<PAGE> 1
FILE NO. 070-09585
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------------
AMENDMENT NO. 1 TO
FORM U-1 APPLICATION/DECLARATION
UNDER
THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
VECTREN CORPORATION
20 N.W. FOURTH STREET
EVANSVILLE, INDIANA 47741
(NAME OF COMPANY FILING THIS STATEMENT AND ADDRESS OF PRINCIPAL EXECUTIVE
OFFICE)
Niel C. Ellerbrook
VECTREN CORPORATION
20 N.W. FOURTH STREET
EVANSVILLE, INDIANA 47741
(NAME AND ADDRESS OF AGENT FOR SERVICE)
The Commission is requested to send copies of all notices, orders and
communications in connection with this Application/Declaration to:
MICHAEL F. CUSICK
Winthrop, Stimson, Putnam & Roberts
One Battery Park Plaza
New York, New York 10004
(212) 858-1000
and
RONALD E. CHRISTIAN
Indiana Energy, Inc.
1630 North Meridian Street
Indianapolis, Indiana 46202
(317) 321-0357
<PAGE> 2
ITEM 1. DESCRIPTION OF PROPOSED TRANSACTION
INTRODUCTION
Pursuant to Sections (9)(a)(2) and 10 of the Public Utility Holding
Company Act of 1935 (the "1935 Act" or the "Act"), Vectren Corporation, an
Indiana corporation ("Vectren" or the "Applicant"), 50% of whose outstanding
capital stock is owned by SIGCORP, Inc., an Indiana corporation ("SIGCORP"), and
50% of whose outstanding capital stock is owned by Indiana Energy, Inc., an
Indiana corporation ("Indiana Energy"), hereby requests that the Securities and
Exchange Commission (the "Commission") issue an order (i) approving the direct
acquisition by Vectren of all of the issued and outstanding voting securities
("Common Stock") of SIGCORP and Indiana Energy (other than certain Common Stock
to be cancelled as described in Item 1(B)(1) and (ii) granting such other
authorizations as may be necessary in connection therewith.
Vectren's proposed direct acquisition of the Common Stock of SIGCORP
and the Common Stock of Indiana Energy is contemplated by the Agreement and Plan
of Merger, dated as of June 11, 1999 (the "Merger Agreement"), by and among
Indiana Energy, SIGCORP and Vectren. The Merger Agreement is attached hereto as
Exhibit B-1. The Merger Agreement provides for, among other things, (i) the
merger of each of SIGCORP and Indiana Energy with and into Vectren in accordance
with the laws of Indiana (the "Merger") and (ii) Vectren continuing as the sole
surviving corporation.
SIGCORP is a holding company under the 1935 Act. It has claimed an
exemption from all provisions of the 1935 Act (except for Section 9(a)(2)
thereof) pursuant to Rule 2 under the 1935 Act. See SIGCORP Form U-3A-2,
"Statement by Holding Company Claiming Exemption Under Rule U-2 from the
Provisions of the Public Utility Holding Company Act of 1935," dated February
25, 1999, attached hereto as Exhibit G-1.
Indiana Energy is a holding company under the 1935 Act. It has claimed
an exemption from all provisions of the 1935 Act (except for Section 9(a)(2)
thereof) pursuant to Rule 2 under the 1935 Act. See Indiana Energy Form U-3A-2,
"Statement by Holding Company Claiming Exemption Under Rule U-2 from the
Provisions of the Public Utility Holding Company Act of 1935," dated February
23, 1999, attached hereto as Exhibit G-2.
Vectren is not currently a holding company under the 1935 Act because
it does not own, control or hold with power to vote ten percent or more of the
voting securities of a public-utility company. Following the consummation of the
Merger, Vectren will become a holding company under the 1935 Act. Vectren will
claim an exemption from all provisions of the 1935 Act (except for Section
9(a)(2) thereof) pursuant to Rule 2 under the 1935 Act immediately following the
consummation of the Merger.
A. DESCRIPTION OF PARTIES TO THE TRANSACTION
1. General Description.
a. Vectren. Vectren is an Indiana corporation organized on June
10, 1999 solely for the purpose of effecting the Merger and carrying on the
combined businesses of SIGCORP and Indiana Energy after the Merger. It currently
does not conduct any business or own any utility
1
<PAGE> 3
assets. Upon consummation of the Merger, Vectren will become a holding company
under the 1935 Act.
b. SIGCORP. SIGCORP is a holding company incorporated on October
19, 1994 under the laws of the State of Indiana. SIGCORP is located in
Evansville, Indiana. SIGCORP has eleven wholly-owned subsidiaries, including its
principal subsidiary, Southern Indiana Gas and Electric Company ("SIGECO"),
which is a public-utility company involved in the gas and electric utility
business, and ten non-utility subsidiaries.
SIGECO is a public-utility company incorporated on June 10, 1912 under
the laws of the State of Indiana. SIGECO is located in Evansville, Indiana and
is engaged in the generation, transmission, distribution and sale of electricity
and the distribution and sale of natural gas in a service area covering ten
counties in southwestern Indiana. For the nine months ended September 30, 1999,
SIGECO had operating revenues of $185,683,040 and net income of $38,264,322. The
balance sheet for SIGECO as of September 30, 1999 is set forth below:
SIGECO
UNAUDITED BALANCE SHEET AS OF SEPTEMBER 30, 1999
ASSETS
<TABLE>
<CAPTION>
9/30/99
---------------
<S> <C>
UTILITY PLANT
Utility Plant in Service ..................... $ 1,286,587,506
Completed Construction Not Classified ........ 13,666,576
Utility Plant Held for Future Use ............ 2,577,611
Construction Work in Progress ................ 57,518,176
---------------
TOTAL UTILITY PLANT .......................... 1,360,349,869
---------------
LESS PROVISION FOR DEPRECIATION .............. 624,434,690
---------------
TOTAL UTILITY PLANT LESS PROVISIONS AT END OF
MONTH ...................................... 735,915,179
---------------
OTHER PROPERTY AND INVESTMENTS
Nonutility Property .......................... 693,061
Provision for Depreciation and Amortization of
Nonutility Property ........................ (80,059)
Other Investments ............................ 964,321
Other Special Funds - Culley $45MM ........... 983,913
---------------
TOTAL OTHER PROPERTY INVESTMENTS ............. 2,561,236
---------------
CURRENT AND ACCRUED ASSETS
Cash and Cash Equivalents .................... 83,723
Notes Receivable ............................. 6,578,761
Working Funds ................................ 242,952
Accounts Receivable .......................... 48,331,333
Provision for Uncollectable Accounts ......... (2,253,410)
Materials and Supplies - Fuel ................ 12,023,235
- Other ............... 14,905,347
Allowance Inventory .......................... 4,217,000
Stores Expense ............................... (659,404)
Gas Stored Underground - Current ............. 10,201,959
Prepayments .................................. 971,822
Miscellaneous Current and Accrued Assets ..... 7,229,801
---------------
TOTAL CURRENT AND ACCRUED ASSETS ............. 101,873,119
---------------
DEFERRED DEBITS
Unamortized Debt Expense ..................... 2,484,315
Preliminary Survey and Investigation Charge .. 20,515
Clearing Accounts ............................ 776,419
Miscellaneous Deferred Debits ................ 13,248,087
Postretirement Benefits -FAS 106 ............. 1,616,650
Demand Side Management ....................... 26,006,984
Unamortized Premium on Reacquired Debt ....... 4,472,481
---------------
TOTAL DEFERRED DEBITS ........................ 48,625,451
---------------
TOTAL ASSETS AND OTHER DEBITS ................ $ 888,974,985
===============
</TABLE>
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
9/30/99
-------------
<S> <C>
LONG-TERM DEBT
Bonds .................................................... $ 303,615,000
Notes Payable ............................................ 1,000,000
Unamortized Debt Premium and Discount - Net .............. (1,615,924)
-------------
TOTAL LONG-TERM DEBT ..................................... 302,999,076
-------------
TOTAL CAPITALIZATION ..................................... 655,932,638
-------------
OTHER NONCURRENT LIABILITIES
Accumulated Provision for Injuries and Damages ........... 987,917
-------------
TOTAL OTHER NONCURRENT LIABILITIES ....................... 987,917
-------------
CURRENT AND ACCRUED LIABILITIES
Notes Payable ............................................ 21,413,589
Accounts Payable ......................................... 20,594,772
Customer Deposits ........................................ 1,434,100
Taxes Accrued ............................................ 5,823,316
Interest Accrued ......................................... 5,541,233
Dividends Declared ....................................... 117,215
Tax Collections Payable .................................. 902,502
Miscellaneous Current and Accrued Liabilities 23,906,987
-------------
TOTAL CURRENT AND ACCRUED LIABILITIES .................... 79,733,714
-------------
DEFERRED CREDITS
Customer Advances for Construction ....................... 818,266
Other Deferred Credits ................................... 1,020,245
Postretirement Benefits -FAS 106 ......................... 13,996,001
Investment Tax Credit - Net .............................. 17,729,590
-------------
TOTAL DEFERRED CREDITS ................................... 33,564,102
-------------
ACCUMULATED DEFERRED INCOME TAXES
Accelerated Amortization ................................. (80)
Liberalized Depreciation and Other ....................... 118,756,694
-------------
TOTAL ACCUMULATED DEFERRED INCOME TAXES .................. 118,756,614
-------------
COMMON SHAREHOLDERS' EQUITY
Common Stock, No Par 23,630,568 Shares Issued ............ 78,258,390
-------------
Retained Earnings: (2)
First of Year ............................................ 241,923,869
Current Year - Net Income ................................ 38,264,322
-------------
Balance .............................................. 280,188,191
Dividends - Common ................................... 23,476,440
Dividends - Preferred ................................ 808,827
Stock Option Cost .................................... 508,952
-------------
End of Month ............................................. 255,393,972
-------------
TOTAL COMMON SHAREHOLDERS' EQUITY ........................ 333,652,362
-------------
PREFERRED STOCK Cumulative, $100 Par:
4.8% Series - 85,895 Shares Issued ....................... 8,589,500
4.75% Series - 25,000 Shares Issued ..................... 2,500,000
6.50% Series 75,000 Shares Issued ........................ 7,500,000
Cumulative, Special, No Par 8-1/2% Series -
6,917 Shares Issued .................................... 691,700
-------------
TOTAL PREFERRED STOCK .................................... 19,281,200
-------------
TOTAL LIABILITIES AND OTHER CREDITS ......................... $ 888,974,985
=============
</TABLE>
SIGECO owns approximately 33% of the outstanding common stock of
Community Natural Gas Company, Inc. ("Community"), a small Indiana gas
distribution public-utility company with offices in Mt. Carmel, Illinois.
2
<PAGE> 4
In addition to SIGECO, SIGCORP has several other subsidiaries. They
include the following:
(i) Southern Indiana Properties, Inc., formed in 1986, which
invests in real estate and equipment, real estate partnerships and joint
ventures and other financial and business arrangements. For the nine months
ended September 30, 1999, Southern Indiana Properties, Inc. had operating
revenues of $5,560,196 and net income of $3,028,584. The balance sheet for
Southern Indiana Properties, Inc. as of September 30, 1999 is set forth below:
SOUTHERN INDIANA PROPERTIES, INC.
UNAUDITED CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 30, 1999
ASSETS
<TABLE>
<CAPTION>
9/30/99
-------------
<S> <C>
CURRENT ASSETS ........................................ $ 12,707,301
NON-CURRENT INVESTMENTS ............................... 128,305,009
-------------
FIXED ASSETS
Buildings .......................................... 2,690,182
Furniture & Fixtures ............................... 26,090
Machinery & Equipment .............................. 95,585
Leasehold Improvements ............................. 67,275
Land ............................................... 898,683
Land Improvements .................................. 170,981
Accumulated Depreciation ........................... (989,534)
-------------
TOTAL FIXED ASSETS ................................. 2,959,262
-------------
OTHER ASSETS
Cash Value Life Insurance .......................... 84,546
Deposits ........................................... 75
Loan Acquisition Costs ............................. 416,233
-------------
TOTAL OTHER ASSETS ................................. 500,854
-------------
TOTAL ASSETS ....................................... $ 144,472,426
=============
</TABLE>
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
9/30/99
-------------
<S> <C>
CURRENT LIABILITIES ...................................... $ 2,099,597
OTHER LIABILITIES ........................................ 116,426,585
-------------
TOTAL LIABILITIES ..................................... 118,526,182
-------------
STOCKHOLDERS' EQUITY
Common Stock .......................................... 1,000,000
Paid in Capital ....................................... 24,900,000
Retained Earnings-Unappr .............................. 30,909,660
Ytd Net Income ........................................ 3,028,584
Dividends Paid ........................................ (33,892,000)
-------------
TOTAL STOCKHOLDERS EQUITY ............................. 25,946,244
-------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY ................................ $ 144,472,426
=============
</TABLE>
(ii) Energy Systems Group, Inc., incorporated in 1994, has a
one-third ownership interest in Energy Systems Group, LLC, an energy-related
performance contracting firm serving industrial and commercial customers. For
the nine months ended September 30, 1999, Energy Systems Group, Inc. had no
operating revenues and net income of $370,393. The balance sheet for Energy
Systems Group, Inc. as of September 30, 1999 is set forth below:
3
<PAGE> 5
ENERGY SYSTEMS GROUP INC.
UNAUDITED BALANCE SHEET AS OF SEPTEMBER 30, 1999
ASSETS
<TABLE>
<CAPTION>
9/30/99
----------
<S> <C>
CURRENT ASSETS
Cash & Cash Equivalents ............................... $ 677,586
Investment in LLC ..................................... 1,557,129
Other Receivables ..................................... 391
----------
TOTAL CURRENT ASSETS .................................. 2,235,106
----------
FIXED ASSETS
TOTAL FIXED ASSETS .................................... 0
----------
TOTAL ASSETS .......................................... $2,235,106
==========
</TABLE>
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
9/30/99
-----------
<S> <C>
CURRENT LIABILITIES
Accounts Payable ...................................... $ 175
Payroll & Other Taxes Payable ......................... 111,584
Income Taxes Payable .................................. (197,856)
-----------
TOTAL CURRENT LIABILITIES ............................. (86,097)
-----------
LONG TERM LIABILITIES
L.T. Energy Guarantee Reserve ......................... 191,908
-----------
TOTAL LONG-TERM LIABILITIES ........................... 191,908
-----------
TOTAL LIABILITIES ..................................... 105,811
-----------
EQUITY
Capital Stock ......................................... 1,000
Additional Paid-In Capital ............................ 499,000
Retained Earnings-Prior ............................... 2,133,488
Dividends ............................................. (1,263,079)
-----------
RETAINED EARNINGS-CURRENT YEAR ........................ 758,886
-----------
TOTAL EQUITY .......................................... 2,129,295
-----------
TOTAL LIABILITIES AND EQUITY .......................... $ 2,235,106
===========
</TABLE>
(iii) Southern Indiana Minerals, Inc., incorporated in 1994 to
process and market coal combustion by-products. For the nine months ended
September 30, 1999, Southern Indiana Minerals, Inc. had operating revenues of
$18,704 and a net loss of $616,332. The balance sheet for Southern Indiana
Minerals, Inc. as of September 30, 1999 is set forth below:
SOUTHERN INDIANA MINERALS, INC.
UNAUDITED BALANCE SHEET AS OF SEPTEMBER 30, 1999
ASSETS
<TABLE>
<CAPTION>
9/30/99
-----------
<S> <C>
CURRENT ASSETS ........................................ 307,976
-----------
OTHER ASSETS .......................................... 387,476
-----------
Property and Equipment ................................ 598,612
Less Accumulated Depreciation ......................... (172,979)
-----------
NET PROPERTY AND EQUIPMENT ............................ 425,633
-----------
TOTAL ASSETS .......................................... $ 1,121,085
===========
</TABLE>
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
9/30/99
-----------
<S> <C>
CURRENT LIABILITIES ................................... $ 1,077,511
-----------
TOTAL LIABILITIES ..................................... 1,077,511
-----------
SHAREHOLDERS' EQUITY
Capital Stock ......................................... 4,166,500
Retained Earnings ..................................... (4,122,926)
-----------
TOTAL SHAREHOLDERS' EQUITY ............................ 43,574
-----------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY .............................................. $ 1,121,085
===========
</TABLE>
(iv) SIGCORP Energy Services, Inc., which was formed in 1996 as an
energy marketer and currently provides natural gas, pipeline management and
other natural gas-related services. For the nine months ended September 30,
1999, SIGCORP Energy Services, Inc. had no operating revenues and net income of
$39,336. The balance sheet for SIGCORP Energy Services, Inc. as of September 30,
1999 is set forth below:
SIGCORP ENERGY SERVICES
UNAUDITED BALANCE SHEET AS OF SEPTEMBER 30, 1999
ASSETS
<TABLE>
<CAPTION>
9/30/99
----------
<S> <C>
CURRENT ASSETS
Cash .................................................. $ 21,168
Prepaid Expenses ...................................... 0
----------
TOTAL CURRENT ASSETS .................................. 21,168
----------
PROPERTY AND EQUIPMENT
Net Property and Equipment ............................ 0
----------
OTHER ASSETS
Investment in Subsidiaries ............................ 1,973,399
----------
TOTAL OTHER ASSETS .................................... 1,973,399
----------
TOTAL ASSETS .......................................... $1,994,567
==========
</TABLE>
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
9/30/99
----------
<S> <C>
CURRENT LIABILITIES
Accounts Payable ....................................... $ 370
Intercompany Payable ................................... 963,989
----------
TOTAL CURRENT LIABILITIES .............................. 964,359
----------
TOTAL LIABILITIES ...................................... 964,359
----------
SHAREHOLDERS' EQUITY
Capital Stock .......................................... 91,500
Retained Earnings ...................................... 938,708
----------
TOTAL SHAREHOLDERS' EQUITY ............................. 1,030,208
----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $1,994,567
==========
</TABLE>
4
<PAGE> 6
(v) SIGCORP Capital, Inc., incorporated in 1996, which is the
primary financing vehicle for SIGCORP's non-regulated subsidiaries. For the nine
months ended September 30, 1999, SIGCORP Capital, Inc. had no operating revenues
and net income of $22,275. The balance sheet for SIGCORP Capital, Inc. as of
September 30, 1999 is set forth below:
SIGCORP CAPITAL, INC.
UNAUDITED BALANCE SHEET AS OF SEPTEMBER 30, 1999
ASSETS
<TABLE>
<CAPTION>
9/30/99
-----------
<S> <C>
Cash-Civitas .......................................... $ 5,000
Intercompany Rec ...................................... 94,451,770
Intercompany Interest Rec ............................. 811,444
Loan Receivable-EMC ................................... 271,562
Interest Receivable-EMC ............................... 7,342
Investment in SES LLC ................................. 28,902
Inv. in SFI Coal Sales LLC ............................ 1,819
-----------
TOTAL ASSETS .......................................... $95,577,839
===========
</TABLE>
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
9/30/99
-----------
<S> <C>
Accounts Payable ...................................... $ 1,690
Checks Written in Excess of Deposits .................. 0
N/P-Civitas ........................................... 17,676,750
N/P-Civitas Bridge Loan ............................... 26,900,000
N/P-Bank One .......................................... 15,000,000
N/P Met Life .......................................... 35,000,000
Demand Deposits Payable ............................... 36,000
Demand Deposits Int. Payable .......................... 4,087
Accrued Interest ...................................... 860,223
Accrued Expenses ...................................... 183
Gross Receipts Tax Payable ............................ 10
-----------
TOTAL LIABILITIES ..................................... 95,478,943
===========
SHAREHOLDERS EQUITY
Capital Stock ......................................... 10,000
Retained Earnings ..................................... 88,896
-----------
TOTAL SHAREHOLDERS' EQUITY ............................ 98,896
-----------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY .............................................. $95,577,839
===========
</TABLE>
(vi) SIGCORP Fuels, Inc., incorporated in 1996 to own and operate
coal mining properties and to provide coal and related services to SIGCORP and
other customers. For the nine months ended September 30, 1999, SIGCORP Fuels,
Inc. had operating revenues of $1,333,670 and net income of $1,068,390. The
balance sheet for SIGCORP Fuels, Inc. as of September 30, 1999 is set forth
below:
SIGCORP FUELS, INC.
UNAUDITED BALANCE SHEET AS OF SEPTEMBER 30, 1999
ASSETS
<TABLE>
<CAPTION>
9/30/99
-----------
<S> <C>
CURRENT ASSETS
Cash .................................................. $ 2,638
Deposits .............................................. 1,371
Accounts Receivable ................................... 1,186,147
Prepaid Expenses ...................................... 136
Prepaid Insurance ..................................... 2,940
-----------
TOTAL CURRENT ASSETS .................................. 1,193,232
-----------
OTHER ASSETS
Investment in Subsidiaries ............................ 2,039,296
Investment in Prosperity Mine ......................... 3,508,671
-----------
TOTAL OTHER ASSETS .................................... 5,547,967
-----------
PROPERTY AND EQUIPMENT
Total Property and Equipment .......................... 94,819
Less Accumulated Depreciation ......................... (16,254)
-----------
NET PROPERTY AND EQUIPMENT ............................ 78,565
-----------
TOTAL ASSETS .......................................... $ 6,819,764
===========
</TABLE>
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
9/30/99
----------
<S> <C>
LIABILITIES
CURRENT LIABILITIES
Current Portion ....................................... $ 20,811
Accounts Payable ...................................... 133,915
Accrued Taxes ......................................... 6,573
Accrued Expenses ...................................... 139,668
Employee Benefit Payable .............................. 473
Intercompany Payable .................................. 5,429,974
----------
TOTAL CURRENT LIABILITIES ............................. 5,731,414
----------
LONG TERM DEBT ........................................ 25,549
----------
TOTAL LIABILITIES ..................................... 5,756,963
----------
SHAREHOLDERS' EQUITY
Capital Stock ......................................... 1,000
Retain Earnings ....................................... 1,061,801
----------
TOTAL SHAREHOLDERS' EQUITY ............................ 1,062,801
----------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY .............................................. $6,819,764
==========
</TABLE>
(vii) SIGCORP Power Marketing, Inc., formed in 1996 to purchase
power for SIGECO and to market power for SIGECO. This company is not currently
active.
(viii) SIGCORP Communications Services, Inc., incorporated in 1997,
was formed to undertake communications-related strategic initiatives. For the
nine months ended September 30, 1999, SIGCORP Communications Services, Inc. had
an operating loss of $38,953 and a net loss of $63,318. The balance sheet for
SIGCORP Communications Services, Inc. as of September 30, 1999 is set forth
below:
SIGCORP COMMUNICATIONS SERVICES, INC.
UNAUDITED BALANCE SHEET AS OF SEPTEMBER 30, 1999
5
<PAGE> 7
ASSETS
<TABLE>
<CAPTION>
9/30/99
-----------
<S> <C>
CURRENT ASSETS ........................................... $ 5,360,642
-----------
PROPERTY AND EQUIPMENT
Total Property and Equipment .......................... 561,292
Less Accumulated Depreciation
and Amortization .................................... (70,895)
-----------
NET PROPERTY AND EQUIPMENT ............................ 490,397
-----------
OTHER ASSETS
Organization Costs .................................... 4,376
Less Accumulated Amortization ......................... (3,481)
-----------
NET OTHER ASSETS ...................................... 895
-----------
TOTAL ASSETS .......................................... $ 5,851,934
===========
</TABLE>
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
9/30/99
-----------
<S> <C>
Total Current Liabilities ............................. $ 5,450,135
Long-Term Debt ........................................ 39,582
-----------
TOTAL LIABILITIES ..................................... 5,489,717
-----------
SHAREHOLDERS' EQUITY
Capital Stock ......................................... 501,000
Retained Earnings ..................................... (138,783)
-----------
TOTAL SHAREHOLDERS' EQUITY ............................ 362,217
-----------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY ................................ $ 5,851,934
===========
</TABLE>
(ix) SIGECO Advanced Communications, Inc., incorporated in 1998,
holds SIGCORP's investment in SIGECOM, LLC and Utilicom Networks, Inc. It is a
joint venture between Advanced Communications, Inc. and Utilicom Networks, Inc.
to provide and to market enhanced communications services over a high-capacity
fiber-optic network in SIGECO's service territory. For the nine months ended
September 30, 1999, SIGCORP Advanced Communications, Inc. had an operating loss
of $126,216 and net income of $107,589. The balance sheet for SIGCORP Advanced
Communications, Inc. as of September 30, 1999 is set forth below:
6
<PAGE> 8
SIGCORP ADVANCED COMMUNICATIONS, INC.
UNAUDITED BALANCE SHEET AS OF SEPTEMBER 30, 1999
ASSETS
<TABLE>
<CAPTION>
9/30/99
-----------
<S> <C>
CURRENT ASSETS
Cash .................................................. $ 6,935
Accts Rec - Utilicom Networks ......................... 624,000
Note Receivable - Utillicom Net ....................... 6,500,000
Prepaid Insurance ..................................... 355
-----------
TOTAL CURRENT ASSETS .................................. 7,131,290
-----------
OTHER ASSETS
Investment in Sigecom LLC (Preferred
Stock) .............................................. 10,750,050
Investment in Utilicom Networks,
Inc. (Common Stock) ................................. 1,000,000
-----------
TOTAL OTHER ASSETS .................................... 11,750,050
-----------
PROPERTY AND EQUIPMENT
Total Property and Equipment .......................... 6,511
Less Accumulated Depreciation ......................... 852
-----------
NET PROPERTY AND EQUIPMENT ............................ 5,659
-----------
TOTAL ASSETS .......................................... $18,886,999
===========
</TABLE>
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
9/30/99
-----------
<S> <C>
CURRENT LIABILITIES
Accounts Payable ...................................... $ 5,383
Intercompany Payable .................................. 6,928,172
Accrued Taxes ......................................... 2,752
Employee Benefits Payable ............................. 909
-----------
TOTAL CURRENT LIABILITIES ............................. 6,937,216
-----------
TOTAL LIABILITIES ..................................... 6,937,216
-----------
SHAREHOLDERS' EQUITY
Capital Stock ......................................... 11,855,050
Retained Earnings ..................................... 94,733
-----------
TOTAL SHAREHOLDERS' EQUITY ............................ 11,949,783
-----------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY .............................................. $18,886,999
===========
</TABLE>
(x) SIGCORP Environmental Services, Inc., formed in 1998, holds
SIGCORP's investment in Air Quality Services, a joint venture created to provide
air quality monitoring and testing services to industry and utilities. For the
nine months ended September 30, 1999, SIGCORP Communications Services, Inc. had
an operating loss of $12,186 and a net loss of $86,774. The balance sheet for
SIGCORP Communications Services, Inc. as of September 30, 1999 is set forth
below:
SIGCORP ENVIRONMENTAL SERVICES, INC.
UNAUDITED BALANCE SHEET AS OF SEPTEMBER 30, 1999
ASSETS
<TABLE>
<CAPTION>
9/30/99
-----------
<S> <C>
CURRENT ASSETS
Cash-Civitas .......................................... $ 4,837
Intercompany Receivable ............................... 44,388
-----------
TOTAL CURRENT ASSETS .................................. 49,225
-----------
OTHER ASSETS
Investment in Air Quality Serv ........................ 155,944
-----------
TOTAL OTHER ASSETS .................................... 155,944
-----------
TOTAL ASSETS .......................................... $ 205,169
===========
</TABLE>
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
9/30/99
-----------
<S> <C>
LIABILITIES
CURRENT LIABILITIES
Accounts Payable ...................................... $ 370
Total Current Liabilities ............................. 370
-----------
Total Liabilities ..................................... 370
SHAREHOLDERS' EQUITY
Capital Stock ......................................... 510
Additional Paid in Capital ............................ 291,064
Retained Earnings ..................................... (86,775)
-----------
TOTAL SHAREHOLDERS' EQUITY ............................ 204,799
-----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY ............ $ 205,169
===========
</TABLE>
c. Indiana Energy. Indiana Energy is a holding company with
subsidiaries and affiliates engaged in natural gas distribution, gas portfolio
administrative services and marketing of natural gas, electric power and related
services and services and products unrelated to energy. It was incorporated
under the laws of the State of Indiana on October 24, 1985. Indiana Energy has
four wholly-owned direct subsidiaries, including its principal subsidiary,
Indiana Gas Company, Inc. ("Indiana Gas"), and three non-regulated subsidiaries,
IEI Services, LLC, IEI Capital Corp. and IEI Investments, Inc.
Indiana Gas is a public-utility company engaged in the business of
providing gas utility service in the State of Indiana. Indiana Gas is also a
holding company because it owns all of the voting securities of public-utility
companies, Richmond Gas Corporation ("Richmond Gas") and Terre Haute Gas
Corporation ("Terre Haute"). While Richmond Gas and Terre Haute technically
exist as separate corporate entities, in accordance with an order issued by the
Indiana Utility Regulatory Commission (the "IURC"), Indiana Gas, Richmond Gas
and Terre Haute have combined their operations for all purposes and are
transacting business under the name of "Indiana Gas Company, Inc." Pursuant to
that order, accounting records and financial reports are maintained and
presented on a consolidated basis. For purposes of this Application/
7
<PAGE> 9
Declaration, any reference to Indiana Gas will, in effect, be inclusive of the
separate corporate entities of Richmond Gas and Terre Haute.
For the nine months ended September 30, 1999, Indiana Gas had operating
revenues of approximately $419,061,000 and net income of approximately
$31,377,000. The balance sheet for Indiana Gas as of September 30, 1999 is set
forth below:
INDIANA GAS COMPANY, INC.
