(As filed with the Securities and Exchange Commission December 30, 2003)
File No. 70-10169
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM U-1/A
AMENDMENT NO. 2
TO
APPLICATION OR DECLARATION
UNDER THE
PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
NiSource Inc.
Northern Indiana Public Service Company
Kokomo Gas and Fuel Company
KGF Trading Company
Northern Indiana Fuel and Light Company, Inc.
Northern Indiana Trading Company, Inc.
EnergyUSA, Inc. and its subsidiaries
PEI Holdings, Inc.
(f/k/a Primary Energy, Inc.)
NiSource Capital Markets, Inc.
NiSource Finance Corp.
Granite State Transmission, Inc.
Crossroads Pipeline Company
NiSource Development Company, Inc. and its subsidiaries
NI Energy Services, Inc. and its subsidiaries
NiSource Corporate Services Company
NiSource Energy Technologies, Inc.
IWC Resources Corporation and its subsidiaries
Columbia Energy Group
Columbia Atlantic Trading Corporation
Columbia Deep Water Services Company
Columbia Energy Services Corporation
Columbia Remainder Corporation and its subsidiary
801 East 86th Avenue
Merrillville, Indiana 46410-6272
Bay State Gas Company
Northern Utilities, Inc.
300 Friberg Parkway
Westborough, Massachusetts 01581-5039
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 Accounts Receivable Corporation
200 Civic Center Drive
Columbus, Ohio 43215
Columbia Gas Transmission Corporation
12801 Fair Lakes Parkway
Fairfax, Virginia 22030-0146
Columbia Gulf Transmission Company
2603 Augusta, Suite 125
Houston, Texas 77057
Columbia Network Services Corporation and its subsidiary
1600 Dublin Road
Columbus, Ohio 43215-1082
NiSource Insurance Corporation Limited
(f/k/a 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)
_____________________________________________________
NISOURCE INC.
(Name of top registered holding company parent of each applicant or declarant)
_______________________________________________________
Jeffrey W. Grossman,
Vice President and Controller
NiSource Inc.
801 East 86th Avenue
Merrillville, Indiana 46410-6272
(Name and address of agent for service)
________________________________________________________
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 875 Third Avenue
Chicago, Illinois 60606-6473 New York, New York 10022
TABLE OF CONTENTS
ITEM 1. DESCRIPTION OF PROPOSED TRANSACTION....................................1
1.1 INTRODUCTION........................................................1
1.2. THE CURRENT ORDERS..................................................2
1.3. CAPITALIZATION OF NISOURCE AND SUBSIDIARIES.........................5
1.3.1 Outstanding Securities of NiSource...........................5
1.3.2 Outstanding Securities of Columbia...........................6
1.3.3 Consolidated Capitalization..................................6
1.4. SUMMARY OF REQUESTED APPROVALS......................................6
1.5 USE OF PROCEEDS.....................................................9
1.6 DESCRIPTION OF PROPOSED FINANCING PROGRAM...........................9
1.6.1 Parameters Applicable to Authorized External Financing
Transactions.................................................9
1.6.2 NiSource External Financing.................................11
1.6.3 Financing by Columbia.......................................15
1.6.4 Utility Subsidiary Financing................................15
1.6.5 Non-Utility Subsidiary Financing............................16
1.7 CONTINUATION OF MONEY POOLS........................................17
1.8 GUARANTEES.........................................................20
1.8.1 Parent Guarantees...........................................20
1.8.2 Non-Utility Subsidiary Guarantees...........................20
1.9 HEDGING TRANSACTIONS...............................................21
1.9.1 Interest Rate Hedges........................................21
1.9.2 Anticipatory Hedges.........................................21
1.10 CHANGES IN CAPITALIZATION OF MAJORITY-OWNED SUBSIDIARIES...........22
1.11 FINANCING SUBSIDIARIES.............................................23
1.12 INTERMEDIATE SUBSIDIARIES..........................................23
1.13 SUBSEQUENT REORGANIZATIONS OF NON-UTILITY SUBSIDIARIES.............25
1.14 EXPENDITURES ON DEVELOPMENT ACTIVITIES.............................25
1.15 SALES OF SERVICES AND GOODS AMONG SUBSIDIARIES.....................25
1.16 ACTIVITIES OF ENERGY-RELATED SUBSIDIARIES OUTSIDE
THE UNITED STATES..................................................26
1.17.1 Distributions by Columbia...................................28
1.17.2 Payment of Dividends by Non-Utility Subsidiaries............29
1.18 TAX ALLOCATION AGREEMENT...........................................30
1.19 CERTIFICATES OF NOTIFICATION.......................................30
ITEM 2. FEES, COMMISSIONS AND EXPENSES........................................32
ITEM 3. APPLICABLE STATUTORY PROVISIONS.......................................32
3.1 GENERAL............................................................32
3.2 COMPLIANCE WITH RULES 53 AND 54....................................32
ITEM 4. REGULATORY APPROVALS..................................................33
ITEM 5. PROCEDURE.............................................................33
ITEM 6. EXHIBITS AND FINANCIAL STATEMENTS.....................................34
A. EXHIBITS..............................................................34
B. FINANCIAL STATEMENTS..................................................35
ITEM 7. INFORMATION AS TO ENVIRONMENTAL EFFECTS...............................36
The Application/Declaration filed in this proceeding on September 18, 2003,
as amended and restated in its entirety by Amendment No. 1, filed on November
10, 2003, is hereby further amended and restated in its entirety to read as
follows:
ITEM 1. DESCRIPTION OF PROPOSED TRANSACTION
-----------------------------------
1.1 INTRODUCTION. NiSource Inc. ("NiSource"), a registered holding
company,/1/ and its direct and indirect public-utility and non-utility
subsidiary companies, are seeking herein to extend, restate and modify their
current authorizations under various orders summarized below in Item 1.2 (the
"Current Orders") to engage in external and intrasystem financing and related
transactions during the period through December 31, 2006 (the "Authorization
Period"). The order issued in this proceeding will replace and supersede the
Current Orders.
NiSource and its wholly-owned subsidiary, Columbia Energy Group
("Columbia"), also a registered holding company, directly and indirectly own all
of the issued and outstanding common stock of ten public utility subsidiary
companies: Northern Indiana Public Service Company ("Northern Indiana"), Kokomo
Gas and Fuel Company ("Kokomo") and Northern Indiana Fuel and Light Company,
Inc. ("NIFL"), Bay State Gas Company ("Bay State"),/2/ Northern Utilities, Inc.
("Northern Utilities"), 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") (collectively, the
"Utility Subsidiaries"). Together, the Utility Subsidiaries distribute gas at
retail in portions of Indiana, Ohio, Virginia, Maryland, Kentucky, Pennsylvania,
Massachusetts, New Hampshire and Maine. Northern Indiana also generates,
transmits and sells electricity in 21 counties in the northern part of Indiana.
NiSource also holds directly or indirectly numerous non-utility
subsidiaries and investments. Its principal non-utility subsidiaries are:
NiSource Corporate Services Company ("NiSource Services"), a subsidiary service
company; Columbia Gas Transmission Corporation, Columbia Gulf Transmission
Company, Granite State Transmission, Inc., and Crossroads Pipeline Company,
which are engaged in interstate natural gas transportation and storage; PEI
Holdings, Inc. (f/k/a Primary Energy, Inc.), an intermediate subsidiary that
owns all of the outstanding common stock of Whiting Clean Energy, Inc., an
"exempt wholesale generator" ("EWG") under Section 32 of the Act; EnergyUSA,
Inc., which serves as the holding company for subsidiaries that are engaged in
energy marketing and in providing energy management services; NiSource
Development Company, Inc., which holds passive investments in affordable housing
projects that qualify for federal income tax credits and in other real estate
ventures that are intended to complement NiSource's energy businesses; and
NiSource Insurance Corporation Limited, a captive insurance subsidiary. NiSource
also holds all of the common stock of IWC Resources Corporation, which was
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1 See NiSource Inc., et al., Holding Co. Act Release No. 27263 (Oct. 30,
2000) (the "Merger Order").
2 Bay State is an exempt holding company pursuant to Rule 2. See File No.
69-340.
previously the holding company for several water distribution companies;/3/ and
two special purpose financing subsidiaries, NiSource Finance Corp. ("NiSource
Finance") and NiSource Capital Markets, Inc. ("Capital Markets"), through which
NiSource issues long-term and short-term debt securities. KGF Trading Company, a
wholly-owned subsidiary of Kokomo, markets natural gas to commercial and
industrial customers. Northern Indiana Trading Company, Inc., a wholly-owned
subsidiary of NIFL, is engaged in, among other things, gas brokering and leasing
equipment and software to associate companies.
For the year ended December 31, 2002, NiSource reported consolidated gross
revenues, operating income and net income of $5,546,900,000, $1,202,700,000, and
$372,500,000. NiSource derived 38% of its consolidated operating income from gas
distribution, 33% from gas transportation and storage, 27% from electric utility
operations, and 2% from gas and oil exploration and production and other
unregulated businesses. At September 30, 2003, NiSource had total consolidated
assets of $15,704,100,000, including net property, plant and equipment of
$8,731,700,000.
