Filed by: NiSource Inc.
Pursuant to Rule 425 under the Securities Act of 1933
Subject Company: Columbia Energy Group
Commission File No: 001-01098
On March 2, 2000, officers of NiSource made the following
presentation in New York City to a group of analysts from various
investment banks and institutions.
TEXT OF ANALYST PRESENTATION
[NISOURCE LOGO]
[COLUMBIA ENERGY LOGO]
CREATING VALUE IN THE ENERGY CORRIDOR
March 2, 2000
These materials contain forward-looking statements as defined in
Section 21E of the Securities Exchange Act of 1934, including
statements about future business operations and financial performance.
These statements involve risks and uncertainties inherent in business
forecasts, and actual results could differ materially from those
indicated in these statements. A number of these risks and
uncertainties are discussed in NiSource s Form 10-Q Quarterly Report
filed with the Securities and Exchange Commission on November 12,
1999.
1
CAPITALIZING ON THE ENERGY CORRIDOR
---------------------------------------------------------------------
[Graph - Corridor Highlights]
* 40% of US energy consumption
* 30% of US population
* 127,000 MW of new gas fired generation
* 24 Bcf/d of new interstate gas pipeline capacity
[Graph - Regional map of the United States
depicting states which NiSource serves]
2
THE PREMIER COMPETITOR
---------------------------------------------------------------------
[Graph - Map depicting certain operations of various
NiSource entities in the Energy Corridor]
3
BUILDING FOR TOMORROW
---------------------------------------------------------------------
* Broad platform to maximize opportunities
- 4.1 million electric, gas, water and propane customers
- Gas distribution in 9 states
- Pipeline operations in 16 states
* Skills to procure, deliver and risk manage the commodity around
the assets
[CHART]
<TABLE>
<CAPTION>
Commodity
Upstream Distribution Downstream
-------- ------------ ----------
<S> <C> <C>
* 19,000 Miles of Pipeline * Regulated Utilities * Energy Related Products
* 700 Bcf of Gas Storage * Customer Growth * Cogeneration
* Marketing Services * Distributed Generation
* Gas Optionality * Commodity Conversion
* Electric Optionality
</TABLE>
4
CREATING VALUE
---------------------------------------------------------------------
. . .With Lower Risk and Higher Returns
* Regulated Businesses
- Positive regulatory relationships
- Aggressive cost efficiencies
- Pursue incentive opportunities
* Related Diversification
- Leverage existing asset base into knowledge based businesses
with high returns
- Integrating existing businesses into growth markets
* Creating New Business Opportunities in Growth Markets
- BTU arbitrage
- Total energy management
* Maintain strong financial profile: Solid investment grade
ratings
5
THE RIGHT ASSETS MAKE ALL THE DIFFERENCE
---------------------------------------------------------------------
15% CAGR
[Graph - Chart depicting projections of Net Income from 2001-2005
for Distributed Generation, Electric Optionality,
Gas Optionality and Base Business]
6
A GREAT TRANSACTION
---------------------------------------------------------------------
* "Columbia acquisition price is approximately 20% below the
average for gas utility acquisitions announced in the last 12
months" -- A.G. Edwards & Sons
- Weighted average economic value of $71.03 per share(1)
* Asset sales
- Minimize equity needs or reduce leverage
- Identified over $1 BN of asset sales: Expect at least $923
MM in after tax proceeds
- Likely that over $500 MM in asset sales will be completed by
year-end 2000
- Sale program to be completed by June 30, 2001
* Dividend Policy
- Committed to maintaining current profile
- Dividend growth will continue to track net income growth
--------------------
(1) Based on NiSource closing price on 2/25/2000 and assuming 70% /
30% cash/stock election.
7
THE TRANSACTION STRUCTURE
---------------------------------------------------------------------
[Graph - Chart depicting transaction structure,
target debt ratings, debt and preferred stock]
8
SOURCES AND USES
---------------------------------------------------------------------
<TABLE>
<CAPTION>
Sources Uses
--------------------------------------------------------- -------------------------------------------------
<S> <C> <C> <C> <C>
SOURCES $MM % USES $MM
--- - ---
Debt Financing $3,685 61% Purchase Price
($72.07/Share) $5,966
SAILS[SM] 102 2% Transaction Costs 98
------
Asset Sales/Cash on Hand 1,023 16%
Common Equity 1,253 21% TOTAL USES $6,063
------ ---- ======
TOTAL SOURCES $6,063 100%
====== ====
(1) Assumes 21% stock election.
