[Federal Register Volume 69, Number 213 (Thursday, November 4, 2004)]
[Notices]
[Pages 64334-64343]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E4-3004]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 35-27905]


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

October 28, 2004.
    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 November 22, 2004, 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 November 22, 2004, the application(s) and/or 
declaration(s), as filed or as amended, may be granted and/or permitted 
to become effective.

AGL Resources, Inc. et al. (70-10243)

    AGL Resources Inc. (``AGL Resources''), a registered public utility 
holding company, AGL Resources'' subsidiary service company, AGL 
Services Company (``AGL Services''), both of Ten Peachtree Place Suite 
1000, Atlanta, GA 30309, AGL Resources' gas utility subsidiaries, 
Atlanta Gas Light Company (``AGLC''), Ten Peachtree Place Suite 1000, 
Atlanta, GA 30309, Chattanooga Gas Company (``CGC''), 6125 Preservation 
Drive Chattanooga, Tennessee 37416 and Virginia Natural

[[Page 64335]]

Gas, Inc. (``VNG''), 5100 East Virginia Beach Boulevard Norfolk, 
Virginia 23502; NUI Corporation (``NUI''), a New Jersey corporation and 
currently a public utility holding company claiming exemption under 
section 3(a)(1) of the Act by rule 2 under the Act; NUI's two gas 
public utility subsidiaries (``NUI Utility Subsidiaries''), NUI 
Utilities, Inc. (``NUI Utilities'') and Virginia Gas Distribution 
Company (``VGDC''); and NUI's direct and indirect nonutility 
subsidiaries (``NUI Nonutilities'' and together with the NUI Utility 
Subsidiaries, ``NUI Subsidiaries'') NUI Capital Corp. (``NUI 
Capital''), Utility Business Services, Inc. (``UBS'') Virginia Gas 
Company (``VGC''), Virginia Gas Storage Company, Virginia Gas Pipeline 
Company (``VGPC''), NUI Saltville Storage, Inc. (``NUISS''), NUI 
Storage, Inc. (``NUI Storage''), NUI Service, Inc.; NUI Energy, Inc. 
(``NUI Energy''), NUI Energy Brokers, Inc.(''NUI Energy Brokers''), NUI 
Energy Solutions, Inc., OAS Group, Inc. (``OAS''), NUI Sales 
Management, Inc., TIC Enterprises, LLC (``TIC''), NUI Richton Storage, 
Inc., Richton Gas Storage Company, LLC; NUI/Caritrade International 
LLC, NUI Hungary, Inc., and NUI International, Inc., all at 550 Route 
202-206 Box 760, Bedminster, NJ 07921-0760 (collectively with AGL 
Resources, AGL Services, AGLC, CGC and VNG, ``Applicants''), request 
authority under sections 3(a)(1), 5, 6(a), 7, 9(a), 10, 11, 12(b), 
12(c) and 13(b) of the Act and rules 16, 43, 45, 46, 54 and 88, 90 and 
91 under the Act.
    AGL proposes to acquire all of the issued and outstanding common 
stock of NUI and indirectly acquire the NUI Subsidiaries. Applicants 
also propose that NUI and the NUI Subsidiaries engage in certain 
financings and other transactions.

