<PAGE>
PROSPECTUS SUPPLEMENT FILED PURSUANT TO RULE 424(b)(5)
(TO PROSPECTUS DATED APRIL 21, 1994) REGISTRATION NO. 33-77812
$75,000,000
NORTHERN ILLINOIS GAS COMPANY
FIRST MORTGAGE BONDS
6.45% SERIES DUE AUGUST 1, 2001
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INTEREST PAYABLE FEBRUARY 1 AND AUGUST 1
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Interest on the New Bonds is payable semiannually on February 1 and August 1
of each year, commencing February 1, 1997. The New Bonds may not be redeemed by
the Company prior to August 1, 2000. On and after August 1, 2000, the New Bonds
will be redeemable, at the Company's option, on not less than 30 nor more than
45 days notice, as a whole at any time or in part from time to time, at 100% of
the principal amount thereof, plus accrued and unpaid interest to the
redemption date.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR
THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
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The Underwriter has agreed to purchase the New Bonds from the Company at
99.224% of their principal amount ($74,418,000) plus accrued interest from
August 1, 1996, before deducting expenses payable by the Company estimated at
$230,000, subject to the terms and conditions set forth in the Underwriting
Agreement.
The Underwriter proposes to offer the New Bonds from time to time for sale in
one or more negotiated transactions, or otherwise, at market prices prevailing
at the time of sale, at prices related to such prevailing market prices or at
negotiated prices. For further information with respect to the plan of
distribution and any discounts, commissions or profits on resale that may be
deemed underwriting discounts or commissions, see "Underwriter" herein.
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The New Bonds are offered by the Underwriter, subject to prior sale, when, as
and if delivered to and accepted by the Underwriter, and subject to its right
to reject orders in whole or in part. It is expected that delivery of the New
Bonds will be made in New York City on or about August 13, 1996.
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PAINEWEBBER INCORPORATED
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THE DATE OF THIS PROSPECTUS SUPPLEMENT IS AUGUST 6, 1996.
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IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SECURITIES
OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
RECENT DEVELOPMENTS
OPERATING RESULTS. Recent operating results (unaudited) for the Company are
as follows:
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Three Months Six Months Twelve Months
Ended Ended Ended
June 30 June 30 June 30
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Statement of Income Data
(Millions): 1996 1995 1996 1995 1996 1995
------ ------ ------ ------ -------- --------
Operating Revenues......... $284.7 $208.9 $937.2 $778.3 $1,471.6 $1,258.8
Net Income................. 22.6 15.1 63.6 51.7 97.3 86.1
</TABLE>
Operating revenues increased $75.8 million, $158.9 million and $212.8 million
for the three-, six- and twelve-month periods, respectively, due primarily to
increased deliveries and higher natural gas costs which are passed through to
sales customers. Increased deliveries were attributable to the positive impact
of colder weather and demand growth.
Net income for the three-, six- and twelve-month periods ended June 30, 1996,
rose $7.5 million to $22.6 million, $11.9 million to $63.6 million and $11.2
million to $97.3 million, respectively, from the corresponding 1995 periods.
For the three-month period, the increase was due primarily to the impact of a
2.8 percent general rate increase along with rate design changes which shift
some revenues from cold-weather months to warm-weather months. For the six- and
twelve-month periods, the increase was due primarily to the positive impact of
higher deliveries. The April 1996 rate case result also contributed to the
improvements.
RATE PROCEEDING. On April 3, 1996, the Illinois Commerce Commission
("Ill.C.C.") granted Northern Illinois Gas a $33.7 million general rate
increase, of which $12 million relates to the change in the Company's composite
depreciation rate. In May 1996, the Ill.C.C. denied requests for rehearing
filed by several parties including Northern Illinois Gas. The Company and other
parties have subsequently appealed the Ill.C.C.'s order to the Third District
Appellate Court of Illinois.
USE OF PROCEEDS
The net proceeds from the sale of the New Bonds will be used for the
replenishment of general corporate funds which were used for the March 1996
maturity of $50,000,000 of 4 1/2% First Mortgage Bonds and the completion of
the Elgin-Volo pipeline project.
DESCRIPTION OF NEW BONDS
GENERAL. Interest at the annual rate set forth on the cover page of this
Prospectus Supplement will accrue from August 1, 1996, and is to be payable
semiannually on February 1 and August 1, beginning February 1, 1997, to the
person in whose name the New Bond is registered on the January 15 or July 15
(whether or not a business day) next preceding such interest payment date. The
New Bonds will be limited to $75,000,000 aggregate principal amount, will be
issued in fully registered form only, in denominations of $1,000 and integral
multiples thereof, and will mature August 1, 2001.
