaent
- 2) Agreement of Assignment q
- 3) Agreement of Purchase l
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TRUST AGREEMENT , ,
EXECUTED AS OF JANUARY 25, 1978
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BY AND BETWEEN RUSSELL B. S4HULMAN,l>M i
AS TRUSTOR AND i
. J. HENRY SCHRODER BANK & TRUST COMPANY, AS TRUSTEE 1.
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l TABLE OF CONTENTS .
Page ,
SECTION 1 Recitals 1 1 Definitions 2 2 Creation and Declaration of Trust 5 3 Authorizations and Directions '
To Trustee 6 .
4 Limitations on Authority of Trus' tee . 10 5 Beneficiaries of Trust . 11
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6 Agreements of Trustee 11 7 Special Provisions Concerning Trustee -20 g
7.1 Trustee's Liability 20.
7.2 Li'mitations of Trustee's Duties 21 l -
7.3 heliance'on Writings and Telephonic Messages 23 1 -
7.4 Investigition by Trustee 24 7.5 Use of Agents 24 .
7.6 Reliance'on Opinions of Counsel 25 7.7 ' Negation of Certain Duties -
25 7.8 Appointment of do-Trustees or Separate Trustees 26 8 Effect of Sales by Trustee 28 9 Resignation and Bemoval of Trustee, -
Co-Trustees or Separate Trustees 29 9.1 Resignation o'r Removal .
29 9.2 Rights of Successor Trustee '
30 (i)
._ . - _ - - - _ _ _ _ _ _---.----_---.--..-_._.--__--.-._----.____._._._______.--__.-___-_--_._-_-__-_a
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10 Assignment of Rights and Trans'fer of Duties by Trustee 31 11' Duration and Termination of and Amendment to Trust 32 11.1 Duration and Termination 32 -
11.2
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Distribution of Trust Estate . -
Upon Termination 32 11.3 Amendments to Trust Agreement 34 12 ,
Compensation of Trustee 34 13 Miscellaneous Provisions 35 13.1 Notices 35
- 1 13.2 Situs of Trust and Applicable Law 36 13.3 Counterparts 37' 13.4 Binding Effect of Trust Agreement 37 13.5 Status of Monies Received by Trustee 37 l
13.6 Trust Agreement for Benefit of -
Gulf States and Chemical Only 38 13.7 Miscellaneous 38 1 Signatures 40 e
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THE STATE OF NEW YORK 'S- '
TRUST AGREEMENT COUNTY OF NEW YORK $
THIS TRUST AGREEMENT, executed as of the 25th day !
,of January, 1978, by and between Russell B. Sghulman, a ^T$t1 resident of the State of 'New Iork (the "Trustor"), and J.
Henry Schroder Bank &. Trust. Company, as Trustee,. a New York banking corporation having its principal offices in the City ,
of New York, New York (the " Trustee"). -
I W'I T N E S S E T H- '
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WHEREAS, the Trustor desires to create a trust j l
with a situs in the State of New York for the purposes of l I
, (i) having the Trustee acquire the right' to purchase 'the !
! i hereinafter described steam' turbine generating equipment , j from' General Electric Company, a New York corporation having offices in.Schenectady, Schenectady County, New York (" Gen-eral Electric"), (ii) having the Trustee obtain , financing for the acquisition of such steam turbine generating equip- l ment through execution of the. hereinafter described credit l agreement with Chemical Bank in its capacity as a New York banking corporation.(" Chemical"), (iii) having the Trustee own and thercafter.sc11 such steam turbine generating equip-ment to Gulf States Utilities Company, a Texas corporation - I e
x ; i
i having its. principal offices in Beaumont, Jefferson County, Texas (" Gulf States"), or its designee in accordance with the hereinafter described agreement of purchase, and (iv) .
obtaining for Chemical and Gulf States the benefits provided ,
for in this Trust' Agreement and all agreements and documents referred to herein; WHEREAS, the Trustee is willing to accept the duties and obligations imposed by this Trust Agreement and i
the agreements and documents referred to herein; and l WHEREAS,- the Trustor has paid to the Trustee the j
sum of One Hundred Dollars ($100.00), in cash, to be held as part of the Trust, the receipt of which sum is herebf acknowledged by the Trustee. 2 NOW, THEREFORE, the parties hereby agree as follows: '
SECTION 1. Definitions For purposes of this Trust Agreement, the terms set forth below shall be defined as f.ollows:
(a) " Assignment Agreement" shall mean the Agreement of Assignment executed as of this date i
by Gulf States and the Trustee, providing, among other things, for the assignment to the Trustee by Gulf States (with the consent of General Electric ,
1 as set forth in the Transfer Agreement) of all of j i
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Gulf States' right, title and interest in and to the Purchase orders relating to the acquisition
, and storage of the Steam Turbine Equipme.nt.
(b) " Collateral Assignment" shall mean the
, Collateral, Assignment and Security Agreement i
executed as of this date b'y the Trustee and Chemical, ,
providing, among other things, for the collateral -
, assignment to Chemical by the Trustee .(with the ,
l ~ consent of Gulf States) of all of the Trustee's right, title and interest in and to the' Purchase Agreement so as to secure repayment of the Trustee's obligations owing to Chemical under the Credit Agreement.
(c)- " Credit. Agreement" shall mean the Cre'dit Agreement executed as of this date by the Trustee and Chemical, providing, among other things, for the extension of credit to the Trustee in order to finance the acquisition, storage and ownership of the Steam Turbine Equipment.
(d) " Purchase Agreement" shall mean the Agreement of Purchase executed as of this date by Gulf States and the Trustee, providing, among
.other things, for the sale to Gulf States (or its.
designee) by the Trustee of the Steam Turbinc O
l- it.
,t -
.d
t l
Equipment and all accompanying rights, claims, guaranties and warranties with respect thereto arising under the Purchase Orders or otherwise.
(e) " Purchase orders" shall mean the pur-chase orders more fully described in the Assign-ment Agreement executed as of this date by Gulf f
States and'the Trustee.
(f) ," Steam Turbine Equipment" shall mean the -
~
steam turbine generating equipment more fully described in the Assignment Agreement executed by .
the Trustee and Gulf States as of this date, together'with all rights, claims, guaranties and !
, warranties arising with respect thereto under the Purchase Orders or otherwise.
(g) '" Transfer Agreement" shall mean the Agreement and Consent to Transfer executed as of this date by Gulf States, General Electric and . . ;
the Trustee, pursuant to the terms of which Gulf I
States and General Electric have made certain.
modifications and revisions to the Purchase Orders so as to allow the Trustee to acquire, store and hold the Steam Turbine Equipment on the terms and conditions herein and therein set forth and to l thereafter sell such Equipment to Gulf States 1
pursuant to the Purchase Agreement.
O ;
l L
e (h) " Trust Agreement" shall mean this Trust '
Agreement executed as of this date by the Trustor
and the Trustee.
.(i) " Trust Estate" shall mean.all right,
! ~
title and interest of the Trustee in and to.the Purchasa Orders, the Steam Turbine Equipment, any payments cn:
proceeds arising from the assignment,
. sale, destruction'or taking of the Steam Turbine Equipment under the Purchase Agreement, and any i
snd all! payments, proceeds, rights, claims, guar- -
! 1 anties, warranties, properties, and privileges '
(other than payments to the Trustee for its fees, 3
.cnc in connection with any indemnification afforded W to the Trustee pursuant to this Trust Agreement or !
i any other agreement or document referred to -
t herein,, or as reimbursement' for out-of pocket ,
expenses of the Trustee paid from other than the i i
Trust, Estate), received under or arising out of or !
in connection with this Trus t Agreement 'and all i
{
other agreements and documents referred to herein. '
i SECTION 2.
Creation and Declaration of Trust . .
By execution hereof and on the terms and condi-tions herein set forth, the Trustor hereby creates and i
I O p f.
~
_ A.
'1
. l s
establishesjthis trust to be known as the "Gideon Trust".
Except as otherwise specifically provided herein, the '
Trustee hereby declares that it shall, and hereby undertakes
.and agrees to, receive, accept and hold the Trust Estate in .
~
and under this Trust and the provisions . hereof / subj ect to (i) the terms and conditions of, and the rights of Gulf States under, the Purchase Agreement and the Transfer Agreement, and (ii) the rights of Chemical as holder of the notes, obligations, or other evide,nces of indebtedness issued by the-Trustee under the Credit Agreement and the .
rights of Chemical under the Collateral Assignment.
SECTION 3. Authorizations and Directions to Trustee The Trustee is hereby authorized and directed. not in its individual capacity, but solely on behalf of the -
Trust:
(a) to accept, execute and deliver the .
j Assignment Agreement, and to perform all of the f . obligations and' duties and to exercise all of the rights of the Trust thereunder and of the assignee j
. p.
under such Agreement; 1
(b) to accept, execute and deliver the
- Transfer Agreement, and to receive the benefits provided for therein to the Trust; (c) to purchase, acquire, store and hold title-to the Steam Turbine Equipment under the 1 '
terms set forth in the Purchase Orders, and to exercise all rights as the owner of such Equipment .
in accordance with this Trust Agreement and the
~
other agreements and documents referred to herein; (d) to accept,. execute and deliver the Credit Agreement and the Collateral Assignment, to perform all of the obligations and duties and to.
exercise all the ' rights of the Trust under the Credit Agreement, and to assign (as provided in the' Collateral Assignment) all of the Trust's .-
'right, title and interest in and to the Purchase j
1, 1
Agreement so as to secure the payment and per-
[ formance of all of the obligations and duties of P the Trust owing to Chemical under the Credit 1
1 Agreement; _
~
(e)- to execute ,and deliver to Chemical any notes, obligations or other evidences of indebted- -
ness so as to obtain funds (pursuant to the Credit
! . Agreement and not otherwise) sufficient or neces-
- sary to acquire, finance , ship , transport, hold, handic, store, inspect, maintain, insure and sell the Steam Turbine Equipment on the terms and
" conditions set forth in this Trust Agreement and the ' other agreements and documents referred to 1
A ___
l .
herein, and with such funds to pay all costs, expenses, and fees (including attorneys ' and .
, accountants' fees), to exercise all rights, and to perform all duties and obligations imposed upon the Trust under this Trust Agreement and the other agreements and documents' referred to herein or otherwise' associated with the acquisition, finan-cing, shipping, transportation, holding, handling, storage, inspection, insurance, maintenance or sale of such Steam Turbine Equipment; -
(f) ~
to accept, execute and deliver the Purchase Agreement, to sell the ' Steam Turbine Equipment to Gulf States (or its designee) in accordance with and on the terms and conditions therein set forth, and to perform all of the .
duties and obligations and to exercise all of the rights of the Trust thereunder; (g) prior to sale of the Steam Turbine I
Equipment to Gulf States (or its designee) pur-suant to the Purchase Agreement, to appoint. Gulf .
' States as irrevocable agent for and on behalf of the Trust to provide for (i) the transportation, shipment, holding, handling, storage, inspection, maintenance and insurance of the Steam Turbine i a -
9
Equipment, (ii) the payment of all taxes or other governmental charges or assessments imposed,
- assessed, or levied'on the Steam Turbine Equipment 4
or in respe.ct of the Trust Estate, and (iii) the 1
, amendment, supplementation or revision of the l Purchase Orders.on such terms and conditions as may be provided in the Assignment Agreement; .
'(h) 'to accept, execute and. deliver all.~other "
, instruments, documents and agreements and, through the acts of the Trustee or any agent appointed -
pursuant to this Trust Agreement and the other agreements and documents referred to herein,' to do all such things and take all such actions (including
.but not limited to obtaining any regulatory or l governmental approval) as may be necessary, ,
incidental, appropriate, desirable or convenient to consummate the transactions and to perform.or -
exercise the rights,. powers, privileges, duties, obligations and discretions of the Trust as -
contemplated by this Trust Agreement and.the other agreements and docu ents referred to herein; and '
(1) subject to receipt of any necessary approvals or consents of others or subsequent to any action by an authorized agent of the Trust s
i :!
.c . _ _ _ _ _ _ - . - _ - - _ _ - - _ _ _ _ _ - -
N acting in su~ch respect, to accept, execute and deliver any modification, supplement or amendment to this Trust AgreeE.ent'and the.other agreements ,
and documents referred .to herein and to perform
^
any of the duties , responsibilities , and obliga-
~
tions 'and to exercise all of the rights and privileges of the Trust under any such agreements .
or documents as so modified, supplemented or -
1 amended. -
l l
The documents referred to in the foregoing clauses (a) l through (f) of this Section 3 shall be executed in sub- l stantially the forms delivered to the Trustee by Chemical and Gulf States concurrently herewith.
1 1
SECTION 4. Limitations on Authority of Trustee .
Except to perform the duties and obligations set !
l forth in this Trust Agreement and in the other agreements ~
and documents referred to in Section 3 hereof and to exer-j' cise.and carry out or cause to be exercised and carried out 1
.the rights, powers, authorizations and discretions of the Trust' thereunder and hereunder.on the terms and conditions herein and therein set forth, the' Trustee shall have no power, right, duty, authority or discretion to own, acquire, finance, manage, control, handle, ship, transport, inspect, '
use, operate,. store, sell, lease, insure, assign,' mortgage, k ~
- j .
1 I
1 encumber, dispose of or in any manner deal in or with the l Steam Turbine Equipment or any other property at any time .
l l
constituting part of the Trust Estate. Nothing contained in this Sedtion 4 shall be deemed to limit or restrict the power and authority of the Trustee to enforce the terms and ,
provisions of this Trust Agreement, the Purchase Orders, the
, Assignment Agreement, the Transfer Agreement, the Purchase .
Agreement, the Collateral Assignment and the Credit Agreement, or to collect and receive sums payable thereunde , or otherwise to exercise the rights, powers, authorizations and discretions .
of the Trust as provided for by such agreements and docu-i ments to the fullest extent permitted by applicable law.
SECTION 5. Beneficiaries of Trust Gulf States .and Chemical shall be the benefici- .
aries of the Trust to the extent and on the terms and con-ditions set forth in this Trust Agreement and in the other agreements and documents . referred to herein, and shall be subject to such duties and obligations and~ shall be entitled 3 to the benefit of such rights, powers, authorizations and i' '
discretions herein and therein provided.
- c II,
- j' SECTION 6. Agreements of Trustee By execution hereof, the Trustee, not in its .
,i .
r :s
- i 4
_. . .. s -
. individual capacity but solely as Trustee, hereby agrees as follows:
(a) to accept, execute and deliver the documents referred to in Section 3 hereof on behalf of the Trust, and to perform all of the obligations and duties and to. exercise all of the rights of the Trust under this Trust Agreement and '
all other agreements. and documents referred to
- t. .
, herein, subject only to the terms and conditions
- contained herein and therein, to the availability l
, of credit or funds pursuant to the Credit Agree- l l
ment and the Purchase Agreement, and to compliance l-,
t
( with all applicable laws and regulations; .
,, (b) to accept and receive assignment of the Purchase Orders under the Assignment Agreement and )
n -
l
, to exercise the rights of the' assignee under such j Agreement through purchase and storage of the J
Steam Turbine Equipment pursuant to the terms of
, l N '
,1 such Purchase Orders as modified by the Transfer E Agreement; ji (c) to acquire and hold citic to the Steam U '
- 4. Turbine Equipment under the terms set forth in the
- i Purchase Orders, this Trust Agreement and the 3!
I n
4 1-l $
.j j . .
1 ,,
3 .
e other agreements and documents referred to herein, to exercise all functions of ownership with res-pect to such Equipment as herein and therein provided, and to thereafter sell such Equipment .to Gulf States'(or.its designee) in accordance with the. Purchase Agreement; .
