EXHIBIT H
PROPOSED FORM OF FEDERAL REGISTER NOTICE
SECURITIES AND EXCHANGE COMMISSION
(Release No. 35-_____)
Filings under the Public Utility Holding Company Act of 1935, as amended
("Act").
July __, 2000
Notice is hereby given that the following filing(s) has/have been made
with the Commission pursuant to provisions of the Act and rules promulgated
thereunder. All interested persons are referred to the application(s) and/or
declaration(s) for complete statements of the proposed transaction(s) summarized
below. The application(s) and/or declaration(s) and any amendments thereto
is/are available for public inspection through the Commission's Office of Public
Reference.
Interested persons wishing to comment or request a hearing on the
application(s) and/or declaration(s) should submit their views in writing by
August , 2000 to the Secretary, Securities and Exchange Commission,
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Washington, D.C. 20549, and serve a copy on the relevant applicant(s) and/or
declarant(s) at the address(es) as specified below. Proof of service (by
affidavit or, in case of an attorney at law, by certificate) should be filed
with the request. Any request for hearing shall identify specifically the issues
of fact or law that are disputed. A person who so requests will be notified of
any hearing, if ordered, and will receive a copy of any notice or order issued
in the matter. After August , 2000, the application(s) and/or declaration(s),
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as filed or as amended, may be granted and/or permitted to become effective.
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NISOURCE INC. AND NEW NISOURCE INC. (70-9551)
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NiSource Inc. ("NiSource"), 801 East 86th Avenue, Merrillville,
Indiana 46410-6272, and New NiSource Inc. ("New NiSource"), 801 East 86th
Avenue, Merrillville, Indiana 46410-6272, have filed a joint
application-declaration the ("Application-Declaration") pursuant to Sections
9(a)(2) and 10 of the Public Utility Holding Company Act of 1935, as amended
(the "Act"), in which they seek Commission approval for a business combination
and for other certain related matters. In the proposed business combination (the
"Merger Structure"), upon receipt of all necessary approvals, NiSource and
Columbia Energy Group ("Columbia") would become subsidiaries of New NiSource,
and New NiSource will register with the Commission as a holding company pursuant
to Section 5 of the Act. Specifically, Parent Acquisition Corp., a Delaware
corporation and wholly-owned subsidiary of New NiSource, will merge into
NiSource, and Company Acquisition Corp., a Delaware corporation and wholly-owned
subsidiary of New NiSource, will merge into Columbia. NiSource and Columbia will
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be the surviving corporations in the merger and will be wholly-owned by New
NiSource. Immediately after the merger, NiSource will merge into New NiSource.
New NiSource will then change its name to "NiSource Inc." and serve as a holding
company for Columbia and the current subsidiaries of NiSource.
NiSource, formerly NIPSCO Industries, Inc., an Indiana corporation,
was incorporated in 1987 to serve as the holding company for Northern Indiana
Public Service Company ("Northern Indiana"), which is a public utility under the
Act, and various non-utility subsidiaries. NiSource is currently an exempt
holding company pursuant to an order under Section 3(a)(1) of the Act. Northern
Indiana, NiSource's largest subsidiary, is a combination gas and electric
utility company which operates in 30 counties in the northern part of Indiana,
serving an area of about 12,000 square miles with a population of approximately
2,200,000. Northern Indiana distributes gas to approximately 681,100
residential, commercial and industrial customers and generates, purchases,
transmits and sells electricity to approximately 426,000 electric customers.
NiSource holds all the issued and outstanding common stock of Kokomo
Gas and Fuel Company ("Kokomo Gas"), which supplies natural gas to approximately
34,500 customers in a six-county area of north central Indiana having a
population of approximately 100,000. The Kokomo Gas service territory is
contiguous to Northern Indiana's gas service territory.
