(As filed with the Securities and Exchange Commission November 1, 2000)
File No. 70-9681
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Amendment No. 2
on
FORM U-1/A
APPLICATION OR DECLARATION
UNDER THE
PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
New NiSource Inc.
NiSource Inc.
Northern Indiana Public Service Company
Kokomo Gas and Fuel Company
Northern Indiana Fuel and Light Company
EnergyUSA, Inc.
Primary Energy, Inc.
NiSource Capital Markets, Inc.
NiSource Finance Corp.
NiSource Pipeline Group, Inc.
NiSource Development Company, Inc.
NI Energy Services, Inc.
Hamilton Harbour Insurance Services, Ltd.
NiSource Corporate Services Company
801 East 86th Avenue
Merrillville, Indiana 46410-6272
Bay State Gas Company
Northern Utilities, Inc.
300 Friberg Parkway
Westborough, Massachusetts 01581-5039
IWC Resources Corporation
1220 Waterway Blvd.
Indianapolis, Indiana 46202
Miller Pipeline Corporation
8850 Crawfordsville Road
Indianapolis, Indiana 46234
SM&P Utility Resources, Inc.
1145 Meredian St.
Suite 200
Carmel, Indiana 46032
Columbia Energy Group
13880 Dulles Corner Lane
Herndon, Virginia 20171-4600
Columbia Gas of Kentucky, Inc.
Columbia Gas of Ohio, Inc.
Columbia Gas of Maryland, Inc.
Columbia Gas of Pennsylvania, Inc.
Columbia Gas of Virginia, Inc.
200 Civic Center Drive
Columbus, Ohio 43215
Columbia Energy Group Service Corporation
Columbia LNG Corporation
Columbia Atlantic Trading Corporation
Columbia Energy Group Capital Corporation
Columbia Pipeline Corporation
Columbia Finance Corporation
13880 Dulles Corner Lane
Herndon, Virginia 20171-4600
Columbia Electric Corporation
13880 Dulles Corner Lane
Herndon, Virginia 20171-4600
Columbia Energy Resources, Inc.
c/o 900 Pennsylvania Avenue
Charleston, West Virginia 25302
Columbia Gas Transmission Corporation
Columbia Transmission Communications Corporation
12801 Fair Lakes Parkway
Fairfax, Virginia 22030-0146
Columbia Gulf Transmission Company
2603 Augusta, Suite 125
Houston, Texas 77057
Columbia Network Services Corporation
1600 Dublin Road
Columbus, Ohio 43215-1082
Columbia Propane Corporation
9200 Arboretum Parkway, Suite 140
Richmond, Virginia 23236
Columbia Insurance Corporation, Ltd.
20 Parliament Street
P.O Box HM 649
Hamilton HM CX, Bermuda
(Names of companies filing this statement and addresses of
principal executive offices)
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NEW NISOURCE INC. 1
(Name of top registered holding company parent of each applicant or declarant)
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Mark T. Maassel
Vice President, Regulatory & Government Policy
NiSource Inc.
801 East 86th Avenue
Merrillville, Indiana 46410-6272
J. W. Trost, Vice President
Columbia Energy Group Service Corporation
13880 Dulles Corner Lane
Herndon, VA 20171-4600
(Names and addresses of agents for service)
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The Commission is requested to mail copies of all orders, notices and other
communications to:
Peter V. Fazio, Jr., Esq. William T. Baker, Jr., Esq.
Schiff Hardin & Waite Thelen Reid & Priest LLP
6600 Sears Tower 40 West 57th Street
Chicago, Illinois 60606-6473 New York, New York 10019
William C. Weeden William S. Lamb, Esq.
Skadden, Arps, Slate, Meagher & Flom LLP Joanne C. Rutkowski, Esq.
1440 New York Avenue, N.W. LeBoeuf, Lamb, Greene & MacRae LLP
Washington, D.C. 20005 125 West 55th Street
New York, New York 10019-5389
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1 New NiSource Inc. will be renamed "NiSource Inc." and will register upon
completing its acquisition of Columbia Energy Group, as described in Item 1.
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TABLE OF CONTENTS
ITEM 1. DESCRIPTION OF PROPOSED TRANSACTION..................................1
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1.1 INTRODUCTION.........................................................1
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1.2. DESCRIPTION OF NISOURCE AND ITS SUBSIDIARIES.........................1
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1.3. CAPITAL STRUCTURE OF NISOURCE........................................3
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1.3.1 Securities Issued in the Merger...............................3
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1.3.2 Other Outstanding Securities and Obligations of NiSource......4
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1.4 CURRENT FINANCING AUTHORIZATION OF COLUMBIA ENERGY GROUP.............5
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1.5. SUMMARY OF REQUESTED APPROVALS.......................................6
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1.6 USE OF PROCEEDS......................................................9
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1.7 DESCRIPTION OF PROPOSED FINANCING PROGRAM...........................10
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1.7.1 Continuation, Extension, or Renewal of Acquisition Debt......10
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1.7.2 NiSource External Financing after the Merger.................10
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1.7.3 NiSource Utility Subsidiary Financing........................15
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1.7.4 Non-Utility Subsidiary Financing.............................15
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1.8 GUARANTEES..........................................................16
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1.8.1 NiSource Guarantees..........................................16
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1.8.2 Non-Utility Subsidiary Guarantees............................17
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1.9 HEDGING TRANSACTIONS................................................17
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1.9.1 Interest Rate Hedges.........................................17
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1.9.2 Anticipatory Hedges..........................................17
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1.10 CHANGES IN CAPITAL STOCK OF SUBSIDIARIES............................18
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1.11 FINANCING SUBSIDIARIES..............................................18
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1.12 INTERMEDIATE SUBSIDIARIES AND SUBSEQUENT REORGANIZATIONS............19
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1.13 SALES OF SERVICES AND GOODS AMONG SUBSIDIARIES......................21
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1.13.1. Continuation of Certain Existing Arrangements with NiSource
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Utility Subsidiaries.......................................21
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1.13.2. Sales and Service Contracts Among Non-Utility Subsidiaries.22
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1.14 ACTIVITIES OF RULE 58 SUBSIDIARIES OUTSIDE THE UNITED STATES........23
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1.15 PAYMENT OF DIVIDENDS OUT OF CAPITAL AND UNEARNED SURPLUS............25
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1.15.1 Payment of Dividends by Columbia............................25
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1.15.1 Payment of Dividends by Non-Utility Subsidiaries............26
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1.16 TAX ALLOCATION AGREEMENT...........................................27
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1.17 CERTIFICATES OF NOTIFICATION.......................................28
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ITEM 2. FEES, COMMISSIONS AND EXPENSES......................................29
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ITEM 3. APPLICABLE STATUTORY PROVISIONS.....................................29
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3.1 GENERAL.............................................................29
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3.2 COMPLIANCE WITH RULES 53 AND 54.....................................30
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ITEM 4. REGULATORY APPROVAL.................................................31
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ITEM 5. PROCEDURE...........................................................31
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ITEM 6. EXHIBITS AND FINANCIAL STATEMENTS...................................31
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A. EXHIBITS............................................................31
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B. FINANCIAL STATEMENTS................................................32
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ITEM 7. INFORMATION AS TO ENVIRONMENTAL EFFECTS.............................33
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<PAGE>
The Application-Declaration filed in this proceeding on May 17, 2000,
as amended and restated by Amendment No. 1, filed September 26, 2000, is hereby
further amended and restated to read as follows:
ITEM 1. DESCRIPTION OF PROPOSED TRANSACTION
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1.1 INTRODUCTION New NiSource Inc. ("New NiSource"), a Delaware
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corporation, is currently a wholly owned subsidiary of NiSource Inc.
("NiSource"), an Indiana corporation. In a separate proceeding,2 New NiSource,
NiSource and Columbia Energy Group ("Columbia"), a Delaware corporation, have
filed an Application/Declaration on Form U-1 (the "Merger Application") pursuant
to Sections 9 and 10 and other applicable provisions of the Public Utility
Holding Company Act of 1935 (the "Act") in which they are seeking approval for
the acquisition by New NiSource of all of the issued and outstanding common
stock of NiSource and Columbia, through mergers of separate subsidiaries of New
NiSource with and into each of NiSource and Columbia, followed by the merger of
NiSource into New NiSource (the "Merger"). Upon consummation of these
transactions, New NiSource will be renamed "NiSource Inc." and will register as
a holding company pursuant to Section 5 of the Act. For ease and simplicity, and
in order to reflect this name change, the new registered holding company after
the Merger is referred to throughout the remainder of this
Application/Declaration as "NiSource." In those instances where it is necessary
to distinguish the current NiSource prior to the Merger from the new registered
holding company, the current NiSource will be referred to as "old" NiSource.
This Application/Declaration seeks authorization and approval of the
Commission with respect to the post-merger financing activities of NiSource and
its subsidiaries, intrasystem guarantees, the maintenance and creation of
specified types of new subsidiaries, the payment of dividends out of capital and
unearned surplus and other related matters pertaining to the Applicants after
NiSource registers under the Act.
1.2 DESCRIPTION OF NISOURCE AND ITS SUBSIDIARIES. Upon completion
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of the Merger, NiSource will own, directly or indirectly, all of the issued and
outstanding common stock of ten public utility subsidiary companies. These
include the wholly-owned public utility subsidiaries of "old" NiSource: Northern
Indiana Public Service Company ("Northern Indiana"), Kokomo Gas and Fuel Company
("Kokomo") and Northern Indiana Fuel and Light Company, Inc. ("NIFL"), all of
which operate exclusively in Indiana, Bay State Gas Company ("Bay State"), which
operates in Massachusetts,3 and Northern Utilities, Inc. ("Northern"), which
operates in New Hampshire and contiguous areas in southern Maine (collectively,
the "NiSource Utility Subsidiaries"); and the five current wholly-owned public
utility subsidiaries of Columbia: Columbia Gas of Kentucky, Inc. ("Columbia
Kentucky"), Columbia Gas of Maryland, Inc. ("Columbia Maryland"), Columbia Gas
of Ohio, Inc. ("Columbia Ohio"), Columbia Gas of Pennsylvania, Inc. ("Columbia
Pennsylvania") and Columbia Gas of Virginia, Inc. ("Columbia Virginia"), which
distribute gas in portions of Kentucky, Maryland, Ohio, Pennsylvania and
Virginia (collectively, the "Columbia Utility Subsidiaries," and together with
the NiSource Utility Subsidiaries, the "Utility Subsidiaries").
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2 See File No. 70-9551; Holding Co. Act Release No. 27226 (Sept. 1, 2000)
(notice of filing).
3 Bay State is an exempt holding company pursuant to Rule 2. See File No.
69-340.
<PAGE>
Upon completion of the Merger, NiSource will also hold, directly or
indirectly, all of the non-utility subsidiaries and investments currently owned
by "old" NiSource, as well as those now owned by Columbia. "Old" NiSource's
principal direct non-utility subsidiaries include EnergyUSA, Inc. ("EnergyUSA"),
which serves as a holding company with management responsibility for many of
"old" NiSource's non-utility subsidiaries and investments, including
subsidiaries engaged in utility line locating and marking, pipeline
construction, energy marketing, and energy management services; Primary Energy,
Inc., which develops and invests in cogeneration and other large industrial
energy facilities; IWC Resources Corporation ("IWC Resources"), a holding
company for several water distribution companies;4 NiSource Pipeline Group,
Inc., a holding company for "old" NiSource's investments in interstate pipeline
companies; NiSource Development Company, Inc., which holds investments in
various businesses, primarily in real estate, that are intended to complement
"old" NiSource's energy businesses; NiSource Capital Markets, Inc. ("Capital
Markets"), which provides financing for "old" NiSource's subsidiaries other than
Northern Indiana and, in certain respects, IWC Resources and Bay State; and
NiSource Corporate Services Company ("Corporate Services"), which provides
management, administrative, gas portfolio management and other services to
certain of "old" NiSource's subsidiaries. Columbia's material direct non-utility
subsidiaries include Columbia Gas Transmission Corporation and Columbia Gulf
Transmission Company, which are interstate pipeline companies; Columbia Electric
Corporation, which develops, owns and operates cogeneration facilities and
"exempt wholesale generator" ("EWG") facilities; Columbia Propane Corporation,
which directly and through subsidiaries of its own purchases and sells propane
and petroleum products; Columbia Energy Resources, Inc, which, through
subsidiaries, explores for, develops, gathers and produces natural gas and oil
in the United States and Canada; and Columbia Energy Group Service Corporation,
a subsidiary service company.5
NiSource will maintain Columbia as a direct wholly-owned subsidiary after
the Merger. Columbia, which will remain a registered holding company, will in
turn hold all of the voting securities of the Columbia Utility Subsidiaries and
its investments in other direct and indirect non-utility subsidiaries.
Applicants expect that Columbia will continue to supply substantially all of the
capital required by its subsidiaries.
A more complete description of NiSource, "old" NiSource and Columbia, and
their respective subsidiaries is contained in the Merger Application, to which
reference is made.
