e424b5
Filed
pursuant to Rule 424(b)(5)
Registration Statement No. 333-140026
PROSPECTUS SUPPLEMENT
(To Prospectus dated January 17, 2007)
ITC Holdings Corp.
Common Stock
We have entered into a sales agency financing agreement pursuant
to which we may offer and sell up to $150,000,000 aggregate
amount of shares of our common stock from time to time through
BNY Mellon Capital Markets, LLC, which we refer to as BNYMCM, as
our agent.
These shares will be offered at market prices prevailing at the
time of sale. We will pay BNYMCM a commission equal to 1.0% of
the sales price of all shares sold through it as our agent.
Our common stock is listed on the New York Stock Exchange under
the symbol ITC. The last reported sale price of our
common stock on the New York Stock Exchange on June 26,
2008 was $51.91 per share.
Investing in our common stock involves risks. See Risk
Factors in the accompanying prospectus, as well as
Part I, Item 1A Risk Factors
in our annual report on
Form 10-K
for the year ended December 31, 2007 and as updated in our
quarterly report on
Form 10-Q
for the quarter ended March 31, 2008 and in any other
reports we file pursuant to the Securities Exchange Act of 1934,
as amended, which we refer to as the Exchange Act, that we
incorporate by reference in this prospectus supplement and the
accompanying prospectus.
Neither the Securities and Exchange Commission nor any state
securities commission has 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.
BNY Mellon Capital Markets,
LLC
The date of this prospectus supplement is June 27, 2008
ITC
Holdings Focuses Exclusively on Transmission of
Electricity
ITC
Holdings Business Units
The map above shows the service territories of ITCTransmission,
METC and ITC Midwest, and the regions in which ITC Great Plains
and ITC Panhandle plan to pursue opportunities for transmission
investments.
TABLE OF
CONTENTS
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Prospectus Supplement
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S-2
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S-3
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S-4
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S-10
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S-13
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S-13
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S-13
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S-13
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Prospectus
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ABOUT
THIS PROSPECTUS SUPPLEMENT
This document is in two parts. The first part is this prospectus
supplement, which describes the terms of the offering of our
common stock and also adds to and updates information contained
in the accompanying prospectus and the documents incorporated by
reference into this prospectus supplement or the accompanying
prospectus. The second part is the accompanying prospectus,
which provides more general information. Generally, when we
refer only to the prospectus, we are referring to both parts
combined, and when we refer to the accompanying prospectus, we
are referring to the base prospectus.
This prospectus supplement and the accompanying prospectus are
part of a registration statement on
Form S-3
that we filed with the Securities and Exchange Commission, which
we refer to as the SEC, which became effective on
January 17, 2007. To the extent there is a conflict between
the information contained in the prospectus supplement, on the
one hand, and the information contained in the accompanying
prospectus or any document incorporated by reference as of the
date of this prospectus supplement, on the other hand, the
information in this prospectus supplement shall control.
You should rely only on the information contained or
incorporated by reference in this prospectus supplement and the
accompanying prospectus or any free writing prospectus prepared
by us. Neither we nor BNYMCM has authorized any other person to
provide you with different or additional information. If anyone
provides you with different or additional information, you
should not rely on it. Neither we nor BNYMCM is making an offer
to sell our common stock in any jurisdiction where the offer or
sale is not permitted. You should assume that the information
contained or incorporated in this prospectus supplement and the
accompanying prospectus is accurate only as of the date of the
applicable document, regardless of the time of delivery of this
prospectus supplement or of any sale of our common stock. Our
business, financial condition, results of operations and
prospects may have changed since that date.
Statements contained in this prospectus regarding the contents
of any contract or other document are not complete, and in each
instance we refer you to the copy of the contract or document
filed or incorporated by reference as an exhibit to the
registration statement of which the accompanying prospectus
constitutes a part or to a document incorporated by reference or
deemed to be incorporated by reference in the registration
statement, each of those statements being qualified in all
respects by this reference.
This prospectus supplement is not complete without, and may not
be delivered or used except in connection with, the accompanying
prospectus. Before making an investment decision, you should
read this entire prospectus supplement and the accompanying
prospectus, as well as the information contained or incorporated
by reference herein and therein.
S-2
THE
COMPANY
We invest in the electricity transmission grid to improve
electric reliability, improve access to markets and lower the
overall cost of delivered energy. We are the largest independent
electricity transmission company in the country. Through our
subsidiaries, International Transmission Company, which we refer
to as ITCTransmission, Michigan Electric Transmission Company,
LLC, which we refer to as METC, and ITC Midwest LLC, which we
refer to as ITC Midwest, we operate regulated, high-voltage
transmission systems in Michigans lower peninsula and
portions of Iowa, Minnesota, Illinois and Missouri serving a
combined peak load in excess of 25,000 MW. We are also
focused on other areas where significant electric transmission
system improvements are needed through our subsidiaries, ITC
Grid Development, ITC Great Plains and ITC Panhandle
Transmission. We, our, us
and the Company are references to ITC Holdings
Corp., together with all of its subsidiaries.
ITC Holdings Corp. is incorporated under the laws of the state
of Michigan. Our principal executive offices are located at
27175 Energy Way, Novi, Michigan 48377, and our telephone number
at that address is
(248) 946-3000.
Our website is located at www.itc-holdings.com. The
information on our website is not part of this prospectus
supplement or the accompanying prospectus.
For a description of our business, financial condition, results
of operations and other important information, see our filings
with the SEC incorporated by reference herein. For instructions
on how to find copies of those and our other filings
incorporated by reference herein, see Incorporation of
Certain Information by Reference in this prospectus
supplement and Where You Can Find Additional
Information and Incorporation of Certain Information
by Reference in the accompanying prospectus.
S-3
FORWARD-LOOKING
STATEMENTS
This prospectus supplement contains or incorporates by reference
certain statements that describe our managements beliefs
concerning future business conditions and prospects, growth
opportunities and the outlook for our business and the electric
transmission industry based upon information currently
available. These statements are forward-looking
statements within the meaning of the Private Securities
Litigation Reform Act of 1995. Wherever possible, we have
identified these forward-looking statements by words
such as will, may,
anticipates, believes,
intends, estimates, expects,
projects and similar phrases. Forward-looking
statements included or incorporated by reference in this
prospectus supplement include, but are not limited to,
statements set forth under Managements Discussion
and Analysis of Financial Condition and Results of
Operations in our annual report on
Form 10-K
for the year ended December 31, 2007 and in our quarterly
report on
Form 10-Q
for the quarter ended March 31, 2008 (which are
incorporated herein by reference).
These forward-looking statements are based upon assumptions our
management believes are reasonable. These forward-looking
statements are subject to risks and uncertainties which could
cause our actual results, performance and achievements to differ
materially from those expressed in, or implied by, these
statements, including, among other things:
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unless we receive dividends or other payments from
ITCTransmission, METC
and/or ITC
Midwest, we will be unable to pay dividends to our stockholders
and fulfill our cash obligations;
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certain elements of ITCTransmissions, METCs
and ITC Midwests cost recovery through rates can be
challenged, which could result in lowered rates
and/or
refunds of amounts previously collected and thus have an adverse
effect on our business, financial condition, results of
operations and cash flows. We have also made certain commitments
to federal and state regulators with respect to, among other
things, our rates in connection with recent acquisitions
(including ITC Midwests asset acquisition) that could have
an adverse effect on our business, financial condition, results
of operations and cash flows;
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approval of ITC Midwests asset acquisition by the state
regulatory authority in Iowa has been appealed. If such
proceeding is decided in a manner that is unfavorable to us, all
or part of the order approving ITC Midwests asset
acquisition in Iowa could be reversed, which could have a
material adverse effect on our business, financial condition,
results of operations and cash flows;
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ITCTransmissions, METCs and ITC Midwests
actual capital expenditures may be lower than planned, which
would decrease their respective rate bases and therefore our
revenues;
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the regulations to which we are subject may limit our ability to
raise capital
and/or
pursue acquisitions or development opportunities or other
transactions or may subject us to liabilities;
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ITCTransmission, METC and ITC Midwest are subject to various
regulatory requirements. Violations of these requirements,
whether intentional or unintentional, may result in penalties
that, under some circumstances, could have a material adverse
effect on our results of operations, financial condition and
cash flows;
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changes in federal energy laws, regulations or policies could
reduce the dividends we may be able to pay our stockholders;
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adverse changes in interest rates may negatively affect us;
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hazards related to our business, such as explosions, fires,
inclement weather, natural disasters, mechanical failure and
related matters, could affect our business and results of
operations;
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if the network load or point-to-point transmission service on
ITCTransmission, METC
and/or ITC
Midwests transmission systems is lower than expected, the
timing of collection of our revenues would be delayed;
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each of ITCTransmission, METC and ITC Midwest depends on its
primary customer for a substantial portion of its revenues, and
any material failure by those primary customers to make payments
for transmission services would adversely affect our revenues
and our ability to service ITCTransmissions, METCs,
ITC Midwests and our debt obligations.
ITCTransmissions primary customer is The Detroit
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S-4
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Edison Company, METCs primary customer is Consumers Energy
Company and ITC Midwests primary customer is Interstate
Power and Light Company, which we refer to as IP&L;
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METC does not own the majority of the land on which its
transmission assets are located. A significant amount of the
land on which ITCTransmissions and ITC Midwests
assets are located is subject to easements, mineral rights and
other similar encumbrances and a significant amount of
ITCTransmission and ITC Midwests other property consists
of easements. As a result, ITCTransmission, METC and ITC Midwest
must comply with the provisions of various easements, mineral
rights and other similar encumbrances, which may adversely
impact their ability to complete construction projects in a
timely manner;
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deregulation
and/or
increased competition may adversely affect customers of
ITCTransmission, METC, ITC Midwest, or customers of The Detroit
Edison Company, Consumers Energy Company or IP&L, which may
affect our ability to collect revenues;
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hazards associated with high-voltage electricity transmission
may result in suspension of ITCTransmissions, METCs
or ITC Midwests operations or the imposition of civil or
criminal penalties;
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ITCTransmission, METC and ITC Midwest are subject to
environmental regulations and to laws that can give rise to
substantial liabilities from environmental contamination;
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acts of war, terrorist attacks and threats or the escalation of
military activity in response to such attacks or otherwise may
negatively affect our business, financial condition and results
of operations;
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the purchase price for ITC Midwests asset acquisition
remains subject to adjustment and, therefore, the final purchase
price cannot be determined at this time;
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we may encounter difficulties consolidating IP&Ls
electric transmission assets into our business and may not fully
attain or retain, or achieve within a reasonable time frame,
expected strategic objectives and other expected benefits of ITC
Midwests asset acquisition;
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if one or both of ITC Midwests operating agreements with
IP&L and American Transmission Company, LLC were terminated
early, ITC Midwest may face a shortage of labor or replacement
contractors to provide the services formerly provided by
IP&L and American Transmission Company, LLC;
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we are highly leveraged and our dependence on debt may limit our
ability to fulfill our debt obligations, pay dividends
and/or
obtain additional financing;
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certain provisions in our debt instruments may limit our
financial flexibility;
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adverse changes in our credit ratings may negatively affect us;
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we have limitations on the amount of federal income tax net
operating loss carryforwards that we may use to reduce our tax
liability in a given period;
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provisions in our articles of incorporation and bylaws, Michigan
corporate law and our debt agreements may impede efforts by our
stockholders to change the direction or management of our
company;
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provisions in our articles of incorporation restrict market
participants from voting or owning 5% or more of the outstanding
shares of our capital stock;
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future sales of our shares could depress the market price of our
common stock;
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ITCTransmissions, METCs and ITC Midwests
ability to raise capital may be restricted which may, in turn,
restrict our ability to make capital expenditures or pay
dividends to our stockholders; and
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other risk factors discussed herein and set forth from time to
time in our public filings with the SEC.
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Because our forward-looking statements are based on estimates
and assumptions that are subject to significant business,
economic and competitive uncertainties, many of which are beyond
our control or are subject to change, actual results could be
materially different and any or all of our forward-looking
statements may turn out to be wrong. Forward-looking statements
speak only as of the date made and can be affected by
assumptions we might make or by known or unknown risks and
uncertainties. Many factors mentioned in our discussion in this
prospectus
S-5
supplement will be important in determining future results.
Consequently, we cannot assure you that our expectations or
forecasts expressed in such forward-looking statements will be
achieved. Actual future results may vary materially. Except as
required by law, we undertake no obligation to publicly update
any forward-looking or other statements, whether as a result of
new information, future events, or otherwise.
Important factors that could cause actual results to differ
materially from the forward-looking statements presented above
include, among others, the risks described in our annual report
on
Form 10-K
for the fiscal year ended December 31, 2007 and in our
quarterly report on
Form 10-Q
for the quarter ended March 31, 2008 and any risks set
forth in our other filings with the SEC that are incorporated by
reference herein. In addition, other factors besides those
listed here could adversely affect our business and results of
operations. You should consider all of these factors carefully
before investing in our securities.
S-6
USE OF
PROCEEDS
We intend to use the net proceeds from the sale of shares of
common stock under the sales agency financing agreement to repay
borrowings under ITC Holdings Corp.s revolving credit
facility, to fund our working capital and for general corporate
purposes, including capital expenditures.
ITC Holding Corp.s revolving credit facility was entered
into on March 29, 2007 and matures on March 29, 2012.
All borrowings made under the facility bear interest at a rate
equal to LIBOR plus an applicable margin of 0.625% or at a base
rate, which is defined as the higher of the administrative
agents prime rate or 0.50% above the federal funds rate,
in each case subject to adjustments based on rating and
commitment utilization.
An affiliate of BNYMCM is a lender to us under our revolving
credit facility and may receive a portion of any amounts repaid
from the proceeds of this offering. See Plan of
Distribution.
S-7
PLAN OF
DISTRIBUTION
We have entered into a sales agency financing agreement with
BNYMCM, dated as of June 27, 2008, pursuant to which we may
offer and sell up to $150,000,000 aggregate amount of shares of
our common stock from time to time through BNYMCM, as our agent.
The sales, if any, of the shares of our common stock under the
sales agency financing agreement will be made in at the
market offerings as defined in Rule 415 of the
Securities Act of 1933, as amended, which we refer to as the
Securities Act, including sales made directly on the New York
Stock Exchange, the principal existing trading market for shares
of our common stock, to or through a market maker, through an
electronic communications network or, if we and BNYMCM agree in
writing, sales made in privately negotiated transactions.
From time to time during the term of the sales agency financing
agreement, and subject to the terms and conditions set forth
therein, we may deliver an issuance notice to BNYMCM specifying:
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the length of the selling period, which may not exceed 20
consecutive trading days;
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the aggregate sales price of our common shares to be sold, which
may not exceed $40,000,000 during any selling period without
BNYMCMs prior written consent; and
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the minimum price (not less than $10.00 per share) below which
sales may not be made.
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Upon receipt of an issuance notice from us, and subject to the
terms and conditions of the sales agency financing agreement,
BNYMCM has agreed to use its commercially reasonable efforts
consistent with its normal trading and sales practices to sell
such shares on such terms. We or BNYMCM may suspend the offering
of shares of our common stock at any time upon proper notice,
and the selling period will immediately terminate. The
settlement between us and BNYMCM of sales of shares of our
common stock will occur (i) on the third business day
following each trading date on which the sales were made or
(ii) on the third business day following the last day of
the applicable selling period. The obligation of BNYMCM under
the sales agency financing agreement to sell shares pursuant to
any issuance notice is subject to a number of conditions, which
BNYMCM reserves the right to waive in its sole discretion.
