SCHEDULE 14A INFORMATION
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THE SECURITIES EXCHANGE ACT OF 1934
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THE BROOKLYN UNION GAS COMPANY
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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BROOKLYN UNION
MID-YEAR UPDATE
1997
ANALYST PRESENTATION
WEDNESDAY, JUNE 18, 1997
NEW YORK, NY<PAGE>
BROOKLYN UNION
ONE METROTECH CENTER
BROOKLYN, NY 11201-3850
HTTP://WWW.BUG.COM
ROBERT B. CATELL
CHAIRMAN & CHIEF EXECUTIVE OFFICER
CRAIG G. MATTHEWS
PRESIDENT & CHIEF OPERATING OFFICER
VINCENT D. ENRIGHT
SENIOR VICE PRESIDENT & CHIEF FINANCIAL OFFICER
JAN C. CHILDRESS
VICE PRESIDENT, INVESTOR RELATIONS
TEL: 718-403-3382
FAX: 718-852-8221
E-MAIL: [email protected]<PAGE>
BROOKLYN
UNION
[LOGO]<PAGE>
LONG-TERM STRATEGIC APPROACH
=================================================================
-- Grow core distribution and transportation business
-- Build complementary upstream and downstream assets
-- Develop strong marketing business
-- Pursue mergers & acquisitions
BROOKLYN
UNION
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[Graphic of an arrow pointing right with Brooklyn Union on
the arrowhead, and an arrow pointing left with LILCO on
the arrowhead]<PAGE>
HOLDING
COMPANY
|
--------------------------
| |
BROOKLYN LONG ISLAND
UNION LIGHTING
COMPANY
BROOKLYN
UNION
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LIPA'S GOALS AND OBJECTIVES
=================================================================
-- Achieve and sustain double digit rate savings
-- Settle the $1.2 billion Shoreham Property tax and
PILOT Litigation ("Shoreham Litigation") and other
tax certiorari cases
-- Assure system reliability and customer service
-- Foster competition
-- Promote conservation and demand side management
-- Maximize private sector involvement
BROOKLYN
UNION
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LILCO RESTRUCTURING
=================================================================
HOLDCO
/ \
/ \
BU NEWCO - Gas
| - Electric Generation
| - Common Facilities
|
LILCO - Electric Transmission
- Electric Distribution
- Nine Mile Point 2 (18% Share)
- Regulatory Asset
- IPP/Power Supply Contracts
- Shoreham Litigation and Other Tax Claims
BROOKLYN
UNION
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LIPA ACQUISITION OF LILCO
=================================================================
HOLDCO
/ \
/ \ Cash Cash
BU NEWCO <------ LIPA <------ LIPA
------> | ------> Tax-Exempt
LILCO | LIPA Bondholders
Stock | Bonds
|
LILCO
BROOKLYN
UNION
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MANAGEMENT SERVICES AGREEMENT ("MSA")
=================================================================
Manager: HOLDCO will serve as initial Manager
for LIPA's T&D system in accordance
with LIPA's policies and procedures
Term: 8 years
Mandatory Rebid: Contract will be competitively bid
after the 5th year
Compensation The MSA will include incentive and
Performance penalty provisions tied to cost
Standards: savings and system performance
standards, including reliability,
customer service and worker safety
BROOKLYN
UNION
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POWER SUPPLY AGREEMENT ("PSA")
=================================================================
Amount of Generation: LIPA will contract with NEWCO for
all of its existing generation
capacity (approximately 3,900 MW)
Energy Purchases: LIPA will purchase energy from
NEWCO and other sources on least-
cost basis
Generation Charges: Generation charges will not be
increased as a result of the
transaction
Agreement Term: 15 years
Ramp-Down Option: Beginning in year 7, LIPA can
reduce by as much as 1,500 MW its
capacity commitment according to
a mutually agreed upon schedule.
If LIPA exercises this option and
accepts bids to replace the
capacity, NEWCO will be paid a
declining percentage of the
present value of the remaining
capacity charges related to the
capacity reduction.
BROOKLYN
UNION
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HIGHLIGHTS
=================================================================
LIPA Will:
-- Acquire Lilco common stock for $2.5 billion ($1.7
billion net)
-- Assume $3.6 billion in debt
-- Redeem $340 million in preferred stock
Merger Provides For Orderly Management Transition
Board of New Holding Company Includes:
-- Six Brooklyn Union Directors
-- Six Lilco Directors
-- Three New Outside Directors
BROOKLYN
UNION
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REQUIRED APPROVALS
=================================================================
Long Island Approve (i) acquisition of LILCO
Power Authority: common stock, (ii) MSA, (iii) PSA
and (iv) LIPA bond resolution
BU and LILCO Approve BU/LILCO combination
(Shareholders): Approve sale of LILCO common
stock to LIPA (LILCO SHAREHOLDERS
ONLY)
Public Authorities Approve transaction and LIPA bond
Control Board: issue
N.Y.S. Comptroller: Approve terms of LIPA bond issue
N.Y.S. Public Service Approve (i) BU/LILCO combination,
Commission: (ii) funding of interest rate
hedge and (iii) split of synergy
savings among gas and electric
customers and shareholders
BROOKLYN
UNION
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REQUIRED APPROVALS
=================================================================
Internal Revenue
Service:
Rulings regarding LIPA's tax-exempt
bonds
Rulings regarding capital gains
related to BU/LILCO sale of LILCO to
LIPA
Federal Energy Approve (i) PSA rates and contract
Regulatory terms and (ii) market power issues
Commission: related to transaction
Nuclear Regulatory Approve transfer of LILCO's 18%
Commission: ownership share of NMP2 to LIPA
Securities Ex- BU/LILCO exemption from Public
change Commission: Utility Holding Company Act
jurisdiction
BROOKLYN
UNION
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GAS DISTRIBUTION PROFILE
=================================================================
For 1996 Fiscal Year
-- 5th largest gas distribution company in U.S.