NiSource holds all the issued and outstanding common stock of Northern
Indiana Fuel and Light Company, Inc. ("NIFL"), which supplies natural gas to
approximately 35,500 customers in five counties in the northeast corner of
Indiana having a population of approximately 66,700. The NIFL service territory
is also contiguous to Northern Indiana's gas service territory and overlaps
Northern Indiana's electric service territory.
NiSource holds all the issued and outstanding common stock of Bay
State Gas Company ("Bay State"). Bay State provides gas service to approximately
271,900 residential, commercial and industrial customers in three separate areas
of Massachusetts covering approximately 1,344 square miles and having a combined
population of approximately 1,340,000.
Northern Utilities, Inc. ("Northern") is a wholly-owned subsidiary of
Bay State. Northern provides gas service to approximately 48,100 residential,
commercial and industrial customers in an area of approximately 808 square miles
in New Hampshire and Maine having a population of approximately 450,000.
Northern's service area extends north from the Massachusetts-New Hampshire
border to the Portland/Lewiston area in Maine. At this time, Northern remains an
indirect subsidiary of NiSource, through Bay State, pending the merger and
registration by New NiSource, and it is expected to continue to be an indirect
subsidiary of New NiSource after the merger with Columbia.
For the twelve months ended December 31, 1999, the gas and electric
public utility subsidiaries of NiSource reported operating income of $467.6
million ($113.0 million gas and $354.6 million electric) on combined operating
gas and electric utility revenues of approximately $2.1 billion. Results for
this period included eleven months of combined operations with Bay State and
Northern. Gas sales (including transportation revenues) accounted for
approximately 52% and electric sales accounted for approximately 48% of
NiSource's gross utility revenues. Consolidated assets of NiSource and its
subsidiaries as of December 31, 1999, were approximately $6.8 billion,
consisting of $5.2 billion in gas and electric utility assets ($2.4 billion gas
and $2.8 billion electric) and $1.6 billion in other non-utility assets.
NiSource owns all of the outstanding common stock of NiSource Pipeline
Group, Inc. ("NPG"). NPG consists of Granite State Gas Transmission, Inc.
("Granite State") and PNGTS Holding Corp. ("PNGTS Holding"). Crossroads Pipeline
Company ("Crossroads"), a subsidiary of NI Energy Services, Inc., which in turn
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is a direct subsidiary of NiSource, is a natural gas transportation company that
was certificated by the Federal Energy Regulatory Commission ("FERC") in May
1995 to operate as an interstate pipeline. Crossroads owns and operates a
201-mile, 20-inch diameter pipeline that extends from Schererville, Indiana, in
the northwestern corner of Indiana, to Cygnet, Ohio, which is located in
northwestern Ohio. At Cygnet, Crossroads' facilities interconnect with those of
Columbia Gas Transmission Corporation ("Columbia Transmission"). Crossroads
receives gas from Natural Gas Pipeline Company of America, Trunkline Gas Company
and Panhandle Eastern Pipeline Company. Crossroads delivers gas to Northern
Indiana, Ohio Gas Company, NIFL, Columbia Transmission and KNG Energy
Incorporated.
Granite State owns and operates a 105-mile, 6 to 12-inch diameter,
interstate pipeline that extends from Haverhill, Massachusetts, where it
interconnects with the facilities of Tennessee Gas Pipeline Company ("Tennessee
Gas"), to a point near Westbrook, Maine, where it interconnects with Portland
Natural Gas Transmission System ("PNGTS"). PNGTS Holding, together with Granite
State, hold a 19.06% interest in PNGTS. PNGTS is a 292-mile, 24 to 30-inch
diameter, natural gas transmission line that provides New England access to
Michigan Storage fields, the Western Canada supply basin supply and the Chicago
market center. PNGTS interconnects with the Tennessee Gas pipeline facilities
near Dracut, Massachusetts, Northern and Granite State at locations in Maine and
New Hampshire, and Trans Quebec Maritimes Pipeline Incorporated at Pittsburgh,
New Hampshire.
