File No. 70-9153
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
FORM U-1/A
AMENDMENT NO. 1
to
APPLICATION OR DECLARATION
under the
PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
____________________________________________
National Fuel Gas Company National Fuel Gas
10 Lafayette Square Distribution Corporation
Buffalo, New York 14203 10 Lafayette Square
Buffalo, New York 14203
Seneca Resources Corporation National Fuel Gas Supply
1201 Louisiana Street, Suite 400 Corporation
Houston, Texas 77002 10 Lafayette Square
Buffalo, New York 14203
National Fuel Resources, Inc. Utility Constructors, Inc.
165 Lawrence Bell Drive, Suite 120 10 Lafayette Square
Williamsville, New York 14221 Buffalo, New York 14203
Horizon Energy Development, Inc. Highland Land & Minerals,
10 Lafayette Square Inc.
Buffalo, New York 14203 10 Lafayette Square
Buffalo, New York 14203
Data-Track Account Services, Inc. Leidy Hub, Inc.
10 Lafayette Square 10 Lafayette Square
Buffalo, New York 14203 Buffalo, New York 14203
Seneca Independence Pipeline Company Niagara Independence
10 Lafayette Square Marketing Company
Buffalo, New York 14203 1201 Louisiana Street,
Suite 400
Houston, Texas 77002
Niagara Energy Trading Inc.
1201 Louisiana Street, Suite 400
Houston, Texas 77002
(Names of companies filing this statement
and addresses of principal executive offices)
_____________________________________________
NATIONAL FUEL GAS COMPANY
(Name of top registered holding company)
_____________________________________________
James R. Peterson Curtis W. Lee, Esq. Robert J. Reger, Jr.,
Assistant Secretary General Manager- Esq.
National Fuel Gas Finance Reid & Priest LLP
Company National Fuel Gas 40 West 57th Street
10 Lafayette Square Distribution New York, New York
Buffalo, New York Corporation 10019
14203 10 Lafayette Square
Buffalo, New York
14203
(Names and addresses of agents for service)
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This Application-Declaration is amended and revised in its
entirety to read as follows:
"Item 1. Description of Proposed Transactions.
National Fuel Gas Company ("National") is a public
utility holding company registered under the Public Utility
Holding Company Act of 1935, as amended ("Holding Company Act").
Each wholly-owned subsidiary of National has joined in this
Application/Declaration. Such subsidiaries include National Fuel
Gas Distribution Corporation ("Distribution"), National Fuel Gas
Supply Corporation ("Supply"), Seneca Resources Corporation
("Seneca"), Utility Constructors, Inc. ("UCI"), Highland Land &
Minerals, Inc. ("Highland"), Leidy Hub, Inc. ("Leidy"), Horizon
Energy Development, Inc. ("Horizon"), Data-Track Account
Services, Inc. ("Data-Track"), National Fuel Resources, Inc.
("NFR"), Seneca Independence Pipeline Company ("Seneca
Independence"), Niagara Independence Marketing Company ("Niagara
Independence") and Niagara Energy Trading Inc. ("NET"). The
subsidiaries listed above are collectively referred to as the
"Subsidiaries". The Subsidiaries, excluding Distribution, are
collectively referred to as the "Non-Utility Subsidiaries".
National and its Subsidiaries are collectively referred to herein
as the National Fuel Gas System ("System").
The System is seeking, as more fully described
hereinafter, Commission authorization, to the extent not exempt
from Commission approval under the Holding Company Act, or
otherwise permitted or authorized under the Holding Company Act
pursuant to Commission rule, regulation or order, for the items
that follow, which authorization is to be applicable for the
period from the effective date of the order (the "Order Date")
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through December 31, 2002 (the "Authorization Period") (except as
specified herein):
I. External financing by National, including A) short-term
financing in the form of borrowings under credit facilities,
issuance of commercial paper, other borrowings from banks or
financial institutions and/or the issuance of other
securities, B) long-term financing (debt and equity), C)
hedging of financing risks, including those associated with
existing and anticipated fixed and floating rate debt
(whether denominated in U.S. dollar or foreign currency),
and D) financing by means of the issuance of other
securities. The proceeds of such financings, together with
other available funds, would be used by National to make
investments in Subsidiaries, to redeem, acquire or retire
outstanding securities, to make investments in Exempt
Wholesale Generators (EWGs) and Foreign Utility companies
(FUCOs), subject to the limitations of Rule 53, to make
investments in Energy-Related Companies and Gas-Related
Companies, subject to the limitations of Rule 58, and for
other corporate purposes.
II. Intra-System financing of Subsidiaries, to the extent not
exempt pursuant to Rule 52 or Rule 45, as applicable,
including an intra-System Money Pool.
III. External financing by Subsidiaries, to the extent not exempt
pursuant to Rule 52, and the formation of financing
entities.
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IV. Guarantees by National with respect to obligations of its
Subsidiaries.
V. Use of proceeds to include exempt investments in EWGs,
FUCOs, Energy-Related Companies and Gas-Related Companies.
I. EXTERNAL FINANCING BY NATIONAL
A. INTRODUCTION
National currently obtains funds externally (i) through
short-term debt financing under credit facilities with banks and
financial institutions and through a commercial paper program,
(ii) through long-term debt financing through the issuance of
debentures and medium-term notes and (iii) through equity
financing by means of compensation, benefits and incentive plans,
customer stock purchase plans and dividend reinvestment plans
(collectively, "Stock Issuance Plans"). Short-term borrowings
are authorized pursuant to the Order of the Commission dated
December 28, 1995 (HCAR No. 26443; File No. 70-8729). National
does not have any existing authority to issue long-term debt.
Currently, National has Stock Issuance Plans authorized pursuant
to the following Orders of the Commission: 1997 Award and Option
Plan (HCAR No. 26670 dated February 18, 1997; File No. 70-8975);
Shares Payment Policy (HCAR No. 26655 dated January 24, 1997;
File No. 70-8943); Customer Stock Purchase Plan (HCAR No. 26394
dated October 19, 1995; File No. 70-8657); Dividend Reinvestment
and Stock Purchase Plan (HCAR No. 26261 dated March 30, 1995;
File No. 70-8579); 401(k) Plans (HCAR No. 26176 dated November
30, 1994; File No. 70-7674; 1993 Award and Option Plan (HCAR No.
25753 dated March 5, 1993; File No. 70-8109); 1984 Stock Plan and
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1983 Incentive Stock Option Plan (HCAR No. 24793 dated December
28, 1988; File No. 70-7581).
National is herewith requesting authorization to issue and
reissue, from time to time during the Authorization Period,
short-term debt (debt with a term not exceeding 270 days)
aggregating not more than $750 million outstanding at any one
time. National also is requesting authority to issue and
reissue, from time to time during the Authorization Period,
additional long-term securities aggregating not more than $2
billion outstanding at any one time. Such securities issuances
would be in addition to any common stock that may be issued
pursuant to National's Rights Plan, as previously authorized
pursuant to the Order of the Commission dated June 12, 1996 (HCAR
No. 26532; File No: 70-8841).
National may issue securities covered by this
Application/Declaration in any of the following ways: (i) through
underwriters or dealers; (ii) directly to a limited number of
purchasers or to a single purchaser, (iii) through agents, (iv)
in exchange for securities of other companies, the acquisition of
which is authorized under a separate order of the Commission or
exempt pursuant to Section 32, 33 or 34 or Rule 58, as
applicable, and/or (v) through Stock Issuance Plans.
If underwriters are used in the sale of the securities, such
securities will be acquired by the underwriters for their own
account and may be resold from time to time in one or more
transactions, including negotiated transactions, at a fixed
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public offering price or at varying prices determined at the time
of sale. The securities may be offered to the public either
through underwriting syndicates (which may be represented by
managing underwriters designated by National) or directly by one
or more underwriters acting alone. The securities may be sold
directly by National or through agents designated by National
from time to time. If dealers are utilized in the sale of any of
the securities, National will sell such securities to the dealers
and any such dealer may then resell such securities to the public
at fixed prices or varying prices to be determined by such dealer
at the time of resale. National may also sell any securities to
agents acting as principal. Such agents may then resell such
securities to the public at fixed prices or varying prices to be
determined by the agent at the time of resale. If equity
securities are being sold in an underwritten offering, National
may grant the underwriters thereof an over-allotment option
permitting the purchase from National of additional equity
securities (an additional 15% under present guidelines), at the
same price as the equity securities then being offered, solely
for the purpose of covering over-allotments.
Securities issued by National may be sold pursuant to
"delayed delivery contracts" which permit the underwriters or
agents to locate buyers who will agree with National to buy the
securities at an agreed price on the trade date but accept
delivery at a later date. Debt securities may also be sold
through the use of medium term note and similar programs or in
transactions whereby securities are sold to initial purchasers
(typically, investment banks or similar institutions) and then
resold by the initial purchasers in reliance upon Rule 144A or
another exemption under the Securities Act of 1933, as amended
("Securities Act") or pursuant to Regulation S under the
Securities Act.
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The System intends that any authorization granted pursuant
to this Application/Declaration regarding the issuance of
securities will supersede the previous authorizations described
in the first paragraph of this Section A to the extent such
previous authorizations apply to the issuance of securities
(except as specified herein).
Parameters for Authorization
The Application/Declaration makes requests for authority,
without any additional prior Commission approvals, to engage in
future financing transactions for which the specific terms and
conditions are not at this time known. Accordingly, it is
appropriate that certain conditions concerning the financial
status of National exist at the time of engaging in such
financing transactions. The general conditions for undertaking
such financing transactions without further prior approval are
given directly below.
1. National Debt of Investment Grade and Maintenance of
Equity Ratio
National would be authorized to engage in the long-term
debt financing activities described herein as long as: (i) its
long-term debt rating is of investment grade as established by a
nationally recognized statistical rating organization as that
term is used in Rule 15c3-l(c)(2)(vi)(F) under the Securities
Exchange Act of 1934 (the "Exchange Act"), and (ii) its common
equity (as reflected in its most recent Form 10-K or Form 10-Q,
as the case may be) does not fall below 30% of its consolidated
capitalization. The issuance of any long-term debt would occur
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over such a period of time and in a combination with the issuance
of equity such that it would not cause National's common equity
to fall below 30% of consolidated capitalization.
2. Effective Cost of Money on Borrowings
The effective cost of money on debt borrowings made
pursuant to the authorizations granted under this
Application/Declaration will not, at the time of the issuance,
exceed 300 basis points over the then current yield to maturity
of comparable term U.S. Treasury securities.
