APPLICATION OF NORAM ENERGY CORP.
FOR AN ORDER OF EXEMPTION
PURSUANT TO SECTIONS 3(a) AND 3(b) OF THE
PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
INTRODUCTION
This application (this "Application") for an Order of
Exemption pursuant to Sections 3(a) and 3(b) of the Public
Utility Holding Company Act of 1935 (the "Act") is submitted by
NorAm Energy Corp. ("NorAm") to the Securities and Exchange
Commission (the "Commission") in response to the Commission's
request for additional information and a consolidated application
regarding NorAm's proposed activities in Latin America pursuant
to the Commission's letter dated February 13, 1996 from James W.
Moeller to NorAm's counsel, Karen J. Doswell, Esq. at Jones, Day,
Reavis & Pogue attached hereto as Exhibit 2. Accordingly, NorAm
hereby withdraws the Application of NorAm Energy Corp. for an
Order of Exemption pursuant to Section 3(b) of the Public Utility
Holding Company Act filed with the Commission on August 14, 1995
regarding proposed investments in Colombia and Mexico and the
Application of NorAm Energy Corp. for an Order of Exemption
pursuant to Section 3(b) of the Public Utility Holding Company
Act filed with the Commission on November 14, 1995 regarding
proposed investments throughout Latin America. This consolidated
Application is submitted with respect to all of NorAm's future
investments in natural gas distribution systems in Latin America.
APPLICATION FOR ORDER OF EXEMPTION
- 1- NorAm / Consolidated Application<PAGE>
NorAm seeks an unqualified order of exemption pursuant to
Section 3(a) of the Act for its wholly-owned subsidiaries (the
"Subsidiary Corporations") which NorAm expects will bid, in
conjunction with local entities, for concessions granted by
various Latin American governmental authorities to establish or
develop existing local gas distribution systems or purchase
ownership interests in various natural gas pipeline and
distribution projects throughout Latin America (the "Latin
American Projects"). While NorAm anticipates that its
participation in each of the Latin American Projects through one
or more of its Subsidiary Corporations may be in any aspect of
the natural gas business in which NorAm currently operates,
including transmission, distribution, marketing, gathering and
processing, none of the Subsidiary Corporations will purchase
more than a 50% interest in any one of the Latin American
Projects, nor will any of the Subsidiary Corporations invest in
any entity which has utility operations in the United States.
NorAm has investigated various concessions and has been
involved in negotiations with parties in Argentina, Bolivia,
Brazil, Chile, Colombia, Mexico, Peru and Uruguay, and expects to
participate in Latin American Projects throughout Latin America.
NorAm will participate in the Latin American Projects, either
alone or in conjunction with various partners. NorAm, through
one or more Subsidiary Corporations, will acquire a debt or
equity interest in entities established to hold the interests of
APPLICATION FOR ORDER OF EXEMPTION
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the parties involved in each of the Latin American Projects (the
"Project Entities"). In no event will any Subsidiary
Corporation's equity interest in any of the Latin American
Projects exceed 49%, nor will any Subsidiary Corporation supply
more than 49% of the debt financing for any one of the Latin
American Projects. No income from the Latin American Projects
will be derived, directly or indirectly, from sources within the
United States, and none of the Subsidiary Corporations nor any
Project Entity will be a public utility company operating in the
United States. Accordingly, NorAm seeks an unqualified order or
exemption pursuant to Sections 3(a) and 3(b) of the Act for the
Project Entities.
In order for NorAm to successfully negotiate with the other
parties involved in any of the Latin American Projects, NorAm
must secure an exemption under the Act. Additionally, NorAm must
be able to assure its potential partners that its involvement in
the Latin American Projects through the Subsidiary Corporations
is not subject to any contingencies. Without receipt of an
unqualified order of exemption pursuant to this Application,
NorAm could neither effectively participate in the negotiations
nor give its potential partners the required assurances. The
granting of an unqualified order of exemption pursuant to this
Application will provide NorAm the opportunity to participate in
the Latin American Projects through the Subsidiary Corporations
without hinderance of delay in government approval. NorAm
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respectfully requests that the Commission grant its Application
for an order of exemption.
