<PAGE>
COMMISSION FILE NO. 30-203
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM U5S
ANNUAL REPORT
FOR THE YEAR ENDED
DECEMBER 31, 1996
----------------
Filed pursuant to the Public Utility Holding Company Act of 1935
by
Consolidated Natural Gas Company
CNG TOWER, 625 LIBERTY AVENUE, PITTSBURGH, PA 15222-3199
<PAGE>
CONSOLIDATED NATURAL GAS COMPANY
FORM U5S -- ANNUAL REPORT
For the Year Ended December 31, 1996
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<C> <S> <C>
ITEM 1. SYSTEM COMPANIES AND INVESTMENT THEREIN AS OF
DECEMBER 31, 1996.............................................. 1
ITEM 2. ACQUISITIONS OR SALES OF UTILITY ASSETS........................ 4
ITEM 3. ISSUE, SALE, PLEDGE, GUARANTEE OR ASSUMPTION OF SYSTEM
SECURITIES..................................................... 4
ITEM 4. ACQUISITION, REDEMPTION OR RETIREMENT OF SYSTEM SECURITIES..... 6
ITEM 5. INVESTMENTS IN SECURITIES OF NON-SYSTEM COMPANIES.............. 12
ITEM 6. OFFICERS AND DIRECTORS
Part I. Names, principal business address and positions held
as of December 31, 1996.............................. 13
Part II. Banking connections.................................. 18
Part III. Compensation and other related information........... 18
ITEM 7. CONTRIBUTIONS AND PUBLIC RELATIONS............................. 20
ITEM 8. SERVICE, SALES AND CONSTRUCTION CONTRACTS
Part I. Contracts for services or goods between system
companies............................................ 20
Part II. Contracts to purchase services or goods between any
system company and any affiliate..................... 20
Part III. Employment of any person by any system company for
the performance on a continuing basis of management
services............................................. 20
ITEM 9. WHOLESALE GENERATORS AND FOREIGN UTILITY COMPANIES
Part I. Information concerning interests held by system
companies in exempt wholesale generators or foreign
utility companies.................................... 21
Part II. Relationship of exempt wholesale generators and
foreign utility companies to system companies, and
financial data....................................... 22
Part III. Investment in exempt wholesale generators and foreign
utility companies.................................... 22
ITEM 10. FINANCIAL STATEMENTS AND EXHIBITS
Financial Statements (Index).................................... 24
Exhibits........................................................ 83
SIGNATURE................................................................ 84
</TABLE>
<PAGE>
CONSOLIDATED NATURAL GAS COMPANY
FORM U5S--ANNUAL REPORT
For the Year Ended December 31, 1996
ITEM 1. SYSTEM COMPANIES AND INVESTMENT THEREIN AS OF DECEMBER 31, 1996
<TABLE>
<CAPTION>
Number of Owner's
Common % of Issuer's Book
Shares Voting Book Value
Name of Company Business Owned Power Value (Note 1)
- ------------------------ ------------------ --------- ------ ----------- -----------
(Thousands of Dollars)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED NATURAL GAS
COMPANY Holding Company
(Registrant, Parent
Company, Company or
CNG):
Consolidated Natural Gas
Service Company, Inc.
(Service Company or
CNGSvc)................ Service Company 100 100% $ 10 $ 10
Unsecured debt........ -- -- $ 14,392 $ 14,392
CNG Transmission
Corporation
(CNG Transmission or
CNGT).................. Gas transmission 59,000 100% $ 743,100 $ 741,484
Unsecured debt........ -- -- $ 386,283 $ 386,283
CNG Iroquois, Inc. 2,394 100% $ 29,359 $ 29,359
(CNG Iroquois)....... Special purpose
subsidiary (Note 2)
The East Ohio Gas
Company
(East Ohio Gas or
EOG)................... Gas utility 4,759,353 100% $ 426,363 $ 405,819
Unsecured debt........ -- -- $ 209,210 $ 209,210
The Peoples Natural Gas
Company
(Peoples Natural Gas or
PNG)................... Gas utility 1,655,350 100% $ 237,710 $ 227,713
Unsecured debt........ -- -- $ 155,139 $ 155,139
Virginia Natural Gas,
Inc.
(Virginia Natural Gas
or VNG)................ Gas utility 4,298 100% $ 170,342 $ 170,262
Unsecured debt........ -- -- $ 97,418 $ 97,418
Hope Gas, Inc. (Hope Gas
or HGI)................ Gas utility 409,000 100% $ 55,752 $ 54,580
Unsecured debt........ -- -- $ 39,276 $ 39,276
West Ohio Gas Company
(West Ohio Gas or WOG)
(Note 3)............... Gas utility 1,499 100% $ 23,209 $ 23,191
Unsecured debt........ -- -- $ 12,460 $ 12,460
CNG Producing Company
(CNG Producing or 37,100 100% $ 452,817 $ 457,160
CNGP).................. Exploration and
Unsecured debt........ production -- -- $ 353,575 $ 353,575
CNG Pipeline Company
(CNG Pipeline)......... Oil pipeline 12,000 100% $ 1,435 $ 1,435
CNG Energy Services
Corporation
(CNG Energy Services or
CNGESC)................ Energy marketing 3,305 100% $ 76,143 $ 75,932
CNG Main Pass Gas
Gathering Corporation
(CNG Main Pass)...... Special purpose 1 100% $ 1,012 $ 1,012
subsidiary (Note 4)
CNG Oil Gathering
Corporation
(CNG Oil Gathering).. Special purpose 1 100% $ 8 $ 8
subsidiary (Note 5)
</TABLE>
- --------
Notes to ITEM 1 appear on page 3.
1
<PAGE>
ITEM 1. SYSTEM COMPANIES AND INVESTMENT THEREIN AS OF DECEMBER 31, 1996
(Continued)
<TABLE>
<CAPTION>
Number of Owner's
Common % of Issuer's Book
Shares Voting Book Value
Name of Company Business Owned Power Value (Note 1)
- ------------------------ ---------------------------- --------- ------ ----------- -----------
(Thousands of Dollars)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED NATURAL GAS COMPANY (Continued)
CNG Power Company (CNG 22,460 100% $ 32,424 $ 25,800
Power)............... Nonutility energy
Unsecured debt (Note ventures
6)................... -- -- $ 13,083 $ 13,083
CNG Market Center
Services, Inc.
(CNG Market Center 10 100% $ 350 $ 350
Services or Special purpose
CNGMCS)............. subsidiary (Note 7)
CNG Bear Mountain,
Inc. Special purpose 1 100% $ 9 $ 9
(CNG Bear Mountain).. subsidiary (Note 8)
Granite Road CoGen,
Inc. Special purpose 1,000 100% $ 1 $ 1
(Granite Road)....... subsidiary (Note 9)
CNG Products and
Services, Inc. 305 100% $ 2,055 $ 2,055
(CNG Products and Nonutility energy
Services)............ business
CNG Technologies, Inc.
(CNG Technologies)... Development of new gas- 200 100% $ 1,880 $ 1,880
related technologies
CNG Storage Service
Company
(CNG Storage or 1,366 100% $15,418 $15,342
CNGStr).............. Gas storage services
Unsecured debt (Note
6).................. -- -- $ 7,350 $ 7,350
CNG Power Services
Corporation
(CNG Power Services or Electric power 1,552 100% $ 12,322 $ 12,322
CNGPSC)............... marketing
CNG Lakewood, Inc.
(CNG Lakewood)....... Special purpose 52 100% $ 153 $ 581
subsidiary (Note 10)
CNG International
Corporation 4,494 100% $ 42,309 $ 42,309
(CNG International or Energy-related activities
CNGI) (Note 11)........ outside of the United States
CNG Cayman One Ltd.
(CNG Cayman One)..... Special purpose 990 100% $ 38,344 $ 38,344
subsidiary (Note 12)
CNG Cayman Two Ltd.
(CNG Cayman Two)..... Special purpose 10 100% $ 387 $ 387
subsidiary (Note 12)
CNGI Australia Pty
Limited Special purpose 100 100% $ 38,731 $ 38,731
(CNGI Australia)..... subsidiary (Note 12)
Consolidated System LNG
Company (Consolidated Importer of liquefied 2,840 100% $ 34,182 $ 34,182
LNG or LNG) (Note 13).. natural gas and
gas wholesaler
CNG Research Company Administers research 1,579 100% $ 325 $ 325
(CNG Research)......... activities
CNG Coal Company (CNG Holds System coal 2,236 100% $ 6,153 $ 6,153
Coal).................. reserves (Note 14)
CNG Financial Services,
Inc. Financing transactions 5 100% $ 40 $ 40
(CNG Financial)........ subsidiary
</TABLE>
- --------
Notes to ITEM 1 appear on page 3.
2
<PAGE>
ITEM 1. SYSTEM COMPANIES AND INVESTMENT THEREIN AS OF DECEMBER 31, 1996
(Concluded)
Notes:
(1) The Parent Company's investment in common stock of its subsidiaries is
stated at equity to comply with Securities and Exchange Commission (SEC)
rules. The chart of accounts used during 1996 by the Registrant and its
subsidiaries, except Service Company and CNG Power Services, was the
Uniform System of Accounts Prescribed for Natural Gas Companies by the
Federal Energy Regulatory Commission (FERC). The Service Company used the
Uniform System of Accounts for Subsidiary Service Companies prescribed by
the SEC. CNG Power Services used the FERC's Uniform System of Accounts
Prescribed for Public Utilities and Licensees.
(2) CNG Iroquois holds a 16% general partnership interest in Iroquois Gas
Transmission System, L.P.
(3) Effective January 1, 1997, West Ohio Gas merged with East Ohio Gas.
(4) CNG Main Pass was formed in 1996 to hold a 33.3% ownership interest in
Main Pass Gathering Company (Main Pass), an undersea natural gas gathering
system in the Gulf of Mexico. Effective December 31, 1996, Main Pass
merged with Dauphin Island Gathering System. CNG Main Pass' ownership
interest in the combined system, Dauphin Island Gathering Partners, is
13.6%.
(5) CNG Oil Gathering was formed in 1996 to hold a 33.3% general partnership
interest in Main Pass Oil Gathering Company which operates an oil
gathering pipeline system in the Main Pass and Viosca Knoll areas of the
Gulf of Mexico.
(6) Unsecured debt held by the Parent Company.
(7) CNG Market Center Services holds a 50% general partnership interest in the
CNG/Sabine Center gas marketing hub.
(8) CNG Bear Mountain holds a 1% general partnership interest in Bear Mountain
Limited, which owns an independent power project that is a qualifying
cogeneration facility under the Public Utility Regulatory Policies Act of
1978.
(9) Granite Road holds a 50% general partnership interest in Granite Road
Limited, a partnership planning the development of a cogeneration
facility.
(10) CNG Lakewood holds a 1% general partnership interest in Lakewood
Cogeneration, L.P. Also, CNG Power holds a 34% limited partnership
interest in Lakewood Cogeneration, L.P.
(11) CNG International was formed in 1996 to engage in energy-related
activities outside of the United States.
(12) CNG Cayman One and CNG Cayman Two were formed during 1996 to hold 99% and
1%, respectively, of the outstanding voting common stock of CNGI
Australia. CNGI Australia was formed in 1996 to hold a 30% ownership
interest in Epic Energy Pty Ltd., an Australian entity that owns and
operates two major long-distance natural gas pipelines in Australia.
(13) Consolidated LNG ended its involvement in liquefied natural gas
operations in 1982 and is currently recovering its undepreciated
investment in related facilities, plus carrying charges and taxes,
through a FERC-approved amortization surcharge.
(14) CNG Coal formerly owned coal reserves and a related plant site. In July
1996, CNG Coal completed the sale of its properties to a subsidiary of
Cyprus Amax Minerals Company.
3
<PAGE>
ITEM 2. ACQUISITIONS OR SALES OF UTILITY ASSETS
None.
ITEM 3. ISSUE, SALE, PLEDGE, GUARANTEE OR ASSUMPTION OF SYSTEM SECURITIES
During 1996, Virginia Natural Gas provided security in the form of surety bonds
and a bank letter of credit in connection with performance guarantees related
to erosion and sediment control. The aggregate original amount of such security
was $333,500. The maximum balance outstanding during 1996 was $55,390, with no
amount remaining outstanding at December 31, 1996. These transactions were
exempt pursuant to Rule 45(b)(6).
CNG Transmission has obtained several letters of credit to provide security to
the Commonwealth of Pennsylvania for the company's obligation to plug and
reclaim gas wells as part of the process of abandonment of such property. One-
half of the cost of one letter of credit on which CNG Transmission has
contingent liability, having a face amount of $3,000,000, is shared by two
nonaffiliated pipeline companies. The maximum balance on CNG Transmission's
portion of all letters of credit during 1996 was $8,250,000, with $8,000,000
remaining outstanding as of December 31, 1996. These transactions are exempt
pursuant to Rule 45(b)(6).
The Company has issued guarantees to the states of Pennsylvania, Virginia and
West Virginia to maintain worker's compensation self-insured status for CNG
Transmission, Virginia Natural Gas and Hope Gas. Self- insured status means
that the subsidiary pays the worker's compensation claims directly instead of
paying into the state maintained fund. In recent years these states have
revised their worker's compensation programs and now require parent company
guarantees--in addition to surety bonds--for subsidiary companies to maintain
self-insured status. These transactions are exempt pursuant to Rule 45(b)(6).
4
<PAGE>
(THIS PAGE WAS INTENTIONALLY LEFT BLANK)
5
<PAGE>
ITEM 4. ACQUISITION, REDEMPTION OR RETIREMENT OF SYSTEM SECURITIES
Calendar Year 1996
(Thousands of Dollars)
<TABLE>
<CAPTION>
Name of Company Number of Shares or
Acquiring, Redeeming Principal Amount
Name of Issuer and Title of Issue or Retiring Securities Acquired
- --------------------------------------------- ---------------------- -------------------
<S> <C> <C>
REGISTERED HOLDING COMPANY:
Parent Company:
Common stock, par value $2.75 per share..... Parent Company 146,667 shares
(Note 3)
East Ohio Gas:
Capital stock, par value $50 per share...... Parent Company 600,000 shares
Peoples Natural Gas:
Non-negotiable note......................... Parent Company $25,000
Virginia Natural Gas:
Non-negotiable note......................... Parent Company $24,000
Hope Gas:
Non-negotiable note......................... Parent Company $1,000
CNG Producing:
Non-negotiable note......................... Parent Company $100,000
CNG Energy Services:
Capital stock, par value $1 per share....... Parent Company 2,300 shares
CNG Power Services:
Capital stock, par value $10,000 per share.. Parent Company 1,500 shares
CNG International:
Capital stock, par value $10,000 per share.. Parent Company 4,494 shares
CNG Research:
Capital stock, par value $10,000 per share.. Parent Company 25 shares
Total Registrant..........................
</TABLE>
- --------
Notes to ITEM 4 appear on page 10.
6
<PAGE>
<TABLE>
<CAPTION>
Number of Shares or
Principal Amount
Redeemed or Retired
(Note 1) Consideration Commission Authorization (Note 2)
- ------------------- --------------- ------------------------------------
<S> <C> <C>
$ 8,144 Rule 42 (Note 3)
$ 30,000 Rule 52
$ 25,000 Rule 52
$ 24,000 Rule 52
$ 1,000 Rule 52
$100,000 Rule 52
$ 33,000 Rule 52
$ 15,000 Section 32(g) exemption
$ 44,940 Release No. 26523 (File No. 70-8759)
$ 250 Rule 52
--------
$281,334
========
</TABLE>
7
<PAGE>
ITEM 4. ACQUISITION, REDEMPTION OR RETIREMENT OF SYSTEM SECURITIES (Continued)
Calendar Year 1996
(Thousands of Dollars)
<TABLE>
<CAPTION>
Name of Company Number of Shares or
Acquiring, Redeeming Principal Amount
Name of Issuer and Title of Issue or Retiring Securities Acquired
- --------------------------------------------- ---------------------- -------------------
<S> <C> <C>
SUBSIDIARIES OF REGISTERED HOLDING COMPANY:
Service Company:
Non-negotiable note......................... Service Company
CNG Transmission:
Non-negotiable note......................... CNG Transmission
East Ohio Gas:
Non-negotiable note......................... East Ohio Gas
Peoples Natural Gas:
Non-negotiable note......................... Peoples Natural Gas
Virginia Natural Gas:
Unsecured loan.............................. Virginia Natural Gas
Hope Gas:
Non-negotiable note......................... Hope Gas
West Ohio Gas:
Non-negotiable note......................... West Ohio Gas
CNG Producing:
Capital stock, par value $10,000 per share.. CNG Producing
CNG Power:
Non-negotiable notes........................ CNG Power
CNG Coal:
Capital stock, par value $10,000 per share.. CNG Coal
Total subsidiaries........................
</TABLE>
- --------
Notes to ITEM 4 appear on page 10.
8
<PAGE>
<TABLE>
<CAPTION>
Number of Shares or
Principal Amount
Redeemed or Retired
(Note 1) Consideration Commission Authorization (Note 2)
- ------------------- --------------- ---------------------------------
<S> <C> <C>
$ 240 $ 240 Rule 42
$ 2,077 $ 2,077 Rule 42
$ 511 $ 511 Rule 42
$ 511 $ 511 Rule 42
$ 4,000 $ 4,000 Rule 42
$ 224 $ 224 Rule 42
$ 179 $ 179 Rule 42
9,984 shares $ 99,840 Rule 42
$ 390 $ 390 Rule 42
1,500 shares $ 15,000 Rule 42
--------
$122,972
========
</TABLE>
9
<PAGE>
ITEM 4. ACQUISITION, REDEMPTION OR RETIREMENT OF SYSTEM SECURITIES (Concluded)
Calendar Year 1996
(Thousands of Dollars)
<TABLE>
<CAPTION>
Name of Company Number of Shares or
Acquiring, Redeeming Principal Amount
Name of Issuer and Title of Issue or Retiring Securities Acquired
- ------------------------------------------------- ------------------------- -------------------
<S> <C> <C>
CNG TRANSMISSION:
CNG Iroquois:
Capital stock, par value $10,000 per share...... CNG Transmission 900 shares
CNG ENERGY SERVICES:
CNG Products and Services:
Capital stock, par value $10,000 per share...... CNG Energy Services 305 shares
CNG Power:
Capital stock, par value $1,000 per share....... CNG Energy Services 22,460 shares
CNG Storage:
Capital stock, par value $10,000 per share...... CNG Energy Services 1,366 shares
CNG Main Pass:
Capital stock, par value $1 per share........... CNG Energy Services 1 share
CNG Oil Gathering:
Capital stock, par value $1 per share........... CNG Energy Services 1 share
Total CNG Energy...............................
CNG PRODUCTS AND SERVICES:
CNG Technologies:
Capital stock, par value $10,000 per share...... CNG Products and Services 200 shares
CNG INTERNATIONAL:
CNG Cayman One:
Capital stock, par value $.01 per share......... CNG International 990 shares
CNGI Australia Pty Limited:
Capital stock, par value $1.00 per share (6).. CNG Cayman One 99 shares
CNG Cayman Two:
Capital stock, par value $1.00 per share........ CNG International 10 shares
CNGI Australia Pty Limited:
Capital stock, par value $1.00 per share (6).. CNG Cayman Two 1 share
</TABLE>
- --------
Notes:
(1) All securities redeemed or retired have been cancelled.
(2) Public Utility Holding Company Act of 1935.
(3) The Parent Company acquired 146,667 shares during 1996 through the
provisions of its employee incentive plans at a cost of $8,144,000, or an
average price of $55.53 a share. All of these shares were sold before year-
end to the Company's benefit plans.
(4) CNG Power and CNG Storage became direct subsidiaries of CNG Energy Services
in 1996. The Parent Company transferred the shares of CNG Power and CNG
Storage to CNG Energy Services as a capital contribution, as authorized in
Release No. 35-26509 (File No. 70-8703).
(5) CNG Products and Services purchased the outstanding shares of CNG
Technologies from CNG Power at net book value, as authorized in Release No.
35-26509 (File No. 70-8703).
(6) Par value shown in Australian dollars.
10
<PAGE>
<TABLE>
<CAPTION>
Number of Shares or
Principal Amount
Redeemed or Retired
(Note 1) Consideration Commission Authorization (Note 2)
- ------------------- --------------- ------------------------------------
<S> <C> <C>
$ 9,000 Release No. 26571 (File No. 70-7641)
=======
$ 3,050 Release No. 26363 (File No. 70-8577)
$ -- (Note 4)
$ -- (Note 4)
$ 10 Release No. 26341 (File No. 70-8621)
$ 10 Release No. 26341 (File No. 70-8621)
-------
$ 3,070
=======
$ 1,919 (Note 5)
=======
$38,344 Release No. 26608 (File No. 70-8759)
=======
$38,344 Release No. 26608 (File No. 70-8759)
=======
$ 387 Release No. 26608 (File No. 70-8759)
=======
$ 387 Release No. 26608 (File No. 70-8759)
=======
</TABLE>
11
<PAGE>
ITEM 5. INVESTMENTS IN SECURITIES OF NON-SYSTEM COMPANIES
The aggregate amounts of investments at December 31, 1996, in persons operating
in the system's retail service area are shown below.
<TABLE>
<CAPTION>
Number of Aggregate
Name of Owner Persons Business of Persons Investment
- ----------------------- --------- ---------------------------------- ----------
<S> <C> <C> <C>
CNG Transmission....... One State Development Fund $ 100,000
Hope Gas............... One State Development Fund $ 100,000
Hope Gas............... One Economic Development Small
Business Investment Company (Note) $2,475,000
Virginia Natural Gas... One State Development Fund $ 50,369
</TABLE>
- --------
Note: Investment made pursuant to the West Virginia Capital Companies Act and
under Rule 40(a)(5).
The above do not include investments in securities of non-system companies
which have been authorized by Commission order under the Public Utility Holding
Company Act of 1935 and which are subject to Rule 24 Certificate filing
requirements.
12
<PAGE>
ITEM 6. OFFICERS AND DIRECTORS
Part I. Names, principal business address and positions held as of December
31, 1996
The names, principal business address and positions held as of December 31,
1996, of the officers and directors of system companies is presented in the
tables on pages 14 through 17. The principal business address of each officer
and director is indicated in such tables by the numbers (1) through (24). The
addresses associated with these number designations are shown in the following
address key. The symbols used to indicate the positions held by officers and
directors are shown in the position symbol key below.
ADDRESS KEY
(1) CNG Tower, Pittsburgh, PA 15222
(2) 625 Liberty Avenue, Pittsburgh, PA 15222
(3) 445 West Main Street, Clarksburg, WV 26301
(4) 1717 East Ninth Street, Cleveland, OH 44114
(5) 1450 Poydras Street, New Orleans, LA 70112
(6) 5100 East Virginia Beach Boulevard, Norfolk, VA 23502
(7) Bank One Center West, Clarksburg, WV 26302
(8) 319 West Market Street, Lima, OH 45802
(9) 12 Kirkland Place, Cambridge, MA 02138
(10) 1819 L Street, N.W., Washington, DC 20036
(11) One Park Ridge Center, Pittsburgh, PA 15244
(12) 11921 Freedom Drive, Reston, VA 20190
(13) 101 N. Elizabeth, Suite 607, Lima, OH 45801
(14) 157 Backbone Road, Sewickley, PA 15143
(15) One PPG Place, Suite 2210, Pittsburgh, PA 15222
(16) 1400 Hanna Building, Cleveland, OH 44115
(17) 131 Regent Wood Road, Northfield, IL 60093
(18) 1000 Six PPG Place, Pittsburgh, PA 15222
(19) 781 Weed Street, New Canaan, CT 06840
(20) 22 West 23rd Street, New York, NY 10010
(21) 500 J. Clyde Morris Boulevard, Newport News, VA 23601
(22) 401 College Place, Norfolk, VA 23510
(23) 787 Seventh Avenue, New York, NY 10019
(24) 1258 Alanton Drive, Virginia Beach, VA 23454
POSITION SYMBOL KEY
<TABLE>
<S> <C> <C> <C>
CB -- Chairman of the Board SAVP -- Senior Assistant Vice President
P -- President AVP -- Assistant Vice President
SVP -- Senior Vice President AS -- Assistant Secretary
VP -- Vice President AT -- Assistant Treasurer
S -- Secretary AcGC -- Associate General Counsel
T -- Treasurer AtGC -- Assistant General Counsel
Cn -- Controller GM -- General Manager
D -- Director r -- Remuneration
CFO -- Chief Financial Officer df -- Directors' fees
GC -- General Counsel
</TABLE>
13
<PAGE>
ITEM 6. OFFICERS AND DIRECTORS (Continued)
Part I. Names, principal business address and positions held as of December 31,
1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
-------------------------------------------------------------------------
Parent Service CNG Hope East Peoples Virginia
Company Company Transmission Gas Ohio Gas Natural Gas Natural Gas
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Adams, R. L. Clarksburg, WV (3) D P-D-r
Atkinson, S. L. Clarksburg, WV (3) S-r
Baril, D. C. New Orleans, LA (5)
Barrack, W. S., Jr. New Canaan, CT (19) D-df
Bartels, M. G. Cleveland, OH (4) SVP-S-T-D-r
Best, R. W. ** Pittsburgh, PA (1) SVP SVP-r D
Borneman, D. W. Pittsburgh, PA (1) SAVP-r
Boswell, W. P. Pittsburgh, PA (2) VP-GC-S-D-r
Brakeman, B. F. Cleveland, OH (4) VP-D-r
Brink, G. R. Newport News, VA (21) D-df
Brown, H. E. Clarksburg, WV (3) VP-GC-AS-D-r
Butera, J. E. Pittsburgh, PA (1) AVP-r
Carrington, J. W., Jr. New Orleans, LA (5)
Carter, G. B. Clarksburg, WV (3) VP-D-r
Causey, J. L. Norfolk, VA (6) D P-D-r
Chamberlain, A. R. Norfolk, VA (6) VP-r
Chandler, N. F. Pittsburgh, PA (1) AS AS-r
Connell, D. W. Pittsburgh, PA (1) VP-r
Connolly, J. W. Pittsburgh, PA (14) D-df
Corbett, F. J. Norfolk, VA (6) VP-r
Crittenden, J. A. Pittsburgh, PA (11)
Cuccinelli, K. T. Reston, VA (12)
Curia, J. A. Pittsburgh, PA (11)
Davidson, G. A., Jr. Pittsburgh, PA (1) CB-D CB-D-r
Deschamps, G. W. Pittsburgh, PA (1) VP-r
Dodd, T. E. Pittsburgh, PA (11)
Elliott, R. S. Clarksburg, WV (7) AS-r
Fickenscher, D. A. Norfolk, VA (6) VP-GC-S-r
Fleming, A. D. New Orleans, LA (5)
Flinn, J. A. Pittsburgh, PA (2) VP-D-r
Fox, W. A. Pittsburgh, PA (2) D P-D P-D-r
Fratangelo, R. D. Pittsburgh, PA (1) VP-r
Fritsche, W. F., Jr. Virginia Beach, VA (24) D-df
Funk, C. T., Jr. Pittsburgh, PA (1) VP-r
Garbe, T. F. Pittsburgh, PA (1) Cn Cn-r
Garrett, J. W. Pittsburgh, PA (1) AVP-r
George, S. G. Pittsburgh, PA (2) AcGC-AS-r
Goral, J. R. Norfolk, VA (6) AS-AT-r
Greer, M. D. Clarksburg, WV (3) VP-D-r VP
Gregg, P. P. New Orleans, LA (5)
Grone, J. A. Lima, OH (8)
Groves, R. J. New York, NY (23) D-df
Haas, R. A., Jr. Pittsburgh, PA (1) AVP-r
Halbritter, M. A. Clarksburg, WV (7) GC-S-D-r
Hickly, G. J., Jr. *** Pittsburgh, PA (11)
Hostetler, J. M. Pittsburgh, PA (1) r
Hunter, W. R. Norfolk, VA (6) VP-Cn-T-r
Jacobs, R. L. Clarksburg, WV (3) r
Jacquet, T. J. New Orleans, LA (5)
Jeffries, G. A. Pittsburgh, PA (11)
Johns, D. M., Jr. New Orleans, LA (5) AS
</TABLE>
* Effective January 1, 1997, West Ohio Gas merged with East Ohio Gas.
** Mr. Best resigned effective March 8, 1997.
*** Mr. Hickly resigned effective April 18, 1997.
Address key and position symbol key are located on page 13.
14
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Name of System Companies with Which Connected
- ---------------------------------------------------------------------------------------------------
West CNG CNG Energy CNG Power CNG Consolidated CNG CNG CNG
Ohio Gas* Producing Services Services International LNG Research Coal Financial
<S> <C> <C> <C> <C> <C> <C> <C> <C>
AS
AS-r S
D
VP-r
S S-D
S-r S
VP-r VP-D
SVP-r
VP-r VP-D
VP-r
D
SVP-CFO-T-D-r VP-T-D
S-T-D-r
Cn-T-r T
AS AS AS AS AS
AS
AS-r
AS-r AS
GC-S-r GC-AS-D
</TABLE>
15
<PAGE>
ITEM 6. OFFICERS AND DIRECTORS (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
---------------------------------------------------------------------------
Parent Service CNG Hope East Peoples Virginia
Company Company Transmission Gas Ohio Gas Natural Gas Natural Gas
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Jones, B. E. Washington, DC (10) VP-r
Keiffer, J. D. Pittsburgh, PA (11)
Klink, B. C. Cleveland, OH (4) SVP-D-r
Koeppel, H. K. Reston, VA (12)
Kovach, R. A. Cleveland, OH (4) VP-D-r
Leber, J. W. New Orleans, LA (5)
Lego, P. E. Pittsburgh, PA (15) D-df
Lepionka, R. L. Pittsburgh, PA (11)
Lewis, J. New Orleans, LA (5)
Magnuson, M. G. Washington, DC (10) VP-AtGC-r
Manley, M. J. Clarksburg, WV (3) AT-r AT
Marks, E. J., III Pittsburgh, PA (1) r
Mayernick, C. S. Pittsburgh, PA (2) D-r
McGreevy, S. R. Pittsburgh, PA (1) VP VP-r
McKenna, M. A. Cambridge, MA (9) D-df
McKeown, L. J. Pittsburgh, PA (1) S S-r AS
Meyer, D. S. Pittsburgh, PA (2) VP-T-D-r
Millet, D. G. New Orleans, LA (5)
Minter, S. A. Cleveland, OH (16) D-df
Newland, T. D. Cleveland, OH (4) D P-D-r
Nicholas, G. A. Clarksburg, WV (7) VP-GM-D-r
Nichols, C. J. New Orleans, LA (5)
Owens, R. M. Clarksburg, WV (7) VP-D-r
Peirson, W. R. Northfield, IL (17) D-df
Plusquellec, P. L. New Orleans, LA (5)
Riley, H. P. New Orleans, LA (5) D
Rutledge, D. B. New Orleans, LA (5)
Sable, R. M., Jr. Pittsburgh, PA (1) T T-r
Schwartz, E. S. Pittsburgh, PA (2) r
Simmons, R. P. Pittsburgh, PA (18) D-df
Slaby, J. B. Clarksburg, WV (3) VP-T-D-r T
Smith, R. M. Pittsburgh, PA (2) VP-D-r
Staton, J. D. Clarksburg, WV (3) VP-D-r
Suttle, N. W., Jr. Clarksburg, WV (3) AT-r AT
Sypolt, G. L. Clarksburg, WV (3) VP-D-r
Taaffe, G. A., Jr. Pittsburgh, PA (1) AS VP-AtGC-r GC
Taylor, R. D. Pittsburgh, PA (1) AVP-r
Thomson, J. S. Reston, VA (12)
Usaj, J. S. Pittsburgh, PA (1) VP-r
Vuchetich, M. K. Lima, OH (8)
Wester, T. E. Pittsburgh, PA (2) VP-D-r
Westfall, D. M. Pittsburgh, PA (1) SVP-CFO SVP-CFO-D-r
Whitehurst, G. W. Norfolk, VA (22) D-df
Whitlinger, M. M. Pittsburgh, PA (1) AT AT-r
Williams, S. E. Pittsburgh, PA (1) SVP-GC SVP-GC-D-r
Witter, D. J. Lima, OH (13)
Wojcik, J. S. Pittsburgh, PA (2) D-r
Wright, R. E. Pittsburgh, PA (1) VP-r
Wyse, L. New York, NY (20) D-df
Yoho, M. L. Clarksburg, WV (3) SVP-D-r
Zachariason, R. A. Pittsburgh, PA (11)
</TABLE>
*See (*) on page 14.
Address key and position symbol key are located on page 13.
16
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Name of System Companies with Which Connected
- --------------------------------------------------------------------------------------------
West CNG CNG Energy CNG Power CNG Consolidated CNG CNG CNG
Ohio Gas* Producing Services Services International LNG Research Coal Financial
<S> <C> <C> <C> <C> <C> <C> <C> <C>
VP-D-r
VP-r
D
VP-r
AT-r AT
SVP-D-r
AS AS
D
AS S
AT-r AT
P-D
AT-r
AT
VP-r
P-D-r D
r AS
T-D T-D VP-T-GM-D
VP-GM-D
T-D
AS
P-D-r
VP-GM-D-r
D P-D
AT AT
P-D P-D D GC-S-D D
GC
VP-r VP
</TABLE>
17
<PAGE>
ITEM 6. OFFICERS AND DIRECTORS (Continued)
Part II. Banking connections
Information concerning all officers and Directors of each system company who
have financial connections within the provisions of Section 17(c) of the
Public Utility Holding Company Act of 1935 as of December 31, 1996, follows:
<TABLE>
<CAPTION>
Position Held Applicable
Name of Officer Name and Location in Financial Exemption
or Director of Financial Institution Institution Rule
------------------- ----------------------------- ------------- -----------
<C> <S> <C> <C>
J. W. Connolly Mellon Bank Corporation* Director 70
and Mellon Bank, N.A. (a)
Pittsburgh, Pennsylvania
G. A. Davidson, Jr. PNC Bank Corp. Director 70
Pittsburgh, Pennsylvania (a)(c)(e)(f)
M. D. Greer Huntington National Advisory 70
Bank, West Virginia Director (c)(f)
Morgantown, West Virginia
S. A. Minter KeyCorp Director 70
Cleveland, Ohio (a)
R. P. Simmons PNC Bank Corp. Director 70
Pittsburgh, Pennsylvania (a)
R. E. Wright Dollar Bank Director 70
Pittsburgh, Pennsylvania (c)(f)
</TABLE>
- ----------
* Bank holding company.
Part III. Compensation and other related information
(a) The compensation of Directors and executive officers of system companies:
Information concerning the compensation of the five highest paid Directors and
executive officers of the system (with all subsidiaries treated as divisions)
for the year 1996 is included in the Registrant's "1997 Notice of Annual
Meeting and Proxy Statement" which is filed as Exhibit F.(3) to this Form U5S.
Information presented under the captions "COMPENSATION OF EXECUTIVE OFFICERS--
SUMMARY COMPENSATION TABLE" on page 12, and "NON-EMPLOYEE DIRECTORS'
COMPENSATION" on pages 19 and 20, in such proxy statement is hereby
incorporated by reference.
(b) Their interest in the securities of system companies including options or
other rights to acquire securities:
Information concerning the interest of Directors and executive officers in the
securities of system companies, including options or other rights to acquire
securities, is included in the Registrant's "1997 Notice of Annual Meeting and
Proxy Statement" which is filed as Exhibit F.(3) to this Form U5S. Information
presented under the following captions in such proxy statement is hereby
incorporated by reference: "SECURITY OWNERSHIP OF DIRECTORS AND OFFICERS" on
page 11; "TRIANNUAL OPTION GRANTS IN LAST FISCAL YEAR" on page 13; "AGGREGATED
NON-QUALIFIED STOCK OPTION EXERCISES IN LAST FISCAL YEAR AND DECEMBER 31,
1996, YEAR-END NON-QUALIFIED STOCK OPTION VALUES" on
page 14; and "LONG-TERM INCENTIVE PLAN AWARDS IN THE LAST FISCAL YEAR" on page
14.
(c) Their contracts and transactions with system companies:
Information concerning the contracts and transactions by Directors and
executive officers with system companies is included in the Registrant's "1997
Notice of Annual Meeting and Proxy Statement" which is filed as Exhibit F.(3)
to this Form U5S. Information presented under the caption "COMPENSATION
COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION" on page 20 in such proxy
statement is hereby incorporated by reference.
18
<PAGE>
ITEM 6. OFFICERS AND DIRECTORS (Concluded)
(d) Their indebtedness to system companies:
None.
(e) Their participation in bonus and profit-sharing arrangements and other
benefits:
Information concerning the participation by Directors and executive officers
in other benefits is included in the Registrant's "1997 Notice of Annual
Meeting and Proxy Statement" which is filed as Exhibit F.(3) to this Form U5S.
Information presented under the captions "LIFE INSURANCE AND RELATED BENEFIT
PLANS" on pages 20 and 21, and "RETIREMENT PROGRAMS" on page 21, in such proxy
statement is hereby incorporated by reference.
(f) Their rights to indemnification:
Pursuant to Section 145 of the General Corporation Law of the State of
Delaware, in which the Company is incorporated, the Company's by-laws
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative (other than an action by or
in the right of the Company) by reason of the fact that he is or was a
Director, officer, employee or agent of the Company, or is or was serving at
the request of the Company as a Director, officer, employee or agent, against
expenses (including attorneys' fees), judgment, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Company, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful.
The Company also purchases directors and officers liability insurance with
limits of $150 million, and, in recognition of the scope of the foregoing by-
law indemnification, certain other errors and omissions and general liability
insurance coverages which are applicable to all employees as insureds,
including Directors and officers.
19
<PAGE>
ITEM 7. CONTRIBUTIONS AND PUBLIC RELATIONS
Tabulated below for each system company are the expenditures, disbursements,
or payments made during the year 1996, directly or indirectly, to or for the
account of any citizens group, or public relations counsel. There were no
payments made to any political party, candidate for public office or holder of
such office, or any committee or agent therefor by the system companies during
the year 1996.
<TABLE>
<CAPTION>
Accounts Charged
Name or Number of Per Books of
Name of Company Beneficiary(ies) Purpose Disbursing Company Amount
- ------------------- --------------------------------------- ------------------ ----------------------- -------
<S> <C> <C> <C> <C>
Parent Company Democratic Leadership Council(Note /1/) Civic Other income deductions $10,000
Parent Company The Congressional Institute(Note /1/) Civic Other income deductions $10,000
East Ohio Gas Five beneficiaries Civic Other income deductions $11,775
West Ohio Gas One beneficiary Public information Operating expenses $ 25
CNG Producing Two beneficiaries Civic Operating expenses $ 600
One beneficiary Public information Operating expenses $ 167
CNG Energy Services Seven beneficiaries Civic Operating expenses $ 3,941
</TABLE>
- ----------
Notes:
(1) All beneficiaries are nonprofit and nonpartisan civic organizations tax-
exempt under Section 501(c)(4) of the Internal Revenue Code.
(2) The information set forth above with respect to the subsidiary companies
of the Parent Company is based upon memoranda submitted to the Parent
Company for such purpose by each of its subsidiary companies, which
memoranda are in the certified form required by Instruction 2 to ITEM 7.
The Parent Company is preserving such memoranda.
ITEM 8. SERVICE, SALES AND CONSTRUCTION CONTRACTS
Part I. Contracts for services, including engineering or construction
services, or goods supplied or sold between system companies during the
year 1996 are as follows:
<TABLE>
<CAPTION>
Date of Contract(s)
Transaction (Note 1) Serving Company Receiving Company Compensation (Note 2)
--------------------- ------------------- -------------------- ------------ ------------------------
<S> <C> <C> <C> <C>
Aircraft services CNG Transmission Hope Gas $ 2,896 Note 3
Management services CNG Transmission Hope Gas $3,672,883 January 1, 1984
Management services CNG Transmission CNG Power $ 207,027 August 15, 1983
Management services CNG Producing CNG Energy Services $ 475,594 October 1, 1990 (Note 4)
Management services CNG Energy Services CNG Power $ 397,277 January 1, 1995
Management services CNG Energy Services CNG Power Services $1,191,036 November 1, 1994
Management and repair
services
and supplies East Ohio Gas West Ohio Gas $ 493,149 December 2, 1969
Management services CNG Energy Services CNG Producing $1,599,654 September 24, 1987
Management services East Ohio Gas Peoples Natural Gas $ 718,759 December 1, 1995
Management services Peoples Natural Gas East Ohio Gas $ 371,258 August 18, 1995
Management services Peoples Natural Gas Virginia Natural Gas $ 137,440 Note 5
</TABLE>
- ----------
Notes:
(1) Contracts for aircraft and management services with aggregate
consideration passing between the same companies of less than $100,000
have been omitted.
(2) All contracts were in effect at December 31, 1996, except as noted.
(3) Aircraft service contracts are dated May 1, 1984 and February 17, 1992.
Fixed-wing aircraft owned by CNG Transmission were sold to non-affiliated
parties in May and July of 1995. The remaining aircraft services consist
of the use of helicopters.
(4) Of this amount, $284,979 relates to an Information Services and Special
Services Agreement dated July 17, 1996.
(5) Approval of contract pending.
Part II. Contracts to purchase services or goods between any system company
and any affiliate (other than a system company) or any company in which
any officer or director of the receiving company is a partner or owns 5
percent or more of any class of equity securities:
None.
Part III. Employment of any person by any system company for the performance
on a continuing basis of management, supervisory or financial advisory
services:
None.
20
<PAGE>
ITEM 9. WHOLESALE GENERATORS AND FOREIGN UTILITY COMPANIES
Part I. Information concerning the interests held by system companies in
exempt wholesale generators or foreign utility companies:
(a)(1) Information concerning the interests held by system companies in an
exempt wholesale generator (EWG) follows.
<TABLE>
<S> <C>
Company Name: Lakewood Cogeneration, L.P.
Location of Fa-
cility: Lakewood, New Jersey
Business Ad-
dress: c/o CMS Hydra-Co Enterprises, Inc.
Fairlane Plaza South
330 Town Center Drive, Suite 1000
Dearborn, MI 48126-2712
</TABLE>
The Lakewood EWG facility (Facility) is a 237-megawatt combined-cycle, gas-
fired facility, dispatchable by General Public Utilities (GPU) (formerly
Jersey Central Power & Light Company) via the Pennsylvania-Jersey-Maryland
grid. The Facility uses 2 gas turbines, 2 heat recovery steam generators, and
1 steam turbine generator. Fuel oil is used as a back-up fuel. The Facility is
directly connected to a GPU switchyard, which is the point of sale for the
electricity. The Facility commenced commercial operations in November 1994.
CNG Power, a wholly owned subsidiary of CNG Energy Services, holds a 34
percent limited partnership interest in Lakewood Cogeneration, L.P. (Lakewood
Partnership). CNG Lakewood, a wholly owned subsidiary of CNG Power Services,
owns a 1 percent general partnership interest in the Lakewood Partnership.
(a)(2) Information concerning the interests held by system companies in a
foreign utility company (FUCO) follows.
During 1996, CNG International purchased a 16.5% limited partnership interest
in The Latin America Energy and Electricity Fund I, L.P. (Latin America Fund),
a Cayman Islands exempted limited partnership, and an 8.29% general
partnership interest in FondElec General Partner, L.P. (FondElec). FondElec
holds a 1% general partnership interest in the Latin America Fund. The Latin
America Fund's business is limited to investing in FUCOs in Latin America. As
part of the transaction, CNG International obtains an ownership interest,
equal to its percentage ownership interest in the partnership, in each of the
Latin America Fund's investments. The Latin America Fund had investments in
two FUCOs as of December 31, 1996.
The name and address of the Latin America Fund are as follows:
The Latin America Energy and Electricity Fund I, L.P.
Stamford Harbor Park
333 Ludlow Street
Stamford, CT 06902
(b)(1) At December 31, 1996, CNG's total investment in the Lakewood
Partnership was $15,893,000.
The Lakewood Partnership has term loans with a group of banks that total
$202.4 million at December 31, 1996. These loans are nonrecourse to the
partners.
CNG's cumulative equity contributions to the Lakewood Partnership total
$17,850,000 at December 31, 1996.
There have been no transfers of assets from a CNG affiliate to the Facility.
21
<PAGE>
ITEM 9. WHOLESALE GENERATORS AND FOREIGN UTILITY COMPANIES (Concluded)
(b)(2) At December 31, 1996, CNG International's investment in the Latin
America Fund totaled $3,441,000. CNG International's total commitment for
investment in the Latin America Fund is $10,000,000, with future payments
expected to be made in the next two years as future individual investment
proposals are made to CNG International for its decision as to whether to
participate.
There have been no transfers of assets from a CNG affiliate to any FUCO in
which the Latin America Fund has an interest.
(c)(1) The capital structure of the Lakewood Partnership is 82 percent debt
and 18 percent equity at December 31, 1996. The Lakewood Partnership had
earnings of $6,400,977 for the year ended December 31, 1996.
(c)(2) The Latin America Fund is an equity investment fund and as such has a
capital structure consisting of equity funds contributed by its partners.
Accordingly, there is no meaningful debt to equity ratio for the Latin America
Fund. The Latin America Fund had earnings of $554,328 for the year ended
December 31, 1996.
(d)(1) The Lakewood Partnership has an agreement with CNG Energy Services
whereby CNG Energy Services provides all fuel management services for the
Facility, including fuel procurement, transportation and administering the
contracts for the purchase, transportation and storage of the fuels for the
Facility. In addition to tolling fees based on the volumes of fuel used in the
facility, CNG Energy Services receives a monthly administration fee. This fee,
originally set at $6,250 per month, is adjusted by the Gross Domestic Product
Deflator Ratio effective January 1 of each calendar year.
(d)(2) There are no service, sales or construction contracts between the Latin
America Fund, or any FUCOs in which the Latin America Fund has an interest,
and a CNG system company.
Part II. Relationship of exempt wholesale generators and foreign utility
companies to system companies, and financial data:
Organization charts showing the relationship of the Lakewood Partnership and
the Latin America Fund to other system companies are filed as Exhibits H.(1)
and H.(2), respectively, to this Form U5S. Financial statements of the
Lakewood Partnership and the Latin America Fund are filed as Exhibits I.(1)
and I.(2), respectively, to this Form U5S.
Part III. Investment in exempt wholesale generators and foreign utility
companies:
At December 31, 1996, the Company's aggregate investment in the Lakewood
Partnership and the Latin America Fund amounted to $15,893,000 and $3,441,000,
respectively. The ratio of the aggregate investment in the Lakewood
Partnership and the Latin America Fund to the Registrant's aggregate capital
investment in its domestic public utility subsidiaries was 1.1 percent and 0.2
percent, respectively, at December 31, 1996.
22
<PAGE>
(THIS PAGE WAS INTENTIONALLY LEFT BLANK)
23
<PAGE>
ITEM 10. FINANCIAL STATEMENTS AND EXHIBITS
FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 1996
INDEX
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Independent Accountants.......................................... 25
Consolidating Balance Sheet................................................ 26
Consolidating Income Statement............................................. 30
Consolidating Statement of Retained Earnings............................... 32
Consolidating Statement of Cash Flows...................................... 34
Consolidating Balance Sheet Supplement..................................... 36
Consolidating Income Statement Supplement.................................. 38
Consolidating Statement of Retained Earnings Supplement.................... 39
Consolidating Statement of Cash Flows Supplement........................... 40
CNG TRANSMISSION CORPORATION:
Consolidating Balance Sheet............................................... 42
Consolidating Income Statement............................................ 44
Consolidating Statement of Retained Earnings.............................. 45
Consolidating Statement of Cash Flows..................................... 46
CNG PRODUCING COMPANY:
Consolidating Balance Sheet............................................... 48
Consolidating Income Statement............................................ 50
Consolidating Statement of Retained Earnings.............................. 51
Consolidating Statement of Cash Flows..................................... 52
CNG ENERGY SERVICES CORPORATION:
Consolidating Balance Sheet............................................... 54
Consolidating Income Statement............................................ 56
Consolidating Statement of Retained Earnings.............................. 57
Consolidating Statement of Cash Flows..................................... 58
CNG POWER COMPANY:
Consolidating Balance Sheet............................................... 60
Consolidating Income Statement............................................ 62
Consolidating Statement of Retained Earnings.............................. 63
Consolidating Statement of Cash Flows..................................... 64
CNG PRODUCTS AND SERVICES, INC.:
Consolidating Balance Sheet............................................... 66
Consolidating Income Statement............................................ 68
Consolidating Statement of Retained Earnings.............................. 69
Consolidating Statement of Cash Flows..................................... 70
CNG POWER SERVICES CORPORATION:
Consolidating Balance Sheet............................................... 72
Consolidating Income Statement............................................ 74
Consolidating Statement of Retained Earnings.............................. 75
Consolidating Statement of Cash Flows..................................... 76
CNG INTERNATIONAL CORPORATION:
Consolidating Balance Sheet............................................... 78
Consolidating Income Statement............................................ 80
Consolidating Statement of Retained Earnings.............................. 81
Consolidating Statement of Cash Flows..................................... 82
Notes to Consolidated Financial Statements................................. Note
</TABLE>
- ----------
Note: The Notes to Consolidated Financial Statements appearing on pages 23 to
50 of Exhibit 99 to Consolidated Natural Gas Company's Annual Report on
Form 10-K for the year ended December 31, 1996, are incorporated herein by
reference.
EXHIBITS
A list of the exhibits is on page 83.
24
<PAGE>
ITEM 10. FINANCIAL STATEMENTS AND EXHIBITS (Continued)
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
Consolidated Natural Gas Company
In our opinion, the financial statements listed in the accompanying index on
page 24 present fairly, in all material respects, the consolidated financial
position of Consolidated Natural Gas Company and its subsidiaries at December
31, 1996, and the results of their operations and their cash flows for the
year then ended, in conformity with generally accepted accounting principles.
These financial statements are the responsibility of the Company's management;
our responsibility is to express an opinion on these financial statements
based on our audit. We conducted our audit of these statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for the
opinion expressed above.
Our audit was made for the purpose of forming an opinion on the consolidated
financial statements taken as a whole. The consolidating information on pages
26 through 82 is presented for purposes of complying with the requirements of
the Public Utility Holding Company Act of 1935 rather than to present
financial position, results of operations, and cash flows of the individual
companies. Accordingly, we do not express an opinion on the financial
position, results of operations and cash flows of the individual companies.
However, the consolidating information on pages 26 through 82 has been
subjected to the auditing procedures applied in the audit of the consolidated
financial statements and, in our opinion, is fairly stated in all material
respects in relation to the consolidated financial statements taken as a
whole.
Price Waterhouse LLP
600 Grant Street
Pittsburgh, Pennsylvania 15219-9954
February 18, 1997
25
<PAGE>
ITEM 10. (Continued)
CONSOLIDATED NATURAL GAS COMPANY
CONSOLIDATING BALANCE SHEET
At December 31, 1996
(Thousands of Dollars)
<TABLE>
<CAPTION>
CONSOLIDATED
------------ --------------------
CNG Eliminations
and and Combined CNGT
Assets Subsidiaries Adjustments* Total CNG CNGSvc (Page 42)
- ------ ------------ ------------ ----------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
PROPERTY, PLANT AND EQUIPMENT (Note 3)
Gas utility and other plant.................... $ 4,848,392 $ (2,228) $ 4,850,620 $ -- $ 29,501 $2,062,752
Accumulated depreciation and amortization...... (1,840,129) 376 (1,840,505) -- (17,491) (809,354)
----------- ----------- ----------- ---------- -------- ----------
Net gas utility and other plant.............. 3,008,263 (1,852) 3,010,115 -- 12,010 1,253,398
----------- ----------- ----------- ---------- -------- ----------
Exploration and production properties.......... 3,455,813 -- 3,455,813 -- -- 225,260
Accumulated depreciation and amortization...... (2,386,776) 25,236 (2,412,012) -- -- (195,876)
----------- ----------- ----------- ---------- -------- ----------
Net exploration and production properties.... 1,069,037 25,236 1,043,801 -- -- 29,384
----------- ----------- ----------- ---------- -------- ----------
Net property, plant and equipment............ 4,077,300 23,384 4,053,916 -- 12,010 1,282,782
----------- ----------- ----------- ---------- -------- ----------
INVESTMENTS
Stocks of subsidiary companies,
at equity -- consolidated..................... -- (2,251,482) 2,251,482 2,251,482 -- --
Notes of subsidiary companies -- consolidated.. -- (1,234,054) 1,234,054 1,234,054 -- --
----------- ----------- ----------- ---------- -------- ----------
Total investments............................ -- (3,485,536) 3,485,536 3,485,536 -- --
----------- ----------- ----------- ---------- -------- ----------
CURRENT ASSETS
Cash and temporary cash investments............ 44,524 -- 44,524 2,454 567 491
Accounts receivable
Customers..................................... 647,207 -- 647,207 -- -- 43,753
Unbilled revenues and other................... 161,525 -- 161,525 57 558 2,625
Allowance for doubtful accounts............... (15,167) -- (15,167) -- -- (938)
Receivables from affiliated
companies -- consolidated..................... -- (1,270,139) 1,270,139 583,029 507,032 15,894
Inventories, at cost
Gas stored -- current portion (Note 8)........ 170,513 (2,089) 172,602 -- -- --
Materials and supplies (average cost method).. 33,070 -- 33,070 -- -- 12,932
Unrecovered gas costs (Note 2)................. 108,016 -- 108,016 -- -- 12,027
Deferred income taxes -- current (net)......... -- (348) 348 -- -- --
Prepayments and other current assets........... 243,333 -- 243,333 51,768 1,298 37,729
----------- ----------- ----------- ---------- -------- ----------
Total current assets......................... 1,393,021 (1,272,576) 2,665,597 637,308 509,455 124,513
----------- ----------- ----------- ---------- -------- ----------
REGULATORY AND OTHER ASSETS
Unamortized abandoned facilities (Note 9)...... 15,791 -- 15,791 -- -- --
Other investments.............................. 149,858 -- 149,858 500 -- 34,389
Deferred charges and other assets
(Notes 2, 4, 6, 7, 15 and 16)................. 364,635 (110,807) 475,442 24,359 16,415 69,312
----------- ----------- ----------- ---------- -------- ----------
Total regulatory and other assets............ 530,284 (110,807) 641,091 24,859 16,415 103,701
----------- ----------- ----------- ---------- -------- ----------
Total assets................................. $ 6,000,605 $(4,845,535) $10,846,140 $4,147,703 $537,880 $1,510,996
=========== =========== =========== ========== ======== ==========
</TABLE>
- ---------
* The elimination journal entries pertaining to this consolidating financial
statement are prepared in detail form, showing the amounts pertaining to
the Registrant and each subsidiary company, and are preserved with the
Registrant's copy of this Form U5S.
( ) denotes negative amount.
The Notes to Consolidated Financial Statements are an integral part of this
statement (see Note on page 24).
26
<PAGE>
<TABLE>
<CAPTION>
SUBSIDIARIES
- ---------------------------------------------------------------------------------------------------------------------
Other
CNGP CNGESC CNGPSC CNGI Subsidaries
EOG PNG VNG HGI WOG (Page 48) (Page 54) (Page 72) (Page 78) LNG (Page 36)
- ---------- --------- --------- -------- -------- ----------- --------- --------- --------- ------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$1,308,068 $ 693,193 $ 474,101 $170,467 $ 70,884 $ -- $ 39,073 $ 2,340 $ 241 $ -- $ --
(545,333) (246,543) (121,029) (67,416) (28,679) -- (4,643) -- (17) -- --
- ---------- --------- --------- -------- -------- ----------- -------- ------- ------- ------- ------
762,735 446,650 353,072 103,051 42,205 -- 34,430 2,340 224 -- --
- ---------- --------- --------- -------- -------- ----------- -------- ------- ------- ------- ------
-- -- -- -- -- 3,230,553 -- -- -- -- --
-- -- -- -- -- (2,216,136) -- -- -- -- --
- ---------- --------- --------- -------- -------- ----------- -------- ------- ------- ------- ------
-- -- -- -- -- 1,014,417 -- -- -- -- --
- ---------- --------- --------- -------- -------- ----------- -------- ------- ------- ------- ------
762,735 446,650 353,072 103,051 42,205 1,014,417 34,430 2,340 224 -- --
- ---------- --------- --------- -------- -------- ----------- -------- ------- ------- ------- ------
-- -- -- -- -- -- -- -- -- -- --
-- -- -- -- -- -- -- -- -- -- --
- ---------- --------- --------- -------- -------- ----------- -------- ------- ------- ------- ------
-- -- -- -- -- -- -- -- -- -- --
- ---------- --------- --------- -------- -------- ----------- -------- ------- ------- ------- ------
9,690 5,235 528 2,861 253 991 12,445 8,682 221 30 76
220,027 84,956 27,141 22,687 16,944 4,292 226,596 811 -- -- --
62,162 6,548 15,211 5,751 5,948 42,548 4,377 14,318 1,151 -- 271
(2,540) (4,335) (189) (1,139) (95) (1,000) (4,931) -- -- -- --
626 284 -- 4,911 -- 101,933 30,543 -- -- 22,766 3,121
86,031 33,615 17,978 7,785 7,898 -- 19,295 -- -- -- --
11,914 2,330 678 1,664 963 2,313 262 14 -- -- --
41,993 34,711 13,322 -- 5,963 -- -- -- -- -- --
-- -- -- 348 -- -- -- -- -- -- --
77,874 8,802 431 2,518 2,500 5,093 54,083 1,149 -- 2 86
- ---------- --------- --------- -------- -------- ----------- -------- ------- ------- ------- ------
507,777 172,146 75,100 47,386 40,374 156,170 342,670 24,974 1,372 22,798 3,554
- ---------- --------- --------- -------- -------- ----------- -------- ------- ------- ------- ------
-- -- -- -- -- -- -- -- -- 15,791 --
-- -- 53 3,475 -- -- 68,868 401 42,172 -- --
172,400 138,590 12,019 13,698 12,186 7,785 3,099 -- 3 1,617 3,959
- ---------- --------- --------- -------- -------- ----------- -------- ------- ------- ------- ------
172,400 138,590 12,072 17,173 12,186 7,785 71,967 401 42,175 17,408 3,959
- ---------- --------- --------- -------- -------- ----------- -------- ------- ------- ------- ------
$1,442,912 $ 757,386 $ 440,244 $167,610 $ 94,765 $ 1,178,372 $449,067 $27,715 $43,771 $40,206 $7,513
========== ========= ========= ======== ======== =========== ======== ======= ======= ======= ======
</TABLE>
27
<PAGE>
ITEM 10. (Continued)
CONSOLIDATED NATURAL GAS COMPANY
CONSOLIDATING BALANCE SHEET
At December 31, 1996
(Thousands of Dollars)
<TABLE>
<CAPTION>
CONSOLIDATED
---------------- --------------------
Eliminations
CNG and Combined CNGT
Stockholders' Equity and Liabilities and Subsidiaries Adjustments* Total CNG CNGSvc (Page 43)
- ------------------------------------ ---------------- ------------ ----------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
CAPITALIZATION
Common stockholders' equity (Note 10)
Common stock -- par value $2.75 per share
400,000,000 authorized shares
Issued -- 94,933,631 shares................. $ 261,068 $(1,657,163) $ 1,918,231 $ 261,068 $ 10 $ 590,000
Capital in excess of par value............... 537,002 (104,044) 641,046 497,037 -- 2,254
Retained earnings, per accompanying statement
(Note 12)................................... 1,424,624 (479,605) 1,904,229 1,424,624 -- 150,846
Unearned compensation........................ (17,542) (17,542) -- -- -- --
---------- ----------- ----------- ---------- -------- ----------
Total common stockholders' equity........... 2,205,152 (2,258,354) 4,463,506 2,182,729 10 743,100
---------- ----------- ----------- ---------- -------- ----------
Long-term debt (Note 13)
Debentures................................... 1,173,821 -- 1,173,821 1,173,821 -- --
Convertible subordinated debentures.......... 244,494 -- 244,494 244,494 -- --
Unsecured loan............................... 8,000 -- 8,000 -- -- --
Notes payable to Registrant -- consolidated.. -- (1,234,054) 1,234,054 -- 14,152 384,206
---------- ----------- ----------- ---------- -------- ----------
Total long-term debt........................ 1,426,315 (1,234,054) 2,660,369 1,418,315 14,152 384,206
---------- ----------- ----------- ---------- -------- ----------
Total capitalization........................ 3,631,467 (3,492,408) 7,123,875 3,601,044 14,162 1,127,306
---------- ----------- ----------- ---------- -------- ----------
CURRENT LIABILITIES
Current maturities on long-term debt.......... 104,000 -- 104,000 100,000 -- --
Commercial paper (Note 14).................... 374,000 -- 374,000 374,000 -- --
Accounts payable.............................. 535,296 -- 535,296 216 10,033 33,215
Estimated rate contingencies and refunds
(Note 2)..................................... 21,602 -- 21,602 -- -- 4,989
Payables to affiliated companies --
consolidated................................ -- (1,270,139) 1,270,139 -- 500,396 52,279
Taxes accrued................................. 97,336 -- 97,336 (1,369) 1,180 30,996
Deferred income taxes --
current (net) (Note 7)...................... 36,096 (348) 36,444 -- -- 1,049
Dividends declared............................ 46,043 -- 46,043 46,043 -- --
Other current liabilities..................... 150,047 -- 150,047 22,612 3,578 26,765
---------- ----------- ----------- ---------- -------- ----------
Total current liabilities................... 1,364,420 (1,270,487) 2,634,907 541,502 515,187 149,293
---------- ----------- ----------- ---------- -------- ----------
DEFERRED CREDITS
Deferred income taxes (Note 7)................ 681,334 8,499 672,835 (625) (3,851) 158,530
Accumulated deferred investment tax credits... 28,838 -- 28,838 -- -- 164
Deferred credits and other liabilities (Notes
7 and 15).................................... 294,546 (91,139) 385,685 5,782 12,382 75,703
---------- ----------- ----------- ---------- -------- ----------
Total deferred credits...................... 1,004,718 (82,640) 1,087,358 5,157 8,531 234,397
---------- ----------- ----------- ---------- -------- ----------
COMMITMENTS AND CONTINGENCIES (Note 17)
---------- ----------- ----------- ---------- -------- ----------
Total stockholders' equity and liabilities.. $6,000,605 $(4,845,535) $10,846,140 $4,147,703 $537,880 $1,510,996
========== =========== =========== ========== ======== ==========
</TABLE>
- ---------
* The elimination journal entries pertaining to this consolidating financial
statement are prepared in detail form, showing the amounts pertaining to
the Registrant and each subsidiary company, and are preserved with the
Registrant's copy of this Form U5S.
