====================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------
SCHEDULE 14D-1/A
(Amendment No. 28)
TENDER OFFER STATEMENT PURSUANT TO SECTION 14(d)(1)
OF THE SECURITIES EXCHANGE ACT OF 1934
------------------------
COLUMBIA ENERGY GROUP
(Name of Subject Company)
CEG ACQUISITION CORP.
NISOURCE INC.
(Bidders)
COMMON STOCK, $.01 PER SHARE
(Title of Class of Securities)
197648108
(CUSIP Number of Class of Securities)
Stephen P. Adik
Senior Executive Vice President,
Chief Financial Officer And Treasurer
NiSource Inc.
801 East 86th Avenue
Merrillville, Indiana 46410-6272
(219) 853-5200
(Name, Address and Telephone Number of Person Authorized to Receive
Notices and Communications on Behalf of Bidder)
--------------------------------
COPIES TO:
Peter V. Fazio, Jr., Esq. Alan G. Schwartz, Esq.
Schiff Hardin & Waite Simpson Thacher & Bartlett
6600 Sears Tower 425 Lexington Avenue
Chicago, Illinois 60606 New York, New York 10017
Telephone: (312) 258-5500 Telephone: (212) 455-2000
================================================
This Amendment No. 28 (this "Amendment") amends and supplements
the Tender Offer Statement on Schedule 14D-1, as amended, originally
filed with the Securities and Exchange Commission on June 25, 1999
(the "Schedule 14D-1") by CEG Acquisition Corp., a Delaware
corporation (the "Offeror") and a wholly owned subsidiary of NiSource
Inc., an Indiana corporation ("Parent"). The Schedule 14D-1 and this
Amendment relate to a tender offer by the Offeror to purchase all of
the outstanding shares of common stock, par value $.01 per share (the
"Shares"), of Columbia Energy Group, a Delaware corporation (the
"Company"), at an amended purchase price of $74 per Share, net to the
seller in cash, without interest thereon, upon the terms and subject
to the conditions set forth in the Offer to Purchase, dated June 25,
1999 (the "Offer to Purchase"), as supplemented by the Supplement
thereto, dated October 18, 1999, and in the related Letter of
Transmittal (which, as either may be amended or supplemented from time
to time, collectively constitute the "Offer"), copies of which are
filed with the Schedule 14D-1 as Exhibits (a)(1), (a)(38) and (a)(39),
respectively.
2
Item 10. Additional Information.
On October 19, 1999, Parent issued (i) a press release regarding
regulatory issues and (ii) the testimony of Parent before the Ohio
House Public Utilities Committee delivered on October 19, 1999, which
are included herein as Exhibits (a)(48) and (a)(49), respectively, and
incorporated herein by reference.
Item 11. Material to be Filed as Exhibits.
(a)(1) Offer to Purchase, dated June 25, 1999.
(a)(2) Letter of Transmittal.
(a)(3) Letter dated June 25, 1999, from Dealer Manager to
brokers, dealers, commercial banks, trust
companies and other nominees.
(a)(4) Letter dated June 25, 1999, to be sent by brokers,
dealers, commercial banks, trust companies and
other nominees to their clients.
(a)(5) Notice of Guaranteed Delivery.
(a)(6) Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9.
(a)(7) Form of Summary Advertisement, dated June 25,
1999.
(a)(8) Press Release issued by Parent on June 24, 1999.
(a)(9) Form of letter dated June 28, 1999 from Gary L.
Neale, Chairman, President and Chief Executive
Officer of Parent, to investors of the Company.
(a)(10) Press Release issued by Parent on June 28, 1999.
(a)(11) "NiSource/Columbia StraightTalk" communication to
stockholders of the Company issued by Parent on
July 2, 1999.
(a)(12) Form of letter dated July 2, 1999, from Gary L.
Neale, Chairman, President and Chief Executive
Officer of Parent, to directors of the Company.
