<PAGE> 1
File Number 70-8759
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Amendment No. 2
to
Form U-1
APPLICATION-DECLARATION UNDER THE PUBLIC UTILITY
HOLDING COMPANY ACT OF 1935
By
CONSOLIDATED NATURAL GAS COMPANY
CNG Tower
625 Liberty Avenue
Pittsburgh, Pennsylvania 15222-3199
(a registered holding company)
Names and addresses of agents for service:
S. E. WILLIAMS, Senior Vice President
and General Counsel
Consolidated Natural Gas Company
CNG Tower
625 Liberty Avenue
Pittsburgh, Pennsylvania 15222-3199
N. F. CHANDLER, General Attorney
Consolidated Natural Gas Service Company, Inc.
CNG Tower
625 Liberty Avenue
Pittsburgh, Pennsylvania 15222-3199
<PAGE> 2 File Number 70-8759
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Amendment No. 2
to
FORM U-1
APPLICATION-DECLARATION UNDER THE PUBLIC UTILITY
HOLDING COMPANY ACT OF 1935
Item 1. Description of Proposed Transaction
___________________________________
(a) Furnish a reasonably detailed and precise description of the
proposed transaction, including a statement of the reasons why it is desired to
consummate the transaction and the anticipated effect thereof. If the
transaction is part of a general program, describe the program and its
relation to the proposed transaction.
I. INTRODUCTION
____________
Consolidated Natural Gas Company (the "Company" or "Consolidated") is a
public utility holding company registered under the Public Utility Holding
Company Act of 1935 ("Act"), and is in the business of owning and holding all
of the outstanding securities (except for certain indebtedness of a
distribution company acquired in 1990) of sixteen companies principally engaged
in the natural gas business. The said subsidiary companies are engaged in
natural gas exploration, production, purchasing, gathering, transmission,
storage, distribution, marketing and by-product operations. Consolidated and
its subsidiaries are herein referred to as the "Consolidated System" or "CNG
System."
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II. FORMATION OF CNG INTERNATIONAL
______________________________
Consolidated proposes to form CNG International Corporation ("CNG
International")as a new Delaware subsidiary which would become the primary
vehicle for the Company to invest in energy related businesses, including
exempt wholesale generators ("EWGs") as defined in Section 32(a) of the Act and
foreign utility companies ("FUCOs") as defined in Section 33(a) of the Act
outside the United States. Consolidated proposes to invest, through CNG
International, up to $300,000,000 in such businesses (other than EWGs and
FUCOs) during the period beginning from the time an order is issued in this
proceeding through March 31, 2001. Investments in EWGs and FUCOs will be made
outside the $300 million cap and subject to the limitations of Rule 53
promulgated under the Act. Any direct or indirect investment (as defined in
Rule 53) by CNG International in an EWG or FUCO would not be undertaken if, as
a consequence, the aggregate direct and indirect investment by Consolidated in
all EWGs and FUCOs would exceed 50% of the Company's consolidated retained
earnings. CNG International would have 50,000 shares of common stock, $10,000
par value per share, authorized, for an aggregate capital stock authorization
of $500,000,000. However, financing of CNG International by Consolidated may
occur in the form of short-term and long-term loans in addition to capital
stock sales, as described in greater detail under "V Source of Funds" below.
In addition to the $300 million investment authorization requested above,
Consolidated also seeks authority herein for parent company guarantees and
other credit support arrangements in the amount not to exceed $300 million.
This request for credit support authorization is described in more detail under
"VI PARENT COMPANY GUARANTEES AND OTHER CREDIT SUPPORT" below.
<PAGE> 4
Consolidated seeks to engage in international energy activities in order
to (i) participate in the more rapid economic growth of international or
foreign energy businesses, (ii) obtain the higher rates of return on equity
that may be obtained from investments in such activities, (iii) utilize to its
profit its expertise developed in the emerging competitive energy markets in
North America, and (iv) obtain further knowledge of developing energy markets
through strategic alliances with companies already involved in the
international energy industry. The types of foreign businesses in which
Consolidated may invest would include both utility and nonutility companies.
For example, Consolidated has recently entered into an alliance agreement with
EnergyAustralia ("EA") (formerly called MetNorth Energy ) , an electric utility
company in Sydney, Australia, for the purpose of working together to seek out,
identify, evaluate and participate in opportunities in the energy sector in
Australia and certain Asian countries. Consolidated is also currently
evaluating a possible investment in the natural gas pipeline infrastructure in
Bolivia.