I. Description of the Parties

A. AGL Resources and Its Subsidiaries

1. AGL Resources
    Applicants state that AGL Resources is a corporation organized 
under the laws of Georgia, and is an Atlanta-based energy services 
holding company. AGL Resources owns three gas public utility subsidiary 
companies: AGLC, CGC, and VNG which serve more than 1.8 million 
customers in three states (collectively, ``AGL Resources Utilities'').
    Applicants state that AGL Resources' common stock has a five dollar 
par value and as of June 30, 2004, AGL Resources had 64,923,654 shares 
of common stock issued and outstanding. As of and for the six months 
ended June 30, 2004, AGL Resources had total assets of $4.01 billion, 
net utility plant assets of $2.26 billion, total operating revenues of 
$945 million, operating income of $186 million and net income of $87 
million.
(a) AGL Resources' Utilities
    (1) AGLC.--Applicants state that AGLC is a natural gas local 
distribution utility with distribution systems and related facilities 
serving 237 cities throughout Georgia, including Atlanta, Athens, 
Augusta, Brunswick, Macon, Rome, Savannah and Valdosta. AGLC also has 
approximately 6.0 billion cubic feet, or Bcf, of liquefied natural gas 
(``LNG'') storage capacity in three LNG plants to supplement the supply 
of natural gas during peak usage periods. The Georgia Public Service 
Commission (``GPSC'') regulates AGLC with respect to rates, maintenance 
of accounting records and various other service and safety matters. 
Applicants state that as of and for the six months ended June 30, 2004, 
AGLC had total assets of $2.41 billion, total operating revenues of 
$308 million and net income of $76 million. AGLC owns all of the 
outstanding stock of AGL Rome Holdings, Inc. (``Rome Holdings''). AGL 
Rome Holdings, Inc. owned property associated with a former 
manufactured gas plant in Rome, Georgia, but sold that property in 
December 2003.
(b) CGC
    Applicants state that CGC is a natural gas local distribution 
utility with distribution systems and related facilities serving twelve 
cities and surrounding areas, including the Chattanooga and Cleveland 
areas of Tennessee. CGC also has approximately 1.2 Bcf of LNG storage 
capacity in its LNG plant. The Tennessee Regulatory Authority (``TRA'') 
regulates CGC with respect to rates, maintenance of accounting records 
and various other service and safety matters. As of and for the six 
months ended June 30, 2004, CGC had total assets of $147 million, total 
operating revenues of $55 million and net income of $7.0 million.
    (1) VNG.--Applicants state that VNG is a natural gas local 
distribution utility with distribution systems and related facilities 
serving eight cities in the Hampton Roads region of southeastern 
Virginia. VNG owns and operates approximately 155 miles of a separate 
high-pressure pipeline that provides delivery of gas to customers under 
firm transportation agreements within the state of Virginia. VNG also 
has approximately 5.0 million gallons of propane storage capacity in 
its two propane facilities to supplement the supply of natural gas 
during peak usage periods. The Virginia State Corporation Commission 
(``VSCC'') regulates VNG with respect to rates, maintenance of 
accounting records and various other service and safety matters. 
Applicants state that as of and for the six months ended June 30, 2004, 
VNG had total assets of $736 million, total operating revenues of $210 
million and net income of $21 million.

B. AGL Nonutilities

    AGL Resources also holds direct and indirect interests in 
nonutility companies (``AGL Nonutilities'' and together with the AGL 
Utilities, ``AGL Subsidiaries'') whose retention has been authorized by 
order dated October 5, 2000 (HCAR No. 27243), (``AGL Merger Order'').

C. NUI

1. Utility Subsidiaries
    Applicants state that NUI has two public utility subsidiary 
companies, NUI Utilities and VGDC. Through its subsidiaries, NUI 
operates natural gas distribution systems and natural gas storage and 
pipeline businesses.
(a) NUI Utilities
    Applicants state that NUI Utilities distributes natural gas to 
approximately 371,000 customers in New Jersey, Florida and Maryland 
through its three regulated utility divisions, Elizabethtown Gas 
Company (``Elizabethtown Gas''), City Gas Company of Florida (``City 
Gas'') and Elkton Gas. Each division is subject to regulation by the 
public service commission in the states where it operates. Applicants 
state that, during fiscal year 2003, the operating revenues associated 
with the provision of distribution services by NUI Utilities' regulated 
utility divisions was approximately $484.8 million, representing 95% of 
the total operating revenues of NUI. Of this amount, 85% was generated 
by utility operations in New Jersey, where approximately 71% of NUI 
Utilities' customers are located. Total utility gas volumes sold or 
transported by such utility operations amounted to 63.7 Bcf, of which 
87% was sold or transported in New Jersey.
    Applicants state that NUI Utilities distributes gas through 
approximately 6,200 miles of steel, cast iron and plastic mains. The 
company has physical interconnections with five interstate pipelines in 
New Jersey and a single interstate pipeline in both Maryland and 
Florida. Common interstate pipelines along the company's operating 
system provide the company with the flexibility to manage pipeline 
capacity and supply, thereby optimizing system utilization.