3. Effective Cost of Money on Other Approved Securities
The effective cost of money on preferred stock and
other fixed income oriented securities will not, at the time of
the issuance, exceed 500 basis points over the then current yield
to maturity of 30-year term U.S. Treasury securities.
4. Maturity of Debt
The maturity of each issuance of debt will be not more
than 50 years.
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5. Issuance Expenses
The underwriting fees, commissions, or other similar
fees paid in connection with the issuance, sale or distribution
of a security pursuant to this Application/Declaration will not
exceed 5% of the principal or total amount of the financing.
6. Aggregate Dollar Limit
The aggregate amount of external debt and equity
financing to be issued or reissued by National during the
Authorization Period will not exceed (i) $2 billion of additional
long-term debt and equity outstanding at any one time (not
including any common stock that may be issued pursuant to
National's Rights Plan authorized pursuant to the Order of the
Commission dated June 12, 1996 (HCAR No. 26532; File No. 70-
8841)) and (ii) $750 million of short-term borrowings outstanding
at any one time. The value of debt securities will equal the
aggregate principal amount of such securities. The value of
equity securities will equal the consideration received by
National at the time the securities are issued.
The proceeds from the sale of securities by National in
external financing transactions will be used by National,
together with other available funds, for general corporate
purposes including (i) the financing, in part, of capital
expenditures of National and its Subsidiaries, (ii) the financing
of inventories and other working capital requirements, (iii) the
acquisition, retirement or redemption of securities of which
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National is the issuer without the need for prior Commission
approval pursuant to Rule 42 or a successor rule, and/or (iv)
investments in EWGs and FUCOs, subject to the limitations of Rule
53, and in Energy-Related Companies and Gas-Related Companies,
subject to the limitations of Rule 58.
B. SHORT-TERM FINANCING
To provide financing for general corporate purposes,
including the temporary financing of inventories and other
working capital requirements and construction spending, National
requests authorization to issue and reissue from time to time
during the Authorization Period, up to $750 million at any one
time outstanding of short-term debt consisting of borrowings
under its credit facilities, the issuance of commercial paper,
and/or other forms of short-term financing generally available to
borrowers with investment grade credit ratings.
In order to consolidate all orders authorizing financing
under one file, National proposes that the authorization for
short-term borrowings of an amount not to exceed $600 million
outstanding at any one time (HCAR No. 26443; File No. 70-8729) be
superseded, as of the Order Date, by the Order of the Commission
sought herein.
National further requests authorization to amend its
commercial paper program or credit facilities without further
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Commission authorization, provided that the term of any borrowing
thereunder does not extend beyond 270 days from its date of
issuance or borrowing.
1. Commercial Paper
Commercial paper would be sold by National, from time
to time, in established domestic or foreign commercial paper
markets directly or through dealers and placement agents at
prevailing discount rates, or at prevailing coupon rates, at the
date of issuance for commercial paper of comparable quality and
maturities sold to commercial paper dealers generally. It is
expected that the dealers and placement agents acquiring
commercial paper from National will re-offer such paper at a
discount to corporate, institutional and, with respect to foreign
commercial paper, also to individual investors. Such corporate
and institutional investors may include, among others, commercial
banks, insurance companies, pension funds, investment trusts,
mutual funds, foundations, colleges and universities, finance
companies and nonfinancial corporations.
Back-up bank lines of credit for 100% of the
outstanding amount of commercial paper are generally required by
credit rating agencies. National currently has a committed
credit facility which acts as back-up to its commercial paper
program.
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2. Credit Facilities with Banks and other Financial
Institutions
National proposes to establish credit facilities with
various banks and/or other financial institutions and to issue
and sell, from time to time, short-term notes.
Such notes would bear interest at rates comparable to,
or lower than, those available through other forms of short-term
borrowing with similar terms as contemplated in this
Application/Declaration. The term of any short-term notes would
not exceed 270 days, and the total amount of notes outstanding at
any time, when added to the aggregate amounts of short-term
borrowing outstanding under other forms of short-term borrowing
contemplated in this Application/Declaration, would not exceed
the total amount of short-term debt for which authorization is
requested. The borrowing arrangements with the banks and
financial institutions may require compensating balances and/or
commitment fees or similar fees. National requests authority to
incur, if necessary, commitment or similar fees not to exceed
one-half of one percent (.50%) of the average daily credit
facility available, and/or compensating balances not to exceed
twenty percent (20%) of the credit facility established.
National, at all times, will attempt to negotiate the most
favorable effective borrowing rate taking into account any
compensating balances and/or fees.
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3. Other Securities
National may engage in other types of short-term
financing as it may deem appropriate in light of its needs and
market conditions at the time of issuance. Such short-term
financing may include, without limitation, bank borrowings, and
other short-term securities issued under a mortgage or indenture.
The term of any such short-term borrowing would not exceed 270
days. In no case will the outstanding balance of all short-term
borrowings exceed $750 million during the Authorization Period.
C. LONG-TERM FINANCING
Long-term securities may consist of any combination of long-
term debt (debt having terms in excess of 270 days), common
stock, preferred stock, or other equity securities, as the case
may be.
1. Long-term Debt Financing
National requests Commission authorization to issue or
reissue from time to time during the Authorization Period
additional long-term debt securities in an aggregate principal
amount which, when combined with the value of the consideration
received from the issuances of common stock, preferred stock and
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other equity securities during the Authorization Period, will not
exceed $2 billion at any one time outstanding. The term of any
such long-term debt securities will be in excess of 270 days.
Examples of such long-term debt securities would include, but not
be limited to, debentures, convertible debt, subordinated debt,
medium-term notes, bank borrowings, and securities with call or
put options. Any long-term debt security would have such
designation, aggregate principal amount, maturity, interest
rate(s) or methods of determining the same, terms of payment of
interest, redemption provisions, non-refunding provisions,
sinking fund terms, conversion or put terms, U.S. dollar or
foreign currency denominations, security and subordination
provisions, and other terms and conditions as National may
determine at the time of issuance. Medium-term notes would be
issued under the Indenture dated as of October 15, 1994, between
National and The Bank of New York, Trustee (or any successor
trustee), as amended (the "Indenture"). Debentures and other
long-term debt securities may be issued under the Indenture or
under a mortgage or other indenture.
2. Equity Financing
National requests Commission authorization to issue
additional equity securities from time to time during the
Authorization Period, the value of which, as determined at the
time the securities are issued, when combined with other
long-term securities issued pursuant to this
Application/Declaration, would not exceed $2 billion, at any one
time outstanding. The value of equity securities will equal the
consideration received by National at the time the securities are
issued. Such issuance would include (a) common stock and the
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rights appurtenant thereto (together, the "Shares"), including,
but not limited to, Shares issued during the Authorization Period
pursuant to the following Stock Issuance Plans and any successor
Stock Issuance Plans: (i) the 1997 Award and Option Plan (HCAR
No. 26670) whereby awards granting the right to purchase up to
1,900,000 Shares may be issued over a ten-year period through
December 12, 2006, (ii) the Shares Payment Policy (HCAR No.
26655), (iii) the Customer Stock Purchase Plan (HCAR No. 26394),
(iv) the Dividend Reinvestment and Stock Purchase Plan (HCAR No.
26261), (v) the 401(k) Plans (HCAR No. 26176), (vi) the 1993
Award and Option Plan (HCAR No. 25753), (vii) the 1984 Stock
Plan, (HCAR No. 24793) and (viii) the 1983 Incentive Stock Option
Plan (HCAR No. 24793), (b) preferred stock, (c) other preferred
securities, (d) options and/or warrants convertible into common
or preferred stock and (e) common and/or preferred stock issued
upon the exercise of convertible debt, rights, options, warrants
and/or similar securities.
From time to time during the Authorization Period,
other similar Stock Issuance Plans may be adopted by National.
For instance, a direct stock purchase plan with a dividend
reinvestment feature that allows sales to persons not already
shareholders may be implemented. National proposes to issue
Shares pursuant to the existing plans and similar plans or plan
funding arrangements hereinafter adopted and to engage in other
sales of its Shares for reasonable business purposes without any
additional prior Commission order during the Authorization
Period, except that the grants of Shares and rights to purchase
Shares under the 1997 Award and Option Plan may be issued from
time to time until December 12, 2006. Transactions of this
variety would thus be treated the same as other equity
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transactions permitted pursuant to this Application/Declaration.
Any authorization requested hereby regarding the issuance of
securities will supersede the authorizations cited above to the
extent such previous authorizations apply to the issuance of
securities, except that the authority previously issued in
connection with the 1997 Award and Option Plan (HCAR No. 26670)
shall still apply to the extent such previous authority extends
through December 12, 2006.
D. HEDGING
In addition, National requests authorization, to the extent
needed, to enter into hedging transactions ("Hedge Program") to
be initiated during the Authorization Period, with respect to all
or a portion of existing or anticipated financings, including
floating rate debt or fixed rate debt, using interest rate swaps
or other derivative products that may be useful for such
purposes.
National is seeking authority, to the extent needed, to
enter into one or more interest rate swaps ("Swaps"), and one or
more derivative instruments, such as caps, floors, collars,
ceilings, options and forwards (collectively, "Derivative
Transactions"), with one or more counterparties from time to time
during the Authorization Period, in notional amounts aggregating
not in excess of the amount of debt outstanding at any one time.
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In order to consolidate all orders authorizing hedging
transactions under one file, National proposes that the
authorization for entering into hedging transactions (HCAR No.
26443; file No. 70-8729) be superseded, as of the Order Date, by
the Order of the Commission sought herein.
Among other strategies that may be employed from time to
time, National may use two different interest rate swap
strategies. Under one swap strategy, National would agree to
make payments to a counterparty, payable periodically. The rate
would be payable at a variable or floating rate index and would
be calculated on a notional (i.e., principal) amount. In return,
the counterparty would agree to make payments to National based
upon the same notional amount and at an agreed upon fixed rate.
This would be a "floating-to-fixed swap" on National's part.
Under another swap strategy, National and the counterparty may
exchange roles. National would pay a fixed rate and receive a
variable rate on a notional amount. This would be a
"fixed-to-floating swap" on National's part.
National also seeks authorization, to the extent needed, to
enter into an anticipatory interest rate hedging program (the
"Anticipatory Hedge Program") for anticipated debt issuances
utilizing Swaps and Derivative Transactions within a limited time
prior to the issuance of shortor long-term debt securities. The
Anticipatory Hedge Program is designed to reduce risk to National
as discussed below.
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The Anticipatory Hedge Program would be utilized to fix
and/or limit the interest rate risk associated with any new
issuance through (i) a forward sale of exchange-traded U.S.