III. TYPES OF ENERGY BUSINESSES IN WHICH CNG INTERNATIONAL
WOULD ENGAGE
__________________________________________________
A. EWGs and FUCOs
1. General
CNG International may acquire securities or interests in the business of
one or more EWGs located outside of the United States and FUCOs. Request is
made for CNG International to form and finance intermediary subsidiary
companies ("Intermediate Companies")so that they may acquire interests in,
finance the acquisition of and hold the securities of EWGs and FUCOs.
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Sections 32 and 33 of the Act permit a registered holding company to
acquire and maintain interests in one or more EWGs or FUCOs, as the case may
be, without the need to apply to or receive the approval of the Commission.
Thus the amount of any investment by Consolidated through CNG International in
EWGs and FUCOs will not be calculated against the $300 million authorization
requested in this proceeding, but will be subject to compliance with Rule 53.
2. Use of Intermediary Companies
Intermediate Companies would be special purpose subsidiaries exclusively
engaged in activities to facilitate the consummation of investments in EWGs and
FUCOs, and would enhance the ability of CNG International to respond quickly to
investment opportunities. Further, it has been the particular experience of
those investing in FUCOs that the use of Intermediate Companies are often
necessitated by business concerns such as foreign ownership requirements in
countries where FUCOs are located, the need to facilitate investments via a
consortium of companies where each member thereof has a consolidated subsidiary
involved in the final FUCO structure for tax and accounting purposes, or to
ease subsequent adjustments to or sales of interests among members of the
ownership group. An Intermediate Company may be organized at the time of the
making of bids or proposals to acquire an interest in any EWG or FUCO or at any
time thereafter in order to facilitate the bidding and subsequent consummation
of an acquisition of an interest of an EWG or FUCO.
Consolidated also proposes that CNG International or any Intermediary
Company will issue equity securities and debt securities to persons other than
Consolidated (and with respect to which there will be no recourse to
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Consolidated), including banks, insurance companies and other financial
institutions, exclusively for the purpose of financing (including any
refinancing) of investments in EWGs and FUCOs. It is anticipated that the
issuance of such securities will generally be exempt transactions pursuant to
Rule 52 under the Act. It is also possible that issuances of securities by
certain subsidiaries engaged in gas related activities may be exempt pursuant
to Rule 16 under the Act.
3. Compliance with Rule 53
Any direct or indirect investment by CNG International in any EWG or FUCO
would be consummated only if, at the time thereof, and giving effect thereto,
Consolidated's "aggregate investment" determined in accordance with Rule
53(a)(1)(i) in all EWGs and FUCOs would not exceed 50% of Consolidated's
consolidated retained earnings as defined in Rule 53(a)(1)(ii). As of
September 30, 1995, one-half of the Company's consolidated retained earnings
was $634,048,000; the Company's investment in EWGs as of the date of filing of
this application-declaration ("Application") is estimated to be approximately
$18,000,000.
The books and records of Consolidated's two current EWGs are kept in
conformity with United States generally accepted accounting principles
("GAAP"), the financial statements are prepared according to GAAP, and
Consolidated undertakes to provide the Securities and Exchange Commission
("Commission" or "SEC") access to such books and records and financial
statements as it may request. It is anticipated that a minimal number of
employees of Consolidated's domestic public-utility companies will render
services, directly or indirectly, to EWGs and FUCOs in the Consolidated System,
and the number of such employees shall not in any event exceed two percent of
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the total number of employees of such utility companies.
A copy of this Application has been submitted to the public utility
commissions of the States of Ohio, Pennsylvania, West Virginia and Virginia,
which are the only regulators having jurisdiction over the retail rates of the
public-utility companies in the Consolidated System. In addition, Consolidated
will submit to each such commission a copy of any Rule 24 certificate required
hereunder, as well as a copy of Item 9 of Consolidated's Form U5S, including
Exhibits G and H thereof.
None of the conditions described in Rule 53(b) under the Act exist with
respect to Consolidated, thereby satisfying Rule 53(b) and making Rule 53(c)
inapplicable.
B. Other Energy Related Activities
1. General
Consolidated proposes that CNG International be authorized to seek out,
identify, evaluate and invest in opportunities in the foreign energy sector.
Interests may be acquired in persons engaged in gas exploration and production,
gas transmission and storage, the brokering and marketing of electricity, gas
and other energy commodities, the sale and servicing of energy equipment and
services related to the foregoing. CNG International may also engage in the
energy consulting business in foreign energy markets. All of such activities
are referred to herein as "Foreign Energy Activities." CNG International may
also acquire interests in other categories of international or foreign energy
activities to the extent that such acquisition may be exempted under a rule of
general applicability hereafter adopted by the Commission.