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 (other than Columbia). The term
"Non-Utility Subsidiaries" also includes any direct or indirect non-utility
subsidiary acquired or formed, directly or indirectly, by NiSource after the
effective date of the order in this proceeding pursuant to the authorization of
the Commission (including the authorizations requested in Items 1.11 and 1.12
below) 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. NiSource, Columbia and the Subsidiaries are sometimes hereinafter
collectively referred to as the "Applicants."
1.2 THE CURRENT ORDERS. NiSource and Columbia and their respective
subsidiaries are authorized under the Current Orders to engage in a program of
external and intrasystem financing, to issue guarantees and other forms of
credit support, to organize and acquire the securities of specified types of new
subsidiaries, to pay dividends out of capital and unearned surplus, to
reorganize and recapitalize subsidiaries, and to engage in other related
transactions through December 31, 2003. The Current Orders are summarized below:
File No. 70-9681 - By order dated November 1, 2000,/4/ as supplemented by
orders dated March 21, 2001/5/ and September 12, 2002,/6/ (i) NiSource is
authorized to maintain in place the indebtedness (the "Acquisition Debt")
incurred to fund the cash portion of the purchase price paid in connection
with its acquisition of Columbia in November 2000 and any extensions,
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3 The principal operating assets of IWC Resources Corporation and its
subsidiaries were sold in April 2002 in accordance with the Commission's
divestiture order under Section 11(b)(1) of the Act.
4 Holding Co. Act Release No. 27265.
5 Holding Co. Act Release No. 27361 (authorizing increase in short-term debt
limit of NiSource from $2 billion to $3.4 billion).
6 Holding Co. Act Release No. 27567 (authorizing tax allocation agreement).
2
renewals or replacements thereof, and the associated guarantees;/7/ (ii)
NiSource is authorized to issue and sell from time to time, directly or
indirectly through one or more direct Financing Subsidiaries (as defined
below), equity securities and long-term debt securities in an aggregate
amount at any time outstanding not to exceed $12 billion, provided that
shares of common stock issuable with respect to certain outstanding
equity-linked securities of NiSource and any shares of preferred stock
issued pursuant to the NiSource's Shareholder Rights Agreement ("Rights
Plan") will not count against this limit, and 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
in an aggregate principal amount at any time outstanding not to exceed $3.4
billion; (iii) the pre-merger Utility Subsidiaries of NiSource are
authorized to issue and sell from time to time 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 Utilities - $50 million; (iv) NiSource is authorized, directly or
through one or more Financing Subsidiaries, to guarantee indebtedness or
contractual obligations or provide other forms of credit support 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; (v)
Non-Utility Subsidiaries are authorized to provide guarantees of
indebtedness or contractual obligations or provide other forms of credit
support 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); (vi) NiSource and, to the extent not exempt
under Rule 52, the Subsidiaries are authorized to enter into hedging
transactions with respect to the outstanding indebtedness and anticipatory
debt offerings in order to manage and minimize interest rate costs; (vii)
the Applicants are authorized 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) the Applicants (other than Columbia) are authorized
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 is authorized 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, "foreign
utility companies" ("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 engage in administrative activities and development
activities relating to their exempt and authorized non-utility
subsidiaries, provide operating services to such entities, and make
expenditures of up to $250 million on preliminary development activities
relating to potential new non-utility investments; (x) NiSource is
authorized to consolidate or otherwise reorganize all or any part of its
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7 The components of the Acquisition Debt are described in Item 1.18 below.
3
direct and indirect ownership interests in Non-Utility Subsidiaries and the
activities and functions related to such Non-Utility Subsidiaries; (xi)
Non-Utility Subsidiaries are exempt from the at-cost requirements of
Section 13(b) with respect to the sale of goods and services to other
Non-Utility Subsidiaries, subject to certain limitations and restrictions;
(xii) Non-Utility Subsidiaries are authorized to engage in certain types of
non-utility activities outside the United States and to invest in
"gas-related" assets (i.e., natural gas transportation and storage
facilities and oil and gas exploration and production assets) outside the
United States, in each case subject to a request for reservation of
jurisdiction; (xiii) Columbia is authorized 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 non-utility
subsidiaries and/or to use such net proceeds to reacquire shares of its
common stock that are held by NiSource, and the Non-Utility Subsidiaries
are authorized 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; and (xiv) the Applicants are
authorized to allocate consolidated income tax liability pursuant to an
agreement that does not conform in all respects to the requirements of Rule
45(c).
File No. 70-9945 - By order dated December 19, 2001,/8/ as supplemented by
orders dated June 3, 2002/9/ and August 8, 2002,/10/ NiSource, the Utility
Subsidiaries and certain of the Non-Utility Subsidiaries are authorized to
participate in the formation and funding of a system money pool arrangement
("Money Pool") and, to the extent not exempt under Rules 45(b) and 52, to
extend credit to and make borrowings from each other (and in connection
therewith to issue their promissory notes evidencing borrowings), subject
to various restrictions/11/ and specified limitations on the amount of
borrowings by each of the Utility Subsidiaries (other than Columbia
Virginia, whose borrowings are exempt pursuant to Rule 52(a)). In addition,
Columbia Maryland is authorized to issue and sell from time to time, and
Columbia is authorized to acquire, Columbia Maryland's common stock and
long-term debt securities in an aggregate amount not to exceed $40 million.
File Nos. 70-8925, 70-9129 and 70-9359 - By orders dated December 23,
1996,/12/ December 22, 1997,/13/ and June 8, 1999,/14/ Columbia is
authorized to issue and sell equity and long-term debt securities in an
aggregate amount not to exceed $6 billion at any one time outstanding
through December 31, 2003, provided that, in accordance with the November
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8 Holding Co. Act Release No. 27479.
9 Holding Co. Act Release No. 27535 (releasing jurisdiction over
participation by Bay State and Northern Utilities in system money pool).
10 Holding Co. Act Release No. 27559 (releasing jurisdiction over
participation by Granite State Gas Transmission, Inc. in system money
pool).
11 Among these restrictions, NiSource, Columbia, NiSource Finance, and Capital
Markets are authorized to participate in the Money Pool as lenders only.
12 Holding Co. Act Release No. 26634.
13 Holding Co. Act Release No. 26798.
14 Holding Co. Act Release No. 27035.
4
1, 2000 order issued in File No. 70-9681, supra, Columbia may issue common
stock only to NiSource. 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. Columbia is
also authorized 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 and to
make direct short-term loans to Columbia Ohio, Columbia Pennsylvania,
Columbia Kentucky, and Columbia Maryland, and such Utility Subsidiaries are
authorized to make direct borrowings from Columbia./15/ Columbia
relinquished its authority to issue short-term debt to external lenders as
part of NiSource's request for authorization to increase its short-term
debt limit from $2 billion to $3.4 billion in File No. 70-9681 (see
footnote 5 above). Columbia was also authorized to fund a system money
pool, and certain of its subsidiaries were authorized to extend credit to
and make borrowings from each other (and to issue notes evidencing such
borrowings) pursuant to the Columbia system money pool, but such money pool
has been terminated and Columbia and certain of its subsidiaries are now
participants in the NiSource Money Pool as authorized in File No. 70-9945
(see preceding paragraph).
1.3 CAPITALIZATION OF NISOURCE AND SUBSIDIARIES.
1.3.1 Outstanding Securities of NiSource. The authorized capital stock
of 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"). As of September 30, 2003, 262,446,840 shares of
Common Stock were issued and outstanding. NiSource does not have any outstanding
shares of Preferred Stock, but 4,000,000 shares have been designated as Series A
Junior Participating Preferred Shares and reserved for issuance under the Rights
Plan (Exhibit B-2 hereto). NiSource also has 55.5 million Stock Appreciation
Income Linked Securities ("SAILS") issued and outstanding. Each unit of the
SAILS consists of a zero coupon debenture with a stated amount of $2.60 and a
purchase contract requiring the holder thereof to purchase, for $2.60 cash, a
fractional number of shares of Common Stock based on a settlement rate indexed
to the market price of Common Stock./16/ The purchase contract settlement date
will be on November 1, 2004, and the debentures, which will mature on November
1, 2006, have been pledged to secure the holders' obligation to purchase Common
Stock under the purchase contract. At September 30, 2003 the aggregate face
amount of the debentures embedded in the SAILS was $133,148,854. In addition, at
September 30, 2003, NiSource (through its Financing Subsidiaries) had
outstanding unsecured long-term indebtedness (not including current portion)
totaling $3,050,063,679 with various maturities between April 2005 and December
2027, and $442,900,000 of short-term borrowings under its 3-year credit
facility.
----------
15 Direct borrowings from Columbia by Columbia Virginia are exempt under Rule
52.
16 The SAILS represented a portion of the total consideration paid to
Columbia's shareholders in connection with NiSource's acquisition of
Columbia in November 2000.
