SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
_____
FORM 10-K
(Check One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1993
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the Transition period from ___________ to____________
Commission file number 0-994
NORTHWEST NATURAL GAS COMPANY
(Exact name of registrant as specified in its charter)
Oregon 93-0256722
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
220 N.W. Second Avenue, Portland, Oregon 97209
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (503) 226-4211
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
- ------------------- -----------------------------------------
None None
Securities registered pursuant to Section 12(g) of the Act:
Title of each class Shares outstanding on February 28, 1994
- ------------------- ---------------------------------------
Common Stock, $3 1/6 par value 13,219,706
Preference Stock, without par value 314,680
Preferred Stock, without par value 170,333
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [ X ] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K [ X ].
The aggregate market value of the shares of voting stock (common stock) held by
non-affiliates of the registrant at February 28, 1994 was: $470,016,700
DOCUMENTS INCORPORATED BY REFERENCE
List documents incorporated by reference and the Part of the Form 10-K into
which the document is incorporated.
Portions of the Proxy Statement of Company, dated April 15, 1994, are
incorporated by reference in Part III.
<PAGE>
NORTHWEST NATURAL GAS COMPANY
Annual Report to Securities and Exchange Commission
on Form 10-K
for the year 1993
Table of Contents
PART I Page
Item 1. Business
General. . . . . . . . . . . . . . . . . . . . . . . 1
Service Area . . . . . . . . . . . . . . . . . . . . 2
Gas Supply . . . . . . . . . . . . . . . . . . . . . 2
Transportation . . . . . . . . . . . . . . . . . . . 7
Regulation and Rates . . . . . . . . . . . . . . . . 7
Competition and Marketing. . . . . . . . . . . . . . 10
Construction and Financing Programs. . . . . . . . . 12
Environment. . . . . . . . . . . . . . . . . . . . . 12
Employees. . . . . . . . . . . . . . . . . . . . . . 13
Item 2. Properties. . . . . . . . . . . . . . . . . . . . . . . 13
Item 3. Legal Proceedings . . . . . . . . . . . . . . . . . . . 14
Item 4. Submission of Matters to a Vote of Security Holders . . 15
Additional Item
Executive Officers of the Registrant. . . . . . . . . . 16
PART II
Item 5. Market for the Registrant's Common Equity and Related
Stockholder Matters. . . . . . . . . . . . . . . . . . 17
Item 6. Selected Financial Data . . . . . . . . . . . . . . . . 19
Item 7. Management's Discussion and Analysis of Results of
Operations and Financial Condition . . . . . . . . . . 20
Item 8. Financial Statements and Supplementary Data . . . . . . 32
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure . . . . . . . . 68
PART III
Items
10. - 13. Incorporated by Reference to Proxy Statement . . . . 68
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K. . . . . . . . . . . . . . . . . . . . . . 68
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . 72
<PAGE>
NORTHWEST NATURAL GAS COMPANY
PART I
ITEM 1. BUSINESS
General
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Northwest Natural Gas Company (the Company) was
incorporated under the laws of Oregon in 1910. The Company and
its predecessors have supplied gas service to the public since
1859. The Company is principally engaged in the distribution of
natural gas to customers in western Oregon and southwestern
Washington, including the Portland metropolitan area.
Basic industries served by the Company include pulp,
paper and other forest products; the processing of farm and food
products; lumber and plywood; the production of various mineral
products; the manufacture of electronic, electrochemical and
electrometallurgical products; metal fabrication and casting; and
the production of machine tools, machinery and textiles. The
City of Portland, Oregon is the principal retail and
manufacturing center in the Columbia River Basin. It is a major
port and growing nucleus for trade with Pacific Rim nations such
as Japan and Korea.
The Company has four subsidiaries, each of which is
incorporated in the State of Oregon: Oregon Natural Gas
Development Corporation (Oregon Natural), NNG Financial
Corporation (Financial Corporation), NNG Energy Systems, Inc.
(Energy Systems) and Pacific Square Corporation (Pacific Square).
Oregon Natural is engaged in natural gas exploration,
development and production in Oregon and other western states,
and, through its wholly-owned subsidiary, Canor Energy Ltd.
(Canor), an Alberta Corporation, also engages in gas and oil
exploration, development and production in Alberta and
Saskatchewan, Canada. Oregon Natural also holds an equity
investment in a Boeing 737-300 aircraft. (See Part I, Item 2,
and Part II, Item 8, Note 2 and Note 11.)
Financial Corporation holds financial investments as a
limited partner in four solar electric generating plants, four
wind power electric generation projects and a hydroelectric
project, all located in California, and in a low-income housing
project in Portland. Financial Corporation also arranges short-
term financing for the Company's operating subsidiaries. (See
Part II, Item 8, Note 11.)
Energy Systems, through its wholly-owned subsidiary,
Agrico Cogeneration Corporation (Agrico), formerly owned a 25
megawatt cogeneration plant near Fresno, California. In
December 1991, Agrico filed a voluntary petition for
reorganization under Chapter 11 of the United States Bankruptcy
Code. In November 1992, Agrico entered into a settlement with
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Pacific Gas & Electric Company (PG&E), the utility which
purchased plant energy and capacity from Agrico, and Wellhead
Electric Company (Wellhead), the contract operator of the Agrico
plant, with respect to PG&E's claimed overpayments to Agrico for
power purchased in 1990 and 1991. In January 1994, the
California Public Utilities Commission's order approving Agrico's
settlement with PG&E and Wellhead became final, and the U.S.
Bankruptcy Court entered its order confirming Agrico's
reorganization plan. The Court's order and the reorganization
plan became final and the sale of Agrico's assets to Wellhead
closed in February 1994. (See Part I, Item 3, and Part II,
Item 8, Note 3.)
Pacific Square is engaged in real estate management,
principally in connection with two office buildings in Portland
and other Company-owned properties adjacent to those buildings.
Pacific Square has entered into an agreement to sell its
interests in the partnership that owns these buildings. (See
Part I, Item 2, and Part II, Item 8, Note 2 and Note 12.)
Service Area
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The Oregon Public Utility Commission (OPUC) has
allocated to the Company as its exclusive service area a major
portion of western Oregon, including most of the fertile
Willamette Valley and the coastal area from Astoria to Coos Bay.
The Company also holds certificates from the Washington Utilities
and Transportation Commission (WUTC) granting it exclusive rights
to serve portions of three Washington counties bordering the
Columbia River. Gas service is provided in 95 cities, together
with neighboring communities, in 16 Oregon counties, and in nine
cities and neighboring communities in three Washington counties.
The Company's service areas have a population of about 2,600,000,
including about 78 percent of the population of the State of
Oregon.
Gas Supply
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General
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The Company meets the needs of its core market
(residential, commercial and firm industrial) customers through
natural gas purchases from a variety of suppliers. The Company
has a diverse portfolio of short-, medium- and long-term firm gas
supply contracts, and, during periods of peak demand, supplements
this supply with gas from storage facilities which are either
owned by or contractually committed to the Company.
Natural gas for the Company's core market is
transported by Northwest Pipeline Corporation (NPC) under a
contract expiring September 30, 2013, providing for the delivery
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of firm requirements of up to 2,460,440 therms(1) per day. NPC's
rates for this service are established by the Federal Energy
Regulatory Commission (FERC) under NPC's primary firm
transportation rate schedule, as amended or superseded from time
to time.
Commencing in April 1993, the Company added 500,000
therms per day of firm transportation capacity for its core
market through participation in an expansion of NPC's system, and
an expansion of Pacific Gas Transmission's (PGT) pipeline through
central Oregon, southeastern Washington and northern Idaho. In
combination, this additional firm transportation capacity
provides a connection through Alberta Natural Gas Company Ltd.'s
(ANG) system to producing regions of Alberta, Canada.
The cost of gas to supply the Company's core market
consists of amounts paid to suppliers of the gas commodity and
peaking services plus transportation charges paid to pipelines in
the United States and Canada. While the rates for pipeline
transportation and peaking services are regulated, the prices of
gas purchased under the supply contracts are not. Although both
gas commodity and pipeline costs have increased, the Company has
been able to minimize the effect of such increases on core market
prices by taking advantage of medium-term fixed price supply
contracts negotiated in 1991, and by negotiating off-system sales
agreements which partially offset pipeline costs in periods when
the core market does not require full utilization of firm
pipeline capacity.
The Company supplies many of its larger industrial
interruptible customers (those customers with full or partial
dual fuel capabilities) through gas transportation service,
delivering gas purchased by these customers directly from
suppliers.
Core Market System Supply
-------------------------
The Company purchases gas for its core market from a
variety of suppliers located in the western United States and
Canada. At December 31, 1993, the Company had 19 contracts with
15 suppliers with original terms of from four months to 15 years
which provided for a maximum of 2,718,250 therms of firm gas per
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[FN]
(1) For gas quantities expressed in therms, one therm is
equivalent to 100 cubic feet of natural gas at an assumed
heat content of 1,000 British Thermal Units (Btu's) per
cubic foot. MMBtu means one million Btu's, or 10 therms.
For gas quantities expressed in cubic feet, unless otherwise
indicated, all volumes are stated at a pressure base of
14.73 pounds per square inch absolute at 60 degrees
Fahrenheit, and in some instances are rounded to the nearest
major multiple. Mcf means one thousand cubic feet, Mmcf
means one million cubic feet and Bcf means one billion cubic
feet.
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day during the peak winter season and 1,804,060 therms per day
during the non-peak season. About three-fourths of this supply
comes from Canada and the remainder from the United States,
including a small portion which is locally produced in Oregon.
The terms of the Company's principal purchase
agreements are summarized as follows:
An agreement expiring November 1, 2003 with CanWest Gas
Supply, Inc. (CanWest), an aggregator for gas producers in
British Columbia, Canada, entitles the Company to purchase up to
approximately 960,000 therms of firm gas per day. This agreement
contains a demand and commodity pricing structure and a provision
for annual renegotiations of the commodity price to reflect
then-prevailing market prices. The demand charges reflect the
reservation of firm transportation space on the Westcoast Energy,
Inc. pipeline system in British Columbia. These demand charges
are subject to change as approved by the Canadian National Energy
Board (NEB) in rate proceedings similar to those conducted in the
United States by the FERC. Under this agreement, the Company
also has the ability to purchase gas between May 1 and October 31
each year for injection into storage facilities at a commodity
price, to be renegotiated annually, substantially below the
commodity price for gas for current use. This contract contains
a pro rata market share commitment and minimum purchase
obligations.
An agreement also expiring November 1, 2003 with Amoco
Canada Petroleum Company, Ltd., on terms similar to the CanWest
agreement, entitles the Company to purchase up to approximately
83,300 therms of firm gas per day. This gas is aggregated from
production in Alberta and the Canadian Yukon and Northwest
Territories. This contract contains a pro rata market share
commitment and minimum purchase obligations.
An agreement with Poco Petroleums, Ltd. (Poco), a
Canadian producer, expiring September 30, 2003, entitles the
Company to purchase up to 155,160 therms per day during the
winter and up to 110,000 therms per day during the summer. The
gas is produced in Alberta and makes use of the Company's added
capacity from transportation on the PGT and ANG systems.
Two agreements expiring September 30, 2003 with
Westcoast Gas Services entitle the Company to purchase up to
140,000 therms per day year-round, plus up to 92,750 therms per
day of winter season supply. This gas is produced in Alberta and
makes use of the Company's new capacity on the PGT and ANG
systems. Pricing for supplies under this agreement can be
renegotiated annually. The current pricing arrangement includes
demand charges for upstream capacity on the Canadian pipeline
systems, a monthly reservation charge and a fixed commodity
price.
An agreement expiring October 31, 1996 with Poco
entitles the Company to purchase up to 200,000 therms of firm gas
-4-
per day. This agreement contains a demand and commodity pricing
structure, a provision for annual renegotiations of the commodity
price, minimum purchase obligations and a pro rata market share
commitment. The demand charge is subject to NEB regulation.
This gas is produced in Alberta and British Columbia.
An agreement expiring September 30, 2000 with Summit
Resources Ltd. entitles the Company to purchase up to 77,580
therms per day during the winter and up to 50,000 therms per day
during the summer. This gas is produced in Alberta and makes use
of the Company's added capacity from transportation on the PGT
and ANG systems. Pricing for supplies under this agreement can
be renegotiated annually. The current pricing arrangement
includes demand charges for upstream capacity on NOVA Corporation
of Alberta's system and commodity charges that are separated into
three tiers.
An agreement expiring October 31, 1994 with Natural Gas
Clearinghouse, one of the largest independent gas marketers in
the United States, entitles the Company to purchase up to 100,000
therms of firm gas per day. This gas is produced in the United
States Rocky Mountain region. The pricing structure for this
agreement contains a monthly reservation charge plus a commodity
charge based on monthly trade indices. Prices are renegotiated
annually. This contract contains a pro rata market share
commitment.
An agreement with Nahama & Weagant Energy Company
(NWEC) expiring January 1, 1995 entitles the Company to purchase
all of the production from the wells at Mist, Oregon that
previously had been under contract with Atlantic Richfield
(ARCO). Although production from these wells continues to
decline, it provides a supply delivered within the Company's
service territory. Production from these wells averages nearly
50,000 therms per day and is priced based on the Company's
weighted average cost of gas.
An agreement with NWEC expiring December 31, 1994
entitles the Company to purchase all of the production from new
wells at Mist. Production from these wells currently provides
the Company with more than 70,000 therms per day. Pricing is
based on an average of monthly spot price indices adjusted for
delivery to the Company's service territory.
During 1993, new purchase agreements for firm gas were
entered into with Vastar Resources, Inc. for 200,000 therms per
day; with Coastal Gas Marketing Company for 180,000 therms per
day; with Enron Gas Marketing for 100,000 therms per day; with
Grand Valley Gas Company for 100,000 therms per day; with
Universal Resources for 50,000 therms per day; and with Union
Pacific Fuels for 100,000 therms per day. These agreements are
similarly structured, as follows: each is for a four-month term,
from November 1, 1993 through February 28, 1994; each provides
volumes based on a combination of reservation charges and indexed
commodity prices; and all but one has a minimum volume obligation
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at a fixed price. All of the gas purchased under these
agreements is produced in the United States Rocky Mountain and
San Juan Basin regions.
The Company also purchases small volumes of gas on the
spot (30 days or less) market as necessary to supplement its firm
core market supplies, to extend the deliverability of its storage
resources and to take advantage of available favorable pricing
opportunities. During 1993, less than one percent of the
Company's purchases for its core market was from this source.
The Company manages gas purchases for its core market
in a manner that will meet customers' needs at reasonable prices.
The Company believes that gas supplies available from suppliers
in the western United States and Canada are adequate to serve its
core market customers for the foreseeable future. Future gas
costs, generally, will track prevailing market conditions for
supplies of similar reliability.
Peaking Supplies
----------------
During peak demand periods, the Company supplements its
firm gas supplies through Company-owned or contracted peaking
facilities in which gas can be stored during periods of low
demand for redelivery during periods of peak demand. In addition
to enabling the Company to meet its peak demand, these facilities
make it possible to lower the cost of gas by allowing the Company
to reduce its pipeline transportation contract demand and to
purchase gas for storage during the summer months when purchase
prices are generally at their lowest.
The Company has contracts with NPC for firm storage
services from the underground gas storage field at Jackson
Prairie and the liquefied natural gas (LNG) facility at Plymouth,
Washington which together provide a daily deliverability of
831,380 therms and a total seasonal capacity of 13,082,647 therms
through October 2004. In addition, the Company has contracted
with NPC for an additional daily deliverability of 94,670 therms
and an additional 2,779,970 therms of seasonal capacity from the
Jackson Prairie storage field through April 1996.
The Company owns and operates two LNG plants which it
uses to liquefy gas during the summer months for redelivery into
its system during the peak winter season. These two plants, one
located in Portland and the other near Newport, Oregon, provide a
maximum daily deliverability of 1,800,000 therms and a total
seasonal capacity of 17,000,000 therms. The LNG plants provide a
cost-effective winter peaking resource of high reliability and
flexibility.
The Company also owns and operates an underground gas
storage facility at Mist, Oregon. This facility has a maximum
daily deliverability of 1,000,000 therms and a total seasonal
working gas capacity of about 70,000,000 therms, or about 15
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percent of the Company's annual core customer usage. These
underground gas storage facilities provide a reliable, cost-
effective winter supply that is available for a much longer
period than the LNG plants.
In January 1993, the Company and Portland General
Electric Company (PGE) entered into an agreement expiring in 2010
that provides the Company with a cost-effective winter peaking
supply and PGE with needed firm pipeline transportation. With
certain limitations, the Company may interrupt gas deliveries to
PGE, use that gas for the Company's own markets, and compensate
PGE by paying PGE's cost for replacement fuel oil. The daily
volume is 300,000 therms, increasing to a maximum of 760,000
therms in November 1995. This agreement makes it possible for
the Company to recover the full cost of firm transportation
capacity while obtaining firm gas deliveries during peak load
periods at a cost that is competitive with other peaking
services.
Transportation
- --------------
By 1992, most of the Company's large industrial
interruptible sales customers had switched from sales service to
transportation service. Since 1992, about half of these
customers have returned to sales service, primarily because the
Company's industrial sales rates were lower than those customers'
costs of purchasing and shipping their own gas. The ability of
industrial customers to switch between sales service and
transportation service has assisted the Company in retaining most
of these customers and has not had a material effect on the
Company's results of operations. (See "Competition and Marketing"
and Part II, Item 7.)
Regulation and Rates
- --------------------
The Company is subject to regulation with respect to,
among other matters, rates, systems of accounts and issuance of
securities by the OPUC and the WUTC. In 1993, approximately
90.0 percent of the Company's gas deliveries and 94.6 percent of
its utility operating revenues were derived from Oregon and the
balance from Washington. The Company is exempt from the
provisions of the federal Natural Gas Act by order of the Federal
Power Commission.
The Company's most recent general rate case in Oregon,
which was effective in 1989, authorized rates designed to produce
a return on common equity of 13.25 percent. The most recent
general rate increase in Washington, which was effective in 1986,
authorized rates also designed to produce a return on common
equity of 13.25 percent. Actual revenues resulting from the
OPUC's and WUTC's general rate orders are dependent on weather,
economic conditions, competition and other factors affecting gas
usage in the Company's service area. The Company has no plans to
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file general rate cases in either Oregon or Washington in 1994.
The Company's returns on average common equity from consolidated
operations were 5.8 percent in 1992 and 13.7 percent in 1993.
In Oregon, the Company has a Purchased Gas Cost
Adjustment (PGA) tariff under which the Company's net income
derived from Oregon operations is affected only within defined
limits by changes in purchased gas costs. The PGA tariff
provides for periodic revisions in rates due to changes in the
Company's cost of purchased gas. Costs included in the PGA
adjustments are based on the Company's gas requirements for the
12-month period ended each June 30. Any resulting rate
adjustments, derived from gas prices negotiated for the gas
supply contract year commencing on the following November 1, are
made effective on the following December 1.
The PGA tariff also provides that 80 percent of any
difference between actual gas commodity costs and related costs
incorporated into rates will be deferred for amortization in
subsequent periods. If actual gas commodity costs exceed those
incorporated in rates, the Company subsequently will adjust its
rates upward to recover 80 percent of the deficiency from core
market customers. Similarly, if actual commodity costs are lower
than those reflected in rates, rates will be adjusted downward to
refund to core market customers 80 percent of such gas commodity
cost savings.
In Washington, the Company is permitted to track
increases and decreases in its cost of purchased gas coincidental
with their incurrence, with the result that net income is not
directly affected by changes in purchased gas costs.
In April 1992, the FERC issued Order No. 636 and
subsequently largely affirmed that order on rehearing in Order
Nos. 636-A and 636-B. These orders required significant changes
in the structure of service provided by interstate pipelines and
required such pipelines to restructure or "unbundle" their
services and eliminate their role as gas merchants. In October
1992, NPC, the primary interstate pipeline serving the Company,
made a filing with the FERC to comply with Order No. 636 and
filed a general rate case seeking FERC approval to increase its
rates. The impact of these filings, as approved by the FERC, was
an increase in the Company's annual cost of interstate pipeline
service of approximately $16.5 million effective April 1, 1993.
NPC's rate increase also included the cost of its $432 million
"Phase I Expansion" completed in April 1993, under which the
Company subscribed to 500,000 therms per day of new firm
capacity, and reflected a change in NPC's rate design to the
FERC-mandated "straight fixed-variable" method, which collects
all fixed costs through monthly demand charges.
In April 1993, the Company filed with the OPUC for rate
increases averaging 6.2 percent in its residential, commercial
and industrial firm schedules to offset the Company's higher
costs for interstate pipeline capacity approved by the FERC for
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NPC. The OPUC approved these rate increases effective May 1,
1993. Effective June 1, 1993, the WUTC approved rate increases
averaging 6.7 percent for the Company's Washington customers to
offset the same cost increases.
In August 1993, the Company filed with the OPUC for
rate increases averaging 3 percent. The OPUC approved the
increases effective October 1, 1993. These rate increases were
due to the removal of temporary rate discounts in effect since
November 1990 to refund to customers gas cost savings and
pipeline rate refunds resulting from NPC's transition to "open
access" transportation.
In November 1993, the Company filed for rate increases
under its PGA tariffs averaging 3.7 percent for Oregon customers
and 7.6 percent for Washington customers. The OPUC and WUTC
approved these increases for their respective states effective
December 1, 1993. These rate increases passed through to
customers the effect of higher gas costs, and removed temporary
rate discounts related to prior gas cost savings which had
applied to rates for firm gas service since December 1992.
In connection with filings by the Company each year
under the PGA tariff, the OPUC has reviewed the Company's
earnings as determined for a recently-completed 12-month period,
normalized for average weather conditions and certain other
adjustments to revenues or expenses as applied in the Company's
last general rate case. The OPUC has taken the position that it
may reduce the amount of a rate increase requested to offset
higher gas costs if its review of normalized earnings were to
show that the resulting return on equity would exceed a
reasonable range for the Company under then-current financial
conditions. Based upon such a review in 1993, the Company and
the OPUC staff negotiated an agreement whereby the Company
reduced the revenue increase requested pursuant to its November
1993 PGA filing by about $2,334,000 per year. The Company
expects the OPUC to conduct a similar review in connection with
its PGA filing to be effective in December 1994, but cannot
predict whether the effect, if any, of such a review on future
earnings would be material.
In Oregon, the Company has an Interruptible Sales
Adjustment (ISA) tariff schedule which levels margin (sales price
less cost of gas) fluctuations resulting from the volatility of
sales to large industrial interruptible customers caused by price
competition between natural gas and residual fuel oil. Under the
ISA tariff schedule, the Company's rates are increased or
decreased at least annually to compensate for deviations in
actual industrial interruptible margins from assumed base
margins. If the actual margin is below the base margin for any
month, the Company's rates applicable to core market customers
are adjusted upward to recover 80 percent of the margin
deficiency, plus interest. Likewise, if the actual margin is
above the base margin, rates subsequently are adjusted downward
to return 80 percent of the margin excess, plus interest. At
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year-end 1993, the ISA account had a credit (refund) balance of
$2.4 million. This tariff schedule enhances the Company's
opportunity to achieve its allowed rate of return and reduces
fluctuations in earnings due to changes in industrial
interruptible sales.
The OPUC and WUTC have approved transportation tariffs
under which the Company may contract with customers to deliver
customer-owned gas. Under these tariffs, revenues from the
transportation of customer-owned gas, except that of large
industrial customers having the capability of bypassing the
Company's system, generally are equivalent to the margins that
would have been realized from sales of Company-owned gas. (See
"Transportation" and "Competition and Marketing".)
The OPUC and WUTC have instituted "least-cost planning"
processes under which utilities develop plans defining
alternative growth scenarios and resource acquisition strategies.
In 1991, the OPUC and WUTC acknowledged and accepted the
Company's submissions of its first Least Cost Plan, and required
further planning during 1992 and 1993, including the development
of demand-side (conservation) resources.
In October 1993, the Company filed its 1993 Integrated
Resource (Least Cost) Plan, with the OPUC and the WUTC. The plan
discusses potential growth in gas demand and describes a range of
possible future supply-side and demand-side resource options to
meet the demand. The plan forecasts growth in peak day load
averaging 2.9 percent per year from 1993 to 2002, 2.3 percent
from 1993 to 2012 and 2 percent from 1993 to 2022. The long-term
resources available to meet this growth include the interstate
pipelines, storage, conservation and long-term industrial
contracts with provisions for the recall of released pipeline
capacity and gas supplies. An updated Least Cost Plan will be
filed in mid-1994 in Oregon and then in Washington.
Competition and Marketing
- -------------------------
Although the Company has no direct competition in the
territory it serves from other natural gas utility distributors,
it competes with NPC to serve large industrial customers; with
oil and, to a lesser extent, electricity, for industrial uses;
with oil, electricity and wood for residential use; and with oil
and electricity for commercial uses. Competition among these
forms of energy is based on price, quality of service, efficiency
and performance. In 1993, the Company maintained its competitive
price advantage over electricity and approximate price parity
with fuel oil in both the residential and commercial markets.
Throughout 1993, natural gas rates continued to be substantially
lower than rates for electricity provided by the investor-owned
utilities which serve approximately 75 percent of the homes in
the Company's Oregon service area. The Company believes that
this rate advantage will continue for the foreseeable future. As
a result of substantial price increases in recent years by the
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Bonneville Power Administration, the wholesale supplier of much
of the electricity sold by publicly-owned electric utilities in
the Pacific Northwest, natural gas for home heating also is more
competitive with electricity provided by public utility
districts.
During 1993, the Company provided gas for spaceheating
to about 85 percent of the new single family homes built within
the reach of the Company's system. The relatively low (estimated
at between 30 and 35 percent) residential (single family and
attached dwelling) saturation of natural gas in the Company's
service territory, together with the price advantage of natural
gas compared with electricity and its operating convenience over
fuel oil, provides the potential for continuing growth in the
residential conversion market. In 1993, 17,941 net (after
subtracting disconnected or terminated services) residential
customers were added, including 8,710 units of existing
residential housing which were reconnected to the system or were
converted from oil or electric appliances to natural gas. More
than half of these customers also use gas for water heating. In
addition, 1,501 net commercial customers were connected in 1993.
The net total of all new customers added in 1993 was 19,449.
This constituted a growth rate of 5.5 percent, more than double
the national average for local distribution companies as reported
by the American Gas Association.
Residential and commercial volumes increased
26.8 percent to 481.3 million therms in 1993, largely due to
increased heating requirements resulting from colder weather.
For the year 1993, temperatures in the Company's service
territory, as expressed in heating degree days, were 22 percent
colder than those of 1992, and were 3 percent colder than the
20-year average. Residential and commercial revenues in 1993
constituted approximately 80 percent of the Company's total
utility operating revenues which were derived from 46 percent of
the total therms delivered. (See Part II, Item 7.)
Natural gas sales and transportation deliveries to
industrial firm customers during 1993 totalled 99.8 million
therms which was 5.6 percent above the 1992 level of 94.5 million
therms. In 1993, 10 percent of total utility operating revenues
and 10 percent of total therms delivered were derived from
deliveries to industrial firm customers.
Total natural gas sales and transportation deliveries
to industrial interruptible customers decreased 22.0 percent in
1993, from 591.1 million therms in 1992, to 462.5 million therms
in 1993. These deliveries included the transportation of
29.3 million therms to two electric generating plants in 1993,
down from 165.2 million therms transported to the same plants in
1992. In 1993, 10 percent of total utility operating revenues
and 44 percent of total therms delivered were derived from sales
and transportation deliveries to industrial interruptible
customers.
-11-
The Company and most of its largest industrial
customers have entered into high-volume interruptible
transportation agreements to replace agreements that were
scheduled to expire. During 1993, the Company negotiated new
agreements with these customers on a case-by-case basis with
terms extending from two years to ten years. These agreements
are designed to provide rates that are competitive with costs for
alternative fuels, such as heavy oil, by reducing the per-therm
transportation rate. They also are designed to provide rates
competitive with "bypass" (direct connection to interstate
pipelines) by applying fixed charges that vary with each
customer's distance from NPC's facilities. These agreements
prohibit bypass during their terms.
In November 1993, the Company's second largest
industrial customer, the James River Corporation plant at Camas,
Washington, switched to NPC for the delivery of gas, thus
bypassing the Company's system. This customer accounted for
about 2.7 percent of total deliveries and 0.2 percent of total
revenues in 1992.
The Company does not expect a significant number of its
other large customers to bypass its system in the foreseeable
future since these customers typically are served under tariffs
which are designed to be competitive with capital and operating
costs of direct connections to NPC's system. (See Part II,
Item 7.)
In February 1994, the OPUC authorized the Company to
enter into agreements with industrial customers, without prior
regulatory approval, providing for the Company to release, at
negotiated rates, rights to portions of its firm pipeline
capacity and natural gas transportation services. In its order
authorizing the Company to enter into such agreements, the OPUC
concluded that rate flexibility was warranted because competition
for such services exists. The OPUC's order, which implements
legislation adopted by the Oregon legislature in 1993, allows the
Company to compete effectively in this market. Eighty percent of
all positive net revenues (gross revenues less the actual cost of
gas or pipeline capacity) generated from these agreements will be
credited to core customer gas costs.
Construction and Financing Programs
- -----------------------------------
See Part II, Item 7, Management's Discussion and
Analysis of Results of Operations and Financial Condition.
Environment
- -----------
The Company is subject to air, water and other
environmental regulation by state and federal authorities and has
complied in all material respects with applicable regulations.
Compliance with these regulations has had no material effect upon
-12-
the capital expenditures, earnings or the competitive position of
the Company.
The Company owns property in Linnton, Oregon and
previously owned property in Salem, Oregon that were former sites
of gas manufacturing plants. Both sites are under investigation
for potential remediation. (See Part II, Item 7, and Item 8,
Note 12.)
Employees
- ---------
At year-end 1993, the Company had 1,293 employees, of
which 932 were members of the Office and Professional Employees
International Union, Local No. 11. These union employees
approved a five-year Joint Accord covering wages, benefits and
working conditions effective April 1, 1992.
