UNITED STATES OF AMERICA
Before the
SECURITIES AND EXCHANGE COMMISSION
- --------------------------------------------
In the Matter of
NATIONAL FUEL GAS COMPANY SEVENTH
NATIONAL FUEL GAS DISTRIBUTION CORPORATION CERTIFICATE
NATIONAL FUEL GAS SUPPLY CORPORATION PURSUANT TO
SENECA RESOURCES CORPORATION RULE 24
UTILITY CONSTRUCTORS, INC.
HIGHLAND LAND & MINERALS, INC.
LEIDY HUB, INC.
DATA-TRACK ACCOUNT SERVICES, INC.
NATIONAL FUEL RESOURCES, INC.
HORIZON ENERGY DEVELOPMENT, INC.
SENECA INDEPENDENCE PIPELINE COMPANY
NIAGARA INDEPENDENCE MARKETING COMPANY
UPSTATE ENERGY INC., F/K/A NIAGARA ENERGY TRADING INC.
File No. 70-9153
(Public Utility Holding Company Act of 1935)
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THIS IS TO CERTIFY, pursuant to Rule 24, that certain transactions
proposed by National Fuel Gas Company ("National"), and its subsidiaries:
National Fuel Gas Distribution Corporation ("Distribution Corporation"),
National Fuel Gas Supply Corporation ("Supply Corporation"), Seneca Resources
Corporation ("Seneca"), Highland Land & Minerals, Inc. ("Highland") on its own
behalf and as successor by merger to Utility Constructors, Inc. ("UCI"), Leidy
Hub, Inc. ("Leidy"), Data-Track Account Services, Inc. ("Data-Track"), National
Fuel Resources, Inc. ("NFR"), Horizon Energy Development, Inc. ("Horizon
Energy"), Seneca Independence Pipeline Company ("SIP"), Niagara Independence
Marketing Company ("NIM"), and Upstate Energy Inc., formerly known as Niagara
Energy Trading Inc. ("Upstate") (collectively, the "Subsidiaries"), in their
Application-Declaration on Form U-1, as amended, ("Application-Declaration")in
SEC File No. 70-9153, have been carried out in accordance with the terms and
conditions, and for the purposes as represented by said Application-Declaration,
and the Order of the Securities and Exchange Commission ("Commission") (HCAR No.
35-26847 dated March 20, 1998) with respect thereto.
1. EXTERNAL FINANCING BY NFG
-------------------------
a. Short-term Debt
---------------
BORROWING BY NATIONAL
- ---------------------
National borrowed funds to be used for its own corporate purposes by
issuing commercial paper and/or short-term notes (in all cases having maturities
of no more than 270 days) to banks or other financial institutions during the
quarter ended September 30, 1999 ("Quarter"):
- ------------------------------------------------------------------------------
At Beginning At End Maximum Level Minimum Level
of Quarter of Quarter of Such Short-term Debt of Such Short-term Debt
---------- ---------- ----------------------- -----------------------
$25,700,000 $26,600,000 $26,600,000 $25,700,000
b. Long-term securities
--------------------
(1) Long-Term Debt Securities; Preferred Stock
During the Quarter, National sold long-term debt securities (i.e. debt
with maturities in excess of 270 days) on one occasion. On July 7, 1999 National
sold $100,000,000 principal amount of medium term notes ("MTNs") through
underwriters. These MTNs were issued on July 12, 1999 and will mature on August
1, 2004 (or the first business day thereafter). The MTNs have a coupon rate of
6.82%. The proceeds were used to refund $50,000,000 of MTNs that matured on July
14, 1999 and to complete the redemption of HarCor Energy, Inc.'s 14.875% Senior
Secured Notes as described further in National's Form 10-Q for the quarter ended
June 30, 1999 (Item 1, Note 3).
(2) Stock Issuance Plans
During the Quarter, National issued the following shares of common
stock through the following plans ("Stock Issuance Plans"):
Number of Number of Shares Exchanged as
Name Of Plan Shares Issued Consideration for Share Issuances
- ------------ ------------- ---------------------------------
Customer Stock Purchase 7,848 N/A
Plan
Dividend Reinvestment and 25,853 N/A
Stock Purchase Plan
Tax Deferred Savings 29,666 N/A
Plans [401(k)]
Retainer Policy for 700 N/A
Outside Directors
1997 Award & Option Plan 500 - 0 -
1993 Award and Option 21,329 - 0 -
Plan
1984 Stock Plan - 0 - - 0 -
1983 Incentive Stock Option 3,100 - 0 -
Plan
Total Number of 88,996 - 0 -
Shares Issued/Exchanged
Net New Shares 88,996
Aggregate Consideration received upon issuance of 88,996 shares: $3,824,153.41.