( ) denotes negative amount.
The Notes to Consolidated Financial Statements are an integral part of this
statement (see Note on page 24).
28
<PAGE>
<TABLE>
<CAPTION>
SUBSIDIARIES
- ------------------------------------------------------------------------------------------------------------------
Other
CNGP CNGESC CNGPSC CNGI Subsidiaries
EOG PNG VNG HGI WOG (Page 49) (Page 55) (Page 73) (Page 79) LNG (Page 37)
- ---------- -------- -------- -------- ------- ---------- --------- --------- --------- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 237,968 $165,535 $109,697 $ 40,900 $14,990 $ 371,000 $ 3 $ 15,520 $ 44,940 $ 28,400 $ 38,200
4,550 -- 57,603 -- 435 -- 79,167 -- -- -- --
183,845 72,175 3,042 14,852 7,784 81,817 (3,027) (3,198) (2,631) 5,782 (31,682)
-- -- -- -- -- -- -- -- -- -- --
- ---------- -------- -------- -------- ------- ---------- -------- -------- -------- -------- --------
426,363 237,710 170,342 55,752 23,209 452,817 76,143 12,322 42,309 34,182 6,518
- ---------- -------- -------- -------- ------- ---------- -------- -------- -------- -------- --------
-- -- -- -- -- -- -- -- -- -- --
-- -- -- -- -- -- -- -- -- -- --
-- -- 8,000 -- -- -- -- -- -- -- --
208,699 144,628 97,418 39,052 12,281 313,575 20,043 -- -- -- --
- ---------- -------- -------- -------- ------- ---------- -------- -------- -------- -------- --------
208,699 144,628 105,418 39,052 12,281 313,575 20,043 -- -- -- --
- ---------- -------- -------- -------- ------- ---------- -------- -------- -------- -------- --------
635,062 382,338 275,760 94,804 35,490 766,392 96,186 12,322 42,309 34,182 6,518
- ---------- -------- -------- -------- ------- ---------- -------- -------- -------- -------- --------
-- -- 4,000 -- -- -- -- -- -- -- --
-- -- -- -- -- -- -- -- -- -- --
150,852 45,614 32,125 8,401 6,992 85,308 149,021 12,739 778 -- 2
10,375 945 2,761 2,232 300 -- -- -- -- -- --
292,639 107,479 78,645 16,471 31,548 51,061 137,201 1,481 918 -- 21
60,717 2,521 1,292 4,018 (261) 797 (2,137) (542) (240) (69) 433
14,283 15,166 3,877 -- 2,069 -- -- -- -- -- --
-- -- -- -- -- -- -- -- -- -- --
20,235 12,165 11,418 3,421 1,188 8,321 38,818 1,527 (1) -- --
- ---------- -------- -------- -------- ------- ---------- -------- -------- -------- -------- --------
549,101 183,890 134,118 34,543 41,836 145,487 322,903 15,205 1,455 (69) 456
- ---------- -------- -------- -------- ------- ---------- -------- -------- -------- -------- --------
137,146 116,125 1,821 10,464 5,312 226,446 14,640 188 7 6,093 539
13,151 9,248 3,140 2,577 558 -- -- -- -- -- --
108,452 65,785 25,405 25,222 11,569 40,047 15,338 -- -- -- --
- ---------- -------- -------- -------- ------- ---------- -------- -------- -------- -------- --------
258,749 191,158 30,366 38,263 17,439 266,493 29,978 188 7 6,093 539
- ---------- -------- -------- -------- ------- ---------- -------- -------- -------- -------- --------
- ---------- -------- -------- -------- ------- ---------- -------- -------- -------- -------- --------
$1,442,912 $757,386 $440,244 $167,610 $94,765 $1,178,372 $449,067 $ 27,715 $ 43,771 $ 40,206 $ 7,513
========== ======== ======== ======== ======= ========== ======== ======== ======== ======== ========
</TABLE>
29
<PAGE>
ITEM 10. (Continued)
CONSOLIDATED NATURAL GAS COMPANY
CONSOLIDATING INCOME STATEMENT
For the Year Ended December 31, 1996
(Thousands of Dollars)
<TABLE>
<CAPTION>
CONSOLIDATED
---------------- ------------------
Eliminations
CNG and Combined CNGT
and Subsidiaries Adjustments* Total CNG CNGSvc (Page 44)
---------------- ------------ ---------- -------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
OPERATING REVENUES
Regulated gas sales.............................. $1,752,223 $ (11,278) $1,763,501 $ -- $ -- $ --
Nonregulated gas sales........................... 1,092,486 (491,671) 1,584,157 -- -- 40,064
---------- --------- ---------- -------- ------- --------
Total gas sales................................. 2,844,709 (502,949) 3,347,658 -- -- 40,064
Gas transportation and storage................... 465,110 (119,836) 584,946 -- -- 451,121
Other............................................ 484,490 (69,494) 553,984 -- 60,154 54,511
---------- --------- ---------- -------- ------- --------
Total operating revenues (Note 2)............... 3,794,309 (692,279) 4,486,588 -- 60,154 545,696
---------- --------- ---------- -------- ------- --------
OPERATING EXPENSES
Purchased gas.................................... 1,614,983 (617,219) 2,232,202 -- -- 7,421
Transport capacity and other purchased products.. 346,747 (8,818) 355,565 -- -- 52,964
Operation expense (Note 4)....................... 699,289 (66,830) 766,119 9,659 53,664 150,703
Maintenance...................................... 90,067 -- 90,067 -- 997 24,963
Depreciation and amortization (Note 3)........... 304,171 2,362 301,809 -- 2,497 65,071
Taxes, other than income taxes................... 191,078 -- 191,078 2,500 1,643 38,833
---------- --------- ---------- -------- ------- --------
Subtotal........................................ 3,246,335 (690,505) 3,936,840 12,159 58,801 339,955
---------- --------- ---------- -------- ------- --------
Operating income before income taxes............ 547,974 (1,774) 549,748 (12,159) 1,353 205,741
Income taxes (Note 7)............................ 155,830 (868) 156,698 (13,493) -- 70,740
---------- --------- ---------- -------- ------- --------
Operating income................................ 392,144 (906) 393,050 1,334 1,353 135,001
---------- --------- ---------- -------- ------- --------
OTHER INCOME (DEDUCTIONS)
Interest revenues................................ 2,281 (8,044) 10,325 263 1 2,345
Other -- net..................................... 7,023 -- 7,023 (5,789) (70) 7,408
Equity in earnings of subsidiary companies--
consolidated -- (318,950) 318,950 318,950 -- --
Interest revenues from affiliated companies--
consolidated.................................... -- (108,174) 108,174 98,131 76 3,638
---------- --------- ---------- -------- ------- --------
Total other income (deductions)................. 9,304 (435,168) 444,472 411,555 7 13,391
---------- --------- ---------- -------- ------- --------
Income before interest charges.................. 401,448 (436,074) 837,522 412,889 1,360 148,392
---------- --------- ---------- -------- ------- --------
INTEREST CHARGES
Interest on long-term debt....................... 101,814 (86,789) 188,603 100,597 1,166 27,837
Other interest expense........................... 7,224 (28,693) 35,917 14,019 194 447
Allowance for funds used during construction..... (5,863) -- (5,863) -- -- (1,056)
---------- --------- ---------- -------- ------- --------
Total interest charges.......................... 103,175 (115,482) 218,657 114,616 1,360 27,228
---------- --------- ---------- -------- ------- --------
NET INCOME....................................... $ 298,273 $(320,592) $ 618,865 $298,273 $ -- $121,164
========== ========= ========== ======== ======= ========
Earnings per share of common stock............... $ 3.16
Average common shares outstanding (thousands).... 94,434
</TABLE>
- ---------
* The elimination journal entries pertaining to this consolidating financial
statement are prepared in detail form, showing the amounts pertaining to
the Registrant and each subsidiary company, and are preserved with the
Registrant's copy of this Form U5S.
( ) denotes negative amount.
The Notes to Consolidated Financial Statements are an integral part of this
statement (see Note on page 24).
30
<PAGE>
<TABLE>
<CAPTION>
SUBSIDIARIES
- -------------------------------------------------------------------------------------------------------------------
Other
CNGP CNGESC CNGPSC CNGI Subsidiaries
EOG PNG VNG HGI WOG (Page 50) (Page 56) (Page 74) (Page 80) LNG (Page 38)
- ---------- -------- -------- -------- ------- --------- ---------- --------- --------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$1,040,310 $336,370 $200,936 $113,622 $55,412 $ -- $ -- $ -- $ -- $16,851 $ --
-- -- -- -- -- 362,323 1,181,770 -- -- -- --
- ---------- -------- -------- -------- ------- -------- ---------- -------- ------- ------- -----
1,040,310 336,370 200,936 113,622 55,412 362,323 1,181,770 -- -- 16,851 --
71,437 42,875 3,034 8,886 6,254 532 807 -- -- -- --
7,421 7,758 7,359 3,593 171 227,136 76,336 109,446 98 -- 1
- ---------- -------- -------- -------- ------- -------- ---------- -------- ------- ------- -----
1,119,168 387,003 211,329 126,101 61,837 589,991 1,258,913 109,446 98 16,851 1
- ---------- -------- -------- -------- ------- -------- ---------- -------- ------- ------- -----
641,974 170,770 109,536 65,055 37,777 51,691 1,147,978 -- -- -- --
-- -- -- -- -- 115,708 75,556 111,337 -- -- --
191,318 80,288 38,341 29,488 13,271 139,512 39,423 2,059 3,908 14,277 208
25,712 17,235 4,913 4,409 1,505 10,322 5 -- 6 -- --
33,336 18,004 15,935 4,628 2,229 158,380 1,712 -- 17 -- --
93,820 24,172 9,580 9,054 4,667 5,761 838 2 -- -- 208
- ---------- -------- -------- -------- ------- -------- ---------- -------- ------- ------- -----
986,160 310,469 178,305 112,634 59,449 481,374 1,265,512 113,398 3,931 14,277 416
- ---------- -------- -------- -------- ------- -------- ---------- -------- ------- ------- -----
133,008 76,534 33,024 13,467 2,388 108,617 (6,599) (3,952) (3,833) 2,574 (415)
39,744 24,821 7,998 3,534 237 26,220 (1,790) (1,346) (1,418) 1,642 (191)
- ---------- -------- -------- -------- ------- -------- ---------- -------- ------- ------- -----
93,264 51,713 25,026 9,933 2,151 82,397 (4,809) (2,606) (2,415) 932 (224)
- ---------- -------- -------- -------- ------- -------- ---------- -------- ------- ------- -----
6,691 3 3 15 5 648 235 23 -- 5 88
592 (685) (323) (7) (80) 93 5,845 50 1 -- (12)
-- -- -- -- -- -- -- -- -- -- --
-- -- -- 169 -- 3,711 1,047 -- -- 886 516
- ---------- -------- -------- -------- ------- -------- ---------- -------- ------- ------- -----
7,283 (682) (320) 177 (75) 4,452 7,127 73 1 891 592
- ---------- -------- -------- -------- ------- -------- ---------- -------- ------- ------- -----
100,547 51,031 24,706 10,110 2,076 86,849 2,318 (2,533) (2,414) 1,823 368
- ---------- -------- -------- -------- ------- -------- ---------- -------- ------- ------- -----
14,682 9,954 6,943 2,707 996 22,106 1,615 -- -- -- --
9,014 2,705 3,925 223 512 326 4,335 -- 217 -- --
(448) (196) -- (329) -- (3,834) -- -- -- -- --
- ---------- -------- -------- -------- ------- -------- ---------- -------- ------- ------- -----
23,248 12,463 10,868 2,601 1,508 18,598 5,950 -- 217 -- --
- ---------- -------- -------- -------- ------- -------- ---------- -------- ------- ------- -----
$ 77,299 $ 38,568 $ 13,838 $ 7,509 $ 568 $ 68,251 $ (3,632) $ (2,533) $(2,631) $ 1,823 $ 368
========== ======== ======== ======== ======= ======== ========== ======== ======= ======= =====
</TABLE>
31
<PAGE>
ITEM 10. (Continued)
CONSOLIDATED NATURAL GAS COMPANY
CONSOLIDATING STATEMENT OF RETAINED EARNINGS
For the Year Ended December 31, 1996
(Thousands of Dollars)
<TABLE>
<CAPTION>
CONSOLIDATED
---------------- ----------------
Eliminations
CNG and Combined CNGT
and Subsidiaries Adjustments* Total CNG CNGSvc (Page 45)
---------------- ------------ ---------- ---------- ------ ---------
<S> <C> <C> <C> <C> <C> <C>
RETAINED EARNINGS
Balance at December 31, 1995...................... $1,309,906 $(443,843) $1,753,749 $1,309,906 $ -- $ 153,771
Adjustments:
Transfer of CNG Power to CNG Energy Services
by Parent Company............................... -- -- -- -- -- --
Transfer of CNG Storage to CNG Energy Services
by Parent Company............................... -- -- -- -- -- --
Net income for the year 1996 per accompanying
income statement................................. 298,273 (320,592) 618,865 298,273 -- 121,164
---------- --------- ---------- ---------- ---- ---------
Total.......................................... 1,608,179 (764,435) 2,372,614 1,608,179 -- 274,935
Dividends declared on common stock -- cash
(Note 10)........................................ (183,671) 284,830 (468,501) (183,671) -- (124,089)
Pension liability adjustment (Note 5)............. 116 -- 116 116 -- --
---------- --------- ---------- ---------- ---- ---------
Balance at December 31, 1996 (Note 12)............ $1,424,624 $(479,605) $1,904,229 $1,424,624 $ -- $ 150,846
========== ========= ========== ========== ==== =========
</TABLE>
- ---------
* The elimination journal entries pertaining to this consolidating financial
statement are prepared in detail form, showing the amounts pertaining to
the Registrant and each subsidiary company, and are preserved with the
Registrant's copy of this Form U5S.
( ) denotes negative amount.
The Notes to Consolidated Financial Statements are an integral part of this
statement (see Note on page 24).
32
<PAGE>
<TABLE>
<CAPTION>
SUBSIDIARIES
- ----------------------------------------------------------------------------------------------------------------------------
Other
CNGP CNG CNGESC CNGPSC CNGI Subsidiaries
EOG PNG VNG HGI WOG (Page 51) Power (Page 57) (Page 75) CNGStr (Page 81) LNG (Page 39)
- -------- -------- -------- -------- ------- --------- ------- --------- --------- ------ --------- ------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$194,610 $ 77,573 $ 3,904 $ 18,881 $ 9,622 $13,566 $ 6,624 $(6,095) $ (665) $ 76 $ -- $3,959 $(31,983)
-- -- -- -- -- -- (6,624) 6,624 -- -- -- -- --
-- -- -- -- -- -- -- 76 -- (76) -- -- --
77,299 38,568 13,838 7,509 568 68,251 -- (3,632) (2,533) -- (2,631) 1,823 368
- -------- -------- -------- -------- ------- ------- ------- ------- ------- ---- ------- ------ --------
271,909 116,141 17,742 26,390 10,190 81,817 -- (3,027) (3,198) -- (2,631) 5,782 (31,615)
(88,064) (43,966) (14,700) (11,538) (2,406) -- -- -- -- -- -- -- (67)
-- -- -- -- -- -- -- -- -- -- -- -- --
- -------- -------- -------- -------- ------- ------- ------- ------- ------- ---- ------- ------ --------
$183,845 $ 72,175 $ 3,042 $ 14,852 $ 7,784 $81,817 $ -- $(3,027) $(3,198) $ -- $(2,631) $5,782 $(31,682)
======== ======== ======== ======== ======= ======= ======= ======= ======= ==== ======= ====== ========
</TABLE>
33
<PAGE>
ITEM 10. (Continued)
CONSOLIDATED NATURAL GAS COMPANY
CONSOLIDATING STATEMENT OF CASH FLOWS
For the Year Ended December 31, 1996
(Thousands of Dollars)
<TABLE>
<CAPTION>
CONSOLIDATED
---------------- --------------------
Eliminations
CNG and Combined CNGT
and Subsidiaries Adjustments* Total CNG CNGSvc (Page 46)
---------------- ------------ --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income...................................... $ 298,273 $(320,592) $ 618,865 $ 298,273 $ -- $ 121,164
Adjustments to reconcile net income to net cash
provided
by (used in) operating activities
Depreciation and amortization.................. 304,171 2,362 301,809 -- 2,497 65,071
Deferred income taxes -- net................... 63,230 (868) 64,098 (2,748) (1,485) 7,175
Investment tax credit.......................... (2,201) -- (2,201) -- -- (22)
Changes in current assets and current liabili-
ties
Accounts receivable -- net..................... (139,179) -- (139,179) (10) 205 13,494
Receivables from affiliated cos. -- consoli-
dated......................................... -- 42,560 (42,560) (20,102) (7,938) 24,108
Inventories.................................... (55,339) 126 (55,465) -- -- 769
Unrecovered gas costs.......................... (82,893) -- (82,893) -- -- 1,398
Accounts payable............................... 94,131 -- 94,131 (242) 4,191 (31,216)
Payables to affiliated cos. -- consolidated.... -- (42,560) 42,560 -- 5,333 4,849
Estimated rate contingencies and refunds....... (37,761) -- (37,761) -- -- (12,383)
Amounts payable to customers................... (40,315) -- (40,315) -- -- --
Taxes accrued.................................. (16,999) -- (16,999) (762) 416 (1,634)
Other -- net................................... (6,006) -- (6,006) 876 679 (2,498)
Changes in other assets and other liabilities.. 28,305 22 28,283 17,375 (6,334) (24,064)
Excess of equity in earnings of subsidiary com-
panies over their
cash dividends paid -- consolidated........... -- 64,022 (64,022) (64,022) -- --
Other -- net................................... (252) -- (252) 215 (35) (376)
--------- --------- --------- --------- --------- ---------
Net cash provided by (used in) operating ac-
tivities..................................... 407,165 (254,928) 662,093 228,853 (2,471) 165,835
--------- --------- --------- --------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Plant construction and other property additions.. (439,489) -- (439,489) -- (6,126) (55,220)
Proceeds from dispositions of prop., plant and
equip. -- net.................................. 9,079 -- 9,079 -- 35 7,835
Cost of other investments -- net................ (87,735) -- (87,735) (500) -- (15,052)
Intrasystem money pool investments -- net....... -- 299,775 (299,775) (195,460) (145,745) 3,685
Intrasystem long-term financing -- net.......... -- 154,218 (154,218) (154,218) -- --
Property transfers to (from) affiliates......... -- -- -- -- -- --
--------- --------- --------- --------- --------- ---------
Net cash provided by (used in) investing ac-
tivities..................................... (518,145) 453,993 (972,138) (350,178) (151,836) (58,752)
--------- --------- --------- --------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of common stock -- Registrant.......... 37,726 -- 37,726 37,726 -- --
Issuance of debentures -- Registrant............ 299,567 -- 299,567 299,567 -- --
Repayments of long-term debt.................... (68,750) -- (68,750) (68,750) -- --
Unsecured loan repayment........................ (4,000) -- (4,000) -- -- --
Commercial paper borrowings -- net.............. 37,853 -- 37,853 37,853 -- --
Dividends paid -- Registrant.................... (183,020) -- (183,020) (183,020) -- --
Intrasystem long-term financing -- net.......... -- (154,218) 154,218 -- (240) (2,077)
Intrasystem money pool borrowings (or repay-
ments) -- net.................................. -- (299,775) 299,775 -- 154,030 4,225
Dividends paid -- subsidiary cos. -- consoli-
dated.......................................... -- 254,928 (254,928) -- -- (109,479)
Other -- net.................................... (149) -- (149) (149) -- --
--------- --------- --------- --------- --------- ---------
Net cash provided by (used in) financing ac-
tivities..................................... 119,227 (199,065) 318,292 123,227 153,790 (107,331)
--------- --------- --------- --------- --------- ---------
Net increase (decrease) in cash and TCIs...... 8,247 -- 8,247 1,902 (517) (248)
CASH AND TCIS AT JANUARY 1, 1996................ 36,277 -- 36,277 552 1,084 739
--------- --------- --------- --------- --------- ---------
CASH AND TCIS AT DECEMBER 31, 1996.............. $ 44,524 $ -- $ 44,524 $ 2,454 $ 567 $ 491
========= ========= ========= ========= ========= =========
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for
Interest (net of amounts capitalized).......... $ 109,602 $(103,423) $ 213,025 $ 110,836 $ 1,349 $ 27,400
Income taxes (net of refunds).................. $ 108,742 $ -- $ 108,742 $ (9,933) $ 1,075 $ 60,590
Non-cash financing activities
Issuance of common stock under benefit plans... $ 25,570 $ -- $ 25,570 $ 25,570 $ -- $ --
Capital contribution of CNG Power to CNG Energy
Services...................................... $ -- $ -- $ -- $ (22,460) $ -- $ --
Capital contribution of CNG Storage to CNG En-
ergy Services................................. $ -- $ -- $ -- $ (13,660) $ -- $ --
Non-cash investing activities
Transfer of CNG Power, net of cash............. $ -- $ -- $ -- $ 21,949 $ -- $ --
Transfer of CNG Storage, net of cash........... $ -- $ -- $ -- $ 13,643 $ -- $ --
</TABLE>
- ---------
* The eliminations and adjustments are those required to eliminate
transactions among affiliated companies and otherwise give effect to the
adjusting and reclassifying entries to the consolidating balance sheets,
income statements and statements of retained earnings of the Registrant and
its subsidiaries.
( ) denotes negative amount.
The Notes to Consolidated Financial Statements are an integral part of this
statement (see Note on page 24).
34
<PAGE>
<TABLE>
<CAPTION>
SUBSIDIARIES
- --------------------------------------------------------------------------------------------------------------------
Other
CNGP CNGESC CNGPSC CNGI Subsidiaries
EOG PNG VNG HGI WOG (Page 52) (Page 58) (Page 76) (Page 82) LNG (Page 40)
- -------- -------- -------- -------- ------- --------- --------- --------- --------- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 77,299 $ 38,568 $ 13,838 $ 7,509 $ 568 $ 68,251 $ (3,632) $ (2,533) $ (2,631) $ 1,823 $ 368
33,336 18,004 15,935 4,628 2,229 158,380 1,712 -- 17 -- --
36,021 10,641 10,338 169 1,999 (5,273) 1,715 94 7 (4,993) 10,438
(1,336) (502) (152) (137) (52) -- -- -- -- -- --
(17,727) (24,287) (1,587) (634) (5,404) (16,298) (74,652) (10,963) (1,151) -- (165)
(537) (199) -- (4,853) -- (34,569) 1,475 -- -- 79 (24)
(39,539) (5,922) (5,911) (2,751) (1,905) (315) 109 -- -- -- --
(41,993) (23,304) (13,322) -- (5,672) -- -- -- -- -- --
21,546 8,627 11,141 (4,660) 1,163 9,954 63,976 8,960 778 -- (87)
(16,959) 1,507 1,220 (302) 925 5,343 40,245 (500) 918 -- (19)
(11,717) (4,511) (8,118) 239 (1,271) -- -- -- -- -- --
(36,094) -- (4,221) -- -- -- -- -- -- -- --
(9,926) 7,241 (1,642) 218 (1,261) (9,193) (322) (474) (240) 305 275
(1,229) 453 564 (41) 355 9,003 (14,460) 378 (1) -- (85)
9,419 2,211 5,422 7,237 2,197 463 (16) 100 (3) 14,267 9
-- -- -- -- -- -- -- -- -- -- --
98 (247) 34 -- 42 4 -- -- -- -- 13
- -------- -------- -------- -------- ------- --------- -------- -------- -------- -------- --------
662 28,280 23,539 6,622 (6,087) 185,750 16,150 (4,938) (2,306) 11,481 10,723
- -------- -------- -------- -------- ------- --------- -------- -------- -------- -------- --------
(63,175) (30,865) (32,433) (10,570) (5,353) (230,107) (3,106) (2,293) (241) -- --
(1,076) 430 (484) (359) (103) 963 12 -- -- -- 1,826
-- -- -- -- -- -- (30,011) -- (42,172) -- --
-- -- -- -- -- 47,100 -- -- -- (11,465) 2,110
-- -- -- -- -- -- -- -- -- -- --
-- -- -- 4,525 -- (4,525) -- -- -- -- --
- -------- -------- -------- -------- ------- --------- -------- -------- -------- -------- --------
(64,251) (30,435) (32,917) (6,404) (5,456) (186,569) (33,105) (2,293) (42,413) (11,465) 3,936
- -------- -------- -------- -------- ------- --------- -------- -------- -------- -------- --------
-- -- -- -- -- -- -- -- -- -- --
-- -- -- -- -- -- -- -- -- -- --
-- -- -- -- -- -- -- -- -- -- --
-- -- (4,000) -- -- -- -- -- -- -- --
-- -- -- -- -- -- -- -- -- -- --
-- -- -- -- -- -- -- -- -- -- --
29,489 24,489 24,000 776 (179) 160 32,610 15,000 44,940 -- (14,750)
124,000 8,015 -- 9,815 14,120 -- (14,430) -- -- -- --
(85,475) (33,024) (11,000) (12,139) (3,373) -- (371) -- -- -- (67)
-- -- -- -- -- -- -- -- -- -- --
- -------- -------- -------- -------- ------- --------- -------- -------- -------- -------- --------
68,014 (520) 9,000 (1,548) 10,568 160 17,809 15,000 44,940 -- (14,817)
- -------- -------- -------- -------- ------- --------- -------- -------- -------- -------- --------
4,425 (2,675) (378) (1,330) (975) (659) 854 7,769 221 16 (158)
5,265 7,910 906 4,191 1,228 1,650 11,591 913 -- 14 234
- -------- -------- -------- -------- ------- --------- -------- -------- -------- -------- --------
$ 9,690 $ 5,235 $ 528 $ 2,861 $ 253 $ 991 $ 12,445 $ 8,682 $ 221 $ 30 $ 76
======== ======== ======== ======== ======= ========= ======== ======== ======== ======== ========
$ 22,192 $ 12,152 $ 10,596 $ 2,597 $ 1,385 $ 18,499 $ 5,802 $ -- $ 217 $ -- $ --
$ 17,284 $ 10,095 $ (1,135) $ 3,633 $ (330) $ 40,066 $ (5,970) $ (884) $ (1,185) $ 6,330 $(10,894)
$ -- $ -- $ -- $ -- $ -- $ -- $ -- $ -- $ -- $ -- $ --
$ -- $ -- $ -- $ -- $ -- $ -- $ 22,460 $ -- $ -- $ -- $ --
$ -- $ -- $ -- $ -- $ -- $ -- $ 13,660 $ -- $ -- $ -- $ --
$ -- $ -- $ -- $ -- $ -- $ -- $(21,949) $ -- $ -- $ -- $ --
$ -- $ -- $ -- $ -- $ -- $ -- $(13,643) $ -- $ -- $ -- $ --
</TABLE>
35
<PAGE>
ITEM 10. (Continued)
CONSOLIDATED NATURAL GAS COMPANY
CONSOLIDATING BALANCE SHEET SUPPLEMENT
At December 31, 1996(Thousands of Dollars)
<TABLE>
<CAPTION>
Other
Subsidiaries CNG CNG CNG
Assets Total Research Coal Financial
- ------ ------------ -------- ------ ---------
<S> <C> <C> <C> <C>
PROPERTY, PLANT AND EQUIPMENT (Note 3)
Gas utility and other plant............ $ -- $ -- $ -- $--
Accumulated depreciation and amortiza-
tion.................................. -- -- -- --
------ ---- ------ ---
Net gas utility and other plant.... -- -- -- --
------ ---- ------ ---
Exploration and production properties.. -- -- -- --
Accumulated depreciation and amortiza-
tion.................................. -- -- -- --
------ ---- ------ ---
Net exploration and production
properties........................ -- -- -- --
------ ---- ------ ---
Net property, plant and equipment.. -- -- -- --
------ ---- ------ ---
INVESTMENTS
Stocks of subsidiary companies, at eq-
uity -- consolidated.................. -- -- -- --
Notes of subsidiary companies -- con-
solidated............................. -- -- -- --
------ ---- ------ ---
Total investments.................. -- -- -- --
------ ---- ------ ---
CURRENT ASSETS
Cash and temporary cash investments.... 76 5 31 40
Accounts receivable
Customers............................. -- -- -- --
Unbilled revenues and other........... 271 229 42 --
Allowance for doubtful accounts....... -- -- -- --
Receivables from affiliated compa-
nies -- consolidated.................. 3,121 89 3,032 --
Inventories, at cost
Gas stored -- current portion (Note
8)................................... -- -- -- --
Materials and supplies (average cost
method).............................. -- -- -- --
Unrecovered gas costs (Note 2)......... -- -- -- --
Deferred income taxes -- current
(net)................................. -- -- -- --
Prepayments and other current assets... 86 -- 86 --
------ ---- ------ ---
Total current assets............... 3,554 323 3,191 40
------ ---- ------ ---
REGULATORY AND OTHER ASSETS
Unamortized abandoned facilities (Note
9).................................... -- -- -- --
Other investments...................... -- -- -- --
Deferred charges and other assets
(Notes 2, 4, 6, 7, 15 and 16)......... 3,959 13 3,946 --
------ ---- ------ ---
Total regulatory and other assets.. 3,959 13 3,946 --
------ ---- ------ ---
Total assets....................... $7,513 $336 $7,137 $40
====== ==== ====== ===
</TABLE>
- ----------
( ) denotes negative amount.
The Notes to Consolidated Financial Statements are an integral part of this
statement (see Note on page 24).
36
<PAGE>
ITEM 10. (Continued)
CONSOLIDATED NATURAL GAS COMPANY
CONSOLIDATING BALANCE SHEET SUPPLEMENT
At December 31, 1996(Thousands of Dollars)
<TABLE>
<CAPTION>
Other
Subsidiaries CNG CNG CNG
Stockholders' Equity and Liabilities Total Research Coal Financial
- ------------------------------------ ------------ -------- -------- ---------
<S> <C> <C> <C> <C>
CAPITALIZATION
Common stockholders' equity (Note 10)
Common stock -- par value $2.75 per
share
400,000,000 authorized shares
Issued -- 94,933,631 shares........... $ 38,200 $ 15,790 $ 22,360 $ 50
Capital in excess of par value......... -- -- -- --
Retained earnings, per accompanying
statement (Note 12)................... (31,682) (15,465) (16,207) (10)
Unearned compensation.................. -- -- -- --
-------- -------- -------- ----
Total common stockholders' equity... 6,518 325 6,153 40
-------- -------- -------- ----
Long-term debt (Note 13)
Debentures............................. -- -- -- --
Convertible subordinated debentures.... -- -- -- --
Unsecured loan......................... -- -- -- --
Notes payable to Registrant -- consoli-
dated................................. -- -- -- --
-------- -------- -------- ----
Total long-term debt................ -- -- -- --
-------- -------- -------- ----
Total capitalization................ 6,518 325 6,153 40
-------- -------- -------- ----
CURRENT LIABILITIES
Current maturities on long-term debt.... -- -- -- --
Commercial paper (Note 14).............. -- -- -- --
Accounts payable........................ 2 1 1 --
Estimated rate contingencies and refunds
(Note 2)............................... -- -- -- --
Payables to affiliated companies -- con-
solidated.............................. 21 -- 21 --
Taxes accrued........................... 433 11 422 --
Deferred income taxes -- current (net)
(Note 7)............................... -- -- -- --
Dividends declared...................... -- -- -- --
Other current liabilities............... -- (1) 1 --
-------- -------- -------- ----
Total current liabilities........... 456 11 445 --
-------- -------- -------- ----
DEFERRED CREDITS
Deferred income taxes (Note 7).......... 539 -- 539 --
Accumulated deferred investment tax
credits................................ -- -- -- --
Deferred credits and other liabilities
(Notes 7 and 15)....................... -- -- -- --
-------- -------- -------- ----
Total deferred credits.............. 539 -- 539 --
-------- -------- -------- ----
COMMITMENTS AND CONTINGENCIES (Note 17)
-------- -------- -------- ----
Total stockholders' equity and lia-
bilities........................... $ 7,513 $ 336 $ 7,137 $ 40
======== ======== ======== ====
</TABLE>
- ----------
( ) denotes negative amount.
The Notes to Consolidated Financial Statements are an integral part of this
statement (see Note on page 24).
37
<PAGE>
ITEM 10. (Continued)
CONSOLIDATED NATURAL GAS COMPANY
CONSOLIDATING INCOME STATEMENT SUPPLEMENT
For the Year Ended December 31, 1996(Thousands of Dollars)
<TABLE>
<CAPTION>
Other
Subsidiaries CNG CNG CNG
Total Research Coal Financial
------------ -------- ----- ---------
<S> <C> <C> <C> <C>
OPERATING REVENUES
Regulated gas sales.................... $ -- $ -- $ -- $ --
Nonregulated gas sales................. -- -- -- --
----- ---- ----- ----
Total gas sales.................... -- -- -- --
Gas transportation and storage......... -- -- -- --
Other.................................. 1 -- 1 --
----- ---- ----- ----
Total operating revenues (Note 2).. 1 -- 1 --
----- ---- ----- ----
OPERATING EXPENSES
Purchased gas.......................... -- -- -- --
Transport capacity and other purchased
products.............................. -- -- -- --
Operation expense (Note 4)............. 208 16 185 7
Maintenance............................ -- -- -- --
Depreciation and amortization (Note
3).................................... -- -- -- --
Taxes, other than income taxes......... 208 -- 205 3
----- ---- ----- ----
Subtotal........................... 416 16 390 10
----- ---- ----- ----
Operating income before income tax-
es................................ (415) (16) (389) (10)
Income taxes (Note 7).................. (191) (5) (186) --
----- ---- ----- ----
Operating income................... (224) (11) (203) (10)
----- ---- ----- ----
OTHER INCOME (DEDUCTIONS)
Interest revenues...................... 88 -- 88 --
Other -- net........................... (12) -- (12) --
Equity in earnings of subsidiary compa-
nies -- consolidated.................. -- -- -- --
Interest revenues from affiliated com-
panies -- consolidated................ 516 3 513 --
----- ---- ----- ----
Total other income (deductions).... 592 3 589 --
----- ---- ----- ----
Income before interest charges..... 368 (8) 386 (10)
----- ---- ----- ----
INTEREST CHARGES
Interest on long-term debt............. -- -- -- --
Other interest expense................. -- -- -- --
Allowance for funds used during con-
struction............................. -- -- -- --
----- ---- ----- ----
Total interest charges............. -- -- -- --
----- ---- ----- ----
NET INCOME............................. $ 368 $ (8) $ 386 $(10)
===== ==== ===== ====
</TABLE>
- ----------
( ) denotes negative amount.
The Notes to Consolidated Financial Statements are an integral part of this
statement (see Note on page 24).
38
<PAGE>
ITEM 10. (Continued)
CONSOLIDATED NATURAL GAS COMPANY
CONSOLIDATING STATEMENT OF RETAINED EARNINGS SUPPLEMENT
For the Year Ended December 31, 1996(Thousands of Dollars)
<TABLE>
<CAPTION>
Other
Subsidiaries CNG CNG CNG
Total Research Coal Financial
------------ -------- -------- ---------
<S> <C> <C> <C> <C>
RETAINED EARNINGS
Balance at December 31, 1995....... $(31,983) $(15,457) $(16,526) $ --
Adjustments:
Transfer of CNG Power to CNG
Energy Services
by Parent Company................ -- -- -- --
Transfer of CNG Storage to CNG
Energy Services
by Parent Company................ -- -- -- --
Net income for the year 1996 per
accompanying
income statement.................. 368 (8) 386 (10)
-------- -------- -------- ----
Total.......................... (31,615) (15,465) (16,140) (10)
Dividends declared on common
stock -- cash (Note 10)........... (67) -- (67) --
Pension liability adjustment
Note 5)........................... -- -- -- --
-------- -------- -------- ----
Balance at December 31, 1996 (Note
12)............................... $(31,682) $(15,465) $(16,207) $(10)
======== ======== ======== ====
</TABLE>
- ----------
( ) denotes negative amount.
The Notes to Consolidated Financial Statements are an integral part of this
statement (see Note on page 24).
39
<PAGE>
ITEM 10. (Continued)
CONSOLIDATED NATURAL GAS COMPANY
CONSOLIDATING STATEMENT OF CASH FLOWS SUPPLEMENT
For the Year Ended December 31, 1996(Thousands of Dollars)
<TABLE>
<CAPTION>
Other
Subsidiaries CNG CNG CNG
Total Research Coal Financial
------------ -------- -------- ---------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income........................... $ 368 $ (8) $ 386 $(10)
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities
Depreciation and amortization....... -- -- -- --
Deferred income taxes -- net........ 10,438 -- 10,438 --
Investment tax credit............... -- -- -- --
Changes in current assets and
current liabilities
Accounts receivable -- net.......... (165) (123) (42) --
Receivables from affiliated cos. --
consolidated...................... (24) (8) (16) --
Inventories......................... -- -- -- --
Unrecovered gas costs............... -- -- -- --
Accounts payable.................... (87) (61) (26) --
Payables to affiliated cos. --
consolidated..................... (19) -- (19) --
Estimated rate contingencies and
refunds............................ -- -- -- --
Amounts payable to customers........ -- -- -- --
Taxes accrued....................... 275 4 271 --
Other -- net........................ (85) (1) (84) --
Changes in other assets and other
liabilities........................ 9 -- -- 9
Excess of equity in earnings of
subsidiary companies over their
cash dividends
paid -- consolidated............... -- -- -- --
Other -- net........................ 13 -- 13 --
-------- ----- -------- ----
Net cash provided by (used in) op-
erating activities............... 10,723 (197) 10,921 (1)
-------- ----- -------- ----
CASH FLOWS FROM INVESTING ACTIVITIES
Plant construction and other property
additions........................... -- -- -- --
Proceeds from dispositions of prop.,
plant and equip. -- net............. 1,826 -- 1,826 --
Cost of other investments -- net..... -- -- -- --
Intrasystem money pool investments --
net................................ 2,110 (60) 2,170 --
Intrasystem long-term financing --
net................................ -- -- -- --
Property transfers to (from)
affiliates.......................... -- -- -- --
-------- ----- -------- ----
Net cash provided by (used in) in-
vesting activities............... 3,936 (60) 3,996 --
-------- ----- -------- ----
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of common stock --
Registrant......................... -- -- -- --
Issuance of debentures --
Registrant......................... -- -- -- --
Repayments of long-term debt......... -- -- -- --
Unsecured loan repayment............. -- -- -- --
Commercial paper borrowings -- net... -- -- -- --
Dividends paid -- Registrant......... -- -- -- --
Intrasystem long-term financing --
net................................ (14,750) 250 (15,000) --
Intrasystem money pool borrowings (or
repayments) -- net.................. -- -- -- --
Dividends paid -- subsidiary cos. --
consolidated....................... (67) -- (67) --
Other -- net......................... -- -- -- --
-------- ----- -------- ----
Net cash provided by (used in) fi-
nancing activities............... (14,817) 250 (15,067) --
-------- ----- -------- ----
Net increase (decrease) in cash
and TCIs......................... (158) (7) (150) (1)
CASH AND TCIS AT JANUARY 1, 1996..... 234 12 181 41
-------- ----- -------- ----
CASH AND TCIS AT DECEMBER 31, 1996... $ 76 $ 5 $ 31 $ 40
======== ===== ======== ====
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for
Interest (net of amounts
capitalized)....................... $ -- $ -- $ -- $ --
Income taxes (net of refunds)....... $(10,894) $ (9) $(10,885) $ --
Non-cash financing activities
Issuance of common stock under
benefit plans...................... $ -- $ -- $ -- $ --
Capital contribution of CNG Power to
CNG Energy Services................ $ -- $ -- $ -- $ --
Capital contribution of CNG Storage
to CNG Energy Services............. $ -- $ -- $ -- $ --
Non-cash investing activities
Transfer of CNG Power, net of cash.. $ -- $ -- $ -- $ --
Transfer of CNG Storage, net of
cash............................... $ -- $ -- $ -- $ --
</TABLE>
- ----------
( ) denotes negative amount.
The Notes to Consolidated Financial Statements are an integral part of this
statement (see Note on page 24).
40
<PAGE>
(THIS PAGE WAS INTENTIONALLY LEFT BLANK)
41
<PAGE>
ITEM 10. (Continued)
CNG TRANSMISSION CORPORATION
CONSOLIDATING BALANCE SHEET
At December 31, 1996
(Thousands of Dollars)
<TABLE>
<CAPTION>
CNGT Eliminations
and and Combined CNG
Subsidiary Adjustments Total CNGT Iroquois
---------- ------------ ---------- ---------- --------
<S> <C> <C> <C> <C> <C>
ASSETS
- ------
PROPERTY, PLANT AND
EQUIPMENT
Gas utility and other
plant.................. $2,062,752 $ -- $2,062,752 $2,062,752 $ --
Accumulated depreciation
and amortization....... (809,354) -- (809,354) (809,354) --
---------- -------- ---------- ---------- -------
Net gas utility and
other plant........ 1,253,398 -- 1,253,398 1,253,398 --
---------- -------- ---------- ---------- -------
Exploration and
production properties.. 225,260 -- 225,260 225,260 --
Accumulated depreciation
and amortization....... (195,876) -- (195,876) (195,876) --
---------- -------- ---------- ---------- -------
Net exploration and
production
properties......... 29,384 -- 29,384 29,384 --
---------- -------- ---------- ---------- -------
Net property, plant
and equipment...... 1,282,782 -- 1,282,782 1,282,782 --
---------- -------- ---------- ---------- -------
INVESTMENTS
Stock of subsidiary
company, at equity --
consolidated........... -- (29,359) 29,359 29,359 --
Notes of subsidiary
company --
consolidated.......... -- -- -- -- --
---------- -------- ---------- ---------- -------
Total investments... -- (29,359) 29,359 29,359 --
---------- -------- ---------- ---------- -------
CURRENT ASSETS
Cash and temporary cash
investments............ 491 -- 491 453 38
Accounts receivable
Customers.............. 43,753 -- 43,753 43,753 --
Unbilled revenues and
other................. 2,625 -- 2,625 2,625 --
Allowance for doubtful
accounts.............. (938) -- (938) (938) --
Receivables from
affiliated companies --
consolidated........... 15,894 (2,899) 18,793 17,306 1,487
Inventories, at cost
Gas stored -- current
portion............... -- -- -- -- --
Materials and supplies
(average cost
method)............... 12,932 -- 12,932 12,932 --
Unrecovered gas costs... 12,027 -- 12,027 12,027 --
Deferred income taxes --
current (net)......... -- -- -- -- --
Prepayments and other
current assets......... 37,729 -- 37,729 37,729 --
---------- -------- ---------- ---------- -------
Total current
assets............. 124,513 (2,899) 127,412 125,887 1,525
---------- -------- ---------- ---------- -------
REGULATORY AND OTHER
ASSETS
Unamortized abandoned
facilities............. -- -- -- -- --
Other investments....... 34,389 -- 34,389 -- 34,389
Deferred charges and
other assets........... 69,312 -- 69,312 69,312 --
---------- -------- ---------- ---------- -------
Total regulatory and
other assets....... 103,701 -- 103,701 69,312 34,389
---------- -------- ---------- ---------- -------
Total assets........ $1,510,996 $(32,258) $1,543,254 $1,507,340 $35,914
========== ======== ========== ========== =======
</TABLE>
- ----------
( ) denotes negative amount.
42
<PAGE>
ITEM 10. (Continued)
CNG TRANSMISSION CORPORATION
CONSOLIDATING BALANCE SHEET
At December 31, 1996
(Thousands of Dollars)
<TABLE>
<CAPTION>
CNGT Eliminations
and and Combined CNG
Subsidiary Adjustments Total CNGT Iroquois
---------- ------------ ---------- ---------- --------
<S> <C> <C> <C> <C> <C>
STOCKHOLDER'S EQUITY AND
LIABILITIES
- ------------------------
CAPITALIZATION
Common stockholder's
equity
Common stock........... $ 590,000 $(23,940) $ 613,940 $ 590,000 $23,940
Capital in excess of
par value............. 2,254 -- 2,254 2,254 --
Retained earnings, per
accompanying
statement............. 150,846 (5,419) 156,265 150,846 5,419
Unearned compensation.. -- -- -- -- --
---------- -------- ---------- ---------- -------
Total common
stockholder's
equity............. 743,100 (29,359) 772,459 743,100 29,359
---------- -------- ---------- ---------- -------
Long-term debt
Debentures............. -- -- -- -- --
Convertible
subordinated
debentures............ -- -- -- -- --
Unsecured loan......... -- -- -- -- --
Notes payable to Parent
Company............... 384,206 -- 384,206 384,206 --
---------- -------- ---------- ---------- -------
Total long-term
debt............... 384,206 -- 384,206 384,206 --
---------- -------- ---------- ---------- -------
Total
capitalization..... 1,127,306 (29,359) 1,156,665 1,127,306 29,359
---------- -------- ---------- ---------- -------
CURRENT LIABILITIES
Current maturities on
long-term debt......... -- -- -- -- --
Commercial paper........ -- -- -- -- --
Accounts payable........ 33,215 -- 33,215 33,215 --
Estimated rate
contingencies and
refunds................ 4,989 -- 4,989 4,989 --
Payables to affiliated
companies --
consolidated........... 52,279 (2,899) 55,178 53,766 1,412
Taxes accrued........... 30,996 -- 30,996 30,568 428
Deferred income taxes --
current (net)......... 1,049 -- 1,049 1,049 --
Dividends declared...... -- -- -- -- --
Other current
liabilities............ 26,765 -- 26,765 26,765 --
---------- -------- ---------- ---------- -------
Total current
liabilities........ 149,293 (2,899) 152,192 150,352 1,840
---------- -------- ---------- ---------- -------
DEFERRED CREDITS
Deferred income taxes... 158,530 -- 158,530 153,815 4,715
Accumulated deferred
investment tax
credits................ 164 -- 164 164 --
Deferred credits and
other liabilities...... 75,703 -- 75,703 75,703 --
---------- -------- ---------- ---------- -------
Total deferred
credits............ 234,397 -- 234,397 229,682 4,715
---------- -------- ---------- ---------- -------
COMMITMENTS AND
CONTINGENCIES
---------- -------- ---------- ---------- -------
Total stockholder's
equity and
liabilities........ $1,510,996 $(32,258) $1,543,254 $1,507,340 $35,914
========== ======== ========== ========== =======
</TABLE>
- --------
( ) denotes negative amount.
43
<PAGE>
ITEM 10. (Continued)
CNG TRANSMISSION CORPORATION
CONSOLIDATING INCOME STATEMENT
For the Year Ended December 31, 1996
(Thousands of Dollars)
<TABLE>
<CAPTION>
CNGT Eliminations
and and Combined CNG
Subsidiary Adjustments Total CNGT Iroquois
---------- ------------ -------- -------- --------
<S> <C> <C> <C> <C> <C>
OPERATING REVENUES
Regulated gas sales...... $ -- $ -- $ -- $ -- $ --
Nonregulated gas sales... 40,064 -- 40,064 40,064 --
-------- ------- -------- -------- -------
Total gas sales...... 40,064 -- 40,064 40,064 --
Gas transportation and
storage................. 451,121 -- 451,121 451,121 --
Other.................... 54,511 -- 54,511 54,511 --
-------- ------- -------- -------- -------
Total operating
revenues............ 545,696 -- 545,696 545,696 --
-------- ------- -------- -------- -------
OPERATING EXPENSES
Purchased gas............ 7,421 -- 7,421 7,421 --
Transport capacity and
other purchased
products................ 52,964 -- 52,964 52,964 --
Operation expense........ 150,703 -- 150,703 150,703 --
Maintenance.............. 24,963 -- 24,963 24,963 --
Depreciation and
amortization............ 65,071 -- 65,071 65,071 --
Taxes, other than income
taxes................... 38,833 -- 38,833 38,695 138
-------- ------- -------- -------- -------
Subtotal............. 339,955 -- 339,955 339,817 138
-------- ------- -------- -------- -------
Operating income
before income
taxes............... 205,741 -- 205,741 205,879 (138)
Income taxes............. 70,740 -- 70,740 68,067 2,673
-------- ------- -------- -------- -------
Operating income..... 135,001 -- 135,001 137,812 (2,811)
-------- ------- -------- -------- -------
OTHER INCOME (DEDUCTIONS)
Interest revenues........ 2,345 -- 2,345 2,344 1
Other -- net............. 7,408 -- 7,408 209 7,199
Equity in earnings of
subsidiary company --
consolidated............ -- (4,347) 4,347 4,347 --
Interest revenues from
affiliated companies --
consolidated............ 3,638 -- 3,638 3,406 232
-------- ------- -------- -------- -------
Total other income
(deductions)........ 13,391 (4,347) 17,738 10,306 7,432
-------- ------- -------- -------- -------
Income before
interest charges.... 148,392 (4,347) 152,739 148,118 4,621
-------- ------- -------- -------- -------
INTEREST CHARGES
Interest on long-term
debt.................... 27,837 -- 27,837 27,837 --
Other interest expense... 447 -- 447 173 274
Allowance for funds used
during construction..... (1,056) -- (1,056) (1,056) --
-------- ------- -------- -------- -------
Total interest
charges............. 27,228 -- 27,228 26,954 274
-------- ------- -------- -------- -------
NET INCOME............... $121,164 $(4,347) $125,511 $121,164 $ 4,347
======== ======= ======== ======== =======
</TABLE>
- ----------
( ) denotes negative amount.
44
<PAGE>
ITEM 10. (Continued)
CNG TRANSMISSION CORPORATION
CONSOLIDATING STATEMENT OF RETAINED EARNINGS
For the Year Ended December 31, 1996
(Thousands of Dollars)
<TABLE>
<CAPTION>
CNGT Eliminations
and and Combined CNG
Subsidiary Adjustments Total CNGT Iroquois
---------- ------------ --------- --------- --------
<S> <C> <C> <C> <C> <C>
RETAINED EARNINGS
Balance at December 31,
1995................... $ 153,771 $(3,367) $ 157,138 $ 153,771 $ 3,367
Net income for the year
1996 per accompanying
income statement....... 121,164 (4,347) 125,511 121,164 4,347
--------- ------- --------- --------- -------
Total............... 274,935 (7,714) 282,649 274,935 7,714
Dividends declared on
common stock -- cash... (124,089) 2,295 (126,384) (124,089) (2,295)
--------- ------- --------- --------- -------
Balance at December 31,
1996................... $ 150,846 $(5,419) $ 156,265 $ 150,846 $ 5,419
========= ======= ========= ========= =======
</TABLE>
- ----------
( ) denotes negative amount.
45
<PAGE>
ITEM 10. (Continued)
CNG TRANSMISSION CORPORATION
CONSOLIDATING STATEMENT OF CASH FLOWS
For the Year Ended December 31, 1996
(Thousands of Dollars)
<TABLE>
<CAPTION>
CNGT Eliminations
and and Combined CNG
Subsidiary Adjustments Total CNGT Iroquois
---------- ------------ --------- --------- --------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM
OPERATING ACTIVITIES
Net income............. $ 121,164 $(4,347) $ 125,511 $ 121,164 $ 4,347
Adjustments to
reconcile net income to
net cash
provided by (used in)
operating activities
Depreciation and
amortization......... 65,071 -- 65,071 65,071 --
Deferred income
taxes -- net......... 7,175 -- 7,175 6,492 683
Investment tax
credit............... (22) -- (22) (22) --
Changes in current
assets and current
liabilities
Accounts
receivable -- net.... 13,494 -- 13,494 13,494 --
Receivables from
affiliated cos. --
consolidated........ 24,108 1,487 22,621 22,603 18
Inventories........... 769 -- 769 769 --
Unrecovered gas
costs................ 1,398 -- 1,398 1,398 --
Accounts payable...... (31,216) -- (31,216) (31,216) --
Payables to
affiliated cos. --
consolidated........ 4,849 (1,487) 6,336 6,336 --
Estimated rate
contingencies and
refunds.............. (12,383) -- (12,383) (12,383) --
Amounts payable to
customers............ -- -- -- -- --
Taxes accrued......... (1,634) -- (1,634) (1,817) 183
Other -- net.......... (2,498) -- (2,498) (2,498) --
Changes in other
assets and other
liabilities.......... (24,064) -- (24,064) (22,147) (1,917)
Excess of equity in
earnings of
subsidiary companies
over their cash
dividends paid --
consolidated........ -- 3,464 (3,464) (3,464) --
Other -- net.......... (376) -- (376) (376) --
--------- ------- --------- --------- --------
Net cash provided by
(used in) operating
activities......... 165,835 (883) 166,718 163,404 3,314
--------- ------- --------- --------- --------
CASH FLOWS FROM
INVESTING ACTIVITIES
Plant construction and
other property
additions............. (55,220) -- (55,220) (55,220) --
Proceeds from
dispositions of prop.,
plant and equip. --
net.................. 7,835 -- 7,835 7,835 --
Cost of other
investments -- net.... (15,052) -- (15,052) -- (15,052)
Intrasystem money pool
investments -- net.... 3,685 -- 3,685 55 3,630
Intrasystem long-term
financing -- net...... -- 9,000 (9,000) (9,000) --
Property transfers to
(from) affiliates..... -- -- -- -- --
--------- ------- --------- --------- --------
Net cash provided by
(used in) investing
activities......... (58,752) 9,000 (67,752) (56,330) (11,422)
--------- ------- --------- --------- --------
CASH FLOWS FROM
FINANCING ACTIVITIES
Issuance of common
stock................. -- -- -- -- --
Issuance of
debentures............ -- -- -- -- --
Repayments of long-term
debt.................. -- -- -- -- --
Unsecured loan
repayment............. -- -- -- -- --
Commercial paper
borrowings -- net..... -- -- -- -- --
Dividends paid......... -- -- -- -- --
Intrasystem long-term
financing -- net...... (2,077) (9,000) 6,923 (2,077) 9,000
Intrasystem money pool
borrowings (or
repayments) -- net.... 4,225 -- 4,225 4,225 --
Dividends paid --
subsidiary cos. --
consolidated......... (109,479) 883 (110,362) (109,479) (883)
Other -- net........... -- -- -- -- --
--------- ------- --------- --------- --------
Net cash provided by
(used in) financing
activities......... (107,331) (8,117) (99,214) (107,331) 8,117
--------- ------- --------- --------- --------
Net increase
(decrease) in cash
and TCIs........... (248) -- (248) (257) 9
CASH AND TCIS AT
JANUARY 1, 1996....... 739 -- 739 710 29
--------- ------- --------- --------- --------
CASH AND TCIS AT
DECEMBER 31, 1996..... $ 491 $ -- $ 491 $ 453 $ 38
========= ======= ========= ========= ========
SUPPLEMENTAL CASH FLOW
INFORMATION
Cash paid for
Interest (net of
amounts
capitalized)......... $ 27,400 $ -- $ 27,400 $ 27,126 $ 274
Income taxes (net of
refunds)............. $ 60,590 $ -- $ 60,590 $ 58,954 $ 1,636
</TABLE>
- --------
( ) denotes negative amount.
46
<PAGE>
(THIS PAGE WAS INTENTIONALLY LEFT BLANK)
47
<PAGE>
ITEM 10. (Continued)
CNG PRODUCING COMPANY
CONSOLIDATING BALANCE SHEET
At December 31, 1996
(Thousands of Dollars)
<TABLE>
<CAPTION>
CNGP Eliminations
and and Combined CNG
Subsidiary Adjustments Total CNGP Pipeline
----------- ------------ ----------- ----------- --------
<S> <C> <C> <C> <C> <C>
ASSETS
- ------
PROPERTY, PLANT AND
EQUIPMENT
Gas utility and other
plant.................. $ -- $ -- $ -- $ -- $ --
Accumulated depreciation
and amortization....... -- -- -- -- --
----------- ------- ----------- ----------- -------
Net gas utility and
other plant........ -- -- -- -- --
----------- ------- ----------- ----------- -------
Exploration and produc-
tion properties........ 3,230,553 -- 3,230,553 3,226,026 4,527
Accumulated depreciation
and amortization....... (2,216,136) -- (2,216,136) (2,212,226) (3,910)
----------- ------- ----------- ----------- -------
Net exploration and
production
properties......... 1,014,417 -- 1,014,417 1,013,800 617
----------- ------- ----------- ----------- -------
Net property, plant
and equipment...... 1,014,417 -- 1,014,417 1,013,800 617
----------- ------- ----------- ----------- -------
INVESTMENTS
Stock of subsidiary
company, at equity --
consolidated........... -- (1,435) 1,435 1,435 --
Notes of subsidiary
company --
consolidated........... -- -- -- -- --
----------- ------- ----------- ----------- -------
Total investments... -- (1,435) 1,435 1,435 --
----------- ------- ----------- ----------- -------
CURRENT ASSETS
Cash and temporary cash
investments............ 991 -- 991 957 34
Accounts receivable
Customers............. 4,292 -- 4,292 4,292 --
Unbilled revenues and
other................ 42,548 -- 42,548 42,545 3
Allowance for doubtful
accounts............. (1,000) -- (1,000) (1,000) --
Receivables from
affiliated companies --
consolidated........... 101,933 (123) 102,056 100,896 1,160
Inventories, at cost
Gas stored -- current
portion.............. -- -- -- -- --
Materials and supplies
(average cost
method).............. 2,313 -- 2,313 2,313 --
Unrecovered gas costs... -- -- -- -- --
Deferred income taxes --
current (net)......... -- -- -- -- --
Prepayments and other
current assets......... 5,093 -- 5,093 5,077 16
----------- ------- ----------- ----------- -------
Total current as-
sets............... 156,170 (123) 156,293 155,080 1,213
----------- ------- ----------- ----------- -------
REGULATORY AND OTHER AS-
SETS
Unamortized abandoned
facilities............. -- -- -- -- --
Other investments....... -- -- -- -- --
Deferred charges and
other assets........... 7,785 -- 7,785 7,785 --
----------- ------- ----------- ----------- -------
Total regulatory and
other assets....... 7,785 -- 7,785 7,785 --
----------- ------- ----------- ----------- -------
Total assets........ $ 1,178,372 $(1,558) $ 1,179,930 $ 1,178,100 $ 1,830
=========== ======= =========== =========== =======
</TABLE>
- ----------
( ) denotes negative amount.
48
<PAGE>
ITEM 10. (Continued)
CNG PRODUCING COMPANY
CONSOLIDATING BALANCE SHEET
At December 31, 1996
(Thousands of Dollars)
<TABLE>
<CAPTION>
CNGP Eliminations
and and Combined CNG
Subsidiary Adjustments Total CNGP Pipeline
---------- ------------ ---------- ---------- --------
<S> <C> <C> <C> <C> <C>
STOCKHOLDERS' EQUITY AND
LIABILITIES
- ------------------------
CAPITALIZATION
Common stockholder's eq-
uity
Common stock........... $ 371,000 $(1,200) $ 372,200 $ 371,000 $1,200
Capital in excess of
par value............. -- -- -- -- --
Retained earnings, per
accompanying
statement............. 81,817 (235) 82,052 81,817 235
Unearned compensation.. -- -- -- -- --
---------- ------- ---------- ---------- ------
Total common
stockholder's
equity............. 452,817 (1,435) 454,252 452,817 1,435
---------- ------- ---------- ---------- ------
Long-term debt
Debentures............. -- -- -- -- --
Convertible subordi-
nated debentures...... -- -- -- -- --
Unsecured loan......... -- -- -- -- --
Notes payable to Parent
Company............... 313,575 -- 313,575 313,575 --
---------- ------- ---------- ---------- ------
Total long-term
debt............... 313,575 -- 313,575 313,575 --
---------- ------- ---------- ---------- ------
Total capitaliza-
tion............... 766,392 (1,435) 767,827 766,392 1,435
---------- ------- ---------- ---------- ------
CURRENT LIABILITIES
Current maturities on
long-term debt......... -- -- -- -- --
Commercial paper........ -- -- -- -- --
Accounts payable........ 85,308 -- 85,308 85,261 47
Estimated rate contin-
gencies and refunds.... -- -- -- -- --
Payables to affiliated
companies --
consolidated........... 51,061 (123) 51,184 51,061 123
Taxes accrued........... 797 -- 797 794 3
Deferred income taxes --
current (net)......... -- -- -- -- --
Dividends declared...... -- -- -- -- --
Other current liabili-
ties................... 8,321 -- 8,321 8,322 (1)
---------- ------- ---------- ---------- ------
Total current lia-
bilities........... 145,487 (123) 145,610 145,438 172
---------- ------- ---------- ---------- ------
DEFERRED CREDITS
Deferred income taxes... 226,446 -- 226,446 226,223 223
Accumulated deferred
investment tax
credits................ -- -- -- -- --
Deferred credits and
other liabilities...... 40,047 -- 40,047 40,047 --
---------- ------- ---------- ---------- ------
Total deferred cred-
its................ 266,493 -- 266,493 266,270 223
---------- ------- ---------- ---------- ------
COMMITMENTS AND CONTIN-
GENCIES
---------- ------- ---------- ---------- ------
Total stockholder's
equity and
liabilities........ $1,178,372 $(1,558) $1,179,930 $1,178,100 $1,830
========== ======= ========== ========== ======
</TABLE>
- ----------
( ) denotes negative amount.
