Filed by: NiSource Inc.
Pursuant to Rule 425 under the Securities Act of 1933
Subject Company: Columbia Energy Group
Registration Statement File No: 333-33896
On August 16, 2000, NiSource issued the Interim Report For the
Three, Six and Twelve Months Ended June 30, 2000 to NiSource
shareholders. The text of the interim report is set forth below.
TEXT OF INTERIM REPORT
AUGUST 16, 2000
[NiSource logo]
Creating the Premier Competitor
Momentum Builds on
* Approvals
* Leadership
* Integration
INTERIM REPORT FOR THE THREE, SIX AND TWELVE MONTHS ENDED JUNE 30, 2000
BOARD DELCARES DIVIDEND
Your Board of Directors, on May 23, declared a quarterly common share
dividend payment of:
$.27 per share
payable on:
August 18, 2000
to shareholders of record at the close of the business day on:
July 31, 2000
Enclosed is your quarterly dividend check. Enrollment information for
electronic deposit of dividends is contained on the reverse side of
the check stub. Dividend Reinvestment Plan information and account
maintenance is located in the top right-hand corner of the stub.
If you are reinvesting your common share dividends in our Automatic
Dividend Reinvestment and Share Purchase Plan, no dividend check is
enclosed.
Regularly updated information and news about NiSource is available on
our Internet site, www.nisource.com.
[Bar Chart depicting Six Months Basic Earnings Five-year Comparison
per Share]
1996 ....... $0.73
1997 ....... $0.80
1998 ....... $0.73
1999 ....... $0.80
2000 ....... $0.84
SHAREHOLDER INFORMATION
Shareholders with questions about NiSource Inc. or those seeking
information concerning their individual holdings can telephone, mail
or e-mail us at:
Local (Northwest Indiana) Toll-
free Calling Area 219-853-5700
General Toll-Free Calling Area 800-348-6466
Corporate Address 801 East 86th Avenue
Merrillville, Indiana 46410
Internet Site: www.nisource.com
NISOURCE MARKS EXCELLENT PROGRESS
Dear Shareholder:
We are proud to report that NiSource has achieved exceptional results
in our efforts to complete our merger with Columbia Energy Group
announced just five months ago. NiSource shareholders' overwhelming
approval of the merger and that of Columbia's shareholders were
critical benchmarks reached in early June. We thank you again for
your strong support of our vision for the new NiSource. This is the
value-adding expansion strategy we outlined for shareholders five
years ago and are actively putting into place today.
NiSource and Columbia received all nine necessary state regulatory
commission actions within a four-month period, a timeframe unmatched
in mergers of our size. This reflects both the outstanding teamwork
among our organizations and the excellent regulatory relationships
held by both companies within the states where we distribute energy.
In late July, we received Federal Energy Regulatory Commission merger
approval, as well as cleared the waiting period under the Hart-Scott-
Rodino Act at the U.S. Department of Justice and Federal Trade
Commission.
We now await Securities and Exchange Commission authorization to
complete the $6 billion transaction that will transform NiSource into
a super-regional energy powerhouse. We will serve 3.6 million gas and
electric customers and directly access the largest and fastest-growing
U.S. energy demand corridor, stretching from the Gulf of Mexico to
Chicago to New England. Assuming regulatory approvals, we remain
confident the transaction will be completed before year-end.
In order to facilitate our transition to the new NiSource quickly and
effectively, on August 1 we announced the key leadership and
organizational structure to be in place upon completion of the merger.
Your Board of Directors has chosen me to head the new company and
retain my title.
Your Board has designated a strong management team drawing from both
companies to lead the following major areas of responsibility (current
subsidiary brands will remain solidly in place) for the new company:
* Catherine G. Abbott, chief executive officer of Columbia Gas
Transmission Company and Columbia Gulf Transmission Company, is
named president, Pipeline Operations.
* Patrick J. Mulchay, president of NiSource's Northern Indiana
Public Service Company, will become president of Merchant
Company, our wholesale electric and gas operations, including
electric generation and transmission.
* Jeffrey W. Yundt, president of NiSource's Bay State Gas Company,
will be president of Energy Distribution, comprised of all of our
local energy distributors.
[PROJECT COMPASS LOGO]
* Mark D. Wyckoff, former NiSource vice president of Human
Resources who is leading Project Compass, the NiSource/Columbia
organizational integration process, will head New Energy Company,
developing our emerging distributed generation and electronic
commerce technologies.
* Joseph L. Turner will remain in his position of president of
Primary Energy, Inc., the nation's leading developer of on-site
industrial power generation.
* Stephen P. Adik, NiSource senior executive vice president, chief
financial officer and treasurer will become vice chairman.
