(As filed with the Securities and Exchange Commission November 10, 2003)
File No. 70-10169
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM U-1/A
AMENDMENT NO. 1
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 and its subsidiary
Northern Indiana Fuel and Light Company, Inc. and its subsidiary
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.
Bay State GPE, 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.......................................................5
1.3.3 Consolidated Capitalization..............................................................5
1.4. SUMMARY OF REQUESTED APPROVALS....................................................................6
1.5 USE OF PROCEEDS...................................................................................8
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.............................................................10
1.6.3 Financing by Columbia...................................................................14
1.6.4 Utility Subsidiary Financing............................................................15
1.6.5 Non-Utility Subsidiary Financing........................................................16
1.7 CONTINUATION OF MONEY POOLS......................................................................16
1.8 GUARANTEES.......................................................................................19
1.8.1 Parent Guarantees.......................................................................19
1.8.2 Non-Utility Subsidiary Guarantees.......................................................20
1.9 HEDGING TRANSACTIONS...............................................................................20
1.9.1 Interest Rate Hedges....................................................................20
1.9.2 Anticipatory Hedges.....................................................................21
1.10 CHANGES IN CAPITALIZATION OF MAJORITY-OWNED SUBSIDIARIES..........................................21
1.11 FINANCING SUBSIDIARIES............................................................................22
1.12 INTERMEDIATE SUBSIDIARIES.........................................................................23
1.13 SUBSEQUENT REORGANIZATIONS OF NON-UTILITY SUBSIDIARIES............................................24
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 DISTRIBUTIONS OUT OF CAPITAL OR UNEARNED SURPLUS..................................................28
1.17.1 Distributions by Columbia..............................................................28
1.17.2 Payment of Dividends by Non-Utility Subsidiaries.......................................28
1.18 TAX ALLOCATION AGREEMENT..........................................................................29
1.19 CERTIFICATES OF NOTIFICATION......................................................................30
ITEM 2. FEES, COMMISSIONS AND EXPENSES..........................................................................31
ITEM 3. APPLICABLE STATUTORY PROVISIONS.........................................................................31
3.1 GENERAL............................................................................................31
3.2 COMPLIANCE WITH RULES 53 AND 54....................................................................32
ITEM 4. REGULATORY APPROVALS..............................................................................32
ITEM 5. PROCEDURE...............................................................................................33
ITEM 6. EXHIBITS AND FINANCIAL STATEMENTS.......................................................................33
A. EXHIBITS............................................................................................33
B. FINANCIAL STATEMENTS................................................................................35
ITEM 7. INFORMATION AS TO ENVIRONMENTAL EFFECTS.................................................................36
The Application/Declaration filed in this proceeding on September 18,
2003 is hereby 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
previously the holding company for several water distribution companies;/3 and
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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.
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.
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 June 30, 2003, NiSource had
total consolidated assets of $16,896,900,000, including net property, plant and
equipment of $10,068,000,000.
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, 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
----------
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).
7 The components of the Acquisition Debt are described in Item 1.18 below.
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 "exempt wholesale generators" ("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 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 categories of activities permitted
under Rule 58 outside the United States, subject to certain
3
limitations; (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 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
----------
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
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 June 30, 2003, 262,794,466 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 June 30, 2003 the aggregate face amount of the
debentures embedded in the SAILS was $130,680,254. In addition, at June 30,
2003, NiSource (through its Financing Subsidiaries) had outstanding unsecured
long-term indebtedness (not including current portion) totaling $2,540,335,400
with various maturities between April 2005 and December 2027, and $859,400,000
of short-term borrowings under its 3-year credit facility.
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 June 30, 2003, Columbia had
outstanding unsecured long-term indebtedness (not including current portion)
totaling $1,355,166,000, consisting of 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 June 30, 2003 was as follows:
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
--------------------------------- ------------------------------- ------------------------------
Common Stock Equity $4,257,300,000 38.11%
--------------------------------- ------------------------------- ------------------------------
Preferred Stock $84,900,000 0.76%
--------------------------------- ------------------------------- ------------------------------
Long-term Debt $5,041,700,000 45.14%
--------------------------------- ------------------------------- ------------------------------
Short-term Debt* $1,786,200,000 15.99%
--------------------------------- ------------------------------- ------------------------------
Total $11,170,100,000 100.00%
--------------------------------- ------------------------------- ------------------------------
* Including current portion of Long-term Debt.
