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File Number 70-8667
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
and its subsidiary companies:
CNG COAL COMPANY CNG STORAGE SERVICE COMPANY
CNG ENERGY SERVICES CORPORATION CNG TRANSMISSION CORPORATION
and its subsidiary company CONSOLIDATED NATURAL GAS
CNG PRODUCTS AND SERVICES, INC. SERVICE COMPANY, INC.
CNG FINANCIAL SERVICES, INC. CONSOLIDATED SYSTEM LNG COMPANY
CNG POWER COMPANY HOPE GAS, INC.
and its subsidiary company THE EAST OHIO GAS COMPANY
CNG MARKET CENTER SERVICES, INC. THE PEOPLES NATURAL GAS COMPANY
CNG PRODUCING COMPANY VIRGINIA NATURAL GAS, INC.
and its subsidiary WEST OHIO GAS COMPANY
company CNG PIPELINE COMPANY
CNG RESEARCH COMPANY
Consolidated Natural Gas Company,
a registered holding company,
is the parent of the other parties.
Names and addresses of agents for service:
STEPHEN E. WILLIAMS, Esq., N. F. CHANDLER, Esq., General Attorney
Senior Vice President and Consolidated Natural Gas Service
General Counsel Company, Inc.
Consolidated Natural Gas Company CNG Tower
CNG Tower 625 Liberty Avenue
625 Liberty Avenue Pittsburgh, PA 15222-3199
Pittsburgh, PA 15222-3199
with a copy to:
Gary W. Wolf, Esq.
Cahill Gordon & Reindel
Eighty Pine Street
New York, NY 10005
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File Number 70-
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
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.
Consolidated Natural Gas Company (the "Company" or "Consolidated") is
a public utility holding company registered as such under the Public Utility
Holding Company Act of 1935 (the "Act" or "1935 Act"). It is engaged solely in
the business of owning and holding all of the outstanding securities of sixteen
directly owned subsidiary companies most of which are in the natural gas
business. All directly and indirectly owned subsidiaries of Consolidated are
referred to individually as "Subsidiary" and collectively as "Subsidiaries."
The Subsidiaries are principally engaged in natural gas exploration,
production, purchasing, gathering, transmission, storage, distribution,
marketing and by-product operations. Consolidated and its Subsidiaries are
referred to herein as the "Consolidated System" or "CNG System."
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I. OVERVIEW OF OMNIBUS TYPE APPLICATION
This application-declaration ("Application") contains the request of
Consolidated and certain of its Subsidiaries for authorization for financing
for the period beginning with the effective date of an order issued in this
proceeding through March 31, 2001. The Application is an omnibus type filing
and is a departure from Consolidated's traditional annual system financing
requests in several respects. The Application is believed to be in alignment
with the efforts of the Securities and Exchange Commission ("Commission") to
modernize its administration of the Act.
The Application seeks to consolidate in one filing all of the financing
authorizations for the Consolidated System, and simultaneously asks for a
significant amount of flexibility as to these financings - both as to
characteristics and as to amounts. It is similar in concept to the shelf-type
registration statement filings permitted under Rule 415 promulgated under the
Securities Act of 1933 ("1933 Act"). The Application approaches financing from
a system-wide viewpoint, and does not concentrate on the details of the
individual components within the over-all system financing program. As long as
Consolidated maintains a solid financial base which is reflected objectively by
ratings of a nationally recognized statistical rating organization,
Consolidated would be allowed a great deal of discretion with respect to its
financing activities. This would allow it to be readily responsive so as to be
able to take advantage of current financial market conditions, which, in turn,
should make it more competitive with companies which are not subject to the
jurisdiction of the Act.
The Application strives to open pathways for a variety of activities which
would occur within stated ambits, but for which specific prior authorization
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would not be needed. Continuous Commission oversight would take place through
disclosures of Consolidated System activities made in the Commission's
integrated disclosure system in place for use under the 1933 Act and the
Securities Exchange Act of 1934 ("1934 Act"), and through the notification
system pursuant to this proceeding.
The following is a summary description of how the Application differs from
Consolidated's usual past annual financing applications.
Consolidated External Financings
1. The Application seeks financing for an approximate 5 year period instead
of the traditional 12 month fiscal financing period running from July 1 of
one year through June 30 of the succeeding year.
2. The Application requests authority for Consolidated to offer and sell a
variety of securities in an "out of the basket" or "off the shelf" manner,
and to sell the securities in a variety of ways in addition to the
formerly required competitive bidding process. Consolidated would have
the right to choose the amount, type and terms of a security, as
appropriate to its needs and market conditions as they exist at the time
of financing, provided (i) the aggregate amount of securities sold during
the approximate 5 year period does not exceed $3.5 billion and (ii) its
debt has an investment grade financial rating. Securities which may be
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issued pursuant to this proceeding include common stock, preferred stock
the terms of which are set by the Board of Directors, bonds, debentures,
notes, other forms of indebtedness, monthly or quarterly income preferred
securities, interest rate and equity swaps, guarantees of third party
obligations in connection with ordinary business transactions and such
other securities as may be authorized by the Commission by supplemental
order pursuant to post-effective amendments.