</TABLE>
9
PRO FORMA FINANCIAL PROFILE: BASE BUSINESS
<TABLE>
<CAPTION>
(Dollars in Millions, except per share data) 2001 2002 ASSUMPTIONS
-------------------------------------------- ----- ----- -----------
<S> <C> <C> <C>
NiSource Net Income 260.0 280.8 $2.08 in 2001 (First Call Consensus) and
$2.25 in 2002 (8% growth)
Columbia Net Income 380.0 418.0 $4.59 in 2001 (First Call Consensus) and
$5.05 in 2002 (10% growth)
Asset Sale Forgone Net Income (24.7) (30.0) $617 MM of after-tax proceeds from non-core
assets sales by Jan 2001, and additional
$306 MM by June 2001
After-tax Synergies(1)(2) 62.4 90.4 Pre-tax synergies of $98 MM in 2001 and $141
MM in 2002
Goodwill / Write Up (88.9) (88.9) $3.56 BN of Goodwill/Asset write up over 40
years
After-tax Interest of Acquisition Debt(2) (196.5) (200.5) $4 BN of initial debt reducing to $3.7 BN by
June 30, 2001. Blended cost of debt: 8% in
2001 and 8.5% thereafter.
After-tax Imputed Interest of SAILS(2) (6.5) (7.0) Interest accreting per annum on beginning
balance of $124 MM
Aftertax Interest Benefit of Debt 4.8 15.9 Debt paydown at midyear using FCF of $188 MM
Reduction(2) in 2001 and $209 MM in 2002
PRO FORMA NET INCOME $390.6 $478.6
COMBINED EPS $1.95 $2.39
ACCRETION (DILUTION) ($0.13) $0.15
COMBINED EPS -- PRE GOODWILL $2.40 $2.84
ACCRETION (DILUTION) - PRE GOODWILL $0.32 $0.59
Pro Forma Shares Outstanding 200.1 200.1 124.1 million shares pre-merger plus 75.9
million issued assuming 21% stock election
at $16.50 or lower
---------------------
(1) Excludes one-time charges.
(2) 36% effective tax rate.
</TABLE>
10
REALISABLE SYNERGIES
---------------------------------------------------------------------
<TABLE>
<CAPTION>
(Dollars in Millions)
2001 2002 2003 2004 2005
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
DISTRIBUTION
Revenue $1.5 $7.7 $11.5 $15.8 $18.1
Cost 15.3 19.1 22.6 27.8 29.5
TRANSMISSION
Cost 8.7 13.9 15.3 17.3 17.8
CORPORATE 72.1 100.6 106.5 112.7 119.6
TOTAL SYNERGIES $97.6 $141.3 $155.9 $173.6 $185.0
Expect to identify further savings once complete review with Columbia
</TABLE>
11
6-9% OF COMBINED NON-FUEL O&M
----------------------------------------------------------------------
-
[ Graph - Bar Chart depicting pretax cost synergies and
revenue enhancements from 2001 to 2004]
2001 2002 2003 2004
---- ---- ---- ----
Cost savings % of Pro
Forma 5.8% 8.1% 8.6% 9.4%
Combined Non-Fuel O&M
Cost savings % of
Columbia 9.6% 13.2% 14.2% 15.6%
Non-Fuel O&M
12
MINIMIZING RISK
----------------------------------------------------------------------
-
* Stock Election
- Focused on retail shareholders (20% of Columbia shareholder
base)
- Provides tax free exchange
- Significant dividend accretion
- If less stock elected, increase level of asset sales:
domestic businesses that are attractive and readily saleable
* Minimal Regulatory Risk
- Columbia management incentivized to proactively spearhead
the transition process
- Dominion/CNG completed in 8-1/2 months
- Low rates, strong regulatory settlements, existing customer
choice and open access programs minimize state regulatory
pressures
* Pro Forma Credit Profile similar to Dominion/CNG
- Intend to proactively manage interest rate exposure
- Lower business risk profile
- Approximately 90% of EBIT from regulated businesses
13
SOLID INVESTMENT GRADE
--------------------------------------------------------------------
Pro Forma Credit Statistics(1)
2001 2002
----
NiSource EBITDA $911.0 $966.0
Columbia EBITDA 1,057 1,120
EBITDA/Interest 3.09x 3.39x
Pre-Tax Int. Coverage 2.19x 2.42x
Debt/Capital 69.4% 66.7%
(1) Projections incorporate identified synergies.
