As Filed Pursuant to Rule 424(b)(5)
Registration Nos. 333-85716
THE INFORMATION IN THIS PRELIMINARY PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING
PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. THIS PRELIMINARY PROSPECTUS
SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS ARE NOT AN OFFER TO SELL THESE
SECURITIES AND WE ARE NOT SOLICITING OFFERS TO BUY THESE SECURITIES IN ANY
JURISDICTION WHERE THE OFFER OR SALE IS NOT PERMITTED.
PROSPECTUS SUPPLEMENT (Subject to Completion) Issued September 6, 2002
(TO PROSPECTUS DATED JULY 22, 2002)
14,500,000 SHARES
[PPL LOGO]
COMMON STOCK
---------------------
PPL Corporation is selling 14,500,000 shares of its common stock.
---------------------
Our common stock is traded on the New York Stock Exchange under the symbol
"PPL." On September 5, 2002, the last reported sale price of our common stock on
the New York Stock Exchange was $34.26 per share.
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INVESTING IN OUR COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING ON
PAGE 4 OF THE ACCOMPANYING PROSPECTUS.
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PER SHARE TOTAL
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Public offering price....................................... $ $
Underwriting discounts and commissions...................... $ $
Proceeds to PPL............................................. $ $
We have granted the underwriters an option to purchase up to an additional
2,175,000 shares of our common stock to cover over-allotments.
The Securities and Exchange Commission and state securities regulators have not
approved or disapproved of these securities, or determined if this prospectus
supplement or the accompanying prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.
The underwriters expect to deliver the shares to purchasers on or about
September , 2002.
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JOINT BOOK-RUNNING MANAGERS
JPMORGAN MORGAN STANLEY
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CO-LEAD MANAGER
UBS WARBURG
SALOMON SMITH BARNEY WACHOVIA SECURITIES
JANNEY MONTGOMERY SCOTT LLC
September , 2002
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT PAGE
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Forward-Looking Information................ S-1
Prospectus Supplement Summary.............. S-3
Use of Proceeds............................ S-9
Price Range of Common Stock................ S-10
Dividend Policy............................ S-10
Capitalization............................. S-11
Certain United States Tax Consequences to
Non-United States Holders................ S-12
Underwriting............................... S-14
Validity of Common Stock................... S-16
Experts.................................... S-16
Where You Can Find More Information........ S-16
PROSPECTUS PAGE
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About This Prospectus...................... 2
Risk Factors............................... 4
Forward-Looking Information................ 13
PPL Corporation............................ 14
PPL Capital Funding........................ 15
PPL Capital Funding Trust II............... 16
Use of Proceeds............................ 16
Ratios of Earnings to Fixed Charges and
Earnings to Fixed Charges and Preferred
Dividends................................ 16
Description of PPL Corporation's Capital
Stock.................................... 17
Description of Stock Purchase Contracts and
Stock Purchase Units..................... 19
Description of the Debt Securities......... 19
Description of the Trust Securities........ 27
Description of the Preferred Trust
Securities Guarantee..................... 34
Description of the Subordinated Debt
Securities............................... 37
Information Concerning the Trustees........ 48
Plan of Distribution....................... 48
Where You Can Find More Information........ 49
Experts.................................... 51
Validity of the Securities and the
Securities Guarantees.................... 51
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This document is in two parts. The first part is this prospectus
supplement, which describes the terms of the offering of common stock and also
adds to and updates information contained in the accompanying prospectus and the
documents incorporated by reference into the accompanying prospectus. The second
part is the accompanying prospectus, which gives more general information, some
of which will not apply to the common stock. If the description of the offering
varies between this prospectus supplement and the accompanying prospectus, you
should rely on the information in this prospectus supplement.
You should rely only on the information contained or incorporated by
reference in this prospectus supplement and the accompanying prospectus. We and
the underwriters have not authorized anyone to provide you with information
other than that contained or incorporated by reference in this prospectus
supplement and the accompanying prospectus. The information in this prospectus
supplement and the accompanying prospectus may be accurate only as of their
respective dates.
We and the underwriters are not making an offer to sell the common stock in
jurisdictions where the offer or sale is not permitted. The distribution of this
prospectus supplement and the accompanying prospectus and the offering of the
common stock in certain jurisdictions may be restricted by law. Persons outside
the United States who come into possession of this prospectus supplement and the
accompanying prospectus must inform themselves about and observe any
restrictions relating to the offering of the common stock and the distribution
of this prospectus supplement and the accompanying prospectus outside the United
States. This prospectus supplement and the accompanying prospectus do not
constitute, and may not be used in connection with, an offer to sell, or a
solicitation of an offer to buy, any securities offered by this prospectus
supplement and the accompanying prospectus by any person in any jurisdiction in
which it is unlawful for a person to make an offer or solicitation.
As used in this prospectus supplement, the terms "we," "our" or "us" may,
depending upon the context, refer to PPL Corporation, to one or more of PPL
Corporation's consolidated subsidiaries or to all of them taken as a whole.
FORWARD-LOOKING INFORMATION
Certain statements included or incorporated by reference in this prospectus
supplement, including statements with respect to future earnings, energy supply
and demand, costs, subsidiary performance, growth, new technology, project
development, energy prices, strategic initiatives, and generating capacity and
performance, are "forward-looking statements" within the meaning of the federal
securities laws. Although we believe that the expectations and assumptions
reflected in these statements are reasonable, there can be no assurance that
these expectations will prove to be correct. These forward-looking statements
involve a number of risks and uncertainties, and actual results may differ
materially from the results discussed in the forward-looking statements. In
addition to the specific factors discussed in the "Risk Factors" section in the
accompanying prospectus and our reports that are incorporated by reference, the
following are among the important factors that could cause actual results to
differ materially from the forward-looking statements:
- market demand and prices for energy, capacity and fuel;
- weather variations affecting customer energy usage;
- competition in retail and wholesale power markets;
- the effect of any business or industry restructuring;
- profitability and liquidity;
- new accounting requirements or new interpretations or applications of
existing requirements;
- operation of existing facilities and operating costs;
- the development of new projects, markets and technologies;
- the performance of new ventures;
- political, regulatory or economic conditions in states, regions or
countries where we or our subsidiaries conduct business;
- receipt and renewal of necessary governmental permits and approvals;
- impact of state or federal investigations applicable to us or our
industry;
- capital markets conditions and decisions regarding our capital structure;
- stock price performance;
- our or any of our subsidiaries' securities ratings;
- foreign exchange rates;
- commitments and liabilities;
- state and federal regulatory developments;
- new state or federal legislation;
- national or regional economic conditions, including any potential effects
arising from the September 11, 2001 terrorist attacks in the United
States and any consequential hostilities;
- environmental conditions and requirements; and
- system conditions and operating costs.
Any such forward-looking statements should be considered in light of such
important factors.
New factors that could cause actual results to differ materially from those
described in forward-looking statements emerge from time to time, and it is not
possible for us to predict all of such factors, or the extent to which any such
factor or combination of factors may cause actual results to differ from those
contained in any forward-looking statement. Any forward-looking statement speaks
only as of the date on which such statement
S-1
is made, and we do not undertake any obligation to update the information
contained in such statement to reflect subsequent developments or information.
We caution you that any one of these factors or other factors described
under the heading "Risk Factors" in the accompanying prospectus, or a
combination of these factors, could materially affect our future results of
operations and whether our forward-looking statements ultimately prove to be
accurate. These forward-looking statements are not guarantees of our future
performance, and our actual results and future performance may differ materially
from those suggested in our forward-looking statements. When considering these
forward-looking statements, you should keep in mind the factors described under
the heading "Risk Factors" in the accompanying prospectus and other cautionary
statements in this prospectus supplement, the accompanying prospectus and the
documents we have incorporated by reference.
S-2
PROSPECTUS SUPPLEMENT SUMMARY
This summary contains basic information about us and this offering. Because
it is a summary, it does not contain all of the information that you should
consider before investing. To fully understand this offering, you should read
this entire prospectus supplement and the accompanying prospectus carefully,
including the section entitled "Risk Factors" and our financial statements and
the related notes, contained elsewhere or incorporated by reference in this
prospectus supplement or the accompanying prospectus, before making an
investment decision.
PPL CORPORATION
OVERVIEW
PPL Corporation is an energy and utility holding company that, through its
subsidiaries, is primarily engaged in the generation and marketing of
electricity in the northeastern and western United States and in the delivery of
electricity in Pennsylvania, the United Kingdom and Latin America. At July 31,
2002, we owned or controlled 11,458 megawatts, or MW, of low-cost and diverse
power generation capacity. We are also developing or constructing 990 MW of new
electric power projects in New York and Pennsylvania. Additionally, we provide
energy-related services to businesses primarily in the mid-Atlantic and
northeastern United States.
Approximately 6,500 MW of our total generating capacity is currently
committed to meeting the obligation of our Pennsylvania delivery company to
provide electricity through the year 2009 under fixed-price tariffs pursuant to
Pennsylvania's Customer Choice Act. We have another 450 MW of generating
capacity committed to providing electricity to a delivery company in Montana
through June 2007. Both of these arrangements are consistent with and are an
integral part of our overall business strategy, which includes the use of
long-term energy supply contracts to capture profits while reducing our exposure
to movements in energy prices.
We operate through two principal lines of business:
ENERGY SUPPLY
We are a leading supplier of competitively priced energy in the United
States through our subsidiaries, PPL Generation and PPL EnergyPlus, and acquire
and develop U.S. generation projects through our PPL Global subsidiary.
- PPL GENERATION owns or controls a portfolio of domestic power generation
assets, with a total capacity of 11,458 MW as of July 31, 2002. These
power plants are located in Pennsylvania (8,502 MW), Montana (1,157 MW),
Arizona (750 MW), Illinois (540 MW), Connecticut (253 MW), New York (160
MW) and Maine (96 MW) and use well-diversified fuel sources including
coal, nuclear, natural gas, oil and hydro.
- PPL ENERGYPLUS markets electricity produced by PPL Generation, along with
purchased power and natural gas, in competitive wholesale and deregulated
retail markets, primarily in the northeastern and western portions of the
United States. PPL EnergyPlus also provides energy-related products and
services, such as engineering and mechanical contracting, construction
and maintenance services, to commercial and industrial customers.
- PPL GLOBAL acquires and develops U.S. generation projects that are, in
turn, operated by PPL Generation as part of its portfolio of generation
assets.
ENERGY DELIVERY
We provide energy delivery services in the mid-Atlantic regions of the
United States through our subsidiaries, PPL Electric Utilities and PPL Gas
Utilities, and in the United Kingdom and Latin America through our PPL Global
subsidiary.
S-3
- PPL ELECTRIC UTILITIES is a regulated public utility company,
incorporated in 1920, providing electricity delivery services to
approximately 1.3 million customers in eastern and central Pennsylvania.
- PPL GAS UTILITIES is a regulated public utility providing gas delivery
services to approximately 103,000 customers in Pennsylvania and Maryland.
- PPL GLOBAL holds international energy projects that are primarily focused
on the distribution of electricity. PPL Global currently owns and
operates energy delivery businesses serving approximately 3.5 million
customers in the United Kingdom and Latin America (excluding Companhia
Energetica do Maranhao, or CEMAR).
OUR STRATEGY
A key objective of our strategy is to be a leading, asset-based provider of
retail and wholesale energy and energy-related products and services. We plan to
achieve this objective by generating and selling competitively priced
electricity primarily in the northeastern and western United States markets
using a disciplined approach that balances growth in generation capacity with
growth in retail load or the use of long-term contracts. Another key objective
of our strategy is to own and operate high-quality energy delivery businesses in
selected regions around the world. We believe that the successful achievement of
these objectives will provide strong returns to our shareowners while reducing
our risk exposure to adverse movements in energy prices.
The key elements of our strategy are as follows:
OPERATE A DIVERSE AND LOW-COST PORTFOLIO OF GENERATION ASSETS
We seek to operate an efficient and low-cost portfolio of generation assets
that is diversified as to geography, fuel source, cost structure and operating
characteristics. Our current generation facilities, as well as our new
generation projects under development, provide us with a geographically diverse
presence in the northeastern and western United States, helping to mitigate the
risks resulting from regional price differences. Our current portfolio of
generation assets is also well diversified by fuel type, with 39% coal, 34%
natural gas/oil, 18% nuclear and 7% hydro as of July 31, 2002. Our coal-fired
capacity is located in the eastern and western United States and benefits from
our low fuel transportation costs due to the proximity of our plants to coal
fields, our extensive experience in acquiring coal at competitive prices and our
highly-efficient coal-fired plant technology. With respect to cost structure and
operating characteristics, our current generation portfolio is weighted towards
base-load and/or low variable cost generation units which help reduce the
variability of our revenues. Our development projects involve new intermediate
and peaking facilities utilizing natural gas-fired, combined-cycle and
simple-cycle technology-based generation units.
PURSUE STABLE CASH FLOWS AND EARNINGS THROUGH LONG-TERM CONTRACTS
We have in place and intend to continue to pursue long-term contracts and
other means to mitigate the risk associated with adverse changes in the
difference, or margin, between the cost to produce electricity and the price at
which we sell it. These contracts can take a number of forms and include the use
of fixed-price fuel supply contracts and contracts under which we agree to
provide electricity and generating capacity to third parties for extended
periods at contracted prices for a large portion of our generation capacity.
Currently, we have approximately 6,500 MW of our total generating capacity
committed to our Pennsylvania delivery company through 2009 and an additional
450 MW committed to a delivery company in Montana through June 2007. We believe
that our use of long-term contracts will provide stability to our cash flows and
earnings.
MAINTAIN A DISCIPLINED, ASSET-BASED APPROACH TO MARKETING AND TRADING
OPPORTUNITIES
We use our expertise in energy marketing and trading to optimize the
financial performance of our generation assets and minimize our exposure to
commodity price volatility. Given our asset-based strategy, we seek to execute
contractual commitments for energy sales that do not exceed our ability to
produce the energy required. We believe that our ability to market and trade
around our physical portfolio of generation assets through our integrated
generation, marketing and trading functions will provide us with opportunities
to grow
S-4
our cash flows and earnings. We also utilize our extensive market knowledge to
capture regional arbitrage opportunities and maximize the value of our
generation capacity. In pursuing these opportunities, we limit our financial
exposure by following a comprehensive risk management program. In addition, we
seek to capture a diverse stream of revenues and avoid over-reliance on any one
market or type of customer.
CONTINUE TO PURSUE A DISCIPLINED APPROACH TO ADDING GENERATION FACILITIES
IN KEY MARKETS
As of July 31, 2002, we owned or controlled 11,458 MW of generation
capacity in Pennsylvania, Montana, Arizona, Illinois, Connecticut, New York and
Maine. In addition, we are developing or constructing an additional 990 MW of
new power projects in New York and Pennsylvania and we expect the construction
of these facilities to be completed between 2002 and 2004. Our current
development program will be complete upon the commercial operation of these
facilities. We will continue to evaluate opportunities to acquire operating
generation facilities in key markets using a disciplined strategy that balances
growth in generation capacity with growth in retail load or the use of long-term
contracts. We believe that the northeastern and western regions of the United
States are particularly attractive markets because of favorable supply and
demand dynamics for power in these regions and our understanding of these
markets.
OPERATE OUR TRANSMISSION AND DISTRIBUTION BUSINESSES TO HIGH STANDARDS OF
CUSTOMER SERVICE AND RELIABILITY
We have over 80 years of experience in operating and managing
rate-regulated electric transmission and distribution businesses and we use this
experience to seek to achieve high standards of customer service and reliability
in a cost-effective manner. We believe that by achieving our customer-focused
objectives, we can also deliver strong returns to our shareowners. We have
applied this philosophy both domestically to our Pennsylvania delivery business
as well as to our international investments in the United Kingdom and Latin
America (Argentina, Bolivia, Brazil, Chile, El Salvador and Peru) and have won
customer service awards in the United States and the United Kingdom.
RECENT DEVELOPMENTS
CEMAR
On July 22, 2002, we announced a proposal to sell all of PPL Global's 90%
indirect equity interest in CEMAR to Franklin Park Energy, LLC. Any sale of
CEMAR is subject to regulatory approval of Brazil's National Electric Energy
Agency, or ANEEL, and other customary conditions. The agreement with Franklin
Park Energy provided that either party could terminate the agreement if the sale
did not close by August 15, 2002. Due to the inability to obtain creditor
support on acceptable terms for the sale of CEMAR, ANEEL formally rejected the
application requesting approval of the sale of CEMAR to Franklin Park Energy. As
a result, Franklin Park Energy terminated its agreement to purchase CEMAR.
Due to ANEEL's denial of emergency rate relief for CEMAR in June 2002, the
continued adverse financial condition of CEMAR and the failure of ANEEL to issue
an order approving the sale of CEMAR to Franklin Park Energy, CEMAR filed a
concordata preventiva, the Brazilian equivalent of a U.S. Chapter 11 work-out
proceeding, with a state court in Brazil on August 21, 2002. On the same day,
another state court in Brazil granted a request by the trustee for CEMAR's
debenture holders and three bank lenders of CEMAR to enjoin the board of
directors of our Brazilian holding company and the executive officers of CEMAR
from taking actions that would result in CEMAR filing for the equivalent of a
U.S. Chapter 7 liquidation proceeding or taking any other action that could lead
to such a liquidation proceeding, such as non-payment of short-term debt. We
filed objections to the injunction with the state court on September 4, 2002.
Also on August 21, 2002, ANEEL authorized an administrative intervention in
CEMAR to fully assume control of all operational and financial activities of the
company. ANEEL claims that its intervention was necessary to protect the public
interest in the area served by CEMAR due to CEMAR's financial situation. In its
statement announcing its actions, ANEEL said that its intervention and control
of CEMAR would last for an initial term of up to 180 days. On August 29, 2002,
at the request of the intervenor appointed by ANEEL, the bankruptcy judge
dismissed the concordata preventiva filing without prejudice.
S-5
TOPRS REDEMPTION
In August 2002, pursuant to PPL Electric Utilities' instructions, the
property trustee of PP&L Capital Trust II provided a notice to the holders of
the trust's 8.10% Trust Originated Preferred Securities (TOPrS(SM)) concerning
the redemption in full of the securities. This series of TOPrS, which has a
total principal amount of $150 million, will be redeemed on September 18, 2002
at a redemption price of 100% of the principal amount, plus an aggregate of
approximately $2.6 million in accrued cash distributions. Proceeds from this
offering will be used to redeem the TOPrS.
MEDIUM-TERM NOTE MATURITIES
On August 30, 2002 and September 3, 2002, two series of PPL Capital
Funding's medium-term notes matured and were paid in full. In addition, on
September 11, 2002, an additional series of PPL Capital Funding's medium-term
notes will mature and will be paid in full. Short-term debt incurred to pay the
medium-term notes will be financed in part with proceeds from this offering. The
aggregate principal amount of all of these series of medium-term notes is $200
million.
WPD ACQUISITION
On September 6, 2002, we, through indirect, wholly-owned subsidiaries of
PPL Energy Supply, acquired Mirant Corporation's 49% indirect equity interest in
Western Power Distribution Holdings Limited and WPD Investment Holdings Limited,
or WPD, for an aggregate consideration of approximately $235 million. PPL Energy
Supply and Mirant Corporation have each guaranteed the obligations of their
respective subsidiaries under the acquisition documents. The consideration paid
by the acquiring subsidiaries for the acquisition was funded with a bridge loan
provided by a U.S. affiliate from the issuance of commercial paper. The
acquiring subsidiaries intend to replace this bridge financing with permanent
debt financing in the near future.
WPD, through indirect, wholly-owned subsidiaries, operates two electric
transmission and distribution companies in the United Kingdom which together
serve approximately 2.5 million customers. Prior to the acquisition, we
indirectly held 51% of the equity interests in WPD but shared control of WPD
with Mirant Corporation pursuant to shareholders' agreements. The shareholders'
agreements were terminated in connection with the closing of the acquisition.
For the calendar year ended December 31, 2001 and for the six months ended
June 30, 2002, WPD recorded revenues of L375.3 million ($540.7 million based on
an average exchange rate of $1.441 per British pound for the period) and L199.4
million ($287.9 million based on an average exchange rate of $1.444 per British
pound for the period), and at June 30, 2002, WPD had total assets of L2,912.3
million ($4,464.6 million based on an exchange rate of $1.533 per British pound
at June 30, 2002) and total debt of L1,338.7 million ($2,052.2 million based on
an exchange rate of $1.533 per British pound), L310.0 million ($475.3 million
based on an exchange rate of $1.533 per British pound) of which falls due within
one year. All currently outstanding indebtedness of WPD is non-recourse to all
other PPL affiliates. All of the preceding amounts are unaudited. Historically,
we have accounted for our investment in WPD using the equity method of
accounting. From and after the acquisition of the remaining interest in WPD, the
results of WPD will be consolidated with our results, meaning that we will
eliminate the related investment account from our financial statements and fully
reflect all of WPD's income statement and balance sheet amounts, including all
of WPD's debt, in our financial statements on a U.S. GAAP basis.
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The address of our principal executive offices is Two North Ninth Street,
Allentown, Pennsylvania 18101-1179 and our telephone number is (610) 774-5151.
S-6
THE OFFERING
Common stock offered............... 14,500,000 shares
Common stock to be outstanding
after the offering................. 161,968,950 shares
Use of proceeds.................... We expect to use all of the net proceeds
from the sale of the common stock for the
redemption of 8.10% TOPrS due 2027 and
for general corporate purposes, including
repayment of short-term debt. A portion
of the short-term debt to be repaid was
incurred in connection with our repayment
of medium-term notes and the bridge loan
provided to our affiliates in connection
with the acquisition of WPD.
Dividend policy.................... The annual dividends paid per share in
2001 and in 2000 were $1.06. In January
2002, we increased our dividends per
share to an annualized rate of $1.44
($0.36 per share on a quarterly basis).
We have paid quarterly cash dividends on
our common stock in every year since
1946.
New York and Philadelphia Stock
Exchange symbol.................... Our common stock is listed on the New
York Stock Exchange and the Philadelphia
Stock Exchange under the symbol "PPL."
Risk factors....................... The trading price of our common stock
will be influenced by our operating
results and prospects and by political,
economic, financial and other factors.
Conditions affecting our business and the
energy industry generally, including
competition, commodity prices and
regulatory developments, may adversely
affect the price of our common stock.
Many of these industry and other factors
are outside of our control and could lead
to volatility in the price of our common
stock. See "Risk Factors" beginning on
page 4 of the accompanying prospectus for
a discussion of the risks associated with
our business and the impact on the prices
of our securities.
Unless we state otherwise, the information in this prospectus supplement
does not include 2,175,000 shares of common stock that may be issued to the
underwriters pursuant to their over-allotment option. If the underwriters
exercise their over-allotment option in full, the total number of shares of
common stock offered will be 16,675,000.
The number of shares to be outstanding after the offering is based on
147,468,950 shares outstanding as of July 31, 2002 and does not include
3,056,428 shares issuable upon the exercise of outstanding stock options at a
weighted average price of $32.02 per share.
S-7
SUMMARY FINANCIAL DATA
The summary financial data set forth below should be read in conjunction
with our financial statements and related notes and other financial and
operating data incorporated by reference in this prospectus supplement. The
Statement of Income Data, Balance Sheet Data, Basic EPS (loss) -- reported and
Diluted EPS (loss) -- reported for the years ended December 31, 2001, 2000 and
1999 have been derived from the audited financial statements incorporated by
reference in this prospectus supplement, and for the six months ended June 30,
2002 and 2001 have been derived from the unaudited financial statements
incorporated by reference in this prospectus supplement. Some previously
reported amounts have been reclassified to conform with the current period
presentation.
SIX MONTHS ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
------------------- ------------------------------
2002 2001 2001 2000 1999
-------- -------- -------- -------- --------
STATEMENT OF INCOME DATA -- $
MILLIONS:
Operating revenues.................... $ 2,576 $ 2,977 $ 5,725 $ 5,683 $ 4,590
Operating income(a)................... 406 702 855 1,202 821
Income before cumulative effect of a
change in accounting principle(a)... 152 358 221 524 458
Net income (loss)(a).................. (30) 339 179 498 432
BALANCE SHEET DATA -- $ MILLIONS (END
OF PERIOD):
Cash and cash equivalents............. 193 162 933 480 133
Property, plant and equipment, net.... 6,248 5,898 5,947 5,948(b) 5,624(b)
Recoverable transition costs.......... 2,069 2,299 2,172 2,425 2,647
Total assets.......................... 12,194 12,162 12,566 12,360 11,174
Short-term debt, including current
maturities of long-term debt........ 847 917 616 1,354 1,325
Long-term debt........................ 4,882 4,081 5,081 4,467 3,689
Company-obligated mandatorily
redeemable preferred securities of
subsidiary trusts holding solely
company debentures.................. 725 825 825 250 250
Preferred stock....................... 82 96 82 97 97
Shareowners' common equity............ 1,870 2,252 1,857 2,012 1,613
OTHER DATA:
Return on average common
equity -- %(c)...................... (9.23)% 30.60% 8.41% 27.49% 24.70%
Number of shares
outstanding -- thousands
Period-end.......................... 147,165 146,033 146,580 145,041 143,697
Average............................. 146,927 145,608 145,974 144,350 152,287
Basic EPS (loss) -- reported(a)....... $ (0.20) $ 2.33 $ 1.23 $ 3.45 $ 2.84
Diluted EPS (loss) -- reported(a)..... (0.20) 2.31 1.22 3.44 2.84
Dividends declared per share.......... $ 0.72 $ 0.53 $ 1.06 $ 1.06 $ 1.00
Dividend payout rate -- %(c)(d)....... --(e) 26% 87% 31% 35%
Dividend yield -- %(f)................ 3.78% 1.93% 3.04% 2.35% 4.37%
SALES DATA -- MILLIONS OF
KILOWATT-HOURS:
Electric energy supplied -- retail.... 18,315 19,481 43,470 41,493 36,637
Electric energy
supplied -- wholesale............... 15,948 13,519 27,683 40,925 32,045
Electric energy delivered -- retail... 17,372 17,963 40,529 37,642 35,987
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(a) On January 1, 2002, we adopted the provisions of SFAS 142, "Goodwill and
Other Intangible Assets," which provides that goodwill no longer be
amortized. See Note 10 to our financial statements included in the Form
10-Q/A filed on June 21, 2002, which is incorporated herein by reference.