49
<PAGE>
ITEM 10. (Continued)
CNG PRODUCING COMPANY
CONSOLIDATING INCOME STATEMENT
For the Year Ended December 31, 1996
(Thousands of Dollars)
<TABLE>
<CAPTION>
CNGP Eliminations
and and Combined CNG
Subsidiary Adjustments Total CNGP Pipeline
---------- ------------ -------- -------- --------
<S> <C> <C> <C> <C> <C>
OPERATING REVENUES
Regulated gas sales...... $ -- $ -- $ -- $ -- $ --
Nonregulated gas sales... 362,323 -- 362,323 362,323 --
-------- ----- -------- -------- ------
Total gas sales...... 362,323 -- 362,323 362,323 --
Gas transportation and
storage................. 532 (537) 1,069 532 537
Other.................... 227,136 -- 227,136 226,617 519
-------- ----- -------- -------- ------
Total operating reve-
nues................ 589,991 (537) 590,528 589,472 1,056
-------- ----- -------- -------- ------
OPERATING EXPENSES
Purchased gas............ 51,691 -- 51,691 51,691 --
Transport capacity and
other purchased prod-
ucts.................... 115,708 (537) 116,245 116,245 --
Operation expense........ 139,512 -- 139,512 139,139 373
Maintenance.............. 10,322 -- 10,322 10,322 --
Depreciation and amorti-
zation.................. 158,380 -- 158,380 158,292 88
Taxes, other than income
taxes................... 5,761 -- 5,761 5,753 8
-------- ----- -------- -------- ------
Subtotal............. 481,374 (537) 481,911 481,442 469
-------- ----- -------- -------- ------
Operating income be-
fore income taxes... 108,617 -- 108,617 108,030 587
Income taxes............. 26,220 -- 26,220 25,991 229
-------- ----- -------- -------- ------
Operating income..... 82,397 -- 82,397 82,039 358
-------- ----- -------- -------- ------
OTHER INCOME (DEDUCTIONS)
Interest revenues........ 648 -- 648 648 --
Other -- net............. 93 -- 93 93 --
Equity in earnings of
subsidiary company --
consolidated............ -- (422) 422 422 --
Interest revenues from
affiliated companies --
consolidated............ 3,711 -- 3,711 3,647 64
-------- ----- -------- -------- ------
Total other income
(deductions)........ 4,452 (422) 4,874 4,810 64
-------- ----- -------- -------- ------
Income before inter-
est charges......... 86,849 (422) 87,271 86,849 422
-------- ----- -------- -------- ------
INTEREST CHARGES
Interest on long-term
debt.................... 22,106 -- 22,106 22,106 --
Other interest expense... 326 -- 326 326 --
Allowance for funds used
during construction..... (3,834) -- (3,834) (3,834) --
-------- ----- -------- -------- ------
Total interest
charges............. 18,598 -- 18,598 18,598 --
-------- ----- -------- -------- ------
NET INCOME............... $ 68,251 $(422) $ 68,673 $ 68,251 $ 422
======== ===== ======== ======== ======
</TABLE>
- ----------
( ) denotes negative amount.
50
<PAGE>
ITEM 10. (Continued)
CNG PRODUCING COMPANY
CONSOLIDATING STATEMENT OF RETAINED EARNINGS
For the Year Ended December 31, 1996
(Thousands of Dollars)
<TABLE>
<CAPTION>
CNGP Eliminations
and and Combined CNG
Subsidiary Adjustments Total CNGP Pipeline
---------- ------------ -------- ------- --------
<S> <C> <C> <C> <C> <C>
RETAINED EARNINGS
Balance at December 31,
1995...................... $13,566 $(388) $13,954 $13,566 $ 388
Net income for the year
1996 per accompanying
income statement.......... 68,251 (422) 68,673 68,251 422
------- ----- ------- ------- -----
Total.................. 81,817 (810) 82,627 81,817 810
Dividends declared on com-
mon stock -- cash......... -- 575 (575) -- (575)
------- ----- ------- ------- -----
Balance at December 31,
1996...................... $81,817 $(235) $82,052 $81,817 $ 235
======= ===== ======= ======= =====
</TABLE>
- --------
( ) denotes negative amount.
51
<PAGE>
ITEM 10. (Continued)
CNG PRODUCING COMPANY
CONSOLIDATING STATEMENT OF CASH FLOWS
For the Year Ended December 31, 1996
(Thousands of Dollars)
<TABLE>
<CAPTION>
CNGP Eliminations
and and Combined CNG
Subsidiary Adjustments Total CNGP Pipeline
---------- ------------ --------- --------- --------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERAT-
ING ACTIVITIES
Net income............. $ 68,251 $(422) $ 68,673 $ 68,251 $ 422
Adjustments to
reconcile net income to
net cash
provided by (used in)
operating activities
Depreciation and amor-
tization............. 158,380 -- 158,380 158,292 88
Deferred income tax-
es -- net............ (5,273) -- (5,273) (5,242) (31)
Investment tax cred-
it................... -- -- -- -- --
Changes in current as-
sets and current lia-
bilities
Accounts receiv-
able -- net.......... (16,298) -- (16,298) (16,344) 46
Receivables from
affiliated cos. --
consolidated........ (34,569) (5) (34,564) (34,577) 13
Inventories........... (315) -- (315) (315) --
Unrecovered gas
costs................ -- -- -- -- --
Accounts payable...... 9,954 -- 9,954 9,927 27
Payables to
affiliated cos. --
consolidated........ 5,343 5 5,338 5,343 (5)
Estimated rate
contingencies and
refunds.............. -- -- -- -- --
Amounts payable to
customers............ -- -- -- -- --
Taxes accrued......... (9,193) -- (9,193) (9,052) (141)
Other -- net.......... 9,003 -- 9,003 9,002 1
Changes in other as-
sets and other lia-
bilities............. 463 -- 463 463 --
Excess of equity in
earnings of
subsidiary companies
over their cash
dividends paid --
consolidated........ -- (186) 186 186 --
Other -- net.......... 4 -- 4 4 --
--------- ----- --------- --------- -----
Net cash provided by
(used in) operating
activities......... 185,750 (608) 186,358 185,938 420
--------- ----- --------- --------- -----
CASH FLOWS FROM INVEST-
ING ACTIVITIES
Plant construction and
other property addi-
tions................. (230,107) -- (230,107) (230,107) --
Proceeds from
dispositions of prop.,
plant and equip. --
net.................. 963 -- 963 963 --
Cost of other invest-
ments -- net.......... -- -- -- -- --
Intrasystem money pool
investments -- net.... 47,100 -- 47,100 46,920 180
Intrasystem long-term
financing -- net...... -- -- -- -- --
Property transfers to
(from) affiliates..... (4,525) -- (4,525) (4,525) --
--------- ----- --------- --------- -----
Net cash provided by
(used in) investing
activities......... (186,569) -- (186,569) (186,749) 180
--------- ----- --------- --------- -----
CASH FLOWS FROM FINANC-
ING ACTIVITIES
Issuance of common
stock................. -- -- -- -- --
Issuance of deben-
tures................. -- -- -- -- --
Repayments of long-term
debt.................. -- -- -- -- --
Unsecured loan repay-
ment.................. -- -- -- -- --
Commercial paper
borrowings -- net..... -- -- -- -- --
Dividends paid......... -- -- -- -- --
Intrasystem long-term
financing -- net...... 160 -- 160 160 --
Intrasystem money pool
borrowings (or repay-
ments) -- net......... -- -- -- -- --
Dividends paid -- sub-
sidiary cos. -- con-
solidated............. -- 608 (608) -- (608)
Other -- net........... -- -- -- -- --
--------- ----- --------- --------- -----
Net cash provided by
(used in) financing
activities......... 160 608 (448) 160 (608)
--------- ----- --------- --------- -----
Net increase (de-
crease) in cash and
TCIs............... (659) -- (659) (651) (8)
CASH AND TCIS AT JANU-
ARY 1, 1996........... 1,650 -- 1,650 1,608 42
--------- ----- --------- --------- -----
CASH AND TCIS AT DECEM-
BER 31, 1996.......... $ 991 $ -- $ 991 $ 957 $ 34
========= ===== ========= ========= =====
SUPPLEMENTAL CASH FLOW
INFORMATION
Cash paid for
Interest (net of
amounts capital-
ized)................ $ 18,499 $ -- $ 18,499 $ 18,499 $ --
Income taxes (net of
refunds)............. $ 40,066 $ -- $ 40,066 $ 39,947 $ 119
</TABLE>
- ----------
( ) denotes negative amount.
52
<PAGE>
(THIS PAGE WAS INTENTIONALLY LEFT BLANK)
53
<PAGE>
ITEM 10. (Continued)
CNG ENERGY SERVICES CORPORATION
CONSOLIDATING BALANCE SHEET
At December 31, 1996
(Thousands of Dollars)
<TABLE>
<CAPTION>
CNG
CNGESC Eliminations CNG Products and CNG CNG
and and Combined Power Services CNG Main Oil
Subsidiaries Adjustments Total CNGESC (Page 60) (Page 66) Storage Pass Gathering
------------ ------------ -------- -------- --------- ------------ ------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
- ------
PROPERTY, PLANT AND
EQUIPMENT
Gas utility and other
plant................. $ 39,073 $ -- $ 39,073 $ 11,368 $ 6,485 $ 157 $21,063 $ -- $ --
Accumulated
depreciation and
amortization.......... (4,643) -- (4,643) (2,283) (2,329) (31) -- -- --
-------- -------- -------- -------- ------- ------ ------- ------- -------
Net gas utility and
other plant........ 34,430 -- 34,430 9,085 4,156 126 21,063 -- --
-------- -------- -------- -------- ------- ------ ------- ------- -------
Exploration and
production
properties............ -- -- -- -- -- -- -- -- --
Accumulated
depreciation and
amortization.......... -- -- -- -- -- -- -- -- --
-------- -------- -------- -------- ------- ------ ------- ------- -------
Net exploration and
production
properties......... -- -- -- -- -- -- -- -- --
-------- -------- -------- -------- ------- ------ ------- ------- -------
Net property, plant
and equipment...... 34,430 -- 34,430 9,085 4,156 126 21,063 -- --
-------- -------- -------- -------- ------- ------ ------- ------- -------
INVESTMENTS
Stocks of subsidiary
companies, at
equity --
consolidated.......... -- (44,217) 44,217 44,217 -- -- -- -- --
Notes of subsidiary
companies --
consolidated......... -- -- -- -- -- -- -- -- --
-------- -------- -------- -------- ------- ------ ------- ------- -------
Total investments... -- (44,217) 44,217 44,217 -- -- -- -- --
-------- -------- -------- -------- ------- ------ ------- ------- -------
CURRENT ASSETS
Cash and temporary cash
investments........... 12,445 -- 12,445 11,490 626 327 2 -- --
Accounts receivable
Customers............. 226,596 -- 226,596 226,596 -- -- -- -- --
Unbilled revenues and
other................ 4,377 -- 4,377 3,047 1,330 -- -- -- --
Allowance for doubtful
accounts............. (4,931) -- (4,931) (4,931) -- -- -- -- --
Receivables from
affiliated
companies --
consolidated.......... 30,543 (30,824) 61,367 41,678 17,154 713 1,822 -- --
Inventories, at cost
Gas stored -- current
portion.............. 19,295 -- 19,295 19,295 -- -- -- -- --
Materials and supplies
(average cost
method).............. 262 -- 262 151 111 -- -- -- --
Unrecovered gas costs.. -- -- -- -- -- -- -- -- --
Deferred income
taxes -- current
(net)................. -- -- -- -- -- -- -- -- --
Prepayments and other
current assets........ 54,083 -- 54,083 54,078 5 -- -- -- --
-------- -------- -------- -------- ------- ------ ------- ------- -------
Total current
assets............. 342,670 (30,824) 373,494 351,404 19,226 1,040 1,824 -- --
-------- -------- -------- -------- ------- ------ ------- ------- -------
REGULATORY AND OTHER
ASSETS
Unamortized abandoned
facilities............ -- -- -- -- -- -- -- -- --
Other investments...... 68,868 -- 68,868 (3) 35,410 2,000 -- 15,598 15,863
Deferred charges and
other assets.......... 3,099 -- 3,099 3,099 -- -- -- -- --
-------- -------- -------- -------- ------- ------ ------- ------- -------
Total regulatory and
other assets....... 71,967 -- 71,967 3,096 35,410 2,000 -- 15,598 15,863
-------- -------- -------- -------- ------- ------ ------- ------- -------
Total assets........ $449,067 $(75,041) $524,108 $407,802 $58,792 $3,166 $22,887 $15,598 $15,863
======== ======== ======== ======== ======= ====== ======= ======= =======
</TABLE>
- ---------
( ) denotes negative amount.
54
<PAGE>
ITEM 10. (Continued)
CNG ENERGY SERVICES CORPORATION
CONSOLIDATING BALANCE SHEET
At December 31, 1996
(Thousands of Dollars)
<TABLE>
<CAPTION>
CNG
CNGESC Eliminations CNG Products and CNG CNG
and and Combined Power Services CNG Main Oil
Subsidiaries Adjustments Total CNGESC (Page 61) (Page 67) Storage Pass Gathering
------------ ------------ -------- -------- --------- ------------ ------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
STOCKHOLDER'S EQUITY AND
LIABILITIES
- ------------------------
CAPITALIZATION
Common stockholder's
equity
Common stock........... $ 3 $(39,170) $ 39,173 $ 3 $22,460 $3,050 $13,660 $ -- $ --
Capital in excess of
par value............. 79,167 (20) 79,187 79,167 -- -- -- 10 10
Retained earnings, per
accompanying
statement............. (3,027) (5,027) 2,000 (9,727) 9,964 (995) 1,758 1,002 (2)
Unearned compensation.. -- -- -- -- -- -- -- -- --
-------- -------- -------- -------- ------- ------ ------- ------- -------
Total common
stockholder's
equity.............. 76,143 (44,217) 120,360 69,443 32,424 2,055 15,418 1,012 8
-------- -------- -------- -------- ------- ------ ------- ------- -------
Long-term debt
Debentures............. -- -- -- -- -- -- -- -- --
Convertible
subordinated
debentures............ -- -- -- -- -- -- -- -- --
Unsecured loan......... -- -- -- -- -- -- -- -- --
Notes payable to Parent
Company............... 20,043 -- 20,043 -- 12,693 -- 7,350 -- --
-------- -------- -------- -------- ------- ------ ------- ------- -------
Total long-term
debt................ 20,043 -- 20,043 -- 12,693 -- 7,350 -- --
-------- -------- -------- -------- ------- ------ ------- ------- -------
Total
capitalization...... 96,186 (44,217) 140,403 69,443 45,117 2,055 22,768 1,012 8
-------- -------- -------- -------- ------- ------ ------- ------- -------
CURRENT LIABILITIES
Current maturities on
long-term debt......... -- -- -- -- -- -- -- -- --
Commercial paper........ -- -- -- -- -- -- -- -- --
Accounts payable........ 149,021 -- 149,021 149,391 (834) 439 -- 25 --
Estimated rate
contingencies and
refunds................ -- -- -- -- -- -- -- -- --
Payables to affiliated
companies --
consolidated........... 137,201 (30,824) 168,025 136,200 799 299 114 14,757 15,856
Taxes accrued........... (2,137) -- (2,137) (1,792) 168 177 5 (695) --
Deferred income taxes --
current (net)......... -- -- -- -- -- -- -- -- --
Dividends declared...... -- -- -- -- -- -- -- -- --
Other current
liabilities............ 38,818 -- 38,818 38,818 -- -- -- -- --
-------- -------- -------- -------- ------- ------ ------- ------- -------
Total current
liabilities......... 322,903 (30,824) 353,727 322,617 133 915 119 14,087 15,856
-------- -------- -------- -------- ------- ------ ------- ------- -------
DEFERRED CREDITS
Deferred income taxes... 14,640 -- 14,640 404 13,542 196 -- 499 (1)
Accumulated deferred
investment tax
credits................ -- -- -- -- -- -- -- -- --
Deferred credits and
other liabilities...... 15,338 -- 15,338 15,338 -- -- -- -- --
-------- -------- -------- -------- ------- ------ ------- ------- -------
Total deferred
credits............. 29,978 -- 29,978 15,742 13,542 196 -- 499 (1)
-------- -------- -------- -------- ------- ------ ------- ------- -------
COMMITMENTS AND
CONTINGENCIES
-------- -------- -------- -------- ------- ------ ------- ------- -------
Total stockholder's
equity and
liabilities......... $449,067 $(75,041) $524,108 $407,802 $58,792 $3,166 $22,887 $15,598 $15,863
======== ======== ======== ======== ======= ====== ======= ======= =======
</TABLE>
- ---------
( ) denotes negative amount.
55
<PAGE>
ITEM 10. (Continued)
CNG ENERGY SERVICES CORPORATION
CONSOLIDATING INCOME STATEMENT
For the Year Ended December 31, 1996
(Thousands of Dollars)
<TABLE>
<CAPTION>
CNG
CNGESC Eliminations CNG Products and CNG CNG
and and Combined Power Services CNG Main Oil
Subsidiaries Adjustments Total CNGESC (Page 62) (Page 68) Storage Pass Gathering
------------ ------------ ---------- ---------- --------- ------------ ------- ------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
OPERATING REVENUES
Regulated gas sales... $ -- $ -- $ -- $ -- $ -- $ -- $ -- $ -- $ --
Nonregulated gas
sales................ 1,181,770 -- 1,181,770 1,181,770 -- -- -- -- --
---------- ------- ---------- ---------- ------- ------- ------ ------ ----
Total gas sales.... 1,181,770 -- 1,181,770 1,181,770 -- -- -- -- --
Gas transportation and
storage.............. 807 -- 807 807 -- -- -- -- --
Other................. 76,336 -- 76,336 55,954 15,195 1,722 3,465 -- --
---------- ------- ---------- ---------- ------- ------- ------ ------ ----
Total operating
revenues.......... 1,258,913 -- 1,258,913 1,238,531 15,195 1,722 3,465 -- --
---------- ------- ---------- ---------- ------- ------- ------ ------ ----
OPERATING EXPENSES
Purchased gas......... 1,147,978 -- 1,147,978 1,147,978 -- -- -- -- --
Transport capacity and
other purchased
products............. 75,556 -- 75,556 64,921 10,635 -- -- -- --
Operation expense..... 39,423 -- 39,423 34,183 2,039 3,162 35 2 2
Maintenance........... 5 -- 5 -- -- 5 -- -- --
Depreciation and
amortization......... 1,712 -- 1,712 1,288 393 31 -- -- --
Taxes, other than
income taxes......... 838 -- 838 394 290 6 148 -- --
---------- ------- ---------- ---------- ------- ------- ------ ------ ----
Subtotal........... 1,265,512 -- 1,265,512 1,248,764 13,357 3,204 183 2 2
---------- ------- ---------- ---------- ------- ------- ------ ------ ----
Operating income
before income
taxes............. (6,599) -- (6,599) (10,233) 1,838 (1,482) 3,282 (2) (2)
Income taxes.......... (1,790) -- (1,790) (5,118) 2,085 (487) 1,192 539 (1)
---------- ------- ---------- ---------- ------- ------- ------ ------ ----
Operating income... (4,809) -- (4,809) (5,115) (247) (995) 2,090 (541) (1)
---------- ------- ---------- ---------- ------- ------- ------ ------ ----
OTHER INCOME
(DEDUCTIONS)
Interest revenues..... 235 -- 235 234 1 -- -- -- --
Other -- net.......... 5,845 -- 5,845 72 3,806 -- -- 1,967 --
Equity in earnings of
subsidiary
companies --
consolidated......... -- (5,027) 5,027 5,027 -- -- -- -- --
Interest revenues from
affiliated
companies --
consolidated........ 1,047 -- 1,047 -- 999 -- 48 -- --
---------- ------- ---------- ---------- ------- ------- ------ ------ ----
Total other income
(deductions)...... 7,127 (5,027) 12,154 5,333 4,806 -- 48 1,967 --
---------- ------- ---------- ---------- ------- ------- ------ ------ ----
Income before
interest charges.. 2,318 (5,027) 7,345 218 4,559 (995) 2,138 1,426 (1)
---------- ------- ---------- ---------- ------- ------- ------ ------ ----
INTEREST CHARGES
Interest on long-term
debt................. 1,615 -- 1,615 -- 1,159 -- 456 -- --
Other interest
expense.............. 4,335 -- 4,335 3,850 60 -- -- 424 1
Allowance for funds
used during
construction......... -- -- -- -- -- -- -- -- --
---------- ------- ---------- ---------- ------- ------- ------ ------ ----
Total interest
charges........... 5,950 -- 5,950 3,850 1,219 -- 456 424 1
---------- ------- ---------- ---------- ------- ------- ------ ------ ----
NET INCOME............ $ (3,632) $(5,027) $ 1,395 $ (3,632) $ 3,340 $ (995) $1,682 $1,002 $ (2)
========== ======= ========== ========== ======= ======= ====== ====== ====
</TABLE>
- ---------
( ) denotes negative amount.
56
<PAGE>
ITEM 10. (Continued)
CNG ENERGY SERVICES CORPORATION
CONSOLIDATING STATEMENT OF RETAINED EARNINGS
For the Year Ended December 31, 1996
(Thousands of Dollars)
<TABLE>
<CAPTION>
CNG
CNGESC Eliminations CNG Products and CNG CNG
and and Combined Power Services CNG Main Oil
Subsidiaries Adjustments Total CNGESC (Page 63) (Page 69) Storage Pass Gathering
------------ ------------ -------- ------- --------- ------------ ------- ------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
RETAINED EARNINGS
Balance at December 31,
1995.................. $(6,095) $ -- $(6,095) $(6,095) $ -- $ -- $ -- $ -- $ --
Adjustments:
Transfer of CNG Power
to CNG Energy
Services by Parent
Company.............. 6,624 -- 6,624 -- 6,624 -- -- -- --
Transfer of CNG
Storage to CNG Energy
Services by Parent
Company.............. 76 -- 76 -- -- -- 76 -- --
Net income for the year
1996 per accompanying
income statement...... (3,632) (5,027) 1,395 (3,632) 3,340 (995) 1,682 1,002 (2)
------- ------- ------- ------- ------ ----- ------ ------ ----
Total............... (3,027) (5,027) 2,000 (9,727) 9,964 (995) 1,758 1,002 (2)
Dividends declared on
common stock -- cash.. -- -- -- -- -- -- -- -- --
------- ------- ------- ------- ------ ----- ------ ------ ----
Balance at December 31,
1996.................. $(3,027) $(5,027) $ 2,000 $(9,727) $9,964 $(995) $1,758 $1,002 $ (2)
======= ======= ======= ======= ====== ===== ====== ====== ====
</TABLE>
- ----------
( ) denotes negative amount.
57
<PAGE>
ITEM 10. (Continued)
CNG ENERGY SERVICES CORPORATION
CONSOLIDATING STATEMENT OF CASH FLOWS
For the Year Ended December 31, 1996
(Thousands of Dollars)
<TABLE>
<CAPTION>
CNG
CNGESC Eliminations CNG Products and CNG CNG
and and Combined Power Services CNG Main Oil
Subsidiaries Adjustments Total CNGESC (Page 64) (Page 70) Storage Pass Gathering
------------ ------------ -------- -------- --------- ------------ ------- ------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPER-
ATING ACTIVITIES
Net income............ $ (3,632) $ (5,027) $ 1,395 $ (3,632) $ 3,340 $ (995) $1,682 $1,002 $ (2)
Adjustments to
reconcile net income
to net cash provided
by (used in) operating
activities
Depreciation and am-
ortization.......... 1,712 -- 1,712 1,288 393 31 -- -- --
Deferred income tax-
es -- net........... 1,715 -- 1,715 1,008 140 69 -- 499 (1)
Investment tax cred-
it.................. -- -- -- -- -- -- -- -- --
Changes in current
assets and current
liabilities.........
Accounts receiv-
able -- net......... (74,652) -- (74,652) (74,166) (486) -- -- -- --
Receivables from
affiliated cos. --
consolidated....... 1,475 32,273 (30,798) (30,205) 59 (655) 3 -- --
Inventories.......... 109 -- 109 48 61 -- -- -- --
Unrecovered gas
costs............... -- -- -- -- -- -- -- -- --
Accounts payable..... 63,976 -- 63,976 64,821 (1,309) 439 -- 25 --
Payables to affili-
ated cos. -- consol-
idated.............. 40,245 (32,273) 72,518 47,983 64 299 -- 8,316 15,856
Estimated rate con-
tingencies and re-
funds............... -- -- -- -- -- -- -- -- --
Amounts payable to
customers........... -- -- -- -- -- -- -- -- --
Taxes accrued........ (322) -- (322) 589 (367) 165 (14) (695) --
Other -- net......... (14,460) -- (14,460) (14,457) (3) -- -- -- --
Changes in other as-
sets and other lia-
bilities............ (16) -- (16) (855) 1,369 -- -- (530) --
Excess of equity in
earnings of
subsidiary companies
over their cash
dividends
paid --
consolidated....... -- 5,027 (5,027) (5,027) -- -- -- -- --
Other -- net......... -- -- -- -- -- -- -- -- --
-------- -------- -------- -------- ------- ------- ------ ------ --------
Net cash provided by
(used in) operating
activities......... 16,150 -- 16,150 (12,605) 3,261 (647) 1,671 8,617 15,853
-------- -------- -------- -------- ------- ------- ------ ------ --------
CASH FLOWS FROM IN-
VESTING ACTIVITIES
Plant construction and
other property addi-
tions................ (3,106) -- (3,106) (2,949) -- (157) -- -- --
Proceeds from
dispositions of
prop., plant and
equip. -- net........ 12 -- 12 12 -- -- -- -- --
Cost of other invest-
ments -- net......... (30,011) -- (30,011) 479 (6,000) -- -- (8,627) (15,863)
Intrasystem money pool
investments -- net... -- 1,315 (1,315) -- -- -- (1,315) -- --
Intrasystem long-term
financing -- net..... -- 3,070 (3,070) (3,070) -- -- -- -- --
Property transfers to
(from) affiliates.... -- -- -- -- 1,919 (1,919) -- -- --
-------- -------- -------- -------- ------- ------- ------ ------ --------
Net cash provided by
(used in) investing
activities......... (33,105) 4,385 (37,490) (5,528) (4,081) (2,076) (1,315) (8,627) (15,863)
-------- -------- -------- -------- ------- ------- ------ ------ --------
CASH FLOWS FROM FI-
NANCING ACTIVITIES
Issuance of common
stock................ -- -- -- -- -- -- -- -- --
Issuance of deben-
tures................ -- -- -- -- -- -- -- -- --
Repayments of long-
term debt............ -- -- -- -- -- -- -- -- --
Unsecured loan repay-
ment................. -- -- -- -- -- -- -- -- --
Commercial paper
borrowings -- net.... -- -- -- -- -- -- -- -- --
Dividends paid........ -- -- -- -- -- -- -- -- --
Intrasystem long-term
financing -- net..... 32,610 (3,070) 35,680 33,000 (390) 3,050 -- 10 10
Intrasystem money pool
borrowings (or
repayments) -- net... (14,430) (1,315) (13,115) (14,440) 1,325 -- -- -- --
Dividends paid -- sub-
sidiary cos. -- con-
solidated............ (371) -- (371) -- -- -- (371) -- --
Other -- net.......... -- -- -- -- -- -- -- -- --
-------- -------- -------- -------- ------- ------- ------ ------ --------
Net cash provided by
(used in) financing
activities......... 17,809 (4,385) 22,194 18,560 935 3,050 (371) 10 10
-------- -------- -------- -------- ------- ------- ------ ------ --------
Net increase (de-
crease) in cash and
TCIs............... 854 -- 854 427 115 327 (15) -- --
CASH AND TCIS AT JANU-
ARY 1, 1996.......... 11,591 -- 11,591 11,063 511 -- 17 -- --
-------- -------- -------- -------- ------- ------- ------ ------ --------
CASH AND TCIS AT DE-
CEMBER 31, 1996...... $ 12,445 $ -- $ 12,445 $ 11,490 $ 626 $ 327 $ 2 $ -- $ --
======== ======== ======== ======== ======= ======= ====== ====== ========
SUPPLEMENTAL CASH FLOW
INFORMATION
Cash paid for
Interest (net of
amounts capital-
ized)............... $ 5,802 $ -- $ 5,802 $ 3,700 $ 1,221 $ -- $ 456 $ 424 $ 1
Income taxes (net of
refunds)............ $ (5,970) $ -- $ (5,970) $ (9,261) $ 2,319 $ (649) $ 886 $ 735 $ --
</TABLE>
- -------
( )denotes negative amount.
58
<PAGE>
(THIS PAGE WAS INTENTIONALLY LEFT BLANK)
59
<PAGE>
ITEM 10. (Continued)
CNG POWER COMPANY
CONSOLIDATING BALANCE SHEET
At December 31, 1996
(Thousands of Dollars)
<TABLE>
<CAPTION>
CNG Power Eliminations CNG
and and Combined CNG Granite Bear
Subsidiaries Adjustments Total Power Road Mountain CNGMCS
------------ ------------ -------- ------- ------- -------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
- ------
PROPERTY, PLANT AND
EQUIPMENT
Gas utility and other
plant.................. $ 6,485 $ -- $ 6,485 $ 6,485 $ -- $ -- $ --
Accumulated depreciation
and amortization....... (2,329) -- (2,329) (2,329) -- -- --
------- ----- ------- ------- ---- ---- ----
Net gas utility and
other plant......... 4,156 -- 4,156 4,156 -- -- --
------- ----- ------- ------- ---- ---- ----
Exploration and
production properties.. -- -- -- -- -- -- --
Accumulated depreciation
and amortization....... -- -- -- -- -- -- --
------- ----- ------- ------- ---- ---- ----
Net exploration and
production
properties.......... -- -- -- -- -- -- --
------- ----- ------- ------- ---- ---- ----
Net property, plant
and equipment....... 4,156 -- 4,156 4,156 -- -- --
------- ----- ------- ------- ---- ---- ----
INVESTMENTS
Stocks of subsidiary
companies, at equity --
consolidated........... -- (360) 360 360 -- -- --
Notes of subsidiary
companies --
consolidated........... -- -- -- -- -- -- --
------- ----- ------- ------- ---- ---- ----
Total investments.... -- (360) 360 360 -- -- --
------- ----- ------- ------- ---- ---- ----
CURRENT ASSETS
Cash and temporary cash
investments............ 626 -- 626 203 -- -- 423
Accounts receivable
Customers.............. -- -- -- -- -- -- --
Unbilled revenues and
other................. 1,330 -- 1,330 1,330 -- -- --
Allowance for doubtful
accounts.............. -- -- -- -- -- -- --
Receivables from
affiliated companies --
consolidated........... 17,154 (509) 17,663 17,663 -- -- --
Inventories, at cost
Gas stored -- current
portion............... -- -- -- -- -- -- --
Materials and supplies
(average cost
method)............... 111 -- 111 111 -- -- --
Unrecovered gas costs... -- -- -- -- -- -- --
Deferred income taxes --
current (net)......... -- -- -- -- -- -- --
Prepayments and other
current assets......... 5 -- 5 5 -- -- --
------- ----- ------- ------- ---- ---- ----
Total current
assets.............. 19,226 (509) 19,735 19,312 -- -- 423
------- ----- ------- ------- ---- ---- ----
REGULATORY AND OTHER
ASSETS
Unamortized abandoned
facilities............. -- -- -- -- -- -- --
Other investments....... 35,410 -- 35,410 34,905 1 143 361
Deferred charges and
other assets........... -- -- -- -- -- -- --
------- ----- ------- ------- ---- ---- ----
Total regulatory and
other assets........ 35,410 -- 35,410 34,905 1 143 361
------- ----- ------- ------- ---- ---- ----
Total assets......... $58,792 $(869) $59,661 $58,733 $ 1 $143 $784
======= ===== ======= ======= ==== ==== ====
</TABLE>
- ----------
( ) denotes negative amount.
60
<PAGE>
ITEM 10. (Continued)
CNG POWER COMPANY
CONSOLIDATING BALANCE SHEET
At December 31, 1996
(Thousands of Dollars)
<TABLE>
<CAPTION>
CNG Power Eliminations CNG
and and Combined CNG Granite Bear
Subsidiaries Adjustments Total Power Road Mountain CNGMCS
------------ ------------ -------- ------- ------- -------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
STOCKHOLDER'S EQUITY AND
LIABILITIES
- ------------------------
CAPITALIZATION
Common stockholder's
equity
Common stock........... $22,460 $(111) $22,571 $22,460 $ 1 $ 10 $100
Capital in excess of
par value............. -- -- -- -- -- -- --
Retained earnings, per
accompanying
statement............. 9,964 (249) 10,213 9,964 -- (1) 250
Unearned compensation.. -- -- -- -- -- -- --
------- ----- ------- ------- --- ---- ----
Total common
stockholder's
equity.............. 32,424 (360) 32,784 32,424 1 9 350
------- ----- ------- ------- --- ---- ----
Long-term debt
Debentures............. -- -- -- -- -- -- --
Convertible
subordinated
debentures............ -- -- -- -- -- -- --
Unsecured loan......... -- -- -- -- -- -- --
Notes payable to Parent
Company............... 12,693 -- 12,693 12,693 -- -- --
------- ----- ------- ------- --- ---- ----
Total long-term
debt................ 12,693 -- 12,693 12,693 -- -- --
------- ----- ------- ------- --- ---- ----
Total
capitalization...... 45,117 (360) 45,477 45,117 1 9 350
------- ----- ------- ------- --- ---- ----
CURRENT LIABILITIES
Current maturities on
long-term debt......... -- -- -- -- -- -- --
Commercial paper........ -- -- -- -- -- -- --
Accounts payable........ (834) -- (834) (834) -- -- --
Estimated rate
contingencies and
refunds................ -- -- -- -- -- -- --
Payables to affiliated
companies --
consolidated........... 799 (509) 1,308 794 -- 111 403
Taxes accrued........... 168 -- 168 143 -- -- 25
Deferred income taxes --
current (net)......... -- -- -- -- -- -- --
Dividends declared...... -- -- -- -- -- -- --
Other current
liabilities............ -- -- -- -- -- -- --
------- ----- ------- ------- --- ---- ----
Total current
liabilities......... 133 (509) 642 103 -- 111 428
------- ----- ------- ------- --- ---- ----
DEFERRED CREDITS
Deferred income taxes... 13,542 -- 13,542 13,513 -- 23 6
Accumulated deferred
investment tax
credits................ -- -- -- -- -- -- --
Deferred credits and
other liabilities...... -- -- -- -- -- -- --
------- ----- ------- ------- --- ---- ----
Total deferred
credits............. 13,542 -- 13,542 13,513 -- 23 6
------- ----- ------- ------- --- ---- ----
COMMITMENTS AND
CONTINGENCIES
------- ----- ------- ------- --- ---- ----
Total stockholder's
equity and
liabilities......... $58,792 $(869) $59,661 $58,733 $ 1 $143 $784
======= ===== ======= ======= === ==== ====
</TABLE>
- --------
( ) denotes negative amount.
61
<PAGE>
ITEM 10. (Continued)
CNG POWER COMPANY
CONSOLIDATING INCOME STATEMENT
For the Year Ended December 31, 1996
(Thousands of Dollars)
<TABLE>
<CAPTION>
CNG Power Eliminations CNG
and and Combined CNG Granite Bear
Subsidiaries Adjustments Total Power Road Mountain CNGMCS
------------ ------------ -------- ------- ------- -------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING REVENUES
Regulated gas sales..... $ -- $ -- $ -- $ -- $ -- $ -- $ --
Nonregulated gas sales.. -- -- -- -- -- -- --
------- ----- ------- ------- ---- ---- -----
Total gas sales...... -- -- -- -- -- -- --
Gas transportation and
storage................ -- -- -- -- -- -- --
Other................... 15,195 -- 15,195 15,195 -- -- --
------- ----- ------- ------- ---- ---- -----
Total operating reve-
nues................ 15,195 -- 15,195 15,195 -- -- --
------- ----- ------- ------- ---- ---- -----
OPERATING EXPENSES
Purchased gas........... -- -- -- -- -- -- --
Transport capacity and
other purchased
products............... 10,635 -- 10,635 10,635 -- -- --
Operation expense....... 2,039 -- 2,039 1,936 -- -- 103
Maintenance............. -- -- -- -- -- -- --
Depreciation and amorti-
zation................. 393 -- 393 393 -- -- --
Taxes, other than income
taxes.................. 290 -- 290 287 -- 1 2
------- ----- ------- ------- ---- ---- -----
Subtotal............. 13,357 -- 13,357 13,251 -- 1 105
------- ----- ------- ------- ---- ---- -----
Operating income
before income
taxes............... 1,838 -- 1,838 1,944 -- (1) (105)
Income taxes............ 2,085 -- 2,085 1,886 -- 23 176
------- ----- ------- ------- ---- ---- -----
Operating income..... (247) -- (247) 58 -- (24) (281)
------- ----- ------- ------- ---- ---- -----
OTHER INCOME (DEDUC-
TIONS)
Interest revenues....... 1 -- 1 1 -- -- --
Other -- net............ 3,806 -- 3,806 3,232 -- 17 557
Equity in earnings of
subsidiary company --
consolidated........... -- (269) 269 269 -- -- --
Interest revenues from
affiliated companies --
consolidated........... 999 -- 999 999 -- -- --
------- ----- ------- ------- ---- ---- -----
Total other income
(deductions)........ 4,806 (269) 5,075 4,501 -- 17 557
------- ----- ------- ------- ---- ---- -----
Income before inter-
est charges......... 4,559 (269) 4,828 4,559 -- (7) 276
------- ----- ------- ------- ---- ---- -----
INTEREST CHARGES
Interest on long-term
debt................... 1,159 -- 1,159 1,159 -- -- --
Other interest expense.. 60 -- 60 60 -- -- --
Allowance for funds used
during construction.... -- -- -- -- -- -- --
------- ----- ------- ------- ---- ---- -----
Total interest
charges............. 1,219 -- 1,219 1,219 -- -- --
------- ----- ------- ------- ---- ---- -----
NET INCOME.............. $ 3,340 $(269) $ 3,609 $ 3,340 $ -- $ (7) $ 276
======= ===== ======= ======= ==== ==== =====
</TABLE>
- ----------
( ) denotes negative amount.
62
<PAGE>
ITEM 10. (Continued)
CNG POWER COMPANY
CONSOLIDATING STATEMENT OF RETAINED EARNINGS
For the Year Ended December 31, 1996
(Thousands of Dollars)
<TABLE>
<CAPTION>
CNG Power Eliminations CNG
and and Combined CNG CNG Granite Bear
Subsidiaries Adjustments Total Power Technologies Road Mountain CNGMCS
------------ ------------ -------- ------ ------------ ------- -------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
RETAINED EARNINGS
Balance at December 31,
1995................... $6,624 $101 $6,523 $6,624 $(81) $ -- $ 6 $(26)
Adjustments:
Sale of CNG
Technologies to CNG
Products and
Services.............. -- (81) 81 -- 81 -- -- --
Net income for the year
1996 per accompanying
income statement....... 3,340 (269) 3,609 3,340 -- -- (7) 276
------ ----- ------- ------ ---- ---- --- ----
Total................ 9,964 (249) 10,213 9,964 -- -- (1) 250
Dividends declared on
common stock -- cash... -- -- -- -- -- -- -- --
------ ----- ------- ------ ---- ---- --- ----
Balance at December 31,
1996................... $9,964 $(249) $10,213 $9,964 $ -- $ -- $(1) $250
====== ===== ======= ====== ==== ==== === ====
</TABLE>
- ----------
( ) denotes negative amount.
63
<PAGE>
ITEM 10. (Continued)
CNG POWER COMPANY
CONSOLIDATING STATEMENT OF CASH FLOWS
For the Year Ended December 31, 1996
(Thousands of Dollars)
<TABLE>
<CAPTION>
CNG Power Eliminations CNG
and and Combined CNG Granite Bear
Subsidiaries Adjustments Total Power Road Mountain CNGMCS
------------ ------------ -------- ------- ------- -------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
CASH FLOWS FROM
OPERATING ACTIVITIES
Net income............. $ 3,340 $(269) $ 3,609 $ 3,340 $ -- $ (7) $276
Adjustments to
reconcile net income to
net cash provided by
(used in) operating
activities
Depreciation and
amortization......... 393 -- 393 393 -- -- --
Deferred income
taxes -- net......... 140 -- 140 111 -- 23 6
Investment tax
credit............... -- -- -- -- -- -- --
Changes in current
assets and current
liabilities Accounts
receivable -- net.... (486) -- (486) (486) -- -- --
Receivables from
affiliated cos. --
consolidated........ 59 273 (214) (214) -- -- --
Inventories........... 61 -- 61 61 -- -- --
Unrecovered gas
costs................ -- -- -- -- -- -- --
Accounts payable...... (1,309) -- (1,309) (1,289) -- -- (20)
Payables to
affiliated cos. --
consolidated........ 64 (273) 337 54 -- 121 162
Estimated rate
contingencies and
refunds.............. -- -- -- -- -- -- --
Amounts payable to
customers............ -- -- -- -- -- -- --
Taxes accrued......... (367) -- (367) (423) -- -- 56
Other -- net.......... (3) -- (3) (3) -- -- --
Changes in other
assets and other
liabilities.......... 1,369 -- 1,369 1,444 -- (17) (58)
Excess of dividends
received from sub.
cos. over equity in
earnings thereof --
consolidated........ -- 269 (269) (269) -- -- --
Other -- net.......... -- -- -- -- -- -- --
------- ----- ------- ------- ---- ---- ----
Net cash provided by
(used in) operating
activities......... 3,261 -- 3,261 2,719 -- 120 422
------- ----- ------- ------- ---- ---- ----
CASH FLOWS FROM
INVESTING ACTIVITIES
Plant construction and
other property
additions............. -- -- -- -- -- -- --
Proceeds from
dispositions of prop.,
plant
and equip. -- net..... -- -- -- -- -- -- --
Cost of other
investments -- net.... (6,000) -- (6,000) (5,880) -- (120) --
Intrasystem money pool
investments -- net.... -- -- -- -- -- -- --
Intrasystem long-term
financing -- net...... -- -- -- -- -- -- --
Property transfers to
(from) affiliates..... 1,919 -- 1,919 1,919 -- -- --
------- ----- ------- ------- ---- ---- ----
Net cash provided by
(used in) investing
activities......... (4,081) -- (4,081) (3,961) -- (120) --
------- ----- ------- ------- ---- ---- ----
CASH FLOWS FROM
FINANCING ACTIVITIES
Issuance of common
stock................. -- -- -- -- -- -- --
Issuance of
debentures............ -- -- -- -- -- -- --
Repayments of long-term
debt.................. -- -- -- -- -- -- --
Unsecured loan
repayment............. -- -- -- -- -- -- --
Commercial paper
borrowings -- net..... -- -- -- -- -- -- --
Dividends paid......... -- -- -- -- -- -- --
Intrasystem long-term
financing -- net...... (390) -- (390) (390) -- -- --
Intrasystem money pool
borrowings
(or repayments) --
net.................. 1,325 -- 1,325 1,325 -- -- --
Dividends paid --
subsidiary cos. --
consolidated......... -- -- -- -- -- -- --
Other -- net........... -- -- -- -- -- -- --
------- ----- ------- ------- ---- ---- ----
Net cash provided by
(used in) financing
activities......... 935 -- 935 935 -- -- --
------- ----- ------- ------- ---- ---- ----
Net increase
(decrease) in cash
and TCIs........... 115 -- 115 (307) -- -- 422
CASH AND TCIS AT
JANUARY 1, 1996....... 511 -- 511 510 -- -- 1
------- ----- ------- ------- ---- ---- ----
CASH AND TCIS AT
DECEMBER 31, 1996..... $ 626 $ -- $ 626 $ 203 $ -- $ -- $423
======= ===== ======= ======= ==== ==== ====
SUPPLEMENTAL CASH FLOW
INFORMATION
Cash paid for
Interest (net of
amounts
capitalized)......... $ 596 $ -- $ 596 $ 596 $ -- $ -- $ --
Income taxes (net of
refunds)............. $ 2,319 $ -- $ 2,319 $ 2,204 $ -- $ (4) $119
</TABLE>
- --------
( ) denotes negative amount.
64
<PAGE>
(THIS PAGE WAS INTENTIONALLY LEFT BLANK)
65
<PAGE>
ITEM 10. (Continued)
CNG PRODUCTS AND SERVICES, INC.
CONSOLIDATING BALANCE SHEET
At December 31, 1996
(Thousands of Dollars)
<TABLE>
<CAPTION>
CNG
Products and
Services Eliminations CNG
and and Combined Products and CNG
Subsidiary Adjustments Total Services Technologies
------------ ------------ -------- ------------ ------------
<S> <C> <C> <C> <C> <C>
ASSETS
- ------
PROPERTY, PLANT AND
EQUIPMENT
Gas utility and other
plant.................. $ 157 $ -- $ 157 $ 157 $ --
Accumulated depreciation
and amortization....... (31) -- (31) (31) --
------ ------- ------ ------ ------
Net gas utility and
other plant........ 126 -- 126 126 --
------ ------- ------ ------ ------
Exploration and produc-
tion properties........ -- -- -- -- --
Accumulated depreciation
and amortization....... -- -- -- -- --
------ ------- ------ ------ ------
Net exploration and
production
properties......... -- -- -- -- --
------ ------- ------ ------ ------
Net property, plant
and equipment...... 126 -- 126 126 --
------ ------- ------ ------ ------
INVESTMENTS
Stock of subsidiary
company, at equity --
consolidated........... -- (1,880) 1,880 1,880 --
Notes of subsidiary com-
pany -- consolidated... -- -- -- -- --
------ ------- ------ ------ ------
Total investments... -- (1,880) 1,880 1,880 --
------ ------- ------ ------ ------
CURRENT ASSETS
Cash and temporary cash
investments............ 327 -- 327 327 --
Accounts receivable
Customers.............. -- -- -- -- --
Unbilled revenues and
other................. -- -- -- -- --
Allowance for doubtful
accounts.............. -- -- -- -- --
Receivables from
affiliated companies --
consolidated........... 713 -- 713 667 46
Inventories, at cost
Gas stored -- current
portion............... -- -- -- -- --
Materials and supplies
(average cost
method)............... -- -- -- -- --
Unrecovered gas costs... -- -- -- -- --
Deferred income taxes --
current (net)......... -- -- -- -- --
Prepayments and other
current assets......... -- -- -- -- --
------ ------- ------ ------ ------
Total current as-
sets............... 1,040 -- 1,040 994 46
------ ------- ------ ------ ------
REGULATORY AND OTHER AS-
SETS
Unamortized abandoned
facilities............. -- -- -- -- --
Other investments....... 2,000 -- 2,000 -- 2,000
Deferred charges and
other assets........... -- -- -- -- --
------ ------- ------ ------ ------
Total regulatory and
other assets....... 2,000 -- 2,000 -- 2,000
------ ------- ------ ------ ------
Total assets........ $3,166 $(1,880) $5,046 $3,000 $2,046
====== ======= ====== ====== ======
</TABLE>
- --------
( ) denotes negative amount.
66
<PAGE>
ITEM 10. (Continued)
CNG PRODUCTS AND SERVICES, INC.
CONSOLIDATING BALANCE SHEET
At December 31, 1996
(Thousands of Dollars)
<TABLE>
<CAPTION>
CNG
Products and
Services Eliminations CNG
and and Combined Products and CNG
Subsidiary Adjustments Total Services Technologies
------------ ------------ -------- ------------ ------------
<S> <C> <C> <C> <C> <C>
STOCKHOLDER'S EQUITY AND
LIABILITIES
- ------------------------
CAPITALIZATION
Common stockholder's eq-
uity
Common stock........... $3,050 $(2,000) $ 5,050 $3,050 $2,000
Capital in excess of
par value............. -- -- -- -- --
Retained earnings, per
accompanying
statement............. (995) 120 (1,115) (995) (120)
Unearned compensation.. -- -- -- -- --
------ ------- ------- ------ ------
Total common stock-
holder's equity.... 2,055 (1,880) 3,935 2,055 1,880
------ ------- ------- ------ ------
Long-term debt
Debentures............. -- -- -- -- --
Convertible subordi-
nated debentures...... -- -- -- -- --
Unsecured loan......... -- -- -- -- --
Notes payable to Parent
Company............... -- -- -- -- --
------ ------- ------- ------ ------
Total long-term
debt............... -- -- -- -- --
------ ------- ------- ------ ------
Total capitaliza-
tion............... 2,055 (1,880) 3,935 2,055 1,880
------ ------- ------- ------ ------
CURRENT LIABILITIES
Current maturities on
long-term debt......... -- -- -- -- --
Commercial paper........ -- -- -- -- --
Accounts payable........ 439 -- 439 439 --
Estimated rate contin-
gencies and refunds.... -- -- -- -- --
Payables to affiliated
companies -- consoli-
dated.................. 299 -- 299 299 --
Taxes accrued........... 177 -- 177 210 (33)
Deferred income taxes --
current (net)......... -- -- -- -- --
Dividends declared...... -- -- -- -- --
Other current liabili-
ties................... -- -- -- -- --
------ ------- ------- ------ ------
Total current lia-
bilities........... 915 -- 915 948 (33)
------ ------- ------- ------ ------
DEFERRED CREDITS
Deferred income taxes... 196 -- 196 (3) 199
Accumulated deferred in-
vestment tax credits... -- -- -- -- --
Deferred credits and
other liabilities...... -- -- -- -- --
------ ------- ------- ------ ------
Total deferred cred-
its................ 196 -- 196 (3) 199
------ ------- ------- ------ ------
COMMITMENTS AND CONTIN-
GENCIES
------ ------- ------- ------ ------
Total stockholder's
equity and
liabilities........ $3,166 $(1,880) $ 5,046 $3,000 $2,046
====== ======= ======= ====== ======
</TABLE>
- --------
( ) denotes negative amount.
67
<PAGE>
ITEM 10. (Continued)
CNG PRODUCTS AND SERVICES, INC.
CONSOLIDATING INCOME STATEMENT
For the Year Ended December 31, 1996
(Thousands of Dollars)
<TABLE>
<CAPTION>
CNG
Products and
Services Eliminations CNG
and and Combined Products and CNG
Subsidiary Adjustments Total Services Technologies
------------ ------------ -------- ------------ ------------
<S> <C> <C> <C> <C> <C>
OPERATING REVENUES
Regulated gas sales..... $ -- $-- $ -- $ -- $ --
Nonregulated gas sales.. -- -- -- -- --
------- --- ------- ------- ----
Total gas sales..... -- -- -- -- --
Gas transportation and
storage................ -- -- -- -- --
Other................... 1,722 -- 1,722 1,722 --
------- --- ------- ------- ----
Total operating rev-
enues.............. 1,722 -- 1,722 1,722 --
------- --- ------- ------- ----
OPERATING EXPENSES
Purchased gas........... -- -- -- -- --
Transport capacity and
other purchased
products............... -- -- -- -- --
Operation expense....... 3,162 -- 3,162 3,161 1
Maintenance............. 5 -- 5 5 --
Depreciation and amorti-
zation................. 31 -- 31 31 --
Taxes, other than income
taxes.................. 6 -- 6 (4) 10
------- --- ------- ------- ----
Subtotal............ 3,204 -- 3,204 3,193 11
------- --- ------- ------- ----
Operating income
before income
taxes.............. (1,482) -- (1,482) (1,471) (11)
Income taxes............ (487) -- (487) (515) 28
------- --- ------- ------- ----
Operating income.... (995) -- (995) (956) (39)
------- --- ------- ------- ----
OTHER INCOME (DEDUC-
TIONS)
Interest revenues....... -- -- -- -- --
Other -- net............ -- -- -- -- --
Equity in earnings of
subsidiary company --
consolidated........... -- 39 (39) (39) --
Interest revenues from
affiliated companies --
consolidated........... -- -- -- -- --
------- --- ------- ------- ----
Total other income
(deductions)....... -- 39 (39) (39) --
------- --- ------- ------- ----
Income before inter-
est charges........ (995) 39 (1,034) (995) (39)
------- --- ------- ------- ----
INTEREST CHARGES
Interest on long-term
debt................... -- -- -- -- --
Other interest expense.. -- -- -- -- --
Allowance for funds used
during construction.... -- -- -- -- --
------- --- ------- ------- ----
Total interest
charges............ -- -- -- -- --
------- --- ------- ------- ----
NET INCOME.............. $ (995) $39 $(1,034) $ (995) $(39)
======= === ======= ======= ====
</TABLE>
- --------
( ) denotes negative amount.
68
<PAGE>
ITEM 10. (Continued)
CNG PRODUCTS AND SERVICES, INC.
CONSOLIDATING STATEMENT OF RETAINED EARNINGS
For the Year Ended December 31, 1996
(Thousands of Dollars)
<TABLE>
<CAPTION>
CNG
Products and
Services Eliminations CNG
and and Combined Products and CNG
Subsidiary Adjustments Total Services Technologies
------------ ------------ -------- ------------ ------------
<S> <C> <C> <C> <C> <C>
RETAINED EARNINGS
Balance at December 31,
1995................... $ -- $ -- $ -- $ -- $ --
Adjustments:
Purchase of CNG
Technologies from
CNG Power............. -- 81 (81) -- (81)
Net income for the year
1996 per accompanying
income statement....... (995) 39 (1,034) (995) (39)
----- ---- ------- ----- -----
Total............... (995) 120 (1,115) (995) (120)
Dividends declared on
common stock -- cash... -- -- -- -- --
----- ---- ------- ----- -----
Balance at December 31,
1996................... $(995) $120 $(1,115) $(995) $(120)
===== ==== ======= ===== =====
</TABLE>
- --------
( ) denotes negative amount.
69
<PAGE>
ITEM 10. (Continued)
CNG PRODUCTS AND SERVICES, INC.
CONSOLIDATING STATEMENT OF CASH FLOWS
For the Year Ended December 31, 1996
(Thousands of Dollars)
<TABLE>
<CAPTION>
CNG
Products and
Services Eliminations CNG
and and Combined Products and CNG
Subsidiary Adjustments Total Services Technologies
------------ ------------ -------- ------------ ------------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERAT-
ING ACTIVITIES
Net income............. $ (995) $ 39 $(1,034) $ (995) $(39)
Adjustments to
reconcile net income to
net cash
provided by (used in)
operating activities
Depreciation and amor-
tization............. 31 -- 31 31 --
Deferred income tax-
es -- net............ 69 -- 69 (3) 72
Investment tax cred-
it................... -- -- -- -- --
Changes in current as-
sets and current lia-
bilities
Accounts receiv-
able -- net........ -- -- -- -- --
Receivables from af-
filiated cos. --
consolidated........ (655) -- (655) (667) 12
Inventories........... -- -- -- -- --
Unrecovered gas
costs................ -- -- -- -- --
Accounts payable...... 439 -- 439 439 --
Payables to affili-
ated cos. -- consol-
idated............... 299 -- 299 299 --
Estimated rate con-
tingencies and re-
funds................ -- -- -- -- --
Amounts payable to
customers............ -- -- -- -- --
Taxes accrued......... 165 -- 165 210 (45)
Other -- net.......... -- -- -- -- --
Changes in other as-
sets and other lia-
bilities............. -- -- -- -- --
Excess of equity in
earnings of
subsidiary companies
over their cash
dividends paid --
consolidated........ -- (39) 39 39 --
Other -- net.......... -- -- -- -- --
------- ---- ------- ------- ----
Net cash provided by
(used in) operating
activities......... (647) -- (647) (647) --
------- ---- ------- ------- ----
CASH FLOWS FROM INVEST-
ING ACTIVITIES
Plant construction and
other property addi-
tions................. (157) -- (157) (157) --
Proceeds from disposi-
tions of prop., plant
and equip. -- net..... -- -- -- -- --
Cost of other invest-
ments -- net.......... -- -- -- -- --
Intrasystem money pool
investments -- net.... -- -- -- -- --
Intrasystem long-term
financing -- net...... -- -- -- -- --
Property transfers to
(from) affiliates..... (1,919) -- (1,919) (1,919) --
------- ---- ------- ------- ----
Net cash provided by
(used in) investing
activities......... (2,076) -- (2,076) (2,076) --
------- ---- ------- ------- ----
CASH FLOWS FROM FINANC-
ING ACTIVITIES
Issuance of common
stock................. -- -- -- -- --
Issuance of deben-
tures................. -- -- -- -- --
Repayments of long-term
debt.................. -- -- -- -- --
Unsecured loan repay-
ment.................. -- -- -- -- --
Commercial paper
borrowings -- net..... -- -- -- -- --
Dividends paid......... -- -- -- -- --
Intrasystem long-term
financing -- net...... 3,050 -- 3,050 3,050 --
Intrasystem money pool
borrowings (or repay-
ments) -- net......... -- -- -- -- --
Dividends paid -- sub-
sidiary cos. -- con-
solidated............. -- -- -- -- --
Other -- net........... -- -- -- -- --
------- ---- ------- ------- ----
Net cash provided by
(used in) financing
activities......... 3,050 -- 3,050 3,050 --
------- ---- ------- ------- ----
Net increase (de-
crease) in cash and
TCIs............... 327 -- 327 327 --
CASH AND TCIS AT JANU-
ARY 1, 1996........... -- -- -- -- --
------- ---- ------- ------- ----
CASH AND TCIS AT DECEM-
BER 31, 1996.......... $ 327 $ -- $ 327 $ 327 $ --
======= ==== ======= ======= ====
SUPPLEMENTAL CASH FLOW
INFORMATION
Cash paid for
Interest (net of
amounts capital-
ized)................ $ -- $ -- $ -- $ -- $ --
Income taxes (net of
refunds)............. $ (649) $ -- $ (649) $ (639) $(10)
</TABLE>
- --------
( ) denotes negative amount.
70
<PAGE>
(THIS PAGE WAS INTENTIONALLY LEFT BLANK)
71
<PAGE>
ITEM 10. (Continued)
CNG POWER SERVICES CORPORATION
CONSOLIDATING BALANCE SHEET
At December 31, 1996
(Thousands of Dollars)
<TABLE>
<CAPTION>
CNGPSC Eliminations
and and Combined CNG
Subsidiary Adjustments Total CNGPSC Lakewood
---------- ------------ -------- ------- --------
<S> <C> <C> <C> <C> <C>
ASSETS
- ------
PROPERTY, PLANT AND EQUIP-
MENT
Gas utility and other
plant...................... $ 2,340 $ -- $ 2,340 $ 2,340 $ --
Accumulated depreciation and
amortization............... -- -- -- -- --
------- ----- ------- ------- ----
Net gas utility and
other plant............ 2,340 -- 2,340 2,340 --
------- ----- ------- ------- ----
Exploration and production
properties................. -- -- -- -- --
Accumulated depreciation and
amortization............... -- -- -- -- --
------- ----- ------- ------- ----
Net exploration and pro-
duction properties..... -- -- -- -- --
------- ----- ------- ------- ----
Net property, plant and
equipment.............. 2,340 -- 2,340 2,340 --
------- ----- ------- ------- ----
INVESTMENTS
Stock of subsidiary company,
at equity --consolidated... -- (581) 581 581 --
Notes of subsidiary compa-
ny -- consolidated......... -- -- -- -- --
------- ----- ------- ------- ----
Total investments....... -- (581) 581 581 --
------- ----- ------- ------- ----
CURRENT ASSETS
Cash and temporary cash in-
vestments.................. 8,682 -- 8,682 8,381 301
Accounts receivable
Customers.................. 811 -- 811 811 --
Unbilled revenues and oth-
er........................ 14,318 -- 14,318 14,297 21
Allowance for doubtful ac-
counts.................... -- -- -- -- --
Receivables from affiliated
companies -- consolidated.. -- (8) 8 8 --
Inventories, at cost
Gas stored -- current por-
tion...................... -- -- -- -- --
Materials and supplies (av-
erage cost method)........ 14 -- 14 14 --
Unrecovered gas costs....... -- -- -- -- --
Deferred income taxes --
current (net)............. -- -- -- -- --
Prepayments and other cur-
rent assets................ 1,149 -- 1,149 1,149 --
------- ----- ------- ------- ----
Total current assets.... 24,974 (8) 24,982 24,660 322
------- ----- ------- ------- ----
REGULATORY AND OTHER ASSETS
Unamortized abandoned facil-
ities...................... -- -- -- -- --
Other investments........... 401 -- 401 -- 401
Deferred charges and other
assets..................... -- -- -- -- --
------- ----- ------- ------- ----
Total regulatory and
other assets........... 401 -- 401 -- 401
------- ----- ------- ------- ----
Total assets............ $27,715 $(589) $28,304 $27,581 $723
======= ===== ======= ======= ====
</TABLE>
- --------
( ) denotes negative amount.
