SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM U-1
APPLICATION/DECLARATION
under
The Public Utility Holding Company Act of 1935
NATIONAL FUEL GAS COMPANY HORIZON ENERGY
10 Lafayette Square DEVELOPMENT, INC.
Buffalo, New York 14203 10 Lafayette Square
Buffalo, New York 14203
(Name of company or companies filing this statement
and addresses of principal executive offices)
NATIONAL FUEL GAS COMPANY
(Name of top registered holding company parent
of each applicant or declarant)
P. C. Ackerman, Senior Vice President B. H. Hale
National Fuel Gas Company Horizon Energy Development, Inc.
10 Lafayette Square 10 Lafayette Square
Buffalo, New York 14203 Buffalo, New York 14203
(Names and addresses of agents for service)
The Commission is requested to mail signed copies of all
orders, notices and communications to:
B. H. Hale G. T. Wehrlin
10 Lafayette Square Controller
Buffalo, New York 14203 National Fuel Gas Company
10 Lafayette Square
Buffalo, New York 14203
Kyle G. Storie
10 Lafayette Square
Buffalo, New York 14203
INTRODUCTION
National Fuel Gas Company ("National"), a registered holding
company, and Horizon Energy Development, Inc. ("Horizon"), a
corporation that National proposes to acquire and own as a wholly
owned nonutility subsidiary, both headquartered in Buffalo, New
York, (collectively, the "Applicants") join in this Application/
Declaration.
National proposes to capitalize Horizon by providing debt and
equity capital not to exceed $150 million at any time outstanding
through December 31, 2001. Horizon proposes to invest an amount
not to exceed $150 million of debt or equity capital at any time
outstanding through December 31, 2001 ("Investment Limit") in
authorized project activities ("Project Activities").
Project Activities will include the full range of development
activities from preliminary development work to investments in,
and financing the acquisition of, one or more companies
("Intermediate Companies") engaged directly or indirectly and
exclusively in the business of holding the securities of one or
more exempt wholesale generators, ("EWGs"), as defined by Section
32 of the Public Utility Holding Company Act of 1935 as amended
(the "Act"), and foreign utility companies as defined by Section
33 of the Act ("FUCOs") (EWGs and FUCOs are, hereinafter, referred
to collectively as "Exempt Projects.")
National and Horizon propose to make such investments without
prior Commission approval subject to certain limitations, in
accordance with Sections 32 and 33 of the Act, and rules
promulgated and to be promulgated thereunder. Applicants also
request authority to issue guarantees and assume liabilities with
regard to Exempt Projects up to the proposed $150 million
Investment Limit.
Project Activities would also include development activities
throughout the United States regarding qualifying cogeneration and
small power production facilities as defined in the Public Utility
Regulatory Policies Act of 1978 and the rules and regulations
promulgated thereunder, and independent power production
facilities, (hereinafter collectively referred to as "Domestic
Power Projects"). Horizon also seeks authority to invest and
participate in Domestic Power Projects after obtaining prior
project specific approval from the Commission.
Project Activities shall also include consulting services to
be provided by Horizon or any other subsidiary of National with
respect to Domestic Power Projects and Exempt Projects.
Item I. DESCRIPTION OF PROPOSED TRANSACTION
A. Financing for Horizon
Horizon is a business corporation that has 20,000 shares
of authorized but unissued common stock. The initial financing
for Horizon will be provided by the acquisition by National of 100
shares of Horizon common stock, par value $1.00 per share, for
$500,000. National requests authorization to invest an amount not
to exceed $150 million at any time outstanding in Horizon through
December 31, 2001, for the purpose of financing Horizon's Project
Activities.
National requests authority to make investments in
Horizon in the form of acquisitions of capital stock, capital
contributions, open account advances and/or loans (collectively,
"Investments"). Any Investment shall not exceed $150 million at
any time outstanding. Any loans by National to Horizon that are 9
months or less in duration may be made pursuant to the current
(and any successor) money pool arrangement between National and
its subsidiaries (See SEC File No. 70-8297 for the current money
pool arrangement). These loans will not exceed $150,000,000 in
principal amount outstanding at any time. Likewise, any excess
funds of Horizon could be lent to other subsidiaries of National
pursuant to such money pool arrangements. Any loans by National
to Horizon having maturities of more than 9 months will not exceed
$150,000,000 in principal amount outstanding at any time, and may
be made pursuant to the current (and any successor) long-term debt
program of National and certain of its subsidiaries. (See SEC
File No. 70-8514 for the current long-term debt arrangements.)
The Applicants also request authority to obtain recourse
and nonrecourse debt financing from unaffiliated third parties to
finance investments in Project Activities ("Debt Financing").
Some of the Debt Financing may be obtained by the Intermediate
Companies. All outstanding Debt Financing guaranteed by or having
some other form of recourse to National ("Recourse Debt"), along
with all investments in Project Activities previously funded and
then outstanding, shall not in aggregate principal amount exceed
the Investment Limit at any time. National may charge a
commercially reasonable rate for the provision of such guarantees.
Debt Financing not having recourse to National ("Nonrecourse
Debt"), shall not constitute part of the proposed Investment
Limit.
The term of any Recourse Debt will not exceed 40 years
and its interest rate will not exceed 200 basis points over U.S.
Treasury Securities having comparable terms to maturity in effect
on the date of issue. The term of any Non-Recourse Debt will not
exceed 40 years, and its interest rate (if payable in U.S.
dollars) will not exceed 600 basis points over comparable U.S.
Treasury securities in effect on the date of issue. If any
Recourse Debt or Non-Recourse Debt is denominated in foreign
currencies, the terms and interest rate will be commercially
reasonable at the time of borrowing. Applicants or the
Intermediate Companies may also pay commercially reasonable
commitment and other fees with respect to Debt Financing.
B. Request for Authority Regarding Investments in Exempt
Projects and Intermediate Companies
The Applicants hereby seek authority (1) for
Intermediate Companies to acquire interests in, finance the
acquisition of, and hold the securities of, one or more Exempt
Projects, without filing specific project applications or
declarations under the Act, through the issuance or acquisition of
equity securities and debt securities to or from third parties;
(2) to acquire interests in, finance the acquisition of, and hold
the securities of, one or more Intermediate Companies, without
filing specific project applications or declarations under the
Act, within the limitations set forth herein; (3) for Horizon's
employees and employees of other subsidiaries of National to
provide services in regard to Project Activities; and (4) to issue
guarantees and assume liabilities for development activities in
connection with the proposed Exempt Projects and Intermediate
Companies. The full contingent amount of any such guarantees or
assumptions by National will be counted as part of the Investment
Limit.
The full amount of any such investment in Project
Activities, as well as Recourse Debt, shall not exceed the
Investment Limit. Additionally, no such investment or financing
will be made unless at the time of the investment, National's and
Horizon's "aggregate investment" in Project Activities and
Intermediate Companies does not exceed 50% of National's
"consolidated retained earnings" as required by the safe harbor
provisions set forth in Rule 53 under the Act for investments in
EWGs.<F1> The Applicants will comply with all other applicable
rules under the Act, including, without limitation, such rules as
may be promulgated in the future pursuant to Section 33.
<F1> To come within the safe harbor of Rule 53, the amount of
a registered holding company's aggregate investments in
EWGs and FUCOs cannot exceed 50% of the system's average
consolidated retained earnings over the past four
quarters. Under this limitation, the National system's
present investment limitation is approximately $190
million.
The Applicants believe that the ability to respond
quickly to investment opportunities in Exempt Projects and to
acquire interests in, finance the acquisition of and hold
securities of Intermediate Companies through which such
investments in Exempt Projects are often made, is advantageous,
and that the authority being requested herein will enable them to
effectively compete in this market in accordance with the
principles of the Energy Policy Act of 1992. The use of
Intermediate Companies is often necessitated by business concerns
such as foreign ownership requirements in countries where Exempt
Projects are located, to facilitate investments via a consortium
of companies and to ease subsequent adjustments to or sales of
interests among members of the ownership group.
C. Request for Authorization for Financing by Intermediate
Companies
Approval is also requested for any Intermediate Company
to issue and acquire equity securities and debt securities, with
or without recourse to the Applicants, to or from persons other
than the Applicants including banks, insurance companies, and
other financial institutions, for the purpose of financing
(including any refinancing of) investments in Exempt Projects.
The Intermediate Companies' investments in Exempt Projects may
take the form of issuance or acquisitions of common stock, capital
contributions, open account advances, other loans, or the
borrowing of funds. Securities issued or acquired by Intermediate
Companies pursuant to the order requested in this
Application-Declaration may be issued or acquired in one or more
transactions from time to time through December 31, 2001.