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The brokering and marketing of gas by CNG International or its subsidiary
would be activities similar to those currently engaged in the United States by
CNG Energy Services Corporation ("CNG Energy"), a wholly owned non-utility
subsidiary of Consolidated. Electricity marketing by CNG International or its
subsidiary would be similar to that currently conducted by CNG Power Services
Corporation, an EWG and a wholly owned subsidiary of Consolidated. The
proposed combination of doing gas, electric and other energy commodity
brokering and marketing in CNG International or a subsidiary thereof is similar
to the energy arbitrage activities for which CNG Energy has made application in
a pending Form U-1 proceeding at File No. 70-8631. Public notice of this
filing was given by SEC Release No. 35-26304, dated June 9, 1995.
The amount of investments in Foreign Energy Activities utilizing funds
obtained from Consolidated would be calculated as part of the $300 million
funding requested in this Application. Further, no investments will be made in
any Foreign Energy Activities if such activities would cause CNG International
or its direct or indirect subsidiary companies to become a public utility
company under the Act.
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2. Alliance with EA
Consolidated has entered into a strategic alliance agreement ("Alliance")
with EA of Sydney, Australia. The Alliance, in accordance with Rule 51, states
that the arrangements between the parties are subject to approval of the
Commission under PUHCA. A copy of the Alliance is filed as Exhibit B-1. EA
was formed on October 1, 1995, by the amalgamation of electricity distributors
Sydney Electricity and Orion Energy. The amalgamation is part of an Australian
energy restructuring that will allow the new company to also market natural gas
and strive to become Australia's leading total energy services organization.
EA currently is the largest distributor of electricity in Australia,
distributing electricity to 1.3 million customers in the state of New South
Wales. It also tests and certifies electrical distribution equipment for
companies throughout Australia and Asia, and has electricity distribution and
other projects underway in Indonesia, Vietnam and China.
EA desires to obtain more expertise in the natural gas sector of the
energy industry. Consolidated through its subsidiaries has developed broad
experience in operating in a competitive energy market in North America and
now desires to enter the energy markets of Australia and Asia.
Consolidated and EA have accordingly agreed through the Alliance to co-
operate and work together in a strategic alliance with the object of seeking
out, identifying, evaluating and participating in Foreign Energy Activity, EWG
and FUCO opportunities (including electricity and gas generation, production,
transmission, distribution, marketing, sale and related services) in Australia
and certain Asian countries. EA would bring to the venture, among other
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things, its expertise and experience in design, construction and operation of
technology relevant to all aspects of the electricity industry and marketing of
electricity, its knowledge of the diversity of electricity customer types and
their needs, and the benefit of its business establishment in Australia and
Asia. Consolidated would contribute to the venture, among other things, its
expertise and experience in design, construction and operation of technology
relevant to all aspects of the natural gas industry and marketing of natural
gas, its knowledge of the diversity of natural gas customers and their needs,
its business contacts and experience with United States headquartered
multinational corporations with interests and operations in Asia, and its
detailed understanding of the regulatory regimes applicable to the electricity
and natural gas industries in North America (which are models being considered
by Governments in Asia when establishing their own regimes).
Affiliates of American utility companies, Entergy Corporation, PacifiCorp,
Texas Utilities Co., Utilicorp and General Public Utilities Corp., have within
the past few months acquired interests in the Australian utility industry.
Each of the five electric distribution companies recently sold off by the
government of Victoria (carved out of the former State Electricity Commission
of Victoria) now have full or partial ownership by one of these United States
utility affiliates. One of these acquisitions involves an electric-gas energy
business combination, i.e. the acquisition of Solaris Power Ltd, serving
Melbourne, by a 50-50 joint venture of General Public Utilities subsidiary
Energy Initiatives, Inc. and Australian Gas Light Co., the largest private gas
utility in Australia.
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The Alliance provides for the development of an initial 18 month business
plan to identify opportunities for the venture, and that the parties shall each
be responsible for their own expenses incurred in a joint evaluation process.
The parties would enter into additional agreements with respect to future
potential investment opportunities as they arise. CNG International may enter
other alliances similar to the one with EA , and make further investments
pursuant to such additional alliances as to take advantage of Foreign Energy
Activity, EWG and FUCO opportunities.
3. Evaluation of Possible Bid for Bolivian
Gas Transportation Facilities
CNG Energy was originally authorized to engage in the gas marketing
business by Commission order dated February 27,1987, HCAR No. 24329, File No.
70-7225. Certain restrictions on CNG Energy to generate off-system revenues
were removed pursuant to the Gas Related Activities Act of 1990 (Pub. L.101-
572, November 15, 1990) ("GRAA") by Commission order dated August 7, 1992, HCAR
No. 25600.