New Bonds of any denomination will be exchangeable for a like aggregate
principal amount of New Bonds of different authorized denominations upon
surrender of such New Bonds, with the request for such
S-2
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exchange, at Harris Trust and Savings Bank, Corporate Trust Department, 311
West Monroe Street, Chicago, Illinois, or at Harris Trust Company of New York,
77 Water St., 4th Floor, New York, New York. Principal and interest will be
payable at the offices identified in the preceding sentence, except that any
installment of interest on the New Bonds may, at the Company's option, be paid
by mailing checks for such interest payable to or upon the written order of the
person entitled thereto to the address of such person as it appears on the
registration books.
Reference is made to the Prospectus for a description of the general terms of
the New Bonds which the particular description herein supplements.
REDEMPTION. The New Bonds may not be called for redemption by the Company
prior to August 1, 2000. On August 1, 2000 and thereafter until maturity on
August 1, 2001, the New Bonds may be redeemed at the Company's option, on not
less than 30 nor more than 45 days notice, as a whole at any time, or in part
from time to time, at 100% of the principal amount thereof, plus accrued and
unpaid interest to the date fixed for redemption.
SINKING FUND. No sinking fund is provided for the New Bonds.
TRUSTEE. On February 26, 1996, Harris Trust and Savings Bank succeeded Bank
of America Illinois as trustee under the Indenture.
UNDERWRITER
Under the terms and subject to the conditions contained in the Underwriting
Agreement dated the date hereof, PaineWebber Incorporated (the "Underwriter")
has agreed to purchase, and the Company has agreed to sell to the Underwriter,
$75,000,000 principal amount of the New Bonds.
The Underwriting Agreement provides that the obligations of the Underwriter
to pay for and accept delivery of the New Bonds are subject to the approval of
certain legal matters by their counsel and to certain other conditions. The
Underwriter is committed to take and pay for all of the New Bonds if any are
taken.
The distribution of the New Bonds by the Underwriter is being effected from
time to time in negotiated transactions or otherwise at varying prices to be
determined at the time of each sale. In connection with the sale of any New
Bonds, the Underwriter may be deemed to have received compensation from the
Company equal to the difference between the amount received by the Underwriter
upon the sale of such New Bonds and the price at which the Underwriter
purchased such New Bonds from the Company. In addition, the Underwriter may
sell New Bonds to or through certain dealers, and dealers may receive
compensation in the form of underwriting discounts, concessions or commissions
from the Underwriter and/or any purchasers of New Bonds for whom it may act as
agent (which compensation may be in excess of customary commissions). The
Underwriter may also receive compensation from the purchasers of New Bonds for
whom it may act as agent.
There is presently no trading market for the New Bonds and there is no
assurance that a market will develop. Although it is under no obligation to do
so, the Underwriter presently intends to act as a market maker for the New
Bonds in the secondary trading market but may discontinue market making at any
time without notice.
The Company has agreed to indemnify the Underwriter against certain
liabilities, including civil liabilities under the Securities Act of 1933, as
amended.
S-3
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LOGO
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NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRE-
SENTATIONS IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS SUPPLEMENT OR THE PROSPECTUS AND, IF GIVEN OR MADE, SUCH OTHER IN-
FORMATION AND REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY OR THE UNDERWRITER. NEITHER THE DELIVERY OF THIS PROSPECTUS SUP-
PLEMENT OR THE PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUM-
STANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF
THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE. THIS PROSPECTUS SUPPLEMENT AND
THE PROSPECTUS DO NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER
TO BUY ANY SECURITIES OTHER THAN THE REGISTERED SECURITIES TO WHICH THEY RE-
LATE. THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS DO NOT CONSTITUTE AN OFFER
TO SELL OR A SOLICITATION OF AN OFFER TO BUY SUCH SECURITIES IN ANY CIRCUM-
STANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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PROSPECTUS SUPPLEMENT
<S> <C>
Recent Developments........................................................ S-2
Use of Proceeds............................................................ S-2
Description of New Bonds................................................... S-2
Underwriter................................................................ S-3
PROSPECTUS
Available Information...................................................... 2
Incorporation by Reference................................................. 2
Experts.................................................................... 2
Summary Information........................................................ 3
The Company/Recent Developments............................................ 4
Use of Proceeds............................................................ 4
Plan of Distribution....................................................... 4
Description of Bonds....................................................... 5
Legal Opinions............................................................. 9
</TABLE>
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$75,000,000
FIRST MORTGAGE BONDS
6.45% SERIES DUE
AUGUST 1, 2001
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PROSPECTUS SUPPLEMENT
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PAINEWEBBER INCORPORATED
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AUGUST 6, 1996
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