It is proposed that debt securities issued or acquired
by Intermediate Companies to persons other than the Applicants may
include secured and unsecured promissory notes, and other evidence
of recourse and nonrecourse indebtedness. Indebtedness having
recourse to the Applicants may be in the form of guarantees and
assumptions of liability, and indebtedness having recourse to
National will be included within the Investment Limit. In any
case in which the Applicants directly or indirectly own less than
all of the equity interests of an Intermediate Company, only that
portion of the indebtedness (recourse to National) of such
Intermediate Company equal to the Applicants' equity ownership
percentage shall be included for purposes of the Investment Limit.
Equity securities issued or acquired by any Intermediate
Company to or from persons other than the Applicants may include
common and preferred stock, partnership interests, trust
certificates, or any securities that are equivalent to the
foregoing or would effectively constitute equity securities under
applicable foreign law. Securities issued or acquired by
Intermediate Companies may be denominated in either U.S. dollars
or foreign currencies. The Applicants state that the amount and
type of such securities, and the terms thereof, including (in the
case of any indebtedness) interest rate, maturity, prepayment or
redemption privileges, and the forms of any collateral security
granted with respect thereto, would be negotiated on a case by
case basis, taking into account differences from project to
project in desirable debt-equity ratios, projections of earnings
and cash flow, depreciation lives, and other similar financial and
performance characteristics. Accordingly, the Applicants propose
that they have the flexibility to negotiate the terms and
conditions of such securities without further approval by the
Commission.
Notwithstanding the foregoing, the Applicants state that
no equity security having a stated par value would be issued or
sold by an Intermediate Company for a consideration that is less
than such par value; and that any note, bond or other evidence of
indebtedness issued or sold by any Intermediate Company will
mature not later than 40 years from the date of issuance thereof,
and will bear interest at a rate not to exceed the following: (i)
if such note, bond or other indebtedness is U.S. dollar
denominated, at a fixed rate not to exceed 6.0% over the yield to
maturity on an activity traded, non-callable, U.S. Treasury note
having a maturity equal to the average life of such note, bond or
other indebtedness (the "Applicable Treasury Rate"),<F2> or at a
________________________
<F2> If there is no actively traded Treasury note with a
maturity equal to the average life of such note, bond or
other evidence of indebtedness, then the Applicable
Treasury Rate would be determined by interpolating
linearly with reference to the yields to maturity on
actively traded, non-callable, Treasury notes having
maturities near (i.e., both shorter and longer than)
such average life.
floating rate not to exceed 6.0% over LIBOR from time to time; and
(ii) if such note, bond or other indebtedness is denominated in
the currency of a country other than the United States, the terms
and interest rate will be commercially reasonable at the time of
borrowing.
In connection with the issuance of any debt securities
by any Intermediate Company, it is anticipated that such
Intermediate Company may grant security interests in its assets.
Such security interests may take the form of a pledge of the
shares or other equity securities of an Exempt Project that it
owns, including a security interest in any distributions from any
such Exempt Project, and/or a collateral assignment of its rights
under and interests in other property, including rights under
contracts. It is also anticipated that fees in the form of
placement or commitment fees, or other similar fees, would be
paid to lenders, placement agents, or others in connection with
the issuance of any such debt securities. The Applicants request
authority for any Intermediate Company to agree in any case to pay
commercially reasonable placement or commitment fees and other
similar fees, in connection with any borrowing.
In connection with investments in Exempt Projects, it is
anticipated that a portion of the capital requirements of any such
Exempt Project would be obtained through recourse or non-recourse
financing involving borrowings from banks and other financial
institutions. In some cases, however, it may be necessary or
desirable to structure an investment in an Exempt Project such
that the obligations created are not those of the Exempt Project,
but instead those of its parent companies. For example, in a
consortium of non-affiliated companies bidding to purchase the
securities or assets of an Exempt Project, each of the consortium
members would be obligated to fund its respective share of the
proposed purchase price. If external sources of funds are needed
for this purpose, a participant in the consortium may choose to
engage in recourse or non-recourse financing through one or more
single-purpose subsidiaries that would then utilize the proceeds
of the financing to acquire an ownership interest in the Exempt
Project.
The Applicants believe that external financing by any
Intermediate Company involves the same issues that are involved
when the financing is carried out by an Exempt Project, in terms
of the potential adverse impacts upon the financial integrity of a
registered holding company system. Accordingly, where the
proceeds of any such financing (including any refinancing) are
utilized to make an investment in any Exempt Project, and there is
either no recourse directly or indirectly to National with respect
to the securities issued or sold, or the amount for which there is
such recourse constitutes a part of the Investment Limit, there is
no basis for any adverse findings under Section 6, 7 and 12 of the
Act, provided that, at the time of the issuance thereof, the
Applicants are in compliance with Rule 53.
D. Request Regarding Activities Related to Intermediate
Companies
In order to maintain flexibility with regard to
Intermediate Company and Exempt Project activities, the Applicants
request authorization for Intermediate Companies to effect
adjustments in the respective ownership interests in any Exempt
Project held by the Applicants and unaffiliated co-investors and
to facilitate a whole or partial sale of an interest in any such
Exempt Project. Horizon also requests authority to participate
directly or through Intermediate Companies in joint ventures with
non-associates which joint ventures are in the business of
researching investment opportunities in, and owning and
developing, Exempt Projects. Horizon requests authorization to
acquire interests in Intermediate Companies prior to such
Intermediate Companies acquiring their interests in Exempt
Projects, provided that such Intermediate Companies engage and
will engage in the business of investing in Exempt Projects.
E. Request for Authorization Regarding Domestic Power
Projects
Horizon hereby seeks approval to undertake preliminary
development and administrative activities in regard to Domestic
Power Projects without prior Commission approval. Preliminary
development activities would include the investigation of sites,
preliminary engineering and licensing activities, acquiring
options and rights, contract drafting and negotiating, preparation
of proposals and the other necessary activities to identify and
analyze feasible investment opportunities and initiate the
commercialization of a project. Administration would include the
ongoing personnel, accounting, engineering, legal, financial and
other support activities necessary for Horizon to manage its
development activities and investments in Domestic Power Projects.
In addition, Horizon hereby seeks authority to invest
and participate in Domestic Power Projects either alone or through
joint ventures. Horizon will seek approval from the Commission
prior to actual investment and participation in a particular
project. In some instances, Horizon may act as a developer of
Domestic Power Projects, and in other instances Horizon may
acquire an interest in a project from a developer who has already
started or completed development.
F. Request for Authorization for the Provisions of
Services
The Applicants request authorization for all employees
of Horizon and employees of other subsidiary companies of National
(collectively, "Employees") to provide services to affiliated
Intermediate Companies and Project Activities, subject to the
limitations set forth herein. The Applicants also request prior
Commission approval for the use of employees of National Fuel Gas
Distribution Corporation ("Distribution") for the rendering of
services related to Project Activities. Applicants will comply
with the provisions set forth in Rule 53, which require that no
more than 2% of Distribution's employees render services, at any
one time, to Project Activities. Moreover, there will be no
diversion of personnel or resources that would adversely affect
Distribution's domestic ratepayers.
The services to be rendered relating to Project
Activities by Employees pursuant to this request include such
activities as: management, administrative, legal, tax, and
financing advice, accounting, engineering consulting, language
skills and information systems consulting, provided that such
information systems consulting will not involve proprietary
software owned by National or its subsidiaries. The provision of
these services by Employees is a more practical and economically
efficient alternative to separately retaining the required
expertise on a full-time basis or solely from unaffiliated
providers. It is also an opportunity for the Employees to
increase and expand their expertise for the benefit of National
and its subsidiaries.
Unless otherwise authorized by the Commission or
expressly permitted by the Act, services provided by the employers
of such Employees shall be billed at cost, pursuant to the
requirements of Section 13(b) and Rules 90 and 91 under the Act.
Unless otherwise authorized by the Commission or
expressly permitted under the Act, services provided by the
Applicants to affiliated domestic Intermediate Companies will also
be provided on a cost basis, pursuant to the requirements of
Section 13(b) and Rules 90 and 91 of the Act.
In addition, permission is sought, pursuant to Section
13 and Rule 83 of the Act, for any subsidiary of National
providing such services to do so at market rates in regard to
Exempt Projects involving entities that do not derive, directly or
indirectly, any material part of their income from sources within
the United States and are not public utility companies operating
in the United States.
Applicants will include information on the type, cost
and income earned in connection with any services authorized by an
order pursuant to this request in its annual U5-S filing.
