Filed pursuant to Rule 424(b)(2)
Registration No. 33-53795
PROSPECTUS SUPPLEMENT
---------------------
(To Prospectus dated June 13, 1994)
1,000,000 Shares
NORTHWEST NATURAL GAS COMPANY
Common Stock
----------------
Northwest Natural Gas Company (the "Company") is offering hereby
1,000,000 shares (the "Shares") of its common stock, par value $3 1/6 per
share (the "Common Stock"). The Common Stock is traded on the Nasdaq
National Market. Its price and volume data are reported using the symbol
"NWNG". The last sale price of the Common Stock as reported by the Nasdaq
National Market on February 15, 1995 was $30 per share.
----------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR BY ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS SUPPLEMENT OR THE PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
==========================================================================
UNDERWRITING
DISCOUNTS AND PROCEEDS TO
PRICE TO PUBLIC COMMISSIONS(1) COMPANY(2)
--------------------------------------------------------------------------
Per Share........ $29.75 $1.015 $28.735
--------------------------------------------------------------------------
Total (3)........ $29,750,000 $1,015,000 $28,735,000
==========================================================================
(1) The Company has agreed to indemnify the Underwriters against certain
civil liabilities, including liabilities under the Securities Act of
1933, as amended. See "Underwriting".
(2) Before deducting expenses payable by the Company, estimated at
$150,000.
(3) The Company has granted the Underwriters an option, exercisable within
30 days after the date of this Prospectus Supplement, to purchase up
to 150,000 additional shares (the "Option Shares") at the Price to
Public less Underwriting Discounts and Commissions, for the
purpose of covering over-allotments, if any. If all such Option
Shares are purchased, the total Price to Public, Underwriting
Discounts and Commissions and Proceeds to Company will be increased
to $34,212,500, $1,167,250 and $33,045,250, respectively. See
"Underwriting".
----------------
The shares of Common Stock offered hereby are offered subject to prior
sale, when, as and if delivered to and accepted by the Underwriters, and
subject to approval of certain legal matters by their counsel and counsel
for the Company. The Underwriters reserve the right to withdraw, cancel or
modify such offer and to reject orders in whole or in part. It is expected
that delivery of the Shares will be made in New York, New York on or about
February 23, 1995.
----------------
MERRILL LYNCH & CO.
SMITH BARNEY INC.
A.G. EDWARDS & SONS, INC.
----------------
The date of this Prospectus Supplement is February 15, 1995.
<PAGE>
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR
EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE
COMMON STOCK OF THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE
PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE
NASDAQ NATIONAL MARKET, IN THE OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS, SELLING GROUP
MEMBERS (IF ANY) AND THEIR RESPECTIVE AFFILIATES MAY ENGAGE IN PASSIVE
MARKET MAKING TRANSACTIONS IN THE COMMON STOCK ON THE NASDAQ
NATIONAL MARKET IN ACCORDANCE WITH RULE 10b-6A UNDER THE SECURITIES
EXCHANGE ACT OF 1934. SEE "UNDERWRITING".
SUMMARY INFORMATION
The following material, which is presented herein solely to furnish
limited introductory information regarding the Company, has been selected
from or is based upon the detailed information and financial statements
incorporated by reference into this Prospectus Supplement and the
accompanying Prospectus, is qualified in its entirety by reference thereto,
and, therefore, should be read together therewith.
THE OFFERING
Company............................... Northwest Natural Gas Company
Securities offered.................... 1,000,000 shares of Common Stock
(excluding up to 150,000 Option
Shares)
Shares of Common Stock outstanding
after offering...................... Approximately 14,500,000 (excluding
up to 150,000 Option Shares)
Common Stock closing price range,
365-Day High Low, at
February 15, 1995................... $36 1/4 - 28
Nasdaq National Market Symbol......... NWNG
Indicated current annual dividend
rate................................ $1.76
THE COMPANY
Business.............................. A public utility engaged in natural
gas distribution
Service Area.......................... Western Oregon and southwestern
Washington
Estimated Population of Service
Area................................ Approximately 2,600,000
Customers............................. Approximately 391,600
Average annual growth in number
of customers, 1990-94............... 5.2%
S-2
<PAGE>
SELECTED FINANCIAL INFORMATION(1)
YEARS ENDED DECEMBER 31,
----------------------------------------------
1994 1993 1992 1991 1990
---- ---- ---- ---- ----
(THOUSANDS, EXCEPT PER SHARE AMOUNTS)
INCOME STATEMENT DATA:
Operating revenues..... $368,261 $358,717 $274,366 $295,938 $296,281
Net operating revenues--
Margin (Revenues
less cost of gas).... 205,473 219,884 172,450 185,339 182,226
Income before interest
charges............. 80,853 84,850 49,459 43,289 68,686
Net income............. 35,461 37,647 15,775 14,377 30,724
Preferred and preference
stock dividends....... 2,983 3,488 2,560 2,593 2,729
Earnings applicable to
Common Stock.......... $32,478 $34,159 $13,215 $11,784 $27,995
Average number of common
shares outstanding... 13,295 13,074 11,909 11,698 11,522
Earnings per common
share................. $2.44 $2.61 $1.11 $1.01 $2.43
Dividends per common
share................. $1.76 $1.75 $1.72 $1.69 $1.65
DECEMBER 31,
--------------------------------------------
1994 1993 1992 1991 1990
---- ---- ---- ---- ----
(THOUSANDS)
BALANCE SHEET DATA:
Total assets........... $889,304 $849,036 $731,834 $731,494 $687,835
Redeemable preferred
stock................. 15,950 17,041 28,218 29,148 30,102
Long-term debt......... 291,076 272,931 253,766 252,995 215,230
DECEMBER 31, 1994
---------------------------------------
ACTUAL AS ADJUSTED(2)
----------------- ------------------
(THOUSANDS, EXCEPT PERCENTAGES)
CAPITALIZATION:
Long-term debt.................. $291,076 47.9% $291,076 45.8%
Redeemable preferred stock....... 15,950 2.6 15,950 2.5
Nonredeemable preference
stock.......................... 1,252 0.2 1,252 0.2
Redeemable preference stock...... 25,000 4.1 25,000 3.9
Common Stock equity.............. 274,408 45.2 302,993 47.6
-------- ----- -------- -----
Total capitalization........ $607,686 100.0% $636,271 100.0%
======== ===== ======== =====
---------------
(1) The Selected Financial Information for the years ended December 31,
1993, 1992, 1991 and 1990 was derived from audited financial
statements. The Selected Financial Information for the year ended
December 31, 1994 is unaudited, but includes all adjustments which
the management of the Company considers necessary for a fair
presentation of its results for the year.