NiSource also engages in a variety of non-utility businesses through
subsidiaries. EnergyUSA, Inc. ("EnergyUSA"), a wholly-owned subsidiary of
NiSource, serves as an intermediate holding company for many of NiSource's
non-utility businesses and coordinates the energy-related diversification
efforts of NiSource. Its principal subsidiaries and their activities are:
EnergyUSA-TPC Corp., which operates gas marketing and gas asset management and
optimization businesses; Market Hub Partners, L.P., which develops and operates
underground gas storage facilities; EnergyUSA Retail, Inc., which provides gas
and other energy-related products and services to residential and small
commercial customers of utilities that allow competitive suppliers to market in
their service territories; EnergyUSA Commercial Energy Services, Inc., which
provides traditional energy management services, including power quality
consulting and energy management, to commercial and industrial entities.
EnergyUSA is a partner in Mosaic Energy LLC, a new venture created to develop
and market proprietary fuel cell distributed generation technology.
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Additionally, EnergyUSA has equity interests in a domestic oil and gas producer
with properties located in Texas, Oklahoma and Louisiana.
Primary Energy, Inc. ("Primary"), is a wholly-owned subsidiary of
NiSource, and arranges energy-related projects for large energy-intensive
industrial facilities. Its wholly-owned principal subsidiaries and their
activities in managing the engineering, construction, operation and maintenance
of these energy-related project are: Harbor Coal Company, which has invested in
a partnership to finance, construct, own and operate a $65 million pulverized
coal injection facility; North Lake Energy Corporation, which has entered into a
lease for the use of a 75-megawatt energy facility; Lakeside Energy Corporation,
which has entered into a lease for the use of a 161-megawatt energy facility;
Portside Energy Corporation, which operates a 63-megawatt energy facility;
Cokenergy, Inc. which operates an energy facility to scrub flue gases and
recover waste heat from the coke facility constructed by Indiana Harbor Coke
Company, LP and to produce steam and electricity from the recovered heat;
Whiting Clean Energy, Inc. which has an electric facility currently under
construction which is expected to be an Exempt Wholesale Generator and sell
power into the wholesale market; and Ironside Energy LLC, which, acting as agent
for a third party owner/lessor, has entered into contracts for the construction
of a 50 megawatt cogeneration plant.
SM&P Utility Resources, Inc. ("SM&P"), Colcom Incorporated ("Colcom")
and Underground Technology, Inc. ("UTI") (of which NiSource owns 50%) perform
underground facilities locating for utilities throughout the United States.
During 1999, SM&P, Colcom and UTI performed approximately 6.6 million line
locates. Miller Pipeline Corporation ("Miller") installs, repairs and maintains
underground pipelines used in gas and water transmission and distribution
systems. Miller also sells products and services related to infrastructure
preservation and replacement.
NiSource, through an intermediate holding company, IWC Resources
Corporation ("IWCR"), owns all of the stock in six water companies (Indianapolis
Water Company, Harbour Water Corporation, Liberty Water Corporation, Irishman's
Run Acquisition Corp., The Darlington Water Works Company and IWC Morgan Water
Corporation) and has an operating agreement with the City of Lawrence, Indiana,
which is being treated as a purchase by IWCR in accordance with generally
accepted accounting principles (collectively, the "Water Utilities"). The Water
Utilities supply water to residential, commercial and industrial customers and
for fire protection service in Indianapolis, Indiana and surrounding areas. The
territory served by the Water Utilities covers an area of approximately 650
square miles in seven counties of central Indiana and the Water Utilities serve
approximately 275,000 customers. As of December 31, 1999, assets of the Water
Utilities amounted to $685.3 million, and revenues of the Water Utilities for
the twelve months then ended, amounted to $98 million.