3. Consolidated seeks authority to organize and use new corporations, trusts,
partnerships or other entities (individually, a "Financing Entity") which
would be created for the purpose of facilitating financings involving the
issuance of monthly or quarterly income preferred securities.
4. Consolidated's currently effective authorization to sell up to $350
million of debt securities under its new indenture would be superseded by
the omnibus Application; the ability to sell term debt thereunder would
accordingly be extended as to time.
5. Consolidated would be able to amend its certificate of incorporation to
increase its authorized common stock and to authorize a new class of
preferred stock (in place of its preferred stock currently authorized)
with up-to-date terms and conditions determined by its Board of Directors
as appropriate to meet the Company's needs and market conditions as they
exist at the time of issuance. There are no shares of preferred stock
presently outstanding.
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Intra-system Financings by Consolidated
6. The Application seeks authority for Consolidated to finance certain of its
Subsidiaries through investment vehicles in addition to the traditional
common stock, open account advances and long term note financings.
7. The Application requests authority for Consolidated to finance certain of
its Subsidiaries in an aggregate amount not exceeding $1.5 billion during
the approximate 5 year period. The $1.5 billion excludes financing that
is exempt pursuant to Rules 45 and 52. Consolidated would be allowed to
use its discretion as to how much financing to give to each Subsidiary as
its needs dictate during the period.
Intra-system and External Financings by Subsidiaries
8. Second tier parent company financing of operational Subsidiaries thereof
through transactions involving securities not covered by Rule 52 is
included in the Application.
9. Subsidiary external financing involving the issuance of certain securities
not falling within the compass of Rule 52 and the use of Financing
Entities in connection therewith would be authorized.
Changes in Authorized Capital
10. The Application retains the request for Subsidiaries to alter their legal
capitalization in order to engage in financing with their parent company.
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Parent Company Credit Support
11. The Application requests authority for certain parent companies in the
Consolidated System to enter guarantees, obtain letters of credit, enter
into expense agreements or otherwise provide credit support with respect
to obligations of their respective direct and indirect subsidiaries as
required to enable them to carry on their business.
The following describes which authorizations are specifically requested by
each of the Consolidated subsidiaries which are a party to this proceeding.
* Request to issue securities not covered by Rule 52, guarantee or otherwise
support subsidiary obligations and/or to form a Financing Entity.
CNG Producing Company
CNG Energy Services Corporation
CNG Storage Service Company
CNG Power Company
CNG Financial Services, Inc.
These five Subsidiaries and any Financing Entity of theirs are collectively
referred to herein as the "Non-utility Subsidiaries."
* Request for utility company issuance of short-term debt to Consolidated,
which is not subject to state utility commission approval.
The East Ohio Gas Company
The Peoples Natural Gas Company
West Ohio Gas Company
These three Subsidiaries are collectively referred to herein as the "Utility
Subsidiaries."
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* Request to amend the certificate of incorporation to increase authorized
capitalization to allow for issuance of additional shares of common stock.
All Subsidiary parties
* Request to buy back shares of its common or preferred stock from its
immediate parent company.
All Subsidiary parties
All normal course of business financings by Subsidiaries will occur
pursuant to either outstanding Commission authorizations until the expiration
thereof, or under exemptive Rule 52, and are not a part of the authorizations
requested herein.
II. PARAMETERS FOR AUTHORIZATIONS
The Application makes requests for authority, without any additional prior
Commission approvals, to engage in future financing transactions for which the
specific terms and conditions are not at this time known. Accordingly, it is
appropriate that certain conditions concerning the financial status of
Consolidated exist at the time of engaging in such activities. The general
conditions for doing such financing activities without further prior approval
are given directly below; further limitations on specific types of financing
are set forth further herein.
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CONSOLIDATED DEBT OF INVESTMENT GRADE. Consolidated would be authorized
to engage in the financing activities described herein as long as its long-term
debt rating is of investment grade as established by a nationally recognized
statistical rating organization (as that term is used in Rule 15c3-1(c)2(vi)(F)
under the 1934 Act). Consolidated will at all times during the authorization
period ending March 31, 2001 strive to maintain a capital structure sufficient
to keep an investment grade rating for its debt.
EFFECTIVE COST OF MONEY ON BORROWINGS. The effective cost of money on
borrowings occurring pursuant to the authorizations granted under the
Application will not exceed 300 basis points over comparable term U. S.
Treasury securities.
EFFECTIVE COST OF MONEY ON OTHER APPROVED SECURITIES. The effective cost
of money on preferred stock and other fixed income oriented securities will not
exceed 500 basis points over 30 year term U.S. Treasury securities.
MATURITY OF DEBT. The maturity of indebtedness will not exceed 50 years.
ISSUANCE EXPENSES. The underwriting fees, commissions, or other similar
remuneration paid in connection with the non-competitive bid issue, sale or
distribution of a security pursuant to the Application will not exceed 5% of
the principal or total amount of the financing.