NORAM ENERGY CORP.
NorAm is a Delaware corporation with its principal places of
business and operations in Texas, Louisiana, Arkansas,
Mississippi, Oklahoma, Missouri (which has no significant utility
operations) and Minnesota. NorAm is not a public utility holding
company as defined in the Act because NorAm does not hold an
ownership interest in a public utility company nor in a company
that has an ownership interest in a public utility company.
NorAm is principally engaged in the distribution and transmission
of natural gas, including gathering, storage and marketing.
NorAm's distribution business, which provided approximately 60%
of NorAm's operating income in 1994, serves approximately 2.7
million customers in six states with annual throughput of
approximately 524.2 billion cubic feet ("Bcf"). NorAm is also
engaged in the business of operating (1) two interstate pipelines
with total annual throughput of approximately 878 million MMBtu,
utilizing principal facilities in a five-state area, (2) natural
gas gathering systems, which annually gather approximately 230
Bcf of gas through approximately 3,500 miles of pipe in the
Anadarko, Arkoma and Ark-La-Tex supply basins and (3) a natural
gas marketing company which provides gas supply, storage,
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transportation and other services, with annual sales volume of
approximately 318 Bcf.
NorAm's two interstate pipelines are regulated by the
Federal Energy Regulatory Commission as to the services offered
and the maximum rates which may be charged. NorAm's natural gas
distribution operations are regulated as to services offered and
the rates which may be charged by state utility commissions or
similar agencies in Louisiana, Arkansas, Mississippi, Oklahoma
and Minnesota and by municipalities in Texas, although certain
aspects of service are regulated by the Texas Railroad
Commission. None of the transactions contemplated herein require
the prior approval of any of the aforementioned commissions or
agencies.
Additional information related to NorAm's financial and
operating information is contained in the periodic reports of
NorAm filed with the Commission under the Securities Exchange Act
of 1934 (File No.1-3751).
STATUS OF GAS NATURAL PROJECT
On August 1, 1995, the Commission issued an order of
exemption to NorAm pursuant to NorAm's Application for an Order
of Exemption Pursuant to Section 3(b) of the Public Utility
Holding Company Act of 1935 filed with the Commission on May 5,
1995 with respect to its acquisition of an interest in Gas
Natural, S.A. (the "Gas Natural Application"). To date, NorAm
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- 5 - NorAm / Consolidated Application<PAGE>
has not acquired such interest. Since August 1, 1995, NorAm has
anticipated that EcoPetrol, the government-owned energy company
in Colombia, would sell its interest in Gas Natural. This has
not yet occurred, although in February 1996, EcoPetrol did sell
its 40% interest in another large energy company. NorAm
currently expects that requests for proposals on the sale of Gas
Natural will be issued in mid-1996 and that bids will be due two
to three months thereafter. NorAm expects to submit a bid at
that time, although there is no guarantee that NorAm's bid will
be selected.
In accordance with Rule 24, NorAm will file a certificate
with the Commission within ten days after the consummation of the
transactions contemplated by the Gas Natural Application.
THE LATIN AMERICAN PROJECTS
Though the details of the Latin American Projects have not
been finalized, NorAm's ownership interest in each, through one
or more Subsidiary Corporations, will not exceed 49%. The amount
of NorAm's economic investment and the amount of ownership
acquired by any Subsidiary Corporation in any of the Latin
American Projects will be consistent with NorAm's assessment of
the risks associated with investing in Latin America including,
political stability, the volatility of the currency, advantages
and disadvantages of the regulatory framework, enforcement
measures, the effect of the transfer on the customers and
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- 6 - NorAm / Consolidated Application<PAGE>
completion of a thorough evaluation of the proposed pipeline and
distribution systems. Based upon these factors, the maximum
amount of money NorAm expects to invest in the Latin American
Projects, including amounts allocated for the acquisition of an
ownership interest in Gas Natural, will not exceed $100 million.