(b) Not adjusted for the reclassification of intangible assets required by the
adoption of SFAS 142.
(c) Calculated based on earnings for the twelve-month period.
(d) Based on diluted EPS.
(e) Not meaningful due to the net loss for the twelve months ended June 30,
2002.
(f) Based on period-end market prices.
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USE OF PROCEEDS
We will receive net proceeds from the sale of our common stock of
approximately $480 million, or $552 million if the underwriters exercise their
over-allotment option in full, after deducting underwriting discounts and
commissions and estimated expenses payable by us.
We expect to use all of the net proceeds from the sale of the common stock:
- to make a capital contribution to our subsidiary in order to redeem all
of the $150 million outstanding 8.10% TOPrS due July 1, 2027 of PPL
Capital Trust II as described below, and
- for general corporate purposes, including investing in unregulated
business activities and retiring short-term debt previously incurred to
provide interim financing for such purposes.
A portion of the short-term debt to be repaid was incurred in connection
with our repayment of medium-term notes and the bridge loan provided to our
affiliates in connection with the WPD acquisition. See "Prospectus Supplement
Summary -- Recent Developments."
In order to redeem the TOPrS, we will make a capital contribution to our
subsidiary, PPL Electric Utilities Corporation, so that PPL Electric may redeem
the $150 million principal amount of its subordinated debentures maturing July
1, 2027, owned by PPL Capital Trust II, which are redeemable at the option of
PPL Electric on or after July 1, 2002 at 100% of their principal amount plus
approximately $2.6 million in accrued and unpaid interest. PPL Capital Trust II
will, in turn, use the proceeds received from the subordinated debenture
redemption to redeem all of the outstanding 6,000,000 TOPrS at a redemption
price of $25 per trust preferred security plus approximately $2.6 million in
accumulated but unpaid distributions to the date of redemption.
At June 30, 2002, PPL Corporation had approximately $281 million of
short-term debt outstanding at an average interest rate of 2.0%.
S-9
PRICE RANGE OF COMMON STOCK
Our common stock is traded on the New York Stock Exchange under the symbol
"PPL." The following table sets forth, for the periods indicated, the range of
high and low sale prices for our common stock. On September 5, 2002, the last
reported sale price for our common stock was $34.26 per share.
COMMON STOCK PRICE
-------------------
HIGH LOW
-------- --------
YEAR ENDED DECEMBER 31, 2000
First Quarter............................................... $ 24.00 $ 18.38
Second Quarter.............................................. 25.00 20.38
Third Quarter............................................... 44.44 21.94
Fourth Quarter.............................................. 46.13 37.56
YEAR ENDED DECEMBER 31, 2001
First Quarter............................................... 46.75 33.88
Second Quarter.............................................. 62.36 44.03
Third Quarter............................................... 56.50 30.99
Fourth Quarter.............................................. 37.65 31.20
YEAR ENDING DECEMBER 31, 2002
First Quarter............................................... 39.85 31.40
Second Quarter.............................................. 39.95 28.97
Third Quarter (through September 5, 2002)................... 37.60 26.00
As of July 31, 2002, there were 93,329 holders of record of our common
stock.
DIVIDEND POLICY
We have paid quarterly cash dividends on our common stock in every year
since 1946. The annual dividends paid per share in 2001 and in 2000 were $1.06.
In January 2002, we increased our dividends per share to an annualized rate of
$1.44 ($0.36 per share on a quarterly basis). Future dividends, declared at the
discretion of our board of directors, will be dependent upon future earnings,
financial requirements and other factors.
S-10
CAPITALIZATION
The following table sets forth our historical unaudited consolidated
capitalization as of June 30, 2002:
- on an actual basis; and
- on an as adjusted basis to give effect to the estimated net proceeds of
$480 million from the sale by us of shares of common stock in this
offering and the application of the net proceeds as described under "Use
of Proceeds," including the redemption of the TOPrS and the repayment of
short-term debt, a portion of which was incurred in connection with our
repayment of medium-term notes and the bridge loan provided in connection
with the WPD acquisition.
This table does not reflect the WPD acquisition and the subsequent
consolidation of WPD. At June 30, 2002, WPD had total debt of L1,338.7 million
($2,052.2 million based on an exchange rate of $1.533 per British pound at June
30, 2002), L310.0 million ($475.3 million based on an exchange rate of $1.533
per British pound) of which falls due within one year. The preceding amounts are
unaudited. See "Prospectus Supplement Summary -- Recent Developments" for a
discussion of the WPD acquisition.
This table should be read in conjunction with our consolidated financial
statements, the notes related thereto and other financial and operating data
incorporated by reference into this prospectus supplement and the accompanying
prospectus.
AS OF JUNE 30, 2002
--------------------
ACTUAL AS ADJUSTED
------ -----------
(UNAUDITED)
(IN MILLIONS)
Short-term debt, including current maturities of long-term
debt...................................................... $ 847 $ 705(a)
====== ======
Long-term debt.............................................. $4,882 $4,882
Company-obligated mandatorily redeemable preferred
securities of subsidiary trust holding solely company
debentures................................................ 725 575
Preferred stock, including current sinking fund
obligations............................................... 82 82
Shareowners' common equity:
Common stock, $0.01 par value; 390,000,000 shares
authorized;
147,165,439 shares issued as of June 30, 2002, actual;
and 161,665,439 shares issued as of June 30, 2002, as
adjusted............................................... 2 2
Capital in excess of par value............................ 1,976 2,473
Treasury stock............................................ (836) (836)
Earnings reinvested....................................... 887 884
Accumulated other comprehensive income.................... (120) (120)
Capital stock expense and other........................... (39) (56)
------ ------
Total shareowners' common equity....................... 1,870 2,347
------ ------
Total capitalization................................. $7,559 $7,886
====== ======
---------------
(a) Reflects (i) the reduction of short-term debt by $200 million representing
the repayment of medium-term notes, (ii) the incurrence of $150 million in
short-term debt to repay a portion of the medium-term notes, (iii) the
incurrence of $235 million in short-term debt for the bridge loan provided
in connection with the WPD acquisition and (iv) the application of $327
million of the net proceeds of this offering to the repayment of short-term
debt.
S-11
CERTAIN UNITED STATES TAX CONSEQUENCES TO NON-UNITED STATES HOLDERS
The following summary describes the material United States federal income
and estate tax consequences of the ownership of common stock by a Non-United
States Holder (as defined below) as of the date hereof. This discussion does not
address all aspects of United States federal income and estate taxes and does
not deal with foreign, state and local consequences that may be relevant to such
Non-United States Holders in light of their personal circumstances. Special
rules may apply to certain Non-United States Holders, such as certain United
States expatriates, "controlled foreign corporations," "passive foreign
investment companies," "foreign personal holding companies" and corporations
that accumulate earnings to avoid United States federal income tax, that are
subject to special treatment under the Internal Revenue Code of 1986, as amended
(the "Code"). Such Non-United States Holders should consult their own tax
advisors to determine the United States federal, state, local and other tax
consequences that may be relevant to them. Furthermore, the discussion below is
based upon the provisions of the Code, and regulations, rulings and judicial
decisions thereunder as of the date hereof, and such authorities may be
repealed, revoked or modified so as to result in United States federal income
tax consequences different from those discussed below.
If a partnership holds common stock, the tax treatment of a partner will
generally depend on the status of the partner and the activities of the
partnership. Persons who are partners of partnerships holding common stock
should consult their own tax advisors.
As used herein, a "United States Holder" of common stock means a holder
that for United States federal income tax purposes is (i) a citizen or resident
of the United States, (ii) a corporation or partnership created or organized in
or under the laws of the United States or any political subdivision thereof,
(iii) an estate the income of which is subject to United States federal income
taxation regardless of its source or (iv) a trust if (1) it is subject to the
primary supervision of a court within the United States and one or more United
States persons have the authority to control all substantial decisions of the
trust or (2) it has a valid election in effect under applicable U.S. Treasury
regulations to be treated as a United States person. A "Non-United States
Holder" is a holder that is not a United States Holder.
PERSONS CONSIDERING THE PURCHASE, OWNERSHIP OR DISPOSITION OF COMMON STOCK
SHOULD CONSULT THEIR OWN TAX ADVISORS CONCERNING THE UNITED STATES FEDERAL
INCOME TAX CONSEQUENCES IN LIGHT OF THEIR PARTICULAR SITUATIONS AS WELL AS ANY
CONSEQUENCES ARISING UNDER THE LAWS OF ANY OTHER TAXING JURISDICTION.
DIVIDENDS
Dividends paid to a Non-United States Holder of common stock generally will
be subject to withholding of United States federal income tax at a 30% rate or
such lower rate as may be specified by an applicable income tax treaty. However,
dividends that are effectively connected with the conduct of a trade or business
by the Non-United States Holder within the United States, and, where a tax
treaty applies, are attributable to a United States permanent establishment of
the Non-United States Holder, are not subject to the withholding tax, but
instead are subject to United States federal income tax on a net income basis at
applicable graduated individual or corporate rates. Certain certification and
disclosure requirements must be satisfied in order for effectively connected
income to be exempt from withholding. Any such effectively connected dividends
received by a foreign corporation may be subject to an additional "branch
profits tax" at a 30% rate or such lower rate as may be specified by an
applicable income tax treaty.
A Non-United States Holder of common stock who wishes to claim the benefit
of an applicable treaty rate (and avoid backup withholding as discussed below)
for dividends paid will be required (a) to complete Internal Revenue Service
("IRS") Form W-8BEN (or other applicable form) and certify under penalties of
perjury that such holder is not a United States person or (b) if the common
stock is held through certain foreign intermediaries, to satisfy the relevant
certification requirements of applicable U.S. Treasury regulations. Special
certification and other requirements apply to certain Non-United States Holders
that are entities rather than individuals.
S-12
A Non-United States Holder of common stock eligible for a reduced rate of
United States withholding tax pursuant to an income tax treaty may obtain a
refund of any excess amounts withheld by filing an appropriate claim for refund
with the IRS.
GAIN ON DISPOSITION OF COMMON STOCK
A Non-United States Holder generally will not be subject to United States
federal income tax with respect to gain recognized on a sale or other
disposition of common stock unless (i) the gain is effectively connected with a
trade or business of the Non-United States Holder in the United States, and,
where a tax treaty applies, is attributable to a United States permanent
establishment of the Non-United States Holder, (ii) in the case of a Non-United
States Holder who is an individual and holds the common stock as a capital
asset, such holder is present in the United States for 183 or more days in the
taxable year of the sale or other disposition and certain other conditions are
met, or (iii) we are or have been a "United States real property holding
corporation" for United States federal income tax purposes.
A Non-United States Holder described in clause (i) above will be subject to
tax on the net gain derived from the sale under regular graduated United States
federal income tax rates, and, if it is a corporation, may be subject to the
branch profits tax at a 30% rate or such lower rate as may be specified by an
applicable income tax treaty. An individual Non-United States Holder described
in clause (ii) above will be subject to a flat 30% tax on the gain derived from
the sale, which tax may be offset by U.S. source capital losses (even though the
individual is not considered a resident of the United States).
We have not determined whether we are a "United States real property
holding corporation" for United States federal income tax purposes. If we are or
become a United States real property holding corporation, so long as the common
stock continues to be regularly traded on an established securities market, only
a Non-United States Holder who holds or held (at any time during the shorter of
the five-year period preceding the date of disposition or the holder's holding
period) more than five percent of the common stock will be subject to United
States federal income tax on the disposition of the common stock.
FEDERAL ESTATE TAX
Common stock held by an individual Non-United States Holder at the time of
death will be included in such holder's gross estate for United States federal
estate tax purposes, unless an applicable estate tax treaty provides otherwise.
INFORMATION REPORTING AND BACKUP WITHHOLDING
We must report annually to the IRS and to each Non-United States Holder the
amount of dividends paid to such holder and the tax withheld, if any, with
respect to such dividends, regardless of whether withholding was required.
Copies of the information returns reporting such dividends and withholding may
also be made available to the tax authorities in the country in which the
Non-United States Holder resides under the provisions of an applicable income
tax treaty.
A Non-United States Holder will be subject to backup withholding unless
applicable certification requirements are met.
Payment of the proceeds of a sale of common stock within the United States
or conducted through certain U.S.-related financial intermediaries is subject to
both backup withholding and information reporting unless the beneficial owner
certifies under penalties of perjury that it is a Non-United States Holder (and
the payor does not have actual knowledge or reason to know that the beneficial
owner is a United States person) or the holder otherwise establishes an
exemption.
Any amounts withheld under the backup withholding rules may be allowed as a
refund or a credit against such holder's United States federal income tax
liability provided the required information is furnished to the IRS.
S-13
UNDERWRITING
Under the terms and subject to the conditions contained in an underwriting
agreement dated the date of this prospectus supplement, the underwriters named
below, for whom J.P. Morgan Securities Inc. and Morgan Stanley & Co.
Incorporated are acting as representatives, have severally agreed to purchase,
and we have agreed to sell to them, severally, the number of shares of common
stock indicated below:
NUMBER
NAME OF SHARES
---- -----------
J.P. Morgan Securities Inc. ................................
Morgan Stanley & Co. Incorporated...........................
UBS Warburg LLC.............................................
Salomon Smith Barney Inc. ..................................
Wachovia Securities, Inc. ..................................
Janney Montgomery Scott LLC.................................
-----------
Total.................................................. 14,500,000
===========
The underwriters are offering the shares subject to their acceptance of the
shares from us and subject to prior sale. The underwriting agreement provides
that the obligation of the underwriters to pay for and accept delivery of the
shares of common stock offered by this prospectus supplement is subject to the
approval of certain legal matters by their counsel and to other conditions. The
underwriters are obligated to take and pay for all of the shares of common stock
offered by this prospectus supplement if any are taken. However, the
underwriters are not required to take or pay for the shares of common stock
covered by the underwriters' over-allotment option described below.
The underwriters initially propose to offer some of the shares of common
stock directly to the public at the public offering price listed on the cover
page of this prospectus supplement. The underwriters may also offer some of the
shares of common stock to securities dealers at a price that represents a
concession not in excess of $ per share. After the initial offering of the
shares of common stock, the offering price and other selling terms may from time
to time be changed by the representatives of the underwriters.
We have granted to the underwriters an option to purchase from us within 30
days from the date of this prospectus supplement up to an aggregate of 2,175,000
additional shares of common stock at the public offering price listed on the
cover page of this prospectus supplement less underwriting discounts and
commissions. The underwriters may exercise this option solely to cover
over-allotments, if any, made in connection with this offering. If the option is
exercised, each underwriter will become obligated, subject to certain
conditions, to purchase approximately the same percentage of additional shares
of common stock as the number listed next to the underwriter's name in the
preceding table bears to the total number of shares of common stock offered by
all the underwriters. If the underwriters' over-allotment option is exercised in
full, the total public offering price would be $ million, the total
underwriting discounts and commissions would be $ million and the total
proceeds to us, before offering expenses, would be $ million.
We estimate that the total expenses of this offering payable by us,
excluding underwriting discounts and commissions, will be approximately $1
million.
Our common stock is listed on the New York Stock Exchange and the
Philadelphia Stock Exchange and trades under the symbol "PPL," and the shares of
common stock offered hereby have been approved for listing subject to official
notice of issuance. No underwriter is obligated to make a market in our common
stock and any market making may be discontinued at any time without notice.
In connection with this offering, certain of the underwriters may
distribute prospectuses electronically.
We have agreed to indemnify the underwriters against certain liabilities,
including liabilities under the Securities Act, and to contribute to payments
the underwriters may be required to make under the Securities Act.
S-14
We and each of our directors and officers have agreed, without the prior
written consent of J.P. Morgan Securities Inc. and Morgan Stanley & Co.
Incorporated on behalf of the underwriters, not to, during the period ending 90
days after the date of this prospectus supplement:
- offer, pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option,
right or warrant to purchase, lend, or otherwise transfer or dispose of,
directly or indirectly, any shares of our common stock or any securities
convertible into or exercisable or exchangeable for shares of common
stock; or
- enter into any swap or other arrangement that transfers to another, in
whole or in part, any of the economic consequences of ownership of shares
of our common stock;
whether any transaction described above is to be settled by delivery of shares
of common stock, such other securities, in cash or otherwise. The restrictions
described in the preceding paragraph do not apply to:
- the issuance and sale of the shares of common stock offered by this
prospectus supplement;
- the issuance by us of shares of common stock upon the exercise of an
option or a warrant or the conversion of a security outstanding on the
date of this prospectus supplement of which the underwriters have been
advised in writing;
- the issuance by us of additional options under our existing stock option
plans, provided that these options are not exercisable during the 90-day
period; and
- transactions by any person other than us relating to shares of common
stock or other securities acquired in open market transactions after the
completion of the offering of the shares of common stock.
In order to facilitate the offering of the common stock, the underwriters
may engage in transactions that stabilize, maintain or otherwise affect the
price of the common stock. Specifically, the underwriters may over-allot in
connection with the offering, creating a short position in the common stock for
their own account. A short sale is covered if the short position is no greater
than the number of shares of common stock available for purchase by the
underwriters under the over-allotment option. The underwriters can close out a
covered short sale by exercising the over-allotment option or purchasing common
stock in the open market. In determining the source of common stock to close out
a covered short sale, the underwriters will consider, among other things, the
open market price of the common stock compared to the price available under the
over-allotment option. The underwriters may also sell common stock in excess of
the over-allotment option, creating a naked short position. The underwriters
must close out any naked short position by purchasing common stock in the open
market. A naked short position is more likely to be created if the underwriters
are concerned that there may be downward pressure on the price of the common
stock in the open market after pricing that could adversely affect investors who
purchase shares of common stock in the offering. As an additional means of
facilitating the offering of common stock, the underwriters may bid for and
purchase any shares of common stock in the open market to stabilize the price of
the common stock. Finally, the underwriting syndicate may reclaim selling
concessions allowed to an underwriter or a dealer for distributing the shares of
common stock in the offering, if the syndicate repurchases previously
distributed shares of common stock in transactions to cover syndicate short
positions, in stabilization transactions or otherwise. Any of these activities
may stabilize or maintain the market price of the common stock above independent
market levels or prevent or retard a decline in the market price of the common
stock. The underwriters are not required to engage in these activities, and may
end any of these activities at any time.
From time to time, some of the underwriters and their affiliates have
provided, and continue to provide, investment banking and commercial banking
services to PPL Corporation and its affiliates.
S-15
VALIDITY OF COMMON STOCK
Simpson Thacher & Bartlett, New York, New York, counsel to PPL Corporation,
will pass upon the validity of the shares of common stock offered hereby for PPL
Corporation. Michael A. McGrail, Esq., Senior Counsel of PPL Services
Corporation, will pass upon the validity of the shares of common stock for PPL
Corporation. Sullivan & Cromwell, New York, New York, will pass upon the
validity of the shares of common stock offered hereby for the underwriters.
Simpson Thacher & Bartlett and Sullivan & Cromwell will rely on the opinion of
Mr. McGrail as to matters involving the law of the Commonwealth of Pennsylvania.
As to matters involving the law of the State of New York, Mr. McGrail will rely
on the opinion of Simpson Thacher & Bartlett.
EXPERTS
The consolidated financial statements incorporated in this prospectus
supplement by reference to the Annual Report on Form 10-K of PPL Corporation for
the year ended December 31, 2001 have been so incorporated in reliance on the
report of PricewaterhouseCoopers LLP, independent accountants, given on the
authority of said firm as experts in auditing and accounting.
WHERE YOU CAN FIND MORE INFORMATION
AVAILABLE INFORMATION
PPL Corporation files reports, proxy statements and other information with
the SEC. You may obtain copies of this information by mail from the Public
Reference Room of the SEC, 450 Fifth Street, N.W., Room 1024, Washington, D.C.
20549, at prescribed rates. Further information on the operation of the SEC's
Public Reference Room in Washington, D.C. can be obtained by calling the SEC at
1-800-SEC-0330.
The SEC also maintains an Internet world wide web site that contains
reports, proxy statements and other information about issuers, such as PPL
Corporation, who file electronically with the SEC. The address of that site is
http://www.sec.gov.
PPL Corporation's common stock is listed on the New York Stock Exchange and
the Philadelphia Stock Exchange (symbol: PPL), and reports, proxy statements and
other information concerning PPL Corporation can also be inspected at the
offices of the New York Stock Exchange at 20 Broad Street, New York, New York
10005 and the Philadelphia Stock Exchange, 1900 Market Street, Philadelphia,
Pennsylvania 19103. In addition, reports, proxy statements and other information
concerning PPL Corporation can be inspected at its offices at Two North Ninth
Street, Allentown, Pennsylvania 18101-1179. PPL Corporation maintains an
Internet site at http://www.pplweb.com (which is not intended to be an active
hyperlink herein) which contains information concerning PPL Corporation and its
affiliates. The information at PPL Corporation's Internet site is not
incorporated in this prospectus supplement and the accompanying prospectus by
reference, and you should not consider it a part of this prospectus supplement
and the accompanying prospectus.
INCORPORATION BY REFERENCE
The rules of the SEC allow us to "incorporate by reference" information
into this prospectus supplement and the accompanying prospectus, which means
that we can disclose important information to you by referring you to another
document filed separately with the SEC. The information incorporated by
reference is deemed to be part of this prospectus supplement and the
accompanying prospectus, and later information that we file with the SEC will
automatically update and supersede that information. This prospectus supplement
and the accompanying prospectus incorporate by reference the documents set forth
below that have been previously filed with the SEC. These documents contain
important information about PPL Corporation.
S-16
SEC FILINGS (FILE NO. 1-11459) PERIOD/DATE
------------------------------ -----------
Annual Report on Form 10-K Year ended December 31, 2001
Quarterly Reports on Form 10-Q Quarter ended March 31, 2002 (Amended by Quarterly
Report on Form 10-Q/A filed June 21, 2002) and
quarter ended June 30, 2002
Current Reports on Form 8-K January 7, January 22, January 31, April 25, June
21, July 3 and July 23, 2002
PPL Corporation's Registration Statement on April 27, 1995
Form 8-B
We are also incorporating by reference additional documents that PPL
Corporation files with the SEC pursuant to Section 13(a), 13(c), 14 or 15(d) of
the Exchange Act, between the date of this prospectus supplement and the
termination of the offering of the common stock.
PPL Corporation will provide without charge to each person, including any
beneficial owner, to whom a copy of this prospectus supplement and the
accompanying prospectus has been delivered, a copy of any and all of these
filings. You may request a copy of these filings by writing or telephoning us
at:
PPL Corporation
Two North Ninth Street
Allentown, Pennsylvania 18101-1179
Attention: Investor Services Department
Telephone: 1-800-345-3085
S-17
PROSPECTUS PPL CORPORATION
PPL CAPITAL FUNDING, INC.
PPL CAPITAL FUNDING TRUST II
Two North Ninth Street
Allentown, Pennsylvania
18101-1179
(610) 774-5151
$950,000,000
PPL CORPORATION
COMMON STOCK, PREFERRED STOCK,
STOCK PURCHASE CONTRACTS AND STOCK PURCHASE UNITS
PPL CAPITAL FUNDING, INC.
DEBT SECURITIES AND SUBORDINATED DEBT SECURITIES
GUARANTEED AS DESCRIBED
IN THIS PROSPECTUS BY PPL CORPORATION
PPL CAPITAL FUNDING TRUST II
PREFERRED TRUST SECURITIES
GUARANTEED AS DESCRIBED
IN THIS PROSPECTUS BY PPL CORPORATION
We will provide the specific terms of these securities in supplements to
this prospectus. You should read this prospectus and the supplements carefully
before you invest. This prospectus may not be used to sell securities unless
accompanied by a prospectus supplement.
We may offer the securities directly or through underwriters or agents. The
applicable prospectus supplement will describe the terms of any particular plan
of distribution.
INVESTING IN THE SECURITIES INVOLVES CERTAIN RISKS. SEE "RISK FACTORS"
BEGINNING ON PAGE 4.
PPL Corporation's common stock is listed on the New York Stock Exchange and
the Philadelphia Stock Exchange and trades under the symbol "PPL."
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION DETERMINED
THAT THIS PROSPECTUS IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
The date of this prospectus is July 22, 2002.