As used in the remainder of this Application/Declaration, the term
"Non-Utility Subsidiaries" shall mean each of the direct and indirect
non-utility subsidiaries of NiSource (including Columbia and the subsidiaries
owned directly or indirectly by Columbia prior to the Merger) as of the
effective date of the Merger. The term "Non-Utility Subsidiaries" also includes
any direct or indirect non-utility subsidiary acquired or formed by NiSource
after the effective date of the Merger in a transaction that has been approved
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4 As stated in the Merger Application, the water properties of IWC
Resources are not expected to be retainable under the standards of Section
11(b)(1) of the Act. In addition, "old" NiSource has announced plans to sell the
pipeline construction and certain other subsidiaries of EnergyUSA.
5 Columbia has announced plans to sell Columbia Electric Corporation and
Columbia Propane Corporation.
2
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by the Commission in this proceeding (see specifically Items 1.11 and 1.12) or
in a separate proceeding, or in a transaction that is exempt under the Act
(specifically, Sections 32, 33 and 34) or the rules thereunder (including,
specifically, Rule 58). The term "Subsidiaries" means the Utility Subsidiaries
and the Non-Utility Subsidiaries. Post-Merger, NiSource and the Subsidiaries are
sometimes hereinafter collectively referred to as the "NiSource System" or as
the "Applicants."
1.3 CAPITAL STRUCTURE OF NISOURCE FOLLOWING THE MERGER.
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1.3.1 Securities Issued in the Merger. The authorized capital stock of
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New NiSource consists of 420,000,000 shares, $0.01 par value, of which
400,000,000 are common shares ("Common Stock"), and 20,000,000 are preferred
shares ("Preferred Stock"),6 of which 4,000,000 have been designated as Series
A Junior Participating Preferred Shares and reserved for issuance under New
NiSource's Shareholder Rights Agreement ("Rights Plan") (Exhibit B-2 hereto). In
the Merger, New NiSource will issue approximately 121.2 million shares of Common
Stock in exchange for the outstanding common stock of "old" NiSource, based on
the number of such shares outstanding on June 30, 2000, and, assuming 30% of the
outstanding Columbia shares are exchanged for Common Stock, approximately 96.9
million shares of Common Stock in exchange for the outstanding common stock of
Columbia.7
In addition, New NiSource will issue Stock Appreciation Income Linked
Securities(SM) ("SAILS(SM)") as part of the Merger, which will result in the
issuance of between 6.4 million and 9.0 million shares of Common Stock on the
fourth anniversary of the transaction (the actual number will depend on the
NiSource stock price at that time), assuming 30% of the outstanding Columbia
shares are exchanged for the stock consideration in the Merger.
The cash portion of the consideration paid to Columbia shareholders in the
Merger will range from approximately $4 billion, assuming 30% of the outstanding
Columbia shares are exchanged for the New NiSource stock consideration, to
approximately $6 billion, if all of the Columbia shares are exchanged for the
cash and SAILS(SM) consideration. New NiSource has organized a special purpose
financing subsidiary, NiSource Finance Corp. ("NiSource Finance"), to facilitate
financing the cash portion of the Merger consideration and other costs
associated with the Merger. NiSource Finance currently plans to make unsecured
short-term borrowings under a 364-day revolving credit facility, with the option
to convert outstanding loans at the expiration of such period to term loans
maturing 364 days thereafter, or, alternatively, will issue commercial paper
back-stopped by such credit facilities (the "Acquisition Debt"). The credit
facilities and term loans comprising the Acquisition Debt will be guaranteed by
New NiSource and, until it is merged into New NiSource, by "old" NiSource.
NiSource believes that the holders of the maximum number of Columbia's
shares (30%) will elect to exchange their stock for NiSource Common Stock. In
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6 "Old" NiSource has the same number of authorized shares of common and
preferred stock as New NiSource, but without par value.
7 The actual number of shares of Common Stock issued in the Merger will
depend upon, among other things, the number of "old" NiSource and Columbia
common shares outstanding on the date on which the Merger is consummated and the
elections made by Columbia's shareholders.
3
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such event, and upon the completion in 2000 of the sale of certain non-core
assets of "old" NiSource and/or Columbia, and, if required, the sale of
additional shares of Common Stock, NiSource commits that common equity as a
percentage of pro forma consolidated capitalization will be no less than 28.5%.
In addition, NiSource commits that, on or before November 1, 2002, and
thereafter for the remainder of the Authorization Period (as defined in Item
1.5, below), the combined consolidated capitalization of the new holding company
system will include no less than 30% common equity. Based on similar
circumstances, the Commission has previously held that such a pro forma
consolidated capitalization is acceptable. See The National Grid Group plc,
Holding Co. Act Release No. 27154 (Mar. 15, 2000). Further, NiSource commits to
maintain common equity of Columbia as a percentage of Columbia's consolidated
capitalization at 30% or above throughout the Authorization Period, and to
maintain common equity as a percentage of capitalization of each of the Utility
Subsidiaries at 30% or above throughout the Authorization Period.
1.3.2 Other Outstanding Securities and Obligations of "Old" NiSource.
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By operation of law as a result of the Merger, all of the existing
obligations of "old" NiSource, including all of those described below, will
become the direct obligations of NiSource.
In February 1999, in conjunction with its acquisition of Bay State, "old"
NiSource issued 6,000,000 Premium Income Equity Securities(SM) ("PIES(SM)").
Each PIES(SM) is a unit consisting of a stock purchase contract issued by "old"
NiSource and a preferred security issued by NIPSCO Capital Trust I ("Capital
Trust"), a special purpose financing subsidiary of Capital Markets. The stock
purchase contracts obligate the holders thereof to purchase from NiSource, no
later than February 19, 2003, for a price of $50, a number of shares of NiSource
Common Stock that is based on the closing price for NiSource Common Stock over a
20-day period prior to such date, subject to a collar.8 Based on "old"
NiSource's trading price as of June 30, 2000, the aggregate number of shares of
Common Stock that NiSource would issue pursuant to the PIES(SM) is approximately
13.1 million. Each preferred security has a stated liquidation amount of $50,
and represents an undivided ownership interest in the assets of Capital Trust
and is guaranteed by Capital Markets. The assets of Capital Trust consist solely
of the debentures of Capital Markets maturing on February 19, 2005 that Capital
Trust purchased with the net proceeds of the offering ($345 million) plus equity
invested by Capital Markets ($10.7 million).
"Old" NiSource also currently maintains certain credit arrangements for the
benefit of its subsidiaries that will remain outstanding following the Merger
and become obligations of NiSource. Specifically, under the terms of a Support
Agreement, dated April 4, 1989, as amended, between "old" NiSource and Capital
Markets (see Exhibit B-1), NiSource will be obligated to make payments of
interest and principal on Capital Markets' obligations in the event of a failure
to pay by Capital Markets. Capital Markets has entered into revolving credit
agreements for $200 million, which may be used to support the issuance of
commercial paper. At June 30, 2000, Capital Markets had issued $186.0 million in
commercial paper but there were no borrowings outstanding under the revolving
credit agreements. Capital Markets also has $178.0 million available in money
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8 Under the formula, the number of shares of NiSource Common Stock issued
in respect of each unit of the PIES(SM) will not be less than 1.6103 nor
greater than 1.9002.
4
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market lines of credit with $141.5 million of borrowings outstanding as of June
30 , 2000. At June 30, 2000, Capital Markets also had outstanding $300 million
of medium-term notes having various maturities between April 2004 and May 2027.
The interest rates on and maturities of all of the currently outstanding
securities of Capital Trust and Capital Markets, as described above, were at the
time issued within the parameters set forth in Item 1.7.2 below for similar
types of securities proposed to be issued directly or indirectly by NiSource.
In addition, the Support Agreement backs various guarantees and other forms
of credit support that have been provided by Capital Markets for the benefit of
non-utility subsidiaries of "old" NiSource. These include guarantees of
securities issued by other subsidiaries, lease payment obligations, obligations
under energy marketing contracts, obligations of cogeneration affiliates under
operations and maintenance agreements, surety bonds and indemnification
obligations. At June 30, 2000, the maximum potential financial exposure of
Capital Markets under all of these guarantees was approximately $1 billion.
1.4 CURRENT FINANCING AUTHORIZATION OF COLUMBIA ENERGY GROUP
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Columbia currently has financing authority derived from three orders
(collectively, the "Columbia Financing Orders"). By order dated June 8, 1999,9
Columbia has authority to issue and sell equity and long-term debt securities in
an amount not to exceed $6 billion at any one time outstanding through December
31, 2003. In addition, Columbia is authorized to "enter into guarantee
arrangements, obtain letters of credit, and otherwise provide credit support"
for its subsidiary companies in an amount not to exceed $5 billion at any one
time outstanding through December 31, 2003. By order dated December 22, 1997,10
Columbia has the authority to issue and sell short-term debt securities (that
is, debt securities with maturities of one year or less) in an amount not to
exceed $2 billion at any one time outstanding through December 31, 2003.
Short-term debt may include borrowings under a revolving credit facility, the
issuance of commercial paper, and bid notes to individual banks participating in
the revolving credit facility. The order also authorizes four of the Columbia
Utility Subsidiaries (Columbia Ohio, Columbia Pennsylvania, Columbia Kentucky,
and Columbia Maryland) to make direct borrowings from Columbia.11 Columbia's
Utility Subsidiaries and certain non-utility subsidiaries also may make
short-term borrowings through the Columbia system money pool. Various
restrictions on Columbia's current financing authority are set forth in an order
dated December 23, 1996.12
Under the Columbia Financing Orders, the effective cost of money on debt
may not exceed 300 basis points over comparable term U.S. treasury securities;
and the effective cost of money on preferred stock and other fixed income
securities may not exceed 500 basis points over 30-year term U.S. treasury
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9 Columbia Energy Group, Holding Co. Act Release No. 27035 (June 8, 1999).
10 The Columbia Gas System, Inc., Holding Co. Act Release No. 26798 (Dec.
22, 1997).
11 Columbia Energy Group Service Corporation and Columbia's non-utility
subsidiaries rely upon Rule 52 for borrowings from Columbia.
12 The Columbia Gas System, Inc., Holding Co. Act Release No. 26634 (Dec.
23, 1996).
5
<PAGE>
securities. Bid notes must bear interest rates comparable to, or lower than,
those available through other proposed forms of short-term borrowing with
similar terms and have maturities not exceeding 270 days. The underwriting fees,
commissions, or other similar remuneration paid in connection with the
non-competitive bid issue, sale or distribution of any securities may not exceed
5% of the principal or total amount of the financing.
Columbia is authorized under the Columbia Financing Orders to utilize the
proceeds of authorized financing for general and corporate purposes including:
(a) financing, in part, of the capital expenditures of Columbia and its
subsidiaries; (b) in the case of short-term debt, financing gas storage
inventories, other working capital requirements and capital spending of the
Columbia system; (c) the acquisition of interests in EWGs and "foreign utility
companies" ("FUCOs"); (d) the acquisition, retirement, or redemption of
securities of which Columbia is an issuer without the need for prior Commission
approval pursuant to Rule 42 or a successor rule; and/or (e) the acquisition of
the securities of nonutility companies as permitted under any rule of the
Commission permitting such acquisitions.
The Applicants are not requesting any changes to the amounts or types of
securities and guarantees that Columbia and the Columbia Utility Subsidiaries
are authorized to issue under the terms of the Columbia Financing Orders, and
any securities or guarantees issued by Columbia and the Columbia Utility
Subsidiaries will not count against the proposed limits on financing under this
Application/Declaration. Following the Merger, Columbia may continue to provide
capital required by its subsidiaries by issuing short-term and long-term debt
securities, within the limits of the Columbia Financing Orders. Any capital that
is provided by NiSource to Columbia after the Merger will be within the limits
set forth below in Item 1.7.
1.5 SUMMARY OF REQUESTED APPROVALS. The Applicants request approval for
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a program of external financing, credit support arrangements, and other related
proposals following the registration of NiSource under the Act for the period
through December 31, 2003 ("Authorization Period"), as follows:
(i) NiSource requests authorization to maintain the facility under which
the Acquisition Debt is issued, including any extensions, renewals or
replacements thereof during the Authorization Period, and the
associated guarantees.