We will pay BNYMCM a commission equal to 1.0% of the sales price
of all shares sold through it as agent under the sales agency
financing agreement. We have also agreed to reimburse
BNYMCMs documentation attorneys fees and reasonable
out-of-pocket expenses up to $40,000 in connection with the
sales agency financing agreement. We will also pay BNYMCMs
due diligence attorneys fees for its initial and quarterly
due diligence reviews during the term of the sales agency
financing agreement (initial amount not to exceed $35,000).
In connection with the sale of our common stock as contemplated
in this prospectus supplement, BNYMCM may be deemed to be an
underwriter within the meaning of the Securities
Act, and the compensation paid to BNYMCM may be deemed to be
underwriting commissions or discounts. We have agreed to
indemnify BNYMCM against certain civil liabilities, including
liabilities under the Securities Act.
We intend to report at least quarterly the number of shares of
our common stock sold through BNYMCM as agent in at-the-market
offerings, the net proceeds to us and the compensation paid by
us to BNYMCM in connection with such sales.
Sales of shares of our common stock as contemplated in this
prospectus supplement will be settled through the facilities of
The Depository Trust Company or by such other means as we
and BNYMCM may agree upon.
The offering of shares of our common stock pursuant to the sales
agency financing agreement will terminate upon the earliest of
(1) the sale of all shares of common stock subject to the
sales agency financing agreement, (2) the third anniversary
of the date of the sales agency financing agreement,
(3) the termination of authorization from the FERC for the
Company to issue additional equity and (4) any time upon
ten days prior notice to BNYMCM. BNYMCM may terminate
the sales agency financing agreement upon ten days written
notice, or upon one trading days notice in certain
circumstances, including bankruptcy events relating to us, our
failure to maintain the listing of our common stock on the New
York Stock Exchange or the occurrence of an event which has had
or would reasonably be expected to have a material adverse
effect on us.
S-8
In connection with our issuance on October 10, 2006, which
we refer to as the Issuance Date, of 2,195,045 shares of
our common stock to Macquarie Essential Assets Partnership,
which we refer to as MEAP, we entered into a shareholders
agreement with MEAP, which we refer to as the Shareholders
Agreement. Pursuant to the terms of the Shareholders Agreement,
MEAP may not sell such shares of stock for one year following
the Issuance Date and is entitled to incidental registration
rights during the year following the first anniversary of the
Issuance Date. If, during the year following the first
anniversary of the Issuance Date, we propose to register common
stock under the Securities Act (other than a registration on
Form S-4
or
Form S-8
or a registration of common stock to be issued by ITC Holdings
Corp. to acquire the assets or securities of another entity in
connection with an acquisition or other business combination
transaction), MEAP may elect to exercise its
piggyback registration rights.
We have agreed not to directly or indirectly sell, offer to
sell, contract to sell, grant any option to sell or otherwise
dispose of, our shares of our common stock or securities
convertible into or exchangeable for shares of our common stock,
warrants or any rights to purchase or acquire shares of our
common stock for a period beginning on the first trading day
immediately prior to the delivery of any issuance notice to
BNYMCM and ending on the first trading day immediately following
the settlement date for shares of our common stock sold pursuant
to the applicable issuance notice, without the prior written
consent of BNYMCM. BNYMCM may give this consent at any time
without public notice. The restriction described in this
paragraph does not apply to sales of:
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Shares of our common stock that we offer or sell pursuant to the
sales agency financing agreement;
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Shares of our common stock issuable as consideration in
connection with acquisitions of businesses, assets or securities
of other Persons, as defined in the sales agency financing
agreement;
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Shares of our common stock that we issue upon conversion of
convertible securities, or the exercise of warrants, options or
other rights disclosed in our filings with the SEC; and
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Shares of our common stock and options to purchase shares of our
common stock that we issue, in either case, pursuant to any
employee or director stock option, incentive or benefit plan,
stock purchase, ownership or other compensation plan or dividend
reinvestment plan whether currently existing or adopted
hereafter (but not shares subject to a waiver to exceed plan
limits in our stock purchase plan), including the Amended and
Restated 2003 Stock Purchase and Option Plan for Key Employees
of the Company and its Subsidiaries, the Amended and Restated
2006 Long Term Incentive Plan and the Employee Stock Purchase
Plan.
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BNYMCM and its affiliates have, from time to time, provided
trustee services for us in connection with certain of our debt
obligations. Specifically, The Bank of New York
Trust Company, N.A. serves as trustee, registrar and paying
agent in connection with our 5.25% Senior Notes due 2013,
6.04% Senior Notes due 2014, 5.875% Senior Notes due
2016, 6.23% Senior Notes due 2017, 6.375% Senior Notes
due 2036 and 6.050% Senior Notes due January 31, 2018.
The Bank of New York Trust Company, N.A. also serves as
trustee, registrar and paying agent in connection with ITC
Transmissions 4.45% First Mortgage Bonds, Series A,
due 2013, 6.125% First Mortgage Bonds, Series C, due 2036,
5.75% First Mortgage Bonds, Series D, due April 1,
2018, METCs 5.75% Senior Secured Notes, due
December 10, 2015 and ITC Midwests First Mortgage
Bonds, Series A, due January 31, 2038. BNYMCM and its
affiliates have received customary fees and reimbursement of
expenses for these services and may in the future provide
additional services including, but not limited to, investment
banking, commercial banking or corporate trust services.
An affiliate of BNYMCM is a lender to us under our revolving
credit facilities and may receive a portion of any amounts
repaid from the proceeds of this offering. Because more than 10%
of the net proceeds of this offering may be paid to affiliates
of a member of the Financial Industry Regulatory Authority
(FINRA), which is participating in this offering,
this offering is being conducted in compliance with
Rule 2710(h) of the Conduct Rules of the FINRA.
S-9
CERTAIN
UNITED STATES FEDERAL INCOME AND ESTATE TAX
CONSEQUENCES TO
NON-U.S.
HOLDERS
The following is a summary of certain United States federal
income and estate tax consequences of the purchase, ownership
and disposition of our common stock as of the date hereof.
Except where noted, this summary deals only with common stock
that is held as a capital asset by a
non-U.S. holder.
A
non-U.S. holder
means a person (other than a partnership) that is not for United
States federal income tax purposes any of the following:
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an individual citizen or resident of the United States;
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a corporation (or any other entity treated as a corporation for
United States federal income tax purposes) created or organized
in or under the laws of the United States, any state thereof or
the District of Columbia;
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an estate the income of which is subject to United States
federal income taxation regardless of its source; or
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a trust if it (1) 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) has a valid
election in effect under applicable United States Treasury
regulations to be treated as a United States person.
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This summary is based upon provisions of the Internal Revenue
Code of 1986, as amended (the Code) and regulations,
rulings and judicial decisions as of the date hereof. Those
authorities may be changed, perhaps retroactively, so as to
result in United States federal income and estate tax
consequences different from those summarized below. This summary
does not address all aspects of United States federal income and
estate taxes and does not deal with foreign, state, local or
other tax considerations that may be relevant to
non-U.S. holders
in light of their personal circumstances. In addition, it does
not represent a detailed description of the United States
federal income and estate tax consequences applicable to you if
you are subject to special treatment under the United States
federal income tax laws (including if you are a United States
expatriate, controlled foreign corporation,
passive foreign investment company or a partnership
or other pass-through entity for United States federal income
tax purposes). We cannot assure you that a change in law will
not alter significantly the tax considerations that we describe
in this summary.
If a partnership holds our common stock, the tax treatment of a
partner will generally depend upon the status of the partner and
the activities of the partnership. If you are a partner of a
partnership holding our common stock, you should consult your
tax advisors.
If you are considering the purchase of our common stock, you
should consult your own tax advisors concerning the particular
United States federal income and estate tax consequences to you
of the ownership of the common stock, as well as the
consequences to you arising under the laws of any other taxing
jurisdiction.
Dividends
Dividends paid to a
non-U.S. holder
of our 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-U.S. holder
within the United States (and, if required by an applicable
income tax treaty, are attributable to a United States permanent
establishment) are not subject to the withholding tax, provided
certain certification and disclosure requirements are satisfied.
Instead, such dividends are subject to United States federal
income tax on a net income basis in the same manner as if the
non-U.S. holder
were a United States person as defined under the Code. 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-U.S. holder
of our common stock who wishes to claim the benefit of an
applicable treaty rate and avoid backup withholding, as
discussed below, for dividends will be required (a) to
complete Internal Revenue Service
Form W-8BEN
(or other applicable form) and certify under penalty of perjury
that such holder is not a United States person as defined under
the Code and is eligible for treaty benefits or (b) if our
common stock is held through certain
S-10
foreign intermediaries, to satisfy the relevant certification
requirements of applicable United States Treasury regulations.
Special certification and other requirements apply to certain
non-U.S. holders
that are pass-through entities rather than corporations or
individuals.
A
non-U.S. holder
of our 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 Internal Revenue Service.
Gain on
Disposition of Common Stock
Any gain realized on the disposition of our common stock
generally will not be subject to United States federal income
tax unless:
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the gain is effectively connected with a trade or business of
the
non-U.S. holder
in the United States (and, if required by an applicable income
tax treaty, is attributable to a United States permanent
establishment of the
non-U.S. holder);
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the
non-U.S. holder
is an individual who is present in the United States for
183 days or more in the taxable year of that disposition,
and certain other conditions are met; or
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we are or have been a United States real property holding
corporation for United States federal income tax purposes.
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An individual
non-U.S. holder
described in the first bullet point immediately above will be
subject to tax on the net gain derived from the sale under
regular graduated United States federal income tax rates. An
individual
non-U.S. holder
described in the second bullet point immediately above will be
subject to a flat 30% tax on the gain derived from the sale,
which may be offset by United States source capital losses, even
though the individual is not considered a resident of the United
States. If a
non-U.S. holder
that is a foreign corporation falls under the first bullet point
immediately above, it will be subject to tax on its net gain in
the same manner as if it were a United States person as defined
under the Code and, in addition, may be subject to the branch
profits tax equal to 30% of its effectively connected earnings
and profits or at such lower rate as may be specified by an
applicable income tax treaty.
We believe we are not and do not anticipate becoming a
United States real property holding corporation for
United States federal income tax purposes although no assurance
can be given in this regard as the determination of whether we
are a United States real property holding
corporation is fact-specific and depends on the
composition of our assets. If, contrary to our belief, we are or
become a United States real property holding
corporation, so long as our common stock continues to be
regularly traded on an established securities market (such as
the NYSE), only a
non-U.S. holder
who holds or held (at any time during the shorter of the five
year period preceding the date of disposition or the
holders holding period) more than 5% of our common stock
will be subject to United States federal income tax on the
disposition of our common stock.
Federal
Estate Tax
Common stock held by an individual
non-U.S. holder
at the time of death will be included in such holders
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 Internal Revenue Service and to
each
non-U.S. holder
the amount of dividends paid to such holder and the tax withheld
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-U.S. holder
resides under the provisions of an applicable income tax treaty.
A
non-U.S. holder
will be subject to backup withholding for dividends paid to such
holder unless such holder certifies under penalty of perjury
that it is a
non-U.S. holder
(and the payor does not have actual knowledge or
S-11
reason to know that such holder is a United States person as
defined under the Code), or such holder otherwise establishes an
exemption.
Information reporting and, depending on the circumstances,
backup withholding will apply to the proceeds of a sale of our
common stock within the United States or conducted through
certain United States-related financial intermediaries, unless
the beneficial owner certifies under penalty of perjury that it
is a
non-U.S. holder
(and the payor does not have actual knowledge or reason to know
that the beneficial owner is a United States person as defined
under the Code), or such owner otherwise establishes an
exemption.
Any amounts withheld under the backup withholding rules may be
allowed as a refund or a credit against a
non-U.S. holders
United States federal income tax liability provided the required
information is furnished to the Internal Revenue Service.
S-12
EXPERTS
The consolidated financial statements, the related financial
statement schedule incorporated in this Prospectus Supplement by
reference from ITC Holdings Corp.s Annual Report on
Form 10-K
for the year ended December 31, 2007, and the effectiveness
of ITC Holdings Corp.s internal control over financial
reporting have been audited by Deloitte & Touche LLP,
an independent registered public accounting firm, as stated in
their reports, which are incorporated herein by reference, such
consolidated financial statements and financial statement
schedule have been so incorporated in reliance upon the reports
of such firm given upon their authority as experts in accounting
and auditing.
INDEPENDENT
AUDITORS
The statements of assets acquired and liabilities assumed of the
Electric Transmission Business (the Business) of
IP&L as of December 31, 2006 and 2005 and the
statements of revenues and direct expenses of the Business for
each of the three years in the period ended December 31,
2006 (collectively, the statements), incorporated by
reference in this Prospectus Supplement have been audited by
Deloitte & Touche LLP, independent auditors, as stated
in their report incorporated by reference herein, which report
expresses an unqualified opinion on the statements and includes
an explanatory paragraph referring to the basis of presentation
of the statements, and have been so incorporated in reliance
upon the report of such firm given upon their authority as
experts in accounting and auditing.
VALIDITY
OF THE SHARES
Dykema Gossett PLLC will pass upon the validity of the common
stock and as to certain matters of Michigan law. Certain legal
matters will be passed upon for us by Simpson
Thacher & Bartlett LLP, New York, New York. Certain
legal matters will be passed upon for the agent by Pillsbury
Winthrop Shaw Pittman LLP, New York, New York. Certain
legal matters will be passed upon for the agent by Milbank,
Tweed, Hadley & McCloy LLP, New York, New York.
In addition, Stuntz, Davis & Staffier, P.C.,
Washington, D.C. is advising us on matters relating to the
FERC. Milbank, Tweed, Hadley & McCloy LLP has from
time to time acted as counsel for ITC Holdings in certain
matters. Mr. Richard D. McLellan, a director of the Company
and an owner of less than 1% of the outstanding common stock of
the Company, was, until his retirement in April 2007, a member
at Dykema Gossett PLLC.
INCORPORATION
OF CERTAIN INFORMATION BY REFERENCE
We file annual, quarterly and current reports with the SEC. Our
SEC filings are available over the Internet at the SECs
web site at
http://www.sec.gov.
You may also read and copy any document ITC Holdings Corp. files
at the SECs Public Reference Room at
100 F Street, N.E., Washington, D.C. 20549.
Please call the SEC at
1-800-SEC-0330
for more information on the public reference rooms and their
copy charges.
The SEC allows us to incorporate by reference the
information contained in documents that we file with them, which
means that we can disclose important information to you by
referring you to those documents. The information incorporated
by reference is considered to be part of this prospectus
supplement. Information in this prospectus supplement supersedes
information incorporated by reference that we filed with the SEC
prior to the date of this prospectus supplement, while
information that we file later with the SEC will automatically
update and supersede this information. We incorporate by
reference the documents (other than any portion of such document
that is furnished rather than filed) listed below and any future
filings we will make with the SEC under Sections 13(a),
13(c), 14 or 15(d) of the Exchange Act, after the date of this
prospectus supplement until the registration statement, of which
this prospectus supplement is a part, has been terminated:
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our Annual Report on
Form 10-K
for the year ended December 31, 2007;
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our Quarterly Report on
Form 10-Q
for the quarter ended March 31, 2008;
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our Current Reports on
Form 8-K
filed on January 17, 2008, January 18, 2008,
January 23, 2008, January 25, 2008, January 31,
2008, February 1, 2008, February 22, 2008,
March 27, 2008, May 13, 2008 and May 23, 2008;
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our Current Report on
Form 8-K/A
filed on January 14, 2008; and
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the description of our common stock contained in our
registration statement on
Form 8-A
(File No. 001-32576)
filed on July 20, 2005.
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We will provide to each person, including a beneficial owner, to
whom a prospectus supplement is delivered a copy of any or all
of the information that has been incorporated by reference in
this prospectus supplement. You may request a copy of these
filings at no cost, by writing or calling us at:
ITC Holdings
Corp.