In order to further an expansion of its gas marketing business, CNG Energy
has entered into a Joint Evaluation and Cost Sharing Agreement ("Agreement")
with Panhandle International Development Corporation ("PIDC"), a subsidiary of
Panhandle Eastern Corporation, and two other affiliates of major United States
natural gas companies. The Agreement, a draft of which is filed as Exhibit B-
2, is in response to the Bolivian government's solicitation of proposals to
acquire certain gas transportation assets of Yacimientos Petroliferos Fiscales
Bolivianos. The parties to the Agreement are to equally share the expenses of
PIDC in its evaluation of the Bolivian assets with the goal of the parties
possibly submitting a joint proposal to acquire such assets in the near future.
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The Agreement permits a party to assign to an affiliate its rights or
delegate its obligations and duties thereunder without the express consent of
the other parties. CNG Energy would assign its rights under the Agreement to
CNG International subsequent to the authorization of its formation pursuant to
an order obtained in this proceeding. The basis for such transfer is that any
investment in the Bolivian project would be an investment in a Foreign Energy
Activity such that CNG International would be the more appropriate company in
the CNG System to further pursue the opportunity involved.
4. Consulting and Other Services
Request is also made for CNG International and its affiliates to sell
goods and to provide consulting, administrative, technical, construction,
operating and maintenance and other management services to non-affiliated
persons with respect to their foreign operations. Such services may consist of
consulting as to natural gas and electricity acquisition and marketing, for
example, based on the expertise with respect to such activities developed in
the Consolidated System, particularly that of CNG Energy and CNG Power Services
Corporation, the CNG's System's gas and power marketers, respectively. CNG
International may also offer natural gas exploration, production, transmission
and distribution consulting services based on the CNG System's expertise in
these areas. All of the above services and goods would be provided to non-
affiliates at market based rates sufficient to cover CNG International's cost
and a reasonable profit.
CNG International and its affiliates may also provide services and sell
goods of the type described in the preceding paragraph to entities wholly-owned
by CNG International or one of its subsidiaries, or jointly owned with a
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person with which it has an alliance agreement. Request is made for CNG
International or any of its subsidiaries to provide such services and sell
goods at market based rates if the recipient is an associate company which does
not derive, directly or indirectly, any material part of its income from
sources within the United States and which is not a public-utility company
operating within the United States. Request is further made for CNG
International or any of its subsidiaries to provide such services and sell
goods at market based rates if the recipient does not provide services or sell
goods directly or indirectly to any CNG System domestic utility affiliate.
In order for any of CNG International and its affiliates to provide the
above consulting services and goods, it may contract with associate companies
in the CNG System. Services and goods obtained from utility companies within
the CNG System would be at cost under Rules 90 and 91. Services or goods from
non-utility companies within the CNG System may be transacted either at cost or
at market based rates, except that services and goods provided by Consolidated
Natural Gas Service Company, Inc. or another associate company substantially
involved in providing services to CNG System utility companies will be at cost.
5. Foreign Energy Activities May Be Conducted
through Various Arrangements
CNG International requests authority to enter into arrangements to carry
on Foreign Energy Activities in one or more of the following forms:
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1. CNG International may acquire an ownership interest, which may be up to
100% of the voting or non-voting stock, in one or more corporations
established for the sole purpose of engaging in Foreign Energy
Activities. The organizational documents governing such corporations
will expressly limit their activities to Foreign Energy Activities.
2. CNG International may establish one or more wholly-owned limited purpose
subsidiary corporations to invest and participate in partnerships or
joint ventures to be formed with unrelated persons or entities for the
sole purpose of engaging in Foreign Energy Activities. The
organizational documents governing such partnerships, joint ventures or
corporations would expressly limit their activities to Foreign Energy
Activities. As indicated below, the financing of these wholly-owned
subsidiaries would mirror the financing provided by Consolidated to CNG
International for the purpose of the subject investment.
It is anticipated that most intra-system financings among, and external
financings of, CNG International and its subsidiaries will be exempt pursuant
to Rule 52 under the Act. However, there may arise the need to issue
securities in a transaction with respect to which an exemptive rule under the
Act might not apply. Such securities would encompass interests in
partnerships, joint ventures or other entities, and all other types of equity
<PAGE> 15
instruments regardless of preference with respect to, or conditioned on,
distributions of the issuer upon liquidation or otherwise. Fees, commissions
and expenses expected to be incurred in connection with the issuance of such
securities will not exceed (a) those amounts prescribed by statute or
regulation, in the case of filing or registration fees charged by governmental
agencies; (b) cost, in the case of fees and/or expenses charged by CNG System
associates; or (c) in all other cases, fair, reasonable and customary fees and
commissions at market rates, comparable to those incurred in similar
transactions by similar companies, and arrived at in a negotiated, competitive
and/or arms-length manner. Fees, commissions and expenses of any underwriter
that may be incurred with respect to such securities will not exceed those
amounts generally paid at the time of pricing for sales of such securities
issued by companies of comparable credit quality and having similar terms,
conditions and features. Consolidated therefore requests that the Commission
reserve jurisdiction over the issuance of such additional types of securities.