Columbia's consolidated capitalization (including short-term debt) at
June 30, 2003 was as follows:
--------------------------------- ------------------------------- ------------------------------
Common Stock Equity $2,591,200,000 65.08%
--------------------------------- ------------------------------- ------------------------------
Preferred Stock $0 0%
--------------------------------- ------------------------------- ------------------------------
Long-term Debt $1,390,100,000 34.91%
--------------------------------- ------------------------------- ------------------------------
Short-term Debt* $200,000 0.01%
--------------------------------- ------------------------------- ------------------------------
Total $3,981,500,000 100.00%
--------------------------------- ------------------------------- ------------------------------
* 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, directly or indirectly through one or more Financing
Subsidiaries: (i) 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, (ii) Preferred Stock or other types of
preferred securities (including specifically trust preferred
securities) (together, "Preferred Securities") and
equity-linked securities ("Equity-linked Securities"), and
(iii) notes, debentures and other forms of 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 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
6
refunding or replacing other outstanding long-term securities
where Columbia's capitalization is not increased as a result
thereof).
(iii) 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.
(iv) 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.
(v) 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).
(vi) 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.
(vii) NiSource, for itself and on behalf of the Subsidiaries,
requests authorization to change the terms of the authorized
capitalization of any Subsidiary, provided that, if a
Subsidiary is not wholly owned, all other required shareholder
consents have been obtained for such change.
(viii) NiSource and Columbia request 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 their unsecured
subordinated notes to any Financing Subsidiary to evidence the
transfer of financing proceeds to the parent of the Financing
Subsidiary.
7
(ix) 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.
(x) 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.
(xi) 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.
(xii) 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.
(xiii) NiSource requests authorization on behalf of any current and
future Rule 58 Subsidiaries to engage in certain categories of
activities permitted thereunder outside the United States,
subject to certain limitations.
(xiv) 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.
(xv) 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 years ending during the Authorization Period.
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
8
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
Effective Cost of Money. The effective cost of capital on Long-term
Debt, 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 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, except that 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.
----------
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
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).
1.6.2 NiSource External Financing. NiSource requests
authorization to increase its capitalization through the issuance and sale of
Common 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 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
10
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 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
----------
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).
11
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 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 Securities and Equity-linked Securities. As
indicated, NiSource has not issued any Preferred Stock or other forms of
Preferred Securities. In the future, however, NiSource wishes to have the
flexibility to issue its authorized Preferred Stock and/or issue, directly or
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
12
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 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
----------
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).
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).
13
(c) Long-term Debt. Long-term Debt may be issued, directly
or indirectly through one or more Financing Subsidiaries, in the form of bonds,
notes, medium-term notes or debentures under one or more indentures or 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 commercial paper, notes issued to banks and
other institutional lenders, and other forms of 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.
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
14
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")
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
15
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
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
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).
16
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.
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.
17
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 (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
18
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
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
----------
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
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 or Columbia or by a Financing
Subsidiary of either, Non-Utility Subsidiaries (including Financing Subsidiaries
without credit support from NiSource or Columbia) request authority to provide
to other Non-Utility Subsidiaries guarantees of indebtedness or contractual
obligations or other forms of credit support ("Non-Utility Subsidiary
Guarantees") in an aggregate principal amount not to exceed $2 billion
outstanding at any one time, exclusive of any guarantees and other forms of
credit support that are exempt pursuant to Rule 45(b) and Rule 52(b), provided
however, that the amount of Non-Utility Guarantees in respect of obligations of
any Rule 58 Subsidiaries shall remain subject to the limitations of Rule
58(a)(1). The Non-Utility Subsidiary providing any such credit support may
charge its associate company a fee for each guarantee provided on its behalf
determined in the same manner as specified above.
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 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
20
interest rate swap 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
("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
----------
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).
