[Federal Register Volume 63, Number 16 (Monday, January 26, 1998)]
[Notices]
[Pages 3775-3779]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-1677]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 35-26815]
Filings Under the Public Utility Holding Company Act of 1935, as
Amended (``Act'')
January 16, 1998.
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 References.
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 9, 1998, to the Secretary, Securities and Exchange
Commission, Washington, D.C. 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.
[[Page 3776]]
National Fuel Gas Company et al. (70-9153)
National Fuel Gas Company (``NFG''), a gas registered holding
company, and each of its wholly owned subsidiaries, National Fuel Gas
Distribution Corporation (``Distribution''), a gas utility company, and
NFG's nonutility subsidiaries, National Fuel Gas Supply Corporation
(``Supply''), Utility Constructors, Inc. (``UCI''), Highland Land &
Minerals, Inc. (``Highland''), Leidy Hub, Inc. (``Leidy''), Horizon
Energy Development, Inc. (``Horizon''), Data-Track Account Services,
Inc. (``Data-Track'') and Seneca Independence Pipeline Company
(``Seneca Independence''), each of 10 Lafayette Square, Buffalo, New
York 14203, Seneca Resources Corporation (``Seneca Resources''),
Niagara Independence Marketing Company (``Niagara Marketing'') and
Niagara Energy Trading Inc. (``Niagara Energy''), each of 1201
Louisiana Street, Suite 400, Houston, Texas 77002, and National Fuel
Resources, Inc. (``NFR'') of 165 Lawrence Bell Drive, Suite 120,
Williamsville, New York 14221 (collectively, ``Applicants''), have
filed an application-declaration (``Application'') under sections 6(a),
7, 9(a), 10, 12(b), 12(f), 32 and 33 of the Act, and rule 53 under the
Act requesting authorization to engage in various financing and related
transactions for the period from the effective date of an order in this
matter through December 31, 2002 (``Authorization Period''). The
Applicants, other than NFG, are sometimes referred to collectively as
``Subsidiaries.''
The authorization would be subject to the following conditions: (1)
with respect to long-term debt financing activities (a) NFG's long-term
debt must be rated investment grade by at least one nationally
recognized statistical rating organization, as that term is used in
Rule 15c3-1(c)(2)(vi)(F) under the Securities Exchange Act of 1934 and
(b) NFG's common equity, as reflected in its most recent Form 10-K or
Form 10-Q, does not fall below 30% of its consolidated capitalization;
(2) the effective cost of money for debt may not exceed 300 basis
points over the interest rate on U.S. Treasury securities of a
comparable term; (3) the effective cost of money for preferred stock
and other fixed income securities may not exceed 500 basis points over
the interest rate on 30-year U.S. Treasury securities; (4) the maturity
of debt may not be more than 50 years; (5) issuance expenses in
connection with an offering of securities, including any underwriting
fees, commissions or other similar compensation, may not exceed 5% of
the principal or total amount of the securities being issued; and (6)
the aggregate amount of external debt and equity financing to be issued
by NFG during the Authorization Period will not exceed (a) $750 million
of short-term borrowings outstanding at any one time and (b) $2 billion
of long-term debt and equity outstanding at any one time, excluding any
common stock issued under the NFG Rights Plan.\1\ The value of debt
securities will equal the aggregate principal amount of the debt
securities while the value of equity securities will equal the
consideration received by NFG at the time the equity securities are
issued. In addition, proceeds from the sale of securities by NFG in
external financing transactions will be used by NFG for general
corporate purposes including (i) the financing of capital expenditures
of NFG and its Subsidiaries, (ii) the financing of inventories and
other working capital requirements, (iii) the acquisition, retirement
or redemption of securities issued by NFG that qualifies for the
exemption in rule 42 or a successor rule and/or (iv) investments in
exempt wholesale generators (``EWGs''), as defined in section 32 of the
Act, foreign utility companies (``FUCOs''), as defined in section 33 of
the Act, and energy-related companies and gas related companies, each
as defined in rule 58. Any deviation from these conditions would
require further Commission approval.
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\1\ The terms and conditions of this authorization are contained
in Holding Co. Act Release No. 26532 (June 12, 1996).
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The proposed transactions and the proposed participation of the
various Applicants are described below.