(ii) NiSource requests authority to issue and sell from time to time,
directly or indirectly through one or more direct Financing
Subsidiaries (as defined in paragraph (ix) below and described in Item
1.11), equity securities and long-term and short-term debt securities
in an aggregate amount at any time outstanding not to exceed $14
billion. The amounts of securities that NiSource is requesting
authority to issue and the dollar limitations contained in this
paragraph are in addition to the amounts of securities Columbia is
currently authorized to issue and the dollar limitations imposed on
Columbia under the Columbia Financing Orders, as well as the amounts
of securities that the NiSource Utility Subsidiaries are proposing to
issue, as summarized in paragraph (iii) below. Within such overall
financing limitation, NiSource proposes to issue and sell Common Stock
and Preferred Stock and, directly or through one or more direct
6
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Financing Subsidiaries, unsecured long-term indebtedness ("Long-term
Debt") and other forms of preferred or equity-linked securities having
maturities of up to 50 years. The aggregate amount of all such Common
Stock, Preferred Stock, Long-term Debt and other forms of preferred or
equity-linked securities at any time outstanding during the
Authorization Period shall not exceed $12 billion, provided that
shares of Common Stock that are issuable with respect to the
SAILS(SM) and the outstanding PIES(SM), as described above, and
shares of Preferred Stock issued pursuant to the Rights Plan will not
count against this limit. In addition, NiSource requests authority to
issue and sell from time to time, directly or indirectly through one
or more Financing Subsidiaries, unsecured short-term indebtedness
having maturities of less than one year ("Short-term Debt") in an
aggregate principal amount at any time outstanding not to exceed $2
billion, provided that the Acquisition Debt (or any debt extending,
renewing or replacing the Acquisition Debt) will not be counted
against the Short-term Debt limit, regardless of its maturity, but
will instead be counted against the $12 billion limit on long-term
securities. As a further limitation, the aggregate principal amount of
all indebtedness of NiSource or any direct Financing Subsidiary of
NiSource at any time outstanding (including, without limitation, the
Acquisition Debt, existing debt of "old" NiSource that is assumed by
NiSource as a result of the Merger, and any Long-term Debt or
Short-term Debt issued after the Merger) shall not exceed $10 billion
(the "NiSource Debt Limitation").
(iii) The NiSource Utility Subsidiaries request authority to issue and sell
from time to time short-term notes or other short-term debt securities
in an aggregate amount at any one time outstanding not to exceed the
following amounts: (A) Northern Indiana - $1 billion; (B) Kokomo - $50
million; (C) NIFL - $50 million; (D) Bay State - $250 million; and (E)
Northern - $50 million.
(iv) NiSource requests authority, directly or through one or more Financing
Subsidiaries, to guarantee indebtedness or contractual obligations or
provide other forms of credit support ("NiSource Guarantees") on
behalf or for the benefit of its Subsidiaries in an aggregate
principal or nominal amount not to exceed $5 billion at any one time
outstanding, provided that any securities issued by Financing
Subsidiaries of NiSource that are guaranteed or supported by other
forms of credit enhancement provided by NiSource will not count
against this limitation. The amount of NiSource Guarantees is in
addition to the amounts of guarantees and other forms of credit
support that Columbia is currently authorized to issue under the terms
of the Columbia Financing Orders.
(v) Non-Utility Subsidiaries (other than Columbia) request authority to
provide guarantees of indebtedness or contractual obligations or
provide other forms of credit support ("Non-Utility Subsidiary
Guarantees") on behalf or for the benefit of other Non-Utility
Subsidiaries in an aggregate principal or nominal amount not to exceed
$2 billion at any one time outstanding, exclusive of any guarantees
that are exempt pursuant to Rule 45(b) and Rule 52(b).
7
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(vi) NiSource and, to the extent not exempt under Rule 52, the Subsidiaries
request authority to enter into hedging transactions ("Interest Rate
Hedges") with respect to the indebtedness of such companies in order
to manage and minimize interest rate costs. Such companies also
request authority to enter into hedging transactions ("Anticipatory
Hedges") with respect to anticipatory debt issuances in order to
lock-in current interest rates and/or manage interest rate risk
exposure.13
(vii) NiSource, for itself and on behalf of the Subsidiaries, requests
authorization to change the terms of the authorized capitalization of
any Subsidiary, provided that, if a Subsidiary is not wholly owned,
all other required shareholder consents have been obtained for such
change.
(viii) NiSource and the Subsidiaries request authority to acquire the
equity securities of one or more additional special-purpose
subsidiaries ("Financing Subsidiaries") organized solely to facilitate
a financing and to guarantee the securities issued by such Financing
Subsidiaries, to the extent not exempt pursuant to Rule 45(b) and Rule
52(b).
(ix) NiSource requests authority to acquire, directly or indirectly, the
equity securities of one or more intermediate subsidiaries
("Intermediate Subsidiaries") organized exclusively for the purpose of
acquiring, financing, and holding the securities of one or more
existing or future Non-Utility Subsidiaries, including but not limited
to EWGs, FUCOs, companies engaged or formed to engage in activities
permitted by Rule 58 ("Rule 58 Subsidiaries"), or "exempt
telecommunications companies" ("ETCs"), provided that Intermediate
Subsidiaries may also provide management, administrative, project
development and operating services to such entities.
(x) NiSource requests an exemption from the at-cost requirements of
Section 13(b) with respect to certain existing arrangements between
its Non-Utility and Utility Subsidiaries. In addition, as permitted by
Rule 87(b)(1), Non-Utility Subsidiaries may from time to time provide
services and sell goods to each other. To the extent not exempt
pursuant to Rule 90(d), such companies request authority to perform
such services and to sell such goods to each other at fair market
prices, without regard to "cost," as determined in accordance with
Rules 90 and 91, subject to certain limitations that are noted below.
(xi) NiSource requests authority on behalf of any current and future Rule
58 Subsidiaries to engage in certain categories of activities
permitted thereunder outside the United States, subject to certain
limitations.
(xii) Columbia requests authority to pay dividends out of capital and
unearned surplus in an amount no greater than the net proceeds
realized from the sale of the securities or assets of any of its
------------------------
13 Although Columbia has comparable authority (see The Columbia Gas System,
Inc., supra n. 12), its subsidiaries do not.
8
<PAGE>
non-utility subsidiaries and/or to use such net proceeds to reacquire
shares of its common stock that are held by NiSource. Non-Utility
Subsidiaries request authority to pay dividends out of capital and
unearned surplus to the extent permitted under applicable law and the
terms of any credit arrangements to which they may be parties. The
Subsidiaries also request the authority to acquire, retire, or redeem
the securities that they have issued to any associate company, any
affiliate, or any affiliate of an associate company.
(xiii) NiSource requests approval, subject to a request for reservation of
jurisdiction, for an agreement among NiSource and its Subsidiaries to
allocate consolidated income tax liabilities.
1.6 USE OF PROCEEDS. The proceeds from the financings authorized by the
---------------
Commission pursuant to this Application/Declaration will be used for general
corporate purposes, including (i) refinancing of the Acquisition Debt, (ii)
financing, in part, investments by and capital expenditures of NiSource and its
Subsidiaries (including equity contributions, advances and loans to Columbia),
(iii) the funding of future investments in EWGs, FUCOs, and Rule 58
Subsidiaries, (iv) the repayment, redemption, refunding or purchase by NiSource
or any Subsidiary of any of its own securities, and (v) financing working
capital requirements of NiSource and its Subsidiaries.
As previously indicated, any capital that is provided by NiSource to
Columbia after the Merger will be within the limits set forth below in Item 1.7.
NiSource proposes to make open account advances or cash capital contributions to
Columbia, purchase additional shares of Columbia common stock, and/or make
loans, directly or through a Financing Subsidiary, evidenced by Columbia's
promissory notes. The interest rate and maturity on any borrowings by Columbia
from NiSource, or its Financing Subsidiary, will parallel the effective cost and
maturity of a comparable debt security issued by the lender.
The Applicants represent that no financing proceeds will be used to acquire
the equity securities of any company unless such acquisition has been approved
by the Commission in this proceeding or in a separate proceeding or in
accordance with an available exemption under the Act or rules thereunder,
including Sections 32 and 33 and Rule 58. NiSource states that the aggregate
amount of proceeds of financing and NiSource Guarantees approved by the
Commission in this proceeding which are used to fund investments in EWGs and
FUCOs will not, when added to NiSource's "aggregate investment" (as defined in
Rule 53) in all such entities at any point in time, exceed 50% of NiSource's
"consolidated retained earnings" (also as defined in Rule 53).14 Further,
NiSource represents that proceeds of financing and NiSource Guarantees and
Non-Utility Guarantees utilized to fund investments in Rule 58 Subsidiaries will
be subject to the limitations of that rule. Lastly, NiSource represents that it
will not seek to recover through higher rates of any of the Utility Subsidiaries
losses attributable to any operations of its Non-Utility Subsidiaries.
------------------------
14 Columbia's "aggregate investment" in EWGs and FUCOs will be combined
with NiSource's "aggregate investment" in such entities. Consistent with this
practice, the Applicants propose that the investment limit for both NiSource and
Columbia under Rule 53 shall be equal to 50% of NiSource's consolidated retained
earnings.
9
<PAGE>
1.7 DESCRIPTION OF PROPOSED FINANCING PROGRAM.
-----------------------------------------
1.7.1 Continuation, Extension, or Renewal of Acquisition Debt As
--------------------------------------------------------
indicated, the cash portion of the consideration to be paid in the Merger and
other costs associated therewith (estimated at approximately $4.0 billion to
$6.0 billion) will be financed through borrowings by NiSource Finance under a
364-day revolving credit facility or by the issuance of commercial paper
back-stopped by the undrawn credit facility. After the Merger, NiSource intends
to refinance some or all of the Acquisition Debt from the proceeds of issuances
of equity securities and long-term debt securities, as described below, and/or
cash proceeds from sales of assets. Pending such refinancing, NiSource requests
authorization to maintain or replace the facility under which the Acquisition
Debt is issued and renew or extend the maturities of borrowings thereunder
and/or commercial paper back-stopped by such facility, and to renew or extend
the associated NiSource guaranty. The effective cost of money on any borrowing
evidencing a renewal or extension of the Acquisition Debt will not exceed at the
time of such renewal or extension 300 basis points over the London Interbank
Offered Rate ("LIBOR") for maturities of 1 year or less.
1.7.2 NiSource External Financing after the Merger. NiSource
--------------------------------------------
requests authority to issue and sell Common Stock and Preferred Stock and
directly or indirectly through one or more Financing Subsidiaries (as described
in Item 1.11) Long-term Debt and other forms of preferred or equity-linked
securities. The aggregate amount of all such Common Stock, Preferred Stock,
Long-term Debt and other preferred or equity-linked securities at any time
outstanding shall not exceed $12 billion, provided that shares of Common Stock
that are issuable with respect to the SAILS(SM) and the currently outstanding
PIES(SM) and shares of Preferred Stock issued pursuant to the Rights Plan, as
described below in Item 1.7.2(b), will not count against this limit. In
addition, NiSource requests authority to issue and sell, directly or indirectly
through one or more Financing Subsidiaries, Short-term Debt in an aggregate
principal amount at any time outstanding not to exceed $2 billion. As noted in
Item 1.5, the aggregate principal amount of all indebtedness issued by NiSource
or any Financing Subsidiary of NiSource at any time outstanding (including,
specifically, Acquisition Debt, Long-term Debt and Short-term Debt) will not
exceed the NiSource Debt Limitation. The amounts of securities that NiSource is
requesting authority to issue and the dollar limitations contained in this
paragraph are in addition to the amounts of securities Columbia is currently
authorized to issue and the dollar limitations imposed on Columbia under the
Columbia Financing Orders.
NiSource contemplates that the Common Stock, Preferred Stock, Long-term
Debt and other preferred or equity-linked securities would be issued and sold
directly to one or more purchasers in privately-negotiated transactions or to
one or more investment banking or underwriting firms or other entities who would
resell such securities without registration under the Securities Act of 1933 in
reliance upon one or more applicable exemptions from registration thereunder, or
to the public either (i) through underwriters selected by negotiation or
competitive bidding or (ii) through selling agents acting either as agent or as
principal for resale to the public either directly or through dealers.
10
<PAGE>
(a) Common Stock. NiSource may issue and sell Common Stock, or
------------
options, warrants or other stock purchase rights exercisable for Common Stock,
pursuant to underwriting agreements of a type generally standard in the
industry. Public distributions may be pursuant to private negotiation with
underwriters, dealers or agents, as discussed below, or effected through
competitive bidding among underwriters. In addition, sales may be made through
private placements or other non-public offerings to one or more persons. All
such Common Stock sales will be at rates or prices and under conditions
negotiated or based upon, or otherwise determined by, competitive capital
markets.
Specifically, NiSource may issue and sell Common Stock through underwriters
or dealers, through agents, or directly to a limited number of purchasers or a
single purchaser. If underwriters are used in the sale of Common Stock, such
securities will be acquired by the underwriters for their own account and may be
resold 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 sale. Common Stock may be offered to the public either through
underwriting syndicates (which may be represented by a managing underwriter or
underwriters designated by NiSource) or directly by one or more underwriters
acting alone. Common Stock may be sold directly by NiSource or through agents
designated by NiSource from time to time. If dealers are utilized in the sale of
Common Stock, NiSource will sell such securities to the dealers, as principals.
Any dealer may then resell such Common Stock to the public at varying prices to
be determined by such dealer at the time of resale. If Common Stock is being
sold in an underwritten offering, NiSource may grant the underwriters thereof a
"green shoe" option permitting the purchase from NiSource at the same price of
additional shares solely for the purpose of covering over-allotments.