(a)(13) Press Release issued by Parent on July 6, 1999.
3
(a)(14) Form of letter dated July 12, 1999, from Gary L.
Neale, Chairman, President and Chief Executive
Officer of Parent, to shareholders of Parent.
(a)(15) "NiSource/Columbia StraightTalk" communication to
stockholders of the Company issued by Parent on
July 14, 1999.
(a)(16) Press Release issued by Parent on July 14, 1999.
(a)(17) Press Release issued by Parent on July 19, 1999.
(a)(18) Press Release issued by Parent on July 20, 1999.
(a)(19) Form of letter dated July 21, 1999, from Gary L.
Neale, Chairman, President and Chief Executive
Officer of Parent, to directors of the Company.
(a)(20) Form of letter dated July 26, 1999, from Gary L.
Neale, Chairman, President and Chief Executive
Officer of Parent, to stockholders of the Company.
(a)(21) "NiSource/Columbia StraightTalk" communication to
stockholders of the Company issued by Parent on
July 26, 1999.
(a)(22) Information published by Parent on July 30, 1999,
available via the Internet at
http://www.yes2nisource.com.
(a)(23) Press Release issued by Parent on July 30, 1999.
(a)(24) Press Release issued by Parent on August 9, 1999.
(a)(25) "NiSource/Columbia StraightTalk" communication to
stockholders of the Company issued by Parent on
August 13, 1999.
(a)(26) Form of letter dated August 13, 1999, from Gary L.
Neale, Chairman, President and Chief Executive
Officer of Parent, to directors of the Company.
(a)(27) Form of letter dated August 13, 1999, from Gary L.
Neale, Chairman, President and Chief Executive
Officer of Parent, to Oliver G. Richard III,
Chairman, President and Chief Executive Officer of
the Company.
4
(a)(28) Form of letter dated August 26, 1999, from Gary L.
Neale, Chairman, President and Chief Executive
Officer of Parent, to stockholders of the Company.
(a)(29) Opinion/editorial articles by Gary L. Neale,
Chairman, President and Chief Executive Officer of
Parent, submitted to various newspapers on
September 9, 1999.
(a)(30) Opinion/editorial articles by Gary L. Neale,
Chairman, President and Chief Executive Officer of
Parent, submitted to various newspapers on
September 10, 1999.
(a)(31) Opinion/editorial article by Gary L. Neale,
Chairman, President and Chief Executive Officer of
Parent, submitted to The Appalachian News-Express
on September 13, 1999.
(a)(32) Opinion/editorial article by Gary L. Neale,
Chairman, President and Chief Executive Officer of
Parent, submitted to The Winchester Sun on
September 14, 1999.
(a)(33) Form of Letter dated September 23, 1999, from Gary
L. Neale, Chairman, President and Chief Executive
Officer of Parent, to officers, directors and
managers of Parent.
(a)(34) "Energy News - Oct. 1999" communication to
customers of Northern Indiana Public Service
Company first issued by Parent on October 1, 1999.
(a)(35) Materials made available by Parent at a meeting
among officials of Parent, officials of the
Kentucky Public Service Commission and members of
the public on October 5, 1999.
(a)(36) Letter dated October 5, 1999, from Gary L. Neale,
Chairman, President and Chief Executive Officer of
Parent, to shareholders of the Company.
(a)(37) Letter dated October 18, 1999, from Gary L. Neale,
Chairman, President and Chief Executive Officer of
Parent, to shareholders of the Company.
(a)(38) Supplement to the Offer to Purchase, dated October
18, 1999.
5
(a)(39) Letter of Transmittal.
(a)(40) Letter dated October 18, 1999, to be sent by
brokers, dealers, commercial banks, trust
companies and other nominees to their clients.
(a)(42) Notice of Guaranteed Delivery.
(a)(43) Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9.
(a)(44) Press Release issued by Parent on October 17,
1999.