Treasury futures contracts, U.S. Treasury securities and/or a
forward swap (each a "Forward Sale"), (ii) the purchase of put
options on U.S. Treasury securities (a "Put Options Purchase"),
(iii) a Put Options Purchase in combination with the sale of call
options on U.S. Treasury securities (a "Zero Cost Collar"), or
(iv) some combination of a Forward Sale, Put Options Purchase
and/or Zero Cost Collar. The program may be executed on-exchange
("On-Exchange Trades") with brokers through the opening of
futures and/or options positions traded on the Chicago Board of
Trade ("CBOT"), the opening of over-the-counter positions with
one or more counterparties ("Off-Exchange Trades") or a
combination of On-Exchange Trades and Off-Exchange Trades.
National will determine the optimal structure of the Anticipatory
Hedge Program at the time of execution. National may decide to
lock in interest rates and/or limit its exposure to interest rate
increases. All open positions under the Anticipatory Hedge
Program will be closed on or prior to the date of the new
issuance and National will not, at any time, take possession of
the underlying U.S. Treasury securities.
All transactions entered into under the Hedge Program will
be bona fide hedges and will meet the criteria established by the
Financial Accounting Standards Board in order to qualify for
hedge accounting treatment, and National will comply with the
financial disclosure requirements associated with hedging
transactions.
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National seeks Commission approval of the entire Hedge
Program to ensure the maximum flexibility in structuring
effective financing-related hedging strategies.
E. OTHER SECURITIES
In addition to the specific securities for which
authorization is sought herein, National also proposes to issue
other types of securities that it deems appropriate during the
Authorization Period. National requests that the Commission
reserve jurisdiction over the issuance of additional types of
securities. National also undertakes to file a post-effective
amendment which will describe the general terms of each such
security and request a supplemental order of the Commission
authorizing the issuance thereof by National. National further
requests that each supplemental order be issued by the Commission
without further time-consuming public notice.
II. INTRA-SYSTEM FINANCING BY SUBSIDIARIES
A. MONEY POOL/INTERNAL SHORT-TERM FINANCING
By prior Commission Order dated December 28,1995 (HCAR No.
26443; File No. 70-8729), National, Distribution, Supply, Seneca,
Highland,Leidy, Horizon, Data-Track, NFR and UCI (collectively,
the "Current Money Pool Participants") were authorized to
participate in the National System money pool ("Money Pool")
through December 31, 2000. The Current Money Pool Participants
now propose to continue to participate in, and incur short-term
borrowings from, the Money Pool. National also proposes to allow
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Seneca Independence, Niagara Independence and NET to participate
in, and incur short-term borrowings from, the Money Pool. In
addition, in order to consolidate all orders authorizing the
Money Pool under one file, National proposes that the
authorization for the current Money Pool (HCAR No. 26443; File
No. 70-8729) be superseded, as of the Order Date, by the Order of
the Commission sought herein.
The Subsidiaries require short-term funds to meet normal
working capital requirements. It is proposed that the
Subsidiaries borrow short-term funds from the Money Pool. The
maximum amount of Money Pool borrowing outstanding for each
Subsidiary will be determined by National and the Subsidiaries in
accordance with business needs.
At certain times during the year, National and certain of
its Subsidiaries generate surplus funds. Each Subsidiary may
contribute excess funds to the money pool from time to time.
National will administer the money pool and coordinate the
System's short-term borrowings. Borrowings outside the System,
when necessary, will be made by National. National has requested
in this Application/Declaration authority to issue or reissue
from time to time during the Authorization Period up to $750
million of short-term debt (debt having terms less than or equal
to 270 days) outstanding at any one time consisting of borrowings
under its credit facilities, the issuance and sale of commercial
paper, other borrowings from banks or other financial
institutions and/or issuances of other securities. Such borrowed
amounts will be included in the money pool. Thus, the money pool
funds will be derived from one or more of the following sources:
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1) surplus funds of National and/or of its
Subsidiaries;
2) proceeds from National's sale of commercial paper;
3) borrowings by National from banks or other
financial institutions and/or issuances of other
securities.
National proposes to administer the money pool by matching
up, to the extent possible, the short-term cash surpluses and
borrowing requirements of itself and its subsidiaries.
Subsidiary requests for short-term loans would be met first from
available surplus funds of the other subsidiaries, and then from
National corporate funds, to the extent available. Once these
sources of funds become insufficient to meet the short-term loan
requests, borrowings will be made by National through the
issuance and sale of commercial paper, borrowings under credit
facilities, other borrowing facilities with banks or other
financial institutions and/or issuances of other securities.
Such borrowings shall not exceed $750 million outstanding at any
one time during the Authorization Period.
Borrowing from the Money Pool
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Pursuant to Rule 52, borrowings from the Money Pool by any
of the Non-Utility Subsidiaries are exempt transactions under the
Holding Company Act. Distribution hereby seeks approval to make
borrowings from the Money Pool. Distribution proposes to repay
borrowings from the Money Pool principally by means of funds
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received as a result of providing services to its customers under
its tariffs, and from the possible sale of debt or equity
securities.
National, itself, will not borrow from surplus funds of its
Subsidiaries.
Borrowings from the Money Pool, and repayments thereof, will
be adequately documented and will be evidenced on the books of
each participant who is borrowing funds or lending surplus funds
through the Money Pool.
If only internal funds (surplus funds of National and the
Subsidiaries) make up the funds available in the Money Pool, the
interest rate applicable and payable to or by subsidiaries for
all loans of such internal funds will be the rates for high-grade
unsecured 30-day commercial paper sold through dealers by major
corporations as quoted in The Wall Street Journal or other national
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financial publications.
If external funds (funds borrowed by National either through
commercial paper or borrowings from banks or other financial
institutions) make up all of the funds available in the Money
Pool, or when both surplus funds from other participating
subsidiaries and external funds are concurrently borrowed through
the "Money Pool", the interest rate applicable to all such
borrowings and payable by borrowing subsidiaries will be equal to
National's net cost for such external borrowings.
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Interest will be payable by the borrowing Subsidiary until
the principal amount borrowed is fully repaid.
The Subsidiaries propose to incur short-term borrowings from
the Money-Pool to provide financing for general corporate
purposes, including the temporary financing of inventories and
other working capital requirements and construction spending.
Neither National nor any of the Subsidiaries currently has
an ownership interest in an EWG or a FUCO. None of the internal
subsidiary funds (surplus funds of the Subsidiaries available in
the Money Pool) will be used for the acquisition of an interest
in an EWG or a FUCO with the exception of the following: (i)
investment by Horizon of up to $150 million and (ii) investment
by NFR or a subsidiary of NFR (if and when formed) of up to $25
million.
B. INTERNAL NON-EXEMPT LONG-TERM FINANCING BY NON-UTILITY
SUBSIDIARIES
In addition, to the extent such transactions are not exempt
from the Holding Company Act or otherwise authorized or permitted
by rule, regulation or order of the Commission issued thereunder,
National requests authority under the Holding Company Act for the
Non-Utility Subsidiaries to issue and/or sell securities of any
type (collectively, "Internal Non-Utility Securities") to
National or other Non-Utility Subsidiaries. Internal Non-Utility
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<PAGE>
Securities would be issued and sold pursuant to the authorization
requested herein in one or more transactions from time to time
from the Order Date through the earlier to occur of (1) December
31, 2002 or (2) the effective date of any rule of general
applicability hereafter adopted by the Commission exempting such
transactions (to the extent they remain jurisdictional under the
Holding Company Act) from the approval requirements under
Sections 6(a) and 7 of the Holding Company Act.
National hereby requests that the Commission reserve
jurisdiction over the issuance of any Internal Non-Utility
Securities not currently exempt under Rule 52(b) or otherwise
approved by the Commission, pending completion of the record.
National hereby undertakes to file a post-effective amendment
which will describe the general terms of such Internal Non-
Utility Securities and requests a supplemental order of the
Commission authorizing such issuance. National requests that
each such supplemental order be issued by the Commission without
further public notice. National would report periodically to the
Commission pursuant to Rule 24 under the Holding Company Act
concerning the issuance and sale of such Internal Non-Utility
Securities to the same extent that such reporting is required by
Rule 52(c).
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<PAGE>
III. EXTERNAL FINANCING BY SUBSIDIARIES
A. EXTERNAL NON-EXEMPT FINANCING BY NON-UTILITY SUBSIDIARIES
The Non-Utility Subsidiaries are expected to be active in
the development and expansion of energy-related, non-utility
businesses. They will be competing with large, well-capitalized
companies in different sectors of the energy industry. In order
to accomplish investments in such competitive arenas, it will be
necessary for the Non-Utility Subsidiaries to have the ability to
engage in financing transactions which are commonly accepted for
such types of investments. For example, the Non-Utility
Subsidiaries may issue and sell common stock, preferred stock,
bonds, notes or other forms of indebtedness pursuant to Rule 52.
In addition, to the extent such transactions are not exempt
from the Holding Company Act or otherwise authorized or permitted
by rule, regulation or order of the Commission issued thereunder,
National requests authority under the Holding Company Act for the
Non-Utility Subsidiaries to issue and/or sell securities of any
type (including guarantees) (collectively, "External Non-Utility
Securities") to persons other than National (with or without a
guarantee being provided by National or another Non-Utility
Subsidiary), including banks, insurance companies and other
financial institutions. External Non-Utility Securities would be
issued and sold pursuant to the authorization requested herein in
one or more transactions from time to time from the Order Date
through the earlier to occur of (1) December 31, 2002 and (2) the
effective date of any rule of general applicability hereafter
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<PAGE>
adopted by the Commission exempting such transactions (to the
extent they remain jurisdictional under the Holding Company Act)
from the approval requirements under Sections 6(a) and 7 of the
Act.
National hereby requests that the Commission reserve
jurisdiction over the issuance of any External Non-Utility
Securities not currently exempt under Rule 52(b) or otherwise
approved by the Commission, pending completion of the record.
National hereby undertakes to file a post-effective amendment
which will describe the general terms of such External Non-
Utility Securities and requests a supplemental order of the
Commission authorizing such issuance. National requests that
each such supplemental order be issued by the Commission without
further public notice. National would report periodically to the
Commission pursuant to Rule 24 under the Holding Company Act
concerning the issuance and sale of such External Non-Utility
Securities to the same extent that such reporting is required by
Rule 52(c).
B. EXTERNAL NON-EXEMPT DEBT FINANCING BY DISTRIBUTION
It may be necessary for Distribution to have the ability to
issue, to persons other than National, non-exempt debt
securities. To the extent such debt securities are not exempt
from the Holding Company Act or otherwise authorized or permitted
by rule, regulation or order of the Commission issued thereunder,
National requests authority under the Holding Company Act for
Distribution to issue and/or sell debt securities of any type to
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<PAGE>
persons other than National (with or without a guarantee being
provided by National or a Non-Utility Subsidiary), including
banks, insurance companies, and other financial institutions, in
an aggregate principal amount which will not to exceed $250
million.