NiSource may also issue Common Stock or options, warrants or other stock
purchase rights exercisable for Common Stock in public or privately-negotiated
transactions as consideration for the equity securities or assets of other
companies, provided that the acquisition of any such equity securities or assets
has been authorized in a separate proceeding or is exempt under the Act or the
rules thereunder (specifically Rule 58).15
NiSource also proposes to issue Common Stock and/or purchase shares of its
Common Stock (either currently or under forward contracts) in the open market
for purposes of reissuing such shares at a later date under the SAILS(SM) and
PIES(SM) or other equity-linked securities, or pursuant to stock-based plans
which are maintained for stockholders, employees and nonemployee directors.
Currently, "old" NiSource maintains three plans under which it may directly
issue or purchase in the open market shares of Common Stock. These plans will
become NiSource plans as a result of the Merger. The first is the 1994 Long-Term
Incentive Plan, as amended and restated ("Long-Term Incentive Plan"). The
Long-Term Incentive Plan authorizes grants of restricted common stock, stock
options and other stock-based awards to eligible executives and other key
employees, as well as to directors of the company and its subsidiaries. The
Long-Term Incentive Plan authorizes NiSource to issue a maximum of 11 million
------------------------
15 The Commission has previously approved the issuance of common stock as
consideration for the acquisition of a new business in an exempt transaction or
transaction that has been approved in a separate proceeding. See e.g., SCANA
Corp., Holding Co. Act Release No. 27137 (Feb. 14, 2000).
11
<PAGE>
shares of common stock (or options, performance shares or other rights with
respect thereto). The Long-Term Incentive Plan, as amended, will expire on
December 31, 2005. A copy of the Long-Term Incentive Plan is filed herewith as
Exhibit J-1.
"Old" NiSource has also adopted a Nonemployee Director Stock Incentive Plan
under which NiSource may grant restricted common shares to nonemployee directors
of NiSource. The plan provides for a grant of 2,000 shares to each person, other
than an employee of NiSource, upon his or her election or re-election as a
director of NiSource. The grants of restricted shares vest in 20% annual
increments, with all of a director's shares vesting five years after the date of
award. A copy of the Nonemployee Director Stock Incentive Plan is filed herewith
as Exhibit J-2.
"Old" NiSource has also adopted an Employee Stock Purchase Plan. Under this
plan, employees of NiSource and participating subsidiaries may purchase Common
Stock through payroll deductions of not less than $10 in any pay period and not
more than $20,000 per calendar year. Amounts deducted are used to purchase
shares of Common Stock at the end of each three-month saving period at prices
determined for that savings period. The purchase price is equal to 90% of the
fair market value, which is defined as the closing price of Common Stock on the
New York Stock Exchange on the last trading day of a savings period. As of June
30, 2000, the maximum remaining number of shares of Common Stock that may be
purchased under this plan is 352,245. A copy of the Employee Stock Purchase Plan
is filed herewith as Exhibit J-3.
NiSource proposes to issue shares of its Common Stock under the
authorization and within the limitations set forth herein in order to satisfy
its obligations under each of these existing stock-based plans. Shares of Common
Stock issued under these plans may either be newly issued shares, treasury
shares or shares purchased in the open market. NiSource will make open-market
purchases of Common Stock in accordance with the terms of or in connection with
the operation of the plans pursuant to Rule 42. NiSource also proposes, within
the limitations set forth herein, to issue and/or purchase shares of Common
Stock pursuant to these existing stock plans, as they may be amended or
extended, and similar plans or plan funding arrangements hereafter adopted
without any additional Commission order. Stock transactions of this variety
would thus be treated the same as other stock transactions permitted pursuant to
this Application/Declaration.
(b) Preferred Stock, Long-term Debt and other Preferred or
------------------------------------------------------
Equity-Linked Securities. NiSource will not issue any shares of its authorized
------------------------
Preferred Stock in the Merger and will not have any shares of Preferred Stock
outstanding at the time that it registers as a holding company. However, after
it registers, NiSource seeks to have the flexibility to issue its authorized
Preferred Stock or, directly or indirectly through one or more Financing
Subsidiaries, to issue Long-term Debt and other types of preferred or
equity-linked securities (including, specifically, trust preferred securities).
The proceeds of Preferred Stock, Long-term Debt or other preferred or
equity-linked securities would enable NiSource to reduce the Acquisition Debt
and Short-term Debt or other debt issued or guaranteed by "old" NiSource with
12
<PAGE>
more permanent capital, and provide an important source of future financing for
the operations of and investments in non-utility businesses which are exempt
under the Act.16
Preferred Stock or other types of preferred or equity-linked securities may
be issued in one or more series with such rights, preferences, and priorities as
may be designated in the instrument creating each such series, as determined by
NiSource's board of directors. All such securities will be redeemed no later
than 50 years after the issuance thereof. The dividend rate on any series of
Preferred Stock or other preferred or equity-linked securities will not exceed
at the time of issuance 500 basis points over the yield to maturity of a U.S.
Treasury security having a remaining term equal to the term of such securities.
Dividends or distributions on Preferred Stock or other preferred or
equity-linked securities will be made periodically and to the extent funds are
legally available for such purpose, but may be made subject to terms which allow
the issuer to defer dividend payments or distributions for specified periods.
Preferred Stock or other preferred or equity-linked securities may be
convertible or exchangeable into shares of Common Stock.
As indicated, 4,000,000 shares of Preferred Stock have been designated as
Series A Junior Participating Preferred Shares ("Series A Shares") and reserved
for issuance under the Rights Plan.17 Under the Rights Plan, each share of
Common Stock includes one preferred purchase right ("Right"), which entitles its
holder to purchase one-hundredth (1/100) of a Series A Share at a price of $60
per one-hundredth of a share, subject to adjustment. The Rights will become
exercisable if a person or group acquires 25% or more of the voting power of
NiSource or announces a tender or exchange offer following which such person or
group would hold 25% or more of NiSource's voting power. If such an acquisition
were consummated, or if NiSource were acquired by the person or group in a
merger or other business combination, then each Right would be exercisable for
that number of shares of Common Stock or the acquiring company's common shares
having a market value of two times the exercise price of the Right. The Rights
will also become exercisable on or after the date on which the 25% threshold has
been triggered, if NiSource is acquired in a merger or other business
combination in which NiSource is not the survivor or in which NiSource is the
survivor but its Common Stock is changed into or exchanged for securities of
another entity, cash or other property, or 50% or more of the assets or earning
power of NiSource and its subsidiaries is sold. At such time, each Right will
become exercisable for that number of common shares of the acquiring company
having a market value of two times the exercise price of the Right, but the
Rights will not be exercisable in this instance if the person who acquired
sufficient shares to reach the 25% threshold did so at a price and on terms
------------------------
16 Recently, the Commission approved a similar financing application filed
by Southern Company in which Southern Company requested approval to issue
preferred securities and long-term debt, directly or indirectly through
special-purpose financing entities. See The Southern Company, Holding Co. Act
Release No. 27134 (Feb. 9, 2000). In that case, the Commission took account of
the changing needs of registered holding companies for sources of capital other
than common equity and short-term debt brought about primarily by the
elimination of restrictions under the Act on investments in various types of
non-core businesses (e.g., EWGs, FUCOs, ETCs and businesses allowed by Rule 58).
The Commission noted that, without the ability to raise capital in external
markets that is appropriate for such investments, registered holding companies
would be at a competitive disadvantage to other energy companies that are not
subject to regulation under the Act.
17 NiSource's proposed Shareholder Rights Agreement is substantially the
same as the Shareholder Rights Agreement that "old" NiSource currently has in
place. See Exhibit B-3.
13
<PAGE>
determined by the board of directors to be fair to NiSource's shareholders and
in the best interests of NiSource, provided that the price per common share
offered in the merger or other business combination is not less than the price
paid in the offer and the form of the consideration offered in the merger or
other business combination is the same as that paid in the offer. NiSource may
redeem the Rights at a price of $.01 per Right prior to the occurrence of an
event that causes the Rights to be exercisable for Common Stock. The Rights will
expire on March 12, 2010. NiSource requests authorization to issue Preferred
Stock upon exercise of the outstanding Rights without regard to the $12 billion
limit on issuance of Common Stock, Preferred Stock and Long Term Debt.18
Long-term Debt of a particular series (a) may be convertible into any other
securities of NiSource, (b) will have a maturity ranging from one to 50 years,
(c) will bear interest at a rate not to exceed at the time of issuance 500 basis
points over the yield to maturity of a U.S. Treasury security having a remaining
term equal to the term of such Long-term Debt, (d) may be subject to optional
and/or mandatory redemption, in whole or in part, at par or at various premiums
above the principal amount thereof, (e) may be entitled to mandatory or optional
sinking fund provisions, (f) may provide for reset of the coupon pursuant to a
remarketing arrangement, and (g) may be called from existing investors by a
third party. The maturity dates, interest rates, redemption and sinking fund
provisions and conversion features, if any, with respect to the Long-term Debt
of a particular series, as well as any associated placement, underwriting or
selling agent fees, commissions and discounts, if any, will be established by
negotiation or competitive bidding. NiSource commits to maintain a rating for
all Long-term Debt that is at the investment grade level as established by a
nationally recognized statistical rating organization, as that term is used in
paragraphs (c)(2)(vi)(E), (F) and (H) of Rule 15c3-1 under the Securities
Exchange Act of 1934.
(c) Short-term Debt. Subject to the NiSource Debt Limitation,
---------------
NiSource proposes to issue and sell from time to time, directly or indirectly
through one or more Financing Subsidiaries, Short-term Debt in an aggregate
principal amount at any time outstanding not to exceed $2 billion. The effective
cost of money on Short-term Debt authorized in this proceeding will not exceed
at the time of issuance 300 basis points over LIBOR for maturities of 1 year or
less.
Commercial paper will be sold, directly or indirectly through one or more
Financing Subsidiaries, in established domestic or European commercial paper
markets. Such commercial paper would typically be sold to dealers at the
discount rate per annum prevailing at the date of issuance for commercial paper
of comparable quality and maturities sold to commercial paper dealers generally.
It is expected that the dealers acquiring such commercial paper will reoffer it
at a discount to corporate, institutional and, with respect to European
commercial paper, individual investors. It is anticipated that such commercial
paper will be reoffered to investors such as commercial banks, insurance
companies, pension funds, investment trusts, foundations, colleges and
universities, finance companies and nonfinancial corporations.
------------------------
18 The Commission has previously authorized registered holding companies to
adopt and implement similar shareholder rights plans. See e.g., Ameren
Corporation, Holding Co. Act Release No. 26961 (Dec. 29, 1998); Interstate
Energy Corporation, Holding Co. Act Release No. 26965 (Jan. 15, 1999).
14
<PAGE>
NiSource also proposes to establish, directly or indirectly through one or
more Financing Subsidiaries, credit lines with banks or other institutional
lenders. Loans under these lines will have maturities of less than one year from
the date of each borrowing and the amounts outstanding thereunder will not
exceed the proposed Short-term Debt limitation. NiSource may engage in other
types of short-term financing generally available to borrowers with comparable
credit ratings as it may deem appropriate in light of its needs and market
conditions at the time of issuance.
1.7.3 NiSource Utility Subsidiary Financing The issue and sale of
-------------------------------------
most securities by the NiSource Utility Subsidiaries will be exempt from the
preapproval requirements of Sections 6(a) and 7 of the Act pursuant to Rule
52(a), as most such securities must be approved by the public service commission
in the state in which each NiSource Utility Subsidiary is incorporated and
operating. In particular: Indiana Utility Regulatory Commission ("IURC") must
approve all financings by Northern Indiana, Kokomo, and NIFL other than
short-term indebtedness having a maturity of 12 months or less; the
Massachusetts Department of Telecommunications and Energy ("MDTE") must approve
all financings by Bay State other than short-term indebtedness having a maturity
of one year or less; and the New Hampshire Public Utilities Commission ("NHPUC")
must approve most financings by Northern other than short-term indebtedness
having a maturity of one year or less up to a maximum amount equal to 10% of net
plant.
Accordingly, the NiSource Utility Subsidiaries request authority to issue
and sell from time to time during the Authorization Period notes and other
evidences of indebtedness having a maturity of one year or less in an aggregate
principal amount outstanding at any one time not to exceed the following limits:
Northern Indiana - $1 billion; Kokomo - $50 million; NIFL - $50 million; Bay
State - $250 million; and Northern - $50 million. Subject to such limitations,
the NiSource Utility Subsidiaries may engage in short-term financing as they may
deem appropriate in light of their needs and market conditions at the time of
issuance. Such short-term financing could include, without limitation,
commercial paper sold in established domestic or European commercial paper
markets, bank lines and debt securities issued under its indentures and note
programs. The effective cost of money on short-term financing authorized in this
proceeding will not exceed 300 basis points over the LIBOR for maturities of 1
year or less.
1.7.4 Non-Utility Subsidiary Financing. NiSource, through the
--------------------------------
Non-Utility Subsidiaries, expects to continue to be active in the development
and expansion of energy-related or otherwise functionally-related, non-utility
businesses. In order to finance investments in such competitive businesses, it
will be necessary for the Non-Utility Subsidiaries to have the ability to engage
in financing transactions that are commonly accepted for such types of
investments. It is believed that, in almost all cases, financings by the
Non-Utility Subsidiaries (other than Columbia) will be exempt from Commission
authorization pursuant to Rule 52(b).