G. Retained Earnings Tests of Rule 53(a)(1) and 53(b)(2)
As discussed above, the maximum aggregate investment in
Project Activities by National or Horizon would not exceed $150
million at any time outstanding, which is well below fifty percent
of the National's consolidated retained earnings as of September
30, 1994. Accordingly, the level of investment does not present a
risk of substantial adverse impact as described in Sections 32 and
33 of the Act and Rule 53(a)(1).
H. Bankruptcy Exclusion of Rule 53(b)(1)
Neither the Applicants nor any other members of
National's system have been the subject of a bankruptcy or similar
proceeding.
I. Operating Loss Limitations of Rule 53(b)(3)
Neither Applicants nor any other members of the National
system have reported operating losses attributable to direct or
indirect investments in Exempt Projects or other Project
Activities. Accordingly, such investments do not present a risk
of substantial adverse impact as described in Sections 32 and 33
of the Act and Rule 53.
J. Compliance with Safe Harbor Provisions
The authority being sought by the Applicants in this
Application will allow the Applicants to undertake Project
Activities, (except for actual investment in Domestic Power
Projects), without further Commission approval if two conditions
are met: (i) the investments in Project Activities do not in the
aggregate exceed the $150 million authorization, and (ii) if the
investments pertain to an Exempt Power Project or Intermediate
Company, the investments satisfy the criteria in Rule 53(a)(1)-(4)
and (b)(1)-(3). Thus, the Applicants will ensure that subsections
(a)(1)-(4) and (b)(1)-(3) of Rule 53 are satisfied before
proceeding with investments in an Exempt Project or an
Intermediate Company if no application is to be made to obtain
prior Commission approval. The procedures to be followed with
regard to any investments and related activities, such as
financing, made pursuant to an Order approving this
Application/Declaration, include: (i) all employees of Applicants
responsible for evaluating potential investments are first to be
briefed on the requirements of Section 33 and Rule 53 and then
must prepare, for internal review, an analysis of the impact of
the proposed investment on the requirements of Rule 53(a) and (b);
and (ii) in-house counsel must be consulted to confirm
compliance with the requirements of Section 33 and the regulations
promulgated thereunder.
K. Maintenance of Books and Records
National will comply with Rule 53(a)(2) with regard to
the maintenance of books and records in connection with
investments in Exempt Projects or Intermediate Companies
authorized by this Application.
L. Reporting of Activities
(a) National will file a report with the Commission
within sixty days of the end of each calendar quarter. Each
report will include (i) a balance sheet as of the quarterly
reporting date; (ii) an income statement for the quarterly
reporting period; (iii) a breakdown of the amounts of recourse and
non-recourse debt securities issued to third parties by
Intermediate Companies.
(b) Information on intercompany service transactions
with affiliated Intermediate Companies and Project Activities,
shall be included in National's U5-S and shall be in the form
specified in the letter dated July 1, 1986 between National and
the Commission attached as Exhibit A-1.
Item 2. FEES, COMMISSIONS AND EXPENSES
The fees, commissions and expenses of Applicants expected to
be paid or incurred, directly or indirectly, in connection with
the Application/Declaration are estimated as follows:
Commission filing Fee relating to
Application on Form U-1..................$2,000.00
Legal fees and expenses.................$10,000.00
Miscellaneous related expenses (such
as telephone, courier and travel)........$5,000.00
Total less than $20,000.00
Item 3. APPLICABLE STATUTORY PROVISIONS
The sections of the Act and rules or exemptions thereunder
that are considered to be applicable to the transactions, and the
basis for exemption therefrom, are as follows: Sections 6(a), 7,
9(a), 10, 12(b), 32, 33 and Rules 45 and 53, all relating to the
authority for Applicants to make investments in and finance the
acquisitions of Exempt Projects and Intermediate Companies, are
considered to be applicable to the transactions proposed herein.
Section 13(b) and Rules 87(b), 90 and 91 are applicable to the
request regarding services. Sections 9(a) and 10 apply to
development activities related to Domestic Power Projects.
Item 4. REGULATORY APPROVAL
No commission, other than this Commission, has jurisdiction
over any of the proposed transactions described in the
Application. Pursuant to Rule 53(a)(4), the Applicants will file
this Application/Declaration with the New York Public Service
Commission and Pennsylvania Public Utility Commission.
Item 5. PROCEDURE
Applicants respectfully request that appropriate and timely
action be taken by the Commission in this matter. Applicants
hereby waive any recommended decision by a hearing officer or by
any other officer of the Commission and waive the 30 day waiting
period between issuance of the Commission's order and the date on
which it is to become effective, since it is desired that the
Commission's order, when issued, become effective forthwith.
Item 6. EXHIBITS AND FINANCIAL STATEMENTS
a) Exhibits
A-1 Letter Agreement between National Fuel Gas
Company and Securities and Exchange Commission
dated July 1, 1986
A-2 Opinion of Counsel
B-1 Proposed Form of Notice
G-1 Financial Data Schedules
G-2 Financial Data Schedules
G-3 Financial Data Schedules
b) Financial Statements
S-1 Pro Forma Consolidated Statement of Income
and Earnings Reinvested in the Business for
the twelve months ended March 31, 1995, Pro
Forma Consolidated Balance Sheet at March 31,
1995 and Pro Forma Adjusting Entries.
S-2 National Fuel Gas Company Pro Forma Statement
of Income and Earnings Reinvested in the
Business for the twelve months ended March 31,
1995, Pro Forma Balance Sheet at March 31, 1995
and Pro Forma Adjusting Entries.
S-3 Horizon Pro Forma Balance Sheet at March 31,
1995, and Pro Forma Adjusting Entries.
S-4 Notes to Financial Statements.
There have been no material changes not in the ordinary
course of business since March 31, 1995.
Item 7. INFORMATION AS TO ENVIRONMENTAL EFFECTS
None of the matters that are the subject of this
Application/Declaration involve a "major federal action" nor do
they "significantly affect the quality of the human environment"
as those terms are used in section 102(2)(C) of the National
Environmental Policy Act. None of the transactions that are the
subject of this Application/Declaration will result in changes in
the operation of the Applicants that will have an impact on the
environment. The Applicants are not aware of any federal agency
which has prepared or is preparing an environmental impact
statement with respect to the transactions which are the subject
of this Application/Declaration.
SIGNATURE
Pursuant to the requirements of the Public Utility Holding
Company Act of 1935, the undersigned companies have duly caused
this Application/Declaration to be signed on their behalf by the
undersigned thereunto duly authorized.
NATIONAL FUEL GAS COMPANY
By:/s/Philip C. Ackerman
Philip C. Ackerman
Senior Vice President
HORIZON ENERGY DEVELOPMENT, INC.
By:/s/Bruce H. Hale
Bruce H. Hale
Incorporator
Date: June 14, 1995
EXHIBIT A-1
July 1, 1986
Mr. William C. Weeden
Assistant Director
Office of the Public Utility Regulation
Division of Investment Management
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Dear Bill:
In the past, National Fuel Gas Company has received
correspondence from the staff of the Securities and Exchange
Commission expressing concern over the intercompany relationships
within National Fuel's system. In June of 1985, staff members of the
Office of Public Utility Regulation personally visited our offices to
discuss in detail National Fuel's organizational structure and
services. In March of 1986, an agreement between National Fuel and
the S.E.C. staff was reached regarding the reporting requirements for
intercompany transactions. We agreed that intercompany transactions
would be reported on an annual basis as part of our U5S filing, and we
understand that this annual reporting will satisfy the staff's
concerns regarding Section 13 of the Public Utility Holding Company
Act.
The above-mentioned annual reporting will consist of the
following:
1. National Fuel Gas Company Report of Officers' Salaries.
2. National Fuel Gas Distribution Corporation, National Fuel
Gas Supply Corporation, Penn-York Energy Corporation and
Seneca Resources Corporation Report of Intercompany Sales
and Services.
Mr. William C. Weeden
July 1, 1986
Page 2
3. A statement that no services are rendered by National Fuel
Gas Company to its subsidiary companies.
4. Additions and deletions of sales and services among the
associated companies will be included in the annual
reports as part of 1 and 2 above.
If this is consistent with our understanding, please sign and
return the enclosed copy of this letter.
Very truly yours,
/pad
Enclosures
cc: Anna Marie Cellino
Donald P. Rynkowski
Robert P. Wason
AGREED:
_________________________________
William C. Weeden
EXHIBIT A-2
May 12, 1995
Securities and Exchange Commission
Judiciary Plaza
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: National Fuel Gas Company
Horizon Energy Development, Inc.
