As filed with the Securities and Exchange Commission on June 17, 1994.
File No. 70-08470
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 1
TO
FORM U-1
APPLICATION/DECLARATION
UNDER
THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
SOUTHERN INDIANA GAS AND ELECTRIC COMPANY
20 N.W. Fourth Street
Evansville, Indiana 47741-0001
- ----------------------------------------------------------------------------
(Name of company filing this statement and address
of principal executive office)
SOUTHERN INDIANA GAS AND ELECTRIC COMPANY
- ----------------------------------------------------------------------------
(Name of top registered (exempt) holding company parent
of applicant or declarant)
A.E. GOEBEL
20 N.W. Fourth Street
Evansville, Indiana 47741-0001
- ----------------------------------------------------------------------------
(Name and address of agent for service)
Copies to:
John W. Byington, Jr., Esq.
Winthrop, Stimson, Putnam & Roberts
One Battery Park Plaza
New York, New York 10004-1490
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 1
TO
FORM U-1
APPLICATION/DECLARATION WITH RESPECT TO
ACQUISITION OF INTERESTS IN
NON-AFFILIATED UTILITY COMPANY UNDER
THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
INTRODUCTION
------------
Southern Indiana Gas and Electric Company ("SIGECO"), is filing
this Amendment No. 1 to the Form U-1 Application/Declaration (the
"Application") under the Public Utility Holding Company Act of 1935 (the
"Act") filed with the Securities and Exchange Commission (the "Commission")
on April 4, 1994, for the purpose of providing additional information.
I. Item 2(a) of the original Application is hereby amended and
restated in its entirety as follows:
Item 2. FEES, COMMISSIONS AND EXPENSES
(a) Pursuant to the Agreement, SIGECO and Lincoln have each
agreed that each party will pay all costs and expenses incurred by
it in connection with the proposed transaction whether or not
consummated. The fees and expenses to be paid or incurred by
SIGECO and/or Lincoln in connection with the proposed transactions,
including the Merger, this Application under the Act, the IURC
Petition and other related matters, are estimated to be as follows:
<PAGE>
Form U-1 Filing Fee (Actual) . . . . . $ 2,000
Legal Fees relating to IURC Petition -
Bamberger, Foreman, Oswald
and Hahn . . . . . . . . . . . . . . 5,000
Legal Fees (other than those relating
to IURC Petition) - Winthrop, Stimson,
Putnam & Roberts . . . . . . . . . . 170,000
Accountants' Fees (Actual) -
Arthur Andersen & Co. . . . . . . . . 11,480
Miscellaneous . . . . . . . . . . . . . $ 5,520
-------
Total . . . . . . . . . . . $194,000
--------
II. Item 3.B.2 of the original Application is hereby amended and
restated in its entirety as follows:
Item 3. APPLICABLE STATUTORY PROVISIONS
* * *
B. Section 10(c) Analysis
* * *
2. Section 10(c)(2)
* * *
a. Economics and Efficiencies
The acquisition will tend toward certain economies and
efficiencies, affording Lincoln access to developing gas-related
technologies and purchasing opportunities that, without the acquisition,
Lincoln would not have the financial ability to access. Moreover, while
Lincoln's increased strength as a result of the acquisition will allow
Lincoln to enhance its implementation of conservation programs and to
more readily comply with new and existing environmental standards, the
acquisition will similarly allow Lincoln to expand its operations and
allow SIGECO to expand its investment in the retail gas business.
Although Lincoln will be a separate wholly-owned subsidiary
of SIGECO, the companies will be operated as an integrated
public-utility system. After the acquisition, SIGECO will make
gas-supply purchases for both companies. Lincoln currently pays a
broker's commission of $.05 per Dth of gas purchased which will be
eliminated. This is expected to result in a savings of approximately
$28,000 per year. Other aspects of the Lincoln system will be operated
by SIGECO pursuant to service agreements (i.e., legal, financial,
accounting, engineering, maintenance and other services). Savings
<PAGE>
estimated at $3,000 annually are expected to flow from the fact that all
of Lincoln's gas customers are also SIGECO electric customers and
therefore are already on SIGECO's computerized billing system.
Although SIGECO has agreed with Lincoln that it will not
terminate the employment of any of the approximately nine full-time and
part-time employees of Lincoln upon consummation of the Merger, it does
expect to eventually save most or all of the approximately $325,000
spent by Lincoln annually on salary and benefits by integrating those
employees into the operation of an integrated SIGECO/Lincoln system.
As SIGECO's existing work force is reduced through normal attrition,
these Lincoln employees will be available to SIGECO to replace its lost
workers without additional cost. Likewise, existing SIGECO employees
will be available to fill reductions in staffing at Lincoln, if any, due
to normal attrition. In fact, not only will SIGECO and Lincoln avoid
the additional expenditures of recruiting, training and paying new hires
in the near future, but they will also realize the benefits associated
with the elimination of employee duplication of tasks and
responsibilities.
