File Number 70-8759
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Post-Effective Amendment No. 4
to
Form U-1
APPLICATION-DECLARATION UNDER THE PUBLIC UTILITY
HOLDING COMPANY ACT OF 1935
By
CONSOLIDATED NATURAL GAS COMPANY
CNG INTERNATIONAL CORPORATION
CNG Tower
625 Liberty Avenue
Pittsburgh, Pennsylvania 15222-3199
Consolidated Natural Gas Company, a registered holding company,
is the parent of the other party
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>
File Number 70-8759
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Post-Effective Amendment No. 4
to
FORM U-1
APPLICATION-DECLARATION UNDER THE PUBLIC UTILITY
HOLDING COMPANY ACT OF 1935
Item 1. Description of Proposed Transaction
-----------------------------------
1.1 Introduction. Consolidated Natural Gas Company (the
-------------
"Company" or "CNG"), a registered holding company under the
Public Utility Holding Company Act of 1935, seeks authorization
to invest up to $75 million, through CNG International
Corporation ("CNG International"), in two foreign pipeline
projects, and for such related transactions as may be necessary
to effectuate the acquisition of an interest in the pipeline
projects.
By order dated May 30, 1996, CNG was authorized to
establish CNG International to invest in foreign utility
companies ("FUCOs") and exempt wholesale generators ("EWGs")
located outside of the United States. Holding Co. Act Release
No. 26523. <1> The order further authorized the formation and
capitalization of intermediate subsidiaries to hold interests in
such EWGs and FUCOs, and the provision of up to $300 million
credit support for these entities. In the May order, the SEC
reserved jurisdiction, pending completion of the record, over:
(i) the investment by CNG, through CNG International, of up to
$300 million in entities that would engage in (a) rendering
certain energy consulting and administrative, technical,
construction, operating, maintenance, and other management
----------------------
<1> A notice of the filing was issued on February 9, 1996. No
requests for hearing were received.
<PAGE>
services to nonassociates in connection with their foreign
operations ("Consulting and Support Services") and (b) certain
other energy-related businesses in foreign countries ("Foreign
Energy Activities"), (ii) the provision by CNG, CNG International
and its subsidiaries of credit support agreements aggregating,
together with EWG/FUCO credit support, up to $300 million credit
support as it relates to these activities, (iii) the issue and
sale of nonexempt securities by CNG International and its
subsidiaries, (iv) certain affiliate transactions; and (v)
associated reporting requirements.
By order dated October 25, 1996, the SEC authorized CNG to
invest, through CNG International, up to an aggregate amount of
$75 million in two South American pipeline projects.
Specifically, CNG has been authorized to invest up to $50 million
in connection with a consortium bid to acquire a 50% economic
interest in, and operational control of the hydrocarbon
transportation unit of Yacimientos Petroliferos Fiscales
Bolivianos, the Bolivian state-owned oil and gas company. The
SEC also authorized CNG to invest up to $25 million in connection
with a proposal to construct, own and operate a gas pipeline
between Buenos Aires, Argentina and Montevideo, Uruguay. The SEC
reserved jurisdiction for three years over the acquisition of an
interest in an oil pipeline in connection with the Bolivian gas
pipeline project. Holding Co. Act Release No. 26595.
CNG now requests authority to invest up to $75 million
through CNG International in two additional pipeline projects,
and for certain related transactions.
CNG has been providing, and will continue to provide,
copies of filings in this matter to its state regulators, Ohio
Public Utilities Commission, Pennsylvania Public Utility
Commission, and West Virginia Public Service Commission. There
has been no adverse comment from those regulators.
<PAGE>
Time is of the essence. Accordingly, CNG asks the SEC
issue an order approving the proposed transactions no later than
November 27, 1996.
1.2 Proposed Investments
---------------------
As explained in Post-Effective Amendment No. 3, every
investment opportunity pursued by CNG is subjected to a series of
formal reviews to ensure that the project satisfies the Company's
standards for investment. Over the past year, CNG has reviewed
literally dozens of potential foreign ventures. On the basis of
that review, CNG has identified two new pipeline projects that
meet the Company's criteria for investments. Specific authority
is requested for those projects as discussed below.
[This paragraph contains confidential information which has
been omitted, but filed separately with the Securities and
Exchange Commission.]
Related transactions
--------------------
CNG International will carry on the proposed activities
through one or more special-purpose subsidiary or associate
companies, partnerships, limited liability companies, joint
ventures or other entities (depending upon the legal and
regulatory requirements of the particular project) to be formed
with unrelated persons or entities for the sole purpose of
engaging in Foreign Energy Activities.