BALANCE SHEET AS OF SEPTEMBER 30, 1999
(AMOUNTS IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
9/30/99
-----------
<S> <C>
CURRENT ASSETS:
Cash and Cash Equivalents ............................. $ 14
Accounts Receivable, Less Reserves .................... 16,702
Accounts Receivable From Affiliated
Companies ........................................... 1,014
Accrued Unbilled Revenues ............................. 8,136
Materials and Supplies - At Average Cost .............. 237
Liquefied Petroleum Gas - At Average Cost ............. 810
Gas in Underground Storage - At Last-In,
First-Out Cost ...................................... 9,501
Recoverable Gas Costs ................................. --
Prepayments ........................................... 36,300
Other Current Assets .................................. 1,088
-----------
73,802
UTILITY PLANT:
Original Cost ......................................... 990,780
Less - Accumulated Depreciation and
Amortization ........................................ 398,912
-----------
591,868
NONUTILITY PLANT AND OTHER INVESTMENTS -
NET ................................................. --
-----------
DEFERRED CHARGES:
Regulatory Income Tax Asset ........................... 2,741
Unamortized Debt Discount and Expense ................. 11,954
Environmental Costs ................................... --
Other ................................................. 2,159
-----------
16,854
TOTAL ASSETS .......................................... $ 682,524
===========
</TABLE>
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
9/30/99
-----------
<S> <C>
CURRENT LIABILITIES:
Maturities and Sinking Fund Requirements of
Long-Term Debt ...................................... $ --
Notes Payable ......................................... 68,621
Accounts Payable ...................................... 24,297
Accounts Payable To Affiliated Companies .............. 8,784
Refundable Gas Costs .................................. 11,192
Dividends Payable ..................................... --
Customer Deposits and Advance Payments ................ 14,713
Accrued Taxes ......................................... 12,471
Accrued Interest ...................................... 1,173
Other Current Liabilities ............................. 13,398
-----------
154,649
DEFERRED CREDITS:
Deferred Income Taxes ................................. 60,931
Accrued Postretirement Benefits Other Than
Pensions ............................................ 27,868
Unamortized Investment Tax Credit ..................... 8,383
Regulatory Income Tax Liability ....................... --
Customer Advances For Construction .................... 1,950
Other ................................................. 3,468
-----------
102,600
CAPITALIZATION:
Common Stock .......................................... 142,995
Retained Earnings ..................................... 100,431
-----------
Common Shareholder's Equity ......................... 243,426
Long-Term Debt ........................................ 181,849
-----------
425,275
TOTAL EQUITY AND LIABILITIES .......................... $ 682,524
===========
</TABLE>
Indiana Energy has three other wholly-owned direct subsidiaries. They
include the following:
(i) IEI Services, LLC provides support services to Indiana Energy
and its subsidiaries. Those services include information technology, financial
services, human resources support and building and fleet services. For the nine
months ended September 30, 1999, IEI Services, LLC had operating revenues of
approximately $7,316,000 and net income of approximately $6,480,000. The balance
sheet for IEI Services, LLC as of September 30, 1999 is set forth below:
IEI SERVICES, LLC
BALANCE SHEET AS OF SEPTEMBER 30, 1999
(AMOUNTS IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
9/30/99
-----------
<S> <C>
CURRENT ASSETS
Cash .................................................. $ (121)
A/R - Less Reserves ................................... 115
A/R - Affiliated Companies ............................ 4,005
Materials and Supplies ................................ --
Prepayments ........................................... (341)
-----------
3,658
-----------
Deferred Charges ...................................... 650
-----------
PROPERTY, PLANT & EQUIPMENT
Original Cost ......................................... 63,005
Less: Accumulated Depreciation ....................... 18,421
-----------
44,584
-----------
TOTAL ASSETS .......................................... $ 48,892
===========
</TABLE>
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
9/30/99
-----------
<S> <C>
CURRENT LIABILITIES
Notes Payable to Affiliates ........................... $ 11,625
A/P ................................................... 1,150
A/P - Affiliated Companies ............................ 266
Accrued Taxes ......................................... 316
Accrued Interest - Affiliated Companies ............... 31
Other Current Liabilities ............................. 1,418
Accrued Postretirement Benefits ....................... 267
-----------
15,073
-----------
Deferred Credits ...................................... 65
Owners Equity ......................................... 33,754
-----------
TOTAL LIABILITIES AND EQUITY .......................... $ 48,892
===========
</TABLE>
8
<PAGE> 10
(ii) IEI Capital Corp. was formed to carry out the financing
activities of Indiana Energy and its non-regulated subsidiaries. For the nine
months ended September 30, 1999, IEI Capital Corp. had operating revenues of
approximately $813,000 and a net loss of approximately $37,000. The balance
sheet for IEI Capital Corp. as of September 30, 1999 is set forth below:
IEI CAPITAL CORPORATION
BALANCE SHEET AS OF SEPTEMBER 30, 1999
(AMOUNTS IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
9/30/99
-----------
<S> <C>
Cash .................................................. $ (452)
A/R - Less Reserves ................................... --
A/R - Affiliated Companies ............................ 5
Accrued Interest Receivable -
Affiliated Companies ................................ 52
Notes Receivable - Affiliated Companies 19,475
Deferred Charges ...................................... --
-----------
TOTAL ASSETS .......................................... $ 19,080
===========
</TABLE>
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
9/30/99
-----------
<S> <C>
Notes Payable ............................................ $ 17,900
Notes Payable - Affiliated Companies ..................... 1,177
A/P ...................................................... --
A/P - Affiliated Companies ............................... 1
Accrued Interest ......................................... (3)
Accrued Interest - Affiliated Companies .................. 2
Accrued Taxes ............................................ --
Retained Earnings ........................................ 2
Owners Equity ............................................ 1
-----------
TOTAL LIABILITY AND EQUITY ............................... $ 19,080
===========
</TABLE>
(iii) IEI Investments, Inc. was formed for the purpose of grouping
and controlling Indiana Energy's non-regulated businesses and investments
therein and to separate them from regulated businesses. It has three
wholly-owned subsidiaries, IGC Energy, Inc., Energy Realty, Inc. and Energy
Financial Group, Inc. IGC Energy owns a 50% interest in ProLiance Energy, LLC
("ProLiance"), a firm that provides Indiana Gas with its natural gas supply and
related services. ProLiance is also a provider of energy services to other
customers, including utilities. IEI Investments is committed to invest in a
minority interest in Haddington Energy Partners, L.P., a firm that will
participate in the financing of six to eight projects, including natural gas
gathering and storage and electric power generation. IEI Investments also holds
interests in companies that are engaged in materials management, underground
facilities locating and facilities construction, debt collection, and other
non-jurisdictional activities. For the nine months ended September 30, 1999, IEI
Investments, Inc. and its subsidiary companies on a consolidated basis had
operating revenues of approximately $1,824,000 and net income of approximately
$6,551,000. The balance sheet for IEI Investments, Inc. and its subsidiary
companies as of September 30, 1999 is set forth below:
IEI INVESTMENTS, INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 30, 1999
(AMOUNTS IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
9/30/99
-----------
<S> <C>
FIXED ASSETS
Original Cost ......................................... $ 281
Less - Accumulated Depreciation ....................... 54
-----------
227
-----------
Investment in Unconsolidated Affiliates 44,658
-----------
CURRENT ASSETS
Cash and Cash Equivalents ............................. 324
Notes Receivable From Affiliates ...................... 1,477
Accounts Receivable, Less Reserves .................... 70
Accounts Receivable From Affiliated
Companies ........................................... 925
Interest Receivable From Affiliates ................... 2
Inventory ............................................. --
Prepayments ........................................... (3)
Other Current Assets .................................. 125
-----------
2,920
-----------
DEFERRED CHARGES
Unamortized debt discount and expense ................. --
Other ................................................. 1,110
-----------
1,110
-----------
TOTAL ASSETS .......................................... $ 48,915
===========
</TABLE>
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
9/30/99
-----------
<S> <C>
CURRENT LIABILITIES
Maturities On Long-Term Debt .......................... $ 180
Notes Payable To Affiliates ........................... 4,750
Accounts Payable ...................................... 226
Accounts Payable To Affiliated
Companies ........................................... 1,007
Accrued Taxes ......................................... 68
Accrued Interest ...................................... 12
Interest Payable To Affiliated
Companies ........................................... 4
Other Current Liabilities ............................. 6,813
-----------
13,060
-----------
DEFERRED CREDITS AND OTHER LIABILITIES
Miscellaneous Deferred Credits ........................ 317
Accrued Postretirement Benefits ....................... 8
-----------
325
-----------
CAPITALIZATION
Common Stock - Without Par Value ...................... 1
Paid-In Capital ....................................... 4,179
Retained Earnings ..................................... 30,016
-----------
Common Shareholder's Equity ......................... 34,196
Long-Term Debt ........................................ 1,334
-----------
35,530
-----------
TOTAL SHAREHOLDERS' EQUITY AND
LIABILITIES ......................................... $ 48,915
===========
</TABLE>
8
<PAGE> 11
2. Description of Utility Operations.
a. Vectren. Currently, Vectren does not own any utility
properties or perform any utility operations.
b. SIGECO. SIGECO's electric distribution service at retail is
supplied to customers in Evansville and 74 other cities, town and communities,
as well as adjacent rural areas. SIGECO provides wholesale electric service to
an additional eight communities. As of September 30, 1999, SIGECO served 125,546
retail electric customers. It is a party to an interconnection agreement under
which it provides firm power to the City of Jasper, Indiana. It also has an
agreement with Hoosier Energy Rural Electric Cooperative, Inc. ("Hoosier
Energy") for the sale of firm peaking power to Hoosier Energy during the annual
winter heating season (November 15 - March 15). The contract with Hoosier Energy
expires on March 15, 2000.
SIGECO is a member of the East Central Area Reliability Group ("ECAR")
under an agreement that obligates it to maintain a spinning reserve margin.
SIGECO is interconnected with Louisville Gas and Electric Co., Cinergy Services,
Inc., Indianapolis Power & Light Co., Hoosier Energy, Big Rivers Electric
Corporation, Wabash Valley Power Association and the City of Jasper. Its 1998
peak load was 1,140,800kW.
As of September 30, 1999, SIGECO supplied natural gas service to
107,268 customers in Evansville and 64 other nearby communities and their
environs.
The principal generating facilities of SIGECO include the Culley
Station with 406,000 kW of capacity and Warrick Unit No. 4 with 135,000 kW of
capacity, both located in Warrick County near Yankeetown, Indiana; and the A. B.
Brown Station with 500,000 kW of capacity, located in Posey County about eight
miles east of Mt. Vernon, Indiana. These facilities include six coal-fired
generating units and have a combined generating capacity of 1,041,000 kW.
SIGECO's Broadway Gas Turbine Units, with a capacity of 115,000 kW, are
located in Evansville, Vanderburgh County, Indiana. This generating facility is
equipped to burn oil and/or natural gas. These units generally are used only for
reserve, peaking or emergency purposes due to the higher unit cost per kilowatt
hour of generation when using oil or gas as fuel.
SIGECO's Brown Gas Turbine I, with capacity of 80,000 kW, is located at
the A. B. Brown Station. The unit is fueled by natural gas, although fuel oil
can also be used if gas is unavailable. The main function of the gas turbine is
to generate adequate power during times of peak demand. However, it is also used
to assist in maintaining voltage support on the west end of the system, and can
be used to "black start" the Brown plant if a catastrophe should cause a partial
or total system blackout.
SIGECO also owns two gas fired turbine generating units with a capacity
of 20,000 kW, which are used for peaking and emergency purposes only. These
units are known as the Northeast Gas Turbine Units and are located northeast of
Evansville, in Vanderburgh County, Indiana.
SIGECO's transmission system consists of 817 circuit miles of 138,000
and 69,000 volt lines. The transmission system also includes 27 substations with
an installed capacity of
9
<PAGE> 12
4,013,590 kilovolt amperes. The electric distribution system includes 3,194 pole
miles of lower voltage overhead lines and 221 trench miles of conduit containing
1,326 miles of underground distribution cables. The distribution system also
includes 93 distribution substations with an installed capacity of 1,671,003
kilovolt amperes and 49,307 distribution transformers with an installed capacity
of 2,213,998 kilovolt amperes.
SIGECO owns and operates three underground gas storage fields with an
estimated ready delivery from storage capability of 3.8 billion cubic feet of
gas. The Oliver Field, in service since 1954, is located in Posey County,
Indiana, about 13 miles west of Evansville; the Midway Field, in service since
1966, is located in Spencer County, Indiana, about 20 miles east of Evansville
near Richland, Indiana; and, the Monroe City Field, in service since 1958, is
located 10 miles east of Vincennes, Indiana.
SIGECO's gas transmission system includes 359 miles of transmission
mains, and the gas distribution system includes 2,520 miles of distribution
mains.
The only utility property SIGECO owns outside of Indiana is
approximately eight miles of 138,000 volt electric transmission line which is
located in Kentucky and which interconnects with Louisville Gas and Electric
Company's transmission system at Cloverport, Kentucky.
SIGECO's 33% owned subsidiary, Community, is a small gas public-utility
company that has several service territories in southwestern Indiana. Much of
its service territories are adjacent to or near the gas service territory of
SIGECO. Community has 6,638 natural gas customers consisting of residential,
commercial, industrial and public authority classes of service. Its gas
distribution system includes approximately 470 miles of distribution mains.
Community has no underground gas storage facilities.
c. Indiana Energy. As of the date of the filing of this
Application/Declaration, Indiana Energy directly owns no utility properties and
is solely a holding company owning all of the Common Stock of its four
subsidiaries.
Indiana Gas, the principal subsidiary of Indiana Energy, supplied
natural gas in 1999 to approximately 500,000 consumers in 284 communities in 48
of the 92 counties in the state of Indiana. The largest communities served are
Muncie, Anderson, Lafayette-West Lafayette, Bloomington, Terre Haute, Marion,
New Albany, Columbus, Jeffersonville, New Castle and Richmond. While Indiana Gas
does not provide utility services in Indianapolis, it does serve the counties
and communities that border that city.
The properties of Indiana Gas used for the production, storage and
distribution of gas are located solely within the State of Indiana except for
pipeline facilities extending from points in northern Kentucky to points in
southern Indiana by means of which gas is transported to Indiana for sale or
transportation by Indiana Gas to ultimate customers in Indiana. As of September
30, 1999, these included approximately 10,948 miles of distribution mains;
512,351 meters, five reservoirs for underground storage of purchased gas with
approximately 71,484 acres of land owned and/or held under storage easements
with 7,310,173 Dth of gas in storage providing a daily deliverability capacity
of 134,160 Dth. Indiana Gas has four liquified petroleum air gas manufacturing
plants with a total daily capacity of 32,700 Dth of gas.
10
<PAGE> 13
Indiana Gas purchases all of its natural gas from ProLiance. Gas is
transported to Indiana Gas's system by interstate pipe line suppliers under
Federal Energy Regulatory Commission ("FERC") approved rate schedules.
d. Utility Regulation. SIGECO and Community are subject to broad
regulation as to rates and other matters by the IURC. When an affiliate provides
services to SIGECO, SIGECO is required to file such contracts with the IURC.
Indiana Gas is subject to broad regulation as to rates and other matters by the
IURC. When an affiliate provides services to Indiana Gas, Indiana Gas is
required to file such contracts with the IURC.
SIGECO is subject to the jurisdiction of the FERC under the Federal
Power Act with respect to wholesale electric rates and other matters. ProLiance
is also subject to the jurisdiction of the FERC under the Federal Power Act, as
a marketer of electric power. Indiana Gas is a local distribution company,
having most of its operations covered by the Hinshaw Amendment and thus exempt
from regulation by the FERC under sections 1(b) and 1(c) of the Natural Gas Act.
B. DESCRIPTION OF THE PROPOSED TRANSACTION
1. Merger. SIGCORP, Indiana Energy and Vectren have entered into
the Merger Agreement. Pursuant to the Merger Agreement, the holders of the
Common Stock of SIGCORP ("SIGCORP Common Stock") and the holders of the Common
Stock of Indiana Energy ("Indiana Energy Common Stock") will become the holders
of the Common Stock of Vectren ("Vectren Common Stock"), which will, upon
consummation of the Merger, be the only outstanding equity securities of
Vectren.
As more fully described in the Merger Agreement, each of SIGCORP and
Indiana Energy will merge with and into Vectren, with Vectren as the surviving
corporation. When the Merger becomes effective (the "Effective Time"), the
following shall occur pursuant to the Merger Agreement:
(i) Each share of the capital stock of Vectren issued and
outstanding immediately prior to the Effective Time shall be cancelled and cease
to exist, and no consideration shall be delivered in exchange therefor.
(ii) Each share of SIGCORP Common Stock that is owned by SIGCORP or
any of its subsidiaries or by Indiana Energy or any of its subsidiaries shall be
cancelled and cease to exist. Each share of Indiana Energy Common Stock that is
owned by Indiana Energy or any of its subsidiaries or by SIGCORP or any of its
subsidiaries shall be cancelled and cease to exist. For purposes of this
paragraph, "subsidiaries" are defined in Section 4.1 of the Merger Agreement.
(iii) Each share of SIGCORP Common Stock (other than shares to be
cancelled as described in the preceding paragraph) shall be converted into 1.333
shares of Vectren Common Stock. Each share of Indiana Energy Common Stock (other
than shares to be cancelled as described in the preceding paragraph) shall be
converted into 1 share of Vectren Common Stock. No fractional shares will be
issued. Instead, each holder of SIGCORP Common Stock who would otherwise receive
a fractional share of Vectren Common Stock will receive cash in payment for that
fractional share based on the prevailing price on the New York Stock Exchange
("NYSE").
11
<PAGE> 14
The Merger Agreement also provides, among other things, that upon such
conversions of shares in the Merger, all such shares of SIGCORP Common Stock and
Indiana Energy Common Stock exchanged respectively for the shares of Vectren
Common Stock shall be cancelled and cease to exist, and after the Merger each
holder of shares of SIGCORP Common Stock and each holder of shares of Indiana
Energy Common Stock shall cease to have any rights with respect thereto, except
the right to receive the number of whole shares of Vectren Common Stock to be
issued in consideration therefor and any cash in lieu of fractional shares.
After the Effective Time, certificates representing shares of SIGCORP Common
Stock and certificates representing shares of Indiana Energy Common Stock will
be exchangeable for certificates representing shares of Vectren Common Stock.
Approval of the Merger by a majority of all votes entitled to be cast
by all holders of SIGCORP Common Stock and by a majority of all votes entitled
to be cast by all holders of Indiana Energy Common Stock is a condition
precedent to the consummation of the Merger. The Merger will be voted upon for
approval by SIGCORP shareholders at a meeting to be held on December 17, 1999,
and by Indiana Energy shareholders at a meeting to be held on December 17, 1999.
Proxies for such meetings will be solicited pursuant to Regulation 14A under the
Securities Exchange Act of 1934 (the "1934 Act"). The joint proxy statement for
the shareholders meeting is included in the Registration Statement on form S-4
filed by Vectren with the Commission on November 12, 1999, and amended on
November 15, 1999, for the purpose of registering under the Securities Act of
1933 (the "1933 Act") the shares of Vectren Common Stock to be issued in the
Merger. The Registration Statement was declared effective on November 15, 1999.
The Registration Statement and the Joint Proxy Statement/Prospectus are included
as Exhibits C-1 and C-2 to this Application/Declaration.
Vectren will apply for the listing on the NYSE of Vectren Common Stock
issuable in the Merger. Approval of the listing on the NYSE, upon official
notice of issuance, is a condition precedent to the consummation of the Merger.
Upon consummation of the Merger, SIGCORP Common Stock and Indiana Energy Common
Stock will be delisted from each exchange on which they are listed. Following
the Merger, Vectren will be required to file reports with the Commission
pursuant to Section 13(a) of the 1934 Act.
Vectren proposes to account for the Merger on a "pooling-of-interests"
basis under generally accepted accounting principles ("GAAP"). Use of the
pooling-of-interests method is based on twelve conditions. The following is a
general description of each condition and an application of each condition to
the specific facts of the Merger:
(i) Each of the combining enterprises must be autonomous. None of
Vectren, Indiana Energy or SIGCORP are subsidiaries or divisions of another
enterprise. Vectren, a newly formed holding company, was formed by Indiana
Energy and SIGCORP to complete the Merger, and as such meets this condition as a
newly formed entity which is not a successor to a part of an enterprise or to an
enterprise that is otherwise not autonomous for this condition.
(ii) Each of the combining enterprises must be independent of the
other combining enterprises. Neither Indiana Energy nor SIGCORP holds an
investment in the common stock of the other company. Although Indiana Energy and
SIGCORP hold a common investment in the form of a previously established joint
venture, the joint venture is not material to either Indiana Energy or SIGCORP.
12
<PAGE> 15
(iii) The combination must be effected in a single transaction or
completed in accordance with a specific plan within one year after the plan is
initiated. The combination will be completed in a single transaction, as
described in the Merger Agreement. It is anticipated that the Merger will be
completed within a year, aside from any unforeseen regulatory delays.
(iv) An enterprise must offer and issue only common stock with
rights identical to those of the majority of its outstanding voting common stock
in exchange for substantially all of the voting common stock interest of another
enterprise at the date the plan of combination is consummated. Vectren has one
class of voting common stock outstanding. Vectren plans to exchange shares of
that class for 100% of the outstanding voting common stock of Indiana Energy and
SIGCORP. Indiana Energy and SIGCORP have only one class of voting common stock
outstanding. Cash will be used to acquire fractional shares.
(v) None of the combining enterprises may change the equity
interest of the voting common stock in contemplation of effecting the
combination either within two years before the plan of combination is initiated
or between the dates the combination is initiated and consummated. Examples of
changes in contemplation of effecting the combination include distributions to
stockholders and additional issuances, exchanges, and retirements of securities.
Neither Indiana Energy or SIGCORP changed the equity interest of its voting
common stock in contemplation of the Merger within two years of the date the
plan of the combination was initiated. Only normal dividends have been paid.
(vi) Each of the combining enterprises may reacquire shares of
voting common stock only for purposes other than business combinations, and no
enterprise may reacquire more than a normal number of shares between the dates
the plan of combination is initiated and consummated. The aggregate number of
Indiana Energy shares of voting common stock which was repurchased within the
last two years, the number of shares of voting common stock Indiana Energy has
the authority to repurchase and the number of fractional shares which will be
acquired in connection with the Merger is not expected to exceed the 10%
threshold allowed under the pooling-of-interest conditions. SIGCORP does not
have a common stock repurchase program.
(vii) The ratio of the interest of an individual common stockholder
to those of other common stockholders in a combining enterprise must remain the
same as a result of the exchange of stock to effect the combination. The
stockholders of the combining companies will receive a proportionate interest in
Vectren based on the applicable exchange ratio described in the Merger
Agreement.
(viii) The voting rights to which the common stock ownership
interests in the resulting combined enterprise are entitled must be exercisable
by the stockholders; the stockholders may neither be deprived of nor restricted
in exercising those rights for a period. There will be no restrictions on the
ability of the stockholders to vote their shares of Vectren common stock
received in connection with the Merger. Stockholders who are affiliates will be
required to hold their shares of Vectren common stock for the required holding
period.
(ix) The combination must be resolved at the date the plan is
consummated and no provisions of the plan relating to the issue of securities or
other consideration may be pending. None of the parties to the Merger plan to
enter any agreements to issue additional shares after the Merger is consummated.
13
<PAGE> 16
(x) The combined enterprise must not agree directly or indirectly
to retire or reacquire all or part of the common stock issued to effect the
combination. Vectren will not enter into any agreements to reacquire or retire
directly or indirectly its outstanding common stock issued in connection with
the Merger.
(xi) The combined enterprise must not enter into other financial
arrangements for the benefit of the former stockholders of a combining
enterprise, such as a guaranty of loans secured by stock issued in the
combination, that in effect negates the exchange of equity securities. Vectren
will not enter into loans, guarantees or other such arrangements to or on behalf
of stockholders of the combining companies.
(xii) The combined enterprise must not intend or plan to dispose of
a significant part of the assets of the combined enterprises within two years
after the combination other than disposals in the ordinary course of business of
the formerly separate enterprise and to eliminate duplicate facilities or excess
capacity. There are no plans or agreements to spin off or otherwise dispose of
assets after the Merger is consummated other than in the ordinary course of
business or unless related to excess facilities.
Under the pooling-of-interests accounting, the financial statements of
SIGCORP and Indiana Energy will be combined into Vectren as though they had
always been together; accordingly, the asset, liability and equity accounts of
each company will be carried forward at existing amounts to the new consolidated
financial statements. Reported income and expense of the separate companies for
prior periods will be combined and restated as income and expense of Vectren.
The unaudited pro forma consolidated financial statements for Vectren
as of, and for the nine-month period ended, September 30, 1999 are as follows:
14
<PAGE> 17
VECTREN CORPORATION
PRO FORMA CONDENSED BALANCE SHEET
AT SEPTEMBER 30, 1999
(THOUSANDS - UNAUDITED)
<TABLE>
<CAPTION>
INDIANA
ENERGY SIGCORP
(1) (1) PRO FORMA
(HISTORICAL) (HISTORICAL) COMBINED
------------ ------------ ---------
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and Cash Equivalents ............... $ 20 $ 11,648 $ 11,668
Accounts Receivable ..................... 17,195 72,861 90,056
Accrued Unbilled Revenues ............... 8,136 11,837 19,973
Inventories ............................. 10,311 40,277 50,588
Prepayments and Other Current Assets .... 39,989 15,031 54,020
----------- ----------- -----------
TOTAL CURRENT ASSETS .................... 74,651 151,654 226,305
----------- ----------- -----------
UTILITY PLANT
Original Cost ........................... 990,780 1,360,350 2,351,130
Less Accumulated Depreciation and
Amortization .......................... 398,912 624,435 1,023,347
----------- ----------- -----------
NET UTILITY PLANT ....................... 591,868 735,915 1,327,783
----------- ----------- -----------
OTHER INVESTMENTS AND PROPERTY .......... 89,126 159,842 248,968
----------- ----------- -----------
DEFERRED CHARGES AND OTHER ASSETS(3) .... 21,733 49,004 65,820
----------- ----------- -----------
TOTAL ASSETS ............................ $ 777,378 $ 1,096,415 $ 1,868,876
=========== =========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Current Maturities of Long-Term Debt and
Other Obligations ..................... $ 180 $ 54,386 $ 54,566
Notes Payable ........................... 86,521 80,990 167,511
Accounts Payable(3) ..................... 26,311 44,887 75,281
Refunds To Customers .................... 25,905 4,196 30,101
Accrued Taxes ........................... 12,860 5,264 18,124
Accrued Interest ........................ 1,182 6,401 7,583
Other Current Liabilities ............... 26,386 25,094 51,480
----------- ----------- -----------
TOTAL CURRENT LIABILITIES ............... 179,345 221,218 404,646
----------- ----------- -----------
DEFERRED CREDITS AND OTHER LIABILITIES
Deferred Income Taxes ................... 60,931 147,688 208,619
Accrued Postretirement Benefits Other
Than Pensions ......................... 28,286 13,996 42,282
Unamortized Investment Tax Credit ....... 8,383 17,730 26,113
Other ................................... 5,625 2,451 8,076
----------- ----------- -----------
TOTAL DEFERRED CREDITS AND OTHER
LIABILITIES ........................... 103,225 181,865 285,090
----------- ----------- -----------
CAPITALIZATION
Long-Term Debt and Other Obligations .... 183,183 284,588 467,771
----------- ----------- -----------
PREFERRED STOCK OF SUBSIDIARY
Redeemable .............................. -- 8,192 8,192
Nonredeemable ........................... -- 11,090 11,090
----------- ----------- -----------
TOTAL PREFERRED STOCK ................... -- 19,282 19,282
----------- ----------- -----------
Common Stock ............................ 136,760 78,258 215,018
Retained Earnings(3) ................... 174,865 311,281 477,146
Accumulated Other Comprehensive Income .. -- (77) (77)
----------- ----------- -----------
TOTAL COMMON SHAREHOLDERS' EQUITY ....... 311,625 389,462 692,087
----------- ----------- -----------
TOTAL CAPITALIZATION .................... 494,808 693,332 1,179,140
----------- ----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY ................................ $ 777,378 $ 1,096,415 $ 1,868,876
=========== =========== ===========
</TABLE>
PRO FORMA CONDENSED STATEMENT OF INCOME FOR NINE MONTHS
ENDED SEPTEMBER 30, 199
(THOUSANDS, EXCEPT PER SHARE AMOUNTS - UNAUDITED)
<TABLE>
<CAPTION>
INDIANA
ENERGY SIGCORP PRO FORMA
(1) (2) (1) (2) COMBINED
(HISTORICAL) (HISTORICAL) (3) (4)
------------ ------------ ---------
<S> <C> <C> <C>
OPERATING REVENUES
Electric Utility ...................... $ -- $238,960 $238,960
Gas Utility ........................... 294,114 47,973 342,087
Energy Services and Other ............. 1,108 153,111 154,219
-------- -------- --------
TOTAL OPERATING REVENUES .............. 295,222 440,044 735,266
-------- -------- --------
OPERATING EXPENSES
Fuel For Electric Generation .......... -- 51,529 51,529
Purchased Electric Energy ............. -- 18,731 18,731
Cost of Gas Sold ...................... 147,754 26,826 174,580
Cost of Energy Services and Other ..... -- 150,507 150,507
Other Operating ....................... 59,483 76,403 135,886
Depreciation and Amortization ......... 30,697 33,976 64,673
Taxes Other Than Income Taxes ......... 11,634 9,781 21,415
-------- -------- --------
TOTAL OPERATING EXPENSES .............. 249,568 367,753 617,321
-------- -------- --------
OPERATING INCOME ...................... 45,654 72,291 117,945
OTHER INCOME
Equity in Earnings of Unconsolidated
Affiliates .......................... 7,739 734 8,473
Other - Net ........................... 157 8,609 8,766
-------- -------- --------
TOTAL OTHER INCOME .................... 7,896 9,343 17,239
-------- -------- --------
INTEREST EXPENSE ...................... 12,426 18,157 30,583
-------- -------- --------
INCOME BEFORE PREFERRED DIVIDENDS AND
INCOME TAXES ........................ 41,124 63,477 104,601
PREFERRED DIVIDEND REQUIREMENTS OF
SUBSIDIARY .......................... -- 809 809
-------- -------- --------
INCOME BEFORE INCOME TAXES ............ 41,124 62,668 103,792
INCOME TAXES .......................... 13,649 21,630 35,279
-------- -------- --------
NET INCOME ............................ $ 27,475 $ 41,038 $ 68,513
======== ======== ========
AVERAGE COMMON SHARES OUTSTANDING(5)... 29,848 23,631 61,348
BASIC EARNINGS PER AVERAGE SHARE OF
COMMON STOCK ........................ $ 0.92 $ 1.74 $ 1.12
DILUTED EARNINGS PER AVERAGE SHARE OF
COMMON STOCK ........................ $ 0.92 $ 1.73 $ 1.12
</TABLE>
NOTES TO UNAUDITED PRO FORMA CONDENSED FINANCIAL STATEMENTS
(1) Reclassifications have been made to the Indiana Energy and SIGCORP
historical financial statements to conform to the presentation expected to
be used by the combined companies.
(2) Indiana Energy's fiscal year ends on September 30. SIGCORP's fiscal year
ends on December 31. Vectren's fiscal year will end on December 31. The
financial statements for Vectren for the year in which the combination
occurs will reflect the operations of the combining companies for the same
reporting period as Vectren. The operating results for Indiana Energy for
the period not included in the statements of income (October 1, 1999
through December 31, 1999), will be charged or credited to retained
earnings, assuming the transaction is completed in the year 2000. No
specific request has been filed with the IURC regarding sharing the cost
savings from the Merger. The managements of Indiana Energy and SIGCORP do
anticipate that customers of the utilities will realize benefits from the
Merger over time. However, the managements cannot estimate the precise
level of benefits at this time. In the opinion of management, the
historical combined financial statements would not exhibit materially
different results or trends if the results of the combining companies had
been combined for identical periods.
(3) The companies have deferred approximately $4,917,000 of transaction costs
associated with the Merger, including the investment banking, legal and
other professional fees, pending the Merger close. The total estimated
transaction costs of $9,000,000, inclusive of amounts already recorded,
have been reflected as a decrease in retained earnings in the accompanying
pro forma balance sheet. Further, amounts deferred of $4,917,000 were
eliminated and accounts payable was increased by $4,083,000 for pro forma
purposes. The expenses have not been reflected in the accompanying pro
forma statements of income. Expenses directly related to the transaction
may be deducted in determining the net income of the combined enterprise in
the period the combination is completed. However, Indiana Energy and
SIGCORP have filed with the Indiana Utility Regulatory Commission a request
for approval to defer and amortize these costs in the future. If the IURC
grants this request, some portion up to 100% of the transaction expenses
would be deferred and amortized over a period of years.
15
<PAGE> 18
(4) Because of the seasonal factors that affect Indiana Energy's and SIGCORP's
operations, the pro forma results of operations for interim periods are not
indicative of the pro forma results of operations for an annual period.
(5) The pro forma condensed financial statements reflect the conversion of each
Indiana Energy common share into one Vectren common share and the
conversion of each SIGCORP common share into 1.333 Vectren common shares.
2. Option Agreements. Pursuant to the SIGCORP, Inc. Stock Option
Agreement and the Indiana Energy, Inc. Stock Option Agreement, each dated as of
June 11, 1999 (collectively, the "Stock Option Agreements"), SIGCORP has granted
to Indiana Energy and Indiana Energy has granted to SIGCORP, the right to
acquire under certain circumstances specified in the Stock Option Agreements up
to 4,702,483 shares and 5,927,524 shares, respectively, of authorized but
unissued common stock of the other company (the "Options") at prices of $29.70
and $22.27 per share, respectively. The exercise price is payable, at the
election of the holder of either option, in cash or in shares of its common
stock.
The Options are exercisable, in whole or in part, at any time or from
time to time after the Merger Agreement becomes terminable, upon the occurrence
of certain events specified in the Stock Option Agreements. In each case, an
event that triggers either Option (a "Trigger Event") generally involves breach
of representation, warranty, covenant or agreement, failure to obtain
shareholders' approval of the Merger, board withdrawal or modification of
approval and third party acquisition of greater than 25% of the outstanding
voting securities of the other party.
Each Option will terminate upon the earlier of: (i) the Effective Time;
(ii) the termination of the Merger Agreement pursuant to Section 9.1 thereof
(other than upon or during the continuance of a Trigger Event); or (iii) 180
days following any termination of the Merger Agreement upon or during the
continuance of a Trigger Event (or if, at the expiration of such 180 day period
the Option cannot be exercised by reason of any applicable judgment, decree,
order, law or regulation, ten business days after such impediment to exercise
shall have been removed or shall have become final and not subject to appeal,
but in no event under this clause (iii) later than the third anniversary of June
11, 1999).
The Stock Option Agreements provide that neither of the Options may be
exercised until all necessary regulatory approvals (including approval of the
Commission pursuant to the 1935 Act) have been obtained for the acquisitions of
common stock pursuant to such Options. Pursuant to Section 9(a)(2) and Rule 51
under the 1935 Act, the Applicant hereby requests the Commission to approve the
transactions contemplated by the respective Stock Option Agreements to the
extent required by Rule 51.
3. Negotiations Leading to the Proposed Merger. The energy
industry is undergoing consolidation and diversification of services. Each of
Indiana Energy and SIGCORP has considered mergers and acquisitions as part of
its strategic planning.
On September 27, 1996, the Indiana Energy board met and discussed a
strategic plan for growth through mergers and acquisitions. The Indiana Energy
board identified five entities as possible merger partners or targets for
acquisition, with SIGCORP the most promising of the five because:
- a transaction with SIGCORP presented the fewest regulatory
hurdles;
- the utility facilities were in relatively close proximity;
- the earnings of the principal utility operations of the two
companies seasonally complemented each other; and
16
<PAGE> 19
- the management of Indiana Energy had enjoyed a good working
relationship with the management of SIGCORP.
Since September 27, 1996, Indiana Energy has not given material
consideration to potential merger partners other than SIGCORP.
The Indiana Energy board then recommended that Indiana Energy's
officers contact the officers of SIGCORP to discuss a possible merger. In
September 1996, Mr. L.A. Ferger, Indiana Energy's then Chief Executive Officer,
called Mr. Ronald G. Reherman, SIGCORP's Chief Executive Officer, and a meeting
was scheduled between Indiana Energy and SIGCORP for October 1996.
In October 1996, Mr. Ferger, Mr. Reherman, Mr. Niel Ellerbrook, then
Indiana Energy's Vice President, Treasurer and Chief Financial Officer, and Mr.
Andrew E. Goebel, then Senior Vice President and Chief Financial Officer of
SIGCORP, met and discussed the possible merger of Indiana Energy and SIGCORP.
They agreed to engage Deloitte Consulting LLC to assist the managements of
Indiana Energy and SIGCORP in their analysis of the potential synergies that
might result from the potential merger, as well as investment bankers and
attorneys to consider various issues relating to a merger, all of whom were then
engaged. Indiana Energy engaged Merrill Lynch, Pierce, Fenner & Smith as its
investment banker and Sommer & Barnard, PC and Simpson Thacher & Bartlett as its
attorneys. SIGCORP retained Goldman, Sachs & Co. as its investment banker and
Winthrop, Stimson, Putnam & Roberts as its attorneys.