72
<PAGE>
ITEM 10. (Continued)
CNG POWER SERVICES CORPORATION
CONSOLIDATING BALANCE SHEET
At December 31, 1996
(Thousands of Dollars)
<TABLE>
<CAPTION>
CNGPSC Eliminations
and and Combined CNG
Subsidiary Adjustments Total CNGPSC Lakewood
---------- ------------ -------- ------- --------
<S> <C> <C> <C> <C> <C>
STOCKHOLDER'S EQUITY AND
LIABILITIES
- ------------------------
CAPITALIZATION
Common stockholder's eq-
uity
Common stock............ $15,520 $(520) $16,040 $15,520 $520
Capital in excess of par
value.................. -- -- -- -- --
Retained earnings, per
accompanying state-
ment................... (3,198) (61) (3,137) (2,770) (367)
Unearned compensation... -- -- -- -- --
------- ----- ------- ------- ----
Total common stock-
holder's equity...... 12,322 (581) 12,903 12,750 153
------- ----- ------- ------- ----
Long-term debt
Debentures.............. -- -- -- -- --
Convertible subordinated
debentures............. -- -- -- -- --
Unsecured loan.......... -- -- -- -- --
Notes payable to Parent
Company................ -- -- -- -- --
------- ----- ------- ------- ----
Total long-term debt.. -- -- -- -- --
------- ----- ------- ------- ----
Total capitalization.. 12,322 (581) 12,903 12,750 153
------- ----- ------- ------- ----
CURRENT LIABILITIES
Current maturities on
long-term debt........... -- -- -- -- --
Commercial paper.......... -- -- -- -- --
Accounts payable.......... 12,739 -- 12,739 12,739 --
Estimated rate contingen-
cies and refunds......... -- -- -- -- --
Payables to affiliated
companies -- consoli-
dated.................... 1,481 (8) 1,489 971 518
Taxes accrued............. (542) -- (542) (468) (74)
Deferred income taxes --
current (net)........... -- -- -- -- --
Dividends declared........ -- -- -- -- --
Other current liabili-
ties..................... 1,527 -- 1,527 1,527 --
------- ----- ------- ------- ----
Total current liabili-
ties................. 15,205 (8) 15,213 14,769 444
------- ----- ------- ------- ----
DEFERRED CREDITS
Deferred income taxes..... 188 -- 188 62 126
Accumulated deferred in-
vestment tax credits..... -- -- -- -- --
Deferred credits and other
liabilities.............. -- -- -- -- --
------- ----- ------- ------- ----
Total deferred cred-
its.................. 188 -- 188 62 126
------- ----- ------- ------- ----
COMMITMENTS AND CONTINGEN-
CIES
------- ----- ------- ------- ----
Total stockholder's
equity and liabili-
ties................. $27,715 $(589) $28,304 $27,581 $723
======= ===== ======= ======= ====
</TABLE>
- --------
( ) denotes negative amount.
73
<PAGE>
ITEM 10. (Continued)
CNG POWER SERVICES CORPORATION
CONSOLIDATING INCOME STATEMENT
For the Year Ended December 31, 1996
(Thousands of Dollars)
<TABLE>
<CAPTION>
CNGPSC Eliminations
and and Combined CNG
Subsidiary Adjustments Total CNGPSC Lakewood
---------- ------------ -------- -------- --------
<S> <C> <C> <C> <C> <C>
OPERATING REVENUES
Regulated gas sales...... $ -- $ -- $ -- $ -- $ --
Nonregulated gas sales... -- -- -- -- --
-------- ---- -------- -------- ----
Total gas sales...... -- -- -- -- --
Gas transportation and
storage................. -- -- -- -- --
Other.................... 109,446 -- 109,446 109,446 --
-------- ---- -------- -------- ----
Total operating reve-
nues................ 109,446 -- 109,446 109,446 --
-------- ---- -------- -------- ----
OPERATING EXPENSES
Purchased gas............ -- -- -- -- --
Transport capacity and
other purchased prod-
ucts.................... 111,337 -- 111,337 111,337 --
Operation expense........ 2,059 -- 2,059 2,058 1
Maintenance.............. -- -- -- -- --
Depreciation and amorti-
zation.................. -- -- -- -- --
Taxes, other than income
taxes................... 2 -- 2 1 1
-------- ---- -------- -------- ----
Subtotal............. 113,398 -- 113,398 113,396 2
-------- ---- -------- -------- ----
Operating income be-
fore income taxes... (3,952) -- (3,952) (3,950) (2)
Income taxes............. (1,346) -- (1,346) (1,367) 21
-------- ---- -------- -------- ----
Operating income..... (2,606) -- (2,606) (2,583) (23)
-------- ---- -------- -------- ----
OTHER INCOME (DEDUCTIONS)
Interest revenues........ 23 -- 23 23 --
Other -- net............. 50 -- 50 -- 50
Equity in earnings of
subsidiary company --
consolidated............ -- (27) 27 27 --
Interest revenues from
affiliated companies --
consolidated............ -- -- -- -- --
-------- ---- -------- -------- ----
Total other income
(deductions)........ 73 (27) 100 50 50
-------- ---- -------- -------- ----
Income before inter-
est charges......... (2,533) (27) (2,506) (2,533) 27
-------- ---- -------- -------- ----
INTEREST CHARGES
Interest on long-term
debt.................... -- -- -- -- --
Other interest expense... -- -- -- -- --
Allowance for funds used
during construction..... -- -- -- -- --
-------- ---- -------- -------- ----
Total interest
charges............. -- -- -- -- --
-------- ---- -------- -------- ----
NET INCOME............... $ (2,533) $(27) $ (2,506) $ (2,533) $ 27
======== ==== ======== ======== ====
</TABLE>
- --------
( ) denotes negative amount.
74
<PAGE>
ITEM 10. (Continued)
CNG POWER SERVICES CORPORATION
CONSOLIDATING STATEMENT OF RETAINED EARNINGS
For the Year Ended December 31, 1996
(Thousands of Dollars)
<TABLE>
<CAPTION>
CNGPSC Eliminations
and and Combined CNG
Subsidiary Adjustments Total CNGPSC Lakewood
---------- ------------ -------- ------- --------
<S> <C> <C> <C> <C> <C>
RETAINED EARNINGS
Balance at December 31,
1995..................... $ (665) $(34) $ (631) $ (237) $(394)
Net income for the year
1996 per accompanying in-
come statement........... (2,533) (27) (2,506) (2,533) 27
------- ---- ------- ------- -----
Total................. (3,198) (61) (3,137) (2,770) (367)
Dividends declared on com-
mon stock -- cash........ -- -- -- -- --
------- ---- ------- ------- -----
Balance at December 31,
1996..................... $(3,198) $(61) $(3,137) $(2,770) $(367)
======= ==== ======= ======= =====
</TABLE>
- --------
( ) denotes negative amount.
75
<PAGE>
ITEM 10. (Continued)
CNG POWER SERVICES CORPORATION
CONSOLIDATING STATEMENT OF CASH FLOWS
For the Year Ended December 31, 1996
(Thousands of Dollars)
<TABLE>
<CAPTION>
CNGPSC Eliminations
and and Combined CNG
Subsidiary Adjustments Total CNGPSC Lakewood
---------- ------------ -------- -------- --------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES
Net income................ $ (2,533) $(27) $ (2,506) $ (2,533) $ 27
Adjustments to reconcile
net income to net cash
provided by (used in)
operating activities
Depreciation and
amortization............ -- -- -- -- --
Deferred income taxes --
net.................... 94 -- 94 58 36
Investment tax credit.... -- -- -- -- --
Changes in current assets
and current liabilities
Accounts receivable --
net.................... (10,963) -- (10,963) (10,973) 10
Receivables from
affiliated cos. --
consolidated........... -- (2) 2 2 --
Inventories.............. -- -- -- -- --
Unrecovered gas costs.... -- -- -- -- --
Accounts payable......... 8,960 -- 8,960 8,960 --
Payables to affiliated
cos. -- consolidated.... (500) 2 (502) (494) (8)
Estimated rate
contingencies and
refunds................. -- -- -- -- --
Amounts payable to
customers............... -- -- -- -- --
Taxes accrued............ (474) -- (474) (525) 51
Other -- net............. 378 -- 378 378 --
Changes in other assets
and other liabilities... 100 -- 100 -- 100
Excess of equity in
earnings of subsidiary
companies over their
cash dividends paid --
consolidated........... -- 27 (27) (27) --
Other -- net............. -- -- -- -- --
-------- ---- -------- -------- ----
Net cash provided by
(used in) operating
activities............. (4,938) -- (4,938) (5,154) 216
-------- ---- -------- -------- ----
CASH FLOWS FROM INVESTING
ACTIVITIES
Plant construction and
other property
additions................ (2,293) -- (2,293) (2,293) --
Proceeds from dispositions
of prop., plant and
equip. -- net............ -- -- -- -- --
Cost of other
investments -- net....... -- -- -- -- --
Intrasystem money pool
investments -- net....... -- -- -- -- --
Intrasystem long-term
financing -- net......... -- -- -- -- --
Property transfers to
(from) affiliates........ -- -- -- -- --
-------- ---- -------- -------- ----
Net cash provided by
(used in) investing
activities............. (2,293) -- (2,293) (2,293) --
-------- ---- -------- -------- ----
CASH FLOWS FROM FINANCING
ACTIVITIES
Issuance of common stock.. -- -- -- -- --
Issuance of debentures.... -- -- -- -- --
Repayments of long-term
debt..................... -- -- -- -- --
Unsecured loan repayment.. -- -- -- -- --
Commercial paper
borrowings -- net........ -- -- -- -- --
Dividends paid............ -- -- -- -- --
Intrasystem long-term
financing -- net......... 15,000 -- 15,000 15,000 --
Intrasystem money pool
borrowings (or
repayments) -- net....... -- -- -- -- --
Dividends paid --
subsidiary cos. --
consolidated............ -- -- -- -- --
Other -- net.............. -- -- -- -- --
-------- ---- -------- -------- ----
Net cash provided by
(used in) financing
activities............. 15,000 -- 15,000 15,000 --
-------- ---- -------- -------- ----
Net increase (decrease)
in cash and TCIs....... 7,769 -- 7,769 7,553 216
CASH AND TCIS AT JANUARY
1, 1996.................. 913 -- 913 828 85
-------- ---- -------- -------- ----
CASH AND TCIS AT DECEMBER
31, 1996................. $ 8,682 $ -- $ 8,682 $ 8,381 $301
======== ==== ======== ======== ====
SUPPLEMENTAL CASH FLOW
INFORMATION
Cash paid for
Interest (net of amounts
capitalized)............ $ -- $ -- $ -- $ -- $ --
Income taxes (net of
refunds)................ $ (884) $ -- $ (884) $ (818) $(66)
</TABLE>
- --------
( ) denotes negative amount.
76
<PAGE>
(THIS PAGE WAS INTENTIONALLY LEFT BLANK)
77
<PAGE>
ITEM 10. (Continued)
CNG INTERNATIONAL CORPORATION
CONSOLIDATING BALANCE SHEET
At December 31, 1996
(Thousands of Dollars)
<TABLE>
<CAPTION>
CNG
CNGI Eliminations CNG Cayman One Eliminations CNG CNGI
and and Combined Cayman and and Combined Cayman Australia
Subsidiaries Adjustments Total CNGI Two Subsidiary Adjustments Total One Pty Ltd.
------------ ------------ -------- ------- ------ ---------- ------------ -------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
- ------
PROPERTY, PLANT AND
EQUIPMENT
Gas utility and
other plant....... $ 241 $ -- $ 241 $ 241 $ -- $ -- $ -- $ -- $ -- $ --
Accumulated
depreciation and
amortization...... (17) -- (17) (17) -- -- -- -- -- --
------- -------- ------- ------- ---- ------- -------- ------- ------- -------
Net gas utility
and other
plant.......... 224 -- 224 224 -- -- -- -- -- --
------- -------- ------- ------- ---- ------- -------- ------- ------- -------
Exploration and
production
properties........ -- -- -- -- -- -- -- -- -- --
Accumulated
depreciation and
amortization...... -- -- -- -- -- -- -- -- -- --
------- -------- ------- ------- ---- ------- -------- ------- ------- -------
Net exploration
and production
properties..... -- -- -- -- -- -- -- -- -- --
------- -------- ------- ------- ---- ------- -------- ------- ------- -------
Net property,
plant and
equipment...... 224 -- 224 224 -- -- -- -- -- --
------- -------- ------- ------- ---- ------- -------- ------- ------- -------
INVESTMENTS
Stocks of
subsidiary
companies, at
equity --
consolidated..... -- (38,731) 38,731 38,731 -- -- (38,344) 38,344 38,344 --
Notes of subsidiary
companies --
consolidated...... -- -- -- -- -- -- -- -- -- --
------- -------- ------- ------- ---- ------- -------- ------- ------- -------
Total invest-
ments.......... -- (38,731) 38,731 38,731 -- -- (38,344) 38,344 38,344 --
------- -------- ------- ------- ---- ------- -------- ------- ------- -------
CURRENT ASSETS
Cash and temporary
cash investments.. 221 -- 221 221 -- -- -- -- -- --
Accounts receivable
Customers......... -- -- -- -- -- -- -- -- -- --
Unbilled revenues
and other........ 1,151 -- 1,151 1,151 -- -- -- -- -- --
Allowance for
doubtful ac-
counts........... -- -- -- -- -- -- -- -- -- --
Receivables from
affiliated compa-
nies-- consoli-
dated............. -- -- -- -- -- -- -- -- -- --
Inventories, at
cost
Gas stored -- cur-
rent portion..... -- -- -- -- -- -- -- -- -- --
Materials and sup-
plies (average
cost method)..... -- -- -- -- -- -- -- -- -- --
Unrecovered gas
costs............. -- -- -- -- -- -- -- -- -- --
Deferred income
taxes --
current (net)..... -- -- -- -- -- -- -- -- -- --
Prepayments and
other current
assets............ -- -- -- -- -- -- -- -- -- --
------- -------- ------- ------- ---- ------- -------- ------- ------- -------
Total current
assets......... 1,372 -- 1,372 1,372 -- -- -- -- -- --
------- -------- ------- ------- ---- ------- -------- ------- ------- -------
REGULATORY AND
OTHER ASSETS
Unamortized aban-
doned facilities.. -- -- -- -- -- -- -- -- -- --
Other investments.. 42,172 (387) 42,559 3,441 387 38,731 -- 38,731 -- 38,731
Deferred charges
and other assets.. 3 -- 3 3 -- -- -- -- -- --
------- -------- ------- ------- ---- ------- -------- ------- ------- -------
Total regulatory
and other
assets......... 42,175 (387) 42,562 3,444 387 38,731 -- 38,731 -- 38,731
------- -------- ------- ------- ---- ------- -------- ------- ------- -------
Total assets.... $43,771 $(39,118) $82,889 $43,771 $387 $38,731 $(38,344) $77,075 $38,344 $38,731
======= ======== ======= ======= ==== ======= ======== ======= ======= =======
</TABLE>
- -------
( ) denotes negative amount.
78
<PAGE>
ITEM 10. (Continued)
CNG INTERNATIONAL CORPORATION
CONSOLIDATING BALANCE SHEET
At December 31, 1996
(Thousands of Dollars)
<TABLE>
<CAPTION>
CNG
CNGI Eliminations CNG Cayman One Eliminations CNG CNGI
and and Combined Cayman and and Combined Cayman Australia
Subsidiaries Adjustments Total CNGI Two Subsidiary Adjustments Total One Pty Ltd.
------------ ------------ -------- ------- ------ ---------- ------------ -------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
STOCKHOLDER'S
EQUITY AND
LIABILITIES
- -------------
CAPITALIZATION
Common
stockholder's
equity
Common stock...... $44,940 $ -- $44,940 $44,940 $ -- $ -- $ -- $ -- $ -- $ --
Capital in excess
of par value..... -- (38,731) 38,731 -- 387 38,344 (38,731) 77,075 38,344 38,731
Retained earnings,
per accompanying
statement........ (2,631) -- (2,631) (2,631) -- -- -- -- -- --
Unearned
compensation..... -- -- -- -- -- -- -- -- -- --
------- -------- ------- ------- ---- ------- -------- ------- ------- -------
Total common
stockholder's
equity......... 42,309 (38,731) 81,040 42,309 387 38,344 (38,731) 77,075 38,344 38,731
------- -------- ------- ------- ---- ------- -------- ------- ------- -------
Long-term debt
Debentures........ -- -- -- -- -- -- -- -- -- --
Convertible
subordinated
debentures....... -- -- -- -- -- -- -- -- -- --
Unsecured loan.... -- -- -- -- -- -- -- -- -- --
Notes payable to
Parent Company... -- -- -- -- -- -- -- -- -- --
------- -------- ------- ------- ---- ------- -------- ------- ------- -------
Total long-term
debt........... -- -- -- -- -- -- -- -- -- --
------- -------- ------- ------- ---- ------- -------- ------- ------- -------
Total
capitalization.. 42,309 (38,731) 81,040 42,309 387 38,344 (38,731) 77,075 38,344 38,731
------- -------- ------- ------- ---- ------- -------- ------- ------- -------
MINORITY INTEREST.. -- (387) 387 -- -- 387 387 -- -- --
------- -------- ------- ------- ---- ------- -------- ------- ------- -------
CURRENT LIABILITIES
Current maturities
on long-term
debt.............. -- -- -- -- -- -- -- -- -- --
Commercial paper... -- -- -- -- -- -- -- -- -- --
Accounts payable... 778 -- 778 778 -- -- -- -- -- --
Estimated rate
contingencies and
refunds........... -- -- -- -- -- -- -- -- -- --
Payables to
affiliated
companies --
consolidated...... 918 -- 918 918 -- -- -- -- -- --
Taxes accrued...... (240) -- (240) (240) -- -- -- -- -- --
Deferred income
taxes --
current (net)..... -- -- -- -- -- -- -- -- -- --
Dividends
declared.......... -- -- -- -- -- -- -- -- -- --
Other current
liabilities....... (1) -- (1) (1) -- -- -- -- -- --
------- -------- ------- ------- ---- ------- -------- ------- ------- -------
Total current
liabilities.... 1,455 -- 1,455 1,455 -- -- -- -- -- --
------- -------- ------- ------- ---- ------- -------- ------- ------- -------
DEFERRED CREDITS
Deferred income
taxes............. 7 -- 7 7 -- -- -- -- -- --
Accumulated
deferred
investment tax
credits........... -- -- -- -- -- -- -- -- -- --
Deferred credits
and other
liabilities....... -- -- -- -- -- -- -- -- -- --
------- -------- ------- ------- ---- ------- -------- ------- ------- -------
Total deferred
credits........ 7 -- 7 7 -- -- -- -- -- --
------- -------- ------- ------- ---- ------- -------- ------- ------- -------
COMMITMENTS AND
CONTINGENCIES
------- -------- ------- ------- ---- ------- -------- ------- ------- -------
Total
stockholder's
equity and
liabilities.... $43,771 $(39,118) $82,889 $43,771 $387 $38,731 $(38,344) $77,075 $38,344 $38,731
======= ======== ======= ======= ==== ======= ======== ======= ======= =======
</TABLE>
- -------
( ) denotes negative amount.
79
<PAGE>
ITEM 10. (Continued)
CNG INTERNATIONAL CORPORATION
CONSOLIDATING INCOME STATEMENT
For the Year Ended December 31, 1996
(Thousands of Dollars)
<TABLE>
<CAPTION>
CNG
CNGI Eliminations CNG Cayman One Eliminations CNG CNGI
and and Combined Cayman and and Combined Cayman Australia
Subsidiaries Adjustments Total CNGI Two Subsidiary Adjustments Total One Pty Ltd.
------------ ------------ -------- ------- ------ ---------- ------------ -------- ------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
OPERATING REVENUES
Regulated gas
sales............. $ -- $ -- $ -- $ -- $ -- $ -- $ -- $ -- $ -- $ --
Nonregulated gas
sales............. -- -- -- -- -- -- -- -- -- --
------- ----- ------- ------- ----- ----- ----- ----- ----- -----
Total gas
sales.......... -- -- -- -- -- -- -- -- -- --
Gas transportation
and storage....... -- -- -- -- -- -- -- -- -- --
Other.............. 98 -- 98 98 -- -- -- -- -- --
------- ----- ------- ------- ----- ----- ----- ----- ----- -----
Total operating
revenues....... 98 -- 98 98 -- -- -- -- -- --
------- ----- ------- ------- ----- ----- ----- ----- ----- -----
OPERATING EXPENSES
Purchased gas...... -- -- -- -- -- -- -- -- -- --
Transport capacity
and other
purchased
products.......... -- -- -- -- -- -- -- -- -- --
Operation expense.. 3,908 -- 3,908 3,908 -- -- -- -- -- --
Maintenance........ 6 -- 6 6 -- -- -- -- -- --
Depreciation and
amortization...... 17 -- 17 17 -- -- -- -- -- --
Taxes, other than
income taxes...... -- -- -- -- -- -- -- -- -- --
------- ----- ------- ------- ----- ----- ----- ----- ----- -----
Subtotal........ 3,931 -- 3,931 3,931 -- -- -- -- -- --
------- ----- ------- ------- ----- ----- ----- ----- ----- -----
Operating income
before income
taxes.......... (3,833) -- (3,833) (3,833) -- -- -- -- -- --
Income taxes....... (1,418) -- (1,418) (1,418) -- -- -- -- -- --
------- ----- ------- ------- ----- ----- ----- ----- ----- -----
Operating
income......... (2,415) -- (2,415) (2,415) -- -- -- -- -- --
------- ----- ------- ------- ----- ----- ----- ----- ----- -----
OTHER INCOME
(DEDUCTIONS)
Interest revenues.. -- -- -- -- -- -- -- -- -- --
Other -- net....... 1 -- 1 1 -- -- -- -- -- --
Equity in earnings
of subsidiary
companies --
consolidated..... -- -- -- -- -- -- -- -- -- --
Interest revenues
from affiliated
companies --
consolidated..... -- -- -- -- -- -- -- -- -- --
------- ----- ------- ------- ----- ----- ----- ----- ----- -----
Total other
income
(deductions)... 1 -- 1 1 -- -- -- -- -- --
------- ----- ------- ------- ----- ----- ----- ----- ----- -----
Income before
interest
charges........ (2,414) -- (2,414) (2,414) -- -- -- -- -- --
------- ----- ------- ------- ----- ----- ----- ----- ----- -----
INTEREST CHARGES
Interest on long-
term debt......... -- -- -- -- -- -- -- -- -- --
Other interest
expense........... 217 -- 217 217 -- -- -- -- -- --
Allowance for funds
used during
construction...... -- -- -- -- -- -- -- -- -- --
------- ----- ------- ------- ----- ----- ----- ----- ----- -----
Total interest
charges........ 217 -- 217 217 -- -- -- -- -- --
------- ----- ------- ------- ----- ----- ----- ----- ----- -----
NET INCOME......... $(2,631) $ -- $(2,631) $(2,631) $ -- $ -- $ -- $ -- $ -- $ --
======= ===== ======= ======= ===== ===== ===== ===== ===== =====
</TABLE>
- -------
( ) denotes negative amount.
80
<PAGE>
ITEM 10. (Continued)
CNG INTERNATIONAL CORPORATION
CONSOLIDATING STATEMENT OF RETAINED EARNINGS
For the Year Ended December 31, 1996
(Thousands of Dollars)
<TABLE>
<CAPTION>
CNG
CNGI Eliminations CNG Cayman One Eliminations CNG CNGI
and and Combined Cayman and and Combined Cayman Australia
Subsidiaries Adjustments Total CNGI Two Subsidiary Adjustments Total One Pty Ltd.
------------ ------------ -------- ------- ------ ---------- ------------ -------- ------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
RETAINED EARNINGS
Balance at December
31, 1995.......... $ -- $ -- $ -- $ -- $ -- $ -- $ -- $ -- $ -- $ --
Net income for the
year
1996 per
accompanying
income statement.. (2,631) -- (2,631) (2,631) -- -- -- -- -- --
------- ---- ------- ------- ---- ---- ---- ---- ---- ----
Total........... (2,631) -- (2,631) (2,631) -- -- -- -- -- --
Dividends declared
on common stock --
cash............. -- -- -- -- -- -- -- -- -- --
------- ---- ------- ------- ---- ---- ---- ---- ---- ----
Balance at December
31, 1996.......... $(2,631) $ -- $(2,631) $(2,631) $ -- $ -- $ -- $ -- $ -- $ --
======= ==== ======= ======= ==== ==== ==== ==== ==== ====
</TABLE>
- -------
( ) denotes negative amount.
81
<PAGE>
ITEM 10. (Continued)
CNG INTERNATIONAL CORPORATION
CONSOLIDATING STATEMENT OF CASH FLOWS
For the Year Ended December 31, 1996
(Thousands of Dollars)
<TABLE>
<CAPTION>
CNG
CNGI Eliminations CNG Cayman One Eliminations CNG CNGI
and and Combined Cayman and and Combined Cayman Australia
Subsidiaries Adjustments Total CNGI Two Subsidiary Adjustments Total One Pty Ltd.
------------ ------------ -------- -------- ------ ---------- ------------ -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CASH FLOWS FROM
OPERATING
ACTIVITIES
Net income........ $ (2,631) $ -- $ (2,631) $ (2,631) $ -- $ -- $ -- $ -- $ -- $ --
Adjustments to
reconcile net
income to net cash
provided by (used
in) operating
activities
Depreciation and
amortization.... 17 -- 17 17 -- -- -- -- -- --
Deferred income
taxes -- net.... 7 -- 7 7 -- -- -- -- -- --
Investment tax
credit.......... -- -- -- -- -- -- -- -- -- --
Changes in
current assets
and current
liabilities
Accounts
receivable --
net............ (1,151) -- (1,151) (1,151) -- -- -- -- -- --
Receivables from
affiliated
cos. --
consolidated.... -- -- -- -- -- -- -- -- -- --
Inventories...... -- -- -- -- -- -- -- -- -- --
Unrecovered gas
costs........... -- -- -- -- -- -- -- -- -- --
Accounts
payable......... 778 -- 778 778 -- -- -- -- -- --
Payables to
affiliated
cos. --
consolidated... 918 -- 918 918 -- -- -- -- -- --
Estimated rate
contingencies
and refunds..... -- -- -- -- -- -- -- -- -- --
Amounts payable
to customers.... -- -- -- -- -- -- -- -- -- --
Taxes accrued.... (240) -- (240) (240) -- -- -- -- -- --
Other -- net..... (1) -- (1) (1) -- -- -- -- -- --
Changes in other
assets and other
liabilities..... (3) -- (3) (3) -- -- -- -- -- --
Excess of equity
in earnings of
subsidiary
companies over
their cash
dividends
paid --
consolidated.... -- -- -- -- -- -- -- -- -- --
Other -- net..... -- -- -- -- -- -- -- -- -- --
-------- -------- -------- -------- ----- -------- -------- -------- -------- --------
Net cash
provided by
(used in)
operating
activities.... (2,306) -- (2,306) (2,306) -- -- -- -- -- --
-------- -------- -------- -------- ----- -------- -------- -------- -------- --------
CASH FLOWS FROM
INVESTING
ACTIVITIES
Plant construction
and other
property
additions........ (241) -- (241) (241) -- -- -- -- -- --
Proceeds from
dispositions of
prop., plant and
equip. -- net.... -- -- -- -- -- -- -- -- -- --
Cost of other
investments --
net............. (42,172) -- (42,172) (3,441) -- (38,731) -- (38,731) -- (38,731)
Intrasystem money
pool
investments --
net............. -- -- -- -- -- -- -- -- -- --
Intrasystem long-
term financing --
net............. -- 39,118 (39,118) (38,731) (387) -- 38,344 (38,344) (38,344) --
Property transfers
to (from)
affiliates....... -- -- -- -- -- -- -- -- -- --
-------- -------- -------- -------- ----- -------- -------- -------- -------- --------
Net cash
provided by
(used in)
investing
activities.... (42,413) 39,118 (81,531) (42,413) (387) (38,731) 38,344 (77,075) (38,344) (38,731)
-------- -------- -------- -------- ----- -------- -------- -------- -------- --------
CASH FLOWS FROM
FINANCING
ACTIVITIES
Issuance of common
stock............ -- -- -- -- -- -- -- -- -- --
Issuance of
debentures....... -- -- -- -- -- -- -- -- -- --
Repayments of
long-term debt... -- -- -- -- -- -- -- -- -- --
Unsecured loan
repayment........ -- -- -- -- -- -- -- -- -- --
Commercial paper
borrowings --
net............. -- -- -- -- -- -- -- -- -- --
Dividends paid.... -- -- -- -- -- -- -- -- -- --
Intrasystem long-
term financing --
net............. 44,940 (38,731) 83,671 44,940 387 38,344 (38,731) 77,075 38,344 38,731
Minority
interest......... -- (387) 387 -- -- 387 387 -- -- --
Intrasystem money
pool borrowings
(or
repayments) --
net............. -- -- -- -- -- -- -- -- -- --
Dividends paid --
subsidiary
cos. --
consolidated..... -- -- -- -- -- -- -- -- -- --
Other -- net...... -- -- -- -- -- -- -- -- -- --
-------- -------- -------- -------- ----- -------- -------- -------- -------- --------
Net cash
provided by
(used in)
financing
activities.... 44,940 (39,118) 84,058 44,940 387 38,731 (38,344) 77,075 38,344 38,731
-------- -------- -------- -------- ----- -------- -------- -------- -------- --------
Net increase
(decrease) in
cash and
TCIs.......... 221 -- 221 221 -- -- -- -- -- --
CASH AND TCIS AT
JANUARY 1, 1996.. -- -- -- -- -- -- -- -- -- --
-------- -------- -------- -------- ----- -------- -------- -------- -------- --------
CASH AND TCIS AT
DECEMBER 31,
1996............. $ 221 $ -- $ 221 $ 221 $ -- $ -- $ -- $ -- $ -- $ --
======== ======== ======== ======== ===== ======== ======== ======== ======== ========
SUPPLEMENTAL CASH
FLOW INFORMATION
Cash paid for
Interest (net of
amounts
capitalized).... $ 217 $ -- $ 217 $ 217 $ -- $ -- $ -- $ -- $ -- $ --
Income taxes (net
of refunds)..... $ (1,185) $ -- $ (1,185) $ (1,185) $ -- $ -- $ -- $ -- $ -- $ --
</TABLE>
- -------
( ) denotes negative amount.
82
<PAGE>
ITEM 10. FINANCIAL STATEMENTS AND EXHIBITS (Concluded)
EXHIBITS
<TABLE>
<CAPTION>
SEC
Exhibit
Reference Description of Exhibit
--------- --------------------------------------------------------------------
<C> <S>
A. Consolidated Natural Gas Company's Form 10-K Annual Report for the
year ended December 31, 1996, is hereby incorporated by reference to
the filing made on March 25, 1997 under File No. 1-3196.
B. (1) A copy of the charter, as amended, and copy of the by-laws, as
amended, of Consolidated Natural Gas Company and each subsidiary
company thereof, unless otherwise indicated on the list filed
herewith, are incorporated in this report by reference to
previous filings with the Commission, as shown on such list.
(2) Description of Consolidated Natural Gas Company Rights
Agreement, is hereby incorporated by reference to Exhibit 1 to
the Current Report on Form 8-K filed on January 23, 1996 under
File No. 1-3196.
C.(a) The indentures of Consolidated Natural Gas Company are hereby
incorporated by reference to previously filed material as indicated
on the list filed herewith.
(b) Not applicable.
D. Pursuant to Rule 45(c) under the Public Utility Holding Company Act
of 1935, the Agreement among system companies concerning the
allocation of current federal income taxes (Agreement) is
incorporated in this report by reference to Consolidated Natural Gas
Company's Annual Report on Form U5S for the year ended December 31,
1995 (File No. 30-203). First Amendment to the Agreement is filed
herewith.
E. Pursuant to Rule 16(c) under the Public Utility Holding Company Act
of 1935, the annual report of the Iroquois Gas Transmission System,
L.P., for the year ended December 31, 1996, is filed herewith.
F. Schedules supporting items of this report:
(1) ITEM 1--Schedule of Investments is filed herewith.
(2) ITEM 4--Schedule of Acquisitions, Redemptions, or Retirements of
System Securities is filed herewith.
(3) ITEM 6--Consolidated Natural Gas Company's "1997 Notice of
Annual Meeting and Proxy Statement" is hereby incorporated by
reference to the filing made on March 25, 1997.
(4) ITEM 10--Schedule of utility plant and related depreciation or
amortization accounts, together with schedules of other property
or investments, if applicable, for:
CNG Transmission
East Ohio Gas
Peoples Natural Gas
Virginia Natural Gas
Hope Gas
West Ohio Gas
are filed herewith.
G. Financial Data Schedules have been filed electronically (Exhibit 27
for EDGAR purposes).
H. (1) Organization chart showing the relationship of the exempt
wholesale generator in which the system holds an interest to
other system companies, is filed herewith.
(2) Organization chart showing the relationship of the foreign
utility company in which the system holds an interest to other
system companies, is filed herewith.
I. (1) Financial statements of the exempt wholesale generator are filed
herewith.
(2) Financial statements of the foreign utility company are filed
herewith.
</TABLE>
83
<PAGE>
SIGNATURE
The registrant has duly caused this annual report to be signed on its behalf
by the undersigned thereunto duly authorized pursuant to the requirements of
the Public Utility Holding Company Act of 1935, such company being a
registered holding company.
CONSOLIDATED NATURAL GAS COMPANY
_____________________________________
(Registrant)
By D. M. WESTFALL
____________________________________
(D. M. Westfall)
Senior Vice President
and Chief Financial Officer
April 29, 1997
84
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEC
Exhibit
Reference Description of Exhibit
--------- --------------------------------------------------------------------
<C> <S>
A. Consolidated Natural Gas Company's Form 10-K Annual Report for the
year ended December 31, 1996, is hereby incorporated by reference to
the filing made on March 25, 1997 under File No. 1-3196.
B. (1) A copy of the charter, as amended, and copy of the by-laws, as
amended, of Consolidated Natural Gas Company and each subsidiary
company thereof, unless otherwise indicated on the list filed
herewith, are incorporated in this report by reference to
previous filings with the Commission, as shown on such list.
(2) Description of Consolidated Natural Gas Company Rights
Agreement, is hereby incorporated by reference to Exhibit 1 to
the Current Report on Form 8-K filed on January 23, 1996 under
File No. 1-3196.
C.(a) The indentures of Consolidated Natural Gas Company are hereby
incorporated by reference to previously filed material as indicated
on the list filed herewith.
(b) Not applicable.
D. Pursuant to Rule 45(c) under the Public Utility Holding Company Act
of 1935, the Agreement among system companies concerning the
allocation of current federal income taxes (Agreement) is
incorporated in this report by reference to Consolidated Natural Gas
Company's Annual Report on Form U5S for the year ended December 31,
1995 (File No. 30-203). First Amendment to the Agreement is filed
herewith.
E. Pursuant to Rule 16(c) under the Public Utility Holding Company Act
of 1935, the annual report of the Iroquois Gas Transmission System,
L.P., for the year ended December 31, 1996, is filed herewith.
F. Schedules supporting items of this report:
(1) ITEM 1--Schedule of Investments is filed herewith.
(2) ITEM 4--Schedule of Acquisitions, Redemptions, or Retirements of
System Securities is filed herewith.
(3) ITEM 6--Consolidated Natural Gas Company's "1997 Notice of
Annual Meeting and Proxy Statement" is hereby incorporated by
reference to the filing made on March 25, 1997.
(4) ITEM 10--Schedule of utility plant and related depreciation or
amortization accounts, together with schedules of other property
or investments, if applicable, for:
CNG Transmission
East Ohio Gas
Peoples Natural Gas
Virginia Natural Gas
Hope Gas
West Ohio Gas
are filed herewith.
G. Financial Data Schedules have been filed electronically (Exhibit 27
for EDGAR purposes).
H. (1) Organization chart showing the relationship of the exempt
wholesale generator in which the system holds an interest to
other system companies, is filed herewith.
(2) Organization chart showing the relationship of the foreign
utility company in which the system holds an interest to other
system companies, is filed herewith.
I. (1) Financial statements of the exempt wholesale generator are filed
herewith.
(2) Financial statements of the foreign utility company are filed
herewith.
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> OPUR1
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATING FINANCIAL STATEMENTS INCLUDED IN ITEM 10 OF CONSOLIDATED NATURAL
GAS COMPANY'S ANNUAL REPORT ON FORM U5S FOR THE YEAR ENDED DECEMBER 31, 1996,
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 3,008,263
<OTHER-PROPERTY-AND-INVEST> 1,069,037
<TOTAL-CURRENT-ASSETS> 1,393,021
<TOTAL-DEFERRED-CHARGES> 364,635
<OTHER-ASSETS> 165,649
<TOTAL-ASSETS> 6,000,605
<COMMON> 261,068
<CAPITAL-SURPLUS-PAID-IN> 496,722
<RETAINED-EARNINGS> 1,424,624
<TOTAL-COMMON-STOCKHOLDERS-EQ> 2,205,152
0
0
<LONG-TERM-DEBT-NET> 1,426,315
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 374,000
<LONG-TERM-DEBT-CURRENT-PORT> 104,000
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 1,913,876
<TOT-CAPITALIZATION-AND-LIAB> 6,000,605
<GROSS-OPERATING-REVENUE> 3,794,309
<INCOME-TAX-EXPENSE> 155,830
<OTHER-OPERATING-EXPENSES> 3,246,335
<TOTAL-OPERATING-EXPENSES> 3,402,165
<OPERATING-INCOME-LOSS> 392,144
<OTHER-INCOME-NET> 9,304
<INCOME-BEFORE-INTEREST-EXPEN> 401,448
<TOTAL-INTEREST-EXPENSE> 103,175
<NET-INCOME> 298,273
0
<EARNINGS-AVAILABLE-FOR-COMM> 298,273
<COMMON-STOCK-DIVIDENDS> 183,671
<TOTAL-INTEREST-ON-BONDS> 103,257
<CASH-FLOW-OPERATIONS> 407,165
<EPS-PRIMARY> 3.13
<EPS-DILUTED> 3.11
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> OPUR1
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATING FINANCIAL STATEMENTS INCLUDED IN ITEM 10 OF CONSOLIDATED NATURAL
GAS COMPANY'S ANNUAL REPORT ON FORM U5S FOR THE YEAR ENDED DECEMBER 31, 1996,
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SUBSIDIARY>
<NUMBER> 05
<NAME> EAST OHIO GAS
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 762,735
<OTHER-PROPERTY-AND-INVEST> 0
<TOTAL-CURRENT-ASSETS> 507,777
<TOTAL-DEFERRED-CHARGES> 172,400
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 1,442,912
<COMMON> 237,968
<CAPITAL-SURPLUS-PAID-IN> 0
<RETAINED-EARNINGS> 183,845
<TOTAL-COMMON-STOCKHOLDERS-EQ> 426,363
0
0
<LONG-TERM-DEBT-NET> 208,699
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 0
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 812,400
<TOT-CAPITALIZATION-AND-LIAB> 1,442,912
<GROSS-OPERATING-REVENUE> 1,119,168
<INCOME-TAX-EXPENSE> 39,744
<OTHER-OPERATING-EXPENSES> 986,160
<TOTAL-OPERATING-EXPENSES> 1,025,904
<OPERATING-INCOME-LOSS> 93,264
<OTHER-INCOME-NET> 7,283
<INCOME-BEFORE-INTEREST-EXPEN> 100,547
<TOTAL-INTEREST-EXPENSE> 23,248
<NET-INCOME> 77,299
0
<EARNINGS-AVAILABLE-FOR-COMM> 77,299
<COMMON-STOCK-DIVIDENDS> 88,064
<TOTAL-INTEREST-ON-BONDS> 0
<CASH-FLOW-OPERATIONS> 662
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> OPUR1
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATING FINANCIAL STATEMENTS INCLUDED IN ITEM 10 OF CONSOLIDATED NATURAL
GAS COMPANY'S ANNUAL REPORT ON FORM U5S FOR THE YEAR ENDED DECEMBER 31, 1996,
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SUBSIDIARY>
<NUMBER> 06
<NAME> PEOPLES NATURAL GAS
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 446,650
<OTHER-PROPERTY-AND-INVEST> 0
<TOTAL-CURRENT-ASSETS> 172,146
<TOTAL-DEFERRED-CHARGES> 138,590
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 757,386
<COMMON> 165,535
<CAPITAL-SURPLUS-PAID-IN> 0
<RETAINED-EARNINGS> 72,175
<TOTAL-COMMON-STOCKHOLDERS-EQ> 237,710
0
0
<LONG-TERM-DEBT-NET> 144,628
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 0
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 375,048
<TOT-CAPITALIZATION-AND-LIAB> 757,386
<GROSS-OPERATING-REVENUE> 387,003
<INCOME-TAX-EXPENSE> 24,821
<OTHER-OPERATING-EXPENSES> 310,469
<TOTAL-OPERATING-EXPENSES> 335,290
<OPERATING-INCOME-LOSS> 51,713
<OTHER-INCOME-NET> (682)
<INCOME-BEFORE-INTEREST-EXPEN> 51,031
<TOTAL-INTEREST-EXPENSE> 12,463
<NET-INCOME> 38,568
0
<EARNINGS-AVAILABLE-FOR-COMM> 38,568
<COMMON-STOCK-DIVIDENDS> 43,966
<TOTAL-INTEREST-ON-BONDS> 0
<CASH-FLOW-OPERATIONS> 28,280
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> OPUR1
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATING FINANCIAL STATEMENTS INCLUDED IN ITEM 10 OF CONSOLIDATED NATURAL
GAS COMPANY'S ANNUAL REPORT ON FORM U5S FOR THE YEAR ENDED DECEMBER 31, 1996,
AND IS QUALIFIED IN ITS ENTIRETY TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SUBSIDIARY>
<NUMBER> 07
<NAME> VIRGINIA NATURAL GAS
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 353,072
<OTHER-PROPERTY-AND-INVEST> 0
<TOTAL-CURRENT-ASSETS> 75,100
<TOTAL-DEFERRED-CHARGES> 12,019
<OTHER-ASSETS> 53
<TOTAL-ASSETS> 440,244
<COMMON> 109,697
<CAPITAL-SURPLUS-PAID-IN> 1,082
<RETAINED-EARNINGS> 3,042
<TOTAL-COMMON-STOCKHOLDERS-EQ> 170,342
0
0
<LONG-TERM-DEBT-NET> 105,418
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 4,000
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 217,005
<TOT-CAPITALIZATION-AND-LIAB> 440,244
<GROSS-OPERATING-REVENUE> 211,329
<INCOME-TAX-EXPENSE> 7,998
<OTHER-OPERATING-EXPENSES> 178,305
<TOTAL-OPERATING-EXPENSES> 186,303
<OPERATING-INCOME-LOSS> 25,026
<OTHER-INCOME-NET> (320)
<INCOME-BEFORE-INTEREST-EXPEN> 24,706
<TOTAL-INTEREST-EXPENSE> 10,868
<NET-INCOME> 13,838
0
<EARNINGS-AVAILABLE-FOR-COMM> 13,838
<COMMON-STOCK-DIVIDENDS> 14,700
<TOTAL-INTEREST-ON-BONDS> 0
<CASH-FLOW-OPERATIONS> 23,539
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> OPUR1
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATING FINANCIAL STATEMENTS INCLUDED IN ITEM 10 OF CONSOLIDATED NATURAL
GAS COMPANY'S ANNUAL REPORT ON FORM U5S FOR THE YEAR ENDED DECEMBER 31, 1996,
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SUBSIDIARY>
<NUMBER> 08
<NAME> HOPE GAS
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 103,051
<OTHER-PROPERTY-AND-INVEST> 0
<TOTAL-CURRENT-ASSETS> 47,386
<TOTAL-DEFERRED-CHARGES> 13,698
<OTHER-ASSETS> 3,475
<TOTAL-ASSETS> 167,610
<COMMON> 40,900
<CAPITAL-SURPLUS-PAID-IN> 0
<RETAINED-EARNINGS> 14,852
<TOTAL-COMMON-STOCKHOLDERS-EQ> 55,752
0
0
<LONG-TERM-DEBT-NET> 39,052
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 0
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 72,806
<TOT-CAPITALIZATION-AND-LIAB> 167,610
<GROSS-OPERATING-REVENUE> 126,101
<INCOME-TAX-EXPENSE> 3,534
<OTHER-OPERATING-EXPENSES> 112,634
<TOTAL-OPERATING-EXPENSES> 116,168
<OPERATING-INCOME-LOSS> 9,933
<OTHER-INCOME-NET> 177
<INCOME-BEFORE-INTEREST-EXPEN> 10,110
<TOTAL-INTEREST-EXPENSE> 2,601
<NET-INCOME> 7,509
0
<EARNINGS-AVAILABLE-FOR-COMM> 7,509
<COMMON-STOCK-DIVIDENDS> 11,538
<TOTAL-INTEREST-ON-BONDS> 0
<CASH-FLOW-OPERATIONS> 6,622
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> OPUR1
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATING FINANCIAL STATEMENTS INCLUDED IN ITEM 10 OF CONSOLIATED NATURAL
GAS COMPANY'S ANNUAL REPORT ON FORM U5S FOR THE YEAR ENDED DECEMBER 31, 1996,
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SUBSIDIARY>
<NUMBER> 09
<NAME> WEST OHIO GAS
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 42,205
<OTHER-PROPERTY-AND-INVEST> 0
<TOTAL-CURRENT-ASSETS> 40,374
<TOTAL-DEFERRED-CHARGES> 12,186
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 94,765
<COMMON> 14,990
<CAPITAL-SURPLUS-PAID-IN> 435
<RETAINED-EARNINGS> 7,784
<TOTAL-COMMON-STOCKHOLDERS-EQ> 23,209
0
0
<LONG-TERM-DEBT-NET> 12,281
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 0
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 59,275
<TOT-CAPITALIZATION-AND-LIAB> 94,765
<GROSS-OPERATING-REVENUE> 61,837
<INCOME-TAX-EXPENSE> 237
<OTHER-OPERATING-EXPENSES> 59,449
<TOTAL-OPERATING-EXPENSES> 59,686
<OPERATING-INCOME-LOSS> 2,151
<OTHER-INCOME-NET> (75)
<INCOME-BEFORE-INTEREST-EXPEN> 2,076
<TOTAL-INTEREST-EXPENSE> 1,508
<NET-INCOME> 568
0
<EARNINGS-AVAILABLE-FOR-COMM> 568
<COMMON-STOCK-DIVIDENDS> 2,406
<TOTAL-INTEREST-ON-BONDS> 0
<CASH-FLOW-OPERATIONS> (6,087)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<PAGE>
CHARTERS AND BY-LAWS EXHIBIT B.(1)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
Annual Report
on Form U5S
(File No. 30-203)
Year Ended
December 31, Other Commission Filing
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Consolidated Natural Gas Company
Certificate of Incorporation, restated
October 4, 1990 1990
Certificate of Incorporation, as amended
May 31, 1996 Form S-3 Registration
Statement, Registration
No. 333-10869
By-Laws as last amended February 18, 1997 Exhibit (3B) to the Company's
Form 10-K Annual Report
for the year ended
December 31, 1996,
File No. 1-3196
Consolidated Natural Gas Service Company, Inc.
(Charter) 1961
Charter Amendment dated November 24, 1961 1961
Charter Amendment dated January 3, 1966 1965
Charter Amendment dated November 30, 1982 1982
By-Laws as last amended March 1, 1993 1992
CNG Transmission Corporation
Charter-Composite Certificate of Incorporation
as last amended December 30, 1992 1992
Charter Amendment dated November 8, 1994 1994
By-Laws as last amended September 3, 1996 Filed Herewith
Hope Gas, Inc.
Charter-Agreement and Plan of Merger which sets
forth in Article III the Certificate of Incorporation
of Consolidated Gas Supply Corporation as
amended and restated on April 1, 1965,
effective date of the merger 1965
Charter Amendment dated April 28, 1971 1971
Charter Amendment dated June 30, 1975 1975
Charter Amendment dated August 26, 1977 1977
Charter Amendment dated May 11, 1981 1981
Charter Amendment dated June 6, 1984 1984
Charter Amendment dated August 9, 1990 1990 (Form SE dated April 25, 1991)
Charter Amendment dated March 10, 1993 Filed Herewith
Charter Amendment dated October 13, 1994 Filed Herewith
By-Laws as last amended June 4, 1990 1990 (Form SE dated April 25, 1991)
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
CHARTERS AND BY-LAWS (Continued)
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------
Annual Report
on Form U5S
(File No. 30-203)
Year Ended
December 31, Other Commission Filing
------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
The East Ohio Gas Company
Articles of Incorporation as amended
effective June 17, 1993 Exhibit A-1 to the
Application-Declaration
on Form U-1, File No. 70-
8387
Charter Amendment dated December 30, 1996 Filed Herewith
Certificate of Merger of West Ohio Gas Filed Herewith
Company merging with and into The
East Ohio Gas Company dated
December 30, 1996
By-Laws as last amended March 12, 1991 Exhibit A-2 to the
Application-Declaration
on Form U-1, File No.
70-8387
The Peoples Natural Gas Company
Charter-Composite Amended and Restated
Certificate of Incorporation as last
amended effective April 26, 1990 1992
Charter Amendment dated September 2, 1993 Filed Herewith
By-Laws as last amended March 15, 1990 1990 (Form SE dated April 25, 1991)
West Ohio Gas Company
Articles of Incorporation - Agreement of Merger
Effective April 16, 1969 1969
Charter Amendment dated December 1, 1994 1994
Code of Regulations as last amended
March 15, 1990 1991 (Form SE dated April 24, 1992)
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
CHARTERS AND BY-LAWS (Continued)
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------
Annual Report
on Form U5S
(File No. 30-203)
Year Ended
December 31, Other Commission Filing
------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
CNG Producing Company
Certificate of Incorporation dated February 29, 1972 1972
Certificate of Amendment of Certificate of
Incorporation of CNG Development Company
of Alberta before payment of capital
dated March 8, 1972 1972
Charter Amendment dated July 8, 1974 1974
Charter Amendment dated January 23, 1975 1975
Charter Amendment dated July 7, 1980 1980
Charter Amendment dated July 13, 1982 1982
Charter Amendment dated December 7, 1984 1984
Charter Amendment dated January 4, 1985 1985
Charter Amendment dated November 25, 1987 1987 (Form SE dated April 26, 1988)
Charter Amendment dated November 15, 1989 1989 (Form SE dated April 25, 1990)
Certificate of Agreement of Merger of CNG
Development Company merging with
and into CNG Producing Company dated
December 20, 1990 1990 (Form SE dated April 25, 1991)
By-Laws as last amended June 6, 1996 Filed Herewith
Consolidated System LNG Company
Charter - Composite Certificate of Incorporation
as last amended July 27, 1993 1993
By-Laws as last amended June 1, 1987 1987 (Form SE dated April 26, 1988)
CNG Research Company
Certificate of Incorporation dated June 26, 1975 1975
Charter Amendment dated May 25, 1982 1982
Charter Amendment effective August 23, 1991 1991 (Form SE dated April 24, 1992)
By-Laws as last amended September 10, 1976 1977
CNG Coal Company
Certificate of Incorporation dated October 4, 1976 1977
Charter Amendment dated July 20, 1990 1990 (Form SE dated April 25, 1991)
Charter Amendment effective August 23, 1991 1991 (Form SE dated April 24, 1992)
By-Laws as last amended June 11, 1990 1990 (Form SE dated April 25, 1991)
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
CHARTERS AND BY-LAWS (Continued)
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------
Annual Report
on Form U5S
(File No. 30-203)
Year Ended
December 31, Other Commission Filing
------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
CNG Energy Services Corporation
Certificate of Incorporation as amended
December 9, 1996 Filed Herewith
By-Laws as last amended June 20, 1991 1991 (Form SE dated April 24, 1992)
CNG Financial Services, Inc.
Certificate of Incorporation dated March 1, 1989 1989 (Form SE dated April 25, 1990)
By-Laws as adopted May 26, 1989 1989 (Form SE dated April 25, 1990)
Virginia Natural Gas, Inc.
Amended and Restated Articles of Incorporation
dated December 26, 1990 1990 (Form SE dated April 25, 1991)
By-Laws as last amended April 26, 1991 Filed Herewith
CNG Power Services Corporation
Certificate of Incorporation as amended
December 30, 1996 Filed Herewith
By-Laws as adopted August 8, 1994 1994
CNG International Corporation
Certificate of Incorporation dated
January 22, 1996 Filed Herewith
By-Laws as adopted August 1, 1996 Filed Herewith
</TABLE>
<PAGE>
CERTIFICATE OF INCORPORATION
OF
CNG ENERGY SERVICES CORPORATION
*****
1. The name of the corporation is
CNG ENERGY SERVICES CORPORATION
2. The address of its registered office in the State of Delaware
is 1209 Orange Street in the City of Wilmington, County of New Castle. The name
of its registered agent at such address is The Corporation Trust Company.
3. The nature of the business or purposes to be conducted or
promoted is to engage in any lawful act or activity for which corporations may
be organized under the General Corporation Law of Delaware.
4. The total number of shares of stock which the Corporation
shall have authority to issue is Four Thousand (4,000) shares. Each of such
shares have a par value of One Dollar ($1.00). All such shares are of one class
and are shares of Common Stock.
<PAGE>
5A. The name and mailing address of the incorporator is:
NAME MAILING ADDRESS
D. A. Hampton 1209 Orange Street
Wilmington, Delaware 19801
J. A. Grodzicki 1209 Orange Street
Wilmington, Delaware 19801
S. J. Queppet 1209 Orange Street
Wilmington, Delaware 19801
5B. The name and mailing address of each person, who is to serve
as a director until the first annual meeting of the stockholders or until a
successor is elected and qualified, is as follows:
NAME MAILING ADDRESS
G. A. Davidson, Jr. 10th Fl. - Four Gateway Center
Pittsburgh, PA 15222
P. H. Dudley, Jr. 10th Fl. - Four Gateway Center
Pittsburgh, PA 15222
L. D. Johnson 10th Fl. - Four Gateway Center
Pittsburgh, PA 15222
R. H. Murray 10th Fl. - Four Gateway Center
Pittsburgh, PA 15222
H. P. Sullivan 10th Fl. - Four Gateway Center
Pittsburgh, PA 15222
G. J. Tankersley 10th Fl. - Four Gateway Center
Pittsburgh, PA 15222
6. The corporation is to have perpetual existence.
7. Elections of directors need not be by written ballot unless
the by-laws shall so provide.
<PAGE>
To authorize and cause to be executed mortgages and liens upon
the real and personal property of the corporation.
To set apart out of any of the funds of the corporation available for
dividends a reserve or reserves for any proper purpose and to abolish any such
reserve in the manner in which it was created.
By a majority of the whole board, to designate one or more committees,
each committee to consist of one or more of the directors of the corporation.
The board may designate one or more directors as alternate members of any
committee, who may replace any absent or disqualified member at any meeting of
the committee. The by-laws may provide that in the absence or disqualification
of a member of a committee, the member or members thereof present at any meeting
and not disqualified from voting, whether or not he or they constitute a quorum,
may unanimously appoint another member of the board of directors to act at the
meeting in the place of any such absent or disqualified member. Any such
committee, to the extent provided in the resolution of the board of directors,
or in the by-laws of the corporation, shall have and may exercise all the powers
and authority of the board of directors in the management of the business
affairs of the corporation, and may authorize the seal of the corporation to be
affixed to all papers which may require it; but no such committee shall have the
power or authority in reference to amending the certificate of incorporation,
adopting an agreement of merger or consolidation, recommending to the
stockholders the sale, lease or exchange of all or substantially all of the
corporation's property and assets, recommending to the stockholders a
dissolution of the corporation or a revocation of a dissolution, or amending the
by-laws of the corporation; and, unless the resolution or by-laws of the
corporation; and, unless the resolution or by-laws, expressly so provide, no
such committee shall have the power or authority to declare a dividend or to
authorize the issuance of stock.
When and as authorized by the stockholders in accordance with statute,
to sell, lease or exchange all or substantially all of the property and assets
of the corporation, including its good will and its corporate franchises, upon
such terms and conditions and for such consideration, which may consist in whole
or in part of money or property including shares of stock in, and/or other
securities of, any other corporation or corporations, as its board of directors
shall deem expedient and for the best interests of the corporation.
8. Elections of directors need not be by written ballot unless
the by-laws of the corporation shall so provide.
Meetings of stockholders may be held within or without the State of
Delaware, as the by-laws may provide. The books of the corporation may be kept
(subject to any provision contained in the statutes) outside the State of
Delaware at
<PAGE>
such place or places as may be designated from time to time by the board of
directors or in the by-laws of the corporation.
9. The corporation reserves the right to amend, alter, change or
repeal any provision contained in this certificate of incorporation, in the
manner now or hereafter prescribed by statute, and all rights conferred upon
stockholders herein are granted subject to this reservation.
WE THE UNDERSIGNED, being the incorporators hereinbefore named, for
the purpose of forming a corporation pursuant to the General Corporation Law of
Delaware, do make this certificate, hereby declaring and certifying that this is
his act and deed and the facts herein stated are true, and accordingly have
hereunto set my hand this 28th day of April, 1986.
D. A. Hampton
-------------
D. A. Hampton
J. A. Grodzicki
---------------
J. A. Grodzicki
S. J. Queppet
-------------
S. J. Queppet
INCORPORATORS
<PAGE>
Received for Record
May 8th, A. D. 1986.
Leo J. Dugan, Jr., Recorder.
STATE OF DELAWARE :
: SS.:
NEW CASTLE COUNTY :
Recorded in the Recorder's Office at
Wilmington, Vol. Page &c., the
8th day of May, A. D. 1986.
Witness my hand and official seal.
Leo J. Dugan, Jr.
Recorder.
"""""""""""""""""""""""""""""""""""
" Recorders Office "
" New Castle Co. Del. "
" Mercy Justice "
"""""""""""""""""""""""""""""""""""
<PAGE>
CERTIFICATE OF INCORPORATION
OF
CNG POWER SERVICES CORPORATION
The undersigned, a natural person, for the purpose of organizing a
corporation for conducting the business and promoting the purposes hereinafter
stated, under the provisions and subject to the requirements of the laws of the
State of Delaware (particularly Chapter 1, Title 8 of the Delaware Code and the
acts amendatory thereof and supplemental thereto, and known, identified, and
referred to as the "General Corporation Law of the State of Delaware") hereby
certifies that:
FIRST: The name of the corporation (hereinafter called the
"corporation") is CNG Power Services Corporation.
SECOND: The address, including street, number, city, and county, of the
registered office of the corporation in the State of Delaware is 32 Lockerman
Square, Suite L-100, City of Dover 19901, County of Kent; and the name of the
registered agent of the corporation in the State of Delaware at such address is
The Prentice-Hall Corporation System, Inc.
THIRD: The purpose of the corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of Delaware.
FOURTH: The total number of shares of stock which the Corporation shall
have authority to issue is Three Thousand (3,000) shares. Each of such shares
have a par value of ten thousand dollars ($10,000.00). All such shares are one
class and are shares of Common Stock.
FIFTH: The name and mailing address of the incorporator are as follows:
NAME MAILING ADDRESS
H. P. Payne 21st Floor, CNG Tower
625 Liberty Avenue
Pittsburgh, PA 15222-3199
SIXTH: The name and mailing address of each person who is to serve as a
director until the first annual meeting of stockholders or until a successor is
elected and qualified is as follows:
<PAGE>
T. E. Dodd 23rd Floor, CNG Tower
Pittsburgh, PA 15222-3199
C. T. Funk One Park Ridge Center
Pittsburgh, PA 15244-0746
R. R. Gifford One Park Ridge Center
Pittsburgh, PA 15244-0746
SEVENTH: The corporation is to have perpetual existence.
EIGHTH: In furtherance, and not in limitation of the powers conferred by
statue, the board of directors is expressly authorized:
To make, alter or repeal the by-laws of the corporation.
By a majority of the whole board, to designate one or more committees, each
committee to consist of one or more of the directors of the corporation. The
board may designate one or more directors as alternate members of any committee,
who may replace any designate one or more directors as alternate members of any
committee, who may replace any absent or disqualified member at any meeting of
the committee. The by-laws may provide that in the absence or disqualification
of a member of a committee, the member or members thereof present at any meeting
and not disqualified from voting, whether or not he or they constitute a quorum,
may unanimously appoint another member of the board of directors to act at the
meeting in the place of any such absent or disqualified member. Any such
committee, to the extent provided in the resolution of the board of directors,
or in the by-laws of the corporation, shall have and may exercise all the
business and affairs of the corporation, and may authorize the seal of the
corporation to be affixed to all papers which may require it; but no such
committee shall have the power or authority in reference to amending the
certificate of incorporation, adopting an agreement of merger or consolidation,
recommending to the stockholders the sale, lease or exchange of all or
substantially all of the corporation's property and assets, recommending to the
stockholders a dissolution of the corporation or a revocation of a dissolution,
or amending the by-laws of the corporation; and unless the resolution or by-laws
expressly so provide, no such committee shall have the power or authority to
declare a dividend or to authorize the Issuance of stock.