27175 Energy Way
Novi, Michigan 48377
Attention: General Counsel
Tel:
(248) 946-3000
You should read the information relating to us in this
prospectus supplement and the accompanying prospectus together
with the information in the documents incorporated by reference.
Nothing contained herein shall be deemed to incorporate
information furnished to, but not filed with, the SEC.
S-14
PROSPECTUS
Common Stock
We or a selling stockholder may offer and sell shares of our
common stock from time to time in amounts, at prices and on
terms that will be determined at the time of any such offering.
Each time our common stock is offered, we will provide a
prospectus supplement and attach it to this prospectus. The
prospectus supplement may also add, update or change the
information contained in this prospectus. This prospectus may
not be used to offer or sell securities without a prospectus
supplement describing the method and terms of the offering.
You should carefully read this prospectus and the accompanying
prospectus supplement, together with the documents we
incorporate by reference, before you invest in our common stock.
Our common stock is listed on the New York Stock Exchange under
the symbol ITC.
Investing in our common stock involves risks. You should
consider the risk factors described in this prospectus, any
accompanying prospectus supplement and in the documents we
incorporate by reference. See Risk Factors beginning
on page 9.
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these
securities or passed upon the accuracy or adequacy of this
prospectus. Any representation to the contrary is a criminal
offense.
January 17, 2007
TABLE OF
CONTENTS
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ABOUT
THIS PROSPECTUS
This prospectus is part of a registration statement on
Form S-3
that we filed with the Securities and Exchange Commission, or
the Commission, using a shelf
registration process. Under this shelf registration process, we
and/or a
selling stockholder or selling stockholders may offer and sell
from time to time common stock in one or more offerings or
resales. Each time shares of common stock are offered, we will
provide a supplement to this prospectus that contains specific
information about the offering and attach it to this prospectus.
The prospectus supplement will contain more specific information
about the offering, including the names of any selling
stockholders, if applicable. The prospectus supplement may also
add, update or change information contained in this prospectus.
You should read this prospectus and any applicable prospectus
supplement together with the additional information described
under the heading Where You Can Find Additional
Information.
You should rely only on the information contained or
incorporated by reference in this prospectus and the
accompanying prospectus supplement or any free writing
prospectus prepared by us. Neither we nor any selling
stockholder has authorized any other person to provide you with
different information. If anyone provides you with different or
inconsistent information, you should not rely on it. Neither we
nor any selling stockholder is making an offer of shares of our
common stock in any state where the offer is not permitted.
Neither the delivery of this prospectus nor any sale made
under it implies that there has been no change in our affairs or
that the information in this prospectus is correct as of any
date after the date of this prospectus. You should not assume
that the information in this prospectus, including any
information incorporated in this prospectus by reference, the
accompanying prospectus supplement or any free writing
prospectus prepared by us, is accurate as of any date other than
the date on the front of those documents. Our business,
financial condition, results of operations and prospects may
have changed since that date.
Unless otherwise noted or the context requires, all references
in this prospectus to:
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ITC Holdings are references to ITC Holdings Corp.
and not any of its subsidiaries;
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ITCTransmission are references to
International Transmission Company, a wholly-owned subsidiary of
ITC Holdings;
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METC are references to Michigan Electric
Transmission Company, LLC, a wholly-owned subsidiary of MTH;
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MTH are references to Michigan Transco Holdings,
Limited Partnership, the owner of all of the membership
interests of METC and an indirect, wholly-owned subsidiary of
ITC Holdings;
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We, our and us are
references to ITC Holdings together with all of its subsidiaries;
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the FERC are references to the Federal Energy
Regulatory Commission;
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kW are references to kilowatts (one kilowatt
equaling 1,000 watts); and
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the IT Holdings Partnership are references to
International Transmission Holdings Limited Partnership, a
Michigan limited partnership.
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OUR
COMPANY
Overview
Through our operating subsidiaries, ITCTransmission and
METC, we are the only publicly traded company engaged
exclusively in the transmission of electricity in the United
States. We are also the largest independent electric
transmission company and the tenth largest electric transmission
company in the country based on transmission load served. Our
business strategy is to operate, maintain and invest in our
transmission infrastructure in order to enhance system integrity
and reliability and to reduce transmission constraints. By
pursuing this strategy, we seek to reduce the overall cost of
delivered energy for end-use consumers by providing them with
access to electricity from the lowest cost electricity
generation sources. ITCTransmission and METC operate
contiguous, fully-regulated, high-voltage systems that transmit
electricity to local electricity distribution facilities from
generating stations throughout Michigan and surrounding areas.
The local distribution facilities connected to our systems serve
an area comprising substantially all of the lower peninsula of
Michigan, which had a population of approximately
9.8 million people at December 31, 2005.
As transmission utilities with rates regulated by the FERC, our
subsidiaries earn revenues through fees charged for the use of
their electricity transmission systems by our customers, which
include investor-owned utilities, municipalities, co-operatives,
power marketers and alternative energy suppliers. As independent
transmission companies, our subsidiaries are subject to rate
regulation only by the FERC. The rates charged by our
subsidiaries are established using a formulaic cost-of-service
model and re-calculated annually, allowing for the recovery of
actual expenses and income taxes and a return of and on invested
capital.
Our
Operations
Our operations are conducted through ITCTransmission and
METC. We have no ownership of or financial interest in
electricity generation or distribution assets, allowing us to
focus exclusively on the transmission of electricity and
investment in transmission infrastructure. Our primary operating
responsibilities include maintaining, improving and expanding
our transmission systems to meet our customers ongoing
needs, scheduling outages on transmission system elements to
allow for maintenance and construction, balancing electricity
generation and demand, maintaining appropriate system voltages
and monitoring flows over transmission lines and other
facilities to ensure physical limits are not exceeded.
Our operating subsidiaries assets include over 8,000
circuit miles of high-voltage lines, 236 stations and
substations, approximately 61,000 transmission towers and poles
and 14 external interconnections, which connect our transmission
lines to generation resources, distribution facilities and
neighboring transmission systems. There are also nine
interconnections between ITCTransmission and METC. The
rate base of our operating subsidiaries, which is comprised
primarily of transmission property, plant and equipment, was in
excess of $1.0 billion as of December 31, 2005.
We are committed to investing capital in our transmission
systems to improve reliability and lower the delivered cost of
energy to end-use consumers. By prudently investing capital in
our transmission systems, we believe we will enhance our
earnings growth as we continue to earn a regulated return on our
expanding rate base.
Substantially all of our revenues are derived from providing
transmission service. Our principal customers are The Detroit
Edison Company, or Detroit Edison, a wholly-owned subsidiary of
DTE Energy Company, and Consumers Energy Company, or Consumers
Energy, a wholly-owned subsidiary of CMS Energy Corporation.
Regulation
and Ratemaking
Our utility subsidiaries operate in two different rate zones in
each of which a different transmission service rate is charged.
The rates of our utility subsidiaries are determined using a
FERC-approved formulaic rate setting mechanism known as
Attachment O. Attachment O is a rate template used by members of
the Midwest Independent Transmission System Operator, Inc., or
MISO, that is completed with financial and load information to
calculate a transmission rate. Under Attachment O, our
subsidiaries rates adjust annually to account for
year-to-year changes
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in network load, expenses and a return of and on invested
capital, among other items. These annual adjustments occur under
Attachment O without the need to file a rate case at the FERC.
ITCTransmissions FERC-approved rate allows it to
earn a return of 13.88% on the actual equity portion of its
capital structure in calculating rates.
ITCTransmissions network transmission rate of
$2.099 per kW/month, which became effective beginning on
January 1, 2007, is based on ITCTransmissions
implementation of a forward-looking Attachment O as described
below, which consists of forecasted information for the upcoming
year.
On July 14, 2006, the FERC authorized ITCTransmission
to modify the implementation of its Attachment O formula
rate so that, beginning January 1, 2007, ITCTransmission
began to recover expenses and earn a return on and recover
investments in transmission on a current rather than a
historical basis. ITCTransmissions former
rate-setting method for network transmission rates primarily
used historical data to establish a rate.
Until December 31, 2005, METCs billed network
transmission rate was subject to a rate freeze of $0.98 per
kW/month. On December 30, 2005, the FERC issued an order
that authorized METC to bill rates determined using Attachment
O, subject to specified adjustments. The December 2005 rate
order also authorized METC to earn a return of 13.38% on the
actual equity portion of its capital structure in calculating
rates. Pursuant to the December 2005 rate order, METC began to
charge a network transmission rate of $1.567 per kW/month
effective as of January 1, 2006, subject to refund based on
the outcome of METCs current rate proceeding. METC began
to charge a network transmission rate of $1.524 per kW/month on
June 1, 2006, subject to refund, based primarily on data
from METCs 2005 FERC Form No. 1. On
December 21, 2006, the FERC authorized METC to recover its
expenses and investments in transmission property, plant and
equipment on a current rather than a historical basis beginning
January 1, 2007.
As a result of the FERC authorizations, ITCTransmission
and METC are allowed to collect revenues based on their
current expenses and capital investments, which are expected to
result in higher revenues and cash flows in the initial years
after implementation. During periods of capital expansion and
increasing rate base, ITCTransmission and METC will
recover the costs of these capital investments on a more timely
basis than they would under the prior Attachment O method. The
FERC also approved a
true-up
mechanism to correct for any differences between billed revenue
based on forecasted costs and investment and revenues needed to
recover actual costs and services.
Our principal executive offices are located at 39500 Orchard
Hill Place, Suite 200, Novi, Michigan 48375 and our
telephone number at that address is
(248) 374-7100.
ITC Holdings website is located at www.itc-holdings.com.
The information on our website is not part of this prospectus.
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THE METC
ACQUISITION
On October 10, 2006, ITC Holdings completed the acquisition
of all of the outstanding equity interests in METC,
ITCTransmissions neighboring transmission system,
pursuant to a purchase agreement with TE Power Opportunities
Investors, L.P., Mich 1400 LLC, MEAP US Holdings Ltd., Macquarie
Essential Assets Partnership, Evercore Co-Investment
Partnership II L.P., Evercore METC Capital Partners II
L.P. and the other parties thereto, or the Purchase Agreement.
The final consideration paid pursuant to the Purchase Agreement
was valued at approximately $557 million, consisting of
$484 million in cash and the remainder in shares of ITC
Holdings common stock. In addition, ITC Holdings assumed
approximately $309 million of debt and other liabilities.
ITC Holdings funded the acquisition with net proceeds from a
public offering of its common stock and a portion of the net
proceeds from a private placement of its senior notes.
METCs
Operating Contracts
METC is party to a number of operating contracts that govern the
operations and maintenance of its transmission system. Among
these contracts are the following:
Amended and Restated Easement Agreement. The
easement agreement, dated as of April 29, 2002 and as
further supplemented, is between METC and Consumers Energy.
Under the easement agreement, Consumers Energy provides METC
with an easement to the land, which we refer to as premises, on
which METCs transmission towers, poles, lines and other
transmission facilities used to transmit electricity at voltages
of at least 120 kV are located, which we refer to collectively
as the facilities. Consumers Energy retained for itself the
rights to, and the value of activities associated with, all
other uses of the premises and the facilities covered by the
easement agreement, such as for distribution of electricity,
fiber optics, telecommunications, gas pipelines and agricultural
uses. Accordingly, METC is not permitted to use the premises or
the facilities covered by the easement agreement for any
purposes other than to provide electric transmission and related
services, to inspect, maintain, repair, replace and remove
electric transmission lines and to alter, improve, relocate and
construct additional electric transmission lines. The easement
is further subject to the rights of any third parties that had
rights to use or occupy the premises or the facilities prior to
April 1, 2001 in a manner not inconsistent with METCs
permitted uses.
METC pays Consumers Energy annual rent of approximately
$10.0 million, in equal quarterly installments, for the
easement and related rights under the easement agreement.
Although METC and Consumers Energy share the use of the premises
and the facilities covered by the easement agreement, METC pays
the entire amount of any rentals, property taxes, inspection
fees and other amounts required to be paid to third parties with
respect to any use, occupancy, operations or other activities on
the premises or the facilities and is generally responsible for
the maintenance of the premises and the facilities used for
electricity transmission at its expense. METC also must maintain
commercial general liability insurance protecting METC and
Consumers Energy against claims for personal injury, death or
property damage occurring on the premises or the facilities and
pay for all insurance premiums. METC is also responsible for
patrolling the premises and the facilities by air at its expense
at least annually and to notify Consumers Energy of any
unauthorized uses or encroachments discovered.
METC indemnifies Consumers Energy for all liabilities
arising from the facilities covered by the easement agreement.
METC must notify Consumers Energy before altering, improving,
relocating or constructing additional transmission lines on the
facilities covered by the easement agreement. Consumers Energy
may respond by notifying METC of reasonable work and design
restrictions and precautions that are needed to avoid
endangering existing distribution facilities, pipelines or
communications lines, in which case METC must comply with these
restrictions and precautions. METC has the right at its own
expense to require Consumers Energy to remove and relocate these
facilities, but Consumers Energy may require payment in advance
or the provision of reasonable security for payment by METC
prior to removing or relocating these facilities, and Consumers
Energy need not commence any relocation work until an
alternative right-of-way satisfactory to Consumers Energy is
obtained at METCs expense.
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The term of the easement agreement runs through 2050 and is
subject to 10 automatic
50-year
renewals after that time unless METC provides one years
notice of its election not to renew the term. Consumers Energy
may terminate the easement agreement 30 days after giving
notice of a failure by METC to pay its quarterly installment if
METC does not cure the non-payment within the
30-day
notice period. At the end of the term or upon any earlier
termination of the easement agreement, the easement and related
rights terminate and revert to Consumers Energy.
Amended and Restated Operating Agreement. The
operating agreement, dated as of April 29, 2002, is between
METC and Consumers Energy. Under the operating agreement, METC
agrees to operate its transmission system to provide all
transmission customers with safe, efficient, reliable and
non-discriminatory transmission service pursuant to its tariff.
Among other things, METC is responsible under the operating
agreement for maintaining and operating its transmission system,
providing Consumers Energy with information and access to its
transmission system and related books and records, administering
and performing the duties of control area operator (that is, the
entity exercising operational control over the transmission
system) and, if requested by Consumers Energy, building
connection facilities necessary to permit interaction with new
distribution facilities built by Consumers Energy. Consumers
Energy has corresponding obligations to provide METC with access
to its books and records and to build distribution facilities
necessary to provide adequate and reliable transmission services
to wholesale customers. Consumers Energy must cooperate with
METC as METC performs its duties as control area operator,
including by providing reactive supply and voltage control from
generation sources or other ancillary services and reducing load.
Amended and Restated Services Contract. The
services contract, dated as of April 29, 2002, is between
METC and Consumers Energy. Under the services contract,
Consumers Energy provides contract services, under METCs
direction, for METCs transmission assets for an initial
five-year period. The services contract provides METC with labor
for the following:
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operating, maintenance and inspection work;
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demand work;
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major maintenance programs;
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capital work at METCs request;
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system control and system optimization; and
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spare parts inventory management.
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Under the services contract, METC paid Consumers Energy,
excluding amounts for capital work, approximately
$21.1 million and $19.7 million for the years ended
December 31, 2005 and 2004, respectively, and expects to
pay Consumers Energy approximately $21.7 million for the
year ended December 31, 2006. Payments are made in monthly
installments. METC pays Consumers Energy for the other services
at escalating fixed annual fees or
agreed-upon
rates.
The services contract limits Consumers Energys total
liability arising out of its performance under the services
contract to $1 million. The parties also agreed to maintain
certain insurance coverage under the services contract. Any
disputes between the parties under the services contract will be
brought to the administrative committee established under the
operating agreement.
By its terms, the services contract is in effect through
April 29, 2007. After that time, the services contract
renews automatically every three years unless notice is given by
either party at least 365 days prior to the expiration of
the then-current term. In addition, any services may be removed
from the services contract after the initial five-year term upon
365 days notice by either party.