Application-Declaration on Form U-1
Ladies and Gentlemen:
This opinion relates to the application-declaration, filed on or
about the date hereof (the "Application-Declaration"), by National
Fuel Gas Company ("National") under the Public Utility Holding Company
Act of 1935, as amended. Capitalized terms used but not defined
herein have the respective meanings assigned thereto in the
Application-Declaration.
The Application-Declaration, insofar as it relates specifically
to National, seeks authorization for the following transactions:
(i) The organization of Horizon Energy Development, Inc.
("Horizon") as a wholly-owned subsidiary of National for the purpose
of investing in Project Activities;
(ii) The capitalization of Horizon through debt and equity
financing (including, in the case of debt financing, the participation
by Horizon in National's current money pool arrangement and long-term
debt program, heretofore approved by the Securities and Exchange
Commission in SEC File Nos. 70-8297 and 70-8514) in an aggregate
amount not to exceed $150 million (the "Investment Limit"), such
financing to be provided by National from time to time through
December 31, 2001; and
(iii) Subject to the Investment Limit, the guaranty or
assumption by National of obligations and liabilities incurred by
Horizon and Intermediate Companies in connection with (a) debt
financing obtained from third parties in order to finance investments
in Project Activities and Exempt Projects, and (b) development
activities related to Exempt Projects.
Based upon the foregoing and subject to the qualifications and
assumptions hereinafter set forth, we are of the opinion that:
1. National is a corporation duly incorporated and validly
existing under the laws of the State of New Jersey.
2. If (i) the proposed transactions are approved by the Board
of Directors of National and consummated in accordance with the order
or orders of the Securities and Exchange Commission (the "Commission")
thereon and, in the case of debt financing by National of Horizon, the
orders heretofore entered by the Commission in connection with
National's current money pool arrangement and long-term debt program,
(ii) the respective Boards of Directors of Horizon and the
Intermediate Companies duly authorize and incur the obligations and
liabilities to be guaranteed or assumed by National, (iii) the
obligations so incurred by Horizon and the Intermediate Companies are
legal, valid, binding and enforceable obligations of those obligors
and have been incurred solely in connection with Project Activities
and Exempt Projects, (iv) all debt obligations of Horizon to National
are appropriately documented and properly reflected on the respective
books of Horizon and National, (v) the capital stock of Horizon to be
issued to National upon the organization of Horizon is duly authorized
by the Board of Directors of Horizon and validly issued to National
and the consideration fixed therefor is duly paid by National, and
(vi) all authorizations and approvals from appropriate governmental
and regulatory authorities, if required in connection with (a) the
debt and/or equity investments by Horizon and the Intermediate
Companies in Project Activities and Exempt Projects, and (b) the
participation by Horizon in National's money pool arrangement and
long-term programs, are duly obtained:
A. All laws of the State of New Jersey applicable to the
proposed transactions will have been complied with;
B. Upon the due execution and delivery by National of
appropriate instruments of guaranty and/or assumption of liabilities,
the obligations incurred by National thereunder, insofar as New Jersey
law is applicable, will be duly authorized and within the power and
authority of National and, to that extent, will be valid and binding
obligations of National;
C. Insofar as New Jersey law is applicable, National will
legally acquire (i) the capital stock of Horizon issued to National
upon the organization of Horizon and (ii) the debt obligations of
Horizon owing to it in connection with debt financings, including,
without limitation, obligations evidencing borrowings by Horizon under
National's money pool arrangement which, by the terms of that
arrangement, are owing to National; and
D. The legal rights of the holders of any securities
issued by National will not have been violated.
In rendering the opinions expressed in paragraph 2, we have made
the following assumptions and those opinions are qualified accordingly:
(a) National will, directly or indirectly (i.e., through
Horizon), own equity interests in any Intermediate Company, the debt
obligations or Project Activity liabilities of which National
undertakes to guaranty or otherwise assume on a recourse basis;
(b) No property or assets of National will be pledged as
security for its obligations under any guaranty or assumption of
liabilities that it may issue in connection with the proposed
transactions;
(c) If National, either directly or through Horizon, holds 75%
or more of the voting shares of capital stock of any Intermediate
Company (a "Restricted Subsidiary"), any issuance or sale of such
voting shares, whether by National, Horizon or such Intermediate
Company, will be in compliance with Section 6.04 of that certain
Indenture, dated as of October 15, 1974, between National and The Bank
of New York (formerly, Irving Trust Company), as Trustee, as
supplemented (so supplemented, the "Indenture");
(d) If National, either directly or through Horizon, holds a
majority (but less than 75%) of the voting shares of capital stock of
any Intermediate Company (a "Subsidiary"), any issuance or sale of
voting shares by such Intermediate Company will be in compliance with
subsection 6.04(b) of the Indenture;
(e) Any and all indebtedness incurred by Horizon or by any
Intermediate Company which is a direct or indirect Subsidiary of
National (I) for the repayment of money borrowed from third parties or
representing deferred obligations for the payment of the purchase
price of property purchased from a third party, and (II) which matures
by its terms, or is renewable or extendable at the option of the
obligor to a date, more than one year from the date of incurrence
("Funded Debt"), will be in compliance with Sections 6.05 and 6.06 of
the Indenture; and
(f) Any guaranty or assumption by National of obligations of
Horizon or any Intermediate Company representing Funded Debt will be
in compliance with Section 6.05 of the Indenture.
We consent to the use of this opinion as an exhibit to the
Application-Declaration.
Very truly yours,
/s/Stryker, Tams & Dill
STRYKER, TAMS & DILL
EXHIBIT B-1
UNITED STATES OF AMERICA
before the
SECURITIES AND EXCHANGE COMMISSION
PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
Release No.
__________________________________________
In the Matter of
NATIONAL FUEL GAS COMPANY AND
HORIZON ENERGY DEVELOPMENT, INC.
10 Lafayette Square
Buffalo, New York 14203
(70-_____)
__________________________________________
NOTICE OF PROPOSAL BY NATIONAL FUEL GAS COMPANY AND HORIZON ENERGY
DEVELOPMENT, INC. TO INVEST IN AND FINANCE FUCOS AND EWGS AND TO
PERFORM DEVELOPMENT ACTIVITIES IN REGARD TO DOMESTIC POWER PROJECTS.
Horizon Energy Development, Inc. ("Horizon") which shall
become a wholly-owned subsidiary of National Fuel Gas Company
("National") and National, a registered holding company, both of 10
Lafayette Square, Buffalo, New York 14203 have filed under Sections
6(a), 7, 9(a), 10, 12(b), 32 and 33 of the Act and Rules 87(b), 90
and 91 thereunder.
National proposes to purchase for $500,000.00, 500 shares of
common stock of Horizon which shall be all of the issued and
outstanding stock of Horizon, a newly formed New York corporation.
National proposes to further capitalize Horizon by providing
debt and equity capital not to exceed $150 million at any time
outstanding through December 31, 2001. Horizon proposes to invest an
amount not to exceed $150 million of debt or equity capital at any
time outstanding through December 31, 2001 ("Investment Limit") in
authorized project activities ("Project Activities").
Project Activities will include development activities
concerning investments in, and financing the acquisition of, one or
more companies ("Intermediate Companies") engaged directly or
indirectly and exclusively in the business of holding the securities
of one or more exempt wholesale generators, ("EWGs"), as defined by
Section 32 of the Public Utility Holding Company Act of 1935 as
amended (the "Act"), and foreign utility companies as defined by
Section 33 of the Act ("FUCOs") (EWGs and FUCOs are, hereinafter,
sometimes referred to collectively as "Exempt Projects.")
National and Horizon propose to make such investments
without prior Commission approval subject to certain limitations, in
accordance with Sections 32 and 33 of the Act, and rules to be
promulgated thereunder. Applicants also request authority to issue
guarantees and assume liabilities with regard to Exempt Projects up
to the proposed $150 million Investment Limit.
Project Activities would also include development activities
throughout the United States regarding qualifying cogeneration and
small power production facilities as defined in the Public Utility
Regulatory Policies Act of 1978 and the rules and regulations
promulgated thereunder, and independent power production facilities,
(hereinafter collectively referred to as "Domestic Power Projects").
Horizon also seeks authority to invest and participate in Domestic
Power Projects after obtaining prior project specific approval from
the Commission.
Project Activities shall also include consulting services to
be provided by Horizon or any other subsidiary of National with
respect to Domestic Power Projects and Exempt Projects.
National requests authority to make investments in Horizon
in the form of acquisitions of capital stock, capital contributions,
open account advances and/or loans (collectively, "Investments").
