Filed pursuant to Rule 424(b)(5)
Registration No. 333-48275
Information contained herein is subject to completion or
amendment. A registration statement relating to these securities
has been declared effective by the Securities and Exchange
Commission pursuant to Rule 415 under the Securities Act of 1933.
A final prospectus supplement and the accompanying prospectus
shall not constitute an offer to sell or the solicitation of an
offer to buy nor shall there by any sale of these securities in
any jurisdiction in which such offer, solicitation or sale would
be unlawful prior to registration or qualification under the
securities laws of any such jurisdiction.
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS SUPPLEMENT DATED MARCH 27, 1998
PROSPECTUS SUPPLEMENT
---------------------
(TO PROSPECTUS DATED MARCH 27, 1998)
1,500,000 SHARES
[NW NATURAL LOGO]
COMMON STOCK
------------
Northwest Natural Gas Company (the "Company") is offering
hereby 1,500,000 shares of its common stock, par value $3 1/6 per
share (the "Common Stock") and the common share purchase rights
appurtenant thereto (the "Rights" and, together with the
1,500,000 shares of Common Stock, the "Firm Shares"). The
Company's 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 March 26, 1998 was $27.44 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 PROCEEDS
PRICE TO DISCOUNTS AND TO
PUBLIC COMMISSIONS(1) COMPANY(2)
----------------------------------------------------------------------
Per Share . . . . . . . . $ $ $
----------------------------------------------------------------------
Total (3) . . . . . . . . $ $ $
======================================================================
(1) The Company has agreed to indemnify the Underwriters against
certain civil liabilities, including liabilities under the
Securities Act of 1933, as amended ("Securities Act"). See
"Underwriting".
(2) Before deducting expenses payable by the Company, estimated
at $ .
(3) The Company has granted the Underwriters an option,
exercisable on one or more occasions within 30 days after
the date of this Prospectus Supplement, to purchase up to
225,000 additional shares of Common Stock (the "Option
Shares" and, together with the Firm Shares, the "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 $ , $
and $ , respectively. See "Underwriting".
---------------
The Firm Shares 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 Firm Shares will be made in New York, New York on or about
April , 1998.
---------------
MERRILL LYNCH & CO.
PAINEWEBBER INCORPORATED
RAGEN MACKENZIE INCORPORATED
---------------
The date of this Prospectus Supplement is April , 1998.
<PAGE>
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN
TRANSACTIONS THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE
PRICE OF THE COMMON STOCK, INCLUDING OVER-ALLOTMENT, STABILIZING
AND SHORT COVERING TRANSACTIONS IN THE COMMON STOCK, AND THE
IMPOSITION OF A PENALTY BID, IN CONNECTION WITH THE OFFERING.
FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING".
IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS AND
SELLING GROUP MEMBERS MAY ENGAGE IN PASSIVE MARKET MAKING
TRANSACTIONS IN THE COMPANY'S COMMON STOCK ON THE NASDAQ NATIONAL
MARKET IN ACCORDANCE WITH RULE 103 OF REGULATION M UNDER THE
SECURITIES EXCHANGE ACT OF 1934, AS AMENDED ("EXCHANGE ACT").
SEE "UNDERWRITING".
FORWARD-LOOKING STATEMENTS
This document does, and the documents incorporated herein by
reference may, contain forward-looking statements within the
meaning of Section 27A of the Securities Act and Section 21E of
the Exchange Act. Although the Company believes these statements
are based on reasonable assumptions, no assurance can be given
that actual results will not differ from those in the forward-
looking statements contained herein and in the incorporated
documents. The forward-looking statements contained herein and
in the incorporated documents may be affected by various
uncertainties, including governmental policy and regulatory
action, the competitive environment and economic factors, as well
as weather conditions. For a discussion of additional factors
which may affect forward-looking statements contained herein and
in the incorporated documents, see the Company's most recent
Annual Report on Form 10-K and its most recent Quarterly Report
on Form 10-Q.