When and as authorized by the stockholders in accordance with statue, to
sell, lease or exchange all or substantially all of the property and assets of
the corporation, including its good will and its corporate franchises, upon such
terms and conditions and for such consideration, which may consist in whole or
in part of money or property including shares of stock in, and/or other
securities of, any other corporation or corporations, as its board of directors
shall deem expedient and for the best interests of the corporation.
NINTH: Elections of directors need not be by written ballot unless the by-
law of
<PAGE>
the corporation shall so provide.
Meetings of stockholders may be held within or without the State of
Delaware, as the by-laws may provide. The books of the corporation may be kept
(subject to any provision contained in the statutes) outside the State of
Delaware at such place or places as may be designated from time to time by the
board of directors or in the by-laws of the corporation.
TENTH: To the full extent that the General Corporation Law of the State of
Delaware, as the same now exists, permits elimination or limitation of the
liability of directors, no director of the corporation shall be liable to the
corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the Delaware General Corporation
Law, or (iv) for any transaction from which the director derived an improper
personal benefit.
To the full extent permitted by law, all directors of the corporation shall
be afforded any exemption from liability or limitation of liability permitted by
any subsequent enactment, modification or amendment of the General Corporation
Law of the State of Delaware.
Any repeal or modification of either or both of the foregoing paragraphs by
the stockholders of the corporation shall not adversely affect any exemption
from liability limitation of liability or other right of a director of the
corporation with respect to any matter occurring prior to such repeal or
modification.
ELEVENTH: The corporation reserves the right to amend, alter, change or
repeal any provision contained in this certificate of incorporation, in the
manner now or hereafter prescribed by statute, and all rights conferred upon
stockholders herein are granted subject to this reservation.
Signed on August 4,1994
/s/ H. P. Payne
H. P. Payne, Incorporator
<PAGE>
CERTIFICATE OF INCORPORATION
OF
CNG INTERNATIONAL CORPORATION
The undersigned, a natural person, for the purpose of organizing a
corporation for conducting the business and promoting the purposes hereinafter
stated, under the provisions and subject to the requirements of the laws of the
State of Delaware (particularly Chapter 1, Title 8 of the Delaware Code and the
acts amendatory thereof and supplemental thereto, and known, identified, and
referred to as the "General Corporation Law of the State of Delaware") hereby
certifies that:
FIRST. The name of the corporation (hereinafter called the
"corporation") is:
CNG INTERNATIONAL CORPORATION
SECOND. The address, including street, number, city, and county, of the
registered office of the corporation in the State of Delaware is 1013 Centre
Road, Wilmington, County of New Castle, and the name of the registered agent of
the corporation in the State of Delaware at such address is The Prentice-Hall
Corporation System, Inc.
THIRD. The purpose of the corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of Delaware.
FOURTH. The total number of shares of stock which the Corporation shall
have authority to issue is Thirty Thousand (30,000) shares. Each of such shares
have a par value of Ten Thousand Dollars ($10,000.00). All such shares are one
class and are shares of Common Stock.
FIFTH. The name and mailing address of the incorporator are as follows:
NAME MAILING ADDRESS
Evelyn F. Wright 1013 Centre Road
Wilmington, DE 19805
SIXTH. The name and mailing address of each person who is to serve as a
director until the first annual meeting of stockholders or until a successor is
elected and
<PAGE>
qualified is as follows:
S. E. Williams CNG Tower
625 Liberty Avenue
Pittsburgh, Pa. 15222
D. M. Westfall CNG Tower
625 Liberty Avenue
Pittsburgh, Pa. 15222
R. M. Sable, Jr. CNG Tower
625 Liberty Avenue
Pittsburgh, Pa. 15222
SEVENTH. The corporation is to have perpetual existence.
EIGHTH. In furtherance, and not in limitation of the powers conferred by
statue, the board of directors is expressly authorized:
To make, alter or repeal the by-laws of the corporation.
By a majority of the whole board, to designate one or more committees, each
committee to consist of one or more of the directors of the corporation. The
board may designate one or more directors as alternate members of any committee,
who may replace any designate one or more directors as alternate members of any
committee, who may replace any absent or disqualified member at any meeting of
the committee. The by-laws may provide that in the absence or disqualification
of a member of a committee, the member or members thereof present at any meeting
and not disqualified from voting, whether or not he or they constitute a quorum,
may unanimously appoint another member of the board of directors to act at the
meeting in the place of any such absent or disqualified member. Any such
committee, to the extent provided in the resolution of the board of directors,
or in the by-laws of the corporation, shall have and may exercise all the
business and affairs of the corporation, and may authorize the seal of the
corporation to be affixed to all papers which may require it; but no such
committee shall have the power or authority in reference to amending the
certificate of incorporation, adopting an agreement of merger or consolidation,
recommending to the stockholders the sale, lease or exchange of all or
substantially all of the corporation's property and assets, recommending to the
stockholders a dissolution of the corporation or a revocation of a dissolution,
or amending the by-laws of the corporation; and unless the resolution or by-laws
expressly so provide, no such committee shall have the power or authority to
declare a dividend or to authorize the Issuance of stock.
When and as authorized by the stockholders in accordance with statue, to
sell, lease or exchange all or substantially all of the property and assets of
the corporation, including its good will and its corporate franchises, upon such
terms and conditions and for such consideration, which may consist in whole or
in part of money or property
<PAGE>
including shares of stock in, and/or other securities of, any other corporation
or corporations, as its board of directors shall deem expedient and for the best
interests of the corporation.
NINTH. Elections of directors need not be by written ballot unless the by-
law of the corporation shall so provide.
Meetings of stockholders may be held within or without the State of
Delaware, as the by-laws may provide. The books of the corporation may be kept
(subject to any provision contained in the statutes) outside the State of
Delaware at such place or places as may be designated from time to time by the
board of directors or in the by-laws of the corporation.
TENTH. To the full extent that the General Corporation Law of the State of
Delaware, as the same now exists, permits elimination or limitation of the
liability of directors, no director of the corporation shall be liable to the
corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the Delaware General Corporation
Law, or (iv) for any transaction from which the director derived an improper
personal benefit.
To the full extent permitted by law, all directors of the corporation shall
be afforded any exemption from liability or limitation of liability permitted by
any subsequent enactment, modification or amendment of the General Corporation
Law of the State of Delaware.
Any repeal or modification of either or both of the foregoing paragraphs by
the stockholders of the corporation shall not adversely affect any exemption
from liability limitation of liability or other right of a director of the
corporation with respect to any matter occurring prior to such repeal or
modification.
ELEVENTH. The corporation reserves the right to amend, alter, change or
repeal any provision contained in this certificate of incorporation, in the
manner now or hereafter prescribed by statute, and all rights conferred upon
stockholders herein are granted subject to this reservation.
Signed on January 19,1996
/s/ Evelyn F. Wright
Evelyn F. Wright
Incorporator
<PAGE>
BOOK 54 PAGE 970
State of West Virginia
[SEAL OF THE STATE OF WEST VIRGINIA]
CERTIFICATE
I, Ken Hechler, Secretary of State of the
State of West Virginia, hereby certify that
originals of the Articles of Amendment to the Articles of Incorporation of
HOPE GAS, INC.
are filed in my office, signed and verified, as required by the provisions of
Chapter 31, Article 1, Section 31 of the West Virginia Code and conform to law.
Therefore, I issue this
CERTIFICATE OF AMENDMENT TO THE ARTICLES OF INCORPORATION
of the corporation, to which I have attached a duplicate original of the
Articles of Amendment.
Given under my hand and the
Great Seal of the State of
West Virginia, on this
Tenth day of
March 1993
[SEAL OF THE STATE
OF WEST VIRGINIA] /s/ Ken Hechler
----------------------
Secretary of State
<PAGE>
KEN HECHLER BOOK 51 PAGE 971
Secretary of State [SEAL OF THE STATE FILE IN DUPLICATE ORIGINALS
State Capitol, W-139 OF WEST VIRGINIA] FEE: $5.00
Charleston, WV 25305 FILED
(304) 342-8000 MARCH 10, 1993
IN THE OFFICE OF
SECRETARY OF STATE
WEST VIRGINIA
WEST VIRGINIA
ARTICLES OF INCORPORATION
PROFIT AMENDMENT
- --------------------------------------------------------------------------------
Pursuant to the provisions of Section 31, Article 1, Chapter 31 of the Code
of West Virginia, the undersigned corporation adopts the following Articles of
Amendment to its Articles of Incorporation:
FIRST: The name of the corporation is Hope Gas, Inc.
--------------
SECOND: The following Amendment(s) to the Articles of Incorporation
was adopted by the shareholders (Note 1) of the corporation on June 4, 1990,
------- --
in the manner prescribed by Section 107 and 147, Article 1, Chapter 31.
The number of additional shares of the corporation authorized by
resolution duly adopted by the Board of Directors of the corporation
on June 4, 1990 is 100,000 shares of capital stock at a par value of
One Hundred Dollars ($100.00) each for a total aggregate dollar value
of $10,000,000.
THIRD: The number of shares of the corporation outstanding at the time
of such adoption was 300,000, and the number of shares entitled to vote
-------
was 215,285.
-------
FOURTH: The designation and number of outstanding shares of each class
entitled to vote, as a class, were as follows:
CLASS Number of Shares
Common Stock 215,285
FIFTH: The number of shares voted for such amendment(s) was 215,185;
-------
and the number of shares voted against such amendment(s) was 0.
-
SIXTH: The number of shares of each class entitled to vote as a class
voted for and against such amendment(s) was:
CLASS Number of Shares Voted
For Against
Common 215,285 0
SEVENTH: The manner in which any exchange, reclassification, or
cancellation of issued shares provided for in the amendment(s) shall be
effected, is as follows: None
EIGHTH: The amount of the authorized capital stock of this corporation
shall be increased/decreased from 300,000 shares at the par value of $100.00
------- -------
to 400,000 shares at the par value of $100.00. The total authorized capital
------- -------
stock shall hereafter be $40,000,000.
-----------
<PAGE>
BOOK 54 PAGE 972
Dated March, 1993
HOPE GAS, INC.
----------------------------------
Corporate Name
By:
-------------------------------
It's /s/ R J Bean Jr. President
--------------------------
and /s/ Marc A. Halbritter
-------------------------------
STATE OF WEST VIRGINIA It's Secretary
------------------
COUNTY OF HARRISON
I, Monica A. Parrill a Notary Public, do hereby certify that on this 5th
day of March, 1993, personally appeared before me, Marc A. Halbritter, who,
being by me first duly sworn, declared that he is the Secretary & General
Counsel of Hope Gas, Inc. that he signed the foregoing document as Secretary of
the corporation, and that the statements therein contained are true.
[SEAL OF OFFICIAL SEAL
WEST NOTARY PUBLIC
VIRGINIA] STATE OF WEST VIRGINIA
MONICA PARRILL /s/ MONICA A. PARRILL
P.O. BOX 2868 --------------------------------
CLARKSBURG, WV 26301 Notary Public
MY COMMISSION EXPIRES: SEPT. 7, 1994
My commission expires: Sept. 7, 1994
---------------------------
(NOTARIAL SEAL)
NOTES: 1. Change to "board of directors" if no shares have been issued.
Articles of Amendment
prepared by:
Name HOPE GAS, INC.
------------------------------------------------
Address P.O. Box 2868, Clarksburg, W. Va. 26301
---------------------------------------------
This instrument is in consent of the Clerk of the County
Commission of Harrison County, West Virginia on 3-17-93
the same is admitted to record 2:35p
/s/ Sylvia Basile Clerk
Harrison County Commission
<PAGE>
State of West Virginia
[SEAL OF WEST VIRGINIA]
CERTIFICATE
I, Ken Hechler, Secretary of State of the
State of West Virginia, hereby certify that
originals of the Articles of Amendment to the Articles of Incorporation of
HOPE GAS, INC.
are filed in my office, signed and verified, as required by the provisions of
Chapter 31, Article 1, Section 31 of the West Virginia Code and conform to law.
Therefore, I issue this
CERTIFICATE OF AMENDMENT TO THE ARTICLES OF INCORPORATION
of the corporation, to which I have attached a duplicate original of the
Articles of Amendment.
Given under my hand and the
Great Seal of the State of
West Virginia, on this
[SEAL OF WEST VIRGINIA] Thirteenth day of
October 1994
/s/ Ken Hechler
------------------------------------
Secretary of State
<PAGE>
KEN HECHLER [SEAL OF WEST VIRGINIA] FILE IN DUPLICATE ORIGINALS
Secretary of State Fee $5.00
State Capitol, W-139 (304) 558-8000
Charleston, WV 25305 FAX (304) 558-0900
WEST VIRGINIA FILED
ARTICLES OF INCORPORATION OCT 13 1994
PROFIT AMENDMENT IN THE OFFICE OF
SECRETARY OF STATE
WEST VIRGINIA
- --------------------------------------------------------------------------------
Pursuant to the provisions of Section 31, Article 1, Chapter 31 of the
Code of West Virginia, the undersigned corporation adopts the following Articles
of Amendment to its Articles of Incorporation:
FIRST: The name of the corporation is HOPE GAS, INC.
SECOND: The following Amendment(s) to the Articles of incorporation was
adopted by the shareholders (Note 1) of the corporation on September 30, 1994,
in the manner prescribed by Section 107 and 147, Article 1, Chapter 31.
The number of additional shares of the Corporation authorized by resolution
duly adopted by the Stockholders of the Corporation on September 30, 1994, is
600,000 shares of capital stock at a par value of One Hundred Dollars
($100.00) each for a total aggregate dollar value of $60,000,000, to-wit:
RESOLVED, that the Company's Articles of Incorporation be
amended to increase the number of authorized shares of common
stock in the Corporation to 1,000,000.
THIRD: The number of shares of the corporation outstanding at the time of
such adoption was 400,000; and the number of shares entitled to vote was
400,000.
FOURTH: The designated and number of outstanding shares of each class
entitled to vote, as a class, were as follows.
CLASS Number of Shares
Common 400,000
FIFTH: The number of shares voted for such amendment(s) was 400,000; and
the number of shares voted against such amendment(s) was 0.
SIXTH: The number of shares of each class entitled to vote as a class voted
for and against such amendment(s) was:
CLASS Number of Shares Voted
For Against
Common 400,000 0
SEVENTH: The manner in which any exchange, reclassification, or
cancellation of issued shares provided for in the amendment(s) shall be
effected, is as follows:
EIGHTH: The amount of the authorized capital stock of this corporation
shall be increased/decreased from 400,000 shares at the par value of $100.00 to
1,000,000 shares at the par value of $100.00. The total authorized capital stock
shall hereafter be $100,000,000.
<PAGE>
Dated October 7, 1994
HOPE GAS INC.
---------------------------------
Corporate Name
By: /s/ R. J. Bean, Jr.
------------------------------
It's President
---------------
and /s/ Marc A. Halbritter
------------------------------
It's Secretary
-----------------
STATE OF West Virginia
COUNTY OF Harrison
I, Debra L. Ridgway a Notary Public, do hereby certify that on this 7th day
of October, 1994, personally appeared before me, Ralph J. Bean, Jr., who, being
by me first duly sworn, declared that he is the President of Hope Gas, Inc.,
P.O. Box 2868, Clarksburg, WV 26302-2868 that he signed the foregoing document
as President of the corporation, and that the statements therein contained are
true.
/s/ Debra L. Ridgway
-------------------------------
Notary Public
My commission expires: May 4, 2004
(NOTARIAL SEAL)
OFFICIAL SEAL
NOTARY PUBLIC
STATE OF WEST VIRGINIA
DEBRA L. RIDGWAY
P.O. BOX 2868
CLARKSBURG, WV 26301
MY COMMISSION EXPIRES MAY 4, 2004
NOTES: 1. Change to "board of directors" if no shares have been issued.
Articles of Amendment
prepared by:
Name
--------------------------
Address
-----------------------
<PAGE>
[SEAL OF SECRETARY OF STATE OF OHIO] Prescribed by
BOB TAFT, Secretary of State
30 East Broad Street, 14th Floor
Columbus, Ohio 43266-0418
Charter No.
----------
Approved
-------------
Date
-----------------
Fee
CERTIFICATE OF AMENDMENT
BY SHAREHOLDERS TO THE ARTICLES OF INCORPORATION OF
THE EAST OHIO GAS COMPANY
- --------------------------------------------------------------------------------
(Name of Corporation)
TOM D. NEWLAND, who is:
[ ] Chairman of the Board [X] President [ ] Vice President (Please check one.)
and MICHAEL G. BARTELS, who is:
[X] Secretary [ ] Assistant Secretary (Please check one.)
of the above named Ohio corporation organized for profit does hereby certify
that: (Please check the appropriate box and complete the appropriate
statements.)
[ ] a meeting of the shareholders was duly called for the purpose of adopting
this amendment and held on , 19 at which
----------------------- -----
meeting a quorum of the shareholders was present in person or by proxy, and
by the affirmative vote of the holders of shares entitling them to exercise
% of the voting power of the corporation.
---------------
[X] in a writing signed by all of the shareholders who would be entitled to
notice of a meeting held for that purpose, the following resolution to
amend the articles was adopted: SEE ATTACHED
IN WITNESS WHEREOF, the above named officers, acting for and on the behalf of
the corporation, have hereto subscribed their names this 30th day of DECEMBER,
1996.
By /s/ Tom D. Newland By /s/ Michael G. Bartels
------------------------------------- --------------------------------
(Chairman, President, Vice President) (Secretary, Assistant Secretary)
TOM D. NEWLAND MICHAEL G. BARTELS
NOTE: OHIO LAW DOES NOT PERMIT ONE OFFICER TO SIGN IN TWO CAPACITIES, TWO
SEPARATE SIGNATURES ARE REQUIRED, EVEN IF THIS NECESSITATES THE ELECTION OF A
SECOND OFFICER BEFORE THE FILING CAN BE MADE.
<PAGE>
CERTIFICATE OF AMENDMENT
TO ARTICLES OF
THE EAST OHIO GAS COMPANY (Charter No. 27634)
Tom D. Newland, President, and Michael G. Bartels, Secretary, of The East
Ohio Gas Company, an Ohio Corporation, with its principle office located at
Cleveland, Ohio, do hereby certify that in writing signed under the provisions
of Section 1701.54 of the Revised Code by all of the shareholders who would be
entitled to a notice of a meeting held for such purpose, the following
resolution was adopted to amend the articles:
Resolved that the authorized capital of the corporation
be increased from Four Million, Five Hundred Thousand
shares of the par value of Fifty Dollars each to Six Million
shares of the par value of Fifty Dollars each.
IN WITNESS WHEREOF, said Tom D. Newland, President, and Michael G. Bartels,
Secretary, of The East Ohio Gas Company, acting for and on behalf of said
corporation, have hereunto subscribed their names and caused the seal of said
corporation to be hereunto affixed this 30th day of December, 1996.
By: /s/ Tom D. Newland
------------------------------------
President
By: /s/ Michael G. Bartels
-------------------------------------
Secretary
<PAGE>
05742-0081
=========================================
The State of Ohio
Bob Taft
Secretary of State
27634
Certificate
It is hereby certified that the Secretary of State of Ohio has custody of the
Records of Incorporation and Miscellaneous Filings; that said records show the
filing and recording of: MER
of:
THE EAST OHIO GAS COMPANY
United States of America Recorded on Roll 5742 at Frame 0082
State of Ohio of the Records of Incorporation and
Office of the Secretary of State Miscellaneous Filings.
Witness my hand and the seal of the
Secretary of State at Columbus, Ohio,
this 30TH day of DEC , A.D. 1996.
[SEAL OF SECRETARY OF STATE OF OHIO]
/s/ Bob Taft
Bob Taft
Secretary of State
<PAGE>
05742-0082 27634
[SEAL OF SECRETARY OF STATE OF OHIO]
Prescribed by Approved hp
Bob Taft, Secretary of State ----------
30 East Broad Street, 14th Floor Date 12/30/96
Columbus, Ohio 43266-0418 --------------
Form MER (July 1994) Fee $50
--------------
96123147601
eff 1/1/97
CERTIFICATE OF MERGER
In accordance with the requirements of Ohio law, the undersigned,
corporations, limited liability companies and/or limited partnerships, desiring
to effect a merger, set forth the following facts:
I. SURVIVING ENTITY
A. The name of the entity surviving the merger is:
The East Ohio Gas Company
------------------------------------------------------------------------
------------------------------------------------------------------------
(If the surviving entity is an Ohio limited partnership or qualified
foreign limited partnership, its registration number must be provided)
B. Name change: As a result of this merger, the name of the surviving
entity has been changed to the following:
--------------------------
(complete
-----------------------------------------------------------
only if the name of surviving entry is changing through the merger)
C. The surviving entity is a: (Please check the appropriate box and
fill in the appropriate blanks)
(X) Domestic (Ohio) corporation
( ) Foreign (Non-Ohio) corporation incorporated under the laws of the
state/country of and licensed to transact business
----------------
in the state of Ohio.
( ) Foreign (Non-Ohio) corporation incorporated under the laws of the
state/country of and NOT licensed to transact
----------------
business in the state of Ohio.
( ) Domestic (Ohio) limited liability company
( ) Foreign (Non-Ohio) limited liability company organized under the laws
of the state/country of , and registered to
------------------------
do business in the state of Ohio.
( ) Foreign (Non-Ohio) limited liability company organized under the
laws of the state/country of , and NOT
----------------------
registered to do business in the state of Ohio.
( ) Domestic (Ohio) limited partnership, registration number
-------------
RECEIVED
DEC. 30 1996
BOB TAFT
SECRETARY OF STATE
<PAGE>
05742-0083
( ) Foreign (Non-Ohio) limited partnership organized under the laws of
the state/country of , and registered to
---------------------------
do business in the state of Ohio, under registration number
----------
( ) Foreign (Non-Ohio) limited partnership organized under the laws of
the state/country of , and NOT registered to do
--------------------
business in the state of Ohio.
II. Merging Entities
The name, type of entity, and state/country of incorporation or
organization, respectively, of each entity, other than the survivor, which is a
party to the merger are as follows: (if insufficient space to cover this item,
please attach a separate sheet listing the merging market; Ohio registered or
foreign qualified limited partnerships must include registration number)
Name State/ Country of Organization Type of Entity
West Ohio Gas Company Ohio U.S.A. Corporation
- ------------------------------ ----------------------- ---------------
113695
- ------------------------------ ----------------------- ---------------
3000-
- ------------------------------ ----------------------- ---------------
- ------------------------------ ----------------------- ---------------
- ------------------------------ ----------------------- ---------------
III. Merger Agreement on File
The name and mailing address of the person or entity from whom/which
eligible persons may obtain a copy of the agreement of merger upon written
request:
Name Address
M.G. Bartels 1717 E. Ninth Street
- -------------------- -------------------------------------------------
(street and number)
Cleveland, Ohio 44114
-------------------------------------------------
(city, village or township) (state) (zip code)
IV. Effective Date of Merger
This merger is to be effective:
On January 1, 1997 (if a date is specified, the date must be a date on or
after the date of filing; the effective date of the merger cannot be earlier
than the date of filing; if no date is specified, the date of filing will be the
effective date of the merger).
<PAGE>
05742-0084
V. Merger Authorized
The laws of the state or country under which each constituent entity
exists, permits this merger.
This merger was adopted, approved and authorized by each of the constituent
entities in compliance with the laws of the state under which it is organized,
and the persons signing this certificate on behalf of each of the constituent
entities are duly authorized to do so.
VI. Statutory Agent
The n name and address of the surviving entity's statutory agent upon whom
any process, notice or demand may be served is:
Name Address
- ------------------------- -------------------------------------------------
(complete street address)
-------------------------------------------------
(city, village or township) (zip code)
(This item MUST be completed if the surviving entity is a foreign entity which
is not licensed, registered or otherwise authorized to conduct or transact
business in the State of Ohio)
Acceptance of Agent
The undersigned, named herein as the statutory agent for the above
referenced surviving entity, hereby acknowledges and accepts the appointment of
statutory agent for said entity.
-------------------------------------------------
Signature of Agent
(The acceptance of agent must be completed by domestic surviving entities if
through this merger the statutory agent for the surviving entity has changed,
or the named agent differs in any way from the name reflected on the Secretary
of State's records.
VII. Statement of Merger
Upon filing, or upon such later date as specified herein, the merging
entity/entities listed herein shall merge into the listed surviving entity.
VII. Amendments
The articles of incorporation, articles of organization or certificate of
limited partnership (Strike the inapplicable term) of the surviving domestic
entity herein, are amended as set forth in the attached "Exhibit A"
(Please note that any amendments to articles of incorporation, articles of
organization or to a certificate of limited partnership MUST be attached if the
surviving entity is a DOMESTIC corporation, limited liability company, or
limited partnership.)
<PAGE>
05742-0085
IX. Qualification or Licensure of Foreign Surviving Entity
A. The listed surviving foreign corporation, limited liability company, or
limited partnership desires to transact business in Ohio as a foreign
corporation, foreign limited liability company, or foreign limited partnership,
and hereby appoints the following as its statutory agent upon whom process,
notice or demand against the entity may be served in the State of Ohio. The name
and complete address of the statutory agent is:
N/A
- -------------------------------------- ---------------------------------
(name) (street and number)
, Ohio
- -------------------------------------- ------------------------
(city, village or township) (zip code)
The subject surviving foreign corporation, limited liability company or
limited partnership irrevocably consents to service of process on the statutory
agent listed above as long as the authority of the agent continues, and to
service of process upon the Secretary of State if the agent cannot be found, if
the corporation, limited liability company or limited partnership fails to
designate another agent when required to do so, or if the corporation's, limited
liability company's, or limited partnership's license or registration to do
business in Ohio expires or is cancelled.
B. The qualifying entity also states as follows: (complete only if
applicable) N/A
1. Foreign Qualifying Limited Liability Company
(If the qualifying entity is a foreign limited liability company,
the following information must be completed)
a. The name of the limited liability company in its state of
organization/registration is
-------------------------
------------------------------------------------------
b. The name under which the limited liability company desires
to transact business in Ohio is
---------------------------
c. The limited liability company was organized or registered on
under the laws of the state/country of
----------------------
month day year
----------------------.
d. The address to which interested persons may direct request
for copies of the articles of organization, operating
agreement, bylaws, or other charter documents of the
company is:
-----------------------------------------------
----------------------------------------------------------
<PAGE>
05742-0086
2. Foreign Qualifying Limited Partnership N/A
(If the qualifying entity is a foreign limited partnership, the
following information must be completed)
a. The name of limited partnership is
-------------------------
------------------------------------------------------------
b. The limited partnership was formed on
----------------------
month day year
under the laws of the state/country of
----------------------
c. The address of the office of the limited partnership in its
state/country of organization is
--------------------------
----------------------------------------------------------
d. The limited partnership's principal office address is
----------------------------------------------------------
e. The names and business or residence addresses of the GENERAL
partners of the partnership are as follows:
Name Address
------------------------------------------------------------
------------------------------------------------------------
------------------------------------------------------------
(If insufficient space to cover this item, please attach a
separate sheet listing the general partners and their
respective addresses)
f. The address of the office where a list of the names and
business or residence addresses of the limited partners
and their respective capital contributions is to be
maintained is:
------------------------------------------------------------
------------------------------------------------------------
The limited partnership hereby certifies that it shall
maintain said records until the registration of the limited
partnership in Ohio is cancelled or withdrawn.
<PAGE>
05742-0087
The undersigned constituent entities have caused this certificate of
merger to be signed by its duly authorized officers, partners and
representatives on the date(s) stated below.
THE EAST OHIO GAS COMPANY WEST OHIO GAS COMPANY
- ---------------------------------- -----------------------------
exact name of entity exact name of entity
By: /s/ TOM D. NEWLAND By: /s/ TOM D. NEWLAND
------------------------------- --------------------------
Its: President Its: President
------------------------------ -------------------------
Date: December 24, 1996 Date: December 24, 1996
----------------------------- ------------------------
<PAGE>
05742-0090
================================================================================
The State of Ohio
Bob Taft
Secretary of State
113695
Certificate
It is hereby certified that the Secretary of State of Ohio has custody of the
Records of Incorporation and Miscellaneous Filings; that said records show the
filing and recording of: MEX
of:
WEST OHIO GAS COMPANY
United States of America Recorded on Roll 5742 at Frame 0091
State of Ohio of the Records of Incorporation and
Office of the Secretary of State Miscellaneous Filings.
Witness my hand and the seal of the
Secretary of State at Columbus, Ohio,
this 30TH day of DEC , A.D. 1996
[SEAL OF STATE OF OHIO]
/s/ Bob Taft
Bob Taft
Secretary of State
<PAGE>
9359-1253
Microfilm Number Filed with the Department of State on SEP 02 1993
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Entity Number 275524-008 /s/ Secretary of the Commonwealth
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Secretary of the Commonwealth
ARTICLES OF AMENDMENT-DOMESTIC BUSINESS CORPORATION
In compliance with the requirements of 15 Pa.C.S. (section) 1915 (relating
to articles of amendment), the undersigned business corporation, desiring to
amend its Articles, hereby states that:
1. The name of the corporation is: The Peoples Natural Gas Company
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2. The (a) address of this corporation's current registered office in this
Commonwealth or (b) name of its commercial registered office provider and the
county of venue is (the Department is hereby authorized to correct the
following information to conform to the records of the Department):
(a) 625 Liberty Avenue Pittsburgh Pennsylvania 15222-3197 Allegheny
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Number and Street City State Zip County
(b) c/o: N/A
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Name of Commerical Registered Office Provider County
For a corporation represented by a commercial registered office provider, the
county in (b) shall be deemed the county in which the corporation is located for
venue and official publication purposes.
3. The statute by or under which it was incorporated is Act of May 29, 1885,
-----------------------
P.L. 29, entitled, "An Act to provide for the incorporation and regulation of
- -------------------------------------------------------------------------------
natural gas companies"
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4. The date of its incorporation is: June 26, 1885
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5. (Check, and if appropriate complete, one of the following):
X The amendment shall be effective upon filing these Articles of Amendment in
- the Department of State.
- The amendment shall be effective on: at
--------------- ------------------
Date Hour
6. (Check one of the following):
The amendment was adopted by the shareholders (or members) pursuant to 15
-
Pa.C.S. (section) 1914(a) and (b).
X The amendment was adopted by the board of directors pursuant to 15 Pa.C.S.
-
(section) 1914(c).
7. (Check, and if appropriate complete, one of the following):
- The amendment adopted by the corporation, set forth in full, is as follows:
X The amendment adopted by the corporation as set forth in full in Exhibit A
-
attached hereto and made a part hereof.
PA DEPT OF STATE
SEP 02 1993
<PAGE>
9359-1254
8. (Check if the amendment restates the Articles):
X The restated Articles of Incorporation supersede the original Articles and
- all amendments thereto.
IN TESTIMONY WHEREOF, the undersigned corporation has caused these Articles
of Amendment to be signed by a duly authorized officer thereof this 25th day of
----
August, 1993.
- ------ --
The Peoples Natural Gas Company
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(Name of Corporation)
By: /s/ Susan G. George
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(Signature)
TITLE: Associate General Counsel and Assistant Secretary
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<PAGE>
9359-1255
EXHIBIT A
Article V of the Articles of Incorporation is amended as follows: "The
aggregate number of shares which the Corporation shall have authority to issue
is [1,550,000] 2,550,000 shares, consisting of [1,550,000] 2,550,000 shares of
Capital Stock, par value $100 per share. The Board of Directors shall have the
full authority permitted by law to fix by resolution filed in the manner
provided by law, prior to the issuance thereof, full, limited, multiple or
fractional, or no voting rights, and such designations, preferences,
qualifications, privileges, limitations, restrictions, options, conversion
rights, and other special or relative rights of the Capital Stock, or of any
series of any such classes of shares, that may be desired. Unless otherwise
provided in any such resolution, the number of shares of any existing series or
of any series established and designated in any such resolution hereafter
adopted by the Board of Directors pursuant to this Article V may be increased
(within the then total authorized shares of the class) or decreased (but not
below the number of shares of the series then outstanding) by such a resolution.
In like manner, unless otherwise provided in any such resolution, the Board of
Directors may from time to time, within the then total authorized shares of any
class, establish and designate any reacquired or unissued shares of any series
of any class (whether or not theretofore established and designated as a part of
any existing series) as shares of such class of one or more existing or
additional series and fix and determine the relative rights and preferences
thereof."
<PAGE>
CNG INTERNATIONAL CORPORATION
* * * * *
B Y - L A W S
* * * * *
ARTICLE I
OFFICES
Section 1. The registered office shall be in the City of Dover, County of
Kent, State of Delaware.
Section 2. The corporation may also have offices at such other places both
within and without the State of Delaware as the board of directors may from time
to time determine or the business of the corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
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Section 1. All meetings of the stockholders for the election of directors
shall be held in the City of Pittsburgh, State of Pennsylvania, at such place as
may be fixed from time to time by the board of directors, or at such other place
either within or without the State of Delaware as shall be designated from time
to time by the board of directors and stated in the notice of the meeting.
Meetings of stockholders for any other purpose may be held at such time and
place, within or without the State of Delaware, as shall be stated in the notice
of the meeting or in a duly executed waiver of notice thereof.
Section 2. Annual meetings of stockholders, commencing with the year 1996,
shall be held on the third Tuesday of May if not a legal holiday, and if a
legal holiday, then on the next secular day following, at 10:00 a.m., or at such
other date and time as shall be designated from time to time by the board of
directors and stated in the notice of the meeting, at which they shall elect by
a plurality vote a board of directors, and transact such other business as may
properly be brought before the meeting.
Section 3. Written notice of the annual meeting stating the place, date
and hour of the meeting shall be given to each stockholder entitled to vote at
such meeting not less than ten nor more than sixty days before the date of the
meeting.
Section 4. The officer who has charge of the stock ledger of the
corporation shall prepare and make, at least ten days before every meeting of
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stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any stockholder who is
present.
Section 5. Special meetings of the stockholders, for any purpose or
purposes, unless otherwise prescribed by statute or by the certificate of
incorporation, may be called by the president and shall be called by the
president or secretary at the request in writing of a majority of the board of
directors, or at the request in writing of stockholders owning a majority in
amount of the entire capital stock of the corporation issued and outstanding and
entitled to vote. Such request shall state the purpose or purposes of the
proposed meeting.
Section 6. Written notice of a special meeting stating the place, date and
hour of the meeting and the purpose or purposes for which the meeting is called,
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shall be given not less than ten nor more than sixty days before the date of the
meeting, to each stockholder entitled to vote at such meeting.
Section 7. Business transacted at any special meeting of stockholders
shall be limited to the purposes stated in the notice.
Section 8. The holders of a majority of the stock issued and outstanding
and entitled to vote thereat, present in person or represented by proxy, shall
constitute a quorum at all meetings of the stockholders for the transaction of
business except as otherwise provided by statute or by the certificate of
incorporation. If, however, such quorum shall not be present or represented at
any meeting of the stockholders, the stockholders entitled to vote thereat,
present in person or represented by proxy, shall have power to adjourn the
meeting from time to time, without notice other than announcement at the
meeting, until a quorum shall be present or represented. At such adjourned
meeting at which a quorum shall be present or represented any business may be
transacted which might have been transacted at the meeting as originally
notified. If the adjournment is for more than thirty days, or if after the
adjournment a new record date is fixed for the adjourned meeting, a notice of
the adjourned meeting shall be given to each stockholder of record entitled to
vote at the meeting.
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Section 9. When a quorum is present at any meeting, the vote of the
holders of a majority of the stock having voting power present in person or
represented by proxy shall decide any question brought before such meeting,
unless the question is one upon which by express provision of the statutes or of
the certificate of incorporation, a different vote is required in which case
such express provision shall govern and control the decision of such question.
Section 10. Unless otherwise provided in the certificate of incorporation
each stockholder shall at every meeting of the stockholders be entitled to one
vote in person or by proxy for each share of the capital stock having voting
power held by such stockholder, but no proxy shall be voted on after three years
from its date, unless the proxy provides for a longer period.
Section 11. Unless otherwise provided in the certificate of incorporation,
any action required to be taken at any annual or special meeting of stockholders
of the corporation, or any action which may be taken at any annual or special
meeting of such stockholders, may be taken without a meeting, without prior
notice and without a vote, if a consent in writing, setting forth the action so
taken, shall be signed by the holders of outstanding stock having not less than
the minimum number of votes that would be necessary to authorize or take such
action at a meeting at which all shares entitled to vote thereon were present
and voted. Prompt notice of the taking of the corporate
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action without a meeting by less than unanimous written consent shall be given
to those stockholders who have not consented in writing.
ARTICLE III
DIRECTORS
Section 1. The number of directors which shall constitute the whole board
shall be not less than one nor more than fifteen. The first board shall consist
of three directors. Thereafter, within the limits above specified, the number
of directors shall be determined by resolution of the board of directors or by
the stockholders at the annual meeting. The directors shall be elected at the
annual meeting of the stockholders, except as provided in Section 2 of this
Article, and each director elected shall hold office until his successor is
elected and qualified. Directors need not be stockholders.
Section 2. Vacancies and newly created director-ships resulting from any
increase in the authorized number of directors may be filled by a majority of
the directors then in office, though less than a quorum, or by a sole remaining
director, and the directors so chosen shall hold office until the next annual
election and until their successors are duly elected and shall qualify, unless
sooner displaced. If there are no directors in office, then an election of
directors may be held in the manner provided by
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<PAGE>
statute. If, at the time of filling any vacancy or any newly created
directorship, the directors then in office shall constitute less than a majority
of the whole board (as constituted immediately prior to any such increase), the
Court of Chancery may, upon application of any stockholder or stockholders
holding at least ten percent of the total number of the shares at the time
outstanding having the right to vote for such directors, summarily order an
election to be held to fill any such vacancies or newly created directorships,
or to replace the directors chosen by the directors then in office.
Section 3. The business of the corporation shall be managed by or under
the direction of its board of directors which may exercise all such powers of
the corporation and do all such lawful acts and things as are not by statute or
by the certificate of incorporation or by these by-laws directed or required to
be exercised or done by the stockholders.
MEETINGS OF THE BOARD OF DIRECTORS
Section 4. The board of directors of the corporation may hold meetings,
both regular and special, either within or without the State of Delaware.
Section 5. The first meeting of each newly elected board of directors
shall be held at such time and place as shall be fixed by the vote of the
stockholders at the annual meeting and no notice of such meeting shall be
necessary to the newly
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elected directors in order legally to constitute the meeting, provided a quorum
shall be present. In the event of the failure of the stockholders to fix the
time or place of such first meeting of the newly elected board of directors, or
in the event such meeting is not held at the time and place so fixed by the
stockholders, the meeting may be held at such time and place as shall be
specified in a notice given as hereinafter provided for special meetings of the
board of directors, or as shall be specified in a written waiver signed by all
of the directors
Section 6. Regular meetings of the board of directors may be held without
notice at such time and at such place as shall from time to time be determined
by the board.
Section 7. Special meetings of the board may be called by the president on
two days' notice to each director, either personally or by mail or by telegram;
special meetings shall be called by the president or secretary in like manner
and on like notice on the written request of two directors unless the board
consists of only one director; in which case special meetings shall be called by
the president or secretary in like manner and on like notice on the written
request of the sole director.
Section 8. At all meetings of the board one-third of the directors shall
constitute a quorum for the transaction of business and the act of a majority of
the directors present at any meeting at which there is a quorum shall be the act
of the
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<PAGE>
board of directors except as may be otherwise specifically provided by statute
or by the certificate of incorporation. If a quorum shall not be present at any
meeting of the board of directors the directors present thereat may adjourn the
meeting from time to time, without notice other than announcement at the
meeting, until a quorum shall be present.
Section 9. Unless otherwise restricted by the certificate of incorporation
or these by-laws, any action required or permitted to be taken at any meeting of
the board of directors or of any committee thereof may be taken without a
meeting, if all members of the board or committee, as the case may be, consent
thereto in writing, and the writing or writings are filed with the minutes of
proceedings of the board or committee.
Section 10. Unless otherwise restricted by the certificate of
incorporation or these by-laws, members of the board of directors, or any
committee designated by the board of directors, may participate in a meeting of
the board of directors, or any committee, by means of conference telephone or
similar communications equipment by means of which all persons participating in
the meeting can hear each other, and such participation in a meeting shall
constitute presence in person at the meeting.
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COMMITTEES OF DIRECTORS
Section 11. The board of directors may, by resolution passed by a majority
of the whole board, designate one or more committees, each committee to consist
of one or more of the directors of the corporation. The board may designate one
or more directors as alternate members of any committee, who may replace any
absent or disqualified member at any meeting of the committee.
In the absence or disqualification of a member of a committee, the member
or members thereof present at any meeting and not disqualified from voting,
whether or not he or they constitute a quorum, may unanimously appoint another
member of the board of directors to act at the meeting in the place of any such
absent or disqualified member.
Any such committee, to the extent provided in the resolution of the board
of directors, shall have and may exercise all the powers and authority of the
board of directors in the management of the business and affairs of the
corporation, and may authorize the seal of the corporation to be affixed to all
papers which may require it; but no such committee shall have the power or
authority in reference to amending the certificate of incorporation, (except
that a committee may, to the extent authorized in the resolution or resolutions
providing for the issuance of shares of stock adopted by the board of directors
as provided in Section 151(a) fix any of the preferences or rights of such
shares relating to dividends, redemption, dissolution, any distribution of
assets of the corporation or the conversion into, or the exchange of such shares
for, shares of
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any other class or classes or any other series of the same or any other class or
classes of stock of the corporation) adopting an agreement of merger or
consolidation, recommending to the stockholders the sale, lease or exchange of
all or substantially all of the corporation's property and assets, recommending
to the stockholders a dissolution of the corporation or a revocation of a
dissolution, or amending the by-laws of the corporation; and, unless the
resolution or the certificate of incorporation expressly so provide, no such
committee shall have the power or authority to declare a dividend or to
authorize the issuance of stock or to adopt a certificate of ownership and
merger. Such committee or committees shall have such name or names as may be
determined from time to time by resolution adopted by the board of directors.
Section 12. Each committee shall keep regular minutes of its meetings and
report the same to the board of directors when required.
COMPENSATION OF DIRECTORS
Section 13. Unless otherwise restricted by the certificate of
incorporation or these by-laws, the board of directors shall have the authority
to fix the compensation of directors. The directors may be paid their expenses,
if any, of attendance at each meeting of the board of directors and may be paid
a fixed sum for attendance at each meeting or the board of directors or a stated
salary as director. No such payment shall preclude any director from serving
the corporation in any other capacity and receiving
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compensation therefor. Members of special or standing committees may be allowed
like compensation for attending committee meetings.
REMOVAL OF DIRECTORS
Section 14. Unless otherwise restricted by the certificate of
incorporation or by-laws, any director or the entire board of directors may be
removed, with or without cause, by the holders of a majority of shares entitled
to vote at an election of directors.
ARTICLE IV
NOTICES
Section 1. Whenever, under the provisions of the statutes or of the
certificate of incorporation or of these by-laws, notice is required to be given
to any director or stockholder, it shall not be construed to mean personal
notice, but such notice may be given in writing, by mail, addressed to such
director or stockholder, at his address as it appears on the records of the
corporation, with postage thereon prepaid, and such notice shall be deemed to be
given at the time when the same shall be deposited in the United States mail.
Notice to directors may also be given by telegram.
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Section 2. Whenever any notice is required to be given under the
provisions of the statutes or of the certificate of incorporation or of these
by-laws, a waiver thereof in writing, signed by the person or persons entitled
to said notice, whether before or after the time stated therein, shall be deemed
equivalent thereto.
ARTICLE V
OFFICERS
Section 1. The officers of the corporation shall be chosen by the board of
directors and shall be a president, a vice-president, a secretary and a
treasurer. The board of directors may also choose additional vice-presidents,
and one or more assistant secretaries and assistant treasurers. Any number of
offices may be held by the same person, unless the certificate of incorporation
or these by-laws otherwise provide.
Section 2. The board of directors at its first meeting after each annual
meeting of stockholders shall choose a president, one or more vice-presidents, a
secretary and a treasurer.
Section 3. The board of directors may appoint such other officers and
agents as it shall deem necessary who shall hold their offices for such terms
and shall
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exercise such powers and perform such duties as shall be determined from time to
time by the board.
Section 4. The salaries of all officers and agents of the corporation
shall be fixed by the board of directors.
Section 5. The officers of the corporation shall hold office until their
successors are chosen and qualify. Any officer elected or appointed by the
board of directors may be removed at any time by the affirmative vote of a
majority of the board of directors. Any vacancy occurring in any office of the
corporation shall be filled by the board of directors.
THE PRESIDENT
Section 6. The president shall be the chief executive officer of the
corporation, shall preside at all meetings of the stockholders and the board of
directors, shall have general and active management of the business of the
corporation and shall see that all orders and resolutions of the board of
directors are carried into effect.
Section 7. He shall execute bonds, mortgages and other contracts requiring
a seal, under the seal of the corporation, except where required or permitted by
law to be otherwise signed and executed and except where the signing and
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execution thereof shall be expressly delegated by the board of directors to some
other officer or agent of the corporation.
THE VICE-PRESIDENTS
Section 8. In the absence of the president or in the event of his
inability or refusal to act, the vice-president (or in the event there be more
than one vice-president, the vice-presidents in the order designated by the
directors, or in the absence of any designation, then in the order of their
election) shall perform the duties of the president, and when so acting, shall
have all the powers of and be subject to all the restrictions upon the
president. The vice-presidents shall perform such other duties and have such
other powers as the board of directors may from time to time prescribe.
THE SECRETARY AND ASSISTANT SECRETARIES
Section 9. The secretary shall attend all meetings of the board of
directors and all meetings of the stockholders and record all the proceedings of
the meetings of the corporation and of the board of directors in a book to be
kept for that purpose and shall perform like duties for the standing committees
when required. He shall give, or cause to be given, notice of all meetings of
the stockholders and special meetings of the board of directors, and shall
perform such other duties as may be prescribed by the board of directors or
president, under whose supervision he shall be.
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He shall have custody of the corporate seal of the corporation and he, or an
assistant secretary, shall have authority to affix the same to any instrument
requiring it and when so affixed, it may be attested by his signature or by the
signature of such assistant secretary. The board of directors may give general
authority to any other officer to affix the seal of the corporation and to
attest the affixing by his signature.
Section 10. The assistant secretary, or if there be more than one, the
assistant secretaries in the order determined by the board of directors (or if
there be no such determination, then in the order of their election) shall, in
the absence of the secretary or in the event of his inability or refusal to act,
perform the duties and exercise the powers of the secretary and shall perform
such other duties and have such other powers as the board of directors may from
time to time prescribe.
THE TREASURER AND ASSISTANT TREASURERS
Section 11. The treasurer shall have the custody of the corporate funds
and securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the corporation and shall deposit all moneys
and other valuable effects in the name and to the credit of the corporation in
such depositories as may be designated by the board of directors.
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Section 12. He shall disburse the funds of the corporation as may be
ordered by the board of directors, taking proper vouchers for such
disbursements, and shall render to the president and the board of directors, at
its regular meetings, or when the board of directors so requires, an account of
all his transactions as treasurer and of the financial condition of the
corporation.
Section 13. If required by the board of directors, he shall give the
corporation a bond (which shall be renewed every six years) in such sum and with
such surety or sureties as shall be satisfactory to the board of directors for
the faithful performance of the duties of his office and for the restoration to
the corporation, in case of his death, resignation, retirement or removal from
office, of all books, papers, vouchers, money and other property of whatever
kind in his possession or under his control belonging to the corporation.
Section 14. The assistant treasurer, or if there shall be more than one,
the assistant treasurers in the order determined by the board of directors (or
if there be no such determination, then in the order of their election) shall,
in the absence of the treasurer or in the event of his inability or refusal to
act, perform the duties and exercise the powers of the treasurer and shall
perform such other duties and have such other powers as the board of directors
may from time to time prescribe.
ARTICLE VI
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CERTIFICATES FOR SHARES
Section 1. The shares of the corporation shall be represented by a
certificate or shall be uncertificated. Certificates shall be signed by, or in
the name of the corporation by, the president or a vice-president and the
treasurer or an assistant treasurer, or the secretary or an assistant secretary
of the corporation.
Within a reasonable time after the issuance or transfer of uncertificated
stock, the corporation shall send to the registered owner thereof a written
notice containing the information required to be set forth or stated on
certificates pursuant to Sections 151, 156, 202 (a) or 218 (a) or a statement
that the corporation will furnish without charge to each stockholder who so
requests the powers, designations, preferences and relative participating,
optional or other special rights of each class of stock or series thereof and
the qualifications, limitations or restrictions of such preferences and/or
rights.
Section 2. Any of or all the signatures on a certificate may be facsimile.
In case any officer, transfer agent or registrar who has signed or whose
facsimile signature has been placed upon a certificate shall have ceased to be
such officer, transfer agent or registrar before such certificate is issued, it
may be issued by the corporation with the same effect as if he were such
officer, transfer agent or registrar at the date of issue.
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LOST CERTIFICATES
Section 3. The board of directors may direct a new certificate or
certificates or uncertificated shares to be issued in place of any certificate
or certificates theretofore issued by the corporation alleged to have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate of stock to be lost, stolen or destroyed. When
authorizing such issue of a new certificate or certificates or uncertificated
shares, the board of directors may, in its discretion and as a condition
precedent to the issuance thereof, require the owner of such lost, stolen or
destroyed certificate or certificates, or his legal representative, to advertise
the same in such manner as it shall require and/or to give the corporation a
bond in such sum as it may direct as indemnity against any claim that may be
made against the corporation with respect to the certificate alleged to have
been lost, stolen or destroyed.
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TRANSFER OF STOCK
Section 4. Upon surrender to the corporation or the transfer agent of the
corporation of a certificate for shares duly endorsed or accompanied by proper
evidence of succession, assignation or authority to transfer, it shall be the
duty of the corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate and record the transaction upon its books.
Upon receipt of proper transfer instructions from the registered owner of
uncertificated shares such uncertificated shares shall be canceled and issuance
of new equivalent uncertificated shares or certificated shares shall be made to
the person entitled thereto and the transaction shall be recorded upon the books
of the corporation.
FIXING RECORD DATE
Section 5. In order that the corporation may determine the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, the board of directors may fix, in advance, a record date,
which shall not be more than sixty nor less than ten days before the date of
such meeting, nor more than sixty days prior to any other
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action. A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the meeting:
provided, however, that the board of directors may fix a new record date for the
adjourned meeting.
REGISTERED STOCKHOLDERS
Section 6. The corporation shall be entitled to recognize the exclusive
right of a person registered on its books as the owner of shares to receive
dividends, and to vote as such owner, and to hold liable for calls and
assessments a person registered on its books as the owner of shares, and shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of any other person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of
Delaware.
ARTICLE VII
GENERAL PROVISIONS
DIVIDENDS
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Section 1. Dividends upon the capital stock of the corporation, subject to
the provisions of the certificate of incorporation, if any, may be declared by
the board of directors at any regular or special meeting, pursuant to law.
Dividends may be paid in cash, in property, or in shares of the capital stock,
subject to the provisions of the certificate of incorporation.
Section 2. Before payment of any dividend, there may be set aside out of
any funds of the corporation available for dividends such sum or sums as the
directors from time to time, in their absolute discretion, think proper as a
reserve or reserves to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the corporation, or for such other
purpose as the directors shall think conducive to the interest of the
corporation, and the directors may modify or abolish any such reserve in the
manner in which it was created.
ANNUAL STATEMENT
Section 3. The board of directors shall present at each annual meeting,
and at any special meeting of the stockholders when called for by vote of the
stockholders, a full and clear statement of the business and condition of the
corporation.
CHECKS
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Section 4. All checks or demands for money and notes of the corporation
shall be signed by such officer or officers or such other person or persons as
the board of directors may from time to time designate.
FISCAL YEAR
Section 5. The fiscal year of the corporation shall be the calendar year
unless fixed otherwise by resolution of the board of directors.
SEAL
Section 6. The corporate seal shall have inscribed thereon the name of the
corporation, the year of its organization and the words "Corporate Seal,
Delaware". The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or reproduced or otherwise.
INDEMNIFICATION
Section 7. Each person who at any time is, or shall have been a director
or officer of the corporation, or serves or has served as a director, officer,
fiduciary or other representative of another company, partnership, joint
venture, trust,
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<PAGE>
association or other enterprise (including any employee benefit
plan), where such service was specifically requested by the corporation in
accordance with the fourth paragraph of this Section 7, or the established
guidelines for participation in outside positions (such service hereinafter
being referred to as "Outside Service"), and is threatened to be or is made a
party to any threatened, pending, or completed claim, action, suit or
Proceeding, whether civil, criminal, administrative or investigative
("Proceeding"), by reason of the fact that he is, or was, a director, officer,
fiduciary or other representative of such other enterprise, shall be indemnified
against expenses (including attorney's fees), judgments, fines and amounts paid
in settlement ("Loss") actually and reasonably incurred by him in connection
with any such Proceeding to the full extent permitted under the General
Corporation Law of the State of Delaware, as the same exists or may hereafter be
amended, (but, in the case of any such amendment, only to the extent that such
amendment permits the corporation to provide broader indemnification rights than
said law permitted the corporation to provide prior to such amendment). The
corporation shall indemnify any person seeking indemnity in connection with any
Proceeding (or part thereof) initiated by such person only if such Proceeding
(or part thereof) initiated by such person was authorized by the board of
directors of the corporation. With respect to any Loss arising from Outside
Service, the corporation shall provide such indemnification only if and to the
extent that (i) such other company, partnership, joint venture, trust,
association or enterprise is not legally permitted or financially able to
provide such indemnification, and (ii) such Loss is not
-24-
<PAGE>
paid pursuant to any insurance policy other than any insurance policy maintained
by the corporation.
The right to be indemnified pursuant hereto shall include the right to be
paid by the corporation for expenses, including attorney's fees, incurred in
defending any such Proceeding in advance of its final disposition; provided,
however, that the payment of such expenses in advance of the final disposition
of such Proceeding shall be made only upon delivery to the corporation of an
undertaking, by or on behalf of such director, officer, fiduciary or other
representative in which such director, officer, fiduciary or other
representative agrees to repay all amounts so advanced if it should be
determined ultimately that such director, officer, fiduciary or other
representative is not entitled to be indemnified under applicable law.
The right to be indemnified or to the reimbursement or advancement of
expenses pursuant hereto shall in no way be exclusive of any other rights of
indemnification or advancement to which any such director, officer or employee
may be entitled, under any by-law, agreement, vote of stockholders or
disinterested directors or otherwise both as to action in his official capacity
and as to action in another capacity while holding such office, and shall
continue as to a person who has ceased to be a director, officer or employee and
shall inure to the benefit of the heirs, executors and administrators of such
person.
Any person who is serving or has served as a director, officer, or
fiduciary of (i) another corporation of which a majority of the shares entitled
to vote in the election of its directors is held by the corporation at the time
of such service, or (ii) any
-25-
<PAGE>
employee benefit plan of the corporation or of any corporation referred to in
the foregoing (i), shall be deemed to be doing or have done so at the request of
the corporation.
ARTICLE VIII
AMENDMENTS
Section 1. These by-laws may be altered, amended or repealed or new by-
laws may be adopted by the stockholders or by the board of directors, when such
power is conferred upon the board of directors by the certificate of
incorporation at any regular meeting of the stockholders or of the board of
directors or at any special meeting of the stockholders or of the board of
directors if notice of such alteration, amendment, repeal or adoption of new by-
laws be contained in the notice of such special meeting. If the power to adopt,
amend or repeal by-laws is conferred upon the board of directors by the
certificate of incorporation it shall not divest or limit the power of the
stockholders to adopt, amend or repeal by-laws.
-26-
<PAGE>
ARTICLE IX
COMPANY SEAL IN AUSTRALIA
Section 1. The vice-president in Australia shall provide for the safe
custody of a second seal of the corporation (the "Australian corporate seal").
Section 2. The Australian corporate seal shall have the following
inscriptions: along the outer edge of the seal, "CNG INTERNATIONAL CORPORATION/
DELAWARE, USA/ LIABILITY LIMITED;" toward the center of the seal, "CORPORATE
SEAL 1996/ A.R.B.N. 074 688 421." The seal may be used by causing it or a
facsimile thereof to be impressed or affixed or reproduced or otherwise.
Section 3. The Australian corporate seal shall be used only by the
authority of the vice-president resident in Australia, and every document to
which the seal is affixed shall be signed by the vice-president resident in
Australia and be countersigned by the secretary of Australian branch operations
(an officer appointed under Section 3, Article V).
Section 4. The board of directors may give general authority to any other
officer to affix the seal of the corporation and to attest the affixing by his
or her signature.
-27-
<PAGE>
CNG PRODUCING COMPANY
BY-LAWS
<PAGE>
CONTENTS
1. Offices of the Company
2. Meetings of Stockholders
3. Special Meetings of Stockholders
4. Quorum and Voting at Meetings
5. The Board of Directors
6. Meetings of the Board
7. The Committees of Directors
8. Notices
9. Action by Stockholders and Directors without Meeting
10. The Officers
11. The President
12. The Vice President
13. The Secretary and Assistant Secretaries
14. The Treasurer and Assistant Treasurers
15. Indemnification
16. Certificates of Stock
17. Transfers of Stock
18. Lost or Destroyed Certificates
19. Record Dates
20. Registered Stockholders
21. Dividends
22. Checks
23. Fiscal Year
24. Seal
25. Emergency Bylaws
26. Amendments
<PAGE>
1
OFFICES OF THE COMPANY
----------------------
1.01
The principal office of the Company shall be in the City of New Orleans, Parish
of Orleans, State of Louisiana.
1.02
The Company may also have offices at such other places as the board of directors
may from time to time determine or the business of the Company may require.
<PAGE>
2
ANNUAL MEETINGS OF STOCKHOLDERS
-------------------------------
2.01
Annual meetings of stockholders shall be held at the principal office of the
Company or at such other place as the board may designate.
2.02
Annual meetings of stockholders, commencing with the year 1973, shall be held on
the first Monday in June if that day is not a legal holiday, and if a legal
holiday, then on the next business day following. The meeting shall be held
during normal business hours on the designated day with the exact time of the
meeting to be fixed in the notice which calls said meting. At each annual
meeting the stockholders shall elect by a plurality vote a board of directors
and transact such other business that may properly be brought before the
meeting.
2.03
Written notice of the time, date, and place of the annual meeting shall be
mailed to each stockholder entitled to vote, at the address of the stockholder
appearing on the books of the Company, not less than ten nor more than forty
days prior to the meeting. The notice shall be mailed by the secretary or by
any other person the board may so designate.
<PAGE>
3
SPECIAL MEETINGS OF STOCKHOLDERS
--------------------------------
3.01
Special meetings of stockholders for any purpose or purposes may be held at the
time and place that shall be stated in the notice of the meeting or in a duly
executed waiver of notice.
3.02
Special meetings of stockholders may be called by the board, the president and
secretary, or the holders of not less than ten percent of all the shares
entitled to vote at such meetings, unless otherwise prescribed by statute or by
the charter.
3.03
Written notice of the time, date, place, and purpose of each special meeting of
stockholders shall be mailed to each stockholder entitled to vote, at the
address of the stockholder appearing on the books of the Company, not less than
ten nor more than forty days prior to the meeting. The notice shall be mailed
by the president, the board, or the stockholders calling the meeting, or by the
secretary or some other person at the direction of the president, the board, or
such stockholders.
3.04
The business transacted at any special meeting of stockholders shall be limited
to the purposes stated in the notice.
<PAGE>
4
QUORUM AND VOTING AT MEETINGS
-----------------------------
4.01
The holders of a majority of the stock issued and outstanding and entitled to
vote, present in person or represented by proxy, shall constitute a quorum at
all meeting of stockholders for the transaction of business, except as otherwise
provided by statute or the charter or these bylaws. If, however, such quorum
shall not be present or represented at any meeting of stockholders, the
stockholders entitled to vote, present in person or represented by proxy, shall
have power to adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present or represented. At
such adjourned business may be transacted which might have been transacted at
the meeting as originally notified.
4.02
When a quorum is present at any meeting, the vote of the holders of a majority
of the stock having voting power, present in person or represented by proxy,
shall decide any question brought before such meeting, unless the question is
one upon which a different vote is required by express provision of a statute or
the charter or these bylaws, in which case such express provision shall control
the decision of such question.
4.03
At any meeting of stockholders every stockholder having the right to vote shall
be entitled to vote in person or by proxy appointed by an instrument in wiring
subscribed by such stockholder or authorized agent and bearing a date not more
than three years prior to said meeting, unless such instrument provides for a
longer period. Each stockholder shall have one vote for each share of stock
having noting power and registered in the stockholder's name on the books of the
Company. Except where a date shall have been fixed as a record date for the
determination of stockholders entitled to vote at any meeting, no share of stock
which shall have been transferred on the books of the Company within ten days
next preceding such meeting shall be voted.
4.04
The person presiding at any meeting of stockholders may appoint one or more
inspectors to determine the vote on any question or any election of directors.
<PAGE>
5
THE BOARD OF DIRECTORS
----------------------
5.01
The number of directors which shall constitute the whole board shall be not less
than two nor more than seven. Thereafter, within the limits above specified,
the number of directors shall be determined by resolution of the board of
directors or by the stockholders. Directors need not be stockholders and may be
comprised of employees, non-employees, or a combination thereof.