TABLE OF CONTENTS
PAGE
----
ABOUT THIS PROSPECTUS....................................... 2
RISK FACTORS................................................ 4
FORWARD-LOOKING INFORMATION................................. 13
PPL CORPORATION............................................. 14
PPL CAPITAL FUNDING......................................... 15
PPL CAPITAL FUNDING TRUST II................................ 16
USE OF PROCEEDS............................................. 16
RATIOS OF EARNINGS TO FIXED CHARGES AND EARNINGS TO FIXED
CHARGES AND PREFERRED DIVIDENDS........................... 16
DESCRIPTION OF PPL CORPORATION'S CAPITAL STOCK.............. 17
DESCRIPTION OF STOCK PURCHASE CONTRACTS AND STOCK PURCHASE
UNITS..................................................... 19
DESCRIPTION OF THE DEBT SECURITIES.......................... 19
DESCRIPTION OF THE TRUST SECURITIES......................... 27
DESCRIPTION OF THE PREFERRED TRUST SECURITIES GUARANTEE..... 34
DESCRIPTION OF THE SUBORDINATED DEBT SECURITIES............. 37
INFORMATION CONCERNING THE TRUSTEES......................... 48
PLAN OF DISTRIBUTION........................................ 48
WHERE YOU CAN FIND MORE INFORMATION......................... 49
EXPERTS..................................................... 51
VALIDITY OF THE SECURITIES AND THE SECURITIES GUARANTEES.... 51
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that PPL Corporation,
PPL Capital Funding, Inc. ("PPL Capital Funding") and PPL Capital Funding Trust
II (the "Trust") filed with the Securities and Exchange Commission, or SEC,
using the "shelf" registration process. Under this shelf process, we may, from
time to time, sell combinations of the securities described in this prospectus
in one or more offerings up to a total dollar amount of $950,000,000. This
amount includes $20,000,000 of securities registered under an earlier
registration statement. This prospectus provides a general description of the
securities we may offer. Each time we sell securities, we will provide a
prospectus supplement that will contain specific information about the terms of
that offering. The prospectus supplement may also add, update or change
information contained in this prospectus. You should read both this prospectus
and any prospectus supplement together with additional information described
under "Where You Can Find More Information."
We may use this prospectus to offer from time to time:
- shares of PPL Corporation Common Stock, par value $.01 per share ("Common
Stock");
- shares of PPL Corporation Preferred Stock, par value $.01 per share
("Preferred Stock");
- contracts to purchase shares of PPL Corporation Common Stock ("Stock
Purchase Contracts"); and
- stock purchase units, each representing (1) a Stock Purchase Contract and
(2) debt securities or preferred trust securities of third parties (such
as Debt Securities or Subordinated Debt Securities of PPL Capital
Funding, Preferred Trust Securities of the Trust or United States
Treasury securities) that are pledged to secure the stock purchase unit
holders' obligations to purchase Common Stock under the Stock Purchase
Contracts ("Stock Purchase Units").
2
We may also use this prospectus to offer from time to time:
- PPL Capital Funding's unsecured and unsubordinated debt securities ("Debt
Securities"); and
- PPL Capital Funding's unsecured subordinated debt securities
("Subordinated Debt Securities").
PPL Corporation will unconditionally guarantee the payment of principal,
premium and interest on the PPL Capital Funding Debt Securities and Subordinated
Debt Securities as described below in "Description of the Debt Securities -- PPL
Corporation Guarantees" and "Description of the Subordinated Debt
Securities -- Subordinated Guarantees."
We may also use this prospectus to offer from time to time the Trust's
preferred trust securities ("Preferred Trust Securities"). PPL Corporation will
guarantee the Trust's obligations under the Preferred Trust Securities as
described below under "Description of the Preferred Trust Securities Guarantee."
We sometimes refer to the Common Stock, the Preferred Stock, the Stock
Purchase Contracts, the Stock Purchase Units, the Debt Securities, the
Subordinated Debt Securities and the Preferred Trust Securities collectively as
the "Securities." In addition, we sometimes refer to PPL Corporation's
guarantees of Debt Securities ("Guarantees"), guarantees of Subordinated Debt
Securities ("Subordinated Guarantees"), and the guarantee of Preferred Trust
Securities ("Preferred Trust Securities Guarantee"), collectively as "Securities
Guarantees."
For more detailed information about the Securities and the Securities
Guarantees, you can read the exhibits to the registration statement. Those
exhibits have been either filed with the registration statement or incorporated
by reference to earlier SEC filings listed in the registration statement.
SEE PAGE 13 FOR "FORWARD-LOOKING INFORMATION", WHICH SETS FORTH A WARNING
REGARDING FORWARD-LOOKING INFORMATION CONTAINED OR INCORPORATED BY REFERENCE IN
THIS PROSPECTUS.
3
RISK FACTORS
In addition to the other information in this prospectus, you should
consider the factors described below. The risks and uncertainties described
below are not the only risks we face. Additional risks and uncertainties not
presently known to us or that we currently deem immaterial may impair our
business operations. Each of the risks described below could have a material
adverse effect on our business, financial condition or results of operations and
could result in a loss or a decrease in the value of the Securities.
RISKS RELATED TO OUR SUPPLY BUSINESSES
CHANGES IN COMMODITY PRICES MAY INCREASE THE COST OF PRODUCING POWER OR
DECREASE THE AMOUNT WE RECEIVE FROM SELLING POWER, WHICH COULD ADVERSELY
AFFECT OUR FINANCIAL PERFORMANCE.
Our generation and marketing businesses are subject to changes in power
prices or fuel costs, which may impact our financial results and financial
position by increasing the cost of producing power or decreasing the amount we
receive from the sale of power. The market prices for these commodities may
fluctuate substantially over relatively short periods of time. Among the factors
that could influence such prices are:
- prevailing market prices for coal, natural gas, fuel oil and other fuels
used in our generation facilities, including associated transportation
costs, and supplies of such commodities;
- demand for energy and the extent of additional supplies of energy
available from current or new competitors;
- capacity and transmission service into, or out of, our markets;
- changes in the regulatory framework for wholesale power markets;
- liquidity in the general wholesale electricity market; and
- weather conditions impacting demand for electricity.
In the absence of long-term power sales agreements, we must sell the
energy, capacity and other products from our facilities into the competitive
wholesale power markets. Unlike most other commodities, electric power cannot be
stored and must be produced concurrently with its use. As a result, the
wholesale power markets are subject to significant price fluctuations over
relatively short periods of time and can be unpredictable. In addition, the
price we can obtain for power sales may not change at the same rate as changes
in fuel and other costs. Given the volatility and potential for material
differences between actual power prices and fuel and other costs, if we are
unable to secure or maintain long-term power sales and fuel purchase agreements
for our power generation facilities, our revenues would be subject to increased
volatility and our financial results may be materially adversely affected.
OUR FACILITIES MAY NOT OPERATE AS PLANNED, WHICH MAY INCREASE OUR EXPENSES OR
DECREASE OUR REVENUES AND, THUS, HAVE AN ADVERSE EFFECT ON OUR FINANCIAL
PERFORMANCE.
Operation of power plants involves many risks, including the breakdown or
failure of equipment or processes, accidents, labor disputes, fuel interruption
and performance below expected levels. In addition, weather-related incidents
and other natural disasters can disrupt both generation and transmission
delivery systems. Operation of our power plants below expected capacity levels
may result in lost revenues or increased expenses, including higher maintenance
costs and, if we are unable to perform our contractual obligations as a result,
penalties or damages.
WE MAY NOT BE ABLE TO OBTAIN ADEQUATE FUEL SUPPLIES, WHICH COULD ADVERSELY
AFFECT OUR ABILITY TO OPERATE OUR FACILITIES.
We purchase fuel from a number of suppliers. Disruption in the delivery of
fuel, including disruptions as a result of weather, labor relations or
environmental regulations affecting our fuel suppliers, could adversely affect
our ability to operate our facilities, and thus, our results of operations.
4
WE MAY BE REQUIRED TO MEET OUR "PROVIDER OF LAST RESORT," OR PLR, OBLIGATIONS
AT PRICES WHICH MAY BE BELOW OUR COST, WHICH COULD ADVERSELY AFFECT OUR
FINANCIAL CONDITION. WE ALSO ARE NOT ASSURED OF ANY GUARANTEED LEVEL OF SALES
AS A PLR.
Under its settlement order in connection with its restructuring pursuant to
the Pennsylvania Electricity Generation Customer Choice and Competition Act,
which we refer to as the Customer Choice Act, our Pennsylvania electricity
delivery subsidiary, PPL Electric Utilities Corporation, or PPL Electric, has an
obligation to act as a "provider of last resort," or PLR, to provide
electricity, at settlement rates through 2009, to certain retail electric
customers that do not select an alternate energy supplier. Our energy marketing
subsidiary, PPL EnergyPlus, has entered into long-term contracts to supply PPL
Electric's PLR requirements at the settlement rates through 2009. This
obligation currently represents a significant portion of the normal operating
capacity of our existing generation assets. The prices we receive from our PLR
customers were established under the settlement order and may not have any
relationship to the cost to us of supplying this power. This means that we are
required to absorb increasing costs, including the risk of fuel price increases
and increased costs of production.
The PLR contract obligations do not provide us with any guaranteed level of
sales. If our customers obtain service from alternate suppliers, which they are
entitled to do at any time, our sales of power under the contracts may decrease.
Alternatively, customers could switch back to PPL Electric from alternative
suppliers, which may increase demand above our facilities' available capacity.
Any switching by customers could have a material adverse effect on our results
of operations or financial position.
WE ARE SUBJECT TO THE RISKS OF NUCLEAR GENERATION, INCLUDING THE RISK THAT OUR
SUSQUEHANNA NUCLEAR PLANT COULD BECOME SUBJECT TO REVISED SAFETY REQUIREMENTS
THAT WOULD INCREASE OUR CAPITAL AND OPERATING EXPENDITURES, AND UNCERTAINTIES
ASSOCIATED WITH DECOMMISSIONING OUR PLANT AT THE END OF ITS LICENSED LIFE.
Nuclear generation accounts for about 20% of our generation capacity. The
risks of nuclear generation generally include:
- the potential harmful effects on the environment and human health
resulting from the operation of nuclear facilities and the storage,
handling and disposal of radioactive materials;
- limitations on the amounts and types of insurance commercially available
to cover losses and liabilities that might arise in connection with
nuclear operations; and
- uncertainties with respect to the technological and financial aspects of
decommissioning nuclear plants at the end of their licensed lives.
The Nuclear Regulatory Commission, or NRC, has broad authority under
federal law to impose licensing and safety-related requirements for the
operation of nuclear generation facilities. In the event of non-compliance, the
NRC has the authority to impose fines or shut down a unit, or both, depending
upon its assessment of the severity of the situation, until compliance is
achieved. In addition, revised safety requirements promulgated by the NRC could
necessitate substantial capital or operating expenditures at our Susquehanna
nuclear plant. In addition, although we have no reason to anticipate a serious
nuclear incident at our Susquehanna plant, if an incident did occur, it could
have a material adverse effect on our results of operations or financial
condition.
WE HAVE A LIMITED HISTORY OF OPERATING MANY OF OUR GENERATING FACILITIES IN A
COMPETITIVE ENVIRONMENT, IN WHICH WE ARE NOT ASSURED OF ANY RETURN ON OUR
INVESTMENT.
Many of our facilities were historically operated within
vertically-integrated, regulated utilities that sold electricity to consumers at
prices based on predetermined rates set by state public utility commissions.
Unlike regulated utilities, we are not assured of any rate of return on our
capital investments through predetermined rates, and our revenues and results of
operations are likely to depend, in large part, upon prevailing market prices
for electricity in our regional markets and other competitive markets, the
volume of demand, capacity factors and ancillary services. We have limited
history operating these facilities in a market-based competitive environment,
and we may not be able to operate them successfully in such an environment.
5
CHANGES IN TECHNOLOGY MAY IMPAIR THE VALUE OF OUR POWER PLANTS.
A basic premise of our business is that generating power at central power
plants achieves economies of scale and produces electricity at a relatively low
price. There are other technologies that produce electricity, most notably fuel
cells, microturbines, windmills and photovoltaic (solar) cells. Research and
development activities are ongoing to seek improvements in the alternate
technologies. It is possible that advances will reduce the cost of alternate
methods of electric production to a level that is equal to or below that of most
central station electric production. If this were to happen, the value of our
power plants may be significantly impaired.
WE ARE EXPOSED TO OPERATIONAL, PRICE AND CREDIT RISKS ASSOCIATED WITH SELLING
AND MARKETING PRODUCTS IN THE WHOLESALE POWER MARKETS.
We purchase and sell power at the wholesale level under market-based
tariffs authorized by the Federal Energy Regulatory Commission, or FERC,
throughout the United States and also enter into short-term agreements to market
available energy and capacity from our generation assets with the expectation of
profiting from market price fluctuations. If we are unable to deliver firm
capacity and energy under these agreements, we could be required to pay damages.
These damages would generally be based on the difference between the market
price to acquire replacement capacity or energy and the contract price of the
undelivered capacity or energy. Depending on price volatility in the wholesale
energy markets, such damages could be significant. We also face credit risk that
parties with whom we contract will default in their performance, in which case
we may have to sell our power into a lower-priced market or make purchases in a
higher priced market than existed at the time of contract. For example, we
recorded significant charges in 2001 associated with the bankruptcy of Enron
Corporation and its affiliates ("Enron"), and Enron's defaults under various
electric and gas contracts with our subsidiaries and other entities in which we
have invested. For more information, please refer to the reports described under
"Where You Can Find More Information." In addition, extreme weather conditions,
unplanned power plant outages, transmission disruptions, and other factors could
affect our ability to meet our obligations, or cause significant increases in
the market price of replacement capacity and energy. Although we attempt to
mitigate these risks, there can be no assurance that we will be able to fully
meet our obligations, that we will not experience counterparty non-performance
or that we will not be required to pay damages for failure to perform.
WE DO NOT ALWAYS HEDGE AGAINST RISKS ASSOCIATED WITH ENERGY AND FUEL PRICE
VOLATILITY.
We attempt to mitigate risks associated with satisfying our contractual
power sales arrangements by reserving generation capacity to deliver electricity
to satisfy our net firm sales contracts and, when necessary, by purchasing firm
transmission service. We also routinely enter into contracts, such as fuel and
power purchase and sale commitments, to hedge our exposure to weather
conditions, fuel requirements and other energy-related commodities. We may not,
however, hedge the entire exposure of our operations from commodity price
volatility. To the extent we fail to hedge against commodity price volatility,
our results of operations and financial position may be affected unfavorably.
OUR TRADING, MARKETING AND RISK MANAGEMENT POLICIES MAY NOT WORK AS PLANNED,
AND WE MAY SUFFER ECONOMIC LOSSES DESPITE SUCH POLICIES.
We actively manage the market risk inherent in our energy and fuel, debt
and foreign currency positions. Nonetheless, adverse changes in energy and fuel
prices, interest rates and foreign currency exchange rates may result in losses
in our earnings or cash flows and adversely affect our balance sheet. Our
trading, marketing and risk management procedures may not always be followed or
may not work as planned. As a result, we cannot predict with precision the
impact that our trading, marketing and risk management decisions may have on our
business, operating results or financial position.
In addition, our trading, marketing and risk management activities are
exposed to the credit risk that counterparties that owe us money or energy will
breach their obligations. We have established risk management policies and
programs, including credit policies to evaluate counterparty credit risk.
However, if
6
counterparties to these arrangements fail to perform, we may be forced to enter
into alternative hedging arrangements or honor underlying commitments at
then-current market prices. In that event, our financial results are likely to
be adversely affected.
OUR OPERATING RESULTS MAY FLUCTUATE ON A SEASONAL AND QUARTERLY BASIS.
Electrical power supply may be seasonal. For example, in some parts of the
country, demand for, and market prices of, electricity peak during the hot
summer months, while in other parts of the country such peaks occur in the cold
winter months. As a result, our overall operating results in the future may
fluctuate substantially on a seasonal basis. The pattern of this fluctuation may
change depending on the nature and location of the facilities we acquire and the
terms of our contracts to sell electricity.
WE RELY ON SOME TRANSMISSION AND DISTRIBUTION ASSETS THAT WE DO NOT OWN OR
CONTROL TO DELIVER OUR WHOLESALE ELECTRICITY AND NATURAL GAS. IF TRANSMISSION
IS DISRUPTED, OR IF CAPACITY IS INADEQUATE, OUR ABILITY TO SELL AND DELIVER
POWER MAY BE HINDERED.
We depend on transmission and distribution facilities owned and operated by
utilities and other energy companies to deliver the electricity and natural gas
we sell to the wholesale market, as well as the natural gas we purchase for use
in our electric generation facilities. If transmission is disrupted, or if
capacity is inadequate, our ability to sell and deliver products and satisfy our
contractual obligations may be hindered.
The FERC has issued regulations that require wholesale electric
transmission services to be offered on an open-access, non-discriminatory basis.
Although these regulations are designed to encourage competition in wholesale
market transactions for electricity, there is the potential that fair and equal
access to transmission systems will not be available or that sufficient
transmission capacity will not be available to transmit electric power as we
desire. We cannot predict the timing of industry changes as a result of these
initiatives or the adequacy of transmission facilities in specific markets.
RISKS RELATED TO OUR BUSINESS GENERALLY AND TO OUR INDUSTRY
THE ENERGY INDUSTRY IS RAPIDLY CHANGING AND INTENSELY COMPETITIVE, WHICH MAY
ADVERSELY AFFECT OUR ABILITY TO OPERATE PROFITABLY.
We face intense competition in our energy supply and development
businesses. A number of our competitors, including domestic and international
energy companies and other global power providers, have more extensive
experience operating in unregulated markets, larger staffs and/or greater
financial resources than we do. In addition, many of the regions in which we
operate have implemented or are considering implementing regulatory initiatives
designed to increase competition. For example, regulations encouraging industry
deregulation and privatization continue to cause the disaggregation of
vertically integrated utilities into separate generation, transmission and
distribution businesses in the United States and abroad. Moreover, the FERC has
implemented regulatory changes designed to increase access to transmission grids
by utility and non-utility purchasers and sellers of electricity. As a result, a
significant number of additional competitors could become active in the
generation segment of our industry. This competition may negatively impact our
ability to sell energy and related products and the prices which we may charge
for such products, which could adversely affect our results of operations and
our ability to grow our business.
In addition, while demand for electricity is generally increasing
throughout the United States, the rate of construction and development of new
electric assets may exceed the increase in demand in some regional markets. The
commencement of commercial operation of new facilities in the regional markets
where we own or control generation capacity will likely increase the
competitiveness of the wholesale power market in those regions, which could have
a material adverse effect on our business and financial condition.
7
OUR BUSINESS IS SUBJECT TO EXTENSIVE REGULATION, WHICH MAY INCREASE OUR COSTS,
REDUCE OUR REVENUES, OR PREVENT OR DELAY OPERATION OF OUR FACILITIES.
Our U.S. generation subsidiaries are exempt wholesale generators, or EWGs,
which sell electricity into the wholesale market. Generally, our EWGs are
subject to regulation by the FERC. The FERC has authorized us to sell generation
from our facilities at market-based prices. The FERC retains the authority to
modify or withdraw our market-based rate authority and to impose "cost of
service" rates if it determines that the market is not workably competitive,
that we possess market power or that we are not charging just and reasonable
rates. Any reduction by the FERC of the rate we may receive or any unfavorable
regulation of our business by state regulators could materially adversely affect
our results of operations.
The acquisition, ownership and operation of power generation facilities
require numerous permits, approvals, licenses and certificates from federal,
state and local governmental agencies. We may not be able to obtain or maintain
all required regulatory approvals. If there is a delay in obtaining any required
regulatory approvals or if we fail to obtain or maintain any required approval
or comply with any applicable law or regulation, the operation of our assets and
our sales of electricity could be prevented or delayed or become subject to
additional costs.
WE OPERATE IN COMPETITIVE SEGMENTS OF THE ELECTRIC POWER INDUSTRY CREATED BY
DEREGULATION INITIATIVES AT THE STATE AND FEDERAL LEVELS. IF THE PRESENT TREND
TOWARDS COMPETITION IS REVERSED, DISCONTINUED OR DELAYED, OUR BUSINESS
PROSPECTS AND FINANCIAL CONDITION COULD BE MATERIALLY ADVERSELY AFFECTED.
Some restructured markets have recently experienced supply problems and
price volatility. In some of these markets, government agencies and other
interested parties have made proposals to delay market restructuring or even
re-regulate areas of these markets that have previously been deregulated. See
"We cannot predict the effect of initiatives in Montana to re-regulate
generating assets," below for more information. In California, legislation has
been passed placing a moratorium on the sale of generation plants by public
utilities regulated by the California Public Utilities Commission. In 2001, the
FERC instituted a series of price controls designed to mitigate (or cap) prices
in the entire western U.S. to address the extreme volatility in the California
energy markets. These price controls have had the effect of significantly
lowering spot and forward energy prices in the western market.
In addition, the independent system operators that oversee the transmission
systems in certain wholesale power markets have from time to time been
authorized to impose price limitations and other mechanisms to address
volatility in the power markets. These types of price limitations and other
mechanisms may adversely impact the profitability of our wholesale power
marketing and trading business.
Other proposals to re-regulate our industry may be made, and legislative or
other action affecting the electric power restructuring process may cause the
process to be delayed, discontinued or reversed in the states in which we
currently, or may in the future, operate. If the current trend towards
competitive restructuring of the wholesale and retail power markets is delayed,
discontinued or reversed, our business prospects and financial condition could
be materially adversely affected.
WE CANNOT PREDICT THE OUTCOME OR EXTENT OF ANY INVESTIGATIONS OR LITIGATION
ASSOCIATED WITH OUR CAPACITY TRANSACTIONS DESCRIBED IN THE PJM MARKET MONITOR
REPORT AND RELATED MATTERS, WHICH COULD RESULT IN PENALTIES, AN OBLIGATION TO
PAY DAMAGES, OR OTHER LIABILITIES.
In November 2001, the Market Monitor of PJM Interconnection, LLC, or PJM,
publicly released a report prepared for the Pennsylvania Public Utility
Commission, or PUC, entitled "Capacity Market Questions" relating to the pricing
of installed capacity in the PJM daily market during the first quarter of 2001.
The report concludes that PPL EnergyPlus was able to exercise market power to
raise the market-clearing price above the competitive level during that period.
In November 2001, the PUC issued an investigation order directing its Law Bureau
to conduct an investigation into the PJM capacity market and the allegations in
the Market Monitor's report. In June 2002, the PUC issued an "investigation
report" alleging, among other things, that PPL had "unfairly manipulated
electricity markets in early 2001," and that "there was an unlawful exercise of
market power and market rules gaming by PPL" that was damaging to wholesale
8
and retail electricity markets in Pennsylvania. The PUC stated that it was not
authorized to, and was not attempting to, adjudicate the merits of PPL's
defenses to these charges, but has referred the matter to the U.S. Department of
Justice -- Antitrust Division, or DOJ, the FERC and the Pennsylvania Attorney
General. We had previously responded to certain information requests of the DOJ
in connection with a civil investigative demand regarding capacity transactions
in the PJM, and the Office of the Pennsylvania Attorney General has now
requested PPL to provide it with any information that we provided to the DOJ. In
addition, in July 2002, PPL appealed the PUC order to the Commonwealth Court of
Pennsylvania. Although we believe that the PUC's report is inaccurate, that its
conclusions are groundless, and that we acted ethically and legally, in
compliance with all applicable laws and regulations, we cannot predict the
outcome or extent of any investigations, litigation or other proceedings related
to this matter.
WE CANNOT PREDICT THE EFFECTS OF INITIATIVES IN MONTANA TO RE-REGULATE
GENERATING ASSETS.
In 2001, the Montana Public Service Commission, or MPSC, issued an order in
which it found that The Montana Power Company must continue to provide electric
service to its customers at tariffed rates until its transition plan under the
Montana restructuring legislation is finally approved, and that purchasers of
generating assets from Montana Power must provide electricity to meet Montana
Power's full load requirements at prices to Montana Power that reflect costs
calculated as if the generation assets had not been sold. PPL Montana purchased
Montana Power's interest in two coal-fired plants and 11 hydroelectric units in
1999. In 2001, PPL Montana challenged the MPSC Order, asserting, among other
things, that the Federal Power Act preempts states from regulating the sale of
electricity in wholesale markets, and requesting that the MPSC be enjoined from
seeking to regulate wholesale sales from PPL Montana's generating assets. In
March 2002, the U.S. District Court in Helena, Montana dismissed PPL Montana's
lawsuit on procedural grounds, ruling that the Eleventh Amendment to the U.S.
Constitution prevented PPL Montana from bringing the action in federal court.
The District Court noted that the action could be filed in a state court in
Montana. PPL Montana has appealed the District Court's ruling to the United
States Court of Appeals for the Ninth Circuit. We cannot predict the ultimate
outcome of these proceedings.
In addition, there has been proposed a ballot initiative to create an
elected Montana public power commission to determine whether purchasing
hydroelectric dams in Montana is in the public interest. See "Where You Can Find
More Information" for how you can find more information regarding this
initiative. Such a commission could decide to acquire PPL Montana's
hydroelectric dams either pursuant to a negotiated purchase or an acquisition at
fair market value through the power of condemnation. While PPL Montana intends
to vigorously oppose such an initiative, we cannot predict the outcome of this
proposal.
WE MAY BE ADVERSELY AFFECTED BY LEGAL PROCEEDINGS ARISING OUT OF THE
ELECTRICITY SUPPLY SITUATION IN CALIFORNIA AND OTHER WESTERN STATES, WHICH
COULD RESULT IN REFUND OR OTHER LIABILITIES.