ITEM 2. PROPERTIES
The Company's natural gas distribution system consists
of 9,313 miles of mains, as well as service pipes, meters and
regulators, and gas regulating and metering stations. The mains
and feeder lines are located in municipal streets or alleys
pursuant to valid franchise or occupation ordinances, in county
roads or state highways pursuant to valid agreements or permits
granted pursuant to statute, or on lands of others pursuant to
valid easements obtained from the owners of such lands. The
Company also holds all necessary permits for the crossing of the
Willamette River and a number of small rivers by its mains.
The Company owns service facilities in Portland, as
well as various satellite service centers, garages, warehouses,
and other buildings necessary and useful in the conduct of its
business. It leases office space in Portland for its corporate
headquarters. (See below.) District offices are maintained on
owned or leased premises at convenient points in the distribution
system. The Company owns LNG facilities in Portland and near
Newport, Oregon, and also owns two natural gas reservoirs at
Mist, Oregon.
The Company considers all of its properties currently
used in its operations, both owned and leased, to be well
maintained, in good operating condition, and adequate for its
present and foreseeable future needs.
The Company's Mortgage and Deed of Trust constitutes a
first mortgage lien on substantially all of the real property
constituting its utility plant.
Oregon Natural holds interests in United States oil and
gas leases covering 52,606 net acres. These interests are
located in western Oregon, California, Sweetwater County,
Wyoming, and La Plata and Rio Blanco Counties in Colorado. Canor
owns interests in 19 gas properties and six oil properties in
-13-
southern Alberta and southern Saskatchewan covering mineral
rights on 124,052 net acres. Most Canadian gas production is
sold under long-term contracts to markets in both Canada and the
United States. Oregon Natural also holds an equity investment in
a Boeing 737-300 aircraft.
Energy Systems formerly owned a 25 megawatt
combined-cycle cogeneration system near Fresno, California
through its wholly-owned subsidiary, Agrico, which filed a
voluntary petition for reorganization under Chapter 11 of the
U.S. Bankruptcy Code in December 1991. The U.S. Bankruptcy Court
confirmed Agrico's reorganization plan in January 1994, allowing
the sale of Agrico's assets to Wellhead Electric Company, the
contract operator of the Agrico facility, to close in February
1994. (See Part I, Item 3, and Part II, Item 7, and Item 8,
Note 2 and Note 3.)
Pacific Square, the Company's subsidiary engaged in
real estate management, owns a one-half interest in One Pacific
Square, a 227,000 square foot office building in Northwest
Portland, through a partnership known as Pacific Square
Associates. The Company's corporate headquarters occupy about
63 percent of this building which is 100 percent leased. Pacific
Square Associates, in partnership with the Portland Metropolitan
Chamber of Commerce, owns a 31,000 square foot office building
adjacent to One Pacific Square. This building is fully leased.
In January 1994, Pacific Square entered into an agreement to sell
all of its partnership interests in the two buildings to Hillman
Properties Northwest (Hillman), Pacific Square's joint venture
partner. Under the agreement, Hillman will purchase Pacific
Square's interests in the Pacific Square Associates partnership
and assume all of the partnership's joint obligations. The
transaction is expected to close by the end of April 1994.
ITEM 3. LEGAL PROCEEDINGS
The Company previously reported that Agrico had entered
into a conditional settlement with PG&E and Wellhead with respect
to PG&E's claimed overpayments to Agrico for power purchased in
1990 and 1991. (See Part II, Item 8 of the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1992.)
In December 1993, this settlement was approved by the California
Public Utilities Commission. In January 1994, the U.S.
Bankruptcy Court confirmed Agrico's reorganization plan,
including the terms of the settlement with PG&E and Wellhead.
Following such confirmation, in February 1994, Agrico's assets
were sold to Wellhead in a transaction that will not have a
material effect on 1994 earnings. Under the terms of the sale to
Wellhead, Energy Systems received $860,000 in cash and
$2.4 million in notes in return for its secured debt interests in
Agrico. In March 1994, Energy Systems provided a fund of
$150,000 from the cash proceeds for pro rata distribution to
Agrico's unsecured creditors. (See Part II, Item 8, Note 3.)
-14-
The Company is party to certain legal actions in which
claimants seek material amounts. Although it is impossible to
predict the outcome with certainty, based upon the opinions of
legal counsel, management does not expect disposition of these
matters to have a material adverse effect on the Company's
financial position or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security
holders, through the solicitation of proxies or otherwise, during
the fourth quarter of the year ended December 31, 1993.
-15-
<TABLE>
ADDITIONAL ITEM. EXECUTIVE OFFICERS OF THE COMPANY
<CAPTION>
Age at
December 31, Positions held during
Name 1993 last five years
- ------------------ ---------- ---------------------------------------
<S> <C> <C>
Robert L. Ridgley 59 President and Chief Executive Officer
(1985- ); Director (1984- ); Chairman
of the Executive Committee of the Board
(1985- ).
Bruce R. DeBolt 46 Senior Vice President, Finance, and
Chief Financial Officer (1990- );
Senior Vice President, Finance and
Administration (1987-90); General
Counsel (1983-90).
Dwayne L. Foley 48 Senior Vice President, Operations and
Information Services (1992- );
Senior Vice President, Gas
Operations and Information Services
(1990-92); Vice President, Gas
Supply and Pipeline Relations
(1985-90).
Paul L. Hathaway 59 Senior Vice President, Districts and
Administrative Services (1992- );
Senior Vice President, Marketing,
Districts and Administrative
Services (1990-92); Senior Vice
President, Market Services and Human
Resources (1987-90).
Michael S. McCoy 50 Senior Vice President, Customer Services
Division (1992- );
Vice President, Operations (1990-
92); Vice President, Districts
(1984-90).
Bruce B. Samson 58 Senior Vice President, Public Affairs
(1990- ); General Counsel (1990- );
Senior Vice President, Regulatory
Affairs (1990); President-Public
Policy, U. S. WEST Communications
(1989); Vice President-Legal, U. S.
WEST Communications (1987-88).
Diana J. Johnston 49 Vice President, Human Resources
(1992- );
Manager, Customers Office
Department (1989-92);
Superintendent, Stores Section
(1987-89).
C. J. Rue 48 Secretary (1982- ); Assistant
Treasurer (1987- ).
D. James Wilson 54 Treasurer and Controller (1987- ).
Each executive officer serves successive annual terms; present
terms end May 26, 1994.
There are no family relationships among the Company's executive
officers.
</TABLE>
-16-
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
(a) The outstanding common stock of the Company is
traded in the over-the-counter market and its price and volume
data are reported by the National Association of Securities
Dealers Automated Quotation (NASDAQ) system. The Company's common
stock is included in the NASDAQ National Market System through
which the high, low and closing transaction prices, as well as
volume data, are reported.
The Company's common stock is included on the Federal
Reserve Board's list of over-the-counter securities determined to
be subject to margin requirements under the Board's regulations.
The quarterly high and low closing trades for the
Company's common stock, as quoted on the NASDAQ National Market
System and published by the Wall Street Journal, were as follows:
-------------------
1993 1992
------------------- ------------------
Quarter Ended High Low High Low
- ------------- ------- ------- ------- -------
March 31 $31-1/2 $28-1/2 $31 $27-1/2
June 30 34 30-3/4 30-1/2 26-1/2
September 30 38 34 33 29
December 31 36-3/4 32 33-3/4 28-1/4
The closing quotation for the common stock on
December 31, 1993 was $34-1/4. On December 31, 1992 the closing
quotation was $28-1/2.
The Company's convertible preference stock $2.375
Series is traded in the over-the-counter market. Because of the
small number of shares of this series outstanding trading is
infrequent. The quarterly high and low closing bid price
quotations reported by NASDAQ were as follows:
Bid Prices
------------------------------------------
1993 1992
----------------- -----------------
Quarter Ended High Low High Low
- ------------- ---- --- ---- ---
March 31 $51 $47-1/2 $48-1/4 $44-1/4
June 30 55-1/4 49-3/4 47-3/4 43
September 30 59 55-1/4 51 47-3/4
December 31 59 52-1/2 51 47-1/2
The closing quotations for the convertible preference
stock on December 31, 1993 and December 31, 1992 were $53-1/2
Bid, $57-1/2 Ask and $47-1/2 Bid, $51-1/2 Ask, respectively.
Outstanding shares are convertible into shares of common stock at
-17-
a rate of 1.6502 shares of common stock for each share of
convertible preference stock.
(b) As of January 31, 1994 there were 13,181 holders of
record of the Company's common stock and 138 holders of record of
its convertible preference stock.
(c) The Company has paid quarterly dividends on its
common stock in each year since the stock first was issued to the
public in 1951. Annual common dividend payments have increased
each year since 1956. Dividends per share paid during the past
two years were as follows:
Payment Date 1993 1992
------------ ---- -----
February 15 $0.43 $0.43
May 15 0.44 0.43
August 16 0.44 0.43
November 15 0.44 0.43
----- -----
Total per share $1.75 $1.72
===== =====
It is the intention of the Board of Directors to
continue to pay cash dividends on the Company's common stock on a
quarterly basis. However, future dividends will necessarily be
dependent upon the Company's earnings, its financial condition
and other factors.
The Company's Dividend Reinvestment and Stock Purchase
Plan permits registered owners of common stock to reinvest all or
a portion of their quarterly dividends in additional shares of
the Company's common stock at the current market price.
Shareholders also may invest cash on a monthly basis in
additional shares at the current market price. The Plan was
amended effective January 1, 1994 to allow shareholders to invest
up to $50,000 per calendar year. Previously shareholders were
allowed to invest up to $5,000 per quarter. During 1993, with
about 50 percent of the Company's shareholders participating,
dividend reinvestments and optional cash investments under the
Plan aggregated $5.2 million and resulted in the issuance of
154,900 shares of common stock. During the sixteen years the
Plan has been available the Company has issued and sold 2,676,800
shares of common stock which produced $49.1 million in additional
capital.
-18-
<TABLE>
Item 6. SELECTED FINANCIAL DATA
The following table sets forth selected financial data concerning the Company's
operations and financial condition.
<CAPTION>
Operating revenues and cost of
sales ($000): 1993 1992 1991 1990 1989
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Sales revenues:
Residential $168,217 $124,834 $142,056 $129,830 $121,938
Commercial 103,476 78,614 90,263 84,463 81,710
Industrial - firm 31,340 24,867 25,222 24,603 21,502
- interruptible 18,884 6,920 3,352 5,273 5,352
-------- -------- -------- -------- --------
Total gas revenues 321,917 235,235 260,893 244,169 230,502
Transportation 17,892 25,564 29,424 30,423 29,143
Unbilled revenues 5,153 2,603 (9,362) 9,268 322
Other 2,890 2,781 118 66 (905)
-------- ------- -------- -------- -------
Total utility operating
revenues 347,852 266,183 281,073 283,926 259,062
Cost of gas 138,833 101,733 107,398 110,605 103,306
-------- -------- -------- -------- --------
Net utility operating
revenues 209,019 164,450 173,675 173,321 155,756
Non-utility net operating
revenues 10,865 8,000 11,664 8,905 1,862
-------- -------- -------- ------- -------
Net operating revenues $219,884 $172,450 $185,339 $182,226 $157,618
======== ======== ======== ======== ========
Net income $ 37,647 $ 15,775 $ 14,377 $ 30,724 $ 28,420
Preferred and preference stock
dividend requirements 3,488 2,560 2,593 2,729 2,814
-------- -------- -------- -------- --------
Earnings applicable to
common stock $ 34,159 $ 13,215 $ 11,784 $ 27,995 $ 25,606
======== ======== ======== ======== ========
Average common shares
outstanding (000) 13,074 11,909 11,698 11,522 10,799
Primary earnings per share
of common stock $2.61 $1.11* $1.01* $2.43 $2.37
===== ===== ===== ===== =====
Dividends per share of
common stock $1.75 $1.72 $1.69 $1.65 $1.61
===== ===== ===== ===== =====
Total assets - at end of
period ($000) $849,036 $731,834 $731,494 $687,835 $611,386
======== ======== ======== ======== ========
Capitalization - at end of period ($000):
Common stock equity $258,565 $241,538 $216,280 $219,446 $206,424
Preference stock 26,633 26,766 1,869 2,025 2,320
Redeemable preferred stock 17,041 28,218 29,148 30,102 31,539
Long-term debt 272,931 253,766 252,995 215,230 220,503
-------- -------- -------- -------- --------
Total capitalization $575,170 $550,288 $500,292 $466,803 $460,786
======== ======== ======== ======== ========
Gas sales and transportation deliveries (000 therms):
Residential 267,818 206,131 233,079 208,940 201,144
Commercial 209,642 169,406 189,384 173,508 170,143
Industrial - firm 80,588 67,847 65,535 62,252 54,761
- interruptible 66,370 22,399 13,155 13,554 14,816
-------- -------- -------- -------- --------
Total gas sales 624,418 465,783 501,153 458,254 440,864
Transportation 415,367 595,397 591,171 532,703 556,713
Unbilled therms 3,844 4,163 (16,943) 18,774 3,950
--------- --------- --------- ---------- ---------
Total volumes delivered 1,043,629 1,065,343 1,075,381 1,009,731 1,001,527
========= ========= ========= ========= =========
Customers (average for period):
Residential 320,186 303,585 288,610 274,069 261,207
Commercial 41,906 40,481 38,954 37,286 35,539
Industrial - firm 388 374 366 350 333
- interruptible 122 75 57 91 142
Transportation 100 153 173 177 88
------- ------- ------- ------- -------
Total customers 362,702 344,668 328,160 311,973 297,309
======= ======= ======= ======= =======
Customer statistics:
Heat requirements**
Actual degree days 4,452 3,662 4,248 4,208 4,310
20-year average degree days 4,313 4,354 4,379 4,391 4,409
Average annual use per customer in therms:
Residential 844 685 812 769 777
Commercial 5,029 4,214 4,874 4,670 4,813
Gas purchased cost per therm
(cents) 23.11 23.76 21.91 22.67 25.25
<FN>
* Includes loss of $0.24 per share in 1992 and $1.23 per share in 1991 on
Agrico Cogeneration Corporation. (See Part II, Item 8, Note 3 to the
Consolidated Financial Statements.)
** A degree day is the measure of the coldness of the weather experienced,
based on the extent to which the average of the high and low temperatures
for a day falls below 65 degrees Fahrenheit.
19
</TABLE>
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION
Northwest Natural Gas Company's (Northwest Natural)
consolidated wholly-owned subsidiaries consist of Oregon Natural
Gas Development Corporation (Oregon Natural); NNG Energy Systems,
Inc. (Energy Systems); NNG Financial Corporation (Financial
Corporation); and Pacific Square Corporation (Pacific Square)
(see "Subsidiary Operations" below and Note 2 to the Consolidated
Financial Statements). Together, Northwest Natural and these
subsidiaries are referred to herein as the "Company."
The following is management's assessment of the
Company's financial condition including the principal factors
that impact results of operations. The discussion refers to the
consolidated activities of the Company for the three years ended
December 31, 1993.
Earnings and Dividends
- -----------------------
The Company earned $2.61 per share in 1993, compared to
$1.11 per share in 1992 and $1.01 per share in 1991. The
improved 1993 performance was due to cooler weather, customer
growth and improved subsidiary performance. The Company's
earnings for 1992 were depressed by the effects of record-setting
warm weather and a loss related to Agrico Cogeneration
Corporation (Agrico), a subsidiary of Energy Systems. The
Company's earnings for 1991 also were depressed by a charge which
related to Agrico.
The Company earned $2.72 per share from utility
operations in 1993, compared to $1.41 per share and $2.56 per
share in 1992 and 1991, respectively. Weather conditions in the
Company's service territory in 1993 were 22 percent colder than
in 1992 and 5 percent colder than in 1991.
The Company incurred a loss equivalent to $0.11 per
share from subsidiary operations in 1993, compared to losses
equivalent to $0.30 per share and $1.55 per share in 1992 and
1991, respectively (see "Subsidiary Operations" below).
1993 was the 38th consecutive year in which the
Company's dividends paid have increased. In 1993, dividends paid
on common stock were $1.75, up 1.7 percent from a year ago and
3.6 percent higher than 1991. The indicated annual dividend rate
is $1.76 per share.
Results of Operations
- ---------------------
Regulatory Matters
------------------
In April 1993, Northwest Natural filed with the Oregon
Public Utility Commission (OPUC) for rate increases averaging 6.2
-20-
percent in its residential, commercial, and industrial firm rate
schedules. The OPUC approved the Oregon increases effective
May 1, 1993. Effective June 1, 1993, the Washington Utilities
and Transportation Commission (WUTC) approved rate increases
averaging 6.7 percent for the Company's Washington customers.
The rate increases offset Northwest Natural's higher costs for
interstate pipeline capacity under rates approved by the Federal
Energy Regulatory Commission for Northwest Pipeline Corporation
(NPC), the primary pipeline supplying the Pacific Northwest.
In August 1993, Northwest Natural filed with the OPUC
for rate increases averaging 3 percent. The OPUC approved the
increases effective October 1, 1993. These rate increases were
due to the removal of temporary rate discounts in effect since
November 1990 to distribute gas cost savings and pipeline rate
refunds resulting from the transition to "open access"
transportation by NPC.
In November 1993, Northwest Natural filed with the OPUC
and the WUTC for rate increases which averaged 3.7 percent and
7.6 percent for Oregon and Washington operations, respectively.
The new rates pass through the impact of higher gas costs and
remove temporary rate discounts in place since December 1992 for
the amortization of prior gas cost savings. Both increases were
approved effective December 1, 1993.
None of the above rate increases has a material effect
on net income. The cumulative effect of the increases is not
expected to impair Northwest Natural's competitive position in
its key markets.
Comparison of Gas Operations
-----------------------------
The following table summarizes the composition of
utility gas volumes and revenues for the three years ended
December 31, 1993:
-21-
<TABLE>
<CAPTION>
Thousands 1993 1992 1991
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Gas Sales and Transportation Deliveries (Therms):
- -------------------------------------------------
Residential and commercial
sales 477,460 375,537 422,463
Unbilled volumes 3,844 4,163 (16,943)
--------- --------- ---------
Weather-sensitive volumes 481,304 46% 379,700 36% 405,520 38%
Industrial firm sales 80,588 8% 67,847 6% 65,535 6%
Industrial interruptible
sales 66,370 6% 22,399 2% 13,155 1%
--------- --------- ---------
Total gas sales 628,262 469,946 484,210
Transportation deliveries 415,367 40% 595,397 56% 591,171 55%
--------- ---- --------- ---- --------- ----
Total volumes sold and
delivered 1,043,629 100% 1,065,343 100% 1,075,381 100%
========= ==== ========= ==== ========= ====
Utility Operating Revenues
- --------------------------
Residential and commercial
revenues $271,693 $203,448 $232,319
Unbilled revenues 5,153 2,603 (9,362)
-------- -------- --------
Weather-sensitive revenues 276,846 80% 206,051 77% 222,957 79%
Industrial firm sales revenues 31,340 9% 24,867 9% 25,222 9%
Industrial interruptible sales
revenues 18,884 5% 6,920 3% 3,352 1%
-------- -------- -------
Total gas sales revenues 327,070 237,838 251,531
Transportation revenues 17,892 5% 25,564 10% 29,424 11%
Other revenues 2,890 1% 2,781 1% 118 -
-------- ---- -------- ---- -------- ----
Total utility operating
revenues $347,852 100% $266,183 100% $281,073 100%
======== ==== ======== ==== ======== ====
Cost of gas $138,833 $101,733 $107,398
======== ======== ========
Total number of customers
(end of period) 372,400 353,000 336,400
</TABLE>
Residential and Commercial
--------------------------
Typically, 75 percent or more of the Company's annual
utility operating revenues are derived from gas sales to weather-
sensitive residential and commercial customers. Accordingly,
dramatic shifts in temperatures from one period to the next can
significantly impact volumes of gas sold to these customers.
Normal weather conditions are based upon a 20 year average
measured by degree days. Weather conditions were three percent
cooler than normal in 1993, 16 percent warmer than normal in
1992, and three percent warmer than normal in 1991. 1993 was 22
percent colder than 1992. Cooler weather, the addition of 19,400
customers, and the rate increases approved by the OPUC and WUTC
combined to produce a 34 percent increase in revenues from
residential and commercial customers in 1993 compared to 1992 on
therm deliveries to these customers which were 27 percent higher
than in 1992.
-22-
The Company's residential and commercial customer
growth continued at a rapid pace. In the last three years,
almost 52,500 of these customers have been added to the system,
representing an average growth rate of 5.2 percent.
Industrial, Transportation and Other
------------------------------------
Total volumes delivered to industrial firm, industrial
interruptible and transportation customers were 123 million
therms lower in 1993 than in 1992, while corresponding revenues
from such deliveries were $10.8 million higher. The combined net
operating revenue (margin) from industrial firm and interruptible
sales and transportation customers increased from $42.7 million
in 1992 to $44.4 million in 1993. Transportation volumes
declined due to a 136 million therm reduction in deliveries to
an electric generation plant which was served under a low-margin
transportation tariff. This plant is now served primarily by a
new natural gas pipeline which is a joint venture between Oregon
Natural and Portland General Electric Company. Transportation
revenues from this customer were $0.2 million and $2.5 million in
1993 and 1992, respectively. However, due to the effect of a
regulatory balancing mechanism in Oregon, under which the Company
credits 80 percent of the transportation revenues received for
deliveries to this plant to a deferred account for future refunds
to other customers, the reduced volume of deliveries in 1993
resulted in a decrease in margin revenues of only $0.5 million.
Since 1992, approximately half of Northwest Natural's
transportation customers have switched to sales service. These
customers, which have the option of purchasing natural gas from
Northwest Natural or of purchasing gas directly from suppliers
and transporting it on the systems of Northwest Natural and its
pipeline suppliers for a fee, select the option which from time
to time provides the lowest cost. Management believes that the
migration from transportation to sales tariffs by these customers
was primarily due to the fact that, in 1993, Northwest Natural's
industrial sales tariffs have been lower than the cost to these
customers of purchasing and shipping their own gas. The increase
in revenue attributable to this migration was offset by an
increase in the cost of gas, since transportation rate schedules
are designed to provide the same margin as industrial sales
tariffs and thus had little effect on the Company's income from
operations.
Industrial sales and transportation deliveries remained
relatively stable during 1992 and 1991, at 686 million therms in
1992 compared to 670 million therms in 1991. Related revenues
were $57 million in 1992, essentially unchanged from 1991.
Transportation revenues decreased $3.9 million between these two
years, although related volumes remained relatively stable,
primarily due to rate reductions in certain transportation
tariffs.
-23-
Unbilled revenues are a recognition of revenues for all
gas consumption through the end of the month for all customers,
regardless of the meter reading date, in order to better match
revenues with associated purchased gas costs.
Other revenues are primarily related to regulatory
balancing accounts (see Note 1 to the Consolidated Financial
Statements).
The Company and most of its large industrial customers
have entered into high-volume interruptible transportation
agreements which are designed to provide rates competitive with
"bypass" (direct connection to interstate pipelines) by applying
fixed charges that vary with each customer's distance from
pipeline facilities. These agreements prohibit bypass during
their terms. However, management believes that, during the
period 1994 to 1998 it might lose from four to six large
industrial customers through bypass. In total, these customers
represented approximately 10 percent of 1993 volumes, but less
than 3 percent of 1993 margin revenues. Given the far greater
effect on margin revenues of temperature fluctuations, economic
conditions and growth in residential and commercial customers,
management believes the impact of bypass will not materially
affect the Company's future results of operations or its
financial position.
Cost of Gas
-----------
The cost of gas sold during 1993 was 36 percent greater
than in 1992. The primary contributing factors were a 34 percent
increase in total volumes sold and a 2 percent increase in the
cost of gas per therm which includes purchased gas cost
adjustments and net storage gas activity. The cost of gas sold
in 1992 was 5 percent lower than in 1991 primarily due to a 3
percent decrease in total volumes sold and a lower average cost
of gas per therm.
Subsidiary Operations
---------------------
Consolidated subsidiary results for the three years
ended December 31, 1993, 1992, and 1991, were losses equivalent
to $0.11 per share, $0.30 per share and $1.55 per share,
respectively. The subsidiaries' results for 1993 reflect a
fourth quarter write-down in the value of unproven gas and oil
reserves equivalent to $0.11 per share and increased federal
income tax expense equivalent to $0.05 per share (see
"Depreciation, Depletion and Amortization" and "Income Taxes"
below).
Results of operations for the individual subsidiaries
for 1993, including the adjustments described above, were a net
loss of $0.4 million for Energy Systems; a net loss of $1.4
million for Oregon Natural; a net loss of $0.4 million for
-24-
Financial Corporation; and net income of $0.7 million for Pacific
Square.
The 1992 and 1991 losses resulted primarily from
charges equivalent to $0.24 per share and $1.23 per share,
respectively, related to Agrico. Future charges, if any, related
to Agrico, are expected to be immaterial (see Note 3 to the
Consolidated Financial Statements).
The following discussion summarizes operating expenses,
interest charges and income taxes.
Operating Expenses
------------------
Operations and Maintenance
--------------------------
Operations and maintenance expenses were $6.5 million,
or 10 percent, higher in 1993 compared to 1992. Utility expenses
constituted $6.2 million of this increase including a $3.1
million, or 10 percent, increase in payroll expenses; a $1.3
million increase in employee benefit costs, including an increase
of $0.7 million resulting from the adoption of Statement of
Financial Accounting Standards (SFAS) No. 106, "Employers'
Accounting for Postretirement Benefits Other than Pensions;" a
$1.2 million increase in the allowance for uncollectible accounts
primarily due to higher residential and commercial gas sales; and
a $0.5 million accrual for estimated environmental investigation
costs (see Note 12 to the Consolidated Financial Statements).
Utility operations and maintenance expenses were $3.4
million, or 6 percent, higher in 1992 than in 1991. Subsidiary
operations and maintenance expenses were $4.7 million, or 45
percent, lower. Higher utility operating and maintenance
expenses resulted primarily from a $1.5 million, or 5 percent,
increase in payroll due to wage and salary increases, a $0.5
million increase in employee benefit costs, and increases in
claims for injuries and damages and weatherization costs of $0.5
million and $0.4 million, respectively. Subsidiary expenses were
lower in 1992 than in 1991 due to a five-month suspension of
Agrico operations during 1992.
Taxes Other Than Income
-----------------------
Taxes other than income increased $4.7 million, or
23 percent, in 1993 compared to 1992 due to a $2.5 million
increase in utility property tax accruals and a $1.8 million
increase in franchise taxes resulting from higher utility
operating revenues. Approximately $0.9 million of the increased
property tax accrual is non-recurring and relates to a dispute
with the OPUC over the amount of prior-year savings on property
taxes which must be refunded to Oregon customers. The balance of
-25-
this increase resulted from property taxes on plant additions
made primarily to serve new customers.
Taxes other than income decreased $0.2 million, or 1
percent, in 1992 compared to 1991. This resulted primarily from
a reduction of $0.6 million in utility franchise taxes which
occurred due to decreased utility operating revenues. This
decrease was offset by a $1.0 million increase in property taxes,
again due to new plant additions made primarily to serve new
customers.
Depreciation, Depletion and Amortization
----------------------------------------
Utility depreciation expense increased $1.9 million, or
7 percent, in 1993 and $1.0 million, or 3.5 percent, in 1992,
primarily due to additional utility plant in service. $0.4
million of the increased 1993 expense related to the removal of
all of the Company's underground gasoline tanks.
Subsidiary depreciation expense increased $4.7 million
in 1993 and decreased $1.6 million in 1992. The 1993 increase
resulted primarily from charges totalling $3.5 million, from the
write-downs of Oregon Natural's unproven gas and oil properties
(see Note 2 to the Consolidated Financial Statements). $1.5
million of the 1992 decrease in depreciation expense resulted
from the suspension of depreciation on Agrico's assets upon its
bankruptcy.
Interest Charges
----------------
Utility interest expense for 1993 decreased $1.3
million compared to 1992. The decrease was a result of debt
refinancings which reduced interest expense by $0.6 million;
$11.5 million lower average outstanding commercial paper
balances; and a decrease in average interest rates for utility
commercial paper from 3.9 percent in 1992 to 3.3 percent in 1993.
Subsidiary interest expense for 1993 decreased $0.3 million
compared to 1992 due to a decrease in interest expense under
Financial Corporation's commercial paper program. Financial
Corporation's average outstanding commercial paper balances
decreased $4.4 million from 1992 to 1993. In addition, Financial
Corporation's average interest rates for commercial paper
decreased from 4.1 percent in 1992 to 3.3 percent in 1993.
Utility interest expense for 1992 was $3.0 million
higher than for 1991. Although total utility debt outstanding
was $4.9 million lower at year end 1992 than at year end 1991,
the average monthly debt balances were higher due to the
increased use of commercial paper in 1992. Commercial paper
borrowing increased as warmer-than-average weather reduced
revenues. The effect of the increased borrowings was partially
offset by a decrease in average interest rates for utility
commercial paper from 6.3 percent in 1991 to 3.9 percent in 1992,
-26-
and a decrease in average interest expense of utility long-term
debt from 9.7 percent in 1991 to 9.3 percent in 1992.
The 1992 increase in utility interest expense was
offset in part by a $2.8 million decrease in subsidiary interest
expense which resulted primarily from the reduction of Financial
Corporation's outstanding commercial paper balances and a
decrease in Financial Corporation's average interest rates for
commercial paper from 6.3 percent in 1991 to 4.1 percent in 1992.
Income Taxes
------------
The effective corporate income tax rates for the three
years ended December 31, 1993, 1992, and 1991 were 37 percent, 31
percent, and 14 percent, respectively, compared to the Company's
statutory tax rates for these periods of 39 percent, 38 percent,
and 38 percent, respectively. The effective income tax rate for
1991 was lower than the Company's statutory tax rate primarily as
a result of non-recurring adjustments that reduced amounts
provided for income taxes in prior years by $4.5 million.
The adoption of SFAS No. 109, "Accounting for Income
Taxes," effective January 1, 1993, did not materially affect
results of operations. However, for 1993, the federal income tax
rate for corporations increased from 34 to 35 percent. The
cumulative effect of the tax rate increase was recorded in the
third quarter of 1993 and resulted in additional income tax
expense of $0.6 million, an increase in deferred tax liabilities
of $3.0 million, and an increase in regulatory assets of
$2.6 million.