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<PAGE>
C. FINANCING ENTITIES
National and the Non-Utility Subsidiaries seek authority to
organize new corporations, trusts, partnerships or other entities
created for the purpose of facilitating financings through their
issue to third parties of interests in such entities. Request is
also made for these financing entities to issue such securities
to third parties to the extent such transactions are not exempt
under Rule 52. Additionally, request is made for authorization
with respect to (i) the issuance of debentures or other evidences
of indebtedness, pursuant to an indenture or otherwise, by
National or a Non-Utility Subsidiary to a financing entity in
return for the proceeds of the financing, and (ii) the
acquisition by National or a Non-Utility Subsidiary of voting
interests or equity securities issued by the financing entity to
establish National's or such Non-Utility Subsidiary's ownership
of the financing entity. National and the Non-Utility
Subsidiaries also request authorization to enter into guarantees
and expense agreements with their respective financing entities,
pursuant to which they would agree to pay all amounts payable
with respect to securities issued by such entities.
Such guarantee authority with respect to their respective
financing entities will not exceed $250 million in the aggregate
at any one time during the Authorization Period.
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<PAGE>
IV. GUARANTEES BY NATIONAL
National requests authorization to guarantee securities of
its Subsidiaries, and provide other forms of credit support with
respect to obligations of its Subsidiaries as may be necessary or
appropriate to enable them to carry on in the ordinary course of
their respective businesses subject to a maximum aggregate
limitation on such guarantee authority at any one time of $2
billion. The $2 billion of guarantees is in addition to any
financing requested in this Application/Declaration. Such
authorization of National to provide credit support would
supersede and replace the authorization of National to guarantee
up to $500 million of obligations as set forth in the order of
the Commission dated November 12, 1993 (HCAR No. 25922).
Guarantees made directly or indirectly by National to any
Subsidiary which is an EWG, FUCO, Energy Related Company or Gas-
Related Company will be subject to the limitations of Rules 53 or
58, as applicable. National states that terms and conditions of
any guarantees will be negotiated on a case by case basis as the
need arises. Guarantees and other forms of credit support
provided by National on behalf of any EWG or FUCO would be
subject to the limitations of Rule 53, and any guarantee or other
form of credit support provided on behalf of any Energy-Related
Company or Gas-Related Company would be subject to the
limitations of Rule 58.
V. USE OF FINANCING PROCEEDS FOR ACQUISITIONS OF EWGS, FUCOS,
GAS-RELATED COMPANIES AND ENERGY-RELATED COMPANIES
National proposes to use some or all of the proceeds of the
financings proposed herein to make exempt investments in EWGs and
FUCOs in an aggregate amount at any time outstanding which, when
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<PAGE>
added to National's "Aggregate Investment" (as defined in Rule
53(a)(1)) in any EWGs or FUCOs at any time, shall not exceed 50%
of National's "Consolidated Retained Earnings" (also as defined
in Rule 53(a)(1)).(1) This investment limitation will supersede
and replace the $150 million Investment Limit set forth in the
HCAR No. 35-26364 (File No. 70-8649) dated August 29, 1995, as
it relates to direct or indirect investments by National in
EWGs and FUCOs. Any guarantees of securities issued by, or
other obligations of, any EWG or FUCO or "Intermediate Company"
organized for the purpose of acquiring and holding the securities
of any EWG or FUCO would also be included in National's
"Aggregate Investment" under Rule 53.
National is in compliance and will comply with Rule 53(a)
and all other applicable rules under the Holding Company Act,
including, without limitation, such rules as may be promulgated
in the future pursuant to Section 33 of the Holding Company Act.
Currently, National's Aggregate Investment in EWGs and FUCOs is
zero. National's average Consolidated Retained Earnings,
pursuant to Rule 53(a)(1), for the four quarters ended September
30, 1997 is approximately $473,476,000. National and its
subsidiaries commit that they will maintain books and records and
financial statements to identify investments in and earnings from
EWGs and FUCOs in which they may directly or indirectly hold an
interest. National undertakes to provide the SEC access to such
books and records and financial statements that will be available
to National upon the request of the SEC. Thus, the Rule 53(a)(2)
-----------------
1. Such investments may be made directly by National or
indirectly through Horizon or one or more "Intermediate
Companies" as authorized in HCAR No. 35-26364 (File No.
70-8649) dated August 29, 1995.
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<PAGE>
requirements will be satisfied. No more than 2% of the employees
of Distribution will render services, at any one time, directly
or indirectly, to the EWGs or FUCOs in which National may
directly or indirectly hold an interest, thereby satisfying Rule
53(a)(3). All of the documents required to be filed under Rule
53(a)(4) with federal, state and local regulators having
jurisdiction over the retail rates of Distribution have been
submitted.
None of the conditions described in Rule 53(b) exist with
respect to National, thereby satisfying Rule 53(b) and making
Rule 53(c) inapplicable.
National also proposes to use some or all of the proceeds of
the financings proposed herein to make exempt investments under
Rule 58. Currently, National's Aggregate Investment, as defined
in Rule 58(b)(3), in Energy-Related Companies is zero.
VI. FILING OF CERTIFICATES OF NOTIFICATION
Transactions contemplated herein which occur pursuant to the
authorization which may be granted by the Commission in this
proceeding will be reported through quarterly Rule 24
certificates of notification which, in order to avoid duplication
of reported information, may include cross-references to
National's filings with the Commission under the Securities Act
of 1933, as amended, and Securities Exchange Act of 1934, as
amended. Rule 24 certificates of notification will be filed
within 60 days after each of the first three quarters of
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<PAGE>
National's fiscal year and 90 days after the fourth quarter of
National's fiscal year. The first filing will be made within 60
days after the end of the fiscal quarter in which the Commission
grants its order with respect to this Application/Declaration.
With respect to transactions under the Hedge Program such Rule 24
certificate of notification will include: the trade date, the
type of hedge transaction, the notional principal amount, a
description of the transaction, and the material terms of the
underlying instrument.
VII. SUMMARY OF AUTHORIZATIONS SOUGHT
National and its Subsidiaries request Commission
authorization to undertake the following financing transaction
during the Authorization Period, without any additional
Commission approvals required except as indicated.
I. External financing by National
A) To issue or reissue from time to time during the
Authorization Period, up to $750 million of short-term debt
outstanding at any one time, consisting of borrowings under its
credit facilities, the issuance of commercial paper, other forms
of short-term financing generally available to borrowers with
investment grade credit ratings and/or the issuance of other
securities. National further requests authorization to amend its
commercial paper program or credit facilities without further
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<PAGE>
Commission authorization provided that the term of any borrowing
thereunder does not go beyond 270 days from its date of issuance
or borrowing.
B) Authorization to issue or reissue from time to time
during the Authorization Period, additional long-term debt and
equity securities in an aggregate amount, outstanding at any
time, not to exceed $2 billion. The value of debt securities
will equal the aggregate principal amount of such securities.
The value of equity securities will equal the consideration
received by the National at the time the securities are issued.
C) Authorization to enter into transactions pursuant to
its Hedge Program to be initiated during the Authorization
Period, with respect to all or a portion of existing or
anticipated financings, including floating rate debt or fixed
rate debt, using interest rate swaps or other derivative products
that may be useful for such purposes.
D) Authorization is also being sought to issue, during the
Authorization Period, other types of securities that National
deems appropriate from time to time over which issuance the
Commission would reserve jurisdiction.
II. Intra-system financing by Subsidiaries
A) Authorization is requested for the continuance of the
Money Pool during the Authorization Period, where the maximum
amount of Money Pool borrowings outstanding for each Subsidiary
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<PAGE>
will be determined by National and the Subsidiaries in accordance
with business needs.
B) Authority is requested for the Non-Utility Subsidiaries
to issue, and National to acquire, from time to time during the
Authorization Period, securities of a type which are not exempt
from the Holding Company Act or otherwise authorized or permitted
by rule, regulation or order of the Commission but which are
considered appropriate during the Authorization Period over which
issuance the Commission would reserve jurisdiction.
III. External Financing by Subsidiaries
A) The Non-Utility Subsidiaries request Commission
authorization to issue securities of any type (including
guarantees to nonaffiliates) which are not exempt from the
Holding Company Act or otherwise authorized or permitted by rule,
regulation or order of the Commission but which are considered
appropriate during the Authorization Period over which issuance
the Commission would reserve jurisdiction.
B) Distribution requests Commission authorization to issue
debt securities to nonaffiliates, in an aggregate principal
amount which will not to exceed $250 million at any one time
outstanding, to the extent such issuances are not exempt from the
provisions of the Holding Company Act.
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<PAGE>
C) National and the Non-Utility Subsidiaries seek
authority to organize new corporations, trusts, partnerships or
other entities created for the purpose of facilitating financings
through their issue to third parties of interests in such
entities. Request for authorization is also made for these
financing entities to issue such securities to the extent such
transactions may not be exempt under Rule 52. Additionally,
request is made for authorization with respect to (i) the
issuance of debentures or other evidences of indebtedness
pursuant to an indenture or otherwise, by National or a Non-
Utility Subsidiary to a financing entity in return for the
proceeds of the financing, and (ii) the acquisition by National
or a Non-Utility Subsidiary of voting interests or equity
securities issued by the financing entity to establish National's
or such Non-Utility Subsidiary's ownership of the financing.
National and the Non-Utility Subsidiaries also request
authorization to enter into guarantees and expense agreements
with their respective financing entities, pursuant to which they
would agree to pay all amounts payable with respect to securities
issued by such entities.
Such guarantee authority with respect to their respective
entities will not exceed $250 million in the aggregate at any one
time during the Authorization Period.
IV. National requests authorization to enter guarantee
arrangements and otherwise provide credit support with respect to
obligations of its subsidiaries as may be necessary or
appropriate in the ordinary course of their respective
businesses. The maximum aggregate limit on all such credit
support by National at any one time will be $2 billion. The $2
billion of guarantees is in addition to any financing requested
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<PAGE>
in this Application. Guarantees and other forms of credit
support provided by National on behalf of any EWGs, FUCOs,
Energy-Related Companies or Gas-Related Companies would be
subject to the limitations of Rule 53 or Rule 58, as applicable.
V. Use of Proceeds to include Exempt Investments in EWGs,
FUCOs, Energy-Related Companies and Gas-Related Companies.