In order to be exempt under Rule 52(b), any loans by NiSource to a
Non-Utility Subsidiary or by any Non-Utility Subsidiary, including a Financing
Subsidiary, to another Non-Utility Subsidiary must have interest rates and
maturities that are designed to parallel the lending company's effective cost of
capital. However, in the limited circumstances where the Non-Utility Subsidiary
15
<PAGE>
making the borrowing is not wholly owned by NiSource, directly or indirectly,
authority is requested under the Act for NiSource or a Non-Utility Subsidiary,
as the case may be, to make such loans to such subsidiaries at interest rates
and maturities designed to provide a return to the lending company of not less
than its effective cost of capital.19 If such loans are made to a Non-Utility
Subsidiary, such company will not sell any services to any associate Non-Utility
Subsidiary unless such company falls within one of the categories of companies
to which goods and services may be sold on a basis other than "at cost," as
described below in Item 1.13.2. Furthermore, in the event any such loans are
made, NiSource will include in the next certificate filed pursuant to Rule 24 in
this proceeding substantially the same information as that required on Form
U-6B-2 with respect to such transaction.
1.8 GUARANTEES.
----------
1.8.1 NiSource Guarantees. NiSource requests authorization, directly
-------------------
or indirectly through one or more Financing Subsidiaries, to provide guarantees,
obtain letters of credit, enter into capital support, "keep well,"
indemnification, reimbursement or expense agreements, or otherwise provide
credit support (collectively, "NiSource Guarantees") with respect to the debt or
contractual obligations of any Subsidiary as may be appropriate in the ordinary
course of such Subsidiary's business, in an aggregate principal amount not to
exceed $5 billion outstanding at any one time, provided however, that the amount
of any NiSource Guarantees in respect of obligations of any Subsidiaries shall
also be subject to the limitations of Rule 53(a)(1) or Rule 58(a)(1), as
applicable. The proposed limitation on NiSource Guarantees shall not include the
amount of any guarantees or other forms of credit support outstanding at the
time of the Merger or guarantees or other forms of credit support provided with
respect to securities issued by any Financing Subsidiary (the amounts of which
would count only against the proposed limitations on the amounts of debt and
equity securities that NiSource may issue). NiSource proposes to charge each
Subsidiary a fee for each guarantee provided on its behalf that is not greater
than the cost, if any, of obtaining the liquidity necessary to perform the
guarantee (for example, bank line commitment fees or letter of credit fees, plus
other transactional expenses) for the period of time the guarantee remains
outstanding.
1.8.2 Non-Utility Subsidiary Guarantees. In addition to guarantees
---------------------------------
that may be provided by NiSource, Non-Utility Subsidiaries (including Financing
Subsidiaries without credit support from NiSource, but excluding Columbia)
request authority to provide to other Non-Utility Subsidiaries guarantees of
indebtedness or contractual obligations or other forms of credit support
("Non-Utility Subsidiary Guarantees") in an aggregate principal amount not to
exceed $2 billion outstanding at any one time, exclusive of any guarantees and
other forms of credit support that are exempt pursuant to Rule 45(b) and Rule
52(b), provided however, that the amount of Non-Utility Guarantees in respect of
obligations of any Rule 58 Subsidiaries shall remain subject to the limitations
of Rule 58(a)(1). The Non-Utility Subsidiary providing any such credit support
may charge its associate company a fee for each guarantee provided on its behalf
determined in the same manner as specified above.
------------------------
19 The Commission has granted similar authority to another registered
holding company. See Entergy Corporation, et al., Holding Co. Act Release No.
27039 (June 22, 1999).
16
<PAGE>
1.9 HEDGING TRANSACTIONS.
--------------------
1.9.1 Interest Rate Hedges. NiSource, and to the extent not exempt
--------------------
pursuant to Rule 52, the Subsidiaries, request authorization to enter into
interest rate hedging transactions with respect to existing indebtedness
("Interest Rate Hedges"), subject to certain limitations and restrictions, in
order to reduce or manage interest rate cost. Interest Rate Hedges would only be
entered into with counterparties ("Approved Counterparties") whose senior debt
ratings, or the senior debt ratings of the parent companies of the
counterparties, as published by Standard and Poor's Ratings Group, are equal to
or greater than BBB, or an equivalent rating from Moody's Investors Service,
Fitch Investor Service or Duff and Phelps.
Interest Rate Hedges will involve the use of financial instruments commonly
used in today's capital markets, such as interest rate swaps, caps, collars,
floors, and structured notes (i.e., a debt instrument in which the principal
and/or interest payments are indirectly linked to the value of an underlying
asset or index), or transactions involving the purchase or sale, including short
sales, of U.S. Treasury obligations. The transactions would be for fixed periods
and stated notional amounts. In no case will the notional principal amount of
any interest rate swap exceed that of the underlying debt instrument and related
interest rate exposure. NiSource and its Subsidiaries will not engage in
speculative transactions. Fees, commissions and other amounts payable to the
counterparty or exchange (excluding, however, the swap or option payments) in
connection with an Interest Rate Hedge will not exceed those generally
obtainable in competitive markets for parties of comparable credit quality.
1.9.2 Anticipatory Hedges. In addition, NiSource and the Subsidiaries
-------------------
request authorization to enter into interest rate hedging transactions with
respect to anticipated debt offerings (the "Anticipatory Hedges"), subject to
certain limitations and restrictions. Such Anticipatory Hedges would only be
entered into with Approved Counterparties, and would be utilized to fix and/or
limit the interest rate risk associated with any new issuance through (i) a
forward sale of exchange-traded U.S. Treasury futures contracts, U.S. Treasury
obligations and/or a forward swap (each a "Forward Sale"), (ii) the purchase of
put options on U.S. Treasury obligations (a "Put Options Purchase"), (iii) a Put
Options Purchase in combination with the sale of call options on U.S. Treasury
obligations (a "Zero Cost Collar"), (iv) transactions involving the purchase or
sale, including short sales, of U.S. Treasury obligations, or (v) some
combination of a Forward Sale, Put Options Purchase, Zero Cost Collar and/or
other derivative or cash transactions, including, but not limited to structured
notes, caps and collars, appropriate for the Anticipatory Hedges.
Anticipatory Hedges may be executed on-exchange ("On-Exchange Trades") with
brokers through the opening of futures and/or options positions traded on the
Chicago Board of Trade ("CBOT"), the establishment of over-the-counter positions
with one or more counterparties ("Off-Exchange Trades"), or a combination of
On-Exchange Trades and Off-Exchange Trades. NiSource or a Subsidiary will
determine the optimal structure of each Anticipatory Hedge transaction at the
time of execution.
The Applicants represent that each Interest Rate Hedge and Anticipatory
Hedge will qualify for hedge accounting treatment under GAAP. The Applicants
17
<PAGE>
will also comply with the then existing financial disclosure requirements of the
Financial Accounting Standards Board associated with hedging transactions.20
1.10 CHANGES IN CAPITAL STOCK OF SUBSIDIARIES. The portion of an
----------------------------------------
individual Subsidiary's aggregate financing to be effected through the sale of
stock to NiSource or other immediate parent company during the Authorization
Period pursuant to Rule 52 and/or pursuant to an order issued in this proceeding
cannot be ascertained at this time. The proposed sale of capital securities may
in some cases exceed the then authorized capital stock of such Subsidiary. In
addition, the Subsidiary may choose to use capital stock with no par value.
Also, a Subsidiary may wish to engage in a reverse stock split to reduce
franchise taxes or for other corporate purposes. As needed to accommodate such
proposed transactions and to provide for future issuances of securities, the
Applicants request authority to change the terms of any Subsidiary's authorized
capitalization by an amount deemed appropriate by NiSource or other intermediate
parent company, provided that, if a Subsidiary is not wholly owned, all other
required shareholder consents have been obtained for such change. A Subsidiary
would be able to change the par value, or change between par value and no-par
value stock, without additional Commission approval. Any such action by a
Utility Subsidiary would be subject to and would only be taken upon the receipt
of any necessary approvals by the state commission in the state or states where
the Utility Subsidiary is incorporated and doing business.21
1.11 FINANCING SUBSIDIARIES. As indicated, NiSource will issue the
----------------------
Acquisition Debt through NiSource Finance, a direct or indirect special purpose
financing subsidiary. In addition, "old" NiSource currently owns, directly and
indirectly, all of the common equity securities of two other special-purpose
entities (Capital Markets and Capital Trust) formed specifically for the purpose
of financing the activities of "old" NiSource and certain of its Subsidiaries.
These financing subsidiaries will become Subsidiaries of NiSource as a result of
the Merger. In the future, NiSource and the Subsidiaries may find it desirable
to organize and acquire the equity securities of one or more additional
corporations, trusts, partnerships or other entities (hereinafter, together with
NiSource Finance, Capital Markets and Capital Trust, "Financing Subsidiaries")
organized to serve the same purpose. Specifically, Financing Subsidiaries may be
organized to issue long-term debt, short-term debt or equity or equity-linked
securities, including but not limited to monthly income preferred securities,
and would dividend, loan or otherwise transfer the proceeds of such financings
to or as directed by the Financing Subsidiary's parent company, provided,
however, that a Financing Subsidiary of any Utility Subsidiary will dividend,
loan or otherwise transfer the proceeds of any financing only to its parent
Utility Subsidiary. NiSource may, if required, guarantee, provide support for or
enter into expense agreements in respect of the obligations of any Financing
Subsidiary that it organizes. The Subsidiaries may also provide guarantees and
enter into expense agreements, if required, on behalf of any Financing
------------------------
20 The proposed terms and conditions of the Interest Rate Hedges and
Anticipatory Hedges are substantially the same as the Commission has approved in
other cases. See New Century Energies, Inc., et al., Holding Co. Act Release No.
27000 (April 7, 1999); and Ameren Corp., et al., Holding Co. Act Release No.
27053 (July 23, 1999).
21 The Commission has granted similar approvals to other registered holding
companies. See Conectiv, Inc., Holding Co. Act Release No. 26833 (Feb. 26,
1998); and New Century Energies, Inc., Holding Co. Act Release No. 26750 (Aug.
1, 1997).
18
<PAGE>
Subsidiaries that they organize pursuant to Rules 45(b)(7) and 52, as
applicable. The amount of any long-term debt, short-term debt or equity or
equity-linked securities issued by any Financing Subsidiary shall be counted
against any limitation on the amounts of similar types of securities that may be
issued directly by the parent company of a Financing Subsidiary, as set forth in
this Application/Declaration (see Item 1.7, above) or in any other
Application/Declaration that may be filed in the future, to the extent that such
securities are guaranteed by such parent company. In such cases, however, the
guaranty by the parent company would not also be counted against the limitations
on NiSource Guarantees or Subsidiary Guarantees, as the case may be, set forth
in Item 1.8.1 or Item 1.8.2, above.22
1.12 INTERMEDIATE SUBSIDIARIES AND SUBSEQUENT REORGANIZATIONS.
--------------------------------------------------------
NiSource proposes to acquire, directly or indirectly, the securities of one or
more Intermediate Subsidiaries, which would be organized exclusively for the
purpose of acquiring, holding and/or financing the acquisition of the securities
of or other interest in one or more EWGs or FUCOs, Rule 58 Subsidiaries, ETCs or
other non-exempt Non-Utility Subsidiaries (as authorized in this proceeding or
in a separate proceeding), provided that Intermediate Subsidiaries may also
engage in development activities ("Development Activities") and administrative
activities ("Administrative Activities") relating to such subsidiaries.23 To
the extent such transactions are not exempt from the Act or otherwise authorized
or permitted by rule, regulation or order of the Commission issued thereunder,
NiSource requests an exemption under Section 13(b) of the Act for Intermediate
Subsidiaries to provide management, administrative, project development and
operating services to such entities at fair market prices in the specific
circumstances set forth in Item 1.13.2, below.
Development Activities will be limited to due diligence and design review;
market studies; preliminary engineering; site inspection; preparation of bid
proposals, including, in connection therewith, posting of bid bonds; application
for required permits and/or regulatory approvals; acquisition of site options
and options on other necessary rights; negotiation and execution of contractual
commitments with owners of existing facilities, equipment vendors, construction
firms, power purchasers, thermal "hosts," fuel suppliers and other project
contractors; negotiation of financing commitments with lenders and other
third-party investors; and such other preliminary activities as may be required
in connection with the purchase, acquisition, financing or construction of
facilities or the acquisition of securities of or interests in new businesses.
Intermediate Subsidiaries request authority to expend up to $250 million during
the Authorization Period on all such Development Activities. Administrative
Activities will include ongoing personnel, accounting, engineering, legal,
financial, and other support activities necessary to manage NiSource's
investments in Non-Utility Subsidiaries.
------------------------
22 The Commission has previously authorized registered holding companies
and their subsidiaries to create financing subsidiaries, subject to
substantially the same terms and conditions. See New Century Energies, Inc., et
al., Holding Co. Act Release No. 27000 (April 7, 1999); and Ameren Corp., et
al., Holding Co. Act Release No. 27053 (July 23, 1999); and Southern Company,
Holding Co. Act Release No. 27134 (Feb. 9, 2000).