Any Investment shall not exceed $150 million at any time outstanding.
Any loans by National to Horizon that are 9 months or less in
duration may be made pursuant to the current (and any successor)
money pool arrangement between National and its subsidiaries (See SEC
File No. 70-8297 for the current money pool arrangement). Any loans
by National to Horizon having maturities of more than 9 months will
not exceed $150,000,000 in principal amount outstanding at any time,
and may be made pursuant to the current (and any successor) long-term
debt program of National and certain of its subsidiaries. (See SEC
File No. 70-8514 for the current long-term debt arrangements.)
The Applicants also request authority to obtain recourse and
nonrecourse debt financing from unaffiliated third parties to finance
investments in Project Activities ("Debt Financing"). Some of the
Debt Financing may be obtained by the Intermediate Companies. All
outstanding Debt Financing guaranteed by or having some other form of
recourse to National ("Recourse Debt"), along with all investments in
Project Activities, shall not in aggregate principal amount exceed
the Investment Limit at any time. National may charge a commercially
reasonable rate for the provision of such guarantees. Debt Financing
not having recourse to National ("Nonrecourse Debt"), shall not
constitute part of the proposed Investment Limit.
The term of any Recourse Debt will not exceed 40 years and
its interest rate will not exceed 200 basis points over comparable
U.S. Treasury Securities in effect on the date of issue. The term of
any Non-Recourse Debt will not exceed 40 years, and its interest rate
(if payable in U.S. dollars) will not exceed 600 basis points over
comparable U.S. Treasury securities in effect on the date of issue.
If any Recourse Debt or Non-Recourse Debt is denominated in foreign
currencies, the terms and interest rate will be commercially
reasonable at the time of borrowing. Applicants or the Intermediate
Companies may also pay commercially reasonable commitment and other
fees with respect to Debt Financing.
The Applicants hereby seek authority (1) for Intermediate
Companies to acquire interests in, finance the acquisition of, and
hold the securities of, one or more Exempt Projects, without filing
specific project applications or declarations under the Act, through
the issuance or acquisition of equity securities and debt securities
to or from third parties; (2) to acquire interests in, finance the
acquisition of, and hold the securities of, one or more Intermediate
Companies, without filing specific project applications or
declarations under the Act, within the limitations set forth herein;
(3) for Horizon's employees and employees of other subsidiaries of
National to provide services in regard to Project Activities; and (4)
to issue guarantees and assume liabilities for development activities
in connection with the proposed Exempt Projects and Intermediate
Companies. The full contingent amount of any such guarantees or
assumptions by National will be counted as part of the Investment
Limit.
Approval is also requested for any Intermediate Company to
issue and acquire equity securities and debt securities, with or
without recourse to the Applicants, to or from persons other than the
Applicants including banks, insurance companies, and other financial
institutions, for the purpose of financing (including any refinancing
of) investments in Exempt Projects. The Intermediate Companies'
investments in Exempt Projects may take the form of issuance or
acquisitions of common stock, capital contributions, open account
advances, other loans, or the borrowing of funds. Securities issued
or acquired by Intermediate Companies pursuant to the order requested
in this Application-Declaration may be issued or acquired in one or
more transactions from time to time through December 31, 2001.
It is proposed that debt securities issued or acquired by
Intermediate Companies to persons other than the Applicants may
include secured and unsecured promissory notes, and other evidence of
recourse and nonrecourse indebtedness. Indebtedness having recourse
to the Applicants may be in the form of guarantees and assumptions of
liability, and indebtedness having recourse to National will be
included within the Investment Limit.
Securities issued or acquired by Intermediate Companies may
be denominated in either U.S. dollars or foreign currencies. The
Applicants state that the amount and type of such securities, and the
terms thereof, including (in the case of any indebtedness) interest
rate, maturity, prepayment or redemption privileges, and the forms of
any collateral security granted with respect thereto, would be
negotiated on a case by case basis, taking into account differences
from project to project in desirable debt-equity ratios, projections
of earnings and cash flow, depreciation lives, and other similar
financial and performance characteristics. Accordingly, the
Applicants propose that they have the flexibility to negotiate the
terms and conditions of such securities without further approval by
the Commission.
Notwithstanding the foregoing, the Applicants state that no
equity security having a stated par value would be issued or sold by
an Intermediate Company for a consideration that is less than such
par value; and that any note, bond or other evidence of indebtedness
issued or sold by any Intermediate Company will mature not later than
40 years from the date of issuance thereof, and will bear interest at
a rate not to exceed the following: (i) if such note, bond or other
indebtedness is U.S. dollar denominated, at a fixed rate not to
exceed 6.0% over the yield to maturity on an activity traded,
non-callable, U.S. Treasury note having a maturity equal to the
average life of such note, bond or other indebtedness (the
"Applicable Treasury Rate"),<F1> or at a floating rate not to exceed
6.0% over LIBOR from time to time; and (ii) if such note, bond or
other indebtedness is denominated in the currency of a country other
than the United States, the terms and interest rate will be
commercially reasonable at the time of borrowing.
In order to maintain flexibility with regard to Intermediate
Company and Exempt Project activities, the Applicants request
authorization for Intermediate Companies to effect adjustments in the
respective ownership interests in any Exempt Project held by the
Applicants and unaffiliated co-investors and to facilitate a whole or
partial sale of an interest in any such Exempt Project. Horizon also
requests authority to participate directly or through Intermediate
Companies in joint ventures with non-associates which joint ventures
are in the business of researching investment opportunities in, and
________________________
<F1> If there is no actively traded Treasury note with a
maturity equal to the average life of such note, bond or
other evidence of indebtedness, then the Applicable
Treasury Rate would be determined by interpolating
linearly with reference to the yields to maturity on
actively traded, non-callable, Treasury notes having
maturities near (i.e., both shorter and longer than)
such average life.
owning and developing, Exempt Projects. Horizon requests
authorization to acquire interests in Intermediate Companies prior to
such Intermediate Companies acquiring their interests in Exempt
Projects, provided that such Intermediate Companies engage and will
engage in the business of investing in Exempt Projects.
Horizon hereby seeks approval to undertake preliminary
development and administrative activities in regard to Domestic Power
Projects without prior Commission approval. Preliminary development
activities would include the investigation of sites, preliminary
engineering and licensing activities, acquiring options and rights,
contract drafting and negotiating, preparation of proposals and the
other necessary activities to identify and analyze feasible
investment opportunities and initiate the commercialization of a
project. Administration would include the ongoing personnel,
accounting, engineering, legal, financial and other support
activities necessary for Horizon to manage its development activities
and investments in Domestic Power Projects.
The Applicants request authorization for all employees of
Horizon and employees of other subsidiary companies of National
(collectively, "Employees") to provide services to affiliated
Intermediate Companies and Project Activities, subject to the
limitations set forth herein. The Applicants also request prior
Commission approval for the use of employees of National Fuel Gas
Distribution Corporation ("Distribution") for the rendering of
services related to Project Activities. Applicants will comply with
the provisions set forth in Rule 53, which require that no more than
2% of Distribution's employees render services, at any one time, to
Project Activities. Moreover, there will be no diversion of
personnel or resources that would adversely affect Distribution's
domestic ratepayers.
Unless otherwise authorized by the Commission or expressly
permitted by the Act, services provided by the employers of such
Employees shall be billed at cost, pursuant to the requirements of
Section 13(b) and Rules 90 and 91 under the Act.
Unless otherwise authorized by the Commission or expressly
permitted under the Act, services provided by the Applicants to
affiliated domestic Intermediate Companies will also be provided on a
cost basis, pursuant to the requirements of Section 13(b) and Rules
90 and 91 of the Act.
In addition, permission is sought, pursuant to Section 13
and Rule 83 of the Act, for any subsidiary of National providing such
services to do so at market rates in regard to Exempt Projects
involving entities that do not derive, directly or indirectly, any
material part of their income from sources within the United States
and are not public utility companies operating in the United States.
The application-declaration is available for public
inspection through the Commission's Office of Public Reference.
Interested persons wishing to comment or request a hearing should
submit their views in writing by _____________________, to the
Secretary, Securities and Exchange Commission, Washington, D.C.
20549, and serve a copy on the applicant-declaration at the address
specified above. Proof of service (by affidavit or, in the case of
an attorney at law, by certificate) should be filed with the request.
Any request for a 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
application-declaration, as filed, and as it may be further amended,
may be granted and permitted to become effective.
