Filed Pursuant to Rule 424(b)(5)
Registration Nos. 333-100721
333-100721-01
333-100721-02
333-100721-03
PROSPECTUS SUPPLEMENT
(To Prospectus dated November 6, 2002)
$195,000,000
(ALABAMA POWER LOGO)
SERIES W FLOATING RATE EXTENDIBLE SENIOR NOTES
---------------------------
This is a public offering by Alabama Power Company of $195,000,000 of
Series W Floating Rate Extendible Senior Notes. The Series W Senior Notes will
mature on April 23, 2006, the initial maturity date, unless the maturity of all
or any portion of the principal amount of the Series W Senior Notes is extended
in accordance with the procedures described herein. In no event will the
maturity of the Series W Senior Notes be extended beyond April 23, 2007, the
final maturity date.
Interest on the Series W Senior Notes is payable quarterly, beginning July
23, 2003. The per annum interest rate on the Series W Senior Notes will be reset
quarterly based on three-month LIBOR plus the applicable spread for that
interest period; however, under certain limited circumstances described in this
Prospectus Supplement, the interest rate on the Series W Senior Notes will be
determined without reference to LIBOR.
The Series W Senior Notes are not redeemable prior to the initial maturity
date or the final maturity date.
See "RISK FACTORS" on page S-3 for a description of certain risks
associated with investing in the Series W Senior Notes.
The Series W Senior Notes should be delivered on or about April 23, 2003
through the book-entry facilities of The Depository Trust Company.
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Per Series W
Senior Note Total
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Public Offering Price....................................... 100.000% $195,000,000
Underwriting Discount....................................... 0.450% $ 877,500
Proceeds to Alabama Power Company........................... 99.550% $194,122,500
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Neither the Securities and Exchange Commission nor any other regulatory
body has approved or disapproved of these securities or passed upon the accuracy
or adequacy of this Prospectus Supplement or the accompanying Prospectus. Any
representation to the contrary is a criminal offense.
---------------------------
LEHMAN BROTHERS
BNY CAPITAL MARKETS, INC.
THE WILLIAMS CAPITAL GROUP, L.P.
April 15, 2003
In making your investment decision, you should rely only on the information
contained or incorporated by reference in this Prospectus Supplement and the
attached Prospectus. We have not authorized anyone to provide you with any other
information. If you receive any unauthorized information, you must not rely on
it.
We are offering to sell the Series W Senior Notes only in places where sales are
permitted.
You should not assume that the information contained or incorporated by
reference in this Prospectus Supplement or the attached Prospectus, including
information incorporated by reference, is accurate as of any date other than its
respective date.
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TABLE OF CONTENTS
PAGE
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PROSPECTUS SUPPLEMENT
Risk Factors S-3
The Company S-3
Selected Financial Information S-3
Use of Proceeds S-4
Description of the Series W Senior
Notes S-4
Material U.S. Federal Tax
Considerations S-9
Experts S-11
Underwriting S-12
PAGE
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PROSPECTUS
About this Prospectus 2
Available Information 2
Incorporation of Certain Documents by
Reference 2
Selected Information 4
Alabama Power Company 4
The Trusts 5
Accounting Treatment of Trusts 6
Use of Proceeds 6
Description of the New Bonds 6
Description of the New Stock 9
Description of the Senior Notes 11
Description of the Junior Subordinated
Notes 15
Description of the Preferred
Securities 20
Description of the Guarantees 21
Relationship Among the Preferred
Securities, the Junior Subordinated
Notes and the Guarantees 23
Plan of Distribution 24
Legal Matters 25
Experts 25
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RISK FACTORS
Investing in the Series W Senior Notes involves risk. Please see the risk
factors in Alabama Power Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 2002, which is incorporated by reference in this
Prospectus Supplement. Before making an investment decision, you should
carefully consider these risks as well as other information contained or
incorporated by reference in this Prospectus Supplement and the accompanying
Prospectus. The risks and uncertainties not presently known to Alabama Power
Company or that Alabama Power Company currently deems immaterial may also impair
its business operations, its financial results and the value of the Series W
Senior Notes.
THE COMPANY
Alabama Power Company (the "Company") is a corporation organized under the
laws of the State of Alabama on November 10, 1927, by the consolidation of a
predecessor Alabama Power Company, Gulf Electric Company and Houston Power
Company. The Company has its principal office at 600 North 18th Street,
Birmingham, Alabama 35291, telephone (205) 257-1000. The Company is a wholly
owned subsidiary of The Southern Company.
The Company is a regulated public utility engaged in the generation,
transmission, distribution and sale of electric energy within an approximately
44,500 square mile service area comprising most of the State of Alabama.
SELECTED FINANCIAL INFORMATION
The following selected financial data for the years ended December 31, 1998
through December 31, 2002 have been derived from the Company's financial
statements and related notes, incorporated by reference in this Prospectus
Supplement. The information set forth below is qualified in its entirety by
reference to and, therefore, should be read together with management's
discussion and analysis of results of operations and financial information, the
financial statements and related notes and other financial information
incorporated by reference in this Prospectus Supplement.