METC gave Consumers Energy written notice of termination of the
system control and system optimization portions of the services
contract on November 2, 2004. METC gave Consumers Energy
written notice of termination of the remainder of the services
provided by Consumers Energy under the services contract on
February 6, 2006. Each of these notices is effective in May
2007. METC has already arranged for services such as
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field operations, maintenance, construction work, inventory
management and forestry work, which are currently provided by
Consumers Energy under the services contract. We are hiring and
training personnel for control room operations and are
contracting with qualified parties who can provide these
services starting in May 2007.
Amended and Restated Purchase and Sale Agreement for
Ancillary Services. The ancillary services
agreement, dated as of April 29, 2002 and effective
May 1, 2002, is between METC and Consumers Energy. Since
METC does not own any generating facilities, it must procure
ancillary services from third party suppliers, such as Consumers
Energy. Currently, under the ancillary services agreement, METC
pays Consumers Energy for providing capacity to METC. METC must
furnish Consumers Energy with forecasts of its requirements in
connection with the provision of services under the ancillary
services agreement. METC is not precluded from procuring these
ancillary services from third party suppliers when available.
Amended and Restated Distribution Transmission
Interconnection Agreement. The distribution
agreement, dated April 29, 2002, is between METC and
Consumers Energy. The distribution agreement provides for the
interconnection of Consumers Energys distribution system
with METCs transmission system and defines the continuing
rights, responsibilities and obligations of the parties with
respect to the use of certain of their own and the other
partys properties, assets and facilities. METC agrees to
provide Consumers Energy interconnection service at
agreed-upon
interconnection points, and the parties have mutual
responsibility for maintaining voltage and compensating for
reactive power losses resulting from their respective services.
Amended and Restated Generator Interconnection
Agreement. The generator interconnection
agreement, dated as of April 29, 2002, is between METC and
Consumers Energy. The generator interconnection agreement
specifies the terms and conditions under which Consumers Energy
and METC maintain the interconnection of Consumers Energys
generation resources and METCs transmission assets.
METCs
5.75% Senior Secured Notes due 2015
General. METCs 5.75% Senior Secured
Notes due 2015, or Senior Secured Notes, were issued under a
first mortgage indenture, dated as of December 10, 2003,
between METC and JPMorgan Chase Bank, as trustee, as
supplemented by the first supplemental indenture, dated as of
December 10, 2003, and as further supplemented by the
second supplemental indenture, dated as of December 10,
2003. METCs Senior Secured Notes bear interest at a rate
of 5.75% per annum.
Security and Ranking. Amounts outstanding
under METCs Senior Secured Notes are secured by a first
priority security interest in all of METCs assets equally
with all other securities issued under the first mortgage
indenture.
Redemption. METCs Senior Secured Notes
may be redeemed at METCs option, in whole or in part, at
any time or from time to time at a redemption price equal to the
principal amount of METCs Senior Secured Notes plus a make
whole amount and accrued and unpaid interest to the redemption
date.
Covenants. The indenture contains covenants
limiting, among other things, METCs ability to:
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incur additional indebtedness;
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make capital expenditures prior to the final determination of
METCs rate case, other than capital expenditures that METC
reasonably believes are necessary to comply with its obligations
as a regulated transmission company;
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create or acquire subsidiaries;
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create liens or other encumbrances; and
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engage in sale and lease back transactions.
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The indenture also contains a covenant requiring METC to
maintain a ratio of EBITDA to interest expense of no less than
3.0 to 1.0 and a covenant requiring METC to maintain a ratio of
debt to EBITDA of no more than 3.5 to 1.0 after
5
the earlier to occur of final determination of METCs rate
case and September 30, 2006. For purposes of these ratios,
EBITDA is defined as net income plus interest expense, taxes and
depreciation and amortization and debt is defined as the sum of
liabilities for borrowed money and the deferred purchase price
of property, capital lease and reimbursement obligations,
obligations under hedging agreements and synthetic leases and
those evidenced by bonds, debentures, notes or similar
instruments or guarantees of any of the foregoing, but excludes
liabilities to independent power producers and subordinated
deferred obligations to pay insurance premiums based on loss
experience until the final determination of METCs rate
case.
Events of Default. The indenture provides for
events of default, which, if any of them occur, would permit or
require the principal of and accrued interest on METCs
Senior Secured Notes to become or to be declared due and payable
and would prevent dividends from being paid.
METCs
Revolving Credit Facility
In December 2003, METC entered into a $35.0 million
revolving credit agreement and swingline facility with Comerica
Bank, as Syndication Agent, and JPMorgan Chase Bank, as
administrative agent. The revolving credit facility expires in
2008. Amounts borrowed under the revolving credit facility are
secured by a first priority security interest in all of
METCs assets through the issuance of senior secured bonds,
collateral series, under METCs first mortgage indenture
and the second supplemental indenture thereto.
METCs revolving credit facility provides for both ABR and
LIBOR loans, each with a different interest rate. Under the
agreement, ABR is defined as, for any day, a rate per annum
equal to the greater of (a) the prime rate in effect on
that day and (b) the rates on overnight Federal funds in
effect on that day plus 0.5%, and LIBOR is defined as a rate per
annum determined in dollars based on Page 3750 of the
Telerate screen as of 11:00 A.M., London time, two business
days prior to the beginning of the relevant interest period. The
interest rate per annum on borrowed amounts for ABR loans is
equal to 0.25% plus ABR. The interest rate per annum on borrowed
amounts for LIBOR loans is equal to 1.25% plus LIBOR determined
for each day.
METCs revolving credit facility contains numerous
financial and operating covenants that limit the discretion of
METCs management with respect to certain business matters.
These covenants place significant restrictions on, among other
things, METCs ability to:
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incur additional indebtedness;
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create liens or other encumbrances;
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engage in sale and lease back transactions;
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create or acquire subsidiaries;
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enter into any mergers, consolidations, liquidations or
dissolutions, or sell or otherwise dispose of all or
substantially all of its assets; and
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pay dividends or make distributions on or redemptions of
METCs members capital.
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In addition, the revolving credit facility requires METC to
maintain a ratio of EBITDA to interest expense of no less than
3.0 to 1.0, a ratio of debt to capital of no more than 58% and,
after the final determination of METCs rate case, a ratio
of debt to EBITDA of no more than 3.5 to 1.0. For purposes of
these ratios, EBITDA is defined as net income plus interest
expense, taxes and depreciation and amortization and debt is
defined as the sum of liabilities for borrowed money and the
deferred purchase price of property, capital lease and
reimbursement obligations, obligations under hedging agreements
and synthetic leases and those evidenced by bonds, debentures,
notes or similar instruments or guarantees of any of the
foregoing, but excludes, until the final determination of
METCs rate case, liabilities to independent power
producers.
METCs revolving credit facility provides for voluntary
prepayments of the loans and voluntary reductions of the
unutilized portions of the commitments, without penalty, subject
to certain conditions pertaining to minimum notice and
prepayment/reduction amounts and subject to payment of any
applicable breakage costs of LIBOR loans.
6
FORWARD-LOOKING
STATEMENTS
This prospectus includes and incorporates by reference
forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, or
the Securities Act, and Section 21E of the Securities
Exchange Act of 1934, as amended, or the Exchange Act, and as
defined in the U.S. Private Securities Litigation Reform
Act of 1995. We intend that those statements be covered by the
safe harbors created under those laws. Forward-looking
statements include statements concerning our plans, objectives,
goals, strategies, future events, future revenue or performance,
capital expenditures, financing needs, plans or intentions
relating to acquisitions, business trends and other information
that is not historical information. When used in this
prospectus, the words estimates,
expects, anticipates,
projects, plans, intends,
believes, forecasts or future or
conditional verbs, such as will, should,
could or may, and variations of such
words or similar expressions are intended to identify
forward-looking statements. These forward-looking statements are
subject to a number of risks, uncertainties and assumptions,
including those described in our periodic filings with the
Commission, including those described under Incorporation
of Certain Information by Reference. All forward-looking
statements, including, without limitation, managements
examination of historical operating trends and data, are based
upon our current expectations and various assumptions. Our
expectations, beliefs and projections are expressed in good
faith and we believe there is a reasonable basis for them.
However, we cannot assure you that managements
expectations, beliefs and projections will be achieved. There
are a number of risks, uncertainties and other important factors
that could cause our actual results to differ materially from
the forward-looking statements contained in this prospectus.
Such risks, uncertainties and other important factors which
could cause our actual results to differ materially from those
suggested by our forward-looking statements are set forth in our
reports incorporated by reference into this prospectus, and
include, among other things:
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unless ITC Holdings receives dividends or other payments from
ITCTransmission and/or METC, ITC Holdings will be unable
to pay dividends to its stockholders and fulfill its cash
obligations;
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the FERCs December 2005 rate order authorizing METCs
current rates may result in a settlement or may be subject to a
hearing and possible judicial appeal and in any such
proceedings, METC could be required to refund revenues to
customers under the rates that became effective January 1,
2006 and June 1, 2006, and the rates that METC charges for
services could be reduced;
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certain elements of ITCTransmissions and
METCs cost recovery through rates can be challenged which
could result in lowered rates and have an adverse effect on our
business, financial condition, results of operations and cash
flows;
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the regulations to which we are subject may limit our ability to
raise capital
and/or
pursue acquisitions or development opportunities or other
transactions;
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point-to-point revenues received by ITCTransmission and
METC vary from period to period and may be unpredictable, which
could have an adverse effect on our financial condition and cash
flows;
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changes in federal energy laws, regulations or policies could
reduce the dividends we may be able to pay our stockholders;
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our network load may be lower than expected;
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ITCTransmission and METC depend on their primary
customers for a substantial portion of their revenues, and any
material failure by those customers to make payments for
transmission services would adversely affect our revenues and
our ability to service our debt obligations;
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deregulation
and/or
increased competition may adversely affect
ITCTransmissions customers, METCs customers,
Detroit Edisons customers or Consumers Energys
customers;
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ITCTransmissions and METCs actual capital
investments may be lower than planned, which would decrease
ITCTransmission and METCs expected rate base;
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hazards associated with high-voltage electricity transmission
may result in suspension of ITCTransmissions or
METCs operations or the imposition of civil or criminal
penalties;
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ITCTransmission and METC are subject to environmental
regulations and to laws that can give rise to substantial
liabilities from environmental contamination;
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we may encounter difficulties consolidating METCs business
into ours and may not fully attain or retain, or achieve within
a reasonable time frame, expected strategic objectives, cost
savings and other expected benefits of the acquisition;
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acts of war, terrorist attacks and threats or the escalation of
military activity in response to such attacks or otherwise may
negatively affect our business, financial condition and results
of operations;
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we may be materially and adversely affected by the termination
of METCs service contracts with Consumers Energy;
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METC does not own the majority of the land on which its
transmission assets are located and therefore it must comply
with the provisions of an easement agreement with Consumers
Energy;
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the ability of stockholders of ITC Holdings, other than the IT
Holdings Partnership, to influence our management and policies
will be limited as a result of the ownership of our common stock
by the IT Holdings Partnership;
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we are highly leveraged and our dependence on debt may limit our
ability to pay dividends
and/or
obtain additional financing;
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adverse changes in our credit ratings may negatively affect us;
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certain provisions in our debt instruments limit our capital
flexibility;
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ITCTransmissions and METCs ability to raise
capital may be restricted which may, in turn, restrict our
ability to make capital expenditures or dividend payments to our
stockholders;
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future transactions may limit our ability to use our federal
income tax operating loss carryforwards; and
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other risk factors discussed herein and listed from time to time
in our public filings with the Commission.
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Because our forward-looking statements are based on estimates
and assumptions that are subject to significant business,
economic and competitive uncertainties, many of which are beyond
our control or are subject to change, actual results could be
materially different and any or all of our forward-looking
statements may turn out to be wrong. Forward-looking statements
speak only as of the date made and can be affected by
assumptions we might make or by known or unknown risks and
uncertainties. Many factors mentioned in our discussion in this
prospectus will be important in determining future results.
Consequently, we cannot assure you that our expectations or
forecasts expressed in such forward-looking statements will be
achieved. Actual future results may vary materially.
Except as required by law, we undertake no obligation to
publicly update any forward-looking or other statements, whether
as a result of new information, future events, or otherwise. We
provide a cautionary discussion of risks and uncertainties under
the Risk Factors section in this prospectus. These
are factors that we think could cause our actual results to
differ materially from expected results. Other factors besides
those listed here could adversely affect our business and
results of operations. You should carefully consider the risks
described under Risk Factors in this prospectus,
together with any risks described in the accompanying prospectus
supplement and the information incorporated by reference.
8
RISK
FACTORS
An investment in our common stock involves risks. You should
carefully consider the risks described below, together with the
other information included in this prospectus, the accompanying
prospectus supplement and the information incorporated by
reference, before deciding to purchase any shares of our common
stock.
Risks
Related to Our Business
ITC
Holdings is a holding company with no operations, and unless ITC
Holdings receives dividends or other payments from
ITCTransmission, METC or its other subsidiaries, ITC Holdings
will be unable to pay dividends to its stockholders and fulfill
its cash obligations.
As a holding company with no business operations, ITC
Holdings material assets consist only of the common stock
of ITCTransmission, indirect ownership interests in METC,
ownership interests of its other subsidiaries, deferred tax
assets relating primarily to federal income tax operating loss
carryforwards and cash. ITC Holdings material cash inflows
are only from dividends and other payments received from time to
time from ITCTransmission, METC or its other subsidiaries
and the proceeds raised from the sale of debt and equity
securities. ITC Holdings may not be able to access cash
generated by ITCTransmission or METC or any other
subsidiaries in order to fulfill cash commitments or to pay
dividends to stockholders. The ability of ITCTransmission
and METC to make dividend and other payments to ITC Holdings
is subject to the availability of funds after taking into
account ITCTransmissions and METCs respective
funding requirements, the terms of ITCTransmissions
and METCs respective indebtedness, the regulations of the
FERC under the Federal Power Act, or the FPA, and applicable
state laws. Each of ITCTransmission, METC and each other
subsidiary, however, is legally distinct from ITC Holdings and
has no obligation, contingent or otherwise, to make funds
available to ITC Holdings.
The
FERCs December 2005 rate order authorizing METCs
current rates is subject to a hearing and possible judicial
appeals. In any such proceedings, METC could be required to
refund revenues to customers and the rates that METC charges for
services could be reduced, thereby materially and adversely
impacting our results of operations, financial condition, cash
flows and future earning capacity.
On December 30, 2005, the FERC issued an order authorizing
METC, beginning on January 1, 2006, to charge rates for its
transmission service using the rate setting formula contained in
Attachment O, which results in an authorized rate for network
and point-to-point transmission service of $1.567 per kW/month
from January 1, 2006 to May 31, 2006 and $1.524 per
kW/month from June 1, 2006 to May 31, 2007. The
FERCs December 2005 rate order authorizes METC to collect
this rate, subject to any refunds that might be ordered as a
result of further hearings currently pending before the FERC on
this matter or the approval by the FERC of a settlement of the
issues set for hearing. In particular, the FERC has set for
hearing issues regarding the calculation of METCs rates,
including:
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the need for a mechanism to avoid over-collection of amounts
that METC could not collect during the period from
January 1, 2001 through December 31, 2005, when METC
was subject to a rate freeze, but which METC was authorized to
defer for subsequent collection;
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the accuracy of the computation of those deferred amounts and
the adequacy of information reflected in METCs FERC
Form No. 1;
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the reasonableness of the recovery of fees for services provided
by METCs affiliate, Trans-Elect Inc., or Trans-Elect;
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the proper calculation of the adjustment to METCs equity
account balance resulting from the sale, in December 2003, of
the limited partnership interests in MTH; and
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the need for additional information regarding expenses
associated with METCs operation and maintenance of
facilities that are jointly owned with others.
