[Federal Register Volume 65, Number 142 (Monday, July 24, 2000)]
[Notices]
[Pages 45634-45640]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-18624]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 35-27201]


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

July 18, 2000.
    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 under the Act. 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 amendment(s) is/are available for public 
inspection through the Commission's Branch 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 August 11, 2000, to the Secretary, Securities and Exchange 
Commission, Washington, DC 20549-0609, 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 the case of an attorney at law, 
by certificate) should be filed with the request. Any request for 
hearing should identify specifically the issues of facts 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 August 11, 2000, the applicant(s) and/or 
declaration(s), as filed or as amended, may be granted and/or permitted 
to become effective.

Eastern Enterprises (70-9605)

    Eastern Enterprises (``Eastern''), 9 Riverside Road, Weston, 
Massachusetts 02139, a gas utility holding company claiming exemption 
from registration by rule 2 under the Act, has filed an application 
under sections 3(a)(1), 9(a)(2) and 10 of the Act. Eastern proposes to 
acquire all of the issued and outstanding common stock of EnergyNorth, 
Inc. (``ENI'', also a gas utility holding company claiming exemption 
under the Act by rule 2. In addition, Eastern requests that the

[[Page 45635]]

Commission issue an order under section 3(a)(1) of the Act confirming 
that Eastern and its subsidiary companies, as such, as well as ENI in 
its capacity as a holding company, will continue to qualify for an 
exemption under section 3(a)(1) following the proposed transaction.
    To accomplish the acquisition (referred to here as the ``Merger''), 
Eastern and ENI have entered into an Agreement and Plan of 
Reorganization (``Merger Agreement''), dated as of July 14, 1999, as 
amended by Amendment No. 1, dated as of November 4, 1999 (``Amended 
Merger Agreement''). The Merger Agreement provides, among other things, 
that a special purpose subsidiary of Eastern (``Merger Sub'') will be 
formed to effect the Merger. Following the Merger, Eastern will own all 
the outstanding common stock of ENI and ENGI will remain a wholly owned 
subsidiary of ENI.
    Under another Agreement and Plan of Merger, dated November 4, 1999, 
by and among KeySpan Corporation (``KeySpan''), ACJ Acquisition LLC, a 
wholly owned subsidiary of KeySpan, and Eastern, KeySpan has agreed to 
acquire all of the issued and outstanding common stock of Eastern in an 
all-cash transaction (the ``KeySpan Merger''). KeySpan has filed a 
separate application under the Act for approval of the KeySpan Merger 
and has stated that, following its acquisition of Eastern, it intends 
to register as a holding company under section 5 of the Act.\1\
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    \1\ KeySpan filed its application-declaration under the Act 
seeking approval of the KeySpan Merger on March 6, 2000 (see S.E.C. 
File No. 70-9641). The Commission's notice of the KeySpan Merger 
filing is set forth elsewhere in this Release.
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    The obligation of Eastern under the amended Merger Agreement to 
acquire ENI is not conditioned on KeySpan's acquisition of Eastern, 
although the Amended Merger Agreement contemplates that the Merger will 
close contemporaneously with the KeySpan Merger. If the closing on the 
KeySpan merger is delayed beyond March 31, 2001, ENI would have the 
option to terminate the Merger Agreement or to extend the closing date 
to coincide with the closing of the KeySpan Merger.

