<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 17, 1997
REGISTRATION NO. 333-32949
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
AMENDMENT NO.2 TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
ENERGYNORTH NATURAL GAS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
NEW HAMPSHIRE 4920 02-0209312
(STATE OR OTHER (PRIMARY STANDARD (I.R.S. EMPLOYER
JURISDICTION OF INDUSTRIAL IDENTIFICATION NO.)
INCORPORATION OR CLASSIFICATION CODE
ORGANIZATION) NUMBER)
1260 ELM ST., P.O. BOX 329
MANCHESTER, NEW HAMPSHIRE 03105-0329
(603) 625-4000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
----------------
ROBERT R. GIORDANO
PRESIDENT AND CHIEF EXECUTIVE OFFICER
ENERGYNORTH NATURAL GAS, INC.
1260 ELM STREET, P.O. BOX 329
MANCHESTER, NEW HAMPSHIRE 03105-0329
(603) 625-4000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES TO:
RICHARD A. SAMUELS, ESQUIRE JAMES L. NOUSS, JR., ESQUIRE
MCLANE, GRAF, RAULERSON & MIDDLETON BRYAN CAVE LLP
PROFESSIONAL ASSOCIATION ONE METROPOLITAN SQUARE
900 ELM STREET, P.O. BOX 326 211 N. BROADWAY, SUITE 3600
MANCHESTER, NH 03105-0326 ST. LOUIS, MO 63102-27500
(603) 625-6464 (314) 259-2000
----------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the Registration Statement becomes effective.
----------------
REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION
8(A), MAY DETERMINE.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
ENERGYNORTH NATURAL GAS, INC.
CROSS-REFERENCE SHEET SHOWING LOCATION IN PROSPECTUS OF INFORMATION REQUIRED BY
ITEMS OF PART I
OF FORM S-1
<TABLE>
<CAPTION>
FORM S-1 ITEM AND CAPTION LOCATION IN PROSPECTUS
------------------------- ----------------------
<C> <S> <C>
1. Forepart of the Registration
Statement and Outside Front Cover Front Cover Page; Prospectus Cover
Page of Prospectus.................. Page
2. Inside Front and Outside Back Cover Available Information; Table of
Pages of Prospectus................. Contents
3. Summary Information, Risk Factors and
Ratio of Earnings to Fixed Charges.. Prospectus Summary; Risk Factors;
The Company; Selected Financial
Data
4. Use of Proceeds...................... Use of Proceeds
5. Determination of Offering Price...... Not Applicable
6. Dilution............................. Not Applicable
7. Selling Security Holders............. Not Applicable
8. Plan of Distribution................. Underwriting
9. Description of Securities to be Description of Bonds
Registered..........................
10. Interests of Named Experts and Legal Matters; Experts
Counsel.............................
11. Information with Respect to the Prospectus Summary; Selected
Registrant.......................... Financial Data; Management's
Discussion and Analysis of
Financial Condition and Results of
Operations; Business; Certain
Relationships and Related
Transactions; Management;
Description of Bonds; Financial
Statements
12. Disclosure of Commission Position on
Indemnification for Securities Act Not Applicable
Liabilities.........................
</TABLE>
<PAGE>
SUBJECT TO COMPLETION, DATED SEPTEMBER 17, 1997
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
PROSPECTUS
LOGO
$22,000,000
ENERGYNORTH NATURAL GAS, INC.
FIRST MORTGAGE BONDS DESIGNATED AS
% SERIES E BONDS DUE SEPTEMBER 30, 2027
-----------
The First Mortgage Bonds Designated as % Series E Bonds Due September 30,
2027 (the "Bonds") offered hereby are being issued by EnergyNorth Natural Gas,
Inc. (the "Company"). Interest on the Bonds is payable semiannually on each
March 31 and September 30 beginning March 31, 1998.
The Bonds will be issued in the form of one Global Security (a "Global
Security") registered in the name of the nominee of The Depository Trust
Company, as Depository and such nominee will be the sole holder of the Bonds.
An owner of an interest in the Bonds ("Beneficial Owner") will not be entitled
to the delivery of a definitive security except in limited circumstances. A
Beneficial Owner's interest in the Global Security will be indicated on, and
transfers will be effected only through, records maintained by the Depository
and its participants. See "DESCRIPTION OF BONDS."
The Bonds are redeemable at any time within 60 days after request on behalf
of a deceased holder, subject to an annual maximum principal amount limitation
of $25,000 per holder and $500,000 in the aggregate. At the option of the
Company, the Bonds will be redeemable, in whole or in part, on or after
September 30, 2002, at 104% of the principal amount, declining by 1% of the
principal amount per year for each of the succeeding four years, plus accrued
interest. There will be no sinking fund established to redeem the Bonds. See
"DESCRIPTION OF BONDS."
There is currently no market for the Bonds and there is no assurance that one
will develop. The Company does not intend to list the Bonds for trading on any
national securities exchange. After application of a portion of the net
proceeds from the sale of the Bonds to redeem certain other outstanding bonds
issued by the Company, the principal amount of the Company's secured
indebtedness having an equal priority lien on the Company's property will be
$21,000,000. See "USE OF PROCEEDS." The Bonds are secured by a lien on certain
assets of the Company and are not secured by assets of EnergyNorth, Inc.
("ENI"), the Company's parent corporation, or of EnergyNorth Propane, Inc.
("ENPI"), ENI's other principal subsidiary. Purchasers of the Bonds will have
no claim on the assets of ENI or ENPI.
-----------
SEE "RISK FACTORS" COMMENCING ON PAGE 5 FOR INFORMATION THAT SHOULD BE
CONSIDERED BY PROSPECTIVE INVESTORS.
-----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT(1) COMPANY(2)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Bond.................................. 100% $ $
- --------------------------------------------------------------------------------
Total..................................... $22,000,000 $ $
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1) The Company has agreed to indemnify Edward D. Jones & Co., L.P. (the
"Underwriter") against certain civil liabilities under the Securities Act
of 1933. See "UNDERWRITING."
(2) Before deduction of expenses payable by the Company estimated at $124,367.
-----------
The Bonds are offered by the Underwriter, subject to prior sale, when, as,
and if issued to and accepted by the Underwriter subject to approval of certain
legal matters by counsel for the Underwriter and certain other conditions. The
Underwriter reserves the right to withdraw, cancel, or modify such offer and to
reject orders in whole or in part. It is expected that delivery of the Global
Security will be made through the facilities of the Depository in New York, New
York, on or about September , 1997 against payment therefor in immediately
available funds.
EDWARD D. JONES & CO., L.P.
The date of this Prospectus is September , 1997
<PAGE>
[PHOTO DEPICTS MAP OF THE ENERGYNORTH NATURAL GAS, INC. SERVICE TERRITORY]
The Company will provide to each Beneficial Owner of the Bonds upon the
written request of any such person a copy of annual reports on Form 10-K and
quarterly reports on Form 10-Q free of charge. Such requests should be
addressed to the Manager, Public and Investor Relations of the Company, P.O.
Box 329, Manchester, NH 03105-0329.
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE BONDS,
INCLUDING OVERALLOTMENT, STABILIZING TRANSACTIONS, AND THE PURCHASE OF BONDS
TO COVER SHORT POSITIONS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE
"UNDERWRITING."
2
<PAGE>
PROSPECTUS SUMMARY
The information set forth below should be read in conjunction with and is
qualified in its entirety by the detailed information and financial statements
contained in this Prospectus.
THE OFFERING
Issuer.................... EnergyNorth Natural Gas, Inc.
Securities Offered........ $22,000,000 aggregate principal amount of First
Mortgage Bonds Designated as % Series E Bonds Due
September 30, 2027.
Risk Factors.............. The Company's operations and the Bonds are subject
to certain risks. See "RISK FACTORS."
Maturity.................. September 30, 2027.
Interest Payment Dates.... Each March 31 and September 30, beginning March 31,
1998 until redemption or maturity.
Collateral................ The Bonds are secured by a first mortgage on
substantially all of the real and personal property
of the Company. The Bonds rank equally and ratably
with all other of the Company's first mortgage
bonds. The Bonds are not secured by assets of ENI
or ENPI, and purchasers of Bonds will have no claim
on the assets of ENI or ENPI.
Use of Proceeds........... The proceeds will be used to retire all existing
First Mortgage Bonds Designated as 8.67% Series A
General and Refunding Mortgage Bonds Due 2002 and
to repay the Company's short-term debt. See "USE OF
PROCEEDS."
Deceased Beneficial
Owner's Redemption
Privilege................
At the option of any deceased Beneficial Owner's
representative, interests in the Bonds are
redeemable at 100% of the principal amount, plus
accrued interest, at any time, subject to the
maximum principal amount of $25,000 per deceased
Beneficial Owner and $500,000 in the aggregate for
all deceased Beneficial Owners, during the initial
period ending September 30, 1998 and for each
twelve-month period thereafter. See "DESCRIPTION OF
BONDS--Limited Right of Redemption Upon Death of a
Beneficial Owner."
Company's Redemption The Bonds are not subject to redemption at the
Privilege................ option of the Company prior to September 30, 2002.
Thereafter, the Bonds will be redeemable, in whole
or in part, at the Company's option, at 104% of the
principal amount, declining by 1% of the principal
amount per year for each of the succeeding four
years, plus accrued interest. See "DESCRIPTION OF
BONDS-- Redemption at Option of the Company."
Trustee................... Bank of New Hampshire.
3
<PAGE>
SUMMARY FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT RATIOS AND PERCENTAGES)
<TABLE>
<CAPTION>
TWELVE MONTHS
ENDED
JUNE 30, 1997 FISCAL YEARS ENDED SEPTEMBER 30,
------------- ----------------------------------
1996 1995 1994
(UNAUDITED) ---------- ---------- ----------
<S> <C> <C> <C> <C>
Total operating revenues..... $92,004 $ 77,510 $ 69,817 $ 88,150
Operating income............. 8,217 8,200 6,540 8,096
Net income................... 5,437 5,427 3,745 4,837
Interest charges............. 3,540 3,508 4,049 3,675
Ratio of earnings to fixed
charges(1).................. 3.28x 3.27x 2.27x 2.83x
Ratio of earnings to fixed
charges pro forma(1)(2)..... 3.03x
Long-term debt (including
capital lease obligations
and excluding current
maturities) as percentage of
total capitalization........ 36.6% 39.6% 42.9% 44.4%
</TABLE>
- --------
(1) For the purpose of computing these ratios, earnings consist of net income
plus income taxes and fixed charges. Fixed charges consist of total
interest, amortization of debt discount, premium and expense, and the
estimated portion of interest implicit in rentals.
(2) Assuming that the Bonds had been outstanding throughout the period and that
the indebtedness to be retired from the proceeds of the sale of the Bonds
had not been outstanding and assuming a 7.5% per annum interest rate on the
Bonds.
CAPITALIZATION AT JUNE 30, 1997
(IN THOUSANDS, EXCEPT PERCENTAGES)
<TABLE>
<CAPTION>
AS
ACTUAL ADJUSTED(2)
------------- -------------
<S> <C> <C> <C> <C>
Long-term debt (including capital lease
obligations and excluding current
maturities)(1)................................. $26,789 36.6% $44,066 48.7%
Common shareholder's equity..................... 46,429 63.4 46,429 51.3
------- ----- ------- -----
Total capitalization.......................... $73,218 100.0% $90,495 100.0%
======= ===== ======= =====
</TABLE>
- --------
(1) Current maturities of long-term debt were $1,663.
(2) Adjusted for the sale of the Bonds at par. The Company targets an average
ratio of 50% long-term obligations to total capitalization and anticipates
retaining future earnings or receiving capital contributions from its
shareholders to achieve this ratio.
4
<PAGE>
RISK FACTORS
Prospective purchasers should carefully consider, together with the other
information contained and incorporated by reference in this Prospectus, the
following risk factors before purchasing the Bonds offered hereby. Prospective
purchasers should note, in particular, that this Prospectus contains forward-
looking statements and that actual results could differ materially from those
contemplated by such statements. Prospective purchasers should also refer to
the factors discussed under "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS--Factors That May Affect Future Results."
FACTORS AFFECTING THE GAS UTILITY INDUSTRY
The natural gas utility industry is subject to numerous regulations and
uncertainties, many of which may affect the Company in varying degrees.
Industry issues which have affected or may affect the Company from time to
time include the following:
. Fluctuations in demand attributable to weather (see "MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS--
General");
. New business and operational requirements for gas supply resulting from
changes in federal regulation of interstate pipelines;
. Competition with other sources of gas supply;
. Competition with alternative sources of energy (see "MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS--
General");
. Uncertainty in achieving an adequate return on invested capital due to
inflation;
. Difficulty in obtaining rate increases from regulatory authorities in
adequate amounts and on a timely basis;
. Attrition in earnings produced by the combination of increasing expenses
and the costs of new capital which may exceed allowed rates of return;
. The availability of pipeline transportation capacity necessary to secure
supplies of gas;
. Bypass of the Company's intrastate gas transportation system by customers
installing private transmission mains from the interstate transmission
system (see "BUSINESS--Deregulation");
. Volatility in the price of natural gas;
. Increases in construction and operating costs;
. Environmental regulations and costs of environmental remediation;
. The possibility of state regulation requiring the unbundling of various
elements of gas distribution and service;
. Rates and margin for gas transportation service and customer choice of
transportation service without gas sales service (see "BUSINESS--
Competition");
. The possibility of change from cost-based rate regulation; and
. Uncertainty in the projected rate of growth of customers' energy
requirements.
ABSENCE OF PUBLIC MARKET FOR THE BONDS
There is no public trading market for the Bonds, and the Company does not
intend to apply for listing of the Bonds on any national securities exchange
or for quotation of the Bonds on any automated dealer quotation system. The
Company has been advised by the Underwriter that it presently intends to make
a market in the Bonds after the consummation of the offering contemplated
hereby, although the Underwriter is under no obligation to do so, and may
discontinue any market-making activities at any time without any notice. No
assurance can be given as to the liquidity of the trading market for the Bonds
or that an active public market for
5
<PAGE>
the Bonds will develop. If an active public trading market for the Bonds does
not develop, the market price and liquidity of the Bonds may be adversely
affected. If the Bonds are traded, they may trade at a discount from their
initial offering price, depending on prevailing interest rates, the market for
similar securities, performance of the Company, and certain other factors.
EFFECT OF WEATHER
The Company's business is influenced by seasonal weather conditions. The
amount of gas sold and transported for central and space heating purposes and,
to a lesser extent, water heating is directly related to the ambient air
temperature. Consequently, more gas is sold and transported during the winter
months than during the summer months, resulting in seasonal differences in
revenues. Because the Company's rates are set based on normal temperatures,
warmer than normal temperatures will have an adverse impact on the Company's
revenues and earnings. See "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS."
ENVIRONMENTAL MATTERS
The Company and its predecessors owned or operated several facilities for
the manufacture of gas from coal, a process used through the mid-1900's. The
costs of remediation of by-products produced by that process at two of those
former manufactured-gas facility sites are uncertain, and it is uncertain
whether investigation or remediation of by-product disposal related to other
of the manufactured-gas facilities owned or operated by the Company and its
predecessors will be required in the future and, if required, what the cost of
such investigation or remediation will be. Moreover, although substantially
all of such costs have been allowed to be recovered through rates (over a
period of years but without recovery of carrying costs on the unamortized
balance), and the Company anticipates that such substantial recovery will
continue to be allowed, future proceedings could result in allowance of less
than substantially all such costs, and there can be no assurance that such
costs will not have a material adverse impact on the Company. See "BUSINESS--
Legal Proceedings and Environmental Matters."
THE COMPANY
EnergyNorth Natural Gas, Inc. is a regulated utility engaged in the
purchase, transportation, and sale of natural gas for residential, commercial,
and industrial use in New Hampshire. The Company distributes natural gas
through an underground pipeline distribution network to more than 75 percent
of the natural gas customers in New Hampshire. The Company's approximately
68,000 natural gas customers are located in 27 cities and towns with a
combined population of approximately one-half million residents. The Company
is headquartered in Manchester, New Hampshire and is a wholly-owned subsidiary
of EnergyNorth, Inc. ("ENI"), a public utility holding company, exempt from
registration under the Public Utility Holding Company Act of 1935, also
headquartered in Manchester, New Hampshire. The Company is one of two
principal operating subsidiaries of ENI. ENI's other principal subsidiary is
EnergyNorth Propane, Inc. ("ENPI"), a non-regulated business which sells and
delivers liquefied petroleum gas ("propane" or "LP") to customers both within
and beyond the natural gas pipeline network. See "BUSINESS-General." The
mailing address of the Company's principal executive office is 1260 Elm
Street, P.O. Box 329, Manchester, New Hampshire 03105-0329, and its telephone
number is (603) 625-4000.
USE OF PROCEEDS
The proceeds to the Company from the sale of the Bonds, net of the estimated
underwriting discount and expenses of approximately $125,000, are estimated to
be approximately $20,995,000. The Company intends to use the net proceeds to
retire all of its outstanding First Mortgage Bonds Designated as 8.67% Series
A General and Refunding Mortgage Bonds Due 2002 (approximately $5,900,000) and
to repay its short-term borrowings (approximately $14,500,000), which short-
term borrowings have a weighted average interest rate as of June 30, 1997 of
approximately 6.55% per annum. Any balance of net proceeds will be used for
working capital purposes. Pending such applications, the net proceeds may be
temporarily invested in short-term investment grade securities.
6
<PAGE>
SELECTED FINANCIAL DATA
The following table sets forth selected financial data of the Company. The
selected financial data as of and for the five fiscal years ended September
30, 1996 was derived from the audited financial statements of the Company. The
selected financial data as of and for the twelve months ended June 30, 1997
was derived from unaudited financial statements of the Company which, in the
opinion of management, contain all adjustments (consisting of normal recurring
adjustments) necessary for a fair presentation thereof. The results of
operations for the twelve months ended June 30, 1997 are not necessarily
indicative of the results that may be expected for the fiscal year ending
September 30, 1997. The financial data set forth below should be read in
conjunction with the Financial Statements and the Notes thereto and
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS " included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
TWELVE MONTHS
ENDED
JUNE 30, 1997 FISCAL YEARS ENDED SEPTEMBER 30,
------------- -----------------------------------------------
(UNAUDITED) 1996 1995 1994 1993 1992
-------- -------- -------- -------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Total operating
revenues............... $ 92,004 $ 77,510 $ 69,817 $ 88,150 $ 78,495 $73,067
Net income.............. 5,437 5,427 3,745 4,837 4,960 3,392
Cash dividends.......... 3,651 3,635 3,368 3,199 3,072 2,854
Total assets............ 122,084 122,706 112,287 111,685 104,091 98,212
Capitalization:
Common stockholder's
equity............... 46,429 41,357 38,065 37,688 34,860 32,172
Long-term debt
(including capital
lease obligations)... 26,789 27,102 28,577 30,143 31,786 33,040
Total
capitalization..... 73,218 68,459 66,642 67,831 66,646 65,212
Short-term debt
(including current
portion of long-term
debt).................. 7,163 11,206 3,195 1,709 4,428 4,378
Ratio of earnings to
fixed charges.......... 3.28x 3.27x 2.27x 2.83x 2.88x 2.24x
</TABLE>
- --------
Reclassifications are made periodically to previously issued financial data
to conform to the current presentation.
7
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
GENERAL
The Company's rates charged to customers are regulated by the New Hampshire
Public Utilities Commission ("NHPUC"). The NHPUC is required by New Hampshire
law to allow the Company to charge rates that are just and reasonable, such
that the Company is compensated for the cost of providing service and allowed
a reasonable rate of return on its investment. The Company regularly assesses
whether it is earning a reasonable return and files for rate increases when it
determines that it is not being permitted to earn a reasonable return.
The Company generates revenues primarily through the sale and transportation
of natural gas. The Company's gas sales are divided into two categories: firm,
whereby the Company must supply gas to customers on demand; and interruptible,
whereby the Company may, generally during cooler months, discontinue service
to high volume industrial customers. Sales of gas to interruptible customers
do not materially affect the Company's operating income because all margin on
such sales is returned to the Company's firm customers.
The Company's tariff of rates includes cost of gas adjustment ("CGA") rates
which provide for increases and decreases in the rates charged for gas to
reflect estimated changes in the cost of gas. Although changes in CGA rates
affect revenues, they do not affect total margin because the CGA is a tariff
mechanism designed to provide dollar-for-dollar recovery of gas costs. Amounts
recovered under CGA rates are reconciled semiannually against actual costs,
and future CGA rates are adjusted accordingly.
The Company's sales are responsive to colder weather because the majority of
its firm customers use natural gas for space heating purposes. The Company
measures weather through the use of degree days. A degree day is calculated by
subtracting the average temperature for the day from 65 degrees Fahrenheit.
The "normal" number of degree days during any period is calculated based upon
a rolling approximate thirty-year average number of degree days during such
period. The table below discloses degree day data as recorded at the U.S.
weather station in Concord, New Hampshire, comparing actual degree days to the
previous period and to normal. As a result of the size and topographical
variations of the Company's service territory, weather conditions within such
territory often vary. The Company considers Concord, New Hampshire weather
data to be representative of weather conditions within its service territory.
<TABLE>
<CAPTION>
DEGREE DAYS
--------------------
PRIOR CHANGE VS. CHANGE VS.
ACTUAL PERIOD NORMAL PRIOR PERIOD NORMAL
------ ------ ------ ------------ ----------
<S> <C> <C> <C> <C> <C>
Fiscal year ended September 30,
1994............................ 7,877 7,550 7,512 4.3% 4.9%
Fiscal year ended September 30,
1995............................ 6,834 7,877 7,525 (13.2)% (9.2)%
Fiscal year ended September 30,
1996............................ 7,482 6,834 7,549 9.5% (0.9)%
Twelve months ended June 30,
1997............................ 7,357 7,482 7,511 (1.7)% (2.1)%
</TABLE>
Shifts between transportation and sales gas will cause variations in natural
gas revenues since the transportation rate does not include the commodity cost
of gas, which is billed directly to the customer by its marketer. Prior to
August 1, 1997, the Company's rate structure provided approximately the same
margin from sales service and transportation service. Effective August 1,
1997, transportation rates were reduced by approximately 3%. The Company
cannot predict the impact, if any, that the results of this reduction in
transportation rates will have on customers' decisions to switch to
transportation service or the resulting impact decisions to switch would have
on operating income. The Company will seek an adjustment in overall rates if
it determines that reductions in transportation rates and increases in the
number of transportation customers impair its ability to earn its allowed
return. At June 30, 1997, the Company had 37 transportation customers compared
to 25 customers the previous year.
