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File No. 70-8235
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Amendment No. 6 to Form U-1
JOINT APPLICATION-DECLARATION
UNDER
THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
THE COLUMBIA GAS SYSTEM, INC.
20 Montchanin Road
Wilmington, Delaware 19807
TRISTAR VENTURES CORPORATION
20 Montchanin Road
Wilmington, Delaware 19807
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(Name of Company or Companies Filing This Statement
and Addresses of the Principal Executive Offices)
THE COLUMBIA GAS SYSTEM, INC.
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(Name of Top Registered Holding Company Parent of
Each Applicant or Declarant)
L. J. BAINTER, VICE PRESIDENT
Columbia Gas System Service Corporation
20 Montchanin Road
Wilmington, Delaware 19807
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(Name and Address of Principal Agent for Service)
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This Application-Declaration previously filed and amended is
hereby further amended by restating paragraphs b) and d) of Item 1(a) as
follows and by including the exhibits referenced herein:
Item 1. Description of Proposed Transaction.
(a) Furnish a reasonably detailed and precise description of
the proposed transaction, including a statement of the reasons why it is
desired to consummate the transaction and the anticipated effect thereof. If
the transaction is part of a general program, describe the program and its
relation to the proposed transaction.
b) Background
(1) Preliminary Statement
TVC is currently authorized through December 31, 1994, by
Orders dated November 9, 1992 (HCAR No. 35-25672) and September 17, 1992 (HCAR
No. 35-25635), in File No. 70-8012, to invest up to $10 million in preliminary
development and administrative operations. Under these Orders, approximately
$5 million has been expended through the end of 1993. By this
Application-Declaration, TVC is seeking to modify and replace the current
authorization to effectively provide TVC with $7 million of incremental funding
for preliminary development and administrative expenditures. As such, TVC's
aggregate funding for 1994 would total $12 million, for which authority is
hereby requested. Upon receipt of such authorization, TVC will request a
withdrawal of previous authorizations covering such expenditures. The
financing authority requested herein is within the scope of Columbia's
Bankruptcy authority, and no further Bankruptcy Court approval is required in
connection therewith.
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(2) TVC's Investments Prior to 1990
By Orders dated September 26, 1986 (HCAR No. 35-24199) and
November 5, 1986 (HCAR No. 24199-A), in File No. 70- 7276, the Commission
authorized, among other things, the organization of TVC as a wholly-owned
subsidiary of Columbia for the purpose of making investments in qualifying
cogeneration facilities ("QFs") as defined in the Public Utility Regulatory
Policies Act of 1978 ("PURPA") and the rules and regulations of the Federal
Energy Regulatory Commission. Authorized investments in QFs included the
acquisition of stock, participation in partnerships and joint ventures, the
making and/or guaranteeing of loans and the entry into other contractual
arrangements. By Order dated January 29, 1988 (HCAR No. 35-24569), TVC was
authorized to make such investments directly or indirectly, through multiple
wholly-owned subsidiaries of TVC (the "TriStar Subsidiaries").
In 1987, as a partner of Cogeneration Partners of America
("CPA"), TVC began to develop small cogeneration projects (three megawatts or
less). Between 1987 and 1989, four projects were built, all of which were
completely financed by the CPA partners. As the operating environment evolved,
it became apparent that for various reasons, including changes in electric
utility ratemaking procedures and the inability to leverage returns with
project debt financing, these small cogeneration projects would not provide
adequate returns on investment. These original four projects have been sold.
In 1989, TVC implemented a new strategic plan to develop and
construct larger cogeneration projects. It was
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determined that larger projects would provide higher returns on investment
commensurate with the development risks. Pursuant to this business strategy,
TVC has made investments as discussed below in the Pedricktown, Binghamton,
Rumford and Vineland projects (collectively, the "Projects").
(3) TVC's Investments from 1990 to the Present
Exhibit H-3 summarizes TVC's investments in the Projects
pursuant to its new strategic business plan.
TVC holds a 50% interest in the Pedricktown Project, a natural
gas fired 110-megawatt unit with a capital cost of $105 million. It was
financed with $5 million of total equity, with the balance being debt financed
on a secured, non-recourse basis by a bank group led by The Fuji Bank, Limited,
New York Branch.