I. Description of the Parties

A. Eastern

    Eastern currently owns all of the issued and outstanding common 
stock of three gas utility companies: Boston Gas Company (``Boston 
Gas''); Essex Gas Company (``Essex Gas''); and Colonial Gas Company 
(``Colonial Gas'').\2\ Each of these companies is organized under the 
laws of the Commonwealth of Massachusetts and operates as a gas utility 
comapny exclusively within Massachusetts. Boston Gas, Essex Gas, and 
Colonial Gas are subject to regulation by the Massachusetts Department 
of Telecommunications and Energy (``MDTE'') as to retail rates, 
transportation rates, affiliate transactions, securities issuances, and 
other matters.
    For the year ended December 31, 1999, Eastern reported combined 
total assets of $2,019,757,000, combined gross revenues of 
$978,702,000, of which $690,809,000 were derived from regulated salaes 
of gas and gas transportation, and combined net income of $55,093,000. 
As of April 27, 2000, Eastern had issued and outstandidng 27,146,678 
shares of common stock, par value $1.00 per share. Eastern's common 
stock is listed for trading on the New York, Boston and Pacific Stock 
Exchanges.
    Boston Gas serves approximately 541,000 gas retail customers, all 
in Massachusetts. For the year ended December 31, 1999, Boston Gas had 
total assets of approximately $902.9 million, operating revenues of 
approximately $592.7 million, and approximate net income of $37.9 
million.
    Essex Gas serves approximately 43,000 retail gas customers in 
Massachusetts. For the year ended December 31, 1999, Essex Gas had 
total assets of approximately $97.2 million, operating revenues of 
approximately $44.1 million, and approximate net income of 5.9 million.
    Colonial Gas serves approximately 158,000 retail gas customers in 
Massachusetts. For the year ended December 31, 1999, Colonial Gas had 
total assets of approximately $584 million, operating revenues of 
approximately $176.7 million, and approximate net income of $7.2 
million.
    The service territories of Boston Gas, Essex Gas and Colonial Gas 
are contiguous and together include approximately 10,000 miles of mains 
and 598,000 service connections, all in Massachusetts, and liquefied 
natural gas (``LNG'') storage facilities located in Massachusetts. In 
1999, the three companies delivered a total of 154 billion cubic feet 
of gas, including gas delivered on a ``bundled'' basis to retail 
customers and gas delivered to transportaton-only customers.
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    \2\ Eastern completed its acquisition of Colonial Gas on August 
31, 1999. See Eastern Enterprises, HCAR No. 27059 (Aug. 12, 1999).
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    Eastern has four principal, wholly owned nonutility subsidiary 
companies: Midland Enterprises, Inc. (``Midland''); Transgas Inc. 
(``Transgas''),\3\ AMR Data Corporation (``AMR''); and ServicEdge 
Partners, Inc. (``ServicEdge''). Eastern's principal nonutility 
businesses are as follows: water barging activities, including the 
hauling of fuel and other cargo; transporting LNG and propane by truck; 
providing meters and meter reading services to municipal utilities; and 
providing heating, ventiliation, and air conditioning (``HVAC'') 
services.
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    \3\ Transgas is a subsidiary of Colonial Gas.
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    Midland is primarily engaged, through wholly owned subsidiary 
companies, in the operation of a fleet of towboats, tugboats and barges 
transporting dry bulk commodities, a major portion of which is coal. 
Through other subsidiary companies, Midland also performs repair work 
on marine equipment, operates a rail-to-barge coal dumping terminal, a 
phosphate chemical fertilizer terminal, and cargo transfer facilities.
    Transgas, a direct subsidiary of Colonial Gas, is an unregulated 
energy trucking company that provides over-the-road transportation of 
LNG, propane, and other commodities. Transgas is the nation's largest 
over-the-road transporter of LNG. ServicEdge provides HVAC services, 
primarily to residential customers in eastern Massachusetts. AMR 
provides customized metering equipment and automated meter reading 
services, primarily to municipal utilities in New England.
    In addition to these four subsidiaries, Eastern also owns thirty-
five other nonutility subsidiary companies. These include twenty 
nonutility companies owned by Eastern either directly or through one of 
Eastern's utility subsidiaries: Boston Gas Services, Inc.; CGI 
Transport Ltd.; Colonial Energy,\4\ EE-AEM Cmopany, Inc.; EE 
Acquisition Company, Inc.; EEG Acquisition Company, Inc.; Eastern 
Associated Capital Corp.; Eastern Associated Securities Corp.; Eastern 
Energy Systems Corp.; Eastern Enterprises Foundation; Eastern Rivermoor 
Company, Inc.; Eastern Urban Services, Inc.; LNG Storage, Inc.; 
Massachusetts LNG Incorporated; \5\ Mystic Steamship Corporation; PCC 
Land Company, Inc.; Philadelphia Coke Co., Inc.; Water Products Group 
Incorporated; Western Associated Energy Corp.; and Northern Energy 
Company, Inc.\6\ Midland holds the remaining fifteen nonutility

[[Page 45636]]

subsidiaries either directly or indirectly: Capital Marine Supply, 
Inc.; Chotin Transportation, Inc.; Eastern Associated Terminals 
Company; Federal Barge Lines, Inc.; River Fleets, Inc.; Hartley Marine 
Corp.; Minnesota Harbor Service, Inc.; The Ohio River Company; The Ohio 
River Company Traffic Division, Inc.; The Ohio River Terminals Company; 
Orgulf Transport Co.; Orsouth Transport Co.; Port Allen Marine Service, 
Inc.; Red Circle Transport Co.; and West Virginia Terminals, Inc.
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    \4\ GGI Transport Ltd. And Colonial Energy are direct 
subsidiaries of Transgas, which is a subsidiary of Colonial Gas.
    \5\ Massachusetts LNG Incorporated is a subsidiary of Boston 
Gas.
    \6\ LNG Storage, Inc. and Northern Energy Company, Inc. are 
subsidiaries of Essex Gas.
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B. ENI

    ENI is a New Hampshire corporation that presently owns all of the 
issued and outstanding common stock of one gas utility company 
operating exclusively in New Hampshire: EnergyNorth Natural Gas, Inc. 
(``ENGI''). For the fiscal year ended September 30, 1999, ENI reported 
consolidated assets of $168,325,000, including net utility plant of 
$113,730,000; consolidated operating revenues of $119,172,000, of which 
$76,617,000 (or 64%) represented regulated gas sales and 
transportation; and total net income of $4,537,000. As of April 27, 
2000, ENI had issued and outstanding 3,322,903 shares of common stock, 
par value $1.00 per share, which are listed and traded on the New York 
Stock Exchange.
    ENGI distributes natural gas to approximately 73,000 customers in 
southern, central and northern New Hampshire. ENGI is subject to the 
regulatory supervision of the NHPUC as to gas sales, transportation 
rates, securities issuance and other matters. For the fiscal year ended 
September 30, 1999, ENGI reported total assets of $150,757,000, 
consolidated operating revenues of $76,617,000, and consolidated net 
income of $3,831,000.
    ENI's direct and indirect material nonutility subsidiary companies 
are as follows: EnergyNorth Propane, Inc. (``ENPI''); ENI Mechanicals, 
Inc. (``ENM''); Northern Peabody, Inc. (``NPI''); Granite State 
Plumbing and Heating, Inc. (``GSPH''); Broken Bridge Corp.; EnergyNorth 
Realty, Inc.; and ENI Resources, Inc.
    ENPI sells propane to more than 15,300 customers in and around 
Concord, New Hampshire.\7\ ENPI owns a 49% interest in VGS Propane, LLC 
(``VGSP''), a joint venture with Northern New England Gas Corporation, 
which owns the other 51%. VGSP is a Vermont limited liability company 
that provides propane service to approximately 10,000 customers in 
Vermont.\8\
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    \7\ Propane distribution does not require a regulatory franchise 
in New Hampshire.
    \8\ In August 1999, ENGI exercised an option to offer to sell 
its interest in VGSP to Northern New England Gas Corporation. This 
transaction is expected to close in late summer of 2000.
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    ENM owns all of the outstanding stock of NPI and GSPH, which are 
mechanical contractors engaged in the design, construction and service 
of plumbing, HVAC, and process piping systems. They serve commercial, 
industrial and institutional customers in northern and central New 
England.
    EnergyNorth Realty, Inc. is engaged primarily in owning and leasing 
land and a building in Manchester, New Hampshire, where ENI maintains 
corporate offices. Broken Bridge Corp. owns undeveloped land located in 
Concord, New Hampshire. ENI Resources, Inc. is engaged in an energy 
services joint venture.