5
1.3.2 Outstanding Securities of Columbia. The authorized capital stock
of Columbia consists of 3,000 shares of common stock, $0.01 par value, all of
which are held by NiSource. In addition, at September 30, 2003, Columbia had
outstanding unsecured long-term indebtedness (not including current portion)
totaling $1,382,700,000, which includes five series of debentures having
maturities between November 2005 and November 2025.
1.3.3 Consolidated Capitalization.NiSource's consolidated
capitalization (including short-term debt) at September 30, 2003 was as follows:
----------------------------------------------------------------------
Common Stock Equity $4,253,700,000 38.10%
----------------------------------------------------------------------
Preferred Stock $81,100,000 0.72%
----------------------------------------------------------------------
Long-term Debt $5,513,300,000 49.38%
----------------------------------------------------------------------
Short-term Debt* $1,317,300,000 11.80%
----------------------------------------------------------------------
Total $11,165,400,000 100.00%
----------------------------------------------------------------------
* Including current portion of Long-term Debt.
Columbia's consolidated capitalization (including short-term debt) at
September 30, 2003 was as follows:
----------------------------------------------------------------------
Common Stock Equity $2,694,200,000 66.08%
----------------------------------------------------------------------
Preferred Stock $0 0%
----------------------------------------------------------------------
Long-term Debt $1,382,700,000 33.91%
----------------------------------------------------------------------
Short-term Debt* $200,000 0.01%
----------------------------------------------------------------------
Total $4,077,100,000 100.00%
----------------------------------------------------------------------
* Including current portion of Long-term Debt.
NiSource's senior unsecured debt is currently rated BBB by Standard & Poor's
Inc. ("S&P") and Baa3 by Moody's Investor Service ("Moody's").
1.4 SUMMARY OF REQUESTED APPROVALS. The Applicants request authorization
for a program of external and intrasystem financing, credit support
arrangements, and other related proposals through the Authorization Period, as
follows:
(i) NiSource requests authority to increase its capitalization by issuing
and selling from time to time during the Authorization Period: (i)
directly, additional shares of Common Stock or options, warrants,
forward equity purchase contracts, or other rights that are
exercisable or exchangeable for or convertible into Common Stock,
equity-linked securities ("Equity-linked Securities"), and Preferred
Stock, (ii) indirectly through one or more Financing Subsidiaries,
other types of preferred securities (including specifically trust
preferred securities) ("Preferred Securities"), and (iii) directly or
indirectly through one or more Financing Subsidiaries, unsecured
notes, debentures and other forms of unsecured long-term debt
securities having maturities of one year or more up to 50 years
("Long-term Debt"), in an aggregate amount not to exceed $6 billion,
provided that (A) securities issued for purposes of refunding or
replacing other outstanding long-term securities where NiSource's
capitalization is not increased as a result thereof, and (B) any
shares of Preferred Stock issued under the Rights Plan shall not be
6
counted against this proposed limitation on new long-term financing.
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 $2.5 billion.
(ii) Columbia requests authorization to increase its capitalization by
issuing additional shares of its common stock to NiSource and/or
long-term debt securities having maturities of up to 50 years to
NiSource or a Finance Subsidiary of NiSource or to unaffiliated
third-party lenders in an aggregate amount not to exceed $3 billion
(excluding securities issued for purposes of refunding or replacing
other outstanding long-term securities where Columbia's capitalization
is not increased as a result thereof).
(iii) NiSource and Non-Utility Subsidiaries request authorization to make
loans to other, less than wholly-owned, Non-Utility Subsidiaries at
interest rates and maturities designed to provide a return to the
lending company of not less than its effective cost of capital.
(iv) NiSource, the Utility Subsidiaries, and certain of the Non-Utility
Subsidiaries request authorization to continue to participate in the
Money Pool on the terms and conditions previously authorized.
(v) Columbia Maryland requests authorization to issue and sell from time
to time, and Columbia requests authorization to acquire, additional
shares of Columbia Maryland's common stock and long-term debt
securities. The aggregate amount of common stock and/or long-term debt
securities to be issued by Columbia Maryland during the Authorization
Period will not to exceed $40 million.
(vi) NiSource, directly or through one or more Financing Subsidiaries, and
Columbia request authority to guarantee indebtedness or contractual
obligations or provide other forms of credit support ("Parent
Guarantees") on behalf or for the benefit of any of their Subsidiaries
in an aggregate principal or nominal amount not to exceed $3.5 billion
in the case of NiSource and $3.5 billion in the case of Columbia at
any one time outstanding, provided that any securities issued by a
Financing Subsidiary of NiSource that are guaranteed or supported by
other forms of credit enhancement provided by NiSource will also not
count against the limitation on Parent Guarantees.
(vii) Non-Utility Subsidiaries request authorization 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
(viii) NiSource and Columbia and, to the extent not exempt under Rule 52,
the Subsidiaries request authorization 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 authorization 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.
(ix) 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.
(x) NiSource requests authorization to acquire the equity securities of
one or more additional Financing Subsidiaries, to guarantee the
securities issued by such Financing Subsidiaries, to the extent not
exempt pursuant to Rule 45(b) and Rule 52(b), and to issue its
unsecured subordinated notes to any Financing Subsidiary to evidence
the transfer of financing proceeds by any Financing Subsidiary to
NiSource.
(xi) NiSource requests authorization to acquire, directly or indirectly,
the equity securities of one or more 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, ETCs and Rule
58 Subsidiaries ("Intermediate Subsidiaries"), provided that
Intermediate Subsidiaries may also provide management, administrative,
project development and operating services to such entities.
(xii) NiSource requests authorization 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.
(xiii) Non-Utility Subsidiaries (including Intermediate Subsidiaries)
request authorization to expend up to $250 million during the
Authorization Period on preliminary development activities relating to
potential new non-utility investments.
(xiv) To the extent not exempt pursuant to Rule 90(d), the Non-Utility
Subsidiaries request authorization to perform services and sell such
goods to each other at fair market prices, determined without regard
to "cost," subject to certain specified limitations.
(xv) NiSource requests authorization on behalf of any current and future
Non-Utility Subsidiaries to engage in certain types of non-utility
activities outside the United States and to invest in "gas-related"
assets (i.e., natural gas transportation and storage facilities and
oil and gas exploration and production assets) outside the United
States, in each case subject to a request for reservation of
jurisdiction.
8
(xvi) Columbia requests authority to pay dividends out of capital and
unearned surplus in an amount equal to the net proceeds realized from
the sale of the securities or assets of any of its 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 authorization to pay dividends out of capital and unearned
surplus and/or acquire, retire, or redeem the securities that they
have issued to any associate company to the extent permitted under
applicable law and the terms of any credit arrangements to which they
may be parties.
In addition to the foregoing proposed transactions, for which authorization
is requested during the Authorization Period, the Applicants request
authorization to continue to allocate consolidated income tax liabilities in
accordance with the Tax Allocation Agreement previously approved by the
Commission for tax year 2003 and all future tax years.
1.5 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) financing investments by and capital
expenditures of NiSource and its Subsidiaries (including equity contributions,
advances and loans to Columbia), (ii) the funding of future investments in EWGs,
FUCOs, and Rule 58 Subsidiaries, (iii) the repayment, redemption, refunding or
purchase by NiSource, Columbia or any Subsidiary of any of its own securities,
and (iv) financing working capital requirements of NiSource and its
Subsidiaries. Without limiting the foregoing, NiSource proposes to utilize the
full amount of its requested authority to issue Short-term Debt ($2.5 billion)
in order to fund advances to the Money Pool, as described in Item 1.7 below. 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.
1.6 DESCRIPTION OF PROPOSED FINANCING PROGRAM.
1.6.1 Parameters Applicable to Authorized External Financing
Transactions Authorization is requested herein to engage in financing
transactions during the Authorization Period for which the specific terms and
conditions are not at this time known, and which may not be exempt under Rule
52, without further prior approval by the Commission. The following general
terms will be applicable where appropriate to the proposed external financing
activities requested to be authorized hereby (including, without limitation,
securities issued for the purpose of refinancing or refunding outstanding
securities of the issuer):/17/
----------
17 The Commission has previously authorized financing transactions subject to
these same general parameters. See SCANA Corporation, Holding Co. Act
Release No. 27649 (Feb. 12, 2003).
9
Effective Cost of Money. The effective cost of capital on Long-term Debt,
Preferred Stock, Preferred Securities, Equity-linked Securities, and Short-term
Debt will not exceed competitive market rates available at the time of issuance
for securities having the same or reasonably similar terms and conditions issued
by similar companies of reasonably comparable credit quality; provided that in
no event will the effective cost of capital (i) on any series of Long-term Debt
exceed 500 basis points over a U.S. Treasury security having a remaining term
equal to the term of such series, (ii) on any series of Preferred Stock,
Preferred Securities or Equity-linked Securities exceed 600 basis points over a
U.S. Treasury security having a remaining term equal to the term of such series,
and (iii) on Short-term Debt exceed 500 basis points over the London Interbank
Offered Rate ("LIBOR") for maturities of less than one year.