(d)~ subsequent to acquisition of.the Steam -
Turbine Equipment by ~ the Trust but pr'ior to sale to Gulf States .(or its designee), to provide'for the shipment, transportation, holding, handling, storage, inspection, maintenance and insurance of the Steam Turbine Equipment at the cost and ex- i pense of the Trust, and to pay out of the Trust Estate all taxes or other governmental charges or assessments imposed, assessed.or levied on such Equipment or in: respect of the Trust Estate, and l l
for such purposes the Trustee hereby irrevocably designates and appoints Gulf, States as agent for l and on behalf of the Trust (but without any fee or .
compensation therefor) to provide for and ensure completion of such shipment,' transportation, holding, handling, storage, inspection, and '
maintenance at the cost and expense.of the Trust, to provide for the payment by the Trust,of all 1
, 1
such taxes, charges and assessments imposed, assessed or levied on such Equipment or in respect of the Trust Estate, to procure such insurahce (at the cost of the Trust) as may be required by subsection (o) of this Section and by Section 8 of the Purchase Agreement, and to sign and draw checks for such purposes on the Trust's checking account maintained at Chemical (through the' signatures of authorized employees of Gulf States designated in writing to the Trustee and Chemical); *
(e) subj ect to the ' conditions contained in-
.the Credit Agreement, to issue on behalf of the Trust under such Agreement any notes, obligations or other evidences of indebtedness so as to obtain .
all funds sufficient or necessary to perform all .
of the obligations and duties and to exercise all of-the rights of the Trust under this Trust -
Agreement and all other agreements and documents referred to herein; *
(f) through the Collateral, Assignment, to authorize Chemical to receive all proceeds from the sale, destruction or taking of the Steam .
Turbine Equipment under the Purchase Agreement and all payments to which the Trust may be entitled
3
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~
under any other agreement or document referred to herein, wi'th such proceeds and payments to be '
deposited to the Trust's checking account main- .
tained at Chemical for such purpose and to be thereaf ter applied and - distributed in the - following manner and in the order so listed: (i) payment af . , , l-the Trustee's fees and out-of-pocke t expenses to the extent not theretofore paid under the provisions j
of Section 12 of this Trust Agreement, (ii) payment to Chemical of any indebtedness arising under the
- Credit Agreement, including interest thereon at the rates provided for in the Credit Agreement, to :
- the extent that such indebtedness may be then due and payable, (iii) payment to Chemical of any fees or other amounts payable to it -with respect to its .
commitment under the Credit Agreement,,to the extent that such fees and amounts unay be then due '1 and payable, (iv) payment of all amounts, fees, .
f and taxes (if the 'same are then due.and payable)
.i to any other person, authority or entity in con-
\
{ nection with the' purchase, acquisition, shipment, i.
I transportation, holding,. handling, ownership,.
' inspection, storago, maintenance, insurance,^ sale or.other disposition of the Steam Turb'ine Equip-j ment or otherwise incident-to performance of this ri, .
,J.
. - . 4 --
- ^
~
Trust Agreement and'the other agreements and -
documents referred to herein, (v) investment if otherwise practical in'accordance with Section 13.5 hereof, but only to the extent that such proceeds or payments are not then required to be applied as specified in subclauses (i) through ,
(iv) above, and- (vi) upon termination of this ,
Trust Agreement pursuant to the provisions of ,
9 Section 11 hereof, payment of all amounts described .
in such subclauses (i) through (iv) above, with I
- l any balance ' remaining to be paid over and distributed t .
!' as set forth in such Section 11 of the Trust
!, Agreement and in Sections 8, 9 or 13 of the Pur-chase Agreement; (g) to grant no lien, mortgage, security interest or other encumbrance on all or any part of the Trust Estate (except as and to the extent
- provided in the Collateral Assignment and in the l
_l Purcha.se Agreement), and to use its best efforts to permit or suffer no such lien, mortgage, security interest or encum'brance to be placed thereon by operation of law or otherwise; i
(h) to execute and file all appropriate tax
- returns for the Trust and all such other reports, 4
certificates and' instruments as may be required by
}'
)
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ts y
_ g_
,1
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applicable. law regarding the Trust, the. Steam
. l Turbine Equipment, the agreements and documents referred to herein, the Trust Estate, and all other aspects of the transactions contemplated by -
this Trust < Agreement and such other agreements and documents, but'only as may,be specified from time to time in written, instructions from Chemical or .
Gulf States which shall in all events be accompanied ,,
by the returns, reports, certificates.or instruments 1 i
to be filed and'shall be received'by the Trustee -
no later. than fifteen (15) days before the required '
filing date; (i)' to give Chemical and Gulf States prompt notice of any defaults or breaches or claimed defaults or breaches under any of the agreements and documents referred to herein, but only if and -
to the extent any officer or employee of the !
t Trustee responsible for. administration of the '
l Trust has actual knowledge thereof; (j) to administer the Trust Estate and to -
use its best efforts to collect when due all sum's i payable by Gulf States (or its designee) under the !
Purchase Agreement, or by any other person-or -
I entity under any agreement or document relating to the transactions contemplated by this Trust Agreement; [
1 l
l 1
- l
I.
(k) upon written instructions given at.any
{ time and from time to time by Chemical, to furnish such notice or direction and to exercise such right or power under the Credit Agreement as shall be specified in such instructions from Chemical, and to approve as satisfactory to the Trustee all matters required by the terms of such Agreement to be satisfactory to the Trustee, it being expressly a
understood 'that without instructions .of Chemical, the Trustee shall not approve any s'uch matter as ~
satisfactory to it; (1) upon written instructions given from time to time or at any time by Gulf States, but only if the Trustee does not have actual knowledge bf any eve'nt of default existing under the Purchase -
Agreement, to furnish such notice or~ direction and to exercise such right or power under the Purchase Orders or the Purchase Agreement as shall be specified in such instruIctions from Gulf States, and to approve as_ satisfactory to the Trustee all matters required by the terms of such Purchase Orders or Purchase Agreement to be satisfactory to the Trustee, it being expressly understood that without instructions from Gulf States , the Trustee 1 I
shall not approve any such matter as satisfactory t-l 1
to it; -
(m) to execute, record and file such deeds, t
bills of sale, conveyances, and other documents or instruments as are required to maintain the interests created her'eunder in the Trust Es tate, but only as may be specified from time to time 'in written instructions from Chemical or Gulf States '
which in all events shall be accompanied by the '
i form of' such documents or instruments to be filed or recorded and shall be received by the Trustee .
no later than fifteen (15) days before the required filing date~;
(n) to furnish to Chemical and Gulf States '
promptly upon receipt thereof, originals , dupli-cates or copies of all reports , notices , requests ,
demands, certificates, financial statements and other instruments furnished to.the Trustee under the agreements and docum'ents referred to herein, but only'to the extent that the same shall not have theretofore been furnished to or by Chemical or Gulf States; (o) to cause all insurance procured with respect to the Steam Turbine Equipment to be obtained in such amounts and from such compa'nies I
9
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7 J
__ __ . . -___ . . . .. _ _ - _ . - _ _ _ = . . _ _ _
4 and on such terms and conditions as may be re-quired by the Purchase Agreement and to cause any ,
proceeds of such insurance to be made payable j r
jointly to the Trustee, Gulf States and Chemical, as their respective interests may appear, with such proceeds to be paid over and distributed as provided in Section 8 of the Purchase Agreement;- L and - -
(p) pursuant to written instructions from. '
(
Chemical, to exercise the rights of the Truste'e I i
(to the extent that such rights relate to payment t i
i to Chemical of. amounts due ror to become due to l
.- Chemical under the Credit Agreement) as provided in Section 13.4 of the Purchase Agreement upon .
occurrence of an' event.of default as therein set f forth. I' a
SECTIONL7. Special Provisions Concerning Trustee 7.1 Trustee's Liability-i 1
The Trustee assumes no liability for anything in ,
its individual capacity other than its own gross negligence, 1 fraud or willful misconduct and the material breach or material failure of any warranty, representation or covenant made by the Trustee specifically in its individual capacity l
4
" ~
- I l
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1 o
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, under this Trust Agreement and the other agreements and '
documents referred to herein. In accepting the trusts !
hereby created, the Trustee act.s solely in its capacity as such trustee hereunder, and all persons, including but not limited to Chemical and Gulf States, having any claim i against the Trustee by reason of the transactions contem- l plated hereby shall look 'only to the Trust Estate for pay- .
ment or satisfaction thereof, except as otherwise expressly .
previded herein, Neither the Trustee nor'any shareholder, I officer, employee or agent of the Trustee shall be held to i
\
any personal liability hereunder, nor shall resort be had to i their private property for the satisfaction of an'y claim t
hereunder or in connection with the affairs of the Trust, but the Trust property only shall be liable, unless such .
liability arises under the first sentence of this Section.
The Trustee undertakes to perform such duties and only such duties as are specifically set forth in this ' Trust Agreement and the other agreements and documents referred to herein, and no implied covenants or obligations shall be read into such agreements or documents against the Trustee. .
7.2 Limitations ofnTrustee's Duties Notwithstanding any provision herein to the con-trary, it is understood and agreed that by virtue of the -
provisions of this Trust Agreement and the other agreements i
3
~
I
and documents. referred to herein, (1) the Trnstee shall not be obligated to' make any payment or distribution hereunder or thereunder unless and until the funds for such payment or .
distribution have been received in the Trust Estate by the '
Trustee in cash or immediately available funds, (ii) except as provided in written instructions or directions furnished by Chemical or Gulf States pursuant to Section 6 above, the Trustee shall have no duty'to attend to any recording or ~
filing' of this Trust Agreement, the Collateral Assignment or any other document or instrument that may be required or .
permitted to be recorded or filed under the laws of any jurisdiction so as to perfect or protect the interests created for Chemical, Gulf States, or the Trust by or pursuant
/ to this Trust Agreement or any other agreement or document referred to herein, or to see to the maintenance of any such recording or filing, (iii) except as provided in written instructions or directions furnished by Chemical or Gulf ~ ~ ~ ~
States pursuant to Section 6 above, the Trustee shall have no duty to prepare, execute or file any tax returns or any other reports, certificates and instruments as may be required.
by applicable law regarding the Trust, the Steam Turbine Equipment, the agreements and documents referred to herein, the Trust Estate and all'other aspects of the transactions contemplated by this Trust Agreement and such other agreements i
m_________.______-------- - - - - - - - - _ _ _ _
+ +
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1 l -
and documents, and (iv) the Trustee chall have no obligation or responsibility.to inspect the Steam Turbine Equipment or the locations where it is stored at any time, or to ascertain or inquire as to the performance or observance of any of Gulf States' covenants with respect thereto under this Trust Agreement, the Assignment Agreement, the Purchase Agreement, or any other agreements and documents referred to herein,'or l to purchase, acquire, own, ship, transport, hold, handle, store, finance, maintain, insure, sell, release or dispose
,of the Steam Turbine Equipment other than pursuant to the ,
- terms of this Trust Agreement and the Purchase Agreement, or to otherwise take any action under this Trust Agreement and the other agreements and documents referred to herein (including but not limited to obtaining any governmental or l regulatory approval or institucing any action, suit or legal, or administrative proceeding), in the absence of specific authorization herein or therein or in any instructions ,
furnished to the Trustee by Chemical.or Gulf States for such 1
purpose and then only if the Trustee shall be provided with I indemnity. satisfactory to it.that the Trustee shall incur no personal, individual or corporate liability therefor or by reason thereof.
7.3 Reliance on Writings and-Telephonic Messages The Trustee shall not be liable to Chemical or Gulf States, and shall at'all times be within the standard '
~. __
~
t of care to which it is bound hereunder, in acting upon any writings (including but not limited to instructions from Chemical or Gulf States), certificates, letters, telecopier messages, telexes, and telephonic messages, and in assuming the truth and correctness o" any statement, opinion or assertion of any nature made therein or during the course thereof, provided that any such writing or message is .
reasonably' believed by the Trustee to be genuihe and to have been'sent or made by the proper person or entity.
7.4 . Investigation by Trustee The Trusteefshall not be bound to make any inves-l i
tigation into the facts or matters stated in any telex, )
telephonic or telecopier message, or in any resolution.
} , certificate, statement, instrument, opinion, report, notice, request, direction, consents. order or other paper or docu- "
I t
ment received by the Trustee and supplied-to it by Chemical or Gulf States, but the Trustee, in its discretion ~, may make l such further inquiry or investigation into such facts or Leatters as it may see fit.
7.5 Use of Agents The Trustee may exercise its powers and perform its duties' hereunder or under any of the agreements and' '
I documents referred to_herein by or through such agents.as it shall appoint in good faith, and it shall not be liable to Chemical or Gulf States for any misconduct, negligence, or O
, w.~ ev-*--
failure by such agent to exercise the powers and perform the' ,
duties assigned'to it, provided that if the Trustee appoints any person or entity other than Gulf States as such an l agent, the appointment shall be subj ect to the prior written approval of Gulf States and Chemical. -
7.6 Reliance en OpinionsLof Counsel t
The Trustee shall be entitled to the advice of counsel (who may be, in , cases ' deemed by the Trustee in its
- rea'sonable discretion to be appropriate, counse'l for Chemical
/
or Gulf States), and shall not be liable to Chemical or Gulf States and shall at all' times be within the standard of care-to which it is bound hereunder in respect to any action taken, suffered or omitted by it hereunder in accordance with the advice of such counsel.
,; , 7.7 Negation of Certain Duties
!! Unless otherwise expressly agreed to by the Trustee in writing, the Trustee shall not be liable to anyone for any defect in or for the condition, existence, quality, i quantity, location, storage, shipment, transportation, t
- ' handling, repair, inspection, insurance, or maintenance of any assets which may from time to time or at any time
- {; '
3 constitute part of the Trust Estate, and nothing contained
'n
. i;
- !i in this. Trust Agreement'or in any of the other agreements j .and documents referred to herein shall be construed as a ,
representation or warranty on the part of the Trustee in
( -
.i -25; e
((. .
/
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l l
1 respect of the title to any assets comprising part of the !
Trust Estate, or with regard to the sufficiency, validity or l effect of thic Trust Agreement or any of such agreements and documents. -l 7.8 Appointment of Co "custees or Separate Trustees At any time and from time to time, for the pur-poses of satisfying the legal requirements of any jurisdiction in which any part of the Trust Estate may be located, the Trustee shall have the power to appoint one or more persons or entities approved by Chemical and Gulf States to act as , ;
1 co-trustee of all or any part of the Trust Estate, or to act as separate trustee of any property or assets comprising all or any part thereof, and in either case to vest in any such person or entity pursuant to a written instrument of appoint-ment approved by Gulf States and Chemical, any property, '
title, right or power hereunder deemed necessary or desir-able. Every aeparate trustee or co-trustee shall exercise, jointly with the Trustee, such of the rights, powers, duties and obligations of the Trustee hereunder as may be conferred ,
or imposed upon such separate trustee or co-trustee in the instrument of appointment, except to the extent that, under or because of any law of any jurisdiction in which any particular act or acts are to be performed, the Trustee shall be incompetent, unqualified, or incapacitated to perform such act or acts, in which event such separate
d *
~
l trustee or co-trustee shall become the trustee hereunder for' i.
such purposes and shall exercise and perform all of the
~
a rights,' powers, duties and obligations of the Trust in such j
respects in conformity with and to the fullest extent pos-4 -
sible under applicable law in accordance.with the instruc .
y tions 'of tite Trustee, Subj ect to the provisions of .Section 9 her, eof, by an instrument in writing executed by the i Trustee and approved by Gulf States and Chemical, the ,
Trustee may accept the resignation of or remove'any separate trustee or co-trustee appointed under this SectionJ7.8. l l
Upon the. acceptance in writing of'such appointment -
by any separate trustee or co-trustee, such trustee shall be vested with the estates or property specified in the instru- l ment of appointment subject to all the terms of this Trust Agreement and the other agreements and documents referred to herein. Each such acceptance shall be' filed with the Trustee 1
and a copy of same shall be delivered to Gulf States and i Chemical. Any separate trustee or co-trustee may, at any. I i
time by an instrument in writing, appoint the Trustee as agent and attorney-in-fact for.any such trustee, with full power and authority to do all acts and things and to exer-cise all discretions on behalf of and in the name of any such-trus' tee, provided that in no event shall any trus'tec appointed hereunder (including the Trustee) be liable to 1
l j
l':
1 -
q
) - .. # ,- . . - .