5.02
Except as otherwise provided herein, the directors shall be elected at the
annual meeting of stockholders, and each director shall hold office until his
successor shall be elected and qualified; provided, however, that the term of
office of a director who is an employee of the Company shall expire
simultaneously with his retirement from active service with the Company or his
removal as an officer of the Company.
5.03
Newly created directorships resulting from an increase in the number of
directors constituting the whole board and all vacancies occurring in the
membership of the board may be filled by the affirmative vote of a majority of
the remaining directors, though less than a quorum. A director elected to fill
a newly created directorship or to fill a vacancy shall hold office until his
successor shall be elected and qualified.
5.04
The business of the Company shall be managed by the board which may exercise al
of the powers of the Company except those that are by statute or the charter of
these bylaws conferred upon or reserved to the stockholders.
5.05
To the full extent that the General Corporation Law of the State of Delaware, as
the same now exists, permits elimination or limitation of the liability of
directors, no director of the Corporation shall be liable to the Corporation or
its stockholders for the monetary damages for breach of fiduciary duty as a
director, except for liability (i) for any breach of the director's duty of
loyalty to the Corporation or its stockholders, (ii) for acts or omissions not
in good faith or which involves intentional misconduct or a knowing violation of
law, (iii) under Section 174 of the Delaware General Corporation Law, or (iv)
for any transaction from which the director derived an improper personal
benefit.
5.06
To the full extent permitted by law. all directors of the Corporation shall be
afforded any exemption from liability or limitation of liability permitted by
any subsequent enactment, modification or amendment of the General Corporation
Law of the State of Delaware.
5.07
Any repeal or modification of either or both of the foregoing paragraphs by the
stockholders of the Corporation shall not adversely affect any exemption from
liability, limitation of liability or other right of a director of the
Corporation with respect to any matter occurring prior to such repeal or
modification.
<PAGE>
6
MEETINGS OF THE BOARD
---------------------
6.01
Meetings of the board may be held at such times and places that the board may
from time to time designate by resolution, or any such meeting may be held at
the time and place which shall be stated in the notice thereof as herein
provided.
6.02
All meetings of the board shall be called by the president, by a vice president
when the president is absent, or by any tow directors on one-day's notice of the
time and place thereof which shall be given by the secretary or assistant
secretary to each director by mail, telephone, or personally.
6.03
Notice of the time, place, or purpose of any meeting of the board may be
dispensed with if every director shall attend in person, or if every absent
director shall, in writing, filed with the records of the meeting either before
or after the holding thereof, waive such notice.
6.04
The notice or waiver of notice of a meeting of the board need not specify the
purpose thereof.
6.05
A majority of the directors shall constitute a quorum for the transaction of
business, unless otherwise required or authorized by statute or the charter or
these Bylaws. The act of a majority of the directors at any meeting at which a
quorum is present shall be the act of the Board, unless otherwise required by
statute or the charter or these Bylaws.
6.06
If a quorum shall not be present at a meeting of the board, the directors
present may adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present.
<PAGE>
7
THE COMMITTEES OF DIRECTORS
---------------------------
7.01
The board may, by resolution or resolutions adopted by a majority of the whole
board, designate one or more committees. Each committee shall consist of two or
more of the directors which, to the extent provided in the resolution or
resolutions, shall have and may exercise the powers of the board in the
management of the business and affairs of the Company. Each committee shall
have such name and duties that may be determined from time to time by resolution
adopted by the board.
7.02
The committees shall keep regular minutes of their proceedings and report the
same to the board when required.
<PAGE>
8
NOTICES
-------
8.01
Whenever any notice required by statute or the charter or these bylaws must be
given to a stockholder or a director or an officer, other than notices elsewhere
herein provided for, such notice may be given in writing and mailed to such
person at the address thereof appearing on the books of the Company; and such
notice shall be deemed to be given at the time the same is deposited in the
United States mail. Any such notice to a director or officer may be given by
telephone or telegram in lieu of mailing.
8.02
A waiver of the notice provided for in Section 8.01, signed either before of
after the time stated in the notice by the person entitled thereto, shall be
deemed equivalent to giving such notice.
<PAGE>
9
ACTION BY STOCKHOLDER AND DIRECTORS WITHOUT MEETING
---------------------------------------------------
9.01
Whenever the vote of stockholders at a meeting thereof is required or permitted
to be taken in connection with any corporate action, the meeting and vote of
stockholders may be dispensed with if all the stockholders who would have been
entitled to vote upon the action, it such meeting were held, shall agree in
writing to such corporate action being taken.
9.02
Whenever the vote of directors at a meeting thereof is required or permitted to
be taken in connection with any Company action, the meeting and vote of
directors may be dispensed with if all the directors agree in writing to such
Company action being taken.
<PAGE>
10
THE OFFICERS
------------
10.01
The officers of the Company shall be a president, vice president, a secretary, a
treasurer and such other officers as the board and the organization of the
Company may require. The president shall be chosen from among the directors.
10.02
The board may appoint such officials of the Company as the board may deem
expedient or necessary.
10.03
The board shall choose the officers and appoint the officials of the Company at
the board's first meeting after the annual meeting of stockholders.
10.04
The same person may hold two offices except those of president and vice
president.
10.05
The board may at any time, by affirmative vote of a majority of the board,
create and fill new offices, fill vacancies in existing offices, or vacate and
discontinue offices then existing.
10.06
Each officer shall hold his office until his successor is elected and qualified
or until his earlier resignation or removal. Any officer may resign at any time
upon written notice to the corporation.
<PAGE>
11
THE PRESIDENT
-------------
11.01
The president shall be the chief executive officer of the Company, shall preside
at all meetings of the stockholders and the directors, and shall see that all
orders and resolutions of the board are carried into effect.
11.02
The president shall execute deeds, mortgages, deeds of trust, bonds, and other
instruments, except where required or permitted by law to be otherwise executed
and except where the execution thereof shall be expressly delegated by the board
to some other officer or official of the Company.
<PAGE>
12
THE SENIOR VICE PRESIDENT
and/or THE VICE PRESIDENT
12.01
From time to time the Board may create one or more offices of senior vice
president and one or more offices of vice president and appoint persons to fill
such offices. There shall not, however, be a fixed or minimum number of offices
of either such denomination except as is now or is hereinafter prescribed by the
general corporation laws of the State of Delaware.
12.02
The offices of senior president and vice president shall report directly to the
president of the company unless some provision to the contrary is contained in
either the resolution creating such office or in the resolution naming a
particular person to such office.
12.03
Notwithstanding the provisions of the foregoing section or the provisions of any
prior resolution creating an office or appointing an individual to the office of
senior vice president or vice president, the president of the company shall have
full authority to, from time to time and in his sole discretion, alter or
rearrange the reporting structure of the senior vice president(s) and vice
president(s) of the company so as to increase or decrease the number of persons
reporting directly to the office of president.
12.04
In the absence of the president, a senior vice president or a vice president or
other officer designated by the president or selected by the Board shall perform
the duties and exercise the powers of the president. Each senior vice president
and vice president shall perform such other duties as the board or president
shall prescribe.
<PAGE>
13
THE SECRETARY AND ASSISTANT SECRETARIES
---------------------------------------
13.01
The secretary shall attend all meetings of the board and all meetings of the
stockholders, shall record the proceedings of the meetings in a book kept for
that purpose, and shall perform like duties for committees of directors when
required. The secretary shall perform such other duties as may be prescribed by
the board or the president.
13.02
The secretary shall have custody of the seal of the Company. The secretary, and
assistant secretary, the treasurer, or an assistant treasurer shall have
authority to affix the seal to any instrument requiring it and when so affixed,
the seal may be attested by the signature of the secretary, assistant secretary,
treasurer, or assistant treasurer.
13.03
The assistant secretaries, in the order determined by the board, shall, in the
absence of the secretary, perform the duties and exercise the powers of the
secretary. Any assistant secretary shall perform such other powers as the board
may prescribe/
<PAGE>
14
THE TREASURER AND ASSISTANT TREASURER
-------------------------------------
14.01
The treasurer shall have the custody of the Company's funds and securities and
shall keep full and accurate accounts of receipts and disbursements in books
belonging to the Company. He shall deposit all moneys and other valuable
effects in the name and to the credit of the Company in such depositories as may
be designated by the board.
14.02
The treasurer shall disburse the funds of the Company, taking proper vouchers
for such disbursements, and shall render to the president and directors,
whenever they may require it, accounts of al his transactions as treasurer and
of the financial condition of the Company.
14.03
If required by the board, the treasurer shall give the Company a bond, in such
sum and with such surety as shall be satisfactory to the board, for the faithful
performance of the duties of his office and for the restoration to the Company,
in case of his death, resignation, retirement, or removal from office, of all
books, papers, vouchers, money, and other property of whatever kind in his
possession or under his control and belonging to the Company.
14.04
The assistant treasurer, in the order determined by the board, shall, in the
absence of the treasurer, perform the duties and exercise the powers of the
treasurer. Any assistant treasurer shall perform such other duties and have
such other powers as the board may prescribe.
<PAGE>
15
INDEMNIFICATION
---------------
15.01
Each person who at any time is, or shall have been a director or officer of the
Company, or serves or has served as a director, officer, fiduciary or other
representative of another company, partnership, joint venture, trust,
association or other enterprise (including any employee benefit plan), where
such service was specifically requested by the Company in accordance with
paragraph 15.04 below, or the established guidelines for participation in
outside positions (such service hereinafter being referred to as "Outside
Service"), and is threatened to be or is made a party to any threatened,
pending, or completed claim, action, suit, or proceeding, whether civil,
criminal, administrative or investigative ("Proceeding"), by reason of the fact
that he is, or was, a director or officer of the Company or a director, officer,
fiduciary or other representative of such other enterprise, shall be indemnified
against expenses (including attorney's fees), judgements, fines and amounts paid
in settlement ("Loss") actually and reasonably incurred by him in connection
with any such Proceeding to the full extent permitted under the General
Corporation Law of the State of Delaware, as the same exists or may hereafter be
amended, (but, in the case of any such amendment, only to the extent that such
amendment permits the Company to provide broader indemnification rights than
said Law permitted the Company to provide prior to such amendment). The Company
shall indemnify and person seeking indemnity in connection with any Proceeding
(or part thereof) initiated by such person only if such Proceeding (or part
thereof) initiated by such person was authorized by the Board of Directors of
the Company. With respect to any Loss arising from Outside Service, the Company
shall provide such indemnification only if and to the extent that (i) such other
company, partnership, joint venture, trust, association or enterprise is not
legally permitted or financially able to provide such indemnification, and (ii)
such Loss is not paid pursuant to any insurance policy other than any insurance
policy maintained by the Company.
15.02
The right to be indemnified pursuant hereto shall include the right to be paid
by the Company for expenses, including attorney's fees, incurred in defending
any such Proceeding in advance of its final disposition; provided, however, that
the payment of such expenses in advance of the final disposition of such
Proceeding shall be made only upon delivery to the Company of an undertaking, by
or on behalf of such director, officer, fiduciary or other representative, in
which such director, officer, fiduciary, or other representative agrees to repay
all amounts so advanced if it should be determined ultimately that such
director, officer, fiduciary or other representative is not entitled to be
indemnified under applicable law.
15.03
The right to be indemnified or to the reimbursement or advancement of expenses
pursuant hereto shall in no way be exclusive of any other rights of
indemnification or advancement to which any such director or officer, fiduciary
or other representative may be entitled, under any bylaw, agreement, vote of
stockholders or disinterested directors or otherwise both as to action in his
official capacity and as to action in a another capacity while holding such
office, and shall continue as to a person who has ceased to be a director,
officer, fiduciary or other representative and shall insure to the benefit of
the heirs, executors and administrators of such person.
15.04
Any person who is serving or has served as a director, officer or fiduciary of
(i) another corporation of which a majority of the shares entitled to vote in
the election of its directors is held by the Company at the time of such
service, or (ii) any employee benefit plan of the Company or of any corporation
referred to in paragraph 15.04 (i), shall be deemed to be doing or have done so
at the request of the Company.
<PAGE>
16
CERTIFICATES OF STOCK
---------------------
16.01
The shares of the Company shall be represented by numbered certificates, and
they shall be entered on the books of the Company as they are issued. Each
certificate shall exhibit the holder's name and the number of shares and shall
be signed by the president or a vice president and the secretary, an assistant
secretary, the treasurer, or assistant treasurer. The seal of the Company or a
facsimile thereof may be affixed to each certificate.
16.02
The signature of the officers of the Company upon a certificate of stock may be
facsimiles.
16.03
In the event an officer who has signed or whose facsimile signature has been
placed upon a certificate shall have ceased to be such officer before such
certificate shall have been issued, the certificate may be issued with the same
effect as if he were such officer at the date of the certificate's issue.
<PAGE>
17
TRANSFERS OF STOCK
------------------
17.01
Upon surrender to the Company or the transfer agent of a certificate of stock,
duly endorsed or accompanied by sufficient evidence of succession, assignment or
authority to transfer, a new certificate shall be issued to the person entitled
thereto. The old certificate shall be canceled, and the transaction shall be
recorded on the books of the Company.
<PAGE>
18
LOST OR DESTROYED CERTIFICATES
------------------------------
18.01
The board may direct a new certificate to be issued in place of any certificate
theretofore issued by the Company and alleged to have been lost or destroyed.
Upon authorizing such issue of a new certificate, the board may prescribe such
terms and conditions as it deems expedient to protect the Company.
<PAGE>
19
RECORD DATES
------------
19.01
For the purpose of determining stockholders entitled to notice and vote at any
meeting of stockholders, or to consider agreement upon any proposed action
without a meeting, or to receive payment of any dividend or the allotment of
rights, or to consider any other action, the board may fix in advance a date as
the record date for any such determination of stockholders. Such date shall not
be more than sixty no less than ten days before the date of any meeting nor more
than sixty days prior to any other proposed action. When such determination of
stockholders shall have been made as provided in this section, such
determination shall apply to any adjournment of a meeting, unless the board
fixes a new record date for the adjourned meeting.
<PAGE>
20
REGISTERED STOCKHOLDERS
-----------------------
20.01
The Company shall be entitled to treat the holder of record of any share of
stock as the holder in fact thereof and, accordingly, shall not be bound to
recognize any equitable or other claim to interest in such share on the part of
any other person, whether or not the Company shall have express or other notice
thereof, except as otherwise provided by the laws of West Virginia.
<PAGE>
21
DIVIDENDS
---------
21.01
Dividends upon the capital stock of the Company, subject to the provisions of
the charter, may be declared by the board at any meeting, pursuant to law.
Dividends may be paid in cash, in property, or in shares of the capital stock,
subject to the provisions of the charter and the applicable laws.
<PAGE>
22
CHECKS
------
22.01
All checks or demands for money and notes of the Company shall be signed by such
officer or officers or such other person or persons as the board may from time
to time designate.
<PAGE>
23
FISCAL YEAR
-----------
23.01
The fiscal year shall be the calendar year.
<PAGE>
24
SEAL
----
24.01
The corporate seal shall have inscribed thereon the name of the Company and such
other words and symbols as the board may by resolution determine. The seal may
be used by causing it or a facsimile thereof to be impressed, affixed, or
reproduced.
<PAGE>
25
EMERGENCY BYLAWS
----------------
25.01
The board may adopt emergency bylaws, subject to repeal or change by action of
the stockholders, which shall be operative during any emergency resulting from
an attack on the United States of America or any nuclear or atomic disaster.
The emergency bylaws may make any provision that may be practical or necessary
for the circumstances of the emergency and in conformity with the laws of the
State of Delaware.
25.02
To the extent not inconsistent with the emergency bylaws so adopted, these
bylaws shall remain in effect during any such emergency and upon its termination
the emergency bylaws shall cease to be operative.
<PAGE>
26
AMENDMENTS
----------
26.01
These bylaws may be amended by the stockholders or by the board. Any amendment
to these bylaws made by the board may be altered or repealed by the
stockholders.
<PAGE>
- 1 -
CNG TRANSMISSION CORPORATION
BYLAWS
Adopted April 30, 1980
As Amended
Date Sections
December 23, 1982 3.2
December 1, 1986 9.4
March 5, 1990 3.2
March 15, 1990 3.11
December 2, 1991 (Effective January 1, 1992) 3.2
May 17, 1993 3.2
May 31, 1995 (Effective June 1, 1995) 3.2
September 3, 1996 (Effective August 1, 1996) 3.2
CONTENTS
1. OFFICES
<PAGE>
1.1 Registered Office
1.2 Principal Office
1.3 Other Offices
2. MEETING OF STOCKHOLDERS
2.1 Annual Meetings
2.2 Special Meetings
2.3 Place of Meetings
2.4 Notice of Meetings
2.5 Adjourned Meetings
2.6 Voting Lists
2.7 Quorum
2.8 Proxies
2.9 Voting Rights
2.10 Required Vote
2.11 Election of Directors
2.12 Consent of Stockholders in Lieu of Meeting
3. BOARD OF DIRECTORS
3.1 General Powers
3.2 Number and Qualifications
3.3 Term of Office
3.4 Removal
3.5 Vacancies
3.6 First Meetings
3.7 Regular Meetings
3.8 Special Meetings
3.9 Quorum, Required Vote, and Adjournment
3.10 Consent of Directors in Lieu of Meeting
3.11 Limitation on Liability
4. COMMITTEES
4.1 Powers; Duties
5. OFFICERS
5.1 Number
5.2 Election, Term of Office, and Qualifications
5.3 Subordinate Officers
5.4 Removal
5.5 Vacancies
5.6 The President
<PAGE>
5.7 The Vice Presidents
5.8 The Secretary and Assistant Secretaries
5.9 The Treasurer and Assistant Treasurers
6. EXECUTION OF INSTRUMENTS
6.1 Execution of Instruments Generally
6.2 Checks, Drafts, Etc.
6.3 Proxies
7. CAPITAL STOCK
7.1 Stock Certificates
7.2 Transfer of Stock
7.3 Rights of Corporation with Respect to Registered
Owners
7.4 Transfer Agents and Registrars
7.5 Record Date
7.6 Lost, Destroyed and Stolen Certificates
8. DIVIDENDS
8.1 Sources of Dividends
8.2 Reserves
8.3 Reliance on Corporate Records
8.4 Manner of Payment
9. GENERAL PROVISIONS
9.1 Waiver of Notice
9.2 Seal
9.3 Fiscal Year
9.4 Indemnification
10. AMENDMENTS
10.1 By the Stockholders
10.2 By the Directors
- 1 -
BYLAWS
OF
CNG TRANSMISSION CORPORATION
A Delaware Corporation
<PAGE>
1. OFFICES
1.1 Registered Office. The registered office of the
Corporation is located at 100 Tenth Street, Wilmington,
Delaware. The Corporation may by resolution of the Board of
Directors, change the location to any other place in Delaware.
1.2 Principal Office. The principal office of the
Corporation shall be at 445 West Main Street, Clarksburg,
Harrison County, West Virginia.
1.3 Other Offices. The Corporation may have such other
offices, within or without the State of Delaware, as the Board
of Directors may from time to time establish.
2. MEETINGS OF STOCKHOLDERS
2.1 Annual Meetings. The annual meeting of the
stockholders for the election of directors and for the
transaction of any other proper business, notice of which was
given in the notice of the meeting, shall be held at nine
o'clock in the morning on the first Monday of June in each year,
if not a legal holiday, or if a legal holiday, then on the next
succeeding business day not a legal holiday.
<PAGE>
2.2 Special Meetings. A special meeting of the
stockholders may be called at any time by the Board of Directors
or by the President, and shall be called by the President upon
the written request of stockholders of record holding in the
aggregate one-fifth or more of the outstanding shares of stock
of the Corporation entitled to vote, such written request to
state the purpose or purposes of the meeting and to be delivered
to the President.
2.3 Place of Meetings. The Board of Directors may
designate any place, either within or without the State of
Delaware, as the place of meeting for any annual meeting or for
any special meeting called by the Board of Directors. If no
designation is made, or if a special meeting be otherwise
called, the place of meeting shall be the principal office of
the Corporation.
2.4 Notice of Meetings. Written notice stating the
place, date and hour of the meeting and, in the case of a
special meeting, the purpose or purposes for which the meeting
is called, shall be given by or under the direction of the
Secretary, to each stockholder entitled to vote at such meeting.
Except as otherwise required by statute, the written notice
shall be given not less than ten nor more than sixty days before
the date of the meeting. If mailed, such notice shall be deemed
<PAGE>
to be given when deposited in the United States mail, postage
prepaid, directed to the stockholder at his address as it
appears on the records of the Corporation. Attendance of a
person at a meeting of stockholders shall constitute a waiver of
notice of such meeting, except when the stockholder attends for
the express purpose of objecting, at the beginning of the
meeting, to the transaction of any business because the meeting
is not lawfully called or convened.
2.5 Adjourned Meetings. When a meeting is adjourned to
another time or place, notice need not be given of the adjourned
meeting if the time and place thereof are announced at the
meeting at which the adjournment is taken. At the adjourned
meeting the Corporation may transact any business which might
have been transacted at the original meeting. If the
adjournment is for more than thirty days, or if after the
adjournment a new record date is fixed for the adjourned
meeting, a notice of the adjourned meeting shall be given to
each stockholder of record entitled to vote at the meeting.
2.6 Voting Lists. The officer who has charge of the
stock ledger of the Corporation shall prepare and make, at least
ten days before every meeting of stockholders, a complete list
of the stockholders entitled to vote at the meeting, arranged in
<PAGE>
alphabetical order, and showing the address of each stockholder
and the number of shares registered in the name of each
stockholder. Such list shall be open to the examination of any
stockholder, for any purpose germane to the meeting, during
ordinary business hours, for a period of at least ten days prior
to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the
notice of the meeting, or, if not so specified, at the place
where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during
the whole time thereof, and may be inspected by any stockholder
who is present.
2.7 Quorum. Except as otherwise required by statute,
the presence at any meeting, in person or by proxy, of the
holders of record of a majority of the shares then issued and
outstanding and entitled to vote shall be necessary and
sufficient to constitute a quorum for the transaction of
business. In the absence of a quorum, the stockholders entitled
to vote, present in person or by proxy, may adjourn the meeting
from time to time until a quorum is present.
2.8 Proxies. Each stockholder entitled to vote at a
meeting of stockholders or to express consent or dissent to
corporate action in writing without a meeting may authorize
<PAGE>
another person or persons to act for him by proxy, but no such
proxy shall be voted or acted upon after three years from its
date, unless the proxy provides for a longer period. A duly
executed proxy shall be irrevocable if it states that it is
irrevocable and if, and only as long as, it is coupled with an
interest sufficient in law to support an irrevocable power.
2.9 Voting Rights. Except as otherwise provided by
statute or by the Certificate of Incorporation, and subject to
the provisions of Paragraph 7.5 of these Bylaws, each
stockholder shall at every meeting of the stockholders be
entitled to one vote for each share of the capital stock having
voting power held by such stockholder.
2.10 Required Vote. Except as otherwise required by
statute or by the Certificate of Incorporation, the holders of a
majority of the capital stock having voting power, present in
person or by proxy, shall decide any question brought before a
meeting of the stockholders at which a quorum is present.
2.11 Elections of Directors. Elections of directors need
not be by written ballot.
2.12 Consent of Stockholders in Lieu of Meeting. Any
action required or permitted to be taken at any annual or
special meeting of stockholders may be taken without a meeting,
<PAGE>
without prior notice and without a vote, if consent in writing,
setting forth the action so taken, is signed by the holders of
outstanding stock having not less than the minimum number of
votes that would be necessary to authorize or take such action
at a meeting at which all shares entitled to vote thereon were
present and voted.
3. BOARD OF DIRECTORS
3.1 General Powers. The business of the Corporation
shall be managed by the Board of Directors, except as otherwise
provided by statute or by the Certificate of Incorporation.
3.2 Number and Qualifications. The number of directors
which shall constitute the whole board shall be eight. By
amendment of this bylaw the number may be increased or decreased
from time to time by the Board of Directors within the limits
permitted by law. Directors need not be stockholders.
3.3 Term of Office. Each director shall hold office
until the next annual meeting of stockholders and until his
successor is elected and qualified or until his death,
resignation or removal.
3.4 Removal. The stockholders may at any time, at a
meeting expressly called for that purpose, remove any or all of
the directors, with or without cause, by a vote of the holders
<PAGE>
of a majority of the shares then entitled to vote at an election
of directors.
3.5 Vacancies. Vacancies and newly created
directorships resulting from any increase in the authorized
number of directors may be filled by a majority of the directors
then in office, although less than a quorum, or by a sole
remaining director.
3.6 First Meetings. The first meeting of each newly
elected Board of Directors shall be held without notice
immediately after, and at the same place as, the annual meeting
of the stockholders for the purpose of the organization of the
Board, the election of officers, and the transaction of such
other business as may properly come before the meeting.
3.7 Regular Meetings. Regular meetings of the Board of
Directors may be held without notice at such times and at such
places, within or without the State of Delaware, as shall from
time to time be determined by the Board.
3.8 Special Meetings. Special meetings of the Board of
Directors may be called by the President and shall be called by
the Secretary on the written request of two directors. Such
meetings shall be held at such times and at such places, within
or without the State of Delaware, as shall be determined by the
<PAGE>
President or by the directors requesting the meeting. Notice of
the time and place thereof shall be mailed to each director,
addressed to him at his address as it appears on the records of
the Corporation, at least two days before the day on which the
meeting is to be held, or sent to him at such place by
telegraph, radio or cable, or telephoned or delivered to him
personally, not later than the day before the day on which the
meeting is to be held. Such notice need not state the purposes
of the meeting. Attendance of a director at a meeting shall
constitute a waiver of notice of such meeting, except when the
director attends for the express purpose of objecting, at the
beginning of the meeting, to the transaction of any business
because the meeting is not lawfully called or convened.
3.9 Quorum, Required Vote, and Adjournment. The
presence, at any meeting, of one-third of the total number of
directors shall be necessary and sufficient to constitute a
quorum for the transaction of business. Except as otherwise
required by statute or by the Certificate of Incorporation, the
vote of a majority of the directors present at a meeting at
which a quorum is present shall be the act of the Board of
Directors. In the absence of a quorum, a majority of the
directors present at the time and place of any meeting may
adjourn such meeting from time to time until a quorum be
<PAGE>
present.
3.10 Consent of Directors in Lieu of Meeting. Any action
required or permitted to be taken at any meeting of the Board of
Directors, or any committee thereof, may be taken without a
meeting if all the members of the Board or committee, as the
case may be, consent thereto in writing. The Secretary shall
file the written consents with the minutes of the Board or
committee.
3.11 Limitation on Liability
(a) To the full extent that the General Corporation
Law of the State of Delaware, as the same now exists, permits
elimination or limitation of the liability of directors, no
director of the Corporation shall be liable to the Corporation
or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of
the director's duty of loyalty to the Corporation or its
stockholders, (ii) for acts or omissions not in good faith or
which involves intentional misconduct or a knowing violation of
law, (iii) under Section 174 of the Delaware General Corporation
Law, or (iv) for any transaction from which the director derived
an improper personal benefit.
(b) To the full extent permitted by law, all
<PAGE>
directors of the Corporation shall be afforded any exemption
from liability or limitation of liability permitted by any
subsequent enactment, modification or amendment of the General
Corporation Law of the State of Delaware.
(c) Any repeal or modification of either or both of
the foregoing paragraphs by the stockholders of the Corporation
shall not adversely affect any exemption from liability,
limitation of liability or other right of a director of the
Corporation with respect to any matter occurring prior to such
repeal or modification.
4. COMMITTEES
4.1 Powers; Duties. The Board of Directors may, by
resolution passed by a majority of the whole Board, designate
one or more committees, each committee to consist of two or more
of the directors of the Corporation, which, to the extent
provided in the resolution, shall have and may exercise the
powers of the Board of Directors in the management of the
business and affairs of the Corporation, and may authorize the
seal of the Corporation to be affixed to all papers which may
require it. In the absence or disqualification of a member of a
committee, the member or members thereof present at any meeting
<PAGE>
and not disqualified from voting, whether or not constituting a
quorum, may unanimously appoint another member of the Board to
act at the meeting in place of any absent or disqualified
member. Each committee shall have such name and duties as may
be determined from time to time by resolution adopted by the
Board of Directors. The committees of the Board of Directors
shall keep regular minutes of their proceedings and report the
same to the Board of Directors when required.
5. OFFICERS
5.1 Number. The officers of the Corporation shall be a
President, a Vice President, a Secretary, a Treasurer, and such
other officers as the Board shall specify from time to time,
each of whom shall be elected by the Board of Directors. Any
number of offices may be held by the same person.
5.2 Election, Term of Office, and Qualifications. The
officers of the Corporation to be elected by the Board of
Directors shall be elected annually at the first meeting of the
Board held after each annual meeting of stockholders. If the
election of officers shall not be held at such meeting, such
election shall be held as soon thereafter as conveniently may
be. Each officer shall hold office until his successor is
<PAGE>
elected and qualified or until his death, resignation or
removal. No officer need be a director or stockholder of the
Corporation.
5.3 Subordinate Officers. The Board of Directors from
time to time may appoint other officers and agents, including
one or more Assistant Secretaries and one or more Assistant
Treasurers, each of whom shall hold office for such period, have
such authority and perform such duties as the Board of Directors
from time to time may determine. The Board of Directors may
delegate the power to appoint any such subordinate officers and
agents and to prescribe their respective authorities and duties.
5.4 Removal. Any officer or agent may be removed at any
time, with or without cause, by the affirmative vote of a
majority of the directors then in office.
5.5 Vacancies. Any vacancy occurring in any office of
the Corporation shall be filled for the unexpired term in the
manner prescribed by these Bylaws for the regular election or
appointment to the office.
5.6 The President. The President shall be the chief
executive officer of the Corporation and, subject to the
direction and under the supervision of the Board of Directors,
shall have general charge of the business, affairs and property
of the Corporation, and control over its officers, agents and
<PAGE>
employees. He shall preside at all meetings of the stockholders
and of the Board of Directors at which he is present. He shall,
in general, perform all duties and have all powers incident to
the office of President and shall perform such other duties and
have such other powers as from time to time may be assigned to
him by these Bylaws or by the Board of Directors. The President
shall be chosen from among the directors.
5.7 The Vice Presidents. At the request of the
President or in the event of his absence or disability, the Vice
President, or in case there shall be more than one Vice
President, the Vice President designated by the President, or in
the absence of such designation, the Vice President or other
officer designated by the Board of Directors, shall perform all
the duties of the President, and when so acting, shall have all
the powers of, and be subject to all the restrictions upon, the
President. Any Vice President shall perform such other duties
and have such other powers as from time to time may be assigned
to him by these Bylaws or by the Board of Directors or by the
President.
5.8 The Secretary and Assistant Secretaries. The
Secretary shall keep the minutes of the proceedings of the
stockholders and of the Board of Directors in one or more books
<PAGE>
to be kept for that purpose. He shall have custody of the seal
of the Corporation and shall have authority to cause such seal
to be affixed to, or impressed or otherwise reproduced upon, all
documents the execution and delivery of which on behalf of the
Corporation shall have been duly authorized. The seal also may
be affixed, impressed and attested by the Treasurer or any
Assistant Secretary or Assistant Treasurer. He shall, in
general, perform all duties and have all powers incident to the
office of Secretary and shall perform such other duties and have
such other powers as may from time to time be assigned to him by
these Bylaws, by the Board of Directors or by the President.
The Assistant Secretaries, in the order determined by the Board,
shall, in the absence of the Secretary, perform the duties and
exercise the powers of the Secretary. Any Assistant Secretary
shall perform such other duties and have such other powers as
the Board may prescribe.
5.9 The Treasurer and Assistant Treasurers. The
Treasurer shall have custody of the corporate funds and
securities and shall keep full and accurate accounts of receipts
and disbursements in books belonging to the Corporation. He
shall cause all moneys and other valuable effects to be
deposited in the name and to the credit of the Corporation in
such depositories as may be designated by the Board of
<PAGE>
Directors. He shall cause the funds of the Corporation to be
disbursed when such disbursements have been duly authorized,
taking proper vouchers for such disbursements, and shall render
to the President and the Board of Directors, whenever requested,
an account of all his transactions as Treasurer and of the
financial condition of the Corporation. He shall, in general,
perform all duties and have all powers incident to the office of
Treasurer and shall perform such other duties and have such
other powers as may from time to time be assigned to him by
these Bylaws, by the Board of Directors or by the President.
The Assistant Treasurers, in the order determined by the Board,
shall, in the absence of the Treasurer, perform the duties and
exercise the powers of the Treasurer. Any Assistant Treasurer
shall perform such other duties and have such other powers as
the Board may prescribe.
6. EXECUTION OF INSTRUMENTS
6.1 Execution of Instruments Generally. All documents,
instruments or writings of any nature shall be signed, executed,
verified, acknowledged and delivered by such officer or officers
or such agent or agents of the Corporation and in such manner as
the Board of Directors from time to time may determine.
<PAGE>
6.2 Checks, Drafts, Etc. All notes, drafts,
acceptances, checks, endorsements, and all evidence of
indebtedness of the Corporation whatsoever, shall be signed by
such officer or officers or such agent or agents of the
Corporation and in such manner as the Board of Directors from
time to time may determine. Endorsements for deposit to the
credit of the Corporation in any of its duly authorized
depositories shall be made in such manner as the Board of
Directors from time to time may determine.
6.3 Proxies. Proxies to vote with respect to shares of
stock of other corporations owned by or standing in the name of
the Corporation may be executed and delivered from time to time
on behalf of the Corporation by the President or a Vice
President and the Secretary or an Assistant Secretary of the
Corporation or by any other person or persons duly authorized by
the Board of Directors.
7. CAPITAL STOCK
7.1 Stock Certificates. Every holder of stock in the
Corporation shall be entitled to have a certificate signed by,
or in the name of the Corporation by the President or a Vice
President, and by the Treasurer or an Assistant Treasurer, or
the Secretary or an Assistant Secretary of the Corporation
<PAGE>
certifying the number of shares owned by him in the Corporation.
Any or all of the signatures on the certificate may be by a
facsimile. In case any officer who has signed or whose
facsimile signature has been placed upon a certificate shall
have ceased to be such officer before such certificate is
issued, it may be issued by the Corporation with the same effect
as if he were such officer at the date of issue.
7.2 Transfer of Stock. Shares of stock of the
Corporation shall only be transferred on the books of the
Corporation by the holder of record thereof or by his attorney
duly authorized in writing, upon surrender to the Corporation of
the certificates for such shares endorsed by the appropriate
person or persons, with such evidence of the authenticity of
such endorsement, transfer, authorization and other matters as
the Corporation may reasonably require, and accompanied by all
necessary stock transfer tax stamps. In that event it shall be
the duty of the Corporation to issue a new certificate to the
person entitled thereto, cancel the old certificate, and record
the transaction on its books.
7.3 Rights of Corporation with Respect to Registered
Owners. Prior to the surrender to the Corporation of the
certificates for shares of stock with a request to record the
<PAGE>
transfer of such shares, the Corporation may treat the
registered owner as the person entitled to receive dividends, to
vote, to receive notifications, and otherwise to exercise all
the rights and powers of an owner.
7.4 Transfer Agents and Registrars. The Board of
Directors may make such rules and regulations as it may deem
expedient concerning the issuance and transfer of certificates
for shares of the stock of the Corporation and may appoint
transfer agents or registrars or both, and may require all
certificates of stock to bear the signature of either or both.
Nothing herein shall be construed to prohibit the Corporation
from acting as its own transfer agent at any of its offices.
7.5 Record Dates. In order that the Corporation may
determine the stockholders entitled to notice of or to vote at
any meeting of stockholders or any adjournment thereof, or to
express consent to corporate action in writing without a
meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise
any rights in respect of any change, conversion or exchange of
stock or for the purpose of any other lawful action, the Board
of Directors may fix, in advance, a record date, which shall not
be more than sixty nor less than ten days before the date of
such meeting, nor more than sixty days prior to any other
<PAGE>
action. If no record date is fixed, the record date for
determining stockholders entitled to notice of or to vote at a
meeting of stockholders shall be at the close of business on the
day next preceding the day on which notice is given, or, if
notice is waived, at the close of business on the day next
preceding the day on which the meeting is held. If no record
date is fixed, the record date for determining stockholders
entitled to express consent to corporate action in writing
without a meeting, when no prior action by the Board of
Directors is necessary, shall be the day on which the first
written consent is expressed. The record date for determining
stockholders for any other purpose shall be at the close of
business on the day on which the Board of Directors adopts the
resolution relating thereto. A determination of stockholders of
record entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new
record date for the adjourned meeting.
7.6 Lost, Destroyed and Stolen Certificates. Where the
owner of a certificate for shares claims that such certificate
has been lost, destroyed or wrongfully taken, the Corporation
shall issue a new certificate in place of the original
<PAGE>
certificate if the owner (a) so requests before the Corporation
has notice that the shares have been acquired by a bona fide
purchaser; (b) files with the Corporation a sufficient indemnity
bond; and (c) satisfies such other reasonable requirements,
including evidence of such loss, destruction, or wrongful
taking, as may be imposed by the Corporation.
8. DIVIDENDS
8.1 Sources of Dividends. The directors of the
Corporation, subject to any restrictions contained in the
statutes and Certificate of Incorporation, may declare and pay
dividends upon the shares of the capital stock of the
Corporation either (a) out of its surplus as defined and
computed in accordance with the General Corporation Law of
Delaware, as amended from time to time, or (b) in case there
shall be no such surplus, out of its net profits for the fiscal
year in which the dividend is declared and/or preceding fiscal
year.
8.2 Reserves. Before the payment of any dividend, the
directors of the Corporation may set apart out of any of the
funds of the Corporation available for dividends a reserve or
reserves for any proper purpose, and the directors may abolish
any such reserve in the manner in which it was created.
<PAGE>
8.3 Reliance on Corporate Records. A director shall be
fully protected in relying in good faith upon the books of
account of the Corporation or statements prepared by any of its
officials or by independent public accountants as to the value
and amount of the assets, liabilities and net profits of the
Corporation, or any other facts pertinent to the existence and
amount of surplus or other funds from which dividends might
properly be declared and paid, or with which the Corporation's
stock might properly be redeemed or purchased.
8.4 Manner of Payment. Dividends may be paid in cash,
in property, or in shares of the capital stock of the
Corporation at par.
9. GENERAL PROVISIONS
9.1 Waiver of Notice. Whenever notice is required to be
given under any provision of the statutes or of the Certificate
of Incorporation or Bylaws, a written waiver thereof, signed by
the person entitled to notice, whether before or after the time
stated therein, shall be deemed equivalent to notice.
Attendance of a person at a meeting shall constitute a waiver of
notice of that meeting, except where the person attends a
meeting for the express purpose of objecting, at the beginning
<PAGE>
of the meeting, to the transaction of any business because the
meeting was not lawfully called or convened.
9.2 Seal. The corporate seal, subject to alteration by
the Board of Directors, shall be in the form of a circle and
shall bear the name of the Corporation and the year of its
incorporation and shall indicate its formation under the laws of
the State of Delaware. Such seal may be used by causing it or a
facsimile thereof to be impressed or affixed or in any other
manner reproduced.
9.3 Fiscal Year. The fiscal year shall be the calendar
year except as otherwise provided by the Board of Directors.
9.4 Indemnification.
(a) The Corporation shall indemnify any person who
was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (other
than an action by or in the right of the Corporation) by reason
of the fact that he is or was a director, officer, employee or
agent of the Corporation, or is or was serving at the written
request of the Corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust
or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually
<PAGE>
and reasonably incurred by him in connection with such action,
suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best
interests of the Corporation, and, with respect to any criminal
action or proceeding, had no reasonable cause to believe his
conduct was unlawful. The termination of any action, suit or
proceeding by judgment, order, settlement, conviction, or upon a
plea of nolo contendere or its equivalent, shall not, of itself,
create a presumption that the person did not act in good faith
and in a manner which he reasonably believed to be in or not
opposed to the best interests of the Corporation, and, with
respect to any criminal action or proceeding, had reasonable
cause to believe that his conduct was unlawful.
(b) The Corporation shall indemnify any person who
was or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the
right of the Corporation to procure a judgment in its favor by
reason of the fact that he is or was a director, officer,
employee or agent of the Corporation, or is or was serving at
the written request of the Corporation as a director, officer,
employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including
<PAGE>
attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit
if he acted in good faith and in a manner he reasonably believed
to be in or not opposed to the best interests of the Corporation
and except that no indemnification shall be made in respect of
any claim, issue or matter as to which such person shall have
been adjudged to be liable to the Corporation unless and only to
the extent that the court of Chancery of the State of Delaware
or the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, such
person is fairly and reasonably entitled to indemnity for such
expenses which the Court of Chancery of the State of Delaware or
such other court shall deem proper.
(c) To the extent that a director, officer,
employee or agent of the Corporation has been successful on the
merits or otherwise in defense of any action, suit or proceeding
referred to in subparagraphs (a) and (b) of this Paragraph 9.4,
or in defense of any claim, issue or matter therein, he shall be
indemnified against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection therewith.
(d) Any indemnification under subparagraphs (a) and
(b) of this Paragraph 9.4 (unless ordered by a court) shall be
<PAGE>
made by the Corporation only as authorized in the specific case
upon a determination that indemnification of the director,
officer, employee or agent is proper in the circumstances
because he has met the applicable standard of conduct set forth
therein. Such determination shall be made (1) by the Board of
Directors by a majority vote of a quorum consisting of directors
who were not parties to such action, suit or proceeding, or (2)
if such a quorum is not obtainable, or, even if obtainable a
quorum of disinterested directors so directs, by independent
legal counsel in a written opinion, or (3) by the stockholders.
(e) Expenses incurred in defending a civil or
criminal action, suit or proceeding may be paid by the
Corporation in advance of the final disposition of such action,
suit or proceeding upon the receipt of an undertaking by or on
behalf of the director, officer, employee or agent to repay such
amount if it shall ultimately be determined that he is not
entitled to be indemnified by the Corporation as authorized in
this Paragraph 9.4.
(f) The indemnification and advancement of expenses
provided by or granted pursuant to the other subparagraphs of
this Paragraph 9.4 shall not be deemed exclusive of any other
rights to which those seeking indemnification or advancement of
<PAGE>
expenses may be entitled under any statute, by-law, agreement,
vote of stockholders or disinterested directors or otherwise,
both as to action in his official capacity and as to action in
another capacity while holding such office.
(g) By action of its Board of Directors,
notwithstanding any interest of the directors in the action, the
Corporation may purchase and maintain insurance, in such amounts
as of the Board of Directors deems appropriate, on behalf of any
person who is or was a director, officer, employee or agent of
the Corporation, or is or was serving at the written request of
the Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other
enterprise, against any liability asserted against him and
incurred by him in any such capacity, or arising out of his
status as such, whether or not the Corporation would have the
power or would be required to indemnify him against such
liability under the provisions of this Paragraph 9.4 of the
General Corporation Law of the State of Delaware.
(h) The indemnification and advancement of expenses
provided by, or granted pursuant to, this Paragraph shall,
unless otherwise provided when authorized or ratified, continue
as to a person who has ceased to be a director, officer,
employee or agent and shall inure to the benefit of the heirs,
<PAGE>
executors and administrators of such a person.
10. AMENDMENTS
10.1 By the Stockholders. These Bylaws may be amended or
repealed, or new Bylaws may be made and adopted, by a majority
vote of all the stock of the Corporation issued and outstanding
and entitled to vote at any annual or special meeting of the
stockholders, provided that notice of intention to amend shall
have been contained in the notice of meeting.
10.2 By the Directors. These Bylaws, including
amendments adopted by the stockholders, may be amended or
repealed by a majority vote of the whole Board of Directors at
any regular or special meeting of the Board, provided that the
stockholders may from time to time specify particular provisions
of the bylaws which shall not be amended by the Board of
Directors.
<PAGE>
BY-LAWS
OF
VIRGINIA NATURAL GAS, INC./1/
- --------------------
/1/ Annotated version containing all amendments through April 25, 1996.
<PAGE>
TABLE OF CONTENTS
Article
-------
I. Name
II. Stockholders' Meetings
III. Annual Meeting
IV. Special Meetings
V. Notice of Stockholders' Meetings and Voting Lists
VI. Waiver of Notice
VII. Quorum
VIII. Proxy and Voting
IX. Board of Directors
X. Powers of Directors
XI. Executive and Other Committees
XII. Meetings of Directors and Quorum
XIII. Action Without a Meeting
XIV. Officers
XV. Eligibility of Officers
XVI. Chairman of the Board of Directors and President
XVII. Vice Presidents
XVIII. Secretary
XIX. Treasurer
XX. Controller
XXI. Resignation and Removals
XXII. Vacancies
XXIII. Certificates of Stock
XXIV. Transfer of Stock
XXV. Record Date and Closing Transfer Books
XXVI. Loss of Certificates
XXVII. Seal
XXVIII. Books and Records
XXIX. Voting of Stock Held
XXX. Bonds, Debentures and Notes Issued Under an Indenture
XXXI. Amendments
XXXII. Emergency By-laws
XXXIII. Indemnification
XXXIV. Limitation on Liability
ii
<PAGE>
ARTICLE I.
Name.
The name of the Company is Virginia Natural Gas, Inc.
ARTICLE II.
Stockholders' Meetings.
All meetings of the Stockholders shall be held at the principal office of
the Company in Norfolk, Virginia or in Richmond, Virginia, unless some other
place in Virginia is stated in the notice given pursuant to Article V. If the
Chairman of the Board of Directors determines that the holding of any meeting at
the place named in the notice might be hazardous, he may cause it to be held at
some other place deemed by him suitable and convenient, upon arranging notice to
Stockholders who attend at the first place and reasonable opportunity for them
to proceed to the new place.
ARTICLE III.
Annual Meeting.
The Annual Meeting of the Stockholders shall be held on the first Tuesday
in May in each year if not a legal holiday, and if a legal holiday then on the
next succeeding Tuesday not a legal holiday. In the event that such Annual
Meeting is omitted by oversight or otherwise on the date herein provided for,
the Board of Directors shall cause a meeting in lieu thereof to be held as soon
thereafter as conveniently may be, and any business transacted or elections held
at such meeting shall be as valid as if transacted or held at the Annual
Meeting. Such subsequent meeting shall be called in the same manner as provided
for Special Stockholders' Meetings.
ARTICLE IV.
Special Meetings.
Special Meetings of the Stockholders shall be held whenever called by the
Chairman of the Board of Directors, the President, or a majority of the
Directors or whenever one-tenth in interest of the capital stock entitled to
vote shall make written application therefor to the Secretary or an Assistant
Secretary stating the time, place and purpose of the meeting applied for.
ARTICLE V.
Notice of Stockholders' Meetings and Voting Lists.
Written notice stating the place, day and hour of each Stockholders'
Meeting and the purpose or purposes for which the meeting is called shall be
given not less than 10 nor more than 50 days before the date of the meeting, or
such longer period as is specified below, by, or at the direction of, the
Chairman of the Board of Directors, the President or any Vice President or the
Secretary or any Assistant Secretary, by mail, to each Stockholder of record
entitled to vote at the meeting, at his or her registered address and the person
giving such notice shall make affidavit in relation thereto. Such notice shall
be deemed to be given when deposited in the United States mails
<PAGE>
addressed to the Stockholder at his address as it appears on the stock transfer
books, with postage thereon prepaid.
Notice of a Stockholders' Meeting to act on an amendment of the Articles
of Incorporation or on a reduction of stated capital or on a plan of merger,
consolidation or exchange or on a sale, lease or exchange, or a mortgage or
pledge for a consideration other than money, of all, or substantially all, of
the property and assets of the Company shall be given, in the manner provided
above, not less than 25 nor more than 50 days before the date of the meeting.
Any notice of a Stockholders' Meeting to act on an amendment of the Articles of
Incorporation or a plan of merger, consolidation or exchange shall be
accompanied by a copy of the proposed amendment or plan of merger, consolidation
or exchange.
Any meeting at which all Stockholders having voting power in respect of
the business to be transacted thereat are present, either in person or by proxy,
or of which those not present waive notice in writing, whether before or after
the meeting, shall be a legal meeting for the transaction of business
notwithstanding that notice has not been given as hereinbefore provided.
The Secretary or an Assistant Secretary shall make, at least 10 days
before each meeting of Stockholders, a complete list of the Stockholders
entitled to vote at such meeting or any adjournment thereof, with the address of
and number of shares held by each. Such list, for a period of 10 days prior to
such meeting, shall be kept on file at the principal place of business of the
Company. Such list shall also be produced at the time and place of the meeting.
Any person who shall have been a Stockholder of record for at least 6 months
immediately preceding his demand or who shall be the holder of record of at
least 5% of all the outstanding shares of the Company, upon written demand
stating the purpose thereof, shall have the right to inspect such list, in
person or by agent or attorney, for any proper purpose during the whole time of
the meeting or at any reasonable time or times during the period of 10 days
prior to the meeting.
ARTICLE VI.
Waiver of Notice.
Notice of any Stockholders' Meeting may be waived by any Stockholder,
whether before or after the date of the meeting. Any Stockholder who attends a
meeting shall be deemed to have had timely and proper notice of the meeting,
unless he attends for the express purpose of objecting to the transaction of any
business because the meeting is not lawfully called or convened.
ARTICLE VII
Quorum.
At any meeting of the Stockholders, a majority in number of votes of all
the capital stock issued and outstanding having voting power in respect to the
business to be transacted thereat, represented by such Stockholders of record in
person or by proxy, shall constitute a quorum, but a less interest may adjourn
any meeting from time to time and the meeting may be held as adjourned without
further notice. When a quorum is present at any meeting, a plurality vote
represented thereat shall decide any question brought before such meeting,
unless the question is one upon which by
<PAGE>
express provision of law or of the Articles of Incorporation or of these By-laws
a larger or different vote is required, in which case such express provision
shall govern and control the decision of such question and except that in
elections of Directors those receiving the greatest numbers of votes shall be
deemed elected even though not receiving a majority.
ARTICLE VIII.
Proxy and Voting.
Stockholders of record entitled to vote may vote at any meeting held, in
person or by proxy executed in writing by the Stockholder or by his duly
authorized attorney-in-fact, which shall be filed with the Secretary of the
meeting before being voted. A proxy executed by any one Stockholder or his duly
authorized attorney-in-fact, or by any number of Stockholders as joint tenants
or tenants in common of a single tenancy or their duly authorized attorney-in
fact, shall designate only one person as proxy except that proxies executed
pursuant to a general solicitation of proxies may designate three persons as
proxies. Proxies shall entitle the holders thereof to vote at any adjournment
of the meeting, but shall not be valid after the final adjournment thereof. No
proxy shall be valid after 11 months from its date. No authorization of an
attorney-in-fact to execute a proxy shall be valid after 10 years from its date
and such power of attorney shall be produced at any meeting upon request but
such proxies may be accepted as valid in absence of notice to the contrary.
Stockholders entitled to vote may also be represented by an agent personally
present, duly designated by power of attorney, with or without power of
substitutions and such power of attorney, shall be produced at the meeting on
request. Each holder of record of stock of any class shall, as to all matters
in respect of which stock of any class has voting power, be entitled to one vote
for each share of stock of such class standing in his name on the books.
ARTICLE IX.
Board of Directors.
A Board of Directors shall be chosen by ballot at the Annual Meeting of
the Stockholders or at any meeting held in lieu thereof of the Stockholders or
at any meeting held in lieu thereof as hereinbefore provided. The number of
Directors which shall constitute the whole Board shall be fixed by resolution of
a majority of the whole Board, but shall be not less than three nor more than
seven./2/ Except as otherwise provided in Article XXII hereof, each Director
shall serve until the next Annual Meeting of the Stockholders and until his
successor is duly elected and qualified. Directors need not be Stockholders.
ARTICLE X.
Powers of Directors.
- --------------------
/2/ By Resolution of the Stockholders dated April 26, 1991, the By-laws were
amended by the addition of this sentence, deleting the following language: "The
number of Directors shall be five but the number may be increased or decreased
at any time by amendment of these By-laws." By Resolution of the Board of
Directors dated April 26, 1991, the number of Directors constituting the whole
Board was fixed at four.
<PAGE>
The Board of Directors shall have the entire management of the business of
the Company. In the management and control of the property, business and
affairs of the Company, the Board of Directors is hereby vested with all the
power possessed by the Company itself, so far as this delegation of authority is
not inconsistent with the laws of the Commonwealth of Virginia, with the
Articles of Incorporation or with these By-laws. The Board of Directors shall
have power to determine what constitutes net earnings, profits and surplus,
respectively, what amount shall be reserved for working capital and for any
other purposes, and what amount shall be declared as dividends, and such
determination by the Board of Directors shall be final and conclusive.
ARTICLE XI.
Executive and Other Committees.
The Board of Directors may by resolution passed by a majority of the whole
Board designate two or more of its number, and may add thereto any officer of
the Company who is not a Director, to constitute an Executive Committee,
provided that all action of the Committee shall be by the affirmative vote of
both, or a majority, as the case may be, of its members who are Directors. When
the Board of Directors is not in session, the Executive Committee shall have and
may exercise all of the authority of the Board of Directors except to approve an
amendment of the Articles of Incorporation or a plan of merger, consolidation of
exchange, to amend the By-Laws, to elect Directors or officers or to declare
dividends, but if the Executive Committee is created for any designated purpose,
its authority shall be limited to such purpose. The Executive Committee shall
report its action to the Board of Directors. The Executive Committee may make
rules for the holding and conduct of its meetings and the keeping of the records
thereof. Reasonable notice of all meetings of the Executive Committee shall be
given the members thereof unless such notice shall be waived in writing, either
before or after the meeting or unless all members are present at the meeting.
Members of the Executive Committee shall receive such compensation for
attendance at meetings as may be fixed by the Board of Directors.
The Board of Directors likewise may appoint from their number or from the
officers of the Company other Committees from time to time, the number composing
such Committees and the powers conferred upon the same to be determined by vote
of the Board of Directors.
ARTICLE XII.
Meetings of Directors and Quorum.
Regular meetings of the Board of Directors shall be held at such places
within or without the Commonwealth of Virginia and at such times as the Board by
vote may determine from time to time, and if so determined no notice thereof
need be given. Special Meetings of the Board of Directors may be held at any
time or place either within or without the Commonwealth of Virginia, whenever
called by the Chairman of the Board of Directors, the President, any Vice
President, the Secretary, or three or more Directors, notice thereof being given
to each Director by the Secretary or an Assistant Secretary or officer calling
the meeting, or at any time without formal notice
<PAGE>
provided all the Directors are present or those not present have waived notice
thereof. Notice of Special Meetings, stating the time and place thereof, shall
be given by mailing the same to each Director at his residence or business
address at least two days before the meeting, or by delivering the same to him
personally or telephoning or telegraphing the same to him at his residence or
business address at least one day before the meeting, unless, in case of
exigency, the Chairman of the Board of Directors, or the President shall
prescribe a shorter notice to be given personally or by telephoning or
telegraphing each Director at his residence or business address. Such Special
Meetings shall be held at such times and places as the notice thereof or waiver
shall specify.
A waiver of notice signed by the Director entitled to such notice, whether
before or after the date of the meeting, shall be equivalent to the giving of
such notice. A Director who attends a meeting shall be deemed to have had
timely and proper notice of the meeting unless he attends for the express
purpose of objecting to the transaction of any business because the meeting is
not lawfully called or convened.
A majority of the number of Directors fixed at the time by the By-laws
shall constitute a quorum for the transaction of business, but a less number may
adjourn any meeting from time to time and the meeting may be held without
further notice. When a quorum is present at any meeting a majority of the
members present thereat shall decide any question brought before such meeting,
except as otherwise provided by law or by these By-laws.
ARTICLE XIII.
Action Without a Meeting.
Any action required to be taken at a meeting of the Directors, or any
action which may be taken at a meeting of the Directors or of a committee, may
be taken without a meeting if a consent in writing (which may be in any number
of counterparts), setting forth the action so to be taken, shall be signed
before such action by all of the Directors, or all of the members of the
committee, as the case may be. Such consent shall have the same force and
effect as a unanimous vote.
ARTICLE XIV.
Officers.
The officers of the Company shall be a Chairman of the Board of Directors,
a President, one or more Vice Presidents, a Secretary, a Treasurer and a
Controller. The Chairman of the Board of Directors, however, shall not be an
officer if he is not also a full-time employee of the Company. The officers and
the Chairman of the Board of Directors, if not an officer, shall be elected or
appointed by the Board of Directors after its election by the Stockholders, and
a meeting may be held without notice for this purpose immediately after the
Annual Meeting of the Stockholders and at the same place.
The Board of Directors, in its discretion, may appoint one or more
Assistant Secretaries, one or more Assistant Treasurers, one or more Assistant
Controllers, and such other officers or agents as it may deem advisable, and
prescribe their duties.
<PAGE>
ARTICLE XV.
Eligibility of Officers.
The Chairman of the Board of Directors and the President shall be
Directors but need not be Stockholders. The Vice Presidents, Secretary,
Treasurer, Controller and such other officers as may be elected or appointed
may, but need not, be Stockholders or Directors. Any person may hold more than
one office if the duties thereof can be consistently performed by the same
person, provided, however, that neither the Secretary, the Treasurer nor the
Controller shall at the same time hold the office of Chairman of the Board of
Directors or President.
ARTICLE XVI.
Chairman of the Board of Directors and President.
The Chairman of the Board of Directors shall preside at the meetings of
the Board of Directors. He may call meetings of the Board of Directors and of
any committee thereof whenever he deems it necessary. He shall call to order,
and act as chairman of, all meetings of the Stockholders and prescribe rules of
procedure therefor. He shall perform the duties commonly incident to his office
and such other duties as the Board of Directors shall designate from time to
time.
The Board of Directors shall designate the Chief Executive Officer of the
Company.
In the absence of the Chairman of the Board of Directors, the President
shall perform his duties. The President shall perform the duties commonly
incident to his office and such other duties as the Board of Directors shall
designate from time to time. The Chief Executive Officer, the President and
each Vice President shall have authority to sign deeds and contracts and to
delegate such authority in such manner as may be approved by the Chief Executive
Officer or the President.
ARTICLE XVII
Vice Presidents.
Except as expressly limited by vote of the Board of Directors, any Vice
President shall perform the duties and have the powers of the President during
the absence or disability of the President and shall have the power to sign all
certificates of stock, bonds, deeds and contracts. He shall perform such other
duties and have such other powers as the Board of Directors shall designate from
time to time.
ARTICLE XVIII.
Secretary.
The Secretary shall keep accurate minutes of all meetings of the
Stockholders, the Board of Directors and the Executive Committee, respectively,
shall perform the duties commonly incident to his office, and shall perform such
other duties and have such other powers as the Board of Directors shall
designate from time to time. The Secretary shall have power together with the
President or a Vice President, to sign certificates of stock. In his absence an
Assistant Secretary or a Secretary pro tempore shall perform his duties. The
Secretary, any Assistant Secretary and any Secretary pro tempore shall be sworn
to the faithful discharge of their duties.
<PAGE>
ARTICLE XIX.
Treasurer.
The Treasurer, subject to the order of the Board of Directors, shall have
the care and custody of the money, funds, valuable papers and documents of the
Company and shall have and exercise under the supervision of the Board of
Directors, all the powers and duties commonly incident to his office, and shall
give bond in such form and with such sureties as shall be required by the Board
of Directors. He shall deposit all funds of the Company in such bank or banks,
trust company or trust companies or with such firm or firms doing a banking
business, as the Directors shall designate. He may endorse for deposit or
collection all checks, notes, et cetera, payable to the Company or to its order,
may accept drafts on behalf of the Company, and, together with the President or
a Vice President, may sign certificates of stock.
All checks, drafts, notes and other obligations for the payment of money
except bonds, debentures and notes issued under an Indenture shall be signed
either manually or, if and to the extent authorized by the Board of Directors,
through facsimile, by the Treasurer or an Assistant Treasurer or such other
officer or agent as the Board of Directors shall authorize. Checks for the
total amount of any payroll may be drawn in accordance with the foregoing
provisions and deposited in a special fund. Checks upon this fund may be drawn
by such person as the Treasurer shall designate.
Notwithstanding the foregoing provisions the Board of Directors may
approve and authorize the use of a "Transfer Check" in such form as they may
approve, for the purpose of transferring the funds of the Company on deposit in
any bank or trust company to any other bank or trust company for the credit of
the Company and any bank or trust company having funds of the Company on deposit
is authorized to honor and pay, in accordance with such action of the Board of
Directors, such Transfer Checks without any signature thereon except such
printed signature, device or symbol as may be approved by the Board of
Directors, upon receiving a letter to that effect signed by the Treasurer or any
Assistant Treasurer under the corporate seal of the Company attested by the
Secretary or any Assistant Secretary.
ARTICLE XX.
Controller.
The Controller shall keep accurate books of account of the Company's
transactions. He shall at all times be subject to the control of the Board of
Directors.
ARTICLE XXI.
Resignation and Removals.
Any Director or officer may resign at any time by giving written notice to
the Board of Directors, to the Chairman of the Board of Directors, to the
President or to the Secretary, and any member of any committee may resign by
giving written notice either as aforesaid or to the committee of which he is a
member or the chairman thereof. Any such resignation shall take effect at the
time specified therein or, if the time be not specified, upon receipt thereof;
and, unless otherwise specified therein, the acceptance
<PAGE>
of such resignation shall not be necessary to make it effective.
