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File No. 70-09421
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Amendment No. 2 to
Form U-1
APPLICATION-DECLARATION
UNDER
THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
COLUMBIA ENERGY GROUP
13880 Dulles Corner Lane
Herndon, Virginia 20171-4600
(Names of company or companies filing this statement
and addresses of principal executive offices)
J.W. Trost, Vice President
Columbia Energy Group Service Corporation
13880 Dulles Corner Lane
Herndon, Virginia 20171-4600
(Name and address of agent for service)
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Columbia Energy Group hereby amends and restates its
Application-Declaration in its entirety:
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.
Columbia Energy Group ("Columbia"), a Delaware Corporation, and a
holding company registered under the Public Utility Holding Company Act of 1935
(the "Act"), is seeking to engage in the factoring of accounts receivable
through one or more, existing or newly-formed or acquired, direct or indirect
subsidiaries (hereinafter referred to collectively as "Factoring Sub").(1)
PROPOSED FACTORING PROGRAM
Columbia proposes to have Factoring Sub engage in the factoring of
accounts receivable interests ("Receivables") of associate companies and of
nonassociate companies.(2) Factoring Sub would limit the acquisition of
Receivables from nonassociate companies so that the trailing twelve-month
average amount of nonassociate company Receivables held as of the end of any
calendar month would be less than the trailing twelve-month average amount of
any Receivables acquired from Columbia associate companies held as of the end of
such calendar month (the "fifty-percent" limitation). The Commission has
previously authorized other registered holding companies to factor Receivables
in the manner proposed above. See, e.g., Central and South West Corporation,
Holding Co. Act Release No. 25995 (March 2, 1994); Allegheny Power System, Inc.,
Holding Co. Act Release No. 26401 (Oct. 27, 1995); New Century Energies, Inc.,
Holding Co. Act Release No. 26748 (August 1, 1997). Columbia further proposes,
as part of the factoring program, to have Factoring Sub enter into purchase and
sales agreements with reputable third-party financial institutions and their
subsidiaries ("Purchasers"). The Commission has previously authorized at least
one other registered holding company and its subsidiaries to transfer
Receivables to third-party Purchasers. See, e.g., Connecticut Light & Power
Company, Holding Co. Act Release No. 26761 (Sept. 29, 1997).
Factoring Sub would purchase Receivables from associate or nonassociate
companies as such Receivables are generated. No additional financing would be
necessary to acquire the Receivables because Factoring Sub would sell these same
Receivables to Purchasers through simultaneous (i.e., same-day) transactions.
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(1) Columbia asks the Commission to reserve jurisdiction over the acquisition
of an entity that is already engaged in factoring of accounts receivable for
third parties.
(2) Such nonassociate companies would either be public utility companies or
holding companies within the meaning of the Act, or entities that are engaged in
"energy-related" or "gas-related" activities of the type described in Rule 58.
Columbia requests that the Commission reserve jurisdiction over the factoring of
receivables for nonassociate nonutility companies.
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Factoring Sub would purchase Receivables from an associate company by
discounting at a rate based on, among other things, Factoring Sub's cost of
capital and the collection history of the associate company. While Purchasers
would have the right to appoint collection agents, Columbia expects that
Purchasers would elect to maintain current collection procedures, which are
managed by associate companies. Thus, the discounting of Receivables acquired by
both Purchasers and Factoring Sub would incorporate a collection fee component
attributable to the collection services rendered by associate companies.
For financial reporting purposes, Columbia would treat both the
transfer of Receivables from associate or nonassociate companies to Factoring
Sub and the transfer of Receivables from Factoring Sub to Purchasers as sales
under generally accepted accounting principles. Columbia would ensure that such
sales activities comply with Statement of Financial Accounting Standards No.
125, Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities, issued in June 1996 by the Financial Accounting
Standards Board ("FAS 125"). FAS 125 would mandate that any Receivables sold to
Purchasers be isolated from Columbia and its creditors, even in bankruptcy or
receivership of Columbia; that Columbia not maintain effective control over the
transferred assets through repurchase and similar arrangements; and that
Factoring Sub and any subsequent Purchasers have the right to pledge or exchange
the Receivables.