[[Page 64336]]

    Applicants state that, through its Elizabethtown Gas and City Gas 
divisions, NUI Utilities also has an appliance service, sales, leasing 
and financing businesses in New Jersey and Florida. The appliance group 
generated operating revenues of $11.4 million in fiscal year 2003 and 
had operating margins of $3.2 million in the same period.
(b) VGDC
    VGDC is an indirect wholly owned public utility subsidiary of NUI 
and a direct subsidiary of VGC, a holding company for certain utility 
and nonutility businesses. VGDC distributes gas to approximately 275 
customers in Virginia. During fiscal year 2003, VGDC sold approximately 
200.785 Mcf of gas, of which 4% was sold to residential customers and 
96% to commercial and industrial customers.
2. Nonutility Subsidiaries
(a) NUI Capital Corp.
    Applicants state that the NUI Nonutilities' businesses are carried 
out primarily by NUI Capital and its subsidiaries. NUI Capital's only 
remaining non-regulated subsidiary with substantial continuing 
operations is UBS, a billing and customer information systems and 
services subsidiary. Applicants state that NUI's other non-regulated 
subsidiaries are winding down their operations. These subsidiaries 
include: NUI Energy, an energy retailer; NUI Energy Brokers, NUI's 
wholesale energy trading and portfolio management subsidiary; OAS, the 
company's digital mapping operation; and TIC, a sales outsourcing 
subsidiary that sold wireless and network telephone services.
    Applicants state that UBS is a wholly owned subsidiary of NUI 
Capital. UBS provides outsourced customer information systems and 
services to NUI Utilities as well as investor-owned and municipal 
water/wastewater utilities. UBS offers customer and utility operations 
information systems and services, including account management, 
reporting, bill printing and mailing, and payment processing services. 
UBS presently serves 13 clients. The majority of UBS' clients are 
municipally-owned and operated water utilities across the United 
States. UBS' top three clients in terms of revenue generation are 
United Water, NUI Utilities and Middlesex Water. Over the past nine 
months, NUI Utilities has provided approximately 36% of UBS' revenues. 
Applicants state that UBS has been profitable in every year since 1995.
    Applicants state that UBS' operating revenues and operating margins 
were $6.1 million and $3.6 million, respectively, in fiscal year 2003. 
UBS provides customer information systems and services to investor-
owned and municipal utilities, as well as third party providers in the 
water, wastewater and gas markets. A customer information system 
developed and maintained by UBS is presently serving 13 clients in 
support of more than 1.5 million customers. UBS provides billing and 
payment processing services to NUI Utilities under a service agreement 
approved by the NJBPU. In June 2003, NUI approved a plan to sell UBS. 
Applicants state, however, that the September 2003 decision to sell NUI 
reduced the probability that a sale of UBS would occur, given that 
there was no guarantee that UBS' largest customer, NUI Utilities, would 
maintain a long-term relationship with UBS after the sale. After the 
acquisition, Applicants expect that the activities of UBS would be 
folded into NUI Utilities or replaced.
(b) VGC
    VGC is a natural gas storage, pipeline and distribution company 
with principal operations in Southwestern Virginia. In addition to 
owning VGDC, a gas utility described above, VGC operates two storage 
facilities; one a high-deliverability salt cavern facility in 
Saltville, Virginia (``Saltville Storage Project'') and the other a 
depleted reservoir facility in Early Grove, Virginia. Combined, the 
facilities have approximately 2.6 Bcf of working gas capacity. VGC also 
owns and operates a 72-mile 8'' intrastate pipeline and serves as the 
construction and operations manager for the Saltville Storage Project 
as discussed below. All of VGC's businesses are regulated by the VSCC, 
and the Saltville Storage Project is regulated by the Federal Energy 
Regulatory Commission (``FERC''). VGC, which was acquired by NUI in 
March 2001, had operating margins of $8.7 million in fiscal year 2003.
(c) NUISS
    NUI's wholly owned subsidiary, NUISS, is a fifty-percent member of 
SSLLC. SSLLC is a joint venture between subsidiaries of NUI and Duke 
Energy Gas Transmission (``DEGT'') that is developing a natural gas 
storage facility in Saltville, Virginia. SSLLC plans to expand the 
present Saltville Storage Project from its current capacity of 1 Bcf to 
approximately 12 Bcf in several phases. The Saltville Storage Project 
connects to DEGT's East Tennessee Natural Gas interstate system and its 
Patriot pipeline. SSLLC is subject to regulation by FERC under the 
Natural Gas Act.
    In conjunction with the development of the Saltville Storage 
Project, NUI Energy Brokers entered into a twenty-year agreement with 
DEGT for the firm transportation of natural gas in the Patriot pipeline 
and a twenty-year agreement with SSLLC for the firm storage of natural 
gas. NUI is not using the Patriot pipeline transportation capacity at 
this time since it has discontinued its trading operations.
(d) NUI Storage
    NUI Storage is a wholly owned subsidiary of NUI. Through its wholly 
owned subsidiaries, NUI Storage has acquired options on the land and 
mineral rights for property located in Richton, Perry County, 
Mississippi that the company plans to develop into a natural gas 
storage facility to help serve the Southeast United States. Like its 
companion storage facility in Saltville, Applicants expect Richton to 
offer the high-deliverability capabilities of salt dome storage for 
natural gas and will have access to a number of major interstate 
pipelines, including Destin Pipeline and its connections to Gulf South, 
Gulfstream, Florida Gas Transmission, SONAT, Tennessee Natural Gas and 
Transco. Through its connection to Destin Pipeline, Richton will have 
direct access to the gas supplies in the Gulf of Mexico, as well as 
supplies from the interconnected interstate pipelines referenced above. 
Richton can also serve as a potential storage facility for the various 
proposed liquefied natural gas projects in the Gulf Coast. Applicants 
anticipate that Richton will be subject to FERC regulation.
3. NUI and NUI Utilities' Capital Structure
    The capital structures of NUI, VGDC and NUI Utilities as of June 
30, 2004 are shown in the tables below.