NiSource Development Company, Inc. ("Development") has investments in
various activities, primarily in real estate, intended to complement NiSource's
energy businesses. South Works Power Company , a wholly-owned subsidiary of
Development, leases electric generating and transmission facilities owned by
U.S. Steel and located in south Chicago, Illinois. The facilities, which are
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presently not in operation, are indirectly interconnected with the electric
transmission system of Northern Indiana.
NiSource Capital Markets Inc. ("Capital Markets"), a wholly-owned
financing subsidiary of NiSource, provides financing for certain of NiSource's
subsidiaries other than Northern Indiana. Capital Markets has entered into
revolving credit agreements for $200 million. These agreements provide financing
flexibility to Capital Markets and may be used to support the issuance of
commercial paper. At December 31, 1999, Capital Markets had issued $137.0
million in commercial paper but there were no borrowings outstanding under the
revolving credit agreements. Capital Markets also has $163.0 million available
in money market lines of credit with $142.5 million of borrowings outstanding as
of December 31, 1999. For the same period, Capital Markets had $450 million in
long-term debt outstanding.
The financial obligations of Capital Markets are subject to a support
agreement ("Support Agreement") between NiSource and Capital Markets which
provides that NiSource make payments of interest and principal on Capital
Markets' obligations in the event of a failure to pay by Capital Markets.
Restrictions in the Support Agreement prohibit recourse on the part of Capital
Markets' creditors against the stock and assets of Northern Indiana which are
owned by NiSource. Under the terms of the Support Agreement, in addition to the
cash flow from cash dividends paid to NiSource by any of its consolidated
subsidiaries, the assets of NiSource, other than the stock and assets of
Northern Indiana, are available as recourse for the benefit of Capital Markets'
creditors. The carrying value of the assets of NiSource, other than the assets
of Northern Indiana, as reflected in the consolidated financial statements of
NiSource, was approximately $3.2 billion at December 31, 1999.
NiSource Corporate Services Company provides management,
administrative, gas portfolio management, accounting and other services to the
various NiSource companies. Hamilton Harbour Insurance Services, Ltd. provides
various insurance services to the NiSource companies.
The non-utility assets of NiSource comprised, as of December 31, 1999,
24% of the consolidated assets of NiSource.
Columbia, formerly The Columbia Gas System, Inc., and its subsidiaries
comprise an integrated natural gas system engaged in natural gas transmission,
natural gas distribution and exploration for and production of natural gas and
oil. Columbia is also engaged in related energy businesses including the
distribution of propane and petroleum products, marketing of natural gas and
electricity and the generation of electricity, primarily fueled by natural gas.
As a registered holding company, Columbia derives substantially all its revenues
and earnings from the operating results of its 20 direct subsidiaries. Columbia
owns all of the securities of these direct subsidiaries except for approximately
8% of the stock in Columbia LNG Corporation.
Columbia provides natural gas distribution services in a five-state
region in the Midwest and mid-Atlantic United States through its five
wholly-owned public utility subsidiaries: Columbia Gas of Kentucky, Inc.,
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Columbia Gas of Maryland, Inc., Columbia Gas of Ohio, Inc., Columbia Gas of
Pennsylvania, Inc. and Columbia Gas of Virginia, Inc. Columbia's five
distribution subsidiaries provide natural gas service to nearly 2.1 million
residential, commercial and industrial customers in Kentucky, Maryland, Ohio,
Pennsylvania and Virginia. Approximately 32,400 miles of distribution pipelines
serve these major markets.
Columbia's two interstate pipeline subsidiaries, Columbia Transmission
and Columbia Gulf Transmission Company ("Columbia Gulf"), own a pipeline network
of approximately 16,250 miles extending from offshore in the Gulf of Mexico to
Lake Erie, New York and the eastern seaboard. In addition, Columbia Transmission
operates one of the nation's largest underground natural gas storage systems.