Consolidated also undertakes to cause a post-effective amendment to be filed in
this proceeding which will describe the general terms of each such security and
request a supplemental order of the Commission authorizing such transactions.
Consolidated further requests that each supplemental order be issued by the
Commission without further time-consuming public notice.
Pursuant to the authorizations requested above and without limiting the
same, CNG International and its subsidiaries would be able to acquire, without
further Commission approval, (i) up to 50% of the voting or nonvoting stock, in
one or more corporation, (ii) up to 50% of the general partnership interests or
voting equity interests in one or more other joint business entities such as
joint ventures or limited liability companies, or (iii) up to 100% of the
limited partnership interests in one or more partnerships, provided all of such
corporations, partnerships or other entities are established for the sole
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purpose of engaging in Foreign Energy Activities which also qualify as natural
gas activities covered by the Gas Related Activities Act of 1990 (Pub. L 101-
572, November 15, 1990) ("GRAA"). This would be similar to the authorization
granted to CNG Energy in Commission order dated July 26, 1995, HCAR No. 26341,
File No. 70-8621. It is anticipated that external financings of such jointly
owned entities will be exempt pursuant to Rule 16 under the Act.
IV. LEGAL BASIS FOR AUTHORIZING ENERGY RELATED ACTIVITIES OF CNG INTERNATIONAL
__________________________________________________________________________
Consolidated is of the opinion that the proposed activities of CNG
International should be permitted under the GRAA and Section 11(b) of the Act
for the reasons given in the legal memorandum which is filed as Exhibit B-3.
Essentially, Consolidated believes that the proposed transactions for CNG
International and its subsidiaries will inure to the benefit of consumers of
the CNG System.
Further, the proposed activities of CNG International are clearly
appropriate in the public interest as evidenced by the recent history of
federal legislation and regulatory action which has strongly promoted the
development of competitive energy markets. Such legislation and regulation
consists of Public Utility Regulatory Practices Act of 1978, 16 USCA 796;
cogeneration statutes, Pub. L. 99-186 and 99-553; the GRAA, FERC Order 636 and
the Energy Policy Act of 1992, Pub. L. 102-486.
<PAGE> 17
V. SOURCE OF FUNDS
_______________
It is proposed for CNG International to raise funds for the proposed
transactions for which authorization is requested herein by (i) selling shares
of its common stock, $10,000 par value per share, to Consolidated, (ii) open
account advances as described below, or (iii) long-term loans from
Consolidated, in any combination thereof. Consolidated will obtain the funds
required for CNG International either through internal cash generation or from
financings at the time authorized by the Commission, such as pursuant to the
five year intrasystem financing authorization requested by Consolidated in the
proceeding at File No. 70-8667 in accordance with the terms of such
authorization.
The open account advances and long-term loans will have the same effective
terms and interest rates as related borrowings of Consolidated in the forms
listed below:
1. Open account advances may be made to CNG International on a revolving
basis to provide working capital and to finance the activities authorized
by the Commission. Open account advances will be made under letter
agreement with CNG International and will be repaid on or before a date
not more than one year from the date of the first advance with interest
at the same effective rate of interest as Consolidated's weighted average
effective rate for commercial paper and/or revolving credit borrowings.
If no such borrowings are outstanding, the interest rate shall be
predicated on the Federal Funds' effective rate of interest as quoted
daily by the Federal Reserve Bank of New York. Only outstanding amounts
of open account advances will be calculated against the $300 million cap
on financing requested herein.
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2. Consolidated may make long-term loans to CNG International for the
financing of its activities. Loans to CNG International shall be
evidenced by long-term non-negotiable notes of CNG International
(documented by book entry only) maturing over a period of time (not in
excess of 50 years) to be determined by the officers of Consolidated,
with the interest predicated on and equal to Consolidated's cost of funds
for comparable borrowings. In the event Consolidated has not had recent
comparable borrowings, the rates will be tied to the Salomon Brothers
indicative rate for comparable debt issuances published in Salomon
Brothers Inc. Bond Market Roundup or similar publication on the date
nearest to the time of takedown. All loans may be prepaid at any time
without premium or penalty.