Financial Condition
- -------------------
The weather-sensitive nature of gas usage by Northwest
Natural's residential and commercial customers influences the
Company's financial condition, including its financing
requirements, from one quarter to the next. Liquidity
requirements are satisfied primarily through the use of
commercial paper, which is supported by commercial bank lines of
credit (see "Lines of Credit" and "Commercial Paper" below).
Capital Structure
-----------------
The Company's long-term goal is to maintain a capital
structure comprised of 40 to 45 percent common stock equity, 5 to
10 percent preferred and preference stock and 45 to 50 percent
short-term and long-term debt. This target structure is managed
by issuing new debt or equity in response to market conditions
and the status of accumulated earnings. The Company also uses
these sources to meet long-term debt and preferred stock
redemption requirements (see Notes 4 and 6 to the Consolidated
Financial Statements).
-27-
Cash Flows
----------
Operating Activities
--------------------
Cash provided from operating activities was higher in
1993 and 1991 as compared to 1992, primarily due to higher
revenues from gas sales resulting from colder weather. Also, a
portion of the increased cash provided from operating activities
in 1991 was due to the effects of unusually cold weather in
December 1990, which produced substantial increases in the year-
end 1990 balances for accounts receivable, unbilled revenue and
accounts payable. These balances, which were collected in 1991,
provided $26 million of additional funds during 1991.
The Company has lease and purchase commitments related
to its operating activities which will continue to be financed
with cash flows from operations (see Note 12 to the Consolidated
Financial Statements).
Investing Activities
--------------------
Cash requirements for utility construction, primarily
related to system improvements and customer growth, totalled
$70.4 million, up $9.7 million, or 16 percent, from 1992 and up
$12.0 million, or 21 percent, from 1991. The 1993 increase
includes $6.3 million in expenditures related to a project
initiated in 1993 to replace the existing customer information
system. It is estimated that this project will involve a total
investment of about $25 million between 1993 and 1996.
A large part of the Company's utility capital
expenditures is required for utility construction resulting from
customer growth and system improvements. While the Company
finances most of these requirements from cash from operations, it
also uses short-term borrowings and periodically refinances these
borrowings through the sale of long-term debt or equity
securities.
Utility construction expenditures totalling $75 million
are projected for 1994. Over the five year period 1994 through
1998, total utility capital expenditures are estimated at between
$325 and $350 million. It is anticipated that approximately
50 percent of the funds required for these expenditures during
this period will be internally generated, and that the remainder
will be funded through short-term borrowings which will be
refinanced periodically through the sale of long-term debt and
equity securities.
Capital expenditures for the Company's operating
subsidiaries in 1994 are expected to be limited to funds
internally generated by the subsidiaries. In 1993, Oregon
Natural sold and exchanged gas producing properties resulting in
net cash inflows of $2.3 million.
-28-
Investments shown on the Consolidated Balance Sheets
under "Investments and Other" for 1992 included a $5.5 million
restricted cash deposit with a commercial bank which related to
Pacific Square. This deposit was reclassified as a current asset
in 1993 due to the pending sale of Pacific Square's primary real
estate investments to which it relates. The sale of Pacific
Square's investments, which is expected to close in 1994, would
not be at a loss to the Company.
Financing Activities
--------------------
During 1993 and 1992, the Company sold $100 million and
$45 million, respectively, of its Medium-Term Notes. Of the
proceeds from 1993 sales, $82.6 million was used to redeem
higher-cost long-term debt, and the remainder was used to meet
capital requirements for the Company's ongoing construction
program and to reduce short-term borrowing. Of the proceeds from
the 1992 sales, $30 million was used to redeem higher-cost long-
term debt and $15 million was used to reduce short-term
borrowing. As a result of these transactions, the average
interest expense on long-term debt declined from 9.7 percent at
December 31, 1991 to 8.3 percent at December 31, 1993.
Additionally, in order to meet the Company's capital
requirements for its ongoing construction program, to refund
higher-cost Preferred Stock, and to increase its equity ratios,
the Company sold $25 million of Preference Stock and $28.5
million, or 990,000 shares, of Common Stock during the fourth
quarter of 1992. In January 1993, approximately $9 million of
the proceeds from the sale of Preference Stock was used to redeem
all of the outstanding shares of the Company's $8.00 and $2.42
Series of Preferred Stock.
Also in 1993, the Company redeemed all of the
outstanding shares of its $6.875 Series of Preferred Stock (see
Consolidated Statements of Capitalization).
The Company reached an agreement with the sole
shareholder of the $8.75 Series of Preferred Stock, with a total
stated value of $15 million, to issue an equivalent amount of the
$7.125 Series of Preferred Stock in exchange for cancellation of
the $8.75 Series, effective as of December 1, 1993.
Lines of Credit
---------------
Northwest Natural has available through September 30,
1994, lines of credit totalling $80 million consisting of a
primary fixed amount of $40 million plus an excess amount of up
to $40 million available as needed, at Northwest Natural's
option, on a monthly basis. Under the terms of these bank lines,
Northwest Natural pays a commitment fee but is not required to
maintain compensating bank balances. The interest rates on
borrowings under these lines of credit are based on current
-29-
market rates as negotiated. There were no outstanding balances
as of December 31, 1993.
Financial Corporation has available through
September 30, 1994, lines of credit with two commercial banks
totalling $20 million, including $10 million committed and $10
million uncommitted. Financial Corporation pays a fee on the
committed line but not on the uncommitted line; it is not required
to maintain compensating bank balances on either line. The
interest rates on borrowings under these lines of credit also are
based on current market rates as negotiated. Financial
Corporation's lines are supported by the unconditional guaranty
of Northwest Natural. There were no outstanding balances as of
December 31, 1993 under the Financial Corporation bank lines.
Commercial Paper
----------------
The Company's primary source of short-term funds is
commercial paper. Both Northwest Natural and Financial
Corporation issue commercial paper which is supported by the
committed bank lines discussed above. Financial Corporation's
commercial paper is unconditionally guarantied by Northwest
Natural (see Note 7 to the Consolidated Financial Statements).
Agrico Term Loan
----------------
At December 31, 1991, $14.0 million was outstanding
under a term loan agreement between Agrico and United States
National Bank of Oregon (U.S. Bank). Under a settlement
agreement between Energy Systems, U.S. Bank, and Northwest
Natural, U.S. Bank assigned the term loan to Energy Systems in
exchange for payments by Energy Systems and Northwest Natural
totalling $7.2 million. Such payments were made, and the debt
was retired during 1992 (see Note 3 to the Consolidated Financial
Statements).
Ratio of Earnings to Fixed Charges
----------------------------------
For the years ended December 31, 1993, 1992, and 1991,
the Company's ratio of earnings to fixed charges, computed by the
Securities and Exchange Commission method, was 3.22, 1.81, and
1.59, respectively. Earnings consist of net income to which has
been added taxes on income and fixed charges. Fixed charges
consist of interest on all indebtedness, amortization of debt
expense and discount or premium, and the estimated interest
portion of rentals charged to income.
-30-
Environmental Matters
- ---------------------
In June 1992, the City of Salem, Oregon, requested the
Company's participation in its review of an environmental
assessment of riverfront property in Salem that is the proposed
site for a park and other public developments. Within the
property is a block previously owned by the Company which was the
former site of a manufactured gas plant. The Company's corporate
predecessor operated the plant for less than four months in 1929
before closing it upon completion of a pipeline providing gas
transmission from Portland to Salem. The City has determined
that there is environmental contamination on the site, and that a
remediation process involving the Company and at least two other
prior owners of the block will be required. To date the Company
has not obtained sufficient information to determine the extent
of its liability for any such remediation.
The Company owns property in Linnton, Oregon, that is
the former site of a gas manufacturing plant that was closed in
1956. Although limited testing for environmental contamination
has been undertaken by other parties on portions of the site, no
comprehensive studies have been performed. The Company submitted
a work plan for the site to the Oregon Department of
Environmental Quality (ODEQ) in 1987, but those efforts were
suspended at ODEQ's request while the Company and other parties
participated in a joint hydrogeologic study of an area adjacent
to the site. In September 1993, pursuant to ODEQ procedures, the
Company submitted a notice of intent to participate in the ODEQ's
Voluntary Cleanup Program. In January 1994, this site was
formally placed in the program. It is anticipated that the site
investigation will commence during 1994.
In September 1993, the Company recorded an expense of
$500,000 for the estimated costs of consultants' fees, ODEQ
oversight cost reimbursements, and legal fees in connection with
the voluntary investigation at the Linnton site. To date, the
Company has not obtained sufficient information to determine
whether any remediation will be required at this site or, if so,
the extent of its liability for any such remediation. The
Company expects that its costs of investigation and any
remediation for which it may be liable should be recoverable, in
large part, from insurance or through future rates.
-31-
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
TABLE OF CONTENTS
-----------------
Page
----
1. Management's Responsibility for Financial Statements . . . 33
2. Independent Auditors' Report . . . . . . . . . . . . . . . . . 34
3. Consolidated Financial Statements:
Consolidated Statements of Income for the Years Ended
December 31, 1993, 1992 and 1991 . . . . . . . . . . . . . . 35
Consolidated Statements of Earnings Invested in the Business
for the Years Ended December 31, 1993, 1992 and 1991 . . . . 36
Consolidated Balance Sheets, December 31, 1993 and 1992. . . . 37
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1993, 1992 and 1991 . . . . . . . . . . . . . . 39
Consolidated Statements of Capitalization, December 31,
1993 and 1992. . . . . . . . . . . . . . . . . . . . . . . . 40
Notes to Consolidated Financial Statements . . . . . . . . . . 41
4. Quarterly Financial Information (unaudited). . . . . . . . . . 61
5. Supplemental Schedules for the Years Ended December 31, 1993,
1992 and 1991
Schedule V - Property, Plant and Equipment . . . . . . . . . . 62
Schedule VI - Accumulated Depreciation, Depletion and
Amortization of Property, Plant and Equipment. . . . . . . . 65
Schedule IX - Short-term Borrowings. . . . . . . . . . . . . . 66
Schedule X - Supplementary Income Statement Information. . . . 67
Supplemental Schedules Omitted
All other schedules are omitted because of the absence of the conditions
under which they are required or because the required information is
included elsewhere in the financial statements.
-32-
MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL STATEMENTS
----------------------------------------------------
The financial statements in this report were prepared by
management, which is responsible for their objectivity and integrity.
The statements have been prepared in conformity with generally accepted
accounting principles and, where appropriate, reflect informed estimates
based on judgments of management. The responsibility of the Company's
independent auditors is to render an independent report on the financial
statements.
The Company's system of internal accounting controls is
designed to provide reasonable assurance that assets are safeguarded and
transactions are executed in accordance with management's
authorizations, that transactions are recorded to permit the preparation
of financial statements in conformity with orders of regulatory
authorities and generally accepted accounting principles and that
accountability for assets is maintained. The Company's system of
internal controls has provided such reasonable assurances during the
periods reported herein. The system includes written policies,
procedures and guidelines, an organization structure that segregates
duties and an established program for monitoring the system by internal
auditors. In addition, Northwest Natural Gas Company has prepared and
annually distributes to its management employees a Code of Ethics
covering its policies for conducting business affairs in a lawful and
ethical manner. Ongoing review programs are carried out to ensure
compliance with these policies.
The Board of Directors, through its Audit Committee, oversees
management's financial reporting responsibilities. The committee meets
regularly with management, the internal auditors, and representatives of
Deloitte & Touche, the Company's independent auditors. Both internal
and external auditors have free and independent access to the committee
and the Board of Directors. No member of the committee is an employee
of the Company. The committee reports the results of its activities to
the full Board of Directors. Annually, the Audit Committee recommends
the nomination of independent auditors to the Board of Directors for
shareholder approval.
/s/ Robert L. Ridgley
-------------------------------
Robert L. Ridgley
President and
Chief Executive Officer
/s/ Bruce R. DeBolt
-------------------------------
Bruce R. DeBolt
Senior Vice President, Finance,
and Chief Financial Officer
-33-
DELOITTE & TOUCHE
- -----------------------------------------------------------------
3900 US Bancorp Tower Telephone: (503) 222-1341
111 SW Fifth Avenue Facsimile: (503) 224-2172
Portland, Oregon 97204-3698
INDEPENDENT AUDITORS' REPORT
----------------------------
To the Board of Directors and Shareholders
Northwest Natural Gas Company
Portland, Oregon
We have audited the accompanying consolidated financial statements of
Northwest Natural Gas Company and subsidiaries, listed in the
accompanying table of contents to financial statements and financial
statement schedules at Item 8. These financial statements and financial
statement schedules are the responsibility of the Company's management.
Our responsibility is to express an opinion on the financial statements
and financial statement schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly,
in all material respects, the consolidated financial position of
Northwest Natural Gas Company and subsidiaries at December 31, 1993 and
1992, and the results of their operations and their cash flows for each
of the three years ended December 31, 1993 in conformity with generally
accepted accounting principles. Also, in our opinion, such financial
statement schedules, when considered in relation to the basic
consolidated financial statements taken as a whole, present fairly in
all material respects the information set forth therein.
As discussed in Notes 8 and 10 to the consolidated financial statements,
the Company changed its method of accounting for income taxes and
postretirement benefits in the year ended December 31, 1993.
/s/ Deloitte & Touche
DELOITTE & TOUCHE
February 25, 1994
-34-
NORTHWEST NATURAL GAS COMPANY
CONSOLIDATED STATEMENTS OF INCOME
(Thousands, Except Per Share Amounts)
Year Ended December 31 1993 1992 1991
- ------------------------------------------------------------------------
NET OPERATING REVENUES:
Revenues:
Utility $347,852 $266,183 $281,073
Other 10,865 8,183 14,865
-------- -------- --------
Total operating revenues 358,717 274,366 295,938
-------- ------- --------
Cost of sales:
Utility 138,833 101,733 107,398
Other - 183 3,201
-------- -------- -------
Total cost of sales 138,833 101,916 110,599
-------- -------- -------
Net operating revenues 219,884 172,450 185,339
-------- -------- -------
OPERATING EXPENSES:
Operations and maintenance 70,723 64,249 65,529
Taxes other than income taxes 25,561 20,865 21,104
Depreciation, depletion and
amortization 39,683 33,035 33,623
Loss on cogeneration facility - 4,575 23,200
-------- ------- --------
Total operating expenses 135,967 122,724 143,456
-------- ------- --------
INCOME FROM OPERATIONS 83,917 49,726 41,883
-------- ------- --------
OTHER INCOME (EXPENSE) 933 (267) 1,406
-------- ------- --------
INTEREST CHARGES:
Interest on long-term debt 22,578 23,001 21,977
Other interest 1,906 3,223 4,266
Amortization of debt discount
and expense 775 511 348
-------- ------- -------
Total interest charges 25,259 26,735 26,591
Allowance for borrowed funds
used during construction and
capitalized interest (152) (2) -
-------- -------- --------
Total interest charges-net 25,107 26,733 26,591
-------- -------- --------
INCOME BEFORE INCOME TAXES 59,743 22,726 16,698
INCOME TAXES 22,096 6,951 2,321
--------- -------- --------
NET INCOME 37,647 15,775 14,377
Preferred and preference stock
dividend requirements 3,488 2,560 2,593
-------- ------- -------
EARNINGS APPLICABLE TO COMMON STOCK $ 34,159 $ 13,215 $ 11,784
======== ======== ========
AVERAGE COMMON SHARES OUTSTANDING 13,074 11,909 11,698
EARNINGS PER SHARE OF COMMON STOCK $2.61 $1.11 $1.01
===== ===== =====
DIVIDENDS PER SHARE OF COMMON STOCK $1.75 $1.72 $1.69
===== ===== =====
- -------------------------------------------------------------------------
See Accompanying Notes to Consolidated Financial Statements.
-35-
NORTHWEST NATURAL GAS COMPANY
CONSOLIDATED STATEMENTS OF EARNINGS INVESTED IN THE BUSINESS
(Thousands of Dollars)
1993 1992 1991
- -------------------------------------------------------------------------
BALANCE AT BEGINNING OF YEAR $77,690 $86,361 $94,325
Net Income 37,647 15,775 14,377
Cash dividends:
Preferred and
preference stock (3,401) (2,525) (2,608)
Common stock (22,853) (20,406) (19,728)
Capital stock expense and other (586) (1,515) (5)
------- ------- -------
BALANCE AT END OF YEAR $88,497 $77,690 $86,361
======= ======= =======
- -------------------------------------------------------------------------
See Accompanying Notes to Consolidated Financial Statements.
-36-
NORTHWEST NATURAL GAS COMPANY
CONSOLIDATED BALANCE SHEETS
(Thousands)
December 31 1993 1992
- ------------------------------------------------------------------------
ASSETS:
PLANT AND PROPERTY IN SERVICE:
Utility plant in service $840,030 $779,274
Less accumulated depreciation 255,282 233,385
-------- --------
Utility plant - net 584,748 545,889
Non-utility property 42,764 44,629
Less accumulated depreciation and depletion 20,646 15,480
-------- --------
Non-utility property - net 22,118 29,149
-------- --------
Total plant and property in service 606,866 575,038
-------- --------
INVESTMENTS AND OTHER:
Investments 32,818 32,818
Restricted cash and long-term notes
receivable 1,756 7,518
------- -------
Total investments and other 34,574 40,336
------- -------
CURRENT ASSETS:
Cash and cash equivalents 4,198 7,537
Accounts receivable - customers 45,340 33,956
Allowance for uncollectible accounts (1,368) (948)
Accrued unbilled revenue 25,890 20,738
Inventories of gas, materials and supplies 16,838 15,797
Prepayments and other current assets 16,412 8,220
-------- --------
Total current assets 107,310 85,300
-------- --------
OTHER REGULATORY TAX ASSETS 62,130 -
DEFERRED DEBITS AND OTHER 38,156 31,160
-------- --------
TOTAL ASSETS $849,036 $731,834
======== ========
- -----------------------------------------------------------------------
See Accompanying Notes to Consolidated Financial Statements.
-37-
NORTHWEST NATURAL GAS COMPANY
CONSOLIDATED BALANCE SHEETS
(Thousands)
December 31 1993 1992
- -----------------------------------------------------------------------
CAPITALIZATION AND LIABILITIES:
CAPITALIZATION (See Consolidated Statements
of Capitalization):
Common stock equity $ 41,728 $ 41,080
Premium on common stock 128,340 122,768
Earnings invested in the business 88,497 77,690
-------- --------
Total common stock equity 258,565 241,538
Preference stock 26,633 26,766
Redeemable preferred stock 17,041 28,218
Long-term debt 272,931 253,766
-------- --------
Total capitalization 575,170 550,288
-------- --------
CURRENT LIABILITIES:
Notes payable 72,548 47,109
Accounts payable 44,318 40,282
Long-term debt due within one year - 2,138
Taxes accrued 6,757 4,790
Interest accrued 4,438 6,792
Other current and accrued liabilities 10,180 9,387
-------- --------
Total current liabilities 138,241 110,498
-------- --------
DEFERRED INVESTMENT TAX CREDITS 14,567 15,603
DEFERRED INCOME TAXES 104,300 34,929
REGULATORY BALANCING ACCOUNTS AND OTHER 16,758 20,516
COMMITMENTS AND CONTINGENT LIABILITIES (Note 12) - -
-------- --------
TOTAL CAPITALIZATION AND LIABILITIES $849,036 $731,834
======== ========
- -------------------------------------------------------------------------
See Accompanying Notes to Consolidated Financial Statements.
-38-
<TABLE>
NORTHWEST NATURAL GAS COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Thousands)
<CAPTION>
Year Ended December 31 1993 1992 1991
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income $ 37,647 $ 15,775 $ 14,377
Adjustments to reconcile net income to net
cash provided by (used for) operations:
Depreciation, depletion and amortization 39,683 33,035 33,623
Loss on cogeneration facility - 4,575 23,200
Deferred income taxes and investment
tax credits 6,205 (1,115) (5,784)
Equity in losses of unconsolidated
affiliates 302 1,506 263
Allowance for funds used during
construction and capitalized interest (152) (2) -
Regulatory balancing accounts and
other - net (10,754) (10,776) 1,672
Changes in operating assets and liabilities:
Accounts receivable (10,964) (5,821) 2,964
Accrued unbilled revenue (5,152) (2,603) 9,362
Inventories of gas, materials and
supplies (1,041) 1,052 (419)
Accounts payable 4,036 (3,507) 5,715
Accrued interest and taxes (387) 881 (1,766)
Other current assets and liabilities (1,899) 2,636 2,501
-------- -------- --------
CASH PROVIDED BY OPERATING ACTIVITIES 57,524 35,636 85,708
-------- -------- --------
INVESTING ACTIVITIES:
Acquisition and construction of
utility plant assets (70,404) (60,709) (58,362)
Investment in non-utility plant (955) (11,907) (4,936)
Investments and other (40) (8,697) (3,122)
--------- -------- --------
CASH USED IN INVESTING ACTIVITIES (71,399) (81,313) (66,420)
--------- -------- --------
FINANCING ACTIVITIES:
Common stock issued 5,720 33,826 4,642
Preference stock issued - 25,000 -
Preferred stock retired (11,177) (930) (954)
Long-term debt:
Issued 100,000 45,000 40,000
Retired (82,606) (30,191) (11,178)
Change in short-term debt 25,439 (41,510) 14,211
Cash dividend payments:
Preferred and preference stock (3,401) (2,525) (2,608)
Common stock (22,853) (20,406) (19,728)
Capital stock expense and other (586) (1,515) (5)
-------- -------- ---------
CASH PROVIDED BY FINANCING ACTIVITIES 10,536 6,749 24,380
-------- -------- ---------
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (3,339) (38,928) 43,668
CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR 7,537 46,465 2,797
-------- -------- --------
CASH AND CASH EQUIVALENTS - END OF YEAR $ 4,198 $ 7,537 $ 46,465
======== ======== ========
SUPPLEMENTAL DISCLOSURE OF
CASH FLOW INFORMATION:
Cash paid during the year for:
Interest $ 26,838 $ 26,502 $ 26,070
Income taxes $ 11,103 $ 10,141 $ 13,238
- ------------------------------------------------------------------------------
See Accompanying Notes to Consolidated Financial Statements.
</TABLE>
-39-
<TABLE>
NORTHWEST NATURAL GAS COMPANY
CONSOLIDATED STATEMENTS OF CAPITALIZATION
(Thousands, Except Share Amounts)
<CAPTION>
December 31 1993 1992
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
COMMON STOCK EQUITY:
Common stock - par value $3-1/6
per share; authorized 30,000,000
shares: outstanding - 1993,
13,177,256 shares; 1992,
12,972,725 shares $ 41,728 $ 41,080
Premium on common stock 128,340 122,768
Earnings invested in business 88,497 77,690
-------- --------
Total common stock equity 258,565 45% 241,538 44%
-------- ---- -------- ----
PREFERENCE STOCK, authorized
2,000,000 shares:
$2.375 Series, convertible, stated value
$25 per share; outstanding - 1993,
65,323 shares; 1992, 70,621 shares 1,633 1,766
$6.95 Series, stated value $100 per
share; outstanding - 1993, 250,000
shares; 1992, 250,000 shares 25,000 25,000
-------- --------
Total preference stock 26,633 5% 26,766 5%
-------- ---- -------- ----
REDEEMABLE PREFERRED STOCK, authorized
1,500,000 shares*:
$4.68 Series, outstanding - 1993,
9,301 shares; 1992, 11,211 shares 930 1,121
$4.75 Series, outstanding - 1993,
11,105 shares; 1992, 11,355 shares 1,111 1,136
$6.875 Series, outstanding - 1993,
no shares; 1992, 19,563 shares - 1,956
$7.125 Series, outstanding - 1993,
150,000 shares; 1992, no shares 15,000 -
$8.00 Series, outstanding - 1993,
no shares; 1992, 29,584 shares - 2,958
$8.75 Series, outstanding - 1993,
no shares; 1992, 150,000 shares - 15,000
$2.42 Series, outstanding - 1993,
no shares; 1992, 219,882 shares - 5,497
Premium - 550
-------- --------
Total redeemable preferred stock 17,041 3% 28,218 5%
--------- --- -------- ---
LONG-TERM DEBT:
First Mortgage Bonds
--------------------
8-5/8% Series due 1996 - 11,658
9-3/8% Series due 2011 - 46,000
9-3/4% Series due 2015 50,000 50,000
9.80% Series due 2018 - 24,938
9-1/8% Series due 2019 25,000 25,000
Medium-Term Notes
-----------------
First Mortgage Bonds:
4.80% Series A due 1996 5,000 -
7.38% Series A due 1997 20,000 20,000
7.69% Series A due 1999 10,000 10,000
5.96% Series B due 2000 5,000 -
5.98% Series B due 2000 5,000 -
8.05% Series A due 2002 10,000 10,000
6.40% Series B due 2003 20,000 -
6.34% Series B due 2005 5,000 -
6.38% Series B due 2005 5,000 -
6.45% Series B due 2005 5,000 -
6.50% Series B due 2008 5,000 -
9.05% Series A due 2021 10,000 10,000
7.25% Series B due 2023 20,000 -
7.50% Series B due 2023 4,000 -
7.52% Series B due 2023 11,000 -
Unsecured:
4.90% Series A due 1996 10,000 -
8.69% Series A due 1996 5,000 5,000
7.40% Series A due 1997 5,000 5,000
8.93% Series A due 1998 5,000 5,000
8.95% Series A due 1998 10,000 10,000
8.47% Series A due 2001 10,000 10,000
Convertible Debentures
----------------------
7-1/4% Series due 2012 12,931 13,308
-------- --------
272,931 255,904
Less long-term debt due within
one-year - 2,138
-------- -------
Total long-term debt 272,931 47% 253,766 46%
-------- ---- ------- ----
TOTAL CAPITALIZATION $575,170 100% $550,288 100%
======== ==== ======== ====
- ------------------------------------------------------------------------------
*The $2.42 series has a stated value of $25 per share, all other series have
a stated value of $100 per share.
See Accompanying Notes to Consolidated Financial Statements.
</TABLE>
-40-
NORTHWEST NATURAL GAS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ---------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
- ------------------------------------------------
Organization and Principles of Consolidation
- ---------------------------------------------
The consolidated financial statements include:
Regulated utility:
--Northwest Natural Gas Company (Northwest Natural)
Non-regulated wholly-owned businesses:
--Oregon Natural Gas Development Corporation (Oregon
Natural)
--NNG Financial Corporation (Financial Corporation)
--Pacific Square Corporation (Pacific Square)
--NNG Energy Systems, Inc. (Energy Systems)
Together these businesses are referred to herein as the
"Company." Intercompany accounts and transactions have been
eliminated.
Investments in corporate joint ventures and partnerships in
which the Company's ownership is 50 percent or less are
accounted for by the equity method or the cost method (see
Note 11).
Certain amounts from prior years have been reclassified to
conform with the 1993 presentation.
Industry Regulation
- -------------------
The Company's principal business is the distribution of
natural gas which is regulated by the Oregon Public Utility
Commission (OPUC) and the Washington Utilities and
Transportation Commission (WUTC). Accounting records and
practices conform to the requirements and uniform system of
accounts prescribed by these regulatory authorities.
Utility Plant
- -------------
Utility plant for Northwest Natural is stated at original
cost. When a depreciable unit of property is retired, the
cost is credited to utility plant and debited to the
accumulated provision for depreciation together with the
cost of removal, less any salvage. No gain or loss is
recognized upon normal retirement.
Allowance for Funds Used During Construction (AFUDC), a non-
cash item, is calculated using actual commercial paper
interest rates. If commercial paper balances are
insufficient to finance the amount of work in progress, a
-41-
NORTHWEST NATURAL GAS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ----------------------------------------------------------------
composite of interest costs of debt, shown as a reduction to
interest charges, and a return on equity funds, shown as
other income, is used to compute AFUDC. This amount is
added to utility plant which is a component of rate base.
While cash is not realized currently from AFUDC, it is
realized in the ratemaking process over the service life of
the related property through increased revenues resulting
from higher rate base and higher depreciation expense. The
Company's weighted average AFUDC rates for 1993 and 1992
were 3.5 percent and 4.5 percent, respectively. No AFUDC
was recorded in 1991.
Northwest Natural's provision for depreciation of utility
property, which is computed under the straight-line,
age-life method in accordance with independent engineering
studies and as approved by regulatory authorities,
approximated 4.1 percent of average depreciable plant in
1993, 4.0 percent for 1992 and 4.2 percent for 1991.
Regulatory Balancing Accounts
- -----------------------------
Regulatory balancing accounts are established pursuant to
orders of the state utility regulatory commissions, in
general rate proceedings or expense deferral proceedings, in
order to provide for recovery of revenues or expenses from,
or refunds to, Northwest Natural's utility customers.
Inventories
- -----------
Northwest Natural's inventories of gas in storage and
materials and supplies are stated at the lower of average
cost or net realizable value.
Income Taxes
- ------------
The Company adopted Statement of Financial Accounting
Standard (SFAS) No. 109, "Accounting for Income Taxes" on
January 1, 1993, with no material effect on earnings (see
Note 8). The Company provides deferred federal income tax
for the timing differences between book depreciation and tax
depreciation under the Accelerated Cost Recovery System
(ACRS) for 1981 - 1985 property additions and Modified
Accelerated Cost Recovery System (MACRS) for post-1985
property additions. Consistent with rate and accounting
instructions of regulatory authorities, deferred income
taxes are not currently collected for those income tax
temporary differences where the prescribed regulatory
accounting methods do not provide for current recovery in
rates.
-42-
NORTHWEST NATURAL GAS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ----------------------------------------------------------------
Investment tax credits on utility property additions which
reduce income taxes payable are deferred for financial
statement purposes and are amortized over the life of the
related property. Investment and energy tax credits
generated by non-regulated subsidiaries are amortized over a
period of two to five years.
Unbilled Revenue
- ----------------
Northwest Natural accrues for gas deliveries not billed to
customers from the meter reading dates to month end.
Cash and Cash Equivalents
- -------------------------
For purposes of reporting cash flows, cash and cash
equivalents include cash on hand and highly liquid temporary
investments with original maturity dates of three months or
less.