8
<PAGE>
RESULTS OF OPERATIONS--TWELVE MONTHS ENDED JUNE 30, 1997 COMPARED TO TWELVE
MONTHS ENDED SEPTEMBER 30, 1996
Earnings and Operating Revenues
Net income increased to $5,437,000 for the twelve months ended June 30, 1997
from $5,427,000 for fiscal year 1996. Total operating revenues were
$92,004,000 compared to $77,510,000 in the prior period, an 18.7%
increase. Higher purchased gas cost of approximately $15,000,000 passed
through the CGA was the primary reason for the significant increase. Despite a
1.5% increase in the average number of customers, warmer weather resulted in
firm sendout, including firm transportation, that was essentially unchanged
from fiscal year 1996. Margin earned from utility natural gas operations
decreased $427,000, or 1.2%.
Operating Expenses
Decreases in wages and related operating expense reductions, as a result of
reductions in the workforce and overtime requirements, were the primary
reasons for the net decrease in operations and maintenance expense. Continued
capital additions to the distribution system and amortization of environmental
remediation costs account for the increase in depreciation and amortization
expense.
Taxes other than income taxes decreased 2.2% due to property tax abatements
and a reduction in the public utility tax assessment.
While interest on long-term debt decreased 3.4% compared to fiscal year
1996, other interest expense increased 16.6%. Higher average outstanding
short-term borrowings during the twelve months ended June 30, 1997 was the
primary reason for the increase.
RESULTS OF OPERATIONS--FISCAL 1996 COMPARED TO FISCAL 1995
Earnings
Net income for 1996 was a record $5,427,000, which represents a 45% increase
over the $3,745,000 net income for 1995. The 1996 increase in earnings was
primarily due to greater margins resulting mostly from growth in volumes
delivered. Volumes of firm gas delivered to utility customers increased 13.1%
to 11,400,000 Mcf (1,000 cubic feet). Weather in the Company's service area
was near normal in 1996, but 9.5% colder than the prior year (based upon a
comparison of degree days for such periods). In addition, 1995 earnings
included a $215,000 after-tax gain on the sale of railcars.
Operating Revenues
Operating revenues were $77,510,000 in 1996, compared to $69,817,000 in
1995. The increase resulted primarily from increased volumes delivered to firm
residential and commercial heating customers due to the colder weather and
1.7% customer growth in 1996. Revenues from gas transported for customers
under firm transportation service rates increased more than 40% to $979,000,
due to a 45% increase in volumes transported. This increase included a shift
of 162,000 Mcf from firm commercial and industrial sales to firm
transportation sales, representing a decrease of $516,000 in operating revenue
attributable to the commodity cost of gas.
Cost of Gas Sold
Cost of gas was $39,115,000 in 1996 and $35,602,000 in 1995. The increase
was primarily due to higher prices from suppliers (approximately $5,900,000)
and the increase in delivered volumes (approximately $4,700,000), partially
offset by timing differences related to the recovery of gas costs through the
CGA (approximately $7,200,000). The average unit cost of gas sold in 1996 was
$3.96 per Mcf, compared to $3.44 per Mcf in 1995. Increases or decreases in
purchased gas costs from suppliers have no significant impact on margin, as
they are recovered from customers through the CGA.
Operating Expenses
Operations and maintenance expense increased $217,000, or 1.2%, to
$18,624,000 in 1996. Reductions in the workforce, other cost saving
initiatives, and workers' compensation and health insurance refunds helped
offset most of the increases from liability insurance, uncollectible accounts
and other administrative expenses.
9
<PAGE>
Depreciation and amortization expense increased from $4,063,000 to
$4,693,000 in 1996, consistent with the Company's continued investment in the
expansion and upgrading of its distribution system and facilities and
amortization of environmental remediation costs. Net additions to property,
plant, and equipment were $7,496,000 and $6,407,000 in 1996 and 1995,
respectively.
Taxes other than income taxes increased $194,000 to $3,654,000 primarily due
to increases in property taxes, resulting from property tax rate increases and
additions to taxable property. A higher level of pretax income was the main
reason for the $1,479,000 increase in total federal and state income taxes in
1996. In addition, as a result of the resolution of certain federal income tax
issues, the Company reduced federal income taxes by $200,000 in 1995.
Total other income for 1995 includes a gain of $350,000 from the sale of
railcars formerly used to transport liquid propane.
Fiscal 1996 interest expense decreased 13.4% from 1995 due mainly to the
repayment of $1,664,000 of long-term debt and a decrease in average short-term
borrowings and average short-term interest rates.
RESULTS OF OPERATIONS--FISCAL 1995 COMPARED TO FISCAL 1994
Earnings
Net income declined to $3,745,000 in 1995 from 1994 net income of
$4,837,000. A key reason for the decrease in net income was the impact on
operations of significantly warmer weather during the 1995 heating season. In
1994, net income was impacted by record colder than normal temperatures.
Operating Revenues
Operating revenues were approximately $69,800,000 in 1995, a decrease of
20.9% from 1994. The total volume of gas sendout declined 7.5% as temperatures
in 1995 were 13.2% warmer than in 1994 and 9.2% warmer than normal. The
average number of utility customers increased 2.1% to more than 65,000 in
1995.
Cost of Gas Sold
The average unit cost of gas purchased and produced decreased to $3.44 per
Mcf in 1995 from $4.03 per Mcf in 1994.
Operating Expenses
Operations and maintenance expense decreased 4% in 1995, primarily because
of reductions in the workforce combined with reductions in workers'
compensation insurance and bad debt expense.
Capital expenditures for the Company's continuing expansion and system
improvement programs were the reason for the 4.1% increase in depreciation and
amortization in 1995.
A gain of $350,000 from the sale of railcars formerly used to transport
liquid propane is included in total other income for 1995.
Total interest expense was $4,049,000 in 1995, or 10.2% greater than 1994.
The Company's total average short-term borrowings and the weighted average
short-term interest rate were greater than in 1994.
Total federal and state income taxes decreased $535,000 in 1995. The lower
level of pretax income and the resolution of certain tax issues are the
principal reasons for the decrease. Partially offsetting the decrease was the
impact of the repeal of the franchise tax, which was a credit against state
income taxes. The Company recorded state income taxes of $359,000 in 1995. No
state income taxes were recorded in 1994, when the franchise tax was in
effect.
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<PAGE>
CAPITAL RESOURCES AND LIQUIDITY
Because of the seasonal nature of the Company's operations, a substantial
portion of cash receipts are generated during the November-March heating
season, which results in the highest cash inflow during late winter and early
spring. However, cash requirements for capital expenditures, dividends, long-
term debt retirement, and working capital do not track this pattern of cash
receipts. The greatest demand for cash is in the fall and early winter to
support the completion of the annual construction program and to fund gas
inventories and other working capital requirements.
Cash provided by operations and financing activities was sufficient to fund
investing activities in 1996. Higher earnings due to increased margins from
greater sales volumes had a favorable impact on funds provided by operating
activities. Prior to November 1996, ENI, the Company's parent, raised
approximately $1,500,000 of common equity through its Dividend Reinvestment
and Stock Purchase Plan and contributed $1,500,000 to the Company's common
capital. Borrowings against lines of credit during 1996 ranged from zero to a
high of approximately $9,500,000. The Company's major uses of cash were
capital expenditures of $7,496,000, environmental remediation of $672,000, and
retirement of $1,664,000 of long-term debt. Deferred gas costs increased
$9,428,000, due to the timing of the recovery of increased gas costs through
the CGA. In addition, dividend payments to ENI totaled $3,635,000 in 1996.
At June 30, 1997, deferred gas cost was in a $2,476,000 overcollected
position resulting from prior summer period activity. The overcollected
amounts are being returned to customers during the current summer period
through the CGA.
Capital expenditures for 1997 are currently projected at approximately
$11,800,000, and annual sinking fund requirements and maturities of long-term
debt are scheduled to be $1,700,000 in 1997. Included in 1997 construction
expenditures is a major main extension project to serve the town of Milford,
New Hampshire. Additional cash requirements will be necessary for the payment
of dividends, environmental remediation, and working capital. Cash to fund
these requirements is expected to be provided principally by internally
generated funds, short-term bank borrowings under the Company's lines of
credit, and debt financing. At September 30, 1996, the Company had available
lines of credit aggregating $12,500,000 with $9,535,000 outstanding. At June
30, 1997 the available lines of credit were $14,700,000 with $5,500,000
outstanding. In addition, a credit line of $9,500,000 was available at
September 30, 1996 and June 30, 1997 under the Company's fuel inventory trust
financing plan. At June 30, 1997, the Company's inventory in trust was
$4,083,000 with an outstanding purchase obligation of $4,101,000.
On June 30, 1997, the Company's capitalization consisted of 58% common
equity and 42% debt, including short-term debt. After issuance of the Bonds
and use of the proceeds (See "USE OF PROCEEDS"), capitalization will consist
of approximately 51% common equity and 49% debt. Return on average common
equity was 12.14% for the twelve months ended June 30, 1997. In order to
contribute to both stability and the ability to market new securities when
appropriate, the Company attempts to maintain a balanced capital structure.
ENVIRONMENTAL MATTERS
The Company is involved in the investigation and remediation of certain
environmental matters. See "BUSINESS--Legal Proceedings and Environmental
Matters." The Company accrues charges in connection with environmental costs
when it is probable that a liability exists and the amount or range of amounts
can be reasonably estimated.
FACTORS THAT MAY AFFECT FUTURE RESULTS
The preceding Management's Discussion and Analysis of Financial Condition
and Results of Operations and the other sections of this Prospectus to which
it refers include: forward-looking statements concerning the impact of changes
in the cost of gas and of the CGA mechanism on total margin; projected capital
expenditures and sources of cash to fund expenditures; and estimated costs of
environmental remediation and anticipated
11
<PAGE>
regulatory approval of recovery mechanisms. The Company's future results,
generally and with respect to such forward-looking statements, may be affected
by many factors, which include but are not limited to: uncertainty as to the
regulatory allowance of recovery of changes in the cost of gas; uncertain
demands for capital expenditures and the availability of cash from various
sources; uncertainty as to whether transportation rates will be reduced in
future regulatory proceedings with resulting decreases in transportation
margins; and uncertainty as to regulatory approval of the full recovery of
environmental costs, transition costs, and other regulatory assets.
NEW ACCOUNTING STANDARDS AND PRONOUNCEMENTS
The Financial Accounting Standards Board has issued new accounting standards
that the Company will adopt in future periods. Statement of Financial
Accounting Standards ("SFAS") No. 128, "Earnings Per Share," establishes
standards for computing and presenting earnings per share, effective fiscal
1998. SFAS No. 130, "Reporting Comprehensive Income," establishes standards
for reporting and the disclosure of comprehensive income and its components,
effective fiscal 1999. It is not expected that the adoption of SFAS Nos. 128
and 130 will have a material impact on the Company's financial reporting.
SFAS No. 131, "Disclosures About Segments of an Enterprise and Related
Information," establishes standards for the way public business enterprises
report information about operating segments, including disclosures about
products and services, geographic areas, and major customers, effective fiscal
1998. The Company is currently evaluating the impact of SFAS No. 131.
The American Institute of Certified Public Accountants issued a Statement of
Position ("SOP") 96-1, "Environmental Remediation Liabilities." The SOP's
objective is to make the timing of the recognition of environmental
obligations more uniform by discussing the estimation process and providing
benchmarks to aid in determining when to recognize environmental liabilities.
The SOP is effective for the Company in fiscal 1998. The Company does not
expect that the adoption of the SOP will have a material impact on the
Company's financial position or results in operations.
THE "YEAR 2000" ISSUE
Many computer systems are currently based on storing two digits to identify
the year of a transaction (for example, "97" for "1997"), rather than a full
four digits, and are not programmed to consider the start of a new century.
Significant processing inaccuracies and even inoperability could result in the
year 2000 and thereafter. The Company's principal computer systems are
currently capable of processing the year 2000, or are in the process of being
upgraded or replaced by systems that are similarly capable. The Company does
not expect that the costs of addressing the "Year 2000" issue will have a
material impact on the Company's financial position or results in operations.
12
<PAGE>
BUSINESS
GENERAL
The Company, incorporated in the State of New Hampshire in 1945, is engaged
in the purchase, transportation and sale of natural gas for residential,
commercial, and industrial use in New Hampshire. The Company is a wholly-owned
subsidiary of ENI, a public utility holding company, also incorporated in the
State of New Hampshire. ENI is exempt from registration under the Public
Utility Holding Company Act of 1935. Both the Company and ENI are
headquartered at 1260 Elm Street, Manchester, New Hampshire. In 1988, the
Company, which had been named Gas Service, Inc., merged with two other natural
gas distribution subsidiaries of ENI, Manchester Gas Company and Concord
Natural Gas Corporation, and changed its name to EnergyNorth Natural Gas, Inc.
The service territory of the Company has a population of approximately
463,000 in 27 communities situated in southern and central New Hampshire,
which includes the communities of Nashua, Manchester, Concord, and Laconia.
The service area encompasses approximately 922 square miles. Located within 30
to 85 miles of Greater Boston, the Company's service territory offers a
favorable business climate with no general sales or personal income taxes, a
productive labor force, and a comfortable, safe, and clean environment for
residents and tourists.
The State of New Hampshire's non-farm job growth continues to be
significantly above average, ranking first among New England states with a
3.9% annual growth rate in 1996. This compares to a 2.0% average growth rate
nationally and a 1.8% average rate for New England for the same period. New
housing permits are expected to increase 34% in 1997 over 1996. While the New
Hampshire unemployment rate for 1997 is forecasted at 3.5% compared to 4.2% in
1996, the labor force is forecasted to increase by 4.7% in 1997. Job growth
and low unemployment in the Company's service area tend to result in an
increase in volumes transported and sold and numbers of customers. (All
employment and housing statistics in this portion of this Prospectus are taken
from The New England Economic Project's May 1997 Economic Outlook for New
Hampshire). In fiscal 1996, the Company experienced net customer growth of
over 2.4% compared to fiscal 1995.
The Company's marketing focus continues to stress low cost growth by
concentrating on adding new customers along the Company's more than 1,000
miles of gas mains and adding load from the existing customer base, while also
expanding its system of mains into areas in which there is a significant
demand for natural gas service. The Company has an approximate 28% share of
the home heating market (based on households) within its service territory,
creating a potential for increased sales where the natural gas pipeline is
located and alternative fuels are used. In New Hampshire, fuel oil has a
penetration of over 57% of the home heating market. Currently, the comparative
full-service price of natural gas for heating is comparable to fuel oil. From
a total energy perspective, natural gas is a strong competitor with a complete
range of gas appliances and uses, including ranges, water heaters, clothes
dryers, fireplaces and gas logs, outdoor lights, and natural gas heat pumps
for heating and cooling. While these multiple uses provide opportunities to be
the total energy provider to new customers, they also provide opportunities
for expansion within the existing customer base. Due to continued customer
conversions from other energy sources and expansion of its service territory,
the Company has an opportunity for growth in the retail sales market. During
the past five years, the Company has experienced an annual average customer
growth rate of about 2.0%. This compares to an approximate 1.5% national
average for local distribution companies, according to the American Gas
Association. Additional growth in distribution operations may also occur as
industrial and commercial customers turn to natural gas for electric
generation because of a price advantage and as a means to ensure compliance
with the provisions of the Clean Air Act. As the electric industry continues
to move toward deregulation, this option may become more attractive. The
development of new gas-burning technologies for industry and the wider
acceptance of natural gas as a fuel for motor vehicles have provided
opportunities for increased gas usage in market sectors that are not sensitive
to the weather, although the use of natural gas powered vehicles in New
Hampshire is not extensive at present.
THE GAS DISTRIBUTION BUSINESS
The Company distributes natural gas as a regulated public utility pursuant
to franchise authority granted to it by the NHPUC. No operations are outside
of the State of New Hampshire. While the franchise area of the
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Company is primarily residential in character, sales volumes are almost evenly
split between residential and commercial/industrial customers. As of June 30,
1997, the Company served over 68,000 customers, of which approximately 88%
were residential and 12% were commercial and industrial. During fiscal 1996,
no customer purchased more than 4% of the Company's total annual sales and
transportation volume.
The Company offers firm and interruptible transportation service to its
commercial and industrial customers. Transportation service allows a customer
to purchase a natural gas supply directly from a third party marketer. The
marketer delivers the gas to one of the Company's interstate pipeline take
stations. The customer contracts with the Company to transport the gas from
the take station to its facility. To ensure a continual, uninterrupted supply,
the Company also provides an optional, separate standby service as a backup to
the gas supplies of transportation customers. As of September 30, 1996, the
Company provided transportation service to 25 customers, and as of June 30,
1997 to 37 customers.
The Company distributes gas to substantially all of its utility customers
through a system of underground pipelines connected with its three operations
centers in Manchester, Nashua, and Tilton, six take stations located in
Manchester, Londonderry, Windham, Concord, Hooksett, and Suncook, and four
production plant facilities in Manchester, Nashua, Concord, and Tilton. The
pipelines are generally located in public ways and are subject to licenses
granted by municipalities. The Company serves over 75% of New Hampshire's
natural gas customers.
SUMMARY OF REVENUES
Revenues attributable to various categories of gas distribution and related
operations (unaudited) during the twelve months ended June 30, 1997 and during
the last three fiscal years are as follows:
<TABLE>
<CAPTION>
TWELVE MONTHS FISCAL YEARS ENDED SEPTEMBER 30,
ENDED --------------------------------
JUNE 30, 1997 1996 1995 1994
------------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Sales service............... $90,776 $ 76,007 $ 69,067 $ 88,150
Transportation service...... 1,228 1,503 749 --
Service and appliance
sales...................... 1,891 1,781 1,650 1,566
Rentals..................... 771 821 821 811
------- ---------- ---------- ----------
$94,666 $ 80,112 $ 72,287 $ 90,527
======= ========== ========== ==========
</TABLE>
During the winter period, November 1 through March 31, the Company's gas
revenues are substantially higher than during the summer months. The increase
in gas revenues during the winter, and the concomitant increase in gas supply
requirements, occurs because approximately 89% of the Company's customers use
natural gas for heating.
DEREGULATION
The implementation of Federal Energy Regulatory Commission ("FERC") Order
636 provided for the unbundling and deregulation of the interstate pipeline
system and led to the beginning of unbundling of the intrastate pipeline
system in New Hampshire. In late 1993, the NHPUC approved gas transportation
rates and separate standby and balancing services for commercial and
industrial customers.
Gas transportation services have allowed customers to utilize the Company's
distribution system for the transportation of gas purchased from third-party
gas marketers, creating competition from gas marketers for the sale of gas to
end users. At June 30, 1997, the Company had 37 transportation customers.
These customers are, for the most part, large commercial and industrial
customers. The volume transported for transportation customers in fiscal 1996
was 514,000 Mcf, approximately 4% of the Company's total gas sales. The
Company expects the number of transportation customers and the volume of gas
transported to increase.
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<PAGE>
The Company is the sole distributor and transporter of natural gas in its
franchise area. The Tennessee Gas Pipeline Company ("Tennessee Gas") is the
only interstate pipeline to serve the Company's franchise area. For that
reason, and because installation of private transmission mains would typically
be impractical, customers have not attempted to bypass the Company's
distribution system.
COMPETITION
Natural gas competes mainly with electricity and fuel oil. The principal
competitive factors between natural gas and alternative fuels are the price of
the fuel and the conversion costs from one fuel to another. Competition is
greatest among the Company's commercial and industrial customers who have the
capability to use alternative fuels. The Company provides flexible rates for
users with dual-fuel capabilities in order to better compete with the
alternative fuels.
Under current market conditions, natural gas has a significant price
advantage over electricity in New Hampshire. Natural gas heating costs are
currently less than one-third of electric heating costs. At the present time,
the price of natural gas is comparable to the price of full-service oil for
heating. The Company continues to add customers who might otherwise elect to
use oil, because energy decisions are also based on factors other than cost
such as service, cleanliness, and environmental impact. Demand for natural gas
is expected to continue to increase as national attention remains focused on
its environmental advantages, efficiency, and security of supply. Commercial
and industrial customers continue to find gas technologies and equipment
attractive as they deal with the requirements of the Clean Air Act Amendments
of 1990 and other federal environmental legislation.
GAS SUPPLY
General. The Company's gas supply goal is to maintain a balanced portfolio
of supply that will continue to minimize the overall cost of gas while
providing the necessary security to meet demand requirements.
Supply Contracts and Storage. The Company's gas supply is principally
natural gas transported by the interstate pipeline system. The Company has
contracted with Tennessee Gas to deliver 56,833 Dekatherms ("Dths", a unit of
heating value equivalent to one million British Thermal Units) per day on a
firm transportation basis and up to 8,000 Dths per day on an interruptible
basis. Natural gas supplies are purchased both on a long-term contract and
short-term spot market basis. During fiscal 1996, the Company purchased
approximately 6.2% of its annual natural gas requirements in the spot market.
At times during the year, typically during the summer, the Company will
purchase lower cost spot market natural gas supply. The Company's long-term
contracts, under which it has firm supply for approximately 32,529 Dths per
day, have remaining terms of two to nine years.
In fiscal 1996, approximately 68% of the Company's gas requirements came
from domestic pipeline sources, 21% from Canadian pipeline supplies, and
approximately 10% from supplemental pipeline supplies. LP and liquefied
natural gas ("LNG") purchases from both domestic and foreign sources made up
approximately 1% of the Company's total supply requirements. Supplemental
supplies of gas are produced from plants owned and operated by the Company.
All pipeline volumes are transported by Tennessee Gas under FERC tariffed
rate schedules. The supply from Canada is transported to Tennessee Gas's
system using the TransCanada and the Iroquois Gas transmission systems.
In addition to long-term supply sources, the Company stores gas during the
summer months under long-term contracts with the owners of storage facilities
located in Pennsylvania and New York. Gas from these storage facilities, up to
24,304 Dths per day on a firm basis, is delivered to the Company during the
winter months through the Tennessee Gas system. The Company owns other on-site
storage facilities capable of holding 125,438 Dths of LP and 13,057 Dths of
LNG.