YEAR ENDED DECEMBER 31,
------------------------------------------
1998 1999 2000 2001 2002
------ ------ ------ ------ ------
(MILLIONS, EXCEPT RATIOS)
Operating Revenues.................................... $3,386 $3,385 $3,667 $3,586 $3,711
Earnings Before Income Taxes.......................... 610 658 698 650 768
Net Income After Dividends on Preferred Stock......... 377 400 420 387 461
Ratio of Earnings to Fixed Charges(1)................. 3.12 3.59 3.46 3.31 3.98
CAPITALIZATION
AS OF DECEMBER 31, 2002
-------------------------------
ACTUAL AS ADJUSTED(2)
------ ----------------------
(MILLIONS, EXCEPT PERCENTAGES)
Common Stock Equity......................................... $3,378 $3,378 46.1%
Cumulative Preferred Stock.................................. 248 373 5.1
Company Obligated Mandatorily Redeemable Preferred
Securities of Subsidiary Trusts Holding Company Junior
Subordinated Notes........................................ 300 300 4.1
Senior Notes................................................ 2,325 2,750 37.5
Other Long-Term Debt........................................ 526 526 7.2
------ ------ -----
Total, excluding amounts due within one year of $1,118
million................................................ $6,777 $7,327 100.0%
====== ====== =====
---------------
(1) This ratio is computed as follows: (i) "Earnings" have been calculated by
adding to "Earnings Before Income Taxes" "Interest expense, net of amounts
capitalized," "Distributions on preferred securities of subsidiary" and the
debt portion of allowance for funds used during construction; and (ii)
"Fixed Charges" consist of "Interest expense, net of amounts capitalized,"
"Distributions on preferred securities of subsidiary" and the debt portion
of allowance for funds used during construction.
S-3
(2) Reflects: (i) the issuance in February 2003 of 1,250 shares ($125,000,000
aggregate stated capital) of Flexible Money Market Class A Preferred Stock
(Series 2003A), Cumulative, Par Value $1 Per Share (Stated Capital $100,000
Per Share); (ii) the issuance in February 2003 of $250,000,000 aggregate
principal amount of Series T 5.70% Senior Notes due February 15, 2033; (iii)
the issuance in February 2003 of $170,000,000 aggregate principal amount of
Series U 2.65% Senior Notes due February 15, 2006; (iv) the redemption in
March 2003 of $200,000,000 aggregate principal amount of Series B 7% Senior
Quarterly Interest Notes due December 31, 2047; (v) the issuance in March
2003 of $200,000,000 aggregate principal amount of Series V 5.60% Senior
Notes due March 15, 2033; (vi) the proposed redemption in April 2003 of
$190,000,000 aggregate principal amount of Series C 7% Senior Notes due
March 31, 2048; and (vii) the issuance of the Series W Senior Notes.
USE OF PROCEEDS
The proceeds from the sale of the Series W Senior Notes will be used by the
Company for general corporate purposes, including the Company's continuous
construction program.
DESCRIPTION OF THE SERIES W SENIOR NOTES
Set forth below is a description of the specific terms of the Series W
Floating Rate Extendible Senior Notes (the "Series W Senior Notes"). This
description supplements, and should be read together with, the description of
the general terms and provisions of the senior notes set forth in the
accompanying Prospectus under the caption "Description of the Senior Notes." The
following description does not purport to be complete and is subject to, and is
qualified in its entirety by reference to, the description in the accompanying
Prospectus and the Senior Note Indenture (the "Senior Note Indenture") dated as
of December 1, 1997, as supplemented, between the Company and JPMorgan Chase
Bank (formerly known as The Chase Manhattan Bank), as trustee (the "Senior Note
Indenture Trustee").
GENERAL
The Series W Senior Notes will be issued as a series of senior notes under
the Senior Note Indenture. The Series W Senior Notes will be initially issued in
the aggregate principal amount of $195,000,000. The Company may, without the
consent of the holders of the Series W Senior Notes, issue additional notes
having the same ranking and interest rate, maturity and other terms (except for
the issue price and issue date) as the Series W Senior Notes. Any additional
notes having such similar terms, together with the Series W Senior Notes, will
constitute a single series of senior notes under the Senior Note Indenture.
The Series W Senior Notes are not subject to any sinking fund provision.
The Series W Senior Notes are available for purchase in denominations of $1,000
and any integral multiple thereof.