(2) As adjusted to reflect the Proceeds to Company from the sale of the
Shares, after deducting estimated expenses payable by the Company.
Assuming the purchase by the Underwriters of the Option Shares, Common
Stock Equity and Total Capitalization, each as adjusted, would be
$307,303,250 and $640,581,250, respectively.
S-3
<PAGE>
THE COMPANY
The Company, which was incorporated under the laws of Oregon in 1910,
distributes natural gas to customers in western Oregon and southwestern
Washington, including the Portland metropolitan area. Gas service is
provided in 95 cities and 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 more than
2,600,000, including about 78 percent of the population of the State of
Oregon. The Company's executive offices are located at One Pacific
Square, 220 N.W. Second Avenue, Portland, Oregon 97209. Its telephone
number is 503-226-4211.
Oregon Natural Gas Development Corporation, a wholly-owned subsidiary,
is engaged in natural gas exploration, development and production in the
western United States and Canada.
NNG Financial Corporation, another wholly-owned subsidiary, holds
financial investments as a limited partner in four solar electric
generating systems, four windmill projects and a hydroelectric project, all
located in California, and in a low-income housing project in Portland.
NNG Financial also arranges short-term financing for the Company's
operating subsidiaries.
RECENT DEVELOPMENTS
The Company reported earnings of $1.29 a share for its fourth quarter
ended December 31, 1994, up from earnings of $1.05 a share in the same
quarter a year earlier. The Company's consolidated earnings applicable to
Common Stock for the fourth quarter were $17,300,000, up 24.7 percent from
the fourth quarter of 1993.
The Company earned $1.32 a share from utility operations compared to
$1.17 a share in the fourth quarter of 1993. Weather in the Company's
service territory in the fourth quarter was 2 percent colder than the
fourth quarter of 1993 and 4 percent colder than average.
The Company's earnings for the full year 1994 were $2.44 a share, the
second highest in history. Earnings included $2.08 a share from utility
operations and $0.36 a share from subsidiary operations. The utility's
results for the year were depressed by the effects of warm weather in the
first and second quarters which more than offset the colder than normal
weather experienced in the fourth quarter. Weather conditions in the
Company's service territory in 1994 were 10 percent warmer than in 1993 and
7 percent warmer than average. Subsidiary results in 1994 included gains
equivalent to $0.17 a share from the sale of assets by two subsidiaries
that discontinued operations during the year.
In 1994, the Company added 19,211 customers, expanding its customer
base by 5.2 percent. Customer additions in the residential and commercial
markets were 58 percent due to new construction and 42 percent due to
conversions from other fuels.
USE OF PROCEEDS
The net proceeds to be received by the Company from the sale of the
Shares and the Option Shares (if the option should be exercised) will be
added to the general funds of the Company and used for corporate purposes,
primarily to fund, in part, the Company's ongoing utility construction
program and to repay short-term debt incurred for such purpose.
The Company expects its utility construction and equipment
expenditures in 1995 to aggregate $76 million. The Company expects such
expenditures for the five-year period, 1995-99, to aggregate between $350
million and $375 million. The capital requirements of its subsidiaries
during the same period are expected to be limited to funds internally
generated by the subsidiaries. Approximately $21 million of long-term debt
matures in 1996 and $26 million in 1997.
The Company estimates that 60% or more of the funds required for
utility purposes during the 1995-99 period will be internally generated and
that the balance, as well as substantially all of the funds required for
the repayment of maturing debt, will be funded through short-term
borrowings, which will be refinanced periodically through the sale of long-
term debt and equity securities, in such amounts and at such times as the
Company's cash requirements and market conditions shall determine. Based
upon this estimate, the Company expects that, during 1995, its sales of
Common Stock will consist of sales of the Shares, the Option Shares (if the
option should be exercised) and approximately $6 million of Common Stock
expected to be sold through its Dividend Reinvestment and Stock Purchase
Plan and various employee plans.
S-4
<PAGE>
DIVIDENDS AND PRICE RANGE
Cash dividends on the Common Stock of the Company have been paid each
year since 1951. It is the intention of the Board of Directors to continue
to pay cash dividends on a quarterly basis. However, future dividends will
be dependent upon the Company's earnings, its financial condition and other
factors. See "Description of Common Stock" in the accompanying Prospectus
for certain restrictions upon the payment of cash dividends.
The Company has a Dividend Reinvestment and Stock Purchase Plan
pursuant to which registered holders of Common Stock may reinvest all or a
portion of their quarterly Common Stock cash dividends in shares of the
Company's Common Stock at the applicable market price. Shareholders may
also make optional cash purchases of shares of Common Stock in amounts up
to $50,000 per calendar year at the applicable market price.