15
<PAGE>
The Company contracted for 1,710,000 Dths of supplemental gas vapor, 75,000
Dths of LNG, and an additional 1,000,000 gallons of LP for the winter of 1996-
1997.
The Company's record peak day sendout of gas, in February 1995, was 90,791
Mcf, or approximately 93,000 Dths. The Company expects to be able to secure
the gas supply required to meet existing customer and forecasted new customer
demands through long-term commitments and purchases in the spot market.
Cost of Purchased and Produced Gas. The average unit cost of gas purchased
and produced during fiscal 1996 was approximately $3.96 per Mcf compared to
$3.44 per Mcf for fiscal 1995. The 1996 average unit cost reflects higher
pipeline costs due to supplier rate case settlements and higher cost of gas
supply in the marketplace. During the twelve months ended June 30, 1997, the
average unit cost of gas purchased and produced was approximately $4.30 per
Mcf compared to $3.86 per Mcf for the same period last year. The CGA clause
authorized by the NHPUC permits recovery by the Company from its customers (or
requires refunds to its customers) of gas costs (including pipeline, LP, LNG,
and storage) that are higher (or lower) than the cost of gas included in base
rates. The CGA is determined twice annually, for summer and winter periods.
Margins earned on interruptible sales, 280-day sales, and capacity release
are passed on to firm customers through the CGA. In addition, costs associated
with a fuel inventory trust, including administration fees and carrying costs,
are recovered through the CGA.
The Company is subject to payment of transition costs associated with FERC
Order 636 restructuring. Tennessee Gas began billing these costs late in
fiscal 1993, and the Company has incurred approximately $5,900,000 in
transition costs through September 30, 1996 and approximately $7,600,000
through June 30, 1997, and is recovering these costs through the CGA. As of
June 30, 1997, the Company has recorded additional transition costs of
approximately $1,500,000 that will be billed over a period of 18 months.
Meanwhile, the Company's customers are benefiting from the restructuring,
realizing long-term savings in gas costs.
SUPERVISION AND REGULATION
The Company is subject to regulation by the NHPUC, which has authority over
accounting, rates and charges, the issuance of securities, and certain
operating matters. Changes in utility rates and charges cannot be made without
30 days notice to the NHPUC, which has the power to suspend, investigate, and
change any proposed increase in rates and charges.
The gas distribution business of the Company is subject to extensive safety
regulations and reporting requirements promulgated by the United States
Department of Transportation, but is not otherwise subject to direct
regulation by federal agencies except as to environmental matters. The Company
is also subject to zoning and other regulations by local authorities, and its
capital expenditures, earnings, and operations have not been materially
affected by environmental and local regulation.
LEGAL PROCEEDINGS AND ENVIRONMENTAL MATTERS
The Company is a party in several proceedings of the sort that arise in the
ordinary course of its business. Such actions, for the most part, are covered
by insurance and, to the extent that they are not fully covered, the damages
sought are not material in amount. The Company is a party to various routine
NHPUC proceedings relating to operations, none of which is expected to have a
material impact on the Company's earnings or assets.
The Company and certain of its predecessors owned or operated several
facilities for the manufacture of gas from coal, a process used through the
mid-1900's that produced by-products that may be considered contaminated or
hazardous under current laws, and some of which may still be present at such
facilities. The Company accrues environmental investigation and clean-up costs
with respect to former manufacturing sites and other environmental matters
when it is probable that a liability exists and the amount or range of amounts
can be reasonably estimated.
16
<PAGE>
In 1995, the Company completed the disposal of the contents of the gasholder
situated on one former gas manufacturing site in Concord, New Hampshire. Total
remediation costs amounted to approximately $3,500,000 and were recorded in
deferred charges. Recovery of these costs from customers began on July 1, 1995
and will extend over a seven-year period. The unamortized balance of
$2,489,000 at June 30, 1997 is excluded from rate base. The Company may not
earn a return or charge rates to customers based on amounts not included in
rate base.
The New Hampshire Department of Environmental Services ("NHDES") has
required remedial action for a portion of the Concord site at which wastes
were disposed from approximately 1852 through 1952. The estimated cost of this
remedial action ranges from $2,100,000 to $3,200,000, and the Company has
recorded $2,100,000 at June 30, 1997 in deferred charges. The Company has
petitioned the NHPUC for approval of the Company's proposed five-year recovery
from ratepayers, including carrying costs, for approximately $1,900,000 of
investigation, remediation, and recovery effort costs.
On September 12, 1995, the Company filed a complaint in the United States
District Court for the District of New Hampshire against UGI Utilities, Inc.,
as the successor to United Gas Improvement Company. The Company seeks
contribution for expenses incurred at the Concord site based upon the
operation of the manufactured gas plant by the United Gas Improvement Company,
a predecessor of UGI Utilities, Inc., during a period of time the manufactured
gas plant was in operation.
On December 8, 1995, the Company filed suit in the United States District
Court for the District of New Hampshire against Associated Electric and Gas
Insurance Services, Ltd., American Home Assurance Company, CIGNA Specialty
Insurance Company, International Insurance Company, Lloyd's, Underwriters at
London, Lexington Insurance Company, and National Union Fire Insurance
Company, later adding Columbia Casualty Company as a defendant, seeking a
declaratory judgment that they owe the Company a defense and/or
indemnification for environmental claims associated with the Concord facility.
The Company filed suit in the New Hampshire (Hillsborough County) Superior
Court on December 8, 1995 against the Continental Insurance Company and
Netherlands Insurance Company seeking a declaratory judgment that they owe the
Company a defense and/or indemnification for environmental claims associated
with the Concord facility. In March and June 1997, the Company reached
settlements with two defendants in those suits in an aggregate amount of
$137,500.
The Company and Public Service Company of New Hampshire ("PSNH"), an
electric utility company, conducted an environmental site characterization of
a second former manufactured gas plant in Laconia, New Hampshire. The Laconia
manufactured gas plant operated between approximately 1887 and 1952, and the
Company owned and operated the facility for approximately the last seven years
of its active life. PSNH also owned and operated the facility during its
active life. Without admitting liability, the Company and PSNH have entered
into an agreement under which the costs of the site characterization are
shared. The Company's share of the costs of the site characterization and a
report to the NHDES totaled $265,000 and has been recorded in deferred charges
as of June 30, 1997. The report describes conditions at the site, including
the presence of by-products of the manufactured gas process in site soils,
groundwater, and sediments in an adjacent water body. Based upon its review of
the report, NHDES has directed PSNH and the Company to prepare and submit a
remedial action plan. The Company expects to incur further costs but is
currently unable to predict the magnitude of any liability that may be imposed
on it for the cost of additional studies or the performance of a remedial
action in connection with the Laconia site. The Company commenced proceedings
in New Hampshire Superior Court and Federal District Court on February 2, 1997
against eighteen of its present and former insurers seeking recovery of
expenses that have been and will be incurred in connection with the
investigation and remediation of contamination from the Laconia plant.
The Company is pursuing and intends to pursue recovery from insurance
carriers and claims against any other responsible parties seeking to ensure
that they contribute appropriately to reimburse the Company for any costs
incurred with respect to environmental matters. The Company intends to seek
and expects to receive approval of rate recovery methods with respect to
environmental matters after it has determined the extent of contamination,
received recommendations with regard to remediation, and commenced remediation
efforts.
See "RISK FACTORS--Environmental Matters" and "FINANCIAL STATEMENTS--
Commitments and Contingencies, Note 8."
17
<PAGE>
PROPERTIES
The Company's utility gas distribution facilities constitute the majority of
its physical assets. As of September 30, 1996, the Company had approximately
1,020 miles of mains and 640 miles of service connections. The utility's mains
and service connections are adequate to meet current service requirements and
are maintained through a regular program of inspection and repair. Offices and
operations centers located in Nashua, Manchester, Concord, and Tilton are
adequate for the needs of the Company and are regularly maintained and in good
condition. Substantially all of the Company's properties are fully utilized.
Substantially all of the Company's utility properties are subject to the liens
of the indentures securing the Company's mortgage bonds. In some cases, motor
vehicles and nonutility assets are subject to purchase money security
interests held by banks.
EMPLOYEES
At June 30, 1997, the Company had 108 full-time employees, represented by
two contracts with Local 12012 of the United Steelworkers of America. The
contracts expire in 2001. Substantially all of the time of ENI's 96 full-time
employees (as of June 30, 1997), is allocated to the Company. None of ENI's
employees are represented by labor unions.
18
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company is one of two principal operating subsidiaries of ENI. The other
principal operating subsidiary of ENI is EnergyNorth Propane, Inc., a retailer
of propane which serves customers in central and southern New Hampshire.
EnergyNorth Propane, Inc. is also a 49% member in VGS Propane LLC, a Vermont
limited liability company which provides propane sales and service in Vermont.
ENI's common stock is registered under the Exchange Act and listed on the New
York Stock Exchange under the symbol "EI." Neither ENI nor any of its
subsidiaries (other than the Company) have guaranteed or pledged assets for
repayment of the Bonds.
In general, the senior management of ENI serves as the senior management of
all of its subsidiaries, including the Company, and ENI is the employer of the
senior management. ENI provides for the administrative support and services
and establishes policies, plans, and goals for the Company. The Company has
entered into a Cost Allocation Agreement with ENI and ENI's other subsidiaries
in order to provide for the equitable allocation of costs of goods and
services incurred by ENI or its subsidiaries for the benefit of one or more of
the subsidiaries or for ENI. Generally, cost allocations for ENI's
subsidiaries, including the Company, are based upon each subsidiary's fixed
assets, number of customers, and net income, relative to the other
subsidiaries. For fiscal 1997, the Company's allocation of costs under the
Cost Allocation Agreement is 88%. Management of the Company believes that the
goods and services provided by ENI and its other subsidiaries are obtained on
terms that are at least as fair to the Company as terms that could have been
obtained from unaffiliated third parties. The Company is also a party to a Tax
Sharing Agreement with ENI and its other subsidiaries whereby the Company,
ENI, and ENI's other subsidiaries agree to be responsible for their allocable
share of federal income taxes (or be entitled to their allocable share of any
refunds) in the event that a consolidated tax return is filed. Tax allocations
are based upon calculations made in accordance with federal tax laws and
regulations.
19
<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
Directors of the Company each serve for a term of one year, or until their
successors have been duly elected and qualified. The term of office of each
executive officer terminates when his or her successor has been duly elected
and qualified. Set forth below is certain information with respect to the
directors and executive officers of the Company.
<TABLE>
<CAPTION>
SERVED AS SERVED AS PRINCIPAL OCCUPATION OR
NAME, AGE AND POSITIONS DIRECTOR EXECUTIVE EMPLOYMENT DURING LAST
HELD WITH THE COMPANY SINCE OFFICER SINCE FIVE YEARS
----------------------- --------- ------------- -----------------------
<S> <C> <C> <C>
Robert R. Giordano, 1984 1983
59(1).................. President and Chief Executive Officer
President and Chief of the Company; President and Chief
Executive Officer; Executive Officer of ENI; Chairman
Director and Chief Executive Officer of ENPI.
N. George Mattaini, 1982 1983
71(1)..................
Chairman of the Board Chairman of the Company; Vice Chairman
of Directors of ENI.
Edward T. Borer, 1982 -- Chairman (and, until 1996, Chief
58(1)(2)............... Executive Officer; and, until 1995,
Director President) of Philadelphia
Corporation for Investment Services,
a registered securities broker/dealer
and investment advisor. Chairman of
ENI.
Michelle L. Chicoine, 41 1996 1990
.......................
Vice President, Chief Financial Officer (since 1997),
Treasurer, Chief Vice President (since 1994), and
Financial Officer; Treasurer (since 1990) of the
Director Company, ENI and ENPI.
Albert J. Hanlon, 1991 1988
56(3)..................
Senior Vice President; Senior Vice President of the Company
Director and of ENI.
Frank L. Childs, 53 .... 1996 1995 Vice President of the Company and ENI
Vice President; (since 1995); formerly (1992-1994)
Director Executive Vice President and Chief
Administrative Officer of UNITIL
Corporation, a registered public
utility holding company; formerly
President (until 1994) and Chief
Operating Officer (until 1992) of
Fitchburg Gas and Electric Light
Company, a public utility.
Richard P. Demers, 60 .. -- 1988 Vice President of the Company and of
Vice President ENI; President of ENPI.
David A. Skrzysowski, 51 -- 1989
....................... Vice President and Controller of the
Vice President and Company and of ENI; Vice President of
Controller ENPI.
Stephen W. Smith, 49 ... -- 1997 Vice President of the Company and ENI
Vice President (since 1997); formerly (1993-1996)
Director of Human Resources of
Hampshire Chemical Corporation;
formerly (1984-1992) Manager of Human
Resources of W.R. Grace & Co.--Conn.
</TABLE>
- --------
(1) Director of EnergyNorth, Inc., parent of the Company.
(2) Mr. Borer is a director of Philadelphia Corporation for Investment
Services.
(3) Mr. Hanlon has announced his intention to retire on December 31, 1997.
20
<PAGE>
COMPENSATION OF DIRECTORS
The directors of the Company are not compensated by the Company for services
provided to the Company as directors. However, the directors of the Company
are compensated by ENI, the parent of the Company, for services as directors
and/or officers of ENI. Eighty-eight percent of compensation paid to directors
of ENI is allocated to the Company.
The Chairman of the board of directors of ENI receives an annual retainer of
$42,000, and the Vice Chairman receives an annual retainer of $24,000. All
other directors of ENI receive annual retainers of $10,500. Committee Chairmen
receive additional annual retainers of $2,500. Directors of ENI, other than
the Chairman and Vice Chairman, receive fees of $600 for each board meeting
attended and $500 for each committee meeting attended, with the exception of
multiple meetings of the board of directors held on the day of the annual
meeting of the board of directors. Directors of ENI also receive annual
incentive stock awards of 100 shares of ENI common stock if stated earnings
and total return objectives are met. Directors of ENI who are employees
receive no annual retainers or meeting fees.
Directors of ENI may elect to have portions of the retainers and fees
credited each year to a deferred compensation account pursuant to a plan that
provides for accrual of interest and distribution of the deferral accounts in
lump sum amounts or in equal installments over ten years, at the option of
each director, beginning on the date designated by the director.
21
<PAGE>
EXECUTIVE COMPENSATION
The following Summary Compensation Table shows compensation paid by ENI, the
Company's parent, for services rendered in all capacities during the fiscal
years ended September 30, 1996, 1995, and 1994 to the Company's Chief
Executive Officer and the four other executive officers of the Company whose
salary and cash incentive compensation award for the 1996 fiscal year exceeded
$100,000. Substantially all (approximately 92%) of such executive compensation
was charged to the Company, based on an allocation of services performed by
each executive officer.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
------------------------------------- ----------------
CASH INCENTIVE OTHER ANNUAL RESTRICTED STOCK ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY(1) COMPENSATION COMPENSATION AWARDS(2) COMPENSATION(3)
- --------------------------- ---- --------- -------------- ------------ ---------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Robert R. Giordano...... 1996 $200,334 $59,103 $2,492 $19,677 $7,961
President and CEO 1995 191,021 19,002 3,124 18,989 7,197
of the Company and 1994 181,369 13,808 2,459 13,805 7,131
ENI; Chairman and
CEO of ENPI
Albert J. Hanlon........ 1996 $114,917 $25,835 $1,346 $ 8,593 $4,555
Senior Vice President 1995 111,866 9,279 1,448 9,248 4,560
of the Company and ENI 1994 106,635 6,962 813 6,937 4,136
Richard P. Demers....... 1996 $ 95,333 $20,959 $ 0 $ 6,971 $4,397
Vice President of the 1995 91,927 7,721 827 7,718 4,250
Company and ENI; 1994 88,203 5,686 757 5,665 3,377
President of ENPI
Frank L. Childs(4)...... 1996 $ 93,750 $22,062 $ 0 $ 7,338 $1,946
Vice President of the 1995 68,981 5,613 0 5,610 645
Company and ENI 1994 0 0 0 0 0
Michelle L. Chicoine.... 1996 $ 85,584 $21,550 $1,053 $ 7,164 $4,095
Vice President, 1995 81,041 6,222 927 6,222 3,729
Treasurer and CFO 1994 76,816 4,647 968 4,619 2,369
of the Company,
ENI and ENPI
</TABLE>
- --------
(1) Includes amounts earned and deferred without election by the officer and
amounts deferred pursuant to Deferred Compensation Agreements and the
Company's 401(k) plan.
(2) The aggregate number of shares of restricted stock holdings of the above-
named officers, as of September 30, 1996, is 7,250 shares, having a value
of $138,656.
(3) All other compensation paid in 1996 includes: employer contributions to
the Company's 401(k) plan for Mr. Giordano ($4,882); value of term life
insurance premiums paid for Mr. Giordano ($2,040), Mr. Hanlon ($1,609),
Mr. Demers ($1,334), Mr. Childs ($1,225) and Ms. Chicoine ($1,176);
portion of interest earned in a deferred compensation account by Mr.
Giordano in excess of 120% of federal long-term rate ($1,039).
(4) Mr. Childs joined the Company in January 1995.
22
<PAGE>
The following Pension Plan Table sets forth estimated annual benefits
payable under ENI's Retirement Plan and Supplemental Executive Retirement Plan
("SERP") at age 65 to persons in specified compensation and years of service
classifications, and combined annual benefits payable under the Retirement
Plan and SERP upon such retirement to persons in those compensation
classifications. Substantially all (approximately 92%) of the Retirement Plan
funding expenses and SERP payments are charged to the Company based on an
allocation of services performed by each executive officer. Combined annual
benefits shown in the table do not reflect offsets for benefits of Social
Security and for retirement benefits received from other employers.
PENSION PLAN TABLE
ESTIMATED ANNUAL BENEFITS UNDER RETIREMENT PLAN
UPON RETIREMENT WITH YEARS OF SERVICE INDICATED
<TABLE>
<CAPTION>
COMBINED ANNUAL BENEFITS
AVERAGE ANNUAL EARNINGS UNDER RETIREMENT PLAN
DURING HIGHEST FIVE YEARS 20 YEARS 30 YEARS 40 YEARS AND SERP UPON RETIREMENT
- ------------------------- -------- -------- -------- ------------------------
<S> <C> <C> <C> <C>
$125,000................... $ 45,000 $ 59,375 $ 65,625 $ 93,750
150,000................... 54,000 71,250 78,750 112,500
175,000................... 63,000 83,125 91,875 131,250
200,000................... 72,000 95,000 105,000 150,000
225,000................... 81,000 106,875 118,125 168,750
250,000................... 90,000 118,750 131,250 187,500
300,000................... 108,000 142,500 157,500 225,000
</TABLE>
Non-Contributory Retirement Plan
All full-time salaried employees, including officers and certain part-time
employees, are eligible to participate in ENI's Retirement Plan, provided an
employee has reached the age of 21 and has completed one year of service. The
SERP is a non-contributory plan intended to supplement benefits of the
Retirement Plan for certain named executive officers, effective January 1,
1985. Under both plans, normal retirement is at age 65 with a provision for
early retirement. Benefits under the Retirement Plan vest after five years of
service and under the SERP vest after ten years of service. Earnings under the
plans for the executive officers named in the Summary Compensation Table
consist of regular annual compensation, excluding bonuses or severance pay,
and is the same as the Annual Compensation and Long-Term Compensation shown in
the Summary Compensation Table. Mr. Giordano has 32 credited years of service
under the plans, Mr. Hanlon 25 years, Mr. Demers 9 years, Mr. Childs 2 years,
and Ms. Chicoine 7 years.
Funding of the Retirement Plan is based on actuarial computations and
results in a pool of assets held in trust that is unallocated with respect to
any particular individual. Benefits payable under the Retirement Plan are
calculated on the basis of straight life annuity amounts, accrued over a 25-
year period and are not subject to any deduction for Social Security Benefits
or other offset.
Benefits under the SERP are unfunded, accrue over a 15-year period and once
they are fully vested do not vary with years of service, except that SERP
participants who are included in the plan after September 30, 1995 will have
benefits reduced if they retire prior to normal retirement date under the
Retirement Plan. For an individual retiring at age 65, benefits are calculated
on the basis of 75% of the average of the five highest consecutive years'
earnings, less any amounts receivable for benefits as Social Security, the
Retirement Plan, and other qualified plans of ENI and other employers.
Employment Agreements
ENI, the Company's parent, has employment agreements with Messrs. Giordano
and Hanlon under which it has agreed to employ them for five and two-year
periods, respectively, and which may be extended annually for an additional
year. If ENI terminates the employment of either of these individuals other
than for his breach of
23
<PAGE>
the agreement or misconduct, it is required to continue salary payments
including average incentive compensation, deferred compensation, and amounts
the employee has elected to defer, through the term of the agreement. Such
termination payments will not be made following any termination of employment
that gives rise to payments under the management continuity agreements
described below. The salaries paid to Messrs. Giordano and Hanlon pursuant to
their employment agreements are determined each year by the ENI Board of
Directors but may be no less than $196,000 and $115,000, respectively, per
year.
Management Continuity Agreements
ENI, the Company's parent, has management continuity agreements (the
"Continuity Agreements") with Messrs. Giordano, Hanlon, Demers, and Childs,
and Ms. Chicoine. The Continuity Agreements provide that in the event of
termination of employment or a reduction in compensation, position, or other
conditions of employment within a specified period following a Change in
Control of ENI, as defined in the Continuity Agreements, or termination by the
employee for Good Reason, as defined in the Continuity Agreements, following a
Change in Control, ENI shall pay to the employee a lump sum severance benefit
and certain other benefits. The severance benefit payable to Mr. Giordano is
five times his annual salary and incentive and deferred compensation, and to
Messrs. Hanlon and Childs and Ms. Chicoine 2.95 times each of their annual
salaries and incentive and deferred compensation. The severance benefit
payable to Mr. Demers is the greater of two times his annual salary or 2.75
times his five-year average taxable compensation. In each Continuity
Agreement, except for Mr. Giordano's, no severance benefits are paid to the
extent that such benefits, aggregated with other benefits paid to the
employee, constitute "excess parachute payments" within the meaning of Section
280G of the Internal Revenue Code of 1986.