It is anticipated that financings by and among CNG
International and its subsidiaries will be generally exempt
pursuant to rule 52 under the Act. CNG requests the SEC reserve
jurisdiction over any financing transactions that are not so
exempt.<2>
-------------------------
<2> CNG will file a post-effective amendment describing the
general terms of each such security and requesting a supplemental
order of the Commission authorizing such transactions. CNG
requests that supplemental orders be issued without further
public notice.
<PAGE>
Pursuant to the authorizations requested above and without
limiting the same, CNG International and its subsidiaries would
be able to acquire, without further SEC approval, voting or
nonvoting stock in one or more corporations, general partnership
interests or voting equity interests in one or more other joint
business entities such as joint ventures or limited liability
companies, or 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
purpose of engaging in Foreign Energy Activities authorized by
the SEC. <3>
CNG International will fund the proposed transactions by
(i) selling shares of its common stock, $10,000 par value per
share, to CNG, (ii) open account advances as described below, or
(iii) long-term loans from CNG, in any combination thereof. The
open account advances and long-term loans will have the same
effective terms and interest rates as related borrowings of CNG
in the forms listed.
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 SEC. 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 CNG'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.
---------------------------------
<3> This would be similar to the authorization granted to CNG
Energy in Commission order dated July 26, 1995, Holding Co. Act
Release No. 26341, File No. 70-8621.
<PAGE>
CNG 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
CNG, with the interest predicated on and equal to CNG's cost of
funds for comparable borrowings. In the event CNG 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.
CNG will obtain the funds required for CNG International
either through internal cash generation or from financings at the
time authorized by the SEC, such as pursuant to the five year
intrasystem financing authorization under Holding Co. Act Release
No. 26500 (March 28, 1996).
Authority is sought for CNG, CNG International and its
subsidiaries engaged in Foreign Energy Activities to enter
guarantee arrangements, obtain letters of credit, and otherwise
provide credit support with respect to obligations of their
respective subsidiaries to third parties as may be needed and
appropriate to enable them to carry on in the ordinary course of
their respective businesses. The maximum aggregate limit on all
credit support by CNG, CNG International and its subsidiaries,
including the credit support previously authorized for EWGs and
FUCOs, will be up to $300 million at any one time outstanding.
The $300 million in guarantees and other credit support is in
addition to the $300 million investment authority requested
elsewhere herein.
<PAGE>
RULE 54 SATISFIED
-----------------
Rule 54 promulgated under the Act states that in
determining whether to approve the issue or sale of a security by
a registered holding company for purposes other than the
acquisition of an EWG or a FUCO, or other transactions by such
registered holding company or its subsidiaries other than with
respect to EWGs or FUCOs, the SEC shall not consider the effect
of the capitalization or earnings of any subsidiary which is an
EWG or a FUCO upon the registered holding company system if rules
53(a), (b) or (c) are satisfied. Currently CNG owns indirectly,
through CNG Power Services Corporation, an EWG, a 1% general
partnership interest in Lakewood Cogeneration, L.P. ("Lakewood"),
also an EWG. CNG Power Company, a wholly-owned subsidiary of CNG
Energy Services Corporation, owns a 34% limited partnership
interest in Lakewood. CNG does not own any interests in a FUCO.
CNG believe that rule 53(a), (b) and (c) are satisfied in its
case as follows.
Fifty percent of CNG's retained earning as of June 30, 1996
was $716,932,000; CNG's aggregate investment (as defined in rule
53(a)(1)(i)) in Lakewood on such date and in both its EWGs as of
the date of filing of this Post-Effective Amendment is estimated
to be approximately $18,000,000, thereby satisfying rule
53(a)(1). CNG and its subsidiaries maintain books and records to
identify the investments in and earning from its EWGs in which
they directly or indirectly hold an interest, thereby satisfying
rule 53(a)(2). In addition, the books and records of each such
entity are kept in conformity with the United States generally
accepted accounting principles ("GAAP"), the financial statements
are prepared according to GAAP, and CNG undertakes to provide the
SEC access to such books and records and financial statements as
it may request. Employees of CNG's domestic public-utility
companies at this time do not render services, directly or
indirectly, to the EWGs in the CNG system, thereby satisfying
rule 53(a)(3). Copies of the Form U-1 filings
<PAGE>
and the other filings required pursuant to rule 53(a)(4) are
being sent to the state regulators. None of the condition
described in rule 53(b) exist with respect to CNG, thereby
satisfying rule 53(b) and making rule 53(c) inapplicable.