The services to be provided by Deloitte & Touche Consulting LLC
included:
- identification of required data;
- identification by activity and quantification of potential cost
savings;
- identification of potential additional cost savings which may not
be quantifiable; and
- identification and quantification of potential costs to achieve
the identified potential cost savings.
On November 1, 1996, Mr. Ferger presented the Indiana Energy board with
a preliminary status report of the continuing negotiations and an evaluation of
the proposed merger of Indiana Energy and SIGCORP. The Indiana Energy board
found the report favorable and as a result, on November 4, 1996, Indiana Energy
and SIGCORP executed a Confidentiality and Standstill Agreement under which the
parties continued their discussions.
In December 1996, Indiana Energy and SIGCORP continued their merger
discussions. The primary focus of those discussions was the identity of the
Chief Executive Officer of the new company, the location of the new company's
corporate headquarters and the potential synergies resulting from the merger.
On January 22, 1997, the Indiana Energy board met and approved
management's recommendation to terminate merger discussions with SIGCORP because
the differences between Indiana Energy and SIGCORP appeared to be
irreconcilable. At that time, the companies could not agree regarding the
location of the headquarters of the new company, and the energy marketplace had
not yet evolved to the point where either party had concluded that a
17
<PAGE> 20
combination was necessary for the continued success of the companies. Indiana
Energy advised SIGCORP's management of the decision and the parties mutually
agreed to formally terminate merger discussions. The parties notified the
advisors engaged to assist them and instructed the advisors to discontinue all
work related to the merger discussions.
A second round of merger discussions between Indiana Energy and SIGCORP
commenced in September 1997, when Mr. Ferger contacted Mr. Reherman to discuss
reestablishing merger negotiations. Mr. Reherman indicated that he would not
consider the resumption of merger discussions without obtaining the support and
approval of both companies' boards of directors.
Consequently, the Indiana Energy board met on September 22, 1997, and
the SIGCORP board met in October 1997. Each board decided in favor of commencing
a second round of merger discussions.
Indiana Energy and SIGCORP started the second round of merger
negotiations and began due diligence in October 1997. The parties undertook
negotiations and due diligence until December 1997 when the parties, by mutual
agreement, again terminated their merger discussions. The companies could not
agree on the location of the headquarters of the new company and the energy
marketplace still had not yet evolved to the point where either party had
concluded that a combination was necessary for the continued success of the
companies.
No merger discussions were held between Indiana Energy and SIGCORP in
1998. However, a third round of merger discussions commenced in 1999. Mr.
Ellerbrook and Mr. Goebel met in person on February 4, 1999 with the intent of
discussing whether a merger between the two companies would be mutually
beneficial. A merger between the companies was seen as a means of meeting the
challenges caused by continued industry deregulation and as a means of possibly
increasing the companies' shareholder values. Mr. Ellerbrook and Mr. Goebel
determined that, in light of the ongoing changes in the energy marketplace, a
business combination would contribute to the continued success of the companies.
Accordingly, Mr. Ellerbrook and Mr. Goebel decided to start a third round of
merger discussions initially focusing their energies on negotiating through the
matters that had caused merger discussions to be formally terminated twice in
the past, including the resolution of the location of the headquarters for the
new company.
On March 10, 1999, the Executive Committee of the SIGCORP board met and
determined that it would be beneficial for the parties to reengage Deloitte
Consulting LLC to assist management in updating the synergies analysis that had
been prepared by management in connection with the prior merger discussions.
Deloitte was not engaged to prepare and did not provide, any report, opinion or
appraisal, whether written or oral, for or to the managements or the boards of
directors of Indiana Energy or SIGCORP
On March 17, 1999, Mr. Ellerbrook and Mr. Goebel met again to further
discuss a business combination. Having previously reached the conclusion that a
combination of the companies would contribute to the continued success of the
companies, at this meeting they determined that the two primary and remaining
issues to be resolved were the location of the new company's corporate
headquarters and the identity of its Chief Executive Officer. The parties agreed
to recommend to their respective boards of directors the following: the new
company's corporate headquarters would be located in Evansville, Indiana, the
location of SIGCORP's
18
<PAGE> 21
current headquarters, and the new company would be headed by Mr. Ellerbrook.
Ellerbrook and Goebel further agreed to meet collectively with a few members of
each company's board of directors to further discuss the proposed merger.
On March 26, 1999, Mr. Ellerbrook, Mr. Goebel and Mr. Carl L. Chapman,
Senior Vice President and Chief Financial Officer of Indiana Energy, met and
agreed to reengage Deloitte Consulting LLC to assist management in updating the
managements' synergies analysis. At that meeting the attendees also confirmed
that the parties' strategic plans for growth were remarkably similar. On April
6, 1999, the parties executed a Confidentiality and Standstill Agreement under
which negotiations were to proceed.
On April 16, 1999, Mr. Goebel, Mr. Chapman and Mr. Richard G. Lynch,
SIGCORP's Vice President of Human Resources, met with the consultant and
reviewed the progress of the updating of the prior synergies analysis.
On April 20, 1999, Mr. Ellerbrook and Mr. Goebel met with selected
members of each company's board of directors (specifically, Mr. Robert L. Koch
II, Mr. Richard W. Shymanski and Mr. Donald E. Smith from SIGCORP and Mr. Anton
H. George, Mr. J. Timothy McGinley and Ms. Jean L. Wojtowicz from Indiana
Energy). At this meeting Mr. Ellerbrook, Mr. Goebel and the board members
discussed the updated synergies analysis as well as the strategic benefits of
the merger and concluded that negotiations should go forward.
On April 23, 1999, the Executive Committee of the SIGCORP board held a
meeting at which the Committee resolved in favor of continuing merger
negotiations.
On April 27, 1999, the SIGCORP board met and approved the engagement of
the consultant to assist management in performing a full and current synergies
analysis. On April 30, 1999, the Indiana Energy board held a meeting at which
the Indiana Energy board approved the engagement of the consultant to assist
management in performing a full and current synergies analysis.
On each of May 6, 10, 13 and 25, 1999, Mr. Ellerbrook and Mr. Goebel
met to discuss various issues affecting the merger, including the structure of
the post-merger board of directors and the new company's management structure.
These negotiations were also held through various telephone conferences in the
same time period.
On May 18, 1999, the SIGCORP board met and authorized the hiring of
various professionals, including attorneys and investment bankers, to proceed
with the merger and proposed a schedule of approving and executing a definitive
agreement by June 11, 1999. After this meeting, members of Indiana Energy's
management and SIGCORP's management continued discussions regarding the merger
telephonically. Also on May 18, 1999, Mr. Jerome A. Benkert, Indiana Energy's
Vice President and Controller, Mr. Chapman, Mr. Ellerbrook, Mr. Goebel, Mr.
Timothy Burke, SIGCORP's Secretary/Treasurer, and Mr. Lynch met with investment
bankers in Indianapolis to discuss business valuation issues.
On June 4, 1999, the Indiana Energy board met and discussed various
issues affecting the merger. Additional presentations were made to the Indiana
Energy board by counsel, investment bankers and the management, with the
assistance of Deloitte Consulting LLC. The Indiana Energy board decided to
reconvene on June 11, 1999 to approve or disapprove the definitive
19
<PAGE> 22
agreement. On June 7, 1999, the SIGCORP board met and discussed various issues
affecting the merger. Additional presentations were made to the SIGCORP board by
outside counsel, investment bankers and management with the assistance of
Deloitte Consulting LLC. The SIGCORP board decided to reconvene on June 11, 1999
to approve or disapprove the definitive agreement.
On June 8, 1999, an ad hoc committee of the board of Indiana Energy met
with a compensation consultant regarding Vectren.
On June 11, 1999, the Indiana Energy board met and the SIGCORP board
met and each approved the form of definitive agreement which was executed by the
parties as of that date.
C. REASONS FOR AND ANTICIPATED EFFECTS OF THE PROPOSED TRANSACTION
Vectren believes that the Merger is a natural alliance of two companies
with complementary products and services. Vectren believes the Merger will
create a company that is better positioned to compete in the energy industry and
expects the Merger to enhance long-term value to shareholders while providing
customers with reliable service at more stable and competitive prices. Vectren
expects to achieve such results by:
(i) offering a broad array of products and services;
(ii) eliminating duplicative activities;
(iii) reducing operating expenses and cost of capital;
(iv) eliminating or postponing some capital expenditures; and
(v) enhancing purchasing capabilities for goods and services.
These benefits are described in greater detail in the discussion of the
economies and efficiencies resulting from the Merger in Item 3.B.2.
D. ADDITIONAL INFORMATION
No associate company or affiliate of SIGCORP or Indiana Energy or any
affiliate of any such associate company has any direct or indirect material
interest in the proposed transaction except as stated herein.
ITEM 2. FEES, COMMISSIONS AND EXPENSES
The fees, commissions and expenses to be paid or incurred, directly or
indirectly, in connection with the transactions contemplated herein, including
the solicitation of proxies and other related matters, are estimated as follows:
<TABLE>
<S> <C>
Commission filing for the Registration Statement on Form S-4...................................... $342,000
Accountants' fees................................................................................. 70,000
Legal fees........................................................................................ 1,700,000
Stockholder communication and proxy solicitation.................................................. 150,000
NYSE listing fee.................................................................................. 66,000
</TABLE>
20
<PAGE> 23
<TABLE>
<S> <C>
Exchanging, printing and engraving of stock certificates.......................................... 400,000
Investment bankers' fees and expenses............................................................. 3,000,000
Consultants' Fees................................................................................. 1,500,000
Miscellaneous..................................................................................... 1,772,000
TOTAL............................................................................................. $9,000,000
</TABLE>
ITEM 3. APPLICABLE STATUTORY PROVISIONS
It is believed that Sections 9(a)(2) and 10 of the Act are applicable
to the proposed transaction. To the extent that the proposed transaction is
considered by the Commission to require authorization, approval or exemption
under any section of the Act or provision of the rules or regulations thereunder
other than those specifically referred to herein, request for such
authorization, approval or exemption is hereby made.
SIGCORP's subsidiary, SIGECO, is both an "electric utility company" as
defined in Section 2(a)(3) of the Act and a "gas utility company" as defined in
Section 2(a)(4) of the Act. SIGECO's 33% owned subsidiary, Community, is a "gas
utility company" as defined in Section 2(a)(4) of the Act. Indiana Energy's
subsidiaries, Indiana Gas, Terre Haute and Richmond, are "gas utility companies"
as defined in Section 2(a)(4) of the Act. Indiana Gas is also a "holding
company" as defined in Section 2(a)(7) of the Act with respect to Terre Haute
and Richmond. Thus, all of the above companies are "public-utility companies" as
defined in Section 2(a)(5) of the Act. Because Vectren will, as a result of the
Merger, be indirectly acquiring five percent or more of the outstanding voting
securities of each of these public-utility companies, the transaction is subject
to Section 9(a)(2) of the Act. Thus the proposed transaction cannot proceed
without the Commission's approval pursuant to Section 10 of the Act. The
relevant statutory standards to be satisfied are set forth in Sections 10(b),
10(c), and 10(f) of the Act.
A. SECTION 10(b)
Section 10(b) of the 1935 Act provides that, if the requirements of
Section 10(f) are satisfied, the Commission shall approve an acquisition under
Section 9(a) unless the Commission finds that:
(1) such acquisition will tend towards interlocking relations
or the concentration of control of public-utility companies, of a kind
or to an extent detrimental to the public interest or the interest of
investors or consumers;
(2) in case of the acquisition of securities or utility
assets, the consideration, including all fees, commissions, and other
remuneration, to whomsoever paid, to be given, directly or indirectly,
in connection with such acquisition is not reasonable or does not bear
a fair relation to the sums invested in or the earning capacity of the
utility assets to be acquired or the utility assets underlying the
securities to be acquired; or
(3) such acquisition will unduly complicate the capital
structure of the holding company system of the applicant or will be
detrimental to the public interest or the interest of investors or
consumers or the proper functioning of such holding company system.
21
<PAGE> 24
The Merger and the requests contained in this Application/Declaration
are well within the precedent of transactions approved by the Commission as
consistent with the 1935 Act. In addition, a number of the recommendations made
by the Division of Investment Management (the "Division") in the report issued
by the Division in June 1995 entitled "The Regulation of Public Utility Holding
Companies" (the "1995 Report") support the applicants' analysis. The
Commission's approval of the Merger would be consistent with previous Commission
rulings and would also be consistent with the Division's overall recommendation
in the 1995 Report that the Commission "act administratively to modernize and
simplify holding company regulation . . . and minimize regulatory overlap, while
protecting the interests of consumers and investors," since, as demonstrated
below, the Merger will benefit both consumers and stockholders of Vectren, and
the other federal regulatory authorities with jurisdiction over the Merger will
have approved it as in the public interest.
1. Section 10(b)(1).
a. Interlocking Relations. The Merger will not tend towards
"interlocking relations or the concentration of control of public-utility
companies, of a kind or to an extent detrimental to the public interest or the
interest of investors or consumers." Although the Merger will result, as in any
transaction subject to Section 9(a)(2), in certain interlocking relations and
concentration of control, they are not of a kind or to an extent detrimental to
the public interest or the interest of investors or consumers.
Following the Merger, there will exist among Vectren and its public
utility subsidiaries interlocking directors and officers only of such nature and
to such extent as normally exist in public utility holding company systems among
affiliated and associated companies. See CIPSCO, Inc., Holding Co. Act Release
No. 25152, 47 S.E.C. Docket 174, 178 (1990). Upon completion of the Merger, it
is contemplated that Niel C. Ellerbrook, who is the President and Chief
Executive Officer of Indiana Energy, will be Chairman of the Board and Chief
Executive Officer of Vectren. Andrew E. Goebel, who is the President and Chief
Operating Officer of SIGCORP, will be President and Chief Operating Officer of
Vectren. The Vectren board of directors will consist of sixteen members. Eight
members will be former members of the SIGCORP board and the other eight will be
former members of the Indiana Energy board.
b. Concentration of Control. It is well settled that the public
interest is to be judged primarily in the context of the problems with which the
1935 Act was designed to deal, as set forth in Section 1(b) thereof. Vermont
Yankee Nuclear Power Corporation, 43 S.E.C. 693, 700 (1968), rev'd on other
grounds, 413 F.2d 1052 (D.C. Cir. 1969). Viewed from this perspective, the
Merger in no way contradicts the requirements of Section 10 (b)(1).
Section 10 (b)(1) is intended to avoid "an excess of concentration and
bigness" while preserving the "opportunities for economies of scale, the
elimination of duplicate facilities and activities, the sharing of production
capacity and reserves and generally more efficient operations" afforded by the
coordination of local utilities into an integrated system. American Electric
Power Co., 46 S.E.C. 1299, 1309 (1978). In applying Section 10 (b)(1) to utility
acquisitions, the Commission must determine whether the acquisition will create
"the type of structures and combinations at which the Act was specifically
directed." Vermont Yankee, 43 S.E.C. at 700. As discussed below, the Merger will
not create a "huge, complex, and irrational system" of a type at which the 1935
Act is directed, but rather will afford the
22
<PAGE> 25
opportunity to achieve economies of scale and efficiencies which are expected to
benefit investors and consumers. American Electric Power Co., 46 S.E.C. at 1307
(1978).
When considering the issue of concentration of control pursuant to
Section 10(b)(1), the Commission "considers various factors, including the size
of the resulting system and the competitive effects of the acquisition." Entergy
Corp., Holding Co. Act Release No. 25952 (December 17, 1993), request for
reconsideration denied, Holding Co. Act Release No. 26037 (April 28, 1994),
remanded sub nom. Cajun Elec. Power Coop. Inc. v. SEC, 1994 WL 704047 (D.C. Cir.
November 16, 1994).
SIZE: As of December 31, 1998, SIGECO supplied electricity to 124,340
electric customers in Evansville and 74 other communities, and supplied gas
service to 108,335 gas customers in Evansville and 64 other nearby communities.
As of December 31, 1998, Indiana Gas supplied gas service to 491,000 gas
customers in 281 communities in 48 of 92 counties in the State of Indiana. The
Merger will bring the utility assets and operations of SIGECO and those of
Indiana Gas under the common control of Vectren. The utility operations of
Vectren will not create a huge, complex and irrational system. Giving effect to
the Merger, (i) as of June 30, 1999, the combined unaudited assets of SIGCORP
and Indiana Energy would have totaled approximately $1.76 billion, and (ii) for
the year ended December 31, 1998, the combined unaudited operating revenues of
the two companies would have totaled approximately $1.02 billion.
By comparison, the Commission has approved a number of acquisitions
involving larger utilities. See, e.g., Sempra Energy, Holding Co. Act Release
No. 26890 (June 26, 1998); Ameren Corporation, Holding Co. Act Release No. 26809
(December 30, 1997); New Century Energies, Inc., Holding Co. Act Release No.
26748 (August 1, 1997); TUC Holding Co. Inc., Holding Co. Act Release No. 26749
(August 1, 1997); Houston Industries Inc., Holding Co. Act Release No. 26744
(July 24, 1997); CINergy Corp., Holding Co. Act Release No. 26146 (Oct. 21,
1994); Entergy Corp., Holding Co. Act Release No. 25952 (December 17, 1993);
Centerior Energy Corp., Holding Co. Act Release No. 24073 (April 29, 1986).
EFFICIENCIES AND ECONOMIES: The Commission has rejected a mechanical
size analysis under Section 10(b)(1) in favor of assessing the size of the
resulting system with reference to the efficiencies and economies that can be
achieved through the integration and coordination of utility operations.
American Electric Power Co., 46 S.E.C. at 1309. More recent pronouncements of
the Commission confirm that size alone is not determinative. Thus, in Centerior
Energy Corp., SUPRA, the Commission stated that a "determination of whether to
prohibit enlargement of a system by acquisition is to be made on the basis of
all the circumstances, not on the basis of size alone." See also Entergy Corp.,
SUPRA. In addition, the Division recommended in the 1995 Report that the
Commission approach its analysis of merger and acquisition transactions in a
flexible manner with emphasis on whether a merger creates an entity subject to
effective regulation and is beneficial for stockholders and customers as opposed
to focusing on rigid, mechanical tests. 1995 Report at 73-74.
By virtue of the Merger, Vectren will be in a position to realize the
"opportunities for economies of scale, the elimination of duplicate facilities
and activities, the sharing of production capacity and reserves and generally
more efficient operations" described by the Commission in
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<PAGE> 26
American Electric Power Co., 46 S.E.C. at 1309. Among other things, the Merger
is expected to make possible offering of a broader array of products and
services; savings through reduction of operating expenses and cost of capital;
savings through elimination or postponement of certain capital expenditures; and
savings through greater purchasing power. These expected economies and
efficiencies from the combined utility operations are described in greater
detail in Item 3.B.2 below.
COMPETITIVE EFFECTS: As the Commission noted in Northeast Utilities,
Holding Co. Act Release No. 25221, 47 SEC Docket 1270 (December 21, 1990),
supplemented, Holding Co. Act Release No. 25273 (March 15, 1991), aff'd, City of
Holyoke Gas & Elec. Dept. v. S.E.C., 792 F.2d 358 (D.C. Cir. 1992), the
"antitrust ramifications of an acquisition must be considered in light of the
fact that public utilities are regulated monopolies and that federal and state
administrative agencies regulate the rates charged consumers." Under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), the Merger may not be consummated until the applicable waiting periods
have expired or been terminated. Filings have been made with the Department of
Justice (the "DOJ") and the Federal Trade Commission (the "FTC") under the HSR
Act, describing the effects of the Merger on competition in the relevant market.
The DOJ has since requested additional information.
In addition, the competitive impact of the Merger is being fully
considered by the FERC before its approval of the Merger. A detailed explanation
of the reasons why the transaction will not threaten competition in relevant
geographic and product markets is set forth in the joint application of SIGECO,
Indiana Energy and Vectren filed with the FERC. The Commission may appropriately
rely upon the FERC with respect to such matters. Entergy Corp., SUPRA, citing
City of Holyoke Gas & Electric Dept. v. S.E.C., 972 F.2d at 363-64, quoting
Wisconsin Environmental Decade, Inc. v. S.E.C., 882 F.2d 523, 527 (D.C. Cir.
1989).
The Merger will result in a holding company system whose management
will remain based in Indiana. Among the purposes of the Merger are (1) to foster
the economic management and operations of that system by obtaining
Merger-dependent cost savings and (2) to further the integration and
coordination of those operations.
Following the Merger, which will not cause any change in their
regulated status, Vectren's public utility subsidiaries will continue to be
subject to the oversight of the IURC. The public utility operations of SIGECO,
Community and Indiana Gas will continue to be confined to the State of Indiana.
In considering the Merger pursuant to Section 10(b)(1) of the Act in light of
Section 1(b)(4) thereof, there is no basis for concluding that the Merger will
involve the growth or extension of a holding company that bears no relation to
economies of management and operation or the integration and coordination of
related operating properties.
2. Section 10(b)(2)--Fairness of Consideration and Fees.
a. Fairness of Consideration. Section 10(b)(2) of the 1935 Act
requires the Commission to determine whether the consideration in connection
with a proposed acquisition of securities is reasonable and whether it bears a
fair relation to the investment in and the earning capacity of the utility
assets underlying the securities being acquired. As noted earlier, when the
Merger is consummated, each share of SIGCORP Common Stock will be converted into
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<PAGE> 27
1.333 shares of Vectren Common Stock and each share of Indiana Energy Stock will
be converted into 1 share of Vectren Common Stock.
These ratios were reached through a process of vigorous arm's-length
negotiations, accommodation, and compromise. Such negotiations were preceded by
extensive due diligence, analysis and evaluation of the assets, liabilities and
business prospects of each of the respective companies. As recognized by the
Commission in Ohio Power Co., 44 S.E.C. 340, 346 (1970), prices arrived at
through arm's-length negotiations are particularly persuasive evidence that
Section 10(b)(2) is satisfied.
Finally, nationally recognized investment bankers for each of SIGCORP
and Indiana Energy have reviewed extensive information concerning the companies
and analyzed the exchange ratios employing a variety of valuation methodologies,
and have opined that the exchange ratios are fair, from a financial point of
view, to the respective holders of SIGCORP Common Stock and Indiana Energy
Common Stock. The investment bankers' opinions are attached hereto as Exhibits
H-1 and H-2. The assistance of independent consultants in setting consideration
has been recognized by the Commission as evidence that the requirements of
Section 10 (b) (2) have been met. See Consolidated Natural Gas Company, Holding
Co. Act Release 25040 (February 14, 1990).
b. Reasonableness of Fees. An estimate of the fees and expenses
to be paid in connection with the Merger is set forth in Item 2 hereof. The
estimated amounts to be paid are fees required to be paid to governmental
bodies, fees for necessary professional services, and other expenses incurred or
to be incurred in connection with carrying out the Merger. Vectren believes that
such fees and commissions incurred in connection with the Merger are reasonable
and fair in light of the size and nature of the Merger and comparable
transactions and thus meet the standards of Section 10 (b)(2).
3. Section 10(b)(3). Section 10(b)(3) requires the Commission to
determine whether the proposed Merger will unduly complicate Vectren's capital
structure or will be detrimental to the public interest, the interests of
investors or consumers or the proper functioning of Vectren's system.
a. Capital Structure. The corporate capital structure of Vectren
after the consummation of the proposed transactions will not be unduly
complicated. In the Merger, Vectren will directly acquire, by operation of law,
all of the Common Stock of SIGCORP and Indiana Energy, and thus there will be no
minority Common Stock interest in either such company. The existing senior debt
and senior equity securities of SIGCORP and Indiana Energy will not be affected
by the Merger.
Moreover, acquisitions do not unduly complicate the capital structure
of the holding company system where the acquiror's capital structure negligibly
is affected and the debt-to-equity ratio of the merged holding company following
the acquisition falls within the seventy-to-thirty percent of debt-to-common
equity generally prescribed by the Commission. Entergy Corp., SUPRA, citing
Northeast Utilities, Holding Co. Act Release No. 25221 (December 21, 1990);
Georgia Power Company, 45 S.E.C. 610, 615 (1974). Furthermore, the Commission
has approved common equity to total capitalization ratios as low as 27.6
percent. See Northeast Utilities, SUPRA.
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<PAGE> 28
The proposed combination of SIGCORP and Indiana Energy will not unduly
complicate the capital structure of the merged company. The summaries of the
historical capital structures of SIGCORP and Indiana Energy as of September 30,
1999 are set forth below:
<TABLE>
<CAPTION>
SIGCORP AND INDIANA ENERGY HISTORICAL CAPITAL STRUCTURES
(THOUSANDS - UNAUDITED FOR SIGCORP, AUDITED FOR INDIANA ENERGY)
SIGCORP INDIANA ENERGY
$ % $ %
<S> <C> <C> <C> <C>
Long-term Debt (includes current
portion) 338,094 45.3 183,363 37.0
Preferred 19,282 2.6 - 0
Common Equity 389,462 52.1 311,625 63.0
---------- ------ ---------- ------
Total Capitalization 746,838 100.0 494,988 100.0
========== ====== ========== ======
Current Maturities of Long-term
Debt 180 54,386
Short-term Debt 80,990 86,521
</TABLE>
The pro forma combined capital structure of SIGCORP and Indiana Energy
following the proposed Merger as of September 30, 1999 would have been as
follows:
VECTREN PRO FORMA CONSOLIDATED CAPITAL STRUCTURE
(THOUSANDS - UNAUDITED)
<TABLE>
<CAPTION>
$ %
<S> <C> <C>
Long-term Debt
(includes current portion) 522,337 42.3
Preferred 19,282 1.6
Common Equity 692,087 56.1
------------- ------
Total Capitalization 1,233,706 100.0
============= ======
Current Maturities
of Long-term Debt 54,566
Short-term Debt 167,511
</TABLE>
As the above tables reveal, the merged company's common equity to total
capitalization ratio significantly exceeds the Commission's traditionally
acceptable 30 to 35 percent level.
b. Public Interest, Interest of Investors and Consumers, and Proper
Functioning of Holding Company System. Section 10(b)(3) also requires the
Commission to determine whether the proposed Merger will be detrimental to the
interests of the general public, investors or consumers, or the proper
functioning of the combined system.
As set forth more fully in Item 3.B.2 and elsewhere herein, the
proposed Merger is expected to result in substantial cost savings and synergies,
and will integrate and improve the efficiency of the operations of the parties
to the transaction. The Merger, therefore, will be in the public interest and
the interests of investors and consumers, and will not be detrimental to the
proper functioning of the resulting holding company system.
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<PAGE> 29
B. SECTION 10(C)
Section 10(c) of the 1935 Act provides that:
Notwithstanding the provisions of subsection (b), the Commission shall
not approve:
(1) an acquisition of securities or utility assets, or of any
other interest, which is unlawful under the provisions of Section 8 or
is detrimental to the carrying out of the provisions of Section 11; or
(2) the acquisition of securities or utility assets of a
public-utility or holding company unless the Commission finds that such
acquisition will serve the public interest by tending towards the
economical and the efficient development of an integrated
public-utility system . . . .
1. Section 10(c)(1). Consistent with the standards set forth in
Section 10(c)(1) of the Act, the proposed acquisition of securities will not be
unlawful under the provisions of Section 8 of the Act (inasmuch as Section 8
applies only to registered holding companies), or detrimental to the carrying
out of the provisions of Section 11 of the 1935 Act, which also applies, by its
terms, only to registered holding companies. This is because Vectren believes
that following the consummation of the Merger it will be a holding company
entitled to an exemption under Section 3(a)(1) of the 1935 Act from all of the
provisions of the 1935 Act (except for Section 9(a)(2) thereof), including
provisions relating to registration.
a. Section 8 Analysis. Section 8 prohibits a registered holding
company or any of its subsidiaries from acquiring, owning interests in or
operating both a gas utility company and an electric utility company serving
substantially the same area if prohibited by state law. Indiana law does not
prohibit, or require approval or authorization of, the ownership or operation by
a single company of the utility assets of electric and gas utilities serving
substantially the same territory. Moreover, the IURC already regulates SIGECO, a
combination electric and gas utility, and will extensively regulate the
operations of SIGECO, Indiana Gas and Community. Accordingly, the Merger will
not be unlawful under the provisions of Section 8.
b. Section 11 Analysis - Integration. Section 10(c)(1) also
requires that an acquisition not be detrimental to carrying out the provisions
of Section 11 of the Act. Section 11(b)(1), in pertinent part, requires, with
limited exceptions, a registered holding company and its subsidiaries to limit
their operations to "a single integrated public-utility system."
Section 2(a)(29)(A) of the Act defines an integrated public-utility
system with respect to electric utility companies as:
a system consisting of one or more units of generating plants
and/or transmission lines and/or distribution facilities,
whose utility assets, whether owned by one or more electric
utility companies, are physically interconnected or capable of
interconnection and which under normal circumstances may be
economically operated as a single interconnected and
coordinated system confined in its operations to a single area
or region, in one or more states, not so large as to impair
(considering the state of the art and area or region affected)
the advantages of localized management, efficient operation,
and the effectiveness of regulation.
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<PAGE> 30
The existing SIGCORP electric utility system is, and following the
Merger will continue to be, an integrated electric utility system. SIGECO
operates in a single contiguous service territory in southwestern Indiana, and
the Merger will not have any impact on the current operation of SIGCORP's
electric utility system.
Section 2(a)(29)(B) of the Act defines an integrated public utility
system with respect to gas utility companies as:
a system consisting of one or more gas utility companies which
are so located and related that substantial economies may be
effectuated by being operated as a single coordinated system
confined in its operations to a single area or region, in one
or more states, not so large as to impair (considering the
state of the art and area or region affected) the advantages
of localized management, efficient operation, and the
effectiveness of regulation: Provided, That gas utility
companies deriving natural gas from a common source of supply
may be deemed to be included in a single area or region.
SIGECO's gas utility operations are located in a single contiguous area
in southwestern Indiana and are currently integrated. Moreover, much of
Community's service territory is adjacent to or near the gas service territory
of SIGECO. Indiana Gas's gas utility operations are also located in a single
contiguous area and are currently integrated. The properties of Indiana Gas used
for the production, storage and distribution of gas are located solely within
the State of Indiana except for pipeline facilities extending from points in
northern Kentucky to points in southern Indiana by means of which gas is
transported to Indiana for sale or transportation by Indiana Gas to ultimate
customers in Indiana. It is evident that all of SIGCORP and Indiana Energy's gas
distribution operations will be in the State of Indiana. Although their service
territories do not necessarily overlap, there can be little question that the
State of Indiana, generally, constitutes a single area or region.
The fact that SIGECO and Indiana Gas derive their gas supplies from
common sources of supply also points to the conclusion that the combined entity
would be confined to a single area or region.
SIGECO currently purchases nearly 100% of its system supply gas
requirements from the Gulf Coast production basin, particularly in the on-shore
and off-shore Texas and Louisiana producing regions. With the completion of
pipeline projects capable of bringing incremental volumes of gas supply from
other basins into the Chicago market hub, it is anticipated that SIGECO will
begin to diversify its supply portfolio. Gas being delivered to the Chicago
market hub can include gas originally produced in the Mid-continent basin
(Oklahoma and Kansas), the Gulf Coast basin and gas from the western Canadian
basin. During the year 2000, it is expected that SIGECO will seek to purchase up
to 5% of its system supply requirements from the Chicago market hub. It is
further expected that by the year 2002, depending upon pricing, that up to 40%
of SIGECO's system supply requirements may be purchased from this location, with
the balance still coming from the Gulf Coast basin. SIGECO has contracted for
firm transportation capacity on five interstate gas pipelines: Texas Gas
Transmission Corporation, Midwestern Gas Transmission Company, Tennessee Gas
Pipeline Company, ANR Gas Pipeline Company and Texas Eastern Transmission
Corporation. SIGECO does not anticipate contracting with any upstream interstate
pipelines to facilitate the purchase of gas supply at the Chicago market hub.
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<PAGE> 31
Indiana Gas currently purchases approximately 50% of its total system
gas supply requirements from the Gulf Coast production basin and approximately
48% from production in the Mid-continent basin. Approximately 2% of Indiana
Gas's gas supplies are accessed through the Chicago market hub giving supply
choice from the western Canadian basin, Michigan production basin or the
Mid-continent basin. The percentage of supply basin purchases may change year to
year based on pipeline transportation arrangements as well as the results from
the annual Request for Proposal competitive bidding process to procure supplies.
Some of the factors that influence supply basin selection are pipeline capacity
availability, supply availability and price. The interstate pipelines that
transport supplies from the supply basins to the Indiana Gas service territory
consist of CMS Panhandle Eastern Pipeline Company, Texas Gas Transmission
Corporation, ANR Pipeline Company, Texas Eastern Transmission Corporation and
Midwestern Gas Transmission Company. CMS Panhandle Eastern Pipeline Company
transports supplies primarily from the Mid-continent area to Indiana Gas while
Texas Gas Transmission Company, ANR Pipeline Company, and Texas Eastern
Transmission Corporation all transport supplies primarily from the Gulf Coast
production basin to Indiana Gas. Midwestern Gas Transmission Company transports
supplies from the Chicago market hub to Texas Gas Transmission Corporation at
Whitesville, Kentucky for redelivery to Indiana Gas. Indiana Gas's current
supply portfolio has arrangements to receive 48% of its supplies from CMS
Panhandle Eastern Pipeline Company, 36% from Texas Gas Transmission Company, 11%
from ANR Pipeline Company, 3% from Texas Eastern Transmission Corporation and 2%
from Midwestern Gas Transmission Company.