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Consumers Energy, the Michigan Public Service Commission, or the
MPSC, and METC filed requests for rehearing on matters not set
for further hearing by the FERC in the December 2005 order. On
August 22, 2006, the FERC issued an order denying these
rehearing requests, except that the FERC required METC to
maintain certain
9
accounting records related to pushdown accounting of goodwill.
The issues addressed in the August 22, 2006 order are final
and are no longer subject to further rehearing or judicial
review.
With respect to the issues set for further hearing in the
December 2005 rate order, following a recent suspension of the
schedule due to the acquisition of METC by ITC Holdings, the
FERC trial staff filed testimony in the case on
September 15, 2006. Consumers Energy filed cross answering
testimony on October 13, 2006. On November 10, 2006,
METC filed rebuttal testimony.
On December 5, 2006, METC and other parties to the rate
case jointly filed a motion to suspend the procedural schedule
and the FERC chief administrative law judge approved the
suspension. METC and the other parties are negotiating an
agreement in principle for settlement of all matters set for
hearing in the rate case. The terms of the agreement are
expected to be filed by January 26, 2007, but these terms
would be subject to FERC approval.
In the event a settlement does not become effective and the
procedural schedule resumes, we would continue to support the
rates METC charged beginning January 1, 2006 as modified by
the rebuttal testimony filed by METC in November 2006. We cannot
estimate the amount of refunds that may result from any
determinations made on the issues set for hearing. In the event
of adverse determinations on all matters set for hearing, we
estimate that the maximum potential refund amount relating to
2006 revenues could be approximately $23.0 million.
Additional refund amounts could result for periods subsequent to
2006 through the date of the FERCs determination. An
adverse determination on any of these matters could also affect
components used in determining the rate to be charged to
customers in METCs service territory in periods subsequent
to the determination.
After any FERC ruling on the issues set for further hearing in
the December 2005 rate order, interested parties may seek a
rehearing or judicial review of any order issued as a result of
or after those hearings. Although we cannot predict if any
subsequent requests for rehearing or appeals will be filed, the
FERC, in response to the requests for rehearing or on remand
after a successful appeal, could modify the terms of its
authorization of METCs current rates, including reducing
those rates retroactively to January 1, 2006 and ordering
refunds. This could result in a significant reduction in
METCs earnings from what we currently expect and,
accordingly, our financial condition, cash flows and results of
operations could be materially and adversely affected.
Certain
elements of ITCTransmissions and METCs cost recovery
through rates can be challenged which could result in lowered
rates and/or refunds of amounts previously collected and thus
have an adverse effect on our business, financial condition,
results of operations and cash flows.
ITCTransmission and METC provide transmission service
under rates regulated by the FERC. The FERC has approved
ITCTransmissions and METCs use of the rate
setting formula under Attachment O, but it has not expressly
approved the amount of ITCTransmissions or
METCs actual capital and operating expenditures to be used
in that formula. In addition, all aspects of
ITCTransmissions or METCs rates approved by
the FERC, including the Attachment O rate mechanism,
ITCTransmissions and METCs respective allowed
13.88% and 13.38% return of and on the actual equity portion of
their respective capital structures, and the data inputs
provided by ITCTransmission and METC for calculation of
each years rate, are subject to challenge by interested
parties at the FERC in a Section 206 proceeding under the
FPA.
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If a challenger can establish that any of these aspects are
unjust, unreasonable, imprudent or unduly discriminatory, then
the FERC will make appropriate prospective adjustments to them
and/or
disallow ITCTransmissions or METCs inclusion
of those aspects in the rate setting formula. This could result
in lowered rates
and/or
refunds of amounts collected after the date that a
Section 206 challenge is filed. In addition, the
FERCs order approving our acquisition of METC is
conditioned upon ITCTransmission and METC not recovering
acquisition-related costs in their rates unless a separate
informational filing is submitted to the FERC. The informational
filing, which could be challenged by interested parties, would
need to identify those costs and show that such costs are
outweighed by the benefits of the acquisition. Determinations by
ITCTransmission or METC that expenses included in
Attachment O for recovery are not acquisition-related costs are
also subject to challenge by interested parties at the FERC. If
challenged at the FERC and ITCTransmission or METC fail
to show that costs included for recovery are not
acquisition-related, this also could result in lowered rates
and/or
refunds of amounts collected. Such events could have an adverse
effect on our business, financial condition, results of
operations and cash flows.
ITCTransmissions
or METCs actual capital investments may be lower than
planned, which would decrease expected rate base and therefore
our revenues.
Each of ITCTransmissions and METCs rate base
is determined in part by additions to property, plant and
equipment when placed in service. If
ITCTransmissions or METCs capital investments
and the resulting in-service property, plant and equipment are
lower than anticipated for any reason, including, among other
things, the impact of weather conditions, union strikes, labor
shortages, material and equipment prices and availability, our
ability to obtain financing for such expenditures, if necessary,
limitations on the amount of construction that can be undertaken
on our system at any one time or regulatory approvals for
reasons relating to environmental, siting or regional planning
issues or as a result of legal proceedings and variances between
estimated and actual costs of construction contracts awarded,
ITCTransmission or METC will have a lower than
anticipated rate base thus causing its revenue requirement and
future earnings to be potentially lower than anticipated.
The
regulations to which we are subject may limit our ability to
raise capital and/or pursue acquisitions, development
opportunities or other transactions or may subject us to
liabilities.
Each of ITCTransmission and METC is a public
utility under the FPA and, accordingly, is subject to
regulation by the FERC. Approval of the FERC is required under
Section 203 of the FPA for a disposition or acquisition of
regulated public utility facilities, either directly or
indirectly through a holding company. Such approval also is
required to acquire securities in a public utility. Under the
Energy Policy Act of 2005, or the Energy Policy Act,
Section 203 of the FPA also provides the FERC with explicit
authority over utility holding companies purchases or
acquisitions of, and mergers or consolidations with, a public
utility. Finally, each of ITCTransmission and METC must
also seek approval by the FERC under Section 204 of the FPA
for issuances of its securities.
In addition, we are subject to local regulations relating to,
among other things, regional planning and siting. If we fail to
comply with these local regulations, we may incur liabilities
for such failure.
Changes
in federal energy laws, regulations or policies could impact
cash flows and could reduce the dividends we may be able to pay
our stockholders.
Attachment O, the rate formula mechanism used by
ITCTransmission and METC to calculate their respective
annual revenue requirements, will be used by ITCTransmission
and METC for that purpose until and unless it is determined
by the FERC to be unjust and unreasonable or another mechanism
is determined by the FERC to be just and reasonable. Such
determinations could result from challenges initiated at the
FERC by interested parties or the FERC in a proceeding under
Section 206 of the FPA, or by an application initiated by
ITCTransmission or METC under Section 205 of the
FPA. We cannot predict whether the approved rate methodologies
will be changed.
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Transmission costs constitute a relatively small portion of
end-use consumers overall electric utility costs. However,
some large end-use consumers and entities supplying electricity
to end-use consumers may attempt to influence government
and/or
regulators to change the rate setting system that applies to
ITCTransmission and METC, particularly if rates for
delivered electricity increase substantially.
Each of ITCTransmission and METC is regulated by the FERC
as a public utility under the FPA and is a
transmission owner in MISO. The FERC could propose new policies
and regulations concerning transmission services or rate setting
methodologies. In addition, the U.S. Congress periodically
considers enacting energy legislation that could shift new
responsibilities to the FERC, modify provisions of the FPA or
provide the FERC or another entity with increased authority to
regulate transmission matters. ITCTransmission and METC
cannot predict whether, and to what extent, ITCTransmission
and METC may be affected by any such changes in federal
energy laws, regulations or policies in the future.
If the
network load or point-to-point transmission service on either
ITCTransmissions or METCs transmission system is
lower than expected, the timing of collection of revenues would
be delayed.
If the network load on either ITCTransmissions or
METCs transmission system is lower than expected due to
weather, a weak economy, changes in the nature or composition of
the transmission grid in Michigan or surrounding regions, poor
transmission quality of neighboring transmission systems, or for
any other reason, the timing of the collection of our revenue
requirement would be delayed until such circumstances are
adjusted through the
true-up
mechanism in ITCTransmissions or METCs
formula rate mechanism.
ITCTransmissions
and METCs revenues and net income typically fluctuate on a
seasonal and quarterly basis.
Demand for electricity varies significantly with weather
conditions. As a result, ITCTransmission and METCs
overall revenues and net income typically fluctuate
substantially on a seasonal basis, thereby impacting
ITCTransmissions, METCs and our operating
results. In general, ITCTransmissions and
METCs revenues typically are higher in summer months,
although a particularly cool summer could reduce electricity
demand and revenues for that period as compared to the same
period of the previous year.
Each
of ITCTransmission and METC depends on its primary customer for
a substantial portion of its revenues, and any material failure
by those primary customers to make payments for transmission
services would adversely affect our revenues and our ability to
service ITCTransmissions and METCs and our debt
obligations.
ITCTransmission derives a substantial portion of its
revenues from the transmission of electricity to Detroit
Edisons local distribution facilities. Payments from
Detroit Edison, billed by MISO, constituted approximately 77% of
ITCTransmissions total operating revenues for the
year ended December 31, 2005 and are expected to constitute
the majority of ITCTransmissions revenues for the
foreseeable future. Detroit Edison is rated BBB/stable and
Baa1/stable by Standard & Poors Ratings Services
and Moodys Investors Services, Inc., respectively.
Similarly, Consumers Energy accounted for approximately 73% of
METCs revenues for the year ended December 31, 2005
and is expected to constitute the majority of METCs
revenues for the foreseeable future. Consumers Energy is rated
BB/stable and Baa3/stable by Standard & Poors
Ratings Services and Moodys Investors Service, Inc.,
respectively. Any material failure by Detroit Edison or
Consumers Energy to make payments for transmission services
would adversely affect our revenues and our ability to service
ITCTransmissions and METCs and our debt
obligations.
12
We may
be materially and adversely affected by the termination of
METCs services contract with Consumers
Energy.
Consumers Energy provides METC with operating, maintenance,
inspection and other services relating to METCs
transmission assets pursuant to a services contract. For the
years ended December 31, 2005 and 2004, METC paid
approximately $21.1 million and $19.7 million,
respectively, to Consumers Energy for these services and expects
to pay Consumers Energy approximately $21.7 million for the
year ended December 31, 2006. METC gave Consumers Energy
notice of termination of the system control and system
optimization portions of the services contract on
November 2, 2004 and of the remainder of the services
provided by Consumers Energy under the services contract on
February 6, 2006. Each of these notices is effective in May
2007. We have nearly completed the process of hiring staff and
procuring services to replace those provided under the services
contract and will contract with qualified parties on the most
economically attractive terms available to METC. After the
termination of the services contract, METC may not be able to
replace these services in a timely manner or on terms and
conditions, including service levels and costs, as favorable as
those METC has received from Consumers Energy.
Consumers Energy also provides certain transmission control
functions for METC at an integrated transmission and
distribution control center in Jackson, Michigan. Effective upon
the termination of the services contract in May 2007, METC will
be performing these functions. METC may not be able to hire all
of the qualified staff required to operate the new operations
and control center or the new operations and control center may
not be fully functional by the anticipated transition date, in
which event METC will be required to continue to rely on
Consumers Energy for the performance of those services even
after the termination of the services contract.
METC
does not own the majority of the land on which its transmission
assets are located and, as a result, it must comply with the
provisions of an easement agreement with Consumers
Energy.
METC does not own the majority of the land on which the
transmission assets it acquired from Consumers Energy are
located. Instead, under the provisions of an easement agreement
with Consumers Energy, METC pays an annual fee of approximately
$10.0 million to Consumers Energy in exchange for
rights-of-way, leases, fee interests and licenses which allow
METC to use the land on which its transmission lines are
located. Under the terms of the easement agreement, METCs
easement rights could be eliminated if METC fails to meet
certain requirements, such as paying contractual rent to
Consumers Energy in a timely manner.
Deregulation
and/or increased competition may adversely affect
ITCTransmissions and METCs customers, or Detroit
Edisons and Consumers Energys customers, which in
turn may reduce our revenues.
The business of ITCTransmissions and METCs
primary customers is subject to regulation that has undergone
substantial change in accordance with Michigan Public Act 141 of
2000, which mandates the implementation of retail access, as
well as changes in federal regulatory requirements. The utility
industry has also been undergoing dramatic structural change for
several years, resulting in increasing competitive pressures on
electric utility companies, such as Detroit Edison and Consumers
Energy. The manufacturing sector in Detroit Edisons and
Consumers Energys service territories has also been
subject to increasing competitive pressures. As a result, demand
for electricity transmission service by manufacturing companies
in ITCTransmissions and METCs service
territories may be negatively impacted. These factors may create
greater risks to the stability of Detroit Edisons and
Consumers Energys revenues and may affect Detroit
Edisons and Consumers Energys ability to make
payments for transmission service to MISO and thus to
ITCTransmission and METC, which would adversely affect
our financial condition and results of operations.
13
On April 1, 2005, MISO began centrally dispatching
generation resources throughout much of the Midwest with the
launch of its Midwest Energy Markets. Because of this
restructuring of power markets throughout the Midwest, the risk
profile of some of our customers may have changed, which may
affect their ability to pay for the services provided by
ITCTransmission and METC.
Hazards
associated with high-voltage electricity transmission may result
in suspension of ITCTransmissions or METCs
operations or the imposition of civil or criminal
penalties.
ITCTransmissions and METCs operations are
subject to the usual hazards associated with high-voltage
electricity transmission, including explosions, fires, inclement
weather, natural disasters, mechanical failure, unscheduled
downtime, equipment interruptions, remediation, chemical spills,
discharges or releases of toxic or hazardous substances or gases
and other environmental risks. The hazards can cause personal
injury and loss of life, severe damage to or destruction of
property and equipment and environmental damage, and may result
in suspension of operations and the imposition of civil or
criminal penalties. We maintain property and casualty insurance,
but we are not fully insured against all potential hazards
incident to our business, such as damage to poles and towers or
losses caused by outages.
ITCTransmission
and METC are subject to environmental regulations and to laws
that can give rise to substantial liabilities from environmental
contamination.
ITCTransmissions and METCs operations are
subject to federal, state and local environmental laws and
regulations, which impose limitations on the discharge of
pollutants into the environment, establish standards for the
management, treatment, storage, transportation and disposal of
hazardous materials and of solid and hazardous wastes, and
impose obligations to investigate and remediate contamination in
certain circumstances. Liabilities to investigate or remediate
contamination, as well as other liabilities concerning hazardous
materials or contamination such as claims for personal injury or
property damage, may arise at many locations, including formerly
owned or operated properties and sites where wastes have been
treated or disposed of, as well as at properties currently owned
or operated by ITCTransmission or METC. Such liabilities
may arise even where the contamination does not result from
noncompliance with applicable environmental laws. Under a number
of environmental laws, such liabilities may also be joint and
several, meaning that a party can be held responsible for more
than its share of the liability involved, or even the entire
share. Environmental requirements generally have become more
stringent in recent years, and compliance with those
requirements more expensive.
ITCTransmission and METC have incurred expenses in
connection with environmental compliance, and we anticipate that
each will continue to do so in the future. Failure to comply
with the extensive environmental laws and regulations applicable
to each could result in significant civil or criminal penalties
and remediation costs. ITCTransmissions and
METCs assets and operations also involve the use of
materials classified as hazardous, toxic, or otherwise
dangerous. Some of ITCTransmissions and METCs
facilities and properties are located near environmentally
sensitive areas such as wetlands and habitats of endangered or
threatened species. In addition, certain properties in which
ITCTransmission has an ownership interest or at which
ITCTransmission or METC operates are, and others are
suspected of being, affected by environmental contamination.