The Common Stock is traded on the Nasdaq National Market. Its price
and volume data are reported using the symbol "NWNG". The range of closing
prices of the Common Stock as published in The Wall Street Journal and
dividends paid or declared are shown in the following table for the periods
indicated:
Closing Prices
Quarterly --------------
Dividends High Low
--------- ---- ---
1992:
First Quarter................ $0.43 $31 $27 1/2
Second Quarter............... 0.43 30 1/2 26 1/2
Third Quarter................ 0.43 33 29
Fourth Quarter............... 0.43 33 3/4 28 1/4
-----
$1.72
=====
1993:
First Quarter................ $0.43 $31 1/2 $28 1/2
Second Quarter............... 0.44 34 30 3/4
Third Quarter................ 0.44 38 34
Fourth Quarter............... 0.44 36 3/4 32
-----
$1.75
=====
1994:
First Quarter................ $0.44 $36 1/2 $33 3/4
Second Quarter............... 0.44 34 3/4 29 3/4
Third Quarter................ 0.44 32 29
Fourth Quarter............... 0.44 32 28 1/2
-----
$1.76
=====
1995:
First Quarter (through
February 15, 1995).......... $0.44 $30 3/4 $28
On January 23, 1995 the Company had 12,380 common shareholders of
record.
S-5
<PAGE>
UNDERWRITING
The Underwriters named below, acting through their Representatives,
Merrill Lynch, Pierce, Fenner & Smith Incorporated, Smith Barney Inc. and
A.G. Edwards & Sons, Inc. (the "Representatives"), have severally agreed,
subject to the terms and conditions of the Underwriting Agreement, dated
February 15, 1995 (the "Underwriting Agreement"), to purchase from the
Company the number of Shares set forth below opposite their respective
names.
Number
Underwriter of Shares
----------- ---------
Merrill Lynch, Pierce, Fenner & Smith
Incorporated.............................. 200,000
Smith Barney Inc...................................... 200,000
A.G. Edwards & Sons, Inc.............................. 200,000
Dean Witter Reynolds Inc.............................. 50,000
Edward D. Jones & Co.................................. 50,000
PaineWebber Incorporated.............................. 50,000
Piper Jaffray Inc..................................... 50,000
Prudential Securities Incorporated.................... 50,000
Ragen MacKenzie Incorporated.......................... 50,000
Black & Company, Inc.................................. 20,000
Crowell, Weedon & Co.................................. 20,000
D. A. Davidson & Co. Incorporated..................... 20,000
Jensen Securities Co.................................. 20,000
Paulson Investment Company, Inc....................... 20,000
---------
Total............................................ 1,000,000
=========
The Underwriters are committed to purchase all of the above Shares if
any are purchased. Under certain circumstances, the commitments of non-
defaulting Underwriters may be increased as set forth in the Underwriting
Agreement.
The Representatives have advised the Company that they propose
initially to offer the Shares to the public at the Price to Public set
forth on the cover page of this Prospectus Supplement, and to certain
dealers at such price less a concession not in excess of $.57 per share.
The Underwriters may allow, and such dealers may reallow, a discount not in
excess of $.10 per share on sales to certain other dealers. After the
initial public offering, the public offering price, concession and discount
may be changed.
The Company has granted the Underwriters an option, exercisable within
30 days after the date of this Prospectus Supplement, to purchase up to
150,000 Option Shares to cover over-allotments, if any, at the Price to
Public set forth on the cover page of this Prospectus Supplement less the
Underwriting Discounts and Commissions. If the Underwriters exercise this
option, each of the Underwriters will have a firm commitment, subject to
certain conditions, to purchase approximately the same percentage of the
Option Shares as the percentage of the Shares which it has agreed to
purchase.
In the Underwriting Agreement, the Company has agreed to indemnify the
Underwriters against certain civil liabilities, including liabilities under
the Securities Act of 1933, as amended (the "Act").
In connection with this offering, certain Underwriters, selling
group members (if any) and their respective affiliates who are
qualified market makers on the Nasdaq National Market may engage in
"passive market making" in the Common Stock on the Nasdaq National
Market in accordance with Rule 10b-6A under the Securities Exchange
Act of 1934, as amended (the "Exchange Act"). Rule 10b-6A permits, upon
the satisfaction of certain conditions, underwriters and selling
group members participating in a distribution that are also Nasdaq
market makers in the security being distributed to engage in limited
market making transactions during the period when Rule 10b-6 under the
Exchange Act would otherwise prohibit such activity. Rule 10b-6A prohibits
underwriters and selling group members engaged in passive market making
generally from entering a bid or effecting a purchase at a price that
exceeds the highest bid for those securities displayed on Nasdaq by a
market maker that is not participating in the distribution. Under
Rule 10b-6A, each underwriter or selling group member engaged in passive
market making is subject to a daily net purchase limitation equal
to 30% of such entity's average daily trading volume during the two
full consecutive calendar months immediately preceding the date of filing
of the registration statement under the Act pertaining to the security
to be distributed.
S-6
<PAGE>
EXPERTS
The financial statements and the related financial statement schedules
incorporated by reference from the Company's Annual Report on Form 10-K for
the year ended December 31, 1993 have been audited by Deloitte & Touche
LLP, independent auditors, as stated in their report (which expresses an
unqualified opinion and includes an explanatory paragraph referring to the
change in method of accounting for income taxes and postretirement benefits
for the year ended December 31, 1993), which is incorporated herein by
reference, and has been so incorporated in reliance upon the report of
such firm given upon their authority as experts in accounting and
auditing.
With respect to the unaudited interim financial information which is
incorporated by reference, Deloitte & Touche LLP has applied limited
procedures in accordance with professional standards for a review of such
information. However, as stated in their reports included in the Company's
Quarterly Reports on Form 10-Q and incorporated by reference herein, they
did not audit and they do not express an opinion on that interim financial
information. Accordingly, the degree of reliance on their reports on such
information should be restricted in light of the limited nature of the
review procedures applied. Deloitte & Touche LLP is not subject to the
liability provisions of Section 11 of the Act, for their reports on the
unaudited interim financial information, because such reports are not
"reports" or a "part" of the registration statement prepared or certified
by an accountant within the meaning of Sections 7 and 11 of the Act.