REPORT OF THE COMPENSATION COMMITTEE OF THE ENI BOARD OF DIRECTORS
The compensation program for executive officers of the Company is
administered by the Compensation Committee of ENI's board of directors. The
Committee's philosophy is to link executive compensation to improvements in
corporate performance and enhanced profitability and shareholder value. The
compensation program objectives are to (1) provide a competitive, market-based
total compensation package that enables ENI to attract and retain key
executives; (2) integrate all compensation programs with ENI's annual and
long-term business objectives and focus executive efforts on the fulfillment
of those objectives; and (3) provide variable compensation opportunities that
are directly linked with the performance of ENI and that align executive
remuneration with the interests of shareholders and utility subsidiary
ratepayers.
Base Salary
The base salary component of executive compensation reflects the first
objective stated above of attracting and retaining qualified executives.
The salary range for each ENI executive officer ("officer") position,
including the Chief Executive Officer ("CEO"), and the actual base salary of
each officer is reviewed annually. The salary ranges are based upon
independent regional and industry salary surveys, including peer groups, for
comparable positions. These surveys are reviewed and analyzed by ENI's Human
Resources Department with the assistance of outside consultants from time to
time. Specific salary levels are established through an evaluation of each
officer's performance relating to duties and individual achievements. For
fiscal year 1996, the salary range and specific officer salary recommendations
were reviewed and approved by the ENI Compensation Committee.
In establishing 1996 base salary of ENI's CEO, the ENI Compensation
Committee reviewed the competitive market data and also reviewed performance
relating to ENI's earnings level and return on equity, cost containment
efforts, involvement in community and industry leadership activities, and
development of relations with customers. The Committee's evaluation of the
CEO's success in meeting these goals resulted in the determination of his base
salary. The Compensation Committee recommended a base salary, which was
approved by the board of directors.
24
<PAGE>
Key Employee Incentive Plan
Each officer of ENI participates in ENI's Key Employee Performance and
Equity Incentive Plan. The Plan is intended to compensate key employees based
upon performance standards and objectives and to reward performance with share
ownership in ENI. ENI seeks to align the interests of key employees with the
interests of shareholders and utility rate payers. In 1996 the annual
performance criteria which determined eligibility for awards under the Plan
were (1) earnings levels compared to forecast, (2) total average shareholder
return over a rolling three-year period compared to a peer group of comparable
natural gas distribution companies, (3) operations and maintenance expenses
per customer benchmarks compared to inflation, and (4) evaluation of
individual performance. Success in meeting these goals determines the amount
of annual incentive compensation an officer will receive. Targeted awards for
the CEO of ENI under the program range up to 40% of the midpoint of the market
interval and up to 30% for other participating officers. Three-quarters of the
Incentive Plan award is paid in cash and one-quarter is paid in the form of
awards of ENI common stock that are subject to forfeiture and restrictions on
transferability for a period of three years.
The ENI Compensation Committee believes that the total compensation program
for executives of ENI is competitive with the compensation programs provided
by similarly-sized utilities. The Compensation Committee believes that any
amounts paid under the annual incentive plan are appropriately related to
corporate and individual performance, yielding awards that are directly linked
to annual financial and operational results of ENI.
Compensation Committee of the Board
of Directors of ENI: Sylvio Dupuis,
Chairman; Roger L. Avery; Richard B.
Couser
Security Ownership
All shares of the Company's common stock, its only outstanding class of
equity securities, are held by ENI.
25
<PAGE>
DESCRIPTION OF BONDS
GENERAL
The First Mortgage Bonds Designated as % Series E Bonds Due September 30,
2027 (the "Bonds") will be issued as a new series of Bonds under the General
and Refunding Mortgage Indenture dated as of June 30, 1987 among Gas Service,
Inc. ("GSI"), now named EnergyNorth Natural Gas, Inc., and Bank of New
Hampshire, N.A. (predecessor to Bank of New Hampshire) (the "Trustee") as
supplemented and modified by six Supplemental Indentures, including the Sixth
Supplemental Indenture dated as of September 15, 1997 relating to the Bonds
(the "Indenture"). The following statements relating to the Bonds and certain
provisions of the Indenture are summaries of the material terms of the Bonds
and the Indenture, do not purport to be complete, and are subject to and are
qualified in their entirety by reference to the provisions of the Indenture.
THE INDENTURE AND INFORMATION CONCERNING OTHER INDENTURES
The Indenture was entered into June 30, 1987 among GSI and the Trustee.
Contemporaneously with the execution of the Indenture, Manchester Gas Company
("MGC") and Concord Natural Gas Corporation ("CNGC"), both wholly-owned gas
distribution subsidiaries of ENI, entered into indentures with the Trustee
virtually identical to the Indenture (the "MGC Indenture" and the "CNGC
Indenture", respectively). Mortgage bonds designated Series A ("Series A
Bonds") were issued under the Indenture, the MGC Indenture, and the CNGC
Indenture. In 1988, MGC and CNGC merged with and into GSI, which changed its
name to EnergyNorth Natural Gas, Inc. All of the mortgage and security
interests created under each of the Indenture, the MGC Indenture, and CNGC
Indenture (the "Liens") were transferred to the Trustee to be held in trust
for the collective benefit of all of the bondholders under the Indenture, the
MGC Indenture, and the CNGC Indenture. The holders of the Series A Bonds (the
"Series A Bondholders") issued under the Indenture, the MGC Indenture, and the
CNGC Indenture contemporaneously entered into a Subordination and
Intercreditor Agreement and an Intercreditor Agreement stipulating that the
Series A Bondholders, as among themselves, had a lien of equal value and
priority on the property subject to the Liens.
The Company intends to redeem all of the outstanding Series A Bonds with the
proceeds of the sale of the Bonds and retire the MGC Indenture and the CNGC
Indenture. All series of bonds issued subsequent to the issuance of the Series
A Bonds have been issued solely under the Indenture.
When the Company entered into the Indenture in 1987, bonds issued under
First Mortgage Indentures of GSI and MGC (the "First Mortgage Indentures")
remained outstanding. As a result, the Indenture was entitled the "General and
Refunding Mortgage Indenture." In 1992, all remaining outstanding bonds under
the First Mortgage Indentures were redeemed, and the First Mortgage Indentures
were discharged and released. Consequently, there are no bonds outstanding
having priority over the bonds under the Indenture.
BOOK-ENTRY ONLY SYSTEM
The Bonds will be issued in an aggregate initial principal amount of
$22,000,000 and will be represented by one certificate (the "Global Security")
to be registered in the name of the nominee of The Depository Trust Company
("DTC") or any successor depository (the "Depository"). The Depository will
maintain the Bonds in denominations of $1,000 and integral multiples thereof
through book-entry facilities. In accordance with its normal procedures, the
Depository will record the interests of each Depository participating firm
("Participant") in the Bonds whether held for its own account or as a nominee
for another person.
So long as the nominee of the Depository is the registered owner of the
Bonds, such nominee will be considered the sole owner or holder of the Bonds
for all purposes under the Indenture and any applicable laws, except as noted
below. Except as otherwise provided below, a Beneficial Owner, as hereinafter
defined, of interests in the Bonds will not be entitled to receive a physical
certificate representing such ownership interest and will not be considered an
owner or holder of the Bonds under the Indenture. A Beneficial Owner is the
person who has the right to sell, transfer, or otherwise dispose of an
interest in the Bonds and the right to receive
26
<PAGE>
the proceeds therefrom, as well as interest, principal, and premium (if any)
payable in respect thereof. A Beneficial Owner's interest in the Bonds will be
recorded, in integral multiples of $1,000, on the records of the Participant
that maintains such Beneficial Owner's account for such purpose. In turn, the
Participant's interest in such Bonds will be recorded, in integral multiples
of $1,000, on the records of the Depository. Therefore, the Beneficial Owner
must rely on the foregoing arrangements to evidence its interest in the Bonds.
Beneficial ownership of the Bonds may be transferred only by compliance with
the procedures of the Beneficial Owner's Participant (e.g., brokerage firm)
and the Depository.
All rights of ownership must be exercised through the Depository and the
book-entry system, except that a Beneficial Owner is entitled to directly
exercise its rights under Section 316(b) of the Trust Indenture Act of 1939,
as amended, with respect to the payment of principal and interest on the
Bonds. Notices that are to be given to registered owners by the Company or the
Trustee will be given only to the Depository. It is expected that the
Depository will forward the notices to the Participants by its usual
procedures so that such Participants may forward such notices to the
Beneficial Owners. Conveyance of notices and other communications by the
Depository to the Participants and by the Participants to Beneficial Owners
and the voting rights of Participants and Beneficial Owners will be governed
by arrangements among them, subject to any statutory or regulatory
requirements as may be in effect from time to time.
The following information concerning DTC and its book-entry has been
obtained from sources the Company believes to be reliable, but it does not
take any responsibility for the accuracy thereof: DTC is a limited-purpose
trust company organized under New York Banking Law, a "banking organization"
within the meaning of New York Banking Law, a member of the Federal Reserve
System, a "clearing corporation" within the meaning of the New York Uniform
Commercial Code, and a "clearing agency" registered pursuant to the provisions
of Section 17A of the Securities Exchange Act of 1934 (the "Exchange Act").
DTC holds securities that Participants deposit with it and facilitates the
settlement of securities transactions among Participants in such securities
transactions through electronic computerized book-entry changes in accounts of
Participants, thereby eliminating the need for physical movement of securities
certificates. Participants include securities brokers and dealers (including
the Underwriter), banks, trust companies, clearing corporations, and certain
other organizations, some of whom (and/or their representatives) own DTC.
Access to DTC's book-entry system is also available to others, such as banks,
brokers, dealers, and trust companies that clear through or maintain a
custodial relationship with a Participant, either directly or indirectly.
Persons who are not Participants may beneficially own securities held by DTC
only through Participants.
INTEREST AND PAYMENT
The Bonds will mature on September 30, 2027. The Bonds will bear interest
from the date of issuance at the rate per annum stated on the cover page
hereof, payable semi-annually on March 31 and September 30 of each year (each
an "Interest Payment Date") commencing March 31, 1998, to the persons in whose
names the Bonds are registered at the close of business on each March 15 and
September 15, respectively, next preceding such Interest Payment Date. If any
payment date would otherwise be a day that is not a business day, the payment
will be postponed to the next day that is a business day, and no interest on
such payment shall accrue for the period from and after such otherwise
scheduled payment date for the purposes of the payment to be made on such next
succeeding business day.
So long as the nominee of the Depository is the registered owner of the
Bonds, payments of interest, principal, and premium (if any) on the Bonds will
be made to the Depository. The Depository will be responsible for crediting
the amount of such distributions to the accounts of the Participants entitled
thereto, in accordance with the Depository's normal procedures. Each
Participant will be responsible for disbursing such distributions to the
Beneficial Owners of the interests in Bonds that it represents. NEITHER THE
COMPANY NOR THE TRUSTEE WILL HAVE ANY RESPONSIBILITY OR LIABILITY FOR ANY
ASPECT OF THE RECORDS RELATING TO, NOTICES TO, OR PAYMENTS MADE ON ACCOUNT OF,
BENEFICIAL OWNERSHIP INTERESTS IN THE BONDS, FOR MAINTAINING, SUPERVISING OR
REVIEWING ANY RECORDS RELATING TO SUCH BENEFICIAL OWNERSHIP INTERESTS, OR FOR
THE SELECTION OF ANY BENEFICIAL OWNER TO RECEIVE PAYMENT IN THE EVENT OF A
PARTIAL REDEMPTION OF THE GLOBAL SECURITY OR FOR CONSENTS GIVEN OR OTHER
ACTION TAKEN ON BEHALF OF ANY BENEFICIAL OWNER.
27
<PAGE>
SECURITY AND PRIORITY
The Bonds are secured by a first mortgage on substantially all of the real
and personal property presently owned by or hereafter acquired by the Company,
including: all real estate interests; all personal property; all gas
manufacturing facilities, distribution facilities and storage facilities; all
equipment used in the transmission or storage of gas; contract rights to
purchase natural gas and other products from various suppliers; and all rights
under any permit or license. Excluded from the security for the Bonds under
the terms of the Indenture are the following: all cash, bonds, stocks,
obligations, and other securities not deposited with the Trustee; all contract
rights other than to purchase natural gas or for material construction
contracts; all accounts receivable, notes and bills receivable, judgments, and
other evidences of indebtedness; all electricity, gas, water, appliances,
stock in trade, materials, fuel, supplies, and other products generated,
manufactured, produced, purchased, or acquired for the purpose of sale and/or
resale, transmission, distribution, storage, inventory, or use in the usual
course of business; all products of the land owned by the Company; all
vehicles, automotive equipment, and construction equipment; all office
equipment, furniture, and tools; all property which is characterized as
supplemental fuel inventory; and the Company's books and records. However,
upon an Event of Default (as defined below), the foregoing excluded property
(except the supplemental fuel inventory) may become subject to the lien of the
Indenture. In the event of a merger, consolidation, transfer, sale, or lease
of the Company or its properties, the lien of the Indenture survives against
the property of the Company in the possession of a successor company.
The Bonds will rank equally and ratably (except as to sinking fund and other
analogous funds established for the exclusive benefit of a particular series)
with all bonds issued under the Indenture (and the MGC Indenture and the CNGI
Indenture with respect to Series A Bond issued thereunder), regardless of
series, from time to time issued and outstanding under the Indenture.
TITLE INSURANCE
Title insurance will be issued to the Trustee for the benefit of the
bondholders insuring all real property conveyed to the Trustee as security
under the Indenture.
REDEMPTION AT OPTION OF THE COMPANY
The Bonds will be redeemable at any time on or after September 30, 2002, as
a whole or in part, at the election of the Company, on not less than 30 nor
more than 60 days' notice given as provided in the Indenture, at 104% of the
principal amount of the Bonds, declining by 1% of the principal amount per
year for each of the succeeding four years, together with accrued and unpaid
interest to the date of redemption, as further illustrated in the table set
forth below, provided that Bonds are redeemed on or after September 30 of the
years indicated:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE %
---- ----------
<S> <C>
2002........................................................... 104%
2003........................................................... 103%
2004........................................................... 102%
2005........................................................... 101%
2006 and thereafter............................................ 100%
</TABLE>
On and after the date fixed for redemption, interest will cease to accrue on
Bonds or portions thereof called for redemption, unless the Company shall
default in the payment of the redemption price.
If the Company elects to redeem less than all of the outstanding Bonds, the
Trustee shall prorate the principal amount of such bonds to be redeemed among
all holders of outstanding Bonds in proportion to the outstanding principal
amount of such bonds held by each holder. The aggregate principal amount of
each partial redemption of Bonds shall be allocated in units of $1,000, or
integral multiples thereof, among the holders of such bonds at the time
outstanding, in proportion as nearly as practicable, to the respective unpaid
principal amount of such bonds held thereby, with adjustment, to the extent
practicable, to equalize for any prior redemption not made in exactly such
proportion.
28
<PAGE>
LIMITED RIGHT OF REDEMPTION UPON DEATH OF A BENEFICIAL OWNER
Unless the Bonds have been declared due and payable prior to their maturity
by reason of an Event of Default, the representative of a deceased Beneficial
Owner has the right to request redemption of all or part of his or her
interest in the Bonds, expressed in integral multiples of $1,000 principal
amount, for payment prior to maturity. The Company will redeem the same
subject to the limitations that the Company will not be obligated to redeem
during the period beginning with the original issuance of the Bonds of this
series and ending on September 30, 1998 and during any twelve-month period
ending on September 30 thereafter, (i) at the request of a representative on
behalf of a deceased Beneficial Owner any interest in the Bonds which exceeds
an aggregate principal amount of $25,000 or (ii) interests in the Bonds in an
aggregate principal amount exceeding $500,000. A Redemption Request, as
hereinafter defined, may be presented to the Trustee at any time and in any
principal amount. If the Company, although not obligated to do so, chooses to
redeem interests of a deceased Beneficial Owner in the Bonds in any such
period in excess of the $25,000 limitation, such redemption, to the extent
that it exceeds the $25,000 limitation for any deceased Beneficial Owner,
shall not be included in the computation of the $500,000 aggregate limitation
for such period or any succeeding period.
Subject to the $25,000 and $500,000 limitations, the Company will upon the
death of any Beneficial Owner redeem the interests of the Beneficial Owner in
the Bonds within 60 days following receipt by the Trustee of a Redemption
Request from such Beneficial Owner's personal representative, or surviving
joint tenant(s), tenant(s) by the entirety or tenant(s) in common, or other
persons entitled to effect such a Redemption Request. If Redemption Requests
exceed the aggregate principal amount of interests in Bonds required to be
redeemed during any twelve-month period, such excess Redemption Requests will
be applied to successive periods, regardless of the number of periods required
to redeem such interests.
A Redemption Request may be made by delivering a request to the Depository,
in the case of a Participant which is the Beneficial Owner of such interest,
or to the Participant through whom the Beneficial Owner owns such interest, in
form satisfactory to the Participant, together with evidence of death and
authority of the representative satisfactory to the Participant and Trustee. A
surviving joint tenant, tenant in common or a tenant by the entirety, or other
person seeking the redemption of an interest in Bonds by reason of the death
of another may make the request for redemption and shall submit such other
evidence of the right to such redemption as the Participant shall require. The
request shall specify the principal amount of interest in the Bonds to be
redeemed. A request for redemption in form satisfactory to the Participant and
accompanied by the documents relevant to the request as above provided,
together with a certification by the Participant that it holds the interest on
behalf of the deceased Beneficial Owner with respect to whom the request for
redemption is being made (a "Redemption Request"), shall be provided to the
Depository by a Participant and the Depository will forward the request to the
Trustee. Redemption Requests shall be in form satisfactory to the Trustee.
The price to be paid by the Company for an interest in the Bonds to be
redeemed pursuant to a request on behalf of a deceased Beneficial Owner is one
hundred percent (100%) of the principal amount thereof plus accrued but unpaid
interest to the date of payment. Subject to arrangements with the Depository,
payment for an interest in the Bonds which are to be redeemed shall be made to
the Depository upon presentation of Bonds to the Trustee for redemption in the
aggregate principal amount specified in the Redemption Requests submitted to
the Trustee by the Depository which are to be fulfilled in connection with
such payment. Any acquisition of Bonds by the Company other than by redemption
at the option of a representative on behalf of a deceased Beneficial Owner
shall not be included in the computation of either the $25,000 or $500,000
limitations for any period.
Interests in the Bonds held in tenancy by the entirety, joint tenancy, or by
tenants in common will be deemed to be held by a single Beneficial Owner, and
the death of a tenant in common, tenant by the entirety, or joint tenant will
be deemed the death of a Beneficial Owner. The death of a person who, during
such person's lifetime,
29
<PAGE>
was entitled to substantially all of the rights of a Beneficial Owner of an
interest in the Bonds will be deemed the death of the Beneficial Owner,
regardless of the recordation of such interest on the records of the
Participant, if such rights can be established to the satisfaction of the
Participant and the Trustee. Such interest shall be deemed to exist in typical
cases of nominee ownership, ownership under the Uniform Gifts to Minors Act or
the Uniform Transfer to Minors Act, community property or other joint
ownership arrangements between a husband and wife (including individual
retirement accounts or Keogh plans maintained solely by or for the decedent or
by or for the decedent and any spouse), and trust and certain other
arrangements where one person has substantially all of the rights of a
Beneficial Owner during such person's lifetime.
In the case of a Redemption Request which is presented on behalf of a
deceased Beneficial Owner and which has not been fulfilled at the time the
Company gives notice of its election to redeem the Bonds, the Bonds which are
the subject of such Redemption Request shall not be eligible for redemption
pursuant to the Company's option to redeem but shall remain subject to
fulfillment pursuant to such Redemption Request.
Subject to the provisions of the immediately preceding paragraph, any
Redemption Request may be withdrawn upon delivery of a written request for
such withdrawal given to the Trustee by the Depository prior to September 1,
1998, in the case of the initial period beginning with the original issuance
of the Bonds and ending on September 30, 1998, or prior to September 1, in the
case of any subsequent twelve-month period ending on September 30.
Because of the limitations of the Company's requirement to redeem, no
Beneficial Owner can have any assurance that his or her interest in the Bonds
will be paid prior to maturity.
SINKING FUND
The Bonds are not subject to a sinking fund.
COVENANTS
The Company may issue additional bonds (in unlimited principal amounts)
under the Indenture only if, after giving effect to such issuance, its Net
Earnings Available for Interest (as defined in the Indenture) for a period of
12 consecutive months during the 24 months immediately preceding the month in
which bonds are issued is at least equal to 1.75 times the total annual
interest charges on all Outstanding Bonds (as defined in the Indenture) under
the Indenture (excluding any bonds for which provision has been made in
compliance with any requirement of the Indenture for their retirement) and all
other indebtedness for borrowed money then secured by a lien equal to or
superior to the lien of the Indenture on any part of the Company's property
which is subject to the Indenture (except any such indebtedness the evidences
of which shall then be held in any sinking fund or otherwise and any such
indebtedness where the necessary moneys for which the payment or redemption
have been deposited with a trustee or mortgagee) (the "Debt"). Further,
additional bonds may be issued only if, after giving effect to the proposed
bond issuance, Outstanding Bonds do not exceed 70% of Bondable Capacity (as
calculated in accordance with the provisions of the Indenture). On June 30,
1997, after giving effect to the issuance of the Bonds and the redemption of
the Series A Bonds, Net Earnings Available for Interest were times the
total annual interest charges for the Debt, and Outstanding Bonds were equal
to 52% of Bondable Capacity.
Before the Trustee may take any action under any provision of the Indenture,
the Trustee must receive, among other things, an officers' certificate and an
opinion of counsel stating that all conditions and covenants which must be
complied with pursuant to the terms of the Indenture before the Trustee may
take the requested action have been complied with.
Subject to the restrictions described above, the Indenture would not afford
any protection to bondholders solely in the event of the Company's involvement
in a highly-leveraged transaction.