TVC has a one-third interest in the Binghamton Project, a
natural gas fired 50-megawatt unit with a capital cost of $63 million. This
project was financed with $18 million of total equity, with the balance being
debt financed on a secured, non- recourse basis by Mellon Bank, N.A.
TVC has a 10% interest in the Rumford Project, an 85-megawatt
coal and waste-wood fired cogeneration plant in Rumford, Maine with a capital
cost of $182 million. It was financed with $46 million of total equity with
the balance being debt financed on a secured, non-recourse basis by a bank
group led by Bank of America.
TVC has a 50% interest in the Vineland Project, which is
scheduled to commence operations in June of 1994. The construction of this
natural gas fired 47-megawatt unit, located
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in Vineland, New Jersey, is currently on schedule and on budget. The Vineland
Project has been debt financed on a secured, non- recourse basis, through the
issuance of $77 million of tax-exempt municipal bonds. Total equity investment
in the Vineland Project is approximately $15 million. The Project's
engineering is currently 99% complete and construction is 95.7% complete. As
of December 1993, construction work in progress totaled $70.5 million.
Collectively, the Projects have a total plant cost of
approximately $442 million. Of this amount, TVC has invested approximately $21
million in equity, the balance being financed by $63 million of equity
contributions from TVC's partners and $358 million from non-recourse
third-party secured debt financings. Because the debt is non-recourse to TVC
and Columbia, and TVC participates in the Projects through special purpose
subsidiaries, the only financial risk to TVC and Columbia is TVC's equity
amounts committed and invested.1
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1 TVC and Dominion Energy, Inc. ("Dominion") had planned
to construct a 56-megawatt, gas-fired cogeneration plant at a
site on the campus of Georgetown University in Washington, D.C.
The Georgetown Project was delayed by numerous, and in many cases
redundant, regulatory proceedings. After the project
successfully obtained over 20 regulatory approvals, the
processing of the building permit for the plant was nevertheless
suspended indefinitely on October 13, 1993 by the District of
Columbia. Because of this indefinite suspension, TVC and
Dominion halted efforts to build the Georgetown project and filed
a lawsuit in Federal Court against the District of Columbia
seeking $80 million in compensatory and punitive damages. As
shown in Exhibit H-4, TVC wrote off its investment in this
project.
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(4) Substantial Income from Projects
The three Projects that are currently operating are profitable
and the fourth, the Vineland Project, is projected to generate profits when it
becomes operational later in 1994. As demonstrated by Exhibit H-4, the
Projects (not taking into account other planned future TVC investments) are
projected to generate more than $11 million in net income to TVC over the next
five years. In 1994, it is projected that TVC's share of the revenues from
current Projects will be approximately $4.2 million, generating $1.5 million in
net income to TVC.
(5) TVC's Future
TVC's future contribution to Columbia and its subsidiaries
(the "System") should be greater than its past contributions. The factors
supporting this conclusion fall into three main categories.
The first factor is that TVC's returns on its current large
Projects are attractive, as demonstrated by Exhibit H- 4. Moreover, these
returns will increase significantly over the remaining life of the Projects
after the Projects' debt is ultimately paid off.2 TVC's goal is to find and
develop new projects which will build on the success of its existing Projects.
Private power markets should offer significant opportunities for TVC to expand
its portfolio. Recent forecasts indicate that 75,000 megawatts of incremental
capacity will be needed within the next ten to fifteen years, and private power
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2 Each of the Projects has been debt financed over at
least a 12 year amortization period.
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producers are expected to meet 50 percent of that demand. Columbia benefits by
having a unit that can seek these attractive unregulated returns.
The second factor is that power generation is the largest
future incremental market for natural gas, and TVC's expertise in this field
should help the System benefit from this opportunity. Increased usage of
natural gas to produce electricity is expected to generate incremental
utilization and related profits from other System assets. Natural gas' share
of U.S. electricity generation is projected to increase from approximately 9.4
percent to 14.0 percent by the year 2000, and then to 16.0 percent by the year
2005. This should result in an increase in natural gas consumption for
electricity generation from approximately 2.8 Tcf to 5.0 Tcf (in the year 2000)
and then to 6.1 Tcf (by the year 2005). These projections are based on factors
such as the comparative prices for natural gas and competing fuels, and the
costs of meeting new clean air requirements.3
The third factor is that TVC focuses on and is capable of
providing synergistic value to the System through its role as a buyer,
transporter, and burner-tip consumer of natural gas. TVC's Projects have
facilitated business opportunities for other business segments in the System.