S-2
<PAGE>
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,
dba NW Natural
Securities offered . . . . 1,500,000 shares of Common Stock
and the common share purchase
rights appurtenant thereto
(excluding up to 225,000 Option
Shares)
Shares of Common Stock outstanding
after offering . . . . . Approximately 24,400,000
(excluding up to 225,000
Option Shares)
Common Stock closing price
range, 365-Day
High-Low, at
March 26, 1998 . . . . . $31.25 - $23.13
Nasdaq National
Market Symbol . . . . . . NWNG
Indicated current annual
dividend rate . . . . . . $1.22
Book value per share at
December 31, 1997 . . . . $16.02
THE COMPANY
Business . . . . . . . . . A public utility engaged in
natural gas distribution
Service Area . . . . . . . Western Oregon and southwestern
Washington
Estimated Population of
Service Area . . . . . . Approximately 2,735,000
Customers at
December 31, 1997 . . . . Approximately 458,000
Average annual growth
in number of
customers, 1993-97 . . . 5.4%
S-3
<PAGE>
SELECTED FINANCIAL INFORMATION(1)
YEARS ENDED DECEMBER 31,
-------------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
(THOUSANDS, EXCEPT PER SHARE AMOUNTS)
INCOME STATEMENT DATA:
Operating revenues . $361,756 $380,318 $356,276 $368,261 $358,717
Net operating
revenues--Margin
(Revenues less
cost of gas) . . . . 232,444 237,513 212,225 205,473 219,884
Income before interest
charges . . . . . . 92,648 100,847 85,864 80,853 84,850
Net income . . . . . 43,059 46,793 38,065 35,461 37,647
Preferred and
preference stock
dividends . . . . . 2,646 2,723 2,806 2,983 3,488
Earnings applicable to
Common Stock . . . . $ 40,413 $ 44,070 $ 35,259 $ 32,478 $ 34,159
Average number of
common shares
outstanding . . . . 22,698 22,391 21,817 19,943 19,611
Basic earnings per
common share . . . . $ 1.78 $ 1.97 $ 1.62 $ 1.63 $ 1.74
Diluted earnings per
common share . . . . $ 1.76 $ 1.94 $ 1.60 $ 1.61 $ 1.72
Dividends per common
share . . . . . . . $ 1.205 $ 1.20 $ 1.18 $ 1.173 $ 1.167
DECEMBER 31,
-------------------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
(THOUSANDS)
BALANCE SHEET DATA:
Total assets . . . . $ 1,111,617 $ 988,869 $ 929,277 $ 889,304 $ 849,036
Redeemable preferred
stock. . . . . . . 12,429 13,749 14,840 15,950 17,041
Redeemable preference
stock. . . . . . . 25,000 25,000 25,000 26,252 26,633
Long-term debt . . . 344,303 271,838 279,945 291,076 272,931
DECEMBER 31, 1997
------------------------------------------------
ACTUAL AS ADJUSTED(2)
---------------------- -----------------------
(THOUSANDS, EXCEPT PERCENTAGES)
CAPITALIZATION:
Long-term debt . . . . $ 344,303 46.0% $ 346,303 %
Redeemable preferred
stock . . . . . . . . 12,429 1.7 12,429
Redeemable preference
stock . . . . . . . . 25,000 3.3 25,000
Common Stock equity . . 366,265 49.0
------- ---- ------- ----
Total $ 747,997 100.0% $ 100.0%
capitalization . ========= ===== ======= =====
---------------------
(1) The Selected Financial Information was derived from audited
financial statements. All share and per share amounts for periods
prior to September 6, 1996 have been adjusted to reflect a 3-for-2
split of the Company's Common Stock effective on such date.
(2) As adjusted to reflect the Proceeds to Company from the sale of the
Shares, after deducting estimated expenses payable by the Company;
the sale of $22,000,000 aggregate principal amount of the Company's
Secured Medium-Term Notes, Series B, in March 1998; and the redemption
of $20,000,000 aggregate principal amount of its First Mortgage Bonds,
9-1/8% Series, in February and April 1998. Assuming the purchase by
the Underwriters of 225,000 Option Shares, Common Stock Equity and
Total Capitalization, each as adjusted, would be $ and
$ , respectively.
S-4
<PAGE>
THE COMPANY
The Company is principally engaged in the distribution of natural gas to
customers in western Oregon and southwest Washington, including the
Portland metropolitan area. NW Natural and its predecessors have supplied
gas service to the public since 1859.
Gas service currently 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 2,700,000, 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.
The Company has two active wholly-owned subsidiaries.
Canor Energy Ltd., which is incorporated in Alberta, Canada, is engaged
in natural gas and oil exploration, development and production in Alberta
and Saskatchewan, Canada. Since 1995, Canor has managed a joint venture
for the development of gas and oil properties in western Canada with a
wholly-owned subsidiary of NIPSCO Industries, Inc. Canor and the NIPSCO
subsidiary plan to amalgamate their respective operations into a new
company during 1998.