Maturity. The maturity of Long-term Debt will be between one and 50 years
after the issuance thereof. Preferred Securities and Equity-linked Securities
will be redeemed no later than 50 years after the issuance thereof, unless
converted into Common Stock. Preferred Stock issued directly by NiSource may be
perpetual in duration.
Issuance Expenses. The underwriting fees, commissions or other similar
remuneration paid in connection with the non-competitive issue, sale or
distribution of securities pursuant to this Application/Declaration will not
exceed the greater of (i) 5% of the principal or total amount of the securities
being issued or (ii) issuance expenses that are generally paid at the time of
the pricing for sales of the particular issuance, having the same or reasonably
similar terms and conditions issued by similar companies of reasonably
comparable credit quality.
Common Equity Ratio. At all times during the Authorization Period,
NiSource, Columbia and each Utility Subsidiary will maintain common equity of at
least 30% of its consolidated capitalization (common equity, preferred stock,
long-term debt and short-term debt); provided that NiSource and Columbia will in
any event be authorized to issue Common Stock (including pursuant to stock-based
plans maintained for shareholders, employees and management) to the extent
authorized herein.
Investment Grade Ratings. Applicants further represent that, except for
securities issued for the purpose of funding Money Pool operations, no
guarantees or other securities, other than Common Stock, may be issued in
reliance upon the authorization granted by the Commission pursuant to this
Application/Declaration, unless (i) the security to be issued, if rated, is
rated investment grade; (ii) all outstanding securities of the issuer that are
rated are rated investment grade; and (iii) all outstanding securities of the
top level registered holding company that are rated are rated investment grade.
For purposes of this provision, a security will be deemed to be rated
"investment grade" if it is rated investment grade by at least one nationally
recognized statistical rating organization ("NRSRO"), 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, as amended ("1934 Act"). Applicants request that the
Commission reserve jurisdiction over the issuance of any such securities that
are rated below investment grade. Applicants further request that the Commission
reserve jurisdiction over the issuance of any guarantee or other securities at
any time that the conditions set forth in clauses (i) through (iii) above are
not satisfied.
Authorization Period. No security will be issued pursuant to the
authorization sought herein after the last day of the Authorization Period
(December 31, 2006).
10
1.6.2 NiSource External Financing. NiSource requests authorization to
increase its capitalization through the issuance and sale of Common Stock,
Preferred Stock, Preferred Securities, Equity-linked Securities and/or Long-term
Debt, as described below. The aggregate amount of new long-term financing
obtained by NiSource during the Authorization Period from the issuance and sale
of Common Stock, when combined with the amount of new financing obtained from
the issuance and sale of Preferred Stock, Preferred Securities, Equity-linked
Securities and/or Long-term Debt, shall not exceed $6 billion, provided that (A)
securities issued for purposes of refunding or replacing other outstanding
long-term securities where NiSource's capitalization is not increased as a
result thereof and (B) any shares of Preferred Stock issued under the Rights
Plan shall not be counted against this limitation. In addition, NiSource
requests authority 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 $2.5 billion.
All securities issued by NiSource in accordance with the authorization
requested herein, including, without limitation, securities issued for the
purpose of refunding or retiring outstanding securities, will comply with the
applicable parameters set forth in Item 1.6.1 above.
NiSource contemplates that such 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, as
amended ("1933 Act") 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. If underwriters are used, 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. Such
securities 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, or may be
sold directly by NiSource or through agents designated by NiSource from time to
time. If dealers are utilized, NiSource will sell such securities to the
dealers, as principals. Any dealer may then resell such securities 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 additional shares then being offered solely for the purpose of
covering over-allotments.
NiSource and NiSource Finance have filed a Registration Statement on Form
S-3 (Exhibit C-1 hereto) under the 1933 Act utilizing the "shelf" registration
process, under which NiSource, directly or through NiSource Finance, may offer
for sale, in one or more transactions, any combination of Common Stock,
Preferred Stock, warrants to purchase Common Stock or Preferred Stock, Long-term
Debt of NiSource Finance to be issued pursuant to an Indenture, dated as of
November 14, 2000, among NiSource, NiSource Finance and The Chase Manhattan
Bank, as trustee (Exhibit B-1 hereto) and guarantees thereof by NiSource, and
Equity-Linked Securities in an aggregate amount up to $2,807,500,000. The
prospectus contained in the Registration Statement provides a general
description of the securities NiSource may offer. Information about the terms of
11
any specific securities to be offered under this "shelf" registration process
will be as set forth in a prospectus supplement to be filed at the time of any
specific offering.
(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, 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. 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)./18/
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 pursuant to stock-based
plans which are maintained for stockholders, employees and nonemployee
directors. Currently, NiSource maintains three plans under which it may directly
issue or purchase in the open market shares of Common Stock. 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 21 million shares of Common Stock (or options, performance shares or
other rights with respect thereto) through December 31, 2005.
NiSource's Amended and Restated Nonemployee Director Stock Incentive Plan
provides for the issuance of up to 500,000 additional shares of Common Stock to
nonemployee directors. Under this plan, NiSource may grant restricted common
shares to nonemployee directors of NiSource. The plan also provides for the
award of nonqualified stock options and restricted stock awards. Awards of
Common Stock vest in 20% annual increments, with full vesting after five years.
NiSource also maintains 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
----------
18 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 Corporation, Holding Co. Act Release No. 27137 (Feb. 14,
2000).
12
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.
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, as they may be
amended or extended, and similar plans or plan funding arrangements hereafter
adopted without any additional Commission order. Shares of Common Stock issued
under these plans may either be newly issued shares, treasury shares or shares
purchased in the open market, provided that only the net proceeds from sales of
newly issued shares will be counted against the overall $6 billion limitation on
new long-term financing by NiSource. 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.
(b) Preferred Stock, Preferred Securities and Equity-linked
Securities. As indicated, NiSource has not issued any Preferred Stock directly
or other forms of Preferred Securities indirectly through any Financing
Subsidiary. In the future, however, NiSource wishes to have the flexibility to
issue its authorized Preferred Stock directly and/or issue, indirectly through
one or more Financing Subsidiaries, other forms of Preferred Securities
(including, without limitation, trust preferred securities or monthly income
preferred securities). Preferred Stock and other forms of Preferred 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. Dividends or distributions on such
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 for specified periods. NiSource may also issue
and sell Equity-linked Securities (such as, for example, SAILS) in the form of
stock purchase units, which combine a security with a fixed obligation (e.g.,
preferred stock or debt) with a stock purchase contract that is exercisable
(either mandatorily or at the option of the holder) within a relatively short
period (e.g., three to six years after issuance)./19/ The dividend or
distribution rates, interest rates, redemption and sinking fund provisions,
conversion features, if any, and maturity dates with respect to the Preferred
Stock or other types of Preferred Securities and Equity-linked Securities 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.
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. Under the Rights Plan (Exhibit B-2 hereto),
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
----------
19 The Commission has previously authorized registered holding companies to
issue and sell Equity-linked Securities. In addition to the Merger Order,
see Ameren Corporation, Holding Co. Act Release No. 27449 (Oct. 5, 2001)
and American Electric Power Company, Inc., Holding Co. Act Release No.
27517 (Apr. 11, 2002).
13
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
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./20/
(c) Long-term Debt. Long-term Debt may be issued, directly or
indirectly through one or more Financing Subsidiaries, in the form of unsecured
bonds, notes, medium-term notes or debentures under one or more indentures or
unsecured long-term indebtedness under agreements with banks or other
institutional lenders. 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 at the time of issuance.
(d) Short-term Debt. NiSource proposes to issue and sell from time to
time, directly or indirectly through one or more Financing Subsidiaries,
Short-term Debt, in the form of unsecured commercial paper, notes issued to
banks and other institutional lenders, and other forms of unsecured short-term
indebtedness, in an aggregate principal amount at any time outstanding not to
exceed $2.5 billion. Within such limitation, NiSource proposes to maintain and
renew from time to time, directly or indirectly through one or more Financing
Subsidiaries, its current 3-year credit facility and/or enter into other similar
credit lines with banks or other institutional lenders. Only the amount borrowed
under credit lines will count against the proposed limit on Short-term Debt.
Short-term borrowings under credit lines will have maturities of less than one
year from the date of each borrowing.
----------
20 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
NiSource currently does not have any outstanding commercial paper. In the
future, however, NiSource may seek to lower its borrowing cost by reentering the
commercial paper market. Commercial paper issued under any commercial paper
facility would 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 would reoffer it at a
discount to corporate, institutional and, with respect to European commercial
paper, individual investors. It is anticipated that such commercial paper would
be reoffered to investors such as commercial banks, insurance companies, pension
funds, investment trusts, foundations, colleges and universities, finance
companies and nonfinancial corporations.