However, the exact amount of each investment will not be
determined until the due diligence process is completed with
respect to each Latin American Project and the Subsidiary
Corporations' ownership interest in each is determined. This
maximum amount is approximately 2.7% of NorAm's consolidated
assets and approximately 4.5% of NorAm's total capitalization,
each as of December 31, 1995. NorAm estimates that none of the
Latin American Projects will effect NorAm's consolidated revenues
more than 4%. Each of the Subsidiary Corporation's interests in
any single Latin American Project generally will be between 20%
and 40% but will never exceed 49%. While the exact timing of the
investments are based on several varying factors, NorAm, through
one or more of its Subsidiary Corporations, plans to invest in
Latin America over the next five years.
The Subsidiary Corporations' interests in the Latin American
Projects will be reflected on each of their financial statements
according to the equity method of accounting, except in those
cases in which the ownership interest is not sufficiently large
to support the equity method under generally accepted accounting
principles ("GAAP"). Under the equity method of accounting, the
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revenues, assets and liabilities related to the Latin American
Projects will not be consolidated into each of the Subsidiary
Corporation's financial statements. Each of the Subsidiary
Corporation's consolidated statement of income will reflect only
that Subsidiary Corporation's indirect percentage interest in the
net income or net loss derived from the Latin American Projects.
Any net loss will be limited to the Subsidiary Corporation's
total investment. Each of the Subsidiary Corporation's
consolidated balance sheets will reflect only the amount of that
Subsidiary Corporation's investment in the Latin American
Projects, increased by its percentage interest in retained
earnings related to the Latin American Projects or decreased by
its percentage interest in any net losses related to the Latin
American Projects. In cases where the ownership interest is too
small to support application of the equity method of accounting
under GAAP, the investment will be carried at cost with income
recognized only upon distribution.
NorAm's expertise in the gas business will significantly
contribute to the success of the Latin American Projects. NorAm,
through the Subsidiary Corporations, will participate in the
provision of quality service to customers and provide technical
and management services throughout Latin America.
APPLICATION FOR ORDER OF EXEMPTION
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LEGAL ANALYSIS UNDER SECTIONS 3(a) AND 3(b) OF THE ACT
Presently, NorAm is not a public utility holding company as
defined under the Act since it does not own or control a public
utility company. However, the Latin American Projects
contemplate NorAm's partial ownership, through one or more
Subsidiary Corporations, of a Project Entity which would be
considered a public utility holding company as defined under the
Act. Any company which directly or indirectly owns, controls, or
holds with power to vote, 10% or more of the voting securities of
a public utility company or of a company which is a holding
company, is considered a holding company, under the Act. Based
upon the proposed transactions, NorAm, the Subsidiary
Corporations and the Project Entities will be holding companies
with respect to the Latin American public utility companies.
NorAm requests an exemption for the Subsidiary Corporations and
the Project Entities pursuant to Section 3(a) of the Act which
provides that the Commission:
"shall exempt any holding company, and every subsidiary
company thereof as such, from any provision or
provisions of this chapter, unless and except insofar
as it finds the exemption detrimental to the public
interest or the interest of investors or consumers,
if - . . . (5) such holding company is not, and derives
no material part of its income, directly or indirectly,
from any one or more subsidiary companies which are, a
company or companies the principal business of which
within the United States is that of a public-utility
company."
None of the Subsidiary Corporations and none of the Project
Entities are companies the principal business of which within the
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United States is that of a public utility company. Each of the
Subsidiary Corporations is a newly-formed corporation formed
solely for the purpose of maintaining an ownership interest in
the Latin American Projects. None of the Subsidiary Corporations
will be a public utility company as defined in the Act. The
Subsidiary Corporations will derive their income from ownership
in one or more of the Project Entities, all of which will operate
solely outside of the United States. All of the income of the
Subsidiary Corporations would be derived from sources outside the
United States. The Project Entities will be formed in
conjunction with foreign entities. None of the Project Entities
will engage in any business within the United States. The
entities will only operate public utility companies in Latin
America and will derive all of their income from the Latin
American Projects. An exemption granted to the Subsidiary
Corporations and to the Project Entities will not be detrimental
to the public interest nor the interest of investors or
consumers. Therefore, the Subsidiary Corporations and the
Project Entities should be exempt from compliance with the Act.