The statements made as to matters of law and legal conclusions in the
documents incorporated in this Prospectus Supplement and the accompanying
Prospectus by reference and under "Description of Common Stock" in such
Prospectus have been reviewed by Bruce B. Samson, Esquire, Portland,
Oregon. Mr. Samson is General Counsel of the Company. These statements
and conclusions are set forth in reliance upon the opinion of Mr. Samson
given upon his authority as an expert. As of January 23, 1995, Mr. Samson
owned approximately 3,900 shares of the Company's common stock (including
1,165 shares through the Company's Retirement K Savings Plan) and has been
granted options to purchase 8,000 additional shares at a price of $24.875
and 2,000 additional shares at a price of $36.00, the market prices of the
shares on the dates of such grants. Mr. Samson's shares, including the
underlying shares subject to options granted to him, had a fair market
value, as of such date, of approximately $389,200.
LEGALITY
The legality of the securities offered hereby will be passed upon for
the Company by Mr. Samson and by Reid & Priest LLP, New York, New York.
Certain legal matters will be passed upon for the Underwriters by Simpson
Thacher & Bartlett (a partnership which includes professional
corporations), New York, New York. However, all matters of Oregon and
Washington law will be passed upon only by Mr. Samson.
S-7
<PAGE>
PROSPECTUS
----------
NORTHWEST NATURAL GAS COMPANY
First Mortgage Bonds
Common Stock
------------------
Northwest Natural Gas Company (the "Company") intends from time to
time to sell its First Mortgage Bonds (the "New Bonds") and/or Common
Stock (the "New Common Stock") (the New Bonds and the New Common Stock
being collectively referred to herein as the "Securities") in any
combination at an aggregate initial offering price not to exceed
$60,000,000. The Securities will be offered at prices and on terms to be
determined at the times of sale. For each issue of the New Bonds for which
this Prospectus will be delivered, there will be an accompanying Prospectus
Supplement that will set forth, with respect to such issue, its series
designation, the aggregate principal amount thereof, the terms of the
offering, its maturity date or dates, its interest rate or rates, the
interest payment dates and the date from which interest will accrue,
whether all or any portion will be issued to a designated depositary, its
redemption provisions, if any, and any other specific terms. For each
issue of the New Common Stock for which this Prospectus will be delivered,
there will be an accompanying Prospectus Supplement that will set forth the
terms of the offering. The Common Stock is traded in the over-the-counter
market. Its price and volume data are reported on the National Association
of Securities DealersAutomated Quotation (NASDAQ) National Market System
using the symbol "NWNG". The sale of one of the Securities will not be
contingent upon the sale of the other.
------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR BY ANY STATE SECURITIES COMMISSION
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
The Securities may be sold directly by the Company or through agents
designated from time to time or through underwriters or dealers. If any
agents of the Company or any underwriters are involved in the sale of the
Securities in respect of which this Prospectus will be delivered, the names
of such agents or underwriters, and the initial price to the public, any
applicable commissions or discounts and the net proceeds to the Company, or
the means of determining the same, will be set forth in an accompanying
Prospectus Supplement. The Company may indemnify agents and underwriters
against certain civil liabilities, including liabilities under the
Securities Act of 1933, as amended. See "Plan of Distribution".
The date of this Prospectus is June 13, 1994.
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended ("Exchange Act"), and, in
accordance therewith, files reports and other information with the
Securities and Exchange Commission. Reports, proxy statements and other
information filed by the Company can be inspected and copied at the public
reference facilities of the Commission, Room 1024, Judiciary Plaza, 450
Fifth Street, N.W., Washington, D.C. 20549, as well as at the following
regional offices: 7 World Trade Center, 13th Floor, New York, New York
10048, and Northwest Atrium Center, Suite 1400, 500 West Madison Street,
Chicago, Illinois 60661-2511. Copies of such material can be obtained from
the Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
There are hereby incorporated by reference in this Prospectus the
following documents heretofore filed with the Securities and Exchange
Commission:
(1) The Company's Annual Report on Form 10-K for the year ended
December 31, 1993.
(2) The Company's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1994.
All documents filed by the Company pursuant to Section 13, 14 or 15(d)
of the Exchange Act after the date of this Prospectus and prior to the
termination of this offering shall be deemed to be incorporated by
reference into this Prospectus and to be a part hereof from the date of
filing of such documents. Any statement contained in a document
incorporated or deemed to be incorporated by reference herein shall be
deemed to be modified or superseded, for purposes of this Prospectus, to
the extent that a statement contained herein or in any other subsequently
filed document which also is or is deemed to be incorporated by reference
herein modifies or supersedes such statement. Any statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
THE COMPANY HEREBY UNDERTAKES TO PROVIDE, WITHOUT CHARGE, TO EACH
PERSON, INCLUDING ANY BENEFICIAL OWNER, TO WHOM A COPY OF THIS PROSPECTUS
SHALL HAVE BEEN DELIVERED, UPON WRITTEN OR ORAL REQUEST OF SUCH PERSON, A
COPY OF ANY OR ALL OF THE DOCUMENTS WHICH HAVE BEEN OR MAY BE INCORPORATED
IN THIS PROSPECTUS BY REFERENCE, OTHER THAN EXHIBITS TO SUCH DOCUMENTS,
UNLESS SUCH EXHIBITS SHALL HAVE BEEN SPECIFICALLY INCORPORATED BY REFERENCE
INTO SUCH DOCUMENTS. REQUESTS FOR SUCH COPIES SHOULD BE DIRECTED TO
NORTHWEST NATURAL GAS COMPANY, SHAREHOLDER SERVICES DEPARTMENT, ONE PACIFIC
SQUARE, 220 N.W. SECOND AVENUE, PORTLAND, OREGON 97209, OR BY CALLING THE
FOLLOWING NUMBER: 503-226-4211.