-- Serves Brooklyn, Staten Island and 2/3 of Queens
-- 1,126,000 customers (including 1,089,000 residential)
-- 142 BCF in firm gas sales
-- $1.4 billion in revenues
-- $82 million in net income
-- $111 million in capital expenditures
BROOKLYN
UNION
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OBJECTIVES 1997-2002
=================================================================
Gas Distribution
-- Five percent annual growth in net income
-- Produce ROE in top quartile of gas distributors
-- Reduce annual capital expenditures by 20 percent
-- Achieve $30 million net reduction on O&M
-- Shape the process of deregulation of NY state
-- Continue to lead NY state utilities in customer
satisfaction
BROOKLYN
UNION
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FUTURE EARNINGS GROWTH
=================================================================
Gas Distribution
-- Increase saturation in existing markets
-- Develop new markets for gas
-- Increase revenue from existing customers
-- New York Hub
-- Price cap
BROOKLYN
UNION
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FUTURE EARNINGS GROWTH
=================================================================
Gas Distribution
-- Expanded parts protection plan
-- Customer Services Guarantees
-- Unbundled Services
-- Additional Segmentation
-- Customized Rates
-- Packaging services to marketers, such as capacity,
storage, swing service and balancing
BROOKLYN
UNION
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DISTRIBUTION BUSINESS
TRADITIONAL MARKET SEGMENTS
Gross Margins
Added From
Potential New Sales
Saturation Margins 1992-1996
---------- --------- --------------
Residential 78% $100.1 mil $16.0 mil
Multifamily 46% 35.2 mil 11.5 mil
Commercial,
Industrial,
Government 52% 135.1 mil 31.4 mil
New Markets -- 113.2 mil 4.0 mil
---------- ----------
Total $383.6 mil $62.9 mil
BROOKLYN
UNION
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POTENTIAL LOAD BY CUSTOMER CLASS
136 Billion Cubic Feet
[Pie Chart showing that 25% held by Commercial, Industrial
and Government, 18% held by Residential, 15% held by
Multifamily and 42% held by New Products.]
BROOKLYN
UNION
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NEW YORK HUB SHAREHOLDERS BENEFITS
=================================================================
Gas Distribution (in $ Millions)
[Bar graph showing $0.40 million in gas distribution in
1994, $1.40 million in 1995 and $2.30 million 1996.]
BROOKLYN
UNION
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COST SAVINGS TARGETS
=================================================================
Gas Distribution (in $ Millions)
[Bar graph demonstrating comparisons between 1996 and 2001
targets for cost of gas ($610 million in 1996 and $592
million in 2001), O&M expense ($371 million in 1996 and
$345 million in 2001) and capital spending ($111 million
in 1996 and $89 million in 2001).]
BROOKLYN
UNION
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CUSTOMER SATISFACTION
=================================================================
Complaint Rates per 1,000 Customers
[Bar graph demonstrating 10 complaints for Central Hudson;
9.6 complaints for Orange & Rockland; 9.5 complaints for
Niagra Mohawk; 9.4 complaints for Rochester G&E; 7.5
complaints for National Fuel; 7 complaints for Con Edison;
6.6 complaints for LILCO; 4.9 complaints for NYSEG; 3.5
complaints for Brooklyn Union, in each case, per 1,000
customers.]
Source: New York State Public Service Commission for 12-Month
Period Ended July 1996.
BROOKLYN
UNION
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INCENTIVE MANAGEMENT
=================================================================
Gas Distribution
-- Increased earnings & sales
-- Lower operating & maintenance expense
-- Higher customer satisfaction ratings
-- Employee excellence
BROOKLYN
UNION
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RESULTS OF LOCAL UNBUNDLING
=================================================================
5,100 Customers Elected Transportation - Only
4.6 BCF in Normalized Annual Firm Sales
5% of Normalized Annual Firm Sales
BROOKLYN
UNION
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PACKAGING SERVICES TO MARKETERS
-- Pipeline Capacity
-- Storage
-- Daily Swing Service
-- Standby Service
-- Billing
BROOKLYN
UNION
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KEYSPAN ENERGY
CORPORATION
[LOGO]
BROOKLYN
UNION
[LOGO]<PAGE>
KEYSPAN ENERGY
MANAGEMENT
[LOGO]
--------------------------
ENERGY-RELATED SERVICES
BROOKLYN
UNION
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KEYSPAN Energy Marketing Group
=================================================================
Northeast Market Area
Demographics as % of Total U.S. Strategic Alliances
------------------------------- -------------------
Residential Population 19.7% Metricom
Electric Sales 14.4% Wickes Inc.