30
<PAGE>
EVENTS OF DEFAULT; NOTICE AND WAIVER
The Indenture provides that the following shall constitute events of default
("Events of Default"):
(a) failure to pay the principal of any bonds secured by and outstanding
under the Indenture when due;
(b) failure to pay interest on any bond secured by and outstanding under
the Indenture for a period of 5 days after such interest shall have become
due;
(c) failure to pay any sinking fund payment for a period of 5 days after
such payment shall have become due under any supplement to the Indenture;
(d) certain events of bankruptcy, insolvency or reorganization;
(e) failure to perform or observe certain covenants, agreements, or
conditions on the part of the Company with respect to the payment of taxes,
the maintenance of certain liens on the trust estate, the maintenance of
certain insurance, and the sale of certain property;
(f) failure to perform or observe any of the other covenants, agreements,
or conditions on the part of the Company in the Indenture, and the
continuance of such failure for a period of 30 days after the earlier of
(i) knowledge by an officer of the Company, or (ii) written notice thereof
to the Company from the Trustee or from the holders of not less than 33
1/3% of the aggregate principal amount of the Bonds outstanding;
(g) default under any covenant or agreement of the Company contained in
any agreement between the Company and the original purchaser or the holders
of the bonds of a particular series so long as (i) such covenant or
agreement expressly states that a default thereunder constitutes a default
under the Indenture and (ii) a copy of such agreement or covenant is
provided to the Trustee;
(h) the rendering against the Company of a judgment or judgments for the
payment of monies in excess of $250,000 in the aggregate and the
continuance of such judgment unsatisfied and without stay for a period of
30 days; and
(i) with respect to Indebtedness for Money Borrowed (as defined in the
Indenture) in the aggregate amount in excess of $250,000 (excluding the
bonds) either (i) failure to pay any amount due or any interest or premium
thereon, when due, or (ii) default in the performance or observance of any
other obligation or condition with respect to such Indebtedness (as defined
in the Indenture) if the effect of such default either accelerates the
maturity of the Indebtedness or permits such Indebtedness to become due and
payable prior to its stated maturity.
Upon the occurrence of an Event of Default, the Trustee may, and upon the
request of the holders of 33 1/3% in aggregate principal amount of the
outstanding bonds shall, by written notice to the Company, declare the
principal and all accrued and unpaid interest on the bonds immediately due and
payable. The Trustee, upon request of the holders of a majority in aggregate
principal amount of the outstanding bonds, shall rescind any such declaration
if such default is cured.
The Indenture provides that within 45 days after the occurrence of an Event
of Default the Trustee will give the holders of the bonds notice of all
uncured Events of Default known to it; but, except in the case of a default in
the payment of principal or premium, if any, or interest on any of the bonds,
or in the payment of any sinking, improvement, purchase, amortization, or
other fund installment, the Trustee shall be protected for withholding such
notice if the Trustee in good faith determines that the withholding of such
notice is in the interest of such holders.
The holders of a majority in aggregate principal amount of the outstanding
bonds may on behalf of the holders of all the bonds waive certain past
defaults, except a default in the payment of the principal or premium or
interest on the bonds or in respect of a covenant or provision of the
Indenture that cannot be modified or amended without the consent of all of the
outstanding bondholders affected. Upon such waiver, such Event of Default
shall be deemed to be cured and no longer to exist for any purpose under the
Indenture.
31
<PAGE>
Holders of bonds have no right to enforce any remedy under the Indenture
unless the Trustee has first had a reasonable opportunity to do so following
notice of default to the Trustee and request by the holders of 25% in
aggregate principal amount of the bonds for action by the Trustee with offer
of indemnity satisfactory to the Trustee against cost, expenses and
liabilities that may be incurred thereby, but this provision does not impair
the absolute right of any holder of bonds to enforce payment of the principal
of and interest on his or her bond when due.
MODIFICATION OF INDENTURE
Modifications and amendments of the Indenture which materially affect the
rights of the holders of the bonds outstanding under the Indenture may be made
by the Company and the Trustee only with the consent of the holders of no less
than 66 2/3% in principal amount of the bonds of each series then outstanding,
provided that no such modification or amendment may: (1) permit the extension
of the time or times of payment of the principal of, or the interest or the
premium (if any) on, any bond, or a reduction in the rate of interest or the
amount of premium thereon, or otherwise affect the terms of payment of the
principal of, or the interest or the premium (if any) on, any bond; (2)
otherwise than as permitted by the Indenture, permit the creation of any lien
ranking prior or equal to the lien of the Indenture with respect to any of the
mortgaged properties; or (3) permit the reduction of the percentage of bonds
required for the making of any such modification or alteration.
RELEASE OF PROPERTY
Unless an Event of Default shall have occurred and be continuing, the
Company is entitled to possess, use and enjoy all the property and
appurtenances, franchise and rights conveyed by the Indenture. Subject to
various limitations and requirements, the Company may obtain a release of any
part of the mortgaged property upon receipt by the Trustee of cash or other
consideration, if any, received or to be received from the sale, surrender or
other disposition of the property to be released.
RELEASE AND DISCHARGE OF INDENTURE
The Company may require the discharge of the Indenture if: (1) the Company
pays or makes appropriate provision for the payment to the holders of the
outstanding bonds of the principal, premium if any, and any interest due and
to become due thereon; and (2) the Company delivers an opinion of counsel and
an officers' certificate in accordance with the Indenture to the Trustee.
SUCCESSOR CORPORATION
Under the Indenture, the Company may not consolidate with or merge into or
convey or lease all or substantially all of its assets to another corporation,
unless immediately after such transaction, no Event of Default will exist and
such corporation assumes all the obligations of the Company under the bonds
and the Indenture.
CONCERNING THE TRUSTEE
Bank of New Hampshire is the Trustee under the Indenture. Its address is 143
Main Street, Concord, New Hampshire. The Company has appointed Bank of New
Hampshire as the Registrar under the Indenture.
The Indenture provides that all indebtedness to the Trustee for compensation
thereunder shall be secured by a lien prior to that of the bonds upon the
trust estate.
32
<PAGE>
UNDERWRITING
The sole Underwriter, Edward D. Jones & Co., L.P., whose address is 12555
Manchester Road, St. Louis, Missouri 63131-3729, has agreed, subject to the
terms and conditions of the Underwriting Agreement, to purchase the Bonds from
the Company.
The Company has been advised that the Underwriter proposes to offer the
Bonds directly to the public at the public offering price set forth on the
cover page of this Prospectus. The Underwriter may organize a selling group of
other securities dealers, all of whom will be members of the National
Association of Securities Dealers, Inc. The Underwriter may allow concessions
to members of the selling group in such amounts as it may determine. After the
initial public offering, the public offering price and concessions to dealers
may be changed.
The Company has been advised that the Underwriter intends to make a market
in the Bonds. In order to facilitate the offering of the Bonds, the
Underwriter may engage in transactions that stabilize, maintain or otherwise
affect the price of the Bonds. Specifically, the Underwriter may over-allot in
connection with the offering, creating a short position in the Bonds for its
own account. In addition, to cover over-allotments or to stabilize the price
of the Bonds, the Underwriter may bid for, and purchase, the Bonds in the open
market. The Underwriter may reclaim selling concessions allowed to a dealer
for distributing the Bonds in the offering, if the Underwriter repurchases
previously distributed Bonds in transactions to cover short positions in
stabilization transactions or otherwise. Any of these activities may stabilize
or maintain the market price of the Bonds above independent market levels. The
Underwriter is not required to engage in these activities, and may end any of
these activities at any time.
The Company has agreed to indemnify the Underwriter against certain
liabilities, including liabilities under the Securities Act of 1933.
LEGAL MATTERS
Certain legal matters in connection with the offering have been passed upon
for the Company by McLane, Graf, Raulerson & Middleton, Professional
Association, Manchester, New Hampshire. Richard A. Samuels, a shareholder and
director of McLane, Graf, Raulerson & Middleton, Professional Association, is
Assistant Secretary of the Company and Secretary of ENI, the Company's parent.
Certain matters will be passed upon for the Underwriter by Bryan Cave LLP,
St. Louis, Missouri.
EXPERTS
The audited financial statements and schedules of the Company included in
this Prospectus and elsewhere in the Registration Statement, of which this
Prospectus is a part, have been audited by Arthur Andersen LLP, independent
public accountants, as indicated in their reports with respect thereto, and
are included herein in reliance upon the authority of such firm as experts in
accounting and auditing in giving said reports.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Exchange Act
under Section 15(d) of the Exchange Act and in accordance therewith files
reports and other information with the Securities and Exchange Commission (the
"SEC"). Such reports and other information can be inspected and copied at the
SEC's Public Reference Room; Judiciary Plaza; 450 Fifth Street, N.W.,
Washington, D.C. 20549, as well as the following Regional Offices of the SEC:
7 World Trade Center, Suite 1300, New York, New York 10048; and Citicorp
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511.
Copies of such material can be obtained from the Public Reference Section of
the SEC at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates. The SEC also maintains a Web site that contains reports,
proxy and information statements and other information regarding registrants
that file electronically with the SEC (http://www.sec.gov).
33
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Public Accountants.................................. F-2
Balance Sheets, June 30, 1997 (unaudited), September 30, 1996 and 1995.... F-3
Statements of Income, Twelve Months Ended June 30, 1997 (unaudited),
Fiscal Years Ended September 30, 1996, 1995 and 1994..................... F-4
Statements of Retained Earnings, Twelve Months Ended June 30, 1997
(unaudited), Fiscal Years Ended September 30, 1996, 1995 and 1994........ F-5
Statements of Cash Flows, Twelve Months Ended June 30, 1997 (unaudited),
Fiscal Years Ended September 30, 1996, 1995 and 1994..................... F-6
Notes to Financial Statements............................................. F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of EnergyNorth Natural Gas, Inc.:
We have audited the accompanying balance sheets of EnergyNorth Natural Gas,
Inc. (a New Hampshire corporation and a wholly owned subsidiary of
EnergyNorth, Inc.) as of September 30, 1996 and 1995, and the related
statements of income, retained earnings and cash flows for each of the three
years in the period ended September 30, 1996. These financial statements are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of EnergyNorth Natural Gas,
Inc. as of September 30, 1996 and 1995, and the results of its operations and
its cash flows for each of the years in the period ended September 30, 1996,
in conformity with generally accepted accounting principles.
/s/ Arthur Andersen LLP
Boston, Massachusetts
November 1, 1996
F-2
<PAGE>
ENERGYNORTH NATURAL GAS, INC.
BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
<TABLE>
<CAPTION>
SEPTEMBER 30,
JUNE 30, -----------------
1997 1996 1995
----------- -------- --------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Utility plant, at cost.......................... $143,711 $136,198 $129,864
Accumulated depreciation and amortization....... 47,686 44,679 41,448
-------- -------- --------
Net utility plant............................... 96,025 91,519 88,416
-------- -------- --------
Current assets:
Cash and temporary cash investments............. 459 311 404
Accounts receivable (net of allowances of
$1,333, $1,176 and $907, respectively)......... 6,047 1,831 1,921
Unbilled revenues............................... 593 582 586
Deferred gas costs.............................. -- 3,783 --
Materials and supplies.......................... 1,523 1,453 1,498
Supplemental gas supplies....................... 5,335 8,825 7,899
Prepaid and deferred taxes...................... 1,412 1,562 1,673
Recoverable FERC 636 transition costs........... 1,514 1,733 1,733
Prepaid expenses and other...................... 413 1,098 1,156
-------- -------- --------
Total current assets.......................... 17,296 21,178 16,870
-------- -------- --------
Deferred charges:
Regulatory asset--income taxes.................. 2,402 2,401 2,401
Recoverable environmental costs................. 6,268 6,840 3,741
Other deferred charges.......................... 93 768 859
-------- -------- --------
Total deferred charges........................ 8,763 10,009 7,001
-------- -------- --------
Total assets.................................. $122,084 $122,706 $112,287
======== ======== ========
STOCKHOLDER'S EQUITY AND LIABILITIES
Capitalization:
Common stock--par value of $25 per share,
120,000 shares authorized, issued and
outstanding.................................... $ 3,000 $ 3,000 $ 3,000
Amount in excess of par......................... 22,538 22,538 21,038
Retained earnings............................... 20,891 15,819 14,027
-------- -------- --------
Total common stockholder's equity............. 46,429 41,357 38,065
-------- -------- --------
Long-term debt.................................. 26,789 27,102 28,552
Capital lease obligations....................... -- -- 25
-------- -------- --------
Total long-term obligations................... 26,789 27,102 28,577
-------- -------- --------
Total capitalization.......................... 73,218 68,459 66,642
-------- -------- --------
Current liabilities:
Notes payable to banks.......................... 5,500 9,535 1,500
Current portion of long-term debt............... 1,663 1,646 1,652
Current portion of capital lease obligations.... -- 25 43
Inventory purchase obligation................... 4,101 7,867 7,130
Accounts payable................................ 5,615 5,287 4,307
Accounts payable to affiliates.................. 763 589 1,285
Deferred gas costs.............................. 2,476 -- 5,645
Accrued interest................................ 1,055 831 857
Accrued taxes................................... 2,596 1,617 192
Accrued FERC 636 transition costs............... 1,514 1,733 1,733
Customer deposits, environmental and other...... 1,933 3,963 1,260
-------- -------- --------
Total current liabilities..................... 27,216 33,093 25,604
-------- -------- --------
Commitments and contingencies
Deferred credits:
Deferred income taxes........................... 16,272 15,619 14,339
Unamortized investment tax credits.............. 1,768 1,870 2,010
Regulatory liability............................ 1,284 1,374 1,497
Contributions in aid of construction and
other.......................................... 2,326 2,291 2,195
-------- -------- --------
Total deferred credits........................ 21,650 21,154 20,041
-------- -------- --------
Total stockholder's equity and liabilities.... $122,084 $122,706 $112,287
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
ENERGYNORTH NATURAL GAS, INC.
STATEMENTS OF INCOME
(IN THOUSANDS)
<TABLE>
<CAPTION>
FISCAL YEARS ENDED
12 MONTHS ENDED SEPTEMBER 30,
JUNE 30, -----------------------
1997 1996 1995 1994
--------------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C>
Operating revenues:
Utility gas service................... $91,029 $76,620 $68,988 $86,376
Other................................. 975 890 829 1,774
------- ------- ------- -------
Total operating revenues............ 92,004 77,510 69,817 88,150
------- ------- ------- -------
Operating expenses:
Cost of gas sold...................... 53,879 39,115 35,602 51,058
Operations and maintenance............ 18,140 18,624 18,407 19,180
Depreciation and amortization......... 4,864 4,693 4,063 3,897
Taxes other than income taxes......... 3,574 3,654 3,460 3,639
Federal and state income taxes........ 3,330 3,224 1,745 2,280
------- ------- ------- -------
Total operating expenses............ 83,787 69,310 63,277 80,054
------- ------- ------- -------
Operating income........................ 8,217 8,200 6,540 8,096
Other income............................ 760 735 1,254 416
------- ------- ------- -------
Income before interest expense.......... 8,977 8,935 7,794 8,512
Interest expense:
Interest on long-term debt............ 2,653 2,747 2,883 3,001
Other interest........................ 887 761 1,166 674
------- ------- ------- -------
Total interest expense.............. 3,540 3,508 4,049 3,675
------- ------- ------- -------
Net income.............................. $ 5,437 $ 5,427 $ 3,745 $ 4,837
======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
ENERGYNORTH NATURAL GAS, INC.
STATEMENTS OF RETAINED EARNINGS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FISCAL YEARS ENDED
12 MONTHS ENDED SEPTEMBER 30,
JUNE 30, -----------------------
1997 1996 1995 1994
--------------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C>
Balance at beginning of year ......... $19,105 $14,027 $13,650 $12,012
Add--net income....................... 5,437 5,427 3,745 4,837
------- ------- ------- -------
24,542 19,454 17,395 16,849
Deduct--cash dividends on common
stock................................ 3,651 3,635 3,368 3,199
------- ------- ------- -------
Balance at end of year................ $20,891 $15,819 $14,027 $13,650
======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
ENERGYNORTH NATURAL GAS, INC.
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FISCAL YEARS ENDED
12 MONTHS ENDED SEPTEMBER 30,
JUNE 30, -------------------------
1997 1996 1995 1994
--------------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C>
Cash flows from operating
activities:
Net income....................... $ 5,437 $ 5,427 $ 3,745 $ 4,837
Noncash items:
Depreciation and amortization.. 5,114 5,177 4,486 4,271
Deferred taxes and investment
tax credits, net.............. 928 1,017 1,066 569
Changes in:
Accounts receivable, net....... (1,843) 90 303 (372)
Unbilled revenues.............. 12 4 (42) (76)
Inventories.................... (820) (881) 47 704
Prepaid expenses and other..... (16) 58 (93) 224
Deferred gas costs............. 4,587 (9,428) 909 5,499
Accounts payable............... 225 980 36 247
Accounts payable to affiliates,
net........................... (719) (696) 901 (269)
Accrued liabilities............ (630) (279) (104) (167)
Accrued/prepaid taxes.......... 246 1,536 (419) 112
Payments for environmental costs
and other....................... (1,315) (821) (2,672) (1,511)
-------- ------- ------- -------
Net cash provided by
operating activities........ 11,206 2,184 8,163 14,068
-------- ------- ------- -------
Cash flows from investing
activities:
Additions to property............ (11,752) (7,496) (6,407) (6,298)
-------- ------- ------- -------
Cash flows from financing
activities:
Capital contributions from
parent.......................... 1,500 1,500 -- 1,190
Issues of long-term debt......... 211 208 149 80
Change in notes payable to
banks........................... 3,500 8,035 1,500 (3,050)
Increase in inventory purchase
obligation...................... 9,194 9,284 6,770 9,962
Change in customer deposits and
other........................... (271) 81 7 128
Cash dividends on common stock... (3,651) (3,635) (3,368) (3,199)
Refunding requirements:
Repayment of long-term debt.... (1,660) (1,664) (1,687) (1,356)
Repayment of capital lease
obligations................... (36) (43) (41) (41)
Repayment of inventory purchase
obligation.................... (8,059) (8,547) (6,974) (9,655)
-------- ------- ------- -------
Net cash provided by (used
for) financing activities... 728 5,219 (3,644) (5,941)
-------- ------- ------- -------
Net increase (decrease) in cash and
temporary cash investments........ 182 (93) (1,888) 1,829
Cash and temporary cash invest-
ments, beginning of year.......... 277 404 2,292 463
-------- ------- ------- -------
Cash and temporary cash invest-
ments, end of year................ $ 459 $ 311 $ 404 $ 2,292
======== ======= ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
ENERGYNORTH NATURAL GAS, INC.
NOTES TO FINANCIAL STATEMENTS
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIOD)
NOTE 1. ACCOUNTING POLICIES
The significant accounting policies followed by EnergyNorth Natural Gas,
Inc. (the "Company") are set forth below.
Business Organization
The Company is a wholly owned subsidiary of EnergyNorth, Inc. Transactions
between the Company and other affiliated companies include payments for
management, accounting, data processing and other services. The Company is a
regulated gas distribution utility located in southern and central New
Hampshire and also provides service and sells appliances. The rates and
accounting practices followed by the Company are regulated by the New
Hampshire Public Utilities Commission ("NHPUC"). The Company's accounting
policies conform to generally accepted accounting principles applicable to
rate-regulated enterprises and reflect the effects of the ratemaking process
in accordance with Statement of Financial Accounting Standards ("SFAS") No.
71, "Accounting for Certain Types of Regulation."
Revenue Recognition
Utility revenues derived from the sale or transportation of natural gas are
based on rates authorized by the NHPUC. Customers' meters are read and bills
are rendered on a cycle basis throughout the month. The Company records
unbilled revenues related to gas delivered but not billed at the end of the
accounting period.
Cost of Gas Adjustment Clause
The Company's tariff includes a cost of gas adjustment ("CGA") clause that
permits billings to customers for changes in its cost of gas over a base
period cost. The tariff provides for a CGA calculation for a summer period and
a winter period. Any difference between the cost of gas incurred and amounts
billed to customers is deferred for ratemaking and accounting purposes to the
next corresponding period. Interest accrues on these amounts at the prime
rate, adjusted quarterly.
Inventories
Inventories are valued on the basis of the lower of average cost or market.
Depreciation
The Company provides for depreciation on the straight-line basis. The rates
applied are approved by the NHPUC. Such rates were equivalent to a composite
rate of 3.4% for the twelve months ended June 30, 1997 and for the fiscal
years ended September 30, 1996, 1995 and 1994. Under depreciation practices
required by the NHPUC, when gas utility assets under the composite method are
retired from service, the cost of the retired assets are removed from the
property accounts and charged, together with any cost of removal, to the
accumulated depreciation accounts. For all other assets, when assets are sold
or retired, the cost of the assets and their related accumulated depreciation
are removed from the respective accounts, net removal costs are recorded and
any gain or loss is included in income.
Deferred Charges
Total deferred charges consist primarily of regulatory assets and the cost
of issuing debt. The Company has established various regulatory assets in
cases where the NHPUC has permitted, or is expected to permit, recovery of
specific costs over a period of time. At September 30, 1996, regulatory assets
included $6,800,000 for
F-7
<PAGE>
ENERGYNORTH NATURAL GAS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
environmental investigation and disposal costs and $2,400,000 of unrecovered
deferred state income taxes (see Note 6). At June 30, 1997, regulatory assets
included $6,300,000 for environmental investigation and disposal costs and
$2,400,000 of unrecovered deferred state income taxes.
The unamortized cost of issuing debt at September 30, 1996 was $664,000 and
at June 30, 1997 was $619,000. Deferred financing costs are amortized over the
life of the related security. Other deferred charges are amortized over the
recovery period specified by the NHPUC.
SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed of," issued in March 1995 and effective
October 1, 1996, establishes accounting standards for the impairment of long-
lived assets. SFAS No. 121 requires that any assets, including regulatory
assets, which are no longer probable of recovery through future revenues, be
revalued based on estimated future cash flows. If the revaluation is less than
the book value of the asset, an impairment loss would be charged to earnings.
While circumstances may change, based on the current regulatory environment in
the Company's service area, the adoption of SFAS No. 121 has not had a
material impact on the Company's financial position or results of operations.
Investment Tax Credits
Investment tax credits are being amortized over the estimated useful life of
the property that gave rise to the credit.
Fair Value of Financial Instruments
Because of the short maturity of certain assets, which include cash,
temporary cash investments and accounts receivable, and certain liabilities,
which include accounts payable and notes payable to banks, these instruments
are stated at amounts that approximate fair value.
If long-term debt outstanding at September 30, 1996 were refinanced using
new issue debt rates of interest that on average are lower than the
outstanding rates, the present value of those obligations would increase from
the amounts outstanding on the September 30, 1996 balance sheet by 11.8%. In
the event of refinancing, there would be no gain or loss as, under established
regulatory procedure, any such difference would be reflected in rates and have
no effect on gross income.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires the use of estimates and assumptions
that affect assets and liabilities, the disclosure of contingent assets and
liabilities, and revenues and expenses. Actual amounts could differ from those
estimates.