23 The Commission has previously authorized Columbia to organize
intermediate subsidiary companies to acquire and hold various non-utility
subsidiaries. See Columbia Energy Group, et al., Holding Co. Act Release No.
27099 (Nov. 5, 1999).
19
<PAGE>
An Intermediate Subsidiary may be organized, among other things, (1) in
order to facilitate the making of bids or proposals to develop or acquire an
interest in any EWG or FUCO, Rule 58 Subsidiary, ETC or other non-exempt
Non-Utility Subsidiary; (2) after the award of such a bid proposal, in order to
facilitate closing on the purchase or financing of such acquired company; (3) at
any time subsequent to the consummation of an acquisition of an interest in any
such company in order, among other things, to effect an adjustment in the
respective ownership interests in such business held by NiSource and
non-affiliated investors; (4) to facilitate the sale of ownership interests in
one or more acquired non-utility companies; (5) to comply with applicable laws
of foreign jurisdictions limiting or otherwise relating to the ownership of
domestic companies by foreign nationals; (6) as a part of tax planning in order
to limit NiSource's exposure to U.S. and foreign taxes; (7) to further insulate
NiSource and the Utility Subsidiaries from operational or other business risks
that may be associated with investments in non-utility companies; or (8) for
other lawful business purposes.
Investments in Intermediate Subsidiaries may take the form of any
combination of the following: (1) purchases of capital shares, partnership
interests, member interests in limited liability companies, trust certificates
or other forms of equity interests; (2) capital contributions; (3) open account
advances with or without interest; (4) loans; and (5) guarantees issued,
provided or arranged in respect of the securities or other obligations of any
Intermediate Subsidiaries. Funds for any direct or indirect investment in any
Intermediate Subsidiary will be derived from (1) financings authorized in this
proceeding; (2) any appropriate future debt or equity securities issuance
authorization obtained by NiSource from the Commission; and (3) other available
cash resources, including proceeds of securities sales by Non-Utility
Subsidiaries pursuant to Rule 52. To the extent that NiSource provides funds or
guarantees directly or indirectly to an Intermediate Subsidiary that are used
for the purpose of making an investment in any EWG or FUCO or a Rule 58
Subsidiary, the amount of such funds or guarantees will be included in
NiSource's "aggregate investment" in such entities, as calculated in accordance
with Rule 53 or Rule 58, as applicable.
In addition, NiSource also requests approval to consolidate or otherwise
reorganize all or any part of its direct and indirect ownership interests in
Non-Utility Subsidiaries, and the activities and functions related to such
investments. To effect any such consolidation or other reorganization, NiSource
may wish to either contribute the equity securities of one Non-Utility
Subsidiary to another Non-Utility Subsidiary (including a newly formed
Intermediate Subsidiary) or sell (or cause a Non-Utility Subsidiary to sell) the
equity securities or all or part of the assets of one Non-Utility Subsidiary to
another one. To the extent that these transactions are not otherwise exempt
under the Act or Rules thereunder,24 NiSource hereby requests authorization
under the Act to consolidate or otherwise reorganize under one or more direct or
indirect Intermediate Subsidiaries NiSource's ownership interests in existing
and future Non-Utility Subsidiaries.25 Such transactions may take the form of a
------------------------
24 Sections 12(c), 32(g), 33(c)(1) and 34(d) and Rules 43(b), 45(b), 46(a)
and 58, as applicable, may exempt many of the transactions described in this
paragraph.
25 The Commission has granted similar authority to another holding company.
See Entergy Corporation, et al., Holding Co. Act Release No. 27039 (June 22,
1999).
20
<PAGE>
Non-Utility Subsidiary selling, contributing or transferring the equity
securities of a subsidiary or all or part of such subsidiary's assets as a
dividend to an Intermediate Subsidiary or to another Non-Utility Subsidiary, and
the acquisition, directly or indirectly, of the equity securities or assets of
such subsidiary, either by purchase or by receipt of a dividend. The purchasing
Non-Utility Subsidiary in any transaction structured as an intrasystem sale of
equity securities or assets may execute and deliver its promissory note
evidencing all or a portion of the consideration given. Each transaction would
be carried out in compliance with all applicable U.S or foreign laws and
accounting requirements, and any transaction structured as a sale would be
carried out for a consideration equal to the book value of the equity securities
being sold.26
1.13 SALES OF SERVICES AND GOODS AMONG SUBSIDIARIES.
----------------------------------------------
1.13.1. Continuation of Certain Existing Arrangements between NiSource
--------------------------------------------------------------
Subsidiaries. Certain Subsidiaries of NiSource provide a variety of services to
------------
other NiSource Subsidiaries, and, in at least one case, a Columbia subsidiary,
under a variety of existing agreements. These agreements, described as follows,
do not appear to fall within any statutory or administrative exemption and are
not cost based:
SM&P Utility Resources ("SM&P"), which provides underground facilities
locating services for utilities throughout the United States, has agreements
with Northern Indiana and NIFL under which it provides these services using
fixed hourly labor rates that are comparable to those that SM&P charges under
contracts with nonassociate companies. Currently, SM&P's work for these
Subsidiaries accounts for less than 10% of its total revenues, the balance of
which is derived from nonassociate customers. SM&P will continue to compete for
this business with other companies providing similar services to NiSource
companies.
Miller Pipeline Corp. ("Miller"), which installs, repairs and maintains
underground pipelines used for gas and water transmission and distribution
systems, provides these services to Indianapolis Water Company, Northern
Indiana, NIFL, Kokomo, and Columbia Ohio, as well as to nonassociate companies.
Under the agreements, Miller uses standard labor and equipment charges that are
comparable to those charged to nonassociate customers. Currently, Miller's work
for these Subsidiaries accounts for less than 40% of its total revenues, the
balance of which is derived from nonassociate customers. Miller will continue to
compete for this business with other companies providing similar services to
NiSource companies.
After the Merger, it is contemplated that both SM&P and Miller will
continue to provide the services described above to associate companies on
competitive terms under these existing agreements or new agreements that may be
entered into from time to time. The cost of services provided to any associate
company by SM&P and Miller will in all cases be comparable to the costs charged
to unaffiliated third parties.
------------------------
26 The Commission has authorized other registered holding companies to
carry out future reorganizations of their non-utility businesses without further
approval. See Columbia Energy Group, Inc., Holding Co. Act Release No. 27099
(Nov. 5, 1999).
21
<PAGE>
Bay State provides repair and installation services to EnergyUSA for
propane equipment sold by EnergyUSA under an agreement entered into in December
1999. Bay State also supplies or procures necessary materials. Under the
agreement, Bay State charges a flat response fee and standard hourly labor
rates.
To the extent needed, NiSource requests an exemption pursuant to Section
13(b) of the Act in order that all of the contractual arrangements described in
this section may remain in place through November 1, 2001. During that period,
NiSource will assess the need to maintain these arrangements in place and will
either discontinue them or address, in a separate application, the justification
for continuing them on a permanent basis.27
1.13.2. Sales and Service Contracts Among Non-Utility Subsidiaries. In
----------------------------------------------------------
the limited circumstances set forth below, NiSource's Non-Utility Subsidiaries
(other than Columbia) propose to provide services and sell goods to each other
at fair market prices determined without regard to cost, and therefore request
an exemption (to the extent that Rule 90(d) does not apply) pursuant to Section
13(b) from the cost standards of Rules 90 and 91 as applicable to such
transactions, in any case in which the Non-Utility Subsidiary purchasing such
goods or services is:
(i) A FUCO or foreign EWG that derives no part of its income, directly
or indirectly, from the generation, transmission, or distribution of electric
energy for sale within the United States;
(ii) An EWG that sells electricity at market-based rates that have been
approved by the Federal Energy Regulatory Commission ("FERC"), provided that the
purchaser is not Northern Indiana;
(iii) A "qualifying facility" ("QF") within the meaning of the Public
Utility Regulatory Policies Act of 1978, as amended ("PURPA") that sells
electricity exclusively (a) at rates negotiated at arms-length to one or more
industrial or commercial customers purchasing such electricity for their own use
and not for resale, and/or (ii) to an electric utility company (other than
Northern Indiana) at the purchaser's "avoided cost" as determined in accordance
with the regulations under PURPA;
(iv) A domestic EWG or QF that sells electricity at rates based upon its
cost of service, as approved by FERC or any state public utility commission
having jurisdiction, provided that the purchaser thereof is not Northern
Indiana; or
(v) A Rule 58 Subsidiary or any other Non-Utility Subsidiary that (a) is
partially-owned by NiSource, provided that the ultimate purchaser of such goods
or services is not a Utility Subsidiary, NiSource Services (or any other entity
within the NiSource system whose activities and operations are primarily related
to the provision of goods and services to the Utility Subsidiaries), (b) is
------------------------
27 The Commission recently granted similar interim relief under Section
13(a) to another new registered holding company. See Dominion Resources, Inc.,
Holding Co. Act Release No. 27113 (Dec. 15, 1999).
22
<PAGE>
engaged solely in the business of developing, owning, operating and/or providing
services or goods to Non-Utility Subsidiaries described in clauses (i) through
(iv) immediately above, or (c) does not derive, directly or indirectly, any
material part of its income from sources within the United States and is not a
public-utility company operating within the United States.28
1.14 ACTIVITIES OF ENERGY-RELATED SUBSIDIARIES OUTSIDE THE UNITED STATES.
-------------------------------------------------------------------
NiSource, on behalf of any current or future Non-Utility Subsidiaries (other
than Columbia), requests authority for such Non-Utility Subsidiaries to engage
in certain "energy-related" activities outside the United States. Such
activities may include:
(i) the brokering and marketing of electricity, natural gas and other
energy commodities ("Energy Marketing");
(ii) energy management services ("Energy Management Services"), including
the marketing, sale, installation, operation and maintenance of various
products and services related to energy management and demand-side
management, including energy and efficiency audits; facility design and
process control and enhancements; construction, installation, testing,
sales and maintenance of (and training client personnel to operate) energy
conservation equipment; design, implementation, monitoring and evaluation
of energy conservation programs; development and review of architectural,
structural and engineering drawings for energy efficiencies, design and
specification of energy consuming equipment; and general advice on
programs; the design, construction, installation, testing, sales and
maintenance of new and retrofit heating, ventilating, and air conditioning
("HVAC"), electrical and power systems, alarm and warning systems, motors,
pumps, lighting, water, water-purification and plumbing systems, and
related structures, in connection with energy-related needs; and the
provision of services and products designed to prevent, control, or
mitigate adverse effects of power disturbances on a customer's electrical
systems; and
(iii) engineering, consulting and other technical support services
("Consulting Services") with respect to energy-related businesses, as well
as for individuals. Such Consulting Services would include technology
assessments, power factor correction and harmonics mitigation analysis,
meter reading and repair, rate schedule design and analysis, environmental
services, engineering services, billing services (including consolidation
billing and bill disaggregation tools), risk management services,
communications systems, information systems/data processing, system
planning, strategic planning, finance, feasibility studies, and other
similar services.
------------------------
28 The five circumstances in which market based pricing would be allowed
are substantially the same as those approved by the Commission in other cases.
See Entergy Corporation, et al., Holding Co. Act Release No. 27039 (June 22,
1999); Ameren Corp., et al., Holding Co. Act Release No. 27053 (July 23, 1999);
and Interstate Energy Corporation, Holding Co. Act Release No. 27069 (August 26,
1999).
23
<PAGE>
NiSource requests that the Commission (i) authorize Non-Utility
Subsidiaries (other than Columbia) to engage in Energy Marketing activities in
Canada and reserve jurisdiction over Energy Marketing activities outside of
Canada pending completion of the record in this proceeding,29 (ii) authorize
Non-Utility Subsidiaries (other than Columbia) to provide Energy Management
Services and Consulting Services anywhere outside the United States,30 and
(iii) reserve jurisdiction over other activities of Non-Utility Subsidiaries
(other than Columbia) outside the United States, pending completion of the
record.
In addition, NiSource requests authorization for Non-Utility Subsidiaries
(other than Columbia) to engage in "gas-related" activities outside the United
States, subject to certain proposed limitations and a request for reservation of
jurisdiction. Specifically, NiSource requests approval for Non-Utility
Subsidiaries (other than Columbia) to engage in the development, exploration and
production of natural gas and oil in Canada and to invest up to $300 million in
the equity securities or assets of new or existing companies that derive
substantially all of their income from such activities. In addition, NiSource
requests approval for Non-Utility Subsidiaries (other than Columbia) to invest,
directly or indirectly through other subsidiaries, in natural gas pipelines or
storage facilities located outside the United States. Investments in such
entities would also count against the $300 million investment limitation.
NiSource requests that the Commission (i) reserve jurisdiction over the proposed
exploration and production activities in foreign countries other than Canada
pending completion of the record,31 and (ii) reserve jurisdiction over
investments in pipeline and storage facilities outside the United States pending
completion of the record.
