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 September 14, 2000, NiSource distributed a "New Direction"
newsletter to employees of NiSource and Columbia. The newsletter
included news and information on NiSource's merger with Columbia. The
text of the newsletter is set forth below.
Text of "New Direction" Employee Newsletter
September 14, 2000
NEW DIRECTION
September 14, 2000 Vol. 1 No. 13
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Spotlight on Pat Mulchay - See Page 2
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ZIMMERMAN NAMED HR OFFICER
LaNette Zimmerman will be the chief human resources officer for the
new NiSource, Chairman Gary Neale announced this week.
Zimmerman has been serving as NiSource's interim vice president of
Human Resources since May. She previously was senior vice president
of Human Resources at Chicago Title and Trust Company.
Zimmerman will report to Neale in the new organization.
FAZIO NAMES LEGAL POSITIONS
NiSource General Counsel Peter Fazio has named the following attorneys
to inside legal leadership roles for the new NiSource. These
positions report to Fazio. They are:
* Mary Pat Wilson, General Counsel for Pipeline Operations;
* Andrew J. Sonderman, General Counsel, Energy Distribution;
* Neal Pierce, General Counsel, Columbia Energy Resources; and
* Stephen Melton, Associate General Counsel for NiSource Inc. for
federal regulatory matters.
Also supporting Pipeline Operations and reporting to Wilson are:
* Sharon O. Flannery, Assistant General Counsel,
Operations/Litigation/Human Resources; and
* Kurt Krieger, Assistant General Counsel, Regulatory/Commercial/
Environmental.
Supporting the Energy Distribution segment and reporting to Sonderman
are:
* Marjorie Brant, General Counsel, with responsibility for Ohio and
Kentucky;
* William MacGillivray, General Counsel, responsible for
Massachusetts, New Hampshire and Maine; and
* Kenneth W. Christman, General Counsel, responsible for
Pennsylvania, Virginia and Maryland.
In addition to these in-house staff positions providing legal services
to the business segments, Fazio is developing a roster of Schiff
Hardin and Waite and other attorneys who, as outside counsel, will
provide various legal services for the corporation.
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Inside This Issue
Meet Pat Mulchay . . . . . . . . . . . . . . . . . . . . . . . Pg. 2
Staffing process update . . . . . . . . . . . . . . . . . . . . Pg. 4
NiSource/Columbia Energy Group offer CEG shareholders
election of stock . . . . . . . . . . . . . . . . . . . . . . . Pg. 4
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SPOTLIGHT ON PAT MULCHAY
Merchant Company leader driving change to a "market mindset"
In his new role as president of the Merchant Company, Pat Mulchay is
at the heart of the company's optionality strategy. He is leading the
change to a "market mindset" more aligned with the demands of today's
energy consumer and opportunities emerging in the marketplace.
Mulchay shared his vision for the Merchant Company and his business
philosophy with a reporter for New Direction. Our questions and his
answers follow.
WHAT PARTS OF NISOURCE AND COLUMBIA ARE COMING TOGETHER TO FORM THE
MERCHANT COMPANY, AND HOW DO THEY FIT TOGETHER?
The Merchant Company is an internal combination of assets and
activities that can be aligned and coordinated with the evolving
marketplace to create additional value.
The Merchant Company consists of Columbia Natural Resources, which is
the exploration and production business. We also have Northern
Indiana Public Service Company's (NIPSCO) generation, which includes
3,400 megawatts of mostly coal-fired electric generation. In
addition, we have the gas supply operations for all of the local
distribution companies (LDCs) in the combined NiSource and Columbia
systems. Also in the Merchant Company is the unregulated marketing
company, TPC, located in Houston, Texas, whose business is principally
managing the gas supply requirements for a portfolio of non-associated
customers. TPC is able to monetize and create additional value from
optimized utilization of these assets.
The common theme is found in the term "merchant." Merchant implies
market. With the evolution of deregulation comes the development of
the associated markets in which there are now opportunities to employ
the combined assets of Columbia and NiSource in alignment with this
changing marketplace to create value.