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AGGREGATE DOLLAR LIMIT. The aggregate amount of outstanding external
financing effected by Consolidated for purposes other than refunding of
outstanding securities during the approximate 5 year period will not exceed
$3.5 billion; for purpose of calculating the amount effected only outstanding
amounts under revolving credit arrangements will be counted. Further, credit
support of underlying Subsidiary obligations (because the same would be subject
to a separate $2 billion limitation) would not be included in the calculation.
Request is also made for Consolidated to effect external financing for the
purpose of refinancing outstanding securities up to an aggregate amount not to
exceed $3.5 billion during the approximate 5 year period.
III. GENERAL FINANCING CONCEPT
Even though no dollar amounts of specific financing transactions are
discussed in this Application, Consolidated and its Subsidiaries would continue
to develop capital budgets and estimates of other financing needs on an annual
basis as they have customarily done for years. Actual financings during a
given year would occur based upon such normal financial planning.
Consolidated would continue to finance its utility Subsidiaries to achieve
a Subsidiary capital structure which would be an approximately mirror image of
that of the parent company. Certain restrictive covenants in the Indenture
dated as of May 1, 1971 between Consolidated and Chemical Bank would continue
to apply during the authorization period requested herein unless otherwise
amended or such indenture is defeased. Such covenants require, among other
things, that certain financial standards be met before dividends can be paid or
additional funded debt may be incurred.
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Consolidated and its Subsidiaries would be allowed to issue and sell
additional debt, preferred stock or common stock or other types of securities
approved for issuance in this proceeding without any additional prior
Commission approval if Consolidated has a long-term debt rating of investment
grade as established by a nationally recognized statistical rating
organization. The provisions of the securities would be determined by
Consolidated at the time of sale and would not be limited by any of the
Commission's "policies" with respect thereto.
To the extent not already exempt under Rule 52, Consolidated and its
Subsidiaries would be permitted to engage in intra-system financing of their
respective directly owned Subsidiaries without additional prior Commission
approval. The use of proceeds from the financings would be limited to use in
the operations of the respective businesses in which such Subsidiaries are
already authorized to engage. However, on June 20, 1995 the Commission issued
HCAR No. 26313 in which it published and solicited public comments on a
proposed Rule 58 under the Act. This proposed rule would permit registered
holding companies and their subsidiaries to acquire securities of companies
engaged in specified nonutility activities without prior Commission approval.
If Rule 58 is adopted, the proceeds of the financings proposed in this
proceeding could also be used for these additional purposes.
In HCAR Nos. 13105 and 13106, dated February 16, 1956, as amended in
HCAR Nos. 16369 and 16758, dated June 22, 1970, the Commission adopted
statements of policy with respect to the first mortgage bonds and preferred
stock ("Statements of Policy"). To the extent that securities proposed to be
issued and sold pursuant to an authorization granted in this proceeding may
conflict with the Statements of Policy, request is hereby made for deviation
from the Statements of Policy
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Due to statutory requirements, the authorization requested herein to
engage in external or intra-system financing without additional Commission
approval do not apply in the case of any financing (other than through the use
of internally generated funds) for the purpose of investing in either an exempt
wholesale generator ("EWG") or a foreign utility company ("FUCO") as defined in
Sections 32 and 33 of the Act, respectively. Nor would any financing be
allowed under the above procedures if it would cause Consolidated to not be in
compliance with Rules 53 and 54 promulgated under the Act.
IV. DESCRIPTION OF SPECIFIC TYPES OF FINANCING
A. Consolidated External Financings
Consolidated currently obtains funds externally through short-term debt
financing, including commercial paper sales; long-term debt financing, such as
debentures and notes; and sales of capital stock. Debt and preferred stock
financings can be either privately placed or publicly distributed. Common
stock can be issued and sold pursuant to underwriting agreements of a type
generally standard in the industry. Public distributions can be pursuant to
private negotiation with underwriters, dealers or agents as discussed below or
effected through competitive bidding among underwriters, private placements or
other non-public offering to one or more persons. All such debt and stock
sales are at rates or prices and under conditions negotiated or based upon, or
otherwise determined by, competitive capital markets. Common stock is also
sold pursuant to various existing or new employee benefit plans and dividend
reinvestment plans. In addition, Consolidated now seeks to issue and sell
monthly or quarterly income preferred securities and to engage in interest rate
and equity swaps.
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Consolidated may sell securities covered by this Application in any of the
following ways: (i) through underwriters or dealers; (ii) directly to a
limited number of purchasers or to a single purchaser, or (iii) through agents.
If underwriters are used in the sale of the securities, such securities will be
acquired by the underwriters for their own account and may be resold from time
to time in one or more transactions, including negotiated transactions, at a
fixed public offering price or at varying prices determined at the time of
sale. The securities may be offered to the public either through underwriting
syndicates (which may be represented by managing underwriters designated by the
Company) or directly by one or more underwriters acting alone. The securities
may be sold directly by the Company or through agents designated by the Company
from time to time. If dealers are utilized in the sale of any of the
securities, the Company will sell such securities to the dealers, as principal.