(a)(45) Letter dated October 18, 1999, from Credit Suisse
First Boston and Barclays Bank, PLC, to the
directors of the Company.
(a)(46) Materials made available by Parent to analysts at
a meeting among officers and representatives of
Parent and analysts on October 18, 1999.
(a)(47) Text of advertisement appearing in various
newspapers beginning on October 19, 1999, issued
by Parent on October 19, 1999.
(a)(48) Press Release issued by Parent on October 19,
1999.*
(a)(49) Testimony of Parent before the Ohio House Public
Utilities Committee delivered on October 19,
1999.*
(b)(1) Commitment Letter dated June 23, 1999 to Parent
from Credit Suisse First Boston and Barclays Bank
PLC.
(b)(2) Amended and Restated Commitment Letter dated
October 15, 1999 to Parent from Credit Suisse
First Boston and Barclays Bank PLC.
(c) Not Applicable.
(d) Not Applicable.
(e) Not Applicable.
(f) Not Applicable.
6
(g)(1) Complaint in NiSource Inc. and CEG Acquisition
Corp. vs. Columbia Energy Group et al., Delaware
Chancery Court, New Castle County.
(g)(2) Complaint in NiSource Inc. and CEG Acquisition
Corp. vs. Columbia Energy Group et al., United
States District Court, District of Delaware.
(g)(3) First Amended Complaint in NiSource Inc. and CEG
Acquisition Corp. vs. Columbia Energy Group et
al., United States District Court, District of
Delaware.
(g)(4) Complaint in NiSource Inc., NiSource Capital
Markets Inc. and CEG Acquisition Corp. vs.
Columbia Energy Group et al., Delaware Chancery
Court, New Castle County.
_______________
*Filed herewith.
7
SIGNATURE
After due inquiry and to the best of its knowledge and belief,
each of the undersigned certifies that the information set forth in
this statement is true, complete and correct.
CEG ACQUISITION CORP.
By: /s/ Gary L. Neale
---------------------------
Name: Gary L. Neale
Title: President
NISOURCE INC.
By: /s/ Gary L. Neale
---------------------------
Name: Gary L. Neale
Title: Chief Executive Officer
Date: October 19, 1999
EXHIBIT INDEX
Exhibit
Number Description
------- -----------
11(a)(1) Offer to Purchase, dated June 25, 1999.
11(a)(2) Letter of Transmittal.
11(a)(3) Letter dated June 25, 1999, from Credit Suisse First
Boston Corporation to brokers, dealers, commercial
banks, trust companies and other nominees.
11(a)(4) Letter dated June 25, 1999, to be sent by brokers,
dealers, commercial banks, trust companies and other
nominees to their clients.
11(a)(5) Notice of Guaranteed Delivery.
11(a)(6) Guidelines for Certification of Taxpayer Identification
Number on Substitute Form W-9.
11(a)(7) Form of Summary Advertisement, dated June 25, 1999.
11(a)(8) Press Release issued by Parent on June 24, 1999.
11(a)(9) Form of letter dated June 28, 1999 from Gary L. Neale,
Chairman, President and Chief Executive Officer of
Parent, to investors of the Company.
11(a)(10) Press Release issued by Parent on June 28, 1999.
11(a)(11) "NiSource/Columbia StraightTalk" communication to
stockholders of the Company issued by Parent on July 2,
1999.
11(a)(12) Form of letter dated July 2, 1999, from Gary L. Neale,
Chairman, President and Chief Executive Officer of
Parent, to directors of the Company.
11(a)(13) Press Release issued by Parent on July 6, 1999.
11(a)(14) Form of letter dated July 12, 1999, from Gary L. Neale,
Chairman, President and Chief Executive Officer of
Parent, to shareholders of Parent.
11(a)(15) "NiSource/Columbia StraightTalk" communication to
stockholders of the Company issued by Parent on
July 14, 1999.
11(a)(16) Press Release issued by Parent on July 14, 1999.