Together, Columbia Transmission and Columbia Gulf serve customers in fifteen
northeastern, mid-Atlantic, midwestern and southern states and the District of
Columbia. Columbia Gulf's pipeline system extends from offshore Louisiana to
West Virginia and transports a major portion of the gas delivered by Columbia
Transmission. It also transports gas for third parties within the production
areas of the Gulf Coast. Columbia Transmission and Columbia Gulf provide an
array of competitively priced natural gas transportation and storage services
for local distribution companies and industrial and commercial customers who
contract directly with producers or marketers for their gas supplies.
In 1999, Columbia Transmission completed construction of the largest
expansion of its storage and transportation system in its history. The expansion
adds approximately 500,000 Mcf per day of firm storage to 23 customers. Columbia
Transmission is also participating in the proposed 442-mile Millennium Pipeline
Project that has been submitted to FERC for approval. As proposed, the project
will transport approximately 700,000 Mcf per day of natural gas from the Lake
Erie region to eastern markets.
Columbia Gulf has announced its participation in the proposed 160
mile, 24-inch diameter, Volunteer Pipeline Project ("Volunteer"). As proposed,
the project will transport approximately 250,000 Mcf per day from Portland,
Tennessee to a point near Chattanooga, Tennessee. In May, 1999, Volunteer
concluded an open season in which nearly a dozen companies requested more than
440,000 Mcf per day of capacity. Potentially expandable to approximately 500,000
Mcf per day, Volunteer expects to provide firm natural gas transportation from
the mid-continent into the Atlanta, Georgia, and other southeastern markets. The
timing of a FERC construction application is contingent upon a final
determination of market demand.
Columbia Gulf also announced plans in September 1998 to consider an
expansion of its onshore East Lateral system to add approximately 600,000 Mcf
per day of incremental firm gas transportation capacity. Columbia Gulf is also
participating in the proposed SunStar Pipeline project, a 56-mile offshore
pipeline project with a capacity of 660,000 Mcf of natural gas per day from the
Gulf of Mexico to its onshore lateral.
Columbia Pipeline Corporation and its wholly-owned subsidiary,
Columbia Deep Water Services Company, were formed to operate pipeline and
gathering facilities that are not regulated by FERC.
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Through its wholly-owned subsidiaries, Columbia's exploration and
production subsidiary, Columbia Energy Resources, Inc. ("Columbia Resources"),
explores for, develops, gathers and produces natural gas and oil in Appalachia
and Canada. As of December 31, 1999, Columbia Resources' subsidiaries held
interests in approximately 3.9 million net acres of gas and oil leases and had
proved gas reserves of 965.8 billion cubic feet of natural gas equivalent.
Columbia Resources' subsidiaries own and operate 8,188 wells and 6,069 miles of
gathering facilities and have expanded their reserve base and production through
an aggressive drilling and acquisition program. During 1999, Columbia Resources'
subsidiaries purchased 800 wells, gathering assets and approximately 800,000
undeveloped acres in the U.S. and Canada. Through its subsidiaries' operations
in north-central West Virginia, southern Kentucky, northern Tennessee and New
York, Columbia Resources is one of the largest-volume independent natural gas
and oil producers in the Appalachian Basin.
Columbia Energy Services Corporation ("Columbia Energy Services") and
its subsidiaries conduct Columbia's non-regulated natural gas and electric power
marketing operations and provide service to residential and small commercial
customers as a result of the unbundling of services that is occurring at the
local distribution level. Columbia Energy Services, through its subsidiary,
Columbia Service Partners, Inc., provides a variety of energy-related services
to both homeowners and businesses. Columbia Energy Services recently sold its
wholesale gas and electric trading operations and decided to exit its major
accounts business. Columbia Propane Corporation ("Columbia Propane") sells
propane at wholesale and retail to more than 350,600 customers in 31 states and
the District of Columbia. Columbia Petroleum Corporation ("Columbia Petroleum")
owns and operates petroleum assets that serve approximately 42,000 customers in
five states. Columbia has been evaluating the appropriateness of remaining in
some of its businesses, given the rapidly changing energy industry and its
pending merger with NiSource, and has determined to exit its energy marketing
operations. Consequently, Columbia has decided to sell Columbia Propane and
Columbia Petroleum. These businesses are currently being prepared for sale and
are being reported as discontinued operations.