Reporting to Adik will be:
* Michael W. O'Donnell, senior vice president and chief financial
officer of Columbia Energy Group, who will become executive vice
president and chief financial officer of the new NiSource.
* Stephen P. Smith, senior vice president and deputy chief
financial officer of Columbia and co-leader of Project Compass,
will become president, Business Services, our administrative and
shared services functions.
* James M. Clarke, NiSource vice president of Risk Management and
Capital Allocation, will continue in that role.
This team's extraordinary experience, talent and energy will enable us
to immediately pass the baton as our merger is completed, delivering
to our customers and shareholders the maximum value from our strategic
combination of brands and other assets.
On July 28, your company reported basic earnings per common share of
84 cents for the six months ended June 30, 2000, a 5 percent increase
from the same period a year ago, despite a warmer winter and cooler
summer. Net income for this six-month period was $103.0 million, an
increase of $3.5 million from the same period a year ago.
Stronger operating results and continued customer growth from
NiSource's natural gas, electric and water distribution businesses
contributed to the improved earnings, which were partially offset by
increased interest charges related to the Bay State Gas and EnergyUSA-
TPC acquisitions.*
Second-quarter basic earnings per average common share improved 5.5
percent to 19 cents. Continued customer growth along with improved
operating results from the company's natural gas, electric, water
distribution and cogeneration facility operations were partially
offset by the aforementioned interest charges.
The evolving energy marketplace offers virtually unlimited
opportunities for growth and innovation. As we successfully move
through our merger approval and integration processes, we are building
an unparalleled organization positioned to capitalize on them: the
premier competitor, your company.
/s/ Gary L. Neale
Gary L. Neale, Chairman,
President and Chief Executive Officer
August 11, 2000
*Results for the six-month periods ended June 30, 1999 and 2000, are
not directly comparable since the current period includes three NiSource
subsidiaries acquired during 1999. NiSource established its New England
presence when it acquired Bay State Gas Company in February 1999. The
natural gas marketing and gas storage units of EnergyUSA-TPC and
Market Hub Partners where acquired during 1999. These operations
record a significant portion of their revenues during the winter
heating season.
<TABLE>
<CAPTION>
NiSOURCE INC. CONDENSED CONSOLIDATED STATEMENT OF INCOME
Three Months Six Months Twelve Months
Ended June 30, Ended June 30, Ended June 30,
(dollars in thousands, except per share amounts) 2000 1999 2000 1999 2000 1999
------ ------ ------ ------ ------- -------
Operating revenues:
<S> <C> <C> <C> <C> <C> <C>
Gas . . . . . . . . . . . . . . . .. . . . . . $ 562,534 $ 308,636 $1,289,356 $ 862,532 $2,080,274 $1,440,044
Electric . . . . . . . . . . . . .. . . . . . 259,177 271,307 514,755 535,749 1,100,044 1,294,502
Water . . . . . . . . . . . . . . .. . . . . . 24,983 24,031 47,896 44,900 101,379 90,313
Products & Services . . . . . . . .. . . . . . 76,277 71,373 138,513 123,741 286,477 243,089
---------- ---------- ---------- ----------- ---------- ------------
922,971 675,347 1,990,520 1,566,922 3,568,174 3,067,948
---------- ---------- ---------- ----------- ---------- ------------
Cost of sales:
Gas costs . . . . . . . . . . . . .. . . . . . 466,201 225,137 985,106 604,727 1,567,837 1,052,847
Fuel for electric generation and
power purchased . . . . . . . . . .. . . . . . 63,500 75,053 129,233 155,401 294,741 511,311
Products & Services . . . . . . . .. . . . . . 44,537 37,022 79,340 62,611 159,413 120,985
---------- ---------- ---------- ------------ ---------- ------------
574,238 337,212 1,193,679 822,739 2,021,991 1,685,143
---------- ---------- ---------- ------------ ---------- ------------
Operating margin:
Gas . . . . . . . . . . . . . . . .. . . . . . 96,333 83,499 309,250 257,805 512,437 387,197
Electric . . . . . . . . . . . . .. . . . . . 195,677 196,254 385,522 380,348 805,303 783,191
Water . . . . . . . . . . . . . . .. . . . . . 24,983 24,031 47,896 44,900 101,379 90,313
Products & Services . . . . . . . .. . . . . . 31,740 34,351 59,173 61,130 127,064 122,104
--------- ----------- ----------- ------------ ---------- ------------
348,733 338,135 796,841 744,183 1,546,183 1,382,805
--------- ----------- ----------- ------------ ---------- ------------
Other operating expenses and taxes .. . . . . . 259,386 253,158 528,586 503,354 1,057,221 916,627
---------- ------------ ----------- ------------ ---------- ------------
Operating Income . . . . . . . . . .. . . . . . 89,347 84,977 268,255 240,829 488,962 466,178
---------- ------------ ----------- ------------ ---------- ------------