Reclassifications
Reclassifications are made periodically to previously issued financial
statements to conform to the current year's presentation.
F-8
<PAGE>
ENERGYNORTH NATURAL GAS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
NOTE 2. CASH FLOWS
Supplemental disclosures of cash flow information are as follows (in
thousands):
<TABLE>
<CAPTION>
FISCAL YEARS ENDED
12 MONTHS ENDED SEPTEMBER 30,
JUNE 30, --------------------
1997 1996 1995 1994
--------------- ------ ------ ------
<S> <C> <C> <C> <C>
Cash paid during the period for:
Interest (net of amount capitalized).... $3,709 $3,369 $4,132 $3,372
Income taxes............................ 2,391 508 898 1,595
</TABLE>
In preparing the accompanying statements of cash flows, all highly liquid
investments having maturities of three months or less when acquired were
considered to be cash equivalents and classified as cash and temporary
investments.
NOTE 3. INVENTORY FINANCING
The Company finances gas inventory purchases through the use of a single
purpose trust, which purchases gas with funds loaned to it by a bank. As the
Company requires gas to service customers, gas is repurchased from the trust
at original product cost plus financing costs and trust fees. The cost of gas
and related financing are recoverable through the CGA.
The bank credit agreement provides for a .375% commitment fee on the credit
line and interest at prime (8.25% at September 30, 1996 and 8.5% at June 30,
1997) with a fixed rate interest option at less than prime on the outstanding
balance. The trust agreement provides for a management fee of $8,000 annually.
The credit agreement between the trust and the bank provides for a total
commitment of up to $9,500,000 through February 1998.
As of September 30, 1996 and 1995, the gas inventories under the trust
agreement and controlled by the Company totaled $7,800,000 and $7,100,000,
respectively, and are included in inventories on the accompanying balance
sheets. At June 30, 1997, gas inventories under the trust agreement were
$4,100,000. Inventory purchase obligations under this financing agreement are
reflected as a current liability on the accompanying balance sheets.
NOTE 4. NOTES PAYABLE TO BANKS
As of June 30, 1997, the Company had available $14,700,000 under various
unsecured bank lines of credit that are renewed annually, $5,500,000 of which
was outstanding. The lines bear interest at prime, or less than prime on
certain of the lines for fixed periods of time, and are due on demand. The
terms of the credit agreements require annual commitment fees of .25% to .35%
of the lines.
F-9
<PAGE>
ENERGYNORTH NATURAL GAS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
NOTE 5. LONG-TERM DEBT
At June 30, 1997 and September 30, 1996 and 1995, long-term debt consisted
of the following (in thousands):
<TABLE>
<CAPTION>
FINAL SEPTEMBER 30,
INTEREST PAYMENT JUNE 30, ---------------
RATE DUE 1997 1996 1995
--------------- ------- -------- ------- -------
<S> <C> <C> <C> <C> <C>
General and Refunding
Bonds:
8.67% 2002 $ 7,088 $ 7,088 $ 8,270
8.44% 2009 4,000 4,333 4,667
9.70% 2019 7,000 7,000 7,000
9.75% 2020 10,000 10,000 10,000
Vehicle notes............ Prime plus .50% 2001 364 327 267
------- ------- -------
Total................ 28,452 28,748 30,204
Less--current portion.... 1,663 1,646 1,652
------- ------- -------
Total long-term
debt................ $26,789 $27,102 $28,552
======= ======= =======
</TABLE>
Interest payments for the General and Refunding Bonds are due semiannually.
The General and Refunding Bonds are collateralized by first mortgage liens on
substantially all real property and operating plant facilities.
The aggregate amounts of principal due for all long-term debt for each of
the five years subsequent to September 30, 1996 are as follows (in thousands):
<TABLE>
<CAPTION>
FISCAL YEAR AMOUNT
----------- ------
<S> <C>
1997................................................................ $1,646
1998................................................................ 1,612
1999................................................................ 1,582
2000................................................................ 1,551
2001................................................................ 1,516
</TABLE>
NOTE 6. INCOME TAXES
The Company files a consolidated federal income tax return with its parent
company. For financial reporting and rate purposes, the Company provides taxes
on a separate return basis.
At September 30, 1996 and 1995, the SFAS No. 109 regulatory liability
amounted to $1,000,000 and $1,100,000, respectively, for the tax benefit of
unamortized investment tax credits, and $339,000 and $384,000, respectively,
for the excess reserves for deferred taxes as a result of pre-July 1, 1987
deferred income taxes that were recorded in excess of the current federal
statutory income tax rate.
A deferred state income tax liability and a corresponding regulatory asset
of approximately $2,400,000, representing revenues the Company expects to
recover from utility gas service customers, were established at September 30,
1994 as a result of recording deferred state income taxes on the cumulative
temporary differences due to a change in New Hampshire tax law. Effective June
2, 1994, the 1% franchise tax assessed on sales of natural gas was repealed.
Prior to the change in tax law, the franchise tax was permitted as a credit
against the New Hampshire Business Profits Tax ("NHBPT"). Because franchise
tax payments exceeded the NHBPT, the Company never incurred a NHBPT liability;
therefore, no deferred state income taxes related to temporary differences
were recorded.
F-10
<PAGE>
ENERGYNORTH NATURAL GAS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
The tax effects of cumulative differences that gave rise to the deferred tax
liabilities and deferred tax assets for the years ended September 30, 1996 and
1995 were as follows (in thousands):
<TABLE>
<CAPTION>
1996 1995
------- -------
<S> <C> <C>
Deferred tax assets:
Contributions in aid of construction...................... $ 696 $ 666
Unamortized investment tax credits........................ 636 683
Allowance for doubtful accounts........................... 454 351
Deferred gas costs........................................ -- 1,373
Other..................................................... 821 655
------- -------
Total deferred tax assets............................... 2,607 3,728
------- -------
Deferred tax liabilities:
Property-related.......................................... 14,742 13,860
Deferred gas costs........................................ 1,773 --
Environmental costs....................................... 1,499 1,445
Other..................................................... 1,372 1,245
------- -------
Total deferred tax liabilities.......................... 19,386 16,550
------- -------
Net deferred tax liability.................................. $16,779 $12,822
======= =======
</TABLE>
Deferred income taxes were classified in the accompanying balance sheets as
of September 30, 1996 and 1995 as follows (in thousands):
<TABLE>
<CAPTION>
1996 1995
------- -------
<S> <C> <C>
Current..................................................... $ 1,160 $(1,517)
Long-term................................................... 15,619 14,339
------- -------
Total................................................... $16,779 $12,822
======= =======
</TABLE>
The components of federal and state income taxes reflected in the
accompanying statements of income for the years ended September 30, 1996, 1995
and 1994 were as follows (in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
------ ------ ------
<S> <C> <C> <C>
Federal:
Current............................................ $ (323) $ 961 $1,944
Deferred........................................... 3,119 566 481
Investment tax credits............................. (140) (141) (145)
------ ------ ------
Total federal.................................... 2,656 1,386 2,280
------ ------ ------
State:
Current............................................ (129) 227 --
Deferred........................................... 697 132 --
------ ------ ------
Total state...................................... 568 359 --
------ ------ ------
Total provision for income taxes..................... $3,224 $1,745 $2,280
====== ====== ======
</TABLE>
F-11
<PAGE>
ENERGYNORTH NATURAL GAS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
The total federal and state income tax provision, as a percentage of income
before federal and state income taxes, was 37.3%, 31.8% and 32% for the years
ended September 30, 1996, 1995 and 1994, respectively. The following table
reconciles the income tax provision calculated using the federal statutory tax
rate of 34% to the book provision for federal income taxes (in thousands).
<TABLE>
<CAPTION>
1996 1995 1994
------ ------ ------
<S> <C> <C> <C>
Tax calculated at statutory rate................... $2,941 $1,867 $2,420
Increase (reduction) in effective tax resulting
from:
Amortization of investment tax credit............ (140) (141) (145)
Adjustment due to change in tax rates............ (28) (28) (28)
State taxes, net of federal tax benefit.......... 375 241 --
Other, net....................................... 76 (194) 33
------ ------ ------
Total provision for income taxes................... $3,224 $1,745 $2,280
====== ====== ======
NOTE 7. EMPLOYEE BENEFIT PLANS
Pension Plans
The Company has a noncontributory defined benefit plan covering
substantially all employees. Benefits are based on years of credited service
and average earnings during the five highest consecutive years of earnings
prior to the normal retirement date. The Company is also charged for pension
expense for the management pension plan of the parent company.
The Company's funding policy is to annually contribute to the plans an
amount that is not less than the minimum amount required by the Employee
Retirement Income Security Act of 1974 and not more than the maximum
deductible for income tax purposes.
Net periodic pension cost included the following components (in thousands):
<CAPTION>
1996 1995 1994
------ ------ ------
<S> <C> <C> <C>
Service cost for benefits earned................... $ 249 $ 236 $ 231
Interest cost on projected benefit obligations..... 472 458 440
Actual return on plan assets....................... (542) (953) 314
Net amortization and deferral...................... (90) 369 (860)
Parent company allocation.......................... 344 389 387
------ ------ ------
Net periodic pension cost.......................... $ 433 $ 499 $ 512
====== ====== ======
The following table sets forth the funded status of the plans at September
30, 1996, 1995 and 1994 (in thousands):
<CAPTION>
1996 1995 1994
------ ------ ------
<S> <C> <C> <C>
Vested benefit obligation.......................... $5,983 $5,239 $5,120
====== ====== ======
Accumulated benefit obligation..................... $6,228 $5,455 $5,322
====== ====== ======
Projected benefit obligation....................... $6,971 $6,429 $6,246
Plan assets at fair value.......................... 7,300 6,839 5,896
------ ------ ------
Funded status...................................... 329 410 (350)
Unrecognized transition asset...................... (384) (444) (504)
Unrecognized prior service cost.................... 351 407 463
Unrecognized net loss.............................. 447 185 782
------ ------ ------
Prepaid pension.................................... $ 743 $ 558 $ 391
====== ====== ======
</TABLE>
F-12
<PAGE>
ENERGYNORTH NATURAL GAS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Assumptions used to determine the projected benefit obligation were as
follows:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Discount rate.............................................. 7.5% 7.5% 7.5%
Rate of increase in future compensation levels............. 4.0% 4.0% 4.5%
Expected long-term rate of return on assets................ 9.0% 9.0% 9.0%
</TABLE>
Plan assets are invested in common stocks and bonds.
The Company has an employee 401(k) savings and investment plan covering
substantially all employees. The Company made contributions of $61,000,
$57,000 and $56,000 for the years ended September 30, 1996, 1995 and 1994,
respectively.
Other Postemployment Benefits
In addition to providing pension benefits, the Company provides certain
health care and life insurance benefits to qualified retired employees.
In accordance with SFAS No. 106, the Company began recording the cost of
postretirement benefits on an accrual basis in 1994. The expense recorded in
fiscal 1996, 1995 and 1994 for providing postretirement benefits, including
amortization of the accumulated projected benefit obligation over a 20-year
period, was $222,000, $278,000 and $451,000, respectively.
The Company has funded these benefit costs by making cash contributions, at
the same level of expense recorded, to a voluntary employee benefit
association ("VEBA") trust.
The following table sets forth the funded status of the plan at September
30, 1996 and 1995 (in thousands):
<TABLE>
<CAPTION>
1996 1995
------- -------
<S> <C> <C>
Accumulated postretirement benefit obligation as of July
31:
Retirees.............................................. $ 1,225 $ 1,005
Fully eligible active plan participants............... 372 530
Other active participants............................. 685 656
------- -------
2,282 2,191
Plan assets at fair market value........................ (738) (557)
Unrecognized transition obligation...................... (2,381) (2,521)
Unrecognized net gain................................... 891 956
------- -------
Accrued postretirement benefit cost at July 31.......... 54 69
Contributions for the two-month period ending September
30..................................................... 55 70
------- -------
Accrued postretirement benefit cost at September 30..... $ (1) $ (1)
======= =======
</TABLE>
The components of the net periodic postretirement benefit cost at September
30, 1996 and 1995 are as follows (in thousands):
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Service cost--benefits
attributed to services
during the year........ $ 48 $ 44
Interest cost on accumu-
lated postretirement
benefit obligation..... 161 162
Actual asset return..... (48) (73)
Net amortization and de-
ferral................. 61 145
---- ----
Net periodic
postretirement benefit
cost................... $222 $278
==== ====
</TABLE>
F-13
<PAGE>
ENERGYNORTH NATURAL GAS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
An 11% average annual rate of increase in the per capita costs of covered
health care benefits was assumed for fiscal 1996, reduced in steps of 1% to a
level of 5% at 2002 and thereafter. This decrease results from changes in
estimates of future health care inflation, assumed changes in health care
utilization and related effects. Increasing the assumed health care cost trend
rates by one percentage point in each year would have resulted in a $198,000
increase in the accumulated postretirement benefit obligation as of July 31,
1996 and an increase in the aggregate of the service cost and interest cost
components of net periodic postretirement benefit cost for fiscal 1996 of
$15,000. A discount rate of 7.5% was used to determine the accumulated
postretirement benefit obligation. The expected long-term rate of return on
plan assets is 9%. Plan assets are invested in common stocks and bonds.
NOTE 8. COMMITMENTS AND CONTINGENCIES
Contracts
The Company has various contractual agreements covering the transportation
of natural gas, underground storage facilities and the purchase of natural
gas, which are recoverable under the Company's CGA. These contracts expire at
various times from 1997 to 2011.
Litigation
The Company has been named in certain lawsuits arising from normal
operations. In the opinion of management, the outcome of these lawsuits will
not have a material adverse effect on the financial position or results of
operations of the Company.
Environmental Issues
The Company and certain of its predecessors owned or operated several
facilities for the manufacture of gas from coal, a process used through the
mid-1900's that produced by-products that may be considered contaminated or
hazardous under current law, and some of which may still be present at such
facilities. The Company accrues environmental investigation and clean-up costs
with respect to former manufacturing sites and other environmental matters
when it is probable that a liability exists and the amount or range of amounts
can be reasonably estimated.
One former manufactured gas facility in Concord, New Hampshire has been
investigated and partially remediated. Disposal of the contents of the
gasholder situated at this former gas manufacturing facility has been
completed. Total remediation costs amounted to approximately $3,500,000 and
were recorded in deferred charges. Recovery of costs from customers began on
July 1, 1995 and will extend over a seven-year period. The unamortized balance
of approximately $2,500,000 at June 30, 1997 is excluded from rate base.
The New Hampshire Department of Environmental Services ("NHDES") has
required remedial action for a portion of the Concord site at which wastes
were disposed of from approximately 1852 through 1952. The estimated cost of
this remedial action ranges from $2,100,000 to $3,200,000, and the Company has
recorded $2,100,000 at June 30, 1997 in deferred charges. The Company has
petitioned the NHPUC for approval of the Company's proposed five-year recovery
from ratepayers, including carrying costs, for approximately $1,900,000 of
investigation, remediation and recovery effort costs.
The Company is pursuing recovery from its insurance carriers as well as from
insurance carriers of its predecessors with respect to the Concord site. In
addition, the Company is pursuing recovery against an entity that the Company
alleges owned or operated the manufactured gas plant during the late 1800's
and early 1900's.
F-14
<PAGE>
ENERGYNORTH NATURAL GAS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
The Company and Public Service Company of New Hampshire ("PSNH"), an
electric utility company, conducted an environmental site characterization of
a second former manufactured gas plant in Laconia, New Hampshire. The Laconia
manufactured gas plant operated between approximately 1887 and 1952, and the
Company owned and operated the facility for approximately the last seven years
of its active life. PSNH also owned and operated the facility during its
active life. Without admitting liability, the Company and PSNH have entered
into an agreement under which costs of the site characterization are shared.
The Company's share of the costs of the site characterization and a report to
the NHDES, totaled $265,000 and has been recorded in deferred charges as of
June 30, 1997. The Company expects to incur further expenses but is currently
unable to predict the magnitude of any liability that may be imposed on it for
the cost of additional studies or the performance of a remedial action in
connection with the Laconia site. The Company is pursuing recovery from its
insurance carriers for costs incurred with respect to the Laconia site.
The Company is pursuing and intends to pursue recovery from insurance
carriers and claims against any other responsible parties seeking to ensure
that they contribute appropriately to reimburse the Company for any costs
incurred with respect to environmental matters. The Company intends to seek
and expects to receive approval of rate recovery methods with respect to
environmental matters after it has determined the extent of contamination,
received recommendations with regard to remediation, and commenced remediation
efforts.
Transition Costs
Federal Energy Regulatory Commission Order 636 allows interstate pipeline
companies to recover transition costs created as they buy out of long-term
fixed-price gas contracts. Since the Company's supplier began direct billing
these costs on September 1, 1993 as a component of demand charges, $7,600,000
has been billed through June 30, 1997. The Company has recorded additional
transition costs of approximately $1,500,000 that will be billed over a period
of 18 months. The Company is recovering transition costs through the cost of
gas adjustment.
F-15
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMA-
TION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN CONNEC-
TION WITH THE OFFERING MADE HEREBY, AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COM-
PANY OR THE UNDERWRITER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL
OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN
ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SO-
LICITATION IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR
ANY SALE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE ANY IMPLICATION THAT
THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE ANY OF THE DATES
AS OF WHICH INFORMATION IS FURNISHED HEREIN OR THE DATE HEREOF.
----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary....................................................... 3
Risk Factors............................................................. 5
The Company.............................................................. 6
Use of Proceeds.......................................................... 6
Selected Financial Data.................................................. 7
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 8
Business................................................................. 13
Certain Relationships and Related Transactions........................... 19
Management............................................................... 20
Description of Bonds..................................................... 26
Underwriting............................................................. 33
Legal Matters............................................................ 33
Experts.................................................................. 33
Available Information.................................................... 33
Index to Financial Statements............................................ F-1
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
$22,000,000
ENERGYNORTH
NATURAL GAS, INC.
FIRST MORTGAGE BONDS
DESIGNATED AS
% SERIES E BONDS
DUE SEPTEMBER 30, 2027
LOGO
----------------
PROSPECTUS
----------------
EDWARD D. JONES & CO., L.P.
DATED , 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
<TABLE>
<CAPTION>
ITEM AMOUNT
---- --------
<S> <C>
Filing fee--Securities and Exchange Commission.................... $ 6,667
Blue Sky filing fees and expenses (including estimated legal
fees)............................................................ $ 7,500
NASD filing fee................................................... $ 2,700
Legal fees and expenses (estimated)............................... $ 50,000
Accounting fees (estimated)....................................... $ 25,000
Printing and engraving (estimated)................................ $ 25,000
Trustee fees...................................................... $ 2,500
Miscellaneous..................................................... $ 5,000
--------
Total........................................................... $124,367
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
New Hampshire Revised Statutes Annotated ("RSA") 293-A, Sections 8.51 and
8.56, empower a corporation, subject to certain limitations, to indemnify its
directors and officers against expenses (including attorney's fees, judgments,
fines and amounts paid in settlement) actually and reasonably incurred by them
in connection with any civil or criminal suit or proceeding (other than a
derivative action) to which they are parties or threatened to be made parties
by reason of being directors or officers, if they acted in good faith and in a
manner reasonably believed to be in or not opposed to the best interests of
the corporation (and with respect to any criminal action or proceeding, had no
reasonable cause to believe their conduct was unlawful). The power to
indemnify in connection with an action or suit by or in the right of the
corporation (a derivative action) is more limited. Indemnification against
expenses actually and reasonably incurred is required if a director or officer
is wholly successful in defense of an action, suit or proceeding of the type
where indemnity is permitted by the statute. Unless ordered by a court,
indemnification under the statute, other than mandatory indemnification
against expenses, may be made only if a determination that indemnification is
proper has been made by a prescribed vote of the board of directors, special
legal counsel in certain cases, by the shareholders or by the prescribed vote
of a committee duly designated by the board of directors, in certain cases.
Indemnification provided for by RSA 293-A:8.50-8.58 is not exclusive and a
corporation is empowered to maintain insurance on behalf of its directors and
officers against any liability asserted against them in that capacity, whether
or not the corporation would have the power under that section to indemnify
them.
The by-laws of the Company provide that it shall indemnify any director or
officer pursuant to the provisions of RSA 293-A:8.50-8.58. The Company
maintains insurance on behalf of its directors and officers against liability
asserted them in that capacity.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) The following is a complete list of Exhibits filed as part of this
Registration Statement:
<TABLE>
<CAPTION>
EXHIBIT NO.
-----------
<C> <S>
*1 Underwriting Agreement between EnergyNorth Natural Gas, Inc. and
Edward D. Jones & Co., L.P.
*3.1 Articles of Incorporation of EnergyNorth Natural Gas, Inc.
3.2 Bylaws of EnergyNorth Natural Gas, Inc.
</TABLE>
- --------
* Previously filed.
II-1
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO.
-----------
<C> <S>
4.1 Gas Service, Inc. General and Refunding Mortgage Indenture, dated
as of June 30, 1987, as amended, and supplemented by a First
Supplemental Indenture, dated as of October 1, 1988, and by a
Second Supplemental Indenture, dated as of August 31, 1989, is
incorporated by reference to Exhibit 4.1 of EnergyNorth, Inc.'s
Form 10-K (File No. 0-11035) for the fiscal year ended September
30, 1989.
4.2 Third Supplemental Indenture, dated as of September 1, 1990, to
Gas Service, Inc. General and Refunding Mortgage Indenture, dated
as of June 30,1987, is incorporated by reference to Exhibit 4.2
of EnergyNorth, Inc.'s Form 10-K (File No. 0-11035) for the
fiscal year ended September 30, 1990.
4.3 Fourth Supplemental Indenture, dated as of January 10, 1992, to
Gas Service, Inc. General and Refunding Mortgage Indenture, dated
as of June 30, 1987, is incorporated by reference to Exhibit 4.3
of EnergyNorth, Inc.'s Form 10-K (File No. 0-11035) for the
fiscal year ended September 30, 1992.
4.4 Fifth Supplemental Indenture, dated as of February 1, 1995, to Gas
Service, Inc. General and Refunding Mortgage Indenture, dated as
of June 30, 1987 is incorporated by reference to Exhibit 4.4 to
EnergyNorth, Inc.'s Form 10-K (File No. 0-11035) for the fiscal
year ended September 30, 1996.