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> OPUR1
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM HORIZON
ENERGY DEVELOPMENT, INC.'S FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000070145
<NAME> NATIONAL FUEL GAS COMPANY
<SUBSIDIARY>
<NUMBER> 1
<NAME> HORIZON ENERGY DEVELOPMENT, INC.
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 12-MOS 12-MOS
<FISCAL-YEAR-END> SEP-30-1995 SEP-30-1995
<PERIOD-START> APR-01-1994 APR-01-1994
<PERIOD-END> MAR-31-1995 MAR-31-1995
<BOOK-VALUE> PER-BOOK PRO-FORMA
<TOTAL-NET-UTILITY-PLANT> 0 0
<OTHER-PROPERTY-AND-INVEST> 0 0
<TOTAL-CURRENT-ASSETS> 0 0
<TOTAL-DEFERRED-CHARGES> 0 0
<OTHER-ASSETS> 0 150,000
<TOTAL-ASSETS> 0 150,000
<COMMON> 0 5
<CAPITAL-SURPLUS-PAID-IN> 0 74,995
<RETAINED-EARNINGS> 0 0
<TOTAL-COMMON-STOCKHOLDERS-EQ> 0 75,000
0 0
0 0
<LONG-TERM-DEBT-NET> 0 60,000
<SHORT-TERM-NOTES> 0 15,000
<LONG-TERM-NOTES-PAYABLE> 0 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0 0
<LONG-TERM-DEBT-CURRENT-PORT> 0 0
0 0
<CAPITAL-LEASE-OBLIGATIONS> 0 0
<LEASES-CURRENT> 0 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 0 0
<TOT-CAPITALIZATION-AND-LIAB> 0 150,000
<GROSS-OPERATING-REVENUE> 0 0
<INCOME-TAX-EXPENSE> 0 0
<OTHER-OPERATING-EXPENSES> 0 0
<TOTAL-OPERATING-EXPENSES> 0 0
<OPERATING-INCOME-LOSS> 0 0
<OTHER-INCOME-NET> 0 0
<INCOME-BEFORE-INTEREST-EXPEN> 0 0
<TOTAL-INTEREST-EXPENSE> 0 0
<NET-INCOME> 0 0
0 0
<EARNINGS-AVAILABLE-FOR-COMM> 0 0
<COMMON-STOCK-DIVIDENDS> 0 0
<TOTAL-INTEREST-ON-BONDS> 0 0
<CASH-FLOW-OPERATIONS> 0 0
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> OPUR1
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM NATIONAL
FUEL GAS COMPANY'S CONSOLIDATED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000070145
<NAME> NATIONAL FUEL GAS COMPANY
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 12-MOS 12-MOS
<FISCAL-YEAR-END> SEP-30-1995 SEP-30-1995
<PERIOD-START> APR-01-1994 APR-01-1994
<PERIOD-END> MAR-31-1995 MAR-31-1995
<BOOK-VALUE> PER-BOOK PRO-FORMA
<TOTAL-NET-UTILITY-PLANT> 1,600,526 1,600,526
<OTHER-PROPERTY-AND-INVEST> 0 0
<TOTAL-CURRENT-ASSETS> 267,332 267,315
<TOTAL-DEFERRED-CHARGES> 14,287 14,287
<OTHER-ASSETS> 195,766 345,766
<TOTAL-ASSETS> 2,077,911 2,227,894
<COMMON> 37,421 39,921
<CAPITAL-SURPLUS-PAID-IN> 328,797 455,297
<RETAINED-EARNINGS> 402,336 402,319
<TOTAL-COMMON-STOCKHOLDERS-EQ> 822,554 897,537
0 0
0 0
<LONG-TERM-DEBT-NET> 404,000 464,000
<SHORT-TERM-NOTES> 70,700 85,700
<LONG-TERM-NOTES-PAYABLE> 0 0
<COMMERCIAL-PAPER-OBLIGATIONS> 20,000 20,000
<LONG-TERM-DEBT-CURRENT-PORT> 154,500 154,500
0 0
<CAPITAL-LEASE-OBLIGATIONS> 0 0
<LEASES-CURRENT> 0 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 606,157 606,157
<TOT-CAPITALIZATION-AND-LIAB> 2,077,911 2,227,894
<GROSS-OPERATING-REVENUE> 1,005,701 1,005,701
<INCOME-TAX-EXPENSE> 44,045 44,045
<OTHER-OPERATING-EXPENSES> 835,421 835,438
<TOTAL-OPERATING-EXPENSES> 879,466 879,483
<OPERATING-INCOME-LOSS> 126,235 126,218
<OTHER-INCOME-NET> 3,316 3,316
<INCOME-BEFORE-INTEREST-EXPEN> 129,551 129,534
<TOTAL-INTEREST-EXPENSE> 50,846 50,846
<NET-INCOME> 78,116 78,099
0 0
<EARNINGS-AVAILABLE-FOR-COMM> 78,116 78,099
<COMMON-STOCK-DIVIDENDS> 58,731 58,731
<TOTAL-INTEREST-ON-BONDS> 39,719 39,719
<CASH-FLOW-OPERATIONS> 226,134 0
<EPS-PRIMARY> 2.09 1.96
<EPS-DILUTED> 2.09 1.96
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> OPUR1
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM NATIONAL
FUEL GAS COMPANY'S (PARENT COMPANY) FINANCIAL STATEMENTS AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000070145
<NAME> NATIONAL FUEL GAS COMPANY
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 12-MOS 12-MOS
<FISCAL-YEAR-END> SEP-30-1995 SEP-30-1995
<PERIOD-START> APR-01-1994 APR-01-1994
<PERIOD-END> MAR-31-1995 MAR-31-1995
<BOOK-VALUE> PER-BOOK PRO-FORMA
<TOTAL-NET-UTILITY-PLANT> 134 134
<OTHER-PROPERTY-AND-INVEST> 0 0
<TOTAL-CURRENT-ASSETS> 331,683 346,666
<TOTAL-DEFERRED-CHARGES> 1,542 1,542
<OTHER-ASSETS> 1,214,146 1,349,146
<TOTAL-ASSETS> 1,215,688 1,350,688
<COMMON> 37,422 39,922
<CAPITAL-SURPLUS-PAID-IN> 382,796 455,296
<RETAINED-EARNINGS> 402,336 402,319
<TOTAL-COMMON-STOCKHOLDERS-EQ> 822,554 897,537
0 0
0 0
<LONG-TERM-DEBT-NET> 404,000 464,000
<SHORT-TERM-NOTES> 107,700 122,700
<LONG-TERM-NOTES-PAYABLE> 0 0
<COMMERCIAL-PAPER-OBLIGATIONS> 20,000 20,000
<LONG-TERM-DEBT-CURRENT-PORT> 154,500 154,500
0 0
<CAPITAL-LEASE-OBLIGATIONS> 0 0
<LEASES-CURRENT> 0 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 38,751 38,751
<TOT-CAPITALIZATION-AND-LIAB> 1,547,505 1,697,488
<GROSS-OPERATING-REVENUE> 0 0
<INCOME-TAX-EXPENSE> 404 404
<OTHER-OPERATING-EXPENSES> 6,925 6,942
<TOTAL-OPERATING-EXPENSES> 7,329 7,346
<OPERATING-INCOME-LOSS> (7,329) (7,346)
<OTHER-INCOME-NET> 133,479 133,479
<INCOME-BEFORE-INTEREST-EXPEN> 126,150 126,133
<TOTAL-INTEREST-EXPENSE> 47,445 47,445
<NET-INCOME> 78,116 78,099
0 0
<EARNINGS-AVAILABLE-FOR-COMM> 78,116 78,099
<COMMON-STOCK-DIVIDENDS> 58,731 58,731
<TOTAL-INTEREST-ON-BONDS> 39,719 39,719
<CASH-FLOW-OPERATIONS> 0 0
<EPS-PRIMARY> 2.09 1.96
<EPS-DILUTED> 2.09 1.96
</TABLE>
EXHIBIT S-1
PAGE 1 OF 3
National Fuel Gas Company ("National") proposes to capitalize Horizon Energy
Development, Inc., a corporation that National intends to acquire and own as a
wholly-owned subsidiary, by providing debt and equity capital of up to $150
million in total through December 31, 2001. Horizon Energy Development, Inc.
proposes to invest up to an aggregate principal amount of $150 million over
that same period in authorized project activities.