11(a)(17) Press Release issued by Parent on July 19, 1999.
11(a)(18) Press Release issued by Parent on July 20, 1999.
11(a)(19) Form of letter dated July 21, 1999, from Gary L. Neale,
Chairman, President and Chief Executive Officer of
Parent, to directors of the Company.
11(a)(20) Form of letter dated July 26, 1999, from Gary L. Neale,
Chairman, President and Chief Executive Officer of
Parent, to stockholders of the Company.
11(a)(21) "NiSource/Columbia StraightTalk" communication to
stockholders of the Company issued by Parent on July
26, 1999.
11(a)(22) Information published by Parent on July 30, 1999,
available via the Internet at
http://www.yes2nisource.com.
11(a)(23) Press Release issued by Parent on July 30, 1999.
11(a)(24) Press Release issued by Parent on August 9, 1999.
11(a)(25) "NiSource/Columbia StraightTalk" communication to
stockholders of the Company issued by Parent on August
13, 1999.
11(a)(26) Form of letter dated August 13, 1999, from Gary L.
Neale, Chairman, President and Chief Executive Officer
of Parent, to directors of the Company.
11(a)(27) Form of letter dated August 13, 1999, from Gary L.
Neale, Chairman, President and Chief Executive Officer
of Parent, to Oliver G. Richard III, Chairman,
President and Chief Executive Officer of the Company.
11(a)(28) Form of letter dated August 26, 1999, from Gary L.
Neale, Chairman, President and Chief Executive Officer
of Parent, to stockholders of the Company.
11(a)(29) Opinion/editorial articles by Gary L. Neale, Chairman,
President and Chief Executive Officer of Parent,
submitted to various newspapers on September 9, 1999.
11(a)(30) Opinion/editorial articles by Gary L. Neale, Chairman,
President and Chief Executive Officer of Parent,
submitted to various newspapers on September 10, 1999.
11(a)(31) Opinion/editorial article by Gary L. Neale, Chairman,
President and Chief Executive Officer of Parent,
submitted to The Appalachian News-Express on September
13, 1999.
11(a)(32) Opinion/editorial article by Gary L. Neale, Chairman,
President and Chief Executive Officer of Parent,
submitted to The Winchester Sun on September 14, 1999.
11(a)(33) Form of Letter dated September 23, 1999, from Gary L.
Neale, Chairman, President and Chief Executive Officer
of Parent, to officers, directors and managers of
Parent.
11(a)(34) "Energy News - Oct. 1999" communication to customers of
Northern Indiana Public Service Company first issued by
Parent on October 1, 1999.
11(a)(35) Materials made available by Parent at a meeting among
officials of Parent, officials of the Kentucky Public
Service Commission and members of the public on October
5, 1999.
11(a)(36) Letter dated October 5, 1999, from Gary L. Neale,
Chairman, President and Chief Executive Officer of
Parent, to shareholders of the Company.
11(a)(37) Letter dated October 18, 1999, from Gary L. Neale,
Chairman, President and Chief Executive Officer of
Parent, to shareholders of the Company.
11(a)(38) Supplement to the Offer to Purchase, dated October 18,
1999.
11(a)(39) Letter of Transmittal.
11(a)(40) Letter dated October 18, 1999, to be sent by brokers,
dealers, commercial banks, trust companies and other
nominees to their clients.
11(a)(42) Notice of Guaranteed Delivery.
11(a)(43) Guidelines for Certification of Taxpayer Identification
Number on Substitute Form W-9.
11(a)(44) Press Release issued by Parent on October 17, 1999.
11(a)(45) Letter dated October 18, 1999, from Credit Suisse First
Boston and Barclays Bank, PLC, to the directors of the
Company.
11(a)(46) Materials made available by Parent to analysts at a
meeting among officers and representatives of Parent
and analysts on October 18, 1999.
11(a)(47) Text of advertisement appearing in various newspapers
beginning on October 19, 1999, issued by Parent on
October 19, 1999.