Columbia Electric Corporation's ("Columbia Electric") primary focus
has been the development, ownership and operation of natural gas-fueled power
plants. Columbia Electric is part owner in three operating cogeneration
projects. These facilities produce both electricity and useful thermal energy
and are fueled principally by natural gas. Columbia Electric holds various
interests in these facilities, which have a total capacity of approximately 248
megawatts.
In June 1998, Columbia Electric and LG&E Power Inc., a subsidiary of
LG&E Energy Corporation, announced an agreement for Columbia to participate in
the development of a gas-fired cogeneration project that would have a total
equivalent capacity of approximately 550 megawatts. The facility will provide
steam and electric services to a Reynolds Metals plant in Gregory, Texas and
will also provide electricity to the Texas energy market. Construction began in
August 1998 and the facility is anticipated to start operations in July of 2000.
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Under PURPA and its implementing regulations, no more than 50% of the
equity interests in a qualifying facility ("QF") may be held by a company that
is an electric utility or an electric utility holding company or any combination
of such companies. Electric utility holding companies now own up to
approximately 50% of the equity interests in each of the four QFs referred to in
the two preceding paragraphs in which Columbia holds an interest. Columbia
currently is not an electric utility holding company, but its interest in QFs
would be held by an electric utility holding company as a result of the merger
with NiSource. Consequently, the 50% limitation on total interests held by
electric utility holding company affiliates would be exceeded. To avoid
jeopardizing the QF status of the projects and to comply with Columbia's
obligations to other participants in the projects, Columbia is in the process of
divesting its interests in the four QFs. Columbia plans to relinquish its
ownership interests in the four QFs before the merger closes in order to
maintain their QF status.
Construction of the Liberty Electric Project, a gas-fired electric
generation plant which is expected to provide approximately 568 megawatts of
electricity, commenced in early 2000 in Eddystone, Pennsylvania. Columbia
currently owns 100% of the Liberty Electric Project.
Construction of the Ceredo Generating Station, a gas-fired electric
generation peaking plant which is expected to provide approximately 500
megawatts of electricity, commenced in July 2000 in Ceredo, West Virginia
("Ceredo Project"). Columbia currently owns 100% of the Ceredo Project, which is
anticipated to commence operations in the summer of 2001.
In December 1999, a limited partnership company established between
Columbia Electric and Atlantic Generation, Inc. completed a transaction
terminating a long-term power purchase contract. Columbia Electric's portion was
approximately $71 million pre-tax under the terms of the buyout. The partners
will continue to operate the facility as a merchant power plant.
Columbia LNG Corporation ("Columbia LNG") provides transition services
related to a liquefied natural gas facility located in Cove Point, Maryland,
which is one of the largest natural gas peaking and storage facilities in the
United States. The facility has the capacity to liquefy natural gas at a rate of
15,000 Mcf per day. The facility enables liquefied natural gas to be stored
until needed for the winter peak-day requirements of utilities and other large
gas users.
Columbia Transmission Communications Corporation, a wholly-owned
subsidiary of Columbia, and its subsidiaries provide telecommunications and
information services and assist personal communications services and other
microwave radio service licensees in locating and constructing antenna
facilities. Columbia Transmission Communications Corporation also is involved in
the development of a dark fiber optics network for voice and data
communications.
As a registered holding company, Columbia and its utility subsidiary
companies are an integrated gas utility system under the Act. The non-utility
companies in the Columbia System are related to, and supportive of, its utility
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operations and, by virtue of continued operations, retainable under the
standards of the Act.