National seeks Commission authorization to use the proceeds
from the financings approved herein to invest in EWGs and FUCOs
in compliance with the standards set forth in Rule 53 and in
Energy-Related Companies and Gas-Related Companies, subject to
the limitations of Rule 58.
ITEM 2. FEES, COMMISSIONS AND EXPENSES
It is estimated that the expenses to be incurred by the
applicants in connection with the proposed transactions are as
follows:
Legal Fees (including New Jersey Counsel)* $35,000
----------------
* The above fees do not include the expenses for the issuance
of the securities authorized pursuant to the Application.
As noted previously, National proposes that such fees be
capped at 5% of the issuance amount.
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<PAGE>
ITEM 3. APPLICABLE STATUTORY PROVISIONS
The issuance of debt and equity securities by National and,
to the extent not exempt pursuant to Rule 52, by Subsidiaries is
subject to Sections 6 and 7 of the Holding Company Act. Sections
9 and 10 of the Holding Company Act are applicable to the
acquisition by National of such securities issued by its
subsidiaries, but may be exempt pursuant to Rule 52.
The issuance by National or any Subsidiary of National of a
guarantee is subject to Sections 6, 7 and 12(b) of the Holding
Company Act and Rule 45 thereunder.
The Money Pool transactions are subject to Sections 6, 7, 9,
10 and 12(b) and (f) of the Holding Company Act and Rule 45
thereunder.
To the extent that any Derivative Transactions or the Hedge
Program involves the jurisdictional issuance of a "security" or
an "extension of credit", Sections 6(a), 7 and 12(b) of the
Holding Company Act and Rule 45 promulgated thereunder are
applicable to the proposed transactions.
The transactions proposed herein are also subject to
Sections 32 and 33 of the Holding Company Act and Rules 53, 54
and 58 promulgated thereunder.
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<PAGE>
ITEM 4. REGULATORY APPROVAL
No Federal regulatory authority, other than the Commission,
has jurisdiction over the proposed transaction.
No State regulatory authority has jurisdiction over the
proposed transactions except that the Public Service Commission
of New York and the Pennsylvania Public Utility Commission have
jurisdiction over the issuance and sale of the long-term notes to
be issued by Distribution and the allocation of costs and
benefits to Distribution. (See Exhibits D-1 and D-3 for
Distribution's Application and Petition.)
ITEM 5. PROCEDURE
It is requested that the Commission issue its Notice by
December 19, 1997 and its order on or before January 20, 1998.
Applicants hereby (i) waive a recommended decision by a
hearing officer, (ii) waive a recommended decision by any other
responsible officer or the Commission, (iii) consent that the
Division of Investment Management may assist in the preparation
of the Commission's decision, and (iv) waive a 30-day waiting
period between the issuance of the Commission's order and the
date on which it is to become effective.
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<PAGE>
ITEM 6. EXHIBITS AND FINANCIAL STATEMENTS
The following exhibits are made a part of this statement:
(a) Exhibits
_______
A-1 Restated Certificate of
Incorporation of National
(Incorporated by reference to
Exhibit 10-00, Form 10-K for fiscal
year ended September 30, 1991 in
File No. 1-3880; Exhibit EX-3(a),
Form 10-K for fiscal year ended
September 30, 1992 in File No. 1-
3880; Exhibit 3.1 to Form 10-K for
fiscal year ended September 30,
1995 in File No. 1-3880; and
Exhibit 3.2 to Form 10-K for fiscal
year ended September 30, 1995 in
File No. 1-3880).
A-2 Bylaws of National, as amended
through September 18, 1997
(Incorporated by reference to
Exhibit A-2 in File No. 70-9149).
A-3 Rights Agreement between National
and Marine Midland Bank dated
June 12, 1996 (Exhibit 99.1,
Form 8-K dated June 13, 1996 in
File
No. 1-3880).
A-4 Indenture, dated as of October 15,
1974, between National and The Bank
of New York (formerly Irving Trust
Company) (Exhibit 2(b), File
No. 2-51796).
A-5 Ninth Supplemental Indenture, dated
as of January 1, 1990 (Exhibit 4.4,
Form 10-K for fiscal year ended
September 30, 1992); Tenth
Supplemental Indenture, dated as of
February 1, 1992 (Exhibit 4(a),
Form 8-K dated February 14, 1992,
in File No. 1-3880); Twelfth
Supplemental Indenture, dated as of
June 1, 1992 (Exhibit 4(c), Form 8-
K dated June 18, 1992, in File
No. 1-3880); Thirteenth
Supplemental Indenture, dated as of
March 1, 1993 (Exhibit 4(a)(14),
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File No. 33-49401); Fourteenth
Supplemental Indenture, dated as of
July 1, 1993 (Exhibit 4.1, Form 10-
K for fiscal year ended September
30, 1993 in File No. 1-3880); and
Fifteenth Supplemental Indenture,
dated as of September 1, 1996
(Exhibit 4.1, Form 10-K for fiscal
year ended September 30, 1996 in
File No. 1-3880).
A-6 Proposed form of Supplemental
Indenture for Debentures and/or
Medium-Term Notes. (Exhibit 4(b),
File No. 33-03803.)
A-7 Form of Debenture (Exhibit 4(c),
File No. 333-03803.)
A-8 Form of Medium-Term Note
(Exhibit 4(c), File No. 333-03803.)
C-1 Form S-3 Registration Statement of
National under the Securities Act
of 1933 (1933 Act) relating to sale
of $480,000,000 aggregate principal
amount of Debentures and/or Medium
Term Notes (File No. 333-03803).
C-2 Form T-1 Statement of Eligibility
under the Trust Indenture Act of
1939 of the Bank of New York, as
Trustee under the Indenture
described in Exhibit A-5 (Exhibit
25, File No. 333-03803).
C-3 Form S-3 Registration Statement of
National under the 1933 Act
relating to shares of common stock
issuable pursuant to National's
Dividend Reinvestment and Stock
Purchase Plan (File No. 33-51881).
C-4 Form S-3 Registration Statement of
National under the 1933 Act
relating to shares of common stock
issuable pursuant to National's
Customer Stock Purchase Plan (File
No. 33-36868).
C-5 Form S-8 Registration Statement of
National under the 1933 Act
relating to shares of common stock
issuable pursuant to National's Tax
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Deferred Savings Plan for Non-Union
Employees (File No. 333-03057).
C-6 Form S-8 Registration Statement of
National under the 1933 Act
relating to shares of common stock
issuable pursuant to National's Tax
Deferred Savings Plan (File No.
333-03055).
C-7 Form S-8 Registration Statement of
National under the 1933 Act
relating to shares of common stock
issuable pursuant to National's
1983 Incentive Stock Option Plan
and 1984 Stock Plan (File No. 2-
94539).
C-8 Form S-8 Registration Statement of
National under the 1933 Act
relating to shares of common stock
issuable pursuant to National's
1993 Award and Option Plan (File
No. 33-49693).
D-1 Copy of Petition 97-G0496 of
Distribution to the Public Service
Commission of New York
(Incorporated by Reference to File
No. 70-8541).
D-2 Copy of the Public Service
Commission of New York's order in
connection with Distribution's
Petition 97-G0496, issued and
effective July 9, 1997
(Incorporated by Reference to File
No. 70-8541).
D-3 Copy of Securities Certificate
Application of Distribution filed
with the Pennsylvania Public
Utility Commission (Incorporated by
Reference to File No. 70-8541).
D-4 Copy of the Pennsylvania Public
Utility Commission's Securities
Certificates Nos. S00970611 and
G00970548 (Incorporated by
Reference to File No. 70-8541).
** F-1 Opinion of Reid & Priest LLP,
counsel to National.
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<PAGE>
** F-2 Opinion of Stryker, Tams & Dill,
L.L.P., New Jersey counsel to
National.
** F-3 Opinion of A.M. Cellino, counsel to
the Subsidiaries.
G Financial Data Schedule
(Incorporated by reference to
Exhibit 27, Form 10-K for fiscal
year ended September 30, 1997 in
File No. 1-3880).
H Proposed notice and order filed pursuant to Rule
22(f).
(b) Financial Statements
_________________
The financial statements filed as part of National's
Annual Report on Form 10-K for the fiscal year ended
September 30, 1997 in File No. 1-3880 are incorporated herein by
reference.
There have been no material changes, not in the
ordinary course of business, since the date of the financial
statements filed herewith.
__________________________
** To be filed by amendment.
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ITEM 7. INFORMATION AS TO ENVIRONMENTAL EFFECTS
As more fully described in Item 1, the proposed transactions
subject to the jurisdiction of this Commission relate only to the
means of financing activities. The proposed transactions subject
to the jurisdiction of this Commission have no environmental
impact in and of themselves.
No federal agency has prepared or, to National's knowledge,
is preparing an EIS with respect to the proposed transaction."
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Public Utility Holding
Company Act of 1935, the undersigned companies have duly caused
this Amendment No. 1 to the 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
NATIONAL FUEL GAS DISTRIBUTION
CORPORATION
By /s/ Philip C. Ackerman
_________________________
Philip C. Ackerman
President
SENECA RESOURCES CORPORATION
By /s/ G. T. Wehrlin
_________________________
G. T. Wehrlin
Controller
NATIONAL FUEL GAS SUPPLY CORPORATION
By /s/ Richard Hare
_________________________
Richard Hare
President
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<PAGE>
NATIONAL FUEL RESOURCES, INC.
By /s/ R. J. Kreppel
_________________________
R. J. Kreppel
President
UTILITY CONSTRUCTORS, INC.
By /s/ Philip C. Ackerman
_________________________
Philip C. Ackerman
President
HORIZON ENERGY DEVELOPMENT, INC.
By /s/ Philip C. Ackerman
_________________________
Philip C. Ackerman
President
HIGHLAND LAND & MINERALS, INC.
By /s/ Philip C. Ackerman
_________________________
Philip C. Ackerman
President
DATA-TRACK ACCOUNT SERVICE, INC.
By /s/ Philip C. Ackerman
_________________________
Philip C. Ackerman
President
LEIDY HUB, INC.
By /s/ G. T. Wehrlin
_________________________
G. T. Wehrlin
Secretary/Treasurer
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<PAGE>
SENECA INDEPENDENCE PIPELINE COMPANY
By /s/ Richard Hare
_________________________
Richard Hare
President
NIAGARA INDEPENDENCE MARKETING COMPANY
By /s/ C. H. Friedrich
_________________________
C. H. Friedrich
Treasurer
NIAGARA ENERGY TRADING INC.
By /s/ C. H. Friedrich
_________________________
C. H. Friedrich
Treasurer
DATED: January 16, 1998
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EXHIBIT INDEDX
Exhibit Description
------- -----------
H Proposed notice and order filed pursuant to
Rule 22(f).