MATURITY AND EXTENSION OF MATURITY
The initial maturity date for the Series W Senior Notes is April 23, 2006
(the "Initial Maturity Date"). The maturity of all or any portion of the
principal amount of the Series W Senior Notes may be extended in accordance with
the procedures set forth below. In no event will the maturity of the Series W
Senior Notes be extended beyond the final maturity date of April 23, 2007 (the
"Final Maturity Date"). If the Initial Maturity Date or the Final Maturity Date
is not a Business Day (as defined herein), the Initial Maturity Date or the
Final Maturity Date, as the case may be, will be the next succeeding Business
Day (and without any interest or other payment in respect of such delay), except
that if such Business Day is in the next calendar month, such Initial Maturity
Date or Final Maturity Date, as the case may be, shall be the immediately
preceding Business Day, in each case with the same force and effect as if made
on such date.
A holder of the Series W Senior Notes may elect to extend the maturity of
all or any portion of the principal amount of its Series W Senior Notes to the
Final Maturity Date with such extension being effective on April 23, 2005 (the
"Extension Date").
S-4
To extend the maturity of the Series W Senior Notes, a holder must deliver
a notice of election during the notice period beginning on the thirty-fifth
calendar day prior to the Extension Date and ending on the fifth calendar day
prior to the Extension Date (the "Notice Period"). A notice of election must be
delivered to the Senior Note Indenture Trustee through the normal clearing
system channels described in more detail below. Upon delivery to the Senior Note
Indenture Trustee of a notice of election to extend the maturity of such
holder's Series W Senior Notes or any portion thereof, that election will be
irrevocable. A holder may elect to extend the maturity of its Series W Senior
Notes having a principal amount of $1,000 or any multiple of $1,000 in excess
thereof.
If, on the Extension Date, a holder has not made an election to extend the
maturity of any portion of the principal amount of its Series W Senior Notes,
the principal amount of the Series W Senior Notes for which such holder has
failed to make such an election will become due and payable on the Initial
Maturity Date. The principal amount of the Series W Senior Notes for which such
election is not exercised will be represented by a note issued as of the
Extension Date. The note so issued will have the same terms as the Series W
Senior Notes, except that it will not be extendible, will have a different
interest rate, will have a separate CUSIP number and its maturity date will be
the Initial Maturity Date. The failure to elect to extend the maturity of any
portion of the Series W Senior Notes will be irrevocable and will be binding
upon any subsequent holder of such Series W Senior Notes.
The Series W Senior Notes will be issued in registered global form and will
remain on deposit with The Depository Trust Company ("DTC"). Therefore, a holder
must exercise the option to extend the maturity through DTC. To ensure that DTC
will receive timely notice of a holder's election to extend the maturity of all
or a portion of the Series W Senior Notes, so that it can deliver notice of the
election to the Senior Note Indenture Trustee prior to the close of business on
the last Business Day in the Notice Period, a holder must instruct its Direct
Participant (as defined herein) or Indirect Participant (as defined herein)
through which it holds an interest in the Series W Senior Notes to notify DTC of
the holder's election to extend the maturity of the Series W Senior Notes in
accordance with the then applicable operating procedures of DTC.
DTC MUST RECEIVE ANY NOTICE OF ELECTION FROM ITS PARTICIPANTS NO LATER THAN
12:00 NOON (NEW YORK CITY TIME) ON THE LAST BUSINESS DAY IN THE NOTICE PERIOD.
DIFFERENT FIRMS HAVE DIFFERENT DEADLINES FOR ACCEPTING INSTRUCTIONS FOR THEIR
CUSTOMERS. A HOLDER SHOULD CONSULT THE DIRECT OR INDIRECT PARTICIPANT THROUGH
WHICH IT HOLDS AN INTEREST IN THE SERIES W SENIOR NOTES TO ASCERTAIN THE
DEADLINE FOR ENSURING THAT TIMELY NOTICE WILL BE DELIVERED TO DTC. IF A HOLDER
HOLDS ITS INTEREST IN THE SERIES W SENIOR NOTES THROUGH EUROCLEAR OR CLEARSTREAM
LUXEMBOURG, ADDITIONAL TIME MAY BE NEEDED TO GIVE NOTICE.
INTEREST
Each Series W Senior Note shall bear interest from the date of original
issuance, payable quarterly in arrears on January 23, April 23, July 23 and
October 23, as applicable, to the person in whose name such Series W Senior Note
is registered at the close of business on the fifteenth calendar day prior to
such payment date. The initial interest payment date for the Series W Senior
Notes is July 23, 2003. The amount of interest payable will be computed on the
basis of the actual number of days elapsed over a 360-day year. If any interest
payment date for the Series W Senior Notes would otherwise be a day that is not
a Business Day, the interest payment date will be the next succeeding Business
Day (except that if any such interest payment date falls on a day that is the
final maturity of a Series W Senior Note (whether on the Initial Maturity Date
or the Final Maturity Date) there shall be no interest or other payment in
respect of such delay), except that if such Business Day is in the next calendar
month, such interest payment date shall be the immediately preceding Business
Day, in each case with the same force and effect as if made on such date.
