[Federal Register Volume 59, Number 19 (Friday, January 28, 1994)]
[Unknown Section]
[Page ]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-1810]


[Federal Register: January 28, 1994]


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SECURITIES AND EXCHANGE COMMISSION
[Release No. 35-25975]


Filings Under the Public Utility Holding Company Act of 1935 
(``Act'')

January 21, 1994.
    Notice is hereby given that the following filing(s) has/have been 
made with the Commission pursuant to provisions of the Act and rules 
promulgated thereunder. All interested persons are referred to the 
application(s) and/or declaration(s) for complete statements of the 
proposed transaction(s) summarized below. The application(s) and/or 
declaration(s) and any amendments thereto is/are available for public 
inspection through the Commission's Office of Public Reference.
    Interested persons wishing to comment or request a hearing on the 
application(s) and/or declaration(s) should submit their views in 
writing by February 14, 1994 to the Secretary, Securities and Exchange 
Commission, Washington, DC 20549, and serve a copy on the relevant 
applicant(s) and/or declarant(s) at the address(es) specified below. 
Proof of service (by affidavit or, in case of an attorney at law, by 
certificate) should be filed with the request. Any request for hearing 
shall identify specifically the issues of fact or law that are 
disputed. A person who so requests will be notified of any hearing, if 
ordered, and will receive a copy of any notice or order issued in the 
matter. After said date, the application(s) and/or declaration(s), as 
filed or as amended, may be granted and/or permitted to become 
effective.

The Columbia Gas System, Inc. et al. (70-8317)