*4.5 Sixth Supplemental Indenture, dated as of September 15, 1997, to
Gas Service, Inc. General and Refunding Mortgage Indenture, dated
as of June 30, 1987.
4.6 Copies of Bond Indentures and a note and credit agreement defining
the rights of holders of long-term debt of certain subsidiaries
of EnergyNorth, Inc., under which the amounts of bonds or the
note issued do not exceed 10% of the consolidated assets of
EnergyNorth, Inc. will be furnished to the Securities and
Exchange Commission upon request.
*5 Opinion of McLane, Graf, Raulerson & Middleton, Professional
Association as to the legality of the Bonds being registered.
10.1 Gas transportation agreement (FT-A), dated as of September 1,
1993, between Tennessee Gas Pipeline Company and EnergyNorth
Natural Gas, Inc. is incorporated by reference to Exhibit 10.1 to
EnergyNorth, Inc.'s Form 10-K (File No. 0-11035) for the fiscal
year ended September 30, 1993.
10.2 Gas transportation agreement (contract No. 632), dated as of
September 1, 1993, between Tennessee Gas Pipeline Company and
EnergyNorth Natural Gas, Inc. is incorporated by reference to
Exhibit 10.2 to EnergyNorth, Inc.'s Form 10-K (File No. 0-11035)
for the fiscal year ended September 30, 1995.
10.3 Supplemental Executive Retirement Plan of EnergyNorth, Inc., as
amended, is incorporated by reference to Exhibit 10.3 to
EnergyNorth, Inc.'s Form 10-K (File No. 0-11035) for the fiscal
year ended September 30, 1996.
10.4 Deferred Compensation Agreement, dated as of November 30, 1993,
between Robert R. Giordano and EnergyNorth, Inc. is incorporated
by reference to Exhibit 10.3 to EnergyNorth, Inc.'s Form 10-K
(File No. 0-11035) for the fiscal year ended September 30, 1993.
10.5 Deferred Compensation Agreement, dated as of November 30, 1993,
between Albert J. Hanlon and EnergyNorth, Inc. is incorporated by
reference to Exhibit 10.5 to EnergyNorth, Inc.'s Form 10-K (File
No. 0-11035) for the fiscal year ended September 30, 1993.
10.6 Amendment to Deferred Compensation Agreement, dated as of October
1, 1996, between Robert R. Giordano and EnergyNorth, Inc. is
incorporated by reference to Exhibit 10.6 to EnergyNorth, Inc.'s
10-K (File No. 0-11035) for the fiscal year ended September 30,
1996.
10.7 Amendment to Deferred Compensation Agreement, dated as of October
1, 1996, between Albert J. Hanlon and EnergyNorth, Inc. is
incorporated by reference to Exhibit 10.6 EnergyNorth, Inc.'s 10-
K (File No. 0-11035) for the fiscal year ended September 30,
1996.
</TABLE>
- --------
* Previously filed.
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO.
-----------
<C> <S>
10.8 Deferred Compensation Agreement, dated as of November 30, 1993,
between Richard P. Demers and EnergyNorth, Inc. is incorporated
by reference to Exhibit 10.6 to EnergyNorth, Inc.'s 10-K (File
No. 0-11035) for the fiscal year ended September 30, 1996.
10.9 Deferred Compensation Agreement, dated as of November 30, 1995,
between Frank L. Childs and EnergyNorth, Inc. is incorporated by
reference to Exhibit 10.6 to EnergyNorth, Inc.'s 10-K (File No.
0-11035) for the fiscal year ended September 30, 1996.
10.10 Deferred Compensation Agreement, dated as of November 30, 1993,
between Michelle L. Chicoine and EnergyNorth, Inc. is
incorporated by reference to Exhibit 10.6 to EnergyNorth, Inc.'s
10-K (File No. 0-11035) for the fiscal year ended September 30,
1996.
10.11 EnergyNorth, Inc. 1992 Directors' Deferred Compensation Plan, as
amended, is incorporated by reference to Exhibit 10.11 to
EnergyNorth, Inc.'s 10-K (File No. 0-11035) for the fiscal year
ended September 30, 1996.
10.12 Employment Agreement, dated as of December 1, 1995, between Robert
R. Giordano and EnergyNorth, Inc. is incorporated by reference to
Exhibit 10.9 to EnergyNorth, Inc.'s Form 10-K (File No. 0-11035)
for the fiscal year ended September 30, 1995.
10.13 Employment Agreement, dated as of December 1, 1995, between Albert
J. Hanlon and EnergyNorth, Inc. is incorporated by reference to
Exhibit 10.11 to EnergyNorth, Inc.'s Form
10-K (File No. 0-11035) for the fiscal year ended September
30,1995.
10.14 Management Continuity Agreement, dated as of December 7, 1995,
between Robert R. Giordano and EnergyNorth, Inc. is incorporated
by reference to Exhibit 10.12 to EnergyNorth, Inc.'s Form 10-K
(File No. 0-11035) for the fiscal year ended September 30, 1995.
10.15 Management Continuity Agreement, dated as of December 7, 1995,
between Albert J. Hanlon and EnergyNorth, Inc. is incorporated by
reference to Exhibit 10.14 to EnergyNorth, Inc.'s Form
10-K (File No. 0-11035) for the fiscal year ended September 30,
1995.
10.16 Management Continuity Agreement, dated as of December 2, 1996,
between Michelle L. Chicoine and EnergyNorth, Inc. is
incorporated by reference to Exhibit 10.18 to EnergyNorth, Inc.'s
Form 10-K (File No. 0-11035) for the fiscal year ended September
30, 1996.
10.17 Management Continuity Agreement, dated as of December 2, 1996,
between Frank L. Childs and EnergyNorth, Inc. is incorporated by
reference to Exhibit 10.19 to EnergyNorth, Inc.'s Form
10-K (File No. 0-11035) for the fiscal year ended September 30,
1996.
10.18 Management Continuity Agreement, dated as of December 7, 1995,
between Richard P. Demers and EnergyNorth, Inc. is incorporated
by reference to Exhibit 10.20 to EnergyNorth, Inc.'s Form 10-K
(File No. 0-11035) for the fiscal year ended September 30, 1996.
10.19 EnergyNorth, Inc. Key Employee Performance and Equity Incentive
Plan, as amended, is incorporated by reference to Exhibit 10.15
to EnergyNorth, Inc.'s Form 10-K (File No. 0-11035) for the
fiscal year ended September 30, 1995.
10.20 EnergyNorth, Inc. Director Incentive Plan is incorporated by
reference to Exhibit 10 to EnergyNorth, Inc.'s Form 10-Q (File
No. 0-11035) for the quarter ended March 31, 1997.
*10.21 Tax Sharing Agreement, dated as of October 1, 1988.
*10.22 Cost Allocation Agreement, dated as of October 1, 1996.
*12 Statement re: Computation of Ratios.
*23.1 Consent of McLane, Graf, Raulerson & Middleton, Professional
Association is contained in Exhibit 5 and incorporated herein by
reference.
23.2 Consent of Arthur Andersen LLP.
24 Power of Attorney is incorporated by reference to Page II-5 of
EnergyNorth Natural Gas, Inc.'s Registration Statement on Form S-
1 (File No. 333-32949).
*25 Statement of Eligibility of Bank of New Hampshire as Trustee on
Form T-1.
*27 Financial Data Schedule.
</TABLE>
- --------
* Previously filed.
II-3
<PAGE>
(b)The following financial statement schedule of EnergyNorth Natural Gas,
Inc. is submitted herewith:
Schedule II--Valuation and Qualifying Accounts for the Three Years Ended
September 30, 1996 and Twelve Months Ended June 30, 1997 (unaudited)
All schedules other than those above have been omitted because they are not
required or are inapplicable.
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes to provide to the underwriter
at the closing specified in the underwriting agreements certificates in such
denominations and registered in such names as required by the underwriter to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than payment by the registrant
of expenses incurred or paid by a director, officer or controlling person of
the registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with
the securities being registered, the registrant will, unless in the opinion of
counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Act and will be governed by
the final adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of
the registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4), or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-4
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS REGISTRATION STATEMENT AMENDMENT NO. 2 TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF
MANCHESTER, STATE OF NEW HAMPSHIRE, ON SEPTEMBER 17, 1997.
EnergyNorth Natural Gas, Inc.
/s/ Robert R. Giordano*
By:___________________________________
Robert R. Giordano
President and Chief Executive
Officer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS REGISTRATION
STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE
DATES INDICATED.
SIGNATURE TITLE DATE
/s/ Robert R. Giordano* Director, President
- ------------------------------------ and Chief September 17,
ROBERT R. GIORDANO Executive Officer 1997
/s/ N. George Mattaini* Chairman of the
- ------------------------------------ Board of Directors September 17,
N. GEORGE MATTAINI 1997
/s/ Edward T. Borer* Director
- ------------------------------------ September 17,
EDWARD T. BORER 1997
/s/ Michelle L. Chicoine Director, Chief
- ------------------------------------ Financial Officer, September 17,
MICHELLE L. CHICOINE Vice President, 1997
Treasurer
/s/ Albert J. Hanlon* Director, Senior
- ------------------------------------ Vice President September 17,
ALBERT J. HANLON 1997
/s/ Frank L. Childs* Director, Vice
- ------------------------------------ President September 17,
FRANK L. CHILDS 1997
/s/ David A. Skrzysowski* Vice President and
- ------------------------------------ Controller (Chief September 17,
DAVID A. SKRZYSOWSKI Accounting 1997
Officer)
- --------
*By Michelle L. Chicoine as
Attorney-In-Fact
II-5
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULE
To the Board of Directors of EnergyNorth Natural Gas, Inc.:
We have audited, in accordance with generally accepted auditing standards, the
financial statements of EnergyNorth Natural Gas, Inc. included in this
Registration Statement and have issued our report thereon dated November 1,
1996. Our audit was made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule listed under Item 16(b) of
the Registration Statement is presented for purposes of complying with the
Securities and Exchange Commission rules and is not part of the basic
financial statements. This schedule for the three years ended September 30,
1996 has been subjected to the auditing procedures applied in the audit of the
basic financial statements and, in our opinion, fairly states in all material
respects the financial data required to be set forth therein in relation to
the basic financial statements taken as a whole.
/s/ Arthur Andersen LLP
Boston, Massachusetts
November 1, 1996
S-1
<PAGE>
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
Reserves which are deducted in the balance sheets from assets to which they
apply:
<TABLE>
<CAPTION>
ADDITIONS
----------------------
BALANCE AT CHARGED TO CHARGED TO BALANCE AT
BEGINNING COSTS AND OTHER END OF
DESCRIPTION OF PERIOD EXPENSES ACCOUNTS(1) DEDUCTIONS PERIOD
----------- ---------- ---------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Twelve months ended
June 30, 1997 Allowance for
(unaudited)............ doubtful accounts $1,205 $1,080 $133 $1,085 $1,333
Fiscal year ended
September 30, 1996..... Allowance for
doubtful accounts 907 1,130 138 999 1,176
Fiscal year ended
September 30, 1995..... Allowance for
doubtful accounts 992 990 167 1,242 907
Fiscal year ended
September 30, 1994..... Allowance for
doubtful accounts 850 1,280 145 1,283 992
</TABLE>
- --------
(1) Represents recoveries on accounts previously written off.
S-2
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT PAGE
NO. DESCRIPTION NO.
------- ----------- ----
<C> <S> <C>
*1 Underwriting Agreement between EnergyNorth Natural Gas, Inc.
and Edward D. Jones & Co., L.P.
*3.1 Articles of Incorporation of EnergyNorth Natural Gas, Inc.
3.2 Bylaws of EnergyNorth Natural Gas, Inc.
4.1 Gas Service, Inc. General and Refunding Mortgage Indenture,
dated as of June 30, 1987, as amended, and supplemented by a
First Supplemental Indenture, dated as of October 1, 1988, and
by a Second Supplemental Indenture, dated as of August 31,
1989, is incorporated by reference to Exhibit 4.1 of
EnergyNorth, Inc.'s Form 10-K (File No. 0-11035) for the
fiscal year ended September 30, 1989
4.2 Third Supplemental Indenture, dated as of September 1, 1990, to
Gas Service, Inc. General and Refunding Mortgage Indenture,
dated as of June 30,1987, is incorporated by reference to
Exhibit 4.2 of EnergyNorth, Inc.'s Form 10-K (File No. 0-
11035) for the fiscal year ended September 30, 1990
4.3 Fourth Supplemental Indenture, dated as of January 10, 1992, to
Gas Service, Inc. General and Refunding Mortgage Indenture,
dated as of June 30, 1987, is incorporated by reference to
Exhibit 4.3 of EnergyNorth, Inc.'s Form 10-K (File No. 0-
11035) for the fiscal year ended September 30, 1992
4.4 Fifth Supplemental Indenture, dated as of February 1, 1995, to
Gas Service, Inc. General and Refunding Mortgage Indenture,
dated as of June 30, 1987 is incorporated by reference to
Exhibit 4.4 to EnergyNorth, Inc.'s Form 10-K (File No. 0-
11035) for the fiscal year ended September 30, 1996
*4.5 Sixth Supplemental Indenture, dated as of September 15, 1997,
to Gas Service, Inc. General and Refunding Mortgage Indenture,
dated as of June 30, 1987
4.6 Copies of Bond Indentures and a note and credit agreement
defining the rights of holders of long-term debt of certain
subsidiaries of EnergyNorth, Inc., under which the amounts of
bonds or the note issued do not exceed 10% of the consolidated
assets of EnergyNorth, Inc. will be furnished to the
Securities and Exchange Commission upon request
*5 Opinion of McLane, Graf, Raulerson & Middleton, Professional
Association as to the legality of the Bonds being registered
10.1 Gas transportation agreement (FT-A), dated as of September 1,
1993, between Tennessee Gas Pipeline Company and EnergyNorth
Natural Gas, Inc. is incorporated by reference to Exhibit 10.1
to EnergyNorth, Inc.'s Form 10-K (File No. 0-11035) for the
fiscal year ended September 30, 1993
10.2 Gas transportation agreement (contract No. 632), dated as of
September 1, 1993, between Tennessee Gas Pipeline Company and
EnergyNorth Natural Gas, Inc. is incorporated by reference to
Exhibit 10.2 of EnergyNorth, Inc.'s Form 10-K (File No. 0-
11035) for the fiscal year ended September 30, 1995
10.3 Supplemental Executive Retirement Plan of EnergyNorth, Inc., as
amended, is incorporated by reference to Exhibit 10.3 to
EnergyNorth, Inc.'s Form 10-K (File No. 0-11035) for the
fiscal year ended September 30, 1996
10.4 Deferred Compensation Agreement, dated as of November 30, 1993,
between Robert R. Giordano and EnergyNorth, Inc. is
incorporated by reference to Exhibit 10.3 to EnergyNorth,
Inc.'s Form 10-K (File No. 0-11035) for the fiscal year ended
September 30, 1993
10.5 Deferred Compensation Agreement, dated as of November 30, 1993,
between Albert J. Hanlon and EnergyNorth, Inc. is incorporated
by reference to Exhibit 10.5 to EnergyNorth, Inc.'s Form 10-K
(File No. 0-11035) for the fiscal year ended September 30,
1993
</TABLE>
- --------
* Previously filed.
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT PAGE
NO. DESCRIPTION NO.
------- ----------- ----
<C> <S> <C>
10.6 Amendment to Deferred Compensation Agreement, dated as of
October 1, 1996, between Robert R. Giordano and EnergyNorth,
Inc. is incorporated by reference to Exhibit 10.6 to
EnergyNorth, Inc.'s 10-K (File No. 0-11035) for the fiscal
year ended September 30, 1996
10.7 Amendment to Deferred Compensation Agreement, dated as of
October 1, 1996, between Albert J. Hanlon and EnergyNorth,
Inc. is incorporated by reference to Exhibit 10.6 EnergyNorth,
Inc.'s 10-K (File No. 0-11035) for the fiscal year ended
September 30, 1996
10.8 Deferred Compensation Agreement, dated as of November 30, 1993,
between Richard P. Demers and EnergyNorth, Inc. is
incorporated by reference to Exhibit 10.6 to EnergyNorth,
Inc.'s 10-K (File No. 0-11035) for the fiscal year ended
September 30, 1996
10.9 Deferred Compensation Agreement, dated as of November 30, 1995,
between Frank L. Childs and EnergyNorth, Inc. is incorporated
by reference to Exhibit 10.6 to EnergyNorth, Inc.'s 10-K (File
No. 0-11035) for the fiscal year ended September 30, 1996
10.10 Deferred Compensation Agreement, dated as of November 30, 1993,
between Michelle L. Chicoine and EnergyNorth, Inc. is
incorporated by reference to Exhibit 10.6 to EnergyNorth,
Inc.'s 10-K (File No. 0-11035) for the fiscal year ended
September 30, 1996
10.11 EnergyNorth, Inc. 1992 Directors' Deferred Compensation Plan,
as amended, is incorporated by reference to Exhibit 10.11 to
EnergyNorth, Inc.'s 10-K (File No. 0-11035) for the fiscal
year ended September 30, 1996
10.12 Employment Agreement, dated as of December 1, 1995, between
Robert R. Giordano and EnergyNorth, Inc. is incorporated by
reference to Exhibit 10.9 to EnergyNorth, Inc.'s Form 10-K
(File No. 0-11035) for the fiscal year ended September 30,
1995
10.13 Employment Agreement, dated as of December 1, 1995, between
Albert J. Hanlon and EnergyNorth, Inc. is incorporated by
reference to Exhibit 10.11 to EnergyNorth, Inc.'s Form 10-K
(File No. 0-11035) for the fiscal year ended September 30,1995
10.14 Management Continuity Agreement, dated as of December 7, 1995,
between Robert R. Giordano and EnergyNorth, Inc. is
incorporated by reference to Exhibit 10.12 to EnergyNorth,
Inc.'s Form 10-K (File No. 0-11035) for the fiscal year ended
September 30, 1995
10.15 Management Continuity Agreement, dated as of December 7, 1995,
between Albert J. Hanlon and EnergyNorth, Inc. is incorporated
by reference to Exhibit 10.14 to EnergyNorth, Inc.'s Form 10-K
(File No. 0-11035) for the fiscal year ended September 30,
1995
10.16 Management Continuity Agreement, dated as of December 2, 1996,
between Michelle L. Chicoine and EnergyNorth, Inc. is
incorporated by reference to Exhibit 10.18 to EnergyNorth,
Inc.'s Form 10-K (File No. 0-11035) for the fiscal year ended
September 30, 1996
10.17 Management Continuity Agreement, dated as of December 2, 1996,
between Frank L. Childs and EnergyNorth, Inc. is incorporated
by reference to Exhibit 10.19 to EnergyNorth, Inc.'s Form 10-K
(File No. 0-11035) for the fiscal year ended September 30,
1996
10.18 Management Continuity Agreement, dated as of December 7, 1995,
between Richard P. Demers and EnergyNorth, Inc. is
incorporated by reference to Exhibit 10.20 to EnergyNorth,
Inc.'s Form 10-K (File No. 0-11035) for the fiscal year ended
September 30, 1996
10.19 EnergyNorth, Inc. Key Employee Performance and Equity Incentive
Plan, as amended, is incorporated by reference to Exhibit
10.15 to EnergyNorth, Inc.'s Form 10-K (File No. 0-11035) for
the fiscal year ended September 30, 1995
10.20 EnergyNorth, Inc. Director Incentive Plan is incorporated by
reference to Exhibit 10 to EnergyNorth, Inc.'s Form 10-Q (File
No. 0-11035) for the quarter ended March 31, 1997
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT PAGE
NO. DESCRIPTION NO.
------- ----------- ----
<C> <S> <C>
*10.21 Tax Sharing Agreement, dated as of October 1, 1988
*10.22 Cost Allocation Agreement, dated as of October 1, 1996
*12 Statement re: Computation of Ratios
*23.1 Consent of McLane, Graf, Raulerson & Middleton, Professional
Association is contained in Exhibit 5 and incorporated herein
by reference
23.2 Consent of Arthur Andersen LLP
24 Power of Attorney is incorporated by reference to Page II-5 of
EnergyNorth Natural Gas, Inc.'s Registration Statement on Form
S-1 (File No. 333-32949).
*25 Statement of Eligibility of Bank of New Hampshire as Trustee on
Form T-1
*27 Financial Data Schedule
</TABLE>
- --------
* Previously filed.
<PAGE>
Exhibit 3.2
BY-LAWS
OF
ENERGYNORTH NATURAL GAS, INC.
ARTICLE I
Offices
-------
The principal office of the corporation in the State of New Hampshire shall
be located in the City of Manchester, County of Hillsborough. The corporation
may have such other offices, either within or without the State of New
Hampshire, as the board of directors may designate or as the business of the
corporation may require from time to time.
ARTICLE II
Shareholders
------------
Section 2.1 Annual Meeting. The annual meeting of the shareholders shall
--------------
be held on the first Wednesday in the month of February in each year, beginning
with the year 1986, at the hour of 10:00 a.m., or at such other time on such
other day as shall be fixed by the board of directors, for the purpose of
electing directors and for the transaction of such other business as may come
before the meeting. If the day fixed for the annual meeting shall be a legal
holiday in the State of New Hampshire, such meeting shall be held on the next
succeeding business day. If the election of directors shall not be held on the
day designated herein for any annual meeting of the shareholders, or at any
adjournment thereof, the board of directors shall cause the election to be held
at a special meeting of the shareholders as soon thereafter as conveniently may
be.
Section 2.2 Special Meetings. Special meetings of the shareholders, for
----------------
any purpose or purposes, unless otherwise prescribed by statute, may be called
by the president or by the board of directors, and shall be called by the
president at the request of the holders of not less than one-tenth (1/10) of all
outstanding shares of the corporation entitled to vote at the meeting.
Section 2.3 Place of Meeting. The board of directors may designate any
----------------
place, either within or without the State of New Hampshire, as the place of
meeting for any annual meeting or for any special meeting called by the board of
directors. A waiver of notice signed by all shareholders entitled to vote at a
meeting may
<PAGE>
designate any place, either within or without the State of New Hampshire, as the
place for the holding of such meeting. If no designation is made, or if a
special meeting be otherwise called, the place of meeting shall be the principal
office of the corporation in the State of New Hampshire.