II. Description of the Merger

    The Amended Merger Agreement provides two alternative means for 
effecting the Merger, depending on whether the KeySpan Merger Agreement 
is terminated prior to the Effective Time of the Merger.\9\
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    \9\ The Effective Time is the date on which the Merger is 
consummated by filing articles of merger with the Secretary of the 
State of New Hampshire following closing of the transaction.

    1. If the Merger and the KeySpan Merger close at the same time, 
then Merger Sub will be merged with and into ENI, with ENI as the 
surviving corporation. In this case, each share of common stock of 
ENI issued and outstanding immediately prior to the Effective Time 
(other than treasury shares) will be canceled and extinguished and 
automatically converted into the right to receive cash in the amount 
of $61.13, without interest, as this amount may be adjusted. Based 
on the number of shares of ENI common stock outstanding on March 20, 
2000, the total consideration paid in the Merger (assuming no 
increase) would be approximately $203.1 million.
    2. If, on the other hand, the KeySpan Merger agreement is 
terminated before the Effective Time, ENI will be merged with and 
into Merger Sub, with Merger Sub as the surviving corporation. 
Merger Sub will change its name to ``EnergyNorth, Inc.'' and remain 
a wholly owned subsidiary of Eastern. ENGI will remain a wholly 
owned subsidiary of ``new'' ENI. Under this alternative, holders of 
ENI common stock will receive cash and common stock of Eastern 
having an expected aggregate value of approximately $182.7 million. 
A total of 49.9% of the outstanding shares of ENI common stock will 
be exchanged for cash and the remainder will be exchanged for shares 
of Eastern common stock. Each share of ENI common stock exchanged 
for cash will entitle the holder to receive $47.00. Each share which 
is not exchanged for cash will entitle the holder to receive that 
number of shares of Eastern common stock having a value of $47.00 
based on the average of the daily per share weighted averages of the 
trading prices of the Eastern common stock for a specified ten-day 
period preceding the effective date of the Merger. The value of the 
Eastern common stock is subject to adjustment if the weighted 
average per share price falls lower than $36.00 or rise higher than 
$44.00.\10\
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    \10\ Based on the average of the daily weighted average price 
per share of Eastern common stock for the ten trading day period 
ended on January 24, 2000 and the number of shares of ENI common 
stock outstanding on March 20, 2000, Eastern would issue 
approximately 1,778,000 shares of its common stock in the Merger, 
and the cash portion of the consideration would equal approximately 
$78 million. ENI's shareholders would hold approximately 6.1% of 
Eastern's outstanding common stock following the transaction.

    Eastern will account for the Merger under the ``purchase method'' 
of accounting, and estimates that $124 million of goodwill will be 
created in the transaction. Eastern states that the goodwill will be 
amortized over a 40-year period.
    On April 27, 2000, the Merger was approved by ENI's shareholders. 
On May 8, 2000, the New Hampshire Public Utilities Commission issued an 
order approving the Merger and further approving the indirect 
acquisition of ENI by KeySpan through the KeySpan Merger.

KeySpan Corporation, et al. (70-9641)

    KeySpan Corporation (``KeySpan''), a combination gas and electric 
utility holding company claiming exemption from registration under 
section 3(a)(1) of the Act by rule 2, and its wholly owned subsidiary 
company ACJ Acquisition LLC (``ACJ''), both located at One Metrotech 
Center, Brooklyn, New York 11201, have filed an application-declaration 
under sections 3(a)(1), 4, 5, 8, 9(a)(2), 10, and 11(b) of the Act and 
rule 54 under the Act.
    KeySpan proposes to acquire all of the issued and outstanding 
shares of common stock of Eastern Enterprises (``Eastern''), a gas 
utility holding company claiming exemption from registration under 
section 3(a)(1) of the Act by rule 2, located at 9 Riverside Road, 
Weston, Massachusetts 02139. KeySpan also seeks Commission approval for 
the retention of: (1) KeySpan's electric utility operations; and (2) 
the nonutility subsidiary companies of KeySpan and Eastern. KeySpan 
further requests a finding by the Commission that Eastern and KeySpan's 
subsidiary utility holding companies will continue to be exempt holding 
companies under section 3(a)(1) of the Act following the proposed