THE COMPANY
The Company, which was incorporated under the laws of Oregon in 1910,
distributes natural gas to customers in western Oregon and southwestern
Washington, including the Portland metropolitan area. Gas service is
provided in 95 cities and 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 2,600,000,
including about 78 percent of the population of the State of Oregon. The
Company's executive offices are located at One Pacific Square, 220 N.W.
Second Avenue, Portland, Oregon 97209. Its telephone number is 503-226-
4211.
Oregon Natural Development Corporation, a wholly-owned subsidiary, is
engaged in natural gas exploration, development and production in the
western United States and Canada.
NNG Financial Corporation, another wholly-owned subsidiary, holds
financial investments as a limited partner in four solar electric
generating systems, four windmill projects and a hydroelectric project, all
located in California, and in a low-income housing project in Portland.
NNG Financial also arranges short-term financing for the Company's
operating subsidiaries.
2
<PAGE>
RATIO OF EARNINGS TO FIXED CHARGES
The Company has calculated the ratios of earnings to fixed charges
pursuant to Item 503 of SEC Regulation S-K as follows:
Twelve Months Ended
-----------------------------------------------------------
March 31, December 31,
--------- --------------------------------------------
1994 1993 1992 1991 1990 1989
---- ---- ---- ---- ---- ----
2.94 3.22 1.81 1.59 2.64 2.75
Earnings consist of net income to which have 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.
USE OF PROCEEDS AND FINANCING PROGRAM
The net proceeds to be received by the Company from the sale of the
Securities will be added to the general funds of the Company and used for
corporate purposes, primarily to fund, in part, the Company's ongoing
utility construction program and to repay short-term debt incurred for such
purpose.
The Company expects its utility construction and equipment
expenditures in 1994 to aggregate $75 million. The Company expects such
expenditures for the five-year period, 1994-98, to aggregate between $325
million and $350 million. The capital requirements of its subsidiaries
during the same period are expected to be limited to funds internally
generated by the subsidiaries. Approximately $21 million of long-term debt
matures in 1996 and $26 million in 1997.
The Company estimates that 50% or more of the funds required for
utility purposes during the 1994-98 period will be internally generated and
that the balance, as well as substantially all of the funds required for
the repayment of maturing debt, will be funded through short-term
borrowings, which will be refinanced periodically through the sale of long-
term debt and equity securities, in such amounts and at such times as the
Company's cash requirements and market conditions shall determine. Based
upon this estimate, the Company expects that, through the end of 1995, its
sales of Common Stock will not exceed $50 million, consisting of not more
than $40 million of New Common Stock and approximately $10 million of
Common Stock expected to be sold through its Dividend Reinvestment and
Stock Purchase Plan and various employee plans.
DESCRIPTION OF THE NEW BONDS
General: The New Bonds are to be issued under the Company's Mortgage
and Deed of Trust, dated as of July 1, 1946, to Bankers Trust Company and
R.G. Page (Stanley Burg, successor), as trustees, as supplemented by twenty
supplemental indentures and as to be further supplemented by one or more
additional supplemental indentures providing for one or more series of the
New Bonds, all of which are collectively referred to as the "Mortgage".
The statements herein concerning the New Bonds and the Mortgage are
merely an outline and do not purport to be complete. They make use of
terms defined in the Mortgage and are qualified in their entirety by
express reference to the cited Sections and Articles.
Reference is made to the Prospectus Supplement for each issue of the
New Bonds for the following terms, among others, of the New Bonds offered
thereby: (i) the series designation and aggregate principal amount
thereof, (ii) the initial public offering price and other terms of their
offering, (iii) the date or dates on which they will mature, (iv) the rate
or rates per annum at which they will bear interest, (v) the times at which
such interest will be payable and the date from which it will accrue, (vi)
whether all or any portion thereof will be issued to a designated
depositary, (vii) any redemption provisions, and (viii) other specific
terms.
Form, Exchange and Payment: Unless otherwise indicated in the
Prospectus Supplement for an issue of the New Bonds, the New Bonds offered
thereby will be issued only in fully registered form in denominations of
$1,000 and any multiple thereof. The New Bonds are exchangeable at the
office of Bankers Trust Company in New York City, without charge other than
taxes or other governmental charges incident thereto. Principal and
interest are payable at such office.
3
<PAGE>
Provisions for Maintenance of Property: While the Mortgage contains
provisions for the maintenance of the Mortgaged and Pledged Property, the
Mortgage does not permit redemption of First Mortgage Bonds ("Bonds")
pursuant to these provisions.
Security: The New Bonds together with all other Bonds now or
hereafter issued under the Mortgage will be secured by the Mortgage, which
constitutes, in the opinion of Bruce B. Samson, Esq., General Counsel of
the Company, a first mortgage lien on all of the gas plants, distribution
systems and other materially important physical properties of the Company
(except as stated below), subject to (a) leases of minor portions of the
Company's property to others for uses which, in the opinion of such
Counsel, do not interfere with the Company's business, (b) leases of
certain property of the Company not used in its gas utility business or the
gas by-product business, (c) excepted encumbrances, and (d) minor defects
and encumbrances customarily found in properties of like size and character
which, in the opinion of such Counsel, do not impair the use of such
properties by the Company. There are excepted from the lien all cash and
securities; certain equipment, apparatus, materials or supplies; aircraft,
automobiles and other vehicles; receivables, contracts, leases and
operating agreements; timber, minerals, mineral rights and royalties; and
all natural gas and oil production property.
The Mortgage contains provisions subjecting after-acquired property
(subject to pre-existing liens) to the lien thereof, subject to limitations
in the case of consolidation, merger or sale of substantially all of the
Company's assets. (See Mortgage, Art. XVI.)
The Mortgage provides that the trustees shall have a lien upon the
mortgaged property, prior to that of the Bonds, for the payment of their
reasonable compensation and expenses, and for indemnity against certain
liabilities. (See Mortgage, Sec. 96.)