Under the terms of the Agreement and Plan of Merger among Columbia,
NiSource, New NiSource, Parent Acquisition Corp., Company Acquisition Corp. and
NiSource Finance Corp., an Indiana corporation, dated as of February 27, 2000,
and as amended and restated as of March 31, 2000 (as so amended, the "Merger
Agreement), each of NiSource and Columbia will be merged with a separate,
wholly-owned subsidiary of New NiSource, after which NiSource will merge into
New NiSource.
The shareholders of both NiSource and Columbia have approved the
Merger Agreement subject to the satisfaction of various conditions, including
receipt of all regulatory approvals. NiSource shareholders will receive one
common share of New NiSource for each of their NiSource common shares and after
the merger the NiSource shareholders will own no less than 53% of the New
NiSource shares. Columbia shareholders will receive, for each of their Columbia
common shares, either (i) $70 in cash, and $2.60 stated amount of a New NiSource
Stock Appreciation Income Linked SecuritySM ("SAILS"), which is a unit
consisting of a zero coupon debt security and a forward equity contract having
the terms described below, or (ii) if the Columbia shareholder elects, the
number of New NiSource common shares equal to $74 divided by the average trading
price of NiSource common shares for the 30 consecutive trading days ending two
trading days before the completion of the merger, which number may never be more
than 4.4848. Stock elections are subject to proration if the elections exceed
30% of Columbia's outstanding shares. Also, unless Columbia shareholders make
stock elections for at least 10% of Columbia's outstanding shares, all Columbia
shareholders will receive cash and New NiSource SAILS in the merger.
If the merger is not completed by February 27, 2001, Columbia
shareholders will receive, for each of their Columbia common shares, an
additional amount in cash equal to interest at 7% per annum on $72.29 for the
period beginning on February 27, 2001 and ending on the day before the
completion of the merger, less the amount of any cash dividends paid on Columbia
common shares with a record date after February 27, 2001.
Each SAILS is a unit consisting of a share purchase contract and a
debenture. The share purchase contract represents the holder's obligation to
purchase common shares on the fourth anniversary of completion of the merger,
and the debenture is pledged to secure that obligation. Under the share purchase
contract, a holder will receive for each New NiSource SAILS, on the fourth
anniversary of the completion of the merger, the following number of New
NiSource common shares: (1) if the average closing price of the common shares on
the New York Stock Exchange over a 30-day period before the fourth anniversary
equals or exceeds $23.10, the holder will receive 0.1126 common shares; (2) if
the average closing price is less than $23.10 but greater than $16.50, the
holder will receive a number of common shares equal to $2.60 divided by the
average closing price; and (3) if the average closing price is less than or
equal to $16.50, the holder will receive 0.1576 common shares. The debenture
that is initially part of each New NiSource SAILS will have a principal amount
of $2.60. The debenture will not pay interest for the first four years after the
merger.
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Unless a holder chooses to make a cash payment of $2.60 to settle the
purchase contract, the debenture that is pledged as collateral will be
remarketed shortly before the fourth anniversary of the merger, and the proceeds
will be used to pay the amount the holder would owe under the purchase contract.
If the remarketing is successful, proceeds from the sale will be delivered to
New NiSource as payment for the common shares. If the remarketing agent cannot
remarket the debentures, New NiSource will exercise its rights as a secured
party and take possession of the debentures. In either case, the holder's
obligation to purchase shares of New NiSource common stock will be fully
satisfied, and the holder will receive New NiSource common shares.
Shareholders of Columbia at the time of the merger who did not vote in
favor of the merger and who made a demand for appraisal of their shares under
the Delaware General Corporation Law (the "DGCL") Section 262 may perfect their
demand for appraisal rights of those shares following the effective date of the
merger in accordance with Section 262 of the DGCL.