21
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
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 and the
Subsidiaries may find it desirable to organize and acquire the equity securities
of one or more additional corporations, trusts, partnerships or other entities
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 and, to the extent not exempt under Rule 52, Subsidiaries
also request authorization to issue their subordinated unsecured notes
("Subordinated Notes") to any Financing Subsidiary to evidence the transfer of
financing proceeds by a Financing Subsidiary to its parent company. 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
the immediate parent company of such Financing Subsidiary. However, to avoid
double counting, the amount of Subordinated Notes issued by a parent company to
its Financing Subsidiary will not be counted against such external financing
limitation. Securities issued by any Financing Subsidiary to third parties shall
be exempt pursuant to Rule 52 (and therefore reportable on Form U-6B-2) only if
such securities, if issued directly by the parent company of such the Financing
Subsidiary, would be exempt under Rule 52. NiSource or a Subsidiary may, if
----------
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
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.
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
----------
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
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.
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
----------
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).
24
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
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
----------
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
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:
(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
----------
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
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.
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)
----------
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).
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).
27
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.
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
----------
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).
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).
28
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.
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 $2.95 billion
of senior unsecured notes with varying maturities between April 15, 2003 and
November 15, 2010 that were issued by NiSource Finance to refinance most of the
commercial paper borrowings incurred by NiSource Finance at the time of closing
in order to fund the cash portion of the consideration paid for Columbia's
shares and the debentures embedded in the SAILS (as described in Item 1.3.1
above). The term also includes indebtedness that may be incurred by NiSource or
NiSource Finance during the Authorization Period for the purpose of refinancing
any of the foregoing indebtedness.
----------
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
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 for tax years ending during the Authorization Period 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;
(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
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
Maryland to Columbia and the price per share paid;
(g) The principal amount, interest rate and maturity of any
long-term debt security issued by Columbia Maryland to Columbia;
(h) The amount and terms of any financings consummated by any
Non-Utility Subsidiary that are not exempt under Rule 52;
30
(i) 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;
(j) 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;
(k) The name, parent company, and amount invested in any new
Intermediate Subsidiary or Financing Subsidiary;
(l) 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
(m) 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 Securities, Equity-linked
Securities, Long-term Debt and Short-term Debt by NiSource, and 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 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 NiSource's or any
Non-Utility Subsidiary's acquisition of the equity securities of any Financing
Subsidiary or Intermediate Subsidiary, and the energy-related activities of
Non-Utility Subsidiaries outside the United States. Section 12(c) of the Act and
Rules 26(c) and 46 are applicable to the payment of dividends 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)
31
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.
Rule 53(a)(1): NiSource's "aggregate investment" (as defined in Rule
53) in EWGs is currently $305.6 million, or approximately 35.4% of NiSource's
"consolidated retained earnings" (also as defined in Rule 53) at June 30, 2003
($863.3 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
32
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
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).
33
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).
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) (to be filed by amendment).
F Opinion of Counsel (to be filed by amendment).
G Proposed Form of Federal Register Notice (previously
filed).
H Projected cash flow summary of NiSource and projected
consolidated capitalization ratios of NiSource and
Subsidiaries for years 2003 - 2006 (to be filed
confidentially by amendment pursuant to Rule 104).
I Projection of exposure under Parent Guarantees for
years 2003 - 2006 (to be filed confidentially by
amendment pursuant to Rule 104).
34
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
July 15, 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
July 15, 2003, in File No. 001-16189
FS-3 NiSource Consolidated Statement of Income Incorporated by reference to Quarterly
for the six months ended June 30, 2003. Report of NiSource on Form 10-Q for the
quarter ended June 30, 2003 in File No.
001-16189
FS-4 NiSource Consolidated Balance Sheet as of Incorporated by reference to Quarterly
June 30, 2003. Report of NiSource on Form 10-Q for the
quarter ended June 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 six months ended June 30, 2003 Report of Columbia on Form 10-Q for the
period ended June 30, 2003 in File No.
1-1098
FS-8 Columbia Consolidated Balance Sheet as of Incorporated by reference to Quarterly
June 30, 2003 Report of Columbia on Form 10-Q for the
period ended June 30, 2003 in File No.
1-1098
35
Form 10-Q for the period ended
June 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 environmental impact statement with respect to the
transactions that are the subject of this Application/Declaration.
36
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
NORTHERN INDIANA FUEL AND LIGHT COMPANY, INC.
BAY STATE GAS COMPANY
BAY STATE GPE, INC.
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: November 10, 2003
38