Issuance of Additional Bonds: Bonds may be issued from time to time
on the basis of (1) 60% of property additions, after adjustments to offset
retirements; (2) retirement of Bonds or qualified lien bonds; or (3)
deposit of cash. With certain exceptions in the case of (2) above, the
issuance of Bonds is subject to adjusted net earnings before income taxes
for 12 consecutive months out of the preceding 15 months being at least
twice the annual interest requirements on all Bonds at the time
outstanding, including the additional issue, and all indebtedness of prior
rank.
Property additions generally include gas, electric, steam or hot water
property or gas by-product property acquired after March 31, 1946, but may
not include securities, airplanes, automobiles or other vehicles or natural
gas transmission lines or natural gas and oil production property. As of
March 31, 1994, approximately $201,300,900 of property additions and
$93,000,000 of retired Bonds were available for use as the basis for the
issuance of Bonds.
The Mortgage contains certain restrictions upon the issuance of Bonds
against property subject to liens.
The New Bonds will be issued against property additions and retired
Bonds.
(See Mortgage, Secs. 4-7, 20-30 and 46 and Third Supplemental, Secs. 3
and 4.)
Release and Substitution of Property: Property may be released
against (1) deposit of cash or, to a limited extent, purchase money
mortgages, (2) property additions, or (3) waiver of the right to issue
Bonds without applying any earnings test. Cash so deposited and cash
deposited against the issuance of additional bonds may be withdrawn upon
the bases stated in (2) and (3) above. When property released is not
funded property, property additions used to effect the release may again,
in certain cases, become available as credits under the Mortgage, and the
waiver of the right to issue Bonds to effect the release may, in certain
cases, cease to be effective as such a waiver. Similar provisions are in
effect as to cash proceeds of such property. The Mortgage contains special
provisions with respect to qualified lien bonds pledged and the disposition
of moneys received on pledged prior lien bonds. (See Mortgage, Secs. 5,
31, 32, 37, 46 to 50, 59 to 61, 100 and 118.)
Defaults and Notice Thereof: Defaults are: default in payment of
principal; default for 60 days in payment of interest or of installments of
funds for retirement of bonds; certain defaults with respect to qualified
lien bonds; certain events in bankruptcy, insolvency or reorganization; and
default for 90 days after notice in the case of other covenants. The
trustees may withhold notice of default (except in payment of principal,
interest or any funds for the retirement of Bonds) if they think it in the
interest of the Bondholders. (See Mortgage, Secs. 65 and 66.)
Holders of 25% of the Bonds may declare the principal and the interest
due on default, but a majority may annul such declaration if such default
has been cured. No holder of Bonds may enforce the lien of the Mortgage
without giving the trustees written notice of a default and unless holders
of 25% of the Bonds have requested the trustees to act
4
<PAGE>
and offered them reasonable opportunity to act and the trustees have
failed to act. The trustees are not required to risk their funds or
incur personal liability if there is reasonable ground for believing
that the repayment is not reasonably assured. The holders of a majority
of the Bonds may direct the time, method and place of conducting any
proceedings for any remedy available to the trustees, or exercising any
trust or power conferred upon the trustees but the trustees are not
required to follow such direction if not sufficiently indemnified for
expenditures. (See Mortgage, Secs. 67, 71, 80 and 94.)
Evidence to be Furnished to the Trustees: Compliance with Mortgage
provisions is evidenced by written statements of the Company's officers or
persons selected by the Company. In certain major matters the accounting,
engineer, appraiser or other expert must be independent. Various
certificates and other papers, including a certificate with respect to
compliance with the terms of the Mortgage and the absence of defaults, are
required to be filed annually and upon the occurrence of certain events.
(See Mortgage, Secs. 67, 71, 80 and 94.)
Modification of the Mortgage: The rights of the Bondholders may be
modified with the consent of 70% of the Bonds and, if less than all series
of Bonds are affected, the consent also of 70% of Bonds of each series
affected. The Company has reserved the right without any consent or other
action by holders of any series of Bonds (including the New Bonds), and
intends in conjunction with the issuance of the New Bonds, to substitute
66 % for 70%. In general, no modification of the terms of payment of
principal and interest, and no modification affecting the lien of the
Mortgage or reducing the percentage required for modification is effective
against any Bondholder without his consent. (See Mortgage, Art. XIX and
Ninth Supplemental, Sec. 6.)
The Company has reserved the right to amend the Mortgage, without any
consent or other action by holders of the Bonds of the Eighteenth Series or
of Bonds of any subsequently created series (including the New Bonds), in
the following respects:
Release and Substitution of Property. To permit the release of
property at the lesser of its cost or its fair value at the time that
such property became funded property, rather than at its fair value at
the time of its release; and to facilitate the release of unfunded
property. (See Mortgage, Secs. 3, 59 and 60 and Eighteenth
Supplemental, Sec. 2.03.)
Issuance of Additional Bonds. To clarify that (i) for purposes of
determining annual interest requirements, interest on Bonds or other
indebtedness bearing interest at a variable interest rate shall be
computed at the average of the interest rates borne by such Bonds or
other indebtedness during the period of calculation, or, if such Bonds
or other indebtedness shall have been issued after such period or
shall be the subject of pending applications, interest shall be
computed at the initial rate borne upon issuance, and (ii) no
extraordinary items shall be included in operating expenses or
deducted from revenues or other income in calculating adjusted net
earnings (See Mortgage, Sec. 7); and to revise the basis for the
issuance of additional Bonds from 60% of property additions, after
adjustments to offset retirements, to 70%. (See Mortgage, Secs. 25,
26, 59 and 61 and Eighteenth Supplemental, Secs. 2.01 and 2.02.)