11(a)(48) Press Release issued by Parent on October 19, 1999.*
11(a)(49) Testimony of Parent before the Ohio House Public
Utilities Committee delivered on October 19, 1999.*
11(b)(1) Commitment Letter dated June 23, 1999 to Parent from
Credit Suisse First Boston and Barclays Bank PLC.
11(b)(2) Amended and Restated Commitment Letter dated October
15, 1999 to Parent from Credit Suisse First Boston and
Barclays Bank PLC.
11(g)(1) Complaint in NiSource Inc. and CEG Acquisition Corp.
vs. Columbia Energy Group et al., Delaware Chancery
Court, New Castle County.
11(g)(2) Complaint in NiSource Inc. and CEG Acquisition Corp.
vs. Columbia Energy Group et al., United States
District Court, District of Delaware.
11(g)(3) First Amended Complaint in NiSource Inc. and CEG
Acquisition Corp. vs. Columbia Energy Group et al.,
United States District Court, District of Delaware.
11(g)(4) Complaint in NiSource Inc., NiSource Capital Markets
Inc. and CEG Acquisition Corp. vs. Columbia Energy
Group et al., Delaware Chancery Court, New Castle
County.
_________________
*Filed herewith.
<PAGE>
Exhibit 11(a)(48)
FOUR REGULATORY EXPERTS COMMENT ON NISOURCE'S PROPOSED TRANSACTION
WITH COLUMBIA ENERGY
MERRILLVILLE, IN, OCTOBER 19, 1999 NiSource Inc. (NYSE: NI)
announced today that four former state regulatory commissioners
retained by the board of directors to review the proposed NiSource /
Columbia Energy transaction have each separately concluded that
NiSource's six to nine month timeframe to complete the transaction is
reasonable and that NiSource's financing plan creates no incremental
regulatory risk.
The former state regulators are: Andrew C. Barrett, who served on the
Illinois Commerce Commission and the Federal Communications
Commission; Charles J. Cicchetti, Ph.D., who served as the Chairman of
the Wisconsin Public Service Commission; Bruce B. Ellsworth, former
New Hampshire Public Utilities Commissioner and former President of
the National Association of Regulatory Utility Commissioners; and
Robert C. Yardley, Jr., former Chairman of the Massachusetts
Department of Telecommunications and Energy. The regulators were
asked to review publicly available information related to the proposed
Columbia/ NiSource transaction and render their opinions from a
regulatory perspective.
TIMING OF REGULATORY APPROVALS.
All four of the former state utility commissioners agreed that
NiSource's six to nine month timeframe for completing the transaction
is reasonable. Bruce Ellsworth said, "Based upon the apparent absence
of any antitrust issues and the non-contiguous nature of the
respective companies' service territories, I am confident, based upon
my own experience, that the regulatory process could be completed, in
a cooperative environment, within six to nine months."
Andrew Barrett added, "Having participated in six or seven mergers of
this size during my regulatory career, the 6-9 month timeframe that
NiSource has proposed is reasonable. Based on recent precedents
within the regulatory jurisdictions that need to undertake a review
process, I am convinced that the process can be completed in an
expedited manner."
FINANCING OF THE TRANSACTION.
The former state commissioners all agreed that given the fact that the
rating agencies have stated that NiSource will maintain its investment
grade credit rating, the financing plan for the proposed transaction
creates no incremental regulatory risk.
Robert Yardley said, "To date, these agencies have indicated that the
merged entity will continue to merit a strong investment grade rating.
This will ensure that the distribution subsidiaries have the access to
capital at reasonable cost required to fulfill their public service
obligations after the merger is complete. Regulators can take
considerable comfort in the rigor of the review performed by the
financial community, and by the rating agencies in particular, when
addressing financial issues in the merger proceedings."
Charles Cicchetti added, "Regulators will look to the projected end-
game when evaluating the combined company's capital structure.