Gulf States or Chemical for the misconduct, negligence, or .
failure to exercise its powers and perform its dutics hereunder.
by any other trustee (including the Trustee). Except as above provided, no separate trustee or co-trustee shall assign any of its rights, powers, trusts, estates, or properties, or delegate.any of its duties and obligations hereunder'(whether'by merger, consolidation or otherwise),
without the prior written consent of the Trustee, Chemical ,
and Gulf States.
In the event that any separate trustee or co-trustee shall die, become incapable of acting, resign or be '
removed, all of the estates, properties, rights, powers,
. trusts, duties and obligations of such separate trustee or co-trustee, so far as permitted by applicable law, shall
)
vest in and be exercised by the Trustee without the appoint- I l
ment of a new trustee as successor to such separate trustee I or cc-trustee and without the execution or filing of any paper or any further action by the Trustee, Chemical or Gulf States.
SECTION 8. Effect of Sales by Trustee Any-sale of all or any.part of the Trust Estate made by the Trustee pursuant to and in compliance with the terms of this Trust Agreement and the Purchase Agreement shall bird-Gulf States and Chemical hereunder, and shall be L
l l
l H
effective for the benefit of the purchaser or purchasers thereof to divest and transfer all right, title and interest of the Trust in the property so sold, and no such purchaser shall be required to ascertain whether the Trustee has complied with the terms.of this Trust Agreement and the
- Purchase' Agreement or to see to the application of any.
consideration paid for such property. .
l 1
SECTION 9. Resignation and Removal of Trustee, l
I Co-Trustees or Separate Trustees 9.1 Resignation or Removal '
The Trustee, or any separate trustee or co-trustee appointed pursuant to Section 7.8 hereof, may resign at any time, with or without cause, by giving at least thirty (30) days' prior written notice to the Trustor, Gulf States and Chemical (and in the case of a separate trustee or co-trustee, to the Trustee), with such resignation to become effective upon expiration of such thirty (30) day period or '
any such greater period as may be specified in the notice.
In addition, at the written request of Gulf States, the Trustor shall, upon at least thirty (30) days ' prior written notice, remove the Trustee or a separate trustee or co-trustee, with or without cause.
Prior to the effective date of any resignation or removal of the Trustee, the Trustor (or Gulf States acting alone if the Trustor shall fail to do so for any reason) shall appoint a successor to the ~
P
.t
- 4. .
t Trustee but only with the written consent of' Gulf States and, !
Chemical. Upon the resignation or removal of a separate trustee or co-trustee, a successor to any such separate trustee or co-trustee may be appointed pursuant to the provisions of Section 7.8 hereof. Should the Trustee or any ,
. separate trustee or co-trustee become incapable of acting as such or be adjudged as bankrupt or insolvent, or should a i receiver for or of the property of the T'ustee'or r any separate
. trustee or co-trustee be appointed, or should any.public officer take charge or' control of the Trustee, any separate trustee or co-trustee, or their respective properties or -
affairs for the purpose of rehabilitation, conservation or liquidation, the Trustee or any such separate trustee or co-trustee, as appropriate, shall be deemed to have resigned l effective immediately prior to such occurrence.
9.2 Rights of Successor Trustee , ,
1 Upon appo ~intment of a successor to the Trustee hereunder and after the consent thereto of Chemical and Gulf States if expressly required by the terms of this Trust Agreement, the. predecessor Trustee shall execute and deliver a bill of sale and other appropriate instruments in due form and in the required number of counterparts for recording or filing, transferring to the successor Trustee all of.the.
estate, properties, rights, powers, duties, oblightions and trusts of the. predecessor Trustee, and such predecessor
Trustee shall duly assign, transfer, deliver and pay over to
- the successor Trustee any property or monies then held by such predecessor Trustee hereunder. The successor Trustee shall execute and deliver to the predecessor Trustee,.the Trustor, Gulf States and Chemical, an instrument or in- ,
i struments in due form and in .the . required number of 'coun-tarparts for recording or filing, accepting such appointment and assuming the obligations of the predecessor Trustee .
- under this Trust Agreement and the other agreements and documents referred to herein, and thereupon such successor -
4 Trustee shall become the Trustee hereunder vested with the estate, properties, rights, powers, duties, obligations and trusts of the predecessor Trustee. .Upon completion of an'y such transfer and assignment, the predecessor Trustee shall be relieved of and discharged from any and all further duties and' obligations hereunder or under any agreement or '
document referred to herein, except for any responsibility such predecessor Trustee may have for acts or omissions i
occurring or arising prior to such transfer and assignment.
SECTION 10. Assignment of Rights and Transfer of Dutics by Trustee
. l Unless otherwise expressly provided to the con-trary in this Trust Agreement or in the agreements and l documents referred to herein, the Trustee shall not trans- '
fer, sell or assign (whether by merger, consolidat' ion or i 1
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sale of all or substantially all of its assets) any of its ,
I right, title and interest hereunder and in the Trust Estate, nor shall'the Trustee delegate any of its powers, d'u ties, obligations, or discretions hereunder, without the prior written consent of Gulf States and Chemical.
SECTION ll.' Duration and Termination of and Amendment to Trust
{
11.1 Duration and Termination - l The Trust created hereunder shall continue and
- remain in full force and effect until expiration of a period 1 of sixty (60.) days after occurrence of the Purchase Date or i I
the Settlement Date established in the Purchase Agreement, whichever may be applicable, but in no event later than
' ~
January 1, 1986.
11.2 Distribution of Trust Estate Upon Termination On the effective date of termination of this Trust ,
pursuant to the provisions of Section 11.1, the Trustee -
shall transfer all of its right, title and interest in the
' Trust to the persons and entities hereinafter provided, and after paying all obligations and indebtedness of the Trust as set forth in Section 6(f) and after making such transfer and accounting for all funds which may have come into its hands,_theTrusteeshallbedischargedandfreeofandkrom any further liability hereunder, except any such liability not payable exclusively out of the assets of the Trust
.1 3
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' Estate.which may be shown by such accounting then to exist.-
No later than the' effective date of termination of p
this, Trust as provided in Section 11.1, but only if the Trustee has not elected to proceed under Section 13.4 of the 1
i 1
' Purchase Agreement (in:which event the provisions of such , o j Section shall govern and control as to transfer an'd disposition j
a of the: Trust Estate), the Trustee shall execute and deliver
{,
to Gulf States or its designee a bill of sale '(in due form i
and in t.he required number of counterparts for filing or' .
recording, if necessary).and any other written documents in i
i form and content reasonably requested by Gulf States or its designee prior to such termination, evidencing the transfer of title to Gulf States or its' designee of all of the remainder of the Trust Estate, if any. Upon receipt of the bill of i
sale'and other written documents more fully described in the immediately preceding sentence, Gulf Sta't'es or its designee
- l shall execute and deliver to the Trustee and Chemical a '
written instrument or instruments (in the required number of 1
counterparts for filing or recording, if necessary) in form j
and content reasonably requested by the Trustee and Chemical,.
evidencing the assumption by. Gulf States or its designee of all of the duties, obligations and-liabilities of the Trust, if any,.under this. Trust' Agreement, the Credit Agreement, and all other. agreements and documents referred to herein c
I and-therein. ..By virtue of and subsequent to such assumption, G
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Gulf States or its designee shall be solely responsible for,-
- and (except for any liability described in Section 7.1 hereof which is not payable exclusively.out of the assets of 1
the Trust Estate and which may be shown by accounting then l to exist) the Trustee shall be relieved, released and discharged from all responsibility for, performance and satisfaction of i all of the duties', obligations and liabilities of the Trustee .
1
[ hereunder and thereunder, if any, and Gulf States or its ,
designee .shall succeed to all of the rights, powers, auth- -
orizations, discretions and benefits of the Trust under this Trust Agreement and all other agreements and documents referred to herein. -
j 11.3 Amendments to' Trust Agreement This Trust Agreement may, from time to time or at any time, be amended, modified or supplemented by an instru- ,
ment in writing duly executed by the Trustor and the Trustee, but'only if such instrument shall first be approved in -
writing by Gulf States.and Chemical.
SECTION 12. Compensation of Trustee The Trustee shall receive as compensation for its l services hereunder the sum of Seven Thousand Dollars ($7,000.00),
with Five'Thousand Dollars ($5,000.00) of such sum to be paid out of the Trust Estate at such time and in such manner as may be mutually acceptable to Gulf States, and with the
4 1
balance o f Two Thousand Dollars ($2,000.00) to be paid .
-directly by Chemical at such time and in such manner as may be mutually acceptable to Chemical. In addition to the ,
i foregoing, the Trustee (or any' separate trustee or co- .
trustee appointed under Section 7'.8) shall be entitled to (i) payment of reasonable fees out of the Trust Estate for d
! such extraordinary services as the Trustee (or such separate trustee or co-trustee) may from tise to time perform ,
J hereunder or under any of the agreements and documents
) referred to herein, and (ii) reimbursement out of the Trust -
Estate for all out-of-pocket expenses reasonably incurred by ,
the Trustee (or such separate . trustee or co-trustee) in the l 1
I performance of its duties hereunder or under any of the I agreements and documents referred to herein. Any such payment or reimbursement shall.be be made at the time and in the manner and amount mutually agreed upon with Gul'f States, and the making of such payment or reimbursement shall not i affect any indemnity to which the Trustee may be otherwise entitled under this Trust Agreement and the-other agreements and documents referred to herein.
SECTION 13. Miscellaneous-Provisions i 13.1 Notices _ . ;
. I All notices-and communications required to be in ]
1 f
-writing hereunder shall become effective'when received, addressed as follows:
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, . . - . .0 . - _ _ _ _ . _ _ _ _ _ _ . _ _ _ _ _ _ _ _ . ._ _ _ _ .
e
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Russell B. Schulman ,
240 West 98th Street Room 13H New York, New York 10025 a-
, Gulf States Utilities Company
] Post Office Box 2951 Beaumont, Texas 77704 q! Attentioni William F. Malec; a
Gideon Trust, c/o J. Henry Schroder Bank & Trust
., Company, as Trustee One State Street New York, New York 10015 .
Attention: Corporate Trust Division Chemical Bank ,
I 20 Pine Street ;
New York, New York 10005 Attention: Ellen Lapson; or to such other address as any of the foregoing parties or their successors may. designate by notice duly given in accordance with this Section 13.1. All of such notices and communications may be given in person or by mail, postage prepaid, or by telegram, charges prepaid, or by telex, telecop.ier or telephonic message,.if promptly confirmed by 3 mail,' postage prepaid.
1 1 -
13.2 Situs of Trust and Applicable. Law l'
q The Trust has been accepted by th'e Trustee and l
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3 shall be located and administered in the. State of New York, l 1
and.the validity and construction of this Trust Agreement {
. sha.ll be governed by the laws of such State. No. bond cr l
'i. '
l' other security shall be required of the Trustec (or any i
s separate trustee or co-trustee appointed under Section 7.8) 4
'I i
or , . .
unless suchLis a requircinent of . applicable law which cannot ,
be waived.
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13.3 Counterparts ,
- This Trust Agreement may be simultaneously exe-
! cuted in any number of counterparts, each of which so ex-l:
ecuted shall.be deemed to be an origin;al, and all of which counterparts together shall constitute and be one and the l
-same instrument. .
13.4 Binding Effect of Trust Agreement
[ '
1 This Trust Agreement shall be binding upon and F
- d. shall inure to'the benefit of the p.arties hereto and the ,
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named beneficiaries hereunder, their respective successors and assigns, provided that. in no event shall the foregoing i i be- deemed to modify cn: otherwise alter the provisions of i
Section 10 hereof.
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13.5 ' Status of Monies Received by Trustee -
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I l All monies received by the Trustee.under or pur-i suant to any provisions of this Trust Agreement (other than ,
payments to the Trustee for its fees, or.in connection with h any indemnification of the Trustee pursuant to this Trust Agreement or any agreement or document referred to herein, 4
or as rcimbursement for out-of-pock'et expenses of the Trustee
-paid from other than the' Trust 1 Estate) shall constitute .
trust.fundsJfor the purpose for which they were paid or are
' held, but need not be segregated in any manner from any
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$ 't other monies and may.be deposited by the Trustee under such ;
conditions as may be permitted by this Trust Agreement or :.
the other agreements and-documents referred to herein, i
At any time and from time to time as directed by 1 .
Gulf States, the balance of monies received by the Trustee i in excess of emounts sufficient'to. satisfy the amounts then owing and'aubject to distribution as provided in Section 6 .
hereof may, to the extent practicable and in all events .
without hinderance t'o the satisfaction or payment of the ,
obligations of the Trustee under this Trust Agreement and ,
the other agreements and documents referred to herein, be .
invested by the Trustee in any certificates of deposit issued by banks in the United States of America having a capital and surplus aggregating at least $20,000,000.
13.6 Trust Agreement for Benefit of Gulf States and Chemical Only Nothing in this Trust Agreement, whether express or implied, shall be construed to give any person or entity .
other than the Trustor, the Trustee, Gulf States and Chem-ical any legal or equitable right, remedy or claim under or in respect of this Trust Agreement, and this Trust Agreement shall be held to be for the sole and exclusive benefit of Culf States and Chemical, with no other person or entity to have1or acquire any right,. remedy or. claim hereunder.
13.7 Miscellaneous (a)- Section headings herein are. for the y'. ! -
convenience of the parties only, and shall be t "
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d given no substantive or interpretive effect -
whatsoever.
(b) Waiver of the breach of any provision hereof shall not be deemed to be a waiver.of any prior or subsequent breach of the same or any other provision hereunder.
(c) Pursuit of any remedy shall not be deemed to be or otherwise constitute a waiver of any other remedy hereunder or'at law or. equity.
(d) Any provision of this Trust Agreement
-which is' prohibited or unenforceable in any jur-isdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating remaining .
provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not -
invalidate or render unenforceable such provision in any other jurisdiction.
(e) The Trustee and any corporation or entity in or with which the Trustee may be in-terested or affiliated and any agent appointed by the Trustee, may have commercial relations and otherwise deal with persons with whom the Trustee has now or may hereafter have agreements or with
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any other person or entity having relations with 1
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--_-__A_._--_-___ _ _ _ _ _ _ - _ _ _ - _ - - . _ - - - _ _ . _ . _ - . - - _ _
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I such persons, and with cny other person or entity, whether or not affiliated with the Trustee. .
IN WITNESS WHEREOF, the Trustor and the Trustee have caused this instrument to be duly executed before the undersigned witnesses as of the day and year first above written. ,
WITNESSES:
f(& ,e 'rb . 9 u n. . *O ' V 4'\
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RUSSELL B. SQiULMAN Trustor
@d '
~f J. HENRY SCHRODER BANK & TRUST i
COMPANY WITNESSES:
~ ' Eb ,,' . m e - . -
By: ffd //h
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/wo// Its: A istant Vice President f' ~ ~ Trustee l
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[ THE STATr )F NEW YORK 5
! COUNTY OF NEW YORK $
BEFORE ME, the undersigned authority, on this day personally appeared RUSSELL B. S@ULMAN, as Trustor, known Kd to me to be the person whose name is subscribed to the foregoing instrument, and acknowledged to me that he executed the same for the purposes and consideration therein expressed, and in the capacity therein stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE this 25th day of January, 1978.
