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File Number 70-8981
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Amendment No. 2
to
Form U-1
APPLICATION-DECLARATION UNDER THE PUBLIC UTILITY
HOLDING COMPANY ACT OF 1935
By
CONSOLIDATED NATURAL GAS COMPANY
CNG Tower
625 Liberty Avenue
Pittsburgh, Pennsylvania 15222-3199
(a registered holding company and the direct
or indirect parent of the other parties)
CNG ENERGY SERVICES CORPORATION
CNG POWER COMPANY
One Park Ridge Center
P.O. Box 15746
Pittsburgh, Pennsylvania 15244-0746
Names and addresses of agents for service:
S. E. WILLIAMS, Senior Vice President
and General Counsel
Consolidated Natural Gas Company
CNG Tower
625 Liberty Avenue
Pittsburgh, Pennsylvania 15222-3199
N. F. CHANDLER, General Attorney
Consolidated Natural Gas Service Company, Inc.
CNG Tower
625 Liberty Avenue
Pittsburgh, Pennsylvania 15222-3199
<PAGE> 2 File Number 70-8981
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Amendment No. 2
to
FORM U-1
APPLICATION-DECLARATION UNDER THE PUBLIC UTILITY
HOLDING COMPANY ACT OF 1935
Item 1. Description of Proposed Transaction
___________________________________
THE APPLICANTS
Consolidated Natural Gas Company (the "Company" or "Consolidated") is a
public utility holding company registered under the Public Utility Holding
Company Act of 1935 ("Act"), and is in the business of directly owning and
holding all of the outstanding securities (except for certain indebtedness of a
distribution company acquired in 1990) of sixteen companies principally engaged
in the natural gas business. The said subsidiary companies are engaged in
natural gas exploration, production, purchasing, gathering, transmission,
storage, distribution, marketing and by-product operations. Consolidated and
its subsidiaries are herein referred to as the "Consolidated System" or "CNG
System."
CNG POWER TO ENGAGE IN EWG ACTIVITIES
CNG Energy Services Corporation ("Energy Services"), a Delaware
corporation, is a wholly-owned nonutility subsidiary of Consolidated. Energy
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Services, pursuant to various orders issued by the Securities and Exchange
Commission ("SEC" or "Commission") beginning in 1987(1), engages in the gas
and power marketing and power generation business. CNG Power Company ("Power
Company"), a Delaware corporation, is a wholly-owned subsidiary of Energy
Services and is engaged principally in the power generation business.
Consolidated, Energy Services and Power Company are collectively referred to
herein as the "Applicants."
Consolidated proposes that Power Company become the primary vehicle for
the Company to invest in exempt wholesale generators ("EWGs"), as defined in
Section 32(a) of the Act, within the United States. Investments in EWGs by
Power Company will be made using internally generated funds of Consolidated and
will accordingly be outside the authorizations sought in this proceeding and
subject to the limitations of Rule 53 promulgated under the Act.
CNG Power may acquire securities or interests in the business of one or
more EWGs located inside the United States. Intermediate companies formed to
be vehicles for making EWG investments ("Intermediate Companies") would be
special purpose subsidiaries exclusively engaged in activities to facilitate
the consummation of investments in EWGs and would enhance the ability of CNG
Power to respond quickly to investment opportunities. It has been the
particular experience of those investing in EWGs that the use of Intermediate
Companies are often necessitated by business concerns such as the need to
_______________
(1) See SEC order dated February 27, 1987, HCAR No. 24329.
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facilitate investments via a consortium of companies where each member thereof
has a consolidated subsidiary involved in the final EWG structure for tax and
accounting purposes, or to ease subsequent adjustments to or sales of interests
among members of the ownership group. Intermediate Companies may acquire
interests in other corporations, joint ventures, partnerships, limited
liability companies and other investment entities created for the purpose of
investing in EWGs. An Intermediate Company may be organized at the time of the
making of bids or proposals to acquire an interest in any EWG or at any time
thereafter in order to facilitate the bidding and subsequent consummation of an
acquisition of an interest of an EWG.