The purpose of National's Customer Stock Purchase Plan and its Dividend
Reinvestment and Stock Purchase Plan is to promote the long-term ownership of
National's common stock by allowing for the purchase thereof directly from
National, through cash purchases and through reinvestment of cash dividends.
The purpose of National's two Tax-Deferred Savings Plans is to
encourage employees of National and of its Subsidiaries to provide for their
retirement needs by providing opportunities for long-term capital accumulation,
to promote ownership of National's common stock among employees, to provide an
attractive employee benefit, and to keep National's employee benefit program
competitive with programs offered by other corporations.
The purpose of National's Retainer Policy for outside directors is to
pay outside directors a portion of their annual retainer in common stock of
National. This promotes the long-term ownership of National's common stock by
outside directors.
National adopted its four award and option plans in order to attract,
retain and motivate key employees of outstanding ability. These plans were
intended to provide an incentive to key employees to maximize the long-range
profits, revenues, and financial integrity of National by increasing the
personal stake of those employees in the continued success and growth of
National, and by providing significant incentives to their continuation of
employment at National and its Subsidiaries.
During the quarter ended September 30, 1999, the Compensation Committee
of the Board of Directors of National did not award any stock options, stock
appreciation rights or shares of restricted stock.
(3) Compliance With Parameters Concerning Long-Term Securities
During the Quarter, all long-term debt of National had bond ratings of
"investment grade", and National's common equity (as reflected in its Form 10-Q)
did not fall below 30% of National's consolidated capitalization.
c. Hedging Transactions
--------------------
During the Quarter, National did not enter into any hedges or other
derivative transactions either pursuant to a Hedge Program or an Anticipatory
Hedge Program.
d. Other Securities
----------------
During the Quarter, National did not issue other types of securities
("Other Securities").
2. MONEY POOL
----------
During the Quarter, National coordinated the borrowing requirements of
Subsidiaries through the system money pool ("Money Pool"). Money Pool activities
included:
a. National sold commercial paper during the Quarter, through Merrill
Lynch Money Markets, Inc. and/or Chase Securities, Inc. The proceeds were loaned
by National to certain Subsidiaries either directly or through the Money Pool
during the Quarter.
Commercial Paper Outstanding
------------------------------------------------------------------
Maximum Amount Minimum Amount
At Beginning At End Outstanding During Outstanding During
of Quarter of Quarter Quarter Quarter
---------- ---------- ------- -------
$132,500,000 $147,500,000 $150,800,000 $90,200,000
b. National issued short-term notes to banks or other financial
institutions during the Quarter. The proceeds thereof were loaned by National to
certain Subsidiaries that borrowed through the Money Pool during the Quarter.
National's External Bank/Financial Institution Borrowings
Outstanding (Money Pool)
------------------------------------------------------------------
Maximum Amount Minimum Amount
At Beginning At End Outstanding During Outstanding During
of Quarter of Quarter Quarter Quarter
---------- ---------- ------- -------
$192,800,000 $218,200,000 $220,000,000 $124,800,000
c. The maximum aggregate amount of external short-term debt borrowed by
National (for its own use and for the Money Pool) at any time during the Quarter
was $392,300,000, and the maximum aggregate amount that National and its
Subsidiaries lent to other Subsidiaries participating in the Money Pool at any
time during the Quarter was $425,700,000.
d. The following table lists cash balances that National and certain
Subsidiaries (i.e., Subsidiaries with surplus funds) loaned to other
Subsidiaries that borrowed through the Money Pool during the Quarter:
Cash Balances Loaned Through the Money Pool
---------------------------------------------------
At Beginning At End
of Quarter of Quarter Maximum Minimum
---------- ---------- ------- -------
National $41,500,000 $42,500,000 $44,200,000 $41,500,000
Distribution 0 0 5,700,000 0
Supply 0 0 0 0
Seneca 13,900,000 14,800,000 16,000,000 13,900,000
UCI 200,000 0 200,000 0
Highland 0 0 0 0
Leidy 700,000 700,000 700,000 700,000
Data-Track 600,000 600,000 600,000 600,000
NFR 0 1,400,000 6,200,000 400,000
Horizon Energy 500,000 0 800,000 0
SIP 0 0 0 0
NIM 0 0 0 0
Upstate 0 0 0 0
e. The following table lists cash balances that certain Subsidiaries
borrowed through the Money Pool during the Quarter. National does not borrow
from its Subsidiaries through the Money Pool or otherwise.