VI. PARENT COMPANY GUARANTEES AND OTHER CREDIT SUPPORT
__________________________________________________
Application is made for Consolidated, CNG International and its
subsidiaries, including Intermediary Companies, to enter guarantee
arrangements, obtain letters of credit, and otherwise provide credit support
with respect to obligations of their respective subsidiaries (including EWGs
and FUCOs) to third parties as may be needed and appropriate to enable them to
carry on in the ordinary course of their respective businesses. The term of
any underlying debt security and reimbursement letter of credit note will not
exceed 50 years, and will carry interest at a rate generally obtainable by
companies of comparable credit quality. The maximum aggregate limit on all
such credit support by Consolidated, CNG International and its subsidiaries at
any one time (including credit support for EWGs, FUCOs and Intermediate
<PAGE> 19
Companies) will be $300 million. The $300 million in guarantees and other
credit support is in addition to the $300 million limit on investments
requested elsewhere herein. Nor will any parent company enter into any such
credit support arrangement with respect to EWG, FUCO or an Intermediate Company
if as a consequence the total direct or indirect investment by Consolidated in
such companies would be in excess of 50% of its consolidated retaining
earnings.
VII. AUTHORIZATIONS REQUESTED
________________________
The following authorizations are hereby requested. All funding by a CNG
System parent company of its immediate subsidiary pursuant to this Application
would be in the form of (a) the sale of the subsidiary's common stock to the
parent, (b) open account advances from the parent to the subsidiary, and/or (c)
long-term loans from the parent to the subsidiary. Any providing of funds by
Consolidated to CNG International can be in any combination of these three
forms of financing; and any financing between CNG International and its
subsidiaries utilizing such Consolidated sourced funds will be in the same
combination of forms that exists between the Consolidated and CNG International
in the transaction which causes CNG International to obtain such funds.
External financing at or below, and intrasystem financing below, the CNG
International level is anticipated to occur pursuant to Rule 52. All the
authorizations described below would be for a period ending March 31, 2001.
1. For CNG International to obtain up to $300 million from Consolidated for
the purpose of investing in international energy activities as described
herein.
<PAGE> 20
2. For CNG International to acquire interests in Intermediary Companies, and
to acquire interests in entities engaged exclusively in Foreign Energy
Activities, and in Foreign Energy Activities directly itself.
3. For CNG International and its subsidiaries to enter into contracts
whereby they would provide consulting and other Foreign Energy Activity
services to unrelated parties and associated companies as described
herein, and for an exemption from the cost standard pursuant to Section
13(b) of the Act and Rule 83.
4. For Consolidated to make guarantees and/or provide other credit support,
either directly or indirectly through CNG International and its
subsidiaries, of foreign energy transactions in which CNG International
has a direct or indirect interest, provided that the total amount of such
guarantees and other credit support shall not exceed $300 million at any
one time.
5. For CNG International and its subsidiaries to enter into agreements with
associated companies with respect to the provision of services and goods
as described in more detail herein, and for an exemption from the cost
standards pursuant to Section 13(b) and Rule 83 for transactions of CNG
International and its subsidiaries with certain non-public utility
associate companies involving services or goods.
<PAGE> 21
Consolidated requests that the Commission reserve jurisdiction over: (i)
the investment by Consolidated, through CNG International, of up to $300
million in Foreign Energy Activities; (ii) the provision by Consolidated, CNG
International and its subsidiaries of credit support agreements aggregating no
more than $300 million with third parties in connection with Foreign Energy
Activities; (iii) the issuance by CNG International and its subsidiaries of
debt securities to third parties that are not exempt from prior Commission
review under Sections 6(a) and 7 of the Act; (iv) agreements for the provision
of services and goods (y) between and among CNG International and its
affiliates and (z) by CNG affiliates to CNG International and its affiliates;
and (v) reporting requirements with respect to the proposed transaction, other
than the investment in Intermediate Companies, EWGs and FUCOs.
VIII. FILING OF CERTIFICATES OF NOTIFICATION
______________________________________
It is also requested that Rule 24 Certificates of Notification be filed
within 45 days after the end of each quarterly calendar period to report to the
Commission with respect to transactions authorized pursuant to this filing.
Such certificates shall contain the following with respect to CNG International
and each Intermediate Company: (i) a balance sheet as of the end of such
period, (ii) a statement of income and expense for the period, and (iii) a
brief narrative describing project size, location and scope of operation.
<PAGE> 22
The certificates will also contain a summary of services provided by
associate CNG System companies to CNG International or its subsidiaries. This
summary will detail the service provided, identify the company providing the
same, the total full-time equivalent employees involved in such service
activities during the reporting period, the charge for such service and the
method of calculating such charge (cost or market).
Item 2. Fees, Commissions and Expenses
______________________________
(a) State (i) the fees, commissions and expenses paid or incurred, or to
be paid or incurred, directly or indirectly, in connection with the proposed
transaction by the applicant or declarant or any associate company thereof, and
(ii) if the proposed transaction involves the sale of securities at competitive
bidding, the fees and expenses to be paid to counsel selected by applicant or
declarant to act for the successful bidder.