~
Mauaddicoo0(05dh)cuae Notary Public) in 'and fok-i New York County, Nes York I
, ' T221Y 5. SIEGEC SO7AILY'PUBLIC, Ita'a of New Y ,tr 1
i i 'No. 41./.5 4 (M 2 THE STATE OF NEW YORK $ t. ou.1;r;.a in oo... c Dc:mboion f.xpires March 30, 1978 COUNTY 0F NEW YORK $
BEFORE ME, the undersigned authority, on this day personally appeared MICHAEL J. PELLINO, Assistant Vice President of J. HENRY SCHRODER BANK & TRUST COMPANY, as Trustee, known to me to be the person and officer whose name- 1 is subscribed to the foregoing instrument, and acknowledged
' to me that he executed the same for the purposes and consideration therein expressed, and in the capacity therein stated as the s
act. and deed of said Corporation.
) GIVEN UNDER MY HAND AND SEAL OF OFFICE this 25th f
day of January, 1978.
Notary Public in and.for New York County, New York
- i . ?!RRY5: 5!!G2C B07A'AY'PU3uC, Nte of New Yorfe No. 41451/J.12 Queltlied in que.as C.s a v
)5,tanmhalen .f.sp,ts os. tecch ,30, 197.8,,
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. 1 AGREEMENT OF ASSIGNMENT .
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EXECUTED AS OF JANUARY 25, 1978 BY AND BETWEEN GULF STATES UTILITIES COMPANY, AS ASSIGNOR I
AND THE GIDEON TRUST, AS ASSIGNEE 4
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. TABLE OF CONTENTS ,
EEfi* ' .
SECTION .
Recitals '
1 >
l' Definitions 2 ,
l 2 Assignment of Purchase Orders. 4 -
3 Acceptance of Purchase Orders and Assumption.of Duties 4. .
4 Negation ~of Warranties 5 .
l r l 5 Covenants of Trustee 6 l 6 Title to Equipment and Procurement '
of Insurance' 8 7 Effect. of Transfer Agreement 9 8 Custody of Documents 9 9 Amendments 10 10 Relationship of Parties 10 11' Notices 10 a
.f 12 Binding Effect of Agreement 11 -
4 i
13 Successor Trustee 11 14 Other Documents and Instruments 12
. 15' Miscellaneous 13 15'.1 Counterparts 13
'. 15.2 Agreement for' Benefit of Trustec, Gulf States and Chemical '13 15.3 Section Headings 13 (i) l: '.
-._ , _ . . _ , .A - - _ _ . -
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.15.4 -Waiver l 13
- 15.5- Pursuit of Remedy ~
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15,6 Severability 14
- 15.7 Governing Law I 14 i 4
15.8 Recourse Against Trustee.
14 Signatures '
15 Exhibit "A"
, 17 !
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THE STATE OF NEW YORK $
AGREEMENT OF ASSIGNMENT
. COUNTY OF NEW YORK 5 THIS AGREEMENT OF ASSIGNMENT, executed as of the 25th day of January,1978, by and between Gulf States Utilities Company, as Assignor, a Texas corporation having its principal -
- offices in Beaumont, Jefferson County, Texas (" Gulf States"), ,
and the Gideon Trust, as Assignee, acting herein by and '.
l through.J. Henry Schroder Bank & Trust Company, not in its i
individual capacity but solely'in its capacity as Trustee of such Trust 'the " Trustee").
W I T N E S S E T H:
WHEREAS, pursuant to the terms of that certain Trust Agreement (as hereinaf ter defined) , the '"Gideon Trust" has been established with a situs in the State of New York for the purposea of (i) having the Trustee acquire the right 11l li to purchase certain Steam Turbine Equipment (as hereinafter
- t defined) from General Electric Company, a New York corpora ,
tion having offices in Schenectady, Schenectady County, New .
lv, York (" General Electric"), (ii) having the Trustee obtain financing for acquisition of the Steam Turbine Equipment '
through execution of.that certain Credit Agreement (as hereinafter defined) with Chemical Bank in its capacity as a state banking corporation (" Chemical"), (iii) having the Trustee own and thereafter sell the Steam Turbine Equipment i
e i F '
__ _ _ _ _______ _ _.___ ________________._.___A________i_.___________ _ _ _ _ _ ._ _.
____________.__j
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to Culf States or its' designee in accordance with that certain Agreement of Purchase (as hereinafter defined), and, (iv) obtaining for Chemical and Gulf States the benefits provided for in the, Trust Agreement and~all other agreements .
and documents referr'ed to therein; WHEREAS,-Gulf States now desires to assign, and the Trustee desires to acquire, all o'f Gulf States' right', .
title and interest in-and to certain Purchase ~ Orders (as hereinafter defined) relating to the acquisition and storage of the Steam Turbine Equipment; and i
WHEREAS, General Electric, the Trustee and Gulf States have executed that certain Transfer Agreenent (as hereinafter defined) so as to permit such essignment to be made to the Trustee on the terms and conditions set forth in this Agreement'of Assignment and in the Trust Agreement.
NOW, THEREFORE, the parties hereby' agree as follows:
SECTION 1. Definitions
-For purposesoof this Agreement of Assign' ment, the terms used'horein shall have the meanings set forth in the Trust Agreement executed as of this date'by and between i
Russell B. Schulman, ac Trustor, and the Trustee, with the
, 'following additional terms to have the meanings set forth below:.
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(a) " Purchase orders" shall mean a purchase order issued by Gulf States (either directly or .
through its agent, Stone & Webster Engineering Corporation) or a contract to which Gulf. States -
(either directly or through such agent) is a .
party, al1 as more fully listed in the Exhibit "A"
- attached' hereto and made' a part- hereof by this -
reference, the rights to which Purchase Orders are .
being assigned to and the obligations and d'uties under which are being assumed by the Trustee with .
respect to the purchase, acquisition, ownership, shipment, transportation, storage, inspection, '
j! maintenance, insurance and handling of the Steam Turbine Equipment, as such Purchase Orders have been modified on this date through the Transfer
.' Agreement and as such Purchase Orders may here-t after be amended, supplemented or revised by the .
Trustee with the prior written consent of Gulf States or through Gulf States in its capacity as agent on behalf of the Trust. -
(b) " Steam Turbine Equipment" shall mean
{ those-items of material, machinery and devices, or , ,
_ parts thereof, now or hereafter comprising and , ,
constituting the steam turbine generating equipment e
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_g_ _ _ _ _ - _ _ _ - _ _ - - - - - - - - - - - - - - - - - - -
d' .
described in the Purchase Orders , together with '
all engineering drawings and specifications, and all rights, claims, . guaranties and warranties arising with respect thereto under the Purchase Orders or otherwise. -
(c) The " Trust" shall mean the Gideon Trust established by the Trust Agreement.
SECTION 2 Assignment of Purchase Orders For.and in considerat' ion of the agreements of the
}. Trustee as contained herein and in the other agreements and i
documents referred to herein, the receipt and sufficiency of I
which is hereby acknowledged, and on the terms and condi-
- tions herein and therein set fe i, Gulf States hereby assigns, sells, transfers and sets over unto the Trustee, and the Trustee hereby acquires from Gulf States, all of the right, title and interest of Gulf States in, to and under the Purchase Orders described in the attached Exhibit "A",
i together with all of the right, title and. interest of Gulf l States in and to the Steam Turbine Equipment identified in j such Purchase Orders, i
SECTION'3. Acceptance of Purchase Orders and Assumptjon of Duties By execution hereof, the Trustee acknowledges receipt of' the Purchase Orders described in Section 2 above b
, 4
, .c- During such period of ownership, the Trustee further agrees.'
that it shall grant no lien, mortgage, security interest or
.cther encumbrance on any part .of the Steam Turbine Equipment the Trust' Estate'(other than as provided in the Collateral or !
h Assignment and the Purchase Agreement), and the Trustee '
i.
4
.shall use its best efforts to permit'or suffer no such lien, . i l
mortgage, security interest or encumbrance to be placed .
thereon by operation of law or otherwise. Prior to sale of ,
i' the Steam Turbine Equipment to Gulf States or its designee,
! .the Trustee covenants'and agrees'that (i) except as provided in cl'ause (iii) below, the Purchase Orders shall not be I
assigned, amended, mod *.fied or supplemented by the Trustee without the prior written consent of Gulf States and any a
other party whose consent may be so required by the terms of 1
} . the Trust Agreement and the other agreements and documents L
referred to therein, (ii) the Trustee shall not use or
! operate the Steam Turbine Equipment in any manner that would cause the Trust to be or become an " electric utility company" i
within the meaning of the Public Utility Holding Company Act of 1934, as in effect from time to time, and (iii) Gulf '
Stse 3s she11 be and is hereby -irrevocably designated and 2
appointed as agent for and on behalf of the Trust (but without any fee or compensation therefor) to make any amendments, supplementations or revisions to the Purchase Orders (which a
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shall thereafter be binding upon the- Trustee and Chemical) on-such terms and conditions as Gulf States shall deem to be l appropriate from time to time or at any time, with photostatic
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i copies of any such amendment, supplementation or revision to be promptly furnished to'the Trustee and Chemical.
SECTION 6. . Title to Equipment and Procurement of Insurance ~
l Subsequent'to acquisition of the Steam Turbine . I Equipment by the Trustee under the Purchase Orders, title to and ownership of such Equipment shall be vested in the 9 Trustee, subject to the terms of this Agreement of Assign-ment, the Purchase Agreement, the Trus t Agreement, and the ..
other agreements and1 documents referred to herein and
-therein. Prior to sale of the Steam Turbine Equipment to Gulf States or its designee in accordance with the Purchase
- Agreement, the Trustee shall procure and maintain such insurance on the Steam Turbine Equipment as may be required by Section 6(o) oof the Trust Agreement and Section 8 of the Purchase Agreement, with any proceeds of such insurance to be made payah b; and thereaf ter distributed in the manner provided in such Sections of the Trust Agreement and Pur-chase Agreement. -
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. SECTION 7. Effect of Transfer Agreement Effective as of this date, Gulf States and the 1rustee have entered into the. Transfer Agreement with General Electric. Neither the e cecution of the Transfer Agreement nor the terms and provisions thereof shall affect any of the -
terms and provisions of this Agreament of Assignment, and all of the terms and~ provisions hereof shall be applicable to the Purchase Orders'to whi.ch the Transfer Agreement -
. 1 pertains'. '
I j
l SECTION 8. Custody of Documents -
At all times subsequent to the date hereof, cus- )
. 1 tody of the original Purchase Orders , as well as the ori- l i
gincls of'all other documents concerning title, ownership, ,
shipment, transportation, insurance, holding, maintenance and storage of'the Steam Turbine Equipment (including all engineering drawings, specifications and other similar work products now or hereafter held _by Gulf States with respect !
to such Equipment) shall remain with Gulf States , but upon l 1
, request Gulf States shall deliver to the Trustee copies of' i i
all such papers , documents , drawings , specifications and ,
similar work products. j
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] SECTION 9. Amendments Any and all amendments, waivers, supplements or modifications.to this Agreement of Assignment shall not be effective
- unless the same are reduced to writing, signed by ,
Gulf States.and the Trustee, and consented to by Chemical.
SECTION 10. Relationship of Parties
, Nothing contained in this Agreement of Assignment shall. be construed as creating any relationship by and between Gulf States, the Trustee, and Chemical as joint .
. venturers, partners, or as principals and agents.
4 a SECTION 11. Notices All notices and communications required to be in
, writing hereunder.shall'b'ecome effective when received, addressed as'follows:
Gulf States Utilities Company Post Office. Box 2951 l
- Beaumont, Texas 77704 )
1 Attention: . William F. Malec, '
\
GideonLTrust, c/o_J. Henry Schroder Bank &
Trust Company, Trustee -
)
One State Street
.tkne York, New York 10015 .
Attention: Corporate Trust Department; ,
1 Chemical Bank '
20' Pine Street HNew York, New' York 10005 Attention: Ellen Lapson; -
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or to such other address as any of the foregoing parties or ,
, .their successors may designate by notice duly'given in ,
i
, accordance with this Section. All of such notices and communications may be given in person or by mail, postage f .
prepaid, or by telegram, charges prepaid, or by telex, telecopier or telephonic message, if promptly confirmed by ~'
f mail, postage prepaid.
l
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SECTION 12. Binding Effect of Agreement This Agre'ement of Assignment shall be binding upon ,
l 1
and shall inure to the benefit of Gulf States and the Trustee, !
their respective successors and assigns, except that.in no j event shall the Trustee assign,- transfer or delegate all or any part of its rights, powers, duties and obligations hereunder without the prior written consent' of Gulf States
] .
and Chemical (unless otherwise expressly provided to the contrary in this Agreement of Assignment, the Trust Agree- ,
ment, and the other agreements and documents referred to herein and therein).
SECTION 13. Successor Trustee Gulf States agrees that in the case of appointment i of any successor Trustee for the Trustee under the terms' of the Trust Agreement prior to termination thereof, the suc-cessor. Trustee shall, upon written notice of acceptance by
- l. . .
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, -6 . - . - . . . - . - -
such successor Trustee delivered to the Trustor, Gulf States and Chemical, succeed to all of the rights, powers and title .
of the Trustee hereunder and shall be deemed to be the owner '
of the Purchase Orders, the Steam Turbi.ne Equipment and all other rights therein for all purposes hereof, without in any way altering the terms of this Agreement of Assignment or Gulf States' obligations hereunder. Upon the appointment of a successor Trustee pursuant to the Trust' Agreement, the -
predecessor Trustee shall have no.further rights, powers, 1
duties or obligations under this Agreement of' Assignment, .
except to the extent otherwise provided in the Trust Agree-ment and the agreements and documents referred to therein.
, One such appointmhnt and designation of a successor Trustee shall not exhaust or otherwise preclude exercise of the right to appoint and designate further successor Trustees under the Trust Agreement from time to' time or at any time as'long as such Agreement shall remain in effect.
s 1 t l l
SECTION 14. Other Documents and Instruments 1[
Each party hereto agrees to execute such other documents and instruments, and to take such other actions, 1
as may be necessary or appropriate to effectuate the pur- '
s poses of this Agreement of Assignment.
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- SECTION 15. Miscellaneous l 15.1 Counterparts- .
i
'This' Agreement of dssignment may be simultaneously.
L executed in 'any number of' counterparts , each of which so . .
[ .
. executed shall.be. deemed to be'. an original and all of which j counterparts together shall constitute and be one and the j' .same instrument.
- . l 15.2 Agreement for Benefit of Trus tee ,
l Gulf States and Chemical .
~
Nothing in this Agreement of Assignment, whether express or implied, shall be _ construed to give any person or
- entity other than the Trustee, Gulf States and Chemical, any legal or equitable.right, remedy or. claim.under or in respect l of'this Agreement of Assignment, and this Agreement of
- i Assignment,'shall be held to be- for the sole and exclusive
[, benefit of such parties , with any other person or entity not ',
11
- l- to have or ac '.re.any-right, remedy or claim hereunder.
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- 15.3 Section Headings -
i Section headings herein are for the convenience of
~ the parties. only, and shall be given no substantive or i interpretive effect whatsoever, j 15.4 -
Waiver Waiver of the breach of any provision hereof "shall i
not be deemed to be a waiver of any. prior or subsequent -
breach of the sameLor any other provision hereunder. '. l
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- 15.5 Pursuit of Remed?L Pursuit of any remedy shall not be deemed to be or otherwise constitute a waiver of any other remedy hereunder or'at law or equity.
15.6 Severability Any provisi,on of this Agreement of Assignment which is prohibited .or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent .,
of such prohibition or unenforceability without invalidating remaining provisions hereof, and any such prohibition or unenforceability 1n any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.
15.7 Governing Law s a This Agreement of Assignment shall be governed by i
and construed in accordance.with the laws of the State of f
Texas. -
15.8 Recourse Against Trustee
=
i The representations, warranties, covenants, duties -
l and obligations set forth in this Agreement of Assignment'as I
i having been made by or undertaken by the Trust have been s
made by or undertaken by the Trustee of the Trust acting as
.such Trustec pursuant to.the authority vested in it under
'the laws of the State'of'New York and in conformity with th'e !