Any dealer may then resell such securities to the public at varying prices to
be determined by such dealer at the time of resale.
If equity securities are being sold in an underwriting offering, the
Company may grant the underwriters thereof a "green shoe" option permitting the
purchase from the Company at the same price additional equity securities (an
additional 15% under present guidelines) then being offered solely for the
purpose of covering over-allotments.
If debt securities are being sold, they may be sold pursuant to "delayed
delivery contracts" which permit the underwriters to locate buyers who will
agree with the Company to buy the debt at the same price but at a later date
than the date of the closing of the sale to the underwriters. They may also be
sold through the use of medium term notes and similar programs or in
transactions covered by Rule 144A under the 1933 Act.
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1. Short-term Financing
To provide financing for general corporate purposes, including financing
gas storage inventories, other working capital requirements and construction
spending until long term financing can be obtained, Consolidated would continue
to sell commercial paper, from time to time, in established domestic or
European commercial paper markets. Such commercial paper would be sold to
dealers at the discount rate per annum prevailing at the date of issuance for
commercial paper of comparable quality and maturities sold to commercial paper
dealers generally. It is expected that the dealers acquiring commercial paper
from Consolidated will reoffer such paper at a discount to corporate,
institutional and, with respect to European commercial paper, to individual
investors. It is anticipated that Consolidated's commercial paper will be
reoffered to investors such as commercial banks, insurance companies, pension
funds, investment trusts, foundations, colleges and universities, finance
companies and nonfinancial corporations.
Back-up bank lines of credit for 100% of the outstanding commercial paper
are required by credit rating agencies. To satisfy this requirement,
Consolidated proposes to establish back-up bank lines in an aggregate principal
amount not to exceed the amount of authorized commercial paper. Consolidated
would borrow, repay and reborrow under these lines from time to time, without
collateral, to the extent that it becomes impracticable to sell commercial
paper due to market conditions or otherwise. Loans under these lines shall
have a maturity date not more than one year from the date of each borrowing.
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Consolidated may engage in other types of short-term financing as it may
deem appropriate in light of its needs and market conditions at the time of
issuance. Such short-term financing could include, without limitation, bank
lines and debt securities issued under its debt securities indenture and note
programs.
2. Long-term Financing
Consolidated was authorized to issue and sell up to $500 million of debt
securities in Commission order dated March 6, 1995, HCAR No. 26245, in File No.
70-8107. On April 12, 1995, Consolidated sold $150 million principal amount of
7 3/8% Debentures Due April 1, 2005, thus leaving $350 million of such
authorization available for future use. The aforesaid 7 3/8% Debentures were,
and new issuances of debt securities would be, issued pursuant to a new form of
simplified indenture which was also authorized in the proceeding under File No.
70-8107. The authorization under the March 6, 1995 order expires on June 30,
1996.
Consolidated is proposing herein a fundamental change in the method by
which it would be authorized to engage in external financings, which would
supersede the above authorization. Consolidated accordingly proposes to
incorporate the specific authorization into the more general financing
authorization requested in this Application. If such is permitted,
Consolidated would issue debt securities under its new indenture (or other
securities indentures) pursuant to the authorization granted in this proceeding
and not under the earlier specific authorization. One effect of this would be
a removal of the terms and conditions and dollar amount limits in the earlier
orders to the extent not replaced by like terms and conditions or issuance
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limitations imposed by an order in this proceeding. The effective date of the
authorization to issue debt securities under the indenture would accordingly be
extended, pursuant to an order issued in this proceeding, to March 31, 2001.
Consolidated may engage in other types of long-term financing with such
terms and conditions as it may deem appropriate in the context of its needs and
financial market conditions at the time of issuance. Any long-term debt or
other security would have such designation, aggregate principal amount,
maturity, interest rate(s) or methods of determining the same, terms of payment
of interest, redemption provisions, non-refunding provisions, and sinking fund
terms, conversion or put terms and other terms and conditions as Consolidated
may at the time of issuance determine. Examples of such long-term securities
would include convertible debt, medium term notes, monthly or quarterly income
preferred debt securities, other bank debt arrangements, and securities with
call or put options. Consolidated may also form Financing Entities to issue
monthly or quarterly income preferred securities. In such case, Consolidated
would issue debt or other securities to such Financing Entities to back-up such
entities' obligations under the securities they issue and to capitalize such
entities.
3. Stock Financing
Consolidated may also issue and sell preferred or common stock, monthly or
quarterly income preferred securities, or issue stock upon the exercise of
convertible debt or pursuant to rights, options, warrants and similar
securities. Financing Entities may be used in connection with the issuance of
monthly or quarterly income preferred securities, in which case Consolidated
may issue its debt or other securities to such Financing Entities to back-up
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the obligations of such Financing Entities and to capitalize such entities.
Consolidated may also buy back shares of such stock, during the authorization
period.