1.6.3 Financing by Columbia. Columbia will continue to provide equity
and long-term debt capital to its Utility and Non-Utility Subsidiaries in the
form of purchases of additional equity securities, cash capital contributions
and open account advances pursuant to Rule 45(b), and intercompany loans, which,
except in the case of Columbia Maryland (see Item 1.6.4 below) are exempt
pursuant to Rule 52. In order to provide such capital to its subsidiaries, as
well as to retire and/or prepay its outstanding long-term indebtedness, Columbia
requests authorization to issue additional shares of its common stock directly
to NiSource and/or unsecured notes evidencing long-term borrowings from NiSource
Finance or other Financing Subsidiary of NiSource and/or unaffiliated
third-party lenders in an aggregate amount not to exceed $3 billion (excluding
securities issued for purposes of refunding or replacing other outstanding
securities of Columbia where Columbia's capitalization is not increased as a
result thereof). The interest rate and maturity of any series of long-term debt
securities issued by Columbia to NiSource Finance or other Financing Subsidiary
of NiSource will parallel the effective cost of funds of Long-term Debt recently
issued by NiSource Finance or other Financing Subsidiary of NiSource, provided
that, if no such Long-term Debt securities were issued during the previous
calendar quarter, then the interest rate and maturity of any series of long-term
debt securities issued by Columbia to NiSource Finance or other Financing
Subsidiary of NiSource will be either the estimated new long-term rate that
would be in effect if NiSource Finance or other Financing Subsidiary of NiSource
were to issue long-term debt securities, as projected by a major investment
bank, or the prevailing market rate for a newly issued "BBB" - rated utility
bond. Long-term debt of any series of Columbia issued to an unaffiliated
third-party lender will comply with the parameters for Long-term Debt set forth
in Item 1.6.1 above.
1.6.4 Utility Subsidiary Financing. The issue and sale of most
securities by the Utility Subsidiaries (other than Columbia Maryland) 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 Utility Subsidiary is incorporated
and operating. Specifically, the 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; the New Hampshire Public Utilities Commission ("NHPUC")
15
must approve most financings by Northern Utilities other than short-term
indebtedness having a maturity of one year or less up to a maximum amount equal
to 10% of net plant; the Public Utilities Commission of Ohio ("PUCO") must
approve all financings by Columbia Ohio other than short-term indebtedness with
a maturity of less than one year; the Public Service Commission of Kentucky
("KPSC") must approve all financings by Columbia Kentucky other than notes with
a maturity of less than two years; the Pennsylvania Public Utilities Commission
("PPUC") must approve all financings by Columbia Pennsylvania other than
short-term indebtedness with a maturity of one year or less or having no fixed
maturity but payable on demand; and the Virginia State Corporation Commission
("VSCC") must approve all financings by Columbia Virginia other than short-term
indebtedness with a maturity of less than one year if the amount thereof is less
than 12% of total capitalization of Columbia Virginia.
Columbia Maryland is not able to rely upon Rule 52(a) for an exemption from
Sections 6(a) and 7 of the Act because Columbia Maryland is a Delaware
corporation. Accordingly, Columbia Maryland requests authorization to issue and
sell from time to time during the Authorization Period, and Columbia requests
authorization to acquire, additional shares of Columbia Maryland's common stock
and long-term debt securities. The aggregate amount of common stock and/or
long-term debt securities to be issued by Columbia Maryland during the
Authorization Period will not exceed $40 million. Columbia Maryland will use the
proceeds of common stock and long-term debt securities to finance, in part,
capital expenditures, and for other general and corporate purposes.
The interest rate on long-term debt securities issued by Columbia Maryland
to Columbia will be designed to match the interest rate on borrowings made by
Columbia from NiSource Finance or other Financing Subsidiary of NiSource in
order to fund the purchase of such long-term securities, which, in turn, will be
equal to the effective rate (i.e., interest rate plus issuance costs) for the
most recent series Long-term Debt securities issued by NiSource Finance or other
Financing Subsidiary of NiSource during the previous calendar quarter, provided
that, if no such Long-term Debt securities were issued during the previous
calendar quarter, then the interest rate on any series of long-term debt
securities issued by Columbia Maryland to Columbia will be either the estimated
new long-term rate that would be in effect if NiSource Finance or other
Financing Subsidiary of NiSource were to issue long-term debt securities, as
projected by a major investment bank, or the prevailing market rate for a newly
issued "BBB" - rated utility bond. Long-term notes issued by Columbia Maryland
to Columbia may have maturities of up to 30 years and may be either secured or
unsecured.
The Utility Subsidiaries do not intend to issue any short-term debt
securities externally. Instead, the Utility Subsidiaries will satisfy their
short-term borrowing needs through borrowings under the Money Pool (see Item 1.7
below).
1.6.5 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
16
Non-Utility Subsidiaries 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
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 less than wholly-owned
subsidiaries at interest rates and maturities designed to provide a return to
the lending company of not less than its effective cost of capital./21/ If such
loans are made to a less than wholly-owned Non-Utility Subsidiary, such company
will not sell any services to any associate company 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 1.15 below.
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.
1.7 CONTINUATION OF MONEY POOLS. NiSource, the Utility Subsidiaries and
certain of the Non-Utility Subsidiaries (as listed below) hereby request
authorization to continue to participate in the Money Pool. To the extent not
exempted by Rule 52, the Money Pool participants request authorization during
the Authorization Period to make unsecured short-term borrowings from the Money
Pool and to contribute surplus funds to the Money Pool and to lend and extend
credit to (and acquire promissory notes from) one another through the Money
Pool. To the extent not exempt by Rule 45(b) or Rule 52(d), as applicable,
NiSource, directly or indirectly through NiSource Finance, requests
authorization to invest surplus funds and/or lend and extend credit to the
participating subsidiaries through the Money Pool.
In addition to NiSource and Columbia and the ten Utility Subsidiaries, the
following direct and indirect Non-Utility Subsidiaries are participants in the
Money Pool:
NiSource Corporate Services Company
EnergyUSA, Inc. (an Indiana corporation)
EnergyUSA-TPC Corp.
EnergyUSA, Inc. (a Massachusetts corporation)
PEI Holdings, Inc.
NiSource Capital Markets, Inc.
NiSource Finance Corp.
Granite State Transmission, Inc.
Crossroads Pipeline Company
NiSource Development Company, Inc.
NI Energy Services, Inc.
----------
21 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).
17
NiSource Energy Technologies, Inc.
NiSource Insurance Corporation Limited
Columbia Gas Transmission Corporation
Columbia Gulf Transmission Company
Columbia Assurance Agency, Inc.
Columbia Accounts Receivable Corporation
Columbia Atlantic Trading Corporation
Columbia Deep Water Services Company
Columbia Network Services Corporation
Columbia Remainder Corporation
Columbia Energy Services Corporation
CNS Microwave, Inc.
NiSource, Columbia, NiSource Finance, and Capital Markets will continue to
participate in the Money Pool as investors only and not as borrowers. In the
future, it is proposed that other existing or new non-utility subsidiaries of
NiSource may participate in the Money Pool as investors only without further
approval of the Commission. EWGs, FUCOs, and ETCs will be specifically excluded
from participating in the Money Pool as borrowers.
The Applicants believe that the effective cost of short-term borrowings
under the Money Pool will generally be more favorable to those Subsidiaries that
are authorized to make borrowings than the comparable cost of external
short-term borrowings, and that the investment rate paid to participating
Subsidiaries that invest surplus funds in the Money Pool will generally be
higher than the typical yield on short-term money market investments.
Under the System Money Pool Agreement (Exhibit B-3 hereto), short-term
funds are available from the following sources for short-term loans to the
participating Subsidiaries from time to time: (1) surplus funds in the
treasuries of Money Pool participants, and (2) proceeds received by NiSource
Finance from the sale of commercial paper, borrowings from banks and other
lenders, and other financing arrangements ("External Funds"). Funds are made
available from such sources in such order as NiSource Services, as the
Administrative Agent under the System Money Pool Agreement, determines would
result in a lower cost of borrowing, consistent with the individual borrowing
needs and financial standing of Money Pool participants that invest funds in the
Money Pool.
Each participating Subsidiary that is authorized to borrow from the Money
Pool (an "Eligible Borrower") will borrow pro rata from each Money Pool
participant that invests surplus funds, in the proportion that the total amount
invested by such investing participant bears to the total amount then invested
in the Money Pool. On any day when more than one source of funds invested in the
Money Pool (e.g., surplus treasury funds of NiSource and other Money Pool
participants ("Internal Funds") and External Funds), with different rates of
interest, is used to fund loans through the Money Pool, each Eligible Borrower
will borrow pro rata from each such funding source in the Money Pool in the same
proportion that the amount of funds provided by that fund source bears to the
total amount of funds invested in to the Money Pool. The interest rate charged
to Eligible Borrowers on borrowings under the Money Pool and paid to Money Pool
participants that invest surplus funds in the Money Pool (the "Composite Rate")
will be determined monthly and will equal the weighted average daily rate on
18
(i) short-term debt of NiSource Finance (i.e., External Funds), plus (ii)
earnings on external investments by NiSource Finance.
Funds not required by the Money Pool to make loans (with the exception of
funds required to satisfy the Money Pool's liquidity requirements) would
ordinarily be invested in one or more short-term investments, including: (i)
obligations issued or guaranteed by the U.S. government and/or its agencies and
instrumentalities; (ii) commercial paper; (iii) certificates of deposit; (iv)
bankers' acceptances; (v) repurchase agreements; (vi) tax exempt notes; (vii)
tax exempt bonds; (viii) tax exempt preferred stock; and (ix) such other
investments as are permitted by Section 9(c) of the Act and Rule 40 thereunder.