The Project Entities and the Latin American public utility
companies should also be exempt from compliance with the Act
pursuant to Section 3(b) which provides that the Commission:
"shall exempt any subsidiary company, as such, of a
holding company from any provision or provisions of
this chapter, the application of which to such
subsidiary company the Commission finds is not
necessary in the public interest or for the protection
of investors, if such subsidiary company derives no
APPLICATION FOR ORDER OF EXEMPTION
- 10 - NorAm / Consolidated Application<PAGE>
material part of its income, directly or indirectly,
from sources within the United States, and neither it
nor any of its subsidiary companies is a public-utility
company operating in the United States."
None of the Project Entities nor any of the Latin American
public utility companies will derive any of their income from
sources within the United States. Further, none of the Project
Entities and none of the Latin American public utility companies
will operate in the United States. It is not necessary in the
public interest or for the protection of the public investors to
impose upon the Subsidiary Corporations, the Project Entities or
the Latin American public utility companies compliance with the
Act.
In American & Foreign Power Co., 6 SEC 396, 403 (1939), and
in Middle West of Canada, Ltd., 2 SEC 505, 507 (1937), the
Commission stated that the purpose of Section 3(b) is that
foreign subsidiary companies "shall largely be freed from the
jurisdiction of this Commission with respect to such of their
activities as are essentially foreign in their nature and
effects." The activities of the Subsidiary Corporations and the
Project Entities will be focused in Latin America and are
exclusively foreign in nature. Consequently, regulation by the
Commission pursuant to the Act is not necessary.
SEC RULES AND REGULATIONS REGARDING THE ACT
Rule 5 provides for an exemption of certain foreign holding
companies. Pursuant to Rule 5, any holding company not organized
APPLICATION FOR ORDER OF EXEMPTION
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under the laws of any state or the District of Columbia, and
owning no utility assets located within any state or the District
of Columbia and having no subsidiaries or affiliates owning any
assets so located, shall, subject to the provisions of Rule 6, be
exempt from all the provisions of the Act and rules thereunder
provided that such exemption shall not be applicable to any
acquisition of utility assets located within any state or the
District of Columbia or of any security of any company owning
such assets or having any subsidiary owning such assets, if, as a
result of such acquisition of securities, the acquiring company
will become an affiliate of the issuer, except an issuer within
any class specified in Rule 10(a). The Project Entities qualify
for exemption pursuant to Rule 5 because all of the assets and
securities acquired by them or their subsidiaries or affiliates,
if any, will be outside of the United States, they will not be
organized under the laws of any state or the District of Columbia
and neither the Project Entities nor any of their subsidiaries
will acquire utility assets located within any state or the
District of Columbia or any security of any company owning such
assets. Rule 6 regarding the termination of exemptions does not
limit the applicability of Rule 5 because the exemption will not
be detrimental to the public interest or the interest of
investors or consumers.
Rule 10 provides for an exemption for NorAm and the
Subsidiary Corporations. Rule 10 states that any holding company
APPLICATION FOR ORDER OF EXEMPTION
- 12 - NorAm / Consolidated Application<PAGE>
shall be exempt from duties imposed on it as a holding company
solely by reason of such company having as a subsidiary any
company which is exempted by order pursuant to Section 3(b) from
duties imposed on it as a subsidiary company. Because the
Project Entities are entitled to an exemption pursuant to
Section 3(b), NorAm and the Subsidiary Corporations should be
exempt under Rule 10 because they are holding companies solely by
reason of having the Project Entities as subsidiaries. Rule 6
regarding the termination of exemptions does not limit the
applicability of Rule 10 because the exemption will not be
detrimental to the public interest or the interest of investors
or consumers.