Litigation arising out of the California electricity supply situation has
been filed with the FERC and in California courts against sellers of energy to
the California ISO. The plaintiffs and intervenors in these proceedings allege
abuse of market power, manipulation of market prices, unfair trade practices and
violations of state antitrust laws, among other things, and seek price caps on
wholesale sales in California and other western power markets, refunds of excess
profits allegedly earned on these sales, and other relief, including treble
damages and attorney's fees. In addition, attorneys general in several western
states, including California, have begun investigations related to the
electricity supply situation in California and other western states. Certain of
our subsidiaries have intervened in the FERC proceedings in order to protect
their interests, but have not been named by the plaintiffs in the proceedings
alleging abuses of market power, manipulation of market prices, unfair trade
practices and violations of state antitrust laws. However, in April 2002, PPL
Montana was named by a defendant in a consolidated court proceeding which
combined several of the lawsuits alleging antitrust and unfair trade practices.
Specifically, one of the original generators, sued by various plaintiffs, filed
a cross-complaint against 30 other generators and power marketers, including PPL
Montana. This generator denies that any unlawful, unfair or fraudulent conduct
occurred or caused any harm to the plaintiffs, and explains that the plaintiffs'
claims are completely barred by federal law. Nonetheless, this generator alleges
that it filed its complaint against the other generators and power marketers in
order to assist
9
the court in resolving the proceeding and asserts that, if it is found liable,
the other generators and power marketers, including PPL Montana caused,
contributed to and/or participated in the plaintiffs' alleged losses.
In addition, PPL Montana has been named as a defendant in a declaratory
judgment action initiated by the State of California to prevent certain members
of the California Power Exchange from seeking compensation for the state's
seizure of certain energy contracts. PPL Montana is a member of the California
Power Exchange, but it has no energy contracts with or through the California
Power Exchange and has not sought compensation in connection with the state's
seizure.
The FERC has determined that all sellers of energy in the California
markets should be subject to refund liability for the period beginning October
2, 2000 through June 20, 2001 and has initiated an evidentiary hearing
concerning refund amounts. The FERC also is considering whether to order refunds
for sales made in the Pacific Northwest, including sales made by our
subsidiaries. The FERC Administrative Law Judge assigned to this proceeding has
recommended that no refunds be ordered for sales into the Pacific Northwest. The
FERC presently is considering this recommendation. In addition, the FERC has
been conducting an additional investigation of alleged price manipulation in
power markets in California and the western United States. In connection with
this investigation, the FERC has served several sets of data requests on sellers
of energy in those markets, including PPL Montana.
While PPL Montana sold only a small amount of electricity into the
California market during 2000 and 2001 and currently is not selling into that
market, and while PPL believes that it has not engaged in any improper trading
practices, we cannot predict whether or the extent to which any of our
subsidiaries will be the target of any additional governmental investigation or
named in other lawsuits or refund proceedings, the outcome of any such existing
or future proceedings or whether the ultimate impact on us of the electricity
supply situation in California and other western states will be material.
OUR COSTS OF COMPLIANCE WITH ENVIRONMENTAL LAWS ARE SIGNIFICANT, AND THE COSTS
OF COMPLIANCE WITH NEW ENVIRONMENTAL LAWS COULD ADVERSELY AFFECT OUR
PROFITABILITY.
Our operations are subject to extensive federal, state, local and foreign
statutes, rules and regulations relating to environmental protection. To comply
with these legal requirements, we must spend significant sums on environmental
monitoring, pollution control and emission fees.
New environmental laws and regulations affecting our operations, and new
interpretations of existing laws and regulations, may be adopted or become
applicable to us. For example, the laws governing air emissions from
coal-burning plants are being re-interpreted by federal and state authorities.
These re-interpretations could result in the imposition of substantially more
stringent limitations on these emissions than those currently in effect.
We may not be able to obtain or maintain all environmental regulatory
approvals necessary to our business. If there is a delay in obtaining any
required environmental regulatory approval or if we fail to obtain, maintain or
comply with any such approval, operations at our affected facilities could be
halted or subjected to additional costs. Further, at some of our older
facilities it may be uneconomical for us to install the necessary equipment,
which may cause us to shut down those generation units.
OUR BUSINESS DEVELOPMENT ACTIVITIES MAY NOT BE SUCCESSFUL AND OUR PROJECTS
UNDER CONSTRUCTION MAY NOT COMMENCE OPERATION AS SCHEDULED, WHICH COULD
INCREASE OUR COSTS AND IMPAIR OUR ABILITY TO RECOVER OUR INVESTMENT.
The acquisition, development and construction of generating facilities
involves numerous risks. We may be required to expend significant sums for
preliminary engineering, permitting, fuel supply, resource exploration, legal
and other expenses in preparation for competitive bids which we may not win or
before it can be established whether a project is feasible, economically
attractive or capable of being financed. Our success in developing a particular
project is contingent upon, among other things, negotiation of satisfactory
engineering, construction, fuel supply and power sales contracts, receipt of
required governmental permits and
10
timely implementation and satisfactory completion of construction. If we were
unable to complete the development of a facility, we would generally not be able
to recover our investment in the project.
Currently, we have power plants with 2,140 MW of generation capacity under
development or construction and we intend to continue to acquire and develop
new, low-cost and efficient electric power generation facilities in key
northeastern and western markets. Successful completion of these facilities is
subject to numerous factors, including:
- changes in market prices;
- our ability to obtain permits and approvals and comply with applicable
regulations;
- availability and timely delivery of gas turbine generators and other
equipment;
- unforeseen engineering problems;
- construction delays and contractor performance shortfalls;
- shortages and inconsistent quality of equipment, material and labor;
- work stoppages;
- adverse weather conditions;
- environmental and geological conditions; and
- unanticipated cost increases.
Any of these factors could give rise to delays, cost overruns or the
termination of expansion, construction or development. The failure to complete
construction according to specifications and on time can result in cost
overruns, liabilities, reduced plant efficiency, higher operating and other
costs and reduced earnings.
OUR INVESTMENTS AND PROJECTS LOCATED OUTSIDE OF THE UNITED STATES EXPOSE US TO
RISKS RELATED TO LAWS OF OTHER COUNTRIES, TAXES, ECONOMIC CONDITIONS,
FLUCTUATIONS IN CURRENCY RATES, POLITICAL CONDITIONS AND POLICIES OF FOREIGN
GOVERNMENTS. THESE RISKS MAY DELAY OR REDUCE OUR REALIZATION OF VALUE FROM OUR
INTERNATIONAL PROJECTS.
We have operations outside of the United States. The acquisition,
financing, development and operation of projects outside the United States
entail significant financial risks, which vary by country, including:
- changes in foreign laws or regulations relating to foreign operations,
including tax laws and regulations;
- changes in United States laws related to foreign operations, including
tax laws and regulations;
- changes in government policies, personnel or approval requirements;
- changes in general economic conditions affecting each country;
- changes in labor relations in foreign operations;
- limitations on foreign investment or ownership of projects and returns or
distributions to foreign investors;
- limitations on ability of foreign companies to borrow money from foreign
lenders and lack of local capital or loans;
- fluctuations in currency exchange rates and difficulty in converting our
foreign funds to U.S. dollars, which can increase our expenses and/or
impair our ability to meet such expenses, and difficulty moving funds out
of the country in which the funds were earned;
- limitations on ability to import or export property and equipment;
- compliance with United States foreign corrupt practices laws;
- political instability and civil unrest; and
- expropriation and confiscation of assets and facilities.
11
Our international operations are subject to regulation by various foreign
governments and regulatory authorities. The laws and regulations of some
countries may limit our ability to hold a majority interest in some of the
projects that we may develop or acquire, thus limiting our ability to control
the development, construction and operation of those projects. In addition, the
legal environment in foreign countries in which we currently own assets or
projects or may develop projects in the future could make it more difficult for
us to enforce our rights under agreements relating to such projects. Our
international projects may also be subject to risks of being delayed, suspended
or terminated by the applicable foreign governments or may be subject to risks
of contract invalidation by commercial or governmental entities.
Despite contractual protections we have against many of these risks for our
international operations or potential investments in the future, our actual
results and the value of our investment may be adversely affected by the
occurrence of any of these events.
Many of the countries in which we operate have adopted programs to
encourage private investment and competition in the electric industry. However,
some of these restructured markets have experienced disruption. Companhia
Energetica de Maranhao, or CEMAR, which is our electricity distribution
subsidiary in Brazil, operates under a 30-year concession agreement with the
Brazilian government. CEMAR has been impacted by shortages of electricity,
government imposed electricity rationing, substantial disruption in the energy
markets, and the failure of the electricity regulator to adequately address
these problems. As a result, CEMAR's results of operations, cash flows, and
ability to meet its financial obligations have deteriorated. We have determined
that the long-term viability of the CEMAR operation is jeopardized and expect to
record impairment losses for the entire amount of the investment. In 2001, we
recorded impairment losses of $217 million. We did not write-off the remaining
portion of our CEMAR investment, approximately $100 million at December 31,
2001, primarily related to our foreign currency translation adjustment, or CTA,
balance, because accounting guidance prohibits the including of CTA in an
impairment calculation where the assets are not held for disposal. We have been
working with CEMAR's creditors and governmental authorities in Brazil on a plan
to return the company to financial stability. That plan included our request for
a rate increase review, which Brazilian regulators denied in early June 2002. We
viewed the rate-increase review as a critical step in restoring CEMAR to
financial stability. We are now considering a narrowing range of options to
maximize the value of CEMAR, but we have not yet made a decision to exit the
investment. Should we make such an exit decision, we would again assess
impairment of the investment and would, most likely, record an additional
impairment for the CTA balance, reduced by any operating losses recorded through
the date of the impairment.
RISKS RELATED TO OUR CORPORATE AND FINANCIAL STRUCTURE
OUR CASH FLOW, ABILITY TO PAY DIVIDENDS AND ABILITY TO MEET DEBT OBLIGATIONS
LARGELY DEPEND ON THE PERFORMANCE OF OUR SUBSIDIARIES AND AFFILIATES, SOME OF
WHICH WE DO NOT CONTROL.
PPL Corporation is a holding company and conducts its operations primarily
through subsidiaries. Substantially all of PPL Corporation's consolidated assets
are held by such subsidiaries. Accordingly, PPL Corporation's cash flow, its
ability to pay dividends on its capital stock and its ability to meet its
obligations under the Securities Guarantees are largely dependent upon the
earnings of these subsidiaries and the distribution or other payment of such
earnings to PPL Corporation in the form of dividends, loans or advances or
repayment of loans and advances from PPL Corporation. The subsidiaries are
separate and distinct legal entities and have no obligation to pay any amounts
due on any Securities (except for the Securities issued by such subsidiaries) or
to make any funds available for such payment.
Because PPL Corporation is a holding company, its obligations under the
Securities Guarantees will be effectively subordinated to all existing and
future liabilities of its subsidiaries. Therefore, PPL Corporation's rights and
the rights of its shareholders and creditors, including rights of a holder of
any Security under a Securities Guarantee, to participate in the assets of any
subsidiary in the event that such a subsidiary is liquidated or reorganized,
will be subject to the prior claims of such subsidiary's creditors. To the
extent that PPL Corporation may itself be a creditor with recognized claims
against any such subsidiary, PPL
12
Corporation's claims would still be effectively subordinated to any security
interest in, or mortgages or other liens on, the assets of the subsidiary and
would be subordinated to any indebtedness or other liabilities of the subsidiary
senior to that held by PPL Corporation. Although certain agreements to which PPL
Corporation and its subsidiaries are parties limit the ability to incur
additional indebtedness, PPL Corporation and its subsidiaries retain the ability
to incur substantial additional indebtedness and other liabilities.
The debt agreements of some of our subsidiaries and affiliates restrict
their ability to pay dividends, make distributions or otherwise transfer funds
to us prior to the payment of other obligations, including operating expenses,
debt service and reserves. Further, if we elect to receive distributions of
earnings from our foreign operations, we may incur United States taxes, net of
any available foreign tax credits, on such amounts. Distributions to us from our
international projects are, in some countries, also subject to withholding
taxes.
FORWARD-LOOKING INFORMATION
Certain statements included or incorporated by reference in this
prospectus, including statements with respect to future earnings, energy supply
and demand, costs, subsidiary performance, growth, new technology, project
development, energy and fuel prices and generating capacity and performance, are
"forward-looking statements" within the meaning of the federal securities laws.
Although we believe that the expectations and assumptions reflected in these
statements are reasonable, there can be no assurance that these expectations
will prove to have been correct. These forward-looking statements involve a
number of risks and uncertainties, and actual results may differ materially from
the results discussed in the forward-looking statements. In addition to the
specific factors discussed in the "Risk Factors" section herein and our reports
that are incorporated herein by reference, the following are among the most
important factors that could cause actual results to differ materially from the
forward-looking statements:
- market demand and prices for energy, capacity and fuel;
- weather variations affecting customer energy usage;
- competition in retail and wholesale power markets;
- the effect of any business or industry restructuring;
- profitability and liquidity;
- new accounting requirements or new interpretations or applications of
existing requirements;
- operation of existing facilities and operating costs;
- the development of new projects, markets and technologies;
- the performance of new ventures;
- political, regulatory or economic conditions in states, regions or
countries where we or our subsidiaries conduct business;
- receipt and renewals of necessary governmental permits and approvals;
- capital markets conditions and decisions regarding our capital structure;
- stock price performance;
- our or any of our subsidiaries' securities ratings;
- foreign exchange rates;
- commitments and liabilities;
- state and federal regulatory developments;
- new state or federal legislation;
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- national or regional economic conditions, including any potential effects
arising from the September 11, 2001 terrorist attacks in the United
States, and any consequential hostilities;
- environmental conditions and requirements; and
- system conditions and operating costs.
Any such forward-looking statements should be considered in light of such
important factors.
New factors that could cause actual results to differ materially from those
described in forward-looking statements emerge from time to time, and it is not
possible for us to predict all of such factors, or the extent to which any such
factor or combination of factors may cause actual results to differ from those
contained in any forward-looking statement. Any forward-looking statement speaks
only as of the date on which such statement is made, and we do not undertake any
obligation to update the information contained in such statement to reflect
subsequent developments or information.
PPL CORPORATION
PPL Corporation ("PPL") is a holding company and is engaged, through
subsidiaries, in power generation and marketing primarily in the northeastern
and western United States, and in the delivery of electricity in Pennsylvania,
the United Kingdom and Latin America. We are a Pennsylvania corporation,
incorporated in 1995, with headquarters in Allentown, Pennsylvania.
- At March 31, 2002, we owned or controlled, through subsidiaries, 10,280
MW of electric power generation capacity, and we intend to continue to
acquire and develop new, low-cost and efficient electric power generation
facilities in key northeastern and western markets. At March 31, 2002, we
were constructing or developing new electric power projects in Arizona,
Illinois, New York and Pennsylvania representing an additional 2,140 MW
of power generation capacity. When we refer to MW in this prospectus, we
mean net megawatts with respect to generation capacity that is currently
in operation, and we mean gross megawatts with respect to generation
capacity that is in development.
- We market wholesale and retail energy primarily in the northeastern and
western portions of the United States, deliver electricity to
approximately 6 million customers in Pennsylvania, the United Kingdom and
Latin America, and provide energy-related services to businesses in the
mid-Atlantic and northeastern United States.
We operate through two principal lines of business, energy supply and
energy delivery.
ENERGY SUPPLY
Our generation assets are managed as an integrated portfolio through
subsidiaries of PPL Energy Supply, our holding company for our competitive
energy businesses, and we coordinate our generation operations with our
marketing, trading and risk management activities.
Our principal supply subsidiaries include:
- PPL GENERATION, which serves as the holding company for our generation
businesses in the United States. At March 31, 2002, PPL Generation owned
or controlled a portfolio of domestic power generation assets with a
total capacity of 10,280 MW. These power plants are located in
Pennsylvania (8,502 MW), Montana (1,157 MW), Arizona (300 MW),
Connecticut (225 MW) and Maine (96 MW) and use well-diversified fuel
sources including coal, nuclear, natural gas, oil and hydro. Our
Pennsylvania generation assets consist primarily of low-cost, baseload
facilities and are located in the market-administered PJM, the largest
centrally-dispatched power pool in the United States.
- PPL ENERGYPLUS, which markets or brokers electricity produced by PPL
Generation, along with purchased power and natural gas, in competitive
wholesale and retail markets, primarily in the northeastern and western
United States. Under two generation supply agreements with PPL Electric
which extend through 2009, PPL EnergyPlus also sells electricity to PPL
Electric to meet PPL
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Electric's PLR obligation, as well as PPL Electric's contractual
obligations to certain municipalities. In addition, PPL EnergyPlus
subsidiaries provide energy-related products and services, such as
engineering and mechanical contracting, construction and maintenance
services, to commercial and industrial customers.
- PPL GLOBAL holds international energy projects that are primarily focused
on the distribution of electricity. PPL Global currently owns and
operates electricity delivery businesses primarily in the United Kingdom
and Latin America.
ENERGY DELIVERY
We also provide high-quality energy delivery services in the mid-Atlantic
regions of the United States through our subsidiaries, PPL Electric and PPL Gas
Utilities Corporation.
- PPL ELECTRIC, incorporated in 1920, is a regulated public utility
providing electricity delivery services to approximately 1.3 million
customers in eastern and central Pennsylvania. PPL Electric also serves
as the PLR for electric customers in its service territory who have not
selected an alternate supplier under the Customer Choice Act.
- PPL GAS UTILITIES is a holding company with regulated public utility
subsidiaries providing natural gas and propane delivery services to
approximately 103,000 customers in Pennsylvania and Maryland.
Our significant operating subsidiaries are depicted below:
ORGANIZATIONAL CHART
The information above concerning PPL Corporation and its subsidiaries is
only a summary and does not purport to be comprehensive. For additional
information concerning PPL Corporation and its subsidiaries, including certain
assumptions, risks and uncertainties involved in the forward-looking statements
contained or incorporated by reference in this prospectus, you should refer to
the information described in "Where You Can Find More Information."
PPL Corporation's offices are located at Two North Ninth Street, Allentown,
Pennsylvania 18101-1179 and its telephone number is (610) 774-5151.
PPL CAPITAL FUNDING
PPL Capital Funding is a Delaware corporation and a wholly-owned subsidiary
of PPL Corporation. PPL Capital Funding's primary business is to provide
financing for the operations of PPL Corporation and its subsidiaries.
PPL Capital Funding's offices are located at Two North Ninth Street,
Allentown, Pennsylvania 18101-1179 and its telephone number is (610) 774-5151.
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PPL CAPITAL FUNDING TRUST II
The Trust is a statutory business trust created under Delaware law under a
trust agreement which is to be amended pursuant to an Amended and Restated Trust
Agreement (as so amended, the "Trust Agreement") among PPL Corporation, JPMorgan
Chase Bank (formerly known as The Chase Manhattan Bank) as the Property Trustee,
Chase Manhattan Bank USA, National Association, as Delaware Trustee and two of
our employees as Administrative Trustees. The Trust exists only to issue and
sell its Preferred Trust Securities and Common Trust Securities, to acquire and
hold the Subordinated Debt Securities as trust assets and to engage in
activities incidental to the foregoing. All of the Common Trust Securities will
be owned by PPL Corporation. The Common Trust Securities will represent at least
3% of the total capital of the Trust. Payments will be made on the Common Trust
Securities pro rata with the Preferred Trust Securities, except that the Common
Trust Securities' right to payment will be subordinated to the rights of the
Preferred Trust Securities if there is a default under the Trust Agreement
resulting from an event of default under the Subordinated Indenture, as defined
below. The Trust has a term of approximately 40 years, but may dissolve earlier
as provided in the Trust Agreement. The Trust's business and affairs will be
conducted by its Administrative Trustees, as set forth in the Trust Agreement.
The office of the Delaware Trustee in the State of Delaware is 500 Stanton
Christiana Road, Building 4, 3rd Floor, Newark, Delaware 19713. The Trust's
offices are located at Two North Ninth Street, Allentown, PA 18101-1179, and the
telephone number is (610) 774-5151.
USE OF PROCEEDS
Unless we indicate differently in the applicable prospectus supplement, the
net proceeds from the sale of the Debt Securities, Subordinated Debt Securities
and/or the Preferred Trust Securities will be loaned to PPL Corporation and/or
its subsidiaries. PPL Corporation and/or its subsidiaries are expected to use
the proceeds of such loans, and the proceeds of any other Securities, for
general corporate purposes, including investing in unregulated business
activities and retiring short-term debt previously incurred to provide interim
financing for such purposes. At May 15, 2002, PPL Corporation had $150 million
of short-term debt outstanding at an average interest rate of 2%.
RATIOS OF EARNINGS TO FIXED CHARGES AND
EARNINGS TO FIXED CHARGES AND PREFERRED DIVIDENDS
The following table sets forth PPL Corporation's ratio of earnings to fixed
charges and ratio of earnings to fixed charges and preferred dividends for the
periods indicated:
TWELVE MONTHS
ENDED MARCH 31, TWELVE MONTHS ENDED DECEMBER 31,
--------------- --------------------------------------------
2002 2001(A) 2000(A) 1999(A) 1998(A) 1997
--------------- ------- ------- ------- ------- ----
Ratio of earnings to fixed charges... 1.5 1.8 2.6 2.8 3.1 2.9
Ratio of earnings to fixed charges
and preferred dividends(b)......... 1.5 1.8 2.6 2.8 3.1 2.9
---------------
(a) 2001, 2000, 1999 and 1998 net income excludes extraordinary items, minority
interest and the cumulative effect of a change in accounting principle. In
addition, the changes in ratios from year-to-year are in part attributable
to certain unusual items with significant earnings impact. See PPL
Corporation's reports on file with the SEC pursuant to the Exchange Act as
described under "Where You Can Find More Information" for more information.
(b) Computed using earnings and fixed charges of PPL Corporation and its
subsidiaries. Fixed charges consist of interest on short-and long-term debt,
interest on company-obligated mandatorily redeemable preferred securities of
subsidiary trusts holding solely subsidiary company debentures, other
interest charges, interest on capital lease obligations and the estimated
interest component of other rentals and dividends on preferred stock of
subsidiaries.
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DESCRIPTION OF PPL CORPORATION'S CAPITAL STOCK
The description below is a summary of certain provisions of PPL
Corporation's capital stock. The Pennsylvania Business Corporation Law, or BCL,
and the Restated Articles of Incorporation and Bylaws of PPL Corporation
determine the rights and privileges of holders of PPL Corporation's capital
stock. We encourage you to read such documents, which have been filed with the
SEC, and the Pennsylvania law for more information regarding such capital stock.
AUTHORIZED CAPITAL
The authorized capital stock of PPL Corporation consists of 390,000,000
shares of Common Stock, par value $.01 per share and 10,000,000 shares of
Preferred Stock, par value $.01 per share.
COMMON STOCK
As of March 31, 2002, 147,142,007 shares of Common Stock were issued and
outstanding. The outstanding Common Stock is, and the Common Stock offered
hereby when issued and paid for will be, fully paid and non-assessable.
Dividends. Dividends on the Common Stock will be paid if, when and as
determined by the Board of Directors of PPL Corporation out of funds legally
available for this purpose. The rate and timing of future dividends will depend
upon the future earnings and financial condition of PPL Corporation and its
subsidiaries and upon other relevant factors affecting PPL Corporation's
dividend policy which PPL Corporation cannot presently determine. As a practical
matter, the ability of PPL Corporation to pay dividends will be governed by the
ability of PPL Corporation's operating subsidiaries to pay dividends to PPL
Corporation. The subsidiaries' ability to pay dividends to PPL Corporation will
be subject to the prior rights of the holders of such subsidiaries' outstanding
debt and preferred securities, the availability of earnings and the needs of
their businesses. See "PPL Corporation -- Holding Company Structure."
Voting Rights. Holders of Common Stock are entitled to one vote for each
share held by them on all matters presented to shareowners. Pursuant to PPL
Corporation's Articles of Incorporation, the holders of Common Stock will not
have cumulative voting rights in the election of directors. PPL Corporation's
bylaws provide for a classified board of directors consisting of three classes
as nearly equal in number as may be. Each class holds office until the third
year following the election of such class, and no director may be removed except
for cause upon a two-thirds vote of all outstanding shares. PPL Corporation's
bylaws also provide for certain notice requirements for shareowner nominations
and proposals at annual meetings and preclude shareowners from bringing business
before any special meeting. PPL Corporation's Articles of Incorporation and
certain provisions of Pennsylvania law would require a supermajority vote of the
holders of Common Stock or a majority vote of disinterested directors to approve
certain business combinations and other major transactions involving PPL
Corporation. See "Possible Anti-Takeover Effects of Our Articles and Bylaws"
below for additional information.
Liquidation Rights. After satisfaction of the preferential liquidation
rights of any Preferred Stock, the holders of Common Stock are entitled to
share, ratably, in the distribution of all remaining net assets.
Preemptive and Other Rights. The holders of Common Stock do not have
preemptive rights as to additional issues of Common Stock or conversion rights.
The shares of Common Stock are not subject to redemption or to any further calls
or assessments and are not entitled to the benefit of any sinking fund
provisions.
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PREFERRED STOCK
PPL Corporation's Board of Directors is authorized, without further
shareowner action, to divide the Preferred Stock into one or more classes or
series and to determine the designations, preferences, limitations and special
rights of any class or series including, but not limited to, the following:
(a) the rate of dividend, if any;
(b) the rights, if any, of the holders of shares of the series upon
voluntary or involuntary liquidation, dissolution or winding up of PPL
Corporation;
(c) the terms and conditions upon which shares may be converted into
shares of other series or other capital stock, if issued with the privilege
of conversion;
(d) the price at and the terms and conditions upon which shares may be
redeemed; and
(e) the voting rights, if any.