[[Page 45637]]

acquisition of Eastern (``Merger'').\11\ After the Merger, KeySpan will 
register with the Commission under section 5 of the Act.
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    \11\ After consummation of the Merger, KeySpan expects to have 
three subsidiary utility holding companies: Eastern; KeySpan Energy 
Corporation; and EnergyNorth, Inc. However, KeySpan intends to 
eliminate EnergyNorth, Inc. as an intermediary holding company as 
soon as practicable after consummation of the Merger. Eastern and 
the other two subsidiary holding companies are described in more 
detail now. These holding companies would remain subject to the Act 
with respect to their status as subsidiaries of a registered holding 
company.
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    Under the terms of an Agreement and Plan of Merger dated as of 
November 4, 1999, as modified by Amendment No. 1 dated January 26, 2000 
(``Merger Agreement''), ACJ will be merged with and into Eastern, with 
Eastern as the surviving entity. Eastern will become a direct wholly 
owned subsidiary of KeySpan. KeySpan anticipates that it will pay 
approximately $1.7 billion to acquire Eastern's common stock in an all-
cash transaction.
    Under another Agreement and Plan of Reorganization dated as of July 
14, 1999, as amended by Amendment No. 1 dated as of November 4, 1999 
(``ENI Merger Agreement''), Eastern has agreed to acquire all of the 
issued and outstanding common stock of EnergyNorth, Inc. (``ENI''), a 
New Hampshire gas utility holding company claiming exemption under 
section 3(a)(1) of the Act by rule 2 (``Eastern/ENI Merger''). This 
proposed transaction is subject to approval by the New Hampshire Public 
Utilities Commission (``NHPUC'') and to Commission approval under the 
Act.\12\ If the Eastern/ENI Merger is approved by the Commission and is 
consummated, ENI will become a direct subsidiary of Eastern and, 
therefore, an indirect subsidiary of KeySpan following consummation of 
the Merger.\13\ For purposes of this application-declaration, KeySpan 
has assumed that the Eastern/ENI Merger will be approved concurrently 
with the Merger. However, KeySpan and ACJ's request for approval of the 
Merger is not contingent on Commission approval of the Eastern/ENI 
Merger.
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    \12\ Eastern filed a separate application-declaration under the 
Act seeking approval of the Eastern/ENI Merger on January 5, 2000 
(see Commission File No. 70-9605). The Eastern/ENI Merger filing is 
being noticed contemporaneously with this notice.
    \13\ As stated in note 1 above, KeySpan intends to eliminate ENI 
as an intermediate holding company as soon as reasonably practicable 
after closing the Merger.
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I. Description of the Parties

A. KeySpan

    KeySpan directly or indirectly owns all of the issued and 
outstanding common stock of three public utility companies: (1) The 
Brooklyn Union Gas Company d/b/a KeySpan Energy Delivery New York 
(KeySpan New York);\14\ (2) KeySpan Gas East Corporation d/b/a KeySpan 
Energy Delivery Long Island (``KeySpan Long Island''); and (3) KeySpan 
Generation LLC (``KeySpan Generation'') (collectively, the ``New York 
Utilities'').\15\
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    \14\ KeySpan New York is indirectly owned by KeySpan through 
KeySpan's wholly owned direct subsidiary holding company KeySpan 
Energy Corporation (``KEC''). KEC owns 100% of the outstanding 
voting stock of KeySpan New York and, like KeySpan, is a public 
utility holding company claiming exemption from registration under 
section 3(a)(1) of the Act by rule 2.
    \15\ KeySpan Long Island and KeySpan Generation own, 
respectively, the gas distribution operations and the non-nuclear 
electric generating facilities formerly held by Long Island Lighting 
Company (``LILCO''). In BL Holding Corp., HCAR No. 26875 (May 15, 
1998), the Commission approved the transactions by which KeySpan 
acquired (i) LILCO's interests in these facilities and in common 
plant associated with these facilities; and (ii) KEC, the parent 
company of KeySpan New York. KeySpan Long Island and KeySpan 
Generation are direct, wholly owned subsidiaries of KeySpan.
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    For the year ended December 31, 1999, KeySpan reported operating 
revenues of $3 billion of which $1.8 billion (or approximately 59%) 
were derived from regulated sales of gas and gas transportation, and 
$861.6 million (or approximately 29%) were derived from electric 
operations. At December 31, 1999, KeySpan had consolidated assets of 
$6.7 billion, including net property and equipment of $4.2 billion, 
operating income of $482.2 million, and net income of $258.6 million. 
As of the same date, KeySpan had issued and outstanding 133.9 million 
shares of common stock, par value $0.01 per share, which is publicly 
traded on the New York Stock Exchange and the Pacific Exchange.
    KeySpan New York distributes natural gas at retail to approximately 
1.1 million customers in the New York City area. For the year ended 
December 31, 1999, KeySpan New York had total assets of $2,196,055,000, 
operating revenues of $1,116,041,000, and net income of $189,648,000.
    KeySpan Long Island distributes natural gas at retail to 
approximately 500,000 customers located on Long Island and the Rockaway 
Peninsula in New York State. For the year ended December 31, 1999, 
KeySpan Long Island had assets of $2,092,853,000, operating revenues of 
$640,705,000, and net income of $41,588,000. Both KeySpan New York and 
KeySpan Long Island are subject to regulation by the New York Public 
Service Commission (``NYPSC'') as to rates, affiliate transactions, and 
certain other matters.\16\
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    \16\ The Applicants state that the NYPSC has expressed no 
concern about the Merger or its effect on rates, regulation or 
competition in New York. Applicants further state that the NYPSC 
does not have statutory jurisdiction over the Merger.
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    KeySpan Generation is a New York limited liability company that 
owns and operates approximately 4,032 megawatts of electric generation 
capacity located on Long Island ( ``KeySpan Generation Facilities'' ). 
All of the capacity of the KeySpan Generation Facilities is sold at 
wholesale to the Long Island Power Authority ( ``LIPA'' ), which 
provides retail electric service to 1.1 million customers. KeySpan 
Generation does not own any electric transmission or distribution 
facilities other than limited facilities necessary to interconnect its 
generating facilities with LIPA's transmission and distribution system. 
For the year ended December 31, 1999, KeySpan Generation had assets of 
$1,111,436,000, operating revenues of $318,864,000, and net income of 
$20,854,000. KeySpan Generation is subject to regulation by the Federal 
Energy Regulatory Commission and by the NYPSC.\17\
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    \17\ The NYPSC regulates KeySpan Generation with respect to 
affiliate transactions and other financial, corporate, reliability, 
and safety matters.
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    In addition to ACJ, KeySpan has seventeen direct, wholly owned 
nonutility subsidiary companies: KEC;\18\ KeySpan Operating Services 
LLC ( ``KOS'' ); \19\ KeySpan Exploration and Production, LLC ( 
``KeySpan Exploration'' ); KeySpan Corporate Services LLC ( ``KCS''; ); 
KeySpan Utility

