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Columbia Energy Group
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`Project Compass' gets underway; teams to be named soon
Mark Wyckoff, NiSource vice president of human resources, has been named to lead
Project Compass, the process of integrating Columbia Energy Group and NiSource.
Steve Smith, Columbia service corporation senior vice president and deputy chief
financial officer, will serve as point person for Columbia.
Columbia and NiSource have chosen "Compass" as the name and symbol for the team
and process that will integrate the two companies, representing their commitment
to build a new NiSource--agile, ready to compete and succeed in the rapidly
changing energy marketplace.The new NiSource will have new ways of doing things
that will deliver value to the company's shareholders, employees, customers and
communities.
The team will look at possibilities, but ground them in reality. It will reach
for new ideas and make the hard choices necessary to implement company strategy.
Building such a company is no small task. To provide merger integration support,
Andersen Consulting has been selected to work with the two companies.
The consulting firm uses a disciplined approach that will provide a template so
that all the teams work consistently to achieve the integration goals. Andersen
staff is already on site at NiSource headquarters in Merrillville, Indiana.
The definition of success for Project Compass is that by the close of the
transaction, all employees will know what their jobs will be, whom they report
to and what role they will play in achieving the company's strategic goals.
Project Compass' mission will focus on three areas:
|X| Guided by NiSource's commitments to the financial community,
aggressively reduce costs and deliver value to the bottom line.
|X| Driven by the NiSource strategy, position and build the organization
of the future.
|X| Support the initial steps in a process of cultural change.
The team's first step will be to develop detailed goals to support each of
these areas.
Project Compass is divided into three phases during the next seven months. They
are:
|X| OPPORTUNITY IDENTIFICATION
|X| CONCEPTUAL DESIGN
|X| DETAILED DESIGN
Right now, pre-project preparation is underway. Through May 15, the team is
defining a process to manage the project, addressing all administrative issues
and establishing office space in Merrillville, Indiana. In addition to
developing the program management function, pre-project preparation involves:
|X| Defining the project organizational structure.
|X| Identifying staffing requirements.
|X| Creating a detailed work plan to ensure all priority issues are
identified.
|X| Collecting and validating baseline data about NiSource and Columbia.
|X| Establishing formal goals for the merger integration process.
This week employees from both companies will be identified to participate on
various teams. The teams will gather for a kick-off session in Merrillville the
week of May 15.
OPPORTUNITY IDENTIFICATION
Phase One, Opportunity Identification, begins on May 15 and will last for six
weeks. The first goal during this phase is to identify and quantify the
opportunities that will be
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pursued to achieve the targeted cost savings. In addition, teams will identify
items that must be accomplished to legally and operationally run the combined
company (e.g., shareholder reporting) as of the date the transaction closes.
Workteams created for this phase will perform several activities including:
|X| Understand the current NiSource and Columbia organizations, processes,
procedures and systems (the "as is" organization).
|X| Identify major cost drivers.
|X| Review best practices and benchmarks - within and outside the utility
industry.
|X| Identify savings opportunities.
|X| Prioritize these opportunities.
|X| Obtain a high level description of the changes that must be made by
the time the transaction closes.
CONCEPTUAL DESIGN
The Conceptual Design phase, which will begin July 1 and last approximately
eight weeks, takes the approved initiatives from Phase One, Opportunity
Identification, to the next level of detail. This includes designing the "to be"
organization, processes and systems. The workteams will also define and
understand the "gaps" that may exist between the "as is" and "to be"
organizations. In this phase, the team will also do a cost/benefit analysis of
the proposed changes, develop sequencing and timelines and identify the
potential interdependencies of various elements that might affect
implementation.
Throughout all phases of the project, employees from NiSource and Columbia
companies will be working together on joint teams to meet Project Compass goals.
DETAILED DESIGN Phase three, to begin in early September, will add detail to the
design of the "to be" models and develop actual implementation plans.
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NY regulators back Millennium;urge FERC to speed up review
The New York Public Service Commission has told the Federal Energy Regulatory
Commission (FERC) it supports the need for new natural gas pipelines in the
state and urges FERC to expedite its review of the Columbia-sponsored Millennium
pipeline project.
In an April 26 letter to FERC, the New York PSC urged the Commission to expedite
its review of Millennium, stressing that the PSC "has been on the record and
continues to support the construction of natural gas pipelines that will serve
New York State, particularly New York City."
The PSC's comments came on the heels of a Millennium letter to Daniel Adamson,
director of FERC's Office of Energy Projects, in which Columbia Transmission
Market Development Vice President David Pentzien responded to several questions
FERC had raised about the project, including questions about the effects of the
proposed merger of Columbia Energy Group and NiSource, Inc.
"First and foremost, I want to assure you and the Commission that Columbia Gas
Transmission Corp. and its three partners remain fully committed to the
financing and construction of the project," Pentzien said in his letter to FERC.
"It is true that NiSource is reviewing the project, as it should, but I have
been authorized by NiSource to advise the Commission that NiSource fully
supports both Columbia's continued participation in the project and the
Commission's prompt approval of Millennium's certificate application."
In the letter, Pentzien noted that Millennium has successfully cleared numerous
state and federal regulatory hurdles in addition to resolving routing concerns
in Westchester County with the NewYork.
They included approvals from the New York Department of Environmental
Conservation, the New York and Pennsylvania State Historic Preservation Offices
and the Pennsylvania Department of Environmental Protection.