[[Page 64337]]



----------------------------------------------------------------------------------------------------------------
                                                                         NUI                  NUI utilities
                                                             ---------------------------------------------------
                                                                            Percent of                Percent of
                                                                 ($MM)      total cap      ($MM)      total cap
----------------------------------------------------------------------------------------------------------------
Long-term debt..............................................          199         28.4          199         39.1
Short-term debt.............................................      \1\ 294         42.0       \2\ 86         16.9
Common stock................................................          207         29.6          224         44.0
Total capitalization........................................          $70        100.0         $501        100.0
----------------------------------------------------------------------------------------------------------------


------------------------------------------------------------------------
                                                          VGDC
                                               -------------------------
                                                              Percent of
                                                   ($MM)      total cap
------------------------------------------------------------------------
Long-term debt................................            0            0
Short-term debt...............................      \3\ (1)           50
Common stock equity...........................          (1)           50
Total capitalization..........................          (1)        100.0
------------------------------------------------------------------------

    NUI and NUI Utilities state that they have the following ratings. 
Applicants state that VGDC has no rated debt.
---------------------------------------------------------------------------

    \1\ Applicants state that this figure is net of $111 million of 
cash at June 30, 2004.
    \2\ Applicants state that this figure is net of $66 million of 
cash at June 30, 2004.
    \3\ Applicants state that this figure includes current 
maturities of long-term debt. Applicants further state that this 
figure is net of $1 million of cash at June 30, 2004.