Borrowings from the Money Pool
------------------------------------------------------
At Beginning At End Maximum Minimum
of Quarter Of Quarter Borrowed Borrowed
---------- ---------- -------- --------
Distribution $ 11,000,000 $ 64,300,000 $ 64,300,000 $ 0
Supply 46,800,000 46,200,000 55,600,000 18,700,000
Seneca 263,400,000 251,100,000 269,600,000 215,400,000
UCI 0 0 0 0
Highland 50,900,000 50,800,000 51,100,000 50,100,000
Leidy 0 0 0 0
Data-Track 0 0 0 0
NFR 0 0 100,000 0
Horizon Energy 0 0 0 0
SIP 9,500,000 9,600,000 9,600,000 9,500,000
NIM 0 0 0 0
Upstate 1,400,000 2,400,000 3,800,000 1,400,000
3. USE OF PROCEEDS
---------------
National has used the proceeds of the aforementioned issuances of
short-term debt, and the borrowing Subsidiaries have used the proceeds of their
Money Pool borrowings, for acquisitions, capital expenditures, working capital
needs, for the retirement or redemption of securities, or for other general
corporate purposes.
4. EXTERNAL FINANCING BY DISTRIBUTION
----------------------------------
On July 28, 1999, the New York Public Service Commission issued an
Order Approving Petition in Case 99-G-0541 - "Petition of National Fuel Gas
Distribution Corporation for Authority to Issue and Sell not More than
$250,000,000 of Promissory Notes and to Assume the Costs and Benefits of up to
$350,000,000 Notional Amount of Derivative Instruments", which order is attached
hereto as Exhibit A. During the Quarter, however, Distribution did not engage in
external financing.
5. FINANCING ENTITIES
------------------
During the Quarter, National and its nonutility Subsidiaries did not
organize new corporations, trusts, partnerships or other entities created for
the purpose of facilitating financing.
6. GUARANTEES BY NATIONAL
----------------------
During the Quarter, National made guarantees on behalf of its
Subsidiaries in the aggregate amount of $14,000,000. The maximum amount of
guarantees or credit support that National had outstanding to its Subsidiaries
at any time during the quarter was $177,310,000.
All guarantees relate to gas transportation, purchases or sales, or
other credit support agreements relating to the Subsidiaries' existing
businesses.
7. ACQUISITIONS OF EWG'S, FUCO'S AND RULE 58 COMPANIES
---------------------------------------------------
During the Quarter, Subsidiaries made the following investments in
entities that had been designated as electric wholesale generators (EWG's) or
foreign utility companies (FUCO's) at such time or in energy-related companies
or gas-related companies under Rule 58. In July 1999, an indirect subsidiary of
Horizon, Severoceske Teplarny, a.s. ("SCT"), a FUCO, increased its interest in
one of its subsidiaries, Jablonecka teplarenska a realitni, a.s., from 34% to
65.78% for $5.7 million net of cash acquired. In September 1999, SCT's immediate
parent, Horizon Energy Development B.V. increased its ownership interest in SCT
from 82.7% to 82.87% for $37,000. On September 30, 1999, Upstate, in exchange
for $1,000,000, acquired a 50 % interest in the Roystone Gas Processing Plant, a
Pennsylvania general partnership and a gas-related company pursuant to Rule 58
which is engaged in processing natural gas and selling natural gas liquids.
The aggregate investment of National and its subsidiaries in EWG's and
FUCO's does not exceed the limits set forth in the Commission's Rule 53.
SIGNATURES
Pursuant to the requirements of the Public Utility Holding Company Act
of 1935, the undersigned companies have duly caused this First Certificate
Pursuant to Rule 24 to be signed on their behalf by the undersigned thereunto
duly authorized.