GUARANTEES AND OTHER CREDIT SUPPORT
Application is made for Consolidated, Energy Services, CNG Power and its
subsidiaries, including Intermediate Companies, to enter guarantee
arrangements, obtain letters of credit, and otherwise provide credit support
with respect to EWG related obligations of their respective subsidiaries
(including EWGs themselves) to third parties as may be needed and
appropriate. The maximum aggregate limit on all such credit support by
Consolidated, Energy Services, CNG Power and its subsidiaries at any one time
will be $150 million. Credit support authorization would be for the period
ending December 31, 2002.
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SERVICE AGREEMENTS WITH AFFILIATES
Energy Services and its affiliates may perform services or construction
for, or sell goods to, an EWG in which CNG Power has acquired an interest.
Services, construction and goods may be provided at market rates (determined by
arms-length negotiation or competitive bidding) if the EWG does not provide
services, construction or goods directly or indirectly to Consolidated System
utility affiliates located in the United States.
Energy Services and its affiliates may contract with Consolidated
associate companies in order to provide the above services, construction and
goods. Services, construction and goods obtained from domestic utility
associates would be at cost. Services, construction and goods from nonutility
associates may be at either cost or market; provided, however, that services,
construction and goods from nonutility associates substantially involved in the
provision of services, construction or goods to Consolidated domestic utility
associates would be at cost.
INCREASE IN CAPITALIZATION OF ENERGY SERVICES
Energy Services has authorized capital of 4,000 shares of common stock,
$1.00 par value per share ("Common Stock"). In order to accommodate future
financings including those requested herein and to reduce annual state of
incorporation taxes based on the number of shares outstanding, application is
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made to (i) change the par value of each share of Common Stock from $1.00 to
$10,000 and (ii) increase Energy Services' Common Stock equity authorization to
50,000 shares of common stock, $10,000 par value per share. Each outstanding
share of $1.00 par value would be converted into a share of $10,000
par value through the transfer of $9,999 per share from the capital in excess
of par value account to the capital stock account. Energy Service had 3,305
shares of Common Stock, $1.00 par value, outstanding at June 30, 1997. The
issuance of each additionally authorized share of Common Stock for $10,000 per
share would allow Energy Service to consummate additional equity financing for
the purposes described herein and for other authorized or exempt transactions.
COMPLIANCE WITH RULE 53
Any direct or indirect investment by CNG Power in any EWG would be
consummated only if, at the time thereof, and giving effect thereto,
Consolidated's "aggregate investment" determined in accordance with Rule
53(a)(1)(i) in all EWGs and FUCOs would not exceed 50% of Consolidated's
consolidated retained earnings as defined in Rule 53(a)(1)(ii). One-half of
the CNG's average consolidated retained earnings as reported for the four most
recent quarterly periods on CNG's Forms 10-K and 10-Q was $737,514,000; CNG's
investment in EWGs as of the date of filing of this application-declaration
("Application") is estimated to be approximately $15,015,000. The Company
currently has $3,651,000 in investments in FUCOs.
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The books and records of Consolidated's EWGs are kept in conformity with
United States generally accepted accounting principles ("GAAP"), the financial
statements are prepared according to GAAP, and Consolidated undertakes to
provide the Commission access to such books and records and financial
statements as it may request. It is anticipated that a minimal number of
employees of Consolidated's domestic public-utility companies will render
services, directly or indirectly, to EWGs and FUCOs in the Consolidated System,
and the number of such employees shall not in any event exceed two percent of
the total number of employees of such utility companies.
Copies of this Application and all amendments thereto are being submitted
to the public utility commissions of the States of Ohio, Pennsylvania, West
Virginia and Virginia, which are the only regulators having jurisdiction over
the retail rates of the public-utility companies in the Consolidated System.
In addition, Consolidated will submit to each such commission a copy of any
Rule 24 certificate required hereunder, as well as a copy of Item 9 of
Consolidated's Form U5S, including Exhibits G and H thereof.
None of the conditions described in Rule 53(b) under the Act exist with
respect to Consolidated, thereby satisfying Rule 53(b) and making Rule 53(c)
inapplicable.
FILING OF CERTIFICATES OF NOTIFICATION
It is also requested that Rule 24 Certificates of Notification be filed
within 60 days after the end of each semi-annual calendar period to report to
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the Commission with respect to transactions authorized pursuant to this
filing. Such certificates shall contain a CNG Power balance sheet as of the
end of such period, and a statement of income and expense for the period.