The Millennium partners originally filed an application for the project with
FERC in December 1997, and received a favorable Draft Environmental Impact
Statement from the Commission in April 1999. However, the Commission has delayed
issuing a Final Environmental Impact Statement (FEIS) for the project or a
certificate authorizing construction.
"Now that we have these state approvals in hand and have responded to your
concerns, we ask for the FEIS to be issued," Pentzien said.
The 442-mile pipeline will originate at the Canadian border in Lake Erie and
extend across southern New York to the New York City metropolitan area. It will
transport about 700 million cubic feet of natural gas to help meet growing
energy needs in the Northeast. Columbia Transmission is the project's largest
interest holder and will operate the Millennium system. Other project sponsors
are TransCanada PipeLines, Westcoast Energy and MCN Energy.
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CKY files merger application
NiSource, Columbia Energy Group and Columbia Gas of Kentucky (CKY) filed Monday
a joint application with the Kentucky Public Service Commission requesting the
necessary approvals related to the planned merger.
Under Kentucky's statutes, the Commission has 60 days in which to review and
rule on the proposed merger.
Similar applications have been filed with the Pennsylvania Public Utility
Commission and the State Corporation Commission of the Commonwealth of Virginia.
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Ohio PUC signs off on merger
Ohio regulators last week told the U.S. Securities and Exchange Commission (SEC)
that a NiSource-Columbia merger would have no impact on the state's ability to
protect the interests of Columbia Gas of Ohio (COH) ratepayers.
In a letter to the SEC, the Public Utilities Commission of Ohio (PUCO) also said
it would continue to exercise jurisdiction over the regulated activities of the
Columbia natural gas utility after the companies' proposed merger.
The PUCO action moves the NiSource-Columbia merger a step closer to the expected
completion of the transaction later this year.
The Ohio commission's staff and COH regulatory staff negotiated a number of
commitments by the utility, Columbia Energy Group and NiSource, which furnished
the basis of the commission action.
The commitments include:
- -- COH headquarters will remain at its present location in Columbus.
- -- The merging companies do not anticipate any material impact on COH employment
levels.
- -- The PUCO and its staff will have access to the books and records of COH and
other affiliates when relevant to the rates and services of COH.
- -- The proposed merger leaves in place the COH rate freeze until October 2004
that was negotiated earlier with a regulatory collaborative and adopted by the
PUCO.
COH is the largest natural gas utility in the state with more than 1.3 million
customers in 64 of Ohio's 88 counties. Still pending are actions by several
state public utility commissions and federal agencies, as well as shareholder
votes on the merger.
"We appreciate the Ohio commission's timely action and consideration in
addressing the merger," said Gary L. Neale, NiSource chairman, president and CEO
and Oliver G. Richard III, Columbia Energy Group chairman, president and CEO, in
a joint statement. "Consumer service and value delivery have and will continue
to be major goals of the Columbia Gas distribution business."
"Columbia Energy Group and NiSource are proud of the record of excellence in
customer service that has been established by Columbia Gas of Ohio," the Ohio
utility stated in a commitment letter submitted to the PUCO. The letter also
said the merging companies are committed to continuation of Columbia Gas of
Ohio's robust Customer Choice program and its collaborative process in working
with the commission on evolving issues in a competitive gas market.
The NiSource/Columbia Energy Group merger, announced February 28, will result in
a combined company serving more than 4.1 million customers primarily located in
nine states. Its operations will span the high-growth energy consumption
corridor stretching from the Gulf of Mexico to New England, creating the largest
natural gas distributor east of the Rocky Mountains.
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Employees holding Columbia stock to vote on merger
Columbia stockholders, including those employees who hold company stock through
the Columbia Savings Plan, are receiving two important meeting notices in the
mail.
One is for the company's annual meeting of stockholders on May 17 and the other
is for a special meeting, scheduled for June 2, to vote on adoption of the
merger agreement between NiSource and Columbia.
Adoption of the merger agreement requires the affirmative vote of a majority of
the more than 80 million outstanding shares of Columbia stock, said Thomas L.
Hughes, vice president for investor relations at Columbia.
Hughes noted that current and former employees of Columbia hold nearly nine
percent of these shares.
The notices, or proxy statements, mailed to shareholders both for the annual and
special meetings include cards for shareholders to record their votes.
For the June 2 special meeting for the merger adoption vote, stockholders may
vote by telephone instead of mailing in their card. The proxy card contains
instructions for telephonic voting.
The proxy votes will be tabulated by Columbia's transfer agent, Harris Trust.
Voting of Savings Plan shares is confidential.
NiSource and Columbia announced on Feb. 28 that the boards of directors of both
companies approved a definitive merger agreement under which NiSource will
acquire all of the outstanding shares of Columbia in a transaction which values
Columbia's common equity at approximately $6.0 billion. NiSource also will
assume approximately $2.5 billion in Columbia long-term debt.
Upon completion of the transaction, Columbia and NiSource will become wholly
owned subsidiaries of a new holding company.
With assets stretching from the Gulf of Mexico, through the Midwest to the
Northeast, the combined company will have a powerful platform, with access to
30% of the U.S. population and 40% of U.S. energy consumption. The company will
have over 4.1 million natural gas, electric, water and propane customers located
primarily in nine states.
The agenda for Columbia's annual meeting includes the election of five
directors: Wilson K. Cadman, J. Bennett Johnston, James P. Heffernan, Karen L.
Hendricks and Peter M. Schwolsky, Columbia's chief legal officer.
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The following is included to conform with federal regulations:
This story and others on the merger contain 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 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 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 and Columbia Energy. 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.
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.