By the end of 1994, a total of over 7.5 Bcf of gas purchased from TVC's
affiliates will be sold to TVC's Projects with throughput on Columbia's
interstate
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3 See Energy Information Administration's 1993 Annual
Energy Outlook Report.
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pipeline subsidiary of nearly 11 Bcf. A current estimate of these synergistic
benefits on an annual basis is shown for the Binghamton, Pedricktown and
Vineland Projects in Exhibit H-5. Such benefits are projected to continue over
the remaining lives of these Projects. It is TVC's expectation that similar
benefit be realized from TVC's future projects.
TVC has the knowledge, skills and capabilities to capture the
opportunities inherent in these projections. TVC provides the System with the
skills to monitor trends in the electric power industry, identify and pursue
power generation opportunities that promote System synergies and enhance the
value of corporate assets, and serve as the System's technical expert on this
critical market. Furthermore, TVC through its Projects will continue to be a
high-volume consumer of natural gas within the System.
d) Additional Financing
TVC and Columbia propose that from January 1, 1994 through December
31, 1994, TVC issue, and Columbia purchase, shares of TVC common stock, $25 par
value, in an aggregate amount up to $12 million for administrative activities
of TVC and for investment by TVC in preliminary development of additional QFs
and other eligible projects related to electrical power generation, such as
Exempt wholesale Generators ("EWGs") and Foreign Utility Companies ("FUCOs").
Preliminary development and administrative activities will be conducted by TVC
directly or indirectly through the TriStar Subsidiaries and/or CPA.
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Preliminary development includes, but is not limited to, the
investigation of sites, preliminary engineering and licensing activities,
acquiring options and rights (pursuant to Rule 51), contract drafting and
negotiating, preparation of proposals and the other activities necessary to
identify and analyze investment opportunities and to initiate the
commercialization of a project. When TVC initiates these activities, it is for
the purpose of identifying and ultimately securing non-utility electric
generation projects that meet rate of return guidelines established by TVC's
management for TVC's equity investments. During the identification phase,
costs incurred are expensed. Normally, upon the execution of a power purchase
agreement with an electric utility company, development costs are capitalized.
The development phase typically ceases when the project initiates
construction and obtains third-party financing to fund the construction costs.
As with the Pedricktown, Binghamton and Vineland projects, TVC will seek to
include its development costs as an allowed cost of construction when
negotiating a project loan with a third-party lender. If this occurs, the
funds used for the cost of development would be returned to TVC when the
construction financing is initiated.
Administration includes personnel, as well as costs associated with
accounting, legal, financial and other services needed to manage TVC's
investments directly or indirectly through CPA and/or the TriStar Subsidiaries.
TVC projects that it will receive sufficient cash through distributions,
interest income and tax refunds to cover its administration costs in 1994.
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Based on the foregoing, TVC anticipates that all of the $12 million
financing authority requested by this Application- Declaration should be
available for funding preliminary development activities in 1994, as necessary.
TVC will obtain approval of the Commission in one or more separate filing(s)
before making an equity investment in QFs or, where appropriate, EWGs and FUCOs
beyond preliminary development of jurisdictional projects or TVC will make such
commitments pursuant to Rule 51 contingent upon the Commission's approval.
Item 6. Exhibits and Financial Statements.
(a) Exhibits
H-3 TriStar Ventures Corporation Overview of Current
Projects
H-4 TriStar Ventures Corporation Income Statement for
Current Projects for the Year Ended December 31,
H-5 Synergistic Benefits of TriStar Projects
H-6 Binghamton Cogeneration Limited Partnership
Balance Sheet as of December 31, 1993 (unaudited)
(Confidential Treatment Requested)
H-7 Binghamton Cogeneration Limited Partnership Statement
of Income for the twelve months ended December
31, 1993 (unaudited) (Confidential Treatment
Requested)
H-8 Pedricktown Cogeneration Limited Partnership Balance
Sheet as of December 31, 1993 (unaudited)
(Confidential Treatment Requested)
H-9 Pedricktown Cogeneration Limited Partnership
Statement of Income for the twelve months ended
December 31, 1993 (unaudited) (Confidential Treatment
Requested)
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H-10 Rumford Cogeneration Company Balance Sheet as of
September 30, 1993 (unaudited) (Confidential
Treatment Requested)
H-11 Rumford Cogeneration Company Statement of Income for
the twelve months ended September 30, 1993
(unaudited) (Confidential Treatment Requested)
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SIGNATURE
Pursuant to the requirements of the Public Utility Holding Company Act of
1935, the undersigned companies have duly caused this statement to be signed on
their behalf by the undersigned thereunto duly authorized.