The interest income and investment income earned on loans and investments
of surplus funds would be allocated among those Money Pool participants that
have invested funds in accordance with the proportion each participant's
investment of funds bears to the total amount of funds invested in the Money
Pool and the cost of External Funds provided to the Money Pool by NiSource
Finance.
Each Eligible Borrower receiving a loan through the Money Pool would be
required to repay the principal amount of such loan, together with all interest
accrued thereon, on demand and in any event within one year after the date of
such loan. All loans made through the Money Pool may be prepaid by the borrower
without premium or penalty and without prior notice.
Proceeds of any short-term borrowings from the Money Pool may be used by an
Eligible Borrower (i) for the interim financing of its construction and capital
expenditure programs; (ii) for its working capital needs; (iii) for the
repayment, redemption or refinancing of its debt and preferred stock; (iv) to
meet unexpected contingencies, payment and timing differences, and cash
requirements; and (v) to otherwise finance its own business and for other lawful
general corporate purposes.
The Utility Subsidiaries (other than Columbia Virginia)/22/ request
authority to make borrowings through the Money Pool in the following maximum
amounts at any time outstanding:
Utility Subsidiary Borrowing Limit
------------------ ---------------
Northern Indiana $1,000,000,000
Kokomo 50,000,000
NIFL 50,000,000
Bay State 300,000,000
Northern Utilities/23/ 50,000,000
Columbia Ohio 700,000,000
----------
22 Borrowings under the Money Pool by Columbia Virginia are exempt under Rule
52(a).
23 Any borrowings by Northern Utilities under the Money Pool that are in
excess of 10% of its net fixed plant must be approved by the NHPUC and,
therefore, would be exempt under Rule 52(a).
19
Columbia Kentucky 80,000,000
Columbia Pennsylvania 300,000,000
Columbia Maryland 50,000,000
Borrowings under the Money Pool by Eligible Borrowers other than the
Utility Subsidiaries are exempt pursuant to Rule 52(b).
1.8 GUARANTEES.
1.8.1 Parent Guarantees. NiSource, directly or indirectly through one
or more Financing Subsidiaries, and Columbia request authorization to provide
Parent Guarantees with respect to debt securities or other contractual
obligations of any Subsidiary as may be appropriate in the ordinary course of
such Subsidiary's business, in an aggregate principal or nominal amount not to
exceed $3.5 billion in the case of NiSource and $3.5 billion in the case of
Columbia outstanding at any one time, provided however, that the amount of any
Parent 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.
Parent Guarantees may take the form of, among others, direct guarantees,
reimbursement undertakings under letters of credit, "keep well" undertakings,
agreements to indemnify, and expense reimbursement agreements. Any Parent
Guarantee that is outstanding at the end of the Authorization Period shall
remain in force until it expires or terminates in accordance with its terms.
The debt of any Financing Subsidiary guaranteed by NiSource or Columbia
will comply with the parameters for financing authorization set forth in Item
1.6.1 above. In order to avoid double counting, however, the amount of any
Parent Guarantee with respect to securities issued by a Financing Subsidiary
will not also be counted against the proposed limit on Parent Guarantees.
Parent Guarantees may, in some cases, be provided to support obligations of
Subsidiaries that are not readily susceptible of exact quantification or that
may be subject to varying quantification. In such cases, NiSource or Columbia,
as the case may be, will determine the exposure under such guarantee for
purposes of measuring compliance with the proposed limitation on Parent
Guarantees by appropriate means, including estimation of exposure based on loss
experience or projected potential payment amounts. If appropriate, such
estimates will be made in accordance with Generally Accepted Accounting
Principles ("GAAP"). Such estimation will be reevaluated periodically.
NiSource and Columbia request authorization to charge each Subsidiary a fee
for each Parent Guarantee that is not greater than the cost, if any, of
obtaining the liquidity necessary to perform such Parent Guarantee (for example,
bank line commitment fees or letter of credit fees, plus other transactional
expenses) for the period of time that it remains outstanding.
1.8.2 Non-Utility Subsidiary Guarantees. In addition to guarantees
that may be provided by NiSource, directly or indirectly through any Financing
Subsidiary, and/or Columbia, Non-Utility Subsidiaries request authorization 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
20
$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.
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 outstanding 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 futures, 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 or Agency (e.g., FNMA) obligations or
LIBOR-based swap instruments. The transactions would be for fixed periods and
stated notional amounts. In no case will the notional principal amount of any
Interest Rate Hedge exceed that of the underlying debt instrument and related
interest rate exposure. 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 "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, 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") or other designated contract markets, the
establishment of over-the-counter positions with one or more counterparties
21
("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 will comply with Statement of Financial Accounting Standard
("SFAS") 133 (Accounting for Derivative Instruments and Hedging Activities) and
SFAS 138 (Accounting for Certain Derivative Instruments and Certain Hedging
Activities) or other standards relating to accounting for derivative
transactions as are adopted and implemented by the Financial Accounting
Standards Board ("FASB"). The Applicants represent that each Interest Rate Hedge
and each Anticipatory Hedge will qualify for hedge accounting treatment under
the current FASB standards in effect and as determined as of the date such
Interest Rate Hedge or Anticipatory Hedge is entered into. The Applicants will
also comply with any future FASB financial disclosure requirements associated
with hedging transactions./24/
1.10 CHANGES IN CAPITALIZATION OF MAJORITY-OWNED 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
pursuant to this filing cannot be ascertained at this time. It may happen that
the proposed sale of capital securities (i.e., common stock or preferred stock)
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.
As needed to accommodate such proposed transactions and to provide for
future issues, request is made for authority to change the terms of any 50% or
more owned Subsidiary's authorized capital stock capitalization or other equity
interests by an amount deemed appropriate by NiSource or other intermediate
parent company; provided that the consents of all other shareholders have been
obtained for the proposed change. This request for authorization is limited to
NiSource's 50% or more owned Subsidiaries and will not affect the aggregate
limits or other conditions contained herein. A Subsidiary would be able to
change the par value, or change between par value and no-par stock, or change
the form of such equity from common stock to limited partnership or limited
liability company interests or similar instruments, or from such instruments to
common 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. NiSource will be
subject to all applicable laws regarding the fiduciary duty of fairness of a
majority shareholder to minority shareholders in any such 50% or more owned
Subsidiary and will undertake to ensure that any change implemented under this
paragraph comports with such legal requirements./25/
----------
24 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 (Apr. 7, 1999); and Ameren Corp., et al., Holding
Co. Act Release No. 27053 (July 23, 1999).
25 The Commission has previously approved substantially similar proposals. See
e.g., FirstEnergy Corp., Holding Co. Act Release No. 27459 (Oct. 29, 2001);
and Reliant Energy, Inc., et al., Holding Co. Act Release No. 27548 (July
5, 2002).
22
1.11 FINANCING SUBSIDIARIES. As indicated, NiSource currently owns the
stock of two Financing Subsidiaries: NiSource Finance and Capital Markets. These
entities were formed specifically for the purpose of financing the activities of
NiSource and certain of its Subsidiaries. In the future, NiSource may find it
desirable to organize and acquire the equity securities of one or more
additional corporations, trusts, partnerships or other entities organized to
serve the same purpose. Specifically, Financing Subsidiaries may be organized to
issue Long-term Debt, Short-term Debt, and Preferred Securities (including but
not limited to monthly income preferred securities) to third parties and the
transfer of the proceeds of such financings to NiSource or such Subsidiaries.
NiSource also requests authorization to issue its subordinated unsecured notes
("Subordinated Notes") to any Financing Subsidiary to evidence the transfer of
financing proceeds by any Financing Subsidiary to NiSource. The principal
amount, maturity and interest rate on any such Subordinated Notes will be
designed to parallel the amount, maturity and interest or distribution rate on
the securities issued by a Financing Subsidiary in respect of which the
Subordinated Note is issued. The amount of securities issued by any Financing
Subsidiary to third parties pursuant to the authorization requested herein will
be included in the overall external financing limitation, if any, authorized for
NiSource. However, to avoid double counting, the amount of Subordinated Notes
issued by NiSource to a Financing Subsidiary will not be counted against such
external financing limitation. NiSource may, if required, guarantee or enter
into support or expense agreements in respect of the obligations of any such
Financing Subsidiaries./26/
1.12 INTERMEDIATE SUBSIDIARIES. 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 administrative activities
("Administrative Activities") and development activities ("Development
Activities"), as such terms are defined below, relating to such
subsidiaries./27/ 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 1.15 below.
----------
26 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 (Apr. 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).
27 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).
23
Administrative Activities include ongoing personnel, accounting,
engineering, legal, financial, and other support activities necessary to manage
NiSource's investments in Non-Utility Subsidiaries.
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.
Administrative Activities will include ongoing personnel, accounting,
engineering, legal, financial, and other support activities necessary to manage
NiSource's investments in Non-Utility Subsidiaries.