NATIONAL FUEL GAS COMPANY AND SUBSIDIARIES
PRO FORMA CONSOLIDATED BALANCE SHEET
AT MARCH 31, 1995
(Thousands of Dollars)
(Unaudited)
Adjustments
Per Books Dr. (Cr.) Pro Forma
ASSETS
PROPERTY, PLANT AND EQUIPMENT $2,252,292 $2,252,292
LESS - ACCUMULATED DEPRECIATION,
DEPLETION AND AMORTIZATION 651,766 651,766
1,600,526 1,600,526
CURRENT ASSETS
CASH & TEMP. CASH INVESTMENTS 13,582 (17) (a,b,c) 13,565
RECEIVABLES - NET 159,199 159,199
UNBILLED UTILITY REVENUE 37,720 37,720
GAS STORED UNDERGROUND 5,935 5,935
MATERIALS AND SUPPLIES 24,839 24,839
PREPAYMENTS 26,057 26,057
267,332 (17) 267,315
OTHER ASSETS
RECOVERABLE FUTURE TAXES 99,020 99,020
UNAMORTIZED DEBT EXPENSE 27,234 27,234
OTHER REGULATORY ASSETS 37,447 37,447
DEFERRED CHARGES 14,287 14,287
OTHER 32,065 150,000 (b) 182,065
210,053 150,000 360,053
TOTAL ASSETS $2,077,911 $149,983 $2,227,894
CAPITALIZATION AND LIABILITIES
CAPITALIZATION:
COMMON STOCK $37,421 ($2,500) (a) $39,921
PAID IN CAPITAL 382,797 (72,500) (a) 455,297
EARNINGS REINVESTED IN THE
BUSINESS 402,336 17 (c) 402,319
822,554 (74,983) 897,537
LONG TERM DEBT, NET OF
CURRENT PORTION 404,000 (60,000) (c) 464,000
TOTAL CAPITALIZATION 1,226,554 (134,983) $1,361,537
CURRENT AND ACCRUED LIABILITIES
NOTES PAYABLE TO BANKS AND
COMMERCIAL PAPER 90,700 (15,000) (a) 105,700
CURRENT PORTION OF LONG-TERM
DEBT 154,500 154,500
ACCOUNTS PAYABLE 50,025 50,025
AMOUNTS PAYABLE TO CUSTOMERS 48,240 48,240
OTHER ACCRUALS AND CURRENT
LIABILITIES 129,524 129,524
472,989 (15,000) 487,989
DEFERRED CREDITS
ACCUMULATED DEFERRED INCOME
TAXES 284,823 284,823
TAXES REFUNDABLE TO CUSTOMERS 31,688 31,688
UNAMORTIZED INVESTMENT TAX CREDIT 13,714 13,714
OTHER DEFERRED CREDITS 48,143 48,143
378,368 0 378,368
TOTAL CAPITALIZATION AND
LIABILITIES $2,077,911 $(149,983) $2,227,894
SEE NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS.
EXHIBIT S-1
PAGE 2 OF 3
NATIONAL FUEL GAS COMPANY AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENTS
OF INCOME AND EARNINGS REINVESTED IN THE BUSINESS
FOR THE TWELVE MONTHS ENDED MARCH 31, 1995
(Thousands of Dollars)
(Unaudited)
Adjustments
Per Books Dr. (Cr.) Pro Forma
OPERATING REVENUES $1,005,701 $1,005,701
OPERATING EXPENSES:
PURCHASED GAS 370,726 370,726
OPERATION EXPENSE 266,520 17 (c) 266,537
MAINTENANCE 28,029 28,029
PROPERTY, FRANCHISE &
OTHER TAXES 96,145 96,145
DEPRECIATION, DEPLETION &
AMORTIZATION 74,001 74,001
INCOME TAXES - NET 44,045 44,045
879,466 17 879,483
OPERATING INCOME 126,235 17 126,218
OTHER INCOME 3,316 3,316
INCOME BEFORE INTEREST CHARGES 129,551 17 129,534
INTEREST CHARGES:
INTEREST ON LONG-TERM
DEBT 39,719 39,719
OTHER INTEREST 11,127 11,127
50,846 0 50,846
INCOME BEFORE CUMULATIVE EFFECT 78,705 17 78,688
CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING (589) (589)
NET INCOME AVAILABLE FOR COMMON
STOCK 78,116 17 78,099
EARNINGS REINVESTED IN THE BUSINESS
BALANCE AT APRIL 1, 1994 382,951 382,951
461,067 17 461,050
DIVIDENDS ON COMMON STOCK (58,731) (58,731)
BALANCE AT MARCH 31, 1995 $402,336 $17 $402,319
EARNINGS PER COMMON SHARE
INCOME BEFORE CUMULATIVE EFFECT $2.11 $0.00 $1.98
CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING (0.02) 0.00 (0.02)
NET INCOME AVAILABLE FOR COMMON
STOCK $2.09 $0.00 $1.96
WEIGHTED AVG. COMMON SHARES
OUTSTANDING 37,279,331 39,779,331
SEE NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS.
EXHIBIT S-1
PAGE 3 OF 3
NATIONAL FUEL GAS COMPANY AND SUBSIDIARIES
PRO FORMA CONSOLIDATED ADJUSTING JOURNAL ENTRIES
AS OF MARCH 31, 1995
(UNAUDITED)
(Thousands of Dollars)
DEBIT CREDIT
(a)
CASH $150,000
N/P TO BANKS & COMMERCIAL PAPER $15,000
LT DEBT $60,000
COMMON STOCK $2,500
PAID IN CAPITAL $72,500
To record National's assumed financing
transactions through December 31, 2001,
to obtain funds to invest in Horizon Energy
Development, Inc.
(b)
INVESTMENTS IN PROJECTS (OTHER ASSETS) $150,000
CASH $150,000
To record Horizon Energy Development, Inc.
investment in project activities.
(c)
OPERATION EXPENSE $17
CASH $17
To record payment of estimated fees related
to the application/declaration.
EXHIBIT S-2
PAGE 1 OF 3
NATIONAL FUEL GAS COMPANY - PARENT
PRO FORMA BALANCE SHEET
AT MARCH 31, 1995
(UNAUDITED)
(Thousands of Dollars)
Adjustments
Per Books Dr. (Cr.) Pro Forma
ASSETS
PROPERTY, PLANT AND EQUIPMENT $244 $244
LESS - ACCUMULATED DEPRECIATION,
DEPLETION AND AMORTIZATION 110 110
134 0 134
CURRENT ASSETS
CASH & TEMP. CASH INVESTMENTS 7,123 (17) (a,b,c,d) 7,106
NOTES RECEIVABLE -
INTERCOMPANY 287,700 15,000 (c) 302,700
ACCOUNTS RECEIVABLE -
INTERCOMPANY 13,787 13,787
OTHER ACCOUNTS RECEIVABLE 7,727 7,727
DIVIDENDS RECEIVABLE -
INTERCOMPANY 13,920 13,920
PREPAYMENTS 1,426 1,426
331,683 14,983 346,666
OTHER ASSETS
INVESTMENT IN ASSOCIATED
COMPANIES 751,547 75,000 (b,c) 826,547
NOTES RECEIVABLE -
INTERCOMPANY 454,965 60,000 (c) 514,965
UNAMORTIZED DEBT EXPENSE 4,341 4,341
DEFERRED CHARGES 1,542 1,542
OTHER 3,293 3,293
1,215,688 135,000 1,350,688
TOTAL ASSETS $1,547,505 $149,983 $1,697,488
CAPITALIZATION AND LIABILITIES
CAPITALIZATION:
COMMON STOCK $37,422 ($2,500) (a) $39,922
PAID IN CAPITAL 382,796 (72,500) (a) 455,296
EARNINGS REINVESTED
IN THE BUSINESS 402,336 17 (d) 402,319
822,554 (74,983) 897,537
LONG-TERM DEBT, NET OF CURRENT
PORTION 404,000 (60,000) (a) 464,000
TOTAL CAPITALIZATION 1,226,554 (134,983) 1,361,537
CURRENT AND ACCRUED LIABILITIES
NOTES PAYABLE TO BANKS AND
COMMERCIAL PAPER 90,700 (15,000) (a) 105,700
NOTES PAYABLE - INTERCOMPANY 37,000 37,000
CURRENT PORTION OF LONG-TERM
DEBT 154,500 154,500
ACCOUNTS PAYABLE - OTHER 128 128
ACCOUNTS PAYABLE -
INTERCOMPANY 10,775 10,775
OTHER ACCRUALS AND CURRENT
LIABILITIES 26,500 26,500
319,603 (15,000) 334,603
DEFERRED CREDITS
ACCUMULATED DEFERRED INCOME
TAXES (203) (203)
OTHER DEFERRED CREDITS 1,551 1,551
1,348 0 1,348
TOTAL CAPITALIZATION AND
LIABILITIES $1,547,505 $(149,983) $1,697,488
SEE NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS.