------------------------------------------------------------------------
                                       NUI              NUI utilities
------------------------------------------------------------------------
Moody's debt rating.........  Caa-1...............  B-1.
Moody's outlook.............  Negative............  Negative.
S&P corporate credit rating.  ....................  BB.
S&P outlook.................  ....................  Credit Watch with
                                                     developing
                                                     implications.
------------------------------------------------------------------------

Description of the Transaction

A. The Merger

    Applicants state that, on September 26, 2003, the Board of 
Directors of NUI announced its intention to pursue the sale of the 
company. Applicants have entered into an Agreement and Plan of Merger 
by and among AGL Resources Inc., Cougar Corporation and NUI 
Corporation, dated as of July 14, 2004 (``Merger Agreement''), under 
which AGL Resources has agreed to acquire all the outstanding shares of 
NUI for $13.70 per share in cash, or $220 million in the aggregate 
based on approximately 16 million shares currently outstanding. AGL 
Resources will assume the outstanding indebtedness of NUI at closing. 
As of March 31, 2004, NUI had approximately $607 million in debt and 
$136 million of cash on its balance sheet, bringing the current net 
value of the acquisition to $691 million. AGL Resources anticipates 
that the amount of NUI debt and cash will change prior to the time of 
closing. Applicants state that NUI will register as a holding company 
under the Act by filing a Notification of Registration on Form U5A upon 
the consummation of the Merger.

B. Financing the Merger

    By order dated April 1, 2004 (HCAR No. 27828) (``Financing 
Order''), the Commission authorized AGL Resources, the AGL Utilities 
and the AGL Nonutilities to engage in various financing transactions in 
an aggregate amount outstanding at any one time not to exceed $5 
billion through March 31, 2007. AGL Resources is not requesting 
additional financing authorization to finance the purchase of NUI. AGL 
Resources may elect to finance the cash portion of the purchase price 
through the issuance of common stock at or prior to closing if market 
conditions are favorable. AGL Resources also must refinance a 
substantial portion of NUI and NUI Utilities' outstanding debt upon 
closing, due to ``change in control'' provisions included in these 
financings. AGL Resources expects to maintain its strong investment-
grade rating and its current dividend policy post-acquisition. After 
the Merger, AGL Resources states that its' ratio of equity to total 
capitalization will remain well above 30%.
    Applicants state that the Financing Order provides sufficient 
authority for AGL Resources to proceed in this fashion because, in the 
unlikely event that AGL Resources were to sell common stock and not 
close the NUI acquisition, the proceeds of the stock issuance would be 
used only for permitted corporate purposes.

C. Conditions

    The transaction is subject to the approval of NUI's shareholders, 
the Federal Communications Commission, and the state regulatory 
agencies of New Jersey, Maryland and Virginia. Applicants state that 
the consummation of the transaction is subject to the following 
conditions: (i) NUI shall have received orders approving the 
transaction from the above referenced state utility commissions that 
contain certain terms specified by AGL Resources, except as would not 
have a material adverse effect on NUI, NUI Utilities, or AGL Resources; 
(ii) neither NUI nor any of its subsidiaries shall have been indicted 
or criminally charged for a felony criminal offense by any governmental 
entity (with the express exception of NUI and NUI Energy Brokers with 
respect to the matters specified in a settlement (``NJAGO Settlement'') 
with the New Jersey Attorney General's Office (``NJAGO'')) relating to 
the matters that are the subject of the New Jersey Board