Earnings Per Share
- ------------------
Earnings per share are computed based on the weighted
average number of common shares outstanding each year.
Outstanding stock options are common stock equivalents but
are excluded from primary earnings per share computations
due to immateriality.
2. CONSOLIDATED SUBSIDIARY OPERATIONS:
- ----------------------------------------
Oregon Natural Gas Development Corporation
- ------------------------------------------
Oregon Natural is a natural gas exploration and production
subsidiary of the Company. Approximately $22 million of
Oregon Natural's total assets of $39 million are invested in
its wholly-owned subsidiary, Canor Energy Ltd., which
manages and develops natural gas and oil properties in
Canada.
Oregon Natural accounts for its exploration costs under the
successful-efforts method. Costs to acquire and develop oil
and gas properties are capitalized until the volume of
proved gas reserves is determined. If there are inadequate
gas reserves, the related deferred costs are expensed.
Capitalized costs associated with properties under
development were $1.4 million at December 31, 1993.
-43-
NORTHWEST NATURAL GAS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ----------------------------------------------------------------
NNG Financial Corporation
- -------------------------
Financial Corporation provides short-term financing for
Oregon Natural, Pacific Square and Energy Systems and has
several financial investments, including investments as a
limited partner in four solar electric generating systems,
four windpower electric generating projects, a hydroelectric
facility and a low-income housing project (see Note 11).
Pacific Square Corporation
- --------------------------
Pacific Square is a real estate management subsidiary of the
Company. Pacific Square owns a 50 percent interest in a
joint venture partnership that owns and operates the
building in which the Company leases its general offices.
Pacific Square also effectively owns a one-third interest in
another partnership that owns and operates an adjacent
building. Pacific Square has agreed to sell its interests
in these partnerships to its joint venture partner through
transactions expected to close in 1994 (see Note 12). The
sale of Pacific Square's interests as proposed would not be
at a loss to the Company.
NNG Energy Systems, Inc.
- -------------------------
Energy Systems was formed to design, construct, own and
operate cogeneration facilities. Energy Systems' only
subsidiary, Agrico Cogeneration Corporation (Agrico), has
been in reorganization under Chapter 11 of the U.S.
Bankruptcy Code (see Note 3).
-44-
NORTHWEST NATURAL GAS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ----------------------------------------------------------------
Summarized financial information for the consolidated subsidiaries
follows:
Consolidated Subsidiaries (Thousands) 1993 1992 1991
- --------------------------------------------------------------------------
Statements of Income for the year ended December 31:
Total Operating Revenues $ 10,865 $ 8,183 $ 14,865
Less cost of sales - 183 3,201
-------- -------- --------
Net Operating Revenues 10,865 8,000 11,664
Operating Expenses:
Operations and maintenance 5,942 5,598 10,264
Taxes other than income taxes 240 153 489
Depreciation, depletion and
amortization 7,986 3,309 4,905
Loss on cogeneration facility* - 4,575 23,200
-------- -------- --------
Total operating expenses 14,168 13,635 38,858
-------- -------- --------
Loss from Operations (3,303) (5,635) (27,194)
Other Expense and Interest Charges* (374) (1,670) (3,230)
-------- -------- --------
Loss Before Income Taxes (3,677) (7,305) (30,424)
Income Tax Benefit 2,188 3,682 12,323
-------- -------- --------
Net Loss $ (1,489) $ (3,623) $(18,101)
======== ======== ========
Balance Sheets as of December 31:
Assets:
Non-utility property $ 39,435 $ 41,048 $ 47,660
Accumulated depreciation and
depletion (18,395) (13,137) (11,044)
Investments and other* 34,731 39,781 34,010
Current assets 34,028 16,001 39,955
-------- -------- --------
Total Assets $ 89,799 $ 83,693 $110,581
======== ======== ========
Capitalization and Liabilities:
Capitalization $ 21,843 $ 24,189 $ 29,005
Current liabilities 42,538 33,940 58,458
Other liabilities 25,418 25,564 23,118
-------- -------- --------
Total Capitalization and
Liabilities $ 89,799 $ 83,693 $110,581
======== ======== ========
- --------------------------------------------------------------------------------
*For additional information regarding subsidiary operations, see Notes 3 and 11.
3. AGRICO COGENERATION CORPORATION:
- -------------------------------------
Agrico is a wholly-owned subsidiary of Energy Systems. In
December 1991, Agrico filed with the United States
Bankruptcy Court for the Eastern District of California a
voluntary petition for reorganization under Chapter 11 of
the U.S. Bankruptcy Code. In view of the uncertainty
-45-
NORTHWEST NATURAL GAS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ----------------------------------------------------------------
regarding the financial viability of Agrico, the Company
recorded a write-down of $23.2 million (pre-tax) in 1991,
resulting in an after-tax charge equivalent to $1.23 per
share.
In 1992, Energy Systems and Northwest Natural entered a
settlement agreement with United States National Bank of
Oregon (U.S. Bank) with respect to U.S. Bank's $14 million
secured loan to Agrico. Agrico also entered a conditional
settlement agreement with Pacific Gas & Electric Company
(PG&E), the purchaser of power produced by Agrico, with
respect to PG&E's claimed overpayments to Agrico for power
purchased in 1990 and 1991. Agrico also entered a
conditional agreement with Wellhead Electric Company
(Wellhead), the contract operator of the Agrico facility,
for the sale of Agrico's assets to Wellhead.
Based upon the estimated costs to the Company under the
settlements with U. S. Bank and PG&E, the estimated net
proceeds to be received from the sale of Agrico's assets to
Wellhead, and other elements of a Chapter 11 reorganization
plan, the Company recorded a charge of $4.6 million in 1992,
resulting in an after-tax charge of $2.8 million, or 24
cents per share.
The California Public Utilities Commission approved Agrico's
settlement with PG&E in December 1993, and the U. S.
Bankruptcy Court confirmed Agrico's reorganization plan in
January 1994. The sale of Agrico's assets to Wellhead
closed in February 1994. No material impact to 1994
earnings is expected related to these events.
4. CAPITAL STOCK:
- -------------------
Common Stock
- ------------
At December 31, 1993, Northwest Natural had reserved 98,720
shares of common stock for issuance under the Employee Stock
Purchase Plan, 623,203 shares under its Dividend
Reinvestment and Stock Purchase Plan, 153,985 shares under
its 1985 Stock Option Plan (see Note 5), 107,866 shares for
future conversions of its convertible preference stock and
472,427 shares for future conversions of its 7-1/4 percent
Convertible Debentures.
Preference Stock
- ----------------
The $2.375 Series of Convertible Preference Stock is
convertible into shares of common stock at a conversion rate
of 1.6502 shares of common stock for each share of
preference stock. Subject to certain restrictions, it is
-46-
NORTHWEST NATURAL GAS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ----------------------------------------------------------------
callable at stipulated prices, plus accrued dividends. The
$6.95 Series of Preference Stock is not redeemable prior to
December 31, 2002, but is subject to mandatory redemption on
that date.
Redeemable Preferred Stock
- --------------------------
The mandatory preferred stock redemption requirements
aggregate $1,042,000 in 1994 and $1,110,000 in 1995, 1996,
1997 and 1998. These requirements are noncumulative. At
any time the Company is in default on any of its obligations
to make the prescribed sinking fund payments, it may not pay
cash dividends on common stock or preference stock. Upon
involuntary liquidation, all series of redeemable preferred
stock are entitled to their stated value.
Generally, the redeemable preferred stock is callable at
stipulated prices, plus accrued dividends, subject to
certain restrictions. At December 31, 1993, redemption
prices were $100 per share for the $4.68 and $4.75 Series.
Shares of the $7.125 Series are redeemable on or after
May 1, 1998 at a price of $104.75 per share decreasing each
year thereafter to $100 per share on or after May 1, 2008.
The following table shows the changes in the number of
shares of the Company's capital stock and the premium on
common stock for the years 1993, 1992 and 1991:
-47-
NORTHWEST NATURAL GAS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ----------------------------------------------------------------
<TABLE>
<CAPTION>
------------Shares------------ Premium
Redeemable on
Thousands, Common Preference Preferred Common
Except Share Data Stock Stock Stock Stock
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance, December 31, 1990 11,603,507 80,986 489,522 $ 88,377
Sales to employees 8,899 -- -- 188
Sales to stockholders 141,454 -- -- 3,517
Exercise of stock options - net 7,668 -- -- 24
Conversion of preference stock
to common 10,253 (6,215) -- 123
Conversion of convertible
debentures to common 13,396 -- -- 357
Sinking fund purchases -- -- (24,068) --
Other -- -- -- 13
---------- -------- -------- --------
Balance, December 31, 1991 11,785,177 74,771 465,454 92,599
Sales to the public 990,000 250,000 -- 25,327
Sales to employees 9,350 -- -- 222
Sales to stockholders 157,046 -- -- 4,228
Exercise of stock options - net 19,918 -- -- 183
Conversion of preference stock
to common 6,846 (4,150) -- 82
Conversion of convertible
debentures to common 4,388 -- -- 117
Sinking fund purchases -- -- (23,859) --
Other -- -- -- 10
---------- ------- ------- --------
Balance, December 31, 1992 12,972,725 320,621 441,595 122,768
Sales to employees 9,542 -- -- 249
Sales to stockholders 154,850 -- 150,000 4,724
Exercise of stock options
- net 19,110 -- -- 172
Conversion of preference
stock to common 8,740 (5,298) -- 105
Conversion of convertible
debentures to common 12,289 -- -- 328
Redemptions -- -- (416,873) --
Sinking fund purchases -- -- (4,316) --
Other -- -- -- (6)
---------- ------- ------- --------
Balance, December 31, 1993 13,177,256 315,323 170,406 $128,340
========== ======= ======= ========
</TABLE>
- --------------------------------------------------------------------------
5. STOCK OPTION AND PURCHASE PLANS:
- -------------------------------------
Northwest Natural's 1985 Stock Option Plan (Plan) authorizes
an aggregate of 300,000 shares of common stock for issuance
as incentive or non-statutory stock options. These options
may be granted only to officers and key employees of the
Company designated by its Board of Directors.
-48-
NORTHWEST NATURAL GAS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ----------------------------------------------------------------
All options granted are at an option price not less than
market value at the date of grant and may be exercised for a
period not exceeding 10 years from the date of grant.
Option holders may exchange shares owned by them for at
least one year, at the current market price, to purchase
shares at the option price.
During 1985 and 1990, 150,000 and 86,500 options were
granted under the Plan at option prices of $17.625 and
$24.875, respectively.
Information regarding the Plan is summarized below:
Options
----------------------------
Year Ended December 31 1993 1992 1991
-----------------------------------------------------------
Outstanding, beginning of year 101,326 138,408 158,029
$17.625 Options:
Exchanged by holders (6,184) (7,673) (6,659)
Exercised (9,334) (13,440) (5,362)
$24.875 Options:
Exchanged by holders (4,729) (6,017) (5,294)
Exercised (9,776) (6,652) (2,306)
Expired - (3,300) -
------- ------- -------
Outstanding, end of year 71,303 101,326 138,408
======= ======= =======
Available for grant, end of year 82,682 82,682 79,382
======= ======= =======
--------------------------------------------------------------
Northwest Natural also has an employee stock purchase plan
whereby employees may purchase common stock at 92 percent
of average bid and ask market price on the subscription
date. The subscription date is set annually, and each
employee may purchase up to 600 shares payable through
payroll deduction over a six to twelve month period.
6. LONG TERM DEBT:
- --------------------
The issuance of first mortgage bonds under the Mortgage and
Deed of Trust is limited by property, earnings and other
provisions of the mortgage. The Company's Mortgage and Deed
of Trust constitutes a first mortgage lien on substantially
all of its utility property.
-49-
NORTHWEST NATURAL GAS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ----------------------------------------------------------------
The 7-1/4 percent Series of Convertible Debentures may be
converted at any time for 33-1/2 shares of common stock for
each $1,000 face value ($29.85 per share).
The sinking fund requirements and maturities for the five
years ending December 31, 1998, on the long-term debt
outstanding at December 31, 1993, amount to: none in 1994;
$1.0 million in 1995; $21.0 million in 1996; $26.0 million
in 1997; and $16.0 million in 1998.
7. NOTES PAYABLE AND LINES OF CREDIT:
- ---------------------------------------
Northwest Natural has available through September 30, 1994,
lines of credit totalling $80 million consisting of a
primary fixed amount of $40 million plus an excess amount of
up to $40 million available as needed, at Northwest
Natural's option, on a monthly basis. Under the terms of
these bank lines, Northwest Natural pays a commitment fee
but is not required to maintain compensating bank balances.
The interest rates on borrowings under these lines of credit
are based on current market rates as negotiated. There were
no outstanding balances as of December 31, 1993.
Financial Corporation has available through September 30,
1994, lines of credit with two commercial banks totalling
$20 million, including $10 million committed and $10 million
uncommitted. Financial Corporation pays a fee on the
committed line but not on the uncommitted line; it is not
required to maintain compensating bank balances on either
line. The interest rates on borrowings under these lines of
credit also are based on current market rates as negotiated.
Financial Corporation's lines are supported by the
unconditional guaranty of Northwest Natural. There were no
outstanding balances as of December 31, 1993 under the
Financial Corporation bank lines.
Northwest Natural and Financial Corporation issue domestic
commercial paper under agency agreements with a commercial
bank. The amounts and average interest rates of commercial
paper outstanding were as follows at December 31:
1993 1992
---------------- ----------------
Average Average
Millions Amount Rate Amount Rate
-----------------------------------------------------------
Northwest Natural $53.4 3.4% $34.4 3.8%
Financial Corporation 19.1 3.4% 11.9 3.7%
----- -----
Total $72.5 $46.3
===== =====
------------------------------------------------------------
-50-
NORTHWEST NATURAL GAS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ----------------------------------------------------------------
Commercial paper issued by Northwest Natural and Financial
Corporation is supported by committed bank lines.
Additionally, Financial Corporation's commercial paper is
supported by the unconditional guaranty of Northwest
Natural.
8. INCOME TAXES:
- -----------------
The Company adopted SFAS No. 109, "Accounting for Income
Taxes," effective January 1, 1993. The adoption of the new
standard results in an increase in net deferred tax
liabilities of $62 million to reflect deferred taxes on
differences previously flowed-through and to adjust existing
deferred taxes to the level required at the current
statutory rate. An offsetting regulatory asset of $62
million was also recorded. The regulatory asset is
primarily based upon differences between the book and tax
basis of utility plant in service and the accumulated
provision for depreciation. It is expected that the
regulatory asset will be recovered in future rates. The
implementation of SFAS No. 109 did not significantly impact
results of operations.
A reconciliation between income taxes calculated at the
statutory federal tax rate and the tax provision reflected
in the financial statements is as follows:
-51-
<TABLE>
<CAPTION>
Thousands 1993 1992 1991
- -------------------------------------------------------------------
<S> <C> <C> <C>
Computed income taxes based on
statutory federal income tax
rate (1993-35%; 1992 and 1991-34%) $20,910 $ 7,727 $ 5,677
Increase (reduction) in taxes
resulting from:
Differences between book and tax
depreciation 1,561 1,233 1,566
Current state income tax, net
of federal tax benefit 2,525 711 727
Federal income tax credits (348) - -
Restoration of investment tax credit (1,064) (1,124) (2,026)
Elimination of amounts previously
provided (1,059) (1,229) (4,462)
Real and personal property taxes 113 - 548
Removal costs (320) (335) (578)
Unconsolidated foreign subsidiary
income (496) - -
Other - net 274 (32) 869
------- ------- -------
Total provision for income taxes $22,096 $ 6,951 $ 2,321
======= ======= =======
- ---------------------------------------------------------------------
</TABLE>
<TABLE>
The provision for income taxes consists of the following:
<CAPTION>
Thousands 1993 1992 1991
- ---------------------------------------------------------------------
<S> <C> <C> <C>
Income taxes currently payable:
Federal $ 13,368 $ 7,577 $ 6,485
State 2,166 375 1,795
Foreign 30 13 (139)
------- ------- -------
Total 15,564 7,965 8,141
------- ------- -------
Deferred taxes - net:
Federal 5,896 (676) (1,805)
State 1,718 616 (1,989)
------- ------ -------
Total 7,614 (60) (3,794)
------- ------ -------
Investment and energy tax credits restored:
From utility operations (800) (800) (800)
From subsidiary operations (282) (154) (1,226)
------- ------ -------
Total (1,082) (954) (2,026)
------- ------ -------
Total provision for income taxes $22,096 $6,951 $ 2,321
======= ====== =======
Percentage of pretax income 36.99% 30.59% 13.90%
======= ====== =======
- --------------------------------------------------------------------
</TABLE>
-52-
NORTHWEST NATURAL GAS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ----------------------------------------------------------------
<TABLE>
The annual provision for deferred income taxes is comprised of the following:
<CAPTION>
Thousands 1993 1992 1991
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
Cost of gas delivered and unbilled $ - $ - $ (1,447)
ACRS and MACRS deductions in excess of
related book depreciation 5,925 8,661 10,199
Revenues and costs deferred for tax purposes 1,528 2,600 (1,718)
Agrico book loss - (1,374) (8,839)
Real and personal property taxes 2,329 (2,328) -
Alternative minimum tax credits - (6,866) -
Elimination of amounts previously provided (2,216) (1,025) (1,740)
Other 48 272 (249)
------- -------- -------
Total $ 7,614 $ (60) $(3,794)
======= ======== =======
- ------------------------------------------------------------------------------
</TABLE>
9. EMPLOYEE RETIREMENT PLANS:
- -------------------------------
The Company has two non-contributory defined benefit
retirement plans covering all regular, full-time employees
with more than one year of service. The benefits under the
plans are based upon years of service and the employee's
average compensation during the final years of service. The
Company's funding policy is to make the annual contribution
required by applicable regulations and recommended by its
actuary. Plan assets consist primarily of marketable
securities, corporate obligations, U.S. government
obligations, real estate and cash equivalents.
-53-
NORTHWEST NATURAL GAS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ----------------------------------------------------------------
<TABLE>
The following table sets forth the amounts recognized in the
Company's financial statements and the combined funded
status of the retirement plans:
<CAPTION>
Pension Costs for the Year
(Thousands): 1993 1992 1991
-----------------------------------------------------------------
<S> <C> <C> <C>
Service cost $ 2,587 $ 2,528 $ 2,098
Interest cost 6,024 5,688 5,109
Return on assets (17,762) (8,797) (16,336)
Net amortization and deferral 9,526 1,215 9,045
-------- -------- --------
Annual pension cost (benefit) $ 375 $ 634 $ (84)
======== ======== ========
-----------------------------------------------------------------
Vested benefit obligation $ 69,859 $ 62,152 $ 55,304
Total accumulated benefit
obligation $ 70,618 $ 62,971 $ 55,802
-----------------------------------------------------------------
Funded status as of December 31:
Plan assets at fair value $108,579 $ 94,595 $ 88,472
Projected benefit obligation
for service rendered to date 86,814 77,278 69,074
-------- -------- --------
Funded status 21,765 17,317 19,398
Unrecognized net gain (21,417) (15,895) (16,601)
Unrecognized net asset at
transition (2,310) (2,706) (3,102)
Unrecognized prior service costs 4,413 3,531 1,690
-------- -------- --------
Prepaid pension cost $ 2,451 $ 2,247 $ 1,385
======== ======== ========
Total cash contribution $ 579 $ 1,496 $ 810
======== ======== ========
------------------------------------------------------------------
Discount rate 7.50% 8.00% 8.00%
===== ===== =====
Expected long-term rate
of return on plan assets 9.00% 9.00% 9.00%
===== ===== =====
Rate for compensation increases 5.13% 5.13% 5.13%
===== ===== =====
-------------------------------------------------------------------
</TABLE>
Effective January 1, 1994, the Company changed the assumed
discount rate used in determining the funded status of the
plans from 8.00 percent to 7.50 percent. The new discount
rate was used in determining the funded status of the plans
at year-end 1993 and will be used to determine annual
pension cost in 1994.
The Company has a qualified "Retirement K Savings Plan"
under Internal Revenue Code Section 401(k) and a non-
qualified "Executive Deferred Compensation Plan", for
eligible employees. These plans are designed to enhance the
existing retirement program of employees and to assist them
-54-
NORTHWEST NATURAL GAS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ----------------------------------------------------------------
in strengthening their financial security by providing an
incentive to save and invest regularly. Company
contributions to these plans in 1993, 1992 and 1991 were
$450,000, $315,000 and $290,000, respectively.
The Company has a non-qualified supplemental retirement plan
for eligible executive officers which it is funding with
trust-owned life insurance. The amount of coverage is
designed to provide sufficient returns to recover all costs
of the plan if assumptions made as to mortality experience,
policy earnings, and other factors are realized. Expenses
related to the plan were $840,000, $883,000 and $894,000 in
1993, 1992 and 1991, respectively.
10. POSTRETIREMENT HEALTH CARE AND LIFE INSURANCE BENEFITS:
- ------------------------------------------------------------
The Company currently provides continued health care and
life insurance coverage after retirement for exempt
employees. These benefits and similar benefits for active
employees are provided by insurance companies and related
premiums are based on the amount of benefits paid during the
year.
Effective January 1, 1993, the Company adopted SFAS No. 106,
"Employers' Accounting for Postretirement Benefits Other
than Pensions." SFAS No. 106 requires the Company to accrue
the estimated cost of retiree benefit payments during the
years of employees' active service. The Company previously
expensed the cost of these benefits, which are principally
health care, as premiums were paid. SFAS No. 106 allows
recognition of the cumulative effect of the liability in the
year of adoption or amortization of the obligation over a
period of up to 20 years. The Company elected to recognize
this obligation of approximately $11,300,000 over a period
of 20 years. The Company's cash flows are not affected by
implementation of this Statement, but implementation
decreased income from operations for 1993 by $715,000.
The incremental costs of approximately $1,110,000 per year
(pre-tax) relating to SFAS No. 106 are not currently
included in the Company's rates. The staff of the OPUC has
recommended that the portion of these costs allocated to
Oregon (approximately 95 percent) be authorized for recovery
in rates only pursuant to a general rate case filing, and
has recommended against the use of deferred accounting
treatment for their recovery. The Company is charging the
Oregon portion of these costs to expense. The WUTC has
approved deferred accounting treatment for the portion of
these costs allocated to Washington (approximately 5
percent), pending final approval for recovery in a general
rate case filing. The Company will continually review its
-55-
NORTHWEST NATURAL GAS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ----------------------------------------------------------------
need for general rate cases covering these and other
expenses but has no present plans to file a general rate
case in Oregon or Washington.
In 1993, 1992 and 1991, the Company recognized $1,751,000,
$671,000 and $588,000, respectively, as the cost of
postretirement health care and life insurance benefits. The
following table sets forth the health care plan's status at
December 31, 1993:
Accumulated postretirement benefit obligation (Thousands):
----------------------------------------------------------
Retirees $ 6,675
Fully eligible active plan participants 260
Other active plan participants 4,815
--------
Total accumulated postretirement
benefit obligation 11,750
Fair value of plan assets -
--------
Accumulated postretirement benefit obligation
in excess of plan assets 11,750
Unrecognized transition obligation (10,716)
Unrecognized gain 76
--------
Accrued postretirement benefit cost $ 1,110
========
Net postretirement benefit cost (Thousands):
--------------------------------------------
Service cost - benefits earned during
the period $ 255
Return on plan assets (if any) -
Interest cost on accumulated postretirement
benefit obligation 932
Amortization of transition obligation 564
--------
Net postretirement benefit cost $ 1,751
========
------------------------------------------------------------
The assumed health care cost trend rate used in measuring
the accumulated postretirement benefit obligation for pre-
Medicare eligibility is 12 percent for 1994; 10 percent for
1995; then decreasing over the next 10 years to 5 percent.
The rate for HMO plan and post-Medicare eligibility is
9 percent for 1994-5, decreasing over the next 10 years to
5 percent. A one-percentage-point change in the assumed
health care cost trend rate for each year would adjust the
accumulated postretirement benefit obligation as of
December 31, 1993 and net postretirement health care cost by
approximately 16 percent. The assumed discount rate used in
determining the accumulated postretirement benefit
obligation was 7.5 percent.
-56-
NORTHWEST NATURAL GAS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ----------------------------------------------------------------
11. INVESTMENTS:
- -----------------
The following table summarizes the Company's year-end
investments in affiliated entities accounted for under the
equity and cost methods, and its investment in a leveraged
lease.
Thousands 1993 1992
------------------------------------------------------------
Electric generation (solar and
wind-power) $21,043 $22,757
Aircraft leveraged lease 9,079 8,264
Automated meter-reading technology 1,301 1,352
Gas pipeline and other 1,395 445
------- -------
Total investments and other $32,818 $32,818
======= =======
-----------------------------------------------------------
Financial Corporation has invested in four solar electric
generation plants located near Barstow, California. Power
generated by these stations is sold to Southern California
Edison Company. Financial Corporation's ownership interests
in these projects range from 4.0 percent to 5.3 percent.
Financial Corporation also has invested in four U. S.
Windpower Partners electric generating projects, with
facilities located near Livermore and Palm Springs,
California. The wind-generated power is sold to PG&E and
Southern California Edison Company under long-term
contracts. Financial Corporation's ownership interests in
these projects range from 8.5 percent to 41 percent.
In 1987, Oregon Natural purchased a Boeing 737-300 aircraft
which was leased to Continental Airlines for 20 years under
a leveraged lease agreement.
In 1990, the Company invested in a developer of automated
meter-reading devices, with facilities located in Spokane,
Washington. The Company's ownership interest is 10 percent.
-57-
NORTHWEST NATURAL GAS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ----------------------------------------------------------------
12. COMMITMENTS AND CONTINGENT LIABILITIES:
- --------------------------------------------
Lease Commitments
-----------------
Future lease commitments are: $5.2 million in 1994;
$4.9 million in 1995; $4.2 million in 1996; $4.0 million in
1997; and $1.8 million in 1998. Thereafter, total
commitments amount to $12.0 million. These commitments
principally relate to the lease of the Company's office
headquarters and computer systems. The pending sale of the
Company's investment in the partnership which owns and
operates its office headquarters building (see Note 2) will
not affect the Company's lease which extends through 2006,
with options to extend beyond that date. Rent paid by the
Company to the partnership was $2.8 million in 1993, and
$2.2 million in 1992 and 1991.
Total rental expense for 1993, 1992 and 1991 was
$5.2 million, $4.4 million and $4.5 million, respectively.
Purchase Commitments
--------------------
The Company has signed agreements providing for the
availability of firm pipeline capacity. Under these
agreements, the Company must make fixed monthly payments for
contracted capacity. The pricing component of the monthly
payment is established, and subject to change, by U.S. or
Canadian regulatory bodies. The aggregate amount of such
required payments was as follows at December 31, 1993:
Commitments (Thousands)
------------------------------------------------------------
1994 $ 58,961
1995 62,123
1996 77,232
1997 74,237
1998 74,012
Thereafter 874,867
----------
Total 1,221,432
Less: Amount representing interest 504,957
----------
Total at present value $ 716,475
==========
------------------------------------------------------------
The Company's total payments of fixed charges under these
agreements in 1993, 1992 and 1991 were $46.7 million, $34.7
million and $32.5 million, respectively. In addition, the
-58-
NORTHWEST NATURAL GAS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ----------------------------------------------------------------
Company is required to pay per-unit charges based on the
actual quantities shipped under the agreements. In certain
of the Company's take-or-pay purchase commitments, annual
deficiencies may be offset by prepayments subject to
recovery over a longer term if future purchases exceed the
minimum annual requirements.
The Company has contracted with an external vendor for the
development of a customer information system for a fixed
contract price of $12 million to be incurred over four years
as follows: $3.6 million in 1993; $4.7 million in 1994;
$0.7 million in 1995; and $3.0 million in 1996.
Environmental Matters
---------------------
In June 1992, the City of Salem, Oregon, requested the
Company's participation in its review of an environmental
assessment of riverfront property in Salem that is the
proposed site for a park and other public developments.
Within the property is a block previously owned by the
Company which was the former site of a manufactured gas
plant. The Company's corporate predecessor operated the
plant for less than four months in 1929 before closing it
upon completion of a pipeline providing gas transmission
from Portland to Salem. The City has determined that there
is environmental contamination on the site, and that a
remediation process involving the Company and at least two
other prior owners of the block will be required. To date
the Company has not obtained sufficient information to
determine the extent of its liability for any such
remediation.
The Company owns property in Linnton, Oregon, that is the
former site of a gas manufacturing plant that was closed in
1956. Although limited testing for environmental
contamination has been undertaken by other parties on
portions of the site, no comprehensive studies have been
performed. The Company submitted a work plan for the site
to the Oregon Department of Environmental Quality (ODEQ) in
1987, but those efforts were suspended at ODEQ's request
while the Company and other parties participated in a joint
hydrogeologic study of an area adjacent to the site. In
September 1993, pursuant to ODEQ procedures, the Company
submitted a notice of intent to participate in the ODEQ's
Voluntary Cleanup Program. In January 1994, this site was
formally placed in the program. It is anticipated that the
site investigation will commence during 1994.
In September 1993, the Company recorded an expense of
$500,000 for the estimated costs of consultants' fees, ODEQ
oversight cost reimbursements, and legal fees in connection
with the voluntary investigation at the Linnton site. To
date, the Company has not obtained sufficient information to
-59-
NORTHWEST NATURAL GAS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ----------------------------------------------------------------
determine whether any remediation will be required at this
site or, if so, the extent of its liability for any such
remediation. The Company expects that its costs of
investigation and any remediation for which it may be liable
should be recoverable, in large part, from insurance or
through future rates.
Litigation
----------
The Company is party to certain legal actions in which
claimants seek material amounts. Although it is impossible
to predict the outcome with certainty, based upon the
opinions of legal counsel, management does not expect
disposition of these matters to have a materially adverse
effect on the Company's financial position or results of
operations.