On a combined basis SIGCORP's and Indiana Energy's gas utility systems
will meet the definition of an integrated public utility system with respect to
gas utility companies found in Section (2)(a)(29)(B) of the Act. Under that
definition, gas utility companies deriving natural gas from a common source of
supply may be deemed to be included in a single area or region. Both SIGCORP and
Indiana Energy derive their gas supply predominantly from the Gulf Coast
production basins. Furthermore, upon the completion of the pipeline projects
mentioned in the discussion above, SIGCORP would be able to diversify its supply
portfolio to include the same Mid-continent and western Canadian production
basins that currently supply a portion of Indiana Energy's gas. Similarly,
SIGCORP and Indiana Energy utilize some of the same interstate pipelines to
transport their gas supplies. Among other pipelines, both SIGCORP and Indiana
Energy contract with Texas Gas Transmission Company, Texas Eastern Transmission
Company and Midwestern Gas Transmission Company. Therefore, under the definition
of Section 2(a)(29)(B), SIGCORP and Indiana Energy's gas utility systems may be
deemed to be included in a single area or region.
The Commission has also looked to coordination of gas supply and common
gas supply sources such as common pipeline suppliers and supply coming from
common gas basins as an indication of an integrated gas utility system. See
NIPSCO Industries, Holding Co. Act Release No. 26975 (February 10, 1999)
(finding integration between gas utility companies in Indiana and Massachusetts
based on coordinated gas supply departments, obtaining gas from common basins
and using trading hubs). SIGCORP and Indiana Energy's combined gas system will
satisfy Section 2(a)(29)(B) of the Act because it will take gas from common
sources of supply. SIGECO's gas utility system and Indiana Gas's gas utility
system are each interconnected with, and receive deliveries from, ANR Pipeline
Company, Texas Eastern Transmission Corporation and Texas Gas Transmission
Corporation. Thus, through these common interstate pipeline
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<PAGE> 32
companies, SIGECO and Indiana Gas can access the same supply basins. Further,
the parties plan to consolidate and integrate the operating departments as well
as the administrative functions of the combined entity. For example, the first
phase of the consolidation of the service dispatching function in the Indiana
Gas service territory has been announced. Full integration of operating
departments such as corporate engineering, gas control, gas system design, sales
and marketing into a single organizational framework is also planned. Corporate
and administrative functions will also be integrated and centralized. These
functions include planning and forecasting, budgeting, tax, investor relations,
treasury, human resources, corporate communications and accounting, which
includes common information technology system platforms. As time goes on other
customer services such as billing, call center and collections are expected to
be centralized as well.
c. Section 11 Analysis - ABC Clauses. Section 11(b)(1) permits a
registered holding company to own one or more additional integrated
public-utility systems only if the requirements of Section 11(b)(1)(A)-(C) (the
"ABC clauses") are satisfied. The Commission has also previously held that a
holding company may acquire additional utility assets that will not, when
combined with its existing utility assets, make up an integrated system or
comply fully with the "ABC" clauses, provided that there is de facto integration
of contiguous utility properties and the holding company will be exempt from
registration under Section 3(a) of the Act following the acquisition. See TUC
Holding Co. Inc., SUPRA; BL Holding Corp., Holding Co. Act Release No. 26875
(May 15, 1998); and CMP Group, Inc., Holding Co. Act Release No. 26977 (February
12, 1999). The respective service territories of SIGECO and Indiana Gas are
adjacent or contiguous in Indiana as shown in the map attached hereto as Exhibit
E-1. Following consummation of the Merger, Vectren will provide the two systems
with shared administrative services. Further, the Merger will not give rise to
any of the abuses, such as ownership of scattered utility properties,
inefficient operations, lack of local management or evasion of state regulation,
that the Act, including Section 11(b)(1), was intended to address.
2. Section 10(c)(2). Because the Merger is expected to result in
cost savings and synergies, it will tend toward the economical and efficient
development of an integrated public utility system, thereby serving the public
interest, as required by Section 10(c)(2) of the Act. "The Commission has
previously determined . . . that where a holding company will be exempt from
registration under section 3 of the Act following an acquisition of
non-integrating utility assets, it suffices for purposes of section 10(c)(2) to
find benefits to one integrated system." TUC Holding Co. Inc., SUPRA at 306. The
Merger clearly satisfies this requirement as it will produce benefits to the gas
and electric utility businesses of the two systems.
The Merger will produce economies and efficiencies sufficient to
satisfy the standards of Section 10(c)(2) of the Act. Although some of the
anticipated economies and efficiencies will be fully realizable only in the
longer term, they are properly considered in determining whether the standards
of Section 10(c)(2) have been met. See in The Matter of American Electric Power
Co., SUPRA at 1320-1321. Some potential benefits cannot be precisely estimated,
nevertheless they too are entitled to be considered. "[S]pecific dollar
forecasts of future savings are not necessarily required; a demonstrated
potential for economies will suffice even when these are not precisely
quantifiable." Centerior Energy Corp., SUPRA at 775.
The Merger is expected to yield several types of currently quantifiable
benefits and savings. The parties to the Merger expect an estimated $200 million
reduction in operating and
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<PAGE> 33
capital costs over the next ten years, allowing a delay or avoidance of future
rate increases. This estimate is based on synergy studies conducted by both
companies with assistance from outside consultants. The $200 million cost
savings over a 10-year period is based upon two categories: cost reduction and
cost avoidance. Cost reductions are primarily derived from the elimination of
duplicative functions, mostly through natural employee attrition and reduction
of duplicative administrative operations. Cost avoidance is derived from the
financial advantages available as a result of the combined company's increase in
scale. Such advantages include improved terms for borrowings, a reduced need to
incur debt, and an improved ability to increase customer base and market new
products. A larger company should be able to encourage greater investments from
outside sources of capital as well.
Aside from this reduction in costs, there are also other benefits
anticipated to result from the Merger. The Merger is expected to result in the
creation of a larger Indiana-based energy company focused on local economic
development, jobs and customers, with greater scale that will contribute to
sustaining long-term growth as a viable energy provider. Additionally, the
resulting larger company after the Merger will be capable of raising and
investing the financial and intellectual capital required to develop and market
products and services designed to attract and retain customers.
C. SECTION 10(f)
Section 10(f) provides that:
The Commission shall not approve any acquisition as to which
an application is made under this section unless it appears to
the satisfaction of the Commission that such State laws as may
apply in respect of such acquisition have been complied with,
except where the Commission finds that compliance with such
State laws would be detrimental to the carrying out of the
provisions of section 11.
SIGECO, Community, and Indiana Gas are currently subject to the
jurisdiction of the IURC. Indiana Energy and SIGCORP have filed a joint petition
with the IURC requesting approval of the Merger. However, as more fully
discussed below, in an unrelated decision issued in July 1999, the Indiana
Supreme Court determined that the IURC does not have jurisdiction over holding
company mergers. As a result, Indiana Energy and SIGCORP have jointly moved to
have their joint petition converted from one in which preapproval of the Merger
is sought to an informational/investigatory proceeding where the IURC is
provided with a forum where pertinent information relating to the transaction
can be submitted and reviewed.
ITEM 4. REGULATORY APPROVALS
Set forth below is a summary of the regulatory approvals that the
applicants have obtained or expect to obtain in connection with the Merger.
A. ANTITRUST
Under the HSR Act and the rules promulgated thereunder by the FTC,
transactions such as the Merger may not be completed unless notice has been
given and information has been furnished to the Antitrust Division of the DOJ
and the FTC and specified waiting period
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<PAGE> 34
requirements have been satisfied. On July 16, 1999, Vectren, SIGCORP and Indiana
Energy filed Pre-Merger Notification and Report Forms with the FTC and the DOJ
under the HSR Act. The waiting period with respect to the Pre-Merger
Notification and Report Forms would have expired on August 15, 1999. However,
prior to such date, the DOJ requested further information. Indiana Energy and
SIGCORP responded to the DOJ'S request for more information on November 24,
1999. The waiting period then expired 20 days after the requested information
was furnished to the DOJ. On January 18, 2000, the DOJ officially and publicly
informed Indiana Energy and SIGCORP that it had concluded its review of the
proposed Merger and would not take any further action. If the Merger is not
completed within twelve months after the expiration or termination of the
waiting period, SIGCORP and Indiana Energy would be required to submit new
notices to the DOJ and the FTC and a new waiting period would have to expire or
be terminated before the Merger could be completed.
At any time before or after the Effective Time of the Merger, the FTC
or the DOJ could take any action under the antitrust laws as it deems necessary
or desirable in the public interest, including seeking to enjoin the Merger or
seeking divestiture of substantial assets of SIGCORP or Indiana Energy or their
respective subsidiaries. Private parties and state attorneys general may also
bring an action under the antitrust laws under certain circumstances. Completion
of the Merger is subject to no action having been instituted by the DOJ or the
FTC that is not withdrawn or terminated prior to the effective time of the
respective transactions.
B. FEDERAL POWER ACT
Section 203 of the Federal Power Act of 1935, as amended (the "Federal
Power Act"), provides, among other things, that no public utility shall sell or
otherwise dispose of its jurisdictional facilities or, directly or indirectly,
merge or consolidate such facilities with those of any other person or acquire
any security of any other public utility without first having obtained
authorization from the FERC. As a result, the approval of the FERC is required
in order to complete the Merger. Under Section 203 of the Federal Power Act, the
FERC will approve a merger if it finds the merger to be "consistent with the
public interest." in undertaking its review of a utility merger transaction, the
FERC generally has evaluated (i) whether the merger will adversely affect
competition, (ii) whether the merger will adversely affect operating costs and
rates, (iii) whether the merger will impair the effectiveness of regulation,
(iv) whether the purchase price is reasonable, (v) whether the merger is the
result of coercion and (vi) whether the accounting treatment is reasonable.
However, the FERC has indicated in its new merger policy statement issued on
December 18, 1996 that rather than utilizing the six-factor test described
above, it will instead focus only on the following three factors: (i) the effect
on competition; (ii) the effect on rates; and (iii) the effect on federal
regulation. On August 13, 1999, SIGECO, Indiana Energy and Vectren filed a joint
application with the FERC requesting that the FERC approve the Merger under
Section 203 of the Federal Power Act. On December 20, 1999, the FERC issued an
Order Approving Disposition of Jurisdictional Facilities in Docket No.
EC99-106-000, 89 FERC Paragraph 61,288. The FERC's Order found that the Merger
of Indiana Energy and SIGCORP into Vectren would be consistent with the public
interest because there would be no adverse effect on competition, rates or
regulation.
32
<PAGE> 35
C. STATE PUBLIC UTILITY REGULATION
On June 17, 1999, Indiana Energy and SIGCORP filed a joint petition
with the IURC requesting approval of the Merger. The petition alleges that the
Merger is in the public interest and should be approved because it enhances the
financial strength of the companies; it creates an Indiana-based company better
able to compete in the future; it creates opportunities to reduce costs and
avoid certain capital expenditures which should delay the need for rate relief
and over time result in lower rates; and it leaves intact the IURC's regulatory
oversight over the two public utilities.
On July 30, 1999, in an unrelated case, the Indiana Supreme Court
issued a decision wherein it determined that the merger of two public-utility
holding companies does not require authorization from the IURC. In light of that
determination, and to provide the IURC with a forum to review the Merger's
implications for SIGECO and Indiana Gas, on September 9, 1999, SIGCORP and
Indiana Energy, together with SIGECO and Indiana Gas, voluntarily filed a joint
motion to amend the petition from one requesting preapproval of the Merger to a
petition requesting the IURC to convert the proceeding into an
informational/investigatory proceeding, as well as for approval of a request for
accounting authority to defer and amortize costs relating to the Merger. In
response to this motion, the IURC established a procedural schedule for the
proceeding, including a public hearing which was held on January 18, 2000.
D. FEDERAL COMMUNICATIONS COMMISSION
On December 6, 1999, Indiana Energy requested authority from the FCC to
transfer the control over the radio license holders. The FCC licenses held by
Indiana Gas, IEI Services LLC and Terre Haute Gas remain in the name of those
respective companies, with the FCC granting approval to transfer the control
over those companies necessary to effectuate the Merger. The FCC authorized the
transfer of control for the Indiana Gas licenses on January 7, 2000. IEI
Services LLC's licenses were approved on December 29, 1999. Terre Haute Gas
Company was granted special temporary authority to effectuate the transfer on
January 11, 2000.
On December 23, 1999, SIGCORP filed applications with the FCC for
authority to transfer control, at the parent level, of certain the radio
licenses held by certain SIGCORP subsidiaries and used in daily operations. It
is anticipated that the FCC will grant final orders approving the transfer
within two months. However, in order to prevent delays in the closing of the
SIGCORP/Indiana Energy Merger, on January 18, 2000 SIGCORP also filed two
requests with the FCC for special temporary authority to effectuate the
transfer. The FCC has granted one of the special temporary authorizations and it
is anticipated that the other special temporary authorization will be granted
within a week.
E. OTHER
Vectren may file other applications for, or request, certain other
consents or authorizations by federal, state or municipal agencies in connection
with the issuance of securities, system operations and franchises or any other
activities subject to regulatory approval.
33
<PAGE> 36
ITEM 5. PROCEDURE
The Applicant requests that there be no 30-day waiting period between
the issuance of the Commission's order and the date on which it is to become
effective. The Applicant submits that a recommended decision by a hearing or
other responsible officer of the Commission is not needed with respect to the
proposed transaction and that the Division may assist with the preparation of
the Commission's decision and/or order in this matter unless such Division
opposes the matters covered hereby.
ITEM 6. EXHIBITS AND FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
A. EXHIBITS
EXHIBIT
<S> <C>
A-1 Articles of Incorporation of Vectren, effective June 10, 1999.
(Incorporated by reference to the Joint Proxy
Statement/Prospectus filed as Exhibit C-2 herein, as Appendix
B).
A-2 Restated Articles of Incorporation of SIGCORP (Incorporated by
reference to the Form S-4 Registration Statement filed February
23, 1995, File No. 33-57381, as Exhibit 3(a)).
A-3 Amended and Restated Articles of Incorporation of Indiana
Energy (Incorporated by reference to the Form 10-Q Quarterly
Report of Indiana Energy for the quarterly period ended
December 31, 1997, File No. 1-9091, as Exhibit 3-A).
B-1 Agreement and Plan of Merger dated as of June 11, 1999, among
Indiana Energy, SIGCORP and Vectren (Incorporated by reference
to the Form 8-K Current Report of SIGCORP filed June 11, 1999,
File No. 1-11603, as Exhibit 2).
B-2 SIGCORP, Inc. Stock Option Agreement between Indiana Energy and
SIGCORP (Incorporated by reference to the Form 8-K Current
Report of SIGCORP filed June 11, 1999, File No. 1-11603, as
Exhibit 4.1).
B-3 Indiana Energy, Inc. Stock Option Agreement between Indiana
Energy and SIGCORP (Incorporated by reference to the Form 8-K
Current Report of SIGCORP filed June 11, 1999, File No.
1-11603, as Exhibit 4.2).
C-1 Registration Statement on Form S-4 (including all exhibits
thereto) (Incorporated by reference to the Registration
Statement filed with the Commission on November 12, 1999
pursuant to the 1933 Act, File No. 333-90763).
C-2 Joint Proxy Statement/Prospectus (Included in Registration
Statement on Form S-4 filed as Exhibit C-1 herein).
D-1 Form of Pre-Merger Notification and Report Forms filed with the
FTC and the DOJ.
D-2 Joint Application of SIGECO, Indiana Energy and Vectren to the
FERC (exhibits to be filed supplementally upon request of
staff).
D-3 Order of the FERC.
E-1 Map showing combined SIGECO and Indiana Gas service areas.
F-1 Preliminary Opinion of Counsel.
</TABLE>
34
<PAGE> 37
<TABLE>
<CAPTION>
EXHIBIT
<S> <C>
F-2 Past Tense Opinion of Counsel (to be filed with certificate of
notification).
F-3 Opinion of counsel re: Indiana jurisdiction.
G-1 SIGCORP Form U-3A-2, "Statement by Holding Company Claiming
Exemption Under Rule U-2 from the Provisions of the Public
Utility Holding Company Act of 1935," dated February 25, 1999
(Incorporated by reference to such filing, File No. 69-397).
G-2 Indiana Energy Form U-3A-2, "Statement by Holding Company
Claiming Exemption under Rule U-2 from the Provisions of the
Public Utility Holding Company Act of 1935," dated February 23,
1999 (Incorporated by reference to such filing, File No.
69-312).
G-3 Form 10-K Annual Report of SIGCORP for the year ended December
31, 1998 (Incorporated by reference to such filing, File No.
1-11603).
G-4 Form 10-K/A Amended Annual Report of SIGCORP for the year ended
December 31, 1998, filed November 3, 1999 (Incorporated by
reference to such filing, File No. 1-11603).
G-5 Form 10-K Annual Report of Indiana Energy for the year ended
September 30, 1998 (Incorporated by reference to such filing,
File No. 1-9091).
G-6 Form 10-Q Quarterly Report of SIGCORP for the Quarter ended
September 30, 1999 (Incorporated by reference to such filing,
File No. 1-11603).
G-7 Form 10-Q Quarterly Report of Indiana Energy for the Quarter
ended June 30, 1999 (Incorporated by reference to such filing,
File No. 1-9130).
H-1 Goldman Sachs Fairness Opinion (Incorporated by reference to
Joint Proxy Statement/Prospectus filed as Exhibit C-2 herein,
as Appendix E).
H-2 Merrill Lynch Fairness Opinion (Incorporated by reference to
Joint Proxy Statement/ Prospectus filed as Exhibit C-2 herein,
as Appendix D).
I-1 Form of Notice (filed previously).
<CAPTION>
B. FINANCIAL STATEMENTS
EXHIBIT
<S> <C>
FS-1 SIGCORP Consolidated Balance Sheet as of June 30, 1999 (see
Quarterly Report of SIGCORP on Form 10-Q for the Quarter ended
September 30, 1999 (Exhibit G-6 hereto)).
FS-2 SIGCORP Consolidated Statements of Income for its last three
months (see Quarterly Report of SIGCORP on Form 10-Q for the
Quarter ended September 30, 1999 (Exhibit G-6 hereto)).
FS-3 Indiana Energy Quarterly Consolidated Balance Sheet as of March
31, 1999 (see Quarterly Report of Indiana Energy on Form 10-Q
for the Quarter ended June 30, 1999 (Exhibit G-7 hereto)).
</TABLE>
35
<PAGE> 38
<TABLE>
<CAPTION>
EXHIBIT
<S> <C>
FS-4 Indiana Energy Consolidated Statements of Income for its last
twelve months (see Quarterly Report of Indiana Energy on Form
10-Q for the Quarter ended June 30, 1999 (Exhibit G-7 hereto)).
</TABLE>
Financial Statements of Vectren are not included herein because it has
no assets and has not engaged in any business operations.
ITEM 7. INFORMATION AS TO ENVIRONMENTAL EFFECTS
The Merger neither involves a "major federal action" nor "significantly
affects the quality of the human environment" as those terms are used in Section
102(2)(C) of the National Environmental Policy Act, 42 U.S.C. Sec. 4321 et seq.
Consummation of the Merger will not result in changes in the operations of
Vectren, SIGCORP, Indiana Energy or their subsidiaries that would have any
impact on the environment. No federal agency is preparing an environmental
impact statement with respect to this matter.
SIGNATURE
Pursuant to the requirements of the Public Utility Holding Company Act
of 1935, the undersigned company has duly caused this Application/Declaration to
be signed on its behalf by the undersigned thereunto duly authorized.
Date: January 28, 2000
VECTREN CORPORATION
By: /s/ Niel C. Ellerbrook
-----------------------------------
Chairman of the Board and
Chief Executive Officer
36
<PAGE> 1
EXHIBIT D-1-A
AFFIDAVIT OF JEROME A. BENKERT
VICE PRESIDENT AND CONTROLLER
INDIANA ENERGY, INC.
STATE OF INDIANA )
) ss.
COUNTY OF MARION )
JEROME A. BENKERT, being duly sworn, deposes and says:
1. I am Vice President and Controller of Indiana Energy, Inc., and make
this Affidavit on behalf of the corporation pursuant to Section
803.5(b) of the Rules of the Federal Trade Commission under Section
7A of the Clayton Act.
2. Indiana Energy, Inc. entered into an Agreement and Plan of Merger
with SIGCORP, INC. and Vectren Corporation.
3. Indiana Energy, Inc. has a good faith intention to consummate the
transaction as described in the attached Notification and Report
forms.
Indiana Energy, Inc.
/s/ Jerome Benkert
-----------------------------
Jerome Benkert
Vice President and Controller
Sworn to before me this
1st day of July, 1999.
/s/ Tammy M Worland
- -------------------
Notary Public
(NOTARIAL SEAL)
NOTARY PUBLIC
OFFICIAL
TAMMY
M
WORLAND
SEAL
STATE OF INDIANA
<PAGE> 2
AFFIDAVIT OF JEROME A. BENKERT
VICE PRESIDENT AND CONTROLLER
INDIANA ENERGY, INC.
STATE OF INDIANA )
) ss.
COUNTY OF MARION )
JEROME A. BENKERT, being duly sworn, deposes and says:
1. I am Vice President and Controller of Indiana Energy, Inc., and make
this Affidavit on behalf of the corporation pursuant to Section
803.5(b) of the Rules of the Federal Trade Commission under Section
7A of the Clayton Act.
2. Indiana Energy, Inc. entered into an Agreement and Plan of Merger
with SIGCORP, INC. and Vectren Corporation.
3. Indiana Energy, Inc. has a good faith intention to consummate the
transaction as described in the attached Notification and Report
forms.
Indiana Energy, Inc.
/s/ Jerome Benkert
-----------------------------
Jerome Benkert
Vice President and Controller
Sworn to before me this
1st day of July, 1999.
/s/ Tammy M Worland
- -------------------
Notary Public
(NOTARIAL SEAL)
NOTARY PUBLIC
OFFICIAL
TAMMY
M
WORLAND
SEAL
STATE OF INDIANA
<PAGE> 3
================================================================================
16 C.F.R. Part 803 Appendix Approved by 0MB
3084-0005
NOTIFICATION AND REPORT FORM FOR CERTAIN MERGERS AND ACQUISITIONS
- --------------------------------------------------------------------------------
[FOR OFFICE USE ONLY]
[Transaction Number ]
[ ]
Attach the Affidavit required by ss. 803.5 to this page. [ / / / / / ]
---------------------
[ CTO ETR ]
---------------------
Is this Acquisition a CASH TENDER OFFER? |_| YES |X| NO
- --------------------------------------------------------------------------------
Do you request Early Termination of the Waiting Period? |X| YES |_| NO
================================================================================
ITEM 1
(a) NAME AND HEADQUARTERS ADDRESS OF PERSON FILING NOTIFICATION (ultimate
parent entity)
Indiana Energy, Inc.
1630 North Meridian Street
Indianapolis, Indiana 46202-1496
- --------------------------------------------------------------------------------
(b) PERSON FILING NOTIFICATION IS
|_| an acquiring person |_| an acquired person |X| both
- --------------------------------------------------------------------------------
(c) LIST NAMES OF ULTIMATE PARENT LIST NAMES OF ULTIMATE PARENT
ENTITIES OF ALL ACQUIRING PERSONS ENTITIES OF ALL ACQUIRED PERSONS:
Indiana Energy, Inc. SIGCORP, INC.
SIGCORP, INC. Indiana Energy, Inc.
- --------------------------------------------------------------------------------
(d) THIS ACQUISITION IS (put an X in all the boxes that apply)
|_| an acquisition of assets
|X| a merger (see ss. 801.2)
|_| an acquisition subject to ss.801.2(e)
|_| formation of a joint venture or other
|_| corporation (see ss. 801.40)
|_| an acquisition subject to ss. 801.30 (specify type):______________________
|_| other (specify) __________________________________________________________
|_| a consolidation (see ss. 801.2)
|_| an acquisition of voting securities
|_| a secondary acquisition
|_| an acquisition subject to ss. 801.31
- --------------------------------------------------------------------------------
(e) INDICATE HIGHEST NOTIFICATION THRESHOLD IN ss. 801.1(h) FOR WHICH THIS
FORM IS BEING FILED (acquiring person only)
|_| $15 million |_| 15% |_| 25% |X| 50%
- --------------------------------------------------------------------------------
(f) VALUE OF VOTING SECURITIES VALUE OF ASSETS
See, Item 2 (a) Not Applicable
- --------------------------------------------------------------------------------
(g) PUT AN X IN THE APPROPRIATE BOX TO DESCRIBE ENTITY FILING NOTIFICATION
|X| corporation |_| partnership |_| other (specify)________________
- --------------------------------------------------------------------------------
(h) DATA FURNISHED BY
|_| calendar year |X| fiscal year (specify period): 10/1 To 09/30
------- --------
- --------------------------------------------------------------------------------
<PAGE> 4
- --------------------------------------------------------------------------------
NAME OF PERSON FILING NOTIFICATION DATE
Indiana Energy, Inc. July 16, 1999
- --------------------------------------------------------------------------------
(i) PUT AN X IN THE APPROPRIATE BOX AND GIVE THE NAME AND ADDRESS OF THE
ENTITY FILING NOTIFICATION (if other than ultimate parent entity)
|X| NA |_| This report is being filed on |_| This report is being filed
behalf of a foreign person on behalf of the ultimate
pursuant to ss. 803.4. parent entity by another
entity within the same
person authorized by it to
file pursuant to ss.
803.2(a)
- --------------------------------------------------------------------------------
NAME OF ENTITY FILING NOTIFICATION ADDRESS
- --------------------------------------------------------------------------------
(j) NAME AND ADDRESS OF ENTITY MAKING ACQUISITION OR WHOSE ASSETS OR VOTING
SECURITIES ARE BEING ACQUIRED IF DIFFERENT FROM THE ULTIMATE PARENT ENTITY
IDENTIFIED IN ITEM 1(A)
Not Applicable
- --------------------------------------------------------------------------------
PERCENT OF VOTING SECURITIES HELD BY EACH ENTITY IDENTIFIED IN ITEM 1(a)
Not Applicable
================================================================================
ITEM 2
2(a) DESCRIPTION OF ACQUISITION
Acquiring Persons Acquired Persons
- ----------------- ----------------
Indiana Energy, Inc. SIGCORP, INC.
1630 North Meridian Street 20 NW Fourth Street
Indianapolis, IN 46202 Evansville, IN 47741
SIGCORP, INC. Indiana Energy, Inc.
20 NW Fourth Street 1630 North Meridian Street
Evansville, IN 47741 Indianapolis, IN 46202
Pursuant to an Agreement and Plan of Merger (the "Agreement") among
Indiana Energy, Inc. ("Indiana"), SIGCORP, INC. ("SIGCORP") and Vectren
Corporation ("Vectren"), Indiana and SIGCORP will merge with and into Vectren.
Vectren, a new corporate entity formed jointly by Indiana and SIGCORP in
connection with this transaction, shall be the surviving corporation and will
continue to exist under the laws of Indiana. The transaction is a merger of
equals and will be effected as a pooling of interests in accordance with GAAP
and SEC regulations.
In accordance with the terms of the Agreement, each share of Indiana
common stock will be converted into the right to receive 1 share of Vectren
common stock and each share of SIGCORP common stock will be converted into the
right to receive 1.333 shares of Vectren common stock. Indiana will merge all of
its shares, valued at approximately $672 million, with and into Vectren. SIGCORP
will merge all of its shares, valued at $697 million, with and into Vectren.
Vectren will be capitalized at approximately $1.4 billion.
Closing of the transaction is subject to certain conditions, further
detailed in Article VIII of the Agreement (hereto attached as HSR Exhibit 1),
including expiration or early termination of the requisite waiting period under
the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.
Consummation of the transaction is scheduled to occur on the second business day
immediately following the date on which the last of the conditions is satisfied.
- --------------------------------------------------------------------------------
2(b)(i) ASSETS TO BE ACQUIRED (to be completed only for assets acquisitions)
Not Applicable
- --------------------------------------------------------------------------------
2
<PAGE> 5
- --------------------------------------------------------------------------------
NAME OF PERSON FILING NOTIFICATION DATE
Indiana Energy, Inc. July 16, 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
2(b)(ii) ASSETS HELD BY ACQUIRING PERSON
None
- --------------------------------------------------------------------------------
2(c) VOTING SECURITIES TO BE ACQUIRED
(c)(i) LIST AND DESCRIPTION OF VOTING SECURITIES AND LIST OF
NON-VOTING SECURITIES:
Indiana will merge all of its voting securities with and
into Vectren (See, Item 2(a)). The total value of the
Indiana's voting securities is approximately $ 672
million. (As Acquired Party)
SIGCORP will merge all of its voting securities with and
into Vectren (See, Item 2(a)). The total value of the
SIGCORP's voting securities is approximately $ 697
million. (As Acquiring Party)
(c)(ii) TOTAL NUMBER OF SHARES OF EACH CLASS OF SECURITY:
See, Item 2(c)(i)
(c)(iii) TOTAL NUMBER OF SHARES OF EACH CLASS OF SECURITY BEING
ACQUIRED:
See, Item 2(c)(i)
(c)(iv) IDENTITY OF PERSONS ACQUIRING SECURITIES:
See, Item 2(c)(i)
(c)(v) DOLLAR VALUE OF SECURITIES IN EACH CLASS BEING ACQUIRED:
See, Item 2(c)(i)
(c)(vi) TOTAL NUMBER OF EACH CLASS OF SECURITIES HELD BY ACQUIRING
PERSON AS A RESULT OF THE ACQUISITION:
See, Item 2(c)(i)
(c)(vii) PERCENTAGE OF EACH CLASS OF SECURITIES HELD BY ACQUIRING
PERSON AS A RESULT OF THE ACQUISITION:
See, Item 2(c)(i)
- --------------------------------------------------------------------------------
3
<PAGE> 6
- --------------------------------------------------------------------------------
NAME OF PERSON FILING NOTIFICATION DATE
Indiana Energy, Inc. July 16, 1999
- --------------------------------------------------------------------------------
(c)(viii) DOLLAR VALUE OF SECURITIES TO BE HELD AS A RESULT OF THE
ACQUISITION:
See, Item 2(c)(i)
- --------------------------------------------------------------------------------
(d) SUBMIT A COPY OF THE MOST RECENT VERSION OF CONTRACT OR AGREEMENT (or
letter of intent to merge or acquire)
ATTACHMENT OR REFERENCE NUMBER OF CONTRACT OR AGREEMENT 1
-----
================================================================================
ITEM 3
ASSETS AND VOTING SECURITIES HELD AS A RESULT OF THE ACQUISITION
(a) PERCENTAGE OF ASSETS Not Applicable
---------------------------
(b) PERCENTAGE OF VOTING SECURITIES 100%
---------------------------
(c) AGGREGATE TOTAL VALUE See, Item 2(a)
---------------------------
- --------------------------------------------------------------------------------
4
<PAGE> 7
- --------------------------------------------------------------------------------
NAME OF PERSON FILING NOTIFICATION DATE
Indiana Energy, Inc. July 16, 1999
- --------------------------------------------------------------------------------
================================================================================
ITEM 4 Persons filing notification may provide below an optional index of
documents required to be submitted by item 4 (see item by item
instructions). These documents should not be attached to this page.
4(a) DOCUMENTS FILED WITH THE UNITED STATES
SECURITIES AND EXCHANGE COMMISSION. ATTACHMENT OR REFERENCE NUMBER
Indiana Energy, Inc. Form 10-K for the 2
fiscal year ended September 30, 1998.
Indiana Energy, Inc. Notice of Annual 3
Meeting of Shareholders and Proxy
Statement dated December 4, 1998
Indiana Energy, Inc. Form 10-Q for the 4
quarterly period ended December 31, 1998
Indiana Energy, Inc. Form l0-Q for the 5
quarterly period ended March 31, 1999
Indiana Energy, Inc. Form 8-K dated 6
October 9, 1998
Indiana Energy, Inc. Form 8-K dated 7
October 12, 1998
Indiana Energy, Inc. Form 8-K dated 8
October 30, 1998
Indiana Energy, Inc. Form 8-K dated 9
January 27, 1999
Indiana Energy, Inc. Form 8-K dated 10
April 22, 1999
Indiana Energy, Inc. Form 8-K dated 11
April 30, 1999
Indiana Energy, Inc. Form 8-K dated 12
June 11, 1999
Indiana Energy, Inc. Form 8-K dated 13
June 14, 1999
Indiana Gas Company, Inc. Form 10-K for 14
the year ended September 30, 1998
Indiana Gas Company, Inc. Form 10-Q for 15
the quarterly period ended December 30, 1998
Indiana Gas Company, Inc. Form 10-Q for 16
the quarterly period ended March 31, 1999
Indiana Gas Company, Inc. Form 8-K dated 17
October 8, 1998
Indiana Gas Company, Inc. Form 8-K dated 18
October 30, 1998
Indiana Gas Company, Inc. Form 8-K dated 19
January 27, 1999
Indiana Gas Company, Inc. Form 8-K dated 20
April 22, 1999
Indiana Gas Company, Inc. Form 8-K dated 21
April 30, 1999
- --------------------------------------------------------------------------------
5
<PAGE> 8
- --------------------------------------------------------------------------------
NAME OF PERSON FILING NOTIFICATION DATE
Indiana Energy, Inc. July 16, 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
4(b) ANNUAL REPORTS, ANNUAL AUDIT REPORTS,
AND REGULARLY PREPARED BALANCE SHEETS. ATTACHMENT OR REFERENCE NUMBER
Indiana Energy, Inc. 1998 Annual Report 22
CIGMA, LLC Financial Statements prepared 23
in August 1998
ProLiance Energy, LLC Financial Statements 24
for the years ended August 31, 1998 and 1997
- --------------------------------------------------------------------------------
6
<PAGE> 9
- --------------------------------------------------------------------------------
NAME OF PERSON FILING NOTIFICATION DATE
Indiana Energy, Inc. July 16, 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
4(c) STUDIES, SURVEYS, ANALYSES, AND REPORTS ATTACHMENT OR REFERENCE NUMBER
Document entitled "Indiana Energy and 25
SIGCORP - Two Strong Companies that Make
Sense Together" prepared by Judy Wilkinson
(Abernathy, McGregor & Frank) on or about
June 12, 1999.