The Corporate Trustee
Bankers Trust Company also serves as the Indenture Trustee under
the Indenture under which the Company's Unsecured Medium-Term Notes
are issued.
DESCRIPTION OF COMMON STOCK
The following is a summary of certain rights and privileges of the
Common Stock. This summary does not purport to be complete. Reference is
made to the Restated Articles of Incorporation and the Bylaws of the
Company, filed as exhibits to the Registration Statement, for complete
statements. The following statements are qualified in their entirety by
such references.
Dividends and Liquidation Rights: Except as hereinafter stated, the
Common Stock is entitled to receive such dividends as are declared by the
Board of Directors and to receive ratably on liquidation any assets which
remain after payment of liabilities. The Company's Preferred and
Preference Stock are entitled in preference to the Common Stock (1) to
cumulative dividends at the annual rate fixed for each series by the Board
of Directors, and (2) in voluntary and involuntary liquidation, to the
amounts fixed for each series by the Board of Directors, plus in each case,
unpaid accumulated dividends.
5
<PAGE>
Dividend Limitations: Should dividends on either the Preferred or the
Preference Stock be in arrears, no dividends on the Common Stock may be
paid or declared. Except with the consent of the holders of a majority of
the Preferred Stock then outstanding, no dividends on the Common Stock or
the Preference Stock may be paid or declared unless the Preferred Stock
purchase and sinking fund obligations have been met for that year. Future
series of the Preferred or the Preference Stock could contain sinking fund,
purchase or redemption obligations under which no dividends on the Common
Stock may be paid or declared while such obligations are in default.
Common Stock dividends also may be restricted by the provisions of future
instruments pursuant to which the Company may issue long-term debt.
Voting Rights: Except as provided by law or as described below, only
the Common Stock has voting rights. Cumulative voting is permitted by the
Restated Articles of Incorporation to holders of Common Stock at elections
of directors. The Preferred Stock has the special right to elect the
smallest number of directors which constitutes at least one-fourth of the
total number of directors, or two directors, whichever is greater, if
payments of four quarterly dividends or more on any share or shares of
Preferred Stock should be in arrears.
Classification of the Board of Directors: The Board of Directors of
the Company may consist of not less than nine nor more than 13 persons, as
determined by the Board, divided into three classes as nearly equal in
number as possible. The current number is twelve. One class is elected
for a three-year term at each annual meeting of shareholders. Vacancies,
including those resulting from an increase in the size of the Board, may be
filled by a majority vote of the directors then in office. One or more of
the directors may be removed, with or without cause, by the affirmative
vote of the holders of not less than two-thirds of the shares entitled to
vote thereon; provided, however, that if fewer than all of the directors
should be candidates for removal, no one of them shall be removed if the
votes cast against such director's removal would be sufficient to elect
such director if then cumulatively voted at an election of the class of
directors of which such director shall be a part. Except for those persons
nominated by the Board, no person shall be eligible for election as a
director unless a request from a shareholder entitled to vote in the
election of directors that such person be nominated and such person's
consent thereto shall be delivered to the Secretary of the Company in
advance of the meeting at which such election shall be held. The foregoing
provisions may not be amended or repealed except by the affirmative vote of
the holders of not less than two-thirds of the shares entitled to vote at
an election of directors. The foregoing provisions will not apply to
directors, if any, elected by the holders of the Preferred Stock.
Transactions with Related Persons: The Company shall not enter into
any business transaction with a related person or in which a related person
shall have an interest (except proportionately as a shareholder of the
Company) without first obtaining both (1) the affirmative vote of the
holders of not less than two-thirds of the outstanding shares of the
capital stock of the Company not held by such related person, and (2) the
determination of a majority of the continuing directors that the cash or
fair market value of the property, securities or other consideration to be
received per share by the holders, other than such related person, of the
shares of each class or series of the capital stock of the Company in such
business transaction shall not be less than the highest purchase price paid
by such related person in acquiring any of its holdings of shares of the
same class or series, unless the continuing directors by a majority vote
shall either (a) have expressly approved the acquisition of the shares of
the capital stock of the Company that caused such related person to become
a related person, or (b) have expressly approved such business transaction.
As used in this paragraph: a "business transaction" includes a merger,
consolidation, reorganization or recapitalization, a purchase, sale, lease,
exchange or mortgage of all or a substantial part (10% or more) of the
property of the Company or a related person, an issuance, sale or exchange
of securities and a liquidation, spin-off or dissolution; a "related
person" includes a person, organization or group thereof owning 10% or more
of the capital stock of the Company; "continuing directors" are those whose
nominations for directorship shall have been approved by a majority of the
directors in office on April 9, 1984 or by a majority of the then
continuing directors. The foregoing provisions may not be amended or
repealed except by the affirmative vote of the holders of not less than
two-thirds of the shares of the capital stock of the Company (other than
shares held by related persons).
Preemptive Rights: The holders of the Common Stock have no preemptive
rights.
Other Provisions: The issued and outstanding shares of Common Stock
are, and the shares of the New Common Stock, if any, will be, fully paid
and nonassessable.
Transfer Agent and Registrar: The Company is the transfer agent and
registrar for the Common Stock.
6
<PAGE>
PLAN OF DISTRIBUTION
The Company may sell the Securities in any of three ways: (i) through
underwriters or dealers; (ii) directly to a limited number of purchasers or
to a single purchaser; or (iii) through agents. Each Prospectus Supplement
will set forth the terms of the offering of the Securities offered thereby,
including the name or names of any underwriters, the purchase price of such
Securities and the proceeds to the Company from such sale, any underwriting
discounts and other items constituting underwriters' compensation, any
initial public offering price and any discounts or concessions allowed or
reallowed or paid to dealers. Any initial public offering price and any
discounts or concessions allowed or reallowed or paid to dealers may be
changed from time to time.