Exhibit H
[Proposed Notice of Proposed Transactions]
UNITED STATES OF AMERICA
before the
SECURITIES EXCHANGE COMMISSION
PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
(Rel. No. _____________________)
__________________________________________
In the Matter of
NATIONAL FUEL GAS COMPANY, et al.
10 Lafayette Square
Buffalo, New York 14203
(70-9153)
___________________________________________
National Fuel Gas Company ("National"), 10 Lafayette Square,
Buffalo, New York 14203, a registered holding company, and each
of National's wholly-owned subsidiaries have filed a joint
application/declaration pursuant to Sections 6, 7, 9, 10, 12(b),
12(f), 32 and 33 of the Public Utility Holding Company Act of
1935, as amended ("Holding Company Act"), and Rules 45, 52, 53,
54 and 58 promulgated thereunder. Such subsidiaries include
National Fuel Gas Distribution Corporation ("Distribution"),
National Fuel Gas Supply Corporation ("Supply"), Seneca Resources
Corporation ("Seneca"), Utility Constructors, Inc. ("UCI"),
Highland Land & Minerals, Inc. ("Highland"), Leidy Hub, Inc.
("Leidy"), Horizon Energy Development, Inc. ("Horizon"), Data-
Track Account Services, Inc. ("Data-Track"), National Fuel
Resources, Inc. ("NFR"), Seneca Independence Pipeline Company
("Seneca Independence"), Niagara Independence Marketing Company
("Niagara Independence") and Niagara Energy Trading Inc. ("NET").
The subsidiaries listed above are collectively referred to as the
"Subsidiaries". The Subsidiaries, excluding Distribution, are
collectively referred to as the "Non-Utility Subsidiaries".
National and its Subsidiaries are collectively referred to herein
as the National Fuel Gas System ("System").
The System is seeking, as more fully described
hereinafter, Commission authorization, to the extent not exempt
from Commission approval under the Holding Company Act, or
otherwise permitted or authorized under the Holding Company Act
pursuant to Commission rule, regulation or order, for the items
that follow, which authorization is to be applicable for the
period from the effective date of the order (the "Order Date")
through December 31, 2002 (the "Authorization Period") (except as
specified herein):
I. External financing by National, including A) short-term
financing in the form of borrowings under credit facilities,
issuance of commercial paper, other borrowings from banks or
financial institutions and/or the issuance of other
securities, B) long-term financing (debt and equity), C)
hedging of financing risks, including those associated with
existing and anticipated fixed and floating rate debt
(whether denominated in U.S. dollar or foreign currency),
and D) financing by means of the issuance of other
securities.
II. Intra-System financing of Subsidiaries, to the extent not
exempt pursuant to Rule 52 or Rule 45, as applicable,
including an intra-System Money Pool.
III. External financing by Subsidiaries, to the extent not exempt
pursuant to Rule 52, and the formation of financing
entities.
IV. Guarantees by National with respect to obligations of its
Subsidiaries.
V. Use of proceeds to include exempt investments in EWGs,
FUCOs, Energy-Related Companies and Gas-Related Companies.
I. EXTERNAL FINANCING BY NATIONAL
A. INTRODUCTION
National is requesting authorization to issue and reissue,
from time to time during the Authorization Period, short-term
debt (debt with a term not exceeding 270 days) aggregating not
more than $750 million outstanding at any one time. National
also is requesting authority to issue and reissue, from time to
time during the Authorization Period, additional long-term
securities aggregating not more than $2 billion outstanding at
any one time. Such securities issuances would be in addition to
any common stock that may be issued pursuant to National's Rights
Plan, as previously authorized pursuant to the Order of the
Commission dated June 12, 1996 (HCAR No. 26532; File No: 70-
8841).
National may issue securities covered by the
Application/Declaration in any of the following ways: (i) through
underwriters or dealers; (ii) directly to a limited number of
purchasers or to a single purchaser, (iii) through agents, (iv)
in exchange for securities of other companies, the acquisition of
which is authorized under a separate order of the Commission or
exempt pursuant to Section 32, 33 or 34 or Rule 58, as
applicable, and/or (v) National currently obtains funds
externally (i) through short-term debt financing under credit
facilities with banks and financial institutions and through a
commercial paper program, (ii) through long-term debt financing
through the issuance of debentures and medium-term notes and
(iii) through equity financing by means of compensation, benefits
and incentive plans, customer stock purchase plans and dividend
reinvestment plans (collectively, "Stock Issuance Plans").
The System intends that any authorization granted pursuant
to this Application/Declaration regarding the issuance of
securities will supersede the previous authorizations described
in the first paragraph of this Section A to the extent such
previous authorizations apply to the issuance of securities
(except as specified herein).
Parameters for Authorization
The Application/Declaration makes requests for authority,
without any additional prior Commission approvals, to engage in
future financing transactions for which the specific terms and
conditions are not at this time known. The general conditions
for undertaking such financing transactions without further prior
approval are given directly below.
1. National Debt of Investment Grade and Maintenance of
Equity Ratio
National would be authorized to engage in the long-term
debt financing activities described herein as long as: (i) its
long-term debt rating is of investment grade as established by a
nationally recognized statistical rating organization as that
term is used in Rule 15c3-l(c)(2)(vi)(F) under the Securities
Exchange Act of 1934 (the "Exchange Act"), and (ii) its common
equity (as reflected in its most recent Form 10-K or Form 10-Q,
as the case may be) does not fall below 30% of its consolidated
capitalization. The issuance of any long-term debt would occur
over such a period of time and in a combination with the issuance
of equity such that it would not cause National's common equity
to fall below 30% of consolidated capitalization.
2. Effective Cost of Money on Borrowings
The effective cost of money on debt borrowings made
pursuant to the authorizations granted under the
Application/Declaration will not, at the time of the issuance,
exceed 300 basis points over the then current yield to maturity
of comparable term U.S. Treasury securities.
3. Effective Cost of Money on Other Approved Securities
The effective cost of money on preferred stock and
other fixed income oriented securities will not, at the time of
the issuance, exceed 500 basis points over the then current yield
to maturity of 30-year term U.S. Treasury securities.
4. Maturity of Debt
The maturity of each issuance of debt will be not more
than 50 years.
5. Issuance Expenses
The underwriting fees, commissions, or other similar
fees paid in connection with the issuance, sale or distribution
of a security pursuant to this Application/Declaration will not
exceed 5% of the principal or total amount of the financing.
6. Aggregate Dollar Limit
The aggregate amount of external debt and equity
financing to be issued or reissued by National during the
Authorization Period will not exceed (i) $2 billion of additional
long-term debt and equity outstanding at any one time (not
including any common stock that may be issued pursuant to
National's Rights Plan authorized pursuant to the Order of the
Commission dated June 12, 1996 (HCAR No. 26532; File No. 70-
8841)) and (ii) $750 million of short-term borrowings outstanding
at any one time. The value of debt securities will equal the
aggregate principal amount of such securities. The value of
equity securities will equal the consideration received by
National at the time the securities are issued.
National intends that proceeds from the sale of
securities by National in external financing transactions will be
used by National, together with other available funds, for
general corporate purposes including (i) the financing, in part,
of capital expenditures of National and its Subsidiaries, (ii)
the financing of inventories and other working capital
requirements, (iii) the acquisition, retirement or redemption of
securities of which National is the issuer without the need for
prior Commission approval pursuant to Rule 42 or a successor
rule, and/or (iv) investments in EWGs and FUCOs, subject to the
limitations of Rule 53, and in Energy-Related Companies and Gas-
Related Companies, subject to the limitations of Rule 58.
B. SHORT-TERM FINANCING
To provide financing for general corporate purposes,
including the temporary financing of inventories and other
working capital requirements and construction spending, National
requests authorization to issue and reissue from time to time
during the Authorization Period, up to $750 million at any one
time outstanding of short-term debt consisting of borrowings
under its credit facilities, the issuance of commercial paper,
and/or other forms of short-term financing generally available to
borrowers with investment grade credit ratings.
In order to consolidate all orders authorizing financing
under one file, National proposes that the authorization for
short-term borrowings of an amount not to exceed $600 million
outstanding at any one time (HCAR No. 26443; File No. 70-8729) be
superseded, as of the Order Date, by the Order of the Commission
sought herein.
National further requests authorization to amend its
commercial paper program or credit facilities without further
Commission authorization, provided that the term of any borrowing
thereunder does not extend beyond 270 days from its date of
issuance or borrowing.
1. Commercial Paper
Commercial paper would be sold by National, from time
to time, in established domestic or foreign commercial paper
markets directly or through dealers and placement agents at
prevailing discount rates, or at prevailing coupon rates, at the
date of issuance for commercial paper of comparable quality and
maturities sold to commercial paper dealers generally. National
expects that the dealers and placement agents acquiring
commercial paper from National will re-offer such paper at a
discount to corporate, institutional and, with respect to foreign
commercial paper, also to individual investors. Such corporate
and institutional investors may include, among others, commercial
banks, insurance companies, pension funds, investment trusts,
mutual funds, foundations, colleges and universities, finance
companies and nonfinancial corporations.
Back-up bank lines of credit for 100% of the
outstanding amount of commercial paper are generally required by
credit rating agencies. National states that it currently has a
committed credit facility which acts as back-up to its commercial
paper program.
2. Credit Facilities with Banks and other Financial
Institutions
National proposes to establish credit facilities with
various banks and/or other financial institutions and to issue
and sell, from time to time, short-term notes.
National states that such notes would bear interest at
rates comparable to, or lower than, those available through other
forms of short-term borrowing with similar terms as contemplated
in this Application/Declaration. According to National, the term
of any short-term notes would not exceed 270 days, and the total
amount of notes outstanding at any time, when added to the
aggregate amounts of short-term borrowing outstanding under other
forms of short-term borrowing contemplated in the
Application/Declaration, would not exceed the total amount of
short-term debt for which authorization is requested. According
to National, the borrowing arrangements with the banks and
financial institutions may require compensating balances and/or
commitment fees or similar fees. National requests authority to
incur, if necessary, commitment or similar fees not to exceed
one-half of one percent (.50%) of the average daily credit
facility available, and/or compensating balances not to exceed
twenty percent (20%) of the credit facility established.
National states that, at all times, it will attempt to negotiate
the most favorable effective borrowing rate taking into account
any compensating balances and/or fees.
3. Other Securities
National may engage in other types of short-term
financing as it may deem appropriate in light of its needs and
market conditions at the time of issuance. Such short-term
financing may include, without limitation, bank borrowings, and
other short-term securities issued under a mortgage or indenture.