The Series W Senior Notes will bear interest for each quarterly Interest
Period at a per annum rate determined by the Calculation Agent, subject to the
maximum interest rate permitted by New York or other applicable state law, as
such law may be modified by United States law of general application. The
interest
S-5
rate applicable during each quarterly Interest Period will be equal to LIBOR on
the Interest Determination Date for such Interest Period plus the Applicable
Spread; provided, however, that in certain circumstances described below, the
interest rate will be determined without reference to LIBOR. The Applicable
Spread will be as follows:
- from the date of original issuance to but excluding the Extension Date,
the Applicable Spread on the Series W Senior Notes shall be 0.20%;
- from the Extension Date to but excluding the Initial Maturity Date, the
Applicable Spread on the Series W Senior Notes (or portions thereof)
which maturity has not been extended shall be 0.05%;
- from the Extension Date to but excluding the Final Maturity Date, the
Applicable Spread on the Series W Senior Notes (or portions thereof)
which maturity has been extended shall be 0.25%.
Promptly upon determination of the applicable interest rate, the
Calculation Agent will notify the Company and the Senior Note Indenture Trustee,
if the Senior Note Indenture Trustee is not then serving as the Calculation
Agent, of the interest rate for the new Interest Period. The interest rate
determined by the Calculation Agent, absent manifest error, shall be binding and
conclusive upon the beneficial owners and holders of the Series W Senior Notes,
the Company and the Senior Note Indenture Trustee.
If the following circumstances exist on any Interest Determination Date,
the Calculation Agent shall determine the interest rate for the Series W Senior
Notes as follows:
(1) In the event no Reported Rate appears on Telerate Page 3750 as of
approximately 11:00 a.m., London time, on an Interest Determination Date,
the Calculation Agent shall request the principal London offices of each of
four major banks in the London interbank market selected by the Calculation
Agent (after consultation with the Company) to provide a quotation of the
rate (the "Rate Quotation") at which three-month deposits in amounts of not
less than $1,000,000 are offered by it to prime banks in the London
interbank market, as of approximately 11:00 a.m., London time, on such
Interest Determination Date, that is representative of single transactions
at such time (the "Representative Amounts"). If at least two Rate
Quotations are provided, the interest rate will be the arithmetic mean of
the Rate Quotations obtained by the Calculation Agent, plus the Applicable
Spread.
(2) In the event no Reported Rate appears on Telerate Page 3750 as of
approximately 11:00 a.m., London time, on an Interest Determination Date
and there are fewer than two Rate Quotations, the interest rate will be the
arithmetic mean of the rates quoted at approximately 11:00 a.m., New York
City time, on such Interest Determination Date, by three major banks in New
York City selected by the Calculation Agent (after consultation with the
Company), for loans in Representative Amounts in U.S. dollars to leading
European banks, having an index maturity of three months for a period
commencing on the second London Business Day immediately following such
Interest Determination Date, plus the Applicable Spread; provided, however,
that if fewer than three banks selected by the Calculation Agent are
quoting such rates, the interest rate for the applicable Interest Period
will be the same as the interest rate in effect for the immediately
preceding Interest Period.
Upon the request of a holder of the Series W Senior Notes, the Calculation
Agent will provide to such holder the interest rate in effect on the date of
such request and, if determined, the interest rate for the next Interest Period.
The following definitions apply to the Series W Senior Notes:
"Business Day" means a day other than (i) a Saturday or Sunday, (ii) a day
on which banks in New York, New York are authorized or obligated by law or
executive order to remain closed, or (iii) a day on which the Senior Note
Indenture Trustee's corporate trust office is closed for business.
"Calculation Agent" means JPMorgan Chase Bank, or its successor appointed
by the Company, acting as calculation agent.
"Interest Determination Date" means the second London Business Day
immediately preceding the first day of the relevant Interest Period.
S-6
"Interest Period" means the period commencing on an interest payment date
for the Series W Senior Notes (or, with respect to the initial Interest Period
only, commencing on the issue date for the Series W Senior Notes) and ending on
the day before the next succeeding interest payment date for the Series W Senior
Notes.
"LIBOR" for any Interest Determination Date will be the offered rate for
deposits in U.S. dollars having an index maturity of three months for a period
commencing on the second London Business Day immediately following the Interest
Determination Date in amounts of not less than $1,000,000, as such rate appears
on Telerate Page 3750 or a successor reporter of such rates selected by the
Calculation Agent and acceptable to the Company, at approximately 11:00 a.m.,
London time, on the Interest Determination Date (the "Reported Rate").
"London Business Day" means a day that is a Business Day and a day on which
dealings in deposits in U.S. dollars are transacted, or with respect to any
future date are expected to be transacted, in the London interbank market.
"Telerate Page 3750" means the display designated on page 3750 on Moneyline
Telerate, Inc. (or such other page as may replace the 3750 page on that service
or such other service as may be nominated by the British Bankers' Association
for the purpose of displaying London interbank offered rates for U.S. dollar
deposits).