LDC Deliveries 17.1%
Commercial Gas 21.1%
Industrial Gas 15.8%
Residential Gas 21.5%
[Map of the northeastern United State including the states
of Maine, New Hampshire, Vermont, Massachusetts, Rhode
Island, Connecticut, New York, Pennsylvania, New Jersey,
Delaware and Maryland which shows Keyspan Offices in Old
Lyme, CT; Stamford, CT; Jericho, Long Island; and
Greenpoint, Brooklyn. Map also indicates Utility
Alliances in Atlantic City, NJ.]
BROOKLYN
UNION
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INDUSTRY GAS VOLUME USAGE (% OF U.S.)
Northeast Market Area
Manufacturing 43.5%
Restaurants 22.9%
Real Estate (Apartments) 37.6%
Hotel/Lodging 20.8%
Health/Hospitals 22.4%
Education/Schools 23.9%
BROOKLYN
UNION
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KEYSPAN ENERGY
PORTFOLIO OF SERVICE OFFERINGS
Markets Services
-- Institutional -- Natural Gas
-- Large Commercial/ -- Electricity
Industrial
-- Fuel Oil
-- Small Commercial/
Industrial -- Energy Efficiency and
Performance Analysis
-- Temperature
Controlled -- Financing
-- Multifamily -- Design & Eng
-- Residential -- Construction Mgmt
-- Maintenance
-- Operations
-- Fuel Management
BROOKLYN
UNION
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CUSTOMER GROWTH
=================================================================
Key Span Energy
[Bar graph demonstrating Customer growth from 0 in 1995 to
2,575 in 1996 to 13,000 in June 1997.]
BROOKLYN
UNION
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NEW VENTURES
=================================================================
-- Key Span Energy Marketing Group (Northeast U.S.)
Retail Energy Marketing
Energy Management Services
Metricom Joint Venture
Appliance Services (Fiscal 1998)
-- British Gas Joint Venture (Northern Ireland)
Gas Transmission
Gas Distribution System
BROOKLYN
UNION
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ENERGY-RELATED INVESTMENTS
(in millions)
[Chart indicating increase of Net Income from Operations
from slightly under $2 million in 1991 to $2 million in
1992 to close to $6 million in 1993 to close to $10
million in 1994 to close to $13 million in 1995 to close
to $15 million in 1996.]
BROOKLYN
UNION
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IROQUOIS GAS TRANSMISSION SYSTEM
=================================================================
Total Volumes Transported (BCF)
[Bar graph indicating Total Volumes Transported equaled
123.0 in 1992; 240.1 in 1993; 264.6 in 1994; 304.6 in
1995; and 312.0 in 1996.]
BROOKLYN
UNION
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THE HOUSTON EXPLORATION COMPANY
=================================================================
Key Financial Results
12 Months 12 Months
Ended 12/96 Ended 12/95
----------- -----------
Revenue (Millions) $65.9 $41.2
Net Income (Millions) $ 8.6 $(0.3)
Cash Flow (Millions) $50.8 $39.4
Earnings Per Share $0.49 $(0.02)
Cash Flow Per Share $2.90 $ 2.58
Weighted Average Shares
Outstanding (Millions) 23.3 15.3
Average Gas Prices Per MCF 2.00 1.79
BROOKLYN
UNION
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NET INCOME PER SHARE
=================================================================
[Bar graph demonstrating Net Income per Share equaled
$1.73 in 1993; $1.85 in 1994; $1.90 in 1995; $2.48 in
1996. 1996 number includes Net Gains of $.52.]
BROOKLYN
UNION
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KEY FINANCIAL RESULTS
=================================================================
6 Months 6 Months
Ended 3/97 Ended 3/96
---------- ----------
Income Available for
Common (Millions) $125.0 $119.0
Earnings Per Share $ 2.50 $ 2.43
Utility $ 2.40 $ 2.37
Energy-Related $ 0.10 $ 0.06
BROOKLYN
UNION
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5-YEAR RETURN ON EQUITY
=================================================================
Gas Distribution
[Bar graph demonstrating 12.8% in 1996; 12.3% in 1995;
12.2% in 1994; 12.2% in 1993; and 12.2% in 1992.]
BROOKLYN
UNION
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DIVIDENDS PER SHARE
=================================================================
[Bar graph demonstrating steady increase of dividends per
share from $1.00 in 1985 to close to $1.45 in 1996.]
BROOKLYN
UNION
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TOTAL SHAREHOLDER RETURN
=================================================================
For Period Ended March 31, 1997
[Bar graph demonstrating 10.6% for 10 year-, 13.4% for
five year- and 8.3% for 1 year-period ended March 31,
1997.]
BROOKLYN
UNION
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