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Trust: Agreement. Reference is hereby made to the Trust i
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Agr'ement, e and all provisions of the Trust Agreement shall .
% be construed as extending to all the rights, duties, and obligationsjof the Trustee under this Agreement of Assignment as fully for all intents'and purposes as if those provisions were contained herein. The name "the Trustee" refers to the Trustee'under the Trust Agreement.in its capacity as Trustee, ,
)
and not individually or personally,.and neither the Trustee nor any shareholder,-officer, employee or agent of the ,
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' Trustee shall be held.to any personal liability. hereunder, -
nor- shall resort be had to. their private property for the satisfaction of any claim hereunder or in connection with .
the affairs of the Trust, but the Trust property only shall be liable, unless'otherwise provided to the contrary in the Trust Agreement.
IN WITNESS WHEREOF,-this Agreement of Assignment has been executed by the parties as of the. day and year -
first above written.
GULF STATES UTILITIES COMPANY ATTEST: '
^/f;'#4,fg7, p Its: Vice Prp'sident and Secretary 4sw.esLa: y GIDEON TRUST, By J. HENRY SCHRODER BANK &
TRUST COMPANY, As Trustee AT7EET:
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By: /.
//fN&rr)
Its : 'Assgstant Vice President
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3 THE STATE OF TEXAS 5 5
COUNTY OF JEFFERSON BEFORE ME, the-undersigned authority, on this day pulsonally' appeared ROBERT.W. JACKSON, Vice President and Secretary of GULF = STATES UTILITIES COMPANY, known to me to be the person and officer whose name is subscribed to theand acknow foregoing instrument,the same.for the purposes and. consideration therein expre and in the capacity therein stated as the act and deed of ;
said corporation.
GIVEN UNDER MY HAND AND SEAL OF OFFICE this.25th h day of January, 1978.
Qh
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9 Notary Public in and for
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Jefferson County, Texas Alic.e D. Sfgoy
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- THE' STATE OF NEW YORK .
COUNTY'0F NEW YORK $
- BEFORE ME, the undersigned authority, on this day personally appeared MICHAEL J. PELLIMO, Assistant Vice President of J. HENRY SCHRODER BANK & TRUST COMPANY, as
[ Trustee of the Gideon Trust, knotm to me to be the person and officer whose name is subscribed to the foregoing instrument,.
and acknowledged to me that'he executed the same for the
'l . purposes'and consideration therein expressed, and in the '
- j capacity therein stated'as the act and deed of said Trust.
at
-I GIVEN UNDER MY HAND AND SEAL OF OFFICE this 25th
- i
' day of' January, 1978.
.f4 01'k U Y )F' M 0 htkI) Gk'i.d Notary \Public i'p and for -. I
. :! New York County,,New York 9
- TIRRY $.$1ESEt '
HoTARY PURIC. T.**:e of tiew YorI J f e 41 ". M2 "
2' 0,,':f;4e? :n ib.e.is w nty
.1 Senuniuion Empises Med 30,197A
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1 EXHIBIT "A"
- AGREEMENT OF ASSIGNMENT 1
EXECUTED Ab 0F JANUARY 25, 1978, .
BY AND BETETEEN a
GlTLF STATES UTILITIES QOMPANY, AS ASSIGNOR, a .
AND ~
, THE GIDEON TRUST, u
AS ASSIGNEE 4
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AGREEMENT OF PURCHASE-EXECUTED AS OF JANUARY 25, 1978
.BY AND BETWEEN l THE GIDEON TRUST l
AND .
1 GULF STATES UTILITIES COMPANY -
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TABLE OF C0t4TEt!TS '
Page' SECTION- -
Recitals 1 l 1 Definitions 2 1 2 Agreement to Purchase and Sell 4 Date of Purchase 3
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4 Passage of Title, Risk of Loss, and
- Shipment of Equipment
. '5 .
4 5 Determination of Purchase Price' 7'
L 5.1 Purchase Price 7 2
5.2 Gain'or Loss from Investments 8 5.3- .
Method of Payment 8 l
4 6 Obligations and Agreements of Gulf States 9
- - 6.1 Unconditional Obligation to Pay 9 6.2 Waiver of Termination Rights 11 6.3 Disclaimer of Warranties 12 6.4 . Reservation of Rights 13 6.5 Maintenance and Operation of Steam Turbine Equipment 14 d
g 6.6 Acceptance of Appointment 15
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- 1. 7 Agreements of Trustee 15 8
Insurance and Risk of Loss Prior to Sale 16 l- 8.1 Risk of Loss 16 8.2 Procurement of Insurance 16 8.3 Disposition of Insurance Proceeds 18 e
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l-9 Taking of Equipment 20 '
,10 Special Covenants by Gulf States 22 11 Indemnification by, Gulf States 24 12 Settlement Date 27 13 Procedure Upon Establishment of Settlement Date 27 13.1 Discharge of Future Obligations 27 13.2 Payment of Pre-Existing obligations 28 l 13.3 Discharge of Pre-Existing' Obligations 28 13.4 Election Upon Certain Events of Default 29 !
14 Events.of Default 31
- 15 Rights of Trustee Upon Default 34 16 Warranties and Representations of Gulf States 35 17 Einding Effect of Agreement . 38 18 Successor' Trustee 38 19 Sales to Designees of Gulf States 39 20 Amendments 40 21 Relationship of Parties 41 22 Notices 41' 23 Other Documents and Instruments 42 24 Failure of Performance by Trustee 42 i
25 Miscellaneous 43
, 25.1 Counterparts 43 25.2 Agreement for Benefit of Trustee, Gulf States and Chemical 43 l
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(ii)
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~ 25.3 Section Headings. 43 .
25.4~ .W aiver 43 v.
25.5 Pursuit of Remedy ,
44 i
j 25.6 Severability 44 t
- j. 25.7 Governing Law 44 ,
s 25.8 Recourse Against Trustee 44 t '
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Signatures -
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THE STATE OF NEW YORK. 5 -
AGREEMENT OF PURCHASE COUNTY OF NEW YORK 5 THIS AGREEMENT OF PURCHASE, executed as of the 25th day of January, 1978, by and between the Gideon Trust established under that certain Trust Agreement (as hereinafter defined), acting.here'in by-and through J. Henry Schroder ~
Bank & Trust Company, not in its individual capacity but .
solely in its capacity as Trustee of such Trust (the " Trustee"),
and Gul'f States Utilities Company, a Texas corporation having its. principal offices in Beaumont, Jefferson County, .
Texas (" Gulf States").
W I.T N E S S E T H:
WHEREAS, pursuant to the terms of that certain Trust Agreement (as hereinaf ter defined), the "Gideon Trust" has been es'tablished with a situs in the State of New York .
for the purposes of (i) having the Trustee acquire the right to purchase'certain Steam Turbine Equipment (as hereinafter ,
defined) from 'eneral G Electric Company, a New York corpora-tion'having offices in Schenectady, Schenectady County, New York (" General Electric"), (ii) having the Trustee obtain financing for acquisition of the Steam Turbine Equipment through execution of that certain Credit Agreement (as hereinafter defined) with Chemical Bank in its capacity as a j
state banking corporation (" Chemical"), (iii) having the
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Trustee own and thereafter cell the Steam Turbine Equipment to Gulf States or its designee in accordance with the terms of this Agreement of Purchase, and (iv) obtaining for Chemi-cal and Gulf States the benefits provided for~in the Trust '
. Agreement and all other agreements and documents referred to therein; WHEREAS, concurrently with the execution of this
! Agreement of Purchase, Gulf Stater and the Trustee have executed that one certain Agreement ~of Assignment (as l
hereinafter defined) which provides, amcag other things, for
- the assignment to the Trustee by Gulf States of all of Gulf States ' right, title and interest in and to the Purchase Orders (as hereinafter defined) relating to the acquisition and storage of the Steam Turbine Equipme.nt; and .
WHEREAS, on the terms and conditions hereinafter .
,' set forth, Gulf States now desires to contract for the pur-chase, and the' Trustee now desires to provide for the sale,
.1 of all of the Trust's right, title, and interest in and to the ' Steam Turbine Equipment and the Purchase Orders. . .
NOW, THEREFORE, it is hereby agreed as follows:
SECTION.l. Definitions ,
For purposes of this Agreement of Purchase, the '
terms used herein shall have the meanings set forth in (i) f
- .__. _ _ _ . _ . _ _ _ _ _ _ _ . . . . _ _ . . IN . _. __. _ m._-..
thcLTrust Agreement executed as of this dato by and between Russell B. Schulman, as Trustor, and the Trustee, and (ii) the Agreement of Assignment executed as of this date by Gulf States and' the Trustee, with the following additional terms to have the meanings set forth below:
(a) " Events of Default" shall mean the occurrences described in Section 14 hereof.
-(b) " Purchase Date" shall mean the purchase '
and sale date established pursuant to Sectio.n 3.
(c)," River Bend Unit No. 1" shall mean the -
nuclear facility of Gulf States, located in West Feleciana Parish, Louisiana, at which the Steam Turbine Equipment is to be used in the generation i
of electricity.
(d) " Settlement Date" shall mean the date for ,
payment established pursuant to Section 12 hereof.
(e) "Taking" shall mean a.. loss, prior to -
purchase by Gulf States or its designee as herein provided, of the ownership, use or, possession of the Steam Turbine Equipment or any part thereof or any interest therein, as a result of or in lieu or in anticipation of an exercise of the right of .
condemnation or eminent domain pursuant to any I
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law, general or special, or by reason of the '
4 temporary requisition of the use of such Steam
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Turbine Equipment or any part thereof, by.any governmental body, authority or entity, whether [ ,
civil or military. -
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SECTION 2. Agr~eement to Purchase ~and Sell >
For and in consideration of the mutual covenan.ts -
l and agreements herein contained, the rece-pt and sufficiency of which are hereby acknowledged, and on the terms and con-l dicions set forth in this Agreement of Purchase and in the other agreements and documents referred to herein, Gulf States agrees to purchase, and the Trustee agrees to sell to Gulf States (or its designee), all of the Trustee's right, j .
title, and interest in and to the Steam Turbine Equipment (including any additions to, substitutions for, or replace- .
1 ments1 of such Equipment), together with all engineering drawings and specifications , and all rights , claims , guaran-ties, and warranties arising at any time with respect there-to under the Purchase Orders, or otherwise.
- SECTION 3. Date of Purchase Unless a Settlement Date shall be sooner established .
pursuant to the provisions of Section 12 of this Agreement l .
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of Purchase, the purchase and sale of the St'eam Turbine Equipment shall be made on such date (the " Purchase Date")
as-all or substantially all of.the Steam Turbine Equipment. l shall be delivered to the installation site or sites previously specified by Gulf States or its designee in written delivery
- instructions furnished to the Trustae for such purpose at any time or from time to time selected by Gulf States in the , j exercise of its sole discretion. On the Purchase Date, Gulf -
States or its designee shall pay the purchase price determined I as provided in Section 5.1. In such event, the Trustee shall sell, transfer, assign and convey the Steam Turbine Equipment and Purchase Orders to Gulf States or its designee as of such date on the terms and conditions set forth in
, Section 13.2 but without the requirement that any further payment be made therefor or thereunder, j .
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SECTION 4. Passage of Title, Risk of Loss, and Shipment of Equipment .
Subject to payment of the amounts required by Section 3 or 13 hereof, as appropriate, and only if the Trustee has not elected to proceed under Section 13.4, title to and' ownership of the Steam Turbine Equipment shall vest in Gulf States or its designee on the earlier of the Purchase '
Date or the Settlement Date. The risk of loss as to the
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l Steam Turbine Equipment shall pass from the Trustee to Gulf *
~ States or its designee on the date the Trustee receives written instructions as to delivery from Gulf States or its ,
designee, but in any event not later than the Settlement .
On such date of passage, Date established by Section 12. ,
Gulf States (or. its -designee) shall ' assume and agree to -
perform all of the Trustee's obligations under the Purchase- ,
Orders (with the Trustee to have no further responsibility ,
therefor), and it shall be the sole obligation of Gulf States (or its. designee) to provide for.the shipment, '
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transportation, delivery, storage, insurance, installetion, l
inspection, handling and maintenance of the Steam Turbine Equipment subsequent to the Trustee's receipt of such i
delivery instructions or to the establishment of a Settlement '
Date pursuant to Section 12, whichever may be the case. In either such _astance, Gulf States (or its designee) shall, " '
to the extent and on the terms and conditions set forth in l Section 6.4, succeed to all of the Trustee's rights, claims and interests with respect to such shipment, t.ransp ortation ,
delivery, storage, insurance, installation, inspection, handling and maintenance of the Steam Turbine Equipment.not-withstanding the responsibility or obligation of Gulf States
-(or its des'ignee) to provide therefor.
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SECTION 5. Determination of Purchase Price ' \
i 5.1 Purchase Price Subj ect to.the provisions of Section 5.2, the i purchase price to be paid by Gulf States (or its designee) l
- for the Steam Turbine Equipment as of the purchase and sale date established pursuant to Section 3 shall be equal to the
, I sum of the following:
(a) the aggregate unpaid balance of. all j' .
indebtedness and other sums .due and owing to I 1
Chemical.from the Trustee under the Credit Agreement '
and the Collateral Assignment as of such date,
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including all interest payable en such indebtedness
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and all other fees and amounts then owing to Chemical thereunder; .
(b) all other costs, charges, taxes, and expenses of the. Trust.due and owing from the Trust '
as of such date with respect to the acquisition, ownership, transportation, shipment, holding,
- delivery, storage, insurance, maintenance, in-stallation, handling, inspection and sale of the Steam Turbine Equipment, but only to the extent that such costs, charges, taxes, and expenses have not been paid (or provision for such payment made) e 6
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. out of the amounts described in clause -(a) above; '
and (c) all commissions, fees, and other reasonable costs and administrative expenses then due and owing to the Trustee under Section 12 of the Trust
- Agreement and not otherwise included in.the calculation of purchase price under clauses (a) or (b) above.
. 5.2 Gain or Loss from Investments .
l Any gain or loss by the Trust on investments made pursuant to Section 13.5 of the. Trust Agreement shall be
- applied toward re' duction of or shall be treated as an increase in the costs and administrative expenses of the Trustee described in clause (c) of Section 5.1 above, as appropriate.
l 5' . 3 Method of Payment 3
Payment of. the purchase price for the Steam Turbine Equipment shall be made by Gulf States (or its designee) directly to Chemical as provided in the Collateral Assign-ment,.or to any other person.or entity designated in writing by the Trustee and approved by Gulf States and Chemical.
Such payment shall be made in cash or immediately available funds.
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SECTION 6. Obligations and Agreements of Gulf States 6.1 ~ Unconditional Obligation to Pay The obligation of G.ulf States to make all payments pursuant to.this-Agreement of Purchase shall be absolute and unconditional, and is not to be ,affec.ted by circumstances of any character. TO,THIS END, IT IS AGREED-THAT THE OBLIGATION ,
s OF GULF STATES TO ACQUIRE AND PAY FOR THE STEAM TURBINE ,
' EQUIPMENT AND PURCHASE ORDERS, AND THE TRUSTEE'S RIGHTS WITH .
RESPECT
- TO ANY SUCH EQUIPMENT OR PURCHASE ORDERS ASSIGNED, SOLD OR DELIVERED DURING THE TERM OF THIS AGREEMENT OF '
PURCHASE OR OTHERWISE, IS WITHOUT ANY WARRANTY O'1 REPRESENTA-TION AS TO ANY MATTER WHATSOEVER ON THE PART OF THE TRUSTEE OR THE TRUST, AND, AS BETNEEN OULF STATES, THE TRUSTEE, AND '
CHEMICAL, BUT SUBJE'CT TO THE PROVISIONS OF SECTION 6.4 HEREOF, GULF STATES ASSUMES ALL RISKS AND WAIVES ANY AND ALL DEFENSES TO SUCH OBLIGATION TO PURCHASE AND MAKE ALL OTHER REQUIRED PAYMENTS'IN ACCORDANCE WITH THE PROVISIONS HEREOF, .