Handwritten notes of Neil Ellerbrook 26
(CEO-Indiana Energy, Inc.) written on
or about April 20, 1999.
Customer Service Area Map prepared by 27
Abernathy, McGregor & Frank in June 1999.
"Service Territory Demographics" prepared 28
by Paul Baker (COO-Indiana Gas) in May 1999.
"Revenue Enhancement Summary" prepared by 29
Deloitte Consulting on or about June 10, 1999.
"Strategic Planning Meeting - Draft Agenda 30
and Meeting Architecture" prepared by Dean
Machoff (Principal -- CSC Plan Metrics) in
April 1999.
"Project Olympus" presentation prepared by 31
Credit Suisse/First Boston on or about
June 4, 1999.
Presentation entitled "Vectren Corporation" 32
prepared by Abernathy, McGregor & Frank and
Jeff Whiteside (Director Investor Relations-
Indiana Energy, Inc.) in June 1999.
"Strategic Rationale for Olympus" prepared by 33
Credit Suisse/First Boston on or about
June 2, 1999.
"Vectren Corporation" presentation prepared by 34
Abernathy, McGregor & Frank, Jeff Whiteside
(Director Investor Relations-Indiana Energy,
Inc.), Tom Zabor (Vice President Human Resources-
Indiana Energy, Inc.), Anthony Ard (Senior Vice
President Corporate Affairs -- Indiana Energy,
Inc.) and Tim Burke (Secretary/Treasurer -- SIGCORP,
INC.) in June 1999.
Indiana Energy/SIGCORP Analyst Conference Call 35
Script prepared by Jeff Whiteside (Director
Investor Relations-Indiana Energy, Inc.), on or
about June 14, 1999.
Handwritten notes of Jeff Whiteside (Director 36
Investor Relations - Indiana Energy, Inc.)
prepared in June 1999.
Joint press release prepared by Jeff Whiteside 37
(Director Investor Relations-Indiana Energy, Inc.),
Tim Zabor (Vice President Human Resources-Indiana
Energy, Inc.), Anthony Ard (Senior Vice President
Corporate Affairs-Indiana Energy, Inc.), Tim Burke
(Secretary/Treasurer-SIGCORP, INC.), Mary Beth
Reese (Manager Corporate Communications-SIGCORP,
INC) and Linda Tiemann (Assistant Secretary --
SIGCORP, INC.) on or about June 14, 1999.
"Project Olympus: Board Document" prepared by 38***
Deloitte Consulting in June 1999.
"Project Olympus: High-Level Opportunity Assessment" 39***
prepared by Deloitte Consulting in April 1999.
"Project Olympus: Additional Opportunities" 40***
prepared by Deloitte Consulting on or about
June 1, 1999.
"Project Olympus -- Preliminary Synergy Analysis" 41***
prepared by Deloitte Consulting on or about
June 1, 1999.
Facsimile from Neil to Andy enclosing meeting 42
agenda, prepared by Neil Ellerbrook (CEO-Indiana
Energy, Inc.) an or about April 19, 1999.
Handwritten notes of Neil Ellerbrook (CEO-Indiana 43
Energy, Inc.) written on or about June 11, 1999.
*** Documents reflecting the notation "Draft-
Privileged and Confidential -- For Internal Use
Only" were not prepared at the request of counsel
and do not meet the standards for a claim of legal
privilege. No privilege is waived by submission of
these documents.
- --------------------------------------------------------------------------------
7
<PAGE> 10
- --------------------------------------------------------------------------------
NAME OF PERSON FILING NOTIFICATION DATE
Indiana Energy, Inc. July 16, 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
================================================================================
ITEM 5 (See the "References" listed in the General Instructions to the Form.
Refer to the 1987 edition of the Standard Industrial Classification
Manual for the 4-digit (SIC Code) industry codes. Refer to the Numerical
List of Manufactured and Mineral Products, 1992 Census of Manufactures
and Census of Mineral Industries (MC92-R-1) for the 5-digit product
class and 7-digit product codes. Report revenues for the 5-digit and
7-digit codes using the codes in the columns labeled "Product code.")
As Acquiring Party and Acquired Party
5(a) DOLLAR REVENUES BY INDUSTRY
<TABLE>
<CAPTION>
4-DIGIT INDUSTRY CODE 1992 TOTAL
Product code published DESCRIPTION DOLLAR REVENUES
- ---------------------- ----------- ---------------
<S> <C> <C>
4923 Natural Gas Transmission 411,260
and Distribution
6512 Operators of Nonresidential 10
Buildings
</TABLE>
- --------------------------------------------------------------------------------
5(b)(i) DOLLAR REVENUES BY MANUFACTURED PRODUCTS
<TABLE>
<CAPTION>
7-DIGIT PRODUCT CODE 1992 TOTAL
Product code published DESCRIPTION DOLLAR REVENUES
<S> <C> <C>
None
</TABLE>
- --------------------------------------------------------------------------------
5(b)(ii) PRODUCTS ADDED OR DELETED
<TABLE>
<CAPTION>
DESCRIPTION (7-DIGIT PRODUCT CODE) ADD DELETE YEAR OF CHANGE TOTAL DOLLAR
<S> <C> <C> <C> <C>
None
</TABLE>
- --------------------------------------------------------------------------------
5(b)(iii) DOLLAR REVENUES BY MANUFACTURED PRODUCT CLASS
<TABLE>
<CAPTION>
5-DIGIT PRODUCT CLASS CODE DESCRIPTION / 1998 /
------
Product Code published TOTAL DOLLAR REVENUES
<S> <C> <C>
None
</TABLE>
- --------------------------------------------------------------------------------
8
<PAGE> 11
- --------------------------------------------------------------------------------
NAME OF PERSON FILING NOTIFICATION DATE
Indiana Energy, Inc. July 16, 1999
- --------------------------------------------------------------------------------
================================================================================
5(c) DOLLAR REVENUES BY NON-MANUFACTURING INDUSTRY
<TABLE>
<CAPTION>
4-DIGIT INDUSTRY DESCRIPTION / 1998 /
CLASS CODE TOTAL DOLLAR
REVENUES
<S> <C> <C>
4911 Electric Services 65,957
4923 Natural Gas Transmission and Distribution 1,111,301
6512 Operators of Nonresidential Buildings 472
6799 Investors, Not Elsewhere Classified 494
7322 Adjustments and Collection Services 330
7359 Equipment Rental and Leasing, Not Elsewhere 12
Classified
7376 Computer Facilities Management Services 19,167
8721 Accounting, Auditing, and Bookkeeping 3,506
Services
8742 Management Consulting Services 3,006
</TABLE>
- --------------------------------------------------------------------------------
5(d) COMPLETE ONLY IF ACQUISITION IS THE INFORMATION OF A JOINT VENTURE OR
OTHER CORPORATION
5(d)(i) NAME AND ADDRESS OF THE JOINT VENTURE OR OTHER CORPORATION
Not Applicable
5(d)(ii)
(A) CONTRIBUTIONS THAT EACH PERSON FORMING THE JOINT VENTURE OR OTHER
CORPORATION HAS AGREED TO MAKE.
Not Applicable
(B) DESCRIPTION OF ANY CONTRACTS OR AGREEMENTS.
Not Applicable
- --------------------------------------------------------------------------------
9
<PAGE> 12
- --------------------------------------------------------------------------------
NAME OF PERSON FILING NOTIFICATION DATE
Indiana Energy, Inc. July 16, 1999
- --------------------------------------------------------------------------------
(C) DESCRIPTION OF ANY CREDIT GUARANTEES OR OBLIGATIONS.
Not Applicable
(D) DESCRIPTION OF CONSIDERATION WHICH EACH PERSON FORMING THE JOINT
VENTURE OR OTHER CORPORATION WILL RECEIVE.
Not Applicable
5(d)(iii) DESCRIPTION OF THE BUSINESS IN WHICH THE JOINT VENTURE OR OTHER
CORPORATION WILL ENGAGE.
Not Applicable
5(d)(iv) SOURCE OF DOLLAR REVENUES BY 4-DIGIT SIC CODE (non-manufacturing) AND
BY 5-DIGIT PRODUCT CLASS (manufacturing).
Not Applicable
================================================================================
ITEM 6
6(a) ENTITIES WITHIN PERSON FILING NOTIFICATION
As Acquiring Party and Acquired Party
<TABLE>
<CAPTION>
COUNTRY COMPANY ADDRESS
- ------- ------- -------
<S> <C> <C>
USA IEI Services, LLC 1630 North Meridian Street
Indianapolis, IN 46202
USA IEI Capital Corp. 1630 North Meridian Street
Indianapolis, IN 46202
USA Indiana Gas, Inc. 1630 North Meridian Street
Indianapolis, IN 46202
USA Terre Haute Gas Corporation 1630 North Meridian Street
Indianapolis, IN 46202
USA Richmond Gas Corporation 1630 North Meridian Street
Indianapolis, IN 46202
USA IEI Investments, Inc. 1630 North Meridian Street
Indianapolis, IN 46202
USA IGC Energy, Inc. 1630 North Meridian Street
Indianapolis, IN 46202
USA ProLiance Energy, LLC 135 N. Pennsylvania Suite 800
Indianapolis, IN 46204
</TABLE>
- --------------------------------------------------------------------------------
10
<PAGE> 13
- --------------------------------------------------------------------------------
NAME OF PERSON FILING NOTIFICATION DATE
Indiana Energy, Inc. July 16, 1999
- --------------------------------------------------------------------------------
6(a) ENTITIES WITHIN PERSON FILING NOTIFICATION
As Acquiring Party and Acquired Party
<TABLE>
<CAPTION>
COUNTRY COMPANY ADDRESS
- ------- ------- -------
<S> <C> <C>
USA CIGMA, LLC 8399 Zionsville Road
Indianapolis, IN 46268
USA Reliant Services, LLC 4902 W. 106th Street
Zionsville, IN 46077
USA Indiana Energy Services, Inc. 1630 North Meridian Street
Indianapolis, IN 46202
USA Energy Realty, Inc. 1630 North Meridian Street
Indianapolis, IN 46202
USA Energy Financial Group, Inc. 1630 North Meridian Street
Indianapolis, IN 46202
USA IEI Synfuels, Inc. 1630 North Meridian Street
Indianapolis, IN 46202
USA IEI Financial Services, LLC 1630 North Meridian Street
Indianapolis, IN 46202
USA Indiana Energy Foundation, Inc. 1630 North Meridian Street
Indianapolis, IN 46202
USA Utility Debt Collection, Inc. 1630 North Meridian Street
Indianapolis, IN 46202
</TABLE>
- --------------------------------------------------------------------------------
6(b) SHAREHOLDERS OF PERSON FILING NOTIFICATION
As Acquiring Party and Acquired Party
<TABLE>
<CAPTION>
ISSUER SHAREHOLDER NUMBER/CLASS/PERCENT
- ------ ----------- --------------------
<S> <C> <C>
Indiana Energy, Inc. Mari H. George* 2,741,469/Common/9.12%
Indiana Energy, Inc. Anton H. George* 2,465,603/Common/8.2%
Indiana Energy, Inc. Katherine M. George* 2,172,133/Common/7.23%
Indiana Energy, Inc. Laura L. George* 2,465,603/Common/8.2%
Indiana Energy, Inc. Nancy L. George* 2,173,184/Common/7.23%
Indiana Energy, Inc. M. Josephine George* 2,169,193/Common/7.22%
Indiana Energy, Inc. Hulman & Company 2,163,247/Common/7.2%
</TABLE>
* Included within the number of shares beneficially held by each individual are
the shares held by Hulman & Company, 2,163,247 shares. Each individual may be
deemed to share voting power or investment power of those shares, due to the
position each person holds with respect to Hulman & Company. Some individuals
have disclaimed beneficial ownership of certain shares. See, page 2 of the Proxy
Statement (Attached hereto as HSR Attachment 3) for more detail regarding
beneficial ownership of the Hulman Interests.
- --------------------------------------------------------------------------------
11
<PAGE> 14
- --------------------------------------------------------------------------------
NAME OF PERSON FILING NOTIFICATION DATE
Indiana Energy, Inc. July 16, 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
6(c) HOLDINGS OF PERSON FILING NOTIFICATION
<TABLE>
<CAPTION>
ISSUER NUMBER/CLASS/PERCENT
------ --------------------
<S> <C>
WeatherWise USA, LLC ProLiance Energy, LLC holds a 20% membership
interest
Energy Systems Group, LLC IGC Energy, Inc. holds a 1/3 membership interest
</TABLE>
================================================================================
ITEM 7 DOLLAR REVENUES
As Acquiring Party and Acquired Party
7(a) 4-DIGIT SIC CODE AND DESCRIPTION
4911 Electric Services
4923 Natural Gas and Distribution
6799 Investors, Not Elsewhere Classified
8742 Management Consulting Services
- --------------------------------------------------------------------------------
7(b) NAME OF EACH PERSON WHICH ALSO DERIVED DOLLAR REVENUES
4911 SIGCORP, INC.
4923 SIGCORP, INC.
6799 SIGCORP, INC.
8742 SIGCORP, INC.
- --------------------------------------------------------------------------------
7(c) GEOGRAPHIC MARKET INFORMATION
4911 - ProLiance Energy, LLC derived wholesale electric revenues in the
following states; Alabama, Arkansas, Indiana, Louisiana, Mississippi and
Ohio. ProLiance services only one retail customer, located in Missouri.
4923 - ProLiance Energy, LLC derived a combination of retail and wholesale
natural gas revenues in the following states; Illinois*, Indiana,
Kentucky*, Michigan, Missouri*, Ohio, Tennessee*, and Wisconsin*. Indiana
Gas, Inc. derived retail natural gas revenues in Indiana. Utility
regulation limits the counties in which Indiana Gas is permitted to
operate, more specifically detailed on the Indiana Gas, Inc. tariff sheet
(hereto attached as HSR Exhibit 44). Only one county in Indiana, Martin,
is common to both SIGECO and Indiana Gas. The firms do not service any
common customers in Martin County.
6799 - Lafayette, Indiana.
8742 - Indiana. All of IEI's revenues in this code are intracompany.
* ProLiance has less than 10 customers in each of these states.
- --------------------------------------------------------------------------------
12
<PAGE> 15
- --------------------------------------------------------------------------------
NAME OF PERSON FILING NOTIFICATION DATE
Indiana Energy, Inc. July 16, 1999
- --------------------------------------------------------------------------------
================================================================================
ITEM 8 VENDOR-VENDEE RELATIONSHIP
|X| NO |_| YES (If yes and you are the vendee, complete the following)
PRODUCT PURCHASES VENDOR DOLLAR AMOUNT
- --------------------------------------------------------------------------------
ITEM 9 PRIOR ACQUISITIONS (to be completed by acquiring person only)
4911 None
4923 None
6799 None
8742 None
- --------------------------------------------------------------------------------
13
<PAGE> 16
- --------------------------------------------------------------------------------
NAME OF PERSON FILING NOTIFICATION DATE
Indiana Energy, Inc. July 1999
- --------------------------------------------------------------------------------
ITEM 10 IDENTIFICATION OF PERSON TO CONTACT REGARDING THIS REPORT
- --------------------------------------------------------------------------------
10(a) NAME OF CONTACT PERSON TITLE OF CONTACT PERSON
Edward P. Henneberry Partner
Howard T. Rosenblatt Partner
- --------------------------------------------------------------------------------
FIRM NAME AND BUSINESS ADDRESS BUSINESS TELEPHONE NUMBER
Howrey & Simon
1299 Pennsylvania Avenue, N.W. 202-383-6926
Washington, D.C. 20004 202-383-7058
- --------------------------------------------------------------------------------
10(b) IDENTIFICATION OF AN INDIVIDUAL LOCATED IN THE UNITED STATES DESIGNATED
FOR THE LIMITED PURPOSE OF RECEIVING NOTICE OF ISSUANCE OF A REQUEST FOR
ADDITIONAL INFORMATION FOR DOCUMENTS. (See ss. 803.20(b)(2)(iii))
- --------------------------------------------------------------------------------
NAME TITLE
- --------------------------------------------------------------------------------
ADDRESS BUSINESS TELEPHONE NUMBER
- --------------------------------------------------------------------------------
CERTIFICATION
- --------------------------------------------------------------------------------
This NOTIFICATION AND REPORT FORM, together with any and all appendices and
attachments thereto; was prepared and assembled under my supervision in
accordance with instructions issued by the Federal Trade Commission. Subject to
the recognition that, where so indicated, reasonable estimates have been made
because books and records do not provide the required data, the information is,
to the best of my knowledge, true, correct, and complete in accordance with the
statute and rules.
- --------------------------------------------------------------------------------
NAME (Please print or type) TITLE
Jerome A. Benkert Vice President
Controller
- --------------------------------------------------------------------------------
SIGNATURE DATE
/s/ Jerome A. Benkert 7-1-99
- --------------------------------------------------------------------------------
Subscribed and sworn to before me at the
City of Indianapolis, State of Indiana
this 1st day of July, 1999.
Signature: /s/ Tammy M. Worland
------------------------------
My Commission expires: May [ILLEGIBLE], 2000
----------------------
[SEAL]
- --------------------------------------------------------------------------------
NOTARY PUBLIC
OFFICIAL
TAMMY M WORLAND
SEAL
STATE OF INDIANA
- --------------------------------------------------------------------------------
<PAGE> 17
EXHIBIT D-1-B
AFFIDAVIT OF TIMOTHY L. BURKE
SECRETARY AND TREASURER
SIGCORP, INC.
STATE OF INDIANA )
) ss.
COUNTY OF VANDERBURGH )
TIMOTHY L. BURKE, being duly sworn, deposes and says:
1. I am Secretary and Treasurer of SIGCORP, INC., and make this
Affidavit on behalf of the corporation pursuant to Section 803.5(b)
of the Rules of the Federal Trade Commission under Section 7A of the
Clayton Act.
2. SIGCORP, INC. has entered into an Agreement and Plan of Merger with
Indiana Energy, Inc. and Vectren Corporation.
3. SIGCORP, INC. has a good faith intention to consummate the
transaction as described in the attached Notification and Report
forms.
SIGCORP, INC.
/s/ Timothy L. Burke
---------------------------
Timothy L. Burke
Secretary and Treasurer
Sworn to before me this
12th day of July, 1999.
/s/ Donna S. Welden
- ------------------------
Donna S. Welden
Notary Public
(SEAL)
<PAGE> 18
================================================================================
16 C.F.R. Part 803 Appendix Approved by 0MB
3084-0005
NOTIFICATION AND REPORT FORM FOR CERTAIN MERGERS AND ACQUISITIONS
- --------------------------------------------------------------------------------
[FOR OFFICE USE ONLY]
[Transaction Number ]
[ ]
Attach the Affidavit required by ss. 803.5 to this page. [ / / / / / ]
---------------------
[ CTO ETR ]
---------------------
Is this Acquisition a CASH TENDER OFFER? |_| YES |X| NO
- --------------------------------------------------------------------------------
Do you request Early Termination of the Waiting Period? |X| YES |_| NO
================================================================================
ITEM 1
(a) NAME AND HEADQUARTERS ADDRESS OF PERSON FILING NOTIFICATION (ultimate
parent entity)
SIGCORP, INC.
20 NW Fourth Street
Evansville, IN 47741
- --------------------------------------------------------------------------------
(b) PERSON FILING NOTIFICATION IS
|_| an acquiring person |_| an acquired person |X| both
- --------------------------------------------------------------------------------
(c) LIST NAMES OF ULTIMATE PARENT LIST LIST NAMES OF ULTIMATE PARENT
ENTITIES OF ALL ACQUIRING PERSONS ENTITIES OF ALL ACQUIRED PERSONS:
SIGCORP, INC. Indiana Energy, Inc.
Indiana Energy, Inc. SIGCORP, INC.
- --------------------------------------------------------------------------------
(d) THIS ACQUISITION IS (put an X in all the boxes that apply)
|_| an acquisition of assets
|X| a merger (see ss. 801.2)
|_| an acquisition subject to ss. 801.2(e)
|_| formation of a joint venture or other
|_| corporation (see ss. 801.40)
|_| an acquisition subject to ss. 801.30 (specify type):______________________
|_| other (specify) __________________________________________________________
|_| a consolidation (see ss. 801.2)
|_| an acquisition of voting securities
|_| a secondary acquisition
|_| an acquisition subject to ss. 801.31
- --------------------------------------------------------------------------------
(e) INDICATE HIGHEST NOTIFICATION THRESHOLD IN ss. 801.1(h) FOR WHICH THIS
FORM IS BEING FILED (acquiring person only)
|_| $15 million |_| 15% |_| 25% |X| 50%
- --------------------------------------------------------------------------------
(f) VALUE OF VOTING SECURITIES VALUE OF ASSETS
See, Item 2 (a) Not Applicable
- --------------------------------------------------------------------------------
(g) PUT AN X IN THE APPROPRIATE BOX TO DESCRIBE ENTITY FILING NOTIFICATION
|X| corporation |_| partnership |_| other (specify)________________
- --------------------------------------------------------------------------------
(h) DATA FURNISHED BY
|X| calendar year |_| fiscal year (specify period): _______ To ________
- --------------------------------------------------------------------------------
<PAGE> 19
- --------------------------------------------------------------------------------
NAME OF PERSON FILING NOTIFICATION DATE
SIGCORP, INC. July 16, 1999
- --------------------------------------------------------------------------------
(i) PUT AN X IN THE APPROPRIATE BOX AND GIVE THE NAME AND ADDRESS OF THE
ENTITY FILING NOTIFICATION (if other than ultimate parent entity)
|X| NA |_| This report is being filed on |_| This report is being filed
behalf of a foreign person on behalf of the ultimate
pursuant to ss. 803.4. parent entity by another
entity within the same
person authorized by it to
file pursuant to ss.
803.2(a)
- --------------------------------------------------------------------------------
NAME OF ENTITY FILING NOTIFICATION ADDRESS
- --------------------------------------------------------------------------------
(j) NAME AND ADDRESS OF ENTITY MAKING ACQUISITION OR WHOSE ASSETS OR VOTING
SECURITIES ARE BEING ACQUIRED IF DIFFERENT FROM THE ULTIMATE PARENT ENTITY
IDENTIFIED IN ITEM 1(A)
Not Applicable
- --------------------------------------------------------------------------------
PERCENT OF VOTING SECURITIES HELD BY EACH ENTITY IDENTIFIED IN ITEM 1(a)
Not Applicable
================================================================================
ITEM 2
2(a) DESCRIPTION OF ACQUISITION
Acquiring Persons Acquired Persons
- ----------------- ----------------
Indiana Energy, Inc. SIGCORP, INC.
1630 North Meridian Street 20 NW Fourth Street
Indianapolis, IN 46202 Evansville, IN 47741
SIGCORP, INC. Indiana Energy, Inc.
20 NW Fourth Street 1630 North Meridian Street
Evansville, IN 47741 Indianapolis, IN 46202
Pursuant to an Agreement and Plan of Merger (the "Agreement") among
Indiana Energy, Inc. ("Indiana"), SIGCORP, INC. ("SIGCORP") and Vectren
Corporation ("Vectren"), Indiana and SIGCORP will merge with and into Vectren.
Vectren, a new corporate entity formed jointly by Indiana and SIGCORP in
connection with this transaction, shall be the surviving corporation and will
continue to exist under the laws of Indiana. The transaction is a merger of
equals and will be effected as a pooling of interests in accordance with GAAP
and SEC regulations.
In accordance with the terms of the Agreement, each share of Indiana
common stock will be converted into the right to receive 1 share of Vectren
common stock and each share of SIGCORP common stock will be converted into the
right to receive 1.333 shares of Vectren common stock. Indiana will merge all of
its shares, valued at approximately $672 million, with and into Vectren. SIGCORP
will merge all of its shares, valued at $697 million, with and into Vectren.
Vectren will be capitalized at approximately $1.4 billion.
Closing of the transaction is subject to certain conditions, further
detailed in Article VIII of the Agreement (hereto attached as HSR Exhibit 1),
including expiration or early termination of the requisite waiting period under
the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.
Consummation of the transaction is scheduled to occur on the second business day
immediately following the date on which the last of the conditions is satisfied.
- --------------------------------------------------------------------------------
2(b)(i) ASSETS TO BE ACQUIRED (to be completed only for assets acquisitions)
Not Applicable
- --------------------------------------------------------------------------------
2
<PAGE> 20
- --------------------------------------------------------------------------------
NAME OF PERSON FILING NOTIFICATION DATE
SIGCORP, INC. July 16, 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
2(b)(ii) ASSETS HELD BY ACQUIRING PERSON
None
- --------------------------------------------------------------------------------
2(c) VOTING SECURITIES TO BE ACQUIRED
(c)(i) LIST AND DESCRIPTION OF VOTING SECURITIES AND LIST OF
NON-VOTING SECURITIES:
SIGCORP will merge all of its voting securities with and
into Vectren (See, Item 2(a)). The total value of the
SIGCORP's voting securities is approximately $697
million. [As Acquired Party]
Indiana will merge all of its voting securities with and
into Vectren (See, Item 2(a)). The total value of the
Indiana's voting securities is approximately $672
million. [As Acquiring Party]
(c)(ii) TOTAL NUMBER OF SHARES OF EACH CLASS OF SECURITY:
See, Item 2(c)(i)
(c)(iii) TOTAL NUMBER OF SHARES OF EACH CLASS OF SECURITY BEING
ACQUIRED:
See, Item 2(c)(i)
(c)(iv) IDENTITY OF PERSONS ACQUIRING SECURITIES:
See, Item 2(c)(i)
(c)(v) DOLLAR VALUE OF SECURITIES IN EACH CLASS BEING ACQUIRED:
See, Item 2(c)(i)
(c)(vi) TOTAL NUMBER OF EACH CLASS OF SECURITIES HELD BY ACQUIRING
PERSON AS A RESULT OF THE ACQUISITION:
See, Item 2(c)(i)
(c)(vii) PERCENTAGE OF EACH CLASS OF SECURITIES HELD BY ACQUIRING
PERSON AS A RESULT OF THE ACQUISITION:
See, Item 2(c)(i)
- --------------------------------------------------------------------------------
3
<PAGE> 21
- --------------------------------------------------------------------------------
NAME OF PERSON FILING NOTIFICATION DATE
SIGCORP, INC. July 16, 1999
- --------------------------------------------------------------------------------
(c)(viii) DOLLAR VALUE OF SECURITIES TO BE HELD AS A RESULT OF THE
ACQUISITION:
See, Item 2(c)(i)
- --------------------------------------------------------------------------------
(d) SUBMIT A COPY OF THE MOST RECENT VERSION OF CONTRACT OR AGREEMENT (or
letter of intent to merge or acquire)
ATTACHMENT OR REFERENCE NUMBER OF CONTRACT OR AGREEMENT 1
-----
================================================================================
ITEM 3
ASSETS AND VOTING SECURITIES HELD AS A RESULT OF THE ACQUISITION
(a) PERCENTAGE OF ASSETS Not Applicable
---------------------------
(b) PERCENTAGE OF VOTING SECURITIES 100%
---------------------------
(c) AGGREGATE TOTAL VALUE See, Item 2(a)
---------------------------
================================================================================
ITEM 4 Persons filing notification may provide below an optional index of
documents required to be submitted by item 4 (see item by item
instructions). These documents should not be attached to this page.
4(a) DOCUMENTS FILED WITH THE UNITED STATES
SECURITIES AND EXCHANGE COMMISSION. ATTACHMENT OR REFERENCE NUMBER
SIGCORP, Inc. and Southern Indiana Gas & 2
Electric Company Form 10-K for the fiscal
year ended December 31, 1998
SIGCORP, INC. and Southern Indiana Gas & 3
Electric Company Proxy Statement
SIGCORP, INC. and Southern Indiana Gas & 4
Electric Company Form 10-Q for the
quarterly period ended March 31, 1999
SIGCORP, Inc. Form 8-K dated June 11, 1999 5
- --------------------------------------------------------------------------------
4(b) ANNUAL REPORTS, ANNUAL AUDIT REPORTS,
AND REGULARLY PREPARED BALANCE SHEETS. ATTACHMENT OR REFERENCE NUMBER
SIGCORP, INC. 1998 Annual Report 6
Financial and Statistical Information 1998-1999 7
- --------------------------------------------------------------------------------
4
<PAGE> 22
- --------------------------------------------------------------------------------
NAME OF PERSON FILING NOTIFICATION DATE
SIGCORP, INC. July 16, 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
4(c) STUDIES, SURVEYS, ANALYSES, AND REPORTS. ATTACHMENT OR REFERENCE NUMBER
"Project Olympus - Board Directors 8***
Meeting" prepared by Deliotte Consulting
in June 1999.
"Project Olympus - High Level Opportunity 9***
Assessment" prepared by Deliotte
Consulting in April 1999.
"Project Olympus - Preliminary Synergies 10***
Analysis" prepared by Deliotte Consulting
on or about June 1, 1999.
"Project Olympus - Additional 11***
Opportunities" prepared by Deliotte
Consulting on or about June 1, 1999
Facsimile from Neil to Andy enclosing 12
meeting agenda, prepared by Neil
Ellerbrook (CEO-Indiana Energy, Inc.) on
or about April 19, 1999.
"Project Olympus - Poseidon Board 13
Presentation" prepared by Goldman Sachs
on or about June 7, 1999.
Document entitled "Indiana Energy and 14
SIGCORP - Two Strong Companies that Make
Sense Together" prepared by Judy Wilkinson
(Abernathy, McGregor & Frank) on or
about June 12, 1999.
Joint press release prepared by Jeff 15
Whiteside (Director Investor
Relations-Indiana Energy, Inc.), Tom Zabor
(Vice President Human Resources-Indiana
Energy, Inc.), Anthony Ard (Senior Vice
President Corporate Affairs-Indiana
Energy, Inc.), Tim Burke
(Secretary/Treasurer-SIGCORP, INC.), Mary
Beth Reese (Manager Corporate
Communications-SIGCORP, INC) and Linda
Tiemann (Assistant Secretary - SIGCORP,
INC.) on or about June 14, 1999.
"Key Points In Making Contacts And/Or 16
Answering Questions Vectren Corporation"
prepared by Mary Beth Reese (Manager
Corporate Communications-SIGCORP, INC) and
Dick Lynch (SIGCORP, INC.) on or about
June 13, 1999.
Indiana Energy/SIGCORP Analyst Conference 17
Call Script prepared by Jeff Whiteside
(Director Investor Relations-Indiana
Energy, Inc.), on or about June 14, 1999.
"Vectren Corporation" presentation 18
prepared by Abernathy, McGregor & Frank,
Jeff Whiteside (Director Investor
Relations- Indiana Energy, Inc.),
Tom Zabor (Vice President Human
Resources-Indiana Energy, Inc.), Anthony
Ard (Senior Vice President Corporate
Affairs - Indiana Energy, Inc.) and Tim
Burke (Secretary/Treasurer - SIGCORP,
INC.) in June 1999.
* * * * * * * Documents reflecting the notation "Draft-Privileged and
Confidential - For Internal Use Only" were not prepared at the request of
counsel and do not meet the standards for a claim of legal privilege. No
privilege is waived by submission of these documents.
- --------------------------------------------------------------------------------
5
<PAGE> 23
- --------------------------------------------------------------------------------
NAME OF PERSON FILING NOTIFICATION DATE
SIGCORP, INC. July 16, 1999
- --------------------------------------------------------------------------------
================================================================================
ITEM 5 (See the "References" listed in the General Instructions to the Form.
Refer to the 1987 edition of the Standard Industrial Classification
Manual for the 4-digit (SIC Code) industry codes. Refer to the Numerical
List of Manufactured and Mineral Products, 1992 Census of Manufactures
and Census of Mineral Industries (MC92-R-1) for the 5-digit product
class and 7-digit product codes. Report revenues for the 5-digit and
7-digit codes using the codes in the columns labeled "Product code.")