The term of any such short-term borrowing would not exceed 270
days. In no case will the outstanding balance of all short-term
borrowings exceed $750 million during the Authorization Period.
C. LONG-TERM FINANCING
Long-term securities may consist of any combination of long-
term debt (debt having terms in excess of 270 days), common
stock, preferred stock, or other equity securities, as the case
may be.
1. Long-term Debt Financing
National requests Commission authorization to issue or
reissue from time to time during the Authorization Period
additional long-term debt securities in an aggregate principal
amount which, when combined with the value of the consideration
received from the issuances of common stock, preferred stock and
other equity securities during the Authorization Period, will not
exceed $2 billion at any one time outstanding. The term of any
such long-term debt securities will be in excess of 270 days.
Examples of such long-term debt securities would include, but not
be limited to, debentures, convertible debt, subordinated debt,
medium-term notes, bank borrowings, and securities with call or
put options. Any long-term debt security would have such
designation, aggregate principal amount, maturity, interest
rate(s) or methods of determining the same, terms of payment of
interest, redemption provisions, non-refunding provisions,
sinking fund terms, conversion or put terms, U.S. dollar or
foreign currency denominations, security and subordination
provisions, and other terms and conditions as National may
determine at the time of issuance. Medium-term notes would be
issued under the Indenture dated as of October 15, 1994, between
National and The Bank of New York, Trustee (or any successor
trustee), as amended (the "Indenture"). Debentures and other
long-term debt securities may be issued under the Indenture or
under a mortgage or other indenture.
2. Equity Financing
National requests Commission authorization to issue
additional equity securities from time to time during the
Authorization Period, the value of which, as determined at the
time the securities are issued, when combined with other
long-term securities issued pursuant to this
Application/Declaration, would not exceed $2 billion, at any one
time outstanding. The value of equity securities will equal the
consideration received by National at the time the securities are
issued. Such issuance would include (a) common stock and the
rights appurtenant thereto (together, the "Shares"), including,
but not limited to, Shares issued during the Authorization Period
pursuant to the following Stock Issuance Plans and any successor
Stock Issuance Plans: (i) the 1997 Award and Option Plan (HCAR
No. 26670) whereby awards granting the right to purchase up to
1,900,000 Shares may be issued over a ten-year period through
December 12, 2006, (ii) the Shares Payment Policy (HCAR No.
26655), (iii) the Customer Stock Purchase Plan (HCAR No. 26394),
(iv) the Dividend Reinvestment and Stock Purchase Plan (HCAR No.
26261), (v) the 401(k) Plans (HCAR No. 26176), (vi) the 1993
Award and Option Plan (HCAR No. 25753), (vii) the 1984 Stock
Plan, (HCAR No. 24793) and (viii) the 1983 Incentive Stock Option
Plan (HCAR No. 24793), (b) preferred stock, (c) other preferred
securities, (d) options and/or warrants convertible into common
or preferred stock and (e) common and/or preferred stock issued
upon the exercise of convertible debt, rights, options, warrants
and/or similar securities.
National states that, from time to time during the
Authorization Period, it may adopt other similar Stock Issuance
Plans may be adopted by National. For instance, a direct stock
purchase plan with a dividend reinvestment feature that allows
sales to persons not already shareholders may be implemented.
National proposes to issue Shares pursuant to the existing plans
and similar plans or plan funding arrangements hereinafter
adopted and to engage in other sales of its Shares for reasonable
business purposes without any additional prior Commission order
during the Authorization Period, except that the grants of Shares
and rights to purchase Shares under the 1997 Award and Option
Plan may be issued from time to time until December 12, 2006.
Transactions of this variety would thus be treated the same as
other equity transactions permitted pursuant to the
Application/Declaration. Any authorization requested by the
Application/Declaration regarding the issuance of securities will
supersede the authorizations cited above to the extent such
previous authorizations apply to the issuance of securities,
except that the authority previously issued in connection with
the 1997 Award and Option Plan (HCAR No. 26670) shall still apply
to the extent such previous authority extends through December
12, 2006.
D. HEDGING
In addition, National requests authorization, to the extent
needed, to enter into hedging transactions ("Hedge Program") to
be initiated during the Authorization Period, with respect to all
or a portion of existing or anticipated financings, including
floating rate debt or fixed rate debt, using interest rate swaps
or other derivative products that may be useful for such
purposes.
National is seeking authority, to the extent needed, to
enter into one or more interest rate swaps ("Swaps"), and one or
more derivative instruments, such as caps, floors, collars,
ceilings, options and forwards (collectively, "Derivative
Transactions"), with one or more counterparties from time to time
during the Authorization Period, in notional amounts aggregating
not in excess of the amount of debt outstanding at any one time.
In order to consolidate all orders authorizing hedging
transactions under one file, National proposes that the
authorization for entering into hedging transactions (HCAR No.
26443; file No. 70-8729) be superseded, as of the Order Date, by
the Order of the Commission sought herein.
National also seeks authorization, to the extent needed, to
enter into an anticipatory interest rate hedging program (the
"Anticipatory Hedge Program") for anticipated debt issuances
utilizing Swaps and Derivative Transactions within a limited time
prior to the issuance of short- or long-term debt securities.
The Anticipatory Hedge Program is designed to reduce risk to
National as discussed below.
National states that it would utilize the Anticipatory Hedge
Program to fix and/or limit the interest rate risk associated
with any new issuance through (i) a forward sale of
exchange-traded U.S. Treasury futures contracts, U.S. Treasury
securities and/or a forward swap (each a "Forward Sale"), (ii)
the purchase of put options on U.S. Treasury securities (a "Put
Options Purchase"), (iii) a Put Options Purchase in combination
with the sale of call options on U.S. Treasury securities (a
"Zero Cost Collar"), or (iv) some combination of a Forward Sale,
Put Options Purchase and/or Zero Cost Collar. The program may be
executed on-exchange ("On-Exchange Trades") with brokers through
the opening of futures and/or options positions traded on the
Chicago Board of Trade ("CBOT"), the opening of over-the-counter
positions with one or more counterparties ("Off-Exchange Trades")
or a combination of On-Exchange Trades and Off-Exchange Trades.
National will determine the optimal structure of the Anticipatory
Hedge Program at the time of execution. National may decide to
lock in interest rates and/or limit its exposure to interest rate
increases. National states that, all open positions under the
Anticipatory Hedge Program will be closed on or prior to the date
of the new issuance and that National will not, at any time, take
possession of the underlying U.S. Treasury securities.
National states that all transactions entered into under the
Hedge Program will be bona fide hedges and will meet the criteria
established by the Financial Accounting Standards Board in order
to qualify for hedge accounting treatment, and that National will
comply with the financial disclosure requirements associated with
hedging transactions.
National seeks Commission approval of the entire Hedge
Program to ensure the maximum flexibility in structuring
effective financing-related hedging strategies.
E. OTHER SECURITIES
In addition to the specific securities for which
authorization is sought herein, National also proposes to issue
other types of securities that it deems appropriate during the
Authorization Period. National requests that the Commission
reserve jurisdiction over the issuance of additional types of
securities. National also undertakes to file a post-effective
amendment which will describe the general terms of each such
security and request a supplemental order of the Commission
authorizing the issuance thereof by National. National further
requests that each supplemental order be issued by the Commission
without further time-consuming public notice.
II. INTRA-SYSTEM FINANCING BY SUBSIDIARIES
A. MONEY POOL/INTERNAL SHORT-TERM FINANCING
By prior Commission Order dated December 28,1995 (HCAR No.
26443; File No. 70-8729), National, Distribution, Supply, Seneca,
Highland,Leidy, Horizon, Data-Track, NFR and UCI (collectively,
the "Current Money Pool Participants") were authorized to
participate in the National System money pool ("Money Pool")
through December 31, 2000. The Current Money Pool Participants
now propose to continue to participate in, and incur short-term
borrowings from, the Money Pool. National also proposes to allow
Seneca Independence, Niagara Independence and NET to participate
in, and incur short-term borrowings from, the Money Pool. In
addition, in order to consolidate all orders authorizing the
Money Pool under one file, National proposes that the
authorization for the current Money Pool (HCAR No. 26443; File
No. 70-8729) be superseded, as of the Order Date, by the Order of
the Commission sought herein.
National states that the Subsidiaries require short-term
funds to meet normal working capital requirements. National
proposes that the Subsidiaries borrow short-term funds from the
Money Pool. National states that the maximum amount of Money
Pool borrowing outstanding for each Subsidiary will be determined
by National and the Subsidiaries in accordance with business
needs.
National states that at certain times during the year,
National and certain of its Subsidiaries generate surplus funds.
Each Subsidiary may contribute excess funds to the money pool
from time to time.
National will administer the money pool and coordinate the
System's short-term borrowings. Borrowings outside the System,
when necessary, will be made by National. National has requested
in the Application/Declaration authority to issue or reissue from
time to time during the Authorization Period up to $750 million
of short-term debt (debt having terms less than or equal to 270
days) outstanding at any one time consisting of borrowings under
its credit facilities, the issuance and sale of commercial paper,
other borrowings from banks or other financial institutions
and/or issuances of other securities. Such borrowed amounts will
be included in the money pool. Thus, the money pool funds will
be derived from one or more of the following sources:
1) surplus funds of National and/or of its
Subsidiaries;
2) proceeds from National's sale of commercial paper;
3) borrowings by National from banks or other
financial institutions and/or issuances of other
securities.
National proposes to administer the money pool by matching
up, to the extent possible, the short-term cash surpluses and
borrowing requirements of itself and its subsidiaries.
Subsidiary requests for short-term loans would be met first from
available surplus funds of the other subsidiaries, and then from
National corporate funds, to the extent available. Once these
sources of funds become insufficient to meet the short-term loan
requests, borrowings will be made by National through the
issuance and sale of commercial paper, borrowings under credit
facilities, other borrowing facilities with banks or other
financial institutions and/or issuances of other securities.
Such borrowings shall not exceed $750 million outstanding at any
one time during the Authorization Period.
Borrowing from the Money Pool
-----------------------------
Pursuant to Rule 52, borrowings from the Money Pool by any
of the Non-Utility Subsidiaries are exempt transactions under the
Holding Company Act. Pursuant to this Application/Declaration,
Distribution seeks approval to make borrowings from the Money
Pool. Distribution proposes to repay borrowings from the Money
Pool principally by means of funds received as a result of
providing services to its customers under its tariffs, and from
the possible sale of debt or equity securities.
National, itself, will not borrow from surplus funds of its
Subsidiaries.