No shares of Preferred Stock have been issued. The applicable prospectus
supplement will describe the terms of any Preferred Stock.
Unless otherwise provided in the applicable prospectus supplement, holders
of Preferred Stock will not have any preemptive rights to subscribe for or
purchase any additional shares of the capital stock of PPL Corporation, or other
securities or other right or option to purchase shares of capital stock. See
"Possible Anti-Takeover Effects of Certain Provisions of the Articles and
Bylaws" below for additional information.
POSSIBLE ANTI-TAKEOVER EFFECTS OF THE ARTICLES AND BYLAWS
Certain provisions of the Articles and Bylaws may have the effect of
discouraging unilateral tender offers or other attempts to takeover and acquire
the business of PPL Corporation. As permitted by the BCL, our Articles and
Bylaws
(a) do not provide for cumulative voting in the election of directors,
(b) restrict shareholders from bringing any business before a special
meeting of shareowners,
(c) require prior written notice of any business to be brought by a
shareowner before the annual meeting and
(d) require advance notice for shareowner nominations for directors.
In addition, the Articles and Bylaws authorize the Board of Directors to create
and issue a new class or series of preferred stock, provide for a classified
Board of Directors, and include certain fair price provisions and super-majority
voting requirements relating to business combinations, removal of directors and
amendments to the Articles and Bylaws. These provisions in our Articles and
Bylaws may limit the ability of individuals to bring matters before shareowner
meetings, change the composition of the Board of Directors and pursue a merger,
takeover, business combination or tender offer involving PPL Corporation, which,
under certain circumstances, could encourage a potentially interested purchaser
to negotiate with the Board of Directors rather than pursue a non-negotiated
takeover attempt, including one which shareowners might favor, and could reduce
the market value of our common stock.
LISTING
The outstanding shares of Common Stock are, and the shares offered hereby
will be, listed on the New York and Philadelphia Stock Exchanges.
TRANSFER AGENTS AND REGISTRARS
The Transfer Agents and Registrars for the Common Stock are PPL Services
Corporation and Wells Fargo Bank Minnesota, N.A., St. Paul, Minnesota.
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DESCRIPTION OF STOCK PURCHASE CONTRACTS AND STOCK PURCHASE UNITS
PPL Corporation may issue Stock Purchase Contracts representing contracts
obligating holders to purchase from PPL Corporation, and PPL Corporation to sell
to the holders, a specified number of shares of Common Stock at a future date or
dates. The price per share of Common Stock and number of shares of Common Stock
may be fixed at the time the Stock Purchase Contracts are issued or may be
determined by reference to a specific formula set forth in the Stock Purchase
Contracts. The Stock Purchase Contracts may be issued separately or as a part of
other Stock Purchase Units that consist of (a) a Stock Purchase Contract or (b)
a Stock Purchase Contract and debt securities or preferred trust securities of
third parties (including, but not limited to, Debt Securities, Subordinated Debt
Securities, Preferred Trust Securities or United States Treasury securities),
that would secure the holders' obligations to purchase the Common Stock under
the Stock Purchase Contracts. The Stock Purchase Contracts may require PPL
Corporation to make periodic payments to the holders of the Stock Purchase Units
or vice-versa. These payments may be unsecured or prefunded on some basis. The
Stock Purchase Contracts may require holders to secure their obligations
thereunder in a specified manner.
The applicable prospectus supplement will describe the terms of any Stock
Purchase Contracts or Stock Purchase Units.
DESCRIPTION OF THE DEBT SECURITIES
The following description sets forth certain general terms and provisions
of PPL Capital Funding's unsecured debt securities, consisting of notes or
debentures, that we may offer by this prospectus ("Debt Securities"). We will
describe the particular terms of Debt Securities, and provisions that vary from
those described below, in one or more prospectus supplements.
We may issue the Debt Securities from time to time in the future in one or
more series. We will issue the Debt Securities and the guarantee or guarantees
of PPL Corporation relating thereto (the "Guarantee" or "Guarantees") under the
Indenture, dated as of November 1, 1997 (as such indenture has been and may be
supplemented, the "Indenture"), among PPL Capital Funding, PPL Corporation and
JPMorgan Chase Bank (formerly known as The Chase Manhattan Bank), as trustee
(the "Trustee").
The Indenture is filed as an exhibit to the registration statement. The
Indenture and its associated documents contain the full legal text of the
matters described in this section. Because this section is a summary, it does
not describe every aspect of the Debt Securities or the Indenture. This summary
is subject to and qualified in its entirety by reference to all the provisions
of the Indenture, including definitions of certain terms used in the Indenture.
We also include references in parentheses to certain sections of the Indenture.
Whenever we refer to particular sections or defined terms of the Indenture in
this prospectus or in a prospectus supplement, such sections or defined terms
are incorporated by reference herein or in the prospectus supplement. This
summary also is subject to and qualified by reference to the description of the
particular terms of your securities described in the applicable prospectus
supplement or supplements. The Indenture has been qualified under the Trust
Indenture Act, and you should refer to the Trust Indenture Act for provisions
that apply to the Debt Securities.
GENERAL
We may issue an unlimited amount of Debt Securities or other securities
under the Indenture. The Debt Securities and all other debt securities issued
previously or hereafter under the Indenture are collectively referred to herein
as the "Indenture Securities."
The Debt Securities will be unsecured and unsubordinated obligations of PPL
Capital Funding, and by the Guarantees will be unconditionally guaranteed by PPL
Corporation as to payment of principal and any interest and premium. See "-- PPL
Corporation Guarantees."
Prior to the issuance of each series, certain aspects of the particular
Debt Securities have to be specified in a supplemental indenture, in a board
resolution of PPL Capital Funding, or in one or more officer's
19
certificates of PPL Capital Funding pursuant to a supplemental indenture or a
board resolution. We refer you to the applicable prospectus supplement(s) for a
description of the following terms of the series of Debt Securities:
(a) the title of such Debt Securities;
(b) any limit upon the principal amount of such Debt Securities;
(c) the date or dates on which principal will be payable or how to
determine such dates;
(d) the rate or rates or method of determination of interest; the date
from which interest will accrue; the dates on which interest will be
payable ("Interest Payment Dates"); and any record dates for the interest
payable on such Interest Payment Dates;
(e) any obligation or option of PPL Capital Funding to redeem,
purchase or repay Debt Securities, or any option of the Holder to require
PPL Capital Funding to redeem or repurchase Debt Securities, and the terms
and conditions upon which such Debt Securities will be redeemed, purchased
or repaid;
(f) the denominations in which such Debt Securities will be issuable
(if other than denominations of $1,000 and any integral multiple thereof);
(g) whether such Debt Securities are to be issued in whole or in part
in the form of one or more global Debt Securities and, if so, the identity
of the depositary for such global Debt Securities; and
(h) any other terms of such Debt Securities.
(See Section 301.)
PPL CORPORATION GUARANTEES
PPL Corporation will unconditionally guarantee the payment of principal of
and any interest and premium on the Debt Securities, when due and payable,
whether at the stated maturity date, by declaration of acceleration, call for
redemption or otherwise, in accordance with the terms of such Debt Securities
and the Indenture. The Guarantees will remain in effect until the entire
principal of and any premium and interest on the Debt Securities has been paid
in full or otherwise discharged in accordance with the provisions of the
Indenture. (See Article Fourteen.) The Guarantees will be unsecured debt of PPL
Corporation, not subordinated by their terms to any other obligations of PPL
Corporation. See "PPL Corporation -- Holding Company Structure," above, however,
with regard to the effect of the holding company structure on the status of PPL
Corporation's obligations compared to obligations of its subsidiaries.
PAYMENT OF DEBT SECURITIES
INTEREST
Unless we indicate differently in a prospectus supplement, we will pay
interest on each Debt Security on each Interest Payment Date by check mailed to
the person in whose name such Debt Security is registered (the registered holder
of any Indenture Security being called a "Holder" in this prospectus) as of the
close of business on the regular record date relating to such Interest Payment
Date, except that interest payable at maturity (whether at stated maturity, upon
redemption or otherwise, "Maturity") will be paid to the person to whom
principal is paid.
However, if we default in paying interest on a Debt Security, we will pay
defaulted interest in either of the two following ways:
(a) We will first propose to the Trustee a payment date for such
defaulted interest. Next, the Trustee will choose a Special Record Date for
determining which Holders are entitled to the payment. The Special Record
Date will be between 10 and 15 days before the payment date we propose.
Finally, we will pay such defaulted interest on the payment date to the
Holder of the Debt Security as of the close of business on the Special
Record Date.
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(b) Alternatively, we can propose to the Trustee any other lawful
manner of payment that is consistent with the requirements of any
securities exchange on which such Debt Securities are listed for trading.
If the Trustee thinks the proposal is practicable, payment will be made as
proposed.
(See Section 307.)
PRINCIPAL
Unless we indicate differently in a prospectus supplement, we will pay
principal of and any interest and premium on the Debt Securities at Maturity
upon presentation of the Debt Securities at the office of JPMorgan Chase Bank in
New York, New York, as our Paying Agent. Any other Paying Agent initially
designated for the Debt Securities of a particular series will be named in the
applicable prospectus supplement.
In our discretion, we may change the place of payment on the Debt
Securities, and may remove any Paying Agent and may appoint one or more
additional Paying Agents (including PPL Capital Funding, PPL Corporation or any
affiliate of either of them). (See Section 602.)
FORM; TRANSFERS; EXCHANGES
Unless otherwise indicated in a prospectus supplement, the Debt Securities
will be issued:
(a) only in fully registered form;
(b) without interest coupons; and
(c) in denominations that are integral multiples of $1,000. (See
Section 302.)
You may have your Debt Securities divided into Debt Securities of smaller
denominations (of at least $1,000) or combined into Debt Securities of larger
denominations, as long as the total principal amount is not changed. This is
called an "exchange."
You may exchange or transfer Debt Securities at the office of the Trustee.
The Trustee acts as our agent for registering Debt Securities in the names of
holders and transferring debt securities. We may appoint another agent or act as
our own agent for this purpose. The entity performing the role of maintaining
the list of registered holders is called the "Security Registrar." It will also
perform transfers.
In our discretion, we may change the place for registration of transfer of
the Debt Securities and may remove and/or appoint one or more additional
Security Registrars (including PPL Capital Funding, PPL Corporation or any
affiliate of either of them). (See Sections 305 and 602.)
Except as otherwise provided in a prospectus supplement, there will be no
service charge for any transfer or exchange of the Debt Securities, but you may
be required to pay a sum sufficient to cover any tax or other governmental
charge payable in connection therewith. We may block the transfer or exchange of
(a) Debt Securities during a period of 15 days prior to giving any notice of
redemption or (b) any Debt Security selected for redemption in whole or in part,
except the unredeemed portion of any Debt Security being redeemed in part. (See
Section 305.)
REDEMPTION
We will set forth any terms for the redemption of Debt Securities in a
prospectus supplement. Unless we indicate differently in a prospectus
supplement, and except with respect to Debt Securities redeemable at the option
of the Holder, Debt Securities will be redeemable upon notice by mail between 30
and 60 days prior to the redemption date. If less than all of the Debt
Securities of any series or any tranche thereof are to be redeemed, the Trustee
will select the Debt Securities to be redeemed. In the absence of any provision
for selection, the Trustee will choose a method of random selection as it deems
fair and appropriate. (See Sections 403 and 404.)
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Debt Securities will cease to bear interest on the redemption date. PPL
Capital Funding will pay the redemption price and any accrued interest once you
surrender the Debt Security for redemption. (See Section 405.) If only part of a
Debt Security is redeemed, the Trustee will deliver to you a new Debt Security
of the same series for the remaining portion without charge. (Section 406.)
We may make any redemption at the option of PPL Capital Funding conditional
upon the receipt by the Paying Agent, on or prior to the date fixed for
redemption, of money sufficient to pay the redemption price. If the Paying Agent
has not received such money by the date fixed for redemption, PPL Capital
Funding will not be required to redeem such Debt Securities. (See Section 404.)
EVENTS OF DEFAULT
An "Event of Default" occurs with respect to Indenture Securities of any
series if
(a) we do not pay any interest on any Indenture Securities of the
applicable series within 30 days of the due date;
(b) we do not pay principal or premium on any Indenture Securities of
the applicable series on its due date;
(c) we remain in breach of a covenant (excluding covenants solely
applicable to a specific series) or warranty of the Indenture for 90 days
after we receive a written notice of default stating we are in breach and
requiring remedy of the breach; the notice must be sent by either the
Trustee or Holders of 25% of the principal amount of Indenture Securities
of the affected series; the Trustee or such Holders can agree to extend the
90-day period and such an agreement to extend will be automatically deemed
to occur if we are diligently pursuing action to correct the default;
(d) the Guarantees on any Indenture Securities of the applicable
series
(1) cease to be effective (except in accordance with their terms),
(2) are found in any judicial proceeding to be unenforceable or
invalid, or
(3) are denied or disaffirmed (except in accordance with their
terms);
(e) we file for bankruptcy or certain other events in bankruptcy,
insolvency, receivership or reorganization occur; or
(f) any other Event of Default specified in the prospectus supplement
occurs.
(See Section 801.)
No Event of Default with respect to the Debt Securities necessarily constitutes
an Event of Default with respect to the Indenture Securities of any other series
issued under the Indenture.
REMEDIES
ACCELERATION
ANY ONE SERIES. If an Event of Default occurs and is continuing with
respect to any one series of Indenture Securities, then either the Trustee or
the Holders of 25% in principal amount of the outstanding Indenture Securities
of such series may declare the principal amount of all of the Indenture
Securities of such series to be due and payable immediately.
MORE THAN ONE SERIES. If an Event of Default occurs and is continuing with
respect to more than one series of Indenture Securities, then either the Trustee
or the Holders of 25% in aggregate principal amount of the outstanding Indenture
Securities of all such series, considered as one class, may make such
declaration of acceleration. Thus, if there is more than one series affected,
the action by 25% in principal amount of the Indenture Securities of any
particular series will not, in itself, be sufficient to make a declaration of
acceleration.
(See Section 802.)
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RESCISSION OF ACCELERATION
After the declaration of acceleration has been made and before the Trustee
has obtained a judgment or decree for payment of the money due, such declaration
and its consequences will be rescinded and annulled, if
(a) we pay or deposit with the Trustee a sum sufficient to pay
(1) all overdue interest;
(2) the principal of and any premium which have become due
otherwise than by such declaration of acceleration and overdue interest
thereon;
(3) interest on overdue interest to the extent lawful; and
(4) all amounts due to the Trustee under the Indenture; and
(b) all Events of Default, other than the nonpayment of the principal
which has become due solely by such declaration of acceleration, have been
cured or waived as provided in the Indenture.
(See Section 802.) For more information as to waiver of defaults, see "-- Waiver
of Default and of Compliance" below.
CONTROL BY HOLDERS; LIMITATIONS
Subject to the Indenture, if an Event of Default with respect to the
Indenture Securities of any one series occurs and is continuing, the Holders of
a majority in principal amount of the outstanding Indenture Securities of that
series will have the right to
(a) direct the time, method and place of conducting any proceeding for
any remedy available to the Trustee; or
(b) exercise any trust or power conferred on the Trustee with respect
to the Indenture Securities of such series.
If an Event of Default is continuing with respect to more than one series
of Indenture Securities, the Holders of a majority in aggregate principal amount
of the outstanding Indenture Securities of all such series, considered as one
class, will have the right to make such direction, and not the Holders of the
Indenture Securities of any one of such series. These rights of Holders to make
direction are subject to the following limitations:
(a) the Holders' directions may not conflict with any law or the
Indenture; and
(b) the Holders' directions may not involve the Trustee in personal
liability where the Trustee believes indemnity is not adequate.
The Trustee may also take any other action it deems proper which is consistent
with the Holders' direction. (See Sections 812 and 903.)
In addition, the Indenture provides that no Holder of any Indenture
Security will have any right to institute any proceeding, judicial or otherwise,
with respect to the Indenture for the appointment of a receiver or for any other
remedy thereunder unless
(a) that Holder has previously given the Trustee written notice of a
continuing Event of Default;
(b) the Holders of 25% in aggregate principal amount of the
outstanding Indenture Securities of all affected series, considered as one
class, have made written request to the Trustee to institute proceedings in
respect of that Event of Default and have offered the Trustee reasonable
indemnity against costs and liabilities incurred in complying with such
request; and
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(c) for 60 days after receipt of such notice, the Trustee has failed
to institute any such proceeding and no direction inconsistent with such
request has been given to the Trustee during such 60-day period by the
Holders of a majority in aggregate principal amount of outstanding
Indenture Securities of all affected series, considered as one class.
Furthermore, no Holder will be entitled to institute any such action if and to
the extent that such action would disturb or prejudice the rights of other
Holders. (See Sections 807 and 903.)
However, each Holder has an absolute and unconditional right to receive
payment when due and to bring a suit to enforce that right. (See Sections 807
and 808.)
NOTICE OF DEFAULT
The Trustee is required to give the Holders of the Indenture Securities
notice of any default under the Indenture to the extent required by the Trust
Indenture Act, unless such default has been cured or waived; except that in the
case of an Event of Default of the character specified above in clause (c) under
"Events of Default," no such notice shall be given to such Holders until at
least 75 days after the occurrence thereof. (See Section 902.) The Trust
Indenture Act currently permits the Trustee to withhold notices of default
(except for certain payment defaults) if the Trustee in good faith determines
the withholding of such notice to be in the interests of the Holders.
We will furnish the Trustee with an annual statement as to the compliance
by PPL Capital Funding with the conditions and covenants in the Indenture. (See
Section 605.)
WAIVER OF DEFAULT AND OF COMPLIANCE
The Holders of a majority in aggregate principal amount of the outstanding
Indenture Securities of any series may waive, on behalf of the Holders of all
Indenture Securities of such series, any past default under the Indenture,
except a default in the payment of principal, premium or interest, or with
respect to compliance with certain provisions of the Indenture that cannot be
amended without the consent of the Holder of each outstanding Indenture
Security. (See Section 813.)
Compliance with certain covenants in the Indenture or otherwise provided
with respect to Indenture Securities may be waived by the Holders of a majority
in aggregate principal amount of the affected Indenture Securities, considered
as one class. (See Section 606.)
CONSOLIDATION, MERGER AND CONVEYANCE OF ASSETS AS AN ENTIRETY; NO FINANCIAL
COVENANTS
Subject to the provisions described in the next paragraph, each of PPL
Capital Funding and PPL Corporation will preserve its corporate existence. (See
Section 604.)
PPL Capital Funding and PPL Corporation have each agreed not to consolidate
with or merge into any other entity or convey, transfer or lease its properties
and assets substantially as an entirety to any entity unless
(a) the entity formed by such consolidation or into which PPL Capital
Funding or PPL Corporation, as the case may be, is merged or the entity
which acquires or which leases the property and assets of PPL Capital
Funding or PPL Corporation, as the case may be, substantially as an
entirety is an entity organized and existing under the laws of the United
States of America or any State thereof or the District of Columbia, and
expressly assumes, by supplemental indenture, the due and punctual payment
of the principal, premium and interest on all the outstanding Indenture
Securities (or the Guarantees endorsed thereon, as the case may be) and the
performance of all of the covenants of PPL Capital Funding or PPL
Corporation, as the case may be, under the Indenture; and
(b) immediately after giving effect to such transactions, no Event of
Default, and no event which after notice or lapse of time or both would
become an Event of Default, will have occurred and be continuing. (See
Section 1101.)
24
The Indenture does not prevent or restrict:
(a) any consolidation or merger after the consummation of which PPL
Capital Funding or PPL Corporation would be the surviving or resulting
entity; or
(b) any conveyance or other transfer, or lease, of any part of the
properties of PPL Capital Funding or PPL Corporation which does not
constitute the entirety, or substantially the entirety, thereof. (See
Section 1103.)
Neither the Indenture nor the Guarantee contains any financial or other
similar restrictive covenants.
MODIFICATION OF INDENTURE
WITHOUT HOLDER CONSENT. Without the consent of any Holders of Indenture
Securities, PPL Capital Funding, PPL Corporation and the Trustee may enter into
one or more supplemental indentures for any of the following purposes:
(a) to evidence the succession of another entity to PPL Capital
Funding or PPL Corporation; or
(b) to add one or more covenants of PPL Capital Funding or PPL
Corporation or other provisions for the benefit of the Holders of all or
any series or tranche of Indenture Securities, or to surrender any right or
power conferred upon PPL Capital Funding or PPL Corporation; or
(c) to add any additional Events of Default for all or any series of
Indenture Securities; or
(d) to change or eliminate any provision of the Indenture or to add
any new provision to the Indenture that does not adversely affect the
interests of the Holders; or
(e) to provide security for the Indenture Securities of any series; or
(f) to establish the form or terms of Indenture Securities of any
series or tranche or any Guarantees as permitted by the Indenture; or
(g) to provide for the issuance of bearer securities; or
(h) to evidence and provide for the acceptance of appointment of a
separate or successor Trustee; or
(i) to provide for the procedures required to permit the utilization
of a noncertificated system of registration for any series or tranche of
Indenture Securities; or
(j) to change any place or places where
(1) we may pay principal, premium and interest,
(2) Indenture Securities may be surrendered for transfer or
exchange, and
(3) notices and demands to or upon PPL Capital Funding or PPL
Corporation may be served; or
(k) to cure any ambiguity, defect or inconsistency or to make any
other changes that do not adversely affect the interests of the Holders in
any material respect.
If the Trust Indenture Act is amended after the date of the Indenture so as
to require changes to the Indenture or so as to permit changes to, or the
elimination of, provisions which, at the date of the Indenture or at any time
thereafter, were required by the Trust Indenture Act to be contained in the
Indenture, the Indenture will be deemed to have been amended so as to conform to
such amendment or to effect such changes or elimination, and PPL Capital
Funding, PPL Corporation and the Trustee may, without the consent of any
Holders, enter into one or more supplemental indentures to effect or evidence
such amendment.
(See Section 1201.)
WITH HOLDER CONSENT. Except as provided above, the consent of the Holders
of at least a majority in aggregate principal amount of the Indenture Securities
of all outstanding series, considered as one class, is
25
generally required for the purpose of adding to, or changing or eliminating any
of the provisions of, the Indenture pursuant to a supplemental indenture.
However, if less than all of the series of outstanding Indenture Securities are
directly affected by a proposed supplemental indenture, then such proposal only
requires the consent of the Holders of a majority in aggregate principal amount
of the outstanding Indenture Securities of all directly affected series,
considered as one class. Moreover, if the Indenture Securities of any series
have been issued in more than one tranche and if the proposed supplemental
indenture directly affects the rights of the Holders of Indenture Securities of
one or more, but less than all, of such tranches, then such proposal only
requires the consent of the Holders of a majority in aggregate principal amount
of the outstanding Indenture Securities of all directly affected tranches,
considered as one class.
However, no amendment or modification may, without the consent of the
Holder of each outstanding Indenture Security directly affected thereby,
(a) change the stated maturity of the principal or interest on any
Indenture Security (other than pursuant to the terms thereof), or reduce
the principal amount, interest or premium payable or change the currency in
which any Indenture Security is payable, or impair the right to bring suit
to enforce any payment;
(b) reduce the percentages of Holders whose consent is required for
any supplemental indenture or waiver or reduce the requirements for quorum
and voting under the Indenture; or
(c) modify certain of the provisions in the Indenture relating to
supplemental indentures and waivers of certain covenants and past defaults.
A supplemental indenture which changes or eliminates any provision of the
Indenture expressly included solely for the benefit of Holders of Indenture
Securities of one or more particular series or tranches will be deemed not to
affect the rights under the Indenture of the Holders of Indenture Securities of
any other series or tranche. (See Section 1202.)
MISCELLANEOUS PROVISIONS
The Indenture provides that certain Indenture Securities, including those
for which payment or redemption money has been deposited or set aside in trust
as described under "-- Satisfaction and Discharge" below, will not be deemed to
be "outstanding" in determining whether the Holders of the requisite principal
amount of the outstanding Indenture Securities have given or taken any demand,
direction, consent or other action under the Indenture as of any date, or are
present at a meeting of Holders for quorum purposes. (See Section 101.)
PPL Capital Funding or PPL Corporation will be entitled to set any day as a
record date for the purpose of determining the Holders of outstanding Indenture
Securities of any series entitled to give or take any demand, direction, consent
or other action under the Indenture, in the manner and subject to the
limitations provided in the Indenture. In certain circumstances, the Trustee
also will be entitled to set a record date for action by Holders. If such a
record date is set for any action to be taken by Holders of particular Indenture
Securities, such action may be taken only by persons who are Holders of such
Indenture Securities on the record date. (See Section 104.)
SATISFACTION AND DISCHARGE
Any Indenture Securities or any portion will be deemed to have been paid
for purposes of the Indenture, and at PPL Capital Funding's election, our entire
indebtedness will be satisfied and discharged, if there shall have been
irrevocably deposited with the Trustee or any Paying Agent (other than PPL
Capital Funding or PPL Corporation), in trust:
(a) money sufficient, or
(b) in the case of a deposit made prior to the maturity of such
Indenture Securities, non-redeemable Government Obligations (as defined in
the Indenture) sufficient, or
(c) a combination of (a) and (b), which in total are sufficient,
26
to pay when due the principal of, and any premium, and interest due and to
become due on such Indenture Securities or portions thereof on and prior to the
maturity thereof.
(See Section 701.)