1. External Financing by NFG
NFG proposes to issue and sell short-term securities, with a term
not to exceed 270 days, aggregating not more than $750 million
outstanding at any one time during the Authorization Period. NFG also
proposes to issue and sell long-term securities aggregating not more
than $2 billion outstanding at any one time through the Authorization
Period. Securities may be issued through underwriters or dealers,
directly to a limited number of purchasers or a single purchaser,\2\
through agents, in exchange for securities of other companies, the
acquisition of which is separately authorized by the Commission or
exempt under section 32, 33 or 34 or rule 58, as applicable, and/or
through compensation, benefits and incentive plans, customer stock
purchase plans and dividend reinvestment plans (collectively, ``Stock
Issuance Plans''). NFG also proposes to engage in interest rate swaps
and similar hedging instruments.
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\2\ If underwriters are used in the sale of the securities,
these 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.
The securities may be offered to the public either through
underwriting syndicates (which may be represented by managing
underwriters) or directly by one or more underwriters acting alone.
The securities may be sold directly by NFG or through agents
designated by NFG from time to time. If dealers are used in the sale
of any securities, these securities will be sold to the dealers and
any dealer may then resell the securities to the public at fixed
prices or varying prices to be determined by the dealer at the time
of resale. NFG may also sell securities to agents acting as
principal. These agents may sell the securities to the public at
fixed prices or varying prices to be determined by the agent at the
time of resale. If equity securities are being sold in an
underwritten offering, NFG may grant the underwriters an over-
allotment option permitting the purchase from NFG of additional
equity securities (an additional 15% under present guidelines), at
the same price as the equity securities then being offered, for the
sole purpose of covering over-allotments.
Securities issued by NFG may be sold under ``delayed delivery
contracts'' which permit the underwriters or agents to locate buyers
who will agree to buy the securities at an agreed price on the trade
date but accept delivery at a later date. Debt securities may also
be sold through the use of medium-term notes and similar programs or
in transactions under which securities are sold to initial
purchasers and then resold by the initial purchasers (typically,
investment banks or similar institutions) in transactions covered by
rule 144A or another exemption under the Securities Act of 1933
(``Securities Act'') or under Regulation S under the Securities Act.
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a. Short-term Debt
NFG proposes to issue short-term debt, consisting of borrowings
under its credit facilities and the issuance of commercial paper and/or
other forms of short-term financing. NFG represents that in no case
will the outstanding balance of all short-term borrowings exceed $750
million during the Authorization Period. With respect to its short-term
borrowings, NFG proposes that the authorizations requested in this
proceeding supersede the short-term borrowing authorization contained
in Commission order, dated December 28, 1995 (``December 1995
Order'').\3\
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\3\ See Holding Co. Act Release No. 26443.
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Commercial paper will be sold by NFG in domestic or foreign
commercial paper markets directly or through dealers and placement
agents at prevailing discount rates or prevailing coupon rates at the
date of issuance for commercial paper of comparable quality and terms.
NFG anticipates that the commercial paper will then be resold at
[[Page 3777]]
a discount to corporate and institutional investors, which may include
commercial banks, insurance companies, pension funds, investment
trusts, mutual funds, foundations, colleges and universities, finance
companies and nonfinancial corporations. Foreign commercial paper may
also be sold to individual investors.
Back-up lines of credit for 100% of the outstanding amount of
commercial paper are generally required by credit rating agencies. NFG
currently has a committed credit facility which provides support for
its commercial paper program.
NFG proposes to establish credit facilities with banks and/or other
financial institutions and to issue and sell, from time to time, short-
term notes. These notes will bear interest at rates comparable to, or
lower than, those available through other forms of short-term borrowing
with similar terms requested in this proceeding, and will have a term
of not more than 270 days. NFG requests authority to incur, as
necessary, commitment or similar fees not to exceed one-half of one
percent (.50%) of the average daily credit facility available, and/or
compensating balances not to exceed twenty percent (20%) of the credit
facility established.
NFG further requests authorization to amend its commercial paper
program or credit facilities without further Commission authorization,
provided that the term of any borrowing under the program or facility
does not extend beyond 270 days from its date of issuance or borrowing.
NFG states that it may engage in other types of short-term
financing, which would include bank borrowings and other short-term
securities issued under a mortgage or indenture, as it deems
appropriate at the time of issuance. The term of these short-term
borrowings will not exceed 270 days.
b. Long-term Securities
NFG proposes to issue and sell long-term securities which would
consist of any combination of long-term debt, debt having terms in
excess of 270 days, common stock, preferred stock or other equity
securities. The aggregate principal amount of long-term debt securities
and the value of the consideration received from the issuances of
equity securities under the Application during the Authorization Period
will not exceed $2 billion at any one time outstanding.