RANKING
The Series W Senior Notes will be direct, unsecured and unsubordinated
obligations of the Company and will rank equally with all other unsecured and
unsubordinated obligations of the Company. The Series W Senior Notes will be
effectively subordinated to all secured debt of the Company, including its first
mortgage bonds, aggregating approximately $302,000,000 outstanding at December
31, 2002. The Senior Note Indenture contains no restrictions on the amount of
additional indebtedness that may be incurred by the Company.
REDEMPTION
The Series W Senior Notes will not be redeemable by the Company prior to
the Initial Maturity Date or the Final Maturity Date.
BOOK-ENTRY ONLY ISSUANCE -- THE DEPOSITORY TRUST COMPANY
DTC will act as the initial securities depository for the Series W Senior
Notes. The Series W Senior Notes will be issued only as fully registered
securities registered in the name of Cede & Co., DTC's nominee, or such other
name as may be requested by an authorized representative of DTC. One or more
fully registered global Series W Senior Notes certificates will be issued,
representing in the aggregate the total principal amount of the Series W Senior
Notes, and will be deposited with DTC.
DTC is a limited-purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Securities Exchange
Act of 1934, as amended. DTC holds and provides asset servicing for over 2
million issues of U.S. and non-U.S. equity issues, corporate and municipal debt
issues and money market instruments from over 85 countries that DTC's
participants ("Direct Participants") deposit with DTC. DTC also facilitates the
post-trade settlement among Direct Participants of sales and other securities
transactions in deposited securities, through electronic computerized book-entry
transfers and pledges between Direct Participants' accounts. This eliminates the
need for physical movement of securities certificates. Direct Participants
include both U.S. and non-U.S. securities brokers and dealers, banks, trust
companies, clearing corporations and certain other organizations. DTC is a
wholly-owned subsidiary of The Depository Trust & Clearing Corporation ("DTCC").
DTCC, in turn, is owned by a number of Direct Participants of DTC and members of
the National Securities Clearing
S-7
Corporation, Government Securities Clearing Corporation, MBS Clearing
Corporation and Emerging Markets Clearing Corporation (NSCC, GSCC, MBSCC and
EMCC, also subsidiaries of DTCC), as well as by the New York Stock Exchange,
Inc., the American Stock Exchange LLC and the National Association of Securities
Dealers, Inc. Access to the DTC system is also available to others such as both
U.S. and non-U.S. securities brokers and dealers, banks, trust companies and
clearing corporations that clear through or maintain a custodial relationship
with a Direct Participant, either directly or indirectly ("Indirect
Participants"). The DTC rules applicable to its Direct and Indirect Participants
are on file with the Securities and Exchange Commission. More information about
DTC can be found at www.dtcc.com.
Purchases of Series W Senior Notes under the DTC system must be made by or
through Direct Participants, which will receive a credit for the Series W Senior
Notes on DTC's records. The ownership interest of each actual purchaser of
Series W Senior Notes ("Beneficial Owner") is in turn to be recorded on the
Direct and Indirect Participants' records. Beneficial Owners will not receive
written confirmation from DTC of their purchases, but Beneficial Owners are
expected to receive written confirmations providing details of the transactions,
as well as periodic statements of their holdings, from the Direct or Indirect
Participants through which the Beneficial Owners purchased Series W Senior
Notes. Transfers of ownership interests in the Series W Senior Notes are to be
accomplished by entries made on the books of Direct and Indirect Participants
acting on behalf of Beneficial Owners. Beneficial Owners will not receive
certificates representing their ownership interests in Series W Senior Notes,
except in the event that use of the book-entry system for the Series W Senior
Notes is discontinued.
To facilitate subsequent transfers, all Series W Senior Notes deposited by
Direct Participants with DTC are registered in the name of DTC's partnership
nominee, Cede & Co., or such other name as may be requested by an authorized
representative of DTC. The deposit of Series W Senior Notes with DTC and their
registration in the name of Cede & Co. or such other DTC nominee do not effect
any changes in beneficial ownership. DTC has no knowledge of the actual
Beneficial Owners of the Series W Senior Notes. DTC's records reflect only the
identity of the Direct Participants to whose accounts such Series W Senior Notes
are credited, which may or may not be the Beneficial Owners. The Direct and
Indirect Participants will remain responsible for keeping account of their
holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants, and by Direct
Participants and Indirect Participants to Beneficial Owners will be governed by
arrangements among them, subject to any statutory or regulatory requirements as
may be in effect from time to time.
Although voting with respect to the Series W Senior Notes is limited, in
those cases where a vote is required, neither DTC nor Cede & Co. (nor any other
DTC nominee) will consent or vote with respect to Series W Senior Notes. Under
its usual procedures, DTC mails an Omnibus Proxy to the Company as soon as
possible after the record date. The Omnibus Proxy assigns Cede & Co.'s
consenting or voting rights to those Direct Participants to whose accounts the
Series W Senior Notes are credited on the record date (identified in a listing
attached to the Omnibus Proxy).