Item 2. Fees, Commissions and Expenses.
------------------------------
The fees, commissions and expenses to be paid or incurred in
connection with the filing of this Application-Declaration are
estimated not to exceed $25,000, including the SEC's $2,000
filing fee, fees payable to Consolidated Natural Gas Service
Company, Inc. ("Service Company") for services on a cost basis
(including fees of regularly employed counsel).
Item 3. Applicable Statutory Provisions.
--------------------------------
3.1 Authorization Requested. By order dated May 30, 1996,
------------------------
CNG was authorized to establish CNG International to invest in
FUCOs and EWGs located outside of the United States. Holding Co.
Act Release No. 26523. The order further authorized the formation
and capitalization of intermediate subsidiaries to hold interests
in such EWGs and FUCOs, and the provision of up to $300 million
credit support for these entities. In the May order, the SEC
reserved jurisdiction, pending completion of the record, over:
(i) the investment by CNG, through CNG International, of up to
$300 million in entities that would engage in Consulting and
Support Services and Foreign Energy Activities, (ii) the provision
by CNG, CNG International and its subsidiaries of credit support
agreements aggregating, together with EWG/FUCO credit support,
up to $300 million credit support as it relates to these
activities, (iii) the issue and sale of nonexempt securities
by CNG International and its subsidiaries, (iv) certain
affiliate transactions; and (v) associated reporting requirements.
<PAGE>
By order dated October 25, 1996, the SEC authorized CNG to
invest, through CNG International, up to an aggregate amount of
$75 million in two South American pipeline projects.
Specifically, CNG has been authorized to invest up to $50 million
in connection with a consortium bid to acquire a 50% economic
interest in, and operational control of the hydrocarbon
transportation unit of Yacimientos Petroliferos Fiscales
Bolivianos, the Bolivian state-owned oil and gas company. The
SEC also authorized CNG to invest up to $25 million in connection
with a proposal to construct, own and operate a gas pipeline
between Buenos Aires, Argentina and Montevideo, Uruguay. The SEC
reserved jurisdiction for three years over the acquisition of an
interest in an oil pipeline in connection with the Bolivian gas
pipeline project. Holding Co. Act Release No. 26595.
CNG now requests authority to invest up to $75 million
through CNG International in two additional pipeline projects,
and for such related transactions as may be necessary to
effectuate the acquisition of an interest in the pipeline
projects.
3.2 General Provisions. The proposal herein is subject to
-------------------
sections 9(a), 10, 11, 32 and rules 16 and 54, and the Gas Related
Activities Act of 1990. In its order dated October 25, 1996, the
SEC found that investments by CNG in foreign gas pipeline
projects "constitute entry into the business of transportation of
natural gas subject to section 2(a) of the [Gas Related Activities
Act of 1990]." Holding Co. Act Release No. 26595. Thus, these
acquisitions are deemed to satisfy the requirements of section
11(b)(1) of the Act.
As the SEC notes, the other requirements of section 10 of
the Act continue to apply. CNG submits that these requirements
are met for the reasons set forth in post-effective amendment no.
3 in this matter. Briefly stated, the proposed Foreign Energy
Activities are a necessary complement to the foreign utility
activities authorized under the Energy Policy Act
<PAGE>
of 1992. Strategic benefits are anticipated to stem from the
company's participation in new energy markets. While investments
in foreign projects may pose risks that do not arise in the
domestic electric utility industry, these risks are not an
absolute bar to foreign investment. Rather, as the SEC
emphasized in its recent order permitting Southern to invest an
amount equal to 100% of its consolidated retained earnings in
exempt wholesale generators and foreign utility companies, there
is a need for the registered holding company to establish
procedures to identify and mitigate such risks.<4>
In this matter, as discussed previously, there are ample
safeguards for consumer interests. The transactions will be
structured so that investors and not consumers will bear the
risks that may be associated with these new ventures. As
explained previously, CNG conducts a thorough review of any
proposed investment, with a view toward risk management. The
international operations will be conducted with the same prudence
and sound business judgment that has resulted in CNG's present
status as one of the country's most financially sound energy
providers.
Accordingly, for the reasons set forth above, CNG requests
that the SEC authorize the proposed pipeline investments and
reserve jurisdiction over the other proposed gas transmission and
storage, gas exploration and production and the marketing and
brokering of energy commodities, pending completion of the
record.
Item 4. Regulatory Approval
--------------------
The authorization sought herein is not subject to the
jurisdiction of any State or Federal Commission (other than the
SEC).