Regulators would find that the pro forma balance sheet is consistent
with other similar energy companies and approved mergers."
CUSTOMER BENEFITS
Mr. Cicchetti also discussed how the combination of NiSource and
Columbia would create numerous benefits for customers. Mr. Cicchetti
said, "This transaction combines two energy companies that complement
each other in three ways. First, a major electric and gas utility
(NiSource) will combine with an interstate natural gas pipeline and
distribution utility to form a new company, stretching from Texas to
Maine. This will extend converged energy services to the companies'
respective, non-overlapping service territories and facilitate a new
retail electric supplier in Columbia's service territories.
"Second, this vast geographic region will have varying time,
geography, weather and fuel dimensions. This will result in a more
efficient natural gas and electric supply network that will enable the
combined entity to sell physical commodities more competitively and
arbitrage across the differences. In addition, this supply-side
efficiency will encourage the combined company to offer financial
services and various hedging contracts to large customers and, through
aggregation, to smaller retail consumers over a region that represents
over 30 percent of the U.S. population and 40 percent of the energy
consumed in the nation.
"Third, customer choice, efficiency, and new products and services
will drive regulatory approval just as they drive the shareholder
value strategy that makes this transaction so compelling," Mr.
Cicchetti concluded.
NiSource Inc. is a holding company with a market capitalization of
approximately $3.6 billion whose primary business is the distribution
of electricity, natural gas and water in the Midwest and Northeast
United States. The company also markets utility services and
customer-focused resource solutions along a corridor stretching from
Texas to Maine. Further information on the company's offer for
Columbia may found on the Internet at www.yes2nisource.com and about
the company at www.nisource.com.
This release is neither an offer to purchase nor a solicitation of an
offer to sell shares of common stock of Columbia Energy Group. Such a
offer is made solely by the Offer to Purchase, dated June 25, 1999, as
amended, and the related Letter of Transmittal. It is not being made
to, and tenders will not be accepted from, holders of shares of
Columbia common stock in any jurisdiction in which making or accepting
such offer would not comply with law. In any jurisdiction where a
licensed broker or dealer must make such offer, it shall be deemed
made on behalf of NiSource Inc. by Credit Suisse First Boston
Corporation or other registered brokers or dealers licensed in such
jurisdiction. The offer may be extended beyond its November 12, 1999
expiration date. Any extension will be publicly announced no later
than 9:00 a.m., New York City time, on the next business day. This
release does not constitute a solicitation of proxies from Columbia
energy Group's stockholders. Any such solicitation will be made only
by separate proxy materials in compliance with Section 14(a) of the
Securities Exchange Act.
INVESTOR CONTACT: MEDIA CONTACT:
NiSource Inc. NiSource Inc.
Dennis Senchak Maria Hibbs
(219) 647-6085 (219) 647-6201
Abernathy MacGregor Frank
Joele Frank/Dan Katcher
(212) 371-5999
###
<PAGE>
Exhibit 11(a)(49)
NiSource Testimony before the
Ohio House Public Utilities Committee
October 19, 1999
Good afternoon. My name is Mark Maassel, vice president of
regulatory and government policy at NiSource. Thank you for this
opportunity to discuss House Bill 452 here today. As a senior officer
at NiSource, I have first-hand experience in utility mergers and
acquisitions and, in fact, led the successful NiSource merger with Bay
State Gas/Northern Utilities which are located in Massachusetts, Maine
and New Hampshire. That merger like others in industries across the
country had its share of tensions and give and take, but eventually we
came together and because of it we have reduced costs of gas to
customers, provided increased opportunities for employees of all
NiSource companies and made an investment in gas infrastructure to
bring new gas into the Northeast. That's what our mergers are about,
bringing greater benefits to the citizens and customers whom we serve,
opportunities for employees and increased shareholder value while
working closely with state and federal regulatory bodies.