Long-term debt securities would include, but not be limited to,
debentures, convertible debt, subordinated debt, medium-term notes,
bank borrowings and securities with call or put options. Long-term debt
securities would have the designation, aggregate principal amount,
maturity, interest rate(s) or methods of determining the same, interest
payment terms, redemption provisions, non-refunding provisions, sinking
fund terms, conversion or put terms, U.S. dollar or foreign currency
denominations, security and subordination provisions, and other terms
and conditions as NFG may determine at the time of issuance. Medium-
term notes would be issued under the Indenture, dated as of October 15,
1994, between NFG and The Bank of New York, Trustee, as amended
(``Indenture''). Debentures and other long-term securities may be
issued under the Indenture or under a mortgage or other indenture.
Equity securities would include common stock (including the rights
with respect to such common stock), including common stock issued by
Stock Issuance Plans under prior Commission orders \4\ during the
Authorization Period and future Stock Issuance Plans authorized by the
Commission, preferred stock, other preferred securities, options and/or
warrants convertible into common or preferred stock and common and/or
preferred stock issued upon the exercise of convertible debt, rights,
options, warrants and/or similar securities.
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\4\ See Holding Co. Act Release Nos. 26670 (Feb. 18, 1997)
(``February 1997 ORder''), 26655 (Jan. 24, 1997), 26394 (Oct. 19,
1995), 26261 (Mar. 30, 1995), 26176 (Nov. 30, 1994), 25753 (Mar. 5,
1993) and 24793 (Dec. 28, 1988) (collectively, ``Existing Common
Stock Authorizations'').
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From time to time during the Authorization Period, NFG may adopt
other similar Stock Issuance Plans. For instance, a direct stock
purchase plan with a dividend reinvestment feature that allows sales to
persons not already shareholders may be implemented. NFG proposes to
issue shares of common stock under existing plans and similar plans or
plan funding arrangements it may adopt and to engage in other sales of
is shares of common stock for reasonable business purposes without the
requirement of prior Commission authorization during the Authorization
Period. With respect to issuances of long-term securities, NFG proposes
that the authorizations requested in this proceeding supersede the
authorizations contained in the Existing Common Stock Authorizations,
except that the grants of common stock and rights to purchase common
stock under the 1997 Award and Option Plan may be issued through
December 12, 2006.\5\
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\5\ The 1997 Award and Option Plan under the February 1997 Order
authorizes awards granting the right to purchase up to 1,900,000
shares of common stock through December 12, 2006.
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c. Hedging Transactions
NFG proposes to enter into hedging transactions (``Hedge Program'')
related to all or a portion of existing or anticipated financing,
including floating rate debt or fixed rate debt, using interest rate
swaps, caps, floors, collars, ceilings, options and forwards
(collectively, ``Derivative Transactions'') with counterparties during
the Authorization Period, in notional (i.e., principal) amounts
aggregating not in excess of the amount of debt outstanding at any one
time.
NFG proposes to use two different swap strategies. Under one swap
strategy, NFG would agree to make payments of interest to a
counterparty, payable periodically. The interest would be payable at a
variable or floating rate index and would be calculated on a notional
amount. In return, the counterparty would agree to make payments to NFG
based upon the same notional amount and at an agreed upon fixed
interest rate. This would be a ``floating-to-fixed swap'' on NFG's
part. Under another swap strategy, NFG would pay a fixed interest rate
and receive a variable interest rate on a notional amount. This would
be a ``fixed-to-floating swap'' on NFG's part.
NFG also proposes to enter into an anticipatory interest rate
hedging program (``Anticipatory Hedge Program'') using Derivative
Transactions within a limited time prior to the issuance of short- or
long-term debt securities. The Hedge Program will be used to fix and/or
limit the interest rate risk exposure of any new issuance through: (1)
a forward sale of exchange-traded U.S. Treasury futures contracts, U.S.
Treasury securities and/or a forward swap (each a ``Forward Sale'');
(2) the purchase of put options on U.S. Treasury securities (``Put
Options Purchase''); (3) a Put Options Purchase in combination with the
sale of call options on U.S. Treasury securities (``Zero Cost
Collar''); or (4) some combination of a Forward Sale, Put Options
Purchase and/or Zero Cost Collar.