[[Page 64338]]

of Public Utilities Settlement Order (``Settlement Order'') and the 
stipulation and agreement (``Stipulation and Agreement'') referred to 
in the Settlement Order, the NJAGO Settlement or the Stier Anderson 
Report (as those terms are defined in the Merger Agreement), and NUI 
and its subsidiaries shall not have received any notice of non-
compliance in any material respect with the NJAGO Settlement, and there 
shall have been no revocation of or material changes to the terms of 
the NJAGO Settlement; (iii) neither NUI or the NUI Subsidiaries shall 
be the subject of an active investigation with respect to the matters 
that are the subject of the Settlement Order and the Stipulation 
Agreement referred to therein, the NJAGO Settlement or the Stier 
Anderson Report, which, individually or in the aggregate, would 
reasonably be expected to have a material adverse effect on NUI or NUI 
Utilities and (iv) no other material adverse effect as defined in the 
Merger Agreement has occurred.
    Applicants state that AGL Resources has the right to terminate the 
Merger Agreement if NUI does not have necessary interim financing in 
place by September 30, 2004. On September 29, 2004, NUI announced that 
it and NUI Utilities had obtained credit facilities aggregating $95 
million. AGL Resources has reviewed the terms of the credit facilities 
and currently believes that the credit facilities conform with the 
terms and requirements of the Merger Agreement. AGL Resources may also 
terminate the agreement if NUI and NUI Utilities do not have certain 
other financing facilities in place or drawn, or there is a payment 
default or an acceleration of indebtedness. Lastly, Applicants state 
that the Merger Agreement may be terminated: (i) By NUI in order for 
NUI to pursue a superior acquisition proposal; (ii) by AGL Resources 
based upon the board of directors of NUI withdrawing its recommendation 
of the Merger Agreement or recommending a superior acquisition proposal 
to the shareholders of NUI; (iii) by either party due to the 
consummation of the merger not occurring by April 13, 2005 (which is 
subject to a 90 day extension to obtain regulatory approvals); (iv) by 
either party due to the shareholders of NUI failing to approve the 
Merger Agreement or (v) by AGL Resources based upon the existence of a 
material, uncured breach of the Merger Agreement by NUI, provided that 
in the cases of clauses (iii)-(v) above, a termination fee (as 
described below) is payable only if and when NUI enters into a 
definitive agreement with respect to an alternative acquisition 
proposal within 12 months of the termination. In the event of a 
termination of the Merger Agreement under the circumstances provided in 
(i) and (ii), NUI will have to pay AGL Resources a termination fee of 
$7.5 million. The Merger Agreement also contains other customary 
termination rights, which do not result in the payment of a termination 
fee.

D. Management and Operations Following the Merger

    Applicants state that under the Merger Agreement, AGL Resources has 
agreed to acquire NUI in a reverse triangular merger in which, at 
closing, a newly created subsidiary of AGL Resources will merge with 
and into NUI. Upon the consummation of the Merger, NUI will be a wholly 
owned direct subsidiary of AGL Resources. Applicants state that, upon 
closing NUI's current CEO, will leave the company. AGL Resources is 
evaluating the appropriate composition of NUI's senior management after 
closing as a part of the work of a combined AGL Resources and NUI 
transition team. The members of the NUI and NUI Utilities Boards of 
Directors will resign and new directors will be selected from the 
management of AGL Resources and its subsidiaries. The AGL Resources 
Board of Directors intends to add a New Jersey resident of significant 
professional stature and business qualification to the AGL Resources 
Board and AGL Resources has sought to have at least one Virginian 
business leader on its Board.
    AGL Resources states that it is still evaluating personnel to fill 
key management positions and roles at NUI. AGL Resources intends to 
manage and govern NUI and NUI Utilities in the same manner in which it 
currently manages AGLC, CGC and VNG. At the corporate level, it is 
clear that there is some overlap among employees at AGL Resources, NUI 
and NUI Utilities, particularly in the ``corporate services'' area, 
including accounting, finance, legal, and public relations. AGL 
Resources and NUI have established an integration team that will 
identify redundancies that should be addressed as AGL Resources 
integrates NUI's corporate management into AGL Resources' existing 
management structure.

III. Affiliate Transactions

    In the AGL Merger Order, the Commission approved the formation of 
AGL's system service company, AGL Services, and authorized certain 
intrasystem transactions. Applicants propose that NUI and the NUI 
Subsidiaries enter into a services agreement with AGL Services under 
the same form of services agreement in the AGL Merger Order.