1.15 PAYMENT OF DIVIDENDS OUT OF CAPITAL AND UNEARNED SURPLUS.
--------------------------------------------------------
1.15.1 PAYMENT OF DIVIDENDS BY COLUMBIA.
--------------------------------
As indicated, Columbia has announced its intention to sell certain non-core
assets or businesses either before or after the Merger. In the event that such
sales take place, Section 12(c) and Rules 26(c) and 46 could limit Columbia's
ability to distribute the cash proceeds from such sales to NiSource as a
dividend. This would occur if the amount of proceeds from such sales were to
exceed Columbia's retained earnings at the time of the distribution. Likewise,
the exemption under Rule 42 would not apply to any use of such proceeds by
Columbia to acquire shares of its common stock that are held by NiSource.
------------------------
29 See Southern Energy, Inc., Holding Co. Act Rel. No. 27020 (May 13, 1999)
(supplemental order amending prior order to permit registered holding company
subsidiary to engage in power and gas marketing activities in Canada and
reserving jurisdiction over such activities outside the United States and
Canada); Interstate Energy Corporation, Holding Co. Act Release No. 27069
(August 26, 1999). See too, National Fuel Gas Company, et al., Holding Co. Act
Release No. 27114 (Dec. 16, 1999).
30 The Commission has heretofore authorized non-utility subsidiaries of a
registered holding company to sell similarly-defined energy management services
and technical consulting services to customers outside the United States. See
Columbia Energy Group, et al., Holding Co. Act Release No. 26498 (March 25,
1996); and Cinergy Corp., Holding Co. Act Release No. 26662 (February 7, 1997);
and Interstate Energy Corporation, Holding Co. Act Release No. 27069 (August 26,
1999).
31 The Commission has heretofore authorized similar programs of investing
in development, exploration and production activities in Canada. See National
Fuel Gas Company, et al., Holding Co. Act Release No. 27114 (Dec. 16, 1999); and
Columbia Energy Group, et al., Holding Co. Act Release No. 27055 (July 30,
1999).
24
<PAGE>
Accordingly, Applicants request authority for Columbia to transfer some or all
of the net proceeds of any sale or sales of the securities or assets of
Non-Utility Subsidiaries to NiSource, either by paying a dividend or by
repurchasing shares of its common stock that are held by NiSource.32 NiSource
intends to use some or all of the proceeds of such non-core asset sales to repay
Acquisition Debt. Columbia will not pay any dividend to NiSource or repurchase
shares of its common stock from NiSource if, as a result thereof, common equity
as a percentage of its capitalization would be less than 30% on a consolidated
basis.
1.15.2 PAYMENT OF DIVIDENDS BY NON-UTILITY SUBSIDIARIES .
-------------------------------------------------
NiSource also proposes, on behalf of each of its current and future
Non-Utility Subsidiaries that such companies be permitted to pay dividends with
respect to the securities of such companies, from time to time through the
Authorization Period, out of capital and unearned surplus (including revaluation
reserve), to the extent permitted under applicable corporate law.33
NiSource anticipates that there will be situations in which a Non-Utility
Subsidiary will have unrestricted cash available for distribution in excess of
such company's current and retained earnings. In such situations, the
declaration and payment of a dividend would have to be charged, in whole or in
part, to capital or unearned surplus. As an example, if an Intermediate
Subsidiary of NiSource were to purchase all of the stock of an EWG or FUCO, and
following such acquisition, the EWG or FUCO incurs non-recourse borrowings some
or all of the proceeds of which are distributed to the Intermediate Subsidiary
as a reduction in the amount invested in the EWG or FUCO (i.e., return of
capital), the Intermediate Subsidiary (assuming it has no earnings) could not,
without the Commission's approval, in turn distribute such cash to NiSource or
its other parent.34
Similarly, using the same example, if an Intermediate Subsidiary, following
its acquisition of all of the stock of an EWG or FUCO, were to sell part of that
stock to a third party for cash, the Intermediate Subsidiary would again have
substantial unrestricted cash available for distribution, but (assuming no
profit on the sale of the stock) would not have current earnings and therefore
could not, without the Commission's approval, declare and pay a dividend to its
parent out of such cash proceeds.
------------------------
32 The Commission has previously authorized the payment of dividends out of
capital and unearned surplus in an amount equal to the net proceeds of sales of
assets. See e.g., Northeast Utilities, et al., Holding Co. Act Release No. 27147
(Mar. 7, 2000).
33 The Commission has granted similar approvals to other registered holding
companies. See Entergy Corporation, et al., Holding Co. Act Release No. 27039
(June 22, 1999); and Interstate Energy Corporation, et al., Holding Co. Act
Release No. 27069 (August 26, 1999).
34 The same problem would arise where an Intermediate Subsidiary is
over-capitalized in anticipation of a bid which is ultimately unsuccessful. In
such a case, NiSource would normally desire a return of some or all of the funds
invested.
25
<PAGE>
Further, there may be periods during which unrestricted cash available for
distribution by a Non-Utility Subsidiary exceeds current and retained earnings
due to the difference between accelerated depreciation allowed for tax purposes,
which may generate significant amounts of distributable cash, and depreciation
methods required to be used in determining book income.
Finally, even under circumstances in which a Non-Utility Subsidiary has
sufficient earnings, and therefore may declare and pay a dividend to its
immediate parent, such immediate parent may have negative retained earnings,
even after receipt of the dividend, due to losses from other operations. In this
instance, cash would be trapped at a subsidiary level where there is no current
need for it.
NiSource, on behalf of each current and future non-exempt Non-Utility
Subsidiary, represents that it will not declare or pay any dividend out of
capital or unearned surplus in contravention of any law restricting the payment
of dividends. In this regard, it should be noted that all U.S. jurisdictions
limit to one extent or another the authority of corporations to make dividend
distributions to shareholders. Most State corporation statutes contain either or
both an equity insolvency test or some type of balance sheet test. NiSource also
states that its subsidiaries will comply with the terms of any credit agreements
and indentures that restrict the amount and timing of distributions to
shareholders.
1.16 TAX ALLOCATION AGREEMENT. The Applicants ask the Commission to approve
------------------------
an agreement for the allocation of consolidated tax among NiSource and the
Subsidiaries (the "Tax Allocation Agreement"). Approval is necessary because the
Tax Allocation Agreement provides for the retention by NiSource of certain
payments from the Subsidiaries for tax losses that NiSource will incur due to
interest expense it will pay on the Acquisition Debt, rather than the allocation
of such losses to Subsidiaries without payment as would otherwise be required by
Rule 45(c)(5). A copy of the proposed Tax Allocation Agreement will be filed by
post-effective amendment as Exhibit B-4 hereto.
Provisions in a tax allocation agreement between a registered holding
company and its subsidiaries must comply with Section 12 of the Act and Rule 45
thereunder. Rule 45(a) of the Act generally prohibits any registered holding
company or subsidiary company from, directly or indirectly, lending or in any
manner extending its credit to or indemnifying, or making any donation or
capital contribution to, any company in the same holding company system, except
pursuant to a Commission order. Rule 45(c) provides, however, that no approval
is required for a tax allocation agreement between eligible associate companies
in a registered holding company system that "provides for allocation among such
associate companies of the liabilities and benefits arising from such
consolidated tax return for each tax year in a manner not inconsistent with" the
conditions of the rule. Of interest here, Rule 45(c)(5) provides that:
The agreement may, instead of excluding members as provided in paragraph
(c)(4), include all members of the group in the tax allocation, recognizing
negative corporate taxable income or a negative corporate tax, according to
the allocation method chosen. An agreement under this paragraph shall
provide that those associate companies with a positive allocation will pay
-------------------
the amount allocated and those subsidiary companies with a negative
--------------------
allocation will receive current payment of their corporate tax credits. The
26
<PAGE>
agreement shall provide a method for apportioning such payments, and for
carrying over uncompensated benefits, if the consolidated loss is too large
to be used in full. Such method may assign priorities to specified kinds of
benefits. (Emphasis added).
Under the rule, only "subsidiary companies," as opposed to "associate
companies" (which includes the holding company in a holding company system), are
entitled to be paid for corporate tax credits. However, if a tax allocation
agreement does not fully comply with the provisions of Rule 45(c), it may
nonetheless be approved by the Commission under Section 12(b) and Rule 45(a).
In connection with the 1981 amendments to Rule 45, the Commission explained
that the distinction between "associate companies," on the one hand, and
"subsidiary companies," on the other, represented a policy decision to preclude
the holding company from sharing in consolidated return savings. The Commission
noted that exploitation of utility companies by holding companies through the
misallocation of consolidated tax return benefits was among the abuses examined
in the investigations underlying the enactment of the Act.35 It must be noted,
however, that the result in Rule 45(c)(5) is not dictated by the statute and, as
the Commission has recognized, there is discretion on the part of the agency to
approve tax allocation agreements that do not, by their terms, comply with Rule
45(c) -- so long as the policies and provisions of the Act are otherwise
satisfied. In this matter, where the holding company is seeking only to receive
payment for tax losses that have been generated by it, the proposed arrangement
will not give rise to the types of problems (e.g., upstream loans) that the Act
was intended to address.36
As a result of the Merger, NiSource will be creating tax losses (chiefly in
the form of deductions for interest expense relating to the Acquisition Debt)
that are non-recourse to the Subsidiaries. Under the proposed Tax Allocation
Agreement, NiSource would receive the benefit of those losses through cash
payments from Subsidiaries with positive taxable income. NiSource requests that
the Commission reserve jurisdiction over this proposal pending completion of the
record.
1.17 CERTIFICATES OF NOTIFICATION. NiSource proposes to file certificates
----------------------------
of notification pursuant to Rule 24 that report each of the transactions carried
out in accordance with the terms and conditions of and for the purposes
represented in this Application/Declaration. Such certificates of notification
would be filed within 60 days after the end of each of the first three calendar
quarters, and 90 days after the end of the last calendar quarter, in which
transactions occur, commencing with the report for the fourth quarter of 2000.
The Rule 24 certificates will contain the following information for the
reporting period:
(a) The sales of any Common Stock and the purchase price per share and
the market price per share at the date of the agreement of sale;
------------------------
35 See Holding Co. Act Release No. 21968 (March 25, 1981), citing Sen. Doc.
92, Part 72A, 70th Congress, 1st Sess. at 477-482.
36 See e.g., Section 12(a) of the Act.
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(b) The total number of shares of Common Stock issued or issuable
under options granted during the quarter under NiSource's benefit plans or
otherwise;
(c) If Common Stock has been transferred to a seller of securities of
a company being acquired, the number of shares so issued, the value per
share and whether the shares are restricted to the acquiror;
(d) The amount and terms of any Long-term Debt, Preferred Stock or
other preferred or equity-linked securities, or Short-term Debt issued
directly or indirectly by NiSource during the quarter;
(e) The amount and terms of any Short-term Debt issued directly or
indirectly by any NiSource Utility Subsidiary during the quarter;
(f) The amount and terms of any financings consummated by any
Non-Utility Subsidiary during the quarter that are not exempt under Rule
52;
(g) The name of the guarantor and of the beneficiary of any NiSource
Guarantee or Non-Utility Subsidiary Guarantee issued during the quarter,
and the amount, terms and purpose of the guarantee;
(h) The notional amount and principal terms of any Interest Rate Hedge
or Anticipatory Hedge entered into during the quarter and the identity of
the parties to such instruments;
(i) The name, parent company, and amount invested in any new
Intermediate Subsidiary or Financing Subsidiary during the quarter;
(j) A list of Form U-6B-2 statements filed with the Commission during
the quarter, including the name of the filing entity and the date of the
filing; and
(k) Consolidated balance sheets as of the end of the quarter, and
separate balance sheets as of the end of the quarter for each company,
including NiSource, that has engaged in financing transactions during the
quarter.
ITEM 2. FEES, COMMISSIONS AND EXPENSES.
------------------------------
The fees, commissions and expenses incurred or to be incurred in connection
with the preparation and filing of this Application/Declaration and certain of
the Exhibits filed herewith are estimated not to exceed $100,000. The above fees
do not include underwriting fees and all other expenses incurred in consummating
specific financings, credit support arrangements, asset transfers, or other
transactions covered hereby. The fees and expenses incurred in connection with
specific financings will not exceed 5% of the proceeds thereof.
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ITEM 3. APPLICABLE STATUTORY PROVISIONS.
-------------------------------
3.1 GENERAL. Sections 6(a) and 7 of the Act are applicable to the issuance
-------
and sale of Common Stock, Preferred Stock, Long-term Debt and Short-term Debt by
NiSource and to the issuance and sale of securities by the Utility Subsidiaries
and Non-Utility Subsidiaries that are not exempt under Rule 52. In addition,
Sections 6(a) and 7 of the Act are applicable to Interest Rate Hedges, except to
the extent that they may be exempt under Rule 52, and to Anticipatory Hedges.