NNG Financial Corporation, which is incorporated in Oregon, holds
financial investments as a limited partner in three solar electric
generating systems, four windmill electric generation projects and a
hydroelectric project, all located in California, and in two low-income
housing projects in Portland. NNG Financial also arranges for short-term
financing for Canor.
RECENT DEVELOPMENTS
NW Natural reported consolidated earnings applicable to common stock of
$17.7 million, or 78 cents a share, for the quarter ended December 31,
1997, up from $17.0 million, or 76 cents a share, in the fourth quarter of
1996.
NW Natural's consolidated earnings applicable to common stock for the
full year 1997 were $40.4 million, or $1.78 a share, the second highest in
the Company's history. Earnings in 1997 included $1.70 a share from
utility operations and 8 cents a share from subsidiary operations.
Earnings in 1996 were a record $44.1 million, or $1.97 a share, including
$1.87 a share from utility operations and 10 cents a share from subsidiary
operations.
The Company added a record 24,900 customers to its system during 1997.
NW Natural had about 458,000 customers at year-end 1997, up 5.7 percent
from year-end 1996. Customer additions in the residential and commercial
markets were 64 percent due to new construction and 36 percent due to
conversions from other fuels. The Company's customer growth rate averaged
5.4 percent per year during the three years ended December 31, 1997, adding
more than 66,000 customers to the system.
Typically, 75 percent or more of NW Natural's annual operating revenues
are derived from gas sales to weather-sensitive residential and commercial
customers. Accordingly, variations in temperatures within the year and
from year to year will affect volumes of gas sold to, and revenues derived
from, these customers. Earnings in 1997 were reduced by warmer-than-normal
weather, the effect of which was partially offset by additional sales from
customer growth. Weather conditions in NW Natural's service territory in
1997 were 8 percent warmer than in 1996 and 4 percent warmer than the
20-year average.
The Company reported on February 27, 1998, that it estimated the
continuing warm weather in this year's El Nino winter may reduce earnings
for the quarter ending March 31, 1998, by 20 to 30 cents a share as
compared to earnings assuming average weather for the quarter. The
estimate was based upon weather through February 24 that was about 15
percent warmer than the 20-year average. The estimated net effect for the
S-5
<PAGE>
quarter was a reduction of about 20 cents a share if weather during the
remainder of the quarter were at average levels, or a reduction of about 30
cents a share if weather continued to be 15 percent warmer than average.
The Company has declared a dividend of 30.5 cents a share on shares of
the Common Stock, along with regular quarterly dividends on shares of its
preferred and preference stock, payable May 15, 1998, to shareholders of
record on April 30, 1998.
USE OF PROCEEDS
The net proceeds to be received by the Company from the sale of the Firm
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 1998 to aggregate $90 million, and in the five-year period 1998-2002, to
aggregate between $500 million and $550 million.
The Company estimates that approximately 50% or more of the funds
required for utility purposes during the 1998-2002 period will be
internally generated and that the balance will be funded through short-term
borrowings, which will be refinanced periodically through the sale of long-
term debt and equity securities, including the Shares offered hereby, 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 1998, its sales of Common Stock will consist of sales
of the Firm Shares, the Option Shares (if the option should be exercised)
and approximately $6.6 million of Common Stock expected to be sold through
its Dividend Reinvestment and Stock Purchase Plan and various employee
plans.
S-6
<PAGE>
DIVIDENDS AND PRICE RANGE
Cash dividends on the Common Stock of the Company have been paid
quarterly 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 the Shares" 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 shareholders may reinvest all or a portion of their
quarterly Common Stock cash dividends to purchase additional shares of the
Company's Common Stock at the applicable market price. Shareholders may
also make optional cash payments to purchase additional shares of Common
Stock in amounts up to $50,000 per calendar year at the applicable market
price.
The Company's Common Stock was split three-for-two effective September
6, 1996, in the form of a 50% stock dividend to shareholders of record
August 23, 1996. Share prices and dividends paid on the Company's Common
Stock for periods prior to the effective date of the stock split have been
adjusted to reflect the stock split.