Borrowings from the Money Pool, and repayments thereof, will
be adequately documented and will be evidenced on the books of
each participant who is borrowing funds or lending surplus funds
through the Money Pool.
If only internal funds (surplus funds of National and the
Subsidiaries) make up the funds available in the Money Pool, the
interest rate applicable and payable to or by subsidiaries for
all loans of such internal funds will be the rates for high-grade
unsecured 30-day commercial paper sold through dealers by major
corporations as quoted in The Wall Street Journal or other national
-----------------------
financial publications.
If external funds (funds borrowed by National either through
commercial paper or borrowings from banks or other financial
institutions) make up all of the funds available in the Money
Pool, or when both surplus funds from other participating
subsidiaries and external funds are concurrently borrowed through
the "Money Pool", the interest rate applicable to all such
borrowings and payable by borrowing subsidiaries will be equal to
National's net cost for such external borrowings.
Interest will be payable by the borrowing Subsidiary until
the principal amount borrowed is fully repaid.
The Subsidiaries propose to incur short-term borrowings from
the Money-Pool to provide financing for general corporate
purposes, including the temporary financing of inventories and
other working capital requirements and construction spending.
Neither National nor any of the Subsidiaries currently has
an ownership interest in an EWG or a FUCO. None of the internal
subsidiary funds (surplus funds of the Subsidiaries available in
the Money Pool) will be used for the acquisition of an interest
in an EWG or a FUCO with the exception of the following: (i)
investment by Horizon of up to $150 million and (ii) investment
by NFR or a subsidiary of NFR (if and when formed) of up to $25
million.
B. INTERNAL NON-EXEMPT LONG-TERM FINANCING BY NON-UTILITY
SUBSIDIARIES
In addition, to the extent such transactions are not exempt
from the Holding Company Act or otherwise authorized or permitted
by rule, regulation or order of the Commission issued thereunder,
National requests authority under the Holding Company Act for the
Non-Utility Subsidiaries to issue and/or sell securities of any
type (collectively, "Internal Non-Utility Securities") to
National or other Non-Utility Subsidiaries. Internal Non-Utility
Securities would be issued and sold pursuant to the authorization
requested herein in one or more transactions from time to time
from the Order Date through the earlier to occur of (1) December
31, 2002 or (2) the effective date of any rule of general
applicability hereafter adopted by the Commission exempting such
transactions (to the extent they remain jurisdictional under the
Holding Company Act) from the approval requirements under
Sections 6(a) and 7 of the Holding Company Act.
National hereby requests that the Commission reserve
jurisdiction over the issuance of any Internal Non-Utility
Securities not currently exempt under Rule 52(b) or otherwise
approved by the Commission, pending completion of the record.
National hereby undertakes to file a post-effective amendment
which will describe the general terms of such Internal Non-
Utility Securities and requests a supplemental order of the
Commission authorizing such issuance. National requests that
each such supplemental order be issued by the Commission without
further public notice. National would report periodically to the
Commission pursuant to Rule 24 under the Holding Company Act
concerning the issuance and sale of such Internal Non-Utility
Securities to the same extent that such reporting is required by
Rule 52(c).
III. EXTERNAL FINANCING BY SUBSIDIARIES
A. EXTERNAL NON-EXEMPT FINANCING BY NON-UTILITY SUBSIDIARIES
According to National, the Non-Utility Subsidiaries will be
active in the development and expansion of energy-related, non-
utility businesses. They will be competing with large,
well-capitalized companies in different sectors of the energy
industry. In order to accomplish investments in such competitive
arenas, National believes that it will be necessary for the Non-
Utility Subsidiaries to have the ability to engage in financing
transactions which are commonly accepted for such types of
investments. For example, the Non-Utility Subsidiaries may issue
and sell common stock, preferred stock, bonds, notes or other
forms of indebtedness pursuant to Rule 52.
In addition, to the extent such transactions are not exempt
from the Holding Company Act or otherwise authorized or permitted
by rule, regulation or order of the Commission issued thereunder,
National requests authority under the Holding Company Act for the
Non-Utility Subsidiaries to issue and/or sell securities of any
type (including guarantees) (collectively, "External Non-Utility
Securities") to persons other than National (with or without a
guarantee being provided by National or another Non-Utility
Subsidiary), including banks, insurance companies and other
financial institutions. External Non-Utility Securities would be
issued and sold pursuant to the authorization requested in the
Application/Declaration in one or more transactions from time to
time from the Order Date through the earlier to occur of (1)
December 31, 2002 and (2) the effective date of any rule of
general applicability hereafter adopted by the Commission
exempting such transactions (to the extent they remain
jurisdictional under the Holding Company Act) from the approval
requirements under Sections 6(a) and 7 of the Act.
Pursuant to the Application/Declaration, National requests
that the Commission reserve jurisdiction over the issuance of any
External Non-Utility Securities not currently exempt under Rule
52(b) or otherwise approved by the Commission, pending completion
of the record. Pursuant to the Application/Declaration, National
undertakes to file a post-effective amendment which will describe
the general terms of such External Non-Utility Securities and
requests a supplemental order of the Commission authorizing such
issuance. National requests that each such supplemental order be
issued by the Commission without further public notice. National
would report periodically to the Commission pursuant to Rule 24
under the Holding Company Act concerning the issuance and sale of
such External Non-Utility Securities to the same extent that such
reporting is required by Rule 52(c).
B. EXTERNAL NON-EXEMPT DEBT FINANCING BY DISTRIBUTION
National states that it may be necessary for Distribution to
have the ability to issue, to persons other than National, non-
exempt debt securities. To the extent such debt securities are
not exempt from the Holding Company Act or otherwise authorized
or permitted by rule, regulation or order of the Commission
issued thereunder, National requests authority under the Holding
Company Act for Distribution to issue and/or sell debt securities
of any type to persons other than National (with or without a
guarantee being provided by National or a Non-Utility
Subsidiary), including banks, insurance companies, and other
financial institutions, in an aggregate principal amount which
will not to exceed $250 million.
C. FINANCING ENTITIES
National and the Non-Utility Subsidiaries seek authority to
organize new corporations, trusts, partnerships or other entities
created for the purpose of facilitating financings through their
issue to third parties of interests in such entities. Request is
also made for these financing entities to issue such securities
to third parties to the extent such transactions are not exempt
under Rule 52. Additionally, request is made for authorization
with respect to (i) the issuance of debentures or other evidences
of indebtedness, pursuant to an indenture or otherwise, by
National or a Non-Utility Subsidiary to a financing entity in
return for the proceeds of the financing, and (ii) the
acquisition by National or a Non-Utility Subsidiary of voting
interests or equity securities issued by the financing entity to
establish National's or such Non-Utility Subsidiary's ownership
of the financing entity. National and the Non-Utility
Subsidiaries also request authorization to enter into guarantees
and expense agreements with their respective financing entities,
pursuant to which they would agree to pay all amounts payable
with respect to securities issued by such entities.
Such guarantee authority with respect to their respective
financing entities will not exceed $250 million in the aggregate
at any one time during the Authorization Period.
IV. GUARANTEES BY NATIONAL
National requests authorization to guarantee securities of
its Subsidiaries, and provide other forms of credit support with
respect to obligations of its Subsidiaries as may be necessary or
appropriate to enable them to carry on in the ordinary course of
their respective businesses subject to a maximum aggregate
limitation on such guarantee authority at any one time of $2
billion. The $2 billion of guarantees is in addition to any
financing requested in the Application/Declaration. Such
authorization of National to provide credit support would
supersede and replace the authorization of National to guarantee
up to $500 million of obligations as set forth in the order of
the Commission dated November 12, 1993 (HCAR No. 25922).
Guarantees made directly or indirectly by National to any
Subsidiary which is an EWG, FUCO, Energy Related Company or Gas-
Related Company will be subject to the limitations of Rules 53 or
58, as applicable. National states that terms and conditions of
any guarantees will be negotiated on a case by case basis as the
need arises. Guarantees and other forms of credit support
provided by National on behalf of any EWG or FUCO would be
subject to the limitations of Rule 53, and any guarantee or other
form of credit support provided on behalf of any Energy-Related
Company or Gas-Related Company would be subject to the
limitations of Rule 58.
V. USE OF FINANCING PROCEEDS FOR ACQUISITIONS OF EWGS, FUCOS,
GAS-RELATED COMPANIES AND ENERGY-RELATED COMPANIES
National proposes to use some or all of the proceeds of the
financings proposed herein to make exempt investments in EWGs and
FUCOs in an aggregate amount at any time outstanding which, when
added to National's "Aggregate Investment" (as defined in Rule
53(a)(1)) in any EWGs or FUCOs at any time, shall not exceed 50%
of National's "Consolidated Retained Earnings" (also as defined
in Rule 53(a)(1)). This investment limitation will supersede and
replace the $150 million Investment Limit set forth in the HCAR
No. 35-26364 (File No. 70-8649) dated August 29, 1995. Any
guarantees of securities issued by, or other obligations of, any
EWG or FUCO or "Intermediate Company" organized for the purpose
of acquiring and holding the securities of any EWG or FUCO would
also be included in National's "Aggregate Investment" under Rule
53.
National is in compliance and will comply with Rule 53(a)
and all other applicable rules under the Holding Company Act,
including, without limitation, such rules as may be promulgated
in the future pursuant to Section 33 of the Holding Company Act.
National states that its Aggregate Investment in EWGs and FUCOs
is zero. National states that its National's average
Consolidated Retained Earnings, pursuant to Rule 53(a)(1), for
the four quarters ended September 30, 1997 is approximately
$473,476,000. National states that it and its subsidiaries
commit that they will maintain books and records and financial
statements to identify investments in and earnings from EWGs and
FUCOs in which they may directly or indirectly hold an interest.
National has undertaken to provide the SEC access to such books
and records and financial statements that will be available to
National upon the request of the SEC. Thus, the Rule 53(a)(2)
requirements will be satisfied. National states that no more
than 2% of the employees of Distribution will render services, at
any one time, directly or indirectly, to the EWGs or FUCOs in
which National may directly or indirectly hold an interest,
thereby satisfying Rule 53(a)(3). National states that all of
the documents required to be filed under Rule 53(a)(4) with
federal, state and local regulators having jurisdiction over the
retail rates of Distribution have been submitted.
National states that none of the conditions described in
Rule 53(b) exist with respect to National, thereby satisfying
Rule 53(b) and making Rule 53(c) inapplicable.
National also proposes to use some or all of the proceeds of
the financings proposed herein to make exempt investments under
Rule 58. National states that currently, its Aggregate
Investment, as defined in Rule 58(b)(3), in Energy-Related
Companies is zero.