Consolidated proposes that it be allowed, subject to further Commission
approval, to (i) amend its Certificate of Incorporation to increase its
authorized capital as deemed necessary and appropriate by Consolidated for
proper corporate purposes, (ii) eliminate the current provision in its
certificate of incorporation authorizing its class of preferred stock and
substitute therefor new provisions authorizing a class of preferred stock ("New
Preferred Stock") and (iii) solicit proxies through a proxy statement, filed
under and meeting the standards of the 1934 Act, requesting shareholder
approval of such amendments to the certificate of incorporation. The New
Preferred Stock would permit the Board of Directors of Consolidated, or a
committee thereof as authorized by Delaware law, to set the terms and
conditions of each Series of New Preferred Stock as appropriate to meet the
Company's needs and market conditions as they exist at the time of issuance.
Any New Preferred Stock issued would have such designation, liquidation
preferences, issue price(s), dividend rate(s) or methods of determining the
same, terms of payment of dividends, redemption provisions, non-refunding
provisions, and sinking fund terms, voting or other special rights, conversion
terms and other terms and conditions as Consolidated may at the time of
issuance determine.
Proxy solicitation material relating to amendments to the certificate of
incorporation will meet the requirements of Schedule 14A under the 1934 Act,
and will be reviewed for compliance with such regulation by the Commission
before the proxy material is sent to shareholders. Such proxy solicitation
material will be incorporated by reference into this Application when it is
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filed with the Commission under the 1934 Act, and request is made under Rule 62
of the Act to begin solicitation of proxies when such filing is made.
Consolidated requests retention of jurisdiction over the implementation of the
amendments pending the making of the 1934 Act filings and completion of the
record. Consolidated further requests that any supplemental order authorizing
amendments to the certificate of incorporation concerning the New Preferred
Stock be issued by the Commission without further time-consuming public notice.
Consolidated obtains funds through the sale of its common stock (whether
newly issued or treasury shares) sold pursuant to various employee benefit
plans and a dividend reinvestment plan. From time to time in the future, other
similar plans may be adopted by Consolidated, existing plans may be changed and
Consolidated may issue securities to fund its obligations under employee
benefit plans or arrangements. For instance, a new dividend reinvestment plan
and stock purchase plan allowing sales to persons not already shareholders may
be implemented. Further, Consolidated's Board of Directors recently authorized
the funding of the Company's obligations under various of it non-qualified
plans and agreements through the issuance to a trust of up to 750,000 shares of
Consolidated common stock, and adopted a 1995 Employee Stock Incentive Plan
pursuant to which up to 2,000,000 shares of common stock may be issued over a
ten year period. Consolidated also acquires treasury shares through the
operations of such employee plans. Details concerning all the currently
effective authorizations relating to these plans and treasury share
acquisitions are set forth in Exhibit G. Consolidated now proposes to issue,
sell, reacquire and resell shares of common stock pursuant to these existing
plans and similar plans or plan funding arrangements hereafter adopted, and to
engage in purchases of its stock and reissuances of its treasury shares for
reasonable business purposes, without any additional prior Commission order.
Stock transactions of this variety would thus be treated the same as other
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stock transactions permitted pursuant to this Application. Such authorization
would supersede all prior authorizations listed on Exhibit G, thereby
simplifying considerably the extensive reporting for generally small
transactions now in place under Consolidated's filings under the Act.
4. Other Securities
In addition to the specific securities for which authorization is sought
herein, Consolidated also proposes to issue other types of securities that it
deems appropriate during the period ending March 31, 2001. Consolidated
requests that the Commission reserve jurisdiction over the issuance of
additional types of securities. Consolidated also undertakes to file a post-
effective amendment in this proceeding which will describe the general terms of
each such security and request a supplemental order of the Commission
authorizing the issuance thereof by Consolidated. Consolidated further
requests that each supplemental order be issued by the Commission without
further time-consuming public notice.
B. Parent-Subsidiary Intra-System Financing
1. Rule 52 Exemption
Due to the Commission's adoption in HCAR No. 26311, dated June 20, 1995,
of amendments to its exemptive Rule 52, much of the financing transactions
between Consolidated and its Subsidiaries would now be exempt pursuant to such
rule. However, to the extent that the transaction (i) involves the issue and
sale of a short-term debt security by an Utility Subsidiary or (ii) involves
the issue and sale by a Non-utility Subsidiary of a security not currently
covered by Rule 52, Rule 52 would not apply. In order to cover these areas not
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included within the ambit of Rule 52, request is made to engage in Consolidated
Utility Subsidiary short-term debt financings and Consolidated Non-utility
Subsidiary security financings as described below.
2. Intra-system Financings by Consolidated
Consolidated would continue to provide financing to each of its directly
owned Subsidiaries as required. Such financings would generally continue to be
in the form of open account advances, long-term loans and/or capital stock
purchases, as requested by the Treasurer of each such Subsidiary. Open account
advances will provide funds for general corporate purposes, including gas
storage inventories, other working capital requirements and temporarily for
capital expenditures until long-term financing is obtained and /or cash is
generated internally. Generally, Consolidated's long-term loans to, and
purchase of capital stock from, such Subsidiaries will provide financing for
their capital expenditures, and will be exempt transactions under Rule 52. The
Subsidiaries may also, from time to time as deemed appropriate by them, buy
back shares of their respective common stock or preferred stock from
Consolidated.