13. FAIR VALUE OF FINANCIAL INSTRUMENTS:
- -----------------------------------------
The estimated fair values of the Company's financial
instruments have been determined by the Company using
available market information and appropriate valuation
methodologies. The following is a list of financial
instruments whose carrying values are sensitive to market
conditions:
December 31, 1993 December 31, 1992
-------------------- -------------------
Carrying Estimated Carrying Estimated
Thousands of Dollars Amount Fair Value Amount Fair Value
- ----------------------------------------------------------------
Preference stock $ 26,633 $ 26,698 $ 26,766 $ 28,354
Redeemable preferred
stock 17,041 16,573 28,218 26,947
Long-term debt 272,931 301,358 255,904 283,280
- ----------------------------------------------------------------
-60-
NORTHWEST NATURAL GAS COMPANY
QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
<TABLE>
<CAPTION>
------------Quarter Ended-----------
Dollars (Thousands
Except Per Share) Mar. 31, June 30, Sept. 30, Dec. 31, Total
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1992
Operating revenues 90,326 47,791 38,811 97,438 274,366
Net operating revenues 56,291 30,827 26,859 58,473 172,450
Net income (loss) 13,130 (3,232) (7,785) 13,662 15,775
Earnings (loss) per share 1.06 (0.33) (0.71) 1.08 1.11*
1993
Operating revenues 128,714 61,789 47,451 120,763 358,717
Net operating revenues 82,116 40,141 30,805 66,822 219,884
Net income (loss) 24,653 2,767 (4,423) 14,650 37,647
Earnings (loss) per share 1.82 0.15 (0.40) 1.05 2.61*
- -------------------------------------------------------------------------------
*Quarterly earnings per share are based upon the average number of
common shares outstanding during each quarter. Because the average
number of shares outstanding has increased in each quarter shown, the
sum of quarterly earnings does not equal earnings per share for the
year.
Variations in earnings between quarterly periods are due primarily to
the seasonal nature of the Company's business.
</TABLE>
-61-
<TABLE>
NORTHWEST NATURAL GAS COMPANY
SCHEDULE V - PROPERTY, PLANT AND EQUIPMENT
YEAR ENDED DECEMBER 31, 1993
(Thousands of Dollars)
<CAPTION>
Balance at Balance
Beginning Additions Retire- Other at End of
Classification of Period at Cost ments Changes* Period
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Utility - gas:
Intangibles $ 39 $ 718 $ - $ 9,085 $ 9,842
Land and land rights 6,876 68 - - 6,944
Structures and improvement 14,863 2,743 - - 17,606
Generating plant equipment 388 - - - 388
Distribution 382,731 29,165 2,139 - 409,757
Customers' installations 268,325 26,311 5,063 - 289,573
General equipment 45,673 5,124 2,742 (9,080) 38,975
Holders 51,962 440 - (5) 52,397
Petroleum gas equipment (butane plant) 3 - - - 3
Natural gas equipment (gate stations
and mixing equipment) 1,254 1 - - 1,255
Property held for future use 803 - - - 803
Construction work in progress 1,330 6,130 - - 7,460
-------- ------- ------ ------- --------
Utility plant - gas 774,247 70,700 9,944 - 835,003
Gas stored underground - long-term 5,027 - - - 5,027
-------- ------- ------ ------- --------
Total utility property, plant and
equipment (including intangibles) $779,274 $70,700 $9,944 $ 0 $840,030
======== ======= ====== ======= ========
Non-utility:
Land $ 125 $ - $ - $ - $ 125
Structures 1,002 - - - 1,002
Storage tanks 2,202 - - - 2,202
GELP conversion burners 252 - 252 - -
Subsidiaries' property 41,048 955 134 (2,434) 39,435
-------- ------- ------ ------- --------
Total non-utility property,
plant and equipment $ 44,629 $ 955 $ 386 $(2,434) $ 42,764
======== ======= ====== ======= ========
<FN>
___________________
*Includes transfers and reclassifications.
-62-
</TABLE>
<TABLE>
NORTHWEST NATURAL GAS COMPANY
SCHEDULE V - PROPERTY, PLANT AND EQUIPMENT
YEAR ENDED DECEMBER 31, 1992
(Thousands of Dollars)
<CAPTION>
Balance at Balance
Beginning Additions Retire- Other at End of
Classification of Period at Cost ments Changes* Period
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Utility - gas:
Intangibles $ 39 $ - $ - $ - $ 39
Land and land rights 6,360 516 - - 6,876
Structures and improvement 13,527 1,336 - - 14,863
Generating plant equipment 388 - - - 388
Distribution 355,706 27,778 755 2 382,731
Customers' installations 245,917 24,123 1,713 (2) 268,325
General equipment 42,376 4,325 1,028 - 45,673
Holders 51,480 482 - - 51,962
Petroleum gas equipment (butane plant) 3 - - - 3
Natural gas equipment (gate stations
and mixing equipment) 1,246 2 (6) - 1,254
Property held for future use - 803 - - 803
Construction work in progress - 1,330 - - 1,330
-------- ------- ------ -------- --------
Utility plant - gas 717,042 60,695 3,490 - 774,247
Gas stored underground - long-term 5,027 - - - 5,027
-------- ------- ------ -------- --------
Total utility property,
plant and equipment
(including intangibles) $722,069 $60,695 $3,490 $ - $779,274
======== ======= ====== ======== ========
Non-utility:
Land $ 125 $ - $ - $ - $ 125
Structures 1,002 - - - 1,002
Storage tanks 2,202 - - - 2,202
GELP conversion burners 276 - 24 - 252
Subsidiaries' property 47,660 8,743 3,502 (11,853) 41,048
-------- ------- ------ -------- --------
Total non-utility property,
plant and equipment $ 51,265 $ 8,743 $3,526 $(11,853) $ 44,629
======== ======= ====== ======== ========
<FN>
_____________________
*Includes write-down of cogeneration plant, transfers and reclassifications.
-63-
</TABLE>
<TABLE>
NORTHWEST NATURAL GAS COMPANY
SCHEDULE V - PROPERTY, PLANT AND EQUIPMENT
YEAR ENDED DECEMBER 31, 1991
(Thousands of Dollars)
<CAPTION>
Balance at Balance
Beginning Additions Retire- Other at End of
Classification of Period at Cost ments Changes* Period
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Utility - gas:
Intangibles $ 39 $ - $ - $ - $ 39
Land and land rights 6,007 353 - - 6,360
Structures and improvement 12,605 965 - (43) 13,527
Generating plant equipment 388 - - - 388
Distribution 333,860 23,354 1,515 7 355,706
Customers' installations 223,624 23,583 1,281 (9) 245,917
General equipment 34,590 9,267 1,478 (3) 42,376
Holders 48,909 2,559 35 47 51,480
Petroleum gas equipment (butane plant) 9 - 6 - 3
Natural gas equipment (gate stations
and mixing equipment) 1,237 35 27 1 1,246
Construction work in progress 2,369 (2,369) - - --
-------- ------- ------ -------- --------
Utility plant - gas 663,637 57,747 4,342 - 717,042
Gas stored underground - long-term 5,027 - - - 5,027
-------- ------- ------ -------- --------
Total utility property, plant and
equipment (including intangibles) $668,664 $57,747 $4,342 $ - $722,069
======== ======= ====== ======== ========
Non-utility:
Land $ 125 $ - $ - $ - $ 125
Structures 1,002 - - - 1,002
Storage tanks 2,202 - - - 2,202
GELP conversion burners 307 - 31 - 276
Subsidiaries' property 66,680 5,181 23 (24,178) 47,660
-------- ------- ------ -------- --------
Total non-utility property,
plant and equipment $ 70,316 $ 5,181 $ 54 $(24,178) $ 51,265
======== ======= ====== ======== ========
<FN>
______________________
*Includes write-down of cogeneration plant, transfers and reclassifications.
-64-
</TABLE>
<TABLE>
NORTHWEST NATURAL GAS COMPANY
SCHEDULE VI - ACCUMULATED DEPRECIATION, DEPLETION AND
AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT
YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
(Thousands of Dollars)
Additions
Balance at Charged to Balance
Beginning Costs and Retire- Other at End of
of Period Expenses ments Changes* P1eriod
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1993
- - accumulated depreciation**
Utility - gas $233,385 $31,697 $ 9,944 $ 144 $255,282
Non-utility - parent 2,343 - 252 160 2,251
Non-utility - subsidiary 13,137 7,986 134 (2,594) 18,395
-------- ------- ------- ------- --------
Total $248,865 $39,683 $10,330 $(2,290) $275,928
======== ======= ======= ======= ========
Year ended December 31, 1992
- - accumulated depreciation**
Utility - gas $207,165 $29,726 $3,490 $ (16) $233,385
Non-utility - parent 2,117 - 24 250 2,343
Non-utility - subsidiary 11,044 3,309 2,179 963 13,137
-------- ------- ------ ------- --------
Total $220,326 $33,035 $5,693 $ 1,197 $248,865
======== ======= ====== ======= ========
Year ended December 31, 1991
- - accumulated depreciation**
Utility - gas $183,404 $28,718 $4,342 $ (615) $207,165
Non-utility - parent 1,946 - 20 191 2,117
Non-utility - subsidiary 8,077 4,905 23 (1,915) 11,044
-------- ------- ------ ------- --------
Total $193,427 $33,623 $4,385 $(2,339) $220,326
======== ======= ====== ======= ========
<FN>
_____________________
*Includes write-down of cogeneration plant, plus removal costs, less salvage credits.
**Accumulated depreciation is maintained for all tangible property, operating and non-operating.
-65-
</TABLE>
<TABLE>
NORTHWEST NATURAL GAS COMPANY
SCHEDULE IX - SHORT-TERM BORROWINGS
YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
(Thousands of Dollars)
<CAPTION>
Weighted
Weighted Average Average
Average Maximum (Daily) (Daily)
Balance Interest Rate Amount Outstanding Interest
at End at End of Outstanding During Rate During
of Period of Period at Month End Period Period
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1993:
Commercial Paper $72,548 3.4% $81,015 $39,965 3.3%
Bank Borrowings - - - $ 7 3.8%
Other Borrowings - - - $ 66 8.9%
Year ended December 31, 1992:
Commercial Paper $46,335 3.7% $96,259 $55,840 3.9%
Bank Borrowings - - $ 4,500 $ 52 4.7%
Other Borrowings $ 774 9.0% $ 774 $ 34 9.0%
Year ended December 31, 1991:
Commercial Paper $88,619 5.2% $88,619 $58,374 6.3%
The weighted average interest rate during each year is computed by dividing the interest
expense during the period by the average daily debt balance.
-66-
</TABLE>
<TABLE>
NORTHWEST NATURAL GAS COMPANY
SCHEDULE X - SUPPLEMENTARY INCOME STATEMENT INFORMATION
YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
(Thousands of Dollars)
<CAPTION>
1993 1992 1991
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Taxes other than federal income and state excise taxes:
Ad valorem $13,974 $11,509 $10,551
Business and franchise taxes and license fees 7,533 5,770 6,419
Payroll 2,878 2,623 2,684
Other 936 810 961
Miscellaneous subsidiary taxes 240 153 489
------- ------- -------
Total $25,561 $20,865 $21,104
======= ======= =======
Maintenance and repairs, depreciation and amortization are reported on Statements of Income.
Advertising costs are insignificant.
-67-
</TABLE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
(Item 10. Directors and Executive Officers of the
Registrant; Item 11. Executive Compensation; Item 12.
Security Ownership of Certain Beneficial Owners and
Management; and Item 13. Certain Relationships and
Related Transactions.)
Information called for by Part III (Items 10., 11.,
12. and 13.) is incorporated herein by reference to the Company's
definitive proxy statement, "Item (1) - Election of Directors,
Executive Compensation and Compensation Pursuant to Certain
Plans." See the Additional Item included in Part I for
information concerning executive officers of the Company.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K
(a) The following documents are filed as part of this
report:
1. A list of all Financial Statements and
Supplementary Schedules is incorporated by
reference to Item 8.
2. List of Exhibits filed:
*(3a.) Restated Articles of Incorporation,
as filed and effective June 24, 1988
and amended December 8, 1992 and
December 1, 1993 (incorporated herein
by reference to Exhibit 4(a) to File
No. 33-51271).
(3b.) Bylaws as amended December 16, 1993.
*(4a.) Copy of Mortgage and Deed of Trust,
dated as of July 1, 1946, to Bankers
Trust and R. G. Page (to whom Stanley
Burg is now successor), Trustees
(incorporated herein by reference to
Exhibit 7(j) in File No. 2-6494); and
copies of Supplemental Indentures
Nos. 1 through 14 to the Mortgage and
Deed of Trust, dated respectively, as
of June 1, 1949, March 1, 1954,
April 1, 1956, February 1, 1959,
68-
July 1, 1961, January 1, 1964,
March 1, 1966, December 1, 1969,
April 1, 1971, January 1, 1975,
December 1, 1975, July 1, 1981,
June 1, 1985 and November 1, 1985
(incorporated herein by reference to
Exhibit 4(d) in File No. 33-1929);
Supplemental Indenture No. 15 to the
Mortgage and Deed of Trust, dated as
of July 1, 1986 (filed as Exhibit
(4)(c) in File No. 33-24168);
Supplemental Indentures Nos. 16, 17
and 18 to the Mortgage and Deed of
Trust, dated, respectively, as of
November 1, 1988, October 1, 1989 and
July 1, 1990 (incorporated herein by
reference to Exhibit (4)(c) in File
No. 33-40482); and Supplemental
Indenture No. 19 to the Mortgage and
Deed of Trust (incorporated herein by
reference to Exhibit 4(c) in File No.
33-64014).
(4a.(1)) Copy of Supplemental Indenture No. 20
to the Mortgage and Deed of Trust,
dated as of June 1, 1993.
*(4d.) Copy of Indenture, dated as of
June 1, 1991, between the Company and
Bankers Trust Company, Trustee,
relating to the Company's Unsecured
Medium-Term Notes (incorporated
herein by reference to Exhibit 4(e)
in File No. 33-64014).
(4e.) Officers' Certificate dated June 12,
1991 creating Series A of the
Company's Unsecured Medium-Term
Notes.
(4f.) Officers' Certificate dated June 18,
1993 creating Series B of the
Company's Unsecured Medium-Term
Notes.
(10j.) Transportation Agreement, dated
June 29, 1990, between the Company
and Northwest Pipeline Corporation.
*(10j.(1)) Replacement Firm Transportation
Agreement, dated July 31, 1991,
between the Company and Northwest
Pipeline Corporation (incorporated
herein by reference to Exhibit
(10j.(2)) to Form 10-K for 1992, File
-69-
No. 0-994).
(10j.(2)) Firm Transportation Service
Agreement, dated November 10, 1993,
between the Company and Pacific Gas
Transmission Company.
(11) Statement re computation of fully-
diluted per share earnings.
(12) Statement re computation of ratios.
(23) Independent Auditors' Consent.
Executive Compensation Plans and Arrangements:
----------------------------------------------
*(10a.) Employment agreement, dated
October 27, 1983, between the Company
and an executive officer
(incorporated herein by reference to
Exhibit (10a.) to Form 10-K for 1989,
File No. 0-994).
*(10b.) Executive Supplemental Retirement
Income Plan, 1989 Republication,
effective January 1, 1989
(incorporated herein by reference to
Exhibit (10b.) to Form 10-K for 1988,
File No. 0-994).
*(10c.) 1985 Stock Option Plan, as amended
effective January 1, 1987
(incorporated herein by reference to
Exhibit (10c.) to Form 10-K for 1992,
File No. 0-994).
*(10e.) Executive Deferred Compensation Plan,
1990 Restatement, effective
January 1, 1990 (incorporated herein
by reference to Exhibit (10e.) to
Form 10-K for 1990, File No. 0-994).
*(10e.-1) Amendment No. 1 to Executive Deferred
Compensation Plan (incorporated by
reference to Exhibit (10e.-1) to Form
10-K for 1991, File No. 0-994).
*(10f.) Directors Deferred Compensation Plan,
1988 Restatement, effective
January 1, 1988 (incorporated herein
by reference to Exhibit (10g.) to
Form 10-K for 1987, File No. 0-994).
-70-
*(10g.) Form of Indemnity Agreement as
entered into between the Company and
each director and executive officer
(incorporated herein by reference to
Exhibit (10g.) to Form 10-K for 1988,
File No. 0-994).
*(10i.) Non-Employee Directors Stock
Compensation Plan, as amended effective
July 1, 1991 (incorporated herein by
reference to Exhibit (10i.) to Form 10-K
for 1991, File No. 0-994).
*(10k.) Executive Annual Incentive Plan,
effective March 1, 1990, as amended
effective January 1, 1992 (incorporated
herein by reference to Exhibit (10k.) to
Form 10-K for 1991, File No. 0-994).
*(10l.) Employment agreement dated November 27,
1989, between the Company and an
executive officer (incorporated herein
by reference to Exhibit (10l.) to
Form 10-K for 1991, File No. 0-994).
The Company agrees to furnish the Commission, upon
request, a copy of certain instruments defining
rights of holders of long-term debt of the Company
or its consolidated subsidiaries which authorize
securities thereunder in amounts which do not
exceed 10% of the total assets of the Company.
(b) Reports on Form 8-K.
No Current Reports on Form 8-K were filed during the
quarter ended December 31, 1993.
[FN]
___________________________________
*Incorporated herein by reference as indicated.
-71-
<TABLE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
NORTHWEST NATURAL GAS COMPANY
Date: March 28, 1994 By /s/ Robert L. Ridgley
----------------------- -----------------------------
Robert L. Ridgley, President
and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the date indicated.
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Robert L. Ridgley Principal Executive Officer March 28, 1994
- ---------------------- and Director
Robert L. Ridgley
President and Chief Executive Officer
/s/ Bruce R. DeBolt Principal Financial Officer March 28, 1994
- ---------------------
Bruce R. DeBolt
Senior Vice President, Finance,
and Chief Financial Officer
/s/ D. James Wilson Principal Accounting Officer March 28, 1994
- -----------------------
D. James Wilson
Treasurer and Controller
/s/ Mary Arnstad Director )
- ---------------------- )
Mary Arnstad )
)
/s/ Thomas E. Dewey, Jr. Director )
- ------------------------ )
Thomas E. Dewey, Jr. )
)
/s/ Tod R. Hamachek Director )
- ------------------------ )
Tod R. Hamachek )
)
/s/ Richard B. Keller Director )
- ------------------------ )
Richard B. Keller )
)
/s/ Wayne D. Kuni Director )
- ------------------------ )
Wayne D. Kuni )
)
/s/ Dwight A. Sangrey Director ) March 28, 1994
- ------------------------ )
Dwight A. Sangrey )
)
/s/ Melody C. Teppola Director )
- ------------------------ )
Melody C. Teppola )
)
/s/ Russell F. Tromley Director )
- ------------------------ )
Russell F. Tromley )
)
/s/ Benjamin R. Whiteley Director )
- ------------------------ )
Benjamin R. Whiteley )
)
Director )
- ------------------------ )
William R. Wiley )
)
/s/ Carlton Woodard Director )
- ------------------------ )
Carlton Woodard )
-72-
</TABLE>
Exhibit (3b.)
BYLAWS
of
NORTHWEST
NATURAL
GAS
COMPANY
As Adopted by the Board of Directors
July 17, 1975
Amended
April 19, 1979
December 18, 1980
October 15, 1981
February 16, 1984
May 17, 1984
October 18, 1984
December 20, 1984, effective January 1, 1985
May 23, 1985
May 26, 1988
February 22, 1990
May 23, 1991
November 21, 1991
January 28, 1993, effective January 1, 1993
February 25, 1993
March 25, 1993
December 16, 1993
<PAGE>
CONTENTS
ARTICLE I.
OFFICES: Page
Section 1. Office . . . . . . . . . . . . . . . . . . . 1
Section 2. Registered Office. . . . . . . . . . . . . . 1
ARTICLE II.
MEETINGS OF SHAREHOLDERS:
Section 1. Annual Meeting . . . . . . . . . . . . . . . 1
Section 2. Special Meetings . . . . . . . . . . . . . . 1
Section 3. Notice . . . . . . . . . . . . . . . . . . . 1
Section 4. Fixing Record Date . . . . . . . . . . . . . 1
Section 5. Record of Shareholders . . . . . . . . . . . 2
Section 6. Quorum . . . . . . . . . . . . . . . . . . . 2
Section 7. Voting . . . . . . . . . . . . . . . . . . . 2
Section 8. Conduct of Meetings . . . . . . . . . . . . 2
ARTICLE III.
BOARD OF DIRECTORS:
Section 1. Directors . . . . . . . . . . . . . . . . . 2
Section 2. Chairman of the Board . . . . . . . . . . . 3
Section 3. Retired Directors . . . . . . . . . . . . . 3
Section 4. Compensation . . . . . . . . . . . . . . . . 3
ARTICLE IV.
MEETINGS OF THE BOARD OF DIRECTORS:
Section 1. Regular Meetings . . . . . . . . . . . . . . 3
Section 2. Special Meetings . . . . . . . . . . . . . . 3
Section 3. Waiver of Notice . . . . . . . . . . . . . . 3
Section 4. Quorum . . . . . . . . . . . . . . . . . . . 4
Section 5. Manner of Acting . . . . . . . . . . . . . . 4
Section 6. Action Without a Meeting . . . . . . . . . . 4
ARTICLE V.
COMMITTEES OF THE BOARD:
Section 1. Executive Committee . . . . . . . . . . . . 4
Section 2. Audit Committee . . . . . . . . . . . . . . 4
Section 3. Retirement Committee. . . . . . . . . . . . 4
Section 4. Pension Committee . . . . . . . . . . . . . 4
Section 5. Compensation Committee. . . . . . . . . . . 5
Section 6. Nominating Committee. . . . . . . . . . . . 5
Section 7. Environmental Policy Committee. . . . . . . 5
Section 8. Other Committees. . . . . . . . . . . . . . 5
Section 9. Changes of Size and Function. . . . . . . . 5
Section 10. Conduct of Meetings . . . . . . . . . . . . 5
Section 11. Compensation. . . . . . . . . . . . . . . . 5
ARTICLE VI.
NOTICES:
Section 1. Form and Manner . . . . . . . . . . . . . . 5
Section 2. Waiver. . . . . . . . . . . . . . . . . . . 5
ARTICLE VII.
OFFICERS:
Section 1. Election. . . . . . . . . . . . . . . . . . 6
Section 2. Compensation. . . . . . . . . . . . . . . . 6
Section 3. Term. . . . . . . . . . . . . . . . . . . . 6
Section 4. Removal . . . . . . . . . . . . . . . . . . 6
Section 5. President . . . . . . . . . . . . . . . . . 6
Section 6. Vice Presidents . . . . . . . . . . . . . . 6
Section 7. Secretary . . . . . . . . . . . . . . . . . 6
Section 8. Treasurer . . . . . . . . . . . . . . . . . 6
ARTICLE VIII.
CONTRACTS, LOANS, CHECKS AND DEPOSITS:
Section 1. Contracts . . . . . . . . . . . . . . . . . 7
Section 2. Loans . . . . . . . . . . . . . . . . . . . 7
Section 3. Checks and Drafts . . . . . . . . . . . . . 7
Section 4. Deposits. . . . . . . . . . . . . . . . . . 7
ARTICLE IX.
CERTIFICATES FOR SHARES AND THEIR TRANSFER
Section 1. Certificates for Shares . . . . . . . . . . 7
Section 2. Transfer. . . . . . . . . . . . . . . . . . 7
Section 3. Owner of Record . . . . . . . . . . . . . . 7
ARTICLE X.
INDEMNIFICATION AND INSURANCE:
Section 1. Indemnification . . . . . . . . . . . . . . 8
Section 2. Insurance . . . . . . . . . . . . . . . . . 8
ARTICLE XI.
SEAL . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
ARTICLE XII.
AMENDMENTS . . . . . . . . . . . . . . . . . . . . . . . . . 8
The following Bylaws were adopted by Northwest Natural Gas
Company on July 17, 1975 superseding amended Bylaws originally
adopted in conformity with an order of the District Court of the
United States for the District of Oregon enforcing a plan for
rearrangement of the Company's capital structure effective
December 31, 1951, and subsequently amended by the stockholders
on May 17, 1954, May 20, 1957, May 21, 1973, and May 20, 1974.
<PAGE>
BYLAWS
OF
NORTHWEST NATURAL GAS COMPANY
ARTICLE I.
OFFICES
SECTION 1. OFFICE. The principal office of the company
shall be located in the City of Portland, Oregon. The company
also may have offices at such other places both within and
without the State of Oregon as the board of directors from time
to time may determine.
SECTION 2. REGISTERED OFFICE. The registered office of the
company required by law to be maintained in the state shall be at
the same location as the principal office unless otherwise
designated by resolution of the board of directors.
ARTICLE II.
MEETINGS OF SHAREHOLDERS
SECTION 1. ANNUAL MEETING. The annual meeting of
shareholders of the company for the election of directors and for
the transaction of other business shall be held at the company's
office in the City of Portland, Oregon, or such other place in
that City as shall be determined by the board of directors, on
the fourth Thursday of May in each year, unless such day shall be
a legal holiday, in which event such meeting shall be held on the
next business day. If such meeting shall not be held on such day
in any year, it shall be held within 60 days thereafter on such
day as shall be fixed by the board of directors and be specified
in the notice of the meeting. Every such meeting shall be held
at the hour of two o'clock p.m., or at such other hour as shall
be fixed by the board and specified in such notice.
SECTION 2. SPECIAL MEETINGS. Special meetings of the
shareholders of the company may be called by the board of
directors or the holders of not less than one-tenth of all shares
entitled to vote at the meeting. Each special meeting shall be
held for such purposes, at such place in the City of Portland,
Oregon, and at such time as shall be specified in the notice
thereof.
SECTION 3. NOTICE. Written or printed notice stating the
place, day and hour of the meeting and, in case of a special
meeting, the purpose or purposes for which the meeting is called,
shall be delivered not less than 10 nor more than 50 days before
the date of the meeting, either personally or by mail, by or at
the direction of the board of directors or the persons calling
the meeting, to each shareholder of record entitled to vote at
such meeting.
SECTION 4. FIXING RECORD DATE. For the purpose of
determining shareholders entitled to notice of or to vote at any
meeting of shareholders, or any adjournment thereof, or entitled
to receive payment of any dividend, or in order to make a
determination of shareholders for any other proper purpose, the
board of directors may fix in advance a date as the record date
for any such determination of shareholders, such date in any case
to be not more than 50 days and, in the case of a meeting of
shareholders, not less than 10 days prior to the date on which
the particular action requiring such determination of
shareholders is to be taken. If no record date is fixed for the
determination of shareholders entitled to notice of or to vote at
a meeting of shareholders, or shareholders entitled to receive
payment of a dividend, the date on which notice of the meeting is
mailed or the date on which the resolution of the board declaring
such dividend is adopted, as the case may be, shall be the record
date for such determination of shareholders. When a
determination of shareholders entitled to vote at any meeting of
shareholders has been made as provided in this section, such
determination shall apply to any adjournment thereof.
- 1 -
SECTION 5. RECORD OF SHAREHOLDERS. The officer or agent
having charge of the transfer books for shares of the company
shall make, at least 10 days before each meeting of shareholders,
a complete record of the shareholders entitled to vote at such
meeting or any adjournment thereof, arranged in alphabetical
order with the address of and the number of shares held by each,
which record, for a period of 10 days prior to such meeting,
shall be kept on file at the registered office of the company and
shall be subject to inspection by any shareholder at any time
during usual business hours. Such record also shall be produced
and kept open at the time and place of the meeting and shall be
subject to the inspection of any shareholder during the whole
time of the meeting. The original transfer books for shares
shall be prima facie evidence as to who are the shareholders
entitled to examine such record or transfer books or to vote at
any meeting of the sharholders.
SECTION 6. QUORUM. A majority of the shares of the company
entitled to vote, represented in person or by proxy, shall
constitute a quorum at all meetings of shareholders. If a quorum
is present, in person or by proxy, the affirmative vote of a
majority of the shares represented at the meeting and entitled to
vote on the subject matter shall be the act of the shareholders,
unless the vote of a greater number, or voting by classes, is
required by law or the Restated Articles of Incorporation.
If a quorum shall not be represented at any meeting of
shareholders, the shareholders represented may adjourn the
meeting from time to time without further notice. At such
adjourned meeting, at which a quorum shall be present or
represented, any business may be transacted which might have
been transacted at the meeting as originally noticed. The
shareholders represented at a duly organized meeting may continue
to transact business until adjournment, notwithstanding the
withdrawal of enough shareholders to leave less than a quorum.
SECTION 7. VOTING. Each outstanding share, regardless of
class, shall be entitled to one vote on each matter submitted to
a vote at a meeting of shareholders, except to the extent that
the voting rights of the shares of any class or classes are
limited or denied by law or the Restated Articles of
Incorporation. At each election of directors holders of shares
of common stock have the right to cumulative voting as provided
for in the Restated Articles of Incorporation. A shareholder may
vote either in person or by proxy executed in writing by the
shareholder or by his duly authorized attorney-in-fact. Such
proxy shall be filed with the secretary of the company before or
at the time of the meeting.
SECTION 8. CONDUCT OF MEETINGS. Every meeting of
shareholders shall be presided over by the chairman of the
board, in his absence by the president, in their absence by a
vice president or, if none be present, by a chairman appointed by
the shareholders present at the meeting. The minutes of such
meeting shall be recorded by the secretary or an assistant
secretary but, if neither be present, by a secretary appointed
for that purpose by the chairman of the meeting.
ARTICLE III.
BOARD OF DIRECTORS
SECTION 1. DIRECTORS. The business and affairs of the
Company shall be managed by its board of directors. The number
of members of the board, their classification and terms of
office, and the manner of their election and removal shall be
determined as provided by the Restated Articles of Incorporation.
Directors need not be residents of the State of Oregon or
shareholders of the Company. No person who has reached the age
of 72 years shall be eligible to be elected a director, but a
director may serve until the next annual meeting of shareholders
after reaching that age.
- 2 -
SECTION 2. CHAIRMAN OF THE BOARD. The board of directors
may elect one of its members as chairman of the board. The
chairman of the board, if that position be filled, shall preside
at all meetings of the shareholders and the board of directors
and shall have such other duties and responsibilities as may be
prescribed by the board of directors. If there shall be no
chairman of the board, or in his absence or disability, the
president also shall exercise the duties and responsibilities of
that position.