5(a) DOLLAR REVENUES BY INDUSTRY
<TABLE>
<CAPTION>
4-DIGIT INDUSTRY CODE 1992 TOTAL
Product code published DESCRIPTION DOLLAR REVENUES
- ---------------------- ----------- ---------------
($000)
As Acquiring Party and Acquired
Party
<S> <C> <C>
4911 Electric Services 243,077
4924 Natural Gas Distribution 64,623
6799 Investors, NEC 1,557
</TABLE>
- --------------------------------------------------------------------------------
5(b)(i) DOLLAR REVENUES BY MANUFACTURED PRODUCTS
<TABLE>
<CAPTION>
7-DIGIT PRODUCT CODE 1992 TOTAL
Product code published DESCRIPTION DOLLAR REVENUES
<S> <C> <C>
As Acquiring Party and Acquired
Party
None
</TABLE>
- --------------------------------------------------------------------------------
5(b)(ii) PRODUCTS ADDED OR DELETED
<TABLE>
<CAPTION>
DESCRIPTION (7-DIGIT PRODUCT CODE) ADD DELETE YEAR OF CHANGE TOTAL DOLLAR
($000)
As Acquiring Party and Acquired Party
<S> <C> <C> <C> <C>
3299094 X 1994 27
</TABLE>
- --------------------------------------------------------------------------------
6
<PAGE> 24
- --------------------------------------------------------------------------------
NAME OF PERSON FILING NOTIFICATION DATE
SIGCORP, INC. July 16, 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
5(b)(iii) DOLLAR REVENUES BY MANUFACTURED PRODUCT CLASS
<TABLE>
<CAPTION>
5-DIGIT PRODUCT CLASS CODE DESCRIPTION / 1998 /
Product Code published TOTAL DOLLAR REVENUES
($000)
As Acquiring Party and Acquired
Party
<S> <C> <C>
32990 Other Nonmetallic Mineral Products, NEC 27
</TABLE>
- --------------------------------------------------------------------------------
5(c) DOLLAR REVENUES BY NON-MANUFACTURING INDUSTRY
<TABLE>
<CAPTION>
4-DIGIT INDUSTRY DESCRIPTION / 1998 /
CLASS CODE TOTAL DOLLAR
REVENUES
As Acquiring Party and ($000)
Acquired Party
<S> <C> <C>
1221 Bituminous Coal and Lignite Surface Mining 15,722
4911 Electric Services 297,865
4923 Natural Gas Transmission and Distribution 180,405
4924 Natural Gas Distribution 66,801
4939 Combination Utilities, NEC 664
5052 Coal and Other Minerals and Ores 1,073
6153 Short-Term Business Credit Institutions,
Except Agriculture 3,425
6799 Investors, NEC 9,846
8742 Management Consulting Services 10,172
</TABLE>
- --------------------------------------------------------------------------------
5(d) COMPLETE ONLY IF ACQUISITION IS THE INFORMATION OF A JOINT VENTURE OR
OTHER CORPORATION
As Acquiring Party and Acquired Party
5(d)(i) NAME AND ADDRESS OF THE JOINT VENTURE OR OTHER CORPORATION
Not Applicable
- --------------------------------------------------------------------------------
7
<PAGE> 25
- --------------------------------------------------------------------------------
NAME OF PERSON FILING NOTIFICATION DATE
SIGCORP, INC. July 16, 1999
- --------------------------------------------------------------------------------
5(d)(ii)
(A) CONTRIBUTIONS THAT EACH PERSON FORMING THE JOINT VENTURE OR OTHER
CORPORATION HAS AGREED TO MAKE.
Not Applicable
(B) DESCRIPTION OF ANY CONTRACTS OR AGREEMENTS.
Not Applicable
(C) DESCRIPTION OF ANY CREDIT GUARANTEES OR OBLIGATIONS.
Not Applicable
(D) DESCRIPTION OF CONSIDERATION WHICH EACH PERSON FORMING THE JOINT
VENTURE OR OTHER CORPORATION WILL RECEIVE.
Not Applicable
5(d)(iii) DESCRIPTION OF THE BUSINESS IN WHICH THE JOINT VENTURE OR OTHER
CORPORATION WILL ENGAGE.
Not Applicable
5(d)(iv) SOURCE OF DOLLAR REVENUES BY 4-DIGIT SIC CODE (non-manufacturing) AND
BY 5-DIGIT PRODUCT CLASS (manufacturing).
Not Applicable
================================================================================
ITEM 6
6(a) ENTITIES WITHIN PERSON FILING NOTIFICATION
As Acquiring Party and Acquired Party
<TABLE>
<CAPTION>
COUNTRY COMPANY ADDRESS
- ------- ------- -------
<S> <C> <C>
USA Southern Indiana Gas and Electric Company 20 N.W. Fourth Street
Evansville, IN 47708
USA Energy Systems Group, Inc. 101 Plaza East Blvd
Evansville, IN 47708
</TABLE>
- --------------------------------------------------------------------------------
8
<PAGE> 26
- --------------------------------------------------------------------------------
NAME OF PERSON FILING NOTIFICATION DATE
SIGCORP, INC. July 16, 1999
- --------------------------------------------------------------------------------
6(a) ENTITIES WITHIN PERSON FILING NOTIFICATION
As Acquiring Party and Acquired Party
<TABLE>
<CAPTION>
COUNTRY COMPANY ADDRESS
- ------- ------- -------
<S> <C> <C>
USA Southern Indiana Minerals, Inc. 8311 Welborn Road
Mt. Vernon, IN
USA SIGCORP Energy Services, Inc. 19 N.W. Fourth Street
Evansville, IN 47708
USA SIGCORP Gas Marketing, LLC 19 N.W. Fourth Street
Evansville, IN 47708
USA SIGCORP Gas Marketing, Inc. 19 N.W. Fourth Street
Evansville, IN 47708
USA SIGCORP Capital, Inc. 19 N.W. Fourth Street
Evansville, IN 47708
USA SIGCORP Communication Services, Inc. 20 N.W. John Street
Evansville, IN 47708
USA SIGCORP Fuels, Inc. 329 Main Street
Evansville, IN 47708
USA SFI Coal Sales 329 Main Street
Evansville, IN 47708
USA Cypress Creek Mine, LLC 329 Main Street
Evansville, IN 47708
USA Prosperity Mine, LLC 329 Main Street
Evansville, IN 47708
USA Cypress Creek Mine, Inc. 329 Main Street
Evansville, IN 47708
USA SIGECO Advanced Communications, Inc. 20 N.W. Fourth Street
Evansville, IN 47708
USA SIGCORP Power Marketing, Inc. 20 N.W. Fourth Street
Evansville, IN 47708
USA SIGCORP Environmental Services, Inc. 20 N.W. Fourth Street
Evansville, IN 47708
USA Air Quality Services, LLC 427 B Main Street
Evansville, IN 47708
USA Southern Indiana Properties, Inc. 100 N.W. 2nd Street
Evansville, IN 47708
USA SIP-GT, Inc. 100 N.W. 2nd Street
Evansville, IN 47708
USA SIP Diversified Holdings, Inc. 913 N. Market Street
Wilmington, DE 19801
USA Southwest Lease Capital, Inc. 100 N.W. 2nd Street
Evansville, IN 47708
</TABLE>
- --------------------------------------------------------------------------------
9
<PAGE> 27
- --------------------------------------------------------------------------------
NAME OF PERSON FILING NOTIFICATION DATE
SIGCORP, INC. July 16, 1999
- --------------------------------------------------------------------------------
6(a) ENTITIES WITHIN PERSON FILING NOTIFICATION
As Acquiring Party and Acquired Party
<TABLE>
<CAPTION>
COUNTRY COMPANY ADDRESS
- ------- ------- -------
<S> <C> <C>
USA SIRO Partners 100 N.W. 2nd Street
Evansville, IN 47708
USA Southern Indiana Joint Ventures, Inc. 100 N.W. 2nd Street
Evansville, IN 47708
USA MCN Equities, Inc. 100 N.W. 2nd Street
Evansville, IN 47708
USA Joint Ventures Affiliated II, Inc. 100 N.W. 2nd Street
Evansville, IN 47708
USA Martin Lamplighter Investments, L.P. 100 N.W. 2nd Street
Evansville, IN 47708
USA Lafayette Housing Association, L.P. 100 N.W. 2nd Street
Evansville, IN 47708
USA House Investments Paragus I, L.P. 100 N.W. 2nd Street
Evansville, IN 47708
USA House Investments Martz TCF II, L.P. 100 N.W. 2nd Street
Evansville, IN 47708
USA House Investments - Bradford Run, L.P. 100 N.W. 2nd Street
Evansville, IN 47708
USA Prestwick Square of Marion, L.P. 100 N.W. 2nd Street
Evansville, IN 47708
USA Multi-Housing Partners I-IV, L.P. 100 N.W. 2nd Street
Evansville, IN 47708
USA House Investments Martz TCF I, L.P. 100 N.W. 2nd Street
Evansville, IN 47708
USA Pleasant View of Hanover, L.P. 100 N.W. 2nd Street
Evansville, IN 47708
</TABLE>
- --------------------------------------------------------------------------------
10
<PAGE> 28
- --------------------------------------------------------------------------------
NAME OF PERSON FILING NOTIFICATION DATE
SIGCORP, INC. July 16, 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
6(b) SHAREHOLDERS OF PERSON FILING NOTIFICATION
As Acquiring Party and Acquired Party
<TABLE>
<CAPTION>
ISSUER SHAREHOLDER NUMBER/CLASS/PERCENT
------ ----------- --------------------
<S> <C> <C>
SIGECO SALKELD & CO 18,000/Preferred Stock 19.7%
P.O. Box 704
Church Street Station
New York, NY 10008
SIGECO IDS Certificate Company
C/O IDS Financial Services, Inc. 75,000/Preferred Stock/40.3%
3000 IDS Tower 10
Minneapolis, MN 55440
SIGCORP, INC. Donald A. Rausch 12,543/Common/5%
SIGCORP, INC. Ronald A Reherman 12,756/Common/5%
SIGCORP, INC. Richard W. Shymanski 10,720/Common/5%
SIGCORP, INC. Donald E. Smith 23,078/Common/10%
</TABLE>
- --------------------------------------------------------------------------------
6(c) HOLDINGS OF PERSON FILING NOTIFICATION
As Acquiring Party and Acquired Party
<TABLE>
<CAPTION>
ISSUER NUMBER/CLASS/PERCENT
------ --------------------
<S> <C>
Energy Systems Group, LLC 33% Membership Interest
SIGECOM, LLC 49% Membership Interest
</TABLE>
================================================================================
ITEM 7 DOLLAR REVENUES
As Acquiring Party and Acquired Party
7(a) 4-DIGIT SIC CODE AND DESCRIPTION
4911 Electric Services
4923 Natural Gas and Distribution
6799 Investors, Not Elsewhere Classified
8742 Management Consulting Services
- --------------------------------------------------------------------------------
11
<PAGE> 29
- --------------------------------------------------------------------------------
NAME OF PERSON FILING NOTIFICATION DATE
SIGCORP, INC. July 16, 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
7(b) NAME OF EACH PERSON WHICH ALSO DERIVED DOLLAR REVENUES
4911 Indiana Energy, Inc.
4923 Indiana Energy, Inc.
6799 Indiana Energy, Inc.
8742 Indiana Energy, Inc.
- --------------------------------------------------------------------------------
7(c) GEOGRAPHIC MARKET INFORMATION
4911 SIGECO provided retail electric services in the following counties in
Indiana; Posey, Vanderburgh, Warrick, Spencer, Gibson and Pike. Wholesale
electric revenues were derived in the following states; Alabama,
California, Indiana, Kentucky, Massachusetts, Ohio, South Dakota and
Texas.
4923 SIGCORP Energy Services derived retail natural gas revenues in the
following states; Colorado, Florida, Georgia, Illinois*, Indiana,
Kentucky, Massachusetts*, Michigan*, Minnesota*, Mississippi*, Nebraska*,
New Jersey*, New York*, Ohio, Pennsylvania and Tennessee. Utility
regulations limit the counties in which SIGECO is permitted to operate. In
Indiana, SIGECO provides retail gas service in the following counties;
Posey, Vanderburgh, Warrick, Spencer, Pike, Gibson, Knox, Davies and
Martin. Only one county in Indiana, Martin, is common to both SIGECO and
Indiana Gas. The firms do not service any common customers in Martin
County.
SIGCORP Energy Services derived wholesale natural gas revenues in the
following states; Colorado, Connecticut, Florida, Georgia, Illinois,
Indiana, Kentucky, Michigan, Mississippi, Nebraska, New Jersey, New York,
Ohio, Oklahoma, Pennsylvania, South Carolina, Tennessee, Texas, Virginia,
Wisconsin and West Virginia.
6799 Delaware, Illinois, Indiana, Kentucky, Massachusetts, Ohio and Utah
8742 California, Georgia, Hawaii, Illinois, Indiana, Iowa, Minnesota,
Missouri, New York, Ohio, Oregon, Texas and Washington.
* SIGCORP has less than ten customers in each state.
================================================================================
ITEM 8 VENDOR-VENDEE RELATIONSHIP
As Acquiring Party and Acquired Party
|X| NO |_| YES (If yes and you are the vendee, complete the following)
PRODUCT PURCHASES VENDOR DOLLAR AMOUNT
- --------------------------------------------------------------------------------
ITEM 9 PRIOR ACQUISITIONS (to be completed by acquiring person only)
As Acquiring Party
4911 None
4923 None
6799 None
8742 None
- --------------------------------------------------------------------------------
12
<PAGE> 30
- --------------------------------------------------------------------------------
NAME OF PERSON FILING NOTIFICATION DATE
SIGCORP, INC. July 1999
- --------------------------------------------------------------------------------
ITEM 10 IDENTIFICATION OF PERSON TO CONTACT REGARDING THIS REPORT
- --------------------------------------------------------------------------------
10(a) NAME OF CONTACT PERSON TITLE OF CONTACT PERSON
Edward P. Henneberry Partner
Howard T. Rosenblatt Partner
- --------------------------------------------------------------------------------
FIRM NAME AND BUSINESS ADDRESS BUSINESS TELEPHONE NUMBER
Howrey & Simon
1299 Pennsylvania Avenue, N.W. 202-383-6926
Washington, D.C. 20004 202-383-7058
- --------------------------------------------------------------------------------
10(b) IDENTIFICATION OF AN INDIVIDUAL LOCATED IN THE UNITED STATES DESIGNATED
FOR THE LIMITED PURPOSE OF RECEIVING NOTICE OF ISSUANCE OF A REQUEST FOR
ADDITIONAL INFORMATION FOR DOCUMENTS. (See ss. 803.20(b)(2)(iii))
- --------------------------------------------------------------------------------
NAME TITLE
Timothy L. Burke Secretary / Treasurer
- --------------------------------------------------------------------------------
ADDRESS BUSINESS TELEPHONE NUMBER
20 NW Fourth Street (812) 465-4136
Evansville, Indiana 47708 (812) 464-4554 (Fax)
- --------------------------------------------------------------------------------
CERTIFICATION
- --------------------------------------------------------------------------------
This NOTIFICATION AND REPORT FORM, together with any and all appendices and
attachments thereto; was prepared and assembled under my supervision in
accordance with instructions issued by the Federal Trade Commission. Subject to
the recognition that, where so indicated, reasonable estimates have been made
because books and records do not provide the required data, the information is,
to the best of my knowledge, true, correct, and complete in accordance with the
statute and rules.
- --------------------------------------------------------------------------------
NAME (Please print or type) TITLE
Timothy L. Burke Secretary / Treasurer
- --------------------------------------------------------------------------------
SIGNATURE DATE
/s/ Timothy L. Burke July 12, 1999
- --------------------------------------------------------------------------------
Subscribed and sworn to before me at the
City of Evansville, State of Indiana
this 12th day of July, 1999.
Signature: /s/ Donna S. Welden
------------------------------
Donna S. Welden, Notary Public
My Commission expires: 11/29/2000
------------------
[SEAL]
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 1
EXHIBIT D-2
[WINTHROP, STIMSON, PUTNAM & ROBERTS LETTERHEAD]
August 13, 1999
Hon. David P. Boergers
Secretary, Federal Energy Regulatory Commission
888 First Street, N.E.
Washington, D.C. 20426
Re: Southern Indiana Gas and Electric Company, Indiana
Energy, Inc. and Vectren Corporation, Docket No. EC99-
Dear Mr. Boergers:
On behalf of the Applicants in the above-entitled proceeding, we are
herewith submitting for filing the original and six copies of an Application for
Authorization and Approval of Merger under Section 203 of the Federal Power Act.
A form of Notice, suitable for publication in the Federal Register, is
also included in the materials filed herewith, together with a diskette
containing the text of the Notice in ASCII format.
This Application seeks Commission authorization for the merger of two
holding companies, SIGCORP, Inc. and Indiana Energy, Inc., into a newly-formed
corporation, Vectren Corporation.
The attention of the Commission and the Staff are respectfully called to
a number of requests for waiver of some of the formal requirements in Part 33 of
the Regulations. In particular, the Applicants are seeking a waiver of
requirements pertaining to the submission of financial data, in light of the
fact that the proposed merger involves two holding companies rather than
operating public utilities.
<PAGE> 2
August 13, 1999
We are also submitting herewith two additional copies of this letter and
the Application and ask that a member of your Staff stamp them to indicate their
receipt and return them to us in the envelope provided for that purpose.
If there are any questions about this filing, please do not hesitate to
contact me.
Sincerely,
/s/ ISAAC D. BENKIN
Isaac D. Benkin
Counsel for Southern Indiana Gas
and Electric Co. and Vectren Corporation
2
<PAGE> 3
EXHIBIT D-2
UNITED STATES OF AMERICA
BEFORE THE
FEDERAL ENERGY REGULATORY COMMISSION
Southern Indiana Gas and )
Electric Company, ) Docket No. EC99-106-000
Indiana Energy, Inc. and )
Vectren Corporation )
APPLICATION FOR AUTHORIZATION
AND APPROVAL OF MERGER
Pursuant to section 203 of the Federal Power Act ("FPA"), 16 U.S.C.
Section 824b, and Part 33 of the Commission's regulations, 18 C.F.R. Sections
33.1-33.10 (1999), Southern Indiana Gas and Electric Company ("SIGECO"), a
wholly-owned subsidiary of SIGCORP, Inc. ("SIGCORP"), Indiana Energy, Inc.
("Indiana Energy") and Vectren Corporation ("Vectren"), on behalf of themselves
and their jurisdictional affiliates (collectively the "Applicants"), hereby
apply for any and all authorizations necessary under the FPA for approval of the
merger of SIGCORP and Indiana Energy into Vectren (the "merger transaction").
Under the merger transaction, SIGCORP, a public utility holding company would
disappear and its wholly-owned subsidiary, SIGECO, would emerge as a
wholly-owned subsidiary of Vectren. Similarly, Indiana Energy, a public utility
holding company that owns, inter alia, 100% of the capital stock of Indiana Gas
Company, Inc. ("Indiana Gas"), two other local distribution companies and,
indirectly, a 50% interest in a power marketer, ProLiance Energy, LLC.
("ProLiance Energy") would disappear and its former subsidiaries would become
subsidiaries of Vectren. The merger would be accomplished through a tax-free
exchange of common stock. It would result in the shareholders of SIGCORP and
Indiana Energy becoming shareholders in Vectren, a newly-formed
<PAGE> 4
corporation, which would continue to carry on the business of both SIGCORP and
Indiana Energy.
The Applicants are treating this merger transaction as a jurisdictional
transaction under the guidance provided in Illinois Power Co., 67 FERC Paragraph
61,136 (1994), a case in which the Commission established a presumption that
section 203 approval is required for the merger of public utility holding
companies.
I. DESCRIPTION OF THE APPLICANTS
(a) Southern Indiana Gas and Electric Company SIGECO, a wholly owned
subsidiary of SIGCORP, is a public utility incorporated under the laws of the
State of Indiana. It is engaged in the generation, transmission, distribution
and sale of electric energy, as well as the purchase of natural gas and its
transportation, transmission, distribution and sale in a service area covering
all or parts of ten counties in southwestern Indiana. Electric distribution
service at retail is supplied to customers in Evansville and 74 other cities,
towns and communities, as well as adjacent rural areas. SIGECO provides
wholesale sales service to an additional five communities. As of December 31,
1998, SIGECO served 124,000 retail electric customers, 108,241 of whom were
residential customers. It is a party to an interconnection agreement under which
it provides firm power to the City of Jasper, Indiana. It also has an agreement
with Hoosier Energy Rural Electric Cooperative, Inc. ("Hoosier Energy") for the
sale of firm peaking power to Hoosier Energy during the annual winter heating
season (November 15-March 15.) The contract with Hoosier Energy expires on March
15, 2000. Under an agreement dated June 26, 1969, filed with the Commission as
SIGECO's FERC Rate Schedule No. 29, as amended, SIGECO makes sales to Alcoa
Generating Corporation.
- 2 -
<PAGE> 5
SIGECO is a member of the East Central Area Reliability Group ("ECAR")
under an agreement that obligates it to maintain a spinning reserve margin.
SIGECO is interconnected with Louisville Gas and Electric Co., PSI Energy, Inc.,
Indianapolis Power & Light Co., Hoosier Energy, Big Rivers Electric Corporation,
Wabash Valley Power Association and the City of Jasper. Its 1998 peak load was
1,082.5 MW.
Since March 1999, SIGECO applied to become, and was accepted as, a
Participant in the Midwest Independent Transmission System Operator. 1/
SIGECO has filed an open-access transmission tariff with the Commission
in accordance with Order No. 888. The Commission approved the non-rate terms and
conditions of the tariff in 1996 (Atlantic City Electric Co., 77 FERC Paragraph
61,144 (1996)) and approved the rates provided for therein the following year
(Allegheny Power System, Inc., 80 FERC Paragraph 61,143 (1997)). SIGECO has also
adopted Standards of Conduct which the Commission has held to be consistent with
Order No. 889. American Services Co., 86 FERC Paragraph 61,079 (1999).
In Southern Indiana Gas & Electric Co., 77 FERC Paragraph 61,024 (1996),
the Commission approved SIGECO's application for authority to sell electricity
at wholesale at market-based rates. The Commission's action was based in part
upon a finding that Southern Indiana's "market share of installed and
uncommitted capacity will not exceed levels that the Commission previously has
found to be acceptable." Id. at 61,092
SIGECO's retail electric service is regulated by the Indiana Utility
Regulatory Commission ("IURC"). The IURC also regulates SIGECO's natural gas
business. SIGECO
- -------------------------------
1/ The Midwest Independent System Operator was conditionally authorized in
September 1998. Midwest Independent System Operator, 84 FERC Paragraph
61,231 (1998). A formal application for authorization for SIGECO's
transmission facilities to be administered by the Midwest ISO (along with
those of other new members) is currently being prepared.
- 3 -
<PAGE> 6
supplies natural gas service to 108,335 customers, including 98,636 residential
customers, 9,481 commercial customers and 218 industrial customers. It operates
2,932 miles of gas transmission and distribution lines. The SIGECO gas system
also includes three underground gas storage fields.
On January 1, 1996, SIGECO became a wholly-owned subsidiary of SIGCORP, a
newly-formed public utility holding company. The Commission approved the
transaction, in which all of the shares of common stock of SIGECO were exchanged
for shares of SIGCORP stock on a one-for-one basis, on November 7, 1995.
Southern Indiana Gas and Electric Co., 73 FERC Paragraph 62,090 (1995).
SIGECO's utility operations produce approximately 80% of SIGCORP's total
revenues. In addition to SIGECO, SIGCORP has several other subsidiaries. They
include the following:
- Southern Indiana Properties, Inc., formed in 1986, which invests
in real estate and equipment, real estate partnerships and joint
ventures and other financial and business arrangements.
- Energy Systems Group, Inc., incorporated in 1994, which has a
one-third ownership interest in Energy Systems Group, LLC. The
firm provides energy-related performance contracting services.
- Southern Indiana Minerals, Inc., incorporated in 1994 to process
and market coal combustion by-products.
- SIGCORP Energy Services, Inc., which was formed in 1996 as an
energy marketer and currently provides natural gas, pipeline
management and other natural gas-related services. SIGCORP Energy
Services has filed in Docket No. ER99-2181-000 a tariff for sales
of electric power at market-based rates. The tariff was accepted
by Commission order dated May 12, 1999. Rocky Road Power, L.L.C.,
87 FERC Paragraph 61,163 (1999). However, SIGCORP Energy Services
has never taken part in any power marketing transactions.
- SIGCORP Capital, Inc., incorporated in October 1996, which is a
primary financing vehicle for SIGCORP's non-regulated
subsidiaries.
- 4 -
<PAGE> 7
- SIGCORP Fuels, Inc., incorporated in December 1996 to own and
operate coal mining properties and to provide coal and related
services to SIGCORP and other customers.
- SIGCORP Power Marketing, Inc., formed in December 1996 to purchase
power for SIGECO and to market power for SIGECO. This company is
not currently active.
- SIGCORP Communications Services, Inc., incorporated in August
1997, was formed to undertake communications-related strategic
initiatives.
- SIGECO Advance Communications, Inc., incorporated in April 1998,
holds SIGCORP's investment in SIGECOM, LLC and Utilicom Networks,
Inc. It is a joint venture between Advanced Communications, Inc.
and Utilicom Networks, Inc. to provide and to market enhanced
communications services over a high-capacity fiber-optic network
in SIGECO's service territory.
- SIGCORP Environmental Services, Inc., formed in November 1998,
holds SIGCORP's investment in Air Quality Services, a joint
venture created to provide air quality monitoring and testing
services to industry and utilities.
Both SIGECO and SIGCORP are incorporated in the State of Indiana.
The Securities and Exchange Commission has determined that SIGCORP is a public
utility holding company that is exempt from the registration requirements and
other regulatory requirements of the Public Utility Holding Company Act of 1935
("PUHCA") pursuant to section 3(a)(1) of PUHCA, 15 U.S.C. Section 79c(a)(1) (the
so-called "single-state" exemption).
(b) Indiana Energy, Inc. Indiana Energy is also an exempt public utility
holding company. It is a publicly-owned corporation with subsidiaries and
affiliates engaged in natural gas distribution, gas portfolio administrative
services and marketing of natural gas, electric power and related services and
services and products unrelated to energy. It was incorporated under the laws of
the State of Indiana on October 24, 1985. Indiana Energy has four wholly-owned
subsidiaries, Indiana Gas , IEI Services, LLC, IEI Capital Corp. and IEI
Investments, Inc.
Indiana Gas is the principal subsidiary and business entity in the
Indiana Energy family. In 1998, it supplied natural gas to about 490,000
residential, small commercial and contract
- 5 -
<PAGE> 8
(large commercial and industrial) customers in 281 communities in 48 of the 92
counties in the State of Indiana. The largest communities served include Muncie,
Anderson, Lafayette-West Lafayette, Bloomington, Terre Haute, Marion, New
Albany, Columbus, Jeffersonville, New Castle and Richmond.
Indiana Gas owns two local distribution companies, Richmond Gas
Corporation and Terre Haute Gas, Inc. Pursuant to Indiana law and regulations,
both of these subsidiaries are operationally combined with, and do business
under the name of, "Indiana Gas Company, Inc." Indiana Gas is itself a local
distribution company, having most of its operations covered by the Hinshaw
Amendment and exempt from regulation by the Commission under sections 1(b) and
1(c) of the Natural Gas Act, 15 U.S.C. Sections 717(b), 717(c). 2/ The remaining
activities of Indiana Gas have been granted a "service area" exemption under
section 7(f) of the Act, 15 U.S.C. Section 717f(f). See Ohio River Pipeline
Corp. 55 FERC Paragraph 61,365 (1991). Indiana Gas's business is regulated by
the IURC.
The other three subsidiaries of Indiana Energy are IEI Services, LLC, IEI
Capital Corp. and IEI Investments, Inc. IEI Services provides support services
to Indiana Energy and its subsidiaries. Those services include information
technology, financial services, human resources support and building and fleet
services.
IEI Capital Corp. was formed to carry out the financing of Indiana Energy
and its non-regulated subsidiaries. IEI Investments, Inc. was formed to conduct
the operations of Indiana Energy's other businesses. It has three subsidiaries,
IGC Energy, Inc., Energy Realty, Inc. and
- --------------------------
2/ The Commission's Hinshaw determination was rendered in 1954. Indiana Gas
and Water Co., 13 F.P.C. 1373 (1954).
- 6 -
<PAGE> 9
Energy Financial Group, Inc. IGC Energy also owns a 50% interest in ProLiance
Energy.3/ ProLiance Energy provides Indiana Gas with its gas supply. ProLiance
Energy is also engaged in the power marketing business. Although ProLiance
Energy does not own or control any generation or transmission assets or hold
power purchase contracts with durations longer than one year, it is a "public
utility" for purposes of the FPA. 4/ IEI Investments is committed to invest in a
minority interest in Haddington Energy Partners, L.P., a firm that will
participate in the financing of six to eight projects, including natural gas
gathering and storage and electric power generation. IEI Investments also holds
interests in companies that are engaged in materials management, underground
facilities locating and facilities construction, debt collection, and other
non-jurisdictional activities.
II. THE TRANSACTION
The merger is proposed to take place in accordance with an Agreement and
Plan of Merger ("Merger Agreement") dated as of June 11, 1999 among Indiana
Energy, SIGCORP and Vectren. A copy of the Merger Agreement is attached to this
Application as Exhibit A. As we have noted above, Vectren is a newly-formed
corporation, created to carry out, and be the surviving corporation of, the
merger transaction. Today, prior to the merger, SIGCORP and Indiana Energy each
owns 50% of the common stock of Vectren.
- ------------------------------
3/ The other 50% interest in ProLiance Energy is owned by a non-affiliated
firm.
4/ ProLiance Energy received authorization to operate as a power marketer by
order issued January 16, 1997 in Docket No. ER97-420-000, 62 Fed. Reg.
4993 (February 3, 1997).
- 7 -
<PAGE> 10
On the effective date of the merger, 5/ each share of Vectren common
stock will be cancelled. Each full share of Indiana Energy's common stock that
is issued and outstanding shall be converted into the right to receive one share
of Vectren common stock, and each share of SIGCORP's common stock that is issued
and outstanding shall be converted into the right to receive 1.333 shares of
Vectren common stock. Treasury stock in both Indiana Energy and SIGCORP shall be
cancelled and fractional shares of common stock in both Indiana Energy and
SIGCORP issued and outstanding shall be converted into the right to receive
cash. Indiana Energy and SIGCORP will both be merged into Vectren, which will be
the surviving corporation, in accordance with the Indiana Business Corporation
Law.
Once the merger transaction is carried out, the former shareholders of
SIGCORP will own 51.4% of the common stock of Vectren. The remaining 48.6% of
Vectren's common stock will be owned by former shareholders of Indiana Energy.
Vectren will own all of the common stock of SIGECO which, in turn, will own
assets that are jurisdictional facilities for purposes of section 203 of the
Federal Power Act. Vectren will also become the indirect owner of a one-half
interest in ProLiance Energy, a power marketer, as well as the owner of SIGCORP
Energy Services, Inc., the holder of authorization to engage in power marketing
activities.
The merger transaction is intended to be a tax-free corporate
reorganization under section 368(a) of the Internal Revenue Code of 1986, so
that the existing shareholders of both SIGCORP
- -------------------------------
5/ The Merger Agreement provides that the closing will take place after all
conditions, including the receipt of all regulatory approvals, have been
met. Under section 9.1 of the Merger Agreement, either SIGCORP or Indiana
Energy may terminate the Agreement if the closing has not taken place by
June 11, 2000, except that the termination date shall be moved back to
December 31, 2000 if the cause of the delay is the failure to obtain one
or more regulatory or statutory approvals which "are being pursued with
diligence."
- 8 -
<PAGE> 11
and Indiana Energy will not recognize gain or loss on the exchange of their
stock for shares of Vectren stock.
The parties to the merger transaction intend that it shall be treated as
a "pooling of interests" business transaction for accounting purposes. The
Commission has described this method as follows:
The pooling of interests method accounts for a business
combination as the uniting of the ownership interests of companies
by exchange of equity securities. No acquisition [premium or
discount] is recognized because the combination is accomplished
without disbursing resources of the constituents. Ownership
interests continue and the former bases of accounting are
retained.
Allegheny Energy, Inc. and DQE, Inc., 84 FERC Paragraph 61,223, 62,075 n.60
(1998).
The pooling of interests methodology has been recognized as a proper way
to account for a merger involving a jurisdictional public utility. See, e.g.,
American Electric Power Co. Central and Southwest Corp., 85 FERC Paragraph
61,201 (1998).
An application for approval of the merger transaction has been submitted
to the IURC. A copy of the joint application filed by SIGCORP and Indiana Energy
is found at Exhibit B to this Application. After the joint application was filed
with the IURC, the Indiana Supreme Court determined that, under Indiana law,
pre-approval by the IURC of a merger of utility holding companies is not
required. Indiana Bell Tel. Co. v. Indiana Util. Regulatory Comm'n, 1999 Ind.
LEXIS 548 (July 30, 1999). The effect of that decision on the joint application
filed by SIGCORP and Indiana Energy has not been addressed by the IURC, nor has
the IURC acted upon the merits of the joint application. If it does so before
the Commission acts in the instant proceeding, a copy of the IURC's order will
be promptly forwarded to the Commission for its information.
- 9 -
<PAGE> 12
III. MERGER ANALYSIS
The merger of the jurisdictional subsidiaries of SIGCORP and Indiana
Energy is consistent with the public interest under section 203 of the FPA.
Section 203 provides:
No public utility shall sell, lease, or otherwise dispose of the
whole of its facilities subject to the jurisdiction of the
Commission, or any part thereof of a value in excess of $50,000,
or by any means whatsoever, directly or indirectly, merge or
consolidate such facilities or any part thereof with those of any
other person, or purchase, acquire, or take any security of any
other public utility without having secured an order of the
Commission authorizing it to do so. * * * After notice and
opportunity for hearing, if the Commission finds that the proposed
disposition, consolidation, acquisition or control will be
consistent with the public interest, it shall approve the same.
16 U.S.C. Section 824b(a) (emphasis added). This statutory provision requires
the Commission to approve a merger if it finds that the merger is in the public
interest. The Commission has stated that an applicant need not show that a
positive benefit will result from the merger. The applicant need only show that
the merger or disposition is consistent with the public interest. See, e.g., IES
Industries, Inc., 65 FERC Paragraph 61,191 at 64,416 (1993).