Lincoln's office is in a building which it owns in Rockport,
Indiana and SIGECO's district office is in a SIGECO-owned building about
a block away. One or the other of these buildings can be sold. In
addition to the cash received from the sale of the building, the
resulting elimination of overhead and operating costs for the building
sold is expected to produce savings of approximately $4,000 to $5,000
annually.
An additional area in which an integrated SIGECO/Lincoln
system will realize savings is in the costs related to the preparation
and review of its financial accounts. SIGECO's current independent
accountants, Arthur Andersen & Co., will assume responsibility for
Lincoln's books with little or no additional expense to SIGECO. Lincoln
has been paying $5,000 annually for such services.
<PAGE>
Beyond the actual dollars saved as a result of the Merger,
SIGECO views the resulting integrated system as one of great strategic
value. The acquisition of Lincoln will give SIGECO entry into a service
area which is ripe for industrial development. SIGECO, with its size
and expertise, will be in a much better position to take advantage of
this anticipated development than it otherwise would without Lincoln's
service area, or, moreover, than Lincoln otherwise would were it to
remain independent.
The above-described benefits are those that will immediately
inure to the companies as a result of the acquisition. The benefits
associated with the integrated system that will be created by the
acquisition, however, go further. The ability of Lincoln to access the
SIGECO system should result in what are not quantifiable cost savings.
A substantial part of these cost savings will inure to the benefit of
ratepayers of both companies. Moreover, the addition of the Lincoln
service territory to the SIGECO system may increase the value of SIGECO
Common Stock and thus benefit SIGECO's shareholders.
In light of these cost savings and various efficiencies, the
requirements of the economical and efficient development of an
integrated utility system of Section 10(c)(2) of the Act will clearly
be met.
III. Item 4(b) of the original Application is hereby amended and
restated in its entirety as follows:
Item 4. REGULATORY APPROVAL
* * *
(b) On December 27, 1993, SIGECO and Lincoln filed a joint
petition with the IURC for authority to consummate the transaction. (See
Exhibit D-1 previously filed.) On May 18, 1994, the IURC issued its
Order approving the transaction. (See Exhibit D-2 filed herewith.)
<PAGE>
IV. Item 6 of the original Application is hereby amended and restated
in its entirety as follows:
Item 6. EXHIBITS AND FINANCIAL STATEMENTS
The following exhibits and financial statements are filed as
a part of this Application:
(a) Exhibits
A-1* Amended Articles of Incorporation of SIGECO, as amended
March 26, 1985. (Physically filed and designated in Form
10-K for the fiscal year 1985, File No. 1-3553, as
Exhibit 3-A.) Articles of Amendment of the Amended
Articles of Incorporation of SIGECO, dated March 24,
1987. (Physically filed and designated in Form 10-K for
the fiscal year 1987, File No. 1-3553, as Exhibit 3-A.)
Articles of Amendment of the Amended Articles of
Incorporation of SIGECO, dated November 27, 1992.
(Physically filed and designated in Form 10-K for the
fiscal year 1992, File No. 1-3553, as Exhibit 3-A.)
A-2** Articles of Incorporation of Spencer, as filed with the
Secretary of State, State of Indiana.
A-3** Articles of Incorporation of Lincoln, as filed with the
Secretary of State, State of Indiana.
B-1** Letter of Intent dated November 19, 1993.
B-2** Agreement and Plan of Merger, dated as of December 23,
1993.
B-3** Right of First Refusal Agreement, dated December 23,
1993.
B-4** Indemnity Agreement, dated as of December 23, 1993.
B-5** Letter Agreement, dated as of December 23, 1993,
regarding certain employee matters.
B-6** Names and shareholdings of stockholders of Lincoln
holding 1% or more of Lincoln Common Stock.
D-1** Joint Petition of SIGECO and Lincoln to the Indiana
Utility Regulatory Commission.
D-2 Order of Indiana Utility Regulatory Commission.
E** Map showing geographical relationship of properties of
SIGECO and Lincoln. (Filed in paper form under Form SE
pursuant to Instruction E to Form U-1 Instructions to
Exhibits.)
F Opinion of counsel to SIGECO.
H** Proposed Notice of Application.
* Incorporated by reference.
** Previously filed with original Application.
<PAGE>
(b) Financial Statements
1.** Southern Indiana Gas and Electric Company Pro Forma Combined
Condensed Balance Sheet of as of December 31, 1993 and Pro
Forma Combined Condensed Statement of Income as of December
31, 1993, with summary of pro forma adjustments.
2.** Lincoln Natural Gas Company, Inc. financial statements for the
year ended December 31, 1993.
3.** Lincoln Natural Gas Company, Inc. financial statements for the
years ended December 31, 1992 and 1991.