A. AGL Services

    Applicants state that AGL Services is a service company established 
in accordance with section 13(b) of the Act. AGL Services provides 
business services to AGL Resources and its subsidiaries including: 
rates and regulatory services, internal auditing, strategic planning, 
external affairs, gas supply and capacity management, legal services 
and risk management, marketing, financial services, information systems 
and technology, corporate services, investor relations, customer 
services, purchasing, employee services, engineering, business support, 
facilities management and other services, such as business development, 
that may be agreed upon by the subsidiaries and AGL Services. As 
compensation for services, the services agreement between the 
subsidiaries and AGL Services provides for client companies to pay to 
AGL Services the cost of these services, computed in accordance with 
the applicable rules and regulations under the Act and appropriate 
accounting standards.
    Applicants propose that AGL Services provide business services to 
NUI and the NUI Subsidiaries under the same terms and conditions as AGL 
Services serves the companies currently within the AGL Resources 
registered holding company system, as approved by the Commission.

B. Gas Procurement and Asset Management Arrangement

    NUI Utilities also proposes to enter into a three year gas 
procurement and asset management arrangement with a subsidiary of AGL 
Resources, Sequent Energy Management (``Sequent''). Sequent provides 
gas procurement and transportation and storage capacity asset 
management services to AGLC, VNG and CGC under arrangements with the 
respective state commissions with jurisdiction over AGLC, VNG and 
CGC.\4\ Under these arrangements, Sequent provides commodity gas, 
including related procurement services, and also acts as agent for 
AGLC, VNG and CGC in connection with transactions for gas 
transportation and storage capacity. Sequent proposes to provide 
similar services to NUI Utilities and VGDC

[[Page 64339]]

subject to the approval of the NJBPU and Virginia State Corporation 
Commission.
---------------------------------------------------------------------------

    \4\ Applicants assert that these transactions are exempt from 
regulation under section 13(b) of the Act by virtue of rules 80 and 
81.
---------------------------------------------------------------------------

    The asset management model that Sequent employs provides for 
revenue sharing between the asset manager and AGLC, VNG and CGC's 
ratepayers. Applicants state that under its current arrangements with 
AGLC, VNG and CGC, Sequent contributed approximately $9.9 million to 
customers in 2003.

C. Billing Services

    NUI Utilities currently has an Agreement for Billing Services, 
dated February 18, 2004, with UBS under which UBS provides NUI 
Utilities with certain billing related services using NUI Utilities' 
customer information system and certain other data center services on 
UBS' mainframe computer, including operating systems related to NUI 
Utilities' work order management, leak management, meter management, 
time entry and field services. The agreement is effective until March 
31, 2007, but may be terminated by NUI Utilities with 180 days prior 
written notice. This agreement has been approved by the NJBPU.
    Applicants state that UBS charges NUI Utilities market rates for 
the provision of these services, however, after closing, AGL Resources 
proposes to cause UBS and NUI Utilities to amend the agreement to 
require the services to be provided to NUI Utilities at UBS' cost. 
Prior to implementing such amendment, however, AGL Resources must 
determine whether a change in the pricing standard to terms more 
favorable to NUI Utilities would trigger contractual obligations to 
provide cost-based pricing to UBS' unaffiliated customers. In addition, 
if NJBPU approval of the amended contract is required, AGL Resources 
must seek this authorization before restructuring the contract between 
UBS and NUI Utilities. As a result, AGL Resources requests a temporary 
exception to the ``at cost'' provisions of section 13(b) of the Act and 
the applicable rules for two years to provide adequate time to 
restructure this contract. Applicants state that it is possible that at 
the end of the two-year period AGL Resources will be able to 
restructure all of UBS' existing contracts so that it may consolidate 
UBS with NUI Utilities.

D. Construction and Management Services

    VGC provides construction and operations management services to 
SSLLC through its wholly owned subsidiary, Virginia Gas Pipeline 
Company (``VGPC''). Applicants state that VGPC serves as the 
construction and operations manager to SSLLC, under an agreement 
(``Operating