Open account advances by Consolidated to Utility Subsidiaries, which would
not be covered by Rule 52, may be made, repaid and remade on a revolving basis,
with interest at the same effective rate of interest as Consolidated's daily
weighted average effective rate of commercial paper, revolving credit and/or
other short-term borrowings. If no such borrowings are outstanding then 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. Such
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advances will be made through the CNG System money pool ("Money Pool")
authorized under Commission order dated June 12, 1986, HCAR No. 24128, File No.
70-7258.
Consolidated and its Non-utility Subsidiaries may engage in types of
security financing of their respective Subsidiaries which do not qualify for
use of Rule 52. Consolidated and the Non-utility Subsidiaries request that the
Commission reserve jurisdiction over the issuance of such additional types of
securities. They also undertake 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 the
issuance thereof by the subject Non-utility Subsidiary. Consolidated and the
Non-utility Subsidiaries further request that each supplemental order be issued
by the Commission without further time-consuming public notice.
3. Changes in Capital Stock of Subsidiaries
The portion of an individual Subsidiary's aggregate financing to be
effected through the sale of stock to Consolidated or other immediate parent
company during the approximate 5 year authorization period cannot be
ascertained at this time. It may happen that the proposed sale of common stock
may in some cases exceed the currently authorized capital stock of such
Subsidiary. In addition, the Subsidiary may choose to use other forms of
capital stock. As needed to accommodate such proposed transactions and to
provide for future issues, request is made for authority to increase the amount
of any such Subsidiary's authorized common stock capitalization by an amount
deemed appropriate by Consolidated or other immediate parent company in the
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instant case, but in no event to exceed twice the currently authorized amount
of common stock capitalization. A Subsidiary would be able to change the par
value, or change between par and no-par common stock, without additional
Commission approval.
C. Non-exempt Financing by Non-Utility Subsidiaries
The Non-utility Subsidiaries are expected to be active in the development
and expansion of energy-related, non-utility businesses in the Consolidated
System. They will be competing with large, well-capitalized companies in
different sectors of the energy industry. In order to accomplish investments
in such competitive arenas, it will be necessary for the Non-utility
Subsidiaries to have the ability to engage in financing transactions which are
commonly accepted for such types of investments. For example, the Non-utility
Subsidiaries may issue and sell monthly or quarterly income preferred
securities pursuant to Rule 52. The Non-utility Subsidiaires may also need to
form Financing Entities to issue monthly or quarterly preferred securities
pursuant to Rule 52; in such case authority is requested for the subject Non-
utility Subsidiary to issue debt or other securities to such Financing Entity
to back-up such entity's obligations under the securities it issues and to
capitalize such entity.
The Non-utility Subsidiaries may engage in types of security financing
which do not qualify for the application of Rule 52. The Non-utility
Subsidiaries therefore request that the Commission reserve jurisdiction over
the issuance of such additional types of securities. They also undertake 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
<PAGE> 23
order of the Commission authorizing the issuance thereof by the subject Non-
utility Subsidiary. The Non-utility Subsidiaries further request that each
supplemental order be issued by the Commission without further time-consuming
public notice.
V. PARENT COMPANY GUARANTEES
Consolidated and its Issuing Non-utility Subsidiaries request
authorization 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.
In addition, Consolidated requests authorization to enter into expense
agreements with any Finance Entities formed by it, pursuant to which
Consolidated would agree to pay all expenses of such entities to enable them to
issue securities. The maximum aggregate limit on all such credit support by
Consolidated and by all Subsidiaries at any one time will be $2.0 billion. The
$2.0 billion on guarantees is in addition to the $3.5 billion limit on
Consolidated's external financing and the $1.5 billion limit on intra-system
financing requested elsewhere herein. Such authorization of Consolidated to
provide credit support would supersede and replace the current authorization of
Consolidated to guarantee up to $750 million of obligations of CNG Energy
Services Corporation as set forth in Commission order dated November 16, 1993,
HCAR No. 25926, File No. 70-8231.
<PAGE> 24
VI. FILING OF CERTIFICATES OF NOTIFICATION
It is proposed that, with respect to Consolidated, the reporting system of
the 1933 Act and the 1934 Act be integrated with the reporting system under the
1935 Act. This would eliminate duplication of filings with the Commission that
cover essentially the same subject matters, resulting in a reduction of expense
for both the Commission and Consolidated. To effect such integration, the
portion of the 1933 Act and 1934 Act reports containing or reflecting
disclosures of transactions occurring pursuant to the authorization granted in
this proceeding would be incorporated by reference into this proceeding through
Rule 24 certificates of notification. Such certificate of notification would
be filed within 60 days after the end of the calendar quarter in which the
transaction occurs.