[[Page 45638]]

Services LLC ( ``KUS'' ); \20\ KeySpan Electric Services LLC ( ``KES'' 
); \21\ KeySpan Energy Trading Services LLC ( ``KeySpan Trading'' ); 
Marquez Development Corporation; Island Energy Services Company, Inc.; 
LILCO Energy System Inc.; \22\ KeySpan-Ravenswood Inc. ( ``KeySpan-
Ravenswood'' ); KeySpan-Ravenswood Services Corp. ( ``KRS'' ); \23\ 
KeySpan Energy Supply, LLC ( ``KeySpan Supply'' ); KeySpan Services 
Inc. ( ``KSI'' ); \24\ Honeoye Storage Corporation ( ``Honeoye'' ); 
\25\ KeySpan Technologies Inc.; and KeySpan MHK, Inc. ( ``KMHK'' ).\26\ 
As of December 31, 1999, KeySpan's combined nonutility subsidiary 
companies and investments together constituted approximately 34% of the 
consolidated assets of KeySpan and its subsidiaries, 33% of its 
consolidated income, and 30% of its consolidated net revenues.
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    \18\ KEC is a holding company for KeySpan New York and for five 
direct, nonutility subsidiary companies: KeySpan North East 
Ventures, Inc.; KeySpan Energy Development Corporation ( ``KEDC'' ); 
THEC Holdings Corp. ( ``THEC'' ); KeySpan Natural Fuels, LLC; and 
GEI Development Corp. Through KeySpan New York and these nonutility 
subsidiary companies, KEC owns 50% or more of the following indirect 
nonutility subsidiary companies: North East Transmission Co., Inc.; 
Northeast Gas Markets, LLC; The Houston Exploration Company ( 
``Houston Exploration'' ); Seneca-Upshur Petroleum, Inc.; GTM 
Energy, LLC; KeySpan International Corporation; GEI Timna, Inc.; 
KeySpan Cross Bay, LLC; KeySpan Midstream, LLC ( ``KeySpan 
Midstream'' ); Solex Production Limited; KeySpan CI Limited; KeySpan 
CI II Limited Premier Transco Limited; Grupo Keyspan S. de R.IL. de 
C.V.; FINSA Energeticos, S. de R.L. de C.V.; GMS Facilities Limited; 
Gulf Midstream Services Limited ( ``Gulf MidStream Services'' ); 
Gulf Midstream Services Partnership; KeySpan Energy Canada, Ltd. ( 
``KeySpan Canada''; ); KeySpan CI Midstream Ltd.; KeySpan Luxembourg 
S.A.R.L.; Nicodama Beheer V.B.V.; KeySpan Energy Development Co. 
(Nova Scotia); and KS Midstream Finance Co.
    \19\ KOS is an inactive company that holds no assets. In June 
2000, KOS sold its only assets, a 51% interest in KeySpan Energy 
Construction LLC, to an unaffiliated entity. KeySpan intends to 
dissolve KOS as soon as practicable.
    \20\ KeySpan Corporate Services LLC and KeySpan Utility Services 
LLC are service companies providing, respectively, corporate 
administrative services and utility transmission and distribution 
services to the New York Utilities and to KeySpan's nonutility 
subsidiary companies. In a separate application, KeySpan will seek 
Commission approval under section 13(b) of the Act of both KCS and 
KUS as service companies for the registered holding company system.
    \21\ KES provides operation, maintenance, and construction 
management services to LIPA for LIPA's transmission and distribution 
facilities located on Long Island, New York, subject to LIPA's 
overall direction and control. KES also provides management and 
administrative services to LIPA for its interests in the Nine Mile 
Point Unit 2 nuclear facility, also located on Long Island.
    \22\ LILCO Energy Systems Inc. holds a 1% interest in Iroquois 
Gas Transmission Systems L.P. ( ``Iroquois'' ), a natural gas 
pipeline regulated by FERC. KeySpan indirectly owns another 18.4% 
interest in Iroquois through North East Transmission Co., Inc., a 
nonutility subsidiary company of KEC.
    \23\ KeySpan-Ravenswood is an exempt wholesaler generator ( 
``EWG'' ) under section 32 of the Act. KRS is primarily engaged in 
providing operation and maintenance services to KeySpan-Ravenswood 
for its electric generating facility located in Queens, New York, 
subject to KeySpan-Ravenswood overall direction and control.
    \24\ Directly or indirectly, KSI wholly owns the following 14 
nonutility subsidiary companies: KeySpan Communications Corp. ( 
``KCC'' ); KeySpan Energy Management, Inc. ( ``KEMI'' ); KeySpan 
Energy Services, Inc.; KeySpan Energy Solutions, LLC; KeySpan 
Plumbing Solutions, Inc.; Fritze KeySpan, LLC; Delta KeySpan, Inc.; 
Active Conditioning Corp.; Fourth Avenue Enterprise Piping Corp.; 
Paulus, Sokolowski & Sartor, Inc. ( ``PS&S'' ); WDF, Inc.; Roy Kay, 
Inc.; Roy Kay Electrical Company; and Roy Kay Mechanical, Inc.
    \25\ KeySpan directly holds a 23.33% interest in Honeoye, and 
KES indirectly holds an additional 28.8% of the outstanding common 
stock of Honeoye.
    \26\ KMHK is a Delaware corporation that currently owns an 
approximate 18.2% equity interest in MyHomeKey.com ( ``MHK'' ). MHK, 
also a Delaware corporation, was created to establish and maintain 
an Internet-based website that will serve as (1) a national platform 
for local websites offering energy and home-related goods and 