Item 2. Fees, Commissions and Expenses
______________________________
It is estimated that the fees, commissions and expenses ascertainable at
this time to be incurred by Consolidated in connection with the herein proposed
transaction will not exceed $25,000, including $10,000 payable to Consolidated
Natural Gas Service Company, Inc. ("Service Company") for services on a cost
basis (including regularly employed counsel) for the preparation of this
application-declaration and other documents, $10,000 payable to non-affiliated
professionals, and $5,000 for miscellaneous other expenses.
Item 3. Applicable Statutory Provisions
_______________________________
Sections 12(b) and Rule 45 are considered applicable to loan arrangements
among Consolidated, Energy Services, CNG Power and its subsidiaries, and to
guarantees and other credit support for direct or indirect subsidiaries by
parent companies as requested herein.
Section 32 and Rules 53 and 54 apply to the financing activities
involving EWGs.
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Section 13(b) and Rules 83, 87, 90 and 91 are deemed applicable to
certain of the proposed service arrangements with respect to which
authorization is sought.
Sections 6(a) and 7 are deemed applicable to the changes in Common Stock
par value and authorization.
If the Commission considers the proposed future transactions to require
any authorization, approval or exemption, under any section of the Act for Rule
or Regulation other than those cited hereinabove, such authorization, approval
or exemption is hereby requested.
Item 4. Regulatory Approval
___________________
The financing authorization sought herein is not subject to the
jurisdiction of any State or Federal Commission (other than the Commission).
Item 5. Procedure
_________
It is hereby requested that the Commission issue its order with respect
to the transaction proposed herein on or before October 17, 1997.
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It is submitted that a recommended decision by a hearing or other
responsible officer of the Commission is not needed with respect to the
proposed transactions. The office of the Division of Investment Management -
Office of Public Utility Regulation may assist in the preparation of the
Commission's decision. There should be no waiting period between the issuance
of the Commission's order and the date on which it is to become effective.
Item 6. Exhibits and Financial Statements
_________________________________
The following exhibits and financial statements are made a part of this
statement:
(a) Exhibits
A-1 Certificate of Incorporation of Energy Services.
(Incorporated by reference to Exhibit A-1 to Form U-1
of Consolidated, File No. 70-8577)
A-2 By-Laws of Energy Services.
(Incorporated by reference to Exhibit A-2 to Form U-1
of Consolidated, File No. 70-8577)
A-3 Certificate of Incorporation of CNG Power Company.
(Incorporated by reference to Exhibit A-1 to Form U-1
of Consolidated, File No. 70-7909)
A-4 By-Laws of CNG Power.
(Incorporated by reference to Exhibit A-2 to Form U-1
of Consolidated, File No. 70-7909)
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F Opinion of counsel for Consolidated, Energy Services
and CNG Power.
(To be filed by Amendment)
O Draft of Notice.
(b) Financial Statements
Financial statements are deemed unnecessary with respect to the
authorizations herein sought due to the nature of the matter proposed.
However, Consolidated will furnish any financial information that the
Commission shall request.
Item 7. Information as to Environmental Effects
_______________________________________
The proposed transactions do not involve major federal action
having a significant effect on the human environment. See Item 1(a).
No federal agency has prepared or is preparing an environmental
impact statement with respect to the proposed transaction.
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SIGNATURE
Pursuant to the requirements of the Public Utility Holding Company Act
of 1935, the undersigned company has duly caused this statement to be signed
on its behalf by the undersigned thereunto duly authorized.
CONSOLIDATED NATURAL GAS COMPANY
By D. M. Westfall
Senior Vice President
and Chief Financial Officer
CNG ENERGY SERVICES CORPORATION
CNG POWER COMPANY
By N. F. Chandler
Their attorney
Date: September 4, 1997
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EXHIBIT O
Proposed Notice
Pursuant to Rule 22(f)
(Release No. 35- )
FILINGS UNDER THE PUBLIC UTILITY HOLDING
COMPANY ACT OF 1935 ("ACT")
September , 1997
Notice is hereby given that the following filing(s) has/have been made
with the Commission pursuant to provisions of the Act and rules promulgated
thereunder. All interested persons are referred to the application(s) and/or
declaration(s) for complete statements of the proposed transaction(s)
summarized below. The application(s) and/or declaration(s) and any amendments
thereto is/are available for public inspection through the Commission's Office
of Public Reference.