The Company's 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 are shown in the following table for the periods
indicated:
QUARTERLY
DIVIDENDS CLOSING PRICES
--------- --------------------------
HIGH LOW
---- ---
1995:
First Quarter . . . $ 0.293 $ 21.00 $ 18.67
Second Quarter . . . 0.293 21.00 19.33
Third Quarter . . . 0.293 21.50 19.75
Fourth Quarter . . . 0.300 22.67 20.50
-----
$ 1.179
=====
1996:
First Quarter . . . $ 0.300 $ 22.67 $ 20.83
Second Quarter . . . 0.300 23.58 21.17
Third Quarter . . . 0.300 24.25 22.54
Fourth Quarter . . . 0.300 25.75 23.25
-----
$ 1.20
=====
1997:
First Quarter . . . $ 0.300 $ 25.38 $ 23.25
Second Quarter . . . 0.300 26.88 23.13
Third Quarter . . . 0.300 27.75 24.25
Fourth Quarter . . . 0.305 31.25 24.38
-----
$ 1.205
=====
1998:
First Quarter
(through March 26,
1998) . . . . . . . $ 0.305 $ 29.50 $ 25.94
On March 20, 1998 the Company had 9,897 common shareholders of record.
S-7
<PAGE>
UNDERWRITING
The Underwriters named below, acting through their Representatives,
Merrill Lynch, Pierce, Fenner & Smith Incorporated, PaineWebber
Incorporated and Ragen MacKenzie Incorporated (the "Representatives"), have
severally agreed, subject to the terms and conditions of the Underwriting
Agreement, dated April , 1998 (the "Underwriting Agreement"), to
purchase from the Company the number of Firm Shares set forth below
opposite their respective names.
NUMBER
UNDERWRITER OF SHARES
----------- ---------
Merrill Lynch, Pierce, Fenner & Smith
Incorporated . . . . . . . . . . . . . . . .
PaineWebber Incorporated . . . . . . . . . . . . . .
Ragen Mackenzie Incorporated. . . . . . . . . . . . .
---------
Total . . . . . . . . . . . . . . . . . . . . . . . . 1,500,000
=========
The Underwriters are committed to purchase all of the above
Firm 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 the
Underwriters 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 $ per share. The Underwriters
may allow, and such dealers may reallow, a discount not in excess
of $ 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 225,000 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 Firm
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.
In connection with this offering, the Underwriters may
purchase and sell shares of the Company's Common Stock in the
open market. These transactions may include over-allotment and
stabilizing transactions and purchases to cover syndicate short
positions created in connection with this offering. Stabilizing
transactions consist of certain bids or purchases for the purpose
of preventing or retarding a decline in the market price of the
Common Stock; and syndicate short positions involve the sale by
the Underwriters of a greater number of shares of Common Stock
than they are required to purchase from the Company in this
offering. The Underwriters also may impose a penalty bid,
whereby selling concessions allowed to syndicate members or other
broker-dealers in respect of the shares of Common Stock sold in
this offering for their account, may be reclaimed by the
syndicate if such shares of Common Stock are repurchased by the
syndicate in stabilizing or covering transactions. These
activities may stabilize, maintain or otherwise affect the market
price of the Common Stock, which may be higher than the price
S-8
<PAGE>
that might otherwise prevail in the open market; and these
activities, if commenced, may be discontinued at any time. These
transactions may be effected on the Nasdaq National Market or
otherwise.
In connection with this offering, certain Underwriters and
selling group members may engage in passive market making
transactions in the Common Stock on the Nasdaq National Market in
accordance with Regulation M under the Exchange Act during a
period before the commencement of offers or sales of Common Stock
hereunder. In general, a passive market maker may not bid for,
or purchase, the Common Stock at a price that exceeds the highest
independent bid. In addition, the net daily purchases made by
any passive market maker generally may not exceed 30% of its
average daily trading volume in the Common Stock during a
specified two month prior period, or 200 shares, whichever is
greater. A passive market maker must identify passive market
making bids as such on the Nasdaq electronic inter-dealer
reporting system. Passive market making may stabilize or
maintain the market price of the Common Stock above independent
market levels. Underwriters and selling group members are not
required to engage in passive market making and may end passive
market making activities at any time.
S-9
<PAGE>
PROSPECTUS
----------
NORTHWEST NATURAL GAS COMPANY
COMMON STOCK
-------------------------
Northwest Natural Gas Company (the "Company") intends from
time to time to issue and sell an aggregate not to exceed
2,500,000 authorized but unissued shares of its common stock, par
value $3 1/6 per share (the "Common Stock"), and the common share
purchase rights appurtenant thereto (the "Rights" and, together
with the 2,500,000 shares of Common Stock, the "Shares"), on
terms to be determined at the times of sale. For each issue of
the Shares 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 Nasdaq Stock Market National Market System using the
symbol "NWNG".