4. Lincoln Natural Gas Company, Inc., Statement of Projected
Income, and Projected Balance Sheet, May 31, 1994 to December
31, 1994 and Statement of Projected Cash Flows, June 1, 1994
to December 31, 1994.
** Previously filed with original Application.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Public Utility Holding Company
Act of 1935, the undersigned, as Applicant, has duly caused this amendment
to be signed on its behalf by the undersigned thereunto duly authorized.
Date: June 17, 1994
SOUTHERN INDIANA GAS AND
ELECTRIC COMPANY
By: /s/ A.E. GOEBEL
---------------------------
A.E. Goebel
Senior Vice President,
Chief Financial Officer,
Secretary and Treasurer
EXHIBIT D-2
STATE OF INDIANA
INDIANA UTILITY REGULATORY COMMISSION
JOINT PETITION OF SOUTHERN INDIANA GAS )
AND ELECTRIC COMPANY ("SIGECO") AND )
LINCOLN NATURAL GAS COMPANY, INC. )
("LINCOLN") FOR AUTHORITY TO ) CAUSE NO. 39872
IMPLEMENT A TRANSACTION WHEREBY )
SIGECO'S WHOLLY OWNED SUBSIDIARY )
SPENCER ENERGY CORP. ("SPENCER") )
WILL ACQUIRE THE STOCK OF LINCOLN AND )
MERGE INTO LINCOLN AND FOR ) APPROVED:
AUTHORITY FOR NECESSARY FINANCING ) MAY 18, 1994
BY SIGECO THEREFOR AND FOR APPROVAL )
OF THE TRANSACTION )
BY THE COMMISSION:
-----------------
Frederick L. Corban, Commissioner
Scott R. Jones, Assistant Chief Administrative Law Judge
On December 27, 1993, Southern Indiana Gas and Electric
Company ("SIGECO" or "Petitioner"), and Lincoln Natural Gas
Company, Inc. ("Lincoln" or Petitioner"), both companies jointly
referred to as "Joint Petitioners", filed their Petition with the
Indiana Utility Regulatory Commission ("Commission") for an order
approving a transaction (the "Transaction") whereby SIGECO's
wholly owned subsidiary Spencer Energy Corp. ("Spencer") will
acquire all Lincoln stock and merge into Lincoln thereby
accomplishing the acquisition of Lincoln by SIGECO. SIGECO also
seeks Commission authority for the necessary financing for the
transaction.
A Prehearing Conference was held pursuant to legal
notice on January 27, 1994, and a resultant Prehearing Conference
Order was issued by the Commission in this Cause on February 9,
1994. The parties have complied with the Prehearing Conference
Order except for an agreed minute extension of time for the
filing of evidence by the Office of the Utility Consumer
Counselor ("UCC").
A public hearing was held in this Cause on April 5,
1994, at 1:30 p.m., EST, in Room TC10, Indiana Government Center
<PAGE>
South, 302 West Washington Street, Indianapolis, Indiana,
pursuant to the Prehearing Conference Order and proper legal
notice published as required by law. SIGECO and the UCC appeared
and actively participated. Lincoln did not appear but indicated
that it is in agreement with SIGECO that the relief requested in
the Joint Petition should be granted so that the transaction can
be consummated pursuant to Commission approval and authority.
Based upon applicable law, the evidence herein and
being duly advised in the premises, the Commission now finds:
1. Commission Jurisdiction. The Joint Petitioners
are both public utilities as defined in the Indiana Public
Service Commission Act, as amended. Proper notice was given of
the petition filing, prehearing conference, and the evidentiary
hearing as required by law. I.C. 8-1-2-6; 12; 14; 23; 48; 49;
78; 79; 80; 83; 84 and other related statutes are applicable.
Therefore, the Commission has jurisdiction over the subject
matter and the Joint Petitioners in this Cause.
2. Joint Petitioner SIGECO's Characteristics. SIGECO
is an Indiana public utility corporation that provides both gas
and electric utility service to the public. This proceeding
primarily involves its gas operations and business in which it
provides sales and service to more than 100,000 gas customers
located in eight counties in southwestern Indiana. Its principal
offices are in Evansville, Indiana, and it operates under
indeterminate permits and certificates of public convenience and
necessity duly acquired by it. It owns, operates, maintains and
manages plant, property, equipment and facilities used and useful
for the acquisition, transmission, transportation, storage,
distribution, sale and service of gas to the public. Its primary
interstate pipeline provider of pipeline service is Texas Gas
Transmission Company ("TGT"), but it presently has
interconnections with three other interstate pipelines.