Payments on the Series W Senior Notes will be made to Cede & Co., or such
other nominee as may be requested by an authorized representative of DTC. DTC's
practice is to credit Direct Participants' accounts upon DTC's receipt of funds
and corresponding detail information from the Company or the Senior Note
Indenture Trustee on the relevant payment date in accordance with their
respective holdings shown on DTC's records. Payments by Direct or Indirect
Participants to Beneficial Owners will be governed by standing instructions and
customary practices, as is the case with securities held for the account of
customers registered in "street name," and will be the responsibility of such
Direct or Indirect Participant and not of DTC or the Company, subject to any
statutory or regulatory requirements as may be in effect from time to time.
Payment to Cede & Co. (or such other nominee as may be requested by an
authorized representative of DTC) is the responsibility of the Company,
disbursement of such payments to Direct Participants is the responsibility of
DTC, and disbursement of such payments to the Beneficial Owners is the
responsibility of Direct and Indirect Participants.
S-8
Except as provided herein, a Beneficial Owner of a global Series W Senior
Note will not be entitled to receive physical delivery of Series W Senior Notes.
Accordingly, each Beneficial Owner must rely on the procedures of DTC to
exercise any rights under the Series W Senior Notes. The laws of some
jurisdictions require that certain purchasers of securities take physical
delivery of securities in definitive form. Such laws may impair the ability to
transfer beneficial interests in a global Series W Senior Note.
DTC may discontinue providing its services as securities depository with
respect to the Series W Senior Notes at any time by giving reasonable notice to
the Company. Under such circumstances, in the event that a successor securities
depository is not obtained, Series W Senior Notes certificates will be printed
and delivered to the holders of record. Additionally, the Company may decide to
discontinue use of the system of book-entry transfers through DTC (or a
successor depository) with respect to the Series W Senior Notes. In that event,
certificates for the Series W Senior Notes will be printed and delivered to the
holders of record.
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that the Company believes to be reliable, but the
Company takes no responsibility for the accuracy thereof. The Company has no
responsibility for the performance by DTC or its Direct and Indirect
Participants of their respective obligations as described herein or under the
rules and procedures governing their respective operations.
MATERIAL U.S. FEDERAL TAX CONSIDERATIONS
The following is a general discussion of the material U.S. federal tax
consequences of the acquisition, ownership and disposition of the Series W
Senior Notes. This discussion is based on current provisions of the Internal
Revenue Code of 1986, as amended (the "Code"), Treasury regulations thereunder,
and administrative and judicial interpretations thereof, all as in effect on the
date hereof and all of which are subject to change, possibly on a retroactive
basis.
This discussion applies only to initial holders that purchase the Series W
Senior Notes upon original issuance at the initial offering price and that hold
the Series W Senior Notes as capital assets. This discussion is for general
information only and does not address all of the federal income tax consequences
that may be important to particular holders in light of their individual
circumstances. As used herein, the term "U.S. Holder" means a beneficial owner
of the Series W Senior Notes that is, for federal income tax purposes, a citizen
or resident of the United States, a corporation organized under the laws of the
United States or any State thereof or an estate or trust that is a United States
person as defined in the Code. As used herein, the term "Non-U.S. Holder" means
a beneficial owner of the Series W Senior Notes that is a nonresident alien
individual, a foreign corporation, or a nonresident alien fiduciary of a foreign
estate or trust. This discussion does not specifically address the tax
consequences to Non-U.S. Holders that are or would be subject to federal income
tax on a net basis on income realized with respect to the Series W Senior Notes
because such income is effectively connected with the conduct of a trade or
business within the United States. In addition, this discussion does not include
any description of the tax laws of any state, local or foreign government that
may be applicable to a particular holder. Prospective purchasers are urged to
consult their own tax advisors as to the particular tax consequences to them of
the acquisition, ownership and disposition of the Series W Senior Notes under
federal, state, local and foreign tax laws, and the possible effects of changes
in such tax laws.
FEDERAL INCOME TAXATION OF U.S. HOLDERS
General
In general, interest on the Series W Senior Notes will be taxable to a U.S.
Holder as ordinary income at the time it accrues or is actually or
constructively received in accordance with the U.S. Holder's method of
accounting for federal income tax purposes. Upon the sale, exchange, redemption,
retirement at maturity or other taxable disposition of the Series W Senior
Notes, a U.S. Holder generally will recognize taxable gain or loss equal to the
difference between (1) the amount realized on such disposition (except to the
extent attributable to accrued interest which will be taxable as ordinary
income) and (2) such U.S. Holder's adjusted tax basis in the Series W Senior
Notes. Such gain or loss generally will be capital gain or loss, and will be
long-
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term capital gain or loss if the Series W Senior Notes were held for more than
one year on the date of disposition.