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.
24
1.13 SUBSEQUENT REORGANIZATIONS OF NON-UTILITY SUBSIDIARIES. NiSource
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,/28/
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./29/ Such transactions may take the form of a 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./30/
1.14 EXPENDITURES ON DEVELOPMENT ACTIVITIES. NiSource requests a
continuation of its authority under the November 1, 2000 Order to make
expenditures on Development Activities, as defined in Item 1.12 above, in an
aggregate amount of up to $250 million. NiSource proposes a "revolving fund"
concept for permitted expenditures on Development Activities. Thus, to the
extent a Non-Utility Subsidiary in respect of which expenditures for Development
Activities were made subsequently becomes an EWG or FUCO or qualifies as an
"energy-related company" under Rule 58, the amount so expended will cease to be
considered an expenditure for Development Activities, but will instead be
considered as part of the "aggregate investment" in such entity pursuant to Rule
53 or 58, as applicable./31/
1.15 SALES OF SERVICES AND GOODS AMONG SUBSIDIARIES. Non-Utility
Subsidiaries request authorization to provide services and sell goods to each
other at fair market prices determined without regard to cost, and therefore
----------
28 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.
29 The Commission has previously granted similar authority to other holding
companies. See Entergy Corporation, et al., Holding Co. Act Release No.
27039 (June 22, 1999).
30 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).
31 This type of approval for a revolving fund of permitted expenditures on
Development Activities has been approved by the Commission in prior cases.
See e.g., Exelon Corporation, Holding Co. Act Release No. 27545 (June 27,
2002).
25
request an exemption (to the extent that Rule 90(d) does not apply) pursuant to
Section 13(b) from the at-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
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./32/
1.16 ACTIVITIES OF ENERGY-RELATED SUBSIDIARIES OUTSIDE THE UNITED STATES.
NiSource, on behalf of any current or future Non-Utility Subsidiaries, requests
authority for such Non-Utility Subsidiaries to engage in certain
"energy-related" activities outside the United States. Such activities may
include:
----------
32 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 (Aug. 26, 1999).
26
(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.
NiSource requests that the Commission (i) authorize Non-Utility
Subsidiaries 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,/33/ (ii) authorize Non-Utility
Subsidiaries to provide Energy Management Services and Consulting Services
anywhere outside the United States,/34/ and (iii) reserve jurisdiction over
other activities of Non-Utility Subsidiaries outside the United States, pending
completion of the record.
----------
33 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 (Aug. 26, 1999). See too, National Fuel Gas Company, et al.,
Holding Co. Act Release No. 27114 (Dec. 16, 1999).
34 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 (Mar. 25, 1996); and Cinergy Corp., Holding Co. Act Release No. 26662
(Feb. 7, 1997); and Interstate Energy Corporation, Holding Co. Act Release
No. 27069 (Aug. 26, 1999).
27
In addition, NiSource requests authorization for Non-Utility Subsidiaries
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 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
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,/35/ and (ii) reserve jurisdiction
over investments in pipeline and storage facilities outside the United States
pending completion of the record.
1.17 DISTRIBUTIONS OUT OF CAPITAL OR UNEARNED SURPLUS.
1.17.1 Distributions by Columbia . Since being acquired by NiSource,
Columbia has sold or entered into agreements to sell the stock or assets of
several of its non-utility subsidiaries.36 Under Section 12(c) of the Act and
Rules 26(c) and 46, the ability of Columbia to distribute the cash proceeds from
any such sale to NiSource as a dividend may be limited. This would occur, for
example, if the amount of proceeds from such sales were to exceed the retained
earnings of Columbia 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. Accordingly, Columbia
requests authorization to transfer some or all of the net proceeds of any sale
or sales of the securities or assets of Non-Utility Subsidiaries of Columbia to
NiSource, either by paying a dividend or by repurchasing shares of its common
stock that are held by NiSource.37 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.
----------
35 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).
36 Columbia has sold or announced its agreement to sell the stock or assets of
Columbia LNG Corporation, Columbia Energy Retail Corporation, Columbia
Electric Corporation and its subsidiaries, Columbia Propane Corporation,
Columbia Petroleum Corporation, Columbia Energy Resources, Inc. and its
subsidiaries, Columbia Transmission Communications Corporation and Columbia
Service Partners, Inc. and its subsidiaries.
37 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).
28
1.17.2 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, to the extent permitted under applicable corporate
law and the terms of any credit agreements and indentures that restrict the
amount and timing of distributions to shareholders./38/
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./39/
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.
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.
----------
38 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 (Aug. 26, 1999).
39 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.
29
1.18 TAX ALLOCATION AGREEMENT. Under the Commission's supplemental order
dated September 12, 2002 in File No. 70-9681, the Applicants are authorized to
file consolidated income tax returns and allocate the consolidated income tax
liability of the group in accordance with a Tax Allocation Agreement that does
not conform in all respects to the requirements of Rule 45(c) (Exhibit B-4
hereto). Specifically, under the Tax Allocation Agreement, NiSource is permitted
to retain the benefit (i.e., the tax savings) in consolidated tax liability that
is attributable to the interest expense on the Acquisition Debt, subject to
certain limitations and restrictions.
The term "Acquisition Debt," as used herein, includes $2.9 billion of
senior unsecured notes outstanding as of November 30, 2003 with varying
maturities between May 4, 2005 and July 15, 2014. These notes were issued by
NiSource Finance to refinance commercial paper and other senior secured notes
issued by NiSource Finance in connection with the acquisition of Columbia./40/
The term Acquisition Debt also includes the debentures embedded in the SAILS (as
described in Item 1.3.1 above), also issued in connection with the acquisition
of Columbia, as well as indebtedness that may be incurred by NiSource or
NiSource Finance during the Authorization Period for the purpose of refinancing
any of the foregoing indebtedness.
For the tax year ended December 31, 2001, the tax benefit attributable to
the interest expense on the Acquisition Debt was approximately $100.2 million,
and for the tax year ended December 31, 2002, it is estimated that such tax
benefit will be approximately $97.0 million.
The Applicants request authorization to continue to file consolidated
income tax returns pursuant to the previously approved Tax Allocation Agreement.
The Applicants will supplement the quarterly report under Rule 24 filed in this
proceeding for the quarterly period in which they file their consolidated
federal income tax return with information showing the calculation of the
portion of NiSource's loss that is attributable to interest expense on the
Acquisition Debt and a spreadsheet showing the actual allocation of income taxes
to each of the members of the consolidated group and the allocation that would
be required by Rule 45(c).
1.19 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. The Rule 24 certificates will contain the following
information for the quarterly 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;
----------
40 NiSource Finance issued and sold four series of senior unsecured notes
totaling $2.95 billion between November 14, 2000 and April 6, 2001 and used
the proceeds thereof to pay down commercial paper issued at the time of the
acquisition of Columbia. Two series of the senior unsecured notes, totaling
$1.05 billion, matured in 2003 and were replaced by new senior unsecured
notes totaling $1 billion issued by NiSource Finance in July and November
2003.
30
(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,
Preferred Securities, Equity-linked Securities or Short-term Debt issued
directly or indirectly by NiSource;
(e) The maximum outstanding amount of all borrowings under or
investments in the Money Pool by each Money Pool participant during the
quarter, and the rate or range of rates charged on Money Pool borrowings
and paid on Money Pool investments;
(f) The number of shares of common stock issued by Columbia to
NiSource and the price per share paid;
(g) The principal amount, interest rate and maturity of any long-term
debt security issued by Columbia to NiSource Finance or other Financing
Subsidiary of NiSource;
(h) The number of shares of common stock issued by Columbia Maryland
to Columbia and the price per share paid;
(i) The principal amount, interest rate and maturity of any long-term
debt security issued by Columbia Maryland to Columbia;
(j) The amount and terms of any financings consummated by any
Non-Utility Subsidiary that are not exempt under Rule 52;
(k) The name of the guarantor and of the beneficiary of any Parent
Guarantee or Non-Utility Subsidiary Guarantee issued, and the amount, terms
and purpose of the guarantee;
(l) The notional amount and principal terms of any Interest Rate Hedge
or Anticipatory Hedge entered into and the identity of the parties to such
instruments;
(m) The name, parent company, and amount invested in any new
Intermediate Subsidiary or Financing Subsidiary;
(n) A list of Form U-6B-2 statements filed with the Commission,
including the name of the filing entity and the date of the filing; and
31
(o) 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 and Columbia, that has engaged in authorized 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 are estimated
not to exceed $60,000. Fees, commissions and expenses paid in connection with
any specific financing transaction will be within the limit set forth in Item
1.6.1 above.