Other income (deductions) . . . . . .. . . . . . (53,031) (50,377) (104,439) (84,748) (230,365) (153,283)
---------- ------------ ----------- ------------ ---------- ------------
Income before income taxes . . . . . . . . . . 36,316 34,600 163,816 156,081 258,597 312,895
---------- ------------ ----------- ------------ ---------- ------------
Income taxes . . . . . . .. . . . . . . . . . . 12,903 11,656 60,787 56,578 94,657 109,673
---------- ------------ ------------ ------------ ------------ ------------
Net income . . . . . . . . . . . . . . . . .. $ 23,413 $ 22,944 $ 103,029 $ 99,503 $ 163,940 $ 203,222
============ ============ ============ ============ ============ ============
verage common shares outstanding - basic . . . . $120,569,530 $124,951,321 $122,203,747 $123,804,922 $123,545,434 $121,166,275
============ ============ ============ ============ ============ ============
Basic earnings per average common share . . . $ 0.19 $ 0.18 $ 0.84 $ 0.80 $ 1.32 $ 1.67
============ ============ ============ ============ ============ ============
Diluted earnings per average common share . . $ 0.18 $ 0.18 $ 0.81 $ 0.80 $ 1.29 $ 1.66
============ ============ ============ ============ ============ ============
Electric sales (megawatt hours) . . . . . . . $ 4,165,655 $ 4,439,074 $ 8,493,385 $ 9,252,106 $ 17,620,258 $ 23,776,299
============ ============ ============ ============ ============ ============
Gas deliveries (dekatherms 000's):
Regulated Gas Deliveries. . . . . . . . . . 77,131 75,970 210,086 203,683 381,390 334,887
Gas transmission . . . . . . . . . . . . 6,507 3,227 11,089 11,726 11,759 10,993
Wholesale and Marketing Sales . . . . . . . 79,344 73,775 198,207 179,648 381,637 345,092
------------ ------------ ------------ ------------ ------------ ------------
Total Gas Deliveries. . . . . . . . . . . . . 162,982 152,972 419,382 395,057 774,786 690,972
============ ============ ============ ============ ============ ============
Water sales (millions of gallons) . . . . . . 10,961 10,221 20,582 19,534 44,013 41,994
============ ============ ============ ============ ============ ============
Prior year's total operating results are not directly comparable due to the purchase of Bay State Gas Company in
February 1999 and TPC Corporation in April 1999.
</TABLE>
NOTE TO CONDENSED CONSOLIDATED STATEMENT OF INCOME: Results of the
interim periods are not necessarily indicative of the results for any
12-month period due to the seasonal nature of NiSource Inc.'s
business.
TO THE BOARD OF DIRECTORS OF NISOURCE INC.: We have audited, in
accordance with auditing standards generally accepted in the United
States, the consolidated balance sheets of NiSource Inc. and
subsidiaries as of June 30, 2000 and December 31, 1999, and the
related consolidated statements of income, common shareholders' equity
and cash flows for the three-, six- and 12-month periods ended June 30,
2000 and 1999 (not presented herein) and, in our report dated August 9,
2000, we expressed an unqualified opinion on those consolidated
financial statements. In our opinion, the information set forth in
the accompanying condensed consolidated statement of income for the
three-, six- and 12-month periods ended June 30, 2000 and 1999, is
fairly stated, in all material respects, in relation to the consolidated
financial statements from which it has been derived.
Chicago, Illinois Arthur Andersen LLP
August 9, 2000
This Condensed Consolidated Statement of Income and the report are
not, under any circumstances, to be construed as an offer to sell, or
as a solicitation of an offer to buy, securities of NiSource Inc.
This report 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 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 report. 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 the report.
In addition to other documents filed with the Securities and
Exchange Commission by the two companies, NiSource and the
new holding company have filed a registration statement,
which contains a joint proxy statement/prospectus for
NiSource and Columbia Energy Group. The final joint proxy
statement/prospectus, dated April 25, 2000, is available and
has been distributed to the companies' shareholders.
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 can receive the joint proxy statement/prospectus and
other 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 at its Web site,
www.nisource.com, or from Columbia Investor Relations at
13880 Dulles Corner Lane, Herndon, Virginia 20171 or at its
Web site, www.columbiaenergygroup.com.
Information concerning the identity of the participants in
the solicitation of proxies by the NiSource Inc. and
Columbia Energy Group boards of directors and their direct
or indirect interests, by security holdings or otherwise,
may be obtained from the secretary of NiSource Inc., or the
secretary of Columbia Energy Group, as the case may be, at
the addresses listed above.