Interested persons wishing to comment or request a hearing on the
application(s) and/or declaration(s) should submit their views in writing by
September , 1997 to the Secretary, Securities and Exchange Commission,
Washington, DC 20549, and serve a copy on the relevant applicant(s) and/or
declarant(s) at the address(es) specified below. Proof of service (by
affidavit or, in case of an attorney at law, by certificate) should be filed
with the request. Any request for hearing shall identify specifically the
issues of fact or law that are disputed. A person who so requests will be
notified of any hearing, if ordered, and will receive a copy of any notice or
order issued in the matter. After said date, the application(s) and/or
declaration(s), as filed or as amended, may be granted and/or permitted to
become effective.
____________________________________
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Consolidated Natural Gas Company, et. al. (70-8981)
___________________________________________________
Consolidated Natural Gas Company ("Consolidated"), CNG Tower, 625
Liberty Avenue, Pittsburgh, Pennsylvania, 15222-3199, a registered holding
company, and Consolidated's wholly-owned subsidiaries, CNG Energy Services
Corporation ("Energy Services") and CNG Power Company ("Power Company"), One
Park Ridge Center, P.O. Box 15746, Pittsburgh, Pennsylvania 15244-0746, have
filed an application-declaration pursuant to Sections 6, 7, 12, 13 and 32 of
the Act and Rules 43, 45, 53, 54, 83, 87, 90, and 91 thereunder.
Consolidated proposes that Power Company become the primary vehicle for
the Company to invest in exempt wholesale generators ("EWGs"), as defined in
Section 32(a) of the Act, within the United States. Investments in EWGs by
Power Company will be made using internally generated funds of Consolidated and
will accordingly be outside the authorizations sought and subject to the
limitations of Rule 53 promulgated under the Act.
Application is also made for Consolidated, Energy Services, CNG Power and
its subsidiaries, including special purpose intermediary companies, to enter
guarantee arrangements, obtain letters of credit, and otherwise provide credit
support with respect to obligations of their respective subsidiaries (including
EWGs) to third parties as may be needed and appropriate to enable them to carry
on in the ordinary course of their respective businesses. The maximum
aggregate limit on all such credit support by Consolidated, Energy Services,
CNG Power and its subsidiaries at any one time will be $150 million. Credit
support authorization would be for the period ending December 31, 2002.
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Energy Services and its affiliates may perform services or construction
for, or sell goods to, an EWG in which CNG Power has acquired an interest.
Such services, construction and goods may be provided at market rates
(determined by arms-length negotiation or competitive bidding) if the EWG does
not provide services, construction or goods directly or indirectly to
Consolidated System utility affiliates located in the United States.
Energy Services and its affiliates may contract with Consolidated
associate companies in order to provide the above services, construction and
goods. Services, construction and goods obtained from domestic utility
associates would be at cost. Services, construction and goods from nonutility
associates may be at either cost or market; provided, however, that services,
construction and goods from nonutility associates substantially involved in the
provision of services, construction or goods to Consolidated domestic utility
associates would be at cost.
Energy Services has authorized capital of 4,000 shares of common stock,
$1.00 par value per share ("Common Stock"). In order to accommodate future
financings including those requested herein and to reduce annual state of
incorporation taxes based on the number of shares outstanding, application is
made to (i) change the par value of each share of Common Stock from $1.00 to
$10,000 and (ii) increase Energy Services' Common Stock equity authorization to
50,000 shares of common stock, $10,000 par value per share. Each outstanding
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share of $1.00 par value would be converted into a share of $10,000
par value through the transfer of $9,999 per share from the capital in excess
of par value account to the capital stock account. Energy Service had 3,305
shares of Common Stock, $1.00 par value, outstanding at June 30, 1997. The
issuance of each additionally authorized share of Common Stock for $10,000 per
share would allow Energy Service to consummate additional equity financing for
the purposes described herein and for other authorized or exempt transactions.
____________________________________
For the Commission, by the Division of Investment Management,
pursuant to delegated authority.
Jonathan G. Katz
Secretary