Compliance with these laws and regulations, and liabilities
concerning contamination or hazardous materials, may adversely
affect our costs and, therefore our business, financial
condition and results of operations.
In addition, claims have been made or threatened against
electric utilities for bodily injury, disease or other damages
allegedly related to exposure to electromagnetic fields
associated with electricity transmission and distribution lines.
We cannot assure you that such claims will not be asserted
against us or that, if determined in a manner adverse to our
interests, would not have a material adverse effect on our
business, financial condition and results of operations.
14
Acts
of war, terrorist attacks and threats or the escalation of
military activity in response to such attacks or otherwise may
negatively affect our business, financial condition and results
of operations.
Acts of war, terrorist attacks and threats or the escalation of
military activity in response to such attacks or otherwise may
negatively affect our business, financial condition and results
of operations in unpredictable ways, such as increased security
measures and disruptions of markets. Strategic targets, such as
energy related assets, including, for example,
ITCTransmissions and METCs transmission
facilities and Detroit Edisons and Consumers Energys
generation and distribution facilities, may be at risk of future
terrorist attacks. In addition to the increased costs associated
with heightened security requirements, such events may have an
adverse effect on the economy in general. A lower level of
economic activity could result in a decline in energy
consumption, which may adversely affect our business, financial
condition and results of operations.
Risks
Relating to the Acquisition of METC
We may
encounter difficulties consolidating METC into our business and
may not fully attain or retain, or achieve within a reasonable
time frame, expected strategic objectives, cost savings and
other expected benefits of the acquisition.
We expect to realize strategic and other benefits as a result of
ITC Holdings acquisition of the indirect ownership
interests in METC. Our ability to realize these benefits or
successfully consolidate METCs business with ours,
however, is subject to certain risks and uncertainties,
including, among others:
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the challenges of consolidating businesses;
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the costs of consolidating METC and upgrading and enhancing its
operations may be higher than we expect and may require more
resources, capital expenditures and management attention than
anticipated;
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delay of capital investments in METCs system due to
uncertainty around the timing of procurement of construction
materials;
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employees important to METCs operations may decide not to
continue employment with us; and
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we may be unable to anticipate or manage risks that are unique
to METCs historical business, including those related to
its workforce, customer demographics and information systems.
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In addition, METC may incur costs relating to the termination of
contracts for engineering and other services performed on behalf
of METC prior to the acquisition. METC may choose not to utilize
these services following consummation of ITC Holdings
acquisition of METC. We are in the process of identifying such
contracts, and METC has received invoices from one of its
vendors for aggregate termination payments of approximately
$2.8 million, which we are disputing. Any such termination
payments made by METC may have an adverse impact on our
financial position, results of operations and cash flows.
Our failure to manage these risks, or other risks related to the
acquisition that are not presently known to us, could prevent us
from realizing the expected benefits of the acquisition and also
may have a material adverse effect on our results of operations
and financial condition, which could cause the value of our
common stock to decline.
15
MTHs
independent accountants identified a material weakness in its
internal control over financial reporting and we cannot assure
you that the accounting staff at MTH has the technical resources
and expertise to account for and disclose more complex
items.
In performing the audit of MTHs financial statements as of
and for the year ended December 31, 2005, MTHs
independent accountants noted a matter involving MTHs
internal control over financial reporting that MTHs
independent accountants consider to be a material weakness.
MTHs internal control over financial reporting is a
process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of
financial statements in accordance with generally accepted
accounting principles. A material weakness is a control
deficiency, or a combination of control deficiencies, that
results in more than a remote likelihood that a material
misstatement of the annual or interim financial statements will
not be prevented or detected.
MTHs independent accountants noted as a material weakness
that the accounting staff at MTH requires additional technical
resources and expertise to properly account for and disclose
more complex items. MTHs independent accountants also
noted that MTHs principal accountant left the company in
the second quarter of 2006, which has further reduced the
expertise of MTHs accounting function and level of
institutional knowledge. Finally, MTHs independent
accountants noted that MTH does not have formal policies and
procedures for identifying, researching and ensuring compliance
with new accounting pronouncements.
MTH had begun the process of hiring additional accounting and
related staff; however, this process was halted in light of the
announcement of the acquisition of METC by ITC Holdings. ITC
Holdings accounting and other personnel with the required
expertise are addressing the material weakness identified by
MTHs independent accountants, and MTH and METC are now
subject to ITC Holdings system of internal control. We are
in the process of reviewing MTHs and METCs
accounting records and will reflect any necessary adjustments
identified in our December 31, 2006 financial statements.
Given the material weakness in MTHs internal control over
financial reporting described above, there is a risk that MTH
has not prevented or detected material misstatements or
irregularities in its historical financial statements.
Risks
Related to Our Capital Structure and Leverage
The
ability of stockholders of ITC Holdings other than the IT
Holdings Partnership, to influence our management and policies
will be limited as a result of the ownership of our common stock
by the IT Holdings Partnership.
As of December 31, 2006, the IT Holdings Partnership owned
26.9% of our common stock, compared to 53.4% as of
December 31, 2005. Even though the IT Holdings Partnership
owns less than 50% of our common stock, it continues to be our
largest single stockholder. The ability of our stockholders,
other than the IT Holdings Partnership, to influence our
management and policies continues to be limited, including with
respect to our acquisition or disposition of assets, the
approval of a merger or similar business combination, the
incurrence of indebtedness, the issuance of additional shares of
common stock or other equity securities and the payment of
dividends or other distributions on our common stock. In
addition, we cannot take certain actions that would adversely
affect the limited partners of the IT Holdings Partnership
without their approval. We cannot assure you that the interests
of the IT Holdings Partnership
and/or its
limited partners will not conflict with the interests of other
holders of our common stock.
We are
highly leveraged and our dependence on debt may limit our
ability to pay dividends and/or obtain additional
financing.
As of December 31, 2006, we had approximately
$1.3 billion of consolidated indebtedness.
16
As of December 31, 2006, ITCTransmission had
outstanding $185.0 million aggregate principal amount of
4.45% First Mortgage Bonds, Series A, due July 15,
2013 and $100.0 million aggregate principal amount of
6.125% First Mortgage Bonds, Series C, due March 31,
2036 and ITC Holdings had outstanding $267.0 million
aggregate principal amount of 5.25% Senior Notes due
July 15, 2013. Additionally, at December 31, 2006, we
had total revolving credit facility commitments at
ITCTransmission and ITC Holdings of $75.0 million
and $50.0 million, respectively, with $12.5 million
and no amounts drawn, respectively. At December 31, 2006,
ITC Holdings had outstanding $255.0 million aggregate
principal amount of 5.875% Senior Notes due 2016 and
$255.0 million aggregate principal amount of
6.375% Senior Notes due 2036.
As of December 31, 2006, METC had outstanding
$175.0 million aggregate principal amount of Senior Secured
Notes and total revolving credit facility commitments of
$35.0 million, with $14.0 million drawn.
This capital structure can have several important consequences,
including, but not limited to, the following:
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If future cash flows are insufficient, we or our subsidiaries
may need to incur further indebtedness in order to make the
capital expenditures and other expenses or investments planned
by us.
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Our indebtedness will have the general effect of reducing our
flexibility to react to changing business and economic
conditions insofar as they affect our financial condition and,
therefore, may pose substantial risk to our stockholders. A
substantial portion of the dividends and payments in lieu of
taxes we receive from ITCTransmission and METC will be
dedicated to the payment of interest on our indebtedness,
thereby reducing the funds available for the payment of
dividends on our common stock.
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In the event that we are liquidated, any of our senior or
subordinated creditors and any senior or subordinated creditors
of our subsidiaries will be entitled to payment in full prior to
any distributions to the holders of our shares of common stock.
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Our credit facilities mature in March 2010, and our ability to
secure additional financing prior to or after that time, if
needed, may be substantially restricted by the existing level of
our indebtedness and the restrictions contained in our debt
instruments.
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We may incur substantial indebtedness in the future. The
incurrence of additional indebtedness would increase the
leverage-related risks described in this prospectus.
Certain
provisions in our debt instruments limit our capital
flexibility.
Our debt instruments include senior notes, secured notes, first
mortgage bonds and revolving credit facilities containing
numerous financial and operating covenants that place
significant restrictions on, among other things, our ability to:
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incur additional indebtedness;
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engage in sale and lease back transactions;
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create liens or other encumbrances;
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enter into mergers, consolidations, liquidations or
dissolutions, or sell or otherwise dispose of all or
substantially all of our assets;
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make capital expenditures at METC prior to the final
determination of METCs rate case, other than capital
expenditures that METC reasonably believes are necessary to
comply with its obligations as a regulated transmission
company; and
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pay dividends or make distributions on ITC Holdings and
ITCTransmissions capital stock.
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The revolving credit facilities and METCs Senior Secured
Notes also require us to meet certain financial ratios. Our
ability to comply with these and other requirements and
restrictions may be affected by changes in economic or business
conditions, results of operations or other events beyond our
control. A failure to comply with the obligations contained in
any of our debt instruments could result in acceleration of the
related debt and the acceleration of debt under other
instruments evidencing indebtedness that may contain cross
acceleration or cross default provisions.
17
Adverse
changes in our credit ratings may negatively affect
us.
Our ability to access capital markets is important to our
ability to operate our business. Increased scrutiny of the
energy industry and the impacts of regulation, as well as
changes in our financial performance could result in credit
agencies reexamining our credit rating. A downgrade in our
credit rating could restrict or discontinue our ability to
access capital markets at attractive rates and increase our
borrowing costs. A rating downgrade could also increase the
interest we pay under our revolving credit facilities.
Our
recent public offering caused us to undergo an ownership
change for purposes of Section 382 of the Internal
Revenue Code which will limit the amount of our net operating
loss carryforwards that we may use to reduce our tax liability
in a given period.
As of December 31, 2005, we had net operating loss
carryforwards, or NOLs, of $71.1 million. These NOLs may be
used to offset future taxable income and thereby reduce our
U.S. federal income taxes otherwise payable.
Section 382 of the Internal Revenue Code of 1986, as
amended, imposes an annual limit on the ability of a corporation
that undergoes an ownership change to use its NOLs
to reduce its tax liability. In the event of an ownership
change, we would not be able to use our pre-ownership change
NOLs in excess of the limitation imposed by Section 382 for
each annual period. Our recent public offering caused us to
experience an ownership change.
In addition, ITC Holdings estimates that it acquired
approximately $50.0 million of NOLs when we acquired all of
the indirect ownership interests in METC in October 2006. We
will be subject to annual limitations on the use of such NOLs as
a result of the acquisition of all of the indirect ownership
interests in METC by ITC Holdings, as well as limitations
resulting from prior transactions by the acquired entities.
While our NOLs may be subject to an annual limitation as a
result of the ownership changes described above, we expect that
our ability to use the NOLs over time will not be materially
affected by such limitation, although we cannot assure you in
this regard.
We may
not be able to pay dividends, and the reduction or elimination
of dividends would negatively affect the market price of our
common stock.
While we currently intend to continue to pay quarterly dividends
on our common stock, we have no obligation to do so. Dividend
payments are within the absolute discretion of our board of
directors and will depend on, among other things, our results of
operations, working capital requirements, capital expenditure
requirements, financial condition, contractual restrictions,
anticipated cash needs and other factors that our board of
directors may deem relevant. For example, we may not generate
sufficient cash from operations in the future to pay dividends
on our common stock in the intended amounts or at all. In
addition, ITC Holdings is a holding company and its ability to
pay dividends may be limited by restrictions upon transfer of
funds applicable to its subsidiaries (including, for example,
those which are contained in ITCTransmissions
revolving credit facility, METCs Senior Secured Notes,
METCs revolving credit facility and the IT Holdings
Partnership agreement). As a holding company without any
specific operations, ITC Holdings is dependent on receiving
dividends from its operating subsidiaries, such as
ITCTransmission and METC and its other subsidiaries, in
order to be able to make dividend distributions of its own. Any
reduction or elimination of dividends could adversely affect the
market price of our common stock.
Provisions
in the Articles of Incorporation and bylaws of ITC Holdings and
Michigan corporate law may prevent efforts by our stockholders
to change the direction or management of our
company.
The Articles of Incorporation and bylaws of ITC Holdings contain
provisions that might enable our management to resist a proposed
takeover. These provisions could discourage, delay or prevent a
change of control or an acquisition at a price that our
stockholders may find attractive. These provisions also may
discourage proxy contests and make it more difficult for our
stockholders to elect directors and take other corporate
actions.
18
The existence of these provisions could limit the price that
investors might be willing to pay in the future for shares of
our common stock. These provisions include:
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a requirement that special meetings of our stockholders may be
called only by our board of directors, the chairman of our board
of directors, our president or the holders of a majority of the
shares of our outstanding common stock;
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a requirement of unanimity when stockholders are acting by
consent without a meeting if the IT Holdings Partnership owns
less than 35% of our shares of common stock;
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advance notice requirements for stockholder proposals and
nominations; and
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the authority of our board to issue, without stockholder
approval, common or preferred stock, including in connection
with our implementation of any stockholders rights plan, or
poison pill.
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Provisions
of the Articles of Incorporation of ITC Holdings restrict market
participants from voting or owning 5% or more of the outstanding
shares of capital stock of ITC Holdings.
ITCTransmission was granted favorable rate treatment by
the FERC based on its independence from market participants. The
FERC defines a market participant to include any
person or entity that, either directly or through an affiliate,
sells or brokers electricity, or provides ancillary services to
MISO. An affiliate, for these purposes, includes any person or
entity that directly or indirectly owns, controls or holds with
the power to vote 5% or more of the outstanding voting
securities of a market participant. To help ensure that ITC
Holdings and its subsidiaries will remain independent of market
participants, ITC Holdings Articles of Incorporation
impose certain restrictions on the ownership and voting of
shares of capital stock of ITC Holdings by market participants.
In particular, the Articles of Incorporation provide that ITC
Holdings is restricted from issuing any shares of capital stock
or recording any transfer of shares if the issuance or transfer
would cause any market participant, either individually or
together with members of its group (as defined in
Commission beneficial ownership rules), to beneficially own 5%
or more of any class or series of our capital stock.
Additionally, if a market participant, together with its group
members, acquires beneficial ownership of 5% or more of any
series of the outstanding shares of capital stock of ITC
Holdings, such market participant or any stockholder who is a
member of a group including a market participant will not be
able to vote or direct or control the votes of shares
representing 5% or more of any series of ITC Holdings
outstanding capital stock. Finally, to the extent a market
participant, together with its group members, acquires
beneficial ownership of 5% or more of the outstanding shares of
any series of capital stock of ITC Holdings, the Articles of
Incorporation allow the board of directors of ITC Holdings to
redeem any shares of capital stock of ITC Holdings so that,
after giving effect to the redemption, the market participant,
together with its group members, will cease to beneficially own
5% or more of that series of ITC Holdings outstanding
capital stock.
Future
sales of our shares could depress the market price of our common
stock.
The market price of our common stock could decline as a result
of sales of a large number of shares of our common stock in the
market or the perception that these sales could occur. These
sales, or the possibility that these sales may occur, also might
make it more difficult for us to sell equity securities in the
future at a time and at a price that we deem appropriate.