INCLUDING WITHOUT ' LIMITATION ATI DEFENSE RELATING TO (A) THE TITLE, TAKING, CONDITION, QUALITY, QUANTITY, FITNESS, OR SUITABILITY FOR USE, MERCHANTABILITY, CONFORMITY TO . SPECIFICATION','
4I ji OR ANY OTHER QUALITY OR. CHARACTERISTIC OF THE STEAM TURBINE i
EQUIPMENT WHETHER OR NOT SUCH EQUIPMENT IS DELIVERED TO. GULF STATES OR THE DESTRUCTION, THEFT, OR THE OTHER PARTIAL OR.
3 -COMPLETE LOSS OF THE STEAM TURBINE EQUIPMENT, (B) ANY SETOFF, )
l , _ COUNTERCLAIM, RECOUPMENT DEFENSE, OR OTHER RIGHT.WHICH GULF t .
_.m
- STATES MAY HAVE A. GAINST ANY PERSON OR ENTITY SELLING, DELIV-ERING, SHIPPING, HANDLING OR TRANSPORTING THE STEAM TURBINE l
EQUIPMENT TO.THE TRUST OR AGAINST THE TRUST, THE TRUSTEE, OR ,
CHEMICAL, OR AGAINST ANY OTHER PERSON OR ENTITY FOR ANY REASON WHATSOEVER, (C) ANY DEFECT IN TITLE OR OWNERSHIP OF l THE STEAM'TURBINN EQUIPMENT OR PURCHASE ORDERS, (D) ANY INABILITY OR ILLEGALITY WITH RESPECT TO THE OWNERSHIP OR USE OR POSSESSION OF THE STEAM TURBINE EQUIPMENT BY GULF STATES OR THE'0WNERSHIP THEREOF BY THE TRUST, (E) ANY INSOLVENCY, ,
BANKRUPTCY, REORGANIZATION, OR SIMILAR PROCEEDING BY OR AGAINST GULF STATE'S, (F) ANY EXPIRATION, INTERRUPTION, SUSPENSION OR OTHER TERMINATION OF ANY REQUIRED GOVERNMENTAL
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LICENSES, PERMITS, CONSENTS, AUTHORIZATIONS, OR APPROVALS AS
~ TO THE STEAM TURBINE EQUIPMENT ACQUIRED BY GULF STATES, THE TRUST OR THE TRUSTEE PRIOR TO ANY SUCH EXPIRATION, INTERRUP-
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TION, SUSP'ENSION, OR OTHER TERMINATION, (G) THE INVALIDITY -
OR UNENFORCEABILITY OF THIS AGREEMENT OF PURCHASE OR ANY l OTHER INFIRMITY HEREIN (INCLUDING FAILURE TO OBTAIN REQUIRED '
REGULATORY APPROVAL, CONSENT OR AUTHORIZATION) OR ANY LACK OF POWER OR AUTHORITY OF THE TRUST OR THE TRUSTEE TO ENTER INTO THIS AGREEMENT OF PURCHASE, AND (H) ANY DESIGNATION BY
. GULF STATES OF A THIRD PARTY TO PURCHASE THE STEAM TURBINE EQUIPMENT AS L'0VIDED-IN SECTION 19 HEREOF.
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6.2 Waiver of Termination Rights To the extent permitted by applicable law, Gulf States hereby waives any and all rights which it may now-have or which at any time hereaf ter may be conferred upon it, by statute or otherwise, to terminate, cancel, rescind, revoke, or surrender.this Agreement 'of Purchase other than in accordance with the express terms hereof. All payments made by Gulf States (or its designee) under Section 3 or .
13.2 hereof shall be final as between and among' Gulf States, j its designee,.the Trustee and Chemical, and it is agreed that neither Gulf ' States nor its designee shall have any right to recover all or any part of such payments from the ,
, Trustee or Chemical for any reason whatsoever, unless express-ly provided to the contrary in this Agreement of Purchase i
and.in the other agreements and documents referred to herein.
Notwithstanding the foregoing, if an error or mistake has ;
1 been made in the computation of any amounts paid by Gulf States (or its designee) pursuant to Section 3 or 13.2 l 1
hereof, and such error or mistake has resulted in the pay-ment of an amount in excess of or less than the amount which e
should have been paid pursuant to such Sections, Gulf States, I its designee, the Trustee, or Chemical, as appropriate, shall not be precluded by this Section from recovering the I amount of such excess or deficiency from the party or parties responsible therefor.
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, 6.3 . Disclaimer of Warranties By execution hereof, Gulf States acknowledges and agrees that THE STEAM TURBINE . EQUIPMENT HAS NOT BEEN SELECTED l BY THE TRUSTEE, THAT THE TRUSTEE HAS NOT SUPPLIED ANY SPECIFICATIONS WITH RESPECT THERETO, AND THAT NEITHER THE TRUSTEE, THE TRUST, AND_ CHEMICAL, NOR ANY PERSON OR ENTITY ACTING ON ITS OR THEIR BEHALF OTHER THAN GULF STATES (i) IS A 1
MANUFACTURER OR PRODUCER OF OR A DEALER IN STEAM TURBINE -
EQUIPMENT, (ii) HAS MADE ANY RsCOMMENDATION, GIVEN ANY 4
ADVICE, OR TAKEN ANY OTHER ACTION WITH RESPECT TO THE CHOICE ,
OF ANY PRODUCER, SUPPLIER, VENDOR, PROCESSOR, FABRICATOR, OR TRANSPORTER OF, OR ANY OTHER CONTRACTOR WITH RESPECT TO, THE STEAM TURBINE EQUIPMENT OR ANY PART THEPEOF, OR HAS GIVEN l ANY SUCH ADVICE OR TAKEN ANY SUCH ACTION WITH RESPECT TO THE STEAP TURBINE EQUIPMENT OR ANY PORTION THEREOF AT ANY " STAGE OF ACQUISITION, PRODUCTION, PROCESSING, SHIPMENT, TRANSPORTATION OR STORAGE, (iii) HAS AT ANY TIME HAD PHYSICAL POSSESSION OF '
ANY PORTION OF THE S' TEAM TURBINE EQUIPMENT OR IMDE ANY I
INSPECTION THEREOF, OR (iv) HAS MADE ANY WARRANTY OR OTHER l' .
l REPRESENTATION, EXPRESS OR IMPLIED, THAT THE STEAM TURBINE EQUIPMENT WILL NOT RESULT IN INJURY OR DAMAGE TO PERSONS OR j PROPERTY, OR HAS BEEN OR WILL BE PROPERLY PRODUCED, STORED OR TRANSPORTED OR WILL ACCOMPLISH THE RESULTS WHICH GULF STATES INTENDS THEREFOR, OR IS SAFE IN ANY MANNER OR RESPECT. '
THE PROVISIONS OF THIS SECTION HAVE BEEN NEGOTIATED WITH THE l 1
'h a
INTENTION OF COMPLETELY EXCLUDING AND NEGATING ALL WARRANTIES BY THE TRUSTEE, THE TRUST, CHEMICAL, OR ANY OTHER PERSON OR
- ENTI" ACTING ON BEHALF OF EITHER OF THEM, WHETHER EXPRESS OR IMPLIED, RELATING TO THE STEAM TURBINE EQUIPMENT OR ANY
' PART THEREOF, WITH RESPECT TO MERCHANTABILITY, FITNESS,'OR l ANY OTHER CIRCUMSTANCE OR MATTER, WHETHER ARISING PURSUANT TO A UNIFORM COMMERCIAL CODE OR ANY OTHER FUTURE OR PRESENT ,
LAW, OR OTHERWISE.
6.4 Reservation of Righcs - - -
Nothing contained in this Agreement of Purchase or '
in the other agreements and documents referred to herein shall limit, abrogate or rescind the liability of any seller, vendor, manufacturer, transporter, insurer, or other contrac-tor (except for the Trustee, the Trust or Chemical as elsewhere 1 I
herein provided) under any agreement, instrument, contract, purchase order, document, warranty, guarantee, claim, or undertaking, whether expressed or implied, relating to the Steam Turbine Equipment, or the shipment, transportation, ownership, delivery, storage, insurance, installation, inspection, handling or maintenance thereof; that the Trustee l
1 may have or hold as of the Purchase Date or the Settlement I
Date, as the case may be, or that shall arise or accrt.o at any time prior or subsequent to either such date, under any such agreement, instrument, contract, document, purchase l
. order, warranty, guarantee, claim or undertaking, or otherwis'e, inhespect thereof. All of such agreements, instruments, documents, contracts, purchase orders, warranties, guaranties, claims, and undertakings, whether express or implied, shall constitute a part of the Steam Turbine Equipment (as described in 'Section 2 hereof) to be assigned and transferred over to
- Gulf States (or its designee) as a part of and incident to .
the sale of the Steam Turbine Equipment on the Purchase Date -
or Settlement Date, as appropriate. Following such assignment and transfer, Gulf States or its designee shall be permitted .
to assert all rights and claims, and to bring.all suits, actions, and proceedings, in its own name and on its own behalf, in respect of any such agreement, instrument, document, contract, purchase order, warranty, guarantee, claim or undertaking, and shall be entitled to retain all proceeds, 4
recoveries or other amounts or benefits receivable or payable as a result of or otherwise arising from any of the foregoing. -
6.5 Maintenance and Operation of Steam Turbine Equipment 1
As agent for the Trust, Gulf States irrevocably
, agrees to maintain, preserve and keep the Trust Estate in good condition and repair at the sole cost and expense of the Trust so that at all times preceding the . sale and transfer provided for herein the efficiency of the Trust Estate shall be maintained and preserved. Prior to sale and transfer of 6
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the. Steam Turbine Equipment and Purchase Orders as herein set forth, Gulf States, in its capacity as agent for and on behalf of the Trust, shall not use or operate, or cause to i be used or operated, the. Steam Turbine Equipment in any manner that would cause the Trust to be or become an " electric utility holding company" within the meaning of the Public !
Utility Holding Company Act of 1934, as.in effect from time to time or at any time. "
l 6.6 Acceptance of Appointment I By execution hereof, Gulf States hereby irrevocably .
accepts appointment by the Trustee as agent for and on behalf of-the Trust to the extent and on the terms and conditions set forth in this Agreement of Purchase, the Trust Agreement and the other agreements and documents
, referred to therein.
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.p 1 SECTION 7. Agreements of Trustee
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l By execution hereof, the Trustee agrees that prior to sale and transfer of the Steam Turbine Equipment and Pur-chase Orders as herein set forth, the Trustee shall not (i) sell, transfer or assign any interest in the Steam Turbine Equipment or the Purchase Orders to any person or entity other than Gulf States or its designee under this Agreement of Purchase, except to the extent otherwise expressly pro-l
'vided to the contrary in Section 13.4 hereof, (ii) place any i
lien, mortgage, securi ty interest- or other encumbrance on i f,
all or any part of the . Trust Estate (except as and to the extent provided in the, Collateral Assignmet ), using its .
best efforts to permit or' suffer _no such lien, mortgage, security. interest, or encumbrance to be placed ther' eon by operation 'of -law or otherwise, (iii) use or operate the Steam' Turbine Equipment in any manner that would cause the Trust to be or'become an " electric utility holding company" '
within the meaning of,the Public Utility , Holding Company Act ,
of 1934,Las in effect:from time to time, and (iv) take.or at any. time claim any depreciation or other similar deduction or credit available with respect to its ownership of the Steam Turbine Equipment _ on any federai; state, or other income tax return required to be filed by or on behalf of the Trust or the Trustee.
- SECTION 8. Insurance and Risk of Loss Prior to sale 8.1 Risk of Loss .
The risk of loss with respect to the Steam Turbine Equipment, after such risk has passed from General Electric
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j to' the Trustee _ under 'the Purchase Orders ,. shall res t with the. Trustee until Gulf States or its designee shall assume and bear such risk as provided in Se6 tion 4 hereof.
8.2 Procurement of Insur -ice Notwithstanding the pro'csions of Section 8.1 above, at all times prior to sale of the Steam Turbine n-, --., ,-
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l Equipment under this Agreement of Purchase, Gulf States (as agent for and on behalf of the Trust) shall cause the Steam Turbine Equipment to be covered by "all riak" insurance issued by insurance companies acceptable to Gulf States and authorized to transact an insurance business in the jurisdic-tion or jurisdiction's where such coverage is to be effected.
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The insurance shall be'in'such amounts and with such coverages
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as are consisten.t with industry practice for investor-owned.
electric utility companies (as determined by Gulf States as agent for the' Trustee), and all policies orsviding such .
coverage shall name Gulf States, the Trustee and Chemical as insureds, with all losses under the policies to be payable to each to the extent that their respective interests may appear. The insurance required by this Section shall be maintained on behalf of the Trust at its sole cost and expense. In its capacity as agent, Gulf States shall arrange for the Trustee's compliance with all terms of such insurance policies and with all requirements of the companies .
issuing the same, and the Trustee shall have no responsibil-ity with respect to compliance with such terms and require-ments except that the Trustce shall take any action au Culf States may from time to time reasonably request in connection therewith. Gulf States shall furnish the Trustcc and Chemi-cal with a copy of each insurance policy maintained hereu,nder, 1
1 s
and shall promptly deliver to the Trustee and Chemical a
, copy of any and all amendments to such policies, provided .
that no such amendment shall adversely affect the rights or obligations of the Trustee or Chemical under the policies without the prior written consent of each. i 8.3 Dispo'sition of Insurance Proceeds In the event of any loss,' damage or. destruction to 1
the Steam Turbine Equipment prior to sale or transfer as -
herein prosided, the Trustee and Gulf States shall promptly I t
l notify the other and Chemical of any such loss, damage or ,
h destruction which comes to its attention. If such loss,
,i damage or destruction is fully covered by the insurance u
- maintained pursuant to Section 8.2, the proceeds of such insurance shall' be applied by the Trustee, Gulf States and Chemica? ward repair, reconstruction or replacement of the .
3, Steam Turbine Equipment, and in such event'all of the rights 1
j; and obligations of the parties under this Agreement of J -
j Purchase and the other agreements and documents referred to
,1
'l .
herein shall remain unaffected. If such loss, damage or
.l 1
destruction is not fully covered by the insurance, Gulf
'I States .shall have a period of ninety (.90) days af te'r the occurrence thereof within which to pay to the Trustee a sum f of money that, when added to the insurance proceeds avaiIable j! therefor, will be sufficient to provide for the full repair, I
o
.h
,h 4
.- 9 reconstruction or replacement of the Steam Turbine' Equipment.
In such event, the Trustce, Gulf States and Chemical shall F
cause the insurance proceeds to be applied toward such repair, reconstruction or replacement, and thereafter the rights and obligations of the parties under this Agreement of Purchase and the other. agreements and documents referred to herein shall remain unaffected. If Gulf States shall fail to pay such sum of money for repair, reconstruction or replacement as above provided, such failure' of Gulf States shall constitute an Event of Default under Section 14(b). -
In such instance, the Trustee shall have the rights and remedies provided for in Section 15, and if Gulf States shall pay all amounts due and owing. hereunder as of the Settlement Date established on or subsequent to such occurrence, Gulf States shall be entitled to receive and retain, and the i Trustee and Chemical shall assign and make available to Gulf l States, all insurance rights and proceeds as a part of the
- Steam Turbine Equipment to be transferred.to Gulf States l l
under Section 13.2 of this Agreement of Purchase. Thereafter. l Culf States shall have full right and authority, in its own.
name and on its own behalf, to claim against any insurance -
l company or other third party so as to prosecute, settle, .
compromise and dispose of any 'and all such claims arising with respect to the loss, damage or destruction of the Steam
~
l Turbine Equipment on such terms and conditions as Gulf
' States shall deem appropriate in the exercise of its sole discretion. If ' Gulf States shall fail to pay all amounts
[ ., due and owing hereunder as of the Settlement Date, such failure shall constitute an Event of Default within the meaning of Section 13.4, and in addition to exercising the i
l rights and remedies provided in such Section and in Section 15, the Trustee shall be entitled to receive and retain al'1 .
insurance p'roceeds to the extent of the amounts'due and owing from Gulf States hereunder, with any balance thereafter .