SECTION 3. RETIRED DIRECTORS. Any person who, upon
retirement as a director after reaching age 72, shall have served
as a director of the company for ten or more years shall be
appointed a retired director of the company for life. Any other
person who shall have served as a director of the company may be
elected by the board as a retired director of the company for one
or more terms of one year or less. A retired director may attend
meetings of the board but shall not have the right to vote at
such meetings.
SECTION 4. COMPENSATION. Directors shall receive such
reasonable compensation for their services as may be fixed from
time to time by resolution of the board of directors, and shall
be reimbursed for their expenses properly incurred in the
performance of their duties as directors. No such payment shall
preclude any director from serving the company in any other
capacity and receiving such reasonable compensation for such
services as may be fixed by resolution of the board.
Retired directors shall receive such compensation as from
time to time may be fixed by resolution of the board of directors
as the annual retainer for members of the board of directors.
ARTICLE IV.
MEETINGS OF THE BOARD OF DIRECTORS
SECTION 1. REGULAR MEETINGS. Regular meetings of the board
of directors shall be held on the fourth Thursday of February,
April, May, July and September, and on the second Thursday of
November and the third Thursday of December, at such hour and
place as shall be specified in the notice of meeting. The date,
time and place for holding regular meetings of the board of
directors may be changed upon the giving of notice to all
directors by or at the request of the chairman of the board or
the president. The board may provide by resolution the time and
place either within or without the State of Oregon for holding of
meetings or may omit the holding of any meeting without other
notice than such resolution.
SECTION 2. SPECIAL MEETINGS. Special meetings of the board
of directors may be called by or at the request of the chairman
of the board, the president or any two directors. The person or
persons authorized to call special meetings of the board may fix
any place, either within or without the State of Oregon, as the
place for holding any special meeting of the board called by
them. Notice of the time and place of special meetings shall be
given to each director at least one day in advance by the
secretary or other officer performing his duties
SECTION 3. WAIVER OF NOTICE. Any director may waive notice
of any meeting. The attendance of a director at any meeting
shall constitute a waiver of notice of such meeting, except where
a director attends a meeting for the express purpose of objecting
to the transaction of any business because the meeting is not
lawfully called or convened. Except as otherwise provided by law
or the Restated Articles of Incorporation, neither the business
to be transacted at, nor the purpose of, any regular or special
meeting of the board of directors need be specified in the notice
of waiver of notice of such meeting.
- 3 -
SECTION 4. QUORUM. A majority of the number of directors
at any time fixed by resolution adopted by the affirmative vote
of a majority of the entire board of directors shall constitute a
quorum for the transaction of business. If a quorum shall not be
present at any meeting of directors, the directors present may
adjourn the meeting from time to time without further notice
until a quorum shall be present.
SECTION 5. MANNER OF ACTING. Except as otherwise provided
by law or the Restated Articles of Incorporation, the act of the
majority of the directors present at a meeting at which a quorum
is present shall be the act of the board of directors.
SECTION 6. ACTION WITHOUT A MEETING. Any action required
or permitted to be taken at a meeting of the board of directors
may be taken without a meeting if a consent in writing, setting
forth the action so taken, shall be signed by all of the
directors entitled to vote with respect to the subject matter
thereof.
ARTICLE V.
COMMITTEES OF THE BOARD
SECTION 1. EXECUTIVE COMMITTEE. The board of directors, at
its first meeting following the annual meeting of shareholders
each year, by resolution adopted by a majority of the board of
directors, may appoint an executive committee composed of the
chairman of the board, the president and such other number of
directors as the board may from time to time determine. The
president and chief executive officer shall act as chairman. The
committee shall have and may exercise all of the authority of the
board of directors in the management of the company, except with
respect to matters upon which by law only the board of directors
may act.
SECTION 2. AUDIT COMMITTEE. The board of directors at any
time, by resolution, may appoint an audit committee composed of
three or more directors, none of whom shall be an officer of the
company. The board shall designate one member of the committee
as chairman. The duties of the committee shall be to discuss and
review with the company's independent auditors the annual audit
of the company, including the scope of the audit, and report the
results of this review to the board; to meet with the independent
auditors at such other times as the committee shall deem to be
advisable; and to perform such other functions as the board by
resolution from time to time may direct.
SECTION 3. RETIREMENT COMMITTEE. The board of directors,
at its first meeting following the annual meeting of shareholders
each year, by resolution shall appoint a retirement committee
composed of three or more directors, the majority of whom shall
not be members under the company's Non-Bargaining Unit Employees
Retirement Plan established by the board. The duties of the
committee shall be general administration of the company's Non-
Bargaining Unit Employees Retirement Plan and the committee shall
be responsible for directing the carrying out of its provisions
as more fully set forth under the terms of the Plan.
SECTION 4. PENSION COMMITTEE. The board of directors, at
its first meeting following the annual meeting of shareholders
each year, by resolution shall appoint three or more directors to
serve on the pension committee provided for in the company's
Bargaining Unit Employees Retirement Plan established by the
board. The duties of the committee shall be general
administration of the Bargaining Unit Employees Retirement Plan
and the committee shall be responsible for directing the carrying
out of its provisions as more fully set forth under the terms of
the Plan.
- 4 -
SECTION 5. COMPENSATION COMMITTEE. The board of directors,
at its first meeting following the annual meeting of shareholders
each year, by resolution may appoint a compensation committee
composed of four or more directors, a majority of whom shall not
be officers of the company. The board shall designate one member
of the committee as chairman. The duties of the committee shall
be to discuss and review the management of the affairs of the
Company relating to personnel and their compensation and to
perform such other functions as the board by resolution from time
to time may direct.
SECTION 6. NOMINATING COMMITTEE. The board of directors at
any time, by resolution, may appoint a nominating committee
composed of four or more directors, none of whom shall be an
officer of the company. The president and chief executive
officer shall designate one member of the committee as chairman.
The duties of the committee shall be to recommend to the board
nominees for election as a director and to perform such other
functions as the board by resolution from time to time may
direct.
SECTION 7. ENVIRONMENTAL POLICY COMMITTEE. The board of
directors, at its first meeting following the annual meeting of
shareholders each year, by resolution may appoint an
environmental policy committee composed of three or more
directors, none of whom shall be officers of the company. The
board shall designate one member of the committee as chairman.
The duties of the committee shall be to develop and recommend to
the Board appropriate environmental policies and to perform such
other functions as the board by resolution from time to time may
direct.
SECTION 8. OTHER COMMITTEES. The board of directors at any
time, by resolution, may appoint from among its members such
other committees and the chairmen thereof as it may deem to be
advisable. Each such committee shall have such powers and
authority as are set forth in the resolutions pertaining thereto
from time to time adopted by the board.
SECTION 9. CHANGES OF SIZE AND FUNCTION. Subject to the
provisions of law, the board of directors shall have the power at
any time to increase or decrease the number of members of any
committee, to fill vacancies thereon, to change any members
thereof and to change the functions and terminate the existence
thereof.
SECTION 10. CONDUCT OF MEETINGS. Each committee shall
conduct its meetings in accordance with the applicable provisions
of these bylaws relating to the conduct of meetings of the board
of directors. Each committee shall adopt such further rules and
regulations regarding its conduct, keep such minutes and other
records and appoint such subcommittees and assistants as it shall
deem to be appropriate.
SECTION 11. COMPENSATION. Persons serving on any committee
shall receive such reasonable compensation for their services on
such committee as may be fixed by resolution of the board of
directors, provided that no person shall receive compensation for
his services on any committee while serving as an officer of the
company.
ARTICLE VI.
NOTICES
SECTION 1. FORM AND MANNER. Whenever, under the provisions
of law or the Restated Articles of Incorporation, notice is
required to be given to any director or shareholder, unless
otherwise specified, it shall be given in writing by mail
addressed to such director or shareholder at his or her address
as it appears on the stock transfer books or other records of the
company, with postage thereon prepaid, and such notice shall be
deemed to be delivered when deposited in the United States Mail.
Notice to directors also may be given by telephone or in any
other manner which is reasonably calculated to give adequate
notice.
SECTION 2. WAIVER. Whenever any notice whatever is
required to be given under the provisions of law, the Restated
Articles of Incorporation or these bylaws, a waiver thereof in
writing signed by the person or persons entitled to such notice,
whether before or after the time stated therein, shall be deemed
equivalent to the giving of such notice.
- 5 -
ARTICLE VII.
OFFICERS
SECTION 1. ELECTION. The board of directors, at its first
meeting following the annual meeting of shareholders each year,
shall elect one of its members as president and shall elect a
secretary. At such meeting, or at any other time it shall deem
appropriate, the board may elect one or more vice presidents and
a treasurer. The board also may elect or appoint such other
officers and agents as it may deem necessary. Any two or more
offices may be held by the same person, except the offices of
president and secretary.
SECTION 2. COMPENSATION. The officers of the company shall
receive such reasonable compensation for their services as from
time to time may be fixed by resolution of the board of
directors.
SECTION 3. TERM. The term of office of all officers shall
commence upon their election or appointment and shall continue
until the first meeting of the board of directors following the
annual meeting of shareholders and thereafter until their
successors shall be elected or until their resignation or
removal. A vacancy occurring in any office of the company for
whatever reason may be filled by the board.
SECTION 4. REMOVAL. Any officer or agent elected or
appointed by the board of directors may be removed by the board
whenever in its judgment the best interests of the company will
be served thereby but such removal shall be without prejudice to
the contract rights, if any, of the officer or agent so removed.
SECTION 5. PRESIDENT. The president shall be the chief
executive officer of the company and, subject to the control of
the board of directors, shall be responsible for the general
administration and operation of the company. He shall have such
other duties and responsibilities as may pertain to such office
or be prescribed by the board of directors. In the absence or
disability of the president, an officer designated by the board
shall exercise the duties and responsibilities of the president.
SECTION 6. VICE PRESIDENTS. Each vice president shall have
such duties and responsibilities as may be prescribed by the
board of directors and the president. The board or the president
may confer a special title upon a vice president.
SECTION 7. SECRETARY. The secretary shall record and keep
the minutes of the shareholders in one or more books provided for
that purpose; see that all notices are duly given in accordance
with the provisions of these bylaws or as required by law; and
perform such other duties as may be prescribed by the board or
the president. The secretary shall have custody of the corporate
seal of the company and shall affix the seal to any instrument
requiring it and attest the same by his signature.
The assistant secretaries shall have such duties as may be
prescribed from time to time by the board, the president or the
secretary. In the absence or disability of the secretary, his
duties shall be performed by an assistant secretary.
SECTION 8. TREASURER. The treasurer shall have charge and
custody and be responsible for all funds and securities of the
company; deposit all moneys and other valuable effects in the
name and to the credit of the company in such depositories as may
be designated by the board of directors; and disburse the funds
of the company as may be authorized by the board and take proper
vouchers for such disbursements. The treasurer shall have such
other duties as may be prescribed from time to time by the board
or the president. In the absence or disability of the treasurer,
his duties shall be performed by an assistant treasurer.
- 6 -
ARTICLE VIII.
CONTRACTS, LOANS, CHECKS AND DEPOSITS
SECTION 1. CONTRACTS. The board of directors by resolution
may authorize any officer or officers, agent or agents, to enter
into any contract or execute and deliver any instrument in the
name of and on behalf of the company, and such authority may be
general or confined to specific instances.
SECTION 2. LOANS. No loans shall be contracted on behalf
of the company and no evidences of indebtedness shall be issued
in its name unless authorized by a resolution of the board of
directors. Such authority may be general or confined to specific
instances.
SECTION 3. CHECKS AND DRAFTS. All checks, drafts or other
orders for the payment of money, notes or other evidences of
indebtedness issued in the name of the company shall be signed by
such officer or officers, agent or agents of the company and in
such manner as shall from time to time be determined by
resolution of the board of directors.
SECTION 4. DEPOSITS. All funds of the company not
otherwise employed shall be deposited from time to time to the
credit of the company in such banks, trust companies or other
depositories as the board of directors or officers of the company
designated by the board may select, or be invested as authorized
by the board.
ARTICLE IX.
CERTIFICATES FOR SHARES AND THEIR TRANSFER
SECTION 1. CERTIFICATES FOR SHARES. Certificates
representing shares of the company shall be issued only for whole
numbers of shares and shall be in such form as the board of
directors may, from time to time, prescribe in accordance with
the laws of the State of Oregon. Such certificates shall be
signed by the president or a vice president and by the secretary
or an assistant secretary and sealed with the corporate seal or a
facsimile thereof. The signatures of such officers upon a
certificate may be facsimiles thereof. In case of a lost,
destroyed or mutilated certificate a new one may be issued
therefor upon such terms and indemnity to the company as the
board may authorize.
SECTION 2. TRANSFER. Shares of stock of the company shall
be transferable on the books of the company by the holder of
record thereof, or by his legal representative who shall furnish
proper evidence of authority to transfer, or by his attorney
thereunto authorized by duly executed power of attorney, and on
surrender for cancellation of the certificates for such shares.
The board of directors may appoint one or more transfer agents
and registrars of stock of the company.
SECTION 3. OWNER OF RECORD. The company shall be entitled
to recognize the exclusive right of a person registered on its
books as the owner of shares to receive dividends and to vote as
such owner and shall not be bound to recognize any equitable or
other claim to or interest in such share or shares on the part of
any other person, whether or not it shall have express or other
notice thereof, except as otherwise provided by law.
- 7 -
ARTICLE X.
INDEMNIFICATION AND INSURANCE
SECTION 1. INDEMNIFICATION. The company shall indemnify
any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that he is or was director,
officer, employee or agent of the company, or is or was serving
at the request of the company as a director, officer, employee,
agent or fiduciary of another corporation, partnership, joint
venture, trust or other enterprise or any employee benefit plan,
against expenses (including attorney's fees), judgments, fines
and amounts paid in settlement actually and reasonably incurred
by him in connection with the defense or settlement of such
action, suit or proceeding to the fullest extent permissible
under the Oregon Business Corporation Act or the indemnification
provisions of any successor Act. The foregoing rights of
indemnification shall not be exclusive of any other rights to
which any such person so indemnified may be entitled, under any
agreement, vote of shareholders or disinterested directors or
otherwise, both as to action in his official capacity and as to
action in another capacity while holding such office; shall
continue as to a person who has ceased to be a director, officer,
employee or agent; and shall inure to the benefit of the heirs,
executors and administrators of such a person.
SECTION 2. INSURANCE. The company may purchase and
maintain insurance (and pay the entire premium therefor) on
behalf of any person who is or was a director, officer, employee
or agent of the company, or is or was serving at the request of
the company as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other
enterprise against any liability asserted against him and
incurred by him in any such capacity or arising out of his status
as such, whether or not the company would have the power to
indemnify him against such liability under the provisions of the
Oregon Business Corporation Act or any successor Act; and on
behalf of any person who is or was a fiduciary under the Employee
Retirement Income Security Act of 1974 with regard to an employee
benefit plan of the company against any liability asserted
against him and incurred by him in his fiduciary capacity.
ARTICLE XI.
SEAL
The corporate seal of the company shall be circular in form
and shall bear an inscription containing the name of the company,
the year of its organization, the state of its incorporation and
the words "Corporate Seal."
ARTICLE XII.
AMENDMENTS
These bylaws, or any of them, may be altered, amended or
repealed, or new bylaws adopted, by resolution of a majority of
the board of directors, subject to repeal or change by action of
the shareholders.
- 8 -
Exhibit (4a.(1))
[CONFORMED COPY]
NORTHWEST NATURAL GAS COMPANY
TO
BANKERS TRUST COMPANY
AND
STANLEY BURG (SUCCESSOR TO R. G. PAGE AND J. C. KENNEDY),
As Trustees under the Mortgage and
Deed of Trust, dated as of July 1,
1946, of Portland Gas & Coke Company
(now Northwest Natural Gas Company)
TWENTIETH SUPPLEMENTAL INDENTURE
providing, among other things, for
First Mortgage Bonds, designated
Secured Medium-Term Notes, Series B
-------------------
Dated as of June 1, 1993
===============================================================
TWENTIETH SUPPLEMENTAL INDENTURE
INDENTURE, dated as of the 1st day of June, 1993,
made and entered into by and between NORTHWEST NATURAL GAS
COMPANY (formerly Portland Gas & Coke Company), a corporation of
the State of Oregon, whose post office address is One Pacific
Square, 220 N.W. Second Avenue, Portland, Oregon 97209
(hereinafter sometimes called the Company), party of the first
part, and BANKERS TRUST COMPANY, a corporation of the State of
New York, whose post office address is Four Albany Street, New
York, New York 10006 (hereinafter sometimes called the Corporate
Trustee) and STANLEY BURG (successor to R. G. PAGE and J. C.
KENNEDY), whose post office address is c/o Bankers Trust Company,
Four Albany Street, New York, New York 10006 (hereinafter
sometimes called the Co-Trustee), parties of the second part (the
Corporate Trustee and the Co-Trustee being hereinafter together
sometimes called the Trustees), as Trustees under the Mortgage
and Deed of Trust, dated as of July 1, 1946 (hereinafter called
the Mortgage), executed and delivered by Portland Gas & Coke
Company (now Northwest Natural Gas Company) to secure the payment
of bonds issued or to be issued under and in accordance with the
provisions of the Mortgage, this indenture (hereinafter called
Twentieth Supplemental Indenture) being supplemental thereto;
WHEREAS the Mortgage was or is to be recorded in the
official records of various counties in the States of Oregon and
Washington which counties include or will include all counties in
which this Twentieth Supplemental Indenture is to be recorded;
and
WHEREAS by the Mortgage the Company covenanted that
it would execute and deliver such supplemental indenture or
indentures and such further instruments and do such further acts
as might be necessary or proper to carry out more effectually the
purposes of the Mortgage and to make subject to the lien of the
Mortgage any property thereafter acquired, made or constructed
and intended to be subject to the lien thereof; and
WHEREAS the Company executed and delivered to the
Trustees its First Supplemental Indenture, dated as of June 1,
1949 (hereinafter called its First Supplemental Indenture), its
Second Supplemental Indenture, dated as of March 1, 1954
(hereinafter called its Second Supplemental Indenture), its Third
Supplemental Indenture, dated as of April 1, 1956 (hereinafter
called its Third Supplemental Indenture), its Fourth Supplemental
Indenture, dated as of February 1, 1959 (hereinafter called its
Fourth Supplemental Indenture), its Fifth Supplemental Indenture,
dated as of July 1, 1961 (hereinafter called its Fifth
Supplemental Indenture), its Sixth Supplemental Indenture, dated
as of January 1, 1964 (hereinafter called its Sixth Supplemental
Indenture), its Seventh Supplemental Indenture, dated as of March
1, 1966 (hereinafter
- 1 -
called its Seventh Supplemental Indenture), its Eighth
Supplemental Indenture, dated as of December 1, 1969 (hereinafter
called its Eighth Supplemental Indenture), its Ninth Supplemental
Indenture, dated as of April 1, 1971 (hereinafter called its
Ninth Supplemental Indenture), its Tenth Supplemental Indenture,
dated as of January 1, 1975 (hereinafter called its Tenth
Supplemental Indenture), its Eleventh Supplemental Indenture,
dated as of December 1, 1975 (hereinafter called its Eleventh
Supplemental Indenture), its Twelfth Supplemental Indenture,
dated as of July 1, 1981 (hereinafter called its Twelfth
Supplemental Indenture), its Thirteenth Supplemental Indenture,
dated as of June 1, 1985 (hereinafter called its Thirteenth
Supplemental Indenture), its Fourteenth Supplemental Indenture,
dated as of November 1, 1985 (hereinafter called its Fourteenth
Supplemental Indenture), its Fifteenth Supplemental Indenture,
dated as of July 1, 1986 (hereinafter called its Fifteenth
Supplemental Indenture), its Sixteenth Supplemental Indenture,
dated as of November 1, 1988 (hereinafter called its Sixteenth
Supplemental Indenture), its Seventeenth Supplemental Indenture,
dated as of October 1, 1989 (hereinafter called its Seventeenth
Supplemental Indenture), and its Eighteenth Supplemental
Indenture, dated as of July 1, 1990 (hereinafter called its
Eighteenth Supplemental Indenture); and
WHEREAS said First through Eighteenth Supplemental
Indentures were filed for record, and were recorded and indexed,
as a mortgage of both real and personal property, in the official
records of various counties in the States of Oregon and
Washington which counties include or will include all counties in
which this Twentieth Supplemental Indenture is to be recorded;
and
WHEREAS the Company executed and delivered to the
Trustees its Nineteenth Supplemental Indenture, dated as of June
1, 1991 (hereinafter called its Nineteenth Supplemental
Indenture); and
WHEREAS said Nineteenth Supplemental Indenture was
filed for record, and was recorded and indexed, as a mortgage of
both real and personal property, and financing statements were
filed, in the official records of the several counties and other
offices in the States of Oregon and Washington listed below, as
follows:
- 2 -
OREGON
-------
Real Property Mortgage Records
-------------------------------
Book, Film
County Date Recorded or Reel Page
------------ ------------- ----------- ----
Benton June 14, 1991 M-135990-91 --
Clackamas June 14, 1991 91-28344 --
Clatsop June 14, 1991 760 836
Columbia June 14, 1991 91-3499 --
Coos June 14, 1991 91-06-0532 --
Douglas June 14, 1991 1140 373
Hood River June 18, 1991 911493 --
Lane June 17, 1991 9127918 --
Lincoln June 14, 1991 230 2261
Linn June 14, 1991 566 2
Marion June 14, 1991 861 37
Multnomah June 14, 1991 2424 970
Polk June 14, 1991 242 1891
Tillamook June 14, 1991 335 496
Wasco June 14, 1991 912001 --
Washington June 14, 1991 91030895 --
Yamhill June 14, 1991 F255P2185 --
Filed as a Financing Statement
-------------------------------
Office Date Filed for Record File
No.
------ --------------------- -------
Secretary of State June 14, 1991 P56754
- 3 -
WASHINGTON
-----------
Real Property Mortgage Records
------------------------------
Book, Film
County Date Recorded or Reel Page
------ ------------- ---------- ----
Clark June 14, 1991 9106140143 --
Klickitat June 14, 1991 273 904
Skamania June 18, 1991 123 757
Filed as a Financing Statement
-------------------------------
Office Date Filed for Record File No.
------------------ --------------------- -----------
Secretary of State June 17, 1991 91-168-0134
- 4 -
WHEREAS an instrument dated as of June 14, 1951, was
executed by the Company appointing J. C. KENNEDY as Co-Trustee in
succession to said R. G. PAGE (resigned) under the Mortgage and
by J. C. KENNEDY accepting the appointment as Co-Trustee under
the Mortgage in succession to the said R. G. PAGE, which
instrument was recorded in various counties in the States of
Oregon and Washington; and
WHEREAS, in the Ninth Supplemental Indenture STANLEY
BURG was appointed by the Company as Co-Trustee under the
Mortgage in succession to said J. C. KENNEDY (resigned) and in
the Ninth Supplemental Indenture STANLEY BURG accepted such
appointment as Co-Trustee under the Mortgage in succession to
said J. C. KENNEDY; and
WHEREAS in addition to the property described in the
Mortgage, as heretofore supplemented, the Company has acquired
certain other property, rights and interests in property; and
WHEREAS, the Company has heretofore issued, in
accordance with the provisions of the Mortgage, as supplemented,
and on the date hereof there remain outstanding, the following
series of First Mortgage Bonds:
Principal Amount
Series Outstanding
- -------------------------------- ---------------
8-5/8% Series due 1996.................. $11,658,000
9-3/8% Series due 2011.................. $46,000,000
9.80% Series due 2018................... $24,938,000
9-1/8% Series due 2019.................. $25,000,000
9-3/4% Series due 2015.................. $50,000,000
Secured Medium-Term Notes, Series A..... $50,000,000
; and
WHEREAS Section 8 of the Mortgage provides that the
form of each series of bonds (other than the First Series) issued
thereunder shall be established by Resolution of the Board of
Directors of the Company; that the form of such series, as
established by said Board of Directors, shall specify the
descriptive title of the bonds and various other terms thereof;
and that such Series may also contain such provisions not
inconsistent with the provisions of the Mortgage as the Board of
Directors may, in its discretion, cause to be inserted therein
expressing or referring to the terms and conditions upon which
such bonds are to be issued and/or secured under the Mortgage;
and
- 5 -
WHEREAS Section 120 of the Mortgage provides, among
other things, that any power, privilege or right expressly or
impliedly reserved to or in any way conferred upon the Company by
any provision of the Mortgage, whether such power, privilege or
right is in any way restricted or is unrestricted, may (to the
extent permitted by law) be in whole or in part waived or
surrendered or subjected to any restriction if at the time
unrestricted or to additional restriction if already restricted,
and the Company may enter into any further covenants, limitations
or restrictions for the benefit of any one or more series of
bonds issued thereunder, or the Company may cure any ambiguity
contained therein or in any supplemental indenture or may (in
lieu of establishment by Resolution as provided in Section 8 of
the Mortgage) establish the terms and provisions of any series of
bonds other than said First Series, by an instrument in writing
executed and acknowledged by the Company in such manner as would
be necessary to entitle a conveyance of real estate to record in
all of the states in which any property at the time subject to
the lien of the Mortgage shall be situated; and
WHEREAS the Company now desires to create a new series
of bonds and (pursuant to the provisions of Section 120 of the
Mortgage) to add to its covenants and agreements contained in the
Mortgage, as heretofore supplemented, certain other covenants and
agreements to be observed by it and to alter and amend in certain
respects the covenants and provisions contained in the Mortgage,
as heretofore supplemented and amended; and
WHEREAS the execution and delivery by the Company of
this Twentieth Supplemental Indenture, and the terms of the bonds
of the Twenty-First Series hereinafter referred to, have been
duly authorized by the Board of Directors of the Company by
appropriate resolutions of said Board of Directors;
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
That Northwest Natural Gas Company, in consideration
of the premises and of One Dollar to it duly paid by the Trustees
at or before the ensealing and delivery of these presents, the
receipt whereof is hereby acknowledged, and in further assurance
of the estate, title and rights of the Trustees, and in order
further to secure the payment both of the principal of and
interest and premium, if any, on the bonds from time to time
issued under the Mortgage, according to their tenor and effect,
and the performance of all the provisions of the Mortgage
(including any instruments supplemental thereto and any
modification made as in the Mortgage provided) and of said bonds,
hereby grants, bargains, sells, releases, conveys, assigns,
transfers, mortgages, pledges, sets over and confirms (subject,
however, to Excepted Encumbrances, as defined in Section 6 of the
Mortgage) unto Stanley Burg and (to the
- 6 -
extent of its legal capacity to hold the same for the purposes
hereof) to Bankers Trust Company, as Trustees under the Mortgage,
and to their successor or successors in said trust, and to said
Trustees and their successors and assigns forever, all property,
real, personal and mixed, acquired by the Company after the date
of the Mortgage, of the kind or nature specifically mentioned in
Article XXI of the Mortgage or of any other kind or nature
(except any herein or in the Mortgage expressly excepted) now
owned or, subject to the provisions of subsection (I) of Section
87 of the Mortgage, hereafter acquired by the Company (by
purchase, consolidation, merger, donation, construction, erection
or in any other way) and wheresoever situated, including (without
in anywise limiting or impairing by the enumeration of the same
the scope and intent of the foregoing) all lands, gas plants, by-
product plants, gas holders, gas mains and pipes; all power
sites, water rights, reservoirs, canals, raceways, dams,
aqueducts, and all other rights or means for appropriating,
conveying, storing and supplying water; all rights of way and
roads; all plants for the generation of electricity by steam,
water and/or other power; all power houses, street lighting
systems, standards and other equipment incidental thereto,
telephone, radio, television and air-conditioning systems and
equipment incidental thereto, water works, water systems, steam
heat and hot water plants, substations, lines, service and supply
systems, bridges, culverts, tracts, ice or refrigeration plants
and equipment, offices, buildings and other structures and the
equipment thereof; all machinery, engines, boilers, dynamos, gas,
electric and other machines, regulators, meters, transformers,
generators, motors, gas, electrical and mechanical appliances,
conduits, cables, gas, water, steam heat or other pipes, service
pipes, fittings, valves and connections, pole and transmission
lines, wires, cables, tools, implements, apparatus, furniture and
chattels; all franchises, consents or permits; all lines for the
transmission and distribution of gas, electric current, steam
heat or water for any purpose including mains, pipes, conduits,
towers, poles, wires, cables, ducts and all apparatus for use in
connection therewith; all real estate, lands, easements,
servitudes, licenses, permits, franchises, privileges, rights of
way and other rights in or relating to public or private
property, real or personal, or the occupancy of such property and
(except as herein or in the Mortgage, as heretofore supplemented,
expressly excepted) all right, title and interest the Company may
now have or may hereafter acquire in and to any and all property
of any kind or nature wheresoever situated.
TOGETHER WITH all and singular the tenements,
hereditaments, prescriptions, servitudes and appurtenances
belonging or in anywise appertaining to the aforementioned
property or any part thereof, with the reversion and reversions,
remainder and remainders and (subject to the provisions of
Section 57 of the Mortgage) the tolls, rents, revenues, issues,
earnings, income,
- 7 -
product and profits thereof, and all the estate, right, title and
interest and claim whatsoever, at law as well as in equity, which
the Company now has or may hereafter acquire in and to the
aforementioned property and franchises and every part and parcel
thereof.