3. Joint Petitioner Lincoln's Characteristics.
Lincoln is a closely held Indiana corporation that provides gas
utility sales and service to approximately 1,300 customers
located in Spencer County, Indiana. Its offices are located in
Rockport, Indiana, and most of its customers are residential. It
operates under indeterminate permits and certificates of public
convenience and necessity, duly acquired by it. Lincoln owns,
operates, maintains and manages plant, property, equipment and
facilities used and useful for the acquisition, transmission,
transportation, distribution, sale and service of natural gas to
the public. Its interstate pipeline provider of pipeline
services is a subsidiary of American Natural Resources
Corporation ("ANR").
4. Characteristics of Spencer: Spencer is an Indiana
corporation wholly owned by SIGECO. Through its acquisition of
all of the corporate stock of Lincoln as provided for in the
Agreement and Plan of Merger ("the Agreement") Among SIGECO,
<PAGE>
Lincoln and Spencer (Supplemental Exhibit C to the Petition),
Spencer will become the sole owner of Lincoln and will then merge
into Lincoln to cause Lincoln to continue to exist and operate as
a wholly owned subsidiary of SIGECO. Resolutions of each of the
Joint Petitioners' Boards approving the Agreement and transaction
have been placed into evidence as Supplemental Exhibits A and B
to the Petition. Subsequent to issuance of this order approving
and authorizing the transaction and required financing, the
stockholders of Lincoln and the sole stockholder (SIGECO) of
Spencer shall vote on the transaction. If the vote is favorable,
as expected, then the transaction will proceed and be
consummated, with Lincoln continuing to be subject to the
jurisdiction of the Commission, but as a wholly owned subsidiary
of SIGECO.
5. Relief Sought: The Joint Petitioners seek
Commission approval of authority for the entire transaction
provided for in their Agreement (Supplemental Petitioners'
Exhibit C) including, but not limited to, the issuance by SIGECO
of its common stock necessary to carry out the acquisition by its
subsidiary Spencer of all the stock and ownership rights of
Lincoln and the subsequent merger of Spencer into Lincoln.
SIGECO also seeks authority for the financing and accounting
necessary to accomplish and conclude the transaction.
6. Nature of the Transaction. Generally stated, the
transaction as contained in the Agreement dated December 23,
1993, provides that SIGECO's subsidiary Spencer will acquire, by
a "stock swap", all the common stock of Lincoln. Spencer will
then merge into Lincoln so that Spencer will cease to exist but
Lincoln will continue to exist and operate as a wholly owned
subsidiary of SIGECO. The price to be paid by SIGECO is
approximately One Million Three Hundred and Thirty Thousand
Dollars ($1,330,000) represented by an appropriate number of
shares of SIGECO's common stock to be exchanged for all the
common stock of Lincoln. The transaction will take place
subsequent to issuance of this Order and after all the
shareholders of Spencer and the necessary majority of
shareholders of Lincoln have voted in favor of the transaction.
The evidence presented is, that the price to be paid by SIGECO
through its subsidiary Spencer for Lincoln is a fair and
reasonable price resulting from arm's length negotiations between
the parties to the Agreement.
7. Commission Discussion and Findings. Commission
approval of the Agreement and transaction is in the best interest
of the parties to the Agreement, their shareholders and
ratepayers. It is also in the public interest based upon our
analysis that the acquisition by SIGECO of Lincoln will enhance
the position of both companies in the newly restructured natural
gas business. SIGECO has approximately 100,000 gas customers
which is a relatively small number when compared with other major
gas utilities both nationally and within Indiana. SIGECO argues
that in the restructured gas industry, it is increasingly
<PAGE>
important for a local distribution company such as SIGECO to
manage its procurement of gas supplies and pipeline
transportation and that, good business sense justifies reasonable
size enhancements so the cost and risk of gas supply procurement
and transportation can be spread over a larger customer base.
Not only does the eventual addition of 1,300 customers to the
number of customers for whom SIGECO will be responsible, help to
create a critical mass for SIGECO helpful to gas business
economics and competitiveness, but it also aids Lincoln by making
it and its customers a part of much larger gas operations.
Additionally, SIGECO will have direct access to an additional
interstate pipeline connection - i.e. - ANR. These interstate
pipeline connections accommodate access to numerous gas
production and marketing areas thereby increasing the likelihood
of acquisition of competitively priced gas supplies. The Lincoln
gas service territory is contiguous to SIGECO's gas service
territory and, pursuant to the prefiled testimony of UCC staff
witness Tina M. Osberg, SIGECO has agreed to undertake a study as
to the reasonableness, desirability and feasibility of
interconnecting the systems of Lincoln and SIGECO. If the study
results find that connection of the two systems is reasonable and
desirable, then Lincoln will have direct access to three
additional interstate pipeline connections - i.e. - TGT, Texas
Eastern and Tennessee, through Midwest. That study is to be
completed, and a report is to be filed by SIGECO with the
Commission and the UCC, within one year of the date of issuance
of this Order. SIGECO stated that Lincoln will, for the
immediately foreseeable future, continue to operate as a separate
and virtually independent utility, but it anticipates that after
an extended period of familiarization between the two utilities,
there may be favorable opportunities for consolidation of some
activities and operation. SIGECO represents that it will take
advantage of such opportunities that are mutually beneficial to
the utilities and their customers. The spreading of certain
costs over a larger number of customers will also permit greater
efficiencies and eventually should result in costs and rates, per
customer, being lower then they would have been absent the
acquisition of Lincoln by SIGECO.