It is estimated that the fees, commissions and expenses ascertainable at
this time to be incurred by Consolidated in connection with the herein proposed
transaction will not exceed $26,000, consisting of the $2,000 filing fee under
the Act, $10,000 payable to Consolidated Natural Gas Service Company, Inc.
("Service Company") for services on a cost basis (including regularly employed
counsel) for the preparation of this application-declaration and other
documents, $10,000 payable to non-affiliated professionals, and $4,000 for
miscellaneous other expenses.
<PAGE> 23
(b) If any person to whom fees or commissions have been or are to be paid
in connection with the proposed transaction is an associate company or an
affiliate of the applicant or declarant, or is an affiliate of an associate
company, set forth the facts with respect thereto.
The charges of Service Company, a subsidiary service company, for
services on a cost basis (including regularly employed counsel) in connection
with the preparation of this application-declaration and other related
documents and papers required to consummate the proposed transactions are as
stated above.
Item 3. Applicable Statutory Provisions
_______________________________
(a) State the section of the Act and the rules thereunder believed to be
applicable to the proposed transaction. If any section or rule would be
applicable in the absence of a specific exemption, state the basis of
exemption.
Sections 6(a) and 7 and Rule 43 are deemed applicable to the issuance of
securities by CNG International and its subsidiaries.
Sections 9(a) and 10 are deemed applicable to the acquisitions (i) by
Consolidated of the capital stock, open account advance debits and notes of
their respective subsidiaries, CNG International and its subsidiaries.
<PAGE> 24
Sections 12(b) and Rule 45 are considered applicable to loan arrangements
among Consolidated, CNG International and its subsidiaries, and to guarantees
of parent companies as requested herein.
Section 13(b) and Rules 83, 87, 90 and 91 are deemed applicable to
certain of the proposed service arrangements with respect to which
authorization is sought.
Section 32 and 33 and Rules 53 and 54 apply to the financing activities
involving EWGs and FUCOs.
Section 11(b)(1) of the Act and the Gas Related Activities Act of 1990
apply to the energy related transactions proposed for CNG International.
Section 3(b) of the Act may apply in so far as issuance of securities by CNG
International and its subsidiaries would not fall within the purview of the
exemption in Rule 52 or Rule 16.
If the Commission considers the proposed future transactions to require
any authorization, approval or exemption, under any section of the Act for Rule
or Regulation other than those cited herein above, such authorization, approval
or exemption is hereby requested.
(b) If an applicant is not a registered holding company or a subsidiary
thereof, state the name of each public utility company of which it is an
affiliate or of which it will become an affiliate as a result of the proposed
transaction, and the reasons why it is or will become such an affiliate.
Not applicable.
<PAGE> 25
Item 4. Regulatory Approval
___________________
(a) State the nature and extent of the jurisdiction of any State
commission or any Federal commission (other than the Securities and Exchange
Commission) over the proposed transactions.
The financing authorization sought herein is not subject to the
jurisdiction of any State or Federal Commission (other than the Commission).
(b) Describe the action taken or proposed to be taken before any
commission named in answer to paragraph (a) of this item in connection with the
proposed transaction.
Inapplicable.
Item 5. Procedure
_________
(a) State the date when Commission action is requested. If the date is
less than 40 days from the date of the original filing, set forth the reasons
for acceleration.
It is hereby requested that the Commission issue its order with respect
to the EWG and FUCO related transactions proposed herein on or before May 29,
1996, and as soon as possible with respect to all other proposed transactions
proposed herein.
(b) State (i) whether there should be a recommended decision by a hearing
officer, (ii) whether there should be a recommended decision by any other
responsible officer of the Commission, (iii) whether the Division
Investment Management - Office of Public Utility Regulation may assist in the
preparation of the Commission's decision, and (iv) whether there should be a
30-day waiting period between the issuance of the Commission's order and the
date on which it is to become effective.
<PAGE> 26
It is submitted that a recommended decision by a hearing or other
responsible officer of the Commission is not needed with respect to the
proposed transactions. The office of the Division of Investment Management -
Office of Public Utility Regulation may assist in the preparation of the
Commission's decision. There should be no waiting period between the issuance
of the Commission's order and the date on which it is to become effective.
Item 6. Exhibits and Financial Statements
_________________________________
The following exhibits and financial statements are made a part of this
statement:
(a) Exhibits
B-1 Strategic Alliance Agreement, dated November 7, 1995,
between Consolidated and EA.
B-2 Draft of Joint Evaluation and Cost Sharing Agreement, dated
November 28, 1995, among PIDC, Sonat Americas Inc.,
El Paso Energy Development Company, and CNG Energy
Services Corporation.