Rule 11 provides that any holding company which is exempt
from Sections 4 and 5(a) of the Act and which is not a subsidiary
of any registered holding company and any individual or company
which is not a holding company or a subsidiary of any registered
holding company shall be exempt from Section 9(a)(2) of the Act
with respect to the acquisition of securities issued by any
public utility or holding company exempted by order pursuant to
Section 3(b) or exempted as a holding company from Sections 4 and
5(a) of the Act by order under subparagraph (5) of Section 3(a)
or securities issued by any company which does not own or
operate, or have a subsidiary which owns or operates any utility
assets located in the United States provided that the acquiring
company is not an affiliate under Section 2(a)(11)(A) of the Act
APPLICATION FOR ORDER OF EXEMPTION
- 13 - NorAm / Consolidated Application<PAGE>
of any company which owns or operates, and has no subsidiary
which owns or operates, any utility assets located in the United
States. Under Rule 11, the Subsidiary Corporations should be
exempt from Section 9(a)(2) with respect to the acquisition of
securities issued by the Project Entities and the Latin American
public utility companies because the Subsidiary Corporations are
exempt from Sections 4 and 5(a) of the Act and are not
subsidiaries of any registered holding company, the Project
Entities should be exempt by order pursuant to Sections 3(a) and
3(b) and the Project Entities and the Latin American public
utility companies do not own or operate or have any subsidiaries
which own or operate any utility assets located in the United
States. The Project Entities should be exempt from Section
9(a)(2) with respect to the acquisition of securities issued by
the Latin American public utility companies because the Project
Entities are exempt from Sections 4 and 5(a) of the Act and are
not subsidiaries of any registered holding company, the Latin
American public utility companies should be exempt from
compliance with the Act as foreign public utility companies, and
the Latin American public utility companies do not own or operate
or have any subsidiaries which own or operate any utility assets
located in the United States. Neither the Subsidiary
Corporations nor the Project Entities are affiliates of NorAm as
defined under Section 2(a)(11)(A) of the Act.
APPLICATION FOR ORDER OF EXEMPTION
- 14 - NorAm / Consolidated Application<PAGE>
In accordance with Rule 24 and upon the granting of this
Application, NorAm will file a certificate with the Commission
within ten days after the consummation of any of the transactions
contemplated in this Application.
Rule 53, which addresses financings by registered holding
companies in connection with the acquisition of one or more
exempt wholesale generators, does not apply to NorAm, the
Subsidiary Corporations or the Project Entities. First, none of
these entities are registered holding companies nor are they
required to be registered under the Act. Second, the issuance
and sale of securities will not be used to finance an exempt
wholesale generator or the guarantee of a security of an exempt
wholesale generator by a registered holding company. Third, the
Commission shall not make a finding that securities issued and
sold by these entities are not reasonably adapted to the earning
power of the issuing entity or to the security structure of such
entity or entities in the same holding company system because
(1) the aggregate investment by any of the entities does not
exceed 50% of consolidated retained earnings, (2) the books and
records and financial statements, which are maintained in
conformity with GAAP, or, upon request, which variations from
GAAP may be described and quantified, will identify investments
in and earnings from any exempt wholesale generator or foreign
utility company in which that entity directly or indirectly holds
an interest, (3) no more than 2% of the employees of any U.S.
APPLICATION FOR ORDER OF EXEMPTION
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entity will render services, at any one time, directly of
indirectly, to exempt wholesale generators or foreign utility
companies in which such entity, directly or indirectly, holds an
interest and (4) no Form U-1 or certificate pursuant to Rule 24
has been filed with the Commission under Rule 53 and no Form U5S
is required to be filed because no federal, state or local
regulator has jurisdiction over the retail rates of the Latin
American public utility companies. Fourth, the proposed issue
and sale of a security to finance the acquisition of an exempt
wholesale generator will not have a substantial adverse impact
upon the financial integrity of the entities nor will it have an
adverse impact on any utility subsidiary of NorAm or NorAm's
customers or on the ability of state commissions to protect
NorAm's subsidiaries or customers.
NorAm's investment in the Latin American Projects is slight
compared to its capitalization and such investment will not
impair the utility functions or the financial condition of NorAm.