As transferees, Factoring Sub and Purchasers would bear the risk of the
uncollectibility of Receivables, but would retain limited recourse against the
transferors of these assets. Such recourse claims would include liability for
(i) failure to transfer first priority ownership interests in the underlying
assets, (ii) transferor's breach of its representations, warranties and
covenants, and (iii) certain indemnity obligations. To secure any remedies
stemming from such claims, the transferees would be granted security interests
in the bank accounts into which payments on the Receivables are to be deposited.
The benefits of operating the proposed factoring program are four-fold.
First, Columbia believes that the factoring of Receivables of Columbia's
operating subsidiaries would reduce capitalization requirements of the latter.
Second, the factoring program would provide a new, non-traditional source of
funds for Columbia and its operating companies, thereby leaving Columbia's
existing funding sources less utilized. Third, the effective cost of the
factoring program is expected to be comparable to or slightly less costly than
Columbia's cheapest source of capital (currently commercial paper). Finally,
Columbia's shareholders should benefit from earnings generated by the program's
purchase and sale of Receivables of nonassociate utility companies, the risks of
which would be familiar to Columbia.
AUTHORIZATION REQUESTED
Columbia requests authorization for its Factoring Sub to engage in the
factoring of accounts receivable, which would supplement customer financing and
certain intrasystem financing activities which are deemed to require no
additional approval from the Commission.
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Rule 24(c)(1), in pertinent part, provides that, unless otherwise
designated in an application or declaration, every order is subject to a
requirement that the transaction proposed be carried out within 60 days of the
date of such order. As a practical matter, the failure to designate an
alternative period has led to a number of lapsed orders in the past,
necessitating the filing of post-effective amendments and the issuance of
supplemental orders. To avoid a recurrence of this situation, Columbia hereby
designates a period from the date of the order in this matter to its express
termination by subsequent order as the period in which it will carry out
transactions authorized in this order, or previously authorized by Commission
order, in accordance with the terms and conditions of, and for the purposes as
authorized by the relevant orders.
(b) Describe briefly, and where practicable state the approximate
amount of, any material interest in the proposed transaction, direct or
indirect, of any associate or affiliate of the applicant or declarant company or
any affiliate of any such associate company.
Not applicable.
(c) If the proposed transaction involves the acquisition of securities
not issued by a registered holding company or subsidiary thereof, describe
briefly the business and property, present or proposed, of the issuer of such
securities.
Not applicable.
(d) If the proposed transaction involves the acquisition or
disposition of assets, describe briefly such assets, setting forth original
cost, vendor's book cost (including the basis of determination) and applicable
valuation and qualifying reserves.
Not applicable.
ITEM 2. FEES, COMMISSIONS AND EXPENSES
(a) State (1) the fees, commissions and expenses paid or incurred, or
to be paid or incurred, directly or indirectly, in connection with the proposed
transaction by the applicant or declarant or any associate company thereof, and
(2) if the proposed transaction involves the sale of securities at competitive
bidding, the fees and expenses to be paid to counsel selected by applicant or
declarant to act for the successful bidder.
Legal fees in connection with the preparation of the Application-
Declaration . . . . . . . . . . . . . . . . . . . . . . $7,500.00
(b) If any person to whom fees or commissions have been or are to be
paid in
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connection with the proposed transaction is an associate company or an affiliate
of any applicant or declarant, or is an affiliate of an associate company, set
forth the facts with respect thereto.
The Columbia Energy Group Service Corporation will render certain legal
services at cost.
ITEM 3. APPLICABLE STATUTORY PROVISIONS
(a) State the section of the Act and the rules thereunder believed
to be applicable to the proposed transaction. If any section or rule would be
applicable in absence of a specific exemption, state the basis of exemption.
Sections 6(a), 7, 9(a), 10, 12 and rules thereunder are applicable.
Columbia does not own, nor operate nor is it an equity participant in
any Exempt Wholesale Generator or any Foreign Utility Company and will not be a
company that owns, operates or has an equity participation in an Exempt
Wholesale Generator or Foreign Utility Company as a result of the approvals
requested herein. Columbia does not have any rights or obligations under a
service, sales or construction contract with an Exempt Wholesale Generator or
Foreign Utility Company as a result of the proposed transactions.
To the extent that the proposed transactions are considered by the
Commission to require authorization, approval or exemption under any section of
the Act or any provision of the rules and regulations other than those
specifically referred to herein, a request for such authorization, approval or
exemption is hereby made.