In its Merger Policy Statement, 6/ the Commission set forth its policy
for determining whether a merger is in the public interest. The Commission there
stated that its analysis of a proposed merger would focus on three factors: (1)
the merger's effect on competition; (2) the merger's effect on rates and
ratepayers, i.e., whether the merger could cause wholesale
- --------------------------
6/ Inquiry Concerning the Commission's Merger Policy Under the Federal Power
Act: Policy Statement, Order No. 592, 61 Fed. Reg. 68,595 (1996), FERC
Stats, & Regs. Paragraph 31,044 (1996), order on reconsideration, Order
No. 592-A, 62 Fed. Reg. 33,341 (1997), 79 FERC Paragraph 61,321 (1997).
- 10 -
<PAGE> 13
ratepayers to incur higher costs as a result of the merger; and (3) the merger's
effect on regulation. See Merger Policy Statement at 30,111.
As discussed below, the proposed merger between SIGCORP and Indiana
Energy will not have an adverse effect on competition. SIGCORP's subsidiary,
SIGECO, is primarily an electric utility and natural gas distribution company
and is one of the smallest electric utilities and gas distributors in the
region. Indiana Energy's principal subsidiary, Indiana Gas, is primarily a
natural gas distribution company. Although this type of "convergence" merger has
raised the Commission's sensitivity to potential vertical market power concerns,
there are no such concerns in this case. The Applicants' market power analysis
shows that they have very small shares of the electric and natural gas markets
in their service areas, indicating that they have no ability to affect market
prices. Thus, the proposed merger will not, among other things, create or
enhance the merged company's ability to exercise market power in natural gas
markets to increase its electric utility rivals' gas costs.
The Commission has recently approved a number of similar "convergence"
mergers, citing the lack of market power concerns. See PG&E Corp., 80 FERC
Paragraph 61,179 (1997); Duke Power Co., 79 FERC Paragraph 61,236 (1997); Enron
Corp., 78 FERC Paragraph 61,179 (1997). Those proceedings, like the one now
before the Commission, involved proposed mergers between entities that were
predominantly electric utilities and entities that were predominantly natural
gas utilities.
With respect to the second factor mentioned in the Merger Policy
Statement, the Applicants cannot increase rates to wholesale customers because
the majority of the wholesale power sales are made under contracts that call for
the payment of market-based rates. Most of the remaining contracts are due to
expire soon, rendering any future sales subject to market
- 11 -
<PAGE> 14
forces as well. Finally, in connection with the Merger Policy Statement's third
factor, the proposed merger will not impair the effectiveness of regulation of
the merged utilities by either the Commission or the IURC, as we show below.
The proposed merger, therefore, presents no concerns under the Merger
Policy Statement's criteria. On the other hand, the proposed merger will provide
substantial benefits by creating a company that is better able to compete in the
newly restructured industry by reducing its operating costs and by increasing
the company's ability to raise capital and market new products. Accordingly, the
proposed merger should be approved as consistent with the public interest.
A. EFFECT ON COMPETITION
In the Merger Policy Statement, the Commission said that it would apply
the Department of Justice-Federal Trade Commission Horizontal Merger Guidelines
as its analytical methodology for evaluating the effect of a proposed merger on
competition. The Merger Policy Statement adopted a complex analytical screen,
set forth in Appendix A to the Statement. The Commission made it clear, however,
that the screen analysis need not be performed or filed when the Applicants "do
not have facilities or sell relevant products in common geographical markets."
See Merger Policy Statement, FERC Stats. & Regs. at 30,136. See also MidAmerican
Energy Co. and MidAmerican Energy Holdings Co., 85 FERC Paragraph 61,354 at
61,367-68 (1998); Boston Edison Co., 82 FERC Paragraph 61,311 at 62,236 (1998);
San Diego Gas & Elec. Co., 81 FERC Paragraph 61,410 at 62,860 (1997); Duke Power
Co. and PanEnergy Corp., 79 FERC Paragraph 61.236 at 62,037-038 (1997).
It is well-established that, with regard to the effect of a merger on
competition, mergers may raise horizontal competitive concerns, vertical
competitive concerns, or both. This merger
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<PAGE> 15
raises no horizontal competitive issues, since such issues arise only when
consolidation of electric generation or transmission assets is contemplated. By
contrast, this is a "vertical merger," according to the affidavit of Applicants'
expert economic witness, David B. Patton, 7/ "because its principal effect is to
consolidate ownership of an input product (delivered gas supply) with the
ownership of electric generation assets." Patton Aff. Paragraph 8. The proposed
merger is a transaction involving two holding companies, one of which owns a
combination public utility and local natural gas distribution company, and the
other of which owns no electric utility property except a one-half interest in a
power marketer which has only short-term contracts as its jurisdictional
property. Mr. Patton has concluded that a horizontal market power analysis is
not required in this case. According to Mr. Patton, the only horizontal aspect
of this merger within the purview of the Commission would be the potential
combination of electric generation or transmission assets. In this case, the
consolidation of Indiana Energy's interest in ProLiance, an electric and natural
gas marketer, with SIGCORP's public utility subsidiaries does not cause
horizontal competitive effects because, as noted above, ProLiance does not own
any generation or transmission properties, and it engages only in short-term
energy transactions. Thus, ProLiance Energy's market share is zero under the
Commission's analytic methodology for dealing with horizontal mergers. Id.
The Commission has considered, and approved, a number of similar
"convergence" mergers -- all of them involving much larger firms than SIGCORP
and Indiana Energy or the
- ---------------------------
7/ Mr. Patton, the head of the natural gas and electric utility practice at
Capital Economics, was a Senior Economist in the Commission's Office of
Economic Policy from 1995 to 1997, where he worked principally on
electric utility open access matters. Mr. Patton's affidavit will be
found at Exhibit C to this Application.
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<PAGE> 16
operating companies they own. See San Diego Gas & Electric Co. and Enova Energy,
Inc., 79 FERC Paragraph 61,372 (1997); Long Island Lighting Co., 80 FERC
Paragraph 61,035 (1997); Pacific Gas & Electric Co. and Valero Energy Corp., 80
FERC Paragraph 61,041 (1997); Enron Corp. on behalf of Enron Power Marketing,
Inc. and Portland General Corp. on behalf of Portland General Electric Co., 78
FERC Paragraph 61,179 (1997). In each case, the Commission has made it clear
that under the Merger Policy Statement, it was unnecessary for the applicants to
provide either a horizontal screen analysis or, for that matter, any analysis of
horizontal market power issues that might arise out of the proposed merger.
Instead, the Commission has said, the competitive impact analysis of a
convergence merger must focus on the vertical competitive effects that might be
caused by such a merger. Specifically, the Commission is concerned with the
possibility that the merged company might use its control of natural gas
facilities or transportation capacity to raise the costs of the merged company's
rivals in the downstream electricity market, thereby allowing the merged company
to profitably raise electricity prices. See San Diego Gas & Electric Co. and
Enova Energy, Inc., 79 FERC Paragraph 61,372 at 62,560 (1997).
Mr. Patton's affidavit presents a thorough analysis of the likelihood
this merger would present vertical market power issues of concern to the
Commission. He notes that in its recent Notice of Proposed Rulemaking on filing
requirements for public utility mergers,8/ the Commission provided guidance with
respect to the analysis of mergers to ascertain whether they raise significant
vertical market power issues. The Filing Requirements NOPR describes a vertical
screen analysis for analyzing vertical competitive issues, which assesses
competitive
- --------------------------
8/ Revised Filing Requirements Under Part 33 of the Commission's
Regulations; Notice of Proposed Rulemaking, FERC Stats. & Regs. Paragraph
32,528 (1998), 63 Fed. Reg. 20340 (1998) (hereinafter cited as Filing
Requirements NOPR).
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conditions in both the upstream and downstream markets. However, the Filing
Requirements NOPR also provides for a de minimis exception to the requirement
for performing a vertical screen analysis. After examining this merger in
relation to the standard for application of the de minimis exception, Mr. Patton
concludes that a full vertical screen analysis is unnecessary.
Mr. Patton highlights three types of vertical market power concerns.
Patton Aff. Paragraph 9. The first, and primary, concern is that the merged
entity will be able to use its control over one or more upstream businesses to
raise input costs for its competitors in downstream markets. The second is that
the merger will induce formerly competing concerns to collude on pricing or
otherwise to share information. The third concern is the possibility that the
merger could allow the merged firm to evade regulatory scrutiny of
intra-corporate transactions that, pre-merger, took place between independent
entities.
To assess whether any or all of these concerns were present, Mr. Patton
performed a study of the upstream natural gas market to ascertain Vectren's
affiliates' probable market share of the pipeline capacity that would be
available to serve their competitors in the relevant geographic market and the
extent to which this market is concentrated. In order to perform such a study,
Mr. Patton made alternative assumptions about the nature of the market for
delivered gas. These assumptions include -
- Definition of geographic market. The larger the geographic market,
the lower the applicant's market power will appear to be. Mr.
Patton conservatively selected only the area of central and
southern Indiana that encompasses both SIGECO's and Indiana
Energy's affiliates' service territories, notwithstanding the fact
that potential competitors could receive service from interstate
pipelines that currently serve surrounding regions. Patton Aff.
Paragraph 30.
- The number of pipelines to consider. There are five pipelines that
serve SIGECO and Indiana Energy's affiliates but only three that
serve both SIGECO and the Indiana
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Energy affiliates. Patton Aff. Paragraph 31. Mr. Patton performed
alternative studies, first looking at available capacity on all
five pipelines and then looking at capacity on just the three
pipelines that serve both sets of companies.
- Uncommitted downstream capacity and released capacity. In dealing
with these two forms of capacity that conceivably could become
available in the event of a significant price increase in the
relevant market, Mr. Patton included in his study both uncommitted
capacity held to serve downstream markets and released capacity on
the pipelines that can be used to serve Indiana. He did not,
however, include either interruptible capacity or unsubscribed
capacity, owing to the lack of reliable data for these parameters.
Patton Aff. Paragraph 32.
- How much downstream capacity to include. One of the "unknowns"
that Mr. Patton faced was how much of the capacity held by
downstream entities is deemed "uncommitted," i.e., available to
respond to an significant price increase in the relevant
geographic market. In performing his study, Mr. Patton decided to
measure market share and market concentration using four different
assumptions about the percentage of downstream capacity (as well
as SIGECO's and Indiana Energy affiliates' non-marketing capacity)
that would be available to serve the geographic market: (1) 20% of
the capacity; (2) 35% of the capacity; (3) 50% and (4) 100%.
Patton Aff. Paragraph 38.
- What about TETCO's "two-leg" system? Only the northern leg of
Texas Eastern's system serves Indiana. In recognition of this
fact, Mr. Patton's analysis of the availability of TETCO capacity
serving downstream markets was scaled down by 75%, to account for
the fact that some 75% of TETCO's capacity is found on its
southern leg. Patton Aff. Paragraph 43.
- What capacity release data should be used? Mr. Patton chose to use
data for historical capacity release averages on the relevant
pipelines, including only those releases that could have been
acquired to serve Indiana customers, each of the last two winters.
He made this choice because it tends to be very conservative,
owing to the fact that released capacity is generally lower in the
winter when customer demand is highest. In addition, Mr. Patton
excluded releases by marketers and the Applicants; he also
subtracted the amount of uncommitted downstream capacity assumed
for each case to eliminate any possibility of double-counting.
Patton Aff. Paragraph Paragraph 40-44.
The results of Mr. Patton's upstream analysis are shown in Attachment C
to his affidavit. Mr. Patton's study "show[s] that even under the most
conservative assumptions, the applicants lack significant control over the
pipeline capacity serving the region. Further, the low levels of
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<PAGE> 19
market concentration found in each of the cases suggests that the Midwest
delivered gas market is not conducive to the exercise of market power." Patton
Aff. Paragraph 45.
The post merger Herfindahl-Hirschman Index calculated by Mr. Patton
ranged from 316 to 848. This result means that the market will continue to be
markedly unconcentrated and competitive after the proposed merger takes place.
As the Commission has said, "[i]f the HHI is below 1000, adverse anticompetitive
effects are unlikely." New England Power Pool, 85 FERC Paragraph 61,379 at
62,472 (1998). The merged company's affiliates' market share, ranging from 5.6%
to 16.2%, is also relatively insignificant regardless of which assumptions are
used. Patton Aff. Paragraph 46.
A number of other factors, not susceptible of precise calculation but
significant nonetheless, support Mr. Patton's conclusion that the merger will
not permit the merged company to exercise market power in the upstream market.
New capacity is being constructed in the Midwest. At the same time, a
substantial number of long-term contracts for capacity on the pipelines serving
SIGECO and Indiana Energy's affiliates are scheduled to expire by their terms
during the next six years. This capacity will be available to compete with the
pipeline capacity held by the firms that will be in the Vectren family. Mr.
Patton also found that gas supplies can be delivered by displacement from the
Chicago market, one of the most competitive and liquid natural gas markets in
the Nation, to serve Indiana. Patton Aff. Paragraph 51. None of this additional
capability is included in Mr. Patton's market analysis, although it will have a
powerful effect in disciplining attempts to raise prices. In addition, this
capability will ensure that utilities in Indiana that rely on natural gas as an
input fuel will have no difficulty in securing abundant supplies, regardless of
what Vectren may do.
Mr. Patton also examined vertical competitive issues raised by the
Applicants' or their affiliates' control of natural gas distribution facilities,
to determine whether they could use their
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<PAGE> 20
ownership of such facilities to raise their rivals' costs or engage in
anticompetitive coordination. He found that SIGECO's distribution system serves
only its own generation facilities. Likewise, Indiana Gas's distribution system
serves a very small share of its potential rivals' generation facilities,
amounting to only 243 MW of gas turbine capacity or less than 0.5% of the total
generation in the Southwest ECAR region. Based on this insignificant amount of
generation owned by potential competitors and served by the Applicants' or their
affiliates' distribution systems, as well as the de minimis role that natural
gas plays in the broader Midwest electric market, Mr. Patton concluded that the
control of distribution facilities by the Applicants and their affiliates poses
no vertical market power concerns. Patton Aff. Paragraph 59.
Mr. Patton also looked at coal as an input, in light of the fact that
SIGECO owns coal resources and because many of its competing utilities are
base-loaded on coal. He determined that, for several reasons, the merger will
not produce anticompetitive results for coal-burning utilities. Patton Aff.
Paragraphs 60-62. First, SIGCORP affiliates own both the electric assets and all
of the coal resources that the merged company will own after the merger. So
there are no vertical market power concerns related to coal holdings that arise
out of the merger. Second, the output of SIGECO's mine "represents an
insignificant amount of coal for the region" only 0.2% of coal production in the
Midwest, and less than 3% of Indiana's coal output. Patton Aff. Paragraph 61;
see also Attachment F. Finally, SIGECO uses 100% of the coal its mine can
produce, leaving no excess capacity to be withheld from the market to raise the
costs of competing generators.
As we have noted above, the Commission's application of the de minimis
rule to vertical mergers makes it unnecessary to perform a full Appendix A
screen when the upstream input (natural gas and coal) that the Applicants
control has little or no significance to the production of the downstream
product (electricity). Mr. Patton's study shows definitively that that is the
case
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<PAGE> 21
with respect to the relationship between control of natural gas pipeline
capacity and coal resources, on the one hand, and production of electricity, on
the other, in the Midwest.
Attachment G to Mr. Patton's affidavit shows that only about six percent
of the electric generation in the Midwest (regardless of how the term "Midwest"
is defined) is fueled by natural gas; the vast bulk of the generation is
coal-fired. Even this figure tends to overstate the importance of natural gas,
most of which is burned in facilities that are kept in reserve and are rarely
dispatched. To demonstrate this fact, Mr. Patton examined the use of natural gas
versus the use of other fossil fuels by Midwestern utilities in 1998. As is
shown in Attachment H to his affidavit, measured in terms of heat input, gas
represented just 1.1% of the fossil fuel used by ECAR utilities, 0.6% of fossil
fuel used by utilities in the Southwestern portion of ECAR and 0.8% of the
fossil fuel used in Indiana. Examination of the relative role of gas in terms of
the amount paid by utilities for fossil fuel produced only slightly larger,
though still not very significant, figures: gas costs represented 2.3% of the
fossil fuel purchases by utilities within ECAR, 1.5% of the fossil fuel
purchases in Southwestern ECAR and 2% of the fossil fuel purchases in Indiana.
Again, natural gas does not appear to be a significant fuel.
Finally, Mr. Patton asked whether natural gas could be deemed the
"marginal" fuel, so that its relative abundance or scarcity might have a
significant impact on rates for electric generation. His analysis shows that
gas-fired generators are operated so infrequently that they are unlikely to
constitute the marginal facilities in the region. Patton Aff. Paragraph 75.
The overall conclusion Mr. Patton reached is undeniable: The proposed
merger of SIGCORP and Indiana Energy into VECTREN "poses none of the potential
competitive concerns outlined in the Commission's Merger Policy for vertical
mergers." Patton Aff. Paragraph 76. The "upstream market results show that the
upstream market [for natural gas ] is not conducive
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<PAGE> 22
to an exercise of market power, which should eliminate the possibility that the
merged company could profitably execute a strategy to raise its rivals' costs."
Id. at Paragraph 77.
Mr. Patton also concluded that "anticompetitive coordination is not a
concern in this case." His primary grounds for this conclusion rested on the
fact that natural gas is relatively insignificant as an input to electric
generation and on the fact that neither of the merger partners' affiliates has a
substantial share of the available pipeline capacity. Id. at Paragraph 79.
However, to ensure that there is no concern about collusion between SIGECO and
ProLiance Energy, a power marketer in which Vectren will own a half interest,
the Applicants commit that SIGECO and ProLiance will comply with a Code of
Conduct guaranteeing that they will not sell to and buy from each other or
exchange sensitive information about competitors except to the same extent such
information is made generally available to the trade. A copy of that Code of
Conduct is attached to this Application as Exhibit D.
This Application does not raise any significant questions with respect to
transmission market power. SIGECO has on file with the Commission an open-access
transmission tariff that conforms fully to the Commission's pro forma
transmission tariff and is otherwise in compliance with Order No. 888. In
addition, as noted above, SIGECO will be a full Participant in the Midwest ISO.
Hence, the use of its transmission system will be available to all utilities in
the region and will be administered by an ISO that is independent of SIGECO's
management. In these circumstances, SIGECO lacks the wherewithal to exercise
undue market power in the market for bulk power transmission service or any of
its sub-markets. See Central Illinois Light Co. and The AES Corp., 87 FERC
Paragraph 61,293 (1999).
This Application, therefore, does not present the Commission with market
power issues that would suggest that approval of the merger is not in the public
interest.
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<PAGE> 23
B. EFFECT ON RATES
SIGECO has three principal wholesale customers. It sells firm power to
the City of Jasper, Indiana, firm peaking power to Hoosier Energy and backup and
emergency power to Alcoa Generating Company. The contract with Hoosier Energy
expires in less than nine months. The contract with the City of Jasper is a
partial requirements contract, as Jasper has limited generation capacity of its
own.
In addition to its wholesale sales to Alcoa Generating Co., Hoosier
Energy and Jasper, SIGECO engages in economy energy and exchange transactions
with all of the utilities with which it is interconnected. As a member of ECAR,
SIGECO provides ancillary services, e.g., spinning reserves, to the regional
entity.
In 1996, the Commission analyzed SIGECO's generation market power and
found that it was so insignificant as to warrant authorizing SIGECO to sell
electricity at wholesale at market-based rates. Southern Indiana Gas & Electric
Co., 77 FERC Paragraph 61,024 (1996). Nothing that has transpired in the
succeeding three years has altered the basis for that determination. Four of the
six agreements under which SIGECO sells power at wholesale to municipal
customers were negotiated under SIGECO's market-based rate authority. To impose
rate conditions upon those agreements would be inimicable to the idea of using
market forces, rather than regulatory fiat, as the mechanism for assuring that
rates are just and reasonable. The remaining two wholesale sales with SIGECO's
municipal customers were made under SIGECO's Rate Schedule "RS" and provide that
the customer may terminate SIGECO's service upon five years' notice. One of such
customers has given the requisite notice, and its service will expire on March
31, 2001. The other agreement remains in force solely because the customer has
elected not to give notice of termination.
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<PAGE> 24
As noted above, the Commission's authorization to charge market-based
rates was based on a finding that SIGECO's share of the relevant market for bulk
power is so small as to make it impossible, as a practical matter, for the
utility to increase its rates above a just and reasonable level. Southern
Indiana Gas & Electric Co., 77 FERC at 61,092 (1996). The merger transaction
will not appreciably change this state of affairs. Indiana Energy's only venture
in the wholesale electric market consists of a 50% interest in ProLiance Energy,
a power marketer that has also been authorized to charge market-based rates. The
joinder of SIGECO and ProLiance Energy under the Vectren umbrella will not alter
the fact that market forces, rather than the wishes of Vectren's management,
will determine the rates the jurisdictional members of the Vectren family can
obtain for their wholesale electric services.
For this reason, the proposed merger does not raise any cognizable issues
with respect to wholesale rates for electric power and energy; those rates will
be kept at just and reasonable levels by market forces, just as they are now. If
SIGECO attempts to institute an unjustified increase in its wholesale rates, its
customers will simply go elsewhere to purchase their bulk power supplies. The
same is true for ProLiance Energy. The marketplace is literally brimming with
alternative suppliers from which they can purchase power.
The Commission has held that wholesale sales at market-based rates do not
raise any concerns about a merger's possible adverse effect on rates See, e.g.,
Destec Energy, Inc. and NGC Corporation, 79 FERC Paragraph 61,373 at 62,574-75
(1997); Enron Corp., 78 FERC Paragraph 61,179 at 61,737 (1997). In these
circumstances, this merger proposal does not call for the implementation
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<PAGE> 25
of any special conditions, such as a rate moratorium or "hold-harmless"
provision, in order to protect wholesale customers from the market power of the
merged entity. 9/
C. EFFECT ON REGULATION
Approval of this merger transaction will have no effect on the regulatory
status of SIGECO. After the merger takes place, its wholesale rates, as well as
its rates for transmission service, will remain, as they are today, subject to
the Commission's regulatory jurisdiction. ProLiance Energy will also remain
subject to the Commission's regulatory authority over power marketers. SIGECO's
retail electric rates will continue to be regulated by the IURC after the
merger. Similarly, the IURC's regulatory jurisdiction over the natural gas
sales, transmission and distribution activities of both SIGECO and Indiana Gas
will be unaffected by the merger.
Since this is a proposed merger of two exempt public utility holding
companies, the Commission's primary regulatory concern, as expressed in its
Merger Policy Statement, is to avoid the loss of jurisdiction over transactions
between SIGECO and affiliated suppliers of inputs, e.g., fuel, under the
doctrine of Ohio Power Co. v. FERC, 954 F.2d 779, 782-86 (D.C. Cir.), cert.
denied, 498 U.S. 73 (1992). The Applicants anticipate that such a loss of
jurisdiction will not occur. After the merger takes place, Vectren, the
surviving corporation, will qualify for exempt status under section 3(a)(1) of
PUHCA, and the Applicants fully intend to seek and obtain such an exemption for
Vectren. Since Ohio Power applies only to registered holding
- ----------------------------
9/ If the Commission so conditions its grant of merger authority, Vectren is
willing to guarantee that none of the costs arising out of the merger
transaction will be used as a vehicle for an increase in its
jurisdictional entities' wholesale electric rates.
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<PAGE> 26
companies, the Commission's jurisdiction over intra-corporate transactions will
not be endangered by the proposed merger. In these circumstances, the Commission
has held that there is no reason to conduct further inquiry with respect to the
effect of a merger on regulation. See PG&E Corp., 80 FERC Paragraph 61,041 at
61,138 (1997); Enova Corp., 79 FERC Paragraph 61,107 at 62,567 (1997).
Recently, however, in Central Illinois Light Co. and The AES Corporation,
87 FERC Paragraph 61,293 (1999), the Commission, in its order considering a
proposed merger of two holding companies, expressed concern that the surviving
corporation's application for exempt status might be withdrawn or denied by the
Securities and Exchange Commission, thereby allowing it to invoke the Ohio Power
doctrine to defeat FERC jurisdiction over abusive intra-corporate transactions.
The Commission required the applicants to commit to abide by its policies with
regard to such transactions. In light of the Commission's concern as expressed
in that case, Vectren hereby offers the same commitment: regardless of whether
or not Vectren enjoys exempt status under PUHCA or becomes a registered holding
company, all of the jurisdictional members within the Vectren family agree not
to invoke the Ohio Power doctrine.
As the Applicants have noted above, the IURC's jurisdiction will not be
adversely affected by the proposed merger.
For the foregoing reasons, this Application presents no cognizable issues
with respect to the effect of the merger on regulation.
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IV. COMPLIANCE WITH 18 C.F.R. SECTION 33.2
(a) Name and address of principal business office
Southern Indiana Gas and Electric Company,
SIGCORP, Inc., and
Vectren Corporation
20 N.W. Fourth Street
Evansville, IN 47741
(812) 465-5300
(812) 464-4554 (fax)
Indiana Energy, Inc.
1630 North Meridian Street
Indianapolis, IN 46202
(317) 926-3351
(317) 321-0747 (fax)
(b) Names and addresses of persons authorized to receive service
For SIGCORP, SIGECO and Vectren
George A. Porch
Bamberger, Foreman, Oswald and Hahn
P.O. Box 657
Evansville, IN 47704
(812) 425-1591
(812) 421-4936 (fax)
Isaac D. Benkin
Winthrop, Stimson, Putnam & Roberts
1133 Connecticut Avenue, N.W.
Washington, D.C. 20036
(202) 775-9880
(202) 833-8491 (fax)
For Indiana Energy
Ronald E. Christian
Robert Heidorn
Indiana Energy, Inc.
1630 N. Meridian Street
Indianapolis, IN 46202
(317) 321-0357
(317) 321-0747 (fax)
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Stephen Angle
Howrey & Simon
1299 Pennsylvania Ave., N.W.
Washington, D.C. 200004
(202) 383-7621
(202) 383-6610 (fax)
(c) Designation of territories served
SIGECO provides retail electric service in the following counties of the
State of Indiana: Vanderburgh, Posey, Gibson, Warrick, Spencer and Pike. A map
of SIGECO's system is attached as Exhibit E to this Application.
(d) Description of jurisdictional facilities
The facilities used by SIGECO to provide FERC-jurisdictional sales and
transmission service consist of the generation facilities listed on Exhibit F
attached to this Application and the transmission facilities shown on Exhibit E
to this Application.
(e) Nature of the transaction
A full and complete description of the transaction is set forth in the
preceding sections of this Application.
(f) Statement of facilities to be merged
Because the merger transaction will consist of the exchange of capital
stock and not the disposition of assets, no facilities used to provide
jurisdictional service will be alienated in any way as a result of the merger.
Those facilities will remain the property of SIGECO and ProLiance Energy.
(g) Accounting treatment
This merger transaction will take place at the holding company level, not
at the operating company level. After the merger, SIGECO's books of account will
continue to be maintained in
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<PAGE> 29
accordance with the Commission's Uniform System of Account for Public Utilities,
just as they are today. No entries will be necessary to reflect the merger,
particularly in light of the principals' intention to use the pooling of
interests method of accounting for the effect of the merger at the holding
company level. As the Commission is aware, under the pooling of interests
method, assets are reflected on the books of the merged corporation at the same
value they had on the books of the merging corporations prior to the merger; no
gain or loss is recognized on account of the merger.
In light of the foregoing, therefore, the Applicants respectfully request
a waiver of the requirement in section 33.2(g) of the Commission's regulations
that they provide a statement of the cost of the jurisdictional assets involved
in the merger, as well as any requirement to provide accounting entries
reflecting the impact of the merger on the books of SIGECO. Such a waiver was
granted in the Central Illinois Light Co. and The AES Corp. case, supra, and the
Applicants respectfully submit that the same reasons for waiving the requirement
to file accounting data relating to a merger are present in the instant case.
(h) Effect of transaction upon jurisdictional contracts
Because the merger will take place entirely at the holding company level,
it will have no effect on the performance of any contract for the sale of
electricity in interstate commerce at wholesale. Nor will it have any effect on
the performance of interstate transmission service. SIGECO will continue to
perform its purchase and wholesale sale contracts without regard to the fact
that its parent corporation will be Vectren rather than SIGCORP, and it will
continue to have an open access transmission tariff on file with the Commission
in accordance with Order No. 888. Similarly, ProLiance Energy will continue to
fulfill its contractual obligations notwithstanding the consummation of the
merger transaction. There are no plans by the
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<PAGE> 30
Applicants to alter the performance of their obligations or those of their
subsidiaries under jurisdictional contracts in any way.
(i) Applications to other state and federal regulatory bodies
As noted above, Indiana Energy and SIGCORP have filed a joint application
with the IURC for approval of the merger transaction. A copy of the application
is attached hereto as Exhibit B. At or about the time the merger is scheduled to
take place, the Securities and Exchange Commission will be asked to rule that
Vectren will be exempt from registration and certain other regulatory
requirements under PUHCA.
(j) Facts relied upon to show the merger will be consistent with the public
interest
This merger transaction will bring together two relatively small energy
companies, each of which has traditionally had a local, Indiana focus. Today,
they are low-cost utilities providing service with a high degree of reliability.
But the future does not look bright for such utilities. There has been a growing
trend towards consolidation and globalization of the utility industry. The
SIGECO service territory, for example, is surrounded by three newly-formed
utility giants that have resulted from mergers approved by the Commission.
Central Illinois Public Service Company and Union Electric Company have merged
to form Ameren; PSI Energy and Cincinnati Gas and Electric have formed Cinergy;
and Louisville Gas and Electric Company and Kentucky Utilities have been merged
into LG&E Energy. Under the Commission's initiatives, the business has become
competitive. To compete with these utility giants, relatively small companies,
such as SIGCORP and Indiana Energy, must take action to increase their scale and
reduce their costs.
As the affidavit of Niel C. Ellerbrook, attached to this Application as
Exhibit G, states, the competitors that SIGCORP and Indiana Energy face -
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have vast financial resources to invest in product development and
marketing. They can offer compensation packages to attract the
best employees. They can spread costs over many customers. They
can absorb start-up costs as the try innovative strategies. They
can finance large business transactions. 10/
To survive in this competitive atmosphere, Mr. Ellerbrook says, small utilities
must undergo a substantial increase in scale, so that they can reduce their
costs and increase their ability to raise capital, to attract management talent,
to increase the customer base and to market new products.11/
As Mr. Ellerbrook points out, SIGCORP and Indiana "are virtually
identical in terms of financial size." This means that the proposed merger is "a
true merger of equals," under which neither merger partner is acquiring the
other. As a result, neither set of shareholders will pay an acquisition premium
to the other. Vectren, Mr. Ellerbrook concludes, will serve more than 650,000
customers located in central and southern Indiana, a critical mass of customers
over which to spread costs, thus creating more stable earnings and a base of
operations for the merged company. He concludes:
As a result of this merger, the following benefits should
be achieved: (1) the creation of a larger Indiana-based energy
company focused on local economic development, jobs and customers,
with greater scale that will contribute to sustaining long-term
growth as a viable energy provider; (2) the creation of a larger
company capable of raising and investing the financial and
intellectual capital required to develop and market products and
services designed to attract and retain customers; (3) the
continued
- --------------------------
10/ Ex. G at p. 2, Paragraph 5. Mr. Ellerbrook is President and Chief
Executive Officer of Indiana Energy.
11/ The merger is expected to reduce operating and capital costs by over $200
million over the next ten years. A substantial portion of these savings
arises through the consolidation of support services which will result in
the more efficient provision of such services for all of the operating
companies. Id..
- 29 -
<PAGE> 32
provision of low cost utility services to the public, and
delay/avoidance of future rate increases due to an estimated $200
million in merger savings (net of costs to achieve); and (4) the
maintenance of quality service to customers.
Ex. G at p. 2, Paragraph 7.
Of special note, according to Mr. Ellerbrook, is the creation of a $1.4
billion company which will be able to stimulate much greater investment from
outside sources of capital. This will produce a financially stable company
without compromising regulatory oversight. Id.
For these reasons, the Applicants submit that this proposed merger is
unquestionably in the public interest.
(k) Statement of franchises held
A full and complete description of the franchises held by both SIGECO and
Indiana Energy's affiliates is set forth in Section I of this Application,
supra.
(l) Federal Register notice
A form of notice of this Application, suitable for publication in the
Federal Register, will be found in Exhibit H to this Application. We are also
submitting a 3.5" diskette containing a copy of the form of Notice in ASCII
format.
V. ADDITIONAL MATTERS
In the Filing Requirements NOPR, the Commission proposed to eliminate as
"unnecessary" some of the mandatory exhibits called for in the existing version
of Part 33 and to require applicants for approval of mergers and other
dispositions to file certain material not now called for in the Part 33
regulations.
- 30 -
<PAGE> 33
In light of their "unnecessary" character and for other reasons indicated
below, the Applicants hereby respectfully request a waiver of certain exhibits
required under section 33.3 of the Commission's regulations, as indicated below:
- Exhibit A: Copies of resolutions of the Boards of Directors of
SIGCORP and Indiana Energy. Applicants request a waiver of the
requirement to file these documents. Characterized as
"unnecessary" in the Filing Requirements NOPR, the requirement to
file such material appears to suggest that perhaps an applicant
would file for approval or a merger or disposition that had not
been approved by the governing board of the applicant, a rather
unlikely premise.
- Exhibit B: A statement of the extent to which the participants in
the merger are controlled by a bank, underwriter, supplier or
public utility. The provenance and governing structure of both
Indiana Energy and SIGCORP are described in Section I, supra. The
capital stock of each of those corporations is publicly held and
traded on national exchanges. Applicants respectfully request a
waiver of the requirement to file this separate statement.