NorAm's investment in the Latin American Projects will not exceed
approximately 2.7% of the consolidated assets and approximately
4.5% of the total capitalization of NorAm, each as of
December 31, 1995. Consequently, because the contemplated
transaction will have no material effect on NorAm's operations,
its consolidated assets or its total capitalization and no United
States investor in the securities of NorAm or its subsidiaries
will have a material direct or indirect interest in the
APPLICATION FOR ORDER OF EXEMPTION
- 16 - NorAm / Consolidated Application<PAGE>
Subsidiary Corporations, the Project Entities, the Latin American
public utility companies or any of the Latin American Projects,
and the amount of NorAm's investment will not be significant,
there is no regulatory purpose in requiring the Subsidiary
Corporations, the Project Entities or the Latin American public
utility companies to comply with the provisions of the Act.
NorAm's utility operations will continue to be focused in
Texas, Louisiana, Arkansas, Mississippi, Oklahoma and Minnesota.
NorAm's profits from the Latin American Projects in relation to
its other operations will be insignificant. NorAm does not
expect to derive any significant part of its income from the
Latin American Projects and NorAm's investment in the Latin
American Projects through the Subsidiary Corporations will
represent a small fraction of its consolidated assets and equity.
It is not necessary to regulate the Subsidiary Corporations or
the Project Entities in the public interest nor for the
protection of investors, and no portion of the Subsidiary
Corporations' or Project Entities' income is derived directly or
indirectly from sources within the United States. Therefore,
this Application for an unqualified order of exemption pursuant
to Sections 3(a) and 3(b) of the Act and Rules 5, 10 and 11
should be granted.
APPLICATION FOR ORDER OF EXEMPTION
- 17 - NorAm / Consolidated Application<PAGE>
NORAM ENERGY CORP.
By:
Jackson W. Ellis, III
Vice President and Corporate
Controller
Date: March 6, 1996
APPLICATION FOR ORDER OF EXEMPTION
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Exhibit 1
PROPOSED FORM OF NOTICE
NORAM ENERGY CORP. (________________)
NorAm Energy Corp., a Delaware corporation, ("NorAm"), 1600
Smith, 11th floor, Houston, Texas 77002, has filed an application
for an order seeking an exemption under the Public Utility
Holding Company Act of 1935 (the "Act") in connection with its
proposed participation in the establishment and development of
natural gas pipeline and distribution systems in Latin America
(the "Latin American Projects").
NorAm is engaged in the business of distributing and
transmitting natural gas principally in six states. NorAm is not
a public utility holding company as defined in the Act.
NorAm will participate in the Latin American Projects
through one or more wholly-owned subsidiaries (the "Subsidiary
Corporations") that will acquire a debt or equity interest in an
entity established to hold the interests of the parties involved
in each of the Latin American Projects (the "Project Entities").
NorAm's interest in the Latin American Projects through the
Subsidiary Corporations will not exceed 49% in any Latin American
Project.
Should the proposed investments take place, NorAm, the
Subsidiary Corporations and the Project Entities would be holding
companies under the Act. The Project Entities and the Latin
American public utility companies would be subsidiaries of
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holding companies under the Act. Section 3(a) provides that the
Commission:
"shall exempt any holding company, and every subsidiary
company thereof as such, from any provision or
provisions of this chapter, unless and except insofar
as it finds the exemption detrimental to the public
interest or the interest of investors or consumers,
if - . . . such holding company is not, and derives no
material part of its income, directly or indirectly,
from any one or more subsidiary companies which are, a
company or companies the principal business of which
within the United States is that of a public-utility
company."
Section 3(b) provides that the Commission:
"shall exempt any subsidiary company, as such, of a
holding company from any provision or provisions of
this chapter the application of which to such
subsidiary company the Commission finds is not
necessary in the public interest or for the protection
of investors, if such subsidiary company derives no
material part of its income, directly or indirectly,
from sources within the United States, and neither it
nor any of its subsidiary companies is a public utility
company operating in the United States."