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, Preferred Securities, Equity-linked
Securities, Long-term Debt and Short-term Debt. Sections 6(a), 7, 9(a), 10,
12(b) and 12(f) of the Act are applicable to the issuance and sale of securities
by Columbia and acquisition thereof by NiSource (or a Financing Subsidiary of
NiSource), to the issuance and sale of securities by Columbia Maryland and
acquisition thereof by Columbia, to Money Pool transactions (to the extent not
exempt under Rule 52), and to intercompany loans to any less than wholly-owned
Non-Utility Subsidiary. 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 Parent Guarantees and 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 applicable to the acquisition of the
equity securities of any Financing Subsidiary or Intermediate Subsidiary, and to
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 or other distributions out of capital or unearned surplus
by Columbia and the Non-Utility Subsidiaries. Section 13(b) applies to
NiSource's request for an exemption to allow Non-Utility Subsidiaries to render
services to other Non-Utility Subsidiaries at market prices determined without
regard to cost. Section 12(b) of the Act and Rule 45(c) are applicable to the
allocation of consolidated income tax liability pursuant to the 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.
32
Rule 53(a)(1): NiSource's "aggregate investment" (as defined in Rule 53) in
EWGs is currently $305.6 million, or approximately 38.2% of NiSource's
"consolidated retained earnings" (also as defined in Rule 53) at September 30,
2003 ($799.1 million). NiSource does not hold an interest in any FUCO.
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.
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 APPROVALS.
--------------------
The participation by Bay State, Northern Utilities, Columbia Virginia and
Columbia Pennsylvania in the Money Pool has been approved by the public service
commissions of Massachusetts, Maine, Virginia and Pennsylvania. The orders of
those commissions were filed as exhibits in File No. 70-9945, as was the notice
filing made with the public service commission in New Hampshire. The proposal of
Northern Utilities, Columbia Virginia and Columbia Pennsylvania to allocate
consolidated income taxes in accordance with the Tax Allocation Agreement has
been approved by the public service commissions of Maine, Virginia and
Pennsylvania. The orders of those commissions were filed as exhibits in File No.
70-9681. 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 Applicants request the Commission to publish a notice under Rule 23
with respect to the filing of this Application/Declaration as soon as
practicable. The Applicants request that the Commission's order be issued not
later than December 31, 2003, 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
33
to the participation by the Division of Investment Management in the preparation
of the Commission's decision and/or order, unless the Division of Investment
Management opposes the matters proposed herein.
ITEM 6. EXHIBITS AND FINANCIAL STATEMENTS.
---------------------------------
A. EXHIBITS.
--------
A-1 Amended and Restated Certificate of Incorporation of NiSource
Inc., effective October 31, 2000 (incorporated by reference to
Exhibit 3.1 to NiSource's Current Report on Form 8-K, dated
November 1, 2000, in File No. 001-16189).
A-2 Amended and Restated By-Laws of NiSource Inc. (incorporated by
reference to Exhibit 3.2 to NiSource's Annual Report on Form 10-K
for the year ended December 31, 2001 in File No. 001-16189).
A-3 Restated Certificate of Incorporation of The Columbia Gas System,
Inc, as amended as of November 28, 1995 (incorporated by
reference to Exhibit 3-A to Columbia's Annual Report on Form 10-K
for the year ended December 31, 1995 in File No. 1-1098).
A-4 By-Laws of The Columbia Gas System, Inc., as amended dated
November 18, 1987 (incorporated by reference to Exhibit 3-B to
Columbia's Annual Report on Form 10-K for the year ended December
31, 1987 in File No. 1-1098).
B-1 Indenture, dated as of November 14, 2000, among NiSource Finance,
NiSource, as guarantor, and The Chase Manhattan Bank, as trustee
(incorporated by reference to Exhibit 4.1 to Registration
Statement on Form S-3 filed November 17, 2000 in File No.
333-49330).
B-2 Rights Agreement, dated November 1, 2000, between NiSource Inc.
and ChaseMellon Shareholder Services, L.L.C., as rights agent
(incorporated by reference to Exhibit 4.1 to NiSource's Current
Report on Form 8-K, dated November 1, 2000, in File No.
001-16189).
B-3 NiSource System Money Pool Agreement (incorporated by reference
to Exhibit B-4 to NiSource's Application/Declaration on Form U-1,
as amended, in File No. 70-9681).
B-4 Tax Allocation Agreement for 2002 (incorporated by reference to
Exhibit D to Item 10 of NiSource's Annual Report on Form U5S in
File No. 030-00350).
34
C-1 Registration Statement of NiSource and NiSource Finance on Form
S-3 filed July 29, 2003 ("shelf" registration of $2,807,005,000
of common stock, preferred stock, warrants, debt securities,
guarantees of debt securities, and equity-linked securities)
(File No. 333-107421).
C-2 Registration Statement of NiSource and NiSource Finance on Form
S-4, as amended as of February 15, 2001 ($2,650,000,000 of
NiSource Finance long-term notes and Parent Guarantees thereof)
(File No. 333-54650).
C-3 Registration Statement of NiSource on Form S-8, as amended as of
November 2, 2000 (savings and deferred compensation plans) (File
No. 333-33896).
D None at this time.
E Organizational Chart of NiSource Inc. and Subsidiaries (Form SE -
Required paper format exhibit) (filed herewith).
F Opinion of Counsel (filed herewith).
G Proposed Form of Federal Register Notice (previously filed).
H Projected cash flow summary of NiSource and projected
consolidated capitalization ratios of NiSource for years 2003 -
2006 (filed herewith confidentially by amendment pursuant to Rule
104).
I Projection of exposure under Parent Guarantees for years 2003 -
2006 (filed herewith confidentially by amendment pursuant to Rule
104).
B. FINANCIAL STATEMENTS.
--------------------
FS-1 NiSource Consolidated Statement of Income Incorporated by reference to Current
for the year ended December 31, 2002. Report of NiSource on Form 8-K, filed
October 6, 2003, in File No. 001-16189
FS-2 NiSource Consolidated Balance Sheet as of Incorporated by reference to Current
December 31, 2002. Report of NiSource on Form 8-K, filed
October 6, 2003, in File No. 001-16189
35
FS-3 NiSource Consolidated Statement of Income Incorporated by reference to Quarterly
for the nine months ended September 30, Report of NiSource on Form 10-Q for the
2003. quarter ended September 30, 2003 in File
No. 001-16189
FS-4 NiSource Consolidated Balance Sheet as of Incorporated by reference to Quarterly
September 30, 2003. Report of NiSource on Form 10-Q for the
quarter ended September 30, 2003 in File
No. 001-16189
FS-5 Columbia Consolidated Statement of Income Incorporated by reference to Annual
for the years ended December 31, 2002 Report of Columbia on Form 10-K for the
year ended December 31, 2002 in File No.
1-1098
FS-6 Columbia Consolidated Balance Sheet as of Incorporated by reference to Annual
December 31, 2002 Report of Columbia on Form 10-K for the
year ended December 31, 2002 in File No.
1-1098
FS-7 Columbia Consolidated Statement of Income Incorporated by reference to Quarterly
for the nine months ended September 30, Report of Columbia on Form 10-Q for the
2003 period ended September 30, 2003 in File
No. 1-1098
FS-8 Columbia Consolidated Balance Sheet as of Incorporated by reference to Quarterly
September 30, 2003 Report of Columbia on Form 10-Q for the
period ended September 30, 2003 in File
No. 1-1098
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
36
environmental impact statement with respect to the transactions that are the
subject of this Application/Declaration.
SIGNATURES
Pursuant to the requirements of the Public Utility Holding Company Act of
1935, the undersigned companies has duly caused this amended
Application/Declaration to be signed their behalves by the undersigned thereunto
duly authorized.
NISOURCE INC.
NORTHERN INDIANA PUBLIC SERVICE COMPANY
ENERGYUSA, INC.
NISOURCE CAPITAL MARKETS, INC.
NISOURCE FINANCE CORP.
NISOURCE DEVELOPMENT COMPANY, INC.
NI ENERGY SERVICES, INC.
NISOURCE CORPORATE SERVICES COMPANY
NISOURCE ENERGY TECHNOLOGIES, INC.
KOKOMO GAS AND FUEL COMPANY
KGF TRADING COMPANY
NORTHERN INDIANA FUEL AND LIGHT COMPANY, INC.
NORTHERN INDIANA TRADING COMPANY, INC.
BAY STATE GAS COMPANY
NORTHERN UTILITIES, INC.
PEI HOLDINGS, INC.
GRANITE STATE TRANSMISSION, INC.
CROSSROADS PIPELINE COMPANY
IWC RESOURCES CORPORATION
COLUMBIA ENERGY GROUP
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 ATLANTIC TRADING CORPORATION
COLUMBIA DEEP WATER SERVICES COMPANY
COLUMBIA ACCOUNTS RECEIVABLE CORPORATION
NISOURCE INSURANCE CORPORATION LIMITED
COLUMBIA GULF TRANSMISSION COMPANY
COLUMBIA GAS TRANSMISSION CORPORATION
(signatures continued on next page)
37
COLUMBIA NETWORK SERVICES CORPORATION
CNS MICROWAVE, INC.
COLUMBIA ENERGY SERVICES CORPORATION
COLUMBIA REMAINDER CORPORATION
By: /s/ Jeffrey W. Grossman
-------------------
Name: Jeffrey W. Grossman
Title: Vice President
Date: December 30, 2003
38