The evidence establishes that the transaction will be
accounted for by SIGECO under the "pooling-of-interest" method of
accounting. As such, there will be no acquisition premium to be
recorded or amortized.
Joint Petitioners' evidence indicates the consideration
to be paid resulted from time-consuming negotiations that
occurred intermittently over an extended period. Further, the
price is substantially less than 5% of the book cost to SIGECO of
its properties, plant and business. Therefore, under I.C. 8-1-2-
84, SIGECO may acquire Lincoln pursuant to the Agreement without
obtaining approval and consent from its voting stockholders.
Finally, the UCC has no objection to the granting of the
requested relief. We find because the acquisition is a
relatively small one for SIGECO given the size of Lincoln,
<PAGE>
approval of the transaction should have no significant impact
upon SIGECO's finances, operations or ability to serve the
public.
Based on all of the above and the record evidence, the
Commission finds that the Agreement and the transaction proposed
therein is in the public interest and should be approved. The
consideration provided for in the Agreement is not unreasonable
and SIGECO's payment thereof results in no rate impact. Thus, we
find the Joint Petitioners should be authorized to conclude the
transaction subject to a favorable vote of the shareholders of
Spencer and Lincoln.
SIGECO also seeks Commission approval and authority for
financing necessary to complete the transaction. This includes
authority for issuance of approximately 45,000 to 50,000
additional shares of SIGECO common stock. The exact number of
shares to be issued will be determined pursuant to the formula
contained in the Agreement. That formula provides that SIGECO
will transfer shares to Lincoln having a market value equal to
the number of Lincoln customers multiplied by $1,000.00.
Therefore, the total number of shares needed will depend on the
number of Lincoln customers and the market value of SIGECO stock
on or near the date of closing of the transaction, as provided
for in the Agreement. The number of shares required is not
expected to exceed 50,000. SIGECO has about 15,700,000 shares of
stock outstanding, so there would be 15,750,000 shares
outstanding after completion of the transaction if 50,000 shares
were used. Therefore, the increase in common equity is less than
0.5% and presents no significant concern. The undisputed
testimony of SIGECO witness A. E. Goebel is that the requested
financing will have no substantial adverse impact on any of the
involved utilities. The transaction will be accounted for as a
"pooling of interest" with no goodwill or acquisition premium
recorded. On a consolidated basis, for financial reporting
purposes, the transaction will result in the assets and
liabilities of SIGECO and Lincoln being added together, with the
equity account reflecting the increased shares of SIGECO common
stock outstanding. The UCC does not oppose the proposed
financing and accounting. The Commission finds that SIGECO's
requested financing, and the accounting therefor, necessary to
implement the transaction should be authorized and approved. The
specific ultimate accounting entries should be:
Debit: Investment in common stock of Lincoln
Natural Gas Co., Inc. $500,000
(Approximately
- dependent
on the formula
at effective
date of
transaction)
<PAGE>
Credit: Common Stock ( S a m e
conditional
amount)
In conclusion, the Commission finds that the entire
transaction whereby SIGECO would acquire, own and operate Lincoln
as a separate subsidiary, and the financing by SIGECO to
implement the transaction, are in the public interest and should
be approved.
IT IS THEREFORE ORDERED BY THE INDIANA UTILITY
REGULATORY COMMISSION that:
1. The Agreement and the entire transaction presented
and proposed by the Joint Petitioners are accepted and approved,
and the Joint Petitioners are jointly and separately authorized
to execute - SIGECO in its own name or through its subsidiary
Spencer - any agreements and documents necessary to accomplish
and conclude the entire transaction as approved herein. SIGECO,
Lincoln and Spencer are further jointly and separately authorized
to do all things reasonably necessary to implement and conclude
the transaction.
2. SIGECO is hereby authorized and empowered to own
Lincoln and all of its permits, certificates, rights, assets and
entirety and to operate Lincoln as its wholly owned subsidiary.
3. The gas rates presently on file with and approved
by the Commission for SIGECO and for Lincoln shall remain in
effect until further proceedings are implemented and appropriate
order is issued thereon by the Commission.
4. SIGECO shall undertake a study of the
reasonableness, desirability and feasibility of interconnecting
the systems of SIGECO and Lincoln. A report thereon shall be
filed by SIGECO with the Commission and the UCC within one year
of the date hereof.