NATIONAL FUEL GAS COMPANY
By: /s/ P. C. Ackerman
------------------------------------
P. C. Ackerman
President
NATIONAL FUEL GAS DISTRIBUTION
CORPORATION
By: /s/ D. F. Smith
------------------------------------
D. F. Smith
President
SENECA RESOURCES CORPORATION
By: /s/ J. A. Beck
------------------------------------
J. A. Beck
President
NATIONAL FUEL GAS SUPPLY CORPORATION
By: /s/ R. Hare
------------------------------------
R. Hare
President
NATIONAL FUEL RESOURCES, INC.
By: /s/ R. J. Kreppel
------------------------------------
R. J. Kreppel
President
HORIZON ENERGY DEVELOPMENT INC.
By: /s/ P. C. Ackerman
------------------------------------
P. C. Ackerman
President
HIGHLAND LAND & MINERAL, INC., on its own behalf and
as successor by merger to Utility Constructors, Inc.
By: /s/ J. A. Beck
------------------------------------
J. A. Beck
President
DATA-TRACK ACCOUNT SERVICES, INC.
By: /s/ P. C. Ackerman
------------------------------------
P. C. Ackerman
President
LEIDY HUB, INC.
By: /s/ W. E. DeForest
------------------------------------
W. E. DeForest
President
SENECA INDEPENDENCE PIPELINE COMPANY
By: /s/ D. J. Seeley
------------------------------------
D. J. Seeley
President, Secretary & Treasurer
NIAGARA INDEPENDENCE MARKETING COMPANY
By: /s/ C. H. Friedrich
------------------------------------
C. H. Friedrich
Treasurer
UPSTATE ENERGY INC.
By: /s/ C. H. Friedrich
------------------------------------
C. H. Friedrich
Treasurer
Dated: November 19, 1999
Exhibit A
STATE OF NEW YORK
PUBLIC SERVICE COMMISSION
At a session of the Public Service
Commission held in the City of
Albany on July 14, 1999
COMMISSIONERS PRESENT:
Maureen O. Helmer, Chairman
Thomas J. Dunleavy
James D. Bennett
Leonard A. Weiss
Neal N. Galvin
CASE 99-G-0541 - Petition of National Fuel Gas Distribution Corporation for
Authority to Issue and Sell not More than $250,000,000 of
Promissory Notes and to Assume the Costs and Benefits of up to
$350,000,000 Notional Amount of Derivative Instruments.
ORDER APPROVING PETITION
(Issued and Effective July 28, 1999)
BY THE COMMISSION:
By petition filed April 19, 1999, National Fuel Gas
Distribution Corporation has requested Commission authority to issue and sell up
to $250 million of promissory notes and to enter into up to $350 million of
derivative transactions. An issue of securities and entering into derivative
transactions in the amounts authorized, subject to the conditions imposed in
this Order, are reasonably required for the purposes we specify and such
purposes are not, in whole or in part, reasonably chargeable to operating
expenses or to income.
The Commission orders:
- ---------------------
1. National Fuel Gas Distribution Corporation (petitioner) is
authorized to issue and sell, not later than December 31, 2002, up to $250
million of promissory notes. The debt shall be issued under and pursuant to the
documents attached to the petition in this proceeding. No material supplemental
to or modification of the said documents shall be executed without the authority
of this Commission. The debt shall be dated, bear a rate of interest, mature and
be redeemable in the manner specified in the above documents.
2. National Fuel Gas Distribution Corporation is authorized to
enter into up to $350 million of derivative transactions not later than December
31, 2002. The transactions shall be entered into under and pursuant to the
documents attached to the petition in this proceeding. No material supplement to
or modification of the said documents shall be executed without the approval of
this Commission. Approval of these transactions is expressly subject to the
understanding that the transactions will be entered into pursuant to the
precautions described in the aforementioned documents.
3. Petitioner shall not enter into any derivative transactions
with a counterparty unless said counterparty has a credit rating at least as
high as that of the petitioner, with a minimum rating of Baa by Moody's or the
equivalent. All derivative transactions authorized by this Order shall be
directly related to the petitioner's outstanding long- or short-term debt. In
addition, the terms of the transaction shall require that the change in the
floating rate portion of the derivative transaction will be exactly equal to the
change in the underlying short-term debt index.
4. Within ten days after the execution of the documents
entered into for the sale of the authorized securities, petitioner shall file
with this Commission verified copies thereof as executed.