The Indenture will be deemed satisfied and discharged when no Indenture
Securities remain outstanding and when we have paid all other sums payable by us
under the Indenture. (See Section 702.)
All moneys we pay to the Trustee or any Paying Agent on Debt Securities
which remain unclaimed at the end of two years after payments have become due
will be paid to or upon the order of PPL Capital Funding. Thereafter, the Holder
of such Debt Security may look only to us for payment thereof. (See Section
603.)
RESIGNATION AND REMOVAL OF THE TRUSTEE; DEEMED RESIGNATION
The Trustee may resign at any time by giving written notice thereof to us.
The Trustee may also be removed by act of the Holders of a majority in
principal amount of the then outstanding Indenture Securities of any series.
No resignation or removal of the Trustee and no appointment of a successor
trustee will become effective until the acceptance of appointment by a successor
trustee in accordance with the requirements of the Indenture.
Under certain circumstances, we may appoint a successor trustee and if the
successor accepts, the Trustee will be deemed to have resigned.
(See Section 910).
GOVERNING LAW
The Indenture, the Debt Securities and the Guarantees provide that they are
to be governed by and construed in accordance with the laws of the State of New
York.
DESCRIPTION OF THE TRUST SECURITIES
The Trust may issue Preferred Trust Securities and Common Trust Securities
under the Trust Agreement. These Trust securities will represent undivided
beneficial interests in the assets of the Trust. The Common Trust Securities are
not being offered by this prospectus. All of the Common Trust Securities of the
Trust will be owned by PPL Corporation. Selected provisions of the Trust
Agreement are summarized below. Because this section is a summary, it does not
describe every aspect of the Trust Agreement. The form of Trust Agreement was
filed with the SEC and you should read the Trust Agreement for provisions that
may be important to you. The Trust Agreement will be qualified as an indenture
under the Trust Indenture Act. You should also refer to the Trust Indenture Act
for provisions that apply to the Preferred Trust Securities. Wherever particular
defined terms of the Trust Agreement are referred to, such defined terms are
incorporated herein by reference.
GENERAL
The Preferred Trust Securities and Common Trust Securities issued by the
Trust will be substantially the same except that, if there is an Event of
Default under the Trust Agreement, as described below, that results from an
Event of Default under the Subordinated Indenture, the rights of the holders of
the Common Trust Securities to payment of distributions and upon liquidation or
redemption will be subordinated to the rights of the holders of the Preferred
Trust Securities.
PPL Corporation will fully and unconditionally guarantee payments due on
the Preferred Trust Securities through a combination of the following:
(a) PPL Corporation's guarantee of PPL Capital Funding's obligations
under the Subordinated Debt Securities (the "Subordinated Guarantee");
27
(b) the rights of holders of Preferred Trust Securities to enforce
those obligations;
(c) PPL Corporation's agreement to pay the expenses of the Trust; and
(d) PPL Corporation's guarantee of payments due on the Preferred Trust
Securities to the extent of the Trust's assets (the "Preferred Trust
Securities Guarantee").
The Trust will use the proceeds from the sale of the Preferred Trust
Securities and Common Trust Securities to purchase Subordinated Debt Securities
from PPL Capital Funding. The Subordinated Debt Securities will be guaranteed by
PPL Corporation pursuant to the Subordinated Guarantee described below. The
Subordinated Debt Securities will be held in trust for the benefit of holders of
the Preferred Trust Securities and Common Trust Securities.
A prospectus supplement relating to the Preferred Trust Securities will
include specific terms of those securities and of the Subordinated Debt
Securities. For a description of some specific terms that will affect both the
Preferred Trust Securities and the Subordinated Debt Securities and your rights
under each, see "Description of the Subordinated Debt Securities" below.
DISTRIBUTIONS
The only income of the Trust available for distribution to the holders of
Preferred Trust Securities will be payments on the Subordinated Debt Securities.
If neither PPL Capital Funding nor PPL Corporation makes interest payments on
the Subordinated Debt Securities, the Trust will not have funds available to pay
distributions on Preferred Trust Securities. The payment of distributions, if
and to the extent the Trust has sufficient funds available for the payment of
such distributions, is guaranteed on a limited basis by PPL Corporation as
described under "Description of the Preferred Trust Securities Guarantee."
So long as no Event of Default under the Subordinated Indenture has
occurred and is continuing, PPL Capital Funding may extend the interest payment
period from time to time on the Subordinated Debt Securities for one or more
periods. As a consequence, distributions on Preferred Trust Securities would be
deferred during any such period. Interest would, however, continue to accrue.
During any extended interest period, or for so long as an "Event of Default"
under the Subordinated Indenture resulting from a payment default or any payment
default under the Preferred Trust Securities Guarantee has occurred and is
continuing, PPL Corporation may not:
(a) declare or pay any dividend or distribution on its capital stock,
other than dividends paid in shares of capital stock of PPL Corporation;
(b) redeem, purchase, acquire or make a liquidation payment with
respect to any of its capital stock;
(c) pay any principal, interest or premium on, or repay, repurchase or
redeem any debt securities that are equal or junior in right of payment
with the Subordinated Guarantees; or
(d) make any payments with respect to any guarantee of debt securities
by PPL Corporation if such guarantee is equal or junior in right of payment
to the Subordinated Guarantees.
Before an extension period ends, PPL Capital Funding may further extend the
interest payment period. No extension period as further extended may exceed 20
consecutive quarters. After any extension period and the payment of all amounts
then due, PPL Capital Funding may select a new extended interest payment period.
No interest period may be extended beyond the maturity of the Subordinated Debt
Securities.
REDEMPTION
Whenever Subordinated Debt Securities are repaid, whether at maturity or
earlier redemption, the Property Trustee will apply the proceeds to redeem a
like amount of Preferred Trust Securities and Common Trust Securities.
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Preferred Trust Securities will be redeemed at the redemption price plus
accrued and unpaid distributions with the proceeds from the contemporaneous
redemption of Subordinated Debt Securities. Redemptions of the Preferred Trust
Securities will be made on a redemption date only if the Trust has funds
available for the payment of the redemption price plus accrued and unpaid
distributions.
Holders of Preferred Trust Securities will be given not less than 30 nor
more than 60 days' notice of any redemption. On or before the redemption date,
the Trust will irrevocably deposit with the paying agent for Preferred Trust
Securities sufficient funds and will give the paying agent irrevocable
instructions and authority to pay the redemption price plus accrued and unpaid
distributions to the holders upon surrender of their Preferred Trust Securities.
Distributions payable on or before a redemption date will be payable to the
holders on the record date for the distribution payment. If notice is given and
funds are deposited as required, then on the redemption date all rights of
holders of the Preferred Trust Securities called for redemption will cease,
except the right of the holders to receive the redemption price plus accrued and
unpaid distributions, and the Preferred Trust Securities will cease to be
outstanding. No interest will accrue on amounts payable on the redemption date.
In the event that any date fixed for redemption of Preferred Trust Securities is
not a business day, then payment will be made on the next business day, except
that, if such business day falls in the next calendar year, then payment will be
made on the immediately preceding business day. No interest will be payable
because of any such delay. The actual payment date will be considered the date
fixed for redemption for purposes of calculating the redemption price plus
accrued and unpaid distributions.
Subject to applicable law, including United States federal securities law,
PPL Corporation or its affiliates may at any time and from time to time purchase
outstanding Preferred Trust Securities by tender, in the open market or by
private agreement.
If Preferred Trust Securities are partially redeemed on a redemption date,
a corresponding percentage of the Common Trust Securities will be redeemed. The
particular Preferred Trust Securities to be redeemed will be selected pro rata
not more than 60 days prior to the redemption date by the Property Trustee. The
Property Trustee will promptly notify the agent designated under the Trust
Agreement for exchange or registration of the Preferred Trust Securities, or
Preferred Trust Securities Registrar, in writing of the Preferred Trust
Securities selected for redemption and, where applicable, the partial amount to
be redeemed.
SUBORDINATION OF COMMON TRUST SECURITIES
Payment of distributions on, and the redemption price, plus accrued and
unpaid distributions, of, the Preferred Trust Securities and Common Trust
Securities shall be made pro rata based on the liquidation preference amount of
such securities. However, if on any distribution payment date or redemption date
an event of default under the Trust Agreement resulting from an event of default
under the Subordinated Indenture has occurred and is continuing, no payment on
any Common Trust Security shall be made until all payments due on the Preferred
Trust Securities have been made. In that case, funds available to the Property
Trustee shall first be applied to the payment in full of all distributions on,
or the redemption price plus accrued and unpaid distributions of, Preferred
Trust Securities then due and payable.
If an event of default under the Trust Agreement results from an event of
default under the Subordinated Indenture, the holder of Common Trust Securities
cannot take action with respect to the Trust Agreement default until the effect
of all defaults with respect to Preferred Trust Securities has been cured,
waived or otherwise eliminated. Until the event of default under the Trust
Agreement with respect to Preferred Trust Securities has been cured, waived or
otherwise eliminated, the Property Trustee shall, to the fullest extent
permitted by law, act solely on behalf of the holders of Preferred Trust
Securities and not the holders of the Common Trust Securities, and only holders
of Preferred Trust Securities will have the right to direct the Property Trustee
to act on their behalf.
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LIQUIDATION DISTRIBUTION UPON DISSOLUTION
The Trust shall dissolve and shall be liquidated by the Property Trustee on
the first to occur of:
(a) the expiration of the term of the Trust;
(b) the bankruptcy, dissolution or liquidation of PPL Corporation;
(c) the redemption of all of the Preferred Trust Securities;
(d) the entry of an order for dissolution of the Trust by a court of
competent jurisdiction; and
(e) the election of PPL Corporation at any time.
If a dissolution of the Trust occurs, the Trust will be liquidated by the
Property Trustee as expeditiously as the Property Trustee determines to be
appropriate. If a dissolution of the Trust occurs other than by redemption of
all the Preferred Trust Securities, the Property Trustee will provide for the
satisfaction of liabilities of creditors, if any, and distribute to each holder
of the Preferred Trust Securities and Common Trust Securities a proportionate
amount of Subordinated Debt Securities. If a distribution of Subordinated Debt
Securities is determined by the Property Trustee not to be practical, holders
will be entitled to receive, out of the assets of the Trust after adequate
provision for the satisfaction of liabilities of creditors, if any, an amount
equal to the aggregate liquidation preference of the Preferred Trust Securities
plus accrued and unpaid distributions thereon to the date of payment. If this
liquidation distribution can be paid only in part because the Trust has
insufficient assets available to pay in full the aggregate liquidation
distribution, then the amounts payable by the Trust on the Preferred Trust
Securities shall be paid on a pro rata basis. PPL Corporation, as holder of the
Common Trust Securities, will be entitled to receive distributions upon any
dissolution pro rata with the holders of the Preferred Trust Securities, except
that if an Event of Default (or event that, with the lapse of time or giving of
notice, would become such an Event of Default) has occurred and is continuing
under the Subordinated Indenture, the Preferred Trust Securities will have a
preference over the Common Trust Securities.
EVENTS OF DEFAULT; NOTICE
Any one of the following events will be an event of default under the Trust
Agreement whether it shall be voluntary or involuntary or be effected by
operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body:
(a) the occurrence of an Event of Default as described in the
Subordinated Indenture;
(b) default by the Trust in the payment of any distribution when it
becomes due and payable, and continuation of that default for a period of
30 days;
(c) default by the Trust in the payment of any redemption price, plus
accrued and unpaid distributions, of any Preferred Trust Security or Common
Trust Security when it becomes due and payable;
(d) default in the performance, or breach, in any material respect, of
any covenant or warranty of the trustees under the Trust Agreement which is
not dealt with above, and the continuation of that default or breach for a
period of 90 days after written notice to the Trust and PPL Corporation by
the holders of Preferred Trust Securities having at least 25% of the total
liquidation preference amount of the outstanding Preferred Trust
Securities; or
(e) the occurrence of certain events of bankruptcy or insolvency with
respect to the Trust.
Within 90 days after the occurrence of any event of default actually known
to the Property Trustee, the Property Trustee shall transmit to the holders of
Preferred Trust Securities, PPL Capital Funding, PPL Corporation and the
Administrative Trustees notice of any such default, unless that default will
have been cured or waived.
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A holder of Preferred Trust Securities may directly institute a proceeding
to enforce payment when due directly to the holder of the Preferred Trust
Securities of the principal of or interest on Subordinated Debt Securities
having a principal amount equal to the aggregate liquidation preference amount
of the holder's Preferred Trust Securities. The holders of Preferred Trust
Securities have no other rights to exercise directly any other remedies
available to the holder of the Subordinated Debt Securities unless the trustees
under the Trust Agreement fail to do so.
REMOVAL OF TRUSTEES
Unless an event of default under the Subordinated Indenture has occurred
and is continuing, the holder of the Common Trust Securities may remove any
trustee under the Trust Agreement at any time. If an event of default under the
Subordinated Indenture has occurred and is continuing, the holders of a majority
of the total liquidation preference amount of the outstanding Preferred Trust
Securities may remove the Property Trustee or the Delaware Trustee, or both of
them. The holder of the Common Trust Securities may remove any Administrative
Trustee at any time. Any resignation or removal of a trustee under the Trust
Agreement will take effect only on the acceptance of appointment by the
successor trustee.
Holders of Preferred Trust Securities will have no right to appoint or
remove the Administrative Trustees of the Trust, who may be appointed, removed
or replaced solely by PPL Corporation as the holder of the Common Trust
Securities.
VOTING RIGHTS
Except as provided below and under "Description of the Preferred Trust
Securities Guarantee -- Amendments and Assignments," and as otherwise required
by law or the Trust Agreement, the holders of Preferred Trust Securities will
have no voting rights.
While Subordinated Debt Securities are held by the Property Trustee, the
Property Trustee will not:
(a) direct the time, method and place to conduct any proceeding for
any remedy available to the Subordinated Indenture Trustee, or execute any
trust or power conferred on the Subordinated Indenture Trustee with respect
to the Subordinated Debt Securities;
(b) waive any past default under the Subordinated Indenture;
(c) exercise any right to rescind or annul a declaration that the
principal of all the Subordinated Debt Securities will be due and payable;
or
(d) consent to any amendment, modification or termination of the
Subordinated Indenture or the Subordinated Debt Securities, where that
consent will be required;
without, in each case, obtaining the prior approval of the holders of Preferred
Trust Securities having at least a majority of the liquidation preference amount
of all outstanding Preferred Trust Securities. Where a consent of each holder of
Subordinated Debt Securities affected is required, no consent shall be given by
the Property Trustee without the prior consent of each holder of the Preferred
Trust Securities affected. The Trustees shall not revoke any action previously
authorized or approved by a vote of the holders of Preferred Trust Securities,
except pursuant to the subsequent vote of the holders of Preferred Trust
Securities. If the Property Trustee fails to enforce its rights under the
Subordinated Debt Securities or the Trust Agreement, a holder of the Preferred
Trust Securities may institute a legal proceeding directly against PPL Capital
Funding or PPL Corporation, as the case may be, to enforce the Property
Trustee's rights under the Subordinated Debt Securities or the Trust Agreement
without first instituting any legal proceeding against the Property Trustee or
anyone else. The Property Trustee shall notify all holders of Preferred Trust
Securities of any notice of default received from the Subordinated Indenture
Trustee. The Property Trustee shall not take any action approved by the consent
of the holders without an opinion of counsel experienced in those matters to the
effect that the Trust will not be classified as a publicly traded partnership or
an association taxable as a corporation for United States federal income tax
purposes on account of that action.
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Holders of Preferred Trust Securities may give any required approval at a
meeting convened for such purpose or by written consent without prior notice.
The Administrative Trustees will give notice of any meeting at which holders of
Preferred Trust Securities are entitled to vote.
No vote or consent of the holders of Preferred Trust Securities will be
required for the Trust to redeem and cancel Preferred Trust Securities in
accordance with the Trust Agreement.
Notwithstanding that holders of Preferred Trust Securities are entitled to
vote or consent under any of the circumstances described above, any Preferred
Trust Securities that are owned by PPL Capital Funding, PPL Corporation or any
affiliate of any of them, shall be treated as if they were not outstanding for
purposes of such vote or consent.
AMENDMENTS
The Trust Agreement may be amended from time to time by a majority of the
Administrative Trustees and PPL Corporation, without the consent of any holders
of Preferred Trust Securities:
(a) to cure any ambiguity, correct inconsistent provisions or make any
other provisions with respect to matters or questions arising under the
Trust Agreement; or
(b) to change the name of the Trust; or
(c) to modify, eliminate or add to any provisions of the Trust
Agreement to the extent necessary to ensure that the Trust will not be
classified for United States federal income tax purposes other than as a
grantor trust (and not an association taxable as a corporation) at all
times that any Preferred Trust Securities and Common Trust Securities are
outstanding or to ensure the Trust's exemption from the status of an
"investment company" under the Investment Company Act of 1940.
No amendment described above may materially adversely affect the interests
of any holder of Preferred Trust Securities and Common Trust Securities without
such holder's consent. Any of the amendments of the Trust Agreement described in
paragraph (a) above shall become effective when notice of the amendment is given
to the holders of Preferred Trust Securities and Common Trust Securities.
Except as provided below, any provision of the Trust Agreement may be
amended by the Administrative Trustees and PPL Corporation with:
(a) the consent of holders of Preferred Trust Securities and Common
Trust Securities representing not less than a majority in aggregate
liquidation preference amount of the Preferred Trust Securities and Common
Trust Securities then outstanding; and
(b) receipt by the trustees of an opinion of counsel to the effect
that such amendment or the exercise of any power granted to the trustees in
accordance with the amendment will not cause the Trust to be treated as a
publicly traded partnership or association taxable as a corporation for
federal income tax purposes or affect the Trust's exemption from status of
an "investment company" under the Investment Company Act of 1940.
Each affected holder of Preferred Trust Securities or Common Trust
Securities must have consented to any amendment to the Trust Agreement that:
(a) adversely changes the amount or timing of any distribution with
respect to Preferred Trust Securities or Common Trust Securities or
otherwise adversely affects the amount of any distribution required to be
made in respect of Preferred Trust Securities and Common Trust Securities
as of a specified date; or
(b) restricts the right of a holder of Preferred Trust Securities or
Common Trust Securities to institute suit for the enforcement of any such
payment on or after that date.
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FORM, EXCHANGE AND TRANSFER
Preferred Trust Securities may be exchanged for other Preferred Trust
Securities in any authorized denomination and of like tenor and aggregate
liquidation preference.
Subject to the terms of the Trust Agreement, Preferred Trust Securities may
be presented for exchange as provided above or for registration of transfer,
duly endorsed or accompanied by a duly executed instrument of transfer, at the
office of the Preferred Trust Security Registrar. The Administrative Trustees
may designate PPL Corporation or PPL Capital Funding or any affiliate of either
of them as the Preferred Trust Security Registrar. The Property Trustee will
initially act as the Preferred Trust Security Registrar and transfer agent. No
service charge will be made for any registration of transfer or exchange of
Preferred Trust Securities, but the Preferred Trust Security Registrar may
require payment of a sum sufficient to cover any tax or other governmental
charge payable in connection with the transfer or exchange. A transfer or
exchange will be made when the Preferred Trust Security Registrar and
Administrative Trustees are satisfied with the documents of title and identity
of the person making the request. The Administrative Trustees may at any time
designate additional transfer agents or rescind the designation of any transfer
agent or approve a change in the office through which any transfer agent acts,
except that PPL Corporation will, or will cause the Preferred Trust Security
Registrar to, maintain an office or agency in The City of New York where
Preferred Trust Securities may be transferred or exchanged.
The Trust will not be required to (1) issue, register the transfer of, or
exchange any Preferred Trust Securities during the 15 calendar days before the
mailing of a notice of redemption of any Preferred Trust Securities called for
redemption and ending at the close of business on the day the notice is mailed
or (2) register the transfer of or exchange any Preferred Trust Securities so
selected for redemption, in whole or in part, except the unredeemed portion of
any Preferred Trust Securities being redeemed in part.
PAYMENT OF PREFERRED TRUST SECURITIES AND PAYING AGENT
Unless we indicate differently in a prospectus supplement, payments in
respect of the Preferred Trust Securities will be made on the applicable
distribution dates by check mailed to the address of the holder entitled thereto
as such address appears on the Preferred Trust Security Registrar. The paying
agent shall initially be the Property Trustee and any co-paying agent chosen by
the Property Trustee and acceptable to the Administrative Trustees, PPL Capital
Funding and PPL Corporation, which may be PPL Corporation or PPL Capital
Funding. The paying agent may resign upon 30 days' written notice to the
Administrative Trustees, the Property Trustee, PPL Capital Funding and PPL
Corporation. In the event that the Property Trustee shall no longer be the
paying agent, the Administrative Trustees shall appoint a successor, which shall
be a bank, trust company or affiliate of PPL Corporation acceptable to the
Property Trustee, PPL Capital Funding and PPL Corporation to act as paying
agent.
DUTIES OF THE TRUSTEES
The Delaware Trustee will act as the resident trustee in the State of
Delaware and will have no other significant duties. The Property Trustee will
hold the Subordinated Debt Securities on behalf of the Trust and will maintain a
payment account with respect to the Preferred Trust Securities and Common Trust
Securities, and will also act as trustee under the Trust Agreement for the
purposes of the Trust Indenture Act.
The Administrative Trustees of the Trust are authorized and directed to
conduct the affairs of the Trust and to operate the Trust so that (i) the Trust
will not be deemed to be an "investment company" required to be registered under
the Investment Company Act, (ii) the Trust will not be taxed as a corporation,
(iii) the Trust will not be classified as other than a grantor trust for United
States federal income tax purposes and (iv) the Subordinated Debt Securities
will be treated as indebtedness of PPL Capital Funding for United States federal
income tax purposes. In this regard, PPL Corporation and the Administrative
Trustees are authorized to take any action, not inconsistent with applicable
law, the certificate of trust or the Trust Agreement, that PPL Corporation and
the Administrative Trustees determine in their discretion to be necessary or
desirable for those purposes, as long as the action does not materially
adversely affect the interests of the holders of the Preferred Trust Securities.
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MISCELLANEOUS
Holders of the Preferred Trust Securities have no preemptive or similar
rights.
GOVERNING LAW
The Trust Agreement, the Preferred Trust Securities and the Common Trust
Securities provide that they are to be governed by and construed in accordance
with the laws of the State of Delaware.
DESCRIPTION OF THE PREFERRED TRUST SECURITIES GUARANTEE
Selected provisions of the Preferred Trust Securities Guarantee that PPL
Corporation will execute and deliver for the benefit of the holders of the
Preferred Trust Securities are summarized below. Because this section is a
summary, it does not describe every aspect of the Preferred Trust Securities
guarantee. The form of Preferred Trust Securities Guarantee was filed with the
SEC and you should read the Preferred Trust Securities Guarantee for provisions
that may be important to you. The Preferred Trust Securities Guarantee will be
qualified as an indenture under the Trust Indenture Act. You should refer to the
Trust Indenture Act for provisions that apply to the Preferred Trust Securities
Guarantee. Whenever particular defined terms of the Preferred Trust Securities
Guarantee are referred to, those defined terms are incorporated herein by
reference.
JPMorgan Chase Bank will act as Guarantee Trustee under the Preferred Trust
Securities Guarantee. The Guarantee Trustee will hold the Preferred Trust
Securities Guarantee for the benefit of the holders of the Preferred Trust
Securities.
GENERAL
PPL Corporation will irrevocably, fully and unconditionally agree to make
the guarantee payments listed below in full to the holders of the Preferred
Trust Securities if they are not made by the Trust, as and when due, regardless
of any defense, right of set-off or counterclaim that the Trust may have or
assert. The Common Trust Securities are also guaranteed by PPL Corporation and
payments will be made under the guarantee to the holders of the Common Trust
Securities and Preferred Trust Securities on a pro rata basis. However, if an
Event of Default occurred or is occurring, the rights of the holders of the
Common Trust Securities will be subordinate to the right of the holders of the
Preferred Trust Securities to receive payment under the guarantee. The following
payments will be subject to the Preferred Trust Securities Guarantee (without
duplication):
(a) any accrued and unpaid distributions required to be paid on
Preferred Trust Securities, to the extent the Trust has funds available
therefor;
(b) the redemption price, plus all accrued and unpaid distributions,
for any Preferred Trust Securities called for redemption by the Trust, to
the extent the Trust has funds available therefor; and
(c) upon a voluntary or involuntary dissolution, winding-up or
termination of the Trust (except in connection with the distribution of
Subordinated Debt Securities to the holders in exchange for Preferred Trust
Securities as provided in the Trust Agreement or upon a redemption of all
of the Preferred Trust Securities upon maturity or redemption of the
Subordinated Debt Securities as provided in the Trust Agreement), the
lesser of:
(1) the aggregate of the liquidation preference and all accrued and
unpaid distributions on Preferred Trust Securities to the date of
payment, to the extent the Trust has funds available therefor; and
(2) the amount of assets of the Trust remaining available for
distribution to holders of Preferred Trust Securities in liquidation of
the Trust after satisfaction of liabilities to creditors of the Trust as
required by applicable law.
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PPL Corporation's obligation to make a guarantee payment may be satisfied by
direct payment of the required amounts by PPL Corporation to the holders of
Preferred Trust Securities or by causing the Trust to pay such amounts to those
holders.
The Preferred Trust Securities Guarantee will be a guarantee with respect
to the Preferred Trust Securities, but will not apply to any payment of
distributions if and to the extent that the Trust does not have funds available
to make those payments.