- Exhibits C-F: Certain financial statements. As we have indicated
supra, the financial statements of SIGECO, the only jurisdictional
entity required to File a Form No. 1 or keep its books and records
in accordance with the Uniform System of Accounts, will not be in
any way affected by the proposed merger. Hence, no useful purpose
would be served by requiring the filing of financial data showing
the impact of the merger on a pro forma basis, and the Applicants
request a waiver of the requirement to file this information.
- Exhibit G: A copy of each application filed with an other federal
or state agency. The IURC application will be found at Exhibit B
hereto.
- Exhibit H: All contracts in respect of the merger transaction:
This material will be found at Exhibit A hereto.
- Exhibit I: A map showing the properties of the Applicants A map of
SIGECO's electric system will be found at Exhibit E hereto.
ProLiance Energy has no jurisdictional assets that can appear on a
map.
In addition to the foregoing, the Applicants are submitting the
following supplemental material:
Exhibit I - Verification.
Exhibit J - List of all persons upon whom copies of this Application have
been served.
- 31 -
<PAGE> 34
VI. CONCLUSION
For the foregoing reasons, the Applicants ask the Commission to determine
that the proposed merger of Indiana Energy and SIGCORP into Vectren is
consistent with the public interest and to issue an order approving said merger.
Respectfully submitted,
/s/ ISAAC D. BENKIN
--------------------------
Isaac D. Benkin
Winthrop, Stimson, Putnam &
Roberts
1133 Connecticut Avenue, N.W.
Washington, DC 20036
(202) 775-9880
/s/ GEORGE A. PORCH
----------------------------
George A. Porch
Bamberger, Foreman, Oswald
and Hahn, LLP
P.O. Box 657
Evansville, IN 47704
(812) 452-4321
Counsel for Vectren Corporation and
Southern Indiana Gas and Electric Company
/s/ STEPHEN ANGLE
----------------------------
Stephen Angle
Howrey & Simon
1299 Pennsylvania Ave., N.W.
Washington, DC 20004
(202) 383-7261
- 32 -
<PAGE> 35
/s/ RONALD E. CHRISTIAN
-----------------------------
Ronald E. Christian
Robert Heidorn
Indiana Energy, Inc.
1630 North Meridian Street
Indianapolis, IN 46202
(317) 321-0357
Counsel for Indiana Energy, Inc.
Filed: August 13, 1999
- 33 -
<PAGE> 36
Index to Exhibits
Exhibit A - Merger Agreement
Exhibit B - Joint Application to IURC
Exhibit C.- Affidavit of David B. Patton
Exhibit D - Code of Conduct Agreement between SIGECO and ProLiance Energy
Exhibit E - Map of SIGECO's Electric System
Exhibit F.- List of SIGECO's Generating Facilities
Exhibit G - Affidavit of Niel C. Ellerbrook
Exhibit H - Federal Register Notice
Exhibit I - Verification
Exhibit J - List of Persons Served With This Application
- 34 -
<PAGE> 1
Exhibit D-3
FERC
ORDER
<PAGE> 2
89 FERC P. 61, 28 8
UNITED STATES OF AMERICA
FEDERAL ENERGY REGULATORY COMMISSION
Before Commissioners: James J. Hoecker, Chairman;
Vicky A. Bailey, William L. Massey,
Linda Breathitt, and Curt Hebert, Jr.
Southern Indiana Gas and Electric Company, Docket No. EC99-106-000
Indiana Energy, Inc. and
Vectren Corporation
ORDER APPROVING DISPOSITION OF
JURISDICTIONAL FACILITIES
(Issued December 20, 1999)
1. Introduction
On August 13, 1999, Southern Indiana Gas and Electric Company (Southern
Indiana), a wholly-owned subsidiary of SIGCORP, Inc. (SIGCORP), Indiana Energy,
Inc. (Indiana Energy), and Vectren Corporation (Vectren) (collectively,
Applicants), filed an application pursuant to section 203 of the Federal Power
Act(1) requesting Commission authorization for the disposition of jurisdictional
facilities. As a result of the proposed transaction, SIGCORP will be merged into
Vectren and Southern Indiana will become a wholly-owned subsidiary of Vectren.
Similarly, Indiana Energy will be merged into Vectren and Indiana Energy's four
subsidiaries will become subsidiaries of Vectren. The Commission will approve
the transaction as consistent with the public interest. As discussed below, the
Commission concludes that the transaction will not adversely affect competition,
rates, or regulation.
- ----------
(1) 16 U.S.C. ss. 824b(1994).
<PAGE> 3
Docket No. EC99-106-000 - 2 -
II. Background
A. Southern Indiana and SIGCORP
Southern Indiana, a wholly-owned subsidiary of SIGCORP,(2) is engaged in
the generation, transmission, distribution and sale of electric energy, as well
as the purchase of natural gas and its transportation, distribution and sale in
a service area covering all or parts of ten counties in southwestern Indiana.
Southern Indiana provides electric services to approximately 124,000 customers
and provides retail gas service to approximately 108,335 customers in
southwestern Indiana. Southern Indiana also operates 2,932 miles of gas
transmission and distribution lines and three underground gas storage fields.
Southern Indiana and SIGCORP jointly have ten wholly-owned subsidiaries:
Southern Indiana Properties, Inc.; Energy Systems Group, Inc.,; Southern Indiana
Minerals, Inc.; SIGCORP Energy Services, Inc.; SIGCORP Capital, Inc.; SIGCORP
Fuels, Inc.; SIGCORP Power Marketing, Inc., SIGCORP Communications Services,
Inc.; SIGCORP Advance Communications, Inc.; and SIGCORP Environmental Services,
Inc.
B. Indiana Energy
Indiana Energy is an exempt public utility holding company with
subsidiaries and affiliates engaged in natural gas marketing and distribution as
well as marketing of electric power and services. Indiana Energy has four
wholly-owned subsidiaries, Indiana Gas, IEI Services, LLC, IEI Capital
Corporation, and IEI Investments, Inc. Indiana Gas provides natural gas to
490,000 customers throughout Indiana. In addition, Indiana Gas owns two local
gas distribution companies, Richmond Gas Corporation and Terre Haute Gas, Inc.,
both of which are operationally combined, and do business under the name Indiana
Gas Company, Inc. IEI Services provides support services to Indiana Energy. IEI
Capital Corporation carries out the financing. IEI Investments, Inc. conducts
the operations of Indiana Energy's other businesses. IEI Investments has three
subsidiaries, IGC Energy, Inc., Energy Realty, Inc. and Energy Financial Group,
Inc. IGC Energy
- ----------
(2) SIGCORP is an exempt public utility holding company under section
3(a)(1) of the Public Utility Holding Company Act (PUHCA), 15 U.S.C. ss. 79c
(1994). On November 7, 1995, the Commission approved the corporate restructuring
of Southern Indiana whereby Southern Indiana became a wholly-owned subsidiary of
SIGCORP. See 73 FERC P. 62,090 (1995).
<PAGE> 4
Docket No. EC99-106-000 - 3 -
owns a 50% interest in ProLiance Energy (ProLiance).(3) ProLiance provides gas
supplies to Indiana Gas. It has received authorization from the Commission to
operate as a power marketer.(4)
C. Vectren
Vectren is a newly-formed corporation, which will conduct the business of
SIGCORP and Indiana Energy.
D. Description of the Proposed Merger
Under the terms of the Agreement and Plan of Merger between Indiana
Energy, SIGCORP and Vectren, Indiana Energy and SIGCORP will be merged into
Vectren, which will continue as the surviving corporation. Under the terms of
the Agreement, the common stock of Indiana Energy will be converted into the
right to receive one share of Vectren common stock and the common stock of
SIGCORP will be converted into the right to receive 1.333 shares of Vecren
common stock. The former shareholders of SIGCORP will own 51.4% of the common
stock of Vecren and the remaining 48.6% will be owned by the former shareholders
of Indiana Energy. In addition, Vecren will own all of the common stock of
Southern Indiana and also become the indirect owner of a 50% interest in
ProLiance. Each SIGCORP subsidiary, including Southern Indiana, will continue to
provide the same products and services it provided before the merger.
III. Notice of Filing and Interventions
Notice of the Applicants' filing was published in the Federal Register, 64
Fed. Reg. 46,369 (1999), with motions to intervene and protests due on or before
October 13, 1999. Timely motions to intervene and protests were filed by the
Indiana Office of Utility Consumer Counselor (IOUCC) and Huntingburg Municipal
Utilities (Huntingburg). Applicants filed an answer to the protests. IOUCC and
Huntingburg filed responses to Applicants' answer. Applicants also filed an
additional response to IOUCC's response. We address intervenors' protests and
subsequent responses below.
- ----------
(3) The other 50% interest in ProLiance is owned by a non-affiliated firm.
(4) On January 16, 1997, the Director, Division of Rate Applications,
Office of Electric Power Regulation, pursuant to delegated authority under 18
C.F.R. ss. 375.308 (1999) authorized ProLiance to engage in wholesale electric
power and energy at market-based rates.
<PAGE> 5
Docket No. EC99-106-000 - 4 -
IV. Discussion
A. Procedural Matters
Pursuant to Rule 214 of the Commission's Rules of Practice and Procedure,
18 C.F.R. ss. 385.214 (1999), the timely, unopposed motions to intervene of
IOUCC and Huntingburg serve to make them parties to this proceeding. Although we
do not generally permit answers to protests and answers to answers,(5) we will
allow them in this case since they have helped to clarity the issues.
B. Standard of Review
Section 203(a) of the FPA provides, in relevant part, as follows:
No public utility shall sell, lease, or otherwise dispose of the whole of
its facilities subject to the jurisdiction of the Commission, or any part
thereof of a value in excess of $50,000, or by any means whatsoever,
directly or indirectly, merge or consolidate such facilities or any part
thereof with those of any other person, or purchase, acquire, or take any
security of any other public utility, without first having secured an
order of the Commission authorizing it to do so.
16 U.S.C. ss. 824b(a) (1994). Under section 203(a), the Commission must approve
a proposed merger if it finds that the merger "will be consistent with the
public interest." Id.
In 1996, the Commission issued a Merger Policy Statement updating and
clarifying its procedures, criteria and policies applicable to public utility
mergers.(6) The Merger Policy Statement provides that the Commission will
generally take account of three factors in analyzing proposed mergers: (a) the
effect on competition; (b) the effect on rates; and (c) the effect on
regulation.
- ----------
(5) See 18 C.F.R. ss. 385.213 (1999).
(6) See Inquiry Concerning the Commission's Merger Policy Under the
Federal Power Act: Policy Statement, Order No. 592, 61 Fed. Reg. 68,595 (1996),
FERC Stats. & Regs. P. 31,044 at 30,117-18 (1996), order on reconsideration,
Order No. 592-A 62 Fed. Reg. 33,341 (1997), 79 FERC P. 61,321 (1997) (Merger
Policy Statement).
<PAGE> 6
Docket No. EC99-106-000 - 5 -
For the reasons discussed below, we find that Applicants' proposed
transaction, together with Applicants' proposed commitments, and as conditioned
below, is consistent with the public interest. Accordingly, we will approve the
merger without further investigation.
C. Effect on Competition
1. Applicants' Analysis
The Applicants state that the proposed merger presents no horizontal
issues because Indiana Energy owns no electric generation or transmission
assets. (7) Therefore, Applicants focus on the vertical aspects of their
proposed merger associated with the consolidation of Southern Indiana's electric
generation/gas distribution and Indiana Energy's gas distribution interests.
Applicants conclude that the proposed merger would not adversely affect
competition through raising rivals' costs, anticompetitive coordination or
regulatory evasion because: (1) upstream relevant delivered gas markets are
competitive; (2) the merged company would serve only a small amount of rival
gas-fired generation located in relevant markets; and (3) natural gas is used to
produce only a de minimus amount of the relevant downstream product
(electricity).
In regard to upstream markets, Applicants identify delivered natural gas
as the relevant product and define the relevant geographic market as Southern
and Central Indiana, an area encompassing both companies' affiliated gas
distribution service areas. They compute market shares for delivered gas
suppliers using the sum of "uncommitted" and release capacity and analyze market
concentration under a number of different scenarios and sensitivity analyses.
Applicants state that these scenarios and sensitivities test the effect of their
assumptions on the scope of the geographic market.(8) In all cases,
- ----------
(7) As noted above, Indiana Energy indirectly holds a 50% interest in
ProLiance, a gas and electric power marketer. However, Applicants note that
ProLiance does not own or control any generation or transmission assets or hold
power purchase contracts with durations longer than one year. Application at
6-7.
(8) These scenarios involve: (1) including capacity on all five pipelines
serving the market versus capacity on the three pipelines interconnected with
Applicants' distribution systems (to test the scope of the geographic market);
(2) including versus excluding capacity held by marketers (to avoid double
counting of previously released capacity); (3) varying the level of uncommitted
capacity in the market (to account for capacity sold at regulated versus
unregulated prices); and (4) reducing release capacity volumes (to
(continued...)
<PAGE> 7
Docket No. EC99-106-000 - 6 -
Applicants' analyses show that the upstream delivered gas markets are
unconcentrated (i.e., HHI statistics ranging from 307 to 848) and Applicants
therefore conclude that the upstream markets are competitive.
With regard to downstream markets, Applicants point to the fact that
Southern Indiana's gas distribution facilities serve only its own generators and
Indiana Gas's gas distribution facilities serve only 243 MW of rival electric
generation capacity as evidence of their inability to carry out a strategy of
raising rival's costs. Finally, Applicants state that a complete analysis of
downstream electricity markets is unnecessary due to the de minimis role of
delivered natural gas in the production of electricity. In support of this
conclusion, Applicants show that: (1) natural gas represents 6 percent of the
generation capacity in both Eastern Central Area Reliability region (ECAR) and
Southwest ECAR; (2) natural gas represents less than 1 percent of fossil fuel
consumption in ECAR, Southwest ECAR and Indiana; (3) gas-fired generators are on
the margin between .8 and 1.8 percent of the hours in ECAR and between .2 and
1.2 percent of the hours in Southwest ECAR;(9) and (4) the average capacity
factor for gas-fired units is 1.7 percent in ECAR and 1.2 percent in Southwest
ECAR.
Based on the above-described analyses, Applicants conclude that the
proposed merger would not adversely affect competition.
2. Intervenor Protests and Responses
Huntingburg contends that Applicants' vertical market power in natural gas
can be leveraged into transmission and generation market power with respect to
captive customers like Huntingburg during peak periods when pipeline capacity is
constrained. Specifically, Huntingburg claims that Applicants' vertical market
analysis is "overbroad and irrelevant" because it ignores the merged company's
market power in unbundled natural gas markets (especially peak storage),
wholesale generation (especially spinning reserves) and electric transmission
markets.(10)
- ----------
(8) (...continued)
account for release market fluctuations).
(9) Applicants estimate regional supply curves for both ECAR and Southwest
ECAR to support this conclusion.
(10) Huntingburg Motion for Leave to Intervene and Protest at 4-6.
<PAGE> 8
Docket No. EC99-106-000 - 7 -
IOUCC argues that Applicants provided insufficient data to verify their
conclusion that the merger poses no potential for vertical power abuse.
Specifically, IOUCC contends that Indiana Energy's gas and power marketer
ProLiance controls a significant amount of natural gas pipeline capacity on
interstate pipelines serving Indiana. IOUCC further claims that Applicants have
not shown that ProLiance's market share on any of these pipelines is
sufficiently small to satisfy the Commission's merger policy guidelines with
regard to ProLiance's ability to influence gas transportation rates on any of
the pipelines analyzed. In this regard, IOUCC critiques various aspects of
Applicants' upstream delivered gas analyses, including: (1) their failure to
demonstrate that pipeline capacity included in relevant upstream markets is a
perfect substitute because they aggregate uncommitted capacity across pipelines;
(2) their use of "scenario" analysis in lieu of actual data; and (3) double
counting capacity in relevant upstream markets by including release
capacity.(11)
In response, Applicants note that they included supporting data for their
conclusions regarding the competitive effects of the proposed merger and argue
that IOUCC's protest fails to provide any factual evidence to invalidate
Applicant's conclusion that the merger will not adversely affect competition in
electricity markets.
3. Commission Determination
The Commission agrees with Applicants that the merger does not raise
horizontal issues. For the reasons discussed below, we also agree the merged
company's consolidation of delivered gas and generation interests will not
create or enhance the ability of the merged company to adversely affect prices
or output in downstream electricity markets and, as a result, the proposed
merger will not adversely affect competition in electricity markets.
Applicants have demonstrated that the proposed merger involves a relevant
upstream product (delivered natural gas) that is used to produce a de minimis
amount of electricity in reasonably defined downstream geographic markets.
Applicants properly conclude that it would be difficult for the merged firm to
adversely affect prices and output in relevant downstream geographic markets. As
pointed out by Applicants, this approach is consistent with the Revised Filing
Requirements NOPR which describes certain instances when, based on certain
limited information, the Commission may
- ----------
(11) IOUCC Motion to Intervene and Protest at 4-13.
<PAGE> 9
Docket No. EC99-106-000 - 8 -
conclude that a merger clearly presents no vertical competitive concerns.(12) We
agree with Applicants' approach and conclusions in this regard and note that
they have provided adequate and useful analysis pertaining to the largely
extra-marginal role of gas-fired capacity in determining prices in relevant
downstream geographic markets.(13) As a result of this showing, we find that the
merger does not present vertical competitive concerns related to raising rivals'
costs or anticompetitive coordination.(14)
In response to Huntingburg and IOUCC, we note that their concerns address
Applicants' upstream analysis, but do not effectively challenge the critical
element of Applicants' analysis, i.e., the conclusion that natural gas is used
to produce only a de minimis amount of electricity in downstream markets
preventing Applicants from affecting prices and output in downstream electric
markets. As a result, we find that Huntingburg's and IOUCC's concerns are
adequately addressed by Applicants' analysis which shows that the proposed
merger will not affect prices or output in downstream electricity markets.
D. Effect of the Merger on Rates
The Merger Policy Statement explains our concern that there be adequate
ratepayer protection from adverse rate effects as a result of a merger. It
describes various commitments that may be acceptable means of protecting
ratepayers, such as hold harmless provisions, open seasons for wholesale
customers, rate freezes, and rate reductions.(15)
1. Applicants' Analysis
Applicants state that the the proposed merger will not have an adverse
effect on rates. According to Applicants, Southern Indiana has five wholesale
customers that may be potentially effected by the proposed merger. Southern
Indiana provides full
- ----------
(12) See Revised Filing Requirements Under Part 33 of the Commission
Regulations, 63 Fed. Reg. 20,340, FERC Stats. and Regs. P 32,528 at 33,375-76.
(13) Extra-marginal capacity is capacity available at a cost higher than
the market-clearing price.
(14) Accord, San Diego Gas & Electric Company and Enova Energy, Inc., et
al., 79 FERC P 61,372 at 62,566 (1997), order denying reh'g, 85 FERC P 61,037
(1998).
(15) Merger Policy Statement at 30,123-24.
<PAGE> 10
Docket No. EC99-106-000 - 9 -
requirements service to Huntingburg and the City of Boonville, Indiana
(Boonville).(16) Southern Indiana also provides partial requirements service to
the City of Jasper, Indiana (Jasper), firm peaking power to Hoosier Energy, and
backup and emergency power to Alcoa Generating Company.(17) To protect wholesale
customers from any merger-related costs, Vectren has committed to a hold
harmless guarantee that provides that none of the costs arising out of the
merger transaction will be used as a vehicle for an increase in its
jurisdictional entities' wholesale electric rates.(18) Applicants note that
Southern Indiana and ProLiance (Indiana Energy's marketing affiliate) sell power
at market-based rates, but maintain that the proposed merger will not have an
adverse effect on their market-based rates because those rates are based on the
market, not costs, and market forces will assure that rates remain just and
reasonable.(19)
2. Intervenor Protests and Responses
Huntingburg claims that the proposed merger increases Applicants' ability
to impose rates that reflect merger-related costs and excessive stranded costs.
Huntingburg also states that Applicants have not addressed the potential impact
of the merged company's enhanced market power on the rates charged to
Huntingburg or the stranded costs Southern Indiana will claim upon termination
of Huntingburg's wholesale requirements contract. Huntingburg further argues
that the merger application should be conditioned to hold it harmless from
potential increases in fuel, generation and transmission costs and market power
of the merged utilities. Huntingburg also requests an open season during which
it may terminate its contract with Southern Indiana without exposure to a claim
for stranded cost recovery.
IOUCC claims that Indiana Gas has structured a capacity release and buy
back transaction with its affiliates, ProLiance, which permits ProLiance to
exceed the
- ----------
(16) Huntingburg has given Southern Indiana a notice of termination, and,
as a result, its contract will terminate on March 31, 2001. Boonville has signed
an agreement with Southern Indiana that will convert its municipal customers to
retail customers of Southern Indiana.
(17) Jasper is expected to continue to purchase part of its power
requirements from Southern Indiana. Southern Indiana's contract with Hoosier
Energy will expire on March 15, 2000.
(18) Application at 23 n. 9.
(19) See Southern Indiana Gas & Electric Company, 77 FERC (P.) 61,024
(1996) (Southern Indiana received market-based sales rates authorization); see
also supra note 4.
<PAGE> 11
Docket No. EC99-106-000 - 10 -
Commission's maximum rate for released capacity and to circumvent the capacity
release competitive bidding process. IOUCC maintains that the proposed merger
will permit ProLiance and Southern Indiana to enter into the same type of
improper affiliate relationship. IOUCC states that the Commission should reject
the proposed merger because it will enhance the ability of the merged companies
and their affiliates to avoid the Commission's policies through self-dealing.
IOUCC alternatively requests the opportunity for discovery regarding the
services provided by ProLiance to Indiana Energy and the corresponding rates and
revenues. IOUCC also states that the Commission should consider conditioning the
merger on a prohibition that would eliminate the self-dealing arrangements and
transactions between the merger applicants and their affiliates.
In its response to Huntingburg, Applicants commit to freeze the base rate
under Huntingburg's contract for the remainder of the term of service.(20) With
respect to transmission rates, Applicants commit to a general hold harmless
guarantee for a period of four years from the date the merger is consummated
whereby Applicants agree to demonstrate that no merger-related transaction or
transition costs are included in any rate increase with respect to Southern
Indiana's transmission service. Applicants also indicate that they intend to
join the Midwest Independent System Operator (Midwest ISO), and that they will
commit to make a section 203 filing requesting authorization to transfer control
of Southern Indiana's transmission facilities to Midwest ISO before it commences
operations.
In response to Huntingburg's argument regarding stranded costs, Applicants
maintain Huntingburg gave notice to terminate its power requirements contract on
March 29, 1996, and that it was aware of the prospect of stranded cost liability
when it gave its notice of termination. In any case, Applicants state that their
merger plans are unrelated to Huntingburg's potential stranded cost liability.
In response to IOUCC, Applicants maintain that issues regarding services
provided by ProLiance to Indiana Gas are not within the Commission's
jurisdiction. Applicants state that the contractual arrangement between Indiana
Gas and ProLiance has been reviewed by the Indiana Utility Regulatory Commission
(Indiana Commission) and found to be consistent with the public interest.
Applicants further maintain that they have not violated the Commission's
capacity release requirements. Applicants state that if Southern Indiana enters
into an agreement with ProLiance similar to that between Indiana
- ----------
(20) Applicants also commit to freeze the base rate in Boonville's
contract until the earlier of the contract termination date or April 24, 2001.
However, consistent with the terms of both contracts, Applicants reserve the
right to pass through any increases in fuel costs.
<PAGE> 12
Docket No. EC99-106-000 - 11 -
Gas and ProLiance, the reasonableness of the gas costs that Southern Indiana
would charge to retail ratepayers would fall within the jurisdiction of the
Indiana Commission as does the ProLiance/Indiana Gas contract. Applicants argue
that whether Southern Indiana will transfer its pipeline capacity to ProLiance
after the merger (in contravention of the Commission's capacity release
requirements) is pure speculation, and therefore not ripe for review at this
time.
3. Commission Determination
We will deny Huntingburg's request for an open season. The Merger Policy
Statement identifies a number of ratepayer protection mechanisms available to
merging parties, and Applicants have selected the hold harmless option.(21) We
find that Applicants' specific hold harmless guarantee, coupled with its general
statement of willingness to hold wholesale customers harmless from
merger-related costs, satisfies the Commission's ratepayer protection concerns.
With respect to Huntingburg's concern over fuel cost increases, the Commission
does not require applicants under section 203 to insulate their customers from
the rate effects of non merger-related events such as increases in fuel costs
pursuant to a fuel adjustment clause as a part of a contractual agreement.(22)
We also reject Huntingburg's argument as it relates to potential stranded
cost increases as a result of the merger. Huntingburg's stranded cost
obligation, if any, pertains to a notice of termination that was given by
Huntingburg to Southern Indiana prior to the filing of this merger, and
Huntingburg has failed to demonstrate how the proposed merger could lead to an
increase in its stranded cost obligation. Because Huntingburg's potential
stranded cost obligation is unrelated to the merger, we reject Huntingburg's
request to be relieved of that obligation.(23)
- ----------
(21) Merger Policy Statement at 30,124.
(22) See Jersey Central Power & Light Co., 87 FERC (P.) 61,014 at 61,038
(1999); Boston Edison Company, 82 FERC (P.) 61,017 at 61,054-55 (1998).
Moreover, Huntingburg may file a complaint under section 206 of the FPA, 16
U.S.C. ss. 824e (1994), if it believes that the fuel adjustment clause needs to
be revised as a result of the proposed transaction.
(23) Accord Duke Power Co., 79 FERC (P.) 61,236 at 62,041 (1997) (customer
will not be allowed to avoid payment of stranded costs if those costs are
unrelated to the merger).
<PAGE> 13
Docket No. EC99-106-000 - 12 -
We will reject IOUCC's request for relief concerning ProAliance. IOUCC's
allegations regarding the ProLiance/Indiana Gas arrangement pre-date this
merger, and are unrelated to the instant transaction. In addition, IOUCC's
concern that, after the merger, Southern Indiana will enter into a similar
contractual arrangement with its new affiliate ProLiance is purely speculative,
and therefore premature. In any event, a section 203 proceeding is not the
proper forum to address existing or potential alleged violations of the
Commission's capacity release rules.
After consideration, we conclude that the proposed merger will not
adversely affect rates.
E. Effect on Regulation
As explained in the Merger Policy Statement, the Commission's primary
concern with the effect on regulation of a proposed merger involves possible
changes in the Commission's jurisdiction when a registered holding company is
formed, thus invoking the jurisdiction of the Securities and Exchange Commission
(SEC). We are also concerned with the effect on state regulation where a state
does not have authority to act on a merger and the state raises concerns about
the effect of the merger on regulation.(24)
Applicants maintain that the proposed merger will not have an adverse
effect on regulation. Applicants state that after the merger, the Commission
will continue to regulate the wholesale rates and transmission service of
Southern Indiana, and ProLiance will remain subject to the Commission's
authority over public utilities. Additionally, Southern Indiana's retail rates
will continue to be regulated by the Indiana Commission, and the Indiana
Commission's regulatory jurisdiction over the natural gas sales, transmission
and distribution activities of both Southern Indiana and Indiana Gas will be
unaffected by the merger.(25)
Applicants further maintain that the proposed merger will not result in
the formation of a registered public utility holding company under PUHCA, and
thus, the Commission's jurisdiction over Southern Indiana and ProLiance will not
be affected. In support, Applicants note that SIGCORP and Indiana Energy are
currently exempt public utility holding companies under PUHCA, and that
post-merger, they will seek to obtain an exemption for Vectren as a public
utility holding company under PUHCA section
- ----------
(24) Merger Policy Statement at 30,124-25.
(25) Applicants note that an application for approval of the merger
transaction has been submitted to the Indiana Commission. Application at 28.
<PAGE> 14
Docket No. EC99-106-000 - 13 -
3(a)(1). In addition, Applicants commit, regardless of whether or not Vectren
receives exempt status under PUHCA or becomes a registered holding company, to
abide by our policies with respect to intra-corporate transactions.
Accordingly, we find that the proposed merger, with Applicants'
commitment, will not have an adverse effect on regulation.
F. Accounting Issues
According to the application, the merger will take place at the holding
company level, with no effect to on the account balances or financial statements
of Southern Indiana. For this reason, Applicants request a waiver of the
requirement to file their accounting for the merger. Based on Applicants'
assertion that Southern Indiana's account balances and financial statements will
not be affected by the merger and the understanding that Southern Indiana will
continue to maintain its accounts in accordance with the Commission's Uniform
System of Accounts, we will grant the waiver of the requirement to file
accounting related to the merger.
The Commission orders:
(A) The proposed disposition of jurisdictional facilities is hereby
authorized subject to the commitments and conditions discussed in the body of
this order.
(B) The request for waiver of the requirement to file accounting related
to the merger is hereby granted.
(C) The foregoing authorization is without prejudice to the authority of
the Commission or any other regulatory body with respect to rates, services,
accounts, valuation, estimates or determinations of cost, or any other matter
whatsoever now pending or which may come before the Commission.
(D) Nothing in this order shall be construed to imply acquiescence in any
estimate or determination of cost or any valuation of property claimed or
asserted.
(E) The Commission retains authority under section 203(b) of the FPA to
issue supplemental orders as appropriate.
<PAGE> 15
Docket No. EC99-106-000 - 14 -
(F) Applicants shall notify the Commission that the merger has occurred
within 10 days of the date the merger is consummated.
By the Commission.
(SEAL)
/s/ David P. Boergers
David P. Boergers,
Secretary.
<PAGE> 1
EXHIBIT E-1
[FILED VIA PAPER COPY PURSUANT TO FORM SE]
<PAGE> 1
EXHIBIT F-1
SOMMER & BARNARD
Attorneys at Law, PC
4000 Bank One Tower
111 Monument Circle
Indianapolis, Indiana 46204
January 25, 2000
Board of Directors
Vectren Corporation
20 N.W. Fourth Street
Evansville, Indiana 47741
Ladies and Gentlemen:
We have acted as counsel to Vectren Corporation ("Vectren") and Indiana
Energy, Inc. ("Indiana Energy") in connection with the negotiation and execution
of the Agreement and Plan of Merger dated June 11, 1999, among Indiana Energy,
SIGCORP, Inc. ("SIGCORP") and Vectren (the "Merger Agreement"). Upon the closing
of the merger contemplated by the Merger Agreement, Vectren will acquire,
directly or indirectly, all of the issued and outstanding voting securities of
Indiana Gas Company, Inc., Richmond Gas Corporation, Terre Haute Gas Corporation
and Southern Indiana Gas and Electric Company, Inc. ("SIGECO"). Each of Indiana
Gas, Richmond Gas, Terre Haute Gas and SIGECO is a public utility company.
We have examined such records and documents, and have made such
investigations of law and fact as we have deemed necessary in the circumstances.
Based on that examination and investigation, it is our opinion that:
1. Vectren is duly incorporated and validly existing under the laws of the State
of Indiana, with full power and authority (corporate and other) to own its
properties and conduct its business as described in its Application/Declaration
on Form U-1 filed with the SEC on November 24, 1999.
2. Vectren is not qualified as a foreign corporation in any jurisdiction and, to
the best of our knowledge, the nature of Vectren's operations do not require it
to be qualified in any jurisdiction.
3. Upon the closing of the merger as described in the Form U-1 and upon filing
of Articles of Merger with the Secretary of State of Indiana, the merger will be
effective in accordance with Indiana law.
4. Upon the closing of the merger and the issuance of Vectren common shares to
the former shareholders of Indiana Energy and SIGCORP pursuant to the Merger
Agreement, the Vectren common shares will be legally issued, fully paid and
nonassessable.
5. Upon the closing of the merger, Vectren will legally acquire all of the
issued and outstanding voting securities of Indiana Gas, Richmond Gas, Terre
Haute Gas and Southern Indiana Gas.
We consent to the filing of this opinion as an exhibit to Form U-1.
Sincerely,
SOMMER & BARNARD, PC
<PAGE> 1
EXHIBIT F-3
SOMMER & BARNARD
Attorneys at Law, PC
4000 Bank One Tower
111 Monument Circle
Indianapolis, Indiana 46204
January 25, 2000
Board of Directors
Vectren Corporation
20 N.W. Fourth Street
Evansville, Indiana 47741
Ladies and Gentlemen:
We have acted as counsel to Vectren Corporation ("Vectren") and Indiana
Energy, Inc. ("Indiana Energy") in connection with the negotiation and
execution of the Agreement and Plan of Merger dated June 11, 1999, among
Indiana Energy, SIGCORP, Inc. ("SIGCORP") and Vectren. Upon the closing of the
merger contemplated by the Merger Agreement, Vectren will acquire, directly or
indirectly, all of the issued and outstanding voting securities of Indiana Gas
Company, Inc., Richmond Gas Corporation, Terre Haute Gas Corporation and
Southern Indiana Gas and Electric Company, Inc. ("SIGECO") Each of Indiana
Gas, Richmond Gas, Terre Haute Gas and SIGECO is a public utility company.
We have examined such records and documents, and have made such
investigations of law and fact as we have deemed necessary in the circumstances.
Included in our review was the recent decision of the Indiana Supreme Court,
Indiana Bell Telephone Co., Inc., et al. v. Indiana Utility Regulatory
Commission et al., 715 N.E. 351 (Ind. 1999). Based on that examination and
investigation, it is our opinion that the consummation of the merger does not
require approval of the Indiana Utility Regulatory Commission.
We consent to the filing of this opinion as an exhibit to Form U-1.
Sincerely,
SOMMER & BARNARD, PC