-------------------------
<4> Southern Co., Holding Co. Act Release No. 26501 (Apr. 1, 1996).
-----------
<PAGE>
Item 5. Procedure
---------
It is hereby requested that the SEC issue its order with
respect to the two proposed pipeline transactions on or before
November 27, 1996.
It is submitted that a recommended decision by a hearing or
other responsible officer of the SEC is not needed with respect
to the proposed transactions. The Division of Investment
Management - Office of Public Utility Regulation may assist in
the preparation of the SEC's decision. There should be no
waiting period between the issuance of the SEC's order and the
date on which it is to become effective.
Subject to the terms and conditions prescribed in rule 24
under the Act, in lieu of certificates required to be filed
thereunder, the applicant shall file:
(1) within ninety days following consummation of the sale
of each pipeline project, a certificate so stating the
applicant's investment position, accompanied by a detailed
description of each foreign pipeline project in respect of which
the applicant has acquired an interest; and
(2) on an annual basis with ninety days following each June
30 and December 31, in respect of each pipeline project entity in
which the applicant has acquired an interest, a description of
each pipeline project and a copy of each entity's balance sheet,
income statement and any related notes, all in English.
<PAGE>
Item 6. Exhibits and Financial Statements
----------------------------------
The following exhibits and financial statements are made a
part of this statement:
(a) Exhibits
F Opinion of counsel for CNG and CNG International.
G Form of Notice.
Item 7. Information as to Environmental Effects
----------------------------------------
The proposed transactions do not involve major federal
action having a significant effect on the human environment.
No federal agency has prepared or is preparing an environmental
impact statement with respect to the proposed transaction.
<PAGE>
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: /s/ D. M. Westfall
---------------------------
D. M. Westfall
Senior Vice President
and Chief Financial Officer
CNG INTERNATIONAL CORPORATION
By: /s/ N. F. Chandler
----------------------------
N. F. Chandler
Its attorney
Date: October 30, 1996
<PAGE>
EXHIBIT INDEX
99.1 F Opinion of counsel for CNG and CNG International.
99.2 G Form of Notice.
October 30, 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 certain
transactions proposed by Consolidated Natural Gas Company
("Consolidated") and CNG International Corporation ("CNG
International") in the Application-Declaration at SEC File No.
70-8759, as amended ("Application").
An order dated May 30, 1996, HCAR No. 26523, was issued
pursuant to the Application which authorized Consolidated to
finance CNG International through March 31, 2001, to invest in
exempt wholesale generators ("EWGs"), as defined in Section 32(a)
of the Act, outside the United States and in foreign utility
companies ("FUCOs"), as defined in Section 33(a) of the Act, and
Intermediate Companies (as defined in the Application) relating
to EWGs and FUCOs. The May 30, 1996 order retained jurisdiction
over investments by CNG International in Foreign Energy
Activities (as defined in the Application).
A supplemental order dated October 25, 1996, HCAR No. 26595,
was issued pursuant to the Application, as post-effectively
amended, which removed the retention of jurisdiction over Foreign
Energy Activities to the extent of allowing the acquisition by
CNG International of interests in two foreign pipelines. It is
anticipated that other specific proposed transactions ("Proposed
Transactions") involving Foreign Energy Activities over which the
retention of jurisdiction remains will be authorized on a case-
by-case basis. Most immediately is the request for such removal
of jurisdiction in Post-Effective Amendment No. 4 seeking
authority for CNG International to acquire interests in another
foreign pipeline.
For further details concerning the financing requests in the
Application, reference is made to my earlier opinions, dated May
29, 1996, and September 13, 1996 filed heretofore in the
proceeding under the above-referenced file number.
I have examined the certificates of incorporation and bylaws
of Consolidated and CNG International; corporate actions of
Consolidated and CNG International relating to the Proposed
Transactions to date; the Applications and all amendments thereto
to date; 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 as the Commission permits amendments to the
Application to become effective which remove the retention of
jurisdiction over Foreign Energy Activity transactions, all
requisite action will have been taken by Consolidated and CNG
International with respect to such Proposed Transactions, except
the actual carrying out thereof.
In the event the Proposed Transactions are consummated in
accordance with the Application as amended, 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 as
amended;
(d) The direct or indirect guarantees and other credit
support arrangements of Consolidated will be valid and
binding obligations of 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 the filing being made contemporaneously herewith in the
proceeding under the above referenced file number.
Very truly yours,
/s/ N. F. Chandler
----------------------
N. F. Chandler
Attorney
[This exhibit contains confidential information which has
been omitted, but filed separately with the Securities and
Exchange Commission.]