The signatures of the applicants and of the persons signing on their
behalf are restricted to the information contained in this application which is
pertinent to the application of the respective companies.
THE COLUMBIA GAS SYSTEM, INC.
Dated: March 9, 1994 By: /s/ L. J. BAINTER
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L. J. Bainter
Treasurer
TRISTAR VENTURES CORPORATION
Dated: March 9, 1994 By: /s/ D. P. DETAR
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D. P. Detar
Treasurer
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EXHIBIT INDEX
(a) Exhibits
H-3 TriStar Ventures Corporation Overview of Current
Projects
H-4 TriStar Ventures Corporation Income Statement for
Current Projects for the Year Ended December 31,
H-5 Synergistic Benefits of TriStar Projects
H-6 Binghamton Cogeneration Limited Partnership Balance
Sheet as of December 31, 1993 (unaudited)
(Confidential Treatment Requested)
H-7 Binghamton Cogeneration Limited Partnership Statement
of Income for the twelve months ended December
31, 1993 (unaudited) (Confidential Treatment
Requested)
H-8 Pedricktown Cogeneration Limited Partnership Balance
Sheet as of December 31, 1993 (unaudited)
(Confidential Treatment Requested)
H-9 Pedricktown Cogeneration Limited Partnership
Statement of Income for the twelve months ended
December 31, 1993 (unaudited) (Confidential Treatment
Requested)
H-10 Rumford Cogeneration Company Balance Sheet as of
September 30, 1993 (unaudited) (Confidential
Treatment Requested)
H-11 Rumford Cogeneration Company Statement of Income for
the twelve months ended September 30, 1993
(unaudited) (Confidential Treatment Requested)
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EXHIBIT H-3
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TRISTAR VENTURES CORPORATION
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AN OVERVIEW OF CURRENT PROJECTS
<TABLE>
<CAPTION>
MEGAWATTS ASSET VALUE
($MILLION)
PROJECT TOTAL TVC TOTAL TVC
- ------- ----- --- ----- ------
<S> <C> <C> <C> <C>
Pedricktown . . . . . . . 110 55 105 52.5
Binghamton . . . . . . . 50 17 63 21.0
Vineland . . . . . . . . 47 24 92 46.0
Rumford . . . . . . . . . 85 9 182 18.7
----- --- ----- ------
TOTAL . . . . . . . . . . 292 105 $442 $138.2
===== === ===== ======
</TABLE>
<TABLE>
<CAPTION>
DEBT*
($MILLION) EQUITY
-------- ------
$MILLIONS PROVIDERS TOTAL TVC
--------- ---------------------- ----- -----
<C> <C> <C> <C>
100 Fuji Bank/ Others 5 2.5
45 Mellon Bank 18 6.0
77 Tax Exempt Municipal Bond Holders 15 7.0
136 Bank of America/Others 46 4.6
-------- ----- -----
$358 $84 $20.6
======== ===== =====
--------
$358
========
</TABLE>
* All debt is third-party non-recourse secured project financing.