VII. DOCUMENTS INCORPORATED BY REFERENCE
The following documents filed with the Commission before or during the
period of effectiveness of an order issued in this proceeding shall be deemed
to be incorporated into this Application and to be a part hereof from the date
of filing of such documents with the Commission, or if filed before the date of
filing of this Application, from the date of the filing hereof.
1933 Act
Consolidated's currently effective Form S-3 Registration Statements Nos.
33-49469 and 33-52585 heretofore filed with the Commission pursuant to the
1933 Act, and each Registration Statement and other filings made under the
1933 Act from the date hereof through March 31, 2001.
<PAGE> 25
1934 Act
Consolidated's most recent Form 10-K Annual Report heretofore filed with
the Commission, its Form 10-Q Quarterly Reports filed heretofore
subsequent to the filing of the aforesaid Form 10-K, and all documents
filed by Consolidated pursuant to Section 13(a), 13(c), 14 or 15(d) of the
1934 Act subsequent to the date of filing of this Application and through
March 31, 2001. (File No. 1-3196).
1935 Act
Consolidated's most recent Form U5S Annual Report, File No. 30-203,
heretofore filed with the Commission pursuant to the Act, and each Form
U5S filed from the date hereof through March 31, 2001.
VIII. CURRENTLY EFFECTIVE SYSTEM FINANCING FORM U-1 SUPERSEDED
On April 28, 1995 Consolidated and certain of its Subsidiaries filed a
Form U-1 application-declaration, File No. 70-8619, seeking Commission
authorization for Consolidated System financing for the fiscal period July 1,
1995 through June 30, 1996. The Form U-1 in such earlier proceeding is in the
traditional format used by Consolidated over many years in seeking intra-system
financing on an annual basis. An order dated June 29, 1995, HCAR No. 26321,
was issued by the Commission in the File No. 70-8619 proceeding. An order
issued in this proceeding would supersede and replace the authorizations
granted in the June 29, 1995 order.
<PAGE> 26
(b) Describe briefly, and where practicable state the approximate amount
of, any material interest in the proposed transaction, direct or indirect, of
any associate company or affiliate of the applicant or declarant or any
affiliate of any such associate company.
None, except as set forth in Item 1.(a) above.
(c) If the proposed transaction involves the acquisition of securities
not listed by a registered holding company or a subsidiary thereof, describe
briefly the business and property, present or proposed, of the issuer of such
securities.
Inapplicable.
(d) If the proposed transaction involves the acquisition or disposition
of assets, describe briefly such assets setting forth original cost, vendor's
book cost (including the basis of determination) and applicable valuation and
qualifying reserves.
Inapplicable.
Item 2. Fees, Commissions and Expenses
______________________________
(a) State (1) 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
(2) 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 underwriting fees and expenses in a transaction
not involving competitive bidding will not exceed 5% of the proceeds. The
fees and expenses involved with a competitively bid transaction will not exceed
approximately 0.5% of the proceeds.
<PAGE> 27
Since the authorization period request is for approximately five years and
it is currently difficult to estimate with any precision future counsels' fees,
no separate memorandum of services of counsel selected by an applicant to act
for the successful bidder in a transaction involving competitive bidding needs
to be filed.
(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.
Charges of Consolidated Natural Gas Service Company, Inc. in
connection with the preparation of this application-declaration on Form U-1 and
other related documents and papers required to consummate the proposed
transactions are included in the information stated above.
Item 3. Applicable Statutory Provisions
_______________________________
(a) State the sections 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.
Applicable Statutory
Transactions Provisions or Rules
____________ ____________________
Issuance of securities by Section 6(a) and 7
Consolidated to non-associ-
ate parties
Issuance of securities by Section 6(a) and 7;
Non-utility Subsidiaries to Rule 43
Consolidated.
<PAGE> 28
Acquisition of securities Section 9(a), 10 and
of Non-utility Subsidiaries 12(b); Rule 45
by Consolidated.
Issuance of securities by Section 6(a) and 7;
a Financing Entity to its Rule 43
parent.
Acquisition of securities Section 9(a), 10 and
of a Financing Entity by 12(b); Rule 45
its parent.
Issuance of short-term debt Section 6(a) and 7;
by Utility Subsidiaries Rule 43
to Consolidated.
Acquisition of short-term Section 9(a), 10 and
debt securities of Utility and 12(b); Rule 45
Subsidiaries by Consolidated.
Amendment of the certificate Section 6(a); Rule 62
of incorporation of Consoli-
dated and Subsidiaries to
increase their respective
capitalization.
Amendment of the certificate Section 6(a); Rule 62
of incorporation of Consoli-
dated to eliminate the current
preferred stock provision and
to substitute therefor new
provisions authorizing a class
of preferred stock with up-to-
date provisions.
Acquisition of shares of Section 9(a) and 10:
their own respective outstand- Rule 42
ing stock by Consolidated and
the Subsidiaries.
Guarantees, expense agreements Section 6(a), 7 and
and other credit support given 12(b); Rule 45
by Consolidated and the
Subsidiaries to their
respective Subsidiaries.