The program 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, the opening of over-the-counter
positions with one or more counterparties (``Off-Exchange Trades'') or
a combination of On-Exchange-Trades and Off-Exchange-Trades'') or a
combination of On-Exchange-Trades and Off-Exchange-Trades. NFG will
determine the optimal
[[Page 3778]]
structure of the Anticipatory Hedge Program at the time of execution.
NFG may decide to lock in interest rates and/or limit its exposure to
interest rate increases. All open positions under the Anticipatory
Hedge Program will be closed on or prior to the date of the new
issuance and NFG will not, at any time, take possession of the
underlying U.S. Treasury securities.
All transactions entered into under the Hedge Program will be bona
fide hedges and will meet the criteria established by the Financial
Accounting Standards Board in order to qualify for hedge accounting
treatment, and NFG will comply with the financial disclosure
requirements associated with hedging transactions.
NFG proposes that the authorizations requested in this proceeding
with respect to hedging transactions, including the Hedge Program and
the Anticipatory Hedge Program, supersede the authorizations to engage
in hedging transactions contained in the December 1995 Order.
d. Other Securities
In addition to the specific securities for which NFG seeks
authorization in this proceeding, NFG also proposes to issue other
types of securities (``Other Securities'') that it deems appropriate
during the Authorization Period. NFG requests that the Commission
reserve jurisdiction over the issuance of Other Securities. NFG also
undertakes that it will file a post-effective amendment in this
proceeding describing the general terms of the proposed Other
Securities and obtain a supplemental order of the Commission
authorizing the issuances of Other Securities.
2. Intrasystem Financing by Subsidiaries
The Subsidiaries propose various financing transactions between NFG
and the Subsidiaries and among the Subsidiaries.
a. Money Pool
Under the December 1995 Order, NFG, Distribution, Supply, Seneca
Resources, Highland, Leidy, Horizon, Data-Track, NFR and UCI (``Current
Money Pool Participants'') were authorized to engage in a money pool
arrangement (``Money Pool'') through December 31, 2000. The Current
Money Pool Participants now propose to continue to participate in, and
incur short-term borrowings from, the Money Pool through the
Authorization Period. NFG proposes to add Seneca Independence, Niagara
Marketing and Niagara Energy as new participants to the Money Pool. NFG
further proposes that the authorizations requested in this proceeding
with respect to the Money Pool supersede the authorizations for the
current Money Pool contained in the December 1995 Order.
At certain times during the year, NFG and certain Subsidiaries
generate surplus funds. Each Subsidiary may contribute excess funds to
the Money Pool from time to time. The Applicants propose that the
Subsidiaries borrow short-term funds from the Money Pool and that the
maximum amount of Money Pool borrowings outstanding for each Subsidiary
will be determined by NFG and the Subsidiaries in accordance with
business needs. Subsidiary borrowings from the Money Pool would be used
to provide financing for general corporate purposes, including the
temporary financing of inventories and other working capital
requirements and construction spending.
NFG will administer the Money Pool and coordinate the system's
short-term borrowings but cannot borrow surplus funds generated by the
Subsidiaries. NFG will match, to the extent possible, the short-term
cash surpluses and borrowing requirements of the Subsidiaries.
The sources of funding for the Money Pool may consist of surplus
funds of NFG and/or of its Subsidiaries, proceeds from NFG's sale of
commercial paper, borrowings under credit facilities, borrowings by NFG
from banks or other financial institutions and/or issuances of other
securities. Amounts borrowed by NFG under the $750 million short-term
borrowing authorization requested in this proceeding would be included
in the Money Pool.
Subsidiary requests for short-term loans will be met first from
available surplus funds of the other Subsidiaries, and then from NFG
corporate funds, if available. In the event these sources of funds are
insufficient, borrowings outside the system will be made by NFG through
the issuance and sale of commercial paper, borrowings under credit
facilities, other borrowing facilities with banks or other financial
institutions and/or issuances of other securities. These borrowings
will not exceed $750 million during the Authorization Period.
The interest rate on Subsidiary borrowings consisting solely of
internal funds from the Money Pool will be the same rate charged on
high-grade unsecured 30-day commercial paper sold through dealers by
major corporate issuers. Borrowings consisting wholly or in part of
funds obtained through the sale of commercial paper or borrowings from
banks or other financial institutions will pay interest at a rate equal
to NFG's net cost for these borrowings.