B-3 Legal Memorandum.
F Opinion of counsel for Consolidated.
O Draft of Notice.
<PAGE> 27
(b) Financial Statements
Financial statements are deemed unnecessary with respect to the
authorizations herein sought due to the nature of the matter proposed.
However, Consolidated will furnish any financial information that the
Commission shall request.
Item 7. Information as to Environmental Effects
_______________________________________
(a) Describe briefly the environmental effects of the proposed
transaction in terms of the standards set forth in Section 102 (2) (C) of the
National Environmental Policy Act 42 U.S.C. 4232 (2) (C). If the response to
this item is a negative statement as to the applicability of Section 102(2)(C)
in connection with the proposed transaction, also briefly state the reasons or
that response.
The proposed transactions do not involve major federal action
having a significant effect on the human environment. See Item 1(a).
(b) State whether any other federal agency has prepared or is preparing
an environmental impact statement ("EIS") with respect to the proposed
transaction. If any other federal agency has prepared or is preparing an EIS,
state which agency or agencies and indicate the status of that EIS preparation.
No federal agency has prepared or is preparing an environmental
impact statement with respect to the proposed transaction.
<PAGE> 28
SIGNATURE
Pursuant to the requirements of the Public Utility Holding Company Act
of 1935, the undersigned company has duly caused this statement to be signed
on its behalf by the undersigned thereunto duly authorized.
CONSOLIDATED NATURAL GAS COMPANY
By D. M. Westfall
Senior Vice President
and Chief Financial Officer
Date: May 29, 1996
<PAGE> 1
EXHIBIT F
May 29, 1996
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Consolidated Natural Gas Company, et al.,
SEC File Number 70-8759
Dear Madams and Sirs:
The following opinion is rendered in accordance with the requirements of
Exhibit F to Form U-1 under the Public Utility Holding Company Act of 1935 (the
"Act") with respect to the transactions proposed ("Proposed Transactions") by
Consolidated Natural Gas Company ("Consolidated") in the Application-
Declaration at SEC File No. 70-8759, as amended ("Application"). In the
Application authority is requested for Consolidated to finance a new
subsidiary, CNG International Corporation ("CNG International"), through March
31, 2001 to enable it to invest in foreign energy related businesses outside of
the United States, including exempt wholesale generators ("EWGs") as defined in
Section 32(a) of the Act and foreign utility companies ("FUCOs") as defined in
Section 33(a) of the Act and Intermediate Companies (as defined) relating to
EWGs and FUCOs. Investments in EWGs and FUCOs and Intermediate Companies would
not exceed 50% of Consolidated's consolidated retained earnings.
Authority is further requested for CNG International to obtain for
investments in Foreign Energy Activities (as defined), through March 31, 2001,
up to $300,000,000 through (i) the sale of shares of its common stock, $10,000
par value per share, to Consolidated, (ii) open account advances from
Consolidated, or (iii) long-term loans from Consolidated, and any combination
thereof. The Application also requests authority for Consolidated, either
directly or indirectly through CNG International and its subsidiaries, to enter
into credit support arrangements with respect to foreign energy transactions.
Pursuant to Consolidated's request, the Securities and Exchange
Commission ("Commission"), in the first order to be issued pursuant to the
Application, will retain jurisdiction over the Foreign Energy Activities
portion therein. Accordingly this opinion will be limited to the transactions
over which jurisdiction is not being so retained, and the EWG and FUCO related
proposed transactions described in the Application are hereinafter referred to
as the "Proposed Transactions."
<PAGE> 2
I have examined the certificate of incorporation and bylaws of
Consolidated; corporate actions of Consolidated relating to the Proposed
Transactions; the Application; and such other documents, records, laws and
other matters as I deemed relevant and necessary for the purposes of this
opinion.
Based on such examination and relying thereon, I am of the opinion that
when the Commission shall have initially permitted the Application to become
effective, all requisite action will have been taken by Consolidated with
respect to the Proposed Transactions, except the actual carrying out thereof.
In the event the Proposed Transactions are consummated in accordance with
the Application, I am of the opinion that:
(a) No state commission has jurisdiction of the proposed transactions;
(b) All state laws applicable to the Proposed Transactions will have
been complied with;
(c) Consolidated will legally acquire the capital stock of, and
interests in open account advances and long-term loans to, CNG
International as described in the Application;
(d) The guarantees and other credit support arrangements of
Consolidated will be valid and binding obligations of the
Consolidated; and
(e) The consummation of the Proposed Transactions will not violate the
legal rights of the holders of any securities issued by
Consolidated or any associate company thereof.
I hereby consent to the use of this opinion in connection with said
filing.
Very truly yours,
N. F. Chandler
Attorney