Section 12(b) of the Act and Rule 45(a) are applicable to the issuance of
NiSource Guarantees and to Non-Utility Subsidiary Guarantees, to the extent not
exempt under Rules 45(b) and 52. Sections 9(a)(1) and 10 of the Act are also
applicable to NiSource's or any Non-Utility Subsidiary's acquisition of the
equity securities of any Financing Subsidiary or Intermediate Subsidiary, and
the energy-related activities of Non-Utility Subsidiaries outside the United
States. Section 12(c) of the Act and Rules 26(c) and 46 are applicable to the
payment of dividends from capital and unearned surplus by Columbia and the
Non-Utility Subsidiaries. Section 13(b) applies to NiSource's request for an
exemption to allow certain of Subsidiaries to render services to other
Subsidiaries at prices other than cost for a limited time. In addition, Section
13(b) of the Act and Rules 80 - 92 are generally applicable to the performance
of services and sale of goods among Non-Utility Subsidiaries, but may be exempt
from the requirements thereof in some cases pursuant to Rules 87(b)(1), 90(d)
and 92, as applicable. Section 12(b) of the Act and Rule 45(c) are applicable to
the proposed Tax Allocation Agreement.
3.2 COMPLIANCE WITH RULES 53 AND 54. The transactions proposed herein are
-------------------------------
also subject to Rules 53 and 54. Under Rule 53(a), the Commission shall not make
certain specified findings under Sections 7 and 12 in connection with a proposal
by a holding company to issue securities for the purpose of acquiring the
securities of or other interest in an EWG, or to guarantee the securities of an
EWG, if each of the conditions in paragraphs (a)(1) through (a)(4) thereof are
met, provided that none of the conditions specified in paragraphs (b)(1) through
(b)(3) of Rule 53 exists. Rule 54 provides that the Commission shall not
consider the effect of the capitalization or earnings of subsidiaries of a
registered holding company that are EWGs or FUCOs in determining whether to
approve other transactions if Rule 53(a), (b) and (c) are satisfied. These
standards are met.
Rule 53(a)(1): The combined "aggregate investment" of NiSource and Columbia
in EWGs and FUCOs is approximately $7.52 million, or approximately 1% of
NiSource's pro forma "consolidated retained earnings" at December 31, 1999
($774.4 million).
Rule 53(a)(2): NiSource will maintain books and records enabling it to
identify investments in and earnings from each EWG and FUCO in which it directly
or indirectly acquires and holds an interest. NiSource will cause each domestic
EWG in which it acquires and holds an interest, and each foreign EWG and FUCO
that is a majority-owned subsidiary, to maintain its books and records and
prepare its financial statements in conformity with U.S. generally accepted
accounting principles ("GAAP"). All of such books and records and financial
statements will be made available to the Commission, in English, upon request.
29
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Rule 53(a)(3): No more than 2% of the employees of the Utility Subsidiaries
will, at any one time, directly or indirectly, render services to EWGs and
FUCOs.
Rule 53(a)(4): NiSource will submit a copy of the Application/Declaration
in this proceeding and each amendment thereto, and will submit copies of any
Rule 24 certificates required hereunder, as well as a copy of NiSource's Form
U5S, to each of the public service commissions having jurisdiction over the
retail rates of the Utility Subsidiaries.
In addition, NiSource states that the provisions of Rule 53(a) are not made
inapplicable to the authorization herein requested by reason of the occurrence
or continuance of any of the circumstances specified in Rule 53(b). Rule 53(c)
is inapplicable by its terms.
ITEM 4. REGULATORY APPROVAL.
-------------------
As described in Item 1.7, the IURC, MDTE and NHPUC generally have
jurisdiction over the issuance of securities by public utilities that are
subject to their jurisdiction. No state commission, and no federal commission,
other than the Commission, has jurisdiction over any of the other transactions
proposed in this Application/Declaration.
ITEM 5. PROCEDURE.
---------
The Commission has published a notice under Rule 23 with respect to the
filing of this Application/Declaration, and the notice period has expired. The
Applicants request that the Commission's order be issued as soon as the rules
allow, and that there should not be a 30-day waiting period between issuance of
the Commission's order and the date on which the order is to become effective.
The Applicants hereby waive a recommended decision by a hearing officer or any
other responsible officer of the Commission and consent that the Division of
Investment Management may assist in the preparation of the Commission's decision
and/or order, unless the Division opposes the matters proposed herein.
ITEM 6. EXHIBITS AND FINANCIAL STATEMENTS.
---------------------------------
A. EXHIBITS.
--------
A-1 Form of Amended and Restated Certificate of Incorporation of New
NiSource (incorporated by reference to Exhibit 3.3 to
Registration Statement on Form S-4 of New NiSource in File No.
333-33896).
A-2 Form of Amended and Restated By-Laws of New NiSource
(incorporated by reference to Exhibit 3.4 to Registration
Statement on Form S-4 of New NiSource in File No. 333-33896).
A-3 Amended and Restated Articles of Incorporation of "old" NiSource
dated as of May 13, 1998, as amended on April 14, 1999 and March
2, 2000 (incorporated by reference to Exhibit 3 to "old"
NiSource's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1998, and Exhibits 3.2 and 3.3 to "old" NiSource's
30
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Annual Report on Form 10-K for the year ended December 31, 1999
in File No. 1-9776).
A-4 Amended and Restated By-Laws of "old" NiSource effective January
29, 2000 (incorporated by reference to Exhibit 3.4 to "old"
NiSource's Annual Report on Form 10-K for the year ended December
31, 1999 in File No. 1-9776).
B-1 "Old" NiSource Support Agreement, as amended (incorporated by
reference to Exhibit 4.2 to the Registration Statement on Form
S-3 of NIPSCO Industries, Inc. in File No. 33-54516).
B-2 Form of Shareholder Rights Agreement between New NiSource and
Chase Mellon Shareholder Services, L.L.C., as rights agent
(incorporated by reference to Exhibit 4.2 to Registration
Statement on Form S-4 of New NiSource in File No. 333-33896).
B-3 Shareholder Rights Agreement between "old" NiSource and Harris
Trust and Savings Bank, as rights agent, dated February 17, 2000
(incorporated by reference to Exhibit 4.1 to Form 8-A, dated
February 24, 2000, of "old" NiSource in File No. 1-9776).
B-4 Form of Tax Allocation Agreement (to be filed by post-effective
amendment).
F Opinion of Counsel (filed herewith).
H Proposed Form of Federal Register Notice (previously filed).
I-1 Deleted.
I-2 Deleted.
J-1 Long-Term Incentive Plan, as amended and restated effective
January 1, 2000 (incorporated by reference to Annex IV to
Registration Statement on Form S-4 of New NiSource in File No.
333-33896).
J-2 Nonemployee Director Stock Incentive Plan, as amended and
restated effective February 1, 1998 (incorporated by reference to
exhibit 10.3 to NIPSCO Industries' Annual Report on Form 10-K for
the year ended December 31, 1998 in File No. 1-9776).
J-3 Employee Stock Purchase Plan prospectus, dated May 1, 1999 (filed
herewith).
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B. FINANCIAL STATEMENTS.
--------------------
FS-1 "Old" NiSource Consolidated See Annual Report of "old"
Statements of Income for last NiSource on Form 10-K for the
three fiscal years ended December year ended December 31,
31, 1999 1999 in File No. 1-9776
FS-2 "Old" NiSource Consolidated See Annual Report of "old"
Balance Sheets as of December 31, NiSource Form 10-K for the
1999 year ended December 31, 1999
in File No. 1-9776
FS-3 "Old" NiSource Consolidated See Quarterly Report of "old"
Statement of Income for the six NiSource on Form 10-Q for the
months ended June 30, 2000 period ended June 30, 2000 in
File No. 1-9776
FS-4 "Old" NiSource Consolidated See Quarterly Report of "old"
Balance Sheet as of June 30, 2000 NiSource Form 10-Q for the
period ended June 30, 2000 in
File No. 1-9776
FS-5 Columbia Consolidated Statements See Annual Report of Columbia
of Income for the last three on Form 10-K for the fiscal
fiscal years ended December 31, year ended December 31, 1999
1999 in File No. 1-1098
FS-6 Columbia Consolidated Balance See Annual Report of Columbia
Sheet as of December 31, 1999 on Form 10-K for the fiscal
year ended December 31, 1999
in File No. 1-1098
FS-7 Columbia Consolidated Statement See Quarterly Report of
of Income for the six months ended Columbia on Form 10-Q for the
June 30, 2000 period ended June 30, 2000 in
File No. 1-1098
FS-8 Columbia Consolidated Balance See Quarterly Report of
Sheet as of June 30, 2000 Columbia on Form 10-Q for the
period ended June 30, 2000 in
File No. 1-1098
32
<PAGE>
ITEM 7. INFORMATION AS TO ENVIRONMENTAL EFFECTS.
---------------------------------------
None of the matters that are the subject of this Application/Declaration
involves a "major federal action" nor do such matters "significantly affect the
quality of the human environment" as those terms are used in section 102(2)(C)
of the National Environmental Policy Act. The transactions that are the subject
of this Application/Declaration will not result in changes in the operation of
the Applicants that will have an impact on the environment. The Applicants are
not aware of any federal agency that has prepared or is preparing an
environmental impact statement with respect to the transactions that are the
subject of this Application/Declaration.
33
<PAGE>
SIGNATURES
Pursuant to the requirements of the Public Utility Holding Company Act of
1935, each of the undersigned companies has duly caused this
Application/Declaration, as amended, to be signed on its behalf by the
undersigned thereunto duly authorized.
NEW NISOURCE INC.
NISOURCE INC.
NORTHERN INDIANA PUBLIC SERVICE COMPANY
ENERGYUSA, INC.
NISOURCE CAPITAL MARKETS, INC.
NISOURCE FINANCE CORP.
NISOURCE DEVELOPMENT COMPANY, INC.
NI ENERGY SERVICES, INC.
HAMILTON HARBOUR INSURANCE SERVICES, LTD.
NISOURCE CORPORATE SERVICES COMPANY
/s/ Gary L. Neale
------------------------------------
Name: Gary L. Neale
Title: President of New NiSource Inc.;
Chairman, Chief Executive Officer
and President of NiSource Inc;
Chairman and Chief Executive
Officer of Northern Indiana Public
Service Company; Chairman and
President of NiSource Finance
Corp.; and Chairman of EnergyUSA,
Inc., NiSource Capital Markets,
Inc., NiSource Development
Company, Inc., NI Energy Services,
Inc., Hamilton Harbour Insurance
Services, LTD., and NiSource
Corporate Services Company
KOKOMO GAS AND FUEL COMPANY
NORTHERN INDIANA FUEL AND LIGHT COMPANY
BAY STATE GAS COMPANY
NORTHERN UTILITIES, INC.
/s/ Jeffrey W. Yundt
------------------------------------
Name: Jeffrey W. Yundt
Title: Chairman of Kokomo Gas and Fuel
Company and Northern Indiana Fuel
and Light Company; Chief Executive
Officer and President of Bay State
Gas Company; Chairman, Chief
Executive Officer and President of
Northern Utilities, Inc.
34
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PRIMARY ENERGY, INC.
/s/ Joseph L. Turner, Jr.
------------------------------------
Name: Joseph L. Turner, Jr.
Title: President
NISOURCE PIPELINE GROUP, INC.
/s/ Daniel D. Gavito
------------------------------------
Name: Daniel D. Gavito
Title: President
IWC RESOURCES CORPORATION
/s/ James T. Morris
------------------------------------
Name: James T. Morris
Title: Chairman, Chief Executive Officer
and President
MILLER PIPELINE CORPORATION
/s/ Dale R. Miller
------------------------------------
Name: Dale R. Miller
Title: Chief Executive Officer
SM&P UTILITY RESOURCES, INC.
/s/ Michael B. Stayton
------------------------------------
Name: Michael B. Stayton
Title: President
35
<PAGE>
COLUMBIA ENERGY GROUP
/s/ M. W. O'Donnell
------------------------------------
Name: M. W. O'Donnell
Title: Senior Vice President
and Chief Financial Officer
COLUMBIA GAS OF KENTUCKY, INC.
COLUMBIA GAS OF OHIO, INC.
COLUMBIA GAS OF MARYLAND, INC.
COLUMBIA GAS OF PENNSYLVANIA, INC.
COLUMBIA GAS OF VIRGINIA, INC.
COLUMBIA NETWORK SERVICES CORPORATION
COLUMBIA PROPANE CORPORATION
COLUMBIA ENERGY GROUP SERVICE CORPORATION
COLUMBIA ATLANTIC TRADING CORPORATION
COLUMBIA ENERGY GROUP CAPITAL CORPORATION
COLUMBIA ELECTRIC CORPORATION
COLUMBIA PIPELINE CORPORATION
COLUMBIA FINANCE CORPORATION
COLUMBIA TRANSMISSION COMMUNICATIONS
CORPORATION
COLUMBIA ENERGY RESOURCES, INC.
COLUMBIA INSURANCE CORPORATION, LTD.
/s/ R. L. Dennis
------------------------------------
Name: R. L. Dennis
Title: Vice President
COLUMBIA GULF TRANSMISSION COMPANY
COLUMBIA GAS TRANSMISSION CORPORATION
COLUMBIA LNG CORPORATION
/s/ M. E. Bockelmann
------------------------------------
Name: M. E. Bockelmann
Title: Vice President
Date: November 1, 2000
36