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 hereinabove, such authorization, approval
or exemption is hereby requested.
<PAGE> 29
(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.
Inapplicable.
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 transaction.
The Public Service Commission of West Virginia has jurisdiction over
the purchase by Hope Gas Inc. of its capital stock from Consolidated.
The Virginia State Corporation Commission has jurisdiction over the
purchase by Virginia Natural Gas, Inc. of its capital stock from Consolidated.
The Pennsylvania Public Utility Commission has jurisdiction over the
purchase by The Peoples Natural Gas Company of its capital stock from
Consolidated.
No other State commission and no Federal commission other than the
Securities and Exchange Commission has jurisdiction over any of the proposed
transactions.
(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.
Required applications as needed will be filed with the commissions
mentioned above.
<PAGE> 30
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 requested that Commission action with respect to the
transaction set forth in this application-declaration become effective on or
before March 31, 1996.
(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 Office of
Public Utility Regulation of the Division of Investment Management 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.
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 Public Utility Regulation of the Division
of Investment Management 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 filed as a part
of this statement:
<PAGE> 31
(a) Exhibits
A-1 The certificate of incorporation and by-laws
of Consolidated as filed as exhibits to
Consolidated's Form U5S, File No. 30-203,
are hereby incorporated by reference.
A-2 Form of provisions to be included in an
amendment to the certificate of incorporation
of Consolidated creating New Preferred Stock.
A-3 Form of Commercial Paper notes.
(Incorporated by reference to Files No. 70-6153
and 70-7393.)
A-4 Form of Indenture.
(Incorporated by reference to Exhibit A of File No. 70-8107)
B-1 Form of Standard Purchase Agreement Provisions - Debt Securities
including Form of Purchase Agreement
(Incorporated by reference to Exhibit B of File No. 70-8107)
B-2 Form of Standard Purchase Agreement Provisions - Stock
including Form of Purchase Agreement
C-1 Form S-3 Registration Statement.
(Incorporated by reference to Registration
Statement No. 33-49469 filed via EDGAR on
April 6, 1993)
C-2 Form S-3 Registration Statement.
(Incorporated by reference to Registration
Statement No. 33-52585 filed via EDGAR on
March 9, 1994)
F-1 Opinion of Counsel for Consolidated
(To be filed by amendment)
F-2 Combined Opinion of Counsel for
CNG Coal Company, CNG Energy Services Corporation,
CNG Products and Services, Inc.
CNG Financial Services, Inc., CNG Power Company,
CNG Market Center Services, Inc., CNG Producing Company,
CNG Pipeline Company, CNG Research Company,
CNG Storage Service Company, CNG Transmission
Corporation, Consolidated Natural Gas Service
<PAGE> 32
Company, Inc., Consolidated System LNG Company,
Hope, Gas, Inc., The East Ohio Gas Company,
The Peoples Natural Gas, Virginia Natural Gas, Inc.,
and West Ohio Gas Company
(To be filed by amendment)
G - Currently effective authorizations for sale of stock to
employee benefit plans and dividend reinvestment plan, and
for acquisition of treasury shares on the open market.
O - Proposed notice pursuant to Rule 22(f).
(b) Financial Statements
Financial statements included in Consolidated's Form 10-K for the
year ended December 31, 1994 and in Consolidated's Form 10-Q for the quarters
ended March 31, June 30, 1995 and September 30, 1995 are hereby incorporated by
reference to File No. 1-3196 under the 1934 Act.
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. 4332(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 for
that response.
As more fully described in Item 1(a), the proposed transactions
subject to the jurisdiction of this Commission relate to financing proposals
and involve no major federal action significantly affecting the human
environment.
<PAGE> 33
(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.
None.
SIGNATURES
__________
Pursuant to the requirements of the Public Utility Holding Company
Act of 1935, the undersigned companies have duly caused this statement to be
signed on their behalf by the undersigned thereunto duly authorized.
CONSOLIDATED NATURAL GAS COMPANY
By D. M. Westfall, Senior Vice President
and Chief Financial Officer
CNG COAL COMPANY
CNG ENERGY SERVICES CORPORATION
CNG PRODUCTS AND SERVICES, INC.
CNG FINANCIAL SERVICES, INC.
CNG POWER COMPANY
CNG MARKET CENTER SERVICES, INC.
CNG PRODUCING COMPANY
CNG PIPELINE COMPANY
CNG RESEARCH COMPANY
CNG STORAGE SERVICE COMPANY
CNG TRANSMISSION CORPORATION
CONSOLIDATED NATURAL GAS SERVICE
COMPANY, INC.
CONSOLIDATED SYSTEM LNG COMPANY
HOPE GAS, INC.
THE EAST OHIO GAS COMPANY
THE PEOPLES NATURAL GAS COMPANY
VIRGINIA NATURAL GAS, INC.
WEST OHIO GAS COMPANY
By N. F. Chandler, Their Attorney
Dated: January 26, 1996