5. Commission approval and authorization is hereby
granted empowering SIGECO to conduct and enter into all financial
arrangements necessary to implement and consummate the Agreement
and the transaction hereby approved; provided that SIGECO is
limited to the issuance of up to 50,000 shares of new common
stock which shares shall be used as consideration pursuant to the
formula contained in the Agreement. SIGECO shall also file a
written report with the Commission describing and detailing the
financing and amount of common stock issued and used to complete
the transaction; such report to be filed within thirty (30) days
of consummation of the transaction.
6. The accounting treatment proposed by SIGECO and
set forth in Finding No. 7 herein is approved.
<PAGE>
7. SIGECO's property is pledged and encumbered under
a certain Indenture of Mortgage and Deed of Trust between SIGECO
and Bankers Trust Company, as Trustee, dated as of April 1, 1932,
and the Commission approves the inclusion of all assets acquired
in the transaction by SIGECO so that they are included within and
subject to that Indenture and Deed of Trust as of the date of
consummation of the transaction.
8. This Order shall be effective on and after the
date of its approval.
MORTELL, CORBAN, KLEIN AND ZIEGNER CONCUR; HUFFMAN ABSENT:
----------------------------------------------------------
APPROVED:
I hereby certify that the above is a true
and correct copy of the Order approved.
/s/ RUTH ANN TOWNSEND
Ruth Ann Townsend, Secretary to the
Commission and Executive Director
EXHIBIT F
Bamberger, Foreman, Oswald and Hahn
7th Floor Hulman Building
P.O. Box 657
Evansville, Indiana 47704
Telephone: (812) 425-1591
Fax: (812) 421-4936
June 13, 1994
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Ladies and Gentlemen:
We have acted as Indiana counsel for Southern Indiana
Gas and Electric Company (the "Company") in connection with its
proposed acquisition of all of the issued and outstanding shares
of common stock, par value $10 per share ("Lincoln Common
Stock"), of Lincoln Natural Gas Company, Inc. ("Lincoln"), an
Indiana public utility corporation engaged in the gas utility
business. A wholly-owned subsidiary of the Company, Spencer
Energy Corp., an Indiana corporation ("Spencer"), will be merged
(the "Merger") with and into Lincoln pursuant to an Agreement and
Plan of Merger, dated December 23, 1993, among the Company,
Spencer and Lincoln (the "Agreement"), with Spencer ceasing to
exist and Lincoln continuing as the surviving corporation. In
the Merger, the holders of Lincoln Common Stock issued and
outstanding immediately prior to the Merger would be entitled to
receive shares of common stock, without par value, of the Company
("SIGECO Common Stock") in accordance with the Agreement, and
each share of common stock, no par value ("Spencer Common
Stock"), of Spencer issued and outstanding immediately prior to
the Merger would be converted into one share of Lincoln Common
Stock. The number of shares of SIGECO Common Stock to be
exchanged in the transactions will be determined by their average
closing market price over a five-day period before the relevant
closing date. The transaction is intended to result in the
liquidation of Spencer and the survival of Lincoln as a wholly-
owned subsidiary of the Company. The Company has filed an
Application/Declaration on Form U-1 (the "Application") with you
under the Public Utility Holding Company Act of 1935, as amended,
in connection with the foregoing proposed transactions.
We are members of the Bar of the State of Indiana and
we do not express any opinion herein concerning any law other
than the law of the State of Indiana.
<PAGE>
We have examined and relied upon originals or certified
copies or copies otherwise identified to our satisfaction of such
documents, corporate records and other instruments as we have
deemed necessary or appropriate as a basis for the opinions
hereinafter expressed, including the order of the Indiana Utility
Regulatory Commission approving the Merger (the "Order").
In our examination, we have assumed the genuineness of
all signatures, the authenticity of all documents and other
material submitted to us as originals and the conformity with the
originals thereof of all documents and other materials submitted
to us as copies. As to various questions of fact material to
this opinion, we have, to the extent that relevant facts were not
independently established by us, relied upon certificates of
public officials, certificates and representations of officers or
other representatives of the Company contained in the Agreement,
and the information set forth in the Application.
Based on the foregoing, we are of the opinion that:
1. Assuming the proposed transactions are consummated
in conformity with the terms of the Order, no other approval or
consent of any state or local governmental body, regulatory body
or administrative authority, will be legally required for the
consummation of the proposed transactions and all laws of the
State of Indiana applicable to the proposed transactions will
have been complied with.
2. The Company and Lincoln are duly organized and
validly existing corporations under the laws of the State of
Indiana.
3. When, as contemplated in the Application, the
Company has taken all corporate action necessary and appropriate
for the legal and valid issue of the SIGECO Common Stock in
accordance with the provisions of the Agreement and in accordance
with the Indiana Business Corporation Law, as amended, and
certificates for the shares of SIGECO Common Stock have been duly
executed on behalf of the Company and delivered as provided in
the Agreement, the SIGECO Common Stock will be validly issued,
fully paid and non-assessable, and the holders thereof will be
entitled to the rights and privileges appertaining thereto set
forth in the Company's Amended Articles of Incorporation, as
amended.