IT IS HEREBY AGREED by the Company that, subject to the
provisions of subsection (I) of Section 87 of the Mortgage, all
the property, rights, and franchises acquired by the Company (by
purchase, consolidation, merger, donation, construction, erection
or in any other way) after the date hereof, except any herein or
in the Mortgage, as heretofore supplemented, expressly excepted,
shall be and are as fully granted and conveyed hereby and by the
Mortgage, and as fully embraced within the lien hereof and the
lien of the Mortgage, as supplemented, as if such property,
rights and franchises were now owned by the Company and were
specifically described herein or in the Mortgage, as heretofore
supplemented, and conveyed hereby or thereby. Provided that the
following are not and are not intended to be now or hereafter
granted, bargained, sold, released, conveyed, assigned,
transferred, mortgaged, pledged, set over or confirmed hereunder
and are hereby expressly excepted from the lien and operation of
this Twentieth Supplemental Indenture and from the lien and
operation of the Mortgage, as heretofore supplemented, viz: (1)
cash, shares of stock, bonds, notes and other obligations and
other securities not hereafter specifically pledged, paid,
deposited, delivered or held under the Mortgage, as heretofore
supplemented, or covenanted so to be; (2) merchandise, equipment,
apparatus, materials or supplies held for the purpose of sale or
other disposition in the usual course of business; fuel, oil and
similar materials and supplies consumable in the operation of any
of the properties of the Company; all aircraft, tractors, rolling
stock, trolley coaches, buses, motor coaches, automobiles, motor
trucks, and other vehicles and materials and supplies held for
the purpose of repairing or replacing (in whole or in part) any
of the same; (3) bills, notes and accounts receivable, judgments,
demands and choses in action, and all contracts, leases and
operating agreements not specifically pledged under the Mortgage,
as heretofore supplemented, or covenanted so to be; (4) the last
day of the term of any lease or leasehold which may be or become
subject to the lien of the Mortgage; (5) gas, petroleum, carbon,
chemicals, light oils, tar products, electric energy, steam,
water, ice, and other materials or products, manufactured,
stored, generated, produced, purchased or acquired by the Company
for sale, distribution or use in the ordinary course of its
business; all timber, minerals, mineral rights and royalties and
all Natural Gas and Oil Production Property, as defined in
Section 4 of the Mortgage; and (6) the Company's franchise to be
a corporation; provided, however, that the property and rights
expressly excepted from the lien and operation of this Twentieth
Supplemental Indenture and from the lien and operation of the
- 8 -
Mortgage, as heretofore supplemented, in the above subdivisions
(2) and (3) shall (to the extent permitted by law) cease to be so
excepted in the event and as of the date that either or both of
the Trustees or a receiver or trustee shall enter upon and take
possession of the Mortgaged and Pledged Property in the manner
provided in Article XIII of the Mortgage by reason of the
occurrence of a Default as defined in Section 65 thereof.
TO HAVE AND TO HOLD all such properties, real, personal
and mixed, granted, bargained, sold, released, conveyed,
assigned, transferred, mortgaged, pledged, set over or confirmed
by the Company as aforesaid, or intended so to be, unto Stanley
Burg and (to the extent of its legal capacity to hold the same
for the purposes hereof) to Bankers Trust Company, as Trustees,
and their successors and assigns forever.
IN TRUST NEVERTHELESS, for the same purposes and upon
the same terms, trusts and conditions and subject to and with the
same provisos and covenants as are set forth in the Mortgage, as
heretofore supplemented, this Twentieth Supplemental Indenture
being supplemental thereto.
AND IT IS HEREBY COVENANTED by the Company that all the
terms, conditions, provisos, covenants and provisions contained
in the Mortgage, as heretofore supplemented, shall affect and
apply to the property hereinbefore described and conveyed, and to
the estates, rights, obligations and duties of the Company and
the Trustees and the beneficiaries of the trust with respect to
said property, and to the Trustees and their successors in the
trust, in the same manner and with the same effect as if the said
property had been owned by the Company at the time of the
execution of the Mortgage, and had been specifically and at
length described in and conveyed to said Trustees by the Mortgage
as a part of the property therein stated to be conveyed.
The Company further covenants and agrees to and with
the Trustees and their successors in said trust under the
Mortgage, as follows:
ARTICLE I.
Twenty-First Series of Bonds.
SECTION 1.0.1. There shall be a series of bonds
designated "Secured Medium-Term Notes, Series B" (herein
sometimes referred to as the "Twenty-first Series"), each of
which shall also bear the descriptive title "First Mortgage
Bond", and the form thereof, which shall be established by
Resolution of the Board of Directors of the Company, shall
contain suitable provisions with
- 9 -
respect to the matters hereinafter in this Article I specified.
Bonds of the Twenty-first Series shall be issued from time to
time as fully registered bonds in denominations of One Thousand
Dollars and, at the option of the Company, in any multiple or
multiples of One Thousand Dollars (the exercise of such option to
be evidenced by the execution and delivery thereof); each bond of
the Twenty-first Series shall mature on such date, shall bear
interest at such rate or rates (which may be either fixed or
variable) and have such other terms and provisions not
inconsistent with the Mortgage as the Board of Directors may
determine in accordance with a Resolution filed with the
Corporate Trustee referring to this Twentieth Supplemental
Indenture; interest on each bond of the Twenty-first Series which
bears interest at either a fixed rate or a variable rate shall be
payable on the dates which shall be established prior to the date
of first authentication of such bond and set forth in such bond
and at maturity (each an interest payment date). Notwithstanding
the foregoing, so long as there shall be no existing default in
the payment of interest on the bonds of the Twenty-first Series
having the same designated interest rate, interest payment dates
and maturity, each of such bonds authenticated by the Corporate
Trustee after the Record Date for any interest payment date for
such bonds, and prior to such interest payment date (unless the
Issue Date is after such Record Date), shall be dated the date of
authentication, but shall bear interest from such interest
payment date, and the person in whose name such bond shall have
been registered at the close of business on such Record Date
shall be entitled to receive the interest payable on such
interest payment date, notwithstanding the cancellation of such
bond upon any transfer or exchange thereof subsequent to such
Record Date and on or prior to such interest payment date;
provided, that, (i) if the Issue Date of bonds of the Twenty-
first Series having the same designated interest rate, interest
payment dates and maturity shall be after a Record Date and prior
to the corresponding interest payment date, such bonds shall bear
interest from the Issue Date, but payment of interest shall
commence on the second interest payment date succeeding the Issue
Date, and (ii) interest payable on the maturity date will be
payable to the person to whom the principal thereof shall be
payable. "Record Date" for bonds of the Twenty-first Series
having the same designated interest rate, interest payment dates
and maturity shall mean (A) the date which shall be established
prior to the date of first authentication of such bonds and set
forth in such bonds, or (B) if no such date shall be established
with respect to such bonds, the date 15 calendar days prior to
any interest payment date for such bonds. "Issue Date" with
respect to bonds of the Twenty-first Series having the same
designated interest rate, interest payment dates and maturity
shall mean (a) the date which shall be established prior to the
date of first authentication of such bonds and set forth in such
bonds, or (b) if no such date shall be established with respect
to such bonds, the
- 10 -
date of first authentication of such bonds. The principal of,
and premium, if any, and interest on, each bond of the Twenty-
first Series shall be payable at the office or agency of the
Company in the Borough of Manhattan, The City of New York, in
such coin or currency of the United States of America as at the
time of payment is legal tender for public and private debts.
Bonds of the Twenty-first Series shall be dated as in Section 10
of the Mortgage provided.
(I) Bonds of the Twenty-first Series shall be
redeemable either at the option of the Company or pursuant to the
requirements of the Mortgage, in whole at any time, or, if
specified on the face of any bond of the Twenty-first Series, in
part from time to time, prior to maturity, upon notice, as
provided in Section 52 of the Mortgage, mailed at least thirty
(30) days prior to the date fixed for redemption, as the Board of
Directors may determine in accordance with a Resolution filed
with the Corporate Trustee referring to this Twentieth
Supplemental Indenture; provided, however, that bonds of the
Twenty-first Series shall not be redeemable pursuant to Section
64 of the Mortgage.
(II) At the option of the registered owner, any bonds
of the Twenty-first Series, upon surrender thereof, for
cancellation, at the office or agency of the Company in the
Borough of Manhattan, The City of New York, shall (subject to the
provisions of Section 12 of the Mortgage) be exchangeable for a
like aggregate principal amount of bonds of the same series of
other authorized denominations which have the same Issue Date,
maturity date, and redemption provisions, if any, and which bear
interest at the same rate.
Transfers of bonds of the Twenty-first Series may be
registered (subject to the provisions of Section 12 of the
Mortgage) at the office or agency of the Company in the Borough
of Manhattan, The City of New York.
Upon any registration of transfer or exchange of bonds
of the Twenty-first Series, the Company may make a charge
therefor sufficient to reimburse it for any tax or taxes or other
governmental charge, as provided in Section 12 of the Mortgage,
but the Company hereby waives any right to make a charge in
addition thereto for any registration of exchange or transfer of
bonds of the Twenty-first Series.
ARTICLE II.
Miscellaneous Provisions.
SECTION 2.0.1. Subject to the amendments provided for
in this Twentieth Supplemental Indenture, the terms defined in
the
- 11 -
Mortgage, as heretofore supplemented, shall, for all purposes of
this Twentieth Supplemental Indenture, have the meanings
specified in the Mortgage, as heretofore supplemented.
SECTION 2.0.2. The holders of bonds of the Twenty-
first Series consent that the Company may, but shall not be
obligated to, fix a record date for the purpose of determining
the holders of bonds of the Twenty-first Series entitled to
consent to any amendment, supplement or waiver. If a record date
is fixed, those persons who were holders at such record date (or
their duly designated proxies), and only those persons, shall be
entitled to consent to such amendment, supplement or waiver or to
revoke any consent previously given, whether or not such persons
continue to be holders after such record date. No such consent
shall be valid or effective for more than 90 days after such
record date.
SECTION 2.0.3. The Trustees hereby accept the trusts
hereby declared, provided, created or supplemented, and agree to
perform the same upon the terms and conditions herein and in the
Mortgage, as heretofore supplemented, set forth, including the
following:
The Trustees shall not be responsible in any manner
whatsoever for or in respect of the validity or sufficiency of
this Twentieth Supplemental Indenture or for or in respect of the
recitals contained herein, all of which recitals are made by the
Company solely. In general each and every term and condition
contained in Article XVII of the Mortgage shall apply to and form
part of this Twentieth Supplemental Indenture with the same force
and effect as if the same were herein set forth in full, with
such omissions, variations and insertions, if any, as may be
appropriate to make the same conform to the provisions of this
Twentieth Supplemental Indenture.
SECTION 2.0.4. Whenever in this Twentieth Supplemental
Indenture any of the parties hereto is named or referred to, this
shall, subject to the provisions of Articles XVI and XVII of the
Mortgage, be deemed to include the successors or assigns of such
party, and all the covenants and agreements in this Twentieth
Supplemental Indenture contained by or on behalf of the Company
or by or on behalf of the Trustees shall bind and inure to the
benefit of the respective successors and assigns of such parties
whether so expressed or not.
SECTION 2.0.5. Nothing in this Twentieth Supplemental
Indenture, expressed or implied, is intended, or shall be
construed, to confer upon, or to give to, any person, firm or
corporation, other than the parties hereto and the holders of the
bonds and coupons outstanding under the Mortgage, any right,
remedy, or claim under or by reason of this Twentieth
Supplemental
- 12 -
Indenture or any covenant, condition, stipulation, promise or
agreement hereof, and all the covenants, conditions,
stipulations, promises and agreements by or on behalf of the
Company as set forth in this Twentieth Supplemental Indenture
shall be for the sole and exclusive benefit of the parties
hereto, and of the holders of the bonds and of the coupons
outstanding under the Mortgage.
SECTION 2.0.6. Except to the extent specifically
provided herein, no provision of this Twentieth Supplemental
Indenture is intended to reinstate any provisions in the Mortgage
which were amended and superseded by the amendments to the Trust
Indenture Act of 1939 effective as of November 15, 1990.
SECTION 2.0.7. This Twentieth Supplemental Indenture
has been executed in several identical counterparts, each of
which shall be an original and all of which shall constitute but
one and the same instrument.
IN WITNESS WHEREOF, Northwest Natural Gas Company,
party hereto of the first part, has caused its corporate name to
be hereunto affixed, and this instrument to be signed and sealed
by its President or one of its Vice Presidents, and its corporate
seal to be attested by its Secretary or one of its Assistant
Secretaries for and in its behalf on the 14th day of June, 1993,
as of June 1, 1993, in Portland, Oregon; Bankers Trust Company,
one of the parties hereto of the second part, has caused its
corporate name to be hereunto affixed, and this instrument to be
signed and sealed by one of its Vice Presidents or one of its
Assistant Vice Presidents and its corporate seal to be attested
by one of its Assistant Secretaries on the 14th day of June,
1993, as of June 1, 1993, in The City of New York; and Stanley
Burg, one of the parties hereto of the second part, has hereunto
set his hand and affixed his seal, in The City of New York, on
the 14th day of June, 1993, as of June 1, 1993.
NORTHWEST NATURAL GAS COMPANY
By /s /Bruce R. DeBolt
----------------------------
Senior Vice President and
Chief Financial Officer
- 13 -
Attest:
/s/ C. J. Rue
------------------
Secretary
Executed, sealed and delivered by
NORTHWEST NATURAL GAS COMPANY in the
presence of:
/s/ P. L. Myers
-------------------------
/s/ Lou-Wayne Steiger
-------------------------
- 14 -
BANKERS TRUST COMPANY, as Trustee,
By /s/ Samir Pandiri
--------------------------
Assistant Vice President
Attest:
/s/ Shikha Dombek
---------------------
Assistant Secretary
/s/ Stanley Burg
--------------------------
STANLEY BURG, as Trustee
Executed, sealed and delivered
by BANKERS TRUST COMPANY and
STANLEY BURG in the presence
of:
/s/ Kenwyn Hackshaw
- -----------------------------
/s/ John Florio
- -----------------------------
- 15 -
STATE OF OREGON )
: ss.:
COUNTY OF MULTNOMAH )
June 14, A.D. 1993.
Before me personally appeared BRUCE R. DEBOLT, who, being
duly sworn, did say that he is Senior Vice President and Chief
Financial Officer, of NORTHWEST NATURAL GAS COMPANY and that the
seal affixed to the foregoing instrument is the corporate seal of
said Corporation and that said instrument was signed and sealed
in behalf of said Corporation by authority of its Board of
Directors; and he acknowledged said instrument to be its
voluntary act and deed.
On this 14th day of June, 1993, before me personally
appeared BRUCE R. DEBOLT, to me known to be Senior Vice President
and Chief Financial Officer of NORTHWEST NATURAL GAS COMPANY, one
of the corporations that executed the within and foregoing
instrument, and acknowledged said instrument to be the free and
voluntary act and deed of said Corporation, for the uses and
purposes therein mentioned, and on oath stated that he was
authorized to execute said instrument and that the seal affixed
is the corporate seal of said Corporation.
IN WITNESS WHEREOF I have hereunto set my hand and
affixed my official seal the day and year first above written.
/s/ Virginia V. Burgess
-----------------------------
Virginia V. Burgess
Notary Public - Oregon
Commission No. 004344
My Commission Expires March 24, 1995
- 16 -
STATE OF NEW YORK )
: ss.:
COUNTY OF NEW YORK )
June 14, A.D. 1993.
Before me personally appeared SAMIR PANDIRI, who, being
duly sworn, did say that he is an Assistant Vice President of
BANKERS TRUST COMPANY and that the seal affixed to the foregoing
instrument is the corporate seal of said Corporation and that
said instrument was signed and sealed in behalf of said
Corporation by authority of its Board of Directors; and he
acknowledged said instrument to be its voluntary act and deed.
On this 14th day of June, 1993, before me personally
appeared SAMIR PANDIRI, to me known to be an Assistant Vice
President of BANKERS TRUST COMPANY, one of the corporations that
executed the within and foregoing instrument, and acknowledged
said instrument to be the free and voluntary act and deed of said
Corporation, for the uses and purposes therein mentioned, and on
oath stated that he was authorized to execute said instrument and
that the seal affixed is the corporate seal of said Corporation.
IN WITNESS WHEREOF I have hereunto set my hand and
affixed my official seal the day and year first above written.
Marjorie Stanley
---------------------------
Marjorie Stanley
Notary Public, State of New York
No. 41-4986405
My Commission Expires 9/16/93
- 17 -
STATE OF NEW YORK )
: ss.:
COUNTY OF NEW YORK )
June 14, A.D. 1993.
Before me personally appeared the above-named STANLEY
BURG and acknowledged the foregoing instrument to be his
voluntary act and deed.
On this day personally appeared before me STANLEY BURG to
me known to be the individual described in and who executed the
within and foregoing instrument, and acknowledged that he signed
the same as his free and voluntary act and deed, for the uses and
purposes therein mentioned.
Given under my hand and official seal this 14th day of
June, 1993.
/s/ Marjorie Stanley
---------------------------
Marjorie Stanley
Notary Public, State of New York
No. 41-4986405
My Commission Expires 9/16/93
- 18 -
Exhibit (4e.)
NORTHWEST NATURAL GAS COMPANY
220 N. W. Second Avenue
Portland, Oregon 97209
(503) 226-4211
OFFICERS' CERTIFICATE
(Under Sections 201 and 301 of the Indenture
referred to herein of Northwest Natural
Gas Company)
Pursuant to Sections 201 and 301 of the Indenture,
dated as of June 1, 1991 (the "Indenture"), from Northwest
Natural Gas Company (the "Company") to Bankers Trust Company, as
trustee (the "Trustee"), and pursuant to the resolutions of the
Company's Board of Directors, dated September 20, 1990 and May
23, 1991 (the "Board Resolutions"), we, Bruce R. DeBolt and C. J.
Rue, the Senior Vice President and Secretary, respectively, of
the Company do hereby certify that:
1. The Company's Unsecured Medium-Term Notes, Series
A (the "Notes"), heretofore established by the
Board Resolutions, shall, in the case of Notes
bearing interest at a fixed rate, be in
substantially the form set forth in Exhibit 1
hereto, and in the case of Notes bearing interest
at a variable rate or not bearing interest, be in
substantially the form or forms set forth in a
Company Order or Orders or in the form or forms
established by procedures, acceptable to the
Trustee, specified in a Company Order or Orders,
and shall have the following title, terms and
characteristics (the lettered clauses set forth
below corresponding to the lettered subsections of
Section 301 of the Indenture, with terms used and
not defined herein having the meanings specified
in the Indenture):
(a) the title of the Securities of such
series shall be "Unsecured Medium-Term Notes,
Series A";
(b) the aggregate principal amount of Notes
which may be authenticated and delivered
under the Indenture shall be limited to
$100,000,000, except as contemplated in
Section 301(b) of the Indenture;
(c) the Notes shall be subject to Periodic
Offering;
-1-
(d) the date or dates on which the principal
of the Notes shall be payable shall be
determined by the officers of the Company and
communicated to the Trustee by a Company
Order or Orders or determined by the officers
of the Company or by its agents and
communicated to the Trustee in accordance
with procedures, acceptable to the Trustee,
specified in a Company Order or Orders (both
of such methods of determination being
hereinafter referred to as "determined
pursuant to Company Order"); provided,
however, that no Note shall have a term of
less than nine months or more than 30 years;
(e)(i) the rate or rates, if any, at which
the Notes, or any Tranche thereof, shall bear
interest, or the method or methods by which
such rate or rates shall be determined, shall
be determined pursuant to Company Order;
(ii) interest, if any, shall accrue on each
Note from the date of its original issue or
from the last date to which interest has been
paid or duly provided for; (iii) if interest
at a fixed rate shall be payable on the
Notes, or any Tranche thereof, the Interest
Payment Dates for such Notes shall be June 1,
and December 1, and the Regular Record Dates
with respect thereto shall be May 15 and
November 15, respectively; (iv) if interest
at variable rates shall be payable on the
Notes, or any Tranche thereof, the Interest
Payment Dates and Regular Record Dates with
respect thereto shall be determined pursuant
to Company Order; and (v) all interest
payments (other than interest payable on the
Interest Payment Date which coincides with
the Stated Maturity of the final payment of
principal of any Note or upon redemption)
will be made by check mailed to the person
entitled thereto as provided in Section 307
of the Indenture; provided, however, that for
so long as the Notes shall be held by a
depository (or its nominee) fo purposes of a
book-entry system of payments and transfers,
payment of
-2-
principal of, and premium, if any, and
interest on, the Notes may be made by wire
transfer or such other means as shall be
specified in an instrument executed on behalf
of the Company and such depository and
accepted by the Trustee;
(f) not applicable;
(g) the Notes, or any Tranche thereof, shall
be redeemable as determined pursuant to
Company Order;
(h) the Notes, or any Tranche thereof, shall
be subject to redemption pursuant to a
sinking fund or analogous device, or to
purchase at the option of a Holder thereof,
as determined pursuant to Company Order;
(i) the Notes, or any Tranche thereof, shall
be issuable in denominations of $100,000 and
any amount in excess thereof that is an
integral multiple of $1,000;
(j) not applicable;
(k) not applicable;
(l) any additional Events of Default with
respect to, and any additional covenants of
the Company for the benefit of the Holders
of, the Notes, or any Tranche thereof, will
be determined pursuant to Company Order;
(m) not applicable;
(n) not applicable;
(o) not applicable;
(p) any exceptions to Section 113 of the
Indenture, or variations in the definition of
Business Day in the Indenture, with respect
to the Notes, or Tranche thereof, will be
determined pursuant to Company Order;
(q) the terms, if any, required to permit
the Notes, or any Tranche thereof, to be
registered pursuant to
- 3 -
a non-certificated system of registration
will be determined pursuant to Company Order;
and
(r) the Notes, or any Tranche thereof, shall
have such further terms as are (i) set forth
in the form of Note attached hereto as
Exhibit 1, if interest at a fixed rate shall
be payable on any Tranche of the Notes, or as
shall be set forth in any form of Note of any
Tranche which is established by a Company
Order or Orders or by procedures, acceptable
to the Trustee, specified in a Company Order
or Orders, and (ii) not inconsistent with the
provisions of the Indenture, as shall be
determined pursuant to Company Order.
2. Pursuant to Section 301 of the Indenture, the
terms of any Tranche of the Notes, to the extent
not established in the Indenture, by an indenture
supplemental to the Indenture, in the Board
Resolutions or herein, shall be determined by the
officers of the Company and communicated to the
Trustee by a Company Order or Orders substantially
in the form attached hereto as Exhibit 2, or
determined by an officer or officers of the
Company or its agent or agents and communicated to
the Trustee in accordance with procedures,
acceptable to the Trustee, specified in such
Company Order or Orders.
3. The officers and agents of the Company who,
initially, are authorized, from time-to-time, to
execute and deliver Company Orders and to carry
out procedures specified therein are listed on the
Incumbency Certificate, dated the date hereof,
attached hereto as Exhibit 3.
4. An Opinion of Counsel, of even date herewith,
complying with Section 303 of the Indenture, is
attached hereto as Exhibit 4.
- 4 -
IN WITNESS WHEREOF, we have hereunto signed our names
this 12th day of June, 1991.
/s/ Bruce R. DeBolt
-----------------------------
Senior Vice President
/s/ C. J. Rue
------------------------------
Secretary
- 5 -
Exhibit (4f.)
OFFICERS' CERTIFICATE
---------------------
(Under Sections 201 and 301 of the Indenture
referred to herein of Northwest Natural
Gas Company)
Pursuant to Sections 201 and 301 of the Indenture,
dated as of June 1, 1991 (the "Indenture"), from Northwest
Natural Gas Company (the "Company") to Bankers Trust Company, as
trustee (the "Trustee"), and pursuant to the resolutions of the
Company's Board of Directors, dated May 27, 1993 (the "Board
Resolutions"), we, Bruce R. DeBolt and C. J. Rue, the Senior Vice
President and Secretary, respectively, of the Company, do hereby
certify that:
1. Unless otherwise provided in a subsequent
Officers' Certificate under Sections 201 and 301 of the
Indenture, the Company's Unsecured Medium-Term Notes, Series B
(the "Notes"), heretofore established by the Board Resolutions,
shall, in the case of Notes bearing interest at a fixed rate, be
in substantially the form set forth in Exhibit 1 hereto, and in
the case of Notes bearing interest at a variable rate or not
bearing interest, be in substantially the form or forms set forth
in a Company Order or Orders or in the form or forms established
by procedures, acceptable to the Trustee, specified in a Company
Order or Orders, and shall have the following title, terms and
characteristics (the lettered clauses set forth below
corresponding to the lettered subsections of Section 301 of the
Indenture, with terms used and not defined herein having the
meanings specified in the Indenture):
(a) the title of the Securities of such series
shall be "Unsecured Medium-Term Notes, Series B";
(b) not applicable;
(c) the Notes shall be subject to Periodic
Offering;
(d) the date or dates on which the principal of
the Notes shall be payable shall be determined by the officers of
the Company and communicated to the Trustee by a Company Order or
Orders or determined by the officers of the Company or by its
agents and communicated to the Trustee in accordance with
procedures, acceptable to the Trustee, specified in a Company
Order or Orders (both of such methods of determination being
hereinafter referred to as "determined pursuant to Company
Order");
- 1 -
(e) (i) the rate or rates, if any, at which the
Notes, or any Tranche thereof, shall bear interest, or the method
or methods by which such rate or rates shall be determined, shall
be determined pursuant to Company Order; (ii) interest, if any,
shall accrue on each Note, (A) unless otherwise determined
pursuant to Company Order, from the date of its original issue,
or (B) from the last date to which interest has been paid or duly
provided for; (iii) if interest at a fixed rate shall be payable
on the Notes, or any Tranche thereof, the Interest Payment Dates
for such Notes, unless otherwise determined pursuant to Company
Order, shall be June 1, and December 1, and the Regular Record
Dates with respect thereto shall be May 15 and November 15,
respectively; (iv) if interest at variable rates shall be payable
on the Notes, or any Tranche thereof, the Interest Payment Dates
and Regular Record Dates with respect thereto shall be determined
pursuant to Company Order; and (v) unless otherwise determined
pursuant to Company Order, all interest payments (other than
interest payable on the Interest Payment Date which coincides
with the Stated Maturity of the final payment of principal of any
Note or upon redemption) will be made by check mailed to the
person entitled thereto as provided in Section 307 of the
Indenture; provided, however, that for so long as the Notes shall
be held by a depository (or its nominee) for purposes of a book-
entry system of payments and transfers, payment of principal of,
and premium, if any, and interest on, the Notes may be made by
wire transfer or such other means as shall be specified in an
instrument executed on behalf of the Company and such depository
and accepted by the Trustee;
(f) not applicable;
(g) the Notes, or any Tranche thereof, shall be
redeemable at the option of the Company as determined pursuant to
Company Order;
(h) the Notes, or any Tranche thereof, shall be
subject to redemption pursuant to a sinking fund or analogous
device, or to purchase at the option of a Holder thereof, as
determined pursuant to Company Order;
(i) not applicable;
(j) not applicable;
(k) not applicable;
(l) any additional Events of Default with respect
to, and any additional covenants of the Company for the benefit
of the Holders of, the Notes, or any Tranche thereof, will be
determined pursuant to Company Order;
- 2 -
(m) not applicable;
(n) not applicable;
(o) not applicable;
(p) any exceptions to Section 113 of the
Indenture, or variations in the definition of Business Day in the
Indenture, with respect to the Notes, or Tranche thereof, will be
determined pursuant to Company Order;
(q) the terms, if any, required to permit the
Notes, or any Tranche thereof, to be registered pursuant to a
non-certificated system of registration will be determined
pursuant to Company Order; and
(r) the Notes, or any Tranche thereof, shall have
such further terms as are (i) set forth in the form of Note
attached hereto as Exhibit 1, if interest at a fixed rate shall
be payable on any Tranche of the Notes, or as shall be set forth
in any form of Note of any Tranche which is established by a
Company Order or Orders or by procedures, acceptable to the
Trustee, specified in a Company Order or Orders, and (ii) not
inconsistent with the provisions of the Indenture, as shall be
determined pursuant to Company Order.
2. Pursuant to Section 301 of the Indenture, the
terms of any Tranche of the Notes, to the extent not established
in the Indenture, by an indenture supplemental to the Indenture,
in the Board Resolutions or herein, shall be determined by the
officers of the Company and communicated to the Trustee by a
Company Order or Orders substantially in the form attached hereto
as Exhibit 2, or determined by an officer of officers of the
Company or its agent or agents and communicated to the Trustee in
accordance with procedures, acceptable to the Trustee, specified
in such Company Order or Orders.
3. The officers and agents of the Company who,
initially, are authorized, from time-to-time, to execute and
deliver Company Orders and to carry out procedures specified
therein are listed on the Incumbency Certificate, dated the date
hereof, attached hereto as Exhibit 3.
4. The Opinion of Counsel, of even date herewith,
complying with Section 303 of the Indenture, is attached hereto
as Exhibit 4.
- 3 -
IN WITNESS WHEREOF, we have hereunto signed our names this
18th day of June, 1993.
/s/
----------------------------
Senior Vice President
/s/
----------------------------
Secretary
- 4 -
Exhibit (10j.)
2595S
TRANSPORTATION AGREEMENT
THIS AGREEMENT is made and entered into this 29th day
of June, 1990, by and between NORTHWEST PIPELINE CORPORATION,
hereinafter referred to as "Transporter", and NORTHWEST NATURAL
GAS COMPANY, hereinafter referred to as "Shipper".
RECITALS:
A. Shipper is a local distribution company of natural gas.
B. Shipper owns or controls certain supplies of natural
gas which it desires Transporter to transport for Shipper's
account pursuant to Part 284 of the regulations of the FERC.
C. On January 29, 1990, Transporter offered all potential
shippers an opportunity to elect to participate in the proposed
expansion of Transporter's mainline for firm transportation
service.
D. Shipper was one of the parties responding to
Transporter's January 29, 1990 offer, by making a complete
written request to Transporter for the transportation service
described herein on March 1, 1990.
E. Transporter has designed a system expansion for the
shippers responding to its January 29, 1990 offer and will file
an application with the Federal Energy Regulatory Commission
("FERC") requesting certificate authority to construct and
operate on a rolled in basis the facilities necessary to provide
the transportation service under this Agreement.
AGREEMENT:
NOW, THEREFORE, in consideration of the premises and
mutual covenants set forth herein, the parties agree as follows:
ARTICLE I - GAS DELIVERIES AND REDELIVERIES
1.1 Subject to the terms, conditions and limitations
hereof, Transporter agrees to receive from Shipper at the Receipt
Point(s) specified in Exhibit A herein, transport and deliver to
Shipper at the Delivery Point(s) specified in Exhibit B herein,
the following quantities of natural gas, known as Transportation
Contract Demand:
Up to 50,000 MMBtu's/day provided that Transporter's
receipt of gas at any receipt point for Shipper's account
hereunder on any day shall not exceed the maximum daily quantity
set forth for such receipt point on Exhibit "A" hereto, and
provided that Transporter's daily obligation to deliver gas to
-1-
Shipper at any delivery point under this Transportation Agreement
shall not exceed the Maximum Daily Delivery Obligation ("MDDO")
set forth in Exhibit "B" of this Agreement.