If neither PPL Capital Funding nor PPL Corporation makes interest payments
on the Subordinated Debt Securities held by the Trust, the Trust will not have
funds available to pay distributions on the Preferred Trust Securities. The
Preferred Trust Securities Guarantee will rank subordinate and junior in right
of payment to all other liabilities of PPL Corporation (except those made pari
passu or subordinate by their terms). The Preferred Trust Securities Guarantee
does not limit PPL Corporation from incurring or issuing additional debt,
whether secured or unsecured, senior to or equal in right of payment to the
Preferred Trust Securities Guarantee in the future.
PPL Corporation will agree to provide funds to the Trust as needed to pay
costs, expenses or liabilities of the Trust to parties other than holders of
Preferred Trust Securities or Common Trust Securities. The Subordinated Debt
Securities, the Subordinated Guarantees and the Preferred Trust Securities
Guarantee, together with the obligations of PPL Corporation with respect to the
Preferred Trust Securities under the Subordinated Indenture, the Trust
Agreement, the Preferred Trust Securities Guarantee, including the agreement by
PPL Corporation to pay expenses and obligations of the Trust to parties (other
than holders of Preferred Trust Securities or Common Trust Securities),
constitute a full and unconditional guarantee of the Preferred Trust Securities
by PPL Corporation. No single document standing alone or operating in
conjunction with fewer than all of the other documents constitutes that
guarantee. It is only the combined operation of these documents that has the
effect of providing a full and unconditional guarantee by PPL Corporation of the
Preferred Trust Securities.
AMENDMENTS AND ASSIGNMENT
No consent of holders of Preferred Trust Securities is required for changes
to the Preferred Trust Securities Guarantee that do not materially adversely
affect their rights. Other terms of the Preferred Trust Securities Guarantee may
be changed only with the prior approval of the holders of the Preferred Trust
Securities having at least a majority of the liquidation preference amount of
the outstanding Preferred Trust Securities. All guarantees and agreements
contained in the Preferred Trust Securities Guarantee will bind the successors,
assigns, receivers, trustees and representatives of PPL Corporation and will
inure to the benefit of the holders of the Preferred Trust Securities then
outstanding.
EVENTS OF DEFAULT
An event of default under the Preferred Trust Securities Guarantee will
occur if PPL Corporation fails to perform any of its payment or other
obligations under the Preferred Trust Securities Guarantee and has not cured
such failure within 90 days of receipt of notice thereof. The holders of the
Preferred Trust Securities having a majority of the liquidation preference of
the Preferred Trust Securities have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the Guarantee
Trustee under the Preferred Trust Securities Guarantee or to direct the exercise
of any trust or power conferred upon the Guarantee Trustee under the Preferred
Trust Securities Guarantee.
Any holder of the Preferred Trust Securities may enforce the Preferred
Trust Securities Guarantee, or institute a legal proceeding directly against PPL
Corporation to enforce the Guarantee Trustee's rights under the Preferred Trust
Securities Guarantee without first instituting a legal proceeding against the
Trust, the Guarantee Trustee or anyone else.
PPL Corporation will be required to file an annual statement with the
Guarantee Trustee as to its compliance with the Preferred Trust Securities
Guarantee.
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DUTIES OF THE GUARANTEE TRUSTEE
The Guarantee Trustee will undertake to perform only those duties
specifically set forth in the Preferred Trust Securities Guarantee until a
default occurs. After a default under the Preferred Trust Securities Guarantee,
the Guarantee Trustee must exercise the same degree of care in its duties as a
prudent individual would exercise in the conduct of his or her own affairs. The
Preferred Trust Securities Guarantee Trustee is under no obligation to exercise
any of the powers vested in it by the Preferred Trust Securities Guarantee at
the request of any holder of the Preferred Trust Securities unless it is offered
reasonable indemnity against the costs, expenses and liabilities that it might
incur.
TERMINATION OF THE PREFERRED TRUST SECURITIES GUARANTEE
The Preferred Trust Securities Guarantee will terminate and be of no
further force and effect upon:
(a) full payment of the redemption price, plus accrued and unpaid
distributions, for all the Preferred Trust Securities;
(b) the distribution of Subordinated Debt Securities to holders of the
Preferred Trust Securities in exchange for all of the Preferred Trust
Securities; or
(c) full payment of the amounts payable upon liquidation of the Trust.
The Preferred Trust Securities Guarantee will continue to be effective or
will be reinstated, as the case may be, if at any time any holder of Preferred
Trust Securities must restore payment of any sums paid under the Preferred Trust
Securities or the Preferred Trust Securities Guarantee.
STATUS OF THE PREFERRED TRUST SECURITIES GUARANTEE
The Preferred Trust Securities Guarantee will be an unsecured obligation of
PPL Corporation and will rank:
(a) subordinate and junior in right of payment to all other
liabilities of PPL Corporation, including the Subordinated Guarantees;
(b) equal in right of payment with the most senior preferred or
preference stock that may be issued by PPL Corporation and with any
guarantee that may be entered into by PPL Corporation in respect of any
preferred or preference stock of any affiliate of PPL Corporation; and
(c) senior to PPL Corporation common stock.
The Trust Agreement provides that by accepting Preferred Trust Securities,
a holder agrees to the subordination provisions and other terms of the Preferred
Trust Securities Guarantee.
The Preferred Trust Securities Guarantee will be a guarantee of payment and
not of collection, that is, the guaranteed party may institute a legal
proceeding directly against PPL Corporation to enforce its rights under the
Preferred Trust Securities Guarantee without first instituting a legal
proceeding against anyone else.
Because PPL Corporation is a holding company that conducts all of its
operations through subsidiaries, obligations under the Preferred Trust
Securities Guarantee, as obligations of a holding company, will generally have a
position junior to claims of creditors and preferred stockholders of the
subsidiaries of PPL Corporation. See "PPL Corporation -- Holding Company
Structure" above.
GOVERNING LAW
The Preferred Trust Securities Guarantee provides that it is to be governed
by and construed in accordance with the laws of the State of New York.
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DESCRIPTION OF THE SUBORDINATED DEBT SECURITIES
The Subordinated Indenture and its associated documents contain the full
legal text of the matters described in this section. Because this section is a
summary, it does not describe every aspect of the Subordinated Debt Securities
or the Subordinated Indenture. The form of the Subordinated Indenture has been
filed with the SEC, and you should read the Subordinated Indenture for
provisions that may be important to you. The Subordinated Indenture will be
qualified under the Trust Indenture Act. You should refer to the Trust Indenture
Act for provisions that apply to the Subordinated Debt Securities.
This summary is subject to and qualified in its entirety by reference to
all the provisions of the Subordinated Indenture, including definitions of
certain terms used in the Subordinated Indenture. We also include references in
parentheses to certain sections of the Subordinated Indenture. Whenever we refer
to particular sections or defined terms of the Subordinated Indenture in this
prospectus or in a prospectus supplement, such sections or defined terms are
incorporated by reference herein or in the prospectus supplement. This summary
also is subject to and qualified by reference to the description of the
particular terms of your securities described in the applicable prospectus
supplement or supplements.
GENERAL
The Subordinated Debt Securities, including any Subordinated Debt
Securities which the Property Trustee will hold on behalf of the Trust as trust
assets, will be issued under the Subordinated Indenture (the "Subordinated
Indenture") among PPL Capital Funding, PPL Corporation and JPMorgan Chase Bank,
as Trustee (the "Subordinated Indenture Trustee"). The Subordinated Indenture
provides for the issuance from time to time of subordinated debt in an unlimited
amount. The Subordinated Debt Securities and all other subordinated debt issued
previously or hereafter under the Subordinated Indenture are collectively
referred to as the "Subordinated Indenture Securities." Subordinated Debt
Securities issued to the Trust will constitute a separate series under the
Subordinated Indenture and will be limited in aggregate principal amount to the
sum of the aggregate liquidation preference amount of the Preferred Trust
Securities and the consideration paid by PPL Corporation for the Common Trust
Securities.
The Subordinated Debt Securities will be unsecured, subordinated
obligations of PPL Capital Funding which rank junior to all of PPL Capital
Funding's Senior Indebtedness (as defined herein). The Subordinated Debt
Securities will be unconditionally guaranteed by PPL Corporation as to payment
of principal, and any interest and premium pursuant to subordinated guarantees
("Subordinated Guarantees") of PPL Corporation which rank junior to all of PPL
Corporation's Senior Indebtedness (as defined herein). See "-- Subordinated
Guarantees."
Prior to the issuance of each series, certain aspects of the particular
securities have to be specified in a supplemental indenture, in a board
resolution of PPL Capital Funding, or in one or more officer's certificates of
PPL Capital Funding pursuant to a supplemental indenture or a board resolution.
We refer you to the applicable prospectus supplement(s) for a description of the
following terms of the series of Subordinated Debt Securities:
(a) the title of such Subordinated Debt Securities;
(b) any limit upon the principal amount of such Subordinated Debt
Securities;
(c) the date or dates on which principal will be payable or how to
determine such dates;
(d) the rate or rates or method of determination of interest; the date
from which interest will accrue; the dates on which interest will be
payable ("Subordinated Debt Securities Interest Payment Dates"); and any
record dates for the interest payable on such Subordinated Debt Securities
Interest Payment Dates;
(e) any obligation or option of PPL Capital Funding to redeem,
purchase or repay Subordinated Debt Securities, or any option of the Holder
to require PPL Capital Funding to redeem or repurchase Subordinated Debt
Securities, and the terms and conditions upon which such Subordinated Debt
Securities will be redeemed, purchased or repaid;
37
(f) the denominations in which such Subordinated Debt Securities will
be issuable (if other than denominations of $25 and any integral multiple
thereof);
(g) whether such Subordinated Debt Securities are to be issued in
whole or in part in the form of one or more global Subordinated Debt
Securities and, if so, the identity of the depositary for such global
Subordinated Debt Securities; and
(h) any other terms of such Subordinated Debt Securities.
(See Section 301.)
SUBORDINATION
The Subordinated Debt Securities will be subordinate and junior in right of
payment to all Senior Indebtedness of PPL Capital Funding. (See Article
Fifteen.) No payment of the principal (including redemption and sinking fund
payments) of, or interest on, the Subordinated Debt Securities may be made by
PPL Capital Funding until all holders of Senior Indebtedness of PPL Capital
Funding have been paid, if any of the following occurs:
(a) certain events of bankruptcy, insolvency or reorganization of PPL
Capital Funding;
(b) any Senior Indebtedness of PPL Capital Funding is not paid when
due and that default continues without waiver;
(c) any other default has occurred and continues without waiver
pursuant to which the holders of Senior Indebtedness of PPL Capital Funding
are permitted to accelerate the maturity of such Senior Indebtedness; or
(d) the maturity of any other series of subordinated debentures under
the Subordinated Indenture has been accelerated, because of an event of
default which remains uncured.
Upon any distribution of assets of PPL Capital Funding to creditors in
connection with any insolvency, bankruptcy or similar proceeding, all principal
of, and premium, if any, and interest due or to become due on all Senior
Indebtedness of PPL Capital Funding must be paid in full before the holders of
the Subordinated Debt Securities are entitled to receive or retain any payment
from such distribution.
Senior Indebtedness, when used with respect to PPL Capital Funding or PPL
Corporation, is defined in the Subordinated Indenture to include all obligations
of PPL Capital Funding or PPL Corporation, as the case may be, for borrowed
money, or guarantees of the same, or for the payment of money pursuant to
capital leases (other than trade accounts payable incurred in the ordinary
course of business), unless such obligation or guarantee expressly provides that
it is not superior to or equal in right of payment to the Subordinated Debt
Securities or the Subordinated Guarantees, as the case may be. The obligations
of PPL Corporation under the Preferred Trust Securities Guarantee shall not be
deemed to be Senior Indebtedness. (See Section 101.)
The Subordinated Indenture does not limit the aggregate amount of Senior
Indebtedness that may be issued. As of December 31, 2001, PPL Capital Funding
had approximately $1.35 billion principal amount of indebtedness for borrowed
money constituting its Senior Indebtedness, and PPL Corporation had
approximately $1.6 billion principal amount of obligations constituting its
Senior Indebtedness (including guarantees of indebtedness of PPL Capital Funding
and certain of PPL Corporation's other subsidiaries).
SUBORDINATED GUARANTEES
PPL Corporation will unconditionally guarantee the payment of principal of
and any interest and premium on the Subordinated Debt Securities, when due and
payable, whether at the stated maturity date, by declaration of acceleration,
call for redemption or otherwise, in accordance with the terms of such
Subordinated Debt Securities and the Subordinated Indenture. The Subordinated
Guarantees will remain in effect until the entire principal of and any premium
and interest on the Subordinated Debt Securities has been paid in full or
otherwise discharged in accordance with the provisions of the Subordinated
Indenture. (See Article Fourteen.)
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The Subordinated Guarantees will be subordinate and junior in right of
payment to all Senior Indebtedness of PPL Corporation. No payment of the
principal (including redemption and sinking fund payments) of, or interest on,
the Subordinated Debt Securities may be made by PPL Corporation under the
Subordinated Guarantees until all holders of Senior Indebtedness of PPL
Corporation have been paid, if any of the following occurs:
(a) certain events of bankruptcy, insolvency or reorganization of PPL
Corporation;
(b) any Senior Indebtedness of PPL Corporation is not paid when due
and that default continues without waiver;
(c) any other default has occurred and continues without waiver
pursuant to which the holders of Senior Indebtedness of PPL Corporation are
permitted to accelerate the maturity of such Senior Indebtedness; or
(d) the maturity of any other series of subordinated debentures under
the Subordinated Indenture which has been guaranteed by PPL Corporation and
has been accelerated, because of an event of default which remains uncured.
Upon any distribution of assets of PPL Corporation to creditors in
connection with any insolvency, bankruptcy or similar proceeding, all principal
of, and premium, if any, and interest due or to become due on all Senior
Indebtedness of PPL Corporation must be paid in full before the holders of the
Subordinated Debt Securities are entitled to receive or retain any payment from
such distribution.
PAYMENT OF SUBORDINATED DEBT SECURITIES
INTEREST
Unless we indicate differently in a prospectus supplement, we will pay
interest on each Subordinated Debt Security on each Subordinated Debt Securities
Interest Payment Date by check mailed to the Holder of the Subordinated Debt
Securities as of the close of business on the regular record date relating to
such Subordinated Debt Securities Interest Payment Date, except, that interest
payable at Maturity will be paid to the person to whom principal is paid.
However, if we default in paying interest on a Subordinated Debt Security,
we will pay defaulted interest in either of the two following ways:
(a) We will first propose to the Subordinated Indenture Trustee a
payment date for such defaulted interest. Next, the Subordinated Indenture
Trustee will choose a Special Record Date for determining which Holders are
entitled to the payment. The Special Record Date will be between 10 and 15
days before the payment date we propose. Finally, we will pay such
defaulted interest on the payment date to the Holder of the Subordinated
Debt Security as of the close of business on the Special Record Date.
(b) Alternatively, we can propose to the Subordinated Indenture
Trustee any other lawful manner of payment that is consistent with the
requirements of any securities exchange on which such Subordinated Debt
Securities are listed for trading. If the Subordinated Indenture Trustee
thinks the proposal is practicable, payment will be made as proposed.
(See Section 307.)
PRINCIPAL
Unless we indicate differently in a prospectus supplement, we will pay
principal of and any interest and premium on the Subordinated Debt Securities at
Maturity upon presentation of the Subordinated Debt Securities at the office of
JPMorgan Chase Bank in New York, New York, as our Paying Agent. Any other Paying
Agent initially designated for the Subordinated Debt Securities of a particular
series will be named in the applicable prospectus supplement.
39
In our discretion, we may change the place of payment on the Subordinated
Debt Securities, and may remove any Paying Agent and may appoint one or more
additional Paying Agents (including PPL Capital Funding, PPL Corporation or any
affiliate of either of them). (See Section 602.)
OPTION TO EXTEND INTEREST PAYMENT PERIOD
So long as no Event of Default under the Subordinated Indenture has
occurred and is continuing, PPL Capital Funding may extend the interest payment
period from time to time on the Subordinated Debt Securities for one or more
periods. As a consequence, distributions on Preferred Trust Securities would be
deferred during any extension period. Interest would, however, continue to
accrue. During any extended interest period, or for so long as an "Event of
Default" under the Subordinated Indenture resulting from a payment default or a
payment default under the Preferred Trust Securities Guarantee has occurred and
is continuing, PPL Corporation may not:
(a) declare or pay any dividend or distribution on its capital stock,
other than dividends paid in shares of capital stock of PPL Corporation;
(b) redeem, purchase, acquire or make a liquidation payment with
respect to any of its capital stock;
(c) pay any principal, interest or premium on, or repay, repurchase or
redeem any debt securities that are equal or junior in right of payment
with the Subordinated Guarantees; or
(d) make any payments with respect to any guarantee of debt securities
by PPL Corporation if such guarantee is equal or junior in right of payment
to the Subordinated Guarantees.
(See Section 312.)
Before an extension period ends, PPL Capital Funding may further extend the
interest payment period. No extension period as further extended may exceed 20
consecutive quarters. After any extension period and the payment of all amounts
then due, PPL Capital Funding may select a new extended interest payment period.
No interest period may be extended beyond the maturity of the Subordinated Debt
Securities. PPL Capital Funding will give the Trust and the Subordinated
Indenture Trustee notice of its election of an extension period prior to the
earlier of (i) one business day before the record date for the distribution
which would occur if PPL Capital Funding did not make the election to extend or
(ii) the date the Administrative Trustees are required to give notice to any
securities exchange or any other applicable self-regulatory organization of the
record date. The Property Trustee shall send notice of that election to the
holders of Preferred Trust Securities.
FEES AND EXPENSES
So long as any Preferred Trust Securities remain outstanding, if the Trust
is required to pay any taxes, duties, assessments or governmental charges
imposed by the United States or any other taxing authority on income derived
from the interest payments on the Subordinated Debt Securities, then PPL Capital
Funding, as borrower, will pay all such taxes, duties, assessments or
governmental charges, so that the net amounts retained by the Trust after the
payment of those taxes, duties, assessments or governmental charges will be the
same as the Trust would have had in the absence of such payment. (See Section
313.)
FORM; TRANSFERS; EXCHANGES
Unless we indicated differently in a prospectus supplement, the
Subordinated Debt Securities will be issued
(a) only in fully registered form;
(b) without interest coupons; and
(c) in denominations that are even multiples of $25. (See Section
302.)
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Unless we indicate differently in a prospectus supplement, Subordinated
Debt Securities may be exchanged at the office of the Subordinated Indenture
Trustee. The Subordinated Indenture Trustee will also act as our agent for
registering Subordinated Debt Securities in the names of holders and
transferring debt securities. We may appoint another agent or act as our own
agent for this purpose. The entity performing the role of maintaining the list
of registered holders is called the "Subordinated Indenture Registrar." It will
also perform transfers.
In our discretion, we may change the place for registration of transfer of
the Subordinated Debt Securities and may remove and/or appoint one or more
additional Subordinated Indenture Registrars (including PPL Capital Funding, PPL
Corporation or any affiliate of either of them). (See Sections 305 and 602.)
Except as otherwise provided in a prospectus supplement, there will be no
service charge for any transfer or exchange of the Debt Securities, but you may
be required to pay a sum sufficient to cover any tax or other governmental
charge payable in connection therewith. We may block the transfer or exchange of
(a) Subordinated Debt Securities during a period of 15 days prior to giving any
notice of redemption or (b) any Subordinated Debt Security selected for
redemption in whole or in part, except the unredeemed portion of any
Subordinated Debt Security being redeemed in part. (See Section 305.)
Unless we indicate differently in a prospectus supplement, if Subordinated
Debt Securities are distributed to holders of Preferred Trust Securities in a
dissolution of the Trust, the Subordinated Debt Securities will be issued in
fully registered certificated form in the denominations and integral multiples
thereof in which the Preferred Trust Securities have been issued, and they may
be transferred or exchanged at the offices of the Subordinated Indenture
Trustee.
REDEMPTION
For so long as the Trust is the holder of all the Subordinated Debt
Securities, the proceeds of any redemption will be used by the Trust to redeem
Preferred Trust Securities and Common Trust Securities in accordance with their
terms.
We will set forth any terms for the redemption of Subordinated Debt
Securities in a prospectus supplement. Unless we indicate differently in a
prospectus supplement, and except with respect to Subordinated Debt Securities
redeemable at the option of the Holder, Subordinated Debt Securities will be
redeemable upon notice by mail between 30 and 60 days prior to the redemption
date. If less than all of the Subordinated Debt Securities of any series or any
tranche thereof are to be redeemed, the Subordinated Indenture Trustee will
select the Subordinated Debt Securities to be redeemed. In the absence of any
provision for selection, the Subordinated Indenture Trustee will choose a method
of random selection as it deems fair and appropriate. (See Sections 403 and
404.)
Subordinated Debt Securities will cease to bear interest on the redemption
date. PPL Capital Funding will pay the redemption price and any accrued interest
once the Subordinated Debt Securities are surrendered for redemption. (See
Section 405.) If only part of a Subordinated Debt Security is redeemed, the
Subordinated Indenture Trustee will deliver a new Subordinated Debt Security of
the same series for the remaining portion without charge. (See Section 406.)
We may make any redemption at the option of PPL Capital Funding conditional
upon the receipt by the paying agent, on or prior to the date fixed for
redemption, of money sufficient to pay the redemption price. If the paying agent
has not received such money by the date fixed for redemption, PPL Capital
Funding will not be required to redeem such Subordinated Debt Securities. (See
Section 404.)
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EVENTS OF DEFAULT
An "Event of Default" occurs with respect to Subordinated Indenture
Securities of any series if
(a) we do not pay any interest on any Subordinated Indenture
Securities of the applicable series within 30 days of the due date;
provided, however, that a valid extension of the interest period by us will
not constitute an Event of Default;
(b) we do not pay principal or premium on any Subordinated Indenture
Securities of the applicable series on its due date;
(c) we remain in breach of a covenant (excluding covenants solely
applicable to a specific series) or warranty of the Subordinated Indenture
for 90 days after we receive a written notice of default stating we are in
breach and requiring remedy of the breach; the notice must be sent by
either the Subordinated Indenture Trustee or Holders of 25% of the
principal amount of Subordinated Indenture Securities of the affected
series; the Subordinated Indenture Trustee or such Holders can agree to
extend the 90-day period and such an agreement to extend will be
automatically deemed to occur if we are diligently pursuing action to
correct the default;
(d) the Subordinated Guarantees of PPL Corporation relating to any
Subordinated Indenture Securities of the applicable series
(1) cease to be effective (except in accordance with their terms),
(2) are found in any judicial proceeding to be unenforceable or
invalid, or
(3) are denied or disaffirmed (except in accordance with their
terms);
(e) we file for bankruptcy or certain other events in bankruptcy,
insolvency, receivership or reorganization occur; or
(f) any other Event of Default specified in the prospectus supplement
occurs.
(See Section 801.)
No Event of Default with respect to the Subordinated Debt Securities necessarily
constitutes an Event of Default with respect to the Subordinated Indenture
Securities of any other series issued under the Subordinated Indenture.
REMEDIES
ACCELERATION
ANY ONE SERIES. If an Event of Default occurs and is continuing with
respect to any one series of Subordinated Indenture Securities, then either the
Subordinated Indenture Trustee or the Holders of 25% in principal amount of the
outstanding Subordinated Indenture Securities of such series may declare the
principal amount of all of the Subordinated Indenture Securities of such series
to be due and payable immediately.
MORE THAN ONE SERIES. If an Event of Default occurs and is continuing with
respect to more than one series of Subordinated Indenture Securities, then
either the Subordinated Indenture Trustee or the Holders of 25% in aggregate
principal amount of the outstanding Subordinated Indenture Securities of all
such series, considered as one class, may make such declaration of acceleration.
Thus, if there is more than one series affected, the action by 25% in principal
amount of the Subordinated Indenture Securities of any particular series will
not, in itself, be sufficient to make a declaration of acceleration.
(See Section 802.)
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RESCISSION OF ACCELERATION
After the declaration of acceleration has been made and before the
Subordinated Indenture Trustee has obtained a judgment or decree for payment of
the money due, such declaration and its consequences will be rescinded and
annulled, if
(a) we pay or deposit with the Subordinated Indenture Trustee a sum
sufficient to pay
(1) all overdue interest;
(2) the principal of and any premium which have become due
otherwise than by such declaration of acceleration and overdue interest
thereon;
(3) interest on overdue interest to the extent lawful; and
(4) all amounts due to the Subordinated Indenture Trustee under the
Subordinated Indenture; and
(b) all Events of Default, other than the nonpayment of the principal
which has become due solely by such declaration of acceleration, have been
cured or waived as provided in the Subordinated Indenture.
(See Section 802.) For more information as to waiver of defaults, see "-- Waiver
of Default and of Compliance" below.
CONTROL BY HOLDERS; LIMITATIONS
Subject to the Subordinated Indenture, if an Event of Default with respect
to the Subordinated Indenture Securities of any one series occurs and is
continuing, the Holders of a majority in principal amount of the outstanding
Subordinated Indenture Securities of that series will have the right to
(a) direct the time, method and place of conducting any proceeding for
any remedy available to the Subordinated Indenture Trustee, or
(b) exercise any trust or power conferred on the Subordinated
Indenture Trustee with respect to the Subordinated Indenture Securities of
such series.