WHY IS PART OF NIPSCO IN THE MERCHANT COMPANY AND PART IN THE
DISTRIBUTION SEGMENT?
The utility of yesterday was essentially an integrated entity,
especially on the electric side, with production, transmission and
distribution residing in one entity located within one regulatory
boundary area. This entity was under the jurisdiction of state and
federal regulatory bodies whose role was to approximate competition
and ensure fairness to the customer. And that was a model that worked
very effectively for many, many years.
Today we're seeing alternatives to that model predicated by the
presence of new technology and the development of new markets. The
underlying driver is the belief that market dynamics can create
greater efficiency and value than the regulatory model can. Market
dynamics provide customers with choice, and when a customer has
choice, there is competition that attracts new providers, increases
efficiency and leads to a cost reflecting the overall market value of
the product. That means that yesterday's utility company has to
embrace these changes to become tomorrow's successful energy provider.
DEFINE OPTIONALITY FOR OUR EMPLOYEES.
Optionality is nothing more or less than choice. It's a choice to
employ an asset in a market-based, coordinated fashion. The growing
marketplace gives us additional options for the employment of those
assets and therefore provides an opportunity to create optimal value.
WHAT WILL BE THE GREATEST CHALLENGES FOR THE MERCHANT COMPANY?
One of the greatest challenges is to develop the market mindset within
the organization. With the exception of TPC, all of these assets come
from a regulated background where there was not an active marketplace
that provided options and choices. So I think moving our organization
to a mindset that matches the market expectations will be a big
challenge.
WHAT WILL BE YOUR PRIORITIES FOR THE MERCHANT COMPANY?
Our first priority is the continuation of reliable, competitive
delivery of gas and electric energy to our customers. We will ensure
that the process of integrating these two companies does not disrupt
what has been very dependable service to customers of NiSource and
Columbia.
Another priority is to begin the process of developing the methodology
for evaluating and assessing the consolidated assets, and identifying
opportunities to align these assets with the marketplace to extract
incremental value. In the long run, our highest priority is to grow
and to develop and be a successful participant in the marketplace as
well as a valued contributor to the NiSource strategy for success.
HOW WILL YOU DEFINE SUCCESS OF THE MERCHANT COMPANY?
We'll define success by the incremental value that we create. There's
a potential value embedded in our assets that can be captured in the
rapidly evolving marketplace.
WHAT ASPECTS OF THIS NEW ROLE EXCITE YOU THE MOST?
The challenge. This role, and the Merchant Company, are tied to the
changes in the marketplace and to new opportunities. That's very
exciting.
HOW HAS YOUR EXPERIENCE AT NIPSCO PREPARED YOU FOR THIS NEW STEP IN
YOUR CAREER?
I have had the opportunity to serve in very diverse functions
throughout my career at NIPSCO. I'm well-grounded in the utility
business. I've been here through the evolution of deregulation on the
gas side and now on the electric side, and I've seen the markets
develop. I'm fascinated with the marketplace and the opportunities
that I think are there. There's value to understanding the new
marketplace by understanding the old marketplace. I understand from
where we came, and I'm excited about what's out there for the future.
WHAT'S THE BEST ADVICE YOU'VE EVER RECEIVED?
I've had a lot of good mentors, and one phrase I always remember is,
"You can if you think you can."
Also, some wise sage once said there's nothing in the world that can
not be accomplished as long as it doesn't matter who gets credit for
it, which for me defines the importance of teamwork.
WHAT IS ONE TIP FOR SUCCESS YOU OFFER TO PEOPLE?
Take a chance.
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MEET PAT MULCHAY
Pat Mulchay began working for Northern Indiana Public Service Company
(NIPSCO) in 1962 as a laborer in his native Michigan City, Ind. He
has worked in just about every aspect of the electric and natural gas
businesses during his 38-year career with NiSource, including
engineering, construction, operations, energy distribution and
training. Currently he is president and chief operating officer of
NIPSCO and executive vice president of NiSource.