4. Assuming all necessary legal and corporate action
has been taken by the Company and Lincoln and that the proposed
transactions are consummated in accordance with and as
contemplated in the Agreement and the Application, the Company
will have legally acquired validly issued, fully paid and non-
assessable Lincoln Common Stock and will be entitled to the
rights and privileges appertaining thereto set forth in Lincoln's
Articles of Incorporation, as amended.
<PAGE>
5. Assuming all necessary legal and corporate action
has been taken by the Company, the consummation of the proposed
transactions in accordance with and as contemplated in the
Agreement and the Application will not violate the legal rights
of the holders of any securities issued by the Company or any
associate company thereof.
This opinion is being delivered to you pursuant to the
Application. We hereby consent to the use of this opinion as
Exhibit F to the Application.
Very truly yours,
BAMBERGER, FOREMAN, OSWALD AND HAHN
/s/ ROBERT M. BECKER
Robert M. Becker
<TABLE>
<CAPTION>
LINCOLN NATURAL GAS COMPANY, INC.
STATEMENT OF PROJECTED INCOME
MAY 31, 1994 TO DECEMBER 31, 1994
MAY 31,1994 JUNE 30,1994 JULY 31,1994 AUG 31,1994 SEPT 31,1994 OCT 31,1994 NOV 30,1994 DEC 31,1994 Y-T-D
Y-T-D PROJECTED PROJECTED PROJECTED PROJECTED PROJECTED PROJECTED PROJECTED PROJECTED
ACTUAL<F1>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
REVENUES
RESIDENTIAL $ 312,906 $ 12,883 $ 12,232 $ 11,058 $ 12,836 $ 27,946 $ 65,126 $108,251 $563,238
COMMERCIAL 155,463 6,163 6,218 6,145 21,227 21,917 33,098 56,089 306,320
CUST FORFEITS 1,626 350 350 350 350 350 350 350 4,076
CUST INSTALL 2,681 994 994 994 994 994 994 994 9,639
CUST TRANS 51,428 9,897 12,054 12,625 13,407 10,744 12,553 14,407 137,315
GCA ADJUST 20,709 20,709
------- ------- ------- ------- ------- ------- ------- ------- ---------
TOTAL 544,813 30,287 31,848 31,172 48,814 61,951 112,121 180,091 1,041,097
EXPENSES
GAS PURCHASES 415,743 14,121 16,604 16,193 26,159 36,881 67,880 112,765 706,346
TRANSMISSION 129 129
DISTRIBUTION 72,064 13,463 16,040 13,463 16,040 13,463 13,463 16,040 174,036
CUSTOMER ACCTS -0- 136 136 136 136 136 136 136 952
SALES PROMO 133 90 90 90 90 90 90 90 763
ADMIN & GENERAL 56,937 9,427 10,295 9,427 10,295 9,427 9,427 10,295 125,530
DEPRECIATION 9,063 1,812 1,812 1,812 1,812 1,812 1,812 1,812 21,747
TAXES 9,296 1,415 1,415 1,415 1,415 1,415 3,611 1,415 21,397
------- ------- ------- ------- ------- ------- ------- ------- ---------
TOTAL 563,365 40,464 46,392 42,536 55,947 63,224 96,419 142,553 1,050,900
INCOME FROM
OPERATIONS ( 18,552) ( 10,177) ( 14,544) (11,364) ( 7,133) (1,273) 15,702 37,538 (9,802)
OTHER INCOME
INTEREST & DIV 2,248 450 450 450 450 450 450 450 5,398
MISCELLANEOUS 167 33 33 33 33 33 33 33 398
------ ----- ----- ----- ----- ----- ----- ----- -------
TOTAL OTHER 2,415 483 483 483 483 483 483 483 5,796
NET INCOME (16,137) ( 9,694) ( 14,061) (10,881) ( 6,650) ( 709) 16,185 38,021 ( 4,007)
RETAINED EARNINGS
BEGINNING 391,175 375,038 365,344 351,283 340,402 333,752 332,962 349,147 391,175
RETAINED EARRNINGS
ENDING $375,038 $345,344 $351,283 $340,402 $333,752 $332,962 $349,147 $357,168 $387,161
________ ________ ________ ________ ________ ________ ________ ________ ________
____________________
<FN>
<F1> Does not reflect the full effect of the Company's most recent rate increase which did not take effect
until late March 1994.
</TABLE>
<TABLE>
<CAPTION>
LINCOLN NATURAL GAS COMPANY, INC.