Pursuant to the management stockholders agreements that we
entered into with each of our employees who have purchased or
been granted shares of our common stock under the 2003 Stock
Purchase and Option Plan, generally these employee stockholders
have the right, upon the sale by the IT Holdings Partnership of
shares of our common stock in any underwritten offering, to sell
a percentage of the shares of our common stock that the employee
stockholders hold at the time of the offering and any shares of
our common stock underlying then exercisable options. Under the
management stockholders agreements, as a percentage of
total shares held, the employee stockholders would be eligible
to sell a percentage equal to the percentage sold by the IT
Holdings Partnership in any underwritten offering. Otherwise,
each of these employee stockholders is restricted from selling
any common stock he or she holds until the fifth anniversary of
the date of the execution of the employee stockholders
respective management stockholders agreement (which were
generally entered into between February 2003 and November 2004),
which date in all cases falls after 90 days from the date
of this prospectus. The piggyback registration
rights described above
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also expire on such fifth anniversary. However, the management
stockholders agreements have been modified with respect to
new employees hired after November 16, 2005 who have
received restricted stock grants after that date so that such
employees will not have piggyback registration
rights with respect to such stock and will not have vesting
rights in such stock upon any change of control of our company.
In the past, ITC Holdings has received from all management
stockholders with piggyback registration rights
agreements to waive their piggyback registration
rights in public offerings of our common stock by the IT
Holdings Partnership. In exchange for these waivers, we have
provided these management stockholders the right to sell,
pursuant to a registration statement on
Form S-8,
at any time, all or any portion of the same number of shares of
ITC Holdings common stock that those management
stockholders could have disposed of by exercising their
piggyback registration rights in the relevant public
offering.
Management stockholders agreements do not apply to grants
under the 2006 Long Term Incentive Plan. The compensation
committee of our board of directors may approve restrictions on
shares granted under that plan. On August 16, 2006, the
compensation committee approved grants of shares of restricted
stock that vest on August 16, 2011 and options to purchase
shares of our common stock which vest 20% per year over a
five-year period from the date of the grant.
As of the date of this prospectus, we had approximately
42,403,760 shares of common stock outstanding. Of those
shares, 27,982,263 shares, will be freely tradable.
Approximately 458,196 shares subject to options held by our
employees are eligible for resale as of the date of this
prospectus, subject to restrictions under the Securities Act.
Approximately 14,421,497 shares outstanding as of the date
of this prospectus are eligible for resale from time to time,
subject to the contractual restrictions on sales referred to
above and to the volume, manner of sale and other conditions of
Rule 144.
In addition, as of the date of this prospectus,
4,446,660 shares were available for future issuance under
our 2003 Stock Purchase and Option Plan, Employee Stock Purchase
Plan and 2006 Long Term Incentive Plan, including
1,168,831 shares issuable upon the exercise of outstanding
stock options, of which 2,650,023 were vested as of the date of
this prospectus. In the future, we may issue our common stock in
connection with investments or repayment of our debt. The amount
of such common stock issued could constitute a material portion
of our then outstanding common stock.
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USE OF
PROCEEDS
In the case of a sale of common stock by us, the use of proceeds
will be specified in the applicable prospectus supplement. In
the case of a sale of securities by any selling stockholder, we
will not receive the proceeds from such sale.
DESCRIPTION
OF OUR CAPITAL STOCK
The following is a summary of the material terms of ITC
Holdings capital stock and the provisions of ITC
Holdings Amended and Restated Articles of Incorporation
and amended and restated bylaws, which we refer to as our
capital stock, our Articles of Incorporation
and our bylaws, respectively. It also summarizes
relevant provisions of the Michigan Business Corporation Act, or
MBCA. Since the terms of our Articles of Incorporation, bylaws
and the MBCA are more detailed than the general information
provided below, we urge you to read the actual provisions of
those documents and the MBCA. The following summary of our
capital stock is subject in all respects to the MBCA, our
Articles of Incorporation and our bylaws. Our Articles of
Incorporation and bylaws are incorporated by reference in the
registration statement of which this prospectus forms a part.
General
As of the date of this prospectus, ITC Holdings authorized
capital stock consisted of:
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100 million shares of common stock, without par
value; and
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10 million shares of preferred stock, without par value.
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As of the date of this prospectus, there were
42,403,760 shares of our common stock outstanding and no
shares of preferred stock outstanding and 324 holders of record
of our common stock.
Common
Stock
All of the outstanding shares of our common stock are fully paid
and nonassessable.
Voting Rights. Each holder of our common
stock, including holders of common stock subject to restricted
stock awards, is entitled to cast one vote for each share held
of record on all matters submitted to a vote of stockholders,
including the election of directors, subject to the restrictions
on market participants described below. Holders of our common
stock have no cumulative voting rights.
Dividends. Holders of our common stock,
including holders of common stock subject to restricted stock
awards, are entitled to receive dividends or other distributions
declared by the board of directors. The right of the board of
directors to declare dividends is subject to the right of any
holders of ITC Holdings preferred stock, to the extent
that any preferred stock is authorized and issued, and the
availability under the MBCA of sufficient funds to pay
dividends. We have not issued any shares of preferred stock. The
declaration and payment of dividends is subject to the
discretion of ITC Holdings board of directors and depends
on various factors, including our net income, financial
condition, cash requirements, future prospects and other factors
deemed relevant by our board of directors. As a holding company
with no business operations, ITC Holdings material assets
consist only of the stock of any subsidiaries ITC Holdings may
have, deferred tax assets relating primarily to federal income
tax operating loss carryforwards and cash on hand. ITC
Holdings only sources of cash to pay dividends to its
stockholders are dividends and other payments received by ITC
Holdings from time to time from its subsidiaries and the
proceeds raised from the sale of our debt and equity securities.
Each of ITC Holdings subsidiaries, however, is legally
distinct from ITC Holdings and has no obligation, contingent or
otherwise, to make funds available to ITC Holdings for the
payment of dividends to ITC Holdings stockholders or
otherwise. The ability of ITC Holdings subsidiaries to pay
dividends and make other payments to ITC Holdings is subject to,
among other things, the availability of funds, after taking into
account capital expenditure requirements, the terms of its
indebtedness, applicable state laws and regulations of the FERC
and the FPA. The debt agreements to which ITC Holdings,
ITCTransmission, MTH and METC are parties contain
covenants that could limit our ability to pay dividends, as well
as covenants that prohibit us from paying dividends if we are in
default under our revolving credit facilities.
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Liquidation Rights. If our company is
dissolved, the holders of our common stock will share ratably in
the distribution of all assets that remain after we pay all of
our liabilities and satisfy our obligations to the holders of
any of ITC Holdings preferred stock, to the extent that
any preferred stock is authorized and issued.
Preemptive and Other Rights. Holders of our
common stock have no preemptive rights to purchase or subscribe
for any stock or other securities of our company and, other than
as described below, there are no conversion rights or redemption
or sinking fund provisions with respect to our common stock.
Repurchases. In August 2005, we repurchased
28,675 shares of our common stock for an aggregate of
$0.8 million, which represented shares of common stock
delivered to us by employees as payment of tax withholdings due
to us upon the vesting of restricted stock awards. During the
fourth quarter of 2006, we repurchased 30,605 shares of our
common stock for an aggregate amount of $1.0 million, which
represented shares of common stock delivered to us by employees
as payment of tax withholdings due to us upon the vesting of
restricted stock awards.
Restrictions on Ownership by Market
Participants. Our Articles of Incorporation
include the following restrictions on issuance to, and ownership
and voting of ITC Holdings capital stock by, market
participants, as defined below, which are provisions that
were designed to ensure that ITCTransmission remains an
independent transmission company eligible for
favorable regulatory treatment, consistent with FERC orders.
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We are restricted from issuing any shares of capital stock or
recording any transfer of shares if the issuance or transfer
would cause any market participant, either individually or
together with members of its group (as defined in
Commission beneficial ownership rules), to beneficially own 5%
or more of any class or series of our capital stock, provided
that we may issue shares in excess of 5% to underwriters or
initial purchasers in underwritten offerings or private
placements approved by our board of directors. In addition, this
restriction will not preclude settlement of any transfer that
occurs on the New York Stock Exchange, or NYSE (or another
national securities exchange or automated inter-dealer quotation
system on which the shares may trade).
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If a market participant, together with its group members,
beneficially owns 5% or more of any class or series of our
capital stock, that market participant, together with its group
members, will not be permitted to exercise voting rights on
shares constituting 5% or more of that class or series.
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We will have the right to redeem shares of capital stock
beneficially owned by a market participant (or its group
members) if that market participant, together with its group
members, beneficially owns 5% or more of any class or series of
our capital stock so that the market participant, together with
its group members, ceases to beneficially own 5% or more of that
class or series.
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Prior to redeeming any shares, we will be required to give at
least 45 days written notice to the holder of the
shares. Prior to the redemption date, the stockholder may sell
any shares that would otherwise be redeemed to avoid redemption
of those shares. The redemption price for any shares redeemed
will be the fair market value of the shares, as determined by
our board of directors in good faith. If our shares are listed
on the NYSE (or another national securities exchange or
automated inter-dealer quotation system), the fair market value
will be equal to the lesser of (x) the volume weighted
average price for the shares over the 10 most recent trading
days immediately prior to the delivery of the redemption notice
and (y) the volume weighted average price for the shares
over the 10 trading days immediately prior to the date the
shares are redeemed.
A market participant has the meaning given to that
term by the FERC and includes:
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any person or entity that, either directly or through an
affiliate, sells or brokers electric energy, or provides
ancillary services to ITCTransmission or to a Regional
Transmission Organization, or RTO, to which we belong (unless
the FERC finds that the person or entity does not have economic
or commercial interests that would be significantly affected by
the actions or decisions of ITCTransmission or an RTO to
which we belong); or
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any other person or entity that the FERC finds to be a market
participant because it has economic or commercial interests that
would be significantly affected by the actions or decisions of
ITCTransmission or any RTO to which we belong.
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An affiliate, for these purposes, includes any person or entity
that directly or indirectly owns, controls or holds with the
power to vote 5% or more of the outstanding voting securities of
a market participant.
A determination by our board of directors, acting in good faith,
that a person or entity is a market participant will be binding
on all stockholders. In determining whether any shares of
capital stock are beneficially owned by a market participant, or
its group members, our board of directors may rely solely on our
stock transfer records, public filings with the Commission on
Schedule 13G or Schedule 13D by beneficial owners of
our shares and on the declarations described below.
Certain Stockholders Required to Certify as to Market
Participant Relationships. Our Articles of
Incorporation permit, and require if we request, the following
persons or entities to make certain declarations to us:
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any person or entity that, together with its group members,
acquires beneficial ownership of 5% or more of any class or
series of capital stock of ITC Holdings and which has made a
filing with the Commission under
Regulation 13D-G
in respect of such beneficial ownership; or
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any person or entity (other than a depositary institution or
broker-dealer who is not a beneficial owner for purposes of
Regulation 13D-G) that is a record holder of 5% or more of any
class or series of capital stock of ITC Holdings.
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The declaration must be delivered to us within 10 days of
any request and must include the following information:
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the number of shares of capital stock beneficially owned by such
person or entity, together with its group members, together with
the name of the record holders of such shares; and
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a certification by such person or entity that neither it nor its
group members is a market participant (or, in lieu of such
certification, the stockholder may deliver a certified list of
all of such persons or entitys activities and
investments related to the sale, marketing, trading, brokering
or distribution of electric energy or provision of ancillary
services to ITCTransmission or to the RTO to which we
belong).
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Any person, entity or group that fails to deliver the
declaration when requested by us to do so will be deemed to be a
market participant for purposes of the voting restrictions and
redemption provisions described above, unless that person,
entity or group subsequently delivers the required declaration
to ITC Holdings and the board of directors determines that such
person, entity or group is not a market participant.
Preferred
Stock
Our Articles of Incorporation authorize our board of directors
to establish one or more series of preferred stock. Unless
required by law or by any stock exchange on which our common
stock is listed, the authorized shares of preferred stock will
be available for issuance without further action by you. Our
board of directors is authorized to determine, with respect to
any series of preferred stock, the terms and rights of that
series including:
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the number of shares of the series;
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the designation of the series;
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the rights with respect to dividends, if any, of the series;
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the conversion and redemption rights, if any, of the series;
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the rights of holders of the series upon liquidation,
dissolution or winding up of ITC Holdings, or in the event of
any merger, consolidation or sale of assets;
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the terms of any sinking fund, redemption, repurchase or
purchase account, if any, to be provided for shares of the
series;
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the preferences and relative, participating, optional or other
special rights, if any, and any qualifications, limitations or
restrictions of the series; and
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the voting rights, if any, of the holders of the series.
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23
Provisions
That May Discourage Takeovers
The MBCA and our Articles of Incorporation and bylaws contain
provisions that may have the effect of discouraging transactions
involving an actual or threatened change of control. These
provisions could protect the continuity of our directors and
management and possibly deprive our stockholders of an
opportunity to sell their shares of common stock at prices
higher than the prevailing market prices. The following
description is subject in its entirety to applicable provisions
of the MBCA and our Articles of Incorporation and bylaws.
Availability of Authorized but Unissued
Shares. Under the terms of our Articles of
Incorporation, our board of directors may issue shares of
authorized common stock without stockholder approval. However,
the listing requirements of the NYSE, which would apply so long
as our common stock is listed on the NYSE, require stockholder
approval of certain issuances equal to or exceeding 20% of the
then-outstanding voting power or then-outstanding number of
shares of common stock. If our board of directors decides to
issue shares to persons supportive of current management, this
could render more difficult or discourage an attempt to obtain
control of our company by means of a merger, tender offer, proxy
contest or otherwise. Authorized but unissued shares also could
be used to dilute the stock ownership of persons seeking to
obtain control of our company, including dilution through a
stockholder rights plan of the type commonly known as a
poison pill, which the board of directors could
adopt without a stockholder vote.
Issuance of Preferred Stock. In addition, our
board of directors could issue shares of preferred stock having
voting rights that adversely affect the voting power of holders
of our common stock, which could have the effect of delaying,
deferring or impeding a change in control of our company.
No Cumulative Voting. Under the MBCA,
stockholders do not have cumulative voting rights for the
election of directors unless the Articles of Incorporation so
provide. Our Articles of Incorporation do not provide for
cumulative voting.
Limitation on Calling Special Meetings of
Stockholders. The MBCA allows the board of
directors or officers, directors or stockholders authorized in
our bylaws to call special meetings of stockholders. Our bylaws
provide that a special meeting may be called by our board of
directors, the chairperson of the board (if the office is
filled) or president, and shall be called by the president or
secretary at the written request of stockholders holding a
majority of the outstanding shares of stock entitled to vote at
the proposed special meeting. Business to be transacted at a
special meeting is limited by our bylaws to the purpose or
purposes stated in the notice of the meeting.
Action Without Meeting of Stockholders. As
long as the IT Holdings Partnership, or its affiliates or
limited partners or their respective affiliates, hold less than
35% of the outstanding capital stock of ITC Holdings, any action
required or permitted by the MBCA to be taken at a meeting of
stockholders may be taken without a meeting, without prior
notice and without a vote, only if consent in writing to such
action is signed by the holders of all of the outstanding
capital stock.
Advance Notice Requirements for Stockholder Proposals and
Director Nominations. Our bylaws provide that
stockholders seeking to nominate candidates for election as
directors or to bring business before an annual or special
meeting of stockholders must provide timely notice of their
proposal in writing to the corporate secretary. Generally, to be
timely, a stockholders notice must be received at our
principal executive offices not less than 90 days nor more
than 120 days prior to the first anniversary date of the
previous years annual meeting or, in the case of a special
meeting, the date of the special meeting. Our bylaws also
specify requirements as to the form and content of a
stockholders notice. These provisions may impede
stockholders ability to bring matters before an annual or
special meeting of stockholders or make nominations for
directors at an annual or special meeting of stockholders.
Business Combinations and Change of
Control. The MBCA contains statutes which
regulate business combinations and changes in control of
Michigan corporations.