EXHIBIT S-2
PAGE 2 OF 3
NATIONAL FUEL GAS COMPANY - PARENT
PRO FORMA STATEMENTS OF INCOME AND
EARNINGS REINVESTED IN THE BUSINESS
FOR THE TWELVE MONTHS ENDED MARCH 31, 1995
(UNAUDITED)
(Thousands of Dollars)
Adjustments
Per Books Dr. (Cr.) Pro Forma
OPERATING REVENUES $0 $0
OPERATING EXPENSES:
OPERATION EXPENSE 5,762 17 (d) 5,779
PROPERTY, FRANCHISE &
OTHER TAXES 1,157 1,157
DEPRECIATION, DEPLETION &
AMORTIZATION 6 6
INCOME TAXES - NET 404 404
7,329 17 7,346
OPERATING INCOME (7,329) 17 (7,346)
OTHER INCOME:
UNREMITTED EARNINGS OF 31,687 31,687
SUBSIDIARIES
DIVIDENDS OF SUBSIDIARIES 49,117 49,117
INTEREST-INTERCOMPANY 52,152 52,152
OTHER INTEREST 523 523
133,479 0 133,479
INCOME BEFORE INTEREST CHARGES 126,150 17 126,133
INTEREST CHARGES:
INTEREST ON LONG-TERM
DEBT 39,719 39,719
INTEREST - INTERCOMPANY 1,938 1,938
OTHER INTEREST 5,788 5,788
47,445 0 47,445
INCOME BEFORE CUMULATIVE EFFECT 78,705 17 78,688
CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING (589) (589)
NET INCOME 78,116 17 78,099
EARNINGS REINVESTED IN THE BUSINESS
BALANCE AT APRIL 1, 1994 382,951 382,951
461,067 17 461,050
DIVIDENDS ON COMMON STOCK (58,731) (58,731)
BALANCE AT MARCH 31, 1995 $402,336 $17 $402,319
EARNINGS PER COMMON SHARE
INCOME BEFORE CUMULATIVE EFFECT $2.11 $0.00 $1.98
CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING (0.02) (0.02)
NET INCOME AVAILABLE FOR COMMON
STOCK $2.09 $0.00 $1.96
WEIGHTED AVG. COMMON SHARES
OUTSTANDING 37,279,331 39,779,331
SEE NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS.
EXHIBIT S-2
PAGE 3 OF 3
NATIONAL FUEL GAS COMPANY - PARENT
PRO FORMA ADJUSTING ENTRIES
AS OF MARCH 31, 1995
(UNAUDITED)
(Thousands of Dollars)
DEBIT CREDIT
(a)
CASH $150,000
N/P TO BANKS & COMMERCIAL PAPER $15,000
LT DEBT $60,000
COMMON STOCK $2,500
PAID IN CAPITAL $72,500
To record National's assumed financing transactions
through December 31, 2001, to obtain funds to
invest in Horizon Energy Development, Inc.
(b)
INVESTMENT IN ASSOCIATED COMPANY $500
CASH $500
To record National's initial Capitalization
of Horizon Energy Development, Inc.
through acquisition of 5,000 shares
of Horizon Energy Development, Inc.
common stock, $1 par value.
(c)
INVESTMENT IN ASSOCIATED COMPANY $74,500
N/R-INTERCOMPANY (CURRENT) $15,000
N/R-INTERCOMPANY(LONG-TERM) $60,000
CASH $149,500
To record National's investment, through
December 31, 2001, in Horizon Energy
Development, Inc. project activities.
(d)
OPERATION EXPENSE $17
CASH $17
To record payment of estimated fees
related to the application/declaration.
EXHIBIT S-3
PAGE 1 OF 2
HORIZON ENERGY DEVELOPMENT, INC.
PRO FORMA BALANCE SHEET
AT MARCH 31, 1995
(UNAUDITED)
(Thousands of Dollars)
Adjustments
Per Books Dr. (Cr.) Pro Forma
ASSETS
PROPERTY, PLANT AND EQUIPMENT $0
LESS - ACCUMULATED DEPRECIATION,
DEPLETION AND AMORTIZATION 0
0 0 0
CURRENT ASSETS
CASH & TEMP. CASH INVESTMENTS 0 (a,b,c) 0
RECEIVABLES - NET 0
ACCOUNTS RECEIVABLE-INTERCOMPANY 0
MATERIALS AND SUPPLIES 0
PREPAYMENTS 0
0 0 0
OTHER ASSETS
DEFERRED CHARGES 0
OTHER 150,000 (c) 150,000
0 150,000 150,000
TOTAL ASSETS $0 $150,000 $150,000
CAPITALIZATION AND LIABILITIES
CAPITALIZATION:
CAPITAL STOCK OF SUBSIDIARIES ($5) (a) $5
PAID IN CAPITAL (74,995) (a,b) 74,995
EARNINGS REINVESTED IN THE
BUSINESS 0
0 (75,000) 75,000
NOTES PAYABLE - INTERCOMPANY (60,000) (b) 60,000
TOTAL CAPITALIZATION 0 (135,000) 135,000
CURRENT AND ACCRUED LIABILITIES
NOTES PAYABLE-INTERCOMPANY (15,000) (b) 15,000
ACCOUNTS PAYABLE 0
ACCOUNT PAYABLE-INTERCOMPANY 0
OTHER ACCRUALS AND CURRENT
LIABILITIES 0
0 (15,000) 15,000
DEFERRED CREDITS
ACCUMULATED DEFERRED INCOME
TAXES 0
OTHER DEFERRED CREDITS 0
0 0 0
TOTAL CAPITALIZATION AND LIABILITIES $0 $(150,000) $150,000
SEE NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS.
EXHIBIT S-3
PAGE 2 OF 2
HORIZON ENERGY DEVELOPMENT, INC.
PRO FORMA ADJUSTING ENTRIES
AS OF MARCH 31, 1995
(UNAUDITED)
(Thousands of Dollars)
DEBIT CREDIT
(a)
CASH $500
COMMON STOCK $5
PAID IN CAPITAL $495
To record National's initial Capitalization
of Horizon Energy Development, Inc. through
acquisition of 5,000 shares of Horizon
Energy Development, Inc. common stock,
$1 par value.
(b)
CASH $149,500
PAID IN CAPITAL $74,500
N/P-INTERCOMPANY (CURRENT) $15,000
N/P-INTERCOMPANY (LONG-TERM) $60,000
To record National's investment, through
December 31, 2001, in Horizon Energy
Development, Inc. project activities.
(c)
INVESTMENTS IN PROJECTS (OTHER ASSETS) $150,000
CASH $150,000
To record Horizon Energy Development, Inc.
investment in project activities.
S-4
NATIONAL FUEL GAS COMPANY AND SUBSUBSIDIARIES
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
1) The Notes to Consolidated Financial Statements appearing on pages 58 to 88
of National Fuel Gas Company's September 30, 1994 Form 10-K are
incorporated herein by reference.
2) The Notes to Consolidated Financial Statements appearing on pages 7 - 11 of
National Fuel Gas Company's December 31, 1994 Form 10-Q and pages 8 - 13
of National Fuel Gas Company's March 31, 1995 Form 10-Q are incorporated
herein by reference.
3) Analysis of Investments in Associated Companies at March 31, 1995 (per
Books):
<TABLE>
<CAPTION>
Earnings
Reinvested
Total
Par or in the
Unremitted Investment
Stated Value Business
Earnings in Associated
of Subsidiary Paid in at
Since Companies at
Stock Capital Acquisition
Acquisition Equity
<S> <C> <C> <C> <C>
<C>
National Fuel Gas Company:
National Fuel Gas Distribution
Corporation $59,170 $121,668 $4,636
$231,881 $417,355
National Fuel Gas Supply
Corporation 25,345 35,833 2,453
137,256 200,887
Seneca Resources Corporation 500 104,035 6
7,007 111,548
Leidy Hub, Inc. 4 1,038
(411) 631
Highland Land & Minerals, Inc. 5 445
4,534 4,984
Utility Constructors, Inc. 1 5,959
(2,957) 3,003
Data-Track Account Services,
Inc. 1 499
97 597
National Fuel Resources, Inc. 10 3,490
3,444 6,944
Consolidating Adjustment
5,598 5,598
85,036 272,967 7,095
386,449 751,547
National Fuel Gas Supply Corporation:
Seneca Resources Corporation 61
61
$85,036 $273,028 $7,095
$386,449 $751,608
</TABLE>