Upon consummation of the merger, NiSource will own an integrated gas
utility system comprised of the gas utility properties of NiSource's
subsidiaries in Indiana, Massachusetts, Maine and New Hampshire and the gas
utility properties of Columbia's subsidiaries in Ohio, Pennsylvania, Maryland,
Kentucky and Virginia. In addition, NiSource's principal operating utility
subsidiary in Indiana will continue to own an integrated electric utility system
in Indiana. Further, NiSource will own the existing non-utility businesses of
NiSource and Columbia which, with certain exceptions, are retainable under the
standards of Section 11(b)(1) of the Act.
New NiSource will issue approximately 124.7 million shares of common
stock, par value $.01 per share, in exchange for the outstanding common stock of
NiSource, based on the number of such shares outstanding on February 29, 2000.
Assuming 30% of the outstanding Columbia shares are exchanged for New NiSource
common stock (which NiSource believes is a reasonable assumption), approximately
109.2 million shares of New NiSource common stock will be issued in the merger
to Columbia's shareholders.
In addition, New NiSource will issue SAILS, which will result in the
issuance of between 6.4 million and 9.0 million shares of New NiSource common
stock on the fourth anniversary date of the merger depending on the New NiSource
stock price, assuming 30% of the outstanding shares are exchanged for the stock
consideration.
NiSource estimates that the cash payments to Columbia shareholders in
the merger will range from approximately $4 billion, assuming 30% of the
outstanding Columbia shares are exchanged for the stock consideration, to
approximately $6 billion, if all of the Columbia shares are exchanged for the
cash and SAILS consideration. In addition, NiSource expects approximately $2.4
billion of Columbia's existing debt to remain outstanding after the merger.
Assuming the sales of certain non-core assets of NiSource and/or Columbia,
NiSource commits that pro forma consolidated common stock equity of the combined
system will be no less than 28.5% of pro forma combined capitalization at the
earlier of November 1, 2000 or the date of the Commission's order with respect
to the Application-Declaration. In addition, NiSource commits that within two
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years after the date of the Commission's order with respect to the
Application-Declaration, the combined consolidated capitalization of the new
system will include no less than 30% common equity.
NiSource has accepted a commitment letter ("Commitment Letter") from
Credit Suisse First Boston Corporation, New York Branch ("Credit Suisse First
Boston") and Barclays Bank PLC ("Barclays", and together with Credit Suisse
First Boston, the "Underwriters"), pursuant to which, subject to specified
conditions, the Underwriters agree to provide the NiSource borrower a 364-day
revolving credit facility from the date of the Commitment Letter in the amount
of $6 billion, with the option to convert outstanding loans at the expiration of
such period into term loans maturing 364 days thereafter (the "Facility") to
finance the merger. A portion of the Facility may be provided by a syndicate of
banks and other financial institutions arranged by the Underwriters. Credit
Suisse First Boston will act as administrative agent for the Facility; Barclays
will serve as documentation agent for the Facility; and Credit Suisse First
Boston and Barclays will act as lead arrangers and co-syndication agents.
The merger will be accounted for as a purchase of Columbia by
NiSource.
The Merger Agreement has been approved by the boards of directors
NiSource and Columbia and the shareholders of NiSource and Columbia. Various
aspects of the proposed transaction have been submitted for review and approval
by the Federal Energy Regulatory Commission, the Virginia State Corporation
Commission, the Pennsylvania Public Utility Commission, the Kentucky Public
Service Commission, the Maine Public Utility Commission, the New Hampshire
Public Utility Commission and the Federal Communications Commission Moreover,
views of other affected state commissions on the effects of the merger have been
provided to the Commission. Finally, NiSource and Columbia have submitted the
required information to the Antitrust Division of the Department of Justice and
the Federal Trade Commission and it is a condition to the consummation of the
Transaction that the applicable waiting periods under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, have expired or been terminated.
The waiting periods have expired and NiSource's clearance to complete an
acquisition of Columbia remains valid until July 9, 2001.
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