The Stockholders, at any meeting called for the purpose, by vote of a
majority of the stock having voting power issued and outstanding, may remove
from office any Director or other officer elected or appointed by the
Stockholders or Board of Directors and elect or appoint his successor. The
Board of Directors, by vote of not less than a majority of the entire Board, may
remove from office any officer, agent or member or members of any committees
elected or appointed by them.
ARTICLE XXII.
Vacancies.
If the office of any officer or agent, one or more, becomes vacant by
reason of death, disability, resignation, removal, disqualification or
otherwise, the Directors at the time in office, if a quorum, may, by a majority
vote, choose a successor or successors who shall hold office for the unexpired
term. If the office of any Director or member of the Executive Committee shall
become vacant in any manner except by removal, the Directors, at the time in
office, whether or not a quorum, may, by a majority vote, choose a successor or
successors who shall hold office for the unexpired term, but vacancies in the
Board of Directors may be filled for an unexpired term by Stockholders having
voting power at a meeting called for the purpose unless such vacancy shall have
been filled by the Directors. Vacancies resulting from an increase in the
number of Directors, provided the increase shall be no more than two, shall be
filled in the same manner.
ARTICLE XXIII.
Certificates of Stock.
Every Stockholder shall be entitled to a certificate or certificates of
the capital stock in such form as may be prescribed by the Board of Directors,
duly numbered and setting forth the number and kind of shares to which such
Stockholder is entitled. Such certificates shall be signed by the President or
Vice President and by the Treasurer or an Assistant Treasurer or the Secretary
or an Assistant Secretary. The Board of Directors may also appoint one or more
Transfer Agents and/or Registrars for its stock of any class or classes and may
require stock certificates to be countersigned and/or registered by one or more
of such Transfer Agents and/or Registrars. If certificates of capital stock are
signed by a Transfer Agent or by a Registrar, the signatures thereon of the
President or a Vice President and the Treasurer or an Assistant Treasurer or the
Secretary or an Assistant Secretary may be facsimiles, engraved or printed. Any
provisions of these By-laws with reference to the signing of stock certificates
shall include, in cases above permitted, such facsimiles. In case any officer
or officers who shall have signed, or whose facsimile signature of signatures
shall have been used on, any such certificate or certificates shall cease to be
such officer or officers of the Company, whether because of death, resignation
or otherwise, before such certificate or certificates shall have been delivered
by the Company, such certificate or certificates may nevertheless be issued and
delivered as though the person or persons who signed such certificate or
certificates or whose facsimile signature or signatures shall have been used
thereon had not ceased to be such officer or officers of the Company.
<PAGE>
ARTICLE XXIV.
Transfer of Stock.
Shares of stock may be transferred by delivery of the certificate
accompanied either by an assignment in writing on the back of the certificate or
by a written power of attorney to sell, assign and transfer the same on the
books of the Company, signed by the person appearing by the certificate to be
the owner of the shares represented thereby, and shall be transferable on the
books of the Company upon surrender thereof so assigned or endorsed. The person
registered on the books of the Company as the owner of any shares of stock shall
exclusively be entitled as the owner of such shares to receive dividends and to
vote as such owner in respect thereof. It shall be the duty of every
Stockholder to notify the Company of its post office address.
ARTICLE XXV.
Record Date and Closing Transfer Books.
For the purpose of determining the Stockholders entitled to notice of or
to vote at any meeting of Stockholders, or any adjournment thereof, or entitled
to receive payment of any dividend, or in order to make a determination of
Stockholders for any other proper purpose, the Board of Directors may provide
that the stock transfer books shall be closed for a stated period, which shall
not, in any case, exceed 50 days. In lieu of closing the stock transfer books,
the Board of Directors may fix in advance a date as the record date for any such
determination of Stockholders, provided that such date shall not in any case be
more than 50 days prior to the date on which the particular action, requiring
such determination of Stockholders, is to be taken. If the stock transfer books
shall not be closed and no record date shall be fixed for the determination of
Stockholders entitled to notice of or to vote at a meeting of Stockholders, or
for the determination of the Stockholders entitled to receive payment of a
dividend, the date on which notice of the meeting is mailed or the date on which
the resolution of the Board of Directors declaring such dividend is adopted, as
the case may be, shall be the record date for such determination of Stockholders
in such cases. When a determination of Stockholders entitled to vote at any
meeting of Stockholders has been made, such determination shall apply to any
adjournment thereof.
ARTICLE XXVI.
Loss of Certificates.
In case of the loss, mutilation or destruction of a certificate of stock,
a duplicate certificate may be issued upon such terms as the Board of Directors
shall prescribe.
ARTICLE XXVII.
Seal.
The seal of the Company shall consist of a flat-faced circular die, of
which there may be any number of counterparts, with the words and figures
"Virginia Natural Gas, Inc., Norfolk, Va. Incorporated 1983" cut or engraved
thereon. Any securities issued by the Company shall be deemed to be issued
under the seal of the Company if a facsimile of the seal, printed or engraved,
appears thereon.
<PAGE>
ARTICLE XXVIII.
Books and Records.
Unless otherwise expressly required by the laws of Virginia, the books and
records of the Company may be kept outside of the Commonwealth of Virginia at
such places as may be designated from time to time by the Board of Directors.
ARTICLE XXIX.
Voting of Stock Held.
Unless the Board of Directors shall otherwise provide, the Chairman of the
Board of Directors, the President, any Vice President, or the Secretary may from
time to time appoint an attorney or attorneys or agent or agents of the Company,
in the name and on behalf of the Company, to case the votes which the Company
may be entitled to cast as a stockholder or otherwise in any other corporation,
any of whose stock or securities may be held by the Company, at meetings of the
holders of the stock or other securities of such other corporations, or to
consent in writing to any action by any such other corporation, and may instruct
the person or persons so appointed as to the manner of casting such votes or
giving such consent, and may execute or cause to be executed on behalf of the
Company and under its corporate seal, or otherwise, such written proxies,
consents, waivers of other instruments as he may deem necessary or proper in the
premises; or either the Chairman of the Board of Directors, the President or the
Secretary may himself attend any meeting of the holders of stock or other
securities of any such other corporation and thereat vote or exercise any or all
other powers of the Company as the holder of such stock or other securities of
such other corporation.
ARTICLE XXX.
Bonds, Debentures and Notes Issued Under an Indenture.
All bonds, debentures and notes issued under an Indenture shall be signed
by the President or any Vice President or such other officer or agent as the
Board of Directors shall authorize and by the Secretary or any Assistant
Secretary or by the Treasurer or any Assistant Treasurer or such other officer
or agent as the Board of Directors shall authorize. The signature of any
authorized officer of the Company on bonds and debentures authenticated by a
corporate trustee may be made manually or by facsimile.
ARTICLE XXXI.
Amendments.
All By-laws shall be subject to alteration or repeal, and new By-laws may
be made, either by the affirmative vote of the holders of record of a majority
of the outstanding stock entitled to vote in respect thereof given at an Annual
Meeting or at any Special Meeting, provided notice of the proposed alteration or
repeal or of the proposed new By-laws be included in the notice of such meeting,
or by the affirmative vote of a majority of the whole Board of Directors given
at a Regular or Special Meeting of the Board of
<PAGE>
Directors given at a Regular or Special Meeting of the Board of Directors,
provided notice of the proposed alteration or repeal or of the proposed new By-
laws be included in the notice of such meeting or waiver thereof or all of the
Directors at the time in office be present at such meeting. By-laws made or
altered by the Stockholders or by the Board of Directors shall be subject to
alteration or repeal by the Stockholders entitled to vote or by the Board of
Directors, except that the Stockholders may prescribe that any particular By-law
made by them shall not be altered, amended or repealed by the Directors.
ARTICLE XXXII.
Emergency By-laws.
The Emergency By-laws provided in this Article XXXIII shall be operative
during any emergency resulting from an attack on the United States or any
nuclear or atomic disaster, notwithstanding any different provision in the
preceding Articles of the By-laws or in the Articles of Incorporation of the
Company or in the Virginia Stock Corporation Act. To the extent not
inconsistent with these Emergency By-laws, the By-laws provided in the preceding
Articles shall remain in effect during such emergency and upon the termination
of such emergency the Emergency By-laws shall cease to be operative unless and
until another such emergency shall occur.
During any such emergency:
(a) Any meeting of the Board of Directors may be called by an officer of the
Company or by any Director. Notice shall be given by such person or by an
officer of the Company. The notice shall specify the place of the meeting,
which shall be the head office of the Company at the time feasible and otherwise
any other place specified in the notice. The notice shall also specify the time
of the meeting. Notice may be given only to such of the Directors as it may be
feasible to reach at the time and by such means as may be feasible at the time,
including publication or radio. If given by mail, messenger, telephone or
telegraph, the notice shall be addressed to the Director at his residence or
business address or such other place as the person giving the notice shall deem
most suitable. Notice shall be similarly given, to the extent feasible, to the
other persons referred to in (b) below. Notice shall be given at least two days
before the meeting if feasible in the judgment of the person giving the notice
and otherwise on any shorter time he may deem necessary.
(b) At any meeting of the Board of Directors, a quorum shall consist of a
majority of the number of Directors fixed at the time by Article IX of the By-
laws. If the Directors present at any particular meeting shall be fewer than
the number required for such quorum, other persons present, to the number
necessary to make up such quorum, shall be deemed Directors for such particular
meeting as determined by the following provisions and in the following order of
priority:
(i) The Executive Vice President;
(ii) The Senior Vice Presidents in the order of their seniority of first
election to such office, or if two or more shall have been first elected to such
office on the same day, in the order of their seniority in age;
(iii) All other Vice Presidents at the head office of the Company in the
order of their seniority of first election to such office, or if two or more
shall have been first
<PAGE>
elected to such office on the same day, in the order of their seniority in age;
and
(iv) Any other persons that are designated on a list that shall have been
approved by the Board of Directors before the emergency, such persons to be
taken in such order or priority and subject to such conditions as may be
provided in the resolution approving the list.
(c) The Board of Directors, during as well as before any such emergency, may
provide, and from time to time modify, lines of succession in the event that
during such an emergency any or all officers or agents of the Company shall for
any reason be rendered incapable of discharging their duties.
(d) The Board of Directors, during as well as before any such emergency,
may, effective in the emergency, change the head office or designate several
alternative head offices or regional offices, or authorize the officers so to
do.
No officer, Director or employee acting in accordance with these Emergency
By-laws shall be liable except for willful misconduct.
These Emergency By-laws shall be subject to repeal or change by further
action of the Board of Directors or by action of the Stockholders, except that
no such repeal or change shall modify the provisions of the next preceding
paragraph with regard to action or inaction prior to the time of such repeal or
change. Any such amendment of these Emergency By-laws may make any further or
different provision that may be practical and necessary for the circumstances of
the emergency.
ARTICLE XXXIII.
Indemnification./3/
Each person who at any time is, or shall have been a director or officer of
the Company, or serves or has served as a director, officer, fiduciary or other
representative of another company, partnership, joint venture, trust,
association or other enterprise (including any employee benefit plan), where
such service was specifically requested by the Company in accordance with the
last paragraph of this Article below, or the established guidelines for
participation in outside positions (such service hereinafter being referred to
as "Outside Service"), and is threatened to be or is made a party to any
threatened, pending, or completed claim, action, suit or proceeding, whether
civil, criminal, administrative or investigative ("Proceeding"), by reason of
the fact that he is, or was, a director or officer of the Company or a director,
officer, fiduciary or other representative of such other enterprise, shall be
indemnified against expenses (including attorney's fees), judgments, fines and
amounts paid in settlement (Loss) actually and reasonably incurred by him in
connection with any such Proceeding to the full extent permitted under the Stock
Corporation Act of the Commonwealth of Virginia, as the same exists or may
hereafter be amended, (but, in the case of any such amendment, only to the
extent that such amendment permits the Company to provide broader
indemnification rights than said Law permitted the Company to provide prior to
such amendment). The
- --------------------
/3/ By Resolution of the Board of Directors dated August 9, 1990, the By-laws
were amended by adding Article XXXIII. Indemnification.
<PAGE>
Company shall indemnify any person seeking indemnity in connection with any
Proceeding (or part thereof) initiated by such person only if such Proceeding
(or part thereof) initiated by such person was authorized by the Board of
Directors of the Company. With respect to any Loss arising from Outside Service,
the Company shall provide such indemnification only if and to the extent that
(i) such other company, partnership, joint venture, trust, association or
enterprise is not legally permitted or financially able to provide such
indemnification, and (ii) such Loss is not paid pursuant to any insurance policy
other than insurance policy maintained by the Company.
The right to be indemnified pursuant hereto shall include the right to be
paid by the Company for expenses, including attorneys' fees, incurred in
defending any such Proceeding in advance of its final disposition; provided,
however, that the payment of such expenses in advance of the final disposition
of such Proceeding shall be made only upon delivery to the Company of an
undertaking, by or on behalf of such director, officer, fiduciary or other
representatives, in which such director, officer, fiduciary or other
representative agrees to repay all amounts so advanced if it should be
determined ultimately that such director, officer, fiduciary or other
representative is not entitled to be indemnified under applicable law.
The right to be indemnified or to the reimbursement or advancement of
expenses pursuant hereto shall in no way be exclusive of any other rights of
indemnification or advancement to which any such director or officer, fiduciary
or other representative may be entitled, under any by-law, agreement, vote of
Stockholders or disinterested directors or otherwise both as to action in his
official capacity and as to action in another capacity while holding such
office, and shall continue as to a person who has ceased to be a director,
officer, fiduciary or other representative and shall inure to the benefit of the
heirs, executors and administrators of such person.
Any person who is serving or has served as a director, officer or fiduciary
of (i) another corporation of which a majority of the shares entitled to vote in
the election of its directors is held by the Company at the time of such
service, or (ii) any employee benefit plan of the Company or of any corporation
referred to in (i) above, shall be deemed to be doing or have done so at the
request of the Company.
ARTICLE XXXIV.
Limitation on Liability./4/
In connection with any proceeding brought by or in the right of the Company
or brought by or on behalf of shareholders of the Company, no director or
officer of the Company shall be personally liable for monetary damages for any
action taken, or any failure to take any action, unless the director or officer
engaged in willful misconduct or a knowing violation of the criminal law or of
any federal or state securities law, including without limitation, any claim of
unlawful insider trading or manipulation of the market for any security.
To the full extent permitted by law, all directors and officers of the
Company shall
- --------------------
/4/ By resolution of the Board of Directors, dated August 9, 1990, the By-laws
were amended by adding Article XXXIV. Limitation on Liability.
<PAGE>
be afforded the maximum exemption from liability or limitation of liability
permitted by any subsequent enactment, modification or amendment of the Stock
Corporation Act of the Commonwealth of Virginia.
Any repeal, modification or adoption of any provision inconsistent with
either or both of the foregoing paragraphs shall be prospective only, and
neither the repeal or modification of either or both of the foregoing paragraphs
shall adversely affect any limitation on the personal liability of a director or
officer of the Company existing at the time of such repeal or modification or
the adoption of such inconsistent provision.
[END]
<PAGE>
EXHIBIT C.(a)
INDENTURES OF CONSOLIDATED NATURAL GAS COMPANY
----------------------------------------------
The Indentures, Supplemental Indentures and Securities Resolutions between
Consolidated Natural Gas Company and its debenture Trustees, as listed below,
are incorporated by reference to material previously filed with the Commission
as indicated:
Manufacturers Hanover Trust Company (now The Chase Manhattan Bank)
Indenture dated as of May 1, 1971 (Exhibit (5) to Certificate of
Notification at Commission File No. 70-5012)
Eleventh Supplemental Indenture thereto dated as of December 1, 1986
(Exhibit (5) to Certificate of Notification at Commission File
No. 70-7079)
Thirteenth Supplemental Indenture thereto dated as of February 1, 1989
(Exhibit (5) to Certificate of Notification at Commission File
No. 70-7336)
Fourteenth Supplemental Indenture thereto dated as of June 1, 1989
(Exhibit (5) to Certificate of Notification at Commission File
No. 70-7336)
Fifteenth Supplemental Indenture thereto dated as of October 1, 1989
(Exhibit (5) to Certificate of Notification at Commission File
No. 70-7651)
Sixteenth Supplemental Indenture thereto dated as of October 1, 1992
(Exhibit (4) to Certificate of Notification at Commission File
No. 70-7651)
Seventeenth Supplemental Indenture thereto dated as of August 1, 1993
(Exhibit (4) to Certificate of Notification at Commission File
No. 70-8167)
Eighteenth Supplemental Indenture thereto dated as of December 1, 1993
(Exhibit (4) to Certificate of Notification at Commission File
No. 70-8167)
United States Trust Company of New York
Indenture dated as of April 1, 1995 (Exhibit (4) to Certificate of
Notification at Commission File No. 70-8107)
Securities Resolution No. 1 effective as of April 12, 1995 (Exhibit 2 to
Form 8-A filed April 21, 1995 under file No. 1-3196 and relating to the
7 3/8% Debentures Due April 1, 2005)
Securities Resolution No. 2 effective as of October 16, 1996 (Exhibit 2 to
Form 8-A filed October 18, 1996 under file No. 1-3196 and relating to the
6 7/8% Debentures Due October 15, 2026)
Securities Resolution No. 3 effective as of December 10, 1996 (Exhibit 2 to
Form 8-A filed December 12, 1996 under file No. 1-3196 and relating to the
6 5/8% Debentures Due December 1, 2008)
The Chase Manhattan Bank (National Association)
Indenture dated as of December 15, 1990 (Exhibit (4A)(1) to
Consolidated Natural Gas Company's Form 10-K for the year ended
December 31, 1990, File No. 1-3196)
<PAGE>
EXHIBIT D.
First Amendment to Agreement Pursuant to Rule 45 (c)
----------------------------------------------------
Under the Public Utility Holding Company Act of 1935
----------------------------------------------------
WHEREAS, Consolidated Natural Gas Company (hereinafter referred to as "Parent"),
a corporation organized and existing under the laws of the State of Delaware,
and its wholly owned subsidiary corporations whose names and respective states
of incorporation are listed below, i.e.:
Name of Subsidiary State of Incorporation
------------------ ----------------------
Consolidated Natural Gas Service Co., Inc. Delaware
CNG Transmission Corporation Delaware
CNG Iroquois, Inc., a wholly-owned subsidiary Delaware
of CNG Transmission Corporation
The East Ohio Gas Company Ohio
The Peoples Natural Gas Company Pennsylvania
Virginia Natural Gas, Inc. Virginia
Hope Gas, Inc. West Virginia
West Ohio Gas Company Ohio
CNG Producing Company Delaware
CNG Pipeline Company, a wholly-owned subsidiary Texas
of CNG Producing Company
CNG Energy Services Corporation Delaware
CNG Power Company Delaware
CNG Storage Service Company Delaware
CNG Technologies, Inc., a wholly-owned subsidiary Delaware
of CNG Power Company
<PAGE>
Name of Subsidiary State of Incorporation
------------------ ----------------------
Granite Road Cogen, Inc., a wholly-owned subsidiary Texas
of CNG Power Company
CNG Market Center Services, Inc., a wholly-owned Delaware
subsidiary of CNG Power Company
CNG Bear Mountain, Inc., a wholly-owned subsidiary Delaware
of CNG Power Company
CNG Power Services Corporation Delaware
CNG Lakewood, Inc., a wholly-owned subsidiary Delaware
of CNG Power Services Corporation
Consolidated System LNG Company Delaware
CNG Research Company Delaware
CNG Coal Company Delaware
CNG Financial Services, Inc. Delaware
have entered into an Agreement dated December 31, 1994 for the allocation of
current federal income taxes; and
WHEREAS, Parent and its subsidiaries (hereinafter collectively referred to
as the "Companies") are desirous of amending the agreement for the purpose of
adding additional subsidiaries that Parent or one of its Subsidiaries has
acquired and giving recognition to the merger of one of the Subsidiaries into
another Subsidiary, and reflecting ownership changes of certain Subsidiaries
within the consolidated group.
NOW, THEREFORE, the Companies, for mutual benefit and valuable
considerations, do hereby covenant and agree with one another that, pursuant to
paragraph IV of the Agreement, it shall be amended as follows:
First: The additional wholly-owned Subsidiaries of the Parent whose
names and respective states of incorporation are listed below
will become parties to the Agreement, i.e.:
<PAGE>
Name of Subsidiary State of Incorporation
------------------ ----------------------
CNG International Corporation Delaware
CNG Telecom, Inc. Delaware
Second: CNG Main Pass Gas Gathering Corporation and CNG Oil Gathering
Corporation, both incorporated in the State of Delaware on July
21, 1995, CNG Products and Services, Inc., incorporated in the
state of Delaware on August 28, 1995, and CNG Retail Services
Corporation, incorporated in the state of Delaware on January 30,
1997, all wholly-owned subsidiaries of CNG Energy Services
Corporation, a party to the Agreement, and CNG Kauai, Inc.,
incorporated in Delaware on March 6, 1997, a wholly-owned
subsidiary of CNG Power Company, a party to the Agreement, will
also become parties to the Agreement.
Third: As a result of the merger of The East Ohio Gas Company and West
Ohio Gas Company, effective January 1, 1997, The East Ohio Gas
Company is the successor in interest and will succeed to all of
the rights, benefits and obligations of West Ohio Gas Company
under the Agreement.
Fourth: CNG Power Company and CNG Storage Service Company, both of which
were formerly wholly-owned subsidiaries of the Parent, became
wholly-owned subsidiaries of CNG Energy Services Corporation on
May 1, 1996.
Fifth: CNG Technologies, Inc., formerly a wholly-owned subsidiary of CNG
Power Company, became a wholly-owned subsidiary of CNG Products
and Services, Inc. effective August 30, 1996.
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this agreement to
be executed in its name and on its behalf by one of its officers duly
authorized, and its corporate seal to be affixed hereto by its Secretary or one
of its Assistant Secretaries as of the 24th day of April, 1997 to be effective
(i) as of December 31, 1996 as to Paragraph First above, (ii) as of the dates of
incorporation of the corporations named therein as to the Paragraph Second
above, and (iii) as of January 1, 1997 as to Paragraph Third above.
ATTEST: Consolidated Natural Gas Company
/s/ Secretary By: /s/ Treasurer
- -------------------------------- ------------------------------------
Secretary Treasurer
ATTEST: Consolidated Natural Gas Service Company
/s/ Secretary By: /s/ Treasurer
- -------------------------------- ------------------------------------
Secretary Treasurer
ATTEST: CNG Research Company
/s/ Assistant Secretary By: /s/ Treasurer
- -------------------------------- ------------------------------------
Assistant Secretary Treasurer
ATTEST: CNG Financial Services, Inc.
/s/ Secretary By: /s/ Treasurer
- -------------------------------- ------------------------------------
Secretary Treasurer
<PAGE>
ATTEST: The Peoples Natural Gas Company
/s/ Secretary and General Counsel By: /s/ President
- --------------------------------- ------------------------------------
Secretary and General Counsel President
<PAGE>
ATTEST: CNG International Corporation
/s/ Secretary By: /s/ Treasurer
- --------------------------------- ------------------------------------
Secretary Treasurer
ATTEST: CNG Telecom, Inc.
/s/ Secretary By: /s/ Treasurer
- --------------------------------- ------------------------------------
Secretary Treasurer
<PAGE>
ATTEST: CNG Transmission Corporation
/s/ Secretary By: /s/ Vice President and Treasurer
- --------------------------------- ------------------------------------
Secretary Vice President and Treasurer
ATTEST: CNG Iroquois, Inc.
/s/ Assistant Secretary By: /s/ Vice President and Treasurer
- --------------------------------- ------------------------------------
Assistant Secretary Vice President and Treasurer
ATTEST: Hope Gas, Inc.
/s/ Secretary By: /s/ Vice President
- --------------------------------- ------------------------------------
Secretary Vice President
<PAGE>
ATTEST: Consolidated System LNG Company
/s/ Assistant Secretary By: /s/ Secretary
- --------------------------------- ------------------------------------
Assistant Secretary Secretary
<PAGE>
ATTEST: The East Ohio Gas Company (Also
signing as Successor in interest for West
Ohio Gas Company)
/s/ Assistant Secretary By:/s/ Sr. Vice President, Secretary, and Treasurer
- ------------------------- --------------------------------------------------
Assistant Secretary Senior Vice President, Secretary, and Treasurer
<PAGE>
ATTEST: Virginia Natural Gas, Inc.
/s/ Secretary By: /s/ Treasurer
- --------------------------------- ------------------------------------
Secretary Treasurer
<PAGE>
ATTEST: CNG Producing Company
/s/ Assistant Secretary By: /s/ Senior Vice President, Chief
- --------------------------------- ------------------------------------
Assistant Secretary Financial Officer and Treasurer
------------------------------------
Senior Vice President, Chief
Financial Officer and Treasurer
ATTEST: CNG Pipeline Company
/s/ Secretary By: /s/ Vice President and Treasurer
- --------------------------------- ------------------------------------
Secretary Vice President and Treasurer
ATTEST: CNG Coal Company
/s/ Secretary By: /s/ Vice President and Treasurer
- --------------------------------- ------------------------------------
Secretary Vice President and Treasurer
<PAGE>
ATTEST: CNG Power Company
/s/ Assistant Secretary By: /s/ Assistant Treasurer
- --------------------------------- ------------------------------------
Assistant Secretary Assistant Treasurer
ATTEST: CNG Technologies, Inc.
/s/ Assistant Secretary By: /s/ Treasurer
- --------------------------------- ------------------------------------
Assistant Secretary Treasurer
ATTEST: Granite Road Cogen, Inc.
/s/ Assistant Secretary By: /s/ Treasurer
- --------------------------------- ------------------------------------
Assistant Secretary Treasurer
ATTEST: CNG Market Center Services, Inc.
/s/ Secretary By: /s/ Treasurer
- --------------------------------- ------------------------------------
Secretary Treasurer
ATTEST: CNG Bear Mountain, Inc.
/s/ Assistant Secretary By: /s/ Assistant Treasurer
- --------------------------------- ------------------------------------
Assistant Secretary Assistant Treasurer
ATTEST: CNG Energy Services Corporation
/s/ Assistant Secretary By: /s/ Assistant Treasurer
- --------------------------------- ------------------------------------
Assistant Secretary Assistant Treasurer
ATTEST: CNG Power Services Corporation
/s/ Assistant Secretary By: /s/ Assistant Treasurer
- --------------------------------- ------------------------------------
Assistant Secretary Assistant Treasurer
<PAGE>
ATTEST: CNG Lakewood, Inc.
/s/ Assistant Secretary By: /s/ Assistant Treasurer
- --------------------------------- ------------------------------------
Assistant Secretary Assistant Treasurer
ATTEST: CNG Storage Service Company
/s/ Assistant Secretary By: /s/ Assistant Treasurer
- --------------------------------- ------------------------------------
Assistant Secretary Assistant Treasurer
ATTEST: CNG Products & Services, Inc.
/s/ Secretary By: /s/ Treasurer
- --------------------------------- ------------------------------------
Secretary Treasurer
ATTEST: CNG Retail Services Corporation
/s/ Assistant Secretary By: /s/ Treasurer
- --------------------------------- ------------------------------------
Assistant Secretary Treasurer
ATTEST: CNG Main Pass Gas Gathering Corporation
/s/ Assistant Secretary By: /s/ Assistant Treasurer
- --------------------------------- ------------------------------------
Assistant Secretary Assistant Treasurer
ATTEST: CNG Oil Gathering Corporation
/s/ Assistant Secretary By: /s/ Assistant Treasurer
- --------------------------------- ------------------------------------
Assistant Secretary Assistant Treasurer
ATTEST: CNG Kauai, Inc.
/s/ Assistant Secretary By: /s/ Assistant Treasurer
- --------------------------------- ------------------------------------
Assistant Secretary Assistant Treasurer
<PAGE>
EXHIBIT E
1996
Consolidated
Financial Statements
[LOGO OF IROQUOIS GAS TRANSMISSION SYSTEM]
------------------------------------
Iroquois Pipeline Operating Company,
--------------------------- Operator
<PAGE>
Table of Contents
Five Years of Growth and Performance...... 1
Management's Discussion
and Analysis........................... 4
Management Report......................... 6
Report of Independent Accountants......... 7
Consolidated Balance Sheets............... 8
Consolidated Statements of Income......... 10
Consolidated Statements of Cash Flows..... 11
Statement of Changes in
Partners' Equity....................... 12
Notes to Consolidated
Financial Statements................... 13
Company Profile
Iroquois Gas Transmission System, L.P. ("Iroquois" or "Company") is an
interstate pipeline extending 375 miles from the U.S. - Canadian border at
Waddington, NY through the state of Connecticut to Long Island, NY. The
Company is regulated by the Federal Energy Regulatory Commission ("FERC").
Since commencement of service in December 1991, the Company has added a short
lateral line, several meter stations and two compressor stations at Wright, NY
and Croghan, NY. In July 1996, the Company made an application to FERC for
authorization to build a third compressor station at Athens, NY.
The Company provides service to local gas distribution companies,
electric utilities and electric power generators, directly or indirectly,
through exchanges and interconnecting pipelines, throughout the northeastern
U.S.
Iroquois is a Delaware limited partnership owned by 10 U.S. and Canadian
energy companies with the Company's headquarters located in Shelton, CT.
Corporate Mission
To provide natural gas transportation into the Northeast in a safe,
environmentally sound and cost effective manner, while maintaining the highest
level of service to our customers.
Environmental Credo
We are committed to preserving our environment by seeking ways to minimize
environmental intrusions and to maximize protection of our natural resources.
Cover:
Iroquois Pipeline right-of-way in Schoharie
County, New York, 1996.
At Right:
Open spaces supported by Iroquois' land
preservation programs.
[CHART SHOWING NET INCOME]
[CHART SHOWING REVENUES]
[CHART SHOWING VOLUMES TRANSPORTED (BCF)]
* Excluding effects of Federal investigations
<PAGE>
Five Years of Growth
On January 28, 1997, Iroquois celebrated its fifth anniversary as an
operational natural gas pipeline. In 1992, the goal was to become the
preeminent transporter of natural gas in the Northeast. To become the "pipeline
of choice" in an increasingly competitive environment, delivering energy
solutions on-time and within customer expectations was critical. Over the past
five years, the Company proved that it is capable of the challenge and has
strengthened even further its commitment to provide the region with critical
supplies of natural gas. Through a combination of expanding pipeline capacity
by commissioning two compressor stations, lowering rates 12.2% since inception,
and achieving an exceptional customer service record, deliveries have more than
doubled and revenues have increased by 70%.
Expansion
The strong demand for natural gas in the Northeast, which led to the
formation of the Iroquois Gas Transmission System, was reconfirmed shortly
after the pipeline began operation. In 1992, Iroquois had 581.1 million cubic
feet per day (MMcf/d) of long-term, firm service volumes under contract. In May
1992, the Federal Energy Regulatory Commission ("FERC") approved construction
of the Company's first compressor station located in Wright, New York. This
station went into service in November 1993 and by year-end, the long-term firm
service volumes under contract were increased to 641.1 MMcf/d. A second
compressor station, in Croghan, New York, was commissioned in December 1994,
expanding firm service to a record 750.1 MMcf/d. At December 31, 1996, Iroquois
had 876.6 MMcf/d of multi-year firm service contracts.
Iroquois is committed to expanding its capability to provide a quality
service to its customers. In July 1996, the Company filed an application with
the FERC to construct a third compressor station in Athens, New York, which
will provide an additional 30 MMcf/d of firm service transportation. Once
approved by the FERC, the station is scheduled for construction during the
summer and fall of 1997, with an in-service target of November 1997.
Competitive Rates
An important factor in being the "pipeline of choice" in this competitive
environment is maintaining a flexible, attractive rate structure. In November
1996, Iroquois filed its second rate case with the FERC. On December 31, 1996,
the FERC authorized a reduction in rates of 5.7%. Combined
1
<PAGE>
with the rate reduction which became effective in early 1995, rates have fallen
by 12.2% since inception, making Iroquois an attractive choice for shippers.
The Company recognizes the importance of competitive prices and has proven that
it possess the dedication and expertise to efficiently and cost-effectively
provide service to its customers.
Exceptional Customer Service
Iroquois takes pride in the relationships that have been built with its
customers over the past five years, and is committed to providing them with
creative solutions to their energy requirements. The Company continues to
facilitate focus group meetings with customers and other interested parties.
This forum provides for meaningful feedback and permits the identification and
resolution of important customer service issues. The annual Marketing and
Operations meeting continues to be an increasingly popular and well-attended
event, drawing customers from all sectors of the marketplace.
Through the Company's extensive marketing and customer service efforts,
Iroquois recognized a need to provide a balancing service and, in 1996,
introduced the Park and Loan service ("PAL"). The PAL service enables a shipper
to increase operational efficiencies by borrowing or leaving gas on the
Iroquois system as operating conditions permit. This service was received with
great enthusiasm and exceeded expectations for use.
Five Years of Strong Performance
Operating income has more than doubled in the five years since operations
commenced. Net income has tripled during the same time frame, while rates have
decreased. There has also been a steady decrease in operating expenses as a
percentage of revenues. This reflects the Company's continued focus to provide
a competitive service to its customers which increases revenues, while
controlling operating costs and providing a reasonable return on equity to the
Company's investors.
2
<PAGE>
Looking Ahead
Deregulation of the electric and gas industries should present significant
opportunities for the Company's continued growth over the next five years.
Iroquois is in a unique position to take advantage of these opportunities due
to our strategic location to the Northeast's electric grid, our high pressure
operations, competitive rate structure and expansion capabilities. In this
regard, in 1992, only 25% of our long-term firm customers were either
electric-only utilities, independent power producers or gas marketers. By the
end of 1996, that number increased to 40%. We expect this trend to continue and
are aggressively seeking business development opportunities to serve new
natural gas end users and expand our customer base.
Additional expansion efforts include the identification of economic
development zones within a 5-to-10 mile radius of our pipeline and working with
the state and regional economic development agencies, particularly in upstate
New York. This initiative has the dual purpose of increasing the efficiency of
the northern sections of the Iroquois mainline, while attracting industries
with natural gas applications to communities in the area of the pipeline.
As we look forward to the next five years, we know that we have the
talent and commitment to address the significant challenges facing the energy
industry and will turn these challenges into opportunities. Opportunities to
expand customer base by being poised to tap the deregulated electric and gas
utility markets. Opportunities to present competitive rate structures to our
customers and opportunities to listen and respond to their energy needs.
3
<PAGE>
MD&A
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Overview
Iroquois filed its first rate case in December 1993 and its second in
November 1996, in accordance with the requirements of its original Federal
Energy Regulatory Commission ("FERC" or "Commission") certificate. An
uncontested rate settlement for the first case was approved by the Commission
on June 19, 1995, which settled all issues except for the recovery of certain
legal costs incurred by the Company in its defense of the investigation,
discussed in Note 6 to the financial statements. Those rates, which were
effective February 1, 1995, reflect a 6.5% reduction from previously approved
rates. On December 31, 1996, the FERC authorized an additional reduction of
5.7% pending final resolution of the second rate case (refer to Note 6 to the
financial statements).
Results of Operations
Operating Revenues
<TABLE>
<CAPTION>
- -------------------------------------------------------------------
Volumes Increase/
(Million Dekatherms) 1996 1995 (Decrease)
<S> <C> <C> <C>
Long-term firm service 296.5 287.2 9.3
Short-term firm service 4.3 12.8 (8.5)
----- ----- ----
Total firm service 300.8 300.0 0.8
Interruptible 17.6 17.9 (0.3)
----- ----- ----
Total Transportation Service 318.4 317.9 0.5
===== ===== ====
- -------------------------------------------------------------------
</TABLE>
Operating revenues in 1996, net of customer revenue sharing of $1.1 million,
reached $154.4 million, an increase of 2.2% over the 1995 level of $151.1
million. Although total volumes transported in 1996 remained relatively at the
same level as the prior year, there is a significant shift of services from
interruptible and short-term to long-term firm services. The Park and Loan
service ("PAL") introduced in 1996, which generated a modest $0.3 million in
revenues, is reflective of Iroquois' commitment to provide new and valuable
services to its customers.
Operation Expenses
Operations expense for 1996, at $22.5 million, is down 8% or $2.0 million
from the prior year as a result of efficiency gains and cost control measures.
The operations expense for 1996 and 1995 includes provisions of $1.5 million
and $2.0 million, respectively. These expenses are for the potential
disallowance of legal costs, for rate making purposes, incurred by the Company
in its defense of
4
<PAGE>
the investigation discussed in Note 6 to the financial statements. In December
1996, the Commission ordered the Company to remove these costs from its rates.
However, the Company has filed for a rehearing.
Depreciation
The change in the depreciation rate from 5% to 4% for transmission plant,
effective February 1, 1995, in accordance with the rate settlement, accounted
for the decrease of $0.2 million in depreciation expense.
Other Income & (Expenses)
Interest income has decreased $0.5 million in 1996 compared to the $2.7
million earned in 1995, due primarily to the payout of the large cash balances
which were maintained through the prior year. An additional provision of $0.9
million was made in 1996 for potential liabilities relating to the federal
investigations discussed in Note 6 to the financial statements. A similar
provision of $24.7 million had been made in 1995.
Liquidity and Capital Resources
Capital expenditures of $6.4 million were incurred in 1996 for minor capital
projects. This activity was down $1.5 million from the 1995 capital
expenditure level of $7.9 million due to expenditures related to the Croghan
Compressor Station which was placed in service in December 1994.
Cash flow (defined as net income adjusted for non-cash items such as
depreciation and deferred income taxes) represents the cash generated from
operations available for capital expenditures, Partner distributions, and other
operational needs. Net cash provided by operating activities decreased $9.7
million in 1996 compared to the prior year. This reduction is due to the
impact of the payments made for settlement of the federal investigations, which
were partially offset by increased revenues, and absence of rate refunds which
were made in 1995.
Iroquois' working capital needs are supported by a $10.0 million line of
credit provided by a major financial institution. There was no draw against
this facility in 1996. During 1995, $13.4 million of new debt was incurred to
finance the Croghan Compressor Station. Long-term debt outstanding at the end
of 1996 was $423.8 million, reduced from the $454.5 million outstanding at the
end of 1995, due to the repayment of $30.7 million made pursuant to the debt
agreement repayment schedule. In 1996, no new debt was incurred.
5
<PAGE>
Management Report
The consolidated financial statements of Iroquois Gas Transmission System,
L.P., and other sections of this Annual Report were prepared by the management
of its operator, Iroquois Pipeline Operating Company, which is responsible for
their integrity and objectivity. These consolidated financial statements were
prepared in accordance with generally accepted accounting principles and were
audited by Coopers & Lybrand L.L.P. Management considered materiality when
making significant estimates and judgments.
The Company maintains a system of internal controls over financial
reporting, which is designed to provide reasonable assurance to the Company's
management and the Management Committee of Iroquois, which is comprised
entirely of Partner representatives, regarding the preparation of reliable
published financial statements. The system contains self-monitoring
mechanisms, and actions are taken to correct deficiencies as they are
identified. Even an effective internal control system, no matter how well
designed, has inherent limitations, including the possibility of the
circumvention or overriding of controls, and such systems can provide only
reasonable assurance with respect to financial statement preparation. Further,
because of changes in conditions, internal control system effectiveness may
vary over time.
Through established programs, the Company regularly emphasizes to its
management employees their internal control responsibilities and policies
prohibiting conflicts of interest. The Audit Committee of Iroquois is
comprised entirely of Partner representatives. This Committee meets
periodically with management, the internal auditor and the independent auditors
to review the activities of each and to discuss audit matters, financial
reporting and the adequacy of internal controls.
Management believes that its system of internal accounting controls and
control environment provide reasonable assurance that its assets are
safeguarded from loss or unauthorized use and that its financial records, which
are the basis for the preparation of all financial statements, are reliable.
/s/ Craig R. Frew
Craig R. Frew
President
Iroquois Pipeline Operating Company
/s/ Paul Bailey
Paul Bailey
Vice President, Finance and Administration
Iroquois Pipeline Operating Company
6
<PAGE>
Report of Independent Accountants
To the Partners of
Iroquois Gas Transmission System, L.P.:
We have audited the accompanying consolidated balance sheets of Iroquois Gas
Transmission System, L.P. as of December 31, 1996 and 1995, and the related
consolidated statements of income, changes in partners' equity and cash flows
for the years then ended. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Iroquois Gas
Transmission System, L.P. as of December 31, 1996 and 1995, and the results of
their operations and their cash flows for the years then ended in conformity
with generally accepted accounting principles.
/s/ Coopers & Lybrand L.L.P.
Hartford, Connecticut
February 12, 1997
7
<PAGE>
Iroquois Gas Transmission System, L.P.
Consolidated Balance Sheets
<TABLE>
<CAPTION>
Assets (Thousands of Dollars)
- --------------------------------------------------------------------------------
At December 31 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C>
Current Assets:
Cash and temporary cash investments $38,661 $48,483
Accounts receivable--trade 9,350 7,815
Accounts receivable--affiliates 5,796 6,847
Other current assets 2,512 2,280
---------- ----------
Total Current Assets 56,319 65,425
---------- ----------
Natural Gas Transmission Plant:
Natural gas plant in service 753,704 752,438
Construction work in progress 4,438 655
---------- ----------
758,142 753,093
Accumulated depreciation and amortization (164,949) (135,239)
---------- ----------
Net Natural Gas Transmission Plant 593,193 617,854
---------- ----------
Deferred Charges:
Regulatory assets--income tax related 15,050 15,801
Regulatory assets--other 2,790 2,978
Other deferred charges 328 497
---------- ----------
Total Deferred Charges 18,168 19,276
---------- ----------
Total Assets $667,680 $702,555
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
8
<PAGE>
Iroquois Gas Transmission System, L.P.
Consolidated Balance Sheets
<TABLE>
<CAPTION>
Liabilities and Partners' Equity (Thousands of Dollars)
- --------------------------------------------------------------------------------
At December 31 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C>
Current Liabilities:
Accounts payable $5,092 $4,474
Accrued interest 6,423 6,864
Current portion of long-term debt 29,705 30,669
Other current liabilities 17,155 16,471
Accrual for federal investigations (Note 6) 1,500 24,700
---------- ----------
Total Current Liabilities 59,875 83,178
---------- ----------
Long-Term Debt 394,112 423,816
Other NonCurrent Liabilities 272 272
---------- ----------
394,384 424,088
---------- ----------
Amounts Equivalent to Deferred Income Taxes:
Generated by Partnership 45,196 36,184
Payable by Partners (30,146) (20,383)
---------- ----------
Total Amounts Equivalent to
Deferred Income Taxes 15,050 15,801
---------- ----------
Commitments and Contingencies (Note 6)
Total Liabilities 469,309 523,067
---------- ----------
Partners' Equity 198,371 179,488
---------- ----------
Total Liabilities and Partners' Equity $667,680 $702,555
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
9
<PAGE>
Iroquois Gas Transmission System, L.P.
Consolidated Statements of Income
<TABLE>
<CAPTION>
(Thousands of Dollars)
- --------------------------------------------------------------------------------
For the Years Ended December 31 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C>
Net Operating Revenues $154,379 $151,129
Operating Expenses:
Operations 22,538 24,534
Depreciation and amortization 31,243 31,416
Taxes other than income taxes 9,607 9,697
---------- ----------
Total Operating Expenses 63,388 65,647
---------- ----------
Operating Income 90,991 85,482
---------- ----------
Other Income & (Expenses):
Interest income 2,194 2,652
Allowance for equity funds used during
construction 35 24
Other, net (205) (472)
Provision for federal investigations (Note 6) (893) (24,700)
---------- ----------
1,131 (22,496)
---------- ----------
Income Before Interest Charges and Taxes 92,122 62,986
Interest Expense:
Interest expense 37,922 40,492
Allowance for borrowed funds used during
construction (67) (45)
---------- ----------
Net Interest Expense 37,855 40,447
---------- ----------
Income Before Taxes 54,267 22,539
Provision for Taxes 22,163 16,392
---------- ----------
Net Income $32,104 $6,147
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
10
<PAGE>
Iroquois Gas Transmission System, L.P.
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
(Thousands of Dollars)
- ----------------------------------------------------------------------------------------------------
For the Years Ended December 31 1996 1995
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net Income $32,104 $6,147
Adjustments to reconcile net income to net cash provided by
(used in) operating activities:
Depreciation and amortization 31,243 31,416
Allowance for equity funds used during construction (35) (24)
Decrease in deferred regulatory asset-income tax related 751 690
Decrease in amounts equivalent to deferred income taxes (751) (690)
Income and other taxes payable by Partners 22,163 16,392
Decrease in other deferred charges 169 72
Decrease in revenues subject to refund -- (4,785)
Changes in working capital:
(Increase) decrease in accounts receivable (484) 415
Increase in other assets (231) (377)
Increase (decrease) in accounts payable 618 (1,581)
(Decrease) increase in accrued interest (441) 42
(Decrease) increase in accrual for federal
investigations (23,200) 24,700
Increase (decrease) in other liabilities 684 (133)
---------- ----------
Net Cash Provided by Operating Activities 62,590 72,284
---------- ----------
Cash Flows from Investing Activities:
Capital expenditures (6,359) (7,893)
---------- ----------
Net Cash Used for Investing Activities (6,359) (7,893)
---------- ----------
Cash Flows from Financing Activities:
Partner contributions 4,616 --
Partner distributions (40,000) (22,000)
Repayments of long-term debt (30,669) (32,089)
Proceeds from long-term debt -- 13,358
Repayments of notes payable -- (4,000)
---------- ----------
Net Cash Used for Financing Activities (66,053) (44,731)
---------- ----------
Net Increase/(Decrease) in Cash and Temporary Cash Investments (9,822) 19,660
Cash and Temporary Cash Investments at Beginning of Year 48,483 28,823
---------- ----------
Cash and Temporary Cash Investments at End of Year $ 38,661 $ 48,483
========== ==========
Supplemental disclosure of cash flow information:
Cash paid for interest $38,364 $40,676
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
11
<PAGE>
Iroquois Gas Transmission System, L.P.
Statement of Changes in Partners' Equity
<TABLE>
<CAPTION>
(Thousands of Dollars)
- --------------------------------------------------------------------------------
<S> <C>
Partners' Equity,
Balance at December 31, 1994 $178,949
Net Income 1995 6,147
Taxes payable by Partners:
Federal income taxes 14,221
State income taxes 752
Other state taxes 1,419
-----------
16,392
Equity distributions to Partners (22,000)
-----------
Partners' Equity
Balance at December 31, 1995 179,488
Net Income 1996 32,104
Contributions by Partners 4,616
Taxes payable by Partners:
Federal income taxes 18,598
State income taxes 2,259
Other state taxes 1,306
-----------
22,163
Equity distributions to Partners (40,000)
-----------
Partners' Equity,
Balance at December 31, 1996 $198,371
===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
12
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1 Description
of Partnership:
Iroquois Gas Transmission System, L.P., ("Iroquois" or "Company") is a
Delaware limited partnership formed for the purpose of constructing, owning and
operating a natural gas transmission pipeline from the Canada-United States
border near Waddington, NY, to South Commack, Long Island, NY. In accordance
with the limited partnership agreement, the Partnership shall continue in
existence until October 31, 2089, and from year to year thereafter, until the
Partners elect to dissolve the Partnership and terminate the limited
partnership agreement.
The partners consist of TransCanada Iroquois Ltd. (29.0%), North East
Transmission Co. (19.4%), CNG Iroquois, Inc. (16.0%), ANR Iroquois, Inc.
(9.4%), ANR New England Pipeline Co. (6.6%), Alenco Iroquois Pipeline, Inc.
(6.0%), JMC-Iroquois, Inc. (4.93%), TEN Transmission Company (4.87%), NJNR
Pipeline Company (2.8%), and LILCO Energy Systems, Inc. (1.0%). In April 1996,
Housatonic Corporation and the New York Power Authority sold their partnership
interest to North East Transmission Co., TEN Transmission Company and
JMC-Iroquois, Inc., whose interests were increased by 8%, 2.47% and 2.13%,
respectively. In July 1996, ANR Iroquois, Inc. acquired all of the capital
stock of Tennessee/New England Pipeline Company and changed the acquired
company's name to ANR New England Pipeline Company. CNG Iroquois, Inc.,
purchased 50% of the partnership interest held by ANR New England Pipeline
Company, thereby increasing its partnership share by 6.6% to 16%. In total,
ANR's partnership share has also increased to 16%. The Iroquois Pipeline
Operating Company, which was purchased by the Company in April 1996, as
discussed in Note 10, is the administrative operator of the pipeline.
Income and expenses are allocated to the Partners and credited to their
respective equity accounts in accordance with the partnership agreements and
their respective percentage interests.
Distributions to Partners are made concurrently to all Partners in
proportion to their respective partnership interests. Total cash distributions
of $40.0 million and $22.0 million were made during 1996 and 1995, respectively.
2 Summary of Significant
Accounting Policies:
Basis of Presentation
The financial statements of the Company are prepared in accordance with
generally accepted accounting principles and with accounting for regulated
public utilities prescribed by the Federal Energy Regulatory Commission
("FERC"). Generally accepted accounting principles for regulated entities
allow the Company to give accounting recognition to the actions of regulatory
authorities in accordance with the provisions of Statement of Financial
Accounting Standards ("SFAS") No. 71, "Accounting for the Effects of Certain
Types of Regulation". In accordance with SFAS No. 71, the Company has deferred
recognition of costs (a regulatory asset) or has recognized obligations (a
regulatory liability) if it is probable that such costs will be recovered or
obligation relieved in the future through the ratemaking process.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company
and Iroquois Pipeline Operating Company, a wholly owned subsidiary.
Intercompany transactions have been eliminated in consolidation.
Cash and Temporary Cash Investments
Iroquois considers all highly liquid temporary cash investments purchased
with an original maturity date of three months or less to be cash equivalents.
Cash and temporary cash investments of $38.7 million, consisting primarily of
low risk mutual funds, are carried at cost, which approximates market. At
December 31, 1996 and 1995, $11.0 million and $12.1 million, respectively, of
cash and temporary cash investments were held to satisfy the terms of the Loan
Agreement (refer to Note 3).
Natural Gas Plant In Service
Natural gas plant in service is carried at original cost. The majority of the
natural gas plant in service is categorized as natural gas transmission plant
which was depreciated over 20 years on a straight line basis from the in-service
date through January 31, 1995. Commencing February 1, 1995, transmission plant
is depreciated over 25 years on a straight-line basis as a result of the rate
case settlement. The general plant is depreciated on a straight-line basis over
various useful lives averaging five years.
Construction Work In Progress
At December 31, 1996, construction work in progress included preliminary
construction costs relating to the proposed Athens compressor station and
on-going minor capital projects.
Allowance for Funds
Used During Construction
The allowance for funds used during construction ("AFUDC") represents the
cost of funds used to finance natural gas transmission plant under
construction. The AFUDC rate includes a component for borrowed funds as well
as equity. The AFUDC is capitalized as an element of natural gas plant in
service.
Provision for Taxes
The payment of income taxes is the responsibility of the Partners and such
taxes are not normally reflected in the financial statements of partnerships.
Iroquois' approved rates, however, include an allowance for taxes (calculated
as if it were a corporation) and the FERC requires Iroquois to record such
taxes in the Partnership records to reflect the taxes payable by the Partners
as a result of Iroquois' operations. These taxes are recorded without regard
as to whether each Partner can utilize its share of the Iroquois tax
deductions. Iroquois' rate base, for rate-making purposes, is reduced by the
amount equivalent to accumulated deferred income taxes in calculating the
required return.
Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes". Under
SFAS No. 109, deferred taxes are provided based upon, among other factors,
enacted tax rates which would apply in the period that the taxes become
payable, and by adjusting deferred tax assets or liabilities for known changes
in future tax rates. SFAS No. 109 requires recognition of a deferred income
tax liability for the equity component of AFUDC.
Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the
13
<PAGE>
reported amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the reported amounts
of revenues and expenses during the reporting period. Actual results could
differ from those estimates.
Reclassifications
Certain prior year amounts have been reclassified to conform with current year
classifications.
3 Financing:
On June 11, 1991, Iroquois entered into a loan agreement which provided a
loan facility totaling $522.6 million to be amortized over a 14-year period
commencing November 1, 1992.
On August 30, 1992, the total amount of the loan became non-recourse to
the Partners. However, the Partners' equity interest remained pledged until
December 7, 1993, at which time the required conditions were met and the liens
were extinguished.
During 1993, Iroquois entered into Expansion Loan Agreement No. 1 in the
amount of $17.6 million to construct the Wright Compressor Station. The
expansion loan conditions are substantially the same as those of the base loan
and are non-recourse with respect to the Partners. The loan will mature in
November 2007.
During 1995, Iroquois entered into Expansion Loan Agreement No. 2 in the
amount of $13.4 million to finance the Croghan Compressor Station. This loan
is subject to similar provisions as the above noted loans. The loan will
mature in November 2008.
As of December 31, 1996, Iroquois was party to interest rate swap
transactions for aggregate notional principal amounts of $550.7 million. The
interest rate swaps relating to the original loan and Expansion Loan No. 1 are
$537.6 million which are being amortized over 14 years in accordance with the
principal repayment schedule provided in the Loan Agreement. The interest rate
and margin over the term of the swaps average 7.615% and 1.159%, respectively.
The interest rate swap relating to Expansion Loan No. 2 is $13.2 million with an
average interest rate and margin of 6.0% and 1.066%, respectively. The interest
rate swap for Expansion Loan No. 2 expires November 2, 1998 at which time the
interest rate, unless a new interest rate swap is undertaken, will be based upon
daily LIBOR plus an average margin of 1.153% over the term of the loan. The
Original Loan Agreement requires that at least 50% of the original debt is
hedged by interest rate swaps. The fair value of interest rate swaps is the
estimated amount that Iroquois would receive or pay to terminate the swap
agreements at the reporting date, taking into account current interest rates
and current credit worthiness of the swap counterparties. The fair value of the
interest rate swaps were ($23.1) million and ($44.5) million at December 31,
1996 and 1995, respectively.
Iroquois is subject to risk from non-performance of the counterparties
of the swap agreements. In the event of non-performance, the Company would be
required to pay interest subject to the original terms of the loan agreement.
This risk is substantially mitigated by the fact that the counterparties are
large, highly rated financial institutions. At December 31, 1996, the largest
single swap agreement subject to exposure was $9.3 million.
At December 31, 1996, the outstanding principal was $396.1 million on
the base loan, $14.9 million on Expansion Loan Agreement No. 1 and $12.8
million on Expansion Loan No. 2 for total long-term debt of $423.8 million.
The combined schedule of repayments is as follows (in millions):
Year Scheduled Repayment
---- -------------------
1997 $ 29.7
1998 $ 28.7
1999 $ 28.7
2000 $ 28.8
2001 $ 26.7
Thereafter $281.2
The loan agreements are collateralized by all the assets of the Partnership
and subject Iroquois to certain restrictions and covenants related to, among
other things, indebtedness, investments, certain expenditures, financial
ratios, and limitations on distributions to Partners. At December 31, 1996,
the Company had an outstanding letter of credit in the amount of $32.8 million,
which is guaranteed by the Partners.
The Company has an unsecured line of credit which permits borrowings up
to a maximum of $10 million at a rate equal to the lenders' alternate base rate
plus 0.5%. This facility is reviewed on an annual basis with the current
agreement expiring in March 1997. The line of credit contains a subjective
acceleration clause as its most restrictive covenant.
4 Concentrations
of Credit Risk:
Iroquois' cash and temporary cash investments and trade accounts receivable
represent concentrations of credit risk. Management believes that the credit
risk associated with cash and temporary cash investments is mitigated by its
practice of limiting its investments to low risk mutual funds, rated Aaa by
Moody's Investor Services and AAA by Standard and Poor's, and its cash deposits
to large, highly rated financial institutions. Management also believes that
the credit risk associated with trade accounts receivable is mitigated by the
restrictive terms of the FERC gas tariff which requires customers to pay for
service within 20 days after the end of the month of service delivery.
5 Gas Transportation
Contracts:
As of December 31, 1996, Iroquois was providing multi-year firm reserved
transportation service to 32 shippers of 876.8 MMcf/d of natural gas which
breaks down as follows:
Term in Years Quantity in MMcf/d
------------- ------------------
3-10 70.0
10-15 31.4
15-20 775.2
Total 876.6
The twenty year firm service gas transportation contracts expire between
November 1, 2011 and October 1, 2014.
6 Commitments and
Contingencies:
Regulatory Proceedings
On November 29, 1996, Iroquois submitted a general rate change application
with the Federal Energy Regulatory Commission
14
<PAGE>
("FERC" or "Commission") in Docket No. RP97-126-000. That rate change
application represented a reduction in Iroquois' test-period revenues of
approximately $4.6 million compared to Iroquois' then effective rates. In an
order issued on December 31, 1996, the Commission accepted and suspended the
rates, permitted them to become effective (with one exception) on January 1,
1997, and established a hearing. The order also required the Presiding
Administrative Law Judge to issue a decision in this proceeding by December 31,
1997. The December 31, 1996 Order granted summary disposition on one issue: as
a result of the Commission's December 20, 1996 Opinion in Docket No. RP94-72
(discussed below), Iroquois was ordered to remove approximately $11.7 million in
plant and associated costs from its proposed rate base. This results in an
additional reduction in Iroquois' test-period revenues of approximately $2.0
million from those set forth in the filing.
The Commission on June 19, 1995, approved a Stipulation and Consent
Agreement in Iroquois' prior rate proceeding in Docket No. RP94-72, which
resolved all issues except for the accounting and recovery of legal defense
costs incurred in connection with the investigations described below. A
hearing was held on this reserved issue on April 5, 1995. On July 19, 1995,
the Presiding Administrative Law Judge issued an Initial Decision which would
have permitted Iroquois to capitalize those legal defense costs and recover
$4.1 million (the dollar amount of such costs which Iroquois filed to recover
in Docket No. RP94-72) from its customers. Various participants, including the
Commission Staff, filed exceptions to the Initial Decision with the Commission
(which were opposed by Iroquois on September 7, 1995). On December 20, 1996,
the Commission issued an order reversing the Initial Decision and disallowing
recovery of the legal defense costs at issue. Iroquois filed a request for
rehearing of this decision on January 21, 1997; accordingly, the issue is still
pending before the Commission for its final action.
In its March 11, 1991 Order in Docket No. CP89-634-004, the Commission
authorized Iroquois to defer facility-related costs in excess of operating
revenues during the initial start-up period (December 1, 1991 to October 31,
1992) while service on Iroquois' system was phased in. In its November 10,
1992 filing implementing this deferred asset surcharge, Iroquois included $3.6
million, amortized over the remaining 19-year term of its long-term service
agreements. On September 30, 1996, as revised on October 22, 1996, Iroquois
submitted its filing in Docket No. TM97-1-110 to recover the costs for year 5
of the amortization period; this filing was accepted by the Commission on
November 18, 1996.
Settlement of Federal
and State Investigations
In late 1991 and early 1992, Iroquois was informed by the United States that
federal criminal and civil investigations of the construction of certain of its
pipeline facilities had been commenced. The investigations were to determine
whether Iroquois violated various environmental and other laws in the
construction of such facilities. In addition, beginning in late 1993, Iroquois
was informed by the FERC, the Army Corps of Engineers, the Department of
Transportation ("DOT"), and the New York State Public Service Commission that
each of these agencies had also commenced investigations regarding the
construction of the pipeline facilities.
On May 23, 1996, as part of a "global" resolution of these
investigations, Iroquois Pipeline Operating Company pled guilty to four felony
violations of the Clean Water Act and entered into consent decrees under the
Clean Water Act in four federal judicial districts. Although not a named
defendant, Iroquois signed the plea agreement and consent decrees and is bound
by their terms. Iroquois also entered into a related settlement with the State
of New York. Under these various agreements, Iroquois and IPOC agreed to the
payment of $22 million in fines and penalties, agreed to remediate 27 wetlands
along its pipeline, and agreed to implement under FERC and DOT orders two 10
year plans to address certain ground stability and pipeline safety concerns.
Iroquois also entered into a separate settlement with the FERC in Docket No.
IN96-1-000, pursuant to which it agreed to remove, prospectively, approximately
$2 million of initial construction costs from its rate base for purposes of
rate collection and to refund to its customers approximately $400,000, plus
interest, associated with such construction costs which it had previously
collected. The reduced rates resulting from this settlement were filed on June
28, 1996 (effective July 1, 1996) and were accepted by the FERC on August 1,
1996. On August 30, 1996, Iroquois submitted to the FERC the refund report
required by that separate settlement. Of the $24.7 million provision made in
1995 for these investigations, $1.5 million remained accrued at December 31,
1996 for wetlands remediation.
In addition, four former employees of IPOC pled guilty to misdemeanor
violations of the Clean Water Act. On October 16, 1996, the United States filed
indictments against another former employee of IPOC, the environmental
consulting firm Iroquois and IPOC engaged during pipeline construction, and two
of that firm's employees, in connection with the same matters covered by the
global settlement.
Legal Proceedings-Other
Iroquois is party to various other legal actions incident to its business;
however, management believes that no material losses will result from such
proceedings.
Leases
Iroquois leases its office space under operating lease arrangements. The leases
expire at various dates through 2003 and are renewable at Iroquois' option.