The Company intends to treat the Final Maturity Date as the maturity date
of the Series W Senior Notes for tax purposes. If the Initial Maturity Date were
the maturity date of the Series W Senior Notes for tax purposes, an election by
a holder to extend the maturity of the Series W Senior Notes to the Final
Maturity Date should not constitute a "significant modification" under Treasury
Regulations governing modifications of debt instruments. Accordingly, even if
the election is viewed as an election to extend the maturity of the Series W
Senior Notes that are deemed to mature on the Initial Maturity Date, rather than
an election to redeem early the Series W Senior Notes that mature on the Final
Maturity Date, the election should not be regarded as resulting in a taxable
exchange.
Backup Withholding and Information Reporting
U.S. Holders will generally be required to supply a social security number
or other taxpayer identification number along with certain certifications under
penalties of perjury in order to avoid backup withholding with respect to
interest paid on the Series W Senior Notes and the proceeds of a sale of the
Series W Senior Notes. In addition, such payments will generally be subject to
information reporting.
FEDERAL TAXATION OF NON-U.S. HOLDERS
General
Payments of interest on the Series W Senior Notes to a Non-U.S. Holder will
not be subject to federal income or withholding tax, provided that (a) the
Non-U.S. Holder does not actually or constructively own 10% or more of the total
combined voting power of all classes of the Company's stock entitled to vote,
(b) the Non-U.S. Holder is not a "controlled foreign corporation" that is
related to the Company, through stock ownership, (c) the Non-U.S. Holder is not
a bank receiving interest on an extension of credit made pursuant to a loan
agreement entered into in the ordinary course of its trade or business, and (d)
the Non-U.S. Holder certifies under penalties of perjury on an Internal Revenue
Service ("IRS") form that it is not a "United States person," as defined in the
Code, and provides the name and address of the beneficial owner. In the case of
the Series W Senior Notes held by a foreign partnership, certifications must
also be provided by the partners rather than the partnership. If interest paid
on the Series W Senior Notes is not eligible for the exemption from withholding
described earlier in this paragraph, a Non-U.S. Holder may be entitled to the
benefits of an income tax treaty under which interest on the Series W Senior
Notes would be subject to a reduced rate of or exemption from withholding tax,
provided a properly executed IRS form is furnished to the withholding agent.
A Non-U.S. Holder generally will not be subject to U.S. income or
withholding tax, except as described below under "Backup Withholding and
Information Reporting," with respect to gain realized on the sale, exchange,
redemption, retirement at maturity or other disposition of the Series W Senior
Notes unless the Non-U.S. Holder is an individual who is present in the United
States for a period or periods aggregating 183 or more days in the taxable year
of disposition and certain other conditions are met.
The Series W Senior Notes held at the time of death by an individual who is
not a citizen or resident of the United States will not be included in such
holder's gross estate for U.S. federal estate tax purposes, provided that the
individual does not actually or constructively own 10% or more of the total
combined voting power of all classes of the Company's stock entitled to vote and
income on the Series W Senior Notes is not effectively connected with the
conduct of a trade or business in the United States.
Backup Withholding and Information Reporting
Backup withholding will not apply to payments made by the Company or a
paying agent to a Non-U.S. Holder if the certification described above is
received. Backup withholding generally will not apply to payments on the Series
W Senior Notes made to a Non-U.S. Holder by or through the foreign office of a
custodian, nominee or other agent of such Non-U.S. Holder, or if a foreign
office of a broker pays the proceeds
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of the sale of the Series W Senior Notes. Information reporting will apply,
however, to payments on the Series W Senior Notes by the Company or its paying
agent and to payments through a foreign office of a custodian, nominee, agent or
broker that is, for U.S. federal income tax purposes, a United States person, a
"controlled foreign corporation", a foreign partnership that at any time during
its taxable year is owned by one or more United States persons who, in the
aggregate, hold more than 50% of the income or capital interest in the
partnership, or a foreign person that has certain connections with the United
States, unless such custodian, nominee, agent or broker has documentary evidence
in its records that the holder is not a United States person and certain other
conditions are met, or the holder otherwise establishes an exemption. Payment by
a U.S. office of a custodian, nominee, agent or broker will be subject to both
backup withholding and information reporting unless the holder certifies under
penalties of perjury that it is not a United States person and the payor does
not have actual knowledge to the contrary or the holder otherwise establishes an
exemption. A Non-U.S. Holder may obtain a refund or a credit against such
Non-U.S. Holder's federal income tax liability of any amounts withheld under the
backup withholding rules, provided the required information is furnished to the
IRS.
EXPERTS
The financial statements and the related financial statement schedule as of
and for the year ended December 31, 2002 incorporated in this Prospectus
Supplement by reference from the Company's Annual Report on Form 10-K for the
year-ended December 31, 2002 have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their report, which is incorporated in this
Prospectus Supplement by reference, and have been so incorporated in reliance
upon the report of such firm given upon their authority as experts in accounting
and auditing.