Mulchay earned his associate's degree in electrical engineering, a
bachelor's degree in management from Purdue University and a master's
degree in business administration from the University of Notre Dame.
Mulchay's office will be at NiSource's headquarters in Merrillville,
Ind. He and his wife, Jackie, reside in Chesterton, Ind., and are the
parents of one son.
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MANAGEMENT ANNOUNCEMENTS TO BE MADE AVAILABLE VIA INTRANET
The next levels of leadership named to corporate, Business Services
and business unit positions will be listed on the Project Compass
intranet site as they are finalized. Some announcements will be made
this week. The site is updated as information becomes available, so
check back frequently.
STAFFING PROCESS UPDATE
More than 1,800 NiSource and Columbia employees indicated their
interest in being considered for positions within functions using the
Project Compass staffing process.
"We are pleased with the number of employees who took the time to let
us know their interests. This will help us meet the challenge we face
in staffing our organizations over the next couple of weeks," said
Steve Smith, Project Compass co-leader and president of Business
Services in the new NiSource.
The information submitted on the Employee Data and Interest Form and
Employee Assessment Form will be shared with hiring managers. They
will be charged with staffing their organizations by reviewing the
information from the two forms and other existing employee data.
Throughout the staffing process, human resources professionals will
work with hiring managers. The Employee Transition Team will
coordinate information across the companies that comprise the new
NiSource.
Staffing decisions for non-management positions will be communicated
beginning in early October.
NISOURCE/COLUMBIA ENERGY GROUP OFFER CEG SHAREHOLDERS ELECTION OF
STOCK
MERGER TARGETED FOR COMPLETION IN LATE OCTOBER
NiSource Inc. and Columbia Energy Group announced on Tuesday that
Columbia shareholders are being asked to elect whether they want to
receive stock of New NiSource Inc. in exchange for their Columbia
shares under the terms of the merger with NiSource.
A package explaining the election process was mailed to Columbia
shareholders earlier this week. Shareholders wishing to receive New
NiSource stock in the merger must submit their completed election
forms and stock certificates in time to be received by the exchange
agent, ChaseMellon Shareholder Services, L.L.C., no later than 5 p.m.
Eastern Time on the second business day before the merger becomes
effective.
The companies said they currently anticipate that the merger will
become effective in late October 2000, subject to meeting the
conditions to closing.
When the effective date and the election deadline are known, they will
be announced in a press release, on the NiSource and Columbia Web
sites and in a filing with the Securities and Exchange Commission.
That information also will be posted on the Project Compass intranet
site.
Once the election deadline is determined, there will be only a brief
period of time for Columbia shareholders to submit the necessary
paperwork. Therefore, the companies are encouraging shareholders who
elect to receive New NiSource stock to promptly submit their Stock
Election Form and Columbia share certificates.
Under the terms of the merger agreement, Columbia shareholders who do
not elect stock will receive a combination of cash and New NiSource
SAILS (Stock Appreciation Income Linked Securities) units consisting
of a zero coupon debt security and a forward equity contract.
Elections are subject to proration if Columbia shareholders elect
stock for more than 30 percent of the total outstanding Columbia
common shares. The right to elect stock is conditioned on Columbia
shareholders electing stock for at least 10 percent of the outstanding
Columbia shares.
Shareholders are asked to review the stock election materials that
were mailed, including answers to frequently asked questions, for
details. Those FAQs are posted under the Questions link on the
Project Compass intranet site. Shareholders are asked to contact
ChaseMellon Shareholder Services at (800) 685-4258 with additional
questions.
Employees holding Columbia shares through an employee savings plan
will receive additional information from the administrators of the
plan.
The following is included to conform with federal regulations:
This publication 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 publication. 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 these stories.
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 Inc. and
Columbia Energy Group. The final joint proxy
statement/prospectus, dated April 24, 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.
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Questions, Comments?
New Direction is published by Project Compass for all NiSource and
Columbia employees. We welcome your comments and questions.
Give us a call at 877-236-2242 or e-mail us at
[email protected].
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