<TABLE>
<CAPTION>
Comparable Credit Analysis(1)
---------------------------------------------------------------------------------------------------------------
Dominion Reliant TXU
Resources(2) Energy AEP Corp.
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Unsecured Ratings Baa1/BBB+ Baa1/BBB+ Baa1/BBB+ Baa3/BBB
EBITDA/Interest 3.7x 3.4x 3.3x 2.8x
Pretax Int. Coverage 2.3x 1.7x 2.0x 1.9x
Debt/Capital 68.4% 66.8% 61.5% 68.5%
(1) Per Moody s Power Company Sourcebook and S&P Utilities Ratings Service for the 12 months ended June 30, 1999.
(2) 2000E Pro forma for merger with CNG.
</TABLE>
14
COMPLETION IN 6-9 MONTHS
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<TABLE>
<CAPTION>
YEAR 2000
--------------------------------------------------------------------------------------------------------
MARCH(1) APRIL MAY JUNE JULY AUGUST SEPTEMBER OCTOBER NOVEMBER DECEMBER
-------- ----- --- ---- ---- ------ --------- ------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Shareholder Mail Proxy Share-
Approval holder
Approval
FERC Filing Commission Approval
Review
Hart-Scott Filing Approval
Rodino
State File: KY, Approval
Filings OH, MD,
PA, VA
SEC 1935 Act Commission Approval
Filing Review
(1) Signing of merger agreement.
</TABLE>
Similar Process and Timing to NiSource / Bay State and Dominion / CNG
APPENDIX A
TRANSACTION TERMS
----------------------------------------------------------------------
* Columbia shareholders may elect to receive:
- $70 in cash and $2.60 face value SAILS[SM] for up to 100% of
outstanding Columbia shares
- $74 in stock for up to 30% of outstanding Columbia shares
* "Fixed value/fixed ratio" collar structure preserves upside price
appreciation for NiSource shareholders while protecting against
downside price movements
- If NiSource stock price > $16.50, exchange ratio is $74
divided by NiSource stock price
- If NiSource stock price < $16.50, exchange ratio is fixed at
4.4848
16
TRANSACTION TERMS
----------------------------------------------------------------------
* SAILS[SM]
- $90 MM -- $100 MM issuance (fair value) depending on
shareholder election
- 0% dividend payments with 40% conversion premium
- NiSource issues stock 4 years after closing calculated as
follows:
- If NiSource stock is less than or equal to $16.50,
NiSource issues 0.16 shares
- If NiSource stock is > $16.50 and < $23.10, NiSource
issues shares equal to $2.60 divided by NiSource stock
price
- If NiSource stock is greater than or equal to $23.10,
NiSource issues 0.11 shares
This analyst presentation contains certain forward-looking
statements within the meaning of the federal securities laws;
these forward-looking statements are subject to various risks and
uncertainties. The factors that could cause actual results to
differ materially from the projections, forecasts, estimates and
expectations discussed herein may include factors that are beyond
the companies' ability to control or estimate precisely, such as
estimates of future market conditions, the behavior of other
market participants and the actions of the Federal and State
regulators. Other factors include, but are not limited to,
actions in the financial markets, weather conditions, economic
conditions in the two companies' service territories,
fluctuations in energy-related commodity prices, conversion
activity, other marketing efforts and other uncertainties. Other
risk factors are detailed from time to time in the two companies'
SEC reports. Readers are cautioned not to place undue reliance on
these forward-looking statements, which speak only as of the date
of this press release. The companies do not undertake any
obligation to publicly release any revisions to these forward-
looking statements to reflect events or circumstances after the
date of this press release.
NiSource and the new holding company will be filing a
registration statement, which will contain a joint proxy
statement/prospectus of NiSource and Columbia Energy, and other
documents with the Securities and Exchange Commission. Investors
and security holders are urged to read the joint proxy
statement/prospectus and any other relevant documents filed with
the SEC when they become available because they will contain
important information. Investors and security holders will be
able to receive the joint proxy statement/prospectus and other
17
documents free of charge at the SEC's web site, www.sec.gov, from
NiSource Investor Relations at 801 East 86th Avenue,
Merrillville, Indiana 46410 or from Columbia Investor Relations
at 13880 Dulles Comer Lane, Herndon, Virginia 20171.