It's because we respect the role of lawmakers and regulators that
I can say that we are NOT here to oppose Representative David
Goodman's bill. In fact, we have always tried to communicate with
state officials, legislators, customers and community leaders that we
understand Ohio's interest in this transaction. Therefore we have
supported the concepts in Representative Goodman's legislation.
We realize that the testimony you have heard to date raises
concerns about the perceived pain that comes from a contentious merger
process. It is common in developing a merger of strong companies to
have some contentious communications. Here, this contentious
discussion is more public than in most mergers, but deals with issues
common to all mergers. It also directs attention away from the
central point, the merger of this Indiana-based company and this
Virginia-based company, NiSource and Columbia Energy Group, which will
bring vital benefits to the citizens and customers of Ohio.
There is no question that today Columbia Energy Group of Herndon,
Virginia is a very fine company with programs that deliver a vital,
environmentally friendly product. But in this fast changing world,
individual companies like NiSource and Columbia will find it more and
more difficult to remain competitive. Combining efforts as we're
suggesting in our merger, improves the ability to provide natural gas
and other products at competitive prices thus benefiting customers.
A merger of NiSource and Columbia will build Columbia's
competitive edge in selling and delivering gas in the nation's
marketplace.
Let me tell you about NiSource.
NiSource is a responsible corporate citizen, a good employer and
dedicated to community involvement. In fact, NiSource supports our
employee's involvement in communities and gives millions of dollars
back to the community through charitable initiatives.
We are pro-environment and the first utility company to attain
ISO-14000 environmental quality certification for all our facilities.
Let me touch on some of the details of our proposed merger with
Columbia. First of all, Columbia Energy Group and NiSource assets and
market areas are complementary, resulting in no overlaps within our
combined system. Together, we create a powerful energy platform
within a corridor stretching from the Gulf Coast, through the Midwest
and into the Northeast. As the largest gas company east of the
Rockies, NiSource will create new products and expanded gas capacity
which will benefit customers.
Our success in building our business has been predicated on
employing the skills and experience of the management team and
employee base present within the companies with which we have merged.
Therefore, we are inviting five Columbia directors, including Rick
Richard, to join an expanded NiSource Board and Mr. Richard to become
vice-chairman of the Board. We also expect to retain the heads of all
critical operating units and the headquarters for those units. Thus,
Columbia Gas of Ohio will continue to be managed by people located
here in Columbus.
Of equal importance, consumers will benefit from the merger in a
variety of ways.
Columbia Energy Group has long sought to achieve "economic
democratization", allowing customers to choose which company supplies
them with natural gas. With this merger, Columbia's excellent
"Choice" program will be maintained and reinforced. Much like
Columbia, NiSource was the first to launch a "Choice" program in our
home state of Indiana. NiSource is already bringing lower prices to
Ohio consumers. We participate in Ohio's Choice program through our
subsidiary, Energy USA, and we are proud to say that our price for gas
was the lowest fixed price of any provider listed in the Public
Utility Commission's "Apples to Apples" price comparison. In fact,
our price was a full 10 percent lower than the listed price of gas to
Columbia Gas of Ohio customers.
In addition, the cost of gas for the customers of NiSource
subsidiary Northern Indiana Public Service Company (NIPSCO), has
consistently been lower than the cost of gas to Columbia Gas of Ohio
customers.
<TABLE>
<CAPTION>
NIPSCO COLUMBIA ENERGY COMPARISON
<S> <C> <C> <C> <C> <C>
Gas Cost/Unit 1994 1995 1996 1997 1998
------------- ---- ---- ---- ---- ----
NIPSCO $2.90 $2.65 $3.02 $3.16 $2.63
Columbia $3.92 $3.24 $3.82 $4.42 $3.72
Difference ($1.02) ($0.59) ($0.80) ($1.26) ($1.09)
</TABLE>
As I noted above, we are committed to bringing lower cost gas to
customers of all NiSource gas distribution companies. Thus, while gas
costs at Bay State Gas were historically higher then those at NIPSCO,
we have already reduced gas costs for Bay State customers. We have
also made substantial investments in infrastructure to bring in new
supplies of gas. We bring a similar philosophy to Columbia Energy
Group.