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UNDERWRITING
Subject to the terms and conditions of an underwriting agreement (the
"Underwriting Agreement"), the Company has agreed to sell to the underwriters
named below (the "Underwriters") and each of the Underwriters has severally
agreed to purchase from the Company the principal amount of the Series W Senior
Notes set forth opposite its name below:
PRINCIPAL AMOUNT OF
NAME SERIES W SENIOR NOTES
---- ---------------------
Lehman Brothers Inc. ....................................... $136,500,000
BNY Capital Markets, Inc. .................................. 39,000,000
The Williams Capital Group, L.P. ........................... 19,500,000
------------
Total............................................. $195,000,000
============
In the Underwriting Agreement, the Underwriters have agreed, subject to the
terms and conditions set forth therein, to purchase all of the Series W Senior
Notes offered hereby if any of the Series W Senior Notes are purchased.
The Underwriters propose to offer the Series W Senior Notes directly to the
public at the initial public offering price set forth on the cover page of this
Prospectus Supplement, and may offer them to certain securities dealers at such
price less a concession not in excess of 0.250% of the principal amount per
Series W Senior Note. The Underwriters may allow, and such dealers may reallow,
a concession not in excess of 0.200% of the principal amount per Series W Senior
Note to certain brokers and dealers. After the Series W Senior Notes are
released for sale to the public, the offering price and other selling terms may
from time to time be varied by the Underwriters.
Prior to this offering, there has been no public market for the Series W
Senior Notes. The Underwriters have advised the Company that they intend to make
a market in the Series W Senior Notes. The Underwriters will have no obligation
to make a market in the Series W Senior Notes, however, and may cease market
making activities, if commenced, at any time.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as amended.
The Company's expenses associated with the offer and sale of the Series W
Senior Notes are estimated to be $275,000.
The Company has agreed with the Underwriters, that during the period of 15
days from the date of the Underwriting Agreement, not to sell, offer to sell,
grant any option for the sale of, or otherwise dispose of any Series W Senior
Notes, any security convertible into, exchangeable into or exercisable for the
Series W Senior Notes or any debt securities substantially similar to the Series
W Senior Notes (except for the Series W Senior Notes issued pursuant to the
Underwriting Agreement), without the prior written consent of Lehman Brothers
Inc. ("Lehman"). This agreement does not apply to issuances of commercial paper
or other debt securities with scheduled maturities of less than one year.
In order to facilitate the offering of the Series W Senior Notes, Lehman
may engage in transactions that stabilize, maintain or otherwise affect the
price of the Series W Senior Notes. Specifically, Lehman may over-allot in
connection with the offering, creating short positions in the Series W Senior
Notes for its own account. In addition, to cover over-allotments or to stabilize
the price of the Series W Senior Notes, Lehman may bid for, and purchase, Series
W Senior Notes in the open market. Lehman may reclaim selling concessions
allowed to an underwriter or dealer for distributing Series W Senior Notes in
the offering, if Lehman repurchases previously distributed Series W Senior Notes
in transactions to cover short positions, in stabilization transactions or
otherwise. Any of these activities may stabilize or maintain the market price of
the Series W Senior Notes above independent market levels. Lehman is not
required to engage in these activities, and may end any of these activities at
any time.
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In general, purchases of a security for the purpose of stabilization or to
reduce a short position could cause the price of the security to be higher than
it might be in the absence of such purchases. The imposition of a penalty bid
might also have an effect on the price of a security to the extent that it were
to discourage resales of the security.
Neither the Company nor the Underwriters make any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of the Series W Senior Notes. In addition,
neither the Company nor the Underwriters make any representation that the
Underwriters will engage in such transactions or that such transactions once
commenced will not be discontinued without notice.
Lehman will make the Series W Senior Notes available for distribution on
the internet through a proprietary web site and/or a third-party system operated
by Market Axess Inc., an internet-based communications technology provider.
Market Axess Inc. is providing the system as a conduit for communications
between Lehman and its customers and is not a party to this offering. Lehman
does not believe that Market Axess Inc. will function as an underwriter or agent
of this offering, nor do they believe that Market Axess Inc. will act as a
broker for any customer of Lehman. Market Axess Inc. is a registered
broker-dealer and will receive compensation from Lehman based on transactions
that Lehman transacts through the system. Lehman will make the Series W Senior
Notes available to its customers through internet distributions, whether made
through a proprietary or third-party system, on the same terms as distributions
made through other channels.
The Underwriters engage in transactions with, and, from time to time, have
performed investment banking and/or commercial banking services for, the Company
and its affiliates in the ordinary course of business and may do so in the
future.
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$195,000,000
(ALABAMA POWER LOGO)
SERIES W FLOATING RATE EXTENDIBLE SENIOR NOTES
---------------------------
PROSPECTUS SUPPLEMENT
April 15, 2003
---------------------------
LEHMAN BROTHERS
BNY CAPITAL MARKETS, INC.
THE WILLIAMS CAPITAL GROUP, L.P.