If underwriters are used in the sale, the Securities will be acquired
by the underwriters for their own account and may be sold from time to time
in one or more transactions, including negotiated transactions, at a fixed
public offering price or at varying prices determined at the time of the
sale. The Securities may be offered to the public either through
underwriting syndicates represented by one or more managing underwriters as
may be designated by the Company, or directly by one or more of such firms.
The underwriter or underwriters with respect to a particular underwritten
offering of Securities will be named in the Prospectus Supplement relating
to such offering and, if an underwriting syndicate is used, the managing
underwriter or underwriters will be set forth on the cover page of such
Prospectus Supplement. Unless otherwise set forth in a Prospectus
Supplement, the obligations of the underwriters to purchase the Securities
offered thereby will be subject to certain conditions precedent, and the
underwriters will be obligated to purchase all such Securities if any are
purchased.
Securities may be sold directly by the Company or through agents
designated by the Company from time to time. Each Prospectus Supplement
will set forth the name of any agent involved in the offer or sale of the
Securities in respect of which such Prospectus Supplement is delivered as
well as any commissions payable by the Company to such agent. Unless
otherwise indicated in such Prospectus Supplement, any such agent will be
acting on a best efforts basis for the period of its appointment.
If so indicated in a Prospectus Supplement, the Company will authorize
agents, underwriters or dealers to solicit offers by certain specified
institutions to purchase the Securities offered thereby from the Company at
the public offering price set forth in such Prospectus Supplement pursuant
to delayed delivery contracts providing for payment and delivery on a
specified date in the future. Such contracts will be subject to those
conditions set forth in such Prospectus Supplement, which will set forth
the commission payable for solicitation of such contracts.
Agents and underwriters may be entitled under agreements entered into
with the Company to indemnification by the Company against certain civil
liabilities, including liabilities under the Securities Act of 1933, as
amended.
EXPERTS
The financial statements and the financial statement schedules of
Northwest Natural Gas Company incorporated in this Prospectus by reference
from the Company's Annual Report on Form 10-K, have been audited by
Deloitte & Touche, independent auditors, as stated in their report, which
is incorporated herein by reference, and have been so incorporated in
reliance upon the report of such firm, given upon their authority as
experts in accounting and auditing.
With respect to the unaudited interim financial information which is
incorporated herein by reference, Deloitte & Touche has applied limited
procedures in accordance with professional standards for a review of such
information. However, as stated in their reports included in the Company's
Quarterly Reports on Form 10-Q and incorporated by reference herein, they
did not audit and they do not express an opinion on that interim financial
information. Accordingly, the degree of reliance on their reports on such
information should be restricted in light of the limited nature of the
review procedures applied. Deloitte & Touche is not subject to the
liability provisions of Section 11 of the Securities Act of 1933, as
amended, for their reports on the unaudited interim financial information
because such reports are not "reports" or a "part" of the registration
statement prepared or certified by an accountant within the meaning of
Sections 7 and 11 of the Act.
The statements made as to matters of law and legal conclusions in the
documents incorporated in this Prospectus by reference and under
"Description of the New Bonds" and "Description of Common Stock" herein
and, if any, in the accompanying Prospectus Supplement have been reviewed
by Bruce B. Samson, Esquire, Portland, Oregon. Mr.
7
<PAGE>
Samson is General Counsel of the Company. These statements and
conclusions are set forth in reliance upon the opinion of Mr. Samson
given upon his authority as an expert. As of March 31, 1994, Mr. Samson
owned approximately 2,802 shares of the Company's common stock (including
1,009 shares through the Company's Retirement K Savings Plan) and has
been granted options to purchase 8,000 additional shares at a price of
$24.875 and 2,000 additional shares at a price of $36.00, the market
prices of the shares on the dates of such grants. Mr. Samson's
shares, including the underlying shares subject to options granted to
him, have a current fair market value of approximately $412,865.
LEGALITY
The legality of the Securities will be passed upon for the Company by
Mr. Samson and by Reid & Priest, New York, New York. Certain legal matters
will be passed upon for the Underwriters by Simpson Thacher & Bartlett (a
partnership which includes professional corporations), New York, New York.
However, all matters pertaining to titles, the lien and enforceability of
the Mortgage, franchises and all other matters of Oregon and Washington law
will be passed upon only by Mr. Samson.
8
<PAGE>
===========================================================================
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS IN CONNECTION WITH THE OFFER
CONTAINED IN THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS, AND, IF GIVEN
OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY OR THE UNDERWRITERS. NEITHER THE
DELIVERY OF THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE
HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE AS OF WHICH
INFORMATION IS GIVEN IN THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS.
THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS DO NOT CONSTITUTE AN OFFER OR
SOLICITATION BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR
SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR
SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL
TO MAKE SUCH OFFER OR SOLICITATION.
TABLE OF CONTENTS
Prospectus Suplement
PAGE
----
Summary Information................................................ S-2
Selected Financial Information..................................... S-3
The Company........................................................ S-4
Use of Proceeds.................................................... S-4
Dividends and Price Range.......................................... S-5
Underwriting....................................................... S-6
Experts............................................................ S-7
Legality........................................................... S-7
Prospectus
Available Information.............................................. 2
Incorporation of Certain Documents by Reference.................... 2
The Company........................................................ 2
Ratio of Earnings to Fixed Charges................................. 3
Use of Proceeds and Financing Program.............................. 3
Description of the New Bonds....................................... 3
Description of Common Stock........................................ 5
Plan of Distribution............................................... 7
Experts............................................................ 7
Legality........................................................... 8
==========================================================================
==========================================================================
1,000,000 SHARES
NORTHWEST
NATURAL GAS COMPANY
COMMON STOCK
-----------------------------------------
P R O S P E C T U S S U P P L E M E N T
-----------------------------------------
MERRILL LYNCH & CO.
SMITH BARNEY INC.
A.G. EDWARDS & SONS, INC.
FEBRUARY 15, 1995
==========================================================================