services; and (2) a contractor for energy and home-related services 
from national providers.
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    KeySpan's principal nonutility businesses are as follows: (1) 
Development, ownership and operation of natural gas pipelines and 
storage facilities;\27\ (2) investment in companies that develop, own, 
and/or operate gas pipelines, nonutility generation plants, gas 
processing facilities, and oil fields; \28\ (3) exploration, 
development and acquisition of natural gas and oil properties;\29\ (4) 
brokering and marketing of natural gas and electricity;\30\ (5) 
provision of operation, maintenance, construction, management, and 
corporate administrative services to affiliate companies; \31\ (6) 
procurement, development, and marketing of new energy related 
technologies;\32\ (7) generation and marketing of electric energy at 
wholesale;\33\ (8) the ownership of telecommunications equipment;\34\ 
(9) the design and development of energy plants for large industrial 
and institutional customers;\35\ (10) the installation and maintenance 
of heating, ventilation and air conditioning (``HVAC'') systems; and 
(11) provision of a wide range of plumbing, engineering and appliances 
services to commercial, industrial, residential and small business 
customers.\36\
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    \27\ These activities are primarily conducted by KEDC, an 
indirect subsidiary of KeySpan, through KEDC's eight direct 
subsidiary companies.
    \28\ These investment activities are conducted by KEDC directly 
and through direct and indirect subsidiary companies of KEDC and of 
Key Span New York. KEDC, both directly and through its subsidiary 
companies, also invests in foreign utility companies, as defined in 
section 33 of the Act.
    \29\ KEC engages in these activities through its subsidiary, 
THEC, which currently holds a 70% interest in Houston Exploration. 
Houston Exploration is engaged in the exploration, development and 
acquisition of domestic natural gas and oil properties, and also 
owns Seneca-Upshur Petroleum, Inc., which owns oil and gas 
properties in West Virginia. Another wholly owned subsidiary of 
KeySpan, KeySpan Exploration, is part of a joint venture with 
Houston Exploration to conduct offshore gas and oil exploration and 
development in the Gulf of Mexico.
    \30\ Subsidiary companies providing these services include 
KeySpan Trading and KeySpan Supply. A direct subsidiary of KEDC, 
KeySpan Midstream, also indirectly holds interests in four Canadian 
companies through a chain of wholly owned subsidiary companies 
incorporated, respectively, in the Cayman Islands, Luxembourg, the 
Netherlands, and Nova Scotia. Two of these Canadian companies own 
interests in several natural gas processing plants located in 
Canada; a third, Gulf Midstream Services, act as the agent for these 
two companies. The fourth company, KeySpan Canada, owns a 19% 
interest in a natural gas liquids and extraction facility located in 
western Canada.
    \31\ Subsidiary companies providing these services include KES, 
KOS, KCS, KUS, and KRS. These service subsidiary companies are 
described above at footnotes 9, 10, 11, and 13.
    \32\ KeySpan engages in these activities through its direct, 
wholly owned subsidiary company, KeySpan Technologies Inc.
    \33\ In addition to KeySpan Generation, which is regulated as an 
electric utility, KeySpan generates and markets electric energy at 
wholesale through an EWG, KeySpan-Ranveswood. See footnote 13 above.
    \34\ KCC, a direct, wholly owned subsidiary of KSI, owns an 
approximately 400-mile fiber optic network on Long Island and in new 
York City. KCC also constructs and operates fiber optic networks and 
transportation facilities.
    \35\ KeySpan engages in these activities indirectly through 
KEMI, a wholly owned subsidiary company of KSI. KEMI is the holding 
company of two wholly owned subsidiary companies that design and 
operate energy systems for large-scale residential and commercial 
facilities and provide energy related services such as the 
installation and construction of power supply and heating, 
ventilation and air conditioning systems, boilers and burners. PS&S, 
another wholly owned subsidiary of KSI, is an engineering and 
consulting firm that engages in design, permitting, licensing and 
environmental compliance work on a wide range of systems for a 
variety of large commercial and industrial customers, including 
utilities, corporate offices, hotels, laboratories, warehouses, 
pharmaceutical companies, hospitals, universities, and power plants.
    \36\ KeySpan provides services relating to HVAC systems, 
plumbing, engineering and appliances through thirteen subsidiary 
companies owned indirectly through KSI.
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B. Eastern