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EXHIBIT H-4
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TRISTAR VENTURES CORPORATION
----------------------------
INCOME STATEMENT - Current Projects Only
For the Year Ended December 31,
$000
<TABLE>
<CAPTION>
1992 1993 1994 1995
===== ====== ===== =====
<S> <C> <C> <C> <C>
REVENUES:
Income from Current Projects 6,680 6,337 4,219 5,924
----- ------ ----- -----
Total Income From Partherships 6,680 6,337 4,219 5,924
OPERATING EXPENSES:
Net Labor and Benefits 435 493 780 816
All Other Operating Expenses 1,259 1,101 872 867
Georgetown Write-Off 1,820 4,701 0 0
----- ------- ----- -----
Total Operating Expenses 3,514 6,295 1,652 1,683
INCOME BEFORE INCOME TAXES; OTHER
INCOME AND INTEREST EXPENSE 3,166 42 2,567 4,241
TOTAL OTHER INCOME 683 510 322 50
----- ------- ----- -----
INCOME BEFORE TAXES & INTEREST 3,849 552 2,889 4,291
INCOME TAXES 447 (527) 1,358 1,802
INTEREST EXPENSE 2,870 2,510 0 0
----- ------- ----- -----
NET INCOME 532 (1,431) 1,531 2,489
===== ======= ===== =====
</TABLE>
<TABLE>
<CAPTION>
Seven
Year
1996 1997 1998 Total
===== ===== ===== ======
<S> <C> <C> <C> <C>
REVENUES:
Income from Current Projects 5,727 6,347 7,063 42,297
----- ----- ----- ------
Total Income From Partherships 5,727 6,347 7,063 42,297
OPERATING EXPENSES:
Net Labor and Benefits 876 927 982 5,309
All Other Operating Expenses 807 853 902 6,661
Georgetown Write-Off 0 0 0 6,521
----- ----- ----- ------
Total Operating Expenses 1,683 1,780 1,884 18,491
INCOME BEFORE INCOME TAXES; OTHER
INCOME AND INTEREST EXPENSE 4,044 4,567 5,179 23,806
TOTAL OTHER INCOME 50 50 50 1,715
----- ----- ----- ------
INCOME BEFORE TAXES & INTEREST 4,094 4,617 5,229 25,521
INCOME TAXES 1,719 1,939 2,196 8,934
INTEREST EXPENSE 0 0 0 5,380
----- ----- ----- ------
NET INCOME 2,375 2,678 3,033 11,207
===== ===== ===== ======
</TABLE>
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EXHIBIT H-5
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SYNERGISTIC BENEFITS OF TRISTAR PROJECTS
<TABLE>
<CAPTION>
CNR1 Long-Term CES2 Spot TCO3 Gas
Project Gas Sales Gas Sales Transported
------- -------------- --------- -----------
<S> <C> <C> <C>
Pedricktown 1.75 Bcf 1.0 Bcf 4.80 Bcf
Binghamton 4.38 Bcf -- 4.38 Bcf
Vineland -- 0.5 Bcf 1.75 Bcf
TOTAL: 6.13 Bcf 1.5 Bcf 10.93 Bcf
</TABLE>
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1 Columbia Natural Resources, Inc., a Columbia oil and gas exploration and
production subsidiary.
2 Columbia Energy Services Corporation, Columbia's gas marketing subsidiary.
3 Columbia Gas Transmission Corporation, a Columbia interstate pipeline
subsidiary.
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EXHIBIT H-6
BINGHAMTON COGENERATION LIMITED PARTNERSHIP
BALANCE SHEET
As of December 31, 1993
Unaudited
(CONFIDENTIAL TREATMENT REQUESTED)
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EXHIBIT H-7
BINGHAMTON COGENERATION LIMITED PARTNERSHIP
STATEMENT OF INCOME
Twelve Months Ended December 31, 1993
Unaudited
(CONFIDENTIAL TREATMENT REQUESTED)
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EXHIBIT H-8
PEDRICKTOWN COGENERATION LIMITED PARTNERSHIP
BALANCE SHEET
As of December 31, 1993
Unaudited
(CONFIDENTIAL TREATMENT REQUESTED)
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EXHIBIT H-9
PEDRICKTOWN COGENERATION LIMITED PARTNERSHIP
STATEMENT OF INCOME
Twelve Months Ended December 31, 1993
Unaudited
(CONFIDENTIAL TREATMENT REQUESTED)
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EXHIBIT H-10
RUMFORD COGENERATION COMPANY
BALANCE SHEET
As of September 30, 1993
Unaudited
(CONFIDENTIAL TREATMENT REQUESTED)
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EXHIBIT H-11
RUMFORD COGENERATION COMPANY
STATEMENT OF INCOME
Nine Months Ended September 30, 1993
Unaudited
(CONFIDENTIAL TREATMENT REQUESTED)