    The Columbia Gas System, Inc. (``Columbia''), a registered holding 
company,\1\ and its nonutility subsidiary company Columbia LNG 
Corporation (``Columbia LNG''), both of 20 Montchanin Road, Wilmington, 
Delaware 19807, have filed an application-declaration under sections 
6(a), 7, 9(a), 10, 12(b) and 12(c) of the Act and rules 42, 43, 45 and 
46 thereunder.
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    \1\On July 31, 1991, Columbia and Columbia Gas Transmission 
Corporation, a wholly owned subsidiary which is not an applicant-
declarant hereunder, filed petitions for reorganization under 
Chapter 11 of Title 11 of the United States Code with the United 
States Bankruptcy Court for the District of Delaware (Case Nos. 91-
803 and 91-804) and were thereupon continued in the management of 
their respective businesses and possession of their respective 
properties as debtors-in-possession.
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    Columbia LNG owns and is currently maintaining in a standby mode a 
one Bcf per day liquefied natural gas (``LNG'') importation terminal at 
Cove Point, Maryland (``Terminal''). Columbia LNG also owns and 
operates an 87-miles, 36-inch natural gas pipeline from Cove Point to 
Loudoun County, Virginia (``Pipeline,'' collectively, the 
``Facility''). Columbia owns 90.8% of the issued and outstanding common 
stock of Columbia LNG, and Shell LNG Company (``Shell LNG'') owns the 
balance (9.2%).
    Columbia LNG and PEPCO Enterprises, Inc. (``PEI''), a wholly owned 
subsidiary of Potomac Electric Power Company (``PEPCO''), a public-
utility company unaffiliated with Columbia, have agreed to develop a 
peak shaving service (``Peaking'') at the Terminal.\2\ The business 
plan contemplates the use of the Terminal's existing storage tanks, 
vaporization equipment, and other plant infrastructure to provide the 
Peaking service. A liquefaction facility (``Liquefaction Unit'') would 
be constructed at the Terminal to liquefy natural gas received from 
Peaking customers for storage in the existing tanks.
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    \2\A peak shaving facility has the ability to deliver large 
amounts of gas on very short notice over brief periods of time for 
use on occasions, such as very cold winter days or very hot summer 
days, when such increased supplies are needed to meet the 
requirements of heating or electric generating customers. Peaking 
service is distinguishable from storage service because storage is 
typically designed to provide meaningful deliveries of natural gas 
on a more frequent basis over a longer period of time, e.g., 120 
days.
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    Applicants-declarants propose that, a limited partnership between 
Columbia LNG and a subsidiary of PEI, Cove Point Energy Company 
(``Partnership'') will: (i) Own and operate the Facility; (ii) provide 
Peaking and pipeline transportation services; and (iii) pursue the 
implementation of an ongoing baseload LNG import trade.
    The Partnership agreement will provide for the contribution of the 
Facility (including specified associated rights and liabilities) by 
Columbia LNG to the Partnership, and for PEI's contribution to the 
Partnership of up to $25 million which will consist of $10 million in 
cash to the Partnership in the form of equity plus a $15 million loan 
secured by the assets of the Partnership. The transfer of assets and 
PEI's contribution of capital would take place at a closing to occur on 
a date after all necessary regulatory approvals are obtained and 
certain conditions precedent are satisfied (``Construction Capital 
Closing''). Columbia LNG and PEI, either directly or through 
subsidiaries, will each obtain a 50% interest and equal voting rights 
in the Partnership. Applicants-declarants expect that Columbia LNG will 
hold a limited partner interest and a general partner interest either 
directly or indirectly through one or more new, wholly owned 
subsidiaries of Columbia LNG (``CLG Subsidiaries'') that will be the 
operator of, and/or hold partnership interests in, the Partnership.
    PEI's equity contributions and loan proceeds will be used for 
recommissioning the Facility (including building the Liquefaction Unit 
and related equipment), operating and maintenance expenses, and working 
capital. Amounts in excess of $25 million necessary prior to the 
completion of the recommissioning of the Facility, including any 
necessary construction backstop and working capital, will be provided 
by Columbia LNG and/or the CLG Subsidiaries, as an equity contribution, 
up to $7.0 million.
    By Commission order dated September 29, 1993 (HCAR No. 25896) 
(``September Order''), Columbia and Columbia LNG were authorized to 
defer principal and interest payments on Columbia LNG's long- and 
short-term debt for the period September 30, 1993 through February 28, 
1994. The aggregate amount of such deferred principal and interest 
payments is estimated to be $3.8 million.
    Columbia and Columbia LNG now propose to continue to defer 
principal and interest payments on Columbia LNG's long- and short-term 
debt for the period March 1, 1994 through December 31, 1994, or 
Construction Capital Closing, whichever is earlier. The aggregate 
amount of such principal and interest payments proposed to be deferred 
is $7.9 million.
    Columbia and Columbia LNG propose to proceed immediately upon 
Commission approval and prior to the issuance of the additional common 
stock by Columbia LNG to reduce the par value of Columbia LNG's common 
stock from $25 to $1 and increase the number of Columbia LNG's 
authorized shares to up to 15,000,000.
    Accomplishing this reduction in par value would involve the 
following steps: (i) Columbia LNG's certificate of incorporation would 
be amended to reduce the common stock's par value from $25.00 per share 
to $1.00 per share and to increase the number of Columbia LNG's 
authorized shares to up to 15,000,000; and (ii) the value of Columbia 
LNG's stated capital would be reduced by up to $24.00 per share of 
common stock outstanding, and such amount would be transferred to 
additional paid in capital.
    Columbia and Columbia LNG also propose to proceed immediately after 
Construction Capital Closing with a recapitalization of Columbia LNG to 
establish a 100% equity capital structure for Columbia LNG. To effect 
this recapitalization, Columbia and Columbia LNG propose that Columbia 
make a capital contribution to Columbia LNG of up to $48.1 million of 
installment promissory notes and short-term debt. An additional amount 
up to $3.9 million would also be contributed which would consist of 
accrued interest to the effective date of the recapitalization deferred 
pursuant to this application-declaration and the interest which was 
deferred pursuant to the September Order.
    Columbia LNG also proposes to contribute the Facility to the 
Partnership at Construction Capital Closing in exchange for a 50% 
interest in the Partnership to be held directly by Columbia LNG and/or 
indirectly through one or more of the CLG Subsidiaries.
    Further, Columbia LNG and Columbia propose that through December 
31, 1995, Columbia LNG offer to issue and sell to Columbia and Shell 
LNG, in proportion to their respective common stock holdings in 
Columbia LNG, up to 7,000,000 shares of common stock, $1 par value, in 
an aggregate amount up to $7.0 million. The up to $7.0 million, 
together with funds on hand and anticipated tax benefits, will (i) 
provide for the continued operation and maintenance of the Facility 
pending Columbia LNG's contribution of the Facility to the Partnership; 
(ii) provide for continued expenditure of developmental costs prior to 
Construction Capital Closing; (iii) provide for any direct and indirect 
Columbia LNG cash capital contributions to the Partnership, including 
the recommissioning costs, if any, and (iv) provide for all other 
operating requirements of Columbia LNG through December 31, 1995. If 
Shell LNG chooses not to purchase any common stock, the entire amount 
up to $7.0 million will be purchased by Columbia, with a corresponding 
increase in Columbia's ownership of Columbia LNG. Some or all of the 
additional developmental costs incurred prior to Construction Capital 
Closing may be reimbursed to Columbia LNG by Cove Point Energy Company.
    Columbia LNG also proposes to create and fund the CLG Subsidiaries 
which will be operator of, and/or hold interests as partners in, the 
Partnership. At the time of the Construction Capital Closing, Columbia 
LNG anticipates transferring all current Columbia LNG employees to one 
or more of the CLG Subsidiaries which will hire additional employees as 
necessary to undertake day-to-day responsibility for operation of the 
various Partnership assets. The Partnership will reimburse the operator 
for all costs incurred by it in such operations and pay the operator 
certain management fees. After this transfer, Columbia LNG's principal 
assets will consist of its Partnership interest and its common stock 
holdings in the CLG Subsidiaries. To fund the CLG Subsidiaries' 
operating requirements through December 31, 1995, Columbia LNG proposes 
to acquire from the CLG Subsidiaries in the aggregate up to $1.0 
million of common stock, $1 par value, to be issued and sold by the CLG 
Subsidiaries.

    For the Commission, by the Division of Investment Management, 
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 94-1810 Filed 1-27-94; 8:45 am]
BILLING CODE 8010-01-M