    Eastern is a Massachusetts voluntary association that currently 
owns all of the outstanding common stock of three gas utility companies 
operating exclusively within Massachusetts: Boston Gas Company 
(``Boston Gas''); Colonial Gas Company (``Colonial Gas''); and Essex 
Gas Company (``Essex Gas'') (collectively, the ``Massachusetts 
Utilities''). At April 27, 2000, Eastern had issued and outstanding 
27,146,678 shares of common stock, par value $1.00 per share. Eastern's 
common stock is listed for trading on the New York, Boston and Pacific 
Stock Exchanges.\37\ For the year ended December 31, 1999, Eastern 
reported consolidated assets of $2,019,757,000, gross revenues of 
$978,702,000, of which $690,809,000 were derived from regulated sales 
of gas and gas transportation, and earnings before extraordinary items 
of $55,093,000.
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    \37\ Eastern's shares will be delisted and cease to be publicly 
traded after consummation of the Merger.
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    The Massachusetts Utilities are organized under the laws of the 
Commonwealth of Massachusetts and are subject to the regulation of the 
Massachusetts Department of Telecommunications and Energy as to retail 
rates, transportation rates, affiliate transactions, securities 
issuances, and other matters. Together, the Massachusetts Utilities 
provide retail gas service to approximately 735,000 customers within 
Massachusetts.
    Boston Gas distributes natural gas to approximately 541,000 
customers

[[Page 45639]]

located in Boston and in other areas throughout eastern and central 
Massachusetts. As of December 31, 1999, Boston Gas had total assets of 
$902,892,000, operating revenues of $592,719,000, and net income of 
$37,912,000.
    Essex Gas distributes natural gas to approximately 43,000 customers 
in eastern Massachusetts. For the year ended December 31, 1999, Essex 
Gas had total assets of $97,196,000, operating revenues of $44,096,000, 
and net income of $5,936,000.
    Colonial Gas serves approximately 158,000 retail gas customers in 
northeastern Massachusetts.\38\ For the year ended December 31, 1999, 
Colonial Gas had total assets of $584,047,000, operating revenues of 
$176,724,000, and net income of $7,233,000.
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    \38\ Eastern completed its acquisition of Colonial Gas on August 
31, 1999. See Eastern Enterprises, HCAR No. 27059 (Aug. 12, 1999).
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    Eastern has four principal, wholly owned nonutility subsidiary 
companies: Midland Enterprises, Inc. (``Midland''); Transgas Inc. 
(``Transgas''); AMR Data Corporation (``AMR''); and ServicEdge 
Partners, Inc. (``ServicEdge''). Together, at December 31, 1999, 
Eastern's nonutility subsidiary companies and investments constituted 
approximately 23% of the consolidated total assets of Eastern and its 
subsidiary companies, 11% of consolidated operating income and 29% of 
consolidated revenues. Eastern's principal nonutility businesses are as 
follows: water barging activities, including the hauling of fuel and 
other cargo;\39\ transporting by truck liquefied natural gas (``LNG'') 
and propane; providing meters and meter reading services to municipal 
utilities; and providing HVAC services.
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    \39\ KeySpan states in its Application that these activities may 
not meet the retention standards of the Act. See note 40 below.
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    Midland is primarily engaged, through wholly owned subsidiary 
companies, in the operation of a fleet of towboats, tugboats and barges 
transporting dry bulk commodities, a major portion of which is coal. 
Through other subsidiary companies, Midland also performs repair work 
on marine equipment, operates a rail-to-barge coal dumping terminal, a 
phosphate chemical fertilizer terminal, and cargo transfer 
facilities.\40\
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    \40\ KeySpan recognizes that Midland's business activities may 
not satisfy the standards for retention by a registered gas utility 
holding company under the Act. Consequently, the Applicants request 
that any order of the Commission that approves the Merger but 
requires KeySpan to divest Midland permit KeySpan to take the 
appropriate actions to effect the sale of all of its interests in 
Midland within three years after the Merger is consummated.
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    Transgas, a direct subsidiary of Colonial Gas, is an unregulated 
energy trucking company that provides over-the-road transportation of 
LNG, propane, and other commodities. Transgas is the nation's largest 
over-the-road transporter of LNG. ServiceEdge provides HVAC services, 
primarily to residential customers in eastern Massachusetts. AMR 
provides customized metering equipment and performs automated meter 
reading services to municipal utilities.
    Not including Midland's subsidiaries, Eastern owns directly or 
indirectly twenty other nonutility subsidiary companies: EE-AEM 
Marketing Company, Inc.; EE Acquisition Corp.; EEG Acquisition Corp.; 
Boston Gas Services, Inc.; Colonial Energy Company, Inc.; Eastern 
Associated Capital Corp.; Eastern Associated Securities Corp.; Eastern 
Energy Systems Corp.; Eastern Enterprises Foundation; Eastern Rivermoor 
Company, Inc.; Eastern Urban Services, Inc.; CGI Transport Ltd.; Mystic 
Steamship Corporation; PCC Land Company, Inc.; Philadelphia Coke Co., 
Inc.; Water Products Group Incorporated; Western Associated Energy 
Corp.; Massachusetts LNG Incorporated \41\; LNG Storage, Inc.; and 
Northern Energy Company, Inc.\42\
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    \41\ Massachusetts LNG Incorporated is a direct subsidiary of 
Boston Gas.
    \42\ LNG Storage, Inc. and Northern Energy Company, Inc. are 
direct subsidiary companies of Essex Gas.
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    Eastern's subsidiary, Midland, also owns the following direct and 
indirect subsidiary companies: Capital Marine Supply, Inc.; Chotin 
Transportation, Inc.; Eastern Associated Terminals Company; Federal 
Barge Lines, Inc.; River Fleets, Inc.; Hartley Marine Corp.; Marine 
Corp.; Minnesota Harbor Service, Inc.; The Ohio River Company; The Ohio 
River company Traffic Division, Inc.; The Ohio River Terminals Company; 
Orgulf Transport Co.; Orsouth Transport Co.; Port Allen Marine Service, 
Inc.; Red Circle Transport Co.; and West Virginia Terminals, Inc.