1.2 Pursuant to Article XIV of the General Transportation
Terms and Conditions applicable to this Agreement, Shipper has
elected to furnish fuel and lost or unaccounted for gas volumes
in-kind. Transporter may receive volumes of gas in excess of the
maximum daily quantity set forth in Section 1.1 when necessary to
cover such fuel gas reimbursement while making full delivery of
such maximum daily quantity or to cover certain balancing
receipts agreed to by the parties.
1.3 Such transportation shall be on a firm basis.
ARTICLE II - TRANSPORTATION RATES AND CHARGES
2.1 (a) Shipper agrees to pay Transporter for all natural
gas transportation service rendered under the
terms of this Agreement in accordance with
Transporter's Rate Schedule TF-1 as filed with the
Federal Energy Regulatory Commission ("FERC"), and
as such rate schedule may be amended or superseded
from time to time.
(b) Payment of applicable reservation charges under
this Agreement will commence the date that
Transporter has in place the facilities necessary
to provide the transportation service.
2.2 This Agreement shall be subject to the provisions of
such Rate Schedule and the General Transportation Terms and
Conditions applicable thereto (and as they may be amended by
Article VIII of this Agreement) and effective from time to time,
which by this reference are incorporated herein and made a part
hereof.
ARTICLE III - GOVERNMENTAL REQUIREMENTS
3.1 Shipper shall reimburse Transporter for any and all
filing fees incurred by Transporter in seeking governmental
authorization for the initiation, extension or termination of
service under this Transportation Agreement.
3.2 The transportation service contemplated herein shall be
provided by Transporter pursuant to Section 284.223 of the FERC's
regulations. The obligation of each party for transportation
service under this Agreement beyond 120 days from the date
service is initiated hereunder are conditioned upon each party
obtaining and accepting from governmental authorities having
jurisdiction such authorizations as may be necessary, including,
but not limited to, FERC approval of a prior notice application.
If any required prior notice approval is not received by
Transporter within one (1) year from the date Transporter has in
place the facilities necessary to provide the transportation, the
-2-
Agreement may be terminated upon 30 days prior written notice by
either party to the other party.
3.3 In the event that Transporter has not filed an
application with FERC requesting certificate authority to
construct and operate the facilities necessary to provide the
transportation service under this Agreement by April 1, 1991,
Shipper may terminate this Agreement with thirty (30) days prior
written notice.
3.4 The gas to be received and transported by Transporter
hereunder shall be limited to gas for which Transporter has been
furnished offers of take-or-pay credits which comply with and are
required by 18 CFR 284.8(f) Transporter may waive the foregoing
requirements on gas received for Shipper's account hereunder
pursuant to another agreement between Transporter and any party,
including Shipper, for which the shipping party under such
Agreement has already furnished offers of take-or-pay credits.
Furthermore, Transporter and Shipper may agree in a written
amendment to this Agreement for an alternative procedure under
which Transporter may verify and monitor that it has received
sufficient offers of take-or-pay credits on the gas transported
in conformance with 18 CFR Section 284.8(f).
3.5 Upon termination, this Transportation Agreement shall
cease to have any force or effect, save as to any unsatisfied
obligations or liabilities of either party arising hereunder
prior to the date of such termination, or arising thereafter as a
result of such termination; provided, however, that this
provision shall not supersede any abandonment authorization which
may be required.
3.6 (Section 3.6 shall be applicable only for the
transportation of imported natural gas.) Shipper hereby
acknowledges and agrees that either it or its buyer or seller is
the "importer of record" and it will comply with all requirements
for reporting and submitting payment of duties, fees and taxes to
the United States or agencies thereof to be made on imported
natural gas and for making the declaration of entry pursuant to
19 CFR Section 141.19. Shipper agrees to indemnify and hold Transporter
harmless from any and all claims of damage or violation of any
applicable laws, ordinances and statutes which pertain to the
importation of the gas transported hereunder and which require
reporting and/or filing of fees in connection with said import.
ARTICLE IV - TERM
4.1 This Agreement becomes effective the date hereof and
shall remain in effect for a period of fifteen (15) years
commencing on the date Transporter places in service the
facilities necessary to provide the transportation service and
year to year thereafter subject to termination by either party
either at the expiration of the primary term or upon any
anniversary thereafter by giving written notice so stating to the
other party at least twelve (12) months in advance.
-3-
4.2 In the event Shipper desires to terminate this
Agreement at any time prior to or after the in-service date of
the new facilities and there is a party willing to contract for
comparable capacity under terms and conditions acceptable by
Transporter, Transporter will allow Shipper to terminate this
Agreement upon execution of a Transportation Agreement with the
new party.
ARTICLE V - WARRANTY OF ELIGIBILITY FOR TRANSPORTATION
5.1 Any shipper under this Rate Schedule warrants for
itself, its successors and assigns, that all gas delivered to
Transporter for transportation hereunder shall be eligible for
transportation in interstate commerce under applicable rules,
regulations or orders of the FERC. Shipper will indemnify
Transporter and save it harmless from all suits, actions,
damages, costs, losses, expenses (including reasonable attorney
fees) and regulatory proceedings, arising from breach of this
warranty.
ARTICLE VI - NOTICES
6.1 Unless herein provided to the contrary, any notice
called for in this Transportation Agreement shall be in writing
and shall be considered as having been given if delivered
personally, or by mail or telegraph with all postage and charges
prepaid to either Shipper or Transporter at the place designated.
Routine communications shall be considered as duly delivered when
mailed by ordinary mail. Normal operating instructions can be
made by telephone. Unless changed, the addresses of the parties
are as follows:
NORTHWEST PIPELINE CORPORATION
P. O. BOX 58900
SALT LAKE CITY, UTAH 84158-0900
Statements: Attention: T&E Accounting (MS-10496)
Payments: Attention: Cash Control (MS-10491)
Contractual Notices: Attention: Marketing (MS-10361)
Other Notices: Attention: T&E Management (MS-10334)
Notices & Statements: NORTHWEST NATURAL GAS COMPANY
220 N. W. Second Avenue
Portland, Oregon 97209
Attention: Gas Supply Department
ARTICLE VII - OTHER OPERATING PROVISIONS
7.1 Pursuant to Section 5.3 of the General Transportation
Terms and Conditions of Transporter's FERC Gas Tariff, Original
Volume No. 1-A, Shipper shall make payments to Transporter
hereunder by wire transfer of immediately available funds by the
due date set forth herein. Such funds shall be wire transferred
to the First Interstate Bank of Utah located in Salt Lake City,
Utah for Transporter's account No. 02-00986-8.
-4-
ARTICLE VIII - ADJUSTMENTS TO GENERAL TERMS AND CONDITIONS
8.1 Certain of the General Transportation Terms and
Conditions are to be adjusted for the purpose of this Agreement,
as specified below:
None.
ARTICLE IX - CANCELLATION OF PRIOR AGREEMENT(S)
9.1 When this Agreement takes effect, it supersedes,
cancels and terminates the following agreement(s):
None.
ARTICLE X - SUCCESSORS AND ASSIGNS
10.1 This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and
assigns. No assignment or transfer by either party hereunder
shall be made without written approval of the other party. Such
approval shall not be unreasonably withheld. As between the
parties hereto, such assignment shall become effective on the
first day of the month following written notice that such
assignment has been effectuated.
IN WITNESS WHEREOF, the parties hereto have executed
this agreement as of the day and year first above set forth.
NORTHWEST NATURAL GAS COMPANY NORTHWEST PIPELINE CORPORATION
(Shipper) (Transporter)
By: /s/ Dwayne L. Foley By: /s/ Tim J. Hausler
----------------------- ------------------------
Title: Vice President, Title: Vice President
Gas Supply & Marketing and
Pipeline Rel. Customer Services
Attest: /s/ C. J. Rue Attest: Karrie L. Hummel
------------------ --------------------
Assistant Secretary
-5-
EXHIBIT "A"
to the
TRANSPORTATION AGREEMENT
DATED June 29, 1990
between
NORTHWEST PIPELINE CORPORATION
and
NORTHWEST NATURAL GAS COMPANY
RECEIPT POINTS
Receipt Point Maximum Daily Quantity
- ------------- ----------------------
For Each Receipt Point
----------------------
(MMBtus)
Opal 50,000
TOTAL MDQ MUST EQUAL TOTAL TRANSPORTATION CONTRACT DEMAND
-6-
EXHIBIT "B"
to the
TRANSPORTATION AGREEMENT
DATED June 29, 1990
between
NORTHWEST PIPELINE CORPORATION
and
NORTHWEST NATURAL GAS COMPANY
DELIVERY POINTS
--------------
Delivery Point Maximum Daily Delivery Obligation
- -------------- ---------------------------------
("MDDO")
For Each Delivery Point
-----------------------
(MMBtus)
Deer Island 19,000
Battle Ground 100
Gresham 11,000
Oregon City 2,000
Molalla 1,000
Monitor 600
Mt. Angel 1,000
Marion 100
Jefferson/Scio 200
Albany 5,000
North Eugene 2,500
South Eugene 7,500
TOTAL MDDO MUST EQUAL TOTAL TRANSPORTATION CONTRACT DEMAND
-7-
AMENDMENT
THIS AMENDMENT is entered into this 1st day of April
1993, by and between NORTHWEST PIPELINE CORPORATION, hereinafter
referred to as "Transporter", and NORTHWEST NATURAL GAS COMPANY,
hereinafter referred to as "Shipper".
RECITALS:
- ---------
A. Transporter and Shipper are parties to that certain Firm
Transportation Agreement (#F-58) dated June 29, 1990,
("Agreement").
B. Shipper made a valid request to change the receipt points
and the delivery points and volumes set forth on Exhibit "A" and
Exhibit "B", respectively. Transporter and Shipper desire to
amend the Agreement to provide for the change of the receipt
points and the delivery points and volumes.
AGREEMENT:
- ----------
NOW THEREFORE, in consideration of the premises and
mutual covenants herein contained, the parties agree as follows:
1. Exhibit "A" of the Agreement shall be deleted in its
entirety and the attached Exhibit "A" to this Amendment shall be
added to and made a part of the Agreement, effective April 1,
1993.
2. Exhibit "B" of the Agreement shall be deleted in its
entirety and the attached Exhibit "B" to this Amendment shall be
added to and made a part of the Agreement, effective April 1,
1993.
3. Except as amended herein, the Agreement shall remain in
full force and effect.
4. This Amendment shall be binding upon and inure to the
benefit of the parties hereto and any successors or assigns of
such parties.
5. This Amendment may be executed in any number of
counterparts.
IN WITNESS WHEREOF, the parties hereto have executed
two duplicate original copies of this Amendment as of the date
and year first written above.
NORTHWEST PIPELINE CORPORATION
By: /s/ Joe H. Fields
-------------------------
Attorney-In-Fact
ATTEST: NORTHWEST NATURAL GAS COMPANY
By: By: /s/ Randolph S. Friedman
------------------- ------------------------
Title: Title: Manager, Gas Acquisition
-------------- and Pipeline Relations
-8-
EXHIBIT "A"
to the
FIRM TRANSPORTATION AGREEMENT
Dated June 29, 1990
(As Amended Effective April 1, 1993)
between
NORTHWEST PIPELINE CORPORATION
and
NORTHWEST NATURAL GAS COMPANY
RECEIPT POINTS
--------------
Receipt Point Maximum Daily Quantity
- ------------- ----------------------
For Each Receipt Point
----------------------
(MMBtus)
Opal 45,000
Redwash 5,000
TOTAL MDQ MUST EQUAL TOTAL TRANSPORTATION CONTRACT DEMAND
-9-
EXHIBIT "B"
to the
FIRM TRANSPORTATION AGREEMENT
Dated June 29, 1990
(As Amended Effective April 1, 1993)
between
NORTHWEST PIPELINE CORPORATION
and
NORTHWEST NATURAL GAS COMPANY
DELIVERY POINTS
---------------
Delivery Point Maximum Daily Delivery Obligation
- -------------- ---------------------------------
("MDDO")
For Each Delivery Point
-----------------------
(MMBtus)
KB Pipeline Meter Station 19,000
Battle Ground 100
Gresham 11,000
Oregon City 2,000
Molalla 1,000
Monitor 600
Mt. Angel 1,000
Marion 100
Jefferson/Scio 200
Albany 5,000
North Eugene 2,500
South Eugene 7,500
TOTAL MDDO MUST EQUAL TOTAL TRANSPORTATION CONTRACT DEMAND
-10-
AMENDMENT
THIS AMENDMENT is entered into this 2nd day of April
1993, by and between NORTHWEST PIPELINE CORPORATION, hereinafter
referred to as "Transporter", and NORTHWEST NATURAL GAS COMPANY,
hereinafter referred to as "Shipper".
RECITALS:
- ---------
A. Transporter and Shipper are parties to that certain Firm
Transportation Agreement (#F-58) dated June 29, 1990,
("Agreement").
B. Shipper made a valid request to change the receipt points
and volumes set forth on Exhibit "A". Transporter and Shipper
desire to amend the Agreement to provide for the change of the
receipt points and volumes.
AGREEMENT:
- ----------
NOW THEREFORE, in consideration of the premises and
mutual covenants herein contained, the parties agree as follows:
1. Exhibit "A" of the Agreement shall be deleted in its
entirety and the attached Exhibit "A" to this Amendment shall be
added to and made a part of the Agreement, effective April 4,
1993.
2. Except as amended herein, the Agreement shall remain in
full force and effect.
3. This Amendment shall be binding upon and inure to the
benefit of the parties hereto and any successors or assigns of
such parties.
4. This Amendment may be executed in any number of
counterparts.
IN WITNESS WHEREOF, the parties hereto have executed
two duplicate original copies of this Amendment as of the date
and year first written above.
NORTHWEST PIPELINE CORPORATION
By: /s/ Joe H. Fields
--------------------
Attorney-In-Fact
ATTEST: NORTHWEST NATURAL GAS COMPANY
By: By: /s/ Randolph S. Friedman
-------------------- -------------------------
Title: Title: Manager, Gas Acquisition
--------------- and Pipeline Relations
-11-
EXHIBIT "A"
to the
FIRM TRANSPORTATION AGREEMENT
Dated June 29, 1990
(As Amended Effective April 4, 1993)
between
NORTHWEST PIPELINE CORPORATION
and
NORTHWEST NATURAL GAS COMPANY
RECEIPT POINTS
---------------
Receipt Point Maximum Daily Quantity
- ------------- ----------------------
For Each Receipt Point
----------------------
(MMBtus)
Opal 42,800
Redwash 5,000
Barrett 2,200
TOTAL MDQ MUST EQUAL TOTAL TRANSPORTATION CONTRACT DEMAND
-12-
AMENDMENT
THIS AMENDMENT is entered into this 28th day of April
1993, by and between NORTHWEST PIPELINE CORPORATION, hereinafter
referred to as "Transporter", and NORTHWEST NATURAL GAS COMPANY,
hereinafter referred to as "Shipper".
RECITALS:
- ---------
A. Transporter and Shipper are parties to that certain Firm
Transportation Agreement (#F-58) dated June 29, 1990,
("Agreement").
B. Shipper made a valid request to change the receipt points
and volumes set forth on Exhibit "A". Transporter and Shipper
desire to amend the Agreement to provide for the change of the
receipt point(s) and volume(s).
AGREEMENT:
- ----------
NOW THEREFORE, in consideration of the premises and
mutual covenants herein contained, the parties agree as follows:
1. Exhibit "A" of the Agreement shall be deleted in its
entirety and the attached Exhibit "A" to this Amendment shall be
added to and made a part of the Agreement, effective May 1, 1993.
2. Except as amended herein, the Agreement shall remain in
full force and effect.
3. This Amendment shall be binding upon and inure to the
benefit of the parties hereto and any successors or assigns of
such parties.
4. This Amendment may be executed in any number of
counterparts.
IN WITNESS WHEREOF, the parties hereto have executed
two duplicate original copies of this Amendment as of the date
and year first written above.
NORTHWEST PIPELINE CORPORATION
By: /s/ Joe H. Fields
----------------------
Attorney-In-Fact
ATTEST: NORTHWEST NATURAL GAS COMPANY
By: By: /s/ Randolph S. Friedman
----------------- -------------------------
Title: Title: Manager, Gas Acquisition
------------ and Pipeline Relations
-13-
EXHIBIT "A"
to the
FIRM TRANSPORTATION AGREEMENT
Dated June 29, 1990
(As Amended Effective May 1, 1993)
between
NORTHWEST PIPELINE CORPORATION
and
NORTHWEST NATURAL GAS COMPANY
RECEIPT POINTS
--------------
Receipt Point Maximum Daily Quantity
- ------------- ----------------------
(MMBtus)
Opal 32,800
Redwash 5,000
Barrett 2,200
Green River Gathering 5,000
Dragon Trail 5,000
TOTAL MDQ MUST EQUAL TOTAL TRANSPORTATION CONTRACT DEMAND
-14-
Exhibit (10j.(2))
FIRM TRANSPORTATION SERVICE AGREEMENT
THIS AGREEMENT is made and entered into this 10th day
of November, 1993, by and between
PACIFIC GAS TRANSMISSION COMPANY, a California
corporation (hereinafter referred to as "PGT"),
and
NORTHWEST NATURAL GAS COMPANY, a corporation existing
under the laws of the State of Oregon, (hereinafter referred to
as "Shipper").
WHEREAS, PGT owns and operates a natural gas pipeline
transmission system which extends from a point of interconnection
with the pipeline facilities of Alberta Natural Gas Company Ltd.
(ANG) at the International Boundary near Kingsgate, British
Columbia, through the states of Idaho, Washington and Oregon to a
point of interconnection with Pacific Gas and Electric Company at
the Oregon-California border near Malin, Oregon; and
WHEREAS, Shipper desires PGT, on a firm basis, to
transport certain quantities of natural gas from Kingsgate,
British Columbia and/or from Stanfield, Oregon to various
delivery points as specified in Exhibit "A" of this Agreement;
and
WHEREAS, Shipper has requested PGT to convert 100% of
its Section 7(C) Firm Transportation Service Agreement dated
April 25, 1991 (for service under Rate Schedule T-3) to Part 284
(for service under Rate Schedule FTS-1) in accordance with the
Terms and Conditions of the FERC's Order at Docket No. RS 92-46;
and,
WHEREAS, PGT is willing to transport certain quantities
of natural gas for shipper, on a firm basis,
NOW, THEREFORE, the parties agree as follows:
I
Governmental Authority
1.1 This Firm Transportation Agreement ("Agreement")
is made pursuant to the regulations of the Federal Energy
Regulatory Commission (FERC) contained in 18 CFR Part 284, as
amended from time to time.
1.2 This Agreement is subject to all valid legislation
with respect to the subject matters hereof, either state or
federal, and to all valid present and future decisions, orders,
rules, regulations and ordinances of all duly constituted
governmental authorities having jurisdiction.
I
Governmental Authority
(continued)
1.3 Shipper shall reimburse PGT for any and all filing
fees incurred by PGT in seeking governmental authorization for
the initiation, extension, or termination of service under this
Agreement and Rate Schedule FTS-1. Shipper shall reimburse PGT
for such fees at PGT's designated office within ten (10) days of
receipt of notice from PGT that such fees are due and payable.
Additionally, Shipper shall reimburse PGT for any and all penalty
fees or fines assessed PGT caused by the negligence of Shipper in
not obtaining all proper Canadian and domestic import/export
licenses, surety bonds or any other documents and approvals
related to the Canadian exportation and subsequent domestic
importation of natural gas transported by PGT hereunder.
II
Quantity of Gas and Priority of Service
2.1 Subject to the terms and provision of this
Agreement and PGT's Transportation General Terms and Conditions
contained in PGT's FERC Gas Tariff First Revised Volume No. 1-A
applicable to Rate Schedule FTS-1, daily receipts of gas by PGT
from Shipper at the point(s) of receipt shall be equal to daily
deliveries of gas by PGT to Shipper at the point(s) of delivery;
provided, however, Shipper shall deliver to PGT an additional
quantity of natural gas at the point(s) of receipt as compressor
station fuel, line loss and unaccounted for gas as specified in
the Statement of Rates and Charges of PGT's FERC Gas Tariff First
Revised Volume No. 1-A. Any limitations of the quantities to be
received from each point of receipt and/or delivered to each
point of delivery shall be as specified on the Exhibit A attached
hereto.
2.2 The maximum quantities of gas to be delivered by
PGT for Shipper's account at the point(s) of delivery are set
forth in Exhibit A.
2.3 In providing service to its existing or new
customers, PGT will use the priorities of service specified in
Paragraph 18 of PGT's Transportation General Terms and Conditions
on file with the FERC.
2.4 Prior to initiation of service, Shipper shall
provide PGT with any information required by the FERC, as well as
all information identified in PGT's Transportation General Terms
and Conditions applicable to Rate Schedule FTS-1.
III
Terms of Agreement
3.1 This Agreement shall become effective November 1,
1993, and shall continue in full force and effect until
October 31, 2023. Thereafter, this Agreement shall continue in
effect from year to year unless either party gives twelve (12)
months prior written notice of desire to terminate this
Agreement.
IV
Points of Receipt and Delivery
4.1 The primary point of receipt of gas deliveries to
PGT is as designated in Exhibit A, attached hereto.
4.2 The primary point of delivery of gas to Shipper is
as designated in Exhibit A, attached hereto.
4.3 Shipper shall deliver or cause to be delivered to
PGT the gas to be transported hereunder at pressures sufficient
to deliver such gas into PGT's system at the point(s) of receipt.
PGT shall deliver the gas to be transported hereunder to or for
the account of Shipper at the pressures existing in PGT's system
at the point(s) of delivery.
4.4 Pursuant to Paragraph 29 of PGT's Transportation
General Terms and Conditions, Shipper may designate other receipt
and/or delivery points as secondary receipt or delivery points.
V
Operating Procedure
5.1 Shipper shall conform to the operating procedures
set forth in PGT's Transportation General Terms and Conditions.
5.2 Nothing in Section 5.1 shall compel PGT to
transport gas pursuant to Shipper's request on any given day.
PGT shall have the right to interrupt or curtail the transport of
gas for the account of Shipper pursuant to PGT's Transportation
General Terms and Conditions applicable to Rate Schedule FTS-1.
VI
Rate(s), Rate Schedules, and
General Terms and Conditions of Service
6.1 Shipper shall pay PGT each month for services
rendered pursuant to this Agreement in accordance with PGT's Rate
Schedule FTS-1, or superseding rate schedule(s), on file with and
subject to the jurisdiction of FERC.
6.2 Shipper shall compensate PGT each month for
compressor station fuel, line loss and other unaccounted for gas
associated with this transportation service provided herein in
accordance with PGT's Rate Schedule FTS-1, or superseding rate
schedule(s), on file with and subject to the jurisdiction of the
FERC.
6.3 This Agreement in all respects shall be and
remains subject to the applicable provisions of Rate Schedule
FTS-1, or superseding rate schedule(s) and of the applicable
Transportation General Terms and Conditions of PGT's FERC Gas
Tariff First Revised Volume No. 1-A on file with the FERC, all of
which are by this reference made a part hereof.
6.4 PGT shall have the unilateral right from time to
time to propose and file with FERC such changes in the rates and
charges applicable to transportation services pursuant to this
Agreement, the rate schedule(s) under which this service is
hereunder provided, or any provisions of PGT's Transportation
General Terms and Conditions applicable to such services.
Shipper shall have the right to protest any such changes proposed
by PGT and to exercise any other rights that Shipper may have
with respect thereto.
VII
Miscellaneous
7.1 This Agreement shall be interpreted according to
the laws of the State of California.
7.2 Shipper agrees to indemnify and hold PGT harmless
for refusal to transport gas hereunder in the event any upstream
or downstream transporter fails to receive or deliver gas as
contemplated by this Agreement.
7.3 Unless herein provided to the contrary, any notice
called for in this Agreement shall be in writing and shall be
considered as having been given if delivered by registered mail
or facsimile with all postage or charges prepaid, to either PGT
or Shipper at the place designated below. Routine
communications, including monthly statements and payment, shall
be considered as duly delivered when received by ordinary mail.
Unless changed, the addresses of the parties are as follows:
"PGT" PACIFIC GAS TRANSMISSION COMPANY
160 Spear Street
Room 1900
San Francisco, California 94105-1570
Attention: President & CEO
"SHIPPER" Northwest Natural Gas Company
220 N. W. Second Avenue
Portland, OR 97209
Attention: Manager, Gas
Acquisition and
Pipeline Relations
7.4 A waiver by either party of any one or more
defaults by the other hereunder shall not operate as a waiver of
any future default or defaults, whether of a like or of a
different character.
VII
Miscellaneous
7.5 This Agreement may only be amended by an
instrument in writing executed by both parties hereto.
7.6 Nothing in this Agreement shall be deemed to
create any rights or obligations between the parties hereto after
the expiration of the term set forth herein, except that
termination of this Agreement shall not relieve either party of
the obligation to correct any quantity imbalances or Shipper of
the obligation to pay any amounts due hereunder to PGT.
7.7 Exhibit(s) A and C attached hereto is/are
incorporated herein by reference and made a part hereof for all
purposes.
IN WITNESS WHEREOF the parties hereto have caused this
Agreement to be executed as of the day and year first above
written.
PACIFIC GAS TRANSMISSION COMPANY
By: /s/ Stephen Reynolds
----------------------------
Title: President & CEO
Date: 11/10/93
NORTHWEST NATURAL GAS COMPANY
By: /s/ Dwayne L. Foley
----------------------------
Title: Senior Vice President
Date: 11/3/93
EXHIBIT A
To the
FIRM TRANSPORTATION SERVICE AGREEMENT
Dated Nov. 1, 1993 Between
PACIFIC GAS TRANSMISSION COMPANY
And
NORTHWEST NATURAL GAS COMPANY
Receipt Delivery Maximum Daily Quantity
Point Point (Delivered) MMBtu/d
(Primary) Winter Summer
Kingsgate, BC Stanfield Exchange, 46,549 30,000
OR
EXHIBIT C
To the
FIRM TRANSPORTATION SERVICE AGREEMENT
Dated _______________ Between
PACIFIC GAS TRANSMISSION COMPANY
And
_________________________
Type of Replacement Service:
Replacement Shipper:
Receipt Point:
Delivery Point:
Maximum Daily Quantity:
Commencement of Credit:
Termination of Credit:
Level of Credit: _____ percent of the maximum rate defined as
applicable for service under Rate Schedule
FTS-1
Other Terms and Conditions:
1)
2)
3)
EXHIBIT 11
NORTHWEST NATURAL GAS COMPANY
Statement Re: Computation of Per Share Earnings
(Thousands, except per share amounts)
(Unaudited)
12 Months Ended December 31
--------------------------
1993 1992 1991
---- ---- ----
Earnings Applicable to Common Stock $34,159 $13,215 $11,784
Preference Stock Dividends 155 168 178
Debenture Interest Less Taxes 572 598 675
------- ------- -------
Net Income Available for Fully-Diluted
Common Stock $34,886 $13,981 $12,637
======= ======= =======
Average Common Shares Outstanding 13,074 11,909 11,698
Stock Options 24 25 32
Convertible Preference Stock 108 116 123
Convertible Debentures 433 446 452
------- ------ ------
Fully-Diluted Common Shares 13,639 12,496 12,305
======= ====== ======
Fully-Diluted Earnings Per Share
of Common Stock $2.56 $1.12 $1.03
===== ===== =====
Note: Primary earnings per share are computed on a weighted daily
average number of common shares outstanding each year. Outstanding
stock options are common stock equivalents but are excluded from primary
earnings per share computations due to immateriality.
<TABLE>
EXHIBIT 12
Northwest Natural Gas Company
Computation of Ratio of Earnings to Fixed Charges
January 1, 1989 - December 31, 1993
($000)
<CAPTION>
----------Year Ended December 31----------
1989 1990 1991 1992 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Fixed Charges, as defined:
Interest on Long-Term Debt $19,344 $22,244 $21,977 $23,001 $22,578
Other Interest 4,011 2,853 4,266 3,223 1,906
Amortization of Debt Discount
and Expense 401 363 348 511 775
Interest Portion of Rentals 1,235 1,546 1,485 1,439 1,701
------- ------- ------- ------- -------
Total Fixed Charges, as
defined $24,991 $27,006 $28,076 $28,174 $26,960
======= ======= ======= ======= =======
Earnings, as defined:
Net Income $28,420 $30,724 $14,377 $15,775 $37,647
Taxes on Income 15,366 13,629 2,321 6,951 22,096
Fixed Charges, as above 24,991 27,006 28,076 28,174 26,960
------- ------- ------- ------- -------
Total Earnings, as defined $68,777 $71,359 $44,774 $50,900 $86,703
======= ======= ======= ======= =======
Ratio of Earnings to Fixed
Charges 2.75 2.64 1.59 1.81 3.22
==== ==== ==== ==== ====
</TABLE>
DELOITTE & TOUCHE
- ----------------------------------------------------------------
3900 US Bancorp Tower Telephone: (503) 222-1341
111 SW Fifth Avenue Facsimile: (503) 224-2172
Portland, Oregon 97204-3698
EXHIBIT 23
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration
Statement No. 33-34724, Post-Effective Amendment No. 1 to
Registration Statement No. 2-76276, and Post-Effective Amendments
No. 2 to Registration Statement Nos. 2-77195 and 33-19354 on
Form S-8 and in Registration Statements Nos. 33-44827, 33-64014,
and 33-51271, and Post-Effective Amendments No. 1 to Registration
Statements Nos. 33-1304 and 33-20384 on Form S-3 of our report
dated February 25, 1994 (which expresses an unqualified opinion
and includes an explanatory paragraph relating to the change in
the Company's method of accounting for income taxes and other
postretirement benefits) appearing in this Annual Report on
Form 10-K of Northwest Natural Gas Company for the year ended
December 31, 1993.
/s/ Deloitte & Touche
DELOITTE & TOUCHE
Portland, Oregon
March 28, 1994