5. The proceeds from the sale of the securities authorized by
this order shall be deposited in a special fund in a responsible banking
institution or institutions. The proceeds shall be applied solely and
exclusively toward reimbursement of petitioner's treasury for equivalent moneys
expended for capital purposes to December 31, 1998. The reimbursement funds
shall be used toward the payment of outstanding short-term debt, maturing senior
securities and/or sinking fund requirements on the dates of issuance of the said
securities. Any remaining funds are to be used toward expenditures on or after
January 1, 1999, for the purposes permitted under Public Service Law Section 69
which shall be over and above the expenditures made for such purposes through
funds originating from credits to the accumulated provisions for depreciation,
net salvage and accumulated deferred income taxes. Withdrawal of a portion or
all of the said reimbursement funds may be made from time to time for other
utility purposes during the period ending December 31, 2002, or may be invested
in short-term marketable securities on condition that such temporary withdrawal,
to the extent that the same are not offset by gross additions less funds
originating from credits to the accumulated provision for depreciation, net
salvage and accumulated deferred income taxes on or after January 1, 1999, are
restored to the special fund not later than December 31, 2002. The entire
proceeds from the issuance of the securities authorized by this Order shall be
used for the purposes specified above. In no instance shall any part of the
special fund be used to pay accrued interest or dividends on the discharged or
refunded obligations.
6. Petitioner shall file annually with the Director of the
Office of Accounting and Finance or his designee a verified report within 60
days after year end. The report shall also include the date of withdrawal of any
of the deposited funds as provided in Clause 4 of this Order, the amount
withdrawn, and the purposes for which such withdrawal was made. Petitioner shall
provide this Commission with the same information that will be supplied to the
Securities and Exchange Commission for any derivative transactions entered into
under this Order. In addition, petitioner shall provide information on the cost
and terms of traditional debt had it been issued. If derivative transactions are
entered into in order to refinance existing debt, petitioner shall demonstrate
the savings achieved.
7. In rate proceedings, the loss and reward from entering into
derivative transactions shall be applied only to petitioner's shareholders.
Recovery of interest costs for debt related to a derivative transaction shall be
calculated using the rate on traditional debt had the derivative transaction not
occurred.
8. If, upon examination of the expenditures made from
withdrawal from the said special fund, it is determined that any expenditure is
not a reasonable and proper capital charge, or has not been duly authorized by
the Commission, or is in violation of any Order of the Commission or any
provision of law, a sum equal to such expenditure shall, upon Order of the
Commission, promptly be placed in the special fund and said sum shall be subject
to all of the conditions and restrictions of this Order.
9. The total costs and expenses of issuing the securities
authorized by this Order, paid or to be paid by petitioner and charged to
Account 181 - Unamortized Debt Expense, shall not exceed $1,500,000 unless any
additional amount expended is approved as a proper and reasonable cost of
issuance by the Director of Accounting and Finance or his designee, and
petitioner shall submit a verified report showing in detail all costs and
expenses. Upon approval, the petitioner shall make such adjustment of the
charges to Account 181 Unamortized Debt Expense - as determined to be necessary
and proper.
10. The total costs and expenses of entering into the
derivative transactions authorized by this Order, paid or to be paid by
petitioner and charged to a sub-account of Account 181 - Unamortized Debt
Expense, shall not exceed $500,000 unless any additional amount expended is
approved as a proper and reasonable cost of issuance by the Director of
Accounting and Finance or his designee, and petitioner shall submit a verified
report showing in detail all costs and expenses. Upon approval, petitioner shall
make such adjustment of the charges to the sub-account of Account 181 -
Unamortized Debt Expense - as determined to be necessary and proper. This
sub-account of Account 181 - Unamortized Debt Expense - shall contain only the
costs and expenses related to the derivative transactions entered into by the
petitioner.
11. The authority granted and the conditions imposed by this
Order shall not be construed as passing upon or otherwise approving the accuracy
of the books, records and accounts of petitioner.
12. The securities authorized by this Order shall not be
issued and the derivative transactions authorized by this Order shall not be
entered into unless and until there has been filed with this Commission an
unconditional acceptance by petitioner agreeing to obey all terms, conditions
and requirements of this Order. If such acceptance is not so filed within a
period of 30 days from the effective date of this Order, this Order may be
revoked by the Commission without further notice.
13. This proceeding is continued.
By the Commission,
(SIGNED) DEBRA RENNER
Acting Secretary