-------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION OR 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 Shares 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 Shares 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 March 27, 1998
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of
the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and, in accordance therewith, files reports and other
information with the Securities and Exchange Commission (the
"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: Seven World Trade Center,
Suite 1300, New York, New York 10048, and 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661. 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. The Commission maintains a Web site
(http://www.sec.gov) that contains reports, proxy statements and
other information filed electronically by the Company.
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, 1997;
2. The Company's Current Report on Form 8-K dated February
27, 1998; and
3. The Company's Registration Statement on Form 8-A dated
February 27, 1996.
All documents filed by the Company pursuant to Section
13(a), 13(c), 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; provided, however, that the documents enumerated
above or subsequently filed by the Company pursuant to Section 13
of the Exchange Act prior to the filing with the Commission of
the Company's most recent Annual Report on Form 10-K (the "Latest
Annual Report") shall not be incorporated by reference in this
Prospectus or be a part hereof from and after the filing of the
Latest Annual Report. 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 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 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 C.J. Rue, Secretary, Northwest Natural Gas
Company, One Pacific Square, 220 N.W. Second Avenue, Portland,
Oregon 97209, telephone 503-226-4211.
THE COMPANY
The Company is principally engaged in the distribution of
natural gas to customers in western Oregon and southwestern
Washington, including the Portland metropolitan area. The
Company and its predecessors have supplied gas service to the
public since 1859. 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.
2
<PAGE>
USE OF PROCEEDS AND FINANCING PROGRAM
The net proceeds to be received by the Company from the sale
of the Shares 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 expenditures in
1998 to aggregate $90 million, and in the five-year period, 1998-
2002, to aggregate between $500 million and $550 million.
The Company estimates that approximately 50% of the funds
required for utility purposes during the 1998-2002 period will be
internally generated and that the balance will be funded through
short-term borrowings which will be refinanced periodically
through the sale of long-term debt and equity securities,
including the Shares, in such amounts and at such times as the
Company's cash requirements and market conditions shall
determine.
DESCRIPTION OF THE SHARES
The following is a summary of certain rights and privileges
of the Shares. This summary description does not purport to be
complete. Reference is made to the Restated Articles of
Incorporation and the Bylaws of the Company and the Rights
Agreement, 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.
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 12. 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
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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 the
Company's Common Stock are, and the Common Stock offered hereby
will be, fully paid and nonassessable.
Transfer Agent and Registrar: The Company is the transfer
agent and registrar for the Common Stock.
Common Share Purchase Rights: The holders of the Common
Stock have one Right for each of their shares. Each Right,
initially evidenced by and traded with the Common Stock, entitles
the holder to purchase one-tenth of a share of Common Stock at a
Purchase Price of $6.67, subject to adjustment. The Rights will
be exercisable only if a person or group ("Person") shall acquire
ownership of 15% or more of the Common Stock (such Person being
hereinafter referred to as an "Acquiring Person") or shall
announce a tender offer, the consummation of which would result
in such Person becoming an Acquiring Person.
If any Person shall have become an Acquiring Person, each
Right, other than Rights owned by the Acquiring Person (which
shall be void), may be exercised by its holder to purchase, at a
50% discount, shares of Common Stock having a market value equal
to 20 times the Purchase Price. If a Person shall have become an
Acquiring Person but shall not have acquired ownership of 50% or
more of the Common Stock, the Board of Directors may provide for
the exchange of all or a part of the Rights (other than Rights
which shall be void as described above) for Common Stock at a
ratio of one share per Right.
In the event that (i) the Company shall consolidate or merge
with any other person, (ii) any person shall consolidate or merge
with the Company and the Company shall be the surviving
corporation and, in connection therewith, all or part of the
Common Stock shall be changed into or exchanged for stock or
other securities of any person (including the Company) or cash or
any other property, or (iii) the Company shall sell or otherwise
transfer, assets or earning power aggregating 50% or more of the
assets or earning power of the Company to any other person, each
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Right, except Rights owned by an Acquiring Person (which shall be
void), may be exercised by its holder to purchase, at a 50%
discount, shares of common stock of the other person having a
market value equal to 20 times the Purchase Price.