If an Event of Default is continuing with respect to more than one series
of Subordinated Indenture Securities, the Holders of a majority in aggregate
principal amount of the outstanding Subordinated Indenture Securities of all
such series, considered as one class, will have the right to make such
direction, and not the Holders of the Subordinated Indenture Securities of any
one of such series. These rights of Holders to make direction are subject to the
following limitations:
(a) the Holders' directions may not conflict with any law or the
Subordinated Indenture; and
(b) the Holders' directions may not involve the Subordinated Indenture
Trustee in personal liability where the Trustee believes indemnity is not
adequate.
The Subordinated Indenture Trustee may also take any other action it deems
proper which is consistent with the Holders' direction. (See Sections 812 and
903.)
In addition, the Subordinated Indenture provides that no Holder of any
Subordinated Indenture Security will have any right to institute any proceeding,
judicial or otherwise, with respect to the Subordinated Indenture for the
appointment of a receiver or for any other remedy thereunder unless
(a) that Holder has previously given the Subordinated Indenture
Trustee written notice of a continuing Event of Default;
(b) the Holders of 25% in aggregate principal amount of the
outstanding Subordinated Indenture Securities of all affected series,
considered as one class, have made written request to the Subordinated
Indenture Trustee to institute proceedings in respect of that Event of
Default and have offered the
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Subordinated Indenture Trustee reasonable indemnity against costs and
liabilities incurred in complying with such request; and
(c) for 60 days after receipt of such notice, the Subordinated
Indenture Trustee has failed to institute any such proceeding and no
direction inconsistent with such request has been given to the Subordinated
Indenture Trustee during such 60-day period by the Holders of a majority in
aggregate principal amount of outstanding Subordinated Indenture Securities
of all affected series, considered as one class.
Furthermore, no Holder will be entitled to institute any such action if and to
the extent that such action would disturb or prejudice the rights of other
Holders. (See Sections 807 and 903.)
However, each Holder has an absolute and unconditional right to receive
payment when due and to bring a suit to enforce that right. (See Sections 807
and 808.)
ENFORCEMENT OF CERTAIN RIGHTS BY HOLDERS OF PREFERRED TRUST SECURITIES
If there is an Event of Default with respect to Subordinated Debt
Securities held by the Trust, then the holders of Preferred Trust Securities
will rely on the Property Trustee or the Subordinated Indenture Trustee, acting
for the benefit of the Property Trustee, to enforce the Property Trustee's
rights against PPL Capital Funding and PPL Corporation as a holder of the
Subordinated Debt Securities. However, a holder of Preferred Trust Securities
may enforce the Subordinated Indenture directly against PPL Capital Funding and
PPL Corporation to the same extent as if the holder of Preferred Trust
Securities held a principal amount of Subordinated Debt Securities equal to the
aggregate liquidation amount of its Preferred Trust Securities. (See Section
609.)
Subject to their right to bring suit to enforce their right to payment, the
holders of Preferred Trust Securities would not be able to institute any
proceeding with respect to the Subordinated Indenture unless the Subordinated
Indenture Trustee has failed to do so for 60 days after a request of the holders
of 25% in liquidation amount of Preferred Trust Securities. Upon such failure,
the holders of a majority of the aggregate liquidation amount of the outstanding
Preferred Trust Securities would have the right to directly institute
proceedings for enforcement of all other rights of the Subordinated Indenture
Trustee against PPL Capital Funding to the fullest extent permitted by law. (See
Sections 807, 808 and 812.)
NOTICE OF DEFAULT
The Subordinated Indenture Trustee is required to give the Holders of the
Subordinated Indenture Securities notice of any default under the Subordinated
Indenture to the extent required by the Trust Indenture Act, unless such default
has been cured or waived; except that in the case of an Event of Default of the
character specified above in clause (c) under "-- Events of Default," no such
notice shall be given to such Holders until at least 90 days after the
occurrence thereof. (See Section 902.) The Trust Indenture Act currently permits
the Subordinated Indenture Trustee to withhold notices of default (except for
certain payment defaults) if the Subordinated Indenture Trustee in good faith
determines the withholding of such notice to be in the interests of the Holders.
We will furnish the Subordinated Indenture Trustee with an annual statement
as to the compliance by PPL Capital Funding with the conditions and covenants in
the Subordinated Indenture. (See Section 605.)
WAIVER OF DEFAULT AND OF COMPLIANCE
The Holders of a majority in aggregate principal amount of the outstanding
Subordinated Indenture Securities of any series may waive, on behalf of the
Holders of all Subordinated Indenture Securities of such series, any past
default under the Subordinated Indenture, except a default in the payment of
principal, premium or interest, or with respect to compliance with certain
provisions of the Subordinated Indenture that cannot be amended without the
consent of the Holder of each outstanding Subordinated Indenture Security. (See
Section 813.)
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Compliance with certain covenants in the Subordinated Indenture or
otherwise provided with respect to Subordinated Indenture Securities may be
waived by the Holders of a majority in aggregate principal amount of the
affected Subordinated Indenture Securities, considered as one class. (See
Section 606.)
CONSOLIDATION, MERGER AND CONVEYANCE OF ASSETS AS AN ENTIRETY
Subject to the provisions described in the next paragraph, each of PPL
Capital Funding and PPL Corporation will preserve its corporate existence. (See
Section 604.)
PPL Capital Funding and PPL Corporation have each agreed not to consolidate
with or merge into any other entity or convey, transfer or lease its properties
and assets substantially as an entirety to any entity unless
(a) the entity formed by such consolidation or into which PPL Capital
Funding or PPL Corporation, as the case may be, is merged or the entity
which acquires or which leases the property and assets of PPL Capital
Funding or PPL Corporation, as the case may be, substantially as an
entirety is an entity organized and existing under the laws of the United
States of America or any State thereof or the District of Columbia, and
expressly assumes, by supplemental indenture, the due and punctual payment
of the principal, premium and interest on all the outstanding Subordinated
Indenture Securities (or the Subordinated Guarantees endorsed thereon, as
the case may be) and the performance of all of the covenants of PPL Capital
Funding or PPL Corporation, as the case may be, under the Subordinated
Indenture, and
(b) immediately after giving effect to such transactions, no Event of
Default, and no event which after notice or lapse of time or both would
become an Event of Default, will have occurred and be continuing. (See
Section 1101.)
The Subordinated Indenture does not prevent or restrict:
(a) any consolidation or merger after the consummation of which PPL
Capital Funding or PPL Corporation would be the surviving or resulting
entity;
(b) any consolidation of PPL Capital Funding with PPL Corporation or
any other entity all of the outstanding voting securities of which are
owned, directly or indirectly, by PPL Corporation; or any merger of any
such entity into any other of such entities; or any conveyance or other
transfer, or lease, or properties by any thereof to any other thereof;
(c) any conveyance or other transfer, or lease, of any part of the
properties of PPL Capital Funding or PPL Corporation which does not
constitute the entirety, or substantially the entirety, thereof; or
(d) the approval by PPL Capital Funding or PPL Corporation of, or the
consent by PPL Capital Funding or PPL Corporation to, any consolidation or
merger to which any direct or indirect subsidiary or affiliate of PPL
Capital Funding or PPL Corporation, as the case requires, may be a party or
any conveyance, transfer or lease by any such subsidiary or affiliate of
any of its assets. (See Section 1103.)
MODIFICATION OF SUBORDINATED INDENTURE
WITHOUT HOLDER CONSENT. Without the consent of any Holders of Subordinated
Indenture Securities, PPL Capital Funding, PPL Corporation and the Subordinated
Indenture Trustee may enter into one or more supplemental indentures for any of
the following purposes:
(a) to evidence the succession of another entity to PPL Capital
Funding or PPL Corporation; or
(b) to add one or more covenants of PPL Capital Funding or PPL
Corporation or other provisions for the benefit of the Holders of all or
any series or tranche of Subordinated Indenture Securities, or to surrender
any right or power conferred upon PPL Capital Funding or PPL Corporation;
or
(c) to add any additional Events of Default for all or any series of
Subordinated Indenture Securities; or
45
(d) to change or eliminate any provision of the Subordinated Indenture
or to add any new provision to the Subordinated Indenture that does not
adversely affect the interests of the Holders; or
(e) to provide security for the Subordinated Indenture Securities of
any series; or
(f) to establish the form or terms of Subordinated Indenture
Securities of any series or tranche or any Subordinated Guarantees as
permitted by the Subordinated Indenture; or
(g) to provide for the issuance of bearer securities; or
(h) to evidence and provide for the acceptance of appointment of a
separate or successor Subordinated Indenture Trustee or co-trustee; or
(i) to provide for the procedures required to permit the utilization
of a noncertificated system of registration for any series or tranche of
Subordinated Indenture Securities; or
(j) to change any place or places where
(1) we may pay principal, premium and interest,
(2) Subordinated Indenture Securities may be surrendered for
transfer or exchange, and
(3) notices and demands to or upon PPL Capital Funding or PPL
Corporation may be served; or
(k) to cure any ambiguity, defect or inconsistency or to make any
other changes that do not adversely affect the interests of the Holders in
any material respect.
If the Trust Indenture Act is amended after the date of the Subordinated
Indenture so as to require changes to the Subordinated Indenture or so as to
permit changes to, or the elimination of, provisions which, at the date of the
Subordinated Indenture or at any time thereafter, were required by the Trust
Indenture Act to be contained in the Subordinated Indenture, the Subordinated
Indenture will be deemed to have been amended so as to conform to such amendment
or to effect such changes or elimination, and PPL Capital Funding, PPL
Corporation and the Subordinated Indenture Trustee may, without the consent of
any Holders, enter into one or more supplemental indentures to effect or
evidence such amendment.
(See Section 1201.)
WITH HOLDER CONSENT. Except as provided above, the consent of the Holders
of at least a majority in aggregate principal amount of the Subordinated
Indenture Securities of all outstanding series, considered as one class, is
generally required for the purpose of adding to, or changing or eliminating any
of the provisions of, the Subordinated Indenture pursuant to a supplemental
indenture. However, if less than all of the series of outstanding Subordinated
Indenture Securities are directly affected by a proposed supplemental indenture,
then such proposal only requires the consent of the Holders of a majority in
aggregate principal amount of the outstanding Subordinated Indenture Securities
of all directly affected series, considered as one class. Moreover, if the
Subordinated Indenture Securities of any series have been issued in more than
one tranche and if the proposed supplemental indenture directly affects the
rights of the Holders of Subordinated Indenture Securities of one or more, but
less than all, of such tranches, then such proposal only requires the consent of
the Holders of a majority in aggregate principal amount of the outstanding
Subordinated Indenture Securities of all directly affected tranches, considered
as one class.
However, no amendment or modification may, without the consent of the
Holder of each outstanding Subordinated Indenture Security directly affected
thereby,
(a) change the stated maturity of the principal or (except as
described above under "-- Option to Extend Interest Payment Period")
interest on any Subordinated Indenture Security (other than pursuant to the
terms thereof), or reduce the principal amount, interest or premium payable
or change the currency in which any Subordinated Indenture Security is
payable, or impair the right to bring suit to enforce any payment;
46
(b) reduce the percentages of Holders whose consent is required for
any supplemental indenture or waiver or reduce the requirements for quorum
and voting under the Subordinated Indenture; or
(c) modify certain of the provisions in the Subordinated Indenture
relating to supplemental indentures and waivers of certain covenants and
past defaults.
A supplemental indenture which changes or eliminates any provision of the
Subordinated Indenture expressly included solely for the benefit of Holders of
Subordinated Indenture Securities of one or more particular series or tranches
will be deemed not to affect the rights under the Subordinated Indenture of the
Holders of Subordinated Indenture Securities of any other series or tranche. So
long as any Preferred Trust Securities are outstanding, the Subordinated
Indenture Trustee may not consent to any supplemental indenture that would
ordinarily require Subordinated Indenture Security Holder consent without the
prior consent of the holders of a majority in aggregate liquidation preference
of all outstanding Preferred Trust Securities affected or, in the case of
changes described in clauses (a) through (c) immediately above, 100% in
aggregate liquidation preference of all such outstanding Preferred Trust
Securities affected. (See Section 1202.)
MISCELLANEOUS PROVISIONS
The Subordinated Indenture provides that certain Subordinated Indenture
Securities, including those for which payment or redemption money has been
deposited or set aside in trust as described under "-- Satisfaction and
Discharge" below, will not be deemed to be "outstanding" in determining whether
the Holders of the requisite principal amount of the outstanding Subordinated
Indenture Securities have given or taken any demand, direction, consent or other
action under the Subordinated Indenture as of any date, or are present at a
meeting of Holders for quorum purposes. (See Section 101.)
PPL Capital Funding or PPL Corporation will be entitled to set any day as a
record date for the purpose of determining the Holders of outstanding
Subordinated Indenture Securities of any series entitled to give or take any
demand, direction, consent or other action under the Subordinated Indenture, in
the manner and subject to the limitations provided in the Subordinated
Indenture. In certain circumstances, the Subordinated Indenture Trustee also
will be entitled to set a record date for action by Holders. If such a record
date is set for any action to be taken by Holders of particular Subordinated
Indenture Securities, such action may be taken only by persons who are Holders
of such Subordinated Indenture Securities on the record date. (See Section 104.)
SATISFACTION AND DISCHARGE
Any Subordinated Indenture Securities or any portion will be deemed to have
been paid for purposes of the Subordinated Indenture, and at PPL Capital
Funding's election, the entire indebtedness of PPL Capital Funding and PPL
Corporation will be satisfied and discharged, if there shall have been
irrevocably deposited with the Subordinated Indenture Trustee or any paying
agent (other than PPL Capital Funding or PPL Corporation), in trust:
(a) money sufficient, or
(b) in the case of a deposit made prior to the maturity of such
Subordinated Indenture Securities, non-redeemable Eligible Obligations (as
defined in the Subordinated Indenture) sufficient, or
(c) a combination of (a) and (b), which in total are sufficient,
to pay when due the principal of, and any premium, and interest due and to
become due on such Subordinated Indenture Securities or portions thereof on and
prior to the maturity thereof.
(See Section 701.)
The Subordinated Indenture will be deemed satisfied and discharged when no
Subordinated Indenture Securities remain outstanding and when we have paid all
other sums payable by us under the Subordinated Indenture. (See Section 702.)
47
All moneys we pay to the Subordinated Indenture Trustee or any paying agent
on Subordinated Debt Securities which remain unclaimed at the end of two years
after payments have become due will be paid to or upon the order of PPL Capital
Funding. Thereafter, the Holder of such Subordinated Debt Security may look only
to us for payment thereof. (See Section 603.)
RESIGNATION AND REMOVAL OF THE SUBORDINATED INDENTURE TRUSTEE; DEEMED
RESIGNATION
The Subordinated Indenture Trustee may resign at any time by giving written
notice thereof to us.
The Subordinated Indenture Trustee may also be removed by act of the
Holders of a majority in principal amount of the then outstanding Subordinated
Indenture Securities of any series.
No resignation or removal of the Subordinated Indenture Trustee and no
appointment of a successor trustee will become effective until the acceptance of
appointment by a successor trustee in accordance with the requirements of the
Subordinated Indenture.
Under certain circumstances, we may appoint a successor trustee and if the
successor accepts, the Subordinated Indenture Trustee will be deemed to have
resigned.
(Section 910).
GOVERNING LAW
The Subordinated Indenture and the Subordinated Indenture Securities
provide that they are to be governed by and construed in accordance with the
laws of the State of New York.
INFORMATION CONCERNING THE TRUSTEES
JPMorgan Chase Bank has at various times in the ordinary course of business
made loans to PPL Corporation and its subsidiaries and affiliates, and acts as a
lender to certain of our subsidiaries under their current revolving credit
facilities. In addition, JPMorgan Chase Bank acts as issuing and paying agent
for PPL Capital Funding's commercial paper notes, and acts as guarantee trustee
and property trustee for the preferred and common trust securities of our
affiliates, PPL Capital Trust and PPL Capital Trust I and acts as trustee with
respect to the related subordinated debentures of our affiliate, PPL Electric.
JPMorgan Chase Bank also acts as purchase contract agent with respect to our
premium equity participating security units and as guarantee trustee and
property trustee for the related preferred and common trust securities of our
affiliate, PPL Capital Funding Trust I, and as trustee with respect to the
related subordinated notes of PPL Capital Funding.
Chase Manhattan Bank USA, National Association, an affiliate of the
Trustee, acts as Delaware trustee for the preferred and common trust securities
of PPL Capital Trust and PPL Capital Trust I and the preferred and common trust
securities of PPL Capital Funding Trust I.
PLAN OF DISTRIBUTION
We may sell Securities (a) to purchasers directly; (b) to underwriters for
public offering and sale by them; or (c) through agents or dealers. We may
determine the price or other terms of the securities offered under this
prospectus by use of an electronic auction. We will describe how any auction
will determine the price or any other terms, how potential investors may
participate in the auction and the nature of the underwriters' obligations in
the related supplement to this prospectus.
We currently expect that sales of Securities will be made through
underwriters, dealers or agents who are broker-dealers or associated persons of
broker-dealers registered under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"). However, we may also sell the Securities directly to
institutional investors and we do not expect that our officers or employees
associated with any such sale will be required to be registered broker-dealers
under the Exchange Act. A prospectus supplement will describe the terms of any
such sale.
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The applicable prospectus supplement will name any underwriter involved in
a sale of Securities. Underwriters may offer and sell Securities at a fixed
price or prices, which may be changed, or from time to time at market prices or
at negotiated prices. Underwriters may be deemed to have received compensation
from us from sales of Securities in the form of underwriting discounts or
commissions and may also receive commissions from purchasers of Securities for
whom they may act as agent.
Underwriters may sell Securities to or through dealers, and such dealers
may receive compensation in the form of discounts, concessions or commissions
from the underwriters and/or commissions (which may be changed from time to
time) from the purchasers for whom they may act as agent.
Unless otherwise provided in a prospectus supplement, the obligations of
any underwriters to purchase particular Securities will be subject to certain
conditions precedent, and the underwriters will be obligated to purchase all
such Securities if any are purchased.
We will name any agent or dealer involved in a sale of Securities, as well
as any commissions payable by us to such agent, in a prospectus supplement.
Unless we indicate differently in the prospectus supplement, any such agent will
be acting on a reasonable efforts basis for the period of its appointment.
Salomon Smith Barney Inc. may act as agent or underwriter in connection with an
at-the-market offering of our common stock.
Underwriters, dealers acting as principals and agents participating in a
sale of Securities may be deemed to be underwriters as defined in the Securities
Act, and any discounts and commissions received by them and any profit realized
by them on resale of the Securities may be deemed to be underwriting discounts
and commissions, under the Securities Act. We may have agreements with
underwriters, dealers and agents to indemnify them against certain civil
liabilities, including liabilities under the Securities Act, and to reimburse
them for certain expenses.
Underwriters or agents and their associates may be customers of, engage in
transactions with or perform services for us or our affiliates in the ordinary
course of business.
Each series of Securities will be a new issue and, except for the Common
Stock, which is listed on the New York and Philadelphia Stock Exchanges, will
have no established trading market. We may elect to list any series of new
Securities on an exchange, or in the case of the Common Stock, on any additional
exchange, but unless we advise you differently in the prospectus supplement, we
have no obligation to cause any Securities to be so listed. Any underwriters
that purchase Securities for public offering and sale may make a market in the
Securities, but such underwriters will not be obligated to do so and may
discontinue any market making at any time without notice. We make no assurance
as to the liquidity of, or the trading markets for, any Securities.
WHERE YOU CAN FIND MORE INFORMATION
AVAILABLE INFORMATION
PPL Corporation files reports, proxy statements and other information with
the SEC. You may obtain copies of this information by mail from the Public
Reference Room of the SEC, 450 Fifth Street, N.W., Room 1024, Washington, D.C.
20549, at prescribed rates. Further information on the operation of the SEC's
Public Reference Room in Washington, D.C. can be obtained by calling the SEC at
1-800-SEC-0330.
The SEC also maintains an Internet world wide web site that contains
reports, proxy statements and other information about issuers, such as PPL
Corporation, who file electronically with the Commission. The address of that
site is http://www.sec.gov.
PPL Corporation Common Stock is listed on the New York Stock Exchange
("NYSE") and the Philadelphia Stock Exchange (symbol: PPL), and reports, proxy
statements and other information concerning PPL Corporation can also be
inspected at the offices of the NYSE at 20 Broad Street, New York, New York
10005 and the Philadelphia Stock Exchange, 1900 Market Street, Philadelphia,
Pennsylvania 19103. In addition, reports, proxy statements and other information
concerning PPL Corporation can be inspected at its
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offices at Two North Ninth Street, Allentown, Pennsylvania 18101-1179. PPL
Corporation maintains an Internet site at http://www.pplweb.com (which is not
intended to be an active hyperlink herein) which contains information concerning
PPL Corporation and its affiliates. The information at PPL Corporation's
Internet site is not incorporated in this prospectus by reference, and you
should not consider it a part of this prospectus.
INCORPORATION BY REFERENCE
The rules of the SEC allow us to "incorporate by reference" information
into this prospectus, which means that we can disclose important information to
you by referring you to another document filed separately with the SEC. The
information incorporated by reference is deemed to be part of this prospectus,
and later information that we file with the SEC will automatically update and
supersede that information. This prospectus incorporates by reference the
documents set forth below that have been previously filed with the SEC. These
documents contain important information about PPL Corporation.
SEC FILINGS (FILE NO. 1-11459) PERIOD/DATE
------------------------------ -----------
Annual Report on Form 10-K Year ended December 31, 2001
Quarterly Report(s) on Form 10-Q Quarter Ended March 31, 2002 (Amended by Quarterly
Report on Form 10-Q/A filed June 21, 2002)
Current Reports on Form 8-K January 7, January 22, January 31, April 25, June
21, and July 3, 2002
PPL Corporation's Registration Statement on April 27, 1995
Form 8-B
We are also incorporating by reference additional documents that PPL
Corporation files with the SEC pursuant to Sections 13(a), 13(c), 14 or 15(d) of
the Exchange Act, between the date of this prospectus and the termination of the
offering of the Securities.
PPL Corporation will provide without charge to each person, including any
beneficial owner, to whom a copy of this prospectus has been delivered, a copy
of any and all of these filings. You may request a copy of these filings by
writing or telephoning us at:
PPL Corporation
Two North Ninth Street
Allentown, Pennsylvania 18101-1179
Attention: Investor Services Department
Telephone: 1-800-345-3085
We have not included or incorporated by reference any separate financial
statements of PPL Capital Funding herein. We do not consider those financial
statements to be material to holders of the Debt Securities or Subordinated Debt
Securities because (1) PPL Capital Funding was formed for the primary purpose of
providing financing for PPL Corporation and its subsidiaries, (2) PPL Capital
Funding does not currently engage in any independent operations and (3) PPL
Capital Funding does not currently plan to engage, in the future, in more than
minimal independent operations. See "PPL Capital Funding." PPL Capital Funding
has received a "no action" letter from the Staff of the SEC stating that the
Staff would not raise any objection if PPL Capital Funding does not file
periodic reports under Sections 13 and 15(d) of the Exchange Act. Accordingly,
we do not expect PPL Capital Funding to file those reports.
We have similarly not included or incorporated by reference any separate
financial statements of the Trust herein. We do not consider those financial
statements to be material to holders of the Preferred Trust Securities because
(1) the Trust is a newly formed special purpose entity and has no operating
history or independent operations, and (2) the Trust is not engaged in and does
not propose to engage in any activity other than holding as trust assets the
Subordinated Debt Securities of PPL Capital Funding and issuing the Preferred
Trust Securities and the Common Trust Securities. We do not expect the Trust to
file periodic reports under Sections 13 and 15(d) of the Exchange Act.
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EXPERTS
The consolidated financial statements of PPL Corporation incorporated in
this prospectus by reference to the Annual Report on Form 10-K of PPL
Corporation for the year ended December 31, 2001, have been so incorporated in
reliance on the report of PricewaterhouseCoopers LLP, independent accountants,
given on the authority of said firm as experts in auditing and accounting.
VALIDITY OF THE SECURITIES AND THE SECURITIES GUARANTEES
Thelen Reid & Priest LLP, New York, New York, counsel to PPL Corporation,
PPL Capital Funding and PPL Capital Funding Trust II, will pass upon the
validity of the Securities and the Securities Guarantees for PPL Corporation,
PPL Capital Funding and the Trust. Simpson Thacher & Bartlett, counsel to PPL
Corporation, will pass upon the validity of the Common Stock and the Preferred
Stock for PPL Corporation. Michael A. McGrail, Esq., Senior Counsel of PPL
Services Corporation, will pass upon the validity of the PPL Corporation
Securities and the Securities Guarantees for PPL Corporation. Sullivan &
Cromwell, New York, New York, will pass upon the validity of the Securities and
the Securities Guarantees for any underwriters or agents. Certain matters of
Delaware law relating to the validity of the Preferred Trust Securities, the
enforceability of the Trust Agreement and the creation of the Trust will be
passed upon by Richards, Layton & Finger, P.A., special Delaware counsel to PPL
Corporation, PPL Capital Funding and the Trust. Thelen Reid & Priest LLP,
Simpson Thacher & Bartlett and Sullivan & Cromwell will rely on the opinion of
Mr. McGrail as to matters involving the law of the Commonwealth of Pennsylvania,
and on the opinion of Richards, Layton & Finger, P.A., as to matters involving
the law of the State of Delaware in connection with the Preferred Trust
Securities. As to matters involving the law of the State of New York, Mr.
McGrail will rely on the opinion of Thelen Reid & Priest LLP.
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