C. ENI

    ENI is a New Hampshire corporation that presently owns all of the 
issued and outstanding common stock of one gas utility company 
operating exclusively in New Hampshire: EnergyNorth Natural Gas, Inc. 
(``ENGI'').\43\ For the fiscal year ended September 30, 1999, ENI 
reported consolidated assets of $168,325,000, consolidated operating 
revenues of $119,172,000, and total net income of $4,537,000. As of 
April 27, 2000, ENI has issued and outstanding 3,322,903 shares of 
common stock, par value $1.00 per share, which are listed and traded on 
the New York Stock Exchange. Upon the consummation of the Eastern/ENI 
Merger, ENI's shares will be delisted and cease to be publicly traded.
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    \43\ If the Eastern/ENI Merger is consummated, ENI will become a 
direct, wholly owned subsidiary of Eastern.
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    ENGI distributes natural gas to approximately 73,000 customers in 
southern, central and northern New Hampshire. ENGI is subject to the 
regulatory supervision of the NHPUC as to gas sales, transportation 
rates, securities issuance and other matters. For the fiscal year ended 
September 30, 1999, NEGI reported total assets of $150,757,000, 
operating revenues of $76,617,000, and net income of $3,831,000.
    ENI's direct and indirect material nonutility subsidiary companies 
are as follows: EnergyNorth Propane, Inc. (``ENPI''); ENI Mechanicals, 
Inc. (``ENM''); Northern Peabody, Inc. (``NPI''); Granite State 
Plumbing and Heating, Inc. (``GSPH''); Broken Bridge Corp.; EnergyNorth 
Realty, Inc.; and ENI Resources, Inc. As of September 30, 1999, ENI's 
nonutility subsidiary companies and investments constituted 
approximately 4.8% of the consolidated assets of ENI and 35% of its 
consolidated gross revenues.
    ENPI sells propane to approximately 15,800 customers in and around 
Concord, New Hampshire.\44\ ENPI owns a 49% interest in VGS Propane LLC 
(``VGSP''), a joint venture with Northern New England Gas Corporation, 
which owns the other 51%. VGSP is a Vermont limited liability company 
that provides propane service to approximately 10,00 customers in 
Vermont.\45\
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    \44\ Propane distribution does not require a regulatory 
franchise in New Hampshire.
    \45\ In August 1999, ENGI exercised an option to offer to sell 
its interest in FGSP to Northern New England Gas Corporation. This 
transaction is expected to close in the late summer of 2000.
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    ENM owns all of the outstanding stock of NPI and GSPH, which are 
mechanical contractors engaged in the design, construction and service 
of plumbing, HVAC, and process piping systems. They serve commercial, 
industrial and institutional customers in northern and central New 
England.
    EnergyNorth Realty, Inc. is engaged primarily in owning and leasing 
land and a building in Manchester, New Hampshire, where ENI maintains 
corporate offices. Broken Bridge Corp. owns undeveloped land located in 
Concord, New Hampshire. ENI Resources, Inc. is engaged in an energy 
services joint venture.

[[Page 45640]]

II. Description of the Merger

    As stated above, the Merger Agreement provides for Eastern to be 
merged with and into ACJ with Eastern being the surviving entity. 
Eastern will then become a wholly owned direct subsidiary of KeySpan 
and KeySpan will register as a holding company under the Act. On April 
26, 2000, Eastern's Shareholders approved the Merger.
    Under the Merger Agreement, the common shareholders of Eastern will 
have the right to receive $64.00 in cash, without interest, for each 
share of Eastern common stock, other than shares with respect to which 
dissenters' appraisal rights have been perfected. Eastern shareholders 
will receive an additional $0.006 per share (``Additional Amount'') for 
each day the Merger has not closed after the later of (a) August 4, 
2000; or (b) ninety days after the NHPUC gives final regulatory 
approval to the Eastern/ENI Merger.\46\ However, the aggregate 
Additional Amount will be reduced by the aggregate amount of any per 
share increase in any dividend actually paid that is attributable to 
any period in which the Additional Amount accrues.
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    \46\ The NHPUC issued an order on May 8, 2000 approving the 
Eastern/ENI Merger. Therefore, the alternate date on which payment 
of the Additional Amount is to begin will be August 6, 2000.
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    KeySpan expects to finance the acquisition price initially through 
the issuance of commercial paper under an expanded KeySpan commercial 
paper program backed by a combination of short-term and long-term 
credit facilities. After closing on the Merger, KeySpan anticipates 
replacing a significant portion of the commercial paper program, as 
well as some or all of the initial short-term acquisition financing, 
with proceeds from the issuance of debt and/or convertible securities. 
KeySpan will account for the Merger under the ``purchase method'' of 
accounting, and estimates that the acquisition premium will be 
$1,080,359,760, which will be amortized over a 40-year period.

    For the Commission by the Division of Investment Management, 
pursuant to delegated authority.
Jonathan G. Katz,
Secretary.
[FR Doc. 00-18624 Filed 7-21-00; 8:45 am]
BILLING CODE 8010-01-M