Iroquois also leases a right-of-way easement on Long Island, New York, from the
Long Island Lighting Company ("LILCO"), a general partner, which requires annual
payments escalating 5% a year over the 39-year term of the lease. In addition,
Iroquois leases various equipment and automobiles under non-cancelable operating
leases. During the years ended December 31, 1996, and 1995, Iroquois made
payments of $0.9 million and $0.8 million respectively, under operating leases
which were recorded as rental expense. Future minimum rental payments under
operating lease arrangements are as follows (millions of dollars):
Year Amount
---- ------
1997 $ 0.7
1998 $ 0.7
1999 $ 0.7
2000 $ 0.7
2001 $ 0.7
Thereafter $ 6.8
15
<PAGE>
7 Income Taxes:
Deferred income taxes which are the result of operations will become the
obligation of the Partners when the temporary differences related to those
items reverse. The Company recognizes a decrease in the Amounts Equivalent to
Deferred Income Taxes account for these amounts and records a corresponding
increase to Partners' equity. Deferred income taxes with respect to the equity
component of AFUDC remain on the accounts of the Partnership until the related
deferred regulatory asset is recognized.
Total income tax expense includes the following components (thousands
of dollars):
U.S. State-
Federal State Other Total
- ------------------------------------------------
1996:
Current $ 9,451 $ 1,643 $ 1,306 $ 12,400
Deferred 9,147 616 -- 9,763
Total $ 18,598 $ 2,259 $ 1,306 $ 22,163
U.S. State-
Federal State Other Total
- ------------------------------------------------
1995:
Current $ 7,856 $ 1,082 $ 1,419 $ 10,357
Deferred 6,365 (330) -- 6,035
Total $ 14,221 $ 752 $ 1,419 $ 16,392
For the years ended December 31, 1996 and 1995, the effective tax rate
differs from the Federal statutory rate due principally to the non-deductible
portion of the provision for the Federal investigations and the impact of state
taxes.
Deferred income taxes included in the income statement relate to the
following (thousands of dollars):
1996 1995
- --------------------------------------------------
Depreciation $ 7,236 $ 7,850
Deferred regulatory asset (72) (72)
Property taxes (19) 82
Legal costs 570 858
Accrued expenses (142) (2,549)
Alternative minimum tax credit 2,078 (298)
Other 112 164
Total deferred taxes $ 9,763 $ 6,035
The components of the net deferred tax liability are as follows (thousands of
dollars):
At December 31, 1996 1995
- ---------------------------------------------------------------
Deferred tax assets-
Alternative minimum tax credit $ 9,766 $ 11,844
Accrued expenses 5,999 5,857
Total deferred tax assets $ 15,765 $ 17,701
Deferred tax liabilities-
Depreciation and related items $ (39,800) $ (32,600)
Deferred regulatory asset (1,095) (1,167)
Property taxes (808) (827)
Legal costs (4,616) (4,046)
Other (370) (258)
Total deferred tax liabilities $ (46,689) $ (38,898)
Net deferred tax liabilities $ (30,924) $ (21,197)
Less deferral of tax rate change 778 814
Deferred taxes-operations (30,146) (20,383)
Deferred tax related
to Equity AFUDC (14,272) (14,987)
Deferred tax related
to change in tax rate (778) (814)
Total deferred taxes $ (45,196) $ (36,184)
8 Related Party
Transactions:
Operating revenues and amounts due from related parties were primarily for
gas transportation services.
Payments to related parties were primarily for services rendered under
operating agreements between Iroquois and TransCanada PipeLines Company, and
between IPOC and Tennessee Gas Pipeline Company through July 1996, when
Tennessee sold its partnership interest. These contracts include various
services provided in connection with construction management, engineering,
maintenance and operation of the pipeline and other costs incident to Iroquois'
operation. The following table summarizes Iroquois' related party transactions
(millions of dollars):
1996 Payments Due Revenue
to from from
Related Related Related
Parties Parties Parties
- --------------------------------------------------------------
TransCanada Iroquois Ltd. $2.3 $0.4 $1.6
Tennessee Gas Pipeline 3.3 -- --
North East Transmission Co. -- 1.5 17.9
Housatonic Corp. -- -- 4.7
ANR Iroquois -- 0.2 2.5
CNG Iroquois -- 0.9 4.7
JMC Iroquois -- -- --
NJNR Pipeline Company -- 0.9 10.2
TEN Transmission Company -- 0.5 6.4
LILCO Energy Systems 0.1 1.4 16.4
Totals $5.7 $5.8 $64.4
1995 Payments Due Revenue
to from from
Related Related Related
Parties Parties Parties
- --------------------------------------------------------------
TransCanada Iroquois Ltd. $7.4 $0.1 $ 0.2
Tennessee Gas Pipeline 6.9 -- --
North East Transmission Co. -- 1.4 19.0
Housatonic Corp. -- 1.2 14.9
ANR Iroquois -- 0.3 0.7
CNG Iroquois -- 1.0 4.2
JMC Iroquois -- -- --
NJNR Pipeline Company -- 0.9 10.9
TEN Transmission Company -- 0.5 6.8
LILCO Energy Systems 0.1 1.4 17.6
Totals $14.4 $6.8 $74.3
9 Employee Benefits:
Iroquois offers a defined contribution retirement plan with a 401(k)
provision to its full-time salaried employees with over one year of service.
The employees' contributions are matched dollar for dollar by Iroquois up to 5%
of base pay in addition to any discretionary amounts approved by the Board of
Directors of the Plan Sponsor. These costs are recognized on a monthly basis
and funding is made on a pay-as-you-go basis. During 1996 and 1995, Iroquois
recognized $359.4 thousand and $403.2 thousand, respectively, of expenses in
connection with this plan. Iroquois does not provide post-retirement health or
life insurance benefits.
10 Acquisitions:
On April 30, 1996, the Company acquired all of the outstanding capital stock
of the Iroquois Pipeline Operating Company ("IPOC"). IPOC is the
administrative operator of the pipeline. The acquisition was accounted for
using the purchase method. The impact of the acquisition and IPOC's operations
are not material to the financial condition or results of operations of the
Company.
16
<PAGE>
[CHART SHOWING FIRM CONTRACTED VOLUMES BY STATE]
[CHART SHOWING MULTI-YEAR, FIRM CONTRACTS]
[CHART SHOWING FIRM CONTRACTED VOLUMES BY END USE]
17
<PAGE>
Iroquois Partners
Partner Company (% Ownership) Affiliate
TransCanada Iroquois Ltd. (29.0%)
TransCanada PipeLines Limited
North East Transmission Company (19.4%)
Brooklyn Union Gas
CNG Iroquois, Inc. (16.0%)
CNG Transmission Corporation
ANR Iroquois, Inc. (9.4%)
ANR Pipeline Company
ANR New England Gas Pipeline Co. (6.6%)
ANR Pipeline Company
ALENCO Iroquois Pipelines, Inc. (6.0%)
AEC Pipelines
JMC-Iroquois, Inc. (4.93%)
U.S. Generating Company
TEN Transmission Company (4.87%)
Connecticut Natural Gas Corporation
NJNR Pipeline Company (2.8%)
New Jersey Resources Corporation
LILCO Energy Systems, Inc. (1.0%)
Long Island Lighting Company
[LOGO OF IROQUOIS GAS TRANSMISSION SYSTEM)
- ------------------------------------
Iroquois Pipeline Operating Company,
- --------------------------- Operator
One Corporate Drive, Suite 600
Shelton, Connecticut 06484-6211
Phone 203/925/7200
Fax 203/929/9501
Iroquois' One-Stop
Transportation Number:
1/888/IGTSREP
(1/888/448/7737)
Call Before You Dig:
New York State 1/800/962/7962
Connecticut 1/800/922/4455
Long Island 1/516/661/6000
Printed entirely with soy-based inks on recycled paper
<PAGE>
EX-99.5
FORM U5S EX. F.(1) - SUPPORTING SCHEDULES, ITEM 1
EXHIBIT F.(1)
ITEM 1 - SCHEDULE OF INVESTMENTS
--------------------------------
At December 31, 1996
(Thousands of Dollars)
<TABLE>
<CAPTION>
Principal
Name of Issuer Title of Issue Amount
- --------------------------------------------------------------------------------------------
<S> <C> <C>
Service Company Non-negotiable notes:
9.5% - maturing serially November 30, 1997 to 2011. . . . $ 3,597
8.90% - maturing May 31, 1999. . . . . . . . . . . . . . . 5,000
6.20% - maturing September 30, 1998. . . . . . . . . . . . 5,000
6.10% - maturing July 31, 2003 . . . . . . . . . . . . . . 795
--------
Total unsecured debt . . . . . . . . . . . . . . . . . . . $ 14,392
========
CNG Transmission Non-negotiable notes:
9.5% - maturing serially November 30, 1997 to 2011. . . . $ 31,149
7.40% - maturing serially November 30, 2000 to 2015. . . . 75,000
8.95% - maturing serially September 30, 2004 to 2014 . . . 35,000
6.20% - maturing September 30, 1998. . . . . . . . . . . . 100,800
6.10% - maturing July 31, 2003 . . . . . . . . . . . . . . 59,541
6.80% - maturing November 30, 2013 . . . . . . . . . . . . 57,793
8.75% - maturing December 31, 2014 . . . . . . . . . . . . 27,000
--------
Total unsecured debt . . . . . . . . . . . . . . . . . . . $386,283
========
East Ohio Gas Non-negotiable notes:
9.5% - maturing serially November 30, 1997 to 2011. . . . $ 7,669
8.90% - maturing May 31, 1999. . . . . . . . . . . . . . . 15,000
7.40% - maturing serially November 30, 2000 to 2015. . . . 30,000
8.95% - maturing serially September 30, 2009 to 2019 . . . 20,000
6.20% - maturing September 30, 1998. . . . . . . . . . . . 78,900
6.10% - maturing July 31, 2003 . . . . . . . . . . . . . . 28,596
6.80% - maturing November 30, 2013 . . . . . . . . . . . . 29,045
--------
Total unsecured debt . . . . . . . . . . . . . . . . . . . $209,210
========
</TABLE>
<PAGE>
ITEM 1 - SCHEDULE OF INVESTMENTS
--------------------------------
At December 31, 1996
(Thousands of Dollars)
<TABLE>
<CAPTION>
Principal
Name of Issuer Title of Issue Amount
- --------------------------------------------------------------------------------------------
<S> <C> <C>
Peoples Natural
Gas Non-negotiable notes:
9.5% - maturing serially November 30, 1997 to 2011. . . . $ 7,670
9.5% - maturing January 31, 1997. . . . . . . . . . . . . 10,000
8.90% - maturing May 31, 1999. . . . . . . . . . . . . . . 10,000
7.40% - maturing November 30, 2015 . . . . . . . . . . . . 3,750
8.95% - maturing serially September 30, 2009 to 2019 . . . 14,000
7.40% - maturing serially November 30, 2000 to 2015. . . . 11,250
6.20% - maturing September 30, 1998. . . . . . . . . . . . 10,000
6.80% - maturing November 30, 2013 . . . . . . . . . . . . 37,430
6.10% - maturing July 31, 2003 . . . . . . . . . . . . . . 26,039
6.85% - maturing September 30, 2026. . . . . . . . . . . . 25,000
--------
Total unsecured debt . . . . . . . . . . . . . . . . . . . $155,139
========
Virginia Natural
Gas Non-negotiable notes:
8.90% - maturing May 31, 1999. . . . . . . . . . . . . . . $ 33,318
6.20% - maturing September 30, 1998. . . . . . . . . . . . 40,100
6.85% - maturing September 30, 2026. . . . . . . . . . . . 24,000
--------
Total unsecured debt . . . . . . . . . . . . . . . . . . . $ 97,418
========
</TABLE>
<PAGE>
ITEM 1 - SCHEDULE OF INVESTMENTS
--------------------------------
At December 31, 1996
(Thousands of Dollars)
<TABLE>
<CAPTION>
Principal
Name of Issuer Title of Issue Amount
- --------------------------------------------------------------------------------------------
<S> <C> <C>
Hope Gas Non-negotiable notes:
9.5% - maturing serially November 30, 1997 to 2011. . . . $ 3,359
7.40% - maturing serially November 30, 2000 to 2015. . . . 5,000
8.95% - maturing serially September 30, 2009 to 2019 . . . 3,000
6.20% - maturing September 30, 1998. . . . . . . . . . . . 8,400
6.10% - maturing July 31, 2003 . . . . . . . . . . . . . . 6,420
6.80% - maturing November 30, 2013 . . . . . . . . . . . . 12,097
6.85% - maturing September 30, 2026. . . . . . . . . . . . 1,000
-------
Total unsecured debt . . . . . . . . . . . . . . . . . . . $39,276
=======
West Ohio Gas Non-negotiable notes:
9.5% - maturing serially November 30, 1997 to 2011. . . . $ 2,684
7.40% - maturing serially November 30, 2000 to 2015. . . . 5,000
6.10% - maturing July 31, 2003 . . . . . . . . . . . . . . 1,625
6.80% - maturing November 30, 2013 . . . . . . . . . . . . 901
8.75% - maturing December 31, 2014 . . . . . . . . . . . . 2,250
-------
Total unsecured debt . . . . . . . . . . . . . . . . . . . $12,460
=======
</TABLE>
<PAGE>
ITEM 1 - SCHEDULE OF INVESTMENTS
--------------------------------
At December 31, 1996
(Thousands of Dollars)
<TABLE>
<CAPTION>
Principal
Name of Issuer Title of Issue Amount
- --------------------------------------------------------------------------------------------
<S> <C> <C>
CNG Producing Non-negotiable notes:
9.5% - maturing January 31, 1997. . . . . . . . . . . . . $ 90,000
8.90% - maturing May 31, 1999. . . . . . . . . . . . . . . 35,000
8.95% - maturing serially September 30, 1999 to 2009 . . . 49,000
6.10% - maturing July 31, 2003 . . . . . . . . . . . . . . 71,075
6.80% - maturing November 30, 2013 . . . . . . . . . . . . 8,500
6.85% - maturing September 30, 2026. . . . . . . . . . . . 100,000
--------
Total unsecured debt . . . . . . . . . . . . . . . . . . . $353,575
========
CNG Power Non-negotiable notes:
9.5% - maturing serially November 30, 1997 to 2011. . . . $ 497
8.95% - maturing serially September 30, 2009 to 2019 . . . 4,000
7.40% - maturing serially November 30, 2000 to 2015. . . . 2,160
8.75% - maturing serially November 30, 1997 to 2014. . . . 6,426
--------
Total unsecured debt . . . . . . . . . . . . . . . . . . . $ 13,083
========
CNG Storage Non-negotiable note:
6.20% - maturing September 30, 1998. . . . . . . . . . . . $ 7,350
========
</TABLE>
<PAGE>
EX-99.6
FORM U5S EX.F.(2) - SUPPORTING SCHEDULES, ITEM 4
ITEM 4 - SCHEDULE OF ACQUISITIONS, REDEMPTIONS,
OR RETIREMENTS OF SYSTEM SECURITIES EXHIBIT F.(2)
<TABLE>
<CAPTION>
Calendar Year 1996
(Thousands of Dollars)
- -------------------------------------------------------------------------------------------------------
Number of
Number of Shares or
Shares or Principal
Principal Amount
Amount Redeemed or Commission
Name of Issuer and Title of Issue Acquired Retired Consideration Authorization
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Registered Holding Company
Parent Company:
Common stock, par value $2.75 per share 146,667 shares $ 8,144 Rule 42
======= ========
Peoples Natural Gas:
Non-negotiable note
6.85% Non-negotiable note due 9/30/26 $ 25,000 $ 25,000 Rule 52
======== ========
Virginia Natural Gas:
Non-negotiable note
6.85% Non-negotiable note due 9/30/26 $ 24,000 $ 24,000 Rule 52
======== ========
Hope Gas:
Non-negotiable note
6.85% Non-negotiable note due 9/30/26 $ 1,000 $ 1,000 Rule 52
======== ========
CNG Producing:
Non-negotiable note
6.85% Non-negotiable note due 9/30/26 $100,000 $100,000 Rule 52
======== ========
Subsidiaries of Registered Holding Company:
Service Company:
Non-negotiable note
9.5% Non-negotiable note due
11/30/96 $ 240 $ 240 Rule 42
======= =======
CNG Transmission:
Non-negotiable note
9.5% Non-negotiable note due
11/30/96 $ 2,077 $ 2,077 Rule 42
======= =======
East Ohio Gas:
Non-negotiable note
9.5% Non-negotiable note due
11/30/96 $ 511 $ 511 Rule 42
====== ======
Peoples Natural Gas:
Non-negotiable note
9.5% Non-negotiable note due
11/30/96 $ 511 $ 511 Rule 42
====== ======
</TABLE>
<PAGE>
ITEM 4 - SCHEDULE OF ACQUISITIONS, REDEMPTIONS,
OR RETIREMENTS OF SYSTEM SECURITIES EXHIBIT F.(2)
<TABLE>
<CAPTION>
Calendar Year 1996
(Thousands of Dollars)
- -------------------------------------------------------------------------------------------------------
Number of
Number of Shares or
Shares or Principal
Principal Amount
Amount Redeemed or Commission
Name of Issuer and Title of Issue Acquired Retired Consideration Authorization
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Virginia Natural Gas Company:
Unsecured loan
9.94% Unsecured loan due 1/1/96 $4,000 $4,000 Rule 42
====== ======
Hope Gas:
Non-negotiable note
9.5% Non-negotiable note due
11/30/96 $ 224 $ 224 Rule 42
====== ======
West Ohio Gas:
Non-negotiable note
9.5% Non-negotiable note due
11/30/96 $ 179 $ 179 Rule 42
====== ======
CNG Power:
Non-negotiable notes
9.5% Non-negotiable note due
11/30/96 $ 33 $ 33 Rule 42
8.75% Non-negotiable note due
11/30/96 $ 357 $ 357 Rule 42
------ ------
$ 390 $ 390
====== ======
</TABLE>
<PAGE>
EXHIBIT H.(1)
CONSOLIDATED NATURAL GAS COMPANY
RELATIONSHIP OF EXEMPT WHOLESALE GENERATOR
TO OTHER SYSTEM COMPANIES
CONSOLIDATED NATURAL GAS COMPANY
|
|
|
----------------------------------------
(Wholly owned | | (Wholly owned
subsidiary) | | subsidiary)
| |
CNG POWER SERVICES CNG ENERGY SERVICES
CORPORATION CORPORATION (Fuel Manager)
| |
(Wholly owned | | (Wholly owned
subsidiary) | | subsidiary)
| |
CNG LAKEWOOD, INC. CNG POWER COMPANY
\ /
\ /
\ /
\ /
\ /
\ /
\ /
(1% General \ / (34% Limited
Partnership \ / Partnership
Interest) \ / Interest)
\ /
\ /
\ /
\ /
\ /
\ /
\ /
\ /
\ /
LAKEWOOD COGENERATION, L.P.
<PAGE>
EXHIBIT H.(2)
CONSOLIDATED NATURAL GAS COMPANY
RELATIONSHIP OF FOREIGN UTILITY COMPANY
TO OTHER SYSTEM COMPANIES
CONSOLIDATED NATURAL GAS COMPANY
|
|
|
|
| (Wholly owned
| subsidiary)
|
|
|
CNG INTERNATIONAL CORPORATION
/ |
/ |
/ |
(8.9% General / | (16.5% Limited
Partnership / | Partnership
Interest) / | Interest)
/ |
/ |
/ |
FONDELEC GENERAL |
PARTNER, L.P. |
\ |
\ |
\ |
(1% General \ |
Partnership \ |
Interest) \ |
\ |
\ |
THE LATIN AMERICA ENERGY AND
ELECTRICITY FUND I, L.P.
<PAGE>
EXHIBIT I - (1)
ARTHUR ANDERSEN LLP
LAKEWOOD COGENERATION
LIMITED PARTNERSHIP
Financial Statements for the
Years Ended December 31, 1996 and 1995
Together with Independent Auditors' Report
<PAGE>
[Letterhead of Arthur Andersen LLP]
Report of Independent Public Accountants
----------------------------------------
To the Partners of Lakewood
Cogeneration Limited Partnership:
We have audited the accompanying balance sheets of Lakewood Cogeneration
Limited Partnership (a Delaware Limited Partnership) as of December 31, 1996
and 1995, and the related statements of income, changes in partners' equity and
cash flows for the years then ended. These financial statements are the
responsibility of the Partnership's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Lakewood Cogeneration
Limited Partnership as of December 31, 1996 and 1995, and the results of its
operations and its cash flows for the years then ended in conformity with
generally accepted accounting principles.
/s/ Arthur Andersen LLP
Detroit, Michigan,
February 24, 1997.
<PAGE>
LAKEWOOD COGENERATION LIMITED PARTNERSHIP
-----------------------------------------
BALANCE SHEETS
--------------
AS OF DECEMBER 31, 1996 AND 1995
--------------------------------
<TABLE>
<CAPTION>
1996 1995
------------ ------------
<S> <C> <C>
Assets
------
Cash and cash equivalents $ 354,888 $ 6,620,727
Accounts receivable 5,171,140 4,242,935
Accounts receivable from affiliates -- 17,604
Prepaid expenses 2,358,903 360,910
Inventory 580,135 430,502
------------ ------------
Total current assets 8,465,066 11,672,678
Net property, plant and equipment 219,257,565 225,185,032
Restricted cash 18,873,898 17,476,550
Deferred charges, net 6,694,521 8,096,730
Accounts receivable 2,000,000 2,000,000
------------ ------------
Total assets $255,291,050 $264,430,990
============ ============
Liabilities and Partners' Equity
--------------------------------
Accounts payable and accrued liabilities $ 2,359,211 $ 2,818,650
Accounts payable to affiliates 4,838,491 3,758,635
Current portion of long term debt 5,510,000 4,830,000
Accrued interest -- 639,444
------------ ------------
Total current liabilities 12,707,702 12,046,729
Retainage payable 130,760 1,222,650
Long term debt 196,885,001 202,395,001
------------ ------------
Total non-current liabilities 197,015,761 203,617,651
Partners' equity 45,567,587 48,766,610
Commitments and contingencies (Note 4)
------------ ------------
Total liabilities and partners' equity $255,291,050 $264,430,990
============ ============
</TABLE>
The accompanying notes are an integral part
of these financial statements.
2
<PAGE>
LAKEWOOD COGENERATION LIMITED PARTNERSHIP
-----------------------------------------
STATEMENTS OF INCOME
--------------------
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
----------------------------------------------
<TABLE>
<CAPTION>
1996 1995
------------ ------------
<S> <C> <C>
Revenues:
Electric sales $ 58,970,794 $ 54,458,284
Operating expenses:
Operating and maintenance 6,687,016 6,134,386
Fuel 17,053,528 13,053,126
Depreciation and amortization 9,044,022 8,320,718
Administrative and general 2,229,602 3,925,249
------------ ------------
Total operating expenses 35,014,168 31,433,479
------------ ------------
Operating income 23,956,626 23,024,805
Interest income and expense:
Interest income 1,008,636 1,288,696
Interest expense (18,564,285) (19,149,150)
------------ ------------
Net interest expense (17,555,649) (17,860,454)
------------ ------------
Earnings $ 6,400,977 $ 5,164,351
============ ============
</TABLE>
The accompanying notes are an integral part
of these financial statements.
3
<PAGE>
LAKEWOOD COGENERATION LIMITED PARTNERSHIP
-----------------------------------------
STATEMENTS OF CHANGES IN PARTNERS' EQUITY
-----------------------------------------
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
----------------------------------------------
<TABLE>
<CAPTION>
HCE CNG CNG POWER HYDRA-CO TPC TOTAL
---------- --------- ------------- ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Balance at
December 31, 1994 $ 9,078 $ 9,078 $ 308,666 $ 399,449 $ 181,568 $ 907,839
Contributions 510,000 510,000 24,527,000 22,440,000 10,200,000 58,187,000
Distributions (83,056) (83,056) (10,010,897) (3,654,455) (1,661,116) (15,492,580)
Earnings 51,644 51,644 1,755,879 2,272,314 1,032,870 5,164,351
---------- --------- ------------- ------------ ------------ -------------
Balance at
December 31, 1995 487,666 487,666 16,580,648 21,457,308 9,753,322 48,766,610
Distributions (96,000) (96,000) (3,264,000) (4,224,000) (1,920,000) (9,600,000)
Earnings 64,010 64,010 2,176,332 2,816,430 1,280,195 6,400,977
---------- --------- ------------- ------------ ------------ -------------
Balance at
December 31, 1996 $ 455,676 $ 455,676 $ 15,492,980 $ 20,049,738 $ 9,113,517 $ 45,567,587
========== ========= ============= ============ ============ =============
</TABLE>
The accompanying notes are an integral part
of these financial statements.
4
<PAGE>
LAKEWOOD COGENERATION LIMITED PARTNERSHIP
-----------------------------------------
STATEMENTS OF CASH FLOWS
------------------------
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
----------------------------------------------
<TABLE>
<CAPTION>
1996 1995
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Earnings $ 6,400,977 $ 5,164,351
Adjustments to reconcile earnings to net
cash provided by operating activities:
Depreciation and amortization 9,044,022 8,320,718
Net change in:
Accounts receivable (928,205) (31,343)
Accounts receivable from affiliates 17,604 (100)
Inventory (149,633) (9,493)
Prepaid expenses (1,997,993) 242,873
Accounts payable and accrued liabilities (459,439) 377,342
Accounts payable to affiliates 1,079,856 (3,988,082)
Retainage payable (1,091,890) (8,855,719)
Accrued interest (639,444) (641,469)
------------ ------------
Total adjustments 4,874,878 (4,585,273)
------------ ------------
Net cash provided by operating activities 11,275,855 579,078
------------ ------------
Cash flows from investing activities:
Property, plant & equipment additions (1,714,346) (8,240,531)
Deferred charges -- (373,971)
Change in restricted cash (1,397,348) (17,476,550)
------------ ------------
Net cash used in investing activities (3,111,694) (26,091,052)
------------ ------------
Cash flow from financing activities:
Proceeds from loans payable -- 14,716,496
Repayments of loans payable (4,830,000) (3,775,000)
Borrowings from affiliates -- 6,615,860
Distributions to partners (9,600,000) (14,305,580)
Contributions from partners -- 20,350,000
------------ ------------
Net cash provided by (used in) financing
activities (14,430,000) 23,601,776
------------ ------------
Net decrease in cash and cash equivalents (6,265,839) (1,910,198)
Cash and cash equivalents at beginning of period 6,620,727 8,530,925
------------ ------------
Cash and cash equivalents at end of period $ 354,888 $ 6,620,727
============ ============
Supplemental disclosure of cash flow information:
Cash paid during the year for interest $ 18,861,729 $ 19,345,353
</TABLE>
Supplemental disclosure of non-cash financing activity:
As of June 8, 1995 (Conversion date), the Partnership accrued borrowings from
affiliates of $30,650,000. On the conversion date, these borrowings were
converted to equity as specified by the partnership agreement.
The accompanying notes are an integral part
of these financial statements.
5
<PAGE>
LAKEWOOD COGENERATION LIMITED PARTNERSHIP
NOTES TO THE FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996 AND 1995
- --------------------------------------------------------------------------------
1. GENERAL INFORMATION AND SIGNIFICANT ACCOUNTING POLICIES
General - Lakewood Cogeneration, Limited Partnership (the Partnership) was
formed to develop, construct, own and operate a 237 megawatt power production
facility (the Facility) located in Lakewood, New Jersey. The Facility
generates electric power for sale to General Public Utilities (GPU), formerly
Jersey Central Power & Light, primarily by burning natural gas with oil as a
backup fuel. Although originally a Qualifying Facility under Federal laws, in
September 1993 the Federal Energy Regulatory Commission approved the
Partnership's application for Exempt Wholesale Generator (EWG) status.
Commercial operations commenced in November 1994.
Ownership interests of the partners are:
General Partners
- ----------------
HCE Lakewood, Inc. (HCE) 1%
CNG Lakewood, Inc. (CNG) 1%
Limited Partners
- ----------------
Hydra-Co Enterprises, Inc. (HYDRA-CO) 44%
CNG Power Company (CNG Power) 34%
TPC Lakewood, Inc. (TPC) 20%
HCE is a wholly owned affiliate of HYDRA-CO, which is a wholly owned subsidiary
of CMS Generation Co. (CMS). CNG is a wholly owned subsidiary of the
Consolidated Natural Gas Company. CNG Power is a wholly owned subsidiary of
CNG Energy Services Corporation (ESC). Profits, losses and cash distributions
are allocated among the partners in proportion to their respective ownership
interest.
Basis of Presentation - The financial statements are prepared in conformity with
generally accepted accounting principles and include the use of management
estimates.
Cash Equivalents - The Partnership considers all highly liquid investments
purchased within three months of their maturity to be cash equivalents.
Restricted Cash - Restricted cash represents amounts consisting primarily of
disbursement, major maintenance, debt service, bank litigation, and punchlist
and warranty funds which are restricted as to their use.
Plant and Equipment - Plant and equipment are stated at cost. Depreciation is
generally provided over estimated useful lives ranging from three to thirty
years. The composite depreciation rate for the Facility in 1996 and 1995 was
3.3%.
Inventories - Fuel inventories are stated at cost using the first in first out
method.
Deferred Charges - Costs associated with the formation of the Partnership
aggregating approximately $5,419,000 were deferred and are being amortized using
the straight-line method over a five-year period commencing with the commercial
operation of the Facility. Amortization expense of such costs amounted to
approximately $1,108,000 and $1,084,000 in 1996 and 1995, respectively.
Costs incurred in negotiating and securing the construction and term financing
amounted to $4,103,000. These costs have been deferred and are being amortized
using the effective interest method over the term of the related debt.
Amortization of such costs amounted to approximately $294,000 and $166,000 in
1996 and 1995, respectively.
6
<PAGE>
Income Taxes - The Partnership has no liability for income taxes. Income is
taxed to the partners based on their allocated share of taxable income (loss).
Therefore, no provision or liability for income taxes has been included in the
accompanying financial statements.
Fair Value of Financial Instruments - The carrying amount of cash, cash
equivalents and restricted cash approximates fair value because of the short
maturities of these instruments. The Partnership's notes payable and short-term
debt approximate fair value because their interest rates are based upon variable
reference rates. The fair value of the Partnership's interest rate swaps (used
for hedging purposes) is the estimated amount the Partnership would have to pay
to terminate the swap agreements, taking into account current interest rates and
the current creditworthiness of the swap counterparties. The estimated
termination benefit associated with the interest rate swaps at December 31, 1996
and 1995 is approximately $511,000 and $6,195,000, respectively.
2. LONG-TERM DEBT
A consortium of banks had made available for construction Tranche A and Tranche
B Bank Loans in the amount of $136,000,000 and $51,000,000, respectively. Total
Tranche A Bank Loans in the amount of $136,000,000 were converted into the
Continuing Bank Term Loans (the Term Loan(s)) on June 8, 1995 (the Conversion
Date). Tranche B Loans were unused. In order to convert the construction loans
to term loans, each of the partners contributed cash or converted their then
outstanding subordinated loans to equity. The Term Loans are being repaid in
semi-annual installments over a fourteen year period which commenced June 30,
1995. The Partnership may select the interest rate for the Term Loans from
three alternatives: a Base Rate option, a CD Rate option and a LIBOR Rate
option. Each of these rates is equivalent to the corresponding Mellon Bank
interest rate option plus a credit spread which varies depending on the type of
Term Loan, and the interest period and option chosen. As of December 31, 1996
and 1995, $128,520,000 and $132,600,000, respectively, was outstanding under the
Term Loans.
The Partnership paid an unused commitment fee of 0.375 percent on the aggregate
unused portion of the Tranche A and Tranche B Bank Loans through the Conversion
Date. During 1995, commitment fees of $64,000 were paid.
The Partnership also has a $2,000,000 Working Capital Loan available. The
Partnership paid a standby fee of 0.125 percent on any unused portion of the
Working Capital Loan through the Conversion Date and 0.375 percent on the
average daily unused portion of the Working Capital Loan thereafter. Fees
totaled $7,700 and $5,400 in 1996 and 1995, respectively. This loan commitment
matures on the fifth anniversary of the Conversion Date with one year extensions
through the final maturity date of the Term Loans.
The Partnership has agreed to pay an Administrative Agent's Fee to Mellon of
$100,000 per year through December 1995 and $75,000 per year thereafter. Fees
paid in 1996 and 1995 were $75,000 and $94,000 respectively.
The Partnership has obtained a $75,000,000 institutional loan from John Hancock
Mutual Life Insurance Company (the Institutional Loan). Outstanding balances as
of December 31, 1996 and 1995 were $73,875,001 and $74,625,001, respectively.
The Institutional Loan is being repaid in semi-annual installments over an
eighteen and one-half year period which began June 30, 1995 and bears a fixed
interest rate of 10.66 percent.
7
<PAGE>
Obligations under the Term Loans and Institutional Loan mature as follows:
<TABLE>
<CAPTION>
Year Term Loans Institutional Loan
<S> <C> <C>
1997 $ 4,760,000 $ 750,000
1998 6,120,000 750,000
1999 6,800,000 750,000
2000 7,480,000 750,000
2001 8,840,000 750,000
Thereafter 94,520,000 70,125,001
------------ -----------
Total $128,520,000 $73,875,001
============ ===========
</TABLE>
The Partnership has entered into interest rate swap agreements to reduce the
impact of changes in interest rates on the Term Loans. At December 31, 1996,
the Partnership had two interest rate swap agreements outstanding with total
notional principal amounts of $120,000,000. Those agreements effectively change
the Partnership's interest rate exposure on a portion of the Term Loans through
2008 to an average all-in borrowing cost of 6.68 percent. The Partnership is
exposed to credit loss in the event of nonperformance by the other parties to
the interest rate swap agreements. However, the Partnership does not
anticipate nonperformance by the counterparties who are affiliated with Mellon
Bank and ABN-AMRO.
3. RELATED PARTY TRANSACTIONS
The Partnership has entered into an Operation and Maintenance Agreement (the O&M
Agreement) with CMS Generation Operating Company II, Lakewood Division (CMSG
II), a wholly-owned subsidiary of HYDRA-CO, and previously known as HYDRA-CO
Operations, Inc. The O&M Agreement expires on the twenty-first anniversary of
the commercial operations date and may be renewed annually thereafter. Under the
terms of the O&M Agreement, CMSG II is reimbursed for all direct costs incurred,
receives an overhead fee of $200,000 and a base fee of $60 per hour multiplied
by the number of hours the Facility is actually dispatched. CMSG II can also
earn a bonus if certain performance factors are achieved. Fees and bonuses
earned by CMSG II were $473,000 and $397,000 in 1996 and 1995, respectively.
CMSG II was also reimbursed for direct costs incurred on behalf of the
Partnership of $3,663,000 and $3,168,000 in 1996 and 1995, respectively.
The Partnership has entered into a Fuel Management Agreement (the FMA) with ESC,
to develop, implement and administer a comprehensive fuel supply and
transportation strategy. The FMA terminates December 31, 2001 and will be
automatically renewed for additional one-year terms unless terminated by either
party. ESC was reimbursed for fees and direct costs incurred on behalf of the
Partnership of $13,109,000 and $8,916,000 in 1996 and 1995, respectively.
CNG Power contributed to the Partnership title to contracts, permits, studies
and designs created, acquired or developed in connection with the Facility. The
fair value of these contributed assets have been reflected as additional
contributions and an increase in property, plant, and equipment. CNG Power was
reimbursed $13,000 and $28,000 in 1996 and 1995 respectively, for direct costs
incurred on behalf of the Partnership.
The Partnership has entered into an Administrative Services Agreement with
HYDRA-CO which expires in November 2012 and may be renewed annually upon mutual
agreement. Administrative fees of $304,200 and $309,000 were paid in 1996 and
1995, respectively. HYDRA-CO was also reimbursed $234,000 and $351,000 in 1996
and 1995, respectively, for direct costs incurred on behalf of the Partnership.
Under the terms of the Partnership Agreement, HCE is entitled to a treasury fee
of up to $400,000 per year if certain interest cost savings, as defined, are
realized by the Partnership. The treasury fee commenced on June 8, 1995. Total
interest cost savings earned by HCE were $342,000 and $220,000 in 1996 and 1995,
respectively.
8
<PAGE>
The Partnership has entered into a Project Management Services Agreement with
Lakewood Project Management, Inc. (LPMI), a wholly-owned subsidiary of HYDRA-CO
for an aggregate sum of $2,765,000 which expires at the end of the Warranty
Period, as defined. Total project management fees charged by LPMI for project
management services in 1996 and 1995 were $156,000 and $720,000, respectively,
and are included as a component of property, plant and equipment.
Under the terms of the Partnership Agreement and the loan agreements, certain
construction cost underruns have been paid to the general partners. As of
December 31, 1996 and 1995, $15,258,000 and $13,258,000, respectively, have been
paid to the partners for these cost underruns, including $2,000,000 during 1996
and $8,545,000 during 1995. Additionally, during 1995, $4,713,000 was paid to
the partners as a management fee. These fees and cost underrun distributions
were capitalized or reflected as returns of capital in the accompanying
financial statements.
On the Conversion Date, subordinated loans to the Partnership in the amount of
$2,600,000, $17,850,000, and $10,200,000 due HYDRA-CO, CNG Power, and TPC,
respectively, were converted to equity. Interest was accruing on these loans at
the LIBOR rate plus one percent and was paid June 16, 1995. Total interest paid
for these loans in 1995 was $150,698, $537,509, and $642,812 on each loan,
respectively.
4. COMMITMENTS AND CONTINGENCIES
Electricity from the Facility is sold under a 20-year Power Purchase Agreement
(the PPA) whereby GPU will purchase the contract capacity, as defined, at
specified rates under a dispatchable arrangement. The PPA expires twenty years
from November 8, 1994 and may be extended for successive periods of five years.
The Facility also generates steam for sale to three customers under a 5-year
agreement commencing in 1996.
The Partnership entered into an Amended and Restated Performance Construction
Contract (the EPC Contract) with CRS Sirrine Engineers, Inc. (CRSS) for a total
contract price of $151,900,000. In accordance with the EPC Contract, the
Partnership withheld 10% of the amounts payable to CRSS as retainage until
Substantial Completion, as defined, was achieved. The EPC Contract called for
the Facility to be substantially complete by September l, 1994 at which time
certain performance tests were required to be met. The EPC Contract also
provided for CRSS to pay certain liquidated damages to the extent that these
performance tests or certain other milestones were not met by September l, 1994.
In February 1995, CRSS and the Partnership entered into a Settlement Agreement
whereby the date of Substantial Completion was designated November 9, 1994.
Furthermore, the balance of retainage held prior to the Settlement Agreement
($15,445,000) was reduced by $5,200,000 in full satisfaction of liquidated
damages. This amount has been recorded as a reduction to property, plant and
equipment in the accompanying balance sheets. The Settlement Agreement also
allowed the Partnership to hold from retainage, otherwise due and payable, an
amount of $3,000,000 as security for the performance of final punchlist items
and an amount of $2,000,000 in an interest bearing escrow account for a
specified amount of time as security for potential warranty claims. The
remaining retainage of $5,245,000 due to CRSS was paid in March 1995. CRSS has
indemnified the Partnership against any liabilities or costs incurred as a
result of any disputes between CRSS and its subcontractors and unconditionally
guaranteed the performance of warranty obligations of CRSS. At the Final
Completion Date (November 20,1995), it was determined that punchlist items
valuing $511,688 remained to be completed. As such $1,488,312 plus $28,500 of
accrued interest was returned to CRSS. At December 31, 1995, the remaining
balance in the escrow account was $514,341. At December 31, 1996, the escrow
account has been closed; $112,121 of retainage remains due and payable to CRSS.
The Partnership entered into various agreements with New Jersey Natural Gas
Company (NJNG), whereby NJNG constructed natural gas pipelines interconnecting
the Facility with two interstate pipeline systems; the Partnership purchased
these pipeline assets for $6,850,000 which is included as a component of
property, plant and equipment.
9
<PAGE>
The Partnership pays NJNG an annual charge of $2,616,000 in capacity
reservation charges. This agreement expires in April 2014 and provides for
early termination payments to NJNG under certain circumstances. NJNG also has
the right to repurchase the assets at the termination of the agreement.
Currently the Facility has three steam customers. Each agreement has an initial
term of five years and can be automatically extended annually with agreement of
both parties for up to twenty years. The Partnership is also required to
construct, at its expense, the steam distribution system to deliver the steam to
the customers.
Pursuant to an amended Agreement of Grant and Reservation with the Lakewood
Township Municipal Utilities Authority (LTMUA), the Partnership has agreed to
construct and maintain certain water facilities whose title will transfer to
LTMUA upon their completion. In addition, the Partnership has agreed to make
non-refundable contributions to LTMUA toward the construction, permitting, and
operation of wells needed to provide water to the Facility.
In October 1995, the Partnership entered into a Long Term Maintenance Agreement
with ABB Power Generation, Inc. (ABB) for its two combustion turbines. The
contract value of $16,051,000 is to be paid over a 61 month period. Contract
payments of $2,880,000 and $1,480,000 were paid to ABB in 1996 and 1995,
respectively.
The Partnership has entered into an Environmental Preservation Trust Fund
Agreement with the Township of Lakewood (the Township). On the financial
closing date, the Partnership paid the Township $2,000,000 for the creation of
an Environmental Preservation Trust Fund (the Fund) in order to insure that the
Partnership will promptly respond to cure any Facility related environmental
impacts. The Township has the right to receive all interest earned on amounts
invested in the Fund which terminates after twenty years when the $2,000,000
principal will be returned to the Partnership. This amount has been reflected
as a receivable from the Township in the accompanying balance sheets.
The Partnership has also entered into a Host Benefits Agreement with the
Township to make minimum annual payments in the amount of $600,000 or the actual
amount of real estate taxes assessed on the Facility, whichever is greater. In
September 1994, the Township assessed the Facility approximately $1,900,000 in
annual property taxes, a level which the Partnership appealed. In August 1996, a
settlement agreement was reached providing for annual property taxes of
approximately $1,200,000. Cash payments in excess of the $1,200,000 made from
1994 though 1996 are to be credited future payments through 1998. As of
December 31, 1996, the outstanding settlement amount which the Partnership can
deduct from future tax payments is approximately $1,900,000 and is reflected as
prepaid expenses in the accompanying balance sheet. In 1996, this settlement
reduced administrative and general expenses in the accompanying statement of
income by $930,000.
In accordance with an agreement between the Partnership and the Ocean County
Prosecutor in Toms River, New Jersey, the Partnership has agreed to cooperate
with any ongoing investigation into certain activities surrounding the
development of the Facility and to perform community service in exchange for
acceptance by the Prosecutor's office of no admission of guilt by the
Partnership and certain of its affiliates.
Until the completion of all construction and warranty phases, the Partnership is
required to maintain a Punchlist and Warranty Escrow. Funds may be withdrawn to
pay construction costs with prior approval of both Mellon Bank and its
Independent Engineers. The excess funds of the Punchlist and Warranty Escrow
not used for construction items will be distributed to the partners as either a
management fee or a return of capital. As of December 31, 1996 and 1995, the
balance in the Punchlist and Warranty Escrow was $361,232 and $3,293,036.
10
<PAGE>
EXHIBIT I - (2)
THE LATIN AMERICA ENERGY
AND ELECTRICITY FUND I, L.P.
FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1996 AND 1995
TOGETHER WITH AUDITORS' REPORT
<PAGE>
[LETTERHEAD OF ARTHUR ANDERSEN LLP]
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Partners of
The Latin America Energy and Electricity Fund I, L.P.:
We have audited the accompanying statements of assets and liabilities, including
the schedules of investments, of The Latin America Energy and Electricity Fund
I, L.P. (a Cayman Islands exempted limited partnership) as of December 31, 1996
and 1995, and the related statements of operations, changes in partners' capital
and cash flows for the year ended December 31, 1996 and for the period from July
17, 1995 (inception) through December 31, 1995. These financial statements are
the responsibility of the Partnership's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of The Latin America Energy and
Electricity Fund I, L.P. as of December 31, 1996 and 1995, and the results of
its operations and its cash flows for the year ended December 31, 1996 and for
the period from July 17, 1995 (inception) through December 31, 1995, in
conformity with generally accepted accounting principles.
As explained in Note 2, the financial statements include securities valued at
$19,673,684 (96 percent of net assets) and $5,915,972 (87 percent of net
assets) as of December 31, 1996 and 1995, respectively, whose values have been
estimated by the Fund Manager in the absence of readily ascertainable market
values. However, because of the inherent uncertainty of valuation, those
estimated values may differ significantly from the values that would have been
used had a ready market for the securities existed, and the differences could
be material.
/s/ Arthur Andersen LLP
Grand Cayman, B.W.I.
February 24, 1997
<PAGE>
THE LATIN AMERICA ENERGY AND ELECTRICITY FUND I, L.P.
-----------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES
------------------------------------
DECEMBER 31, 1996 AND 1995
--------------------------
<TABLE>
<CAPTION>
ASSETS 1996 1995
------ ------------ -----------
<S> <C> <C>
INVESTMENT IN SECURITIES, at fair value
(cost $18,135,656 and $5,915,972 at
December 31, 1996 and 1995,
respectively) $19,673,684 $5,915,972
CASH AND CASH EQUIVALENTS 780,469 440,409
DUE FROM FUND MANAGER (Note 5) 250,000 250,000
DUE FROM CONSORTIUM MEMBERS 41,219 -
ORGANIZATIONAL COSTS, net of
accumulated amortization of $150,000
and $25,000 at December 31, 1996 and
1995, respectively (Note 2) 450,000 475,000
OTHER ASSETS 551,674 19,725
----------- ----------
Total assets $21,747,046 $7,101,106
=========== ==========
LIABILITIES AND PARTNERS' CAPITAL
---------------------------------
LIABILITIES:
Accrued liabilities $ 200,064 $ 105,365
Due to Fund Manager (Note 5) 307,844 196,573
Due to Limited Partners 255,961 -
----------- ----------
Total liabilities 763,869 301,938
----------- ----------
PARTNERS' CAPITAL:
General Partner 209,832 67,992
Limited Partners 20,773,345 6,731,176
----------- ----------
Total partners' capital 20,983,177 6,799,168
----------- ----------
Total liabilities and
partners' capital $21,747,046 $7,101,106
=========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
THE LATIN AMERICA ENERGY AND ELECTRICITY FUND I, L.P.
-----------------------------------------------------
STATEMENTS OF OPERATIONS
------------------------
<TABLE>
<CAPTION>
For the
Period From
July 17, 1995
For the Year (Inception)
Ended Through
December 31, December 31,
1996 1995
------------ -------------
<S> <C> <C>
INVESTMENT INCOME:
Interest $ 58,573 $ 10,631
Dividends 585,440 -
---------- ---------
Total investment income 644,013 10,631
---------- ---------
EXPENSES:
Management and financial advisory fees
(Note 5) 929,420 125,732
Administrative expenses (Note 5) 373,059 128,620
Expenses related to investments not
consummated 200,234 -
Amortization of organization costs 125,000 25,000
---------- ---------
Total expenses 1,627,713 279,352
---------- ---------
Net investment loss (983,700) (268,721)
---------- ---------
NET GAIN ON INVESTMENTS:
Net change in appreciation in value of
investments 1,538,028 -
---------- ---------
Net gain on investments 1,538,028 -
---------- ---------
Net increase (decrease) in net
assets resulting
from operations $ 554,328 $(268,721)
========== =========
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
THE LATIN AMERICA ENERGY AND ELECTRICITY FUND I, L.P.
-----------------------------------------------------
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
------------------------------------------
FOR THE YEAR ENDED DECEMBER 31, 1996 AND FOR THE
------------------------------------------------
PERIOD FROM JULY 17, 1995 (INCEPTION)
-------------------------------------
THROUGH DECEMBER 31, 1995
-------------------------
<TABLE>
<CAPTION>
General Limited
Partner Partners Total
--------- ------------ ------------
<S> <C> <C> <C>
BALANCE, July 17, 1995 (inception) $ - $ - $ -
Capital contributions 70,679 6,997,210 7,067,889
Net decrease in net assets resulting
from operations (2,687) (266,034) (268,721)
-------- ----------- -----------
BALANCE, December 31, 1995 67,992 6,731,176 6,799,168
Capital contributions 138,728 16,911,277 17,050,005
Distributions (2,431) (3,417,893) (3,420,324)
Net increase in net assets resulting
from operations 5,543 548,785 554,328
-------- ----------- -----------
BALANCE, December 31, 1996 $209,832 $20,773,345 $20,983,177
======== =========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
THE LATIN AMERICA ENERGY AND ELECTRICITY FUND I, L.P.
-----------------------------------------------------
STATEMENTS OF CASH FLOWS
------------------------
<TABLE>
<CAPTION>
For the
Period From
July 17, 1995
For the Year (Inception)
Ended Through
December 31, December 31,
1996 1995
------------ -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net increase (decrease) in net assets
resulting from operations $ 554,328 $ (268,721)
Net change in unrealized appreciation
on securities (1,538,028) -
Amortization of organization costs 125,000 25,000
Adjustments to reconcile net decrease
in net assets resulting from
operations to net cash used in
operating activities-
Purchase of securities (12,219,684) (5,915,972)
Increase in due from consortium
members (41,219) -
Increase in other assets (531,949) (19,725)
Increase in accrued liabilities 94,699 105,365
Increase in due to Fund Manager 111,271 196,573
Increase in due to Limited Partners 255,961 -
------------ -----------
Net cash used in operating
activities (13,189,621) (5,877,480)
------------ -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Capital contributions 17,050,005 7,067,889
Distributions (3,420,324) -
Loan to Fund Manager - (250,000)
Organizational costs (100,000) (500,000)
------------ -----------
Net cash provided by financing
activities 13,529,681 6,317,889
------------ -----------
Net increase in cash and cash
equivalents 340,060 440,409
CASH AND CASH EQUIVALENTS, beginning of
period 440,409 -
------------ -----------
CASH AND CASH EQUIVALENTS, end of period $ 780,469 $ 440,409
============ ===========
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
THE LATIN AMERICA ENERGY AND ELECTRICITY FUND I, L.P.
-----------------------------------------------------
SCHEDULES OF INVESTMENTS
------------------------
DECEMBER 31, 1996 AND 1995
--------------------------
<TABLE>
<CAPTION>
1996
-----------------------------------------------------------------------------------
Current Value
Number of at December 31, Percent of Geographic
Security Units Cost Basis 1996 Net Assets Region Industry
-------- --------- ----------- --------------- ---------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C>
NONMARKETABLE SECURITIES:
Ontario-Quinta A.V.V. 5,000,000 $ 5,915,972 $ 7,454,000 36% South America Utilities
Inversora en Distribucion de Entre
Rios S.A. 900 12,219,684 12,219,684 60 South America Utilities
----------- ----------- --
$18,135,656 $19,673,684 96%
=========== =========== ==
<CAPTION>
1995
-----------------------------------------------------------------------------------
Current Value
Number of at December 31, Percent of Geographic
Security Units Cost Basis 1995 Net Assets Region Industry
-------- --------- ----------- --------------- ---------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C>
NONMARKETABLE SECURITIES:
Ontario-Quinta A.V.V. 5,000,000 $ 5,915,972 $ 5,915,972 87% South America Utilities
=========== =========== ==
</TABLE>
The accompanying notes are an integral part of these schedules.
<PAGE>
THE LATIN AMERICA ENERGY AND ELECTRICITY FUND I, L.P.
----------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
DECEMBER 31, 1996 AND 1995
--------------------------
1. ORGANIZATION
------------
The Latin America Energy and Electricity Fund I, L.P. (the "Partnership" or the
"Fund"), a Cayman Islands exempted limited partnership, was formed on July 17,
1995, and commenced operations on October 31, 1995, pursuant to an amended and
restated partnership agreement (the "Partnership Agreement") as of that date.
The Fund was organized to invest in companies whose primary business is
generating, transmitting and distributing electric power in Latin or South
America. The General Partner of the Fund is FondElec General Partner, L.P. (the
"General Partner"), a Cayman Islands exempted limited partnership. The
Partnership shall terminate on October 31, 2003. Its term may be extended for
an additional period of up to two years by the General Partner with the approval
of the investment committee, or it may be terminated earlier under certain
circumstances, as described in the Partnership Agreement. The Fund is managed
by FondElec Group, Inc. (the "Fund Manager").
The General Partner of the Fund, subject to certain conditions, has the power to
carry out any and all of the objectives and purposes of the Partnership. The
General Partner must receive approval from the investment committee (consisting
of representatives of the strategic limited partners of the Fund) prior to
taking certain investment and administrative actions for the Fund.
2. SIGNIFICANT ACCOUNTING POLICIES
-------------------------------
Use of Estimates
- ----------------
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Cash and Cash Equivalents
- -------------------------
The Partnership considers all highly liquid investments purchased with a
remaining maturity of three months or less to be cash equivalents. At December
31, 1995, cash equivalents consisted of approximately $433,000 invested in a
money market fund.
<PAGE>
-2-
Investment Valuation
- --------------------
Unquoted securities are stated at their estimated fair value at December 31,
1996 and 1995, as determined by the Fund Manager.
Deferred Investment Costs
- -------------------------
Expenses incurred in connection with the due diligence investigations of
potential investments and related costs incurred are capitalized. Such costs
are either added to the cost of the investment when consummated or expensed when
the decision is made not to pursue the opportunity any further.
Foreign Currency Transactions
- -----------------------------
The functional currency of the Partnership is the U.S. dollar. Assets and
liabilities denominated in foreign currencies, if any, are translated into U.S.
dollar equivalents using the prevailing year-end spot exchange rate with the
resulting gains and losses included in net unrealized gain on investment.
Organization Costs
- ------------------
Costs incurred in the organization of the Partnership totaling $600,000 have
been capitalized and are being amortized on a straight-line basis over a period
of five years.
Income Taxes
- ------------
No provision is made for United States federal income or excise taxes as the
Fund is organized in the Cayman Islands and does not operate in the United
States. Presently, there is no direct taxation in the Cayman Islands. As such,
interest, distributions and gains received by the Fund are free of all Cayman
Islands taxes.
3. PARTNERS' CAPITAL
-----------------
Capital Contribution
- --------------------
Cumulative capital contributions by the General Partner were $209,407 and
$70,679 at December 31, 1996 and 1995, respectively. Cumulative capital
contributions by the Limited Partners were $23,908,487 and $6,997,210 at
December 31, 1996 and 1995, respectively, net of returns of investment made due
to the admission of a new limited partner during 1996 (see Withdrawal and
Admission of Partners). The capital contributions represent 34% and 14% of the
total capital commitments of the partners of $60,303,030 and $50,252,525 as of
December 31, 1996 and 1995, respectively. The balance is payable upon call by
the General Partner. The Partnership Agreement provides each limited partner
the option not to participate in any specific investment. In such case, the
required contributions of the other limited partners for such investment shall
be proportionally increased.
<PAGE>
-3-
Allocations of Proceeds and Distribution
- ----------------------------------------
Pursuant to the terms of the Partnership Agreement, investment proceeds (as
defined in the Partnership Agreement) as to each investment are allocated
proportionately among the partners participating in such investment. Such
proceeds are further allocated between each limited partner and the General
Partner as follows:
a. The amount necessary to return the limited partner's required contribution
in such investment and to return any realized or unrealized losses that
partner has incurred on other investments will be allocated to the limited
partner.
b. Any investment proceeds in excess of the amount in a. above will be
allocated to the limited partner to provide a preferred return at the rate
of 9% per annum on net cash investment made in such investment or any
unpaid preferred return on other investments.
c. Any remaining investment proceeds will be allocated to the General Partner
until the General Partner receives 25% of the amount allocated in b.
d. Any remaining investment proceeds will be allocated 80% to the limited
partner and 20% to the General Partner.
The Partnership Agreement provides for a final allocation at the termination of
the Partnership related to all investments of each limited partner. To the
extent that the final allocation to any limited partner exceeds the amounts
previously allocated, the General Partner shall, subject to certain limitations,
refund such amount to the Partnership for distribution to the limited partner.
Profits and losses shall be allocated so that the capital account of each
partner is as equal as possible to the distribution that would be made if the
Partnership were dissolved immediately after making such allocation.
Distributions shall be made to the partners in proportion to the allocation of
investment proceeds no more than 60 days after the end of the fiscal quarter in
which such investment proceeds were received by the Partnership.
On May 30, 1996, the Fund distributed $2,432 and $240,742 to the General Partner
and to the Limited Partners, respectively. The distribution was comprised of
interest income and dividends received from the Fund's investment in Ontario-
Quinta A.V.V. ("Ontario-Quinta") (Note 4). Subsequent to December 31, 1996, the
Fund made another distribution to the General Partner and the Limited Partners
of $4,115 and $407,356, respectively, which was comprised of dividends from both
Ontario-Quinta and Inversora en Distribucion de Entre Rios S.A. ("Entre Rios")
(Note 4) as well as interest income.
Withdrawal and Admission of Partners
- ------------------------------------
A limited partner shall not have the right to withdraw any of his capital from
the Fund except with the prior written consent of the General Partner. The
General Partner may, in its sole and
<PAGE>
-4-
absolute discretion, admit new limited partners to the Partnership. If admitted
to the Partnership prior to October 31, 1996, a new limited partner shall remit
to the Partnership its initial capital contribution, together with an additional
amount (the "Subsequent Admission Payment") computed from the date the
Partnership received each contribution, until the date such payment is remitted
to the Partnership at an annual rate of 10%. Any new limited partner admitted
to the Partnership after October 31, 1996 may only participate and invest in
investments made prior to admission with the approval of the investment
committee.
In October 1996, a new limited partner was admitted to the Partnership under the
circumstances of the Partnership Agreement described above, participating and
investing in investments made since inception. The new limited partner paid
approximately $3,600,000 to the Fund, representing approximately $3,400,000 of
capital contributions (inclusive of incremental organizational costs and
management fees in accordance with the Partnership Agreement totaling $250,000)
and a Subsequent Admission Payment of approximately $200,000. The payment made
to the Fund by the new limited partner as well as the payments made by the Fund
pursuant to the Partnership Agreement to the initial limited partners are
included in contributions and distributions, respectively, in the statements of
changes in partners' capital.
4. INVESTMENTS, AT FAIR VALUE
--------------------------
The Partnership is permitted to invest in privately placed securities. These
securities may be resold in transactions exempt, under certain conditions, from
U.S. or local security registration. However, prompt sale of such securities at
an acceptable price may be difficult. As of December 31, 1996 and 1995, 96% and
87%, respectively, of the Partnership's net assets were invested in such
securities.
The investment in Ontario-Quinta represents an equity interest in a holding
company which controls Luz Del Sur, a Peruvian utility company that was
privatized in 1994 and went public in 1996. The investment was purchased on
December 29, 1995. At December 31, 1996, the Partnership valued the investment
based upon, among other factors, the prospects of the company, the underlying
market value of the shares of Luz del Sur, comparable utility companies and
utility holding companies and the liquidity of the investment. At December 31,
1995, the investment was valued at cost.
In May 1996, the Partnership invested in Entre Rios, the private holding company
of Empresa Distribuidora de Entre Rios S.A. ("EDEER"). EDEER is a distributor
and transmitter of electric power in Argentina. At December 31, 1996, the
investment was valued at cost.
5. RELATED PARTY TRANSACTIONS
--------------------------
Note Receivable
- ---------------
During 1995, the Fund received a note from the Fund Manager for $250,000. The
note is payable any time without penalty or upon termination of the management
agreement between the Fund and the Fund Manager. The note bears interest at the
rate of the three-month LIBOR.
<PAGE>
-5-
Management Fee
- --------------
Effective October 31, 1995, the Fund Manager receives 1.25% of the Partnership's
committed capital payable quarterly in advance as a basic management fee. For
the year ended December 31, 1996 and the two-month period ended December 31,
1995, basic management fees of $774,621 and $104,452, respectively, have been
recorded in the statements of operations.
Regional Advisor
- ----------------
In 1996, the Partnership entered into an advisory agreement with FondElec
America Latina, Inc. (the "Regional Advisor"), an affiliate of the Fund Manager.
The advisory agreement provides that the Partnership shall pay the Ecuador
Advisor $125,000 per annum plus reasonable out-of-pocket costs for a period of
three years. For the year ended December 31, 1996, advisory fees of $125,000
have been paid to the Regional Advisor and are included in administrative
expenses in the statements of operations.
Financial Advisor
- -----------------
The Partnership has entered into a financial advisory agreement with an
affiliate of a limited partner pursuant to which the financial advisor shall
advise the Partnership of financing options for each of the Partnership's
investments. The financial advisory agreement provides that the Partnership
shall annually pay the financial advisor .25% of the Partnership's committed
capital quarterly in advance. For the year ended December 31, 1996 and the two-
month period ended December 31, 1995, financial advisory fees of $154,799 and
$21,280, respectively, have been recorded in the statements of operations.
Technical Advisor
- -----------------
The Partnership has entered into a technical advisory agreement with a limited
partner pursuant to which the technical advisor shall assist the Partnership in
evaluating proposed investments. The technical advisory agreement provides that
the Partnership shall annually pay the technical advisor reasonable employee
overhead and out-of-pocket expenses. There were no technical advisory fees
incurred for the year ended December 31, 1996 and the two-month period ended
December 31, 1995.
Due to Fund Manager
- -------------------
In 1996 and 1995, the Fund Manager incurred certain administrative and
organizational costs on behalf of the Partnership. At December 31, 1996 and
1995, amounts remaining to be reimbursed to the Fund Manager were $307,844 and
$196,573, respectively.
Due to Limited Partners
- -----------------------
In connection with the admittance of a new limited partner in 1996, amounts paid
in to the Fund by the new limited partner were to be paid to the initial limited
partners. As of December 31, 1996, $255,961 of such amounts remained to be paid
to the limited partners.