PROJECTED BALANCE SHEET
MAY 31, 1994 TO DECEMBER 31, 1994
MAY 31, 1994 JUNE 30,1994 JULY 31,1994 AUG 30,1994 SEPT 31,1994 OCT 31,1994 NOV 30,1994 DEC 31,1994
Y-T-D ACTUAL PROJECTED PROJECTED PROJECTED PROJECTED PROJECTED PROJECTED PROJECTED
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
GAS PROPERTY
& SYSTEMS $ 768,156 $ 768,156 $ 768,156 $ 768,156 $ 768,156 $ 768,156 $768,156 $768,156
LESS: ACC DEPR (365,235) (367,047) (368,859) (370,671) (372,483) (374,295) (376,107) (377,919)
------- ------- ------- ------- ------- ------- ------- -------
402,921 401,109 399,297 397,485 395,673 393,861 392,049 390,237
CURRENT ASSETS
CASH ON HAND 1,970 1,970 1,970 1,970 1,970 1,970 1,970 1,970
WORKING FUNDS 3,649 40,447 34,350 23,886 16,602 13,549 16,303 34,300
INVESTMENTS 147,324 147,324 147,324 147,324 147,324 147,324 147,324 147,324
ACCOUNTS REC 50,534 30,287 31,848 31,172 48,814 61,951 112,121 180,091
PREPAYMENTS 10,657 8,872 7,087 5,302 3,517 1,732 -0- -0-
OTHER RECEIPTS 16,385 16,385 16,385 16,385 16,385 16,385 16,385 16,385
GAS INVENTORY 35,124 35,124 35,124 35,124 35,124 35,124 35,124 35,124
------- ------- ------- ------- ------- ------- ------- -------
TOTAL CA 265,643 280,409 274,088 261,163 269,736 278,035 329,227 415,194
668,564 681,518 673,385 658,648 665,409 671,896 721,276 805,431
_______ _______ _______ _______ _______ _______ _______ _______
EQUITY & LIABILITY
COMMON STOCK 97,500 97,500 97,500 97,500 97,500 97,500 97,500 97,500
RETAINED EARNINGS 375,038 365,344 351,283 340,402 333,752 332,962 349,147 387,168
REACQUIRED STOCK ( 8,130) ( 8,130) ( 8,130) ( 8,130) ( 8,130) ( 8,130) ( 8,130) ( 8,130)
PREMIUM ON STOCK 17,607 17,607 17,607 17,607 17,607 17,607 17,607 17,607
------- ------- ------- ------- ------- ------- ------- -------
482,015 472,321 458,260 447,379 440,729 439,939 456,124 494,145
LIABILITIES
NOTES PAYABLE 100,095 100,095 100,095 100,095 100,095 100,095 100,095 100,095
ACCOUNTS PAYABLE 17,816 40,464 46,392 42,536 55,947 63,224 96,419 142,553
CUSTOMER DEPOSIT 2,735 2,735 2,735 2,735 2,735 2,735 2,735 2,735
CUSTOMER ADVANCE 16,919 16,919 16,919 16,919 16,919 16,919 16,919 16,919
OTHER ACCT/PAY 49,331 49,331 49,331 49,331 49,331 49,331 49,331 49,331
ACC PRO RATE REF ( 347) ( 347) ( 347) ( 347) ( 347) ( 347) ( 347) ( 347)
------- ------- ------- ------- ------- ------- ------- -------
TOTAL LIAB 186,549 209,197 215,125 211,269 224,680 231,957 265,152 311,286
$ 668,564 $ 681,518 $ 673,385 $ 658,648 $ 665,409 $ 671,896 $ 721,276 $ 805,432
_________ _________ _________ _________ _________ _________ _________ _________
</TABLE>
<TABLE>
<CAPTION>
LINCOLN NATURAL GAS COMPANY, INC.
STATEMENT OF PROJECTED CASH FLOWS
JUNE 1, 1994 TO DECEMBER 31, 1994
JUNE JULY AUG SEPT OCT NOV DEC
1994 1994 1994 1994 1994 1994 1994
------------- -------------- ------------- ------------ ------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
CASH
BEGINNING $ 3,649 $ 40,447 $ 34,350 $ 23,886 $ 16,602 $13,54 $16,303
NET (INCREASE)
DECREASE A/R 20,247 ( 1,561) 676 (17,642) (13,137) (50,170) (67,970)
NET (DECREASE)
INCREASE A/P 22,648 5,928 ( 3,856) 13,411 7,277 33,195 46,134
NET INCOME ( 9,694) (14,061) (10,881) ( 6,650) ( 790) 16,185 38,021
DEPRECIATION 1,812 1,812 1,812 1,812 1,812 1,812 1,812
PREPAID
INSURANCE 1,785 1,785 1,785 1,785 1,785 1,732 -0-
------------- ------------- ------------- ------------- -------------- ------------- --------------
CASH
ENDING $ 40,447 $ 34,350 $ 23,886 $ 16,602 $ 13,549 $16,303 $ 34,300
</TABLE>