(b) If any applicant is not a registered holding company or a
subsidiary thereof, state the name of each public utility company of which it is
an affiliate, or of which it will become an affiliate as a result of the
proposed transaction, and the reasons why it is or will become such an
affiliate.
Not applicable.
ITEM 4. REGULATORY APPROVAL
(a) State the nature and extent of the jurisdiction of any State
commission or any Federal commission (other than the Securities and Exchange
Commission) over the proposed transaction.
Not applicable.
(b) Describe the action taken or proposed to be taken before any
Commission named in answer to Paragraph (a) of this item in connection with the
proposed transaction.
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Not applicable.
ITEM 5. PROCEDURE
(a) State the date when Commission action is requested. If the
date is less than 40 days from the date of the original filing, set forth the
reasons for acceleration.
It is respectively requested that the Commission issue its notice by
May 7, 1999 and its order on or before June 7, 1999.
(b) State (i) whether there should be a recommended decision by a
hearing officer, (ii) whether there should be a recommended decision by any
other responsible officer of the Commission, (iii) whether the Division of
Investment Management may assist in the preparation of the Commission's
decision, and (iv) whether there should be a 30-day waiting period between the
issuance of the Commission's order and the date on which it is to become
effective.
The Applicants hereby (i) waive a recommended decision by a hearing
officer, (ii) waive a recommended decision by any other responsible officer of
the Commission, (iii) specify that the Division of Investment Management may
assist in the preparation of the Commission's decision, and (iv) specifies that
there should not be a 30-day waiting period between the issuance of the
Commission's order and the date on which it is to become effective.
ITEM 6. EXHIBITS AND FINANCIAL STATEMENTS
(a) Exhibits
F Opinion of Counsel (to be filed by amendment).
G Draft Notice.
ITEM 7. INFORMATION AS TO ENVIRONMENTAL EFFECTS
(a) Describe briefly the environmental effects of the proposed
transaction in terms of the standards set forth in Section 102(2)(C) of the
National Environmental Policy Act (42 U.S.C. 4232(2)(C)). If the response to
this item is a negative statement as to the applicability of Section 102(2)(C)
in connection with the proposed transaction, also briefly state the reasons for
that response.
As more fully described in Item 1, the proposed transactions relate
only to the expanded scope of financial activities of a subsidiary company and
have no environmental impact in and of themselves.
(b) State whether any other federal agency has prepared or is
preparing an
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environmental impact statement ("EIS") with respect to the proposed transaction.
If any other federal agency has prepared or is preparing an EIS, state which
agency or agencies and indicate the status of that EIS preparation.
No federal agency has prepared or is preparing an EIS with respect to
the proposed transaction.
SIGNATURE
Pursuant to the requirements of the Public Utility Holding Company Act
of 1935, each of the undersigned companies has duly caused this Declaration to
be signed on its behalf by the undersigned thereunto duly authorized.
COLUMBIA ENERGY GROUP
Date: April 30, 1999 by: //s// M.W. O'Donnell
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M.W. O'Donnell, Senior Vice President
& Chief Financial Officer
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EXHIBIT G
SECURITIES AND EXCHANGE COMMISSION
(Release No. )
__________________, 19___
Columbia Energy Group ("Columbia"), a holding company
registered under the Public Utility Holding Company Act of 1935 (the "Act"),
located at 13880 Dulles Corner Lane, Herndon, Virginia 20171-4600, has filed an
application-declaration seeking authority to engage in the factoring of accounts
receivable for associate and nonassociate companies.
The application - declaration and any amendments thereto are
available for public inspection through the Commission's office of Public
Reference. Interested persons wishing to comment or request a hearing should
submit their views in writing by ___________, 19___, to the Secretary,
Securities and Exchange Commission, Washington, DC 20549, and serve a copy on
the applicants-declarants at the address specified above. Proof of service (by
affidavit or, in the case of an attorney at law, by certificate) should be filed
with the request. Any request for hearing shall identify specifically the issues
of fact or law that are disputed. A person who so requests will be notified of
any hearing, if ordered, and will receive a copy of any notice or order issued
in this manner. After said date, the application-declaration, as filed or as it
may be amended, may be permitted to become effective.
For the Commission by the Division of Investment Management,
pursuant to delegated authority.
Jonathan G. Katz
Secretary