Chapter 7A of the MBCA provides that a business combination
subject to Chapter 7A between a covered Michigan
corporation or any of its subsidiaries and a beneficial owner of
shares entitled to 10% or more of the voting power of such
corporation generally requires the affirmative vote of 90% of
the votes of each class of stock entitled to vote, and not less
than two thirds of the votes of each class of stock entitled to
vote (excluding voting shares owned by such 10% or more owner),
voting as a separate class. These requirements do not apply if
(1) the corporations board of
24
directors approves the transaction before the 10% or more owner
becomes such or (2) the transaction satisfies certain
fairness standards, certain other conditions are met and the 10%
or more owner has been such for at least five years.
Chapter 7A business combinations include, among other
transactions, mergers, significant asset transfers, certain
disproportionate issuances of shares to an interested
stockholder, certain reclassifications and recapitalizations
disproportionately favorable to such stockholder, and the
adoption of a plan of liquidation or dissolution in which such a
stockholder would receive anything other than cash.
Chapter 7A does not restrict the purchase of shares from
other stockholders in the open market, through private
transactions or acquired through a tender offer.
As permitted by Chapter 7A, our Articles of Incorporation
provide that we are not governed by the provisions of that
Chapter. In order for ITC Holdings to become subject to the
provisions of Chapter 7A, our stockholders would have to
vote affirmatively to amend our Articles of Incorporation.
Chapter 7B of the MBCA provides that, unless a
corporations articles of incorporation or bylaws provide
that Chapter 7B does not apply, control shares
of a corporation acquired in a control share acquisition have no
voting rights except as granted by the stockholders of the
corporation. Control shares are outstanding shares
which, when added to shares previously owned by a stockholder,
increase such stockholders voting power, acting alone or
in a group, to exceed three separate thresholds of the
outstanding shares: (1) one-fifth or more but less than
one-third, (2) one-third or more but less than a majority,
or (3) more than a majority of the shares entitled to vote
for the election of directors. To confer voting rights, a
control share acquisition must be approved by the affirmative
vote of a majority of the votes cast by holders of all shares
entitled to vote, excluding shares owned by the acquiror and
certain officers and employee directors. However, no such
approval is required for gifts or other transactions not
involving consideration, for a merger to which the corporation
is a party or for certain other transactions described in
Chapter 7B. Although control shares include, for the
purpose of determining whether the thresholds have been met,
shares beneficially owned by persons acting as a group, the
formation of a group does not constitute a control share
acquisition of shares held by members of the group.
Chapter 7B applies to Michigan corporations which have 100
or more stockholders of record, their principal place of
business or substantial assets in Michigan and at least one of
the following characteristics: (a) more than 10% of their
shares are owned of record by Michigan residents; (b) more
than 10% of their stockholders of record are Michigan residents;
or (c) 10,000 of their stockholders of record are Michigan
residents.
As permitted by Chapter 7B, our bylaws provide that we will
not be governed by the provisions of that Chapter. In order for
ITC Holdings to become subject to the provisions of
Chapter 7B, our board of directors or stockholders may at
any time amend our bylaws to cause Chapter 7B to become
applicable to us if the statutory conditions for applicability
are satisfied.
Limitation
on Liability and Indemnification of Officers and
Directors
As permitted by the MBCA, our Articles of Incorporation and
bylaws generally limit the personal liability of our directors
to us and our stockholders for breach of their fiduciary duty
and require us to indemnify our directors and officers to the
fullest extent permitted by the MBCA. Specifically, our bylaws
require us to indemnify directors and officers against expenses
(including actual and reasonable attorneys fees),
judgments, penalties, fines, excise taxes and settlements
actually and reasonably incurred in connection with any
threatened, pending or completed action or proceeding brought
against a director or officer by reason of the fact that the
person is or was a director or officer of ITC Holdings or, while
serving as a director or officer, is or was serving at the
request of ITC Holdings as a director, officer, member, partner,
trustee, employee, fiduciary or agent of another enterprise to
the maximum extent permitted by, and in accordance with the
procedures and requirements specified in, the MBCA. Our bylaws
also provide that indemnification is a contractual right between
us and the officer or director, who may not be adversely
affected by a repeal of the indemnification provisions of our
bylaws.
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The MBCA and our bylaws authorize us to purchase and maintain
insurance on behalf of a person who is or was a director,
officer, employee or agent of ITC Holdings or who serves at the
request of ITC Holdings as a director, officer, partner,
trustee, employee or agent of another enterprise, whether or not
we would have the power to indemnify him or her under the bylaws
or the laws of the State of Michigan. We maintain a
directors and officers insurance policy. The policy
insures directors and officers against unindemnified losses from
certain wrongful acts in their capacities as directors and
officers and reimburses us for those losses for which we have
lawfully indemnified the directors and officers.
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to officers and directors
pursuant to the provisions described above or otherwise, we have
been advised that, in the opinion of the Commission, such
indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable.
Transfer
Agent and Registrar
Computershare Trust Company, N.A. is the transfer agent and
registrar for our common stock.
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PLAN OF
DISTRIBUTION
We and/or a
selling stockholder may sell shares of common stock from time to
time in any of the following ways:
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through underwriters or dealers;
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directly to a limited number of purchasers or to a single
purchaser; or
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through agents.
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The prospectus supplement will set forth the terms of the
offering of such shares of common stock, including:
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the name or names of any underwriters, dealers or agents and the
amounts of shares of common stock underwritten or purchased by
each of them; and
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the public offering price of the shares of common stock and the
proceeds to us
and/or the
selling stockholder, if applicable, and any discounts,
commissions or concessions allowed or reallowed or paid to
dealers.
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Any public offering price and any discounts or concessions
allowed or reallowed or paid to dealers may be changed from time
to time.
We and/or
the selling stockholder, if applicable, may affect the
distribution of the shares from time to time in one or more
transactions either:
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at a fixed price or at prices that may be changed;
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at market prices prevailing at the time of the sale;
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at prices relating to such prevailing market prices;
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at varying prices determined at the time of sale; or
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at negotiated prices.
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Transactions through dealers may include block trades in which
dealers will attempt to sell the shares of common stock as agent
but may position and resell the block as principal to facilitate
the transaction. The shares of common stock may be sold through
dealers or agents or to dealers acting as market makers.
If underwriters are used in the sale of any shares of common
stock, the shares will be acquired by the underwriters for their
own account and may be resold from time to time in one or more
transactions, including negotiated transactions, at a fixed
public offering price or at varying prices determined at the
time of sale. The shares of common stock may be either offered
to the public through underwriting syndicates represented by
managing underwriters, or directly by underwriters. Generally,
the underwriters obligations to purchase the shares of
common stock will be subject to certain conditions precedent.
The underwriters will be obligated to purchase all of the shares
of common stock if they purchase any of the shares of common
stock (other than any shares of common stock purchased upon
exercise of any over-allotment option, if any).
We and/or a
selling stockholder may sell the shares of common stock through
agents from time to time. The prospectus supplement will name
any agent involved in the offer or sale of the shares of common
stock and any commissions paid to them. Generally, any agent
will be acting on a best efforts basis for the period of its
appointment. Any underwriters, broker-dealers and agents that
participate in the distribution of the shares of common stock
may be deemed to be underwriters as defined in
Section 2(a)(11) of the Securities Act. Any commissions
paid or any discounts, commissions or concessions allowed to any
such persons, and any profits they receive on resale of the
shares of
common stock, may be deemed to be underwriting discounts and
commissions under the Securities Act. We will identify any
underwriters or agents and describe their compensation in the
applicable prospectus supplement.
The shares of common stock may be sold on any national
securities exchange on which the common stock may be listed at
the time of sale, in the over-the-counter market or in
transactions otherwise than on such exchanges or in the
over-the-counter market or in transactions that include special
offerings and exchange distributions pursuant to and in
accordance with the rules of such exchanges.
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We or a selling stockholder may enter into derivative
transactions or forward sale agreements on shares of common
stock with third parties. In such event, we or the selling
stockholder, if applicable, may pledge the shares underlying
such transactions to the counterparties under such agreements,
to secure our or the selling stockholders delivery
obligations. The counterparties or third parties may borrow
shares of common stock from us, the selling stockholder or third
parties and sell such shares in a public offering. This
prospectus may be delivered in conjunction with such sales. Upon
settlement of such transactions, we
and/or the
selling stockholder, if applicable, may deliver shares of common
stock to the counterparties that, in turn, the counterparties
may deliver to us, the selling stockholder or third parties, as
the case may be, to close out the open borrowings of shares of
common stock. The counterparty in such transactions will be an
underwriter and will be identified in the applicable prospectus
supplement.
A prospectus supplement may be used for resales from time to
time by any holder of our shares of common stock that may
acquire such shares of common stock upon an in-kind distribution
by any existing stockholder of all or a portion of such existing
stockholders shares of common stock to its limited and
general partners. Such selling stockholder may include direct
and indirect transferees, pledgees, donees and successors of a
selling stockholder. Further, a prospectus supplement may be
used in connection with sales or resales by any general partner
of a selling stockholder in connection with sales by such
general partner for cash or subsequent transfers by such general
partner to its limited partners of their ratable portion of the
shares then owned by such general partner, together with resales
of such shares by such limited partners.
Underwriters or agents may purchase and sell the shares of
common stock in the open market. These transactions may include
over-allotment, stabilizing transactions, syndicate covering
transactions and penalty bids. Over-allotment involves sales in
excess of the offering size, which creates a short position.
Stabilizing transactions consist of bids or purchases for the
purpose of preventing or retarding a decline in the market price
of the securities and are permitted so long as the stabilizing
bids do not exceed a specified maximum. Syndicate covering
transactions involve the placing of any bid on behalf of the
underwriting syndicate or the effecting of any purchase to
reduce a short position created in connection with the offering.
The underwriters or agents also may impose a penalty bid, which
permits them to reclaim selling concessions allowed to syndicate
activities that may stabilize, maintain or otherwise affect the
market price of the shares of common stock, which may be higher
than the price that might otherwise prevail in the open market.
These activities, if begun, may be discontinued at any time.
These transactions may be effected on any exchange on which the
shares of common stock are traded, in the over-the-counter
market or otherwise.
Our common stock is listed on the NYSE under the symbol
ITC.
Agents and underwriters may be entitled to indemnification by us
and the selling stockholder, if applicable, against certain
civil liabilities, including liabilities under the Securities
Act, or to contribution with respect to payments which the
agents or underwriters may be required to make in respect
thereof. Agents and underwriters may be customers of, engage in
transactions with, or perform services for us in the ordinary
course of business. The specific terms of the
lock-up
provisions in respect of any given offering will be described in
the prospectus supplement.
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LEGAL
MATTERS
Dykema Gossett PLLC will pass upon the validity of the issuance
of our common stock and as to certain matters of Michigan law.
Certain legal matters will be passed upon for us by Simpson
Thacher & Bartlett LLP, New York, New York. In
addition, Stuntz, Davis & Staffier, P.C.,
Washington, D.C. is advising us on matters relating to the
FERC. Simpson Thacher & Bartlett LLP is relying upon
the opinion of Dykema Gossett PLLC as to certain matters of
Michigan law. Certain partners of Simpson Thacher &
Bartlett LLP, members of their families, related persons and
others have an indirect interest, through limited partnerships
who are investors in KKR Millennium Fund, L.P., in less than 1%
of our shares of common stock.
EXPERTS
The consolidated financial statements of ITC Holdings and
subsidiaries as of December 31, 2005 and 2004, and for each
of the two years in the period ended December 31, 2005 and
the period from February 28, 2003 (Date of Acquisition)
through December 31, 2003, managements report on the
effectiveness of internal control over financial reporting as of
December 31, 2005 and the related financial statement
schedule, and the financial statements of International
Transmission Company, LLC (Predecessor ITCTransmission)
for the two-month period ended February 28, 2003,
incorporated in this prospectus by reference from the Annual
Report on
Form 10-K
of ITC Holdings have been audited by Deloitte & Touche
LLP, an independent registered public accounting firm, as stated
in their reports incorporated herein by reference, and have been
so incorporated in reliance upon the reports of such firm given
upon their authority as experts in accounting and auditing.
The financial statements of Michigan Transco Holdings, Limited
Partnership as of December 31, 2005 and December 31,
2004 and for the years ended December 31, 2005 and
December 31, 2004 and the periods January 1, 2003 to
December 9, 2003 and December 10, 2003 to
December 31, 2003 incorporated by reference in this
prospectus have been so incorporated by reference in reliance on
the report (which contains an explanatory paragraph relating to
Michigan Transco Holdings, Limited Partnerships
restatement of its statement of cash flows as described in
Note 2 to the financial statements) of
PricewaterhouseCoopers LLP, independent accountants, given on
the authority of said firm as experts in auditing and accounting.
WHERE YOU
CAN FIND ADDITIONAL INFORMATION
We are subject to the informational requirements of the Exchange
Act, and, in accordance therewith, file annual, quarterly and
current reports, proxy statements and other information with the
Commission. Our Commission filings are available to the public
over the Internet at the Commissions website at
http://www.sec.gov.
You may also read and copy any document we file with the
Commission at its public reference facility located at
100 F Street, N.E., Washington, D.C. 20549.
Please call the Commission at
1-800-SEC-0330
for further information on the public reference room. Our common
stock is listed on the NYSE. You may inspect reports and other
information concerning us at the offices of the NYSE,
20 Broad Street, New York, New York 10005. In addition, our
annual reports on
Form 10-K,
quarterly reports on
Form 10-Q,
current reports on
Form 8-K
and any amendments to those reports filed or furnished pursuant
to section 13(a) or 15(d) of the Exchange Act are available
free of charge through our website at
http://www.itc-holdings.com
as soon as reasonably practicable after they are electronically
filed with, or furnished to, the Commission. Information
contained on our website, however, is not and should not be
deemed a part of this prospectus.
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INCORPORATION
OF CERTAIN INFORMATION BY REFERENCE
The Commission allows us to incorporate by reference
the information contained in documents that we file with them,
which means that we can disclose important information to you by
referring you to those documents. The information incorporated
by reference is considered to be part of this prospectus.
Information in this prospectus supersedes information
incorporated by reference that we filed with the Commission
prior to the date of this prospectus, while information that we
file later with the Commission will automatically update and
supersede this information. We incorporate by reference the
documents (other than any portion of such document that is
furnished rather than filed) listed below and any future filings
we will make with the Commission under Sections 13(a),
13(c), 14 or 15(d) of the Exchange Act after the date of this
prospectus until the registration statement, of which this
prospectus is a part, has been terminated:
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our annual report on
Form 10-K
for the year ended December 31, 2005;
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our quarterly reports on
Form 10-Q
for the quarters ended March 31, 2006, June 30, 2006
and September 30, 2006;
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our current reports on
Form 8-K
filed on February 14, 2006, March 30, 2006,
May 12, 2006, May 17, 2006, May 23, 2006,
May 26, 2006, July 18, 2006, July 25, 2006,
August 7, 2006, August 16, 2006 (as amended
August 17, 2006), August 18, 2006, September 1,
2006, September 25, 2006, October 6, 2006,
October 10, 2006 (as amended December 22, 2006),
October 16, 2006, November 8, 2006, November 14,
2006 and December 27, 2006; and
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the description of our common stock contained in our
registration statement on
Form 8-A
(File
No. 001-32576)
filed on July 20, 2005.
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We will provide to each person, including a beneficial owner, to
whom a prospectus is delivered a copy of any or all of the
information that has been incorporated by reference in this
prospectus. You may request a copy of these filings at no cost,
by writing or calling us at:
ITC Holdings Corp.
39500 Orchard Hill Place
Suite 200
Novi, Michigan 48375
Attention: General Counsel
Tel:
(248) 374-7045
You should read the information relating to us in this
prospectus together with the information in the documents
incorporated by reference. Nothing contained herein shall be
deemed to incorporate information furnished to, but not filed
with, the Commission.
30
Common Stock
PROSPECTUS SUPPLEMENT
June 27, 2008
BNY Mellon Capital Markets,
LLC