- h. remaining to be disposed of as provit .d in Section 13.4.
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U -
- l) SECTION 9. Taking of Equipment In the event that Gulf States or the Trustee shall
', acquire any knowledge that proceedings or negotiations have been commenced which may result in any Taking of the Steam 1 Turbine Equipment prior to sale and transfer as elsewhere
?1 j herein provided, the party acquiring such knowledge shall j promptly notify the other party and Chemical in writing, describing in general the nature and extent of such proceedings 3
i or negotiations, as the case may be. If the proceedings or i '
negotiations shall result in a Taking of the Steam Turbine j Equipment, such occurrence shall constitute an Event of.
t I Default under Section 14(i) of this Agreement of Purchase.
't I In such event, the Trustee shall have the rights and remedie.s i
j' ,
i- '
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t 3 -
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l provided for in Section 15, and i f Gulf States shall pay all -
[
amounts due-and owing under'Section 13.2 as of the Settlement l .
Date established on or subsequent to such occurrence, Gulf l States shall be. entitled to receive and retain, and the .
. Trustee and Chemical shall assign and mcNe available to Gulf States, all proceeds and other rights arising from the Taking as a part of the Steam Turbine Equipment to be transferred to Gulf States under Section 13.2 of this Agreemen't of ,
Purchase. Thereaf ter, Gulf States shall have fu'll right and ' ,
authority, in its own name and on its own behalf, to claim ,
against any governmental authorities or other third parties so as to prosecute, settle, compromise and dispose of any and all such claims arising with respect to the Taking on such terms and conditions as Gulf States shall deem appropriate in the exercise of its sole discretion. If Gulf States shall fail to pay all amounts due and owing hereunder as of the Settlement Date, such failure shall constitute an Event of Default within the meaning of Section 13.4, and in addition' to exercising the rights and remedies provided in such
.Section and in Section 15, the Trustee shall be entitled to receive and retain all proceeds from the'Taking to the cxtent of the amounts due and owing from Gulf States .hcrcunder, with any balance thereaf ter remaining to be disposed of as provided in Section 13.4.
a L
i.
a SECTION 10. Special Covenants by Gulf States Prior to sale and transfer of the Steam Turbine Equipment as herein provided,' Gulf States shall furnish to Chemical and the Trustee (i) on or before the Closing Date (as defined in the Credit Agreement) certified copies of resolutions of the Board of Directors of Gulf States authorizing and ratifying the execution, delivery and performance of this Ag.reement of Purchase, the Assignment Agreement, the ~
Transfer Agreement,'and the Purchase Orders, a copy of the Certificate of' Incorporation and Articles of Incorporation
- of Gulf States certified as of a recent date by the Secrett.ry l
I of the State of Texas, and Certificates of the Secretary of the State of Texas and the Secretary of the. State of Louisiana, dated as of recent dates, as to the good standing of Gulf States and its charter documents on file, (ii) a certificate .
i of the Secretary or Assistant Secretary of Gulf States dated q
I as of such Closing Date certifying (x) an attached copy of -
l I
the Bylaws of Gulf States as true and correct on such date, l (y) the incumbency and signatures of the officers of Gulf i States executing this Agreement of Purchase, the Assignment Agreement, the Transfer Agreement, and any other agreements l and documents delivered in connection herewith, and (z) the
! Certificate of Incorporation of Gulf States has not been I
i amended since the date of the last. amendment thereto indicated i
i i
.,. s on the certificate furnished. pursuant to clause (i) above, (iii) as soon as available but in no event more than sixty -
(60). days after the end of each of the first three (3) fiscal quarters of Gulf States, a balance sheet of Gulf States dated as of the close of each such period, together with statements of income and expense to the close of such period, certified by the Treasurer, Assistant Treasurer, Secretary, or Assistant Secretary of Gulf States, and -
accompanied by a certificate of such officer' stating whether any event has occurred which constitutes an Event of Default -
hereunder or which would constitute such an Event of Default with the giving of notice or thc* lapse of time, or both, e
I and, if so, stating the facts and circumstances with respect thereto, (iv) as soon as available but in no event more than ninety (90) days after the close of each of Gulf States' .
i fiscal years, a copy of the annual report relating to Gulf States prepared in accordance with generally accepted accounting principles and certified by Coopers & Lybrand or other i
acceptable independent accountants, together with financial statements consisting of a balance sheet of Gulf States as
, of the end of each such fiscal year and statements of income and expense and retained earnings of Gulf States for each such fiscal year, (v) as soon as available, but in no event more than ninety (90) days after the close of each of Gulf States' fiscal years, a written statement from.the Treasurer, I
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5 .
[ .
Ascistant Treasurer, Secretary, or Assistant S'ecretary of t
[ Gulf States which'ccrtifies whether any event has occurred -
! to~the close~of each such fisc'al year that constitutes an Event of Default hereunder or that would constitute such an' l Event of Default with the giving of notice or the lapse of L , . .
- time, or.both, and, if so, which states the facts.and -
l circumstances with respect thereto, (vi) as soon as available, '
i .
l- copies of all periodic reports on Form 10-K filed by Gulf s
]
- States under the Securities Exchange'Act of 1934, (vii)
? -
prompt written notice describin'g the facts and circumstances '
surrounding the occurrence of any event which constitutes an y Event of' Default hereunder or which would constitute such an 1-Event of Default with the giving of notice or the lapse of l l time, or both, and (viii) suc'h additional information, P reports or statements as the Trustee may from time to time .
h -
U reasonably request.
4 l
)j SECTION 11. Indemnification by Gulf States Gulf States shall pay, and shall protect, indemnify,
, and hold harmless 'the Trustee, its successors and assigns, i
j and its officers, directora, shareholders, employees, agents, l and' servants, . from and against all liabilities, obliga ti.ons ,
]. impositions, losses, claims, damages, penalties, causes of action, suits, costs and expenses (including, without limita-
,! . tion, attorneys' fees and court costs), judgments of any 6
e
r 4
nature, or any calca, uun, Jncome, or other taxen (exclunive ,
of any income taxes payabic by the Trustee on any fee received by it under the Trust Agreement) imposed ~on or incurred or suffered by the. Trustee and not paid out of the assets of the Trust Estate, as a result of (i) the Trustee's ownership of~the Steam Turbine Equipment or the purchase, repurchase, acceptance, acquisition, ownership, financing, storage, shipment, transportation, delivery,. nondelivery, possession, -
holding, use, non-use, operation, condition,maintenaned, .
insurance, inspection, handling, management, sale, re-sale, return or other disposition of such Equipment, or (ii) the acceptance or administration of the Trust or the acts or;
/ omissions of the Trustee or any of the employees, agents,
.i .
contractors, servants, licensees, or invitees of Gulf States or the Trustee under the Trust Agreement, the other agreements and documents referred to therein or otherwise, or (iii) any claims or penalties arising from any violation by Gulf States or the Trustee of any laws, regulations or provisions, terms or conditions of any licenses, permits, consents, authorizatons, or approvals pertaining to.the Steam Turbine Equipment, or the failure to obtain any such licenses, perr its, consents, authorizations or ap'provals, or (iv) any claims' arising out of latent or other defects in the Steam Turbine l
- i. Equipment, whether or not discoverable by the Trustee o'r i
e Gulf States, or (v) any accident, -injury, death, or damage r
caused by'or connected with any of the acts, events, conditions,
!i l![
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omissions or occurrences hereinabove described. Notwithutanding ,
the foregoing,.in no' event shall Gulf States be obligated o'r .
otherwise required to indemnify or hold harmless the Trustee I from the consequences of any, fraud, gross negligence or willful misconduct of the Trustee, or for the material l l
breach or material failure of any warranty, representatien, i or c'venant o made by the Trustee specifically in it:s individual capacity as a state banking corporation in this Agreement of .
l Purcha or in any of'the other agreements and documents- .
referred to herein. In the event that any action, suit, or proceeding is brought against the Trustee by reason of any act, event, condition, omission or occurrence'as to which the Trustee is entitled to indemnity under this Section, -
Gulf States shall at its sole cost and expense, resist and defend such action, suit or proceeding, or cause the same to be resisted and defended by counsel designated by Gulf States and acceptable to the' Trustee,-and in such event the ,'
counsel so designated by Gulf States shall control the
~
conduct of litigation as to any such action, suit or proceedlng.
The obligations of Gulf States under this'Section shall survive any sale or transfer of the Steam Turbine Equipment pursuant to this Agreement of Purchase or otherwise, and Gulf States shall afford indemnity to the~ Trustee as hereinabove provided at all times subsequent to any such sale or transfer notwithstanding any provision to the contrary in Section.13 hereof.
l 3 __
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- 1 SECTION 12.
Settlement Date l
.. Unless the Steam Turbine Equipment shall be sooner purchased as of the Purchase .Date established in Section 3, a Settlement Date shall be established under this Agreement of Purchase upon occurrence of any of the following: l (a) January 2, 1981; or (b) ten (10) days after delivery to Gulf States by the Trustee of written notice .of the- ,
occurrence of any Event of Default as defined in Section 14 hereof; or 1
(c) after delivery to the Trustee by Gulf l States or its designee.of ten (10) days' prior written notice to the effect that the Steam
't Turbine Equipment is to be purchased as of the expiration of such. period but at the option of l Gulf States or such' designee is to remain in '
storage.
SECTION 13. Procedure Upon Establishment of Settlement Date i 13.1 Discharge of Future Obligations On the Settlement Date es tablished as provided in Section 12, all obligations and liabilities of the Trustee i
and. Gulf States under this Agreement of Purchase shall cease i and terminate except with respect to (i) obligations and L
liabilities of Gulf. States, whether actual or contingent, that arose hereunder on'or prior to the Settlement Date, (ii) obligations of Gulf States under Section 11 hereof, and.
(iii) obligations of the Trustee to transfer the Steam Turbine Equipment pursuant to Section 13.2 or to exercise l
the termination rights.and remedies provided in Section 13.4.
a 13.2 Payment of Pre-Exis ting Obligations -
On.the Settlement Date fixed by or in accordance '
i with Sec' tion 12, Gulf States (or its designee) shall pay to
~
the Trustee an amount equal to the purchase price for the .
Steam Turbine Equipment determined pursuant.to Section 5 l hereof as of such Settlement Date. Upon receipt of such payment which shall be made in the manner provided in Section 5.3, the Trustee shall execute and deliver to Gulf States or its designee a bill of sale (in due form and in the required
'l number of counterparts for filing or recording, if necessary) l and any other written documents in form and content reason-ably requested by Gulf States, evidenci'ng the transfer and I
'l ' vesting in Gulf States or its designee of all of the Trustee's right, title, and ownership interest in and to the Steam
( Turbine Equipment, the Purchase Orders, and this Agreement of Purchase, all as more fully described in Section 2 hereof.
13.3 Discharge of Pre-Existing Obligations Upon payment of the amounts described in Section 13.2 and delivery of the bill of sale and other documents i -
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described therein, Gulf States and the Trus tee agree to execute and deliver a written instrument discharging the .
other party from all further duties , obligations and liabilities under this Agreement of Purchase (except for any obligations which by the express terms hereof shall survive such sale and transfer).
13.4 Election Upon Certain Events of Default
- Notwithstanding the foregoing provisions of this ,
Section, in the event the Settlement Date is established l i
under Section 12 hereof in accordance with written notice -
, from'the Trustee to Gulf States stating that (i) an' Event of l i Default has occurred under clauses (a), (d), (e), (f) or 1
(g) of Section 14, and (ii) in lieu of the sale and transfer l of the Steam Turbine Equipment to Gulf States (or its designee) as provided in Sections 13.1 and 13.2, the Trustee has ,
elected to proceed purcuant to the provisions of this Section, then the Trustee may, on written instructions from Chemical -l l
l given pursuant to clause (p) of Section 6 of the Trust t
Agreement, take one or more of the following actions with 1
J respect to the Steam Turbine Equipment then held by the '
-i Trustee hereunder:
(a) the Trustee may demand that Gulf States, and Gulf States shall upon receipt of such written demand, deliver all or any part of the Steam Tur-bine Equipment to the Trustee or its. designee; or
.f (b) the Trustee or its designee may enter ,
upon the premises where the Steam Turbine Equip-ment is located and,take immediate possession of and hold or remove the same by summary pro-ceedings or otherwise, all without liability on the part of.the Trustee or'the Trust by reason of such entry, taking of possession, or removal; or -
(c) the Trustee may sell all or any part of the Steam Turbine Equipment at public or private ,
sale (as the Trustee on written instructions from Chemical may no determine) free and clear of any ~
Il t2 rights of Gulf States hereunder; or
!i;. (d) the Trustee may take such other action 4
! or resort to such other remedy permitted under l
i applicable law.'
l' In the event.that the Trustee shall sell or otherwise dispose e
of all or any part of the Steam Turbine Equipment pursuant j to clause (c) of this Section, or in the event that the Trustee t
]i shall retain any proceeds from the insurance or Taking of such l Equipment as provided in Section 8 or 9 hereof, any proceeds so received by the Trustee shall be applied (i) first, to 1 .
j the payment of all costs and expens'es of every kind paid or
), incurred in realizing such proceeds or in any way relating
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+
4 1
l
. i to the exercise of the rights of the Trustee under this 9
Ay,reement of Purchase, including any reasonable attorneys' I fees and court costs incurred or paid by the Trus tee, (ii) l second, to the payment.of all amounts owing from Gulf States ,
i to the Trustee hereunder, whether such obligations shall be due or not due, matured or not matured, and (iii) third, to the persons or entities entitled to the balance of such proceeds, if any, pursuant to the provisions of Section 8 or -
3 9 of this Agreement of Purchase or Section 11 of the Trust h- Agreement, as appropriate. .
i
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l SECTION 14. Events of Default !
Any of the.following events shall constitute an '
y 5
Event of Default under this Agreement of Purchase and shall f give rise to the rights on tne part of the Trustee as described 2 -
f in Section 15:
1 (a) default by Gulf States in the payment of .
any amount under Section 3 or 13.2 of this Agreement 1
of Purchase.for more than ten.(10) days after the f
s due date for payment of s.ame; or f (b) default by Gulf States in the payment of
, any other sum or in the satisfaction or performance
( of any other liability or obligation or covenant M -
of Gulf States under this Agreement of Purchase or i
n .