NorAm states that neither the Subsidiary Corporations nor any of
the Project Entities will derive any income, directly or
indirectly, from sources in the United States, and will not
operate, or have any subsidiary operating, as a public utility
company in the United States. NorAm further states that no
United States investor would have a direct or indirect material
interest in the Latin American Projects by virtue of NorAm's
interest in the Latin American Projects, and that the proposed
investments will not affect or impair utility functions or the
financial condition of NorAm. Under these circumstances, NorAm
states that it is not necessary in the public interest or for the
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protection of investors to subject NorAm, the Subsidiary
Corporations or the Project Entities to any of the provisions of
the Act and therefore, that NorAm is entitled to an unqualified
order of exemption pursuant to the Act.
APPLICATION FOR ORDER OF EXEMPTION
- 21 - NorAm / Consolidated Application<PAGE>
Exhibit 2
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
February 13, 1996
VIA FACSIMILE
Karen J. Doswell, Esq.
Jones, Day, Reavis & Pogue
2300 Trammell Crow Center
20001 Ross Avenue
Dallas, Texas 75201
Re: NorAm Energy Corp.
Dear Ms. Doswell:
On May 5, 1995, NorAm Energy Corporation (NorAm) filed with
the U.S. Securities and Exchange Commission (Commission) an
application under Section 3(b) of the Public Utility Holding
Company Act of 1935 (Act) for an order of exemption in connection
with its contemplated acquisition, for an aggregate investment of
up to $75 million, of an interest in Gas Natural, S.A., a gas
public utility company, shares of which were to be sold by the
Colombian government pursuant to a privatization plan. On June
26, 1995, the Commission issued a public notice of the
application. Holding Co. Act Release No. 26324, 60 Fed. Reg.
35,780. On August 1, 1995, the Commission issued an order of
exemption to NorAm for that contemplated acquisition. Holding
Co. Act Release No. 26345.
On August 14, 1995, NorAm filed a second application under
Section 3(b) of the Act for a second order of exemption in
connection with its contemplated acquisition, for an aggregate
investment of up to $150 million over the next five-year period,
of (i) an interest in concessions granted by the government of
Colombia to establish natural gas distribution services to areas
in Colombia, (ii) an interest in concessions granted by the
government of Mexico to establish natural gas distribution
services in Mexico, and (iii) an interest in one or more Mexican
natural gas distribution businesses. On November 24, 1995, the
Commission issued a public notice of the application. Holding
Co. Act Release No. 26415, International Series Release No. 888,
60 Fed. Reg. 58,702. No order of exemption has been issued.
On November 14, 1995, NorAm filed a third application under
Section 3(b) of the Act for a third order of exemption in
connection with its contemplated acquisition, for an aggregate
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Karen J. Doswell, Esq.
February 13, 1996
Page 2
investment of up to $75 million, of interests in various natural
gas pipeline and distribution projects throughout Latin America.
No public notice of the application has been issued.
The second and third applications raise issues, the
resolution of which we believe is required to proceed. To
address these issues, we request that you revise the third
application in several respects:
1. The second and the third applications should be
combined into a new single application (New
Application) and those old applications should be
formally withdrawn.
2. The New Application should provide an updated status on
the acquisition by NorAm of an interest in Gas Natural,
S.A., which acquisition the Commission authorized in
August 1995. Holding Co. Act Release No. 26345.
3. The New Application should provide a legal analysis of
each section and rule of the Act, with relevant
precedent, relied upon for the requested transactions.
4. The New Application should provide an estimate of the
aggregate contemplated investment by NorAm in Columbia,
Mexico, and Latin America, which estimate now appears
to be $300 million.
5. The New Application should provide an updated analysis,
with financial information from the last quarter of
1995, that addresses the requirements of Rule 53 under
the Act.
We request that you provide the above-requested information
prior to or on March 1, 1996. Should you decide not to proceed
with either or both applications, we would appreciate your
decision as soon as possible and a formal written withdrawal
thereof.
Please telephone Catherine A. Fisher (202-942-0560), Barbara
T. Heussler (202-942-0561) or me (202-942-0551) should you have
questions on this request. Thank you for your cooperation.
Sincerely yours,
James W. Moeller
APPLICATION FOR ORDER OF EXEMPTION
- 23 - NorAm / Consolidated Application<PAGE>