At any time prior to any Person becoming an Acquiring
Person, the Board of Directors may redeem the Rights at a price
of $.01 per Right. The Rights will expire on March 15, 2006
unless they are exchanged or redeemed (as described above)
earlier than that date.
The issuance of Common Stock upon exercise of the Rights
will be subject to any necessary regulatory approvals.
The Rights have anti-takeover effects because they will
cause substantial dilution of the Common Stock if a Person
attempts to acquire the Company on terms not approved by the
Board of Directors.
PLAN OF DISTRIBUTION
The Company may sell the Shares 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 Shares offered thereby, including the name or
names of any underwriters, the purchase price of such Shares 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 Shares 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 Shares
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 Shares 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 Shares offered thereby will be subject to certain
conditions precedent, and the underwriters will be obligated to
purchase all such Shares if any are purchased.
The Shares 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 Shares 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 Shares 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.
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EXPERTS
The financial statements as of and for the year ended
December 31, 1997 incorporated in this Prospectus by reference to
the Annual Report on Form 10-K for the year ended December 31,
1997 have been so incorporated in reliance on the report of Price
Waterhouse LLP, independent accountants, given on the authority
of said firm as experts in accounting and auditing.
The financial statements as of and for the years ended
December 31, 1995 and 1996 incorporated by reference in this
Prospectus by reference to the Annual Report on Form 10-K for the
year ended December 31, 1997 have been audited by Deloitte &
Touche LLP, independent auditors, as stated in their report,
which is incoprorated 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.
The statements made as to matters of law and legal
conclusions in the documents incorporated in this Prospectus by
reference and under "Description of Common Stock" herein and, if
any, in the accompanying Prospectus Supplement have been reviewed
by Mark S. Dodson, Esquire, Portland, Oregon. Mr. Dodson is
General Counsel of the Company. These statements and conclusions
are set forth in reliance upon the opinion of Mr. Dodson given
upon his authority as an expert. As of March 19, 1998, Mr.
Dodson owned no shares of the Company's common stock. Mr. Dodson
has been granted an option to purchase 5,000 shares at a price of
$27.875, the market price of the shares on the date such option
was granted.
LEGALITY
The legality of the Shares will be passed upon for the
Company by Mr. Dodson and by Messrs. Reid & Priest LLP, New York,
New York, and for the underwriters by Messrs. Simpson Thacher &
Bartlett, New York, New York. Messrs. Reid & Priest LLP and
Messrs. Simpson Thacher & Bartlett may rely on the opinion of Mr.
Dodson as to legal matters arising under Oregon and Washington
law.
<PAGE>
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NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED
TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT
CONTAINED IN THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS IN
CONNECTION WITH THE OFFERING COVERED BY THIS PROSPECTUS
SUPPLEMENT AND THE PROSPECTUS. 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 AN
IMPLICATION THAT THERE HAS NOT BEEN ANY 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 TO SELL,
OR A SOLICITATION BY ANYONE OF AN OFFER TO BUY, THE SHARES 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.
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TABLE OF CONTENTS
PAGE
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PROSPECTUS SUPPLEMENT
Forward-Looking Statements . . . . . . . . . . . . . . . S-2
Summary Information . . . . . . . . . . . . . . . . . . . S-3
Selected Financial Information . . . . . . . . . . . . . S-4
The Company . . . . . . . . . . . . . . . . . . . . . . . S-5
Use of Proceeds . . . . . . . . . . . . . . . . . . . . . S-6
Dividends and Price Range . . . . . . . . . . . . . . . . S-7
Underwriting . . . . . . . . . . . . . . . . . . . . . . S-8
PROSPECTUS
Available Information . . . . . . . . . . . . . . . . . . 2
Incorporation of Certain Documents by
Reference . . . . . . . . . . . . . . . . . . . . . . . . 2
The Company . . . . . . . . . . . . . . . . . . . . . . . . 2
Use of Proceeds and Financing Program . . . . . . . . . . . 3
Description of the Shares . . . . . . . . . . . . . . . . . 3
Plan of Distribution . . . . . . . . . . . . . . . . . . . 5
Experts . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Legality . . . . . . . . . . . . . . . . . . . . . . . . . 6
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1,500,000 SHARES
[NW NATURAL LOGO]
COMMON STOCK
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P R O S P E C T U S S U P P L E M E N T
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MERRILL LYNCH & CO.
PAINEWEBBER INCORPORATED
RAGEN MACKENZIE INCORPORATED
APRIL , 1998
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