J v
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1 .
the,other agreements and documents referred to .
herein, and ' the ' continuance of such default for ten (10) days after written notice to Gu1f States; or
- (c) any representation or warranty made by Gulf States herein or in any instrument furnished 3
to the Trustee or its designee pursuant to or -
1 contemplated by this Agreement of Purchase and the -
other agreements and documents referred to herein, 4
shall prove at any time to be incorrect or false
~ .
as of the date made in any material respect; or (d) Gulf States shall (i) apply for or consent 1 i
to the appointment of a receiver, trustee or liquidator of Gulf States or all or a substantial part of its properties or assets, (ii) admit in 4
writing its inability to pay its debts as they mature, (iii) make a general assignment for the benefit of creditors, (iv) be adjudicated as '
bankrupt or insolvent, or (v). file a voluntsry i
petition. in bankruptcy or a petition or an answer seeking reorganization or an arrangement with creditors or to take advantage of any bankruptcy, reorganization, insolvency, readjustment of debt, dissolution or liquidation law or statute, or an r'
in -
'r d.
answer admitting the material' allegations of a petition ~ filed ~ against it in .any proceeding under the law, or if corporate action shall be taken by Gulf States for the purpose of effecting any of U the foregoing; or (e) -all' or substantia'lly. all of the property.
of Gulf States shall be condemned, seized or otherwise appropriated by any governmental body, -
authority or entity, or a receiver or trustee shall take possession of all or substantially all ,
of the properties of Gulf States, and in either such instance possession shall not be recovered I within sixty (60) days ; or (f) the termination of existence or business failure of Gulf States; or (g) an order, judgment or decree shall be l entered,.without the application, approval or ,
consent of the debtor by any court of competent
' jurisdiction, approving ~a petition speking -
reorganization of Gulf States, or of all or a substantial part of the properties or assets of
- Gulf States, or appointing a receiver, trustee or' liquidator of Gulf States and such order, judgment or decree shall continue unstayed and in
'effect for any period of. sixty (60) days ; or 1
i : ,
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=; ,' .
(h) - default in respect of payment of principa1 !
or interes t on any obligation for borrowed money 3
in excess o~f $1,000,000 for which Gulf, States is l liable (either directly, by assumption or as guarantor), or. in respect of payment of principal i .
4 l or interest.on any obligation in excess of $1,000,000 l
- which is secured by any' mortgage, pledge, title '
5'
. retention agreement'or other security interest, t .
4 lien, charge or encumbrance on any property of Gulf States ,. and in either of such instances the p, . default'shall continue for.more than the period of p grace, if any, therein specified or shall not be
( cured as therein provided; or (i) the Taking of the Steam Turbine Equipment
.ss provided in Section 9 hereof; or 2
(j) Gulf States shall announce cancellation
- 1 o
of construct. ion of River Bend Unit No. 1, or shall L
announce or otherwise effect the p.ostponement of L ,
g commercial operation of such unit to a date later-than September 1,1985.
SECTION 15. Rights of Trustec Upon Default Upon the occurrence and during the continuance of any Event of Default, the Trustee may, in its discretion,
- y. -
.x.
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proceed by. appropriate judicial proceedings , either at law
~
or in equity,.to enforce performance or observation by Culf States of the applicable provisions of this Agre,ement of Purchase, or to recover damages, losses and expenses sustained by_ reason of such_ default, or to establish a Settlement Date under Se'etion 12 hereof. In addition to the foregcing, upon the occurrence.and during the continuance of any such Event ,
of Default ' described in clauses (a) , (d) , (e), (f) or (g) of Section 14, the Trustee may, in its discretion, exercise such rights and remedies as are provided in Section 13.4 of this Agreement of Purchase.
-i SECTION 16. Warranties and Representations of Gulf States As of the Closing Date (as defined in the' Credit Agreement), Gulf States hereby warrants and represents to
. the Trustee and Chemical-as follows:
(a) Gulf States _ is duly incorporated and validly existing as a corporation in good s tanding
,, under the laws of the State of Texas , with full
- corporate power and authority to conduct its business in Texas and Louisiana, is duly qualified l to do business as a foreign corporation in all'
' states '(inc~1uding . Louisiana) where the conduct of its business and ownership of property requires t
- j- s .
q_ -
-1s-
a such qualification, and has full corporate power '
o and authority to execute and deliver, and perform
'I
- j its obligations under, this Agreement of Purchase, the Assignment Agreement, and the Transfer j
Agreement; i I
i{t '
(b) this Agreement of Purchase, the Assign-
'I is ment Agreement, and the Transfer Agreement have been and will be duly authorized, and have been ,
duly executed and delivered by Gulf S'tates, and i constitute and will constitute legal, valid and b
o; binding obligations of Gulf States enforceable in Q accordance with their respective terms; F.l
,a-q (c) there is no charter, bylaw or preference stock provision of Gulf States and no provision of 1
4 any existing mortgage, indenture, contract or agreement binding on Gulf States or affecting its '
properties,-or any law, administrative regulation 9
or court' decree applicable to Gulf States,.which '
I would conflict with or in any way prevent the 1 -
execution or delivery of this Agreement of Purchase, y
g the Assignment Agreement or the Transfer Agreement, q
l' '
nor the fulfillment by Gulf States of the terms, i
conditions or provisions hereof or thereof, and no approval, authorization or consent of any governmental i
i .
e D
l 1 -
I. ' '
8 r
so., .
O body is required with respect to the transactions' herein or therein contemplated; i
(d) Gulf States is not in default in any material manner, and no' condition exis ts which, I with notice or the lapse of time or both, would constitute a default in any material manner under !
. any mortgage, credit agreement or indenture to -
which Gulf States is a party or by which it is . !
bound or under any other instrument pursuant to -
which it has borrowed money or which secures payment of money it has borrowed, or otherwise:
(e) Gulf States is not in default, and no ,
condition exists which, with notice or the lapse of time or both, would constitute a default, in any respect material to its performance of this Agreement of Purchase, the Assignment Agreement or the Transfer Agreement, under any j udgment, order,
~
3 writ, injunction or decree of any court or governmental body, authority or entity; and q (f) so fr as the officers of Gulf States know, there is no pending or threatened suit or a
- proceeding against. Gulf. States which in the opinion of Gulf States is reasonably likely to materi' ally affect the consummation of the transactions contempla*;ed by this Agreement of Purchase, the Assignment e
4'a if \
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i Agreement,and.the Transfer Agreement _, or otherwise, .
.cn: to materia 11y' interfere with full performance . .
by' Gulf States hereu'nder or thereunder.
On such Closing Date, counsel'for Gulf States shall deliver j to the Trustee and the Gideon Trust an opinion substantially
~
} to the effect and: tenor of the representations and warranties of Gulf States set forth above, with such opinion to state 4
~
h that Chemical shall be authorized to rely thereon.
?
!; SECTION 17. _' Binding Effect of Agreement .
b This Agreement' of Purchase shall be binding upon e ~
l- and shall inure to-the benefit-of Gulf States and the Trustee,
!l,
- their respective successors, designees and assigns, except a
that in no event shall the Trustee assign, transfer.or y' delegate all or,any part of its rights, powers, duties and ,
i a
h! obligations _ hereunder without the prior written consent of Gulf States and Chemical (unless otherwise expressly provided
( {
to the contrary. in this Agreement of Purchase, the Trust i
Agreement, and the other agreements and documents referred to herein and therein).-
. SECTION 18. Successor Trustee Gulf States agrees that.in the case of appointment of any; successor _ Trustee for the Trustee under the terms of-
~
the Trust? Agreement; prior to termination-thereof,'the n
9
e successor Trustcc shall, upon written notice of acceptance by.such successor Trustee delivered to Gulf States and Chemical, succeed to all of the rights, powers and title of the. Trustee hereunder and shall be deemed to be the owner of the Purchase Orders, the Steam Turbine Equipment, and all other rights therein for all purposes hereof, without in any way altering the terms of this Agreement of Purchase or Gulf
~
' States' obligations hereunder. Upon appointment of a successor Trustee pdrsuant to the Trust Agreement, .the predecessor .
Trustee.shall have no further. rights, powers, duties or obligations under this Agreement of Purchase, except (i) the rights provided by Section 11 hereof shall continue to. .
apply to the' predecessor Trustee and (ii) as and to the extent'otherwise provided in the Trust Agreement and in the other agreements.and documents referred to herein. One such appointment and designation of a successor Trustee shall not .
exhaust or otherwise preclude exercise of the right to
- appoint'and designate further successor Trustees under the Trust Agreement from time to time or at any time as long as such Agreement shall remain in effect.
SECTION 19. Sales to Designees of Gulf States Notwithstanding the other provisions of'this Agreement of Purchase at the request of Gulf States the Trustee shall sell all or any part of the Steam Turbine Equipment to such persons or entities as may be designated l' .
i t
k' . . - - - . .
/
by Gulf States for a purchase price equal to the purchase
~
price.dctermined as of the date of sale pursuant to Section .
5 hereof, _ with the proceeds of' any such sale to be subject to the terms of this Agreement of Purchase and to be paid over and distributed as herein se't forth. The sale of all or any part of the Steam Turbine Equipment shal1~, to the -
. l extent of the interest so passing to the designee, be made'
~
on the same terms and conditions (including the disclaimers as to warranty set forth in Section 6.3) and' with the same l trans fer of rights , warranties , guaranties, claims and -
interests by the Trustee, just as if Gulf States rather than _ .
the designee had made the purchase hereunder. As a condition to any su'ch sale, Gulf States shall in all events provide the. Trustee with the undertaking of Gulf States indemnifying i
and holding the Trustee harmless from and against any loss .
or liability (other than as to the sales price to the extent paid by the designee) which may be incurred by reason of ,
j such sale, as well as with the opinion of counsel for the i designee to the effect that such sale shall not violate any applicable law, statute, order, ruling or regulation.
SECTION 20. Amendments, Any and all amendments, waivers, supplements or modifications to this Agreement of Purchase shall not be i
effective. unless the same are reduced to writing, 'signe.d by i Gulf States and the Trustee, and consented to by Chemical.
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SECTION 21. Relationship of Parties Nothing contained in this Agreement of Purchase shall be cons trued as creating, any relationship by and between Gulf States, the Trustee , and Chemical, as j oint I venturers , partners , or as p'rincipals and agents .
SECTION 22. Notices All notices and communications required to be in .
writing hereunder shall become effective when re'ceived, addressed as follows:
Gulf States Utilities Company .
Post Office Box 2951 Beaumont, Texas 77704 Attention: William F. Malec; Gideon Trust, c/o J. Henry Schroder Bank & Trust Company, Trustee One State Street New York, New York 10015 Attention: Corporate. Trust Department; ,
. l Chemical Bank 20 Pine Street New York, New York 10005 j ,
Attention: Ellen Lapson;
! or to such other address as any of the foregoing parties or their successors may designate by notice duly given in accordance with this Section. All of such notices and I communications may be given in person or by mail, pos tage prepaid, or by telegram, charges prepaid, or by telex, i
telecopier or telephonic message, if promptly confirmed by mail, postage prepaid.
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i Other Documents and Instruments f SECTION 23.
Each'part; 3reto agrees to execute such other -
f documents and instruments, and'to take such other actions, '
as may be.necessary or appropriate to effectuate the pur- '
- poses of this Agreement of Purchase at any time prior or subsequent to sale and transfer of the Steam Turbine Equip-j ment as herein provided.
SECTION 24. Failure of Performance by Trustee <
i If the Trustee shall fail to perform any act which
- l the Trustee is obligated to perform under this Agreement of I l
Purchase or under any other agreement or document referred to herein, and if such failure shall continue for five (5)
, days following w'ritten notice thereof from Gulf States to l the Trustee and Chemical, Gulf States shall be entitled and 1
1, is hereby irrevocably appointed as agent of the Trustee to
.: perform any such act on behalf of and in the name of the ,
d Trustee. The designation and appointment of Gulf States as agent for the Trustee under this Section shall be in addi-
- l tion to and not in. lieu of any such designation or appoint-ment of Gulf States as agent under the Trust Agreement and
'l the other agreements and documents referred to therein.
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. SECTION 25. Miscellaneous 25.1 Counterparts This Agreement of Purchase may be simultaneously executed in any number of counterparts, each of which so '
executed shall be deemed to be an original and all of which counterparts together shall . constitute and be one and the same instrument.
25.2 Agreement for Benefit of Trustee, Gulf States and Chemical Nothing in this Agreement of Purchase, whether express or implied, shall be construed to give any person or
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entity other than the Trustee, Gulf States, its designees, and Chemical, any legal or equitable right, remedy or claim u'nder or in respect.of this Agreement of Purchase, and this
. Agreement of Purchase shall be held to be for the sole and exclusive benefit of such parties, with any other person or -
entity not to have or acquire any right, remedy or claim hereunder. s i
25.3 Section Headings Section headings herein are for the conveni-- of the parties only, and shall' be given no substantive - or interpretive effect whatsoever.
. .25.4 Waiver Waivar of the breach of any. provision hereof shall
. not be' deemed- to 'be a waiver of .any prior or subsequent
-breach of the same or any-other provision hereunder.
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-25.5 Pursuit cf Remedy .
. Pursuit of any remedy shall not be deemed to be or otherwise constitute a waiver of any other remedy hereunder i
or at law or equity.
25.6 Severability Any provsion of this Agreement of Purchase which is prohibited or unenforceable in 'any jurisdiction shall, as to such j urisdiction, be ineffec'tive to the extent of such prohibition or unenforceability without invalidating remaining ;
provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable ,
such provision in any other jurisdiction.
25.7 . Governing Law Thi's Agreement of Purchase shall be governed by and construed,in accordance with the laws of the State of Texas.
25.8 Recourse Against Trustee The representations, warranties, covenants, duties ,
and obligations set forth in this Agreement of Purchase as 1
having been made by or undertaken by the Trust have been
} made by or undertaken by the Trustee of the Trust acting as i
such Trustee pursuant to the -aut:hority vested in .it under the laws of the State of New York and in conformity with the j Trust Agreement. Reference is hereby made to the Trust
' Agreement, and all provisions of the Trust Agreement shall 6
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s be construed as extending to all the rights, duties and obligations of the Trustee under this Agreement of Purchase as fully for all intents and purposes as if those provisions were contained herein. The name "the Trustee" refers to the Trustee under the Trust Agreement in its capacity as Trustee, and not individually or personally. and neither the Trustee nor any shareholder, officer, employee or agent of the Trustee shall be held to any personal liability hereunder, ,
nor shal1 resort be had to their private property for. the satisfaction of any claim hereunder or in connection with ,
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the affairs of the Trust, but the Trust property only shall be liable,.unless otherwise provided to the contrary in the Trust Agreement. ;
l IN WITNESS WHEREOF, this Agreement of Purchase has l been executed by the parties as of the day and year first above written. -
1 CIDEON TRUST l By J. HENRY SCHRODER BANK & . .
TRUST COMPANY, As Trustee '
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/ By: / . -e j_
i (M$.Y .-
/ Its: Assis'tapt - Vice
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President l
. GULF STATES UTILITIES COMPANY ATTEST:
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. /f,.,6,. 4 Jf Its:
VicePpsidentandSecretary l (dhs, ace +.,s%:s~ tk .
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3 Tile STATE OF'NEW YORK 5 COUNTY OF NEW YORK 5 l
BEFORE ME, the undersigned authority, on this day I personally appeared MICHAEL J. PELLINO, Assistant Vice '
President of J. HENRY SCHRODER BANK & TRUST COMPANY, as '
Trustee.of the Gideon Trust, known to me to be the person and officer whose name is subscribed to the foregoing instrument, and acknowledged'to me that he executed the same for the purposes and consideration therein expressed, and in the capacity therein stated as the act and deed of said Trust.. '
l GIVEN UNDER MY HAND AND SEAL OF OFFICE this 25th day of January, 1978. l Cl',Ofii.'5 .66)O b ! l Notary Public ingand for i l New York County, New York TrRRY s. si:str ~ '
WARY PUCLIC, */ e of N., y,,g THE STATE'0F TEXAS os.,n$*);??'M' S
commi,,io,i g4;'J4',g.'Q'vg COUNTY OF JEFFERSON S I BEFORE ME personally appeared, ROBERT W. JACKSON,the undersigned Vice President and authority, on t Secretary of. GULF STATES UTILITIES COMPANY, known to me to be the person and officer whose name is subscribed to the foregoing instrument, and acknowledged to me that he executed-the same for the purposes and consideration therein~ expressed, and in the capacity therein stated as the act and deed of said corporation.
GIVEN1978.
day of January, UNDER MY HAND AND SEAL OF OFFICE this 25th Notary Public in and for Jefferson County, Texas
- i. Auc.c D. SWos
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