With regard to House Bill 452, NiSource fully supports the
concept embodied by the legislation. We firmly believe that a
"change in control" of a natural gas or any other utility operating in
Ohio can be an appropriate subject for regulatory review. In fact, we
stated in the tender document itself that NiSource would obtain all
necessary approvals within Ohio (and in other jurisdictions) before
buying the shares of Columbia Energy Group. We have reiterated this
position in conversations and in letters since that time. In short,
NiSource supports legislation which clarifies the PUCO's key role in
any such transaction.
We would like to highlight issues we see in House Bill 452. The
mechanism currently contemplated by House Bill 452 may not provide all
of the information necessary for the Commission to make a thorough
review of an acquisition. For the PUCO to fully evaluate any proposed
transaction and make a reasoned and objective review, the Commission
must have all relevant facts before it. Therefore, NiSource is
proposing several changes to the legislation currently before you.
First, the filing with the PUCO should occur prior to an
acquisition of a utility but after a tender offer has been made.
Because utility mergers evolve like any other business transaction,
the facts and information at the time of a tender offer may change as
the transaction develops. A good example was the October 17
announcement by NiSource which increased the offer price, expanded the
NiSource Board to add five current Columbia directors, invited
Columbia Chairman Rick Richard to be vice-chairman at NiSource, and
indicated that heads of all key operating units would be retained.
The PUCO would be in a better position to review a transaction when it
is clear there is going to be a transaction, when the terms of the
merger have been established and there is full information from both
parties. This is the procedure currently used by the PUCO in
reviewing mergers.
Second, PUCO must have the ability to gather information from all
parties. Thus the parties to the proposed merger should be required
to engage in an accelerated process so that all pertinent information
can be made available to the Commission in conjunction with the filing
required by the legislation. Again, such a change would put the PUCO
in a better position to review a transaction, so that the Commission
is not making its review in a vacuum. If both parties are required to
produce information that would be necessary or useful to the PUCO, the
Commission will be better able to evaluate whether the merger will
truly promote public convenience and protect consumers.
Finally, there are some concerns that House Bill 452, as drafted,
may have an unconstitutional retroactive effect. I would strongly
urge that the Ohio Legislature not take a step which may be
unconstitutional. However, as I have previously stated, NiSource is
prepared to discuss this transaction openly with all interested
groups. Thus, if this language is removed, I will commit that
NiSource will voluntarily submit to the PUCO review envisioned in
House Bill 452.
The changes I have outlined would protect the integrity of the
process before the Commission giving Ohio a procedure that can be
used, not just in the current NiSource-Columbia Energy situation, but
in years to come for any other proposed natural gas utility mergers.
To guarantee a procedure that truly protects Ohio consumers, it is
vital that the Commission's review of any transaction be made upon ALL
of the relevant facts and information. NiSource is happy to work with
the Committee on amendments.
As a final matter, I would like to directly respond to the
comments made last week by Representative Goodman. NiSource strongly
believes that a NiSource Columbia merger would be good for Ohio and
therefore we welcome the opportunity to stand before the PUCO and
testify to that effect or to meet with any appropriate interested
parties. In fact, with or without this bill, when NiSource is
successful in signing a merger agreement with Columbia Energy Group,
it will appear before the PUCO prior to any change in control for the
Commission's review of the acquisition.
In closing, let me say once again that we support the concept
outlined in House Bill 452, and we would support a full and
appropriate review of our merger by the Public Utilities Commission at
the moment in time that any other utility merger would be reviewed,
when the parties have completed their delicate merger negotiations.
We look forward to building a partnership with Ohio lawmakers,
regulators and consumers as we enter the 21st century.
Thank you for your time and attention.