Section 2.4 Notice of Meeting. Written notice stating the place, day and
-----------------
hour of the meeting, and in case of a special meeting the purpose or purposes
for which the meeting is called, shall, unless otherwise prescribed by statute,
be delivered not less than ten (10) nor more than fifty (50) days before the
date of the meeting, either personally or by mail, by or at the direction of the
president, or the secretary, or the officer or other persons calling the
meeting, to each shareholder of record entitled to vote at such meeting. If
mailed, such notice shall be deemed to be delivered when deposited in the United
States mail, addressed to the shareholder at his address as it appears on the
stock transfer books of the corporation, with postage thereon prepaid.
Section 2.5 Closing of Transfer Books or Fixing of Record Date. For the
--------------------------------------------------
purpose of determining shareholders entitled to notice of or to vote at any
meeting of shareholders or any adjournment thereof, or shareholders entitled to
receive payment of any dividend, or in order to make a determination of
shareholders for any other proper purpose, the board of directors of the
corporation may provide that the stock transfer books shall be closed for a
stated period but not to exceed, in any case, fifty (50) days. If the stock
transfer books shall be closed for the purpose of determining shareholders
entitled to notice of or to vote at a meeting of shareholders, such books shall
be closed for at least ten (10) days immediately preceding such meeting. In
lieu of closing the stock transfer books, the board of directors may fix in
advance a date as the record date for any such determination of shareholders,
such date in any case to be not more than fifty (50) days and, in case of a
meeting of shareholders, not less than ten (10) days prior to the date on which
the particular action requiring such determination of shareholders is to be
taken. If the stock transfer books are not closed and no record date is fixed
for the determination of shareholders entitled to notice of or to vote at a
meeting of shareholders, or shareholders entitled to receive payment of a
dividend, the date on which the notice of the meeting is mailed or the date on
which the resolution of the board of directors declaring such dividend is
adopted, as the case may be, shall be the record date for such determination of
shareholders. When a determination of shareholders entitled to vote at any
meeting of shareholders has been made as provided in this section, such
determination shall apply to any adjournment thereof.
Section 2.6 Voting Record. The officer or agent having charge of the stock
-------------
transfer books for shares of the corporation shall make a complete record of the
shareholders entitled to vote at each meeting of shareholders or any adjournment
thereof, arranged in alphabetical order, with the address of and the number of
shares
<PAGE>
- 3 -
held by each. Such record shall be produced and kept open at the time and place
of the meeting and shall be subject to the inspection of any shareholder during
the whole time of the meeting for the purposes thereof.
Section 2.7 Quorum. A majority of the outstanding shares of the
------
corporation entitled to vote, represented in person or by proxy, shall
constitute a quorum at a meeting of shareholders. If less than a majority of
the shares are represented at a meeting, a majority of the shares so represented
may adjourn the meeting from time to time without further notice. At such
adjourned meeting at which a quorum shall be present or represented, any
business may be transacted which might have been transacted at the meeting as
originally noticed. The shareholders present at a duly organized meeting may
continue to transact business until adjournment, notwithstanding the withdrawal
of enough shareholders to leave less than a quorum.
Section 2.8 Proxies. At all meetings of shareholders, a shareholder may
-------
vote in person or by proxy executed in writing by the shareholder or by his duly
authorized attorney in fact. Such proxy shall be filed with the secretary of
the corporation before or at the time of the meeting. No proxy shall be valid
after eleven (11) months from the date of its execution, unless otherwise
provided in the proxy.
Section 2.9 Voting of Shares. Unless cumulative voting is authorized in
----------------
the articles of incorporation, each outstanding share entitled to vote shall be
entitled to one vote upon each matter submitted to a vote at a meeting of
shareholders.
Section 2.10 Voting of Shares by Certain Holders. Shares standing in the
-----------------------------------
name of another corporation may be voted by such officer, agent or proxy as the
By-Laws of such corporation may prescribe or, in the absence of such provision,
as the board of directors of such other corporation may determine.
Shares held by an administrator, executor, guardian or conservator may be
voted by him, either in person or by proxy, without a transfer of such shares
into his name. Shares standing in the name of a trustee may be voted by him,
either in person or by proxy, but no trustee shall be entitled to vote shares
held by him without a transfer of such shares into his name.
Shares standing in the name of a receiver may be voted by such receiver,
and shares held by or under control of a receiver may be voted by such receiver
without the transfer thereof into his name if authority so to do be contained in
an appropriate order of the court by which such receiver was appointed.
A shareholder whose shares are pledged shall be entitled to vote such
shares until the shares have been transferred into the
<PAGE>
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name of the pledgee, and thereafter the pledgee shall be entitled to vote the
shares so transferred.
Neither treasury shares of its own stock held by the corporation, nor
shares held by another corporation if a majority of the shares entitled to vote
for the election of directors of such other corporation are held by the
corporation, shall be voted at any meeting or counted in determining the total
number of outstanding shares at any given time for purposes of any meeting.
Section 2.11 Informal Action by Shareholders. Any action required or
-------------------------------
permitted to be taken at a meeting of the shareholders may be taken without a
meeting if a consent in writing, setting forth the action so taken, shall be
signed by all of the shareholders entitled to vote with respect to the subject
matter thereof.
ARTICLE III
Board of Directors
------------------
Section 3.1 General Powers. The business and affairs of the corporation
--------------
shall be managed by its board of directors.
Section 3.2 Number Tenure and Qualifications. The number of directors of
--------------------------------
the corporation shall be six (6). Each director shall hold office until the
next annual meeting of shareholders and until his successor shall have been
elected and qualified. Directors need not be residents of the State of New
Hampshire or shareholders of the corporation.
Section 3.3 Regular Meetings. A regular meeting of the board of directors
----------------
shall be held without other notice than this By-Law immediately after, and at
the same place as, the annual meeting of shareholders. The board of directors
may provide, by resolution, the time and place, either within or without the
State of New Hampshire, for the holding of additional regular meetings without
other notice than such resolution.
Section 3.4 Special Meetings. Special meetings of the board of directors
----------------
may be called by or at the request of the president or any two directors. The
person or persons authorized to call special meetings of the board of directors
may fix any place, either within or without the State of New Hampshire, as the
place for holding any special meeting of the board of directors called by them.
Section 3.5 Notice. Notice of any special meeting shall be given at least
------
two (2) days previously thereto by written notice delivered personally or mailed
to each director at his business address, or by telegram. If mailed, such
notice shall be deemed to be delivered when deposited in the United States mail,
so
<PAGE>
- 5 -
addressed, with postage thereon prepaid. If notice be given by telegram, such
notice shall be deemed to be delivered when the telegram is delivered to the
telegram company. Any director may waive notice of any meeting. The attendance
of a director at a meeting shall constitute a waiver of notice of such meeting,
except where a director attends a meeting for the express purpose of objecting
to the transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the board of directors need be specified in the
notice or waiver of notice of such meeting.
Section 3.6 Special Telephone Meeting. A special telephone meeting of the
-------------------------
board of directors may be called by or at the request of the chairman, the
president, or any two directors, by means of a conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and such participation shall constitute presence at
the meeting. Notice of a special telephone meeting shall be given by telephone
to or telegram delivered to a responsible person at the director's residence or
business address not less than 12 hours prior to the telephone meeting.
Section 3.7 Quorum. A majority of the number of directors fixed in the
------
manner prescribed by Section 2 of this Article III shall constitute a quorum for
the transaction of business at any meeting of the board of directors, but if
less than such majority is present at a meeting, a majority of the directors
present may adjourn the meeting from time to time without further notice.
Section 3.8 Manner of Acting. The act of the majority of the directors
----------------
present at a meeting at which a quorum is present shall be the act of the board
of directors.
Section 3.9 Action Without a Meeting. Any action required or permitted to
------------------------
be taken by the board of directors at a meeting may be taken without a meeting
if a consent in writing, setting forth the action so taken, shall be signed by
all of the directors.
Section 3.10 Vacancies. Any vacancy occurring in the board of directors
---------
may be filled by the affirmative vote of a majority of the remaining directors
though less than a quorum of the board of directors. A director elected to fill
a vacancy shall be elected for the unexpired term of his predecessor in office.
Any directorship to be filled by reason of an increase in the number of
directors may be filled by election by the board of directors for a term of
office continuing only until the next election of directors by the shareholders.
Section 3.11 Compensation. By resolution of the board of directors, each
------------
director may be paid his expenses, if any, of attendance at each meeting of the
board of directors, and may be
<PAGE>
- 6 -
paid a stated salary as director or a fixed sum for attendance at each meeting
of the board of directors or both. No such payment shall preclude any director
from serving the corporation in any other capacity and receiving compensation
therefor.
Section 3.12 Presumption of Assent. A director of the corporation who is
---------------------
present at a meeting of the board of directors at which action on any corporate
matter is taken shall be presumed to have assented to the action taken unless
his dissent shall be entered in the minutes of the meeting or unless he shall
file his written dissent to such action with the person acting as the secretary
of the meeting before the adjournment thereof or shall forward such dissent by
registered mail to the secretary of the corporation immediately after the
adjournment of the meeting. Such right to dissent shall not apply to a director
who voted in favor of such action.
ARTICLE IV
Officers
--------
Section 4.1 Number. The officers of the corporation shall be a chairman of
------
the board, vice chairman, president, one or more vice-presidents (the number
thereof to be determined by the board of directors), a secretary, and a
treasurer, each of whom shall be elected by the board of directors. Such other
officers and assistant officers as may be deemed necessary may be elected or
appointed by the board of directors. Any two or more offices may be held by the
same person, except the offices of president and secretary.
Section 4.2 Election and Term of Office. The officers of the corporation
---------------------------
to be elected by the board of directors shall be elected annually by the board
of directors at the first meeting of the board of directors held after each
annual meeting of the shareholders. If the election of officers shall not be
held at such meeting, such election shall be held as soon thereafter as
conveniently may be. Each officer shall hold office until his successor shall
have been duly elected and shall have qualified or until his death or until he
shall resign or shall have been removed in the manner hereinafter provided.
Section 4.3 Removal. Any officer or agent may be removed by the board of
-------
directors whenever, in its judgment, the best interests of the corporation will
be served thereby, but such removal shall be without prejudice to the contract
rights, if any, of the person so removed. Election or appointment of an officer
or agent shall not of itself create contract rights.
Section 4.4 Vacancies. A vacancy in any office because of death,
---------
resignation, removal, disqualification or otherwise, may be
<PAGE>
- 7 -
filled by the board of directors for the unexpired portion of the term.
Section 4.5 Chairman of the Board. The chairman of the board shall preside
---------------------
at all meetings of the board of directors and shareholders and shall have such
other duties as the board of directors may prescribe.
Section 4.6 Vice Chairman of the Board. The vice chairman of the board
--------------------------
shall perform such duties as may be assigned to him by the board of directors or
the chairman of the board. In the absence of the chairman, the vice chairman
shall perform the duties of chairman.
Section 4.7 President. The president, subject to the control of the board
---------
of directors, the chairman and vice chairman, shall in general supervise and
control all of the business and affairs of the corporation. He shall, in the
absence of the chairman and vice chairman, preside at meetings of the
shareholders and board of directors. He may sign, with the secretary or any
other proper officer of the corporation thereunto authorized by the board of
directors, certificates for shares of the corporation, any deeds, mortgages,
bonds, contracts, or other instruments which the board of directors has
authorized to be executed, except in cases where the signing and execution
thereof shall be expressly delegated by the board of directors or by these By-
Laws to some other officer or agent of the corporation, or shall be required by
law to be otherwise signed or executed; and in general shall perform all duties
incident to the office of president and such other duties as may be prescribed
by the board of directors from time to time.
Section 4.8 The Vice-Presidents In the absence of the president or in the
-------------------
event of his death, inability or refusal to act, the vice-president (or in the
event there be more than one vice-president, the vice-presidents in the order
designated at the time of their election, or in the absence of any designation,
then in the order of their election) shall perform the duties of the president,
and when so acting shall have all the powers of and be subject to all the
restrictions upon the president. Any vice-president may sign, with the
secretary or an assistant secretary, certificates for shares of the corporation;
and shall perform such other duties as from time to time may be assigned to him
by the president or by the board of directors.
Section 4.9 The Secretary. The secretary shall: (a) be the resident agent
-------------
of the corporation; (b) keep the minutes of the proceedings of the shareholders
and of the board of directors in one or more books provided for that purpose;
(c) see that all notices are duly given in accordance with the provisions of
these By-Laws or as required by law; (d) be custodian of the corporate records
and of the seal of the corporation and see that the seal of the corporation is
affixed to all documents the execution of which
<PAGE>
- 8 -
on behalf of the corporation under its seal is duly authorized; (e) keep a
register of the post office address of each shareholder which shall be furnished
to the secretary by such shareholder; (f) sign with the president, or a vice-
president, certificates for shares of the corporation, the issuance of which
shall have been authorized by resolution of the board of directors; (g) have
general charge of the stock transfer books of the corporation; and (h) in
general perform all duties incident to the office of secretary and such other
duties as from time to time may be assigned to him by the president or by the
board of directors.
Section 4.10 The Treasurer. The treasurer shall: (a) have charge and
-------------
custody of and be responsible for all funds and securities of the corporation;
(b) receive and give receipts for monies due and payable to the corporation from
any source whatsoever, and deposit all such monies in the name of the
corporation in such banks, trust companies or other depositories as shall be
selected in accordance with the provisions of Article V of these By-Laws; (c)
sign with the president, or a vice-president, certificates for shares of the
corporation, the issuance of which shall have been authorized by resolution of
the board of directors; and (d) in general perform all of the duties incident to
the office of treasurer and such other duties as from time to time may be
assigned to him by the president or by the board of directors. If required by
the board of directors, the treasurer shall give a bond for the faithful
discharge of his duties in such sum and with such surety or sureties as the
board of directors shall determine.
Section 4.11 Assistant Secretaries and Assistant Treasurers. The assistant
----------------------------------------------
secretaries or assistant treasurers, when authorized by the board of directors,
may sign with the president or a vice-president certificates for shares of the
corporation the issuance of which shall have been authorized by a resolution of
the board of directors. The assistant treasurers shall respectively, if
required by the board of directors, give bonds for the faithful discharge of
their duties in such sums and with such sureties as the board of directors shall
determine. The assistant secretaries and assistant treasurers, in general,
shall perform such duties as shall be assigned to them by the secretary or the
treasurer, respectively, or by the President or the board of directors.
Section 4.12 Salaries. The salaries of the officers shall be fixed from
--------
time to time by the board of directors and no officer shall be prevented from
receiving such salary by reason of the fact that he is also a director of the
corporation.
<PAGE>
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ARTICLE V
Contracts, Loans, Checks and Deposits
-------------------------------------
Section 5.1 Contracts. The board of directors may authorize any officer or
---------
officers, agent or agents, to enter into any contract or execute and deliver any
instrument in the name of and on behalf of the corporation, and such authority
may be general or confined to specific instances.
Section 5.2 Loans. No loans shall be contracted on behalf of the
-----
corporation and no evidences of indebtedness shall be issued in its name unless
authorized by a resolution of the board of directors. Such authority may be
general or confined to specific instances.
Section 5.3 Checks, Drafts, etc. All checks, drafts or other orders for
-------------------
the payment of money, notes or other evidences of indebtedness issued in the
name of the corporation, shall be signed by such officer or officers, agent or
agents, of the corporation and in such manner as shall from time to time be
determined by resolution of the board of directors.
Section 5.4 Deposits. All funds of the corporation not otherwise employed
--------
shall be deposited from time to time to the credit of the corporation in such
banks, trust companies or other depositories as the board of directors may
select.
ARTICLE VI
Certificates for Shares and Their Transfer
------------------------------------------
Section 6.1 Certificates for Shares. Certificates representing shares of
-----------------------
the corporation shall be in such form as shall be determined by the board of
directors. Such certificates shall be signed by the chairman or vice chairman
of the board of directors, or the president or a vice-president, and by the
secretary or an assistant secretary, or the treasurer or an assistant treasurer
and sealed with the corporate seal or a facsimile thereof. The signatures of
such officers upon a certificate may be facsimiles if the certificate is
manually signed on behalf of a transfer agent or a registrar, other than the
corporation itself or one of its employees. Each certificate for shares shall
be consecutively numbered or otherwise identified. The name and address of the
person to whom the shares represented thereby are issued, with the number of
shares and date of issue, shall be entered on the stock transfer books of the
corporation. All certificates surrendered to the corporation for transfer shall
be cancelled and no new certificate shall be issued until the former certificate
for a like number of shares shall have been surrendered and cancelled, except
that in case of a lost, destroyed
<PAGE>
- 10 -
or mutilated certificate a new one may be issued therefor upon such terms and
indemnity to the corporation as the board of directors may prescribe.
Section 6.2 Transfer of Shares. Transfer of shares of the corporation
------------------
shall be made only on the stock transfer books of the corporation by the holder
of record thereof or by his legal representative, who shall furnish proper
evidence of authority to transfer, or by his attorney thereunto authorized by
power of attorney duly executed and filed with the secretary of the corporation,
and on surrender for cancellation of the certificate for such shares. The
person in whose name shares stand on the books of the corporation shall be
deemed by the corporation to be the owner thereof for all purposes.
ARTICLE VII
Dividends
---------
The board of directors may, from time to time declare and the corporation
may pay dividends on its outstanding shares in the manner, and upon the terms
and conditions provided by law and its articles of incorporation.
ARTICLE VIII
Corporate Seal
--------------
The board of directors shall provide a corporate seal which shall consist
of a flat-faced circular die with the words and figures "EnergyNorth Natural
Gas, Inc.- Incorporated 1945-New Hampshire" inscribed thereon.
ARTICLE IX
Waiver of Notice
----------------
Whenever any notice is required to be given to any shareholder or director
of the corporation under the provisions of these By-Laws or under the provisions
of the articles of incorporation or under the provisions of the New Hampshire
Business Corporation Act, a waiver thereof in writing signed by the person or
persons entitled to such notice, whether before or after the time stated herein,
shall be deemed equivalent to the giving of such notice.
<PAGE>
- 11 -
ARTICLE X
Amendments
----------
These By-Laws may be altered, amended or repealed and new By-Laws may be
adopted by the board of directors, subject to repeal or change by action of the
shareholders.
ARTICLE XI
Executive Committee
-------------------
Section 11.1 Appointment. The board of directors, by resolution adopted by
-----------
a majority of the full board, may designate two or more of its members to
constitute an executive committee. The designation of such committee and the
delegation thereto of authority shall not operate to relieve the board of
directors, or any member thereof, of any responsibility imposed by law. The
board of directors, by resolution adopted by a majority of the full board, may
terminate the executive committee at any time.
Section 11.2 Authority. The executive committee, when the board of
---------
directors is not in session, shall have and may exercise all of the authority of
the board of directors except to the extent, if any, that such authority shall
be limited by the resolution appointing the executive committee and except also
that the executive committee shall not have the authority of the board of
directors in reference to amending the articles of incorporation, adopting a
plan of merger or consolidation, recommending to the shareholders the sale,
lease or other disposition of all or substantially all of the property and
assets of the corporation otherwise than in the usual and regular course of its
business, recommending to the shareholders a voluntary dissolution of the
corporation or a revocation thereof, or amending these By-Laws of the
corporation.
Section 11.3 Tenure and Qualifications. Each member of the executive
-------------------------
committee shall hold office until the next regular annual meeting of the board
of directors following his designation and until his successor is designated as
a member of the executive committee and is elected and qualified.
Section 11.4 Meetings. Regular meetings of the executive committee may be
--------
held without notice at such times and places as the executive committee may fix
from time to time by resolution. Special meetings of the executive committee
may be called by any member thereof upon not less than one (1) day's notice
stating the place, date and hour of the meeting, which notice may be written or
oral, and if mailed, shall be deemed to be delivered when deposited in the
United States mail addressed to the member of the executive committee at his
business address. Any member of the executive
<PAGE>
- 12 -
committee may waive notice of any meeting and no notice of any meeting need be
given to any member thereof who attends in person. The notice of a meeting of
the executive committee need not state the business proposed to be transacted at
the meeting.
Section 11.5 Special Telephone Meetings A special telephone meeting of the
--------------------------
executive committee may be called by any member thereof by means of a conference
telephone or similar communication equipment by means of which all persons
participating in the meeting can hear each other, and such participation shall
constitute presence at the meeting. Notice of a special telephone meeting shall
be given by telephone or a telegram delivered to a responsible person at the
member's residence or business address not less than 12 hours prior to the
telephone meeting.
Section 11.6 Quorum. A majority of the members of the executive committee
------
shall constitute a quorum for the transaction of business at any meeting thereof
and action of the executive committee must be authorized by the affirmative vote
of a majority of the members present at a meeting at which a quorum is present.
Section 11.7 Action Without a Meeting. Any action required or permitted to
------------------------
be taken by the executive committee at a meeting may be taken without a meeting
if a consent in writing, setting forth the action so taken, shall be signed by
all of the members of the executive committee.
Section 11.8 Vacancies. Any vacancy in the executive committee may be
---------
filled by a resolution adopted by a majority of the full board of directors.
Section 11.9 Resignations and Removal. Any member of the executive
------------------------
committee may be removed at any time with or without cause by resolution adopted
by a majority of the full board of directors. Any member of the executive
committee may resign from the executive committee at any time by giving written
notice to the president or secretary of the corporation and, unless otherwise
specified therein, the acceptance of such resignation shall not be necessary to
make it effective.
Section 11.10 Procedure. The executive committee shall elect a presiding
---------
officer from its members and may fix its own rules of procedure which shall not
be inconsistent with these By-Laws. It shall keep regular minutes of its
proceedings and report the same to the board of directors for its information at
the meeting thereof held next after the proceedings shall have been taken.
<PAGE>
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ARTICLE XII
Indemnification of Directors and Officers
-----------------------------------------
The corporation shall indemnify each of its directors or officers or former
directors or officers, or any person who may have served at its request as a
director or officer of another corporation, partnership, joint venture, trust,
or other enterprise to the fullest extent permitted by law.
<TABLE>
<CAPTION>
<S> <C>
ADOPTED: January 25, 1984
AMENDED: October 23, 1985
AMENDED: August 6, 1986
AMENDED: February 4, 1987
AMENDED: February 1, 1988
AMENDED: July 31, 1989
</TABLE>
<PAGE>
Exhibit 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
reports, and to all references to our Firm, included in this Amendment No. 2 to
Registration Statement.
/s/ Arthur Andersen LLP
--------------------------
ARTHUR ANDERSEN LLP
Boston, Massachusetts
September 17, 1997