The Applicants state that none of the internal subsidiary funds
(surplus funds of the Subsidiaries available in the Money Pool) will be
used for the acquisition of an interest in an EWG or a FUCO except (a)
investment by Horizon of up to $150 million and (b) investment by NFR
or through a subsidiary, if formed, of up to $25 million.
b. Internal Nonutility Securities
National requests on behalf of the Subsidiaries, other than
Distribution (``Nonutility Subsidiaries''), authorization to issue and
sell securities of any type that are not otherwise exempt or authorized
by Commission order (``Internal Nonutility Securities'') to NFG and
other Nonutility Subsidiaries during the Authorization Period. NFG
requests that the Commission reserve jurisdiction over the issuances of
Internal Nonutility Securities. NFG also undertakes that it will file a
post-effective amendment in this proceeding describing the general
terms of the proposed Internal Nonutility Securities and obtain a
supplemental order of the Commission authorizing the issuances of
Internal Nonutility Securities.
3. External Financing by Subsidiaries
NFG also requests authorization for the Nonutility Subsidiaries to
issue and sell securities of any type that are not otherwise exempt or
authorized by Commission order, including guarantees (collectively,
``External Nonutility Securities''), to persons other than NFG,
including banks, insurance companies and other financial institutions
during the Authorization Period. NFG requests that the Commission
reserve jurisdiction over the issuance of External Nonutility
Securities. NFG also undertakes that it will file a post-effective
amendment in this proceeding describing the general terms of the
proposed External Nonutility Securities and obtain a supplemental order
of the Commission authorizing the issuances of External Nonutility
Securities.
Distribution also proposes to issue and sell debt securities of any
type that are not otherwise exempt or authorized by Commission order to
persons other than NFG, including banks, insurance companies and other
financial institutions, in an aggregate principal amount which will not
exceed $250 million during the Authorization Period.
[[Page 3779]]
4. Financing Entities
NFG and the Nonutility Subsidiaries propose to organize new
corporations, trusts, partnerships or other entities created for the
purpose of facilitating financings. These entities will issue to third
parties interests in such entities or other securities authorized or
issued under an exemption. Additionally, request is made for: (a) The
issuance of debentures or other evidences of indebtedness by NFG or
Nonutility Subsidiaries to a financing entity in return for the
proceeds of the financing, and (b) the acquisition by NFG and
Nonutility Subsidiaries of voting interests or equity securities issued
by the financing entity to establish such Applicant's ownership of the
financing entity. NFG and the Nonutility Subsidiaries also propose to
enter into guarantees and expense agreements with the corresponding
financing entities, under which they would agree to pay all amounts
payable relating to the securities issued by the financing entity. The
amount of any guarantees provided to financing entities will not exceed
$250 million in the aggregate at any one time during the Authorization
Period.
5. Guarantees by National
NFG is currently authorized to guarantee up to $500 million of
obligations under Commission order dated November 12, 1993 (HCAR No.
25922) (``November 1993 Order''). NFG now proposes to guarantee
securities of, and provide other forms of credit support with respect
to obligations of, its Subsidiaries in an aggregate amount not to
exceed $2 billion at any time during the Authorization Period. The $2
billion of guarantees is in addition to any financing requested in the
Application. The terms and conditions of any guarantee will be
negotiated on a case by case basis as the need arises. NFG proposes
that the guarantee authorization requested in this proceeding supersede
and replace the guarantee authorization granted in the November 1993
Order.
Guarantees and other forms of credit support provided by NFG on
behalf of any EWG, FUCO or rule 58 company will be subject to the
limitations of rule 53 or rule 58, as applicable.
6. Acquisition of EWGs, FUCOs and Rule 58 Companies
NFG proposes to use some or all of the proceeds of the financings
for which authorization is requested in this proceeding to invest in
EWGs and FUCOs in an aggregate amount which, when added to NFG's
aggregate investment, as defined in rule 53(a)(1), would not exceed 50%
of NFG's consolidated retained earnings, as defined in rule 53(a)(1).
NFG proposes that the authorization to invest in EWGs and FUCOs
requested in this Application supersede the authorization applicable to
EWG and FUCO investments contained in Commission order dated August 29,
1995 (HCAR No. 26364).
NFG also proposes to use some or all of the proceeds of the
financings for which authorization is requested in this proceeding to
make investments in energy-related companies and gas-related companies
under rule 58.
For the Commission, by the Division of Investment Management,
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 98-1677 Filed 1-23-98; 8:45 am]
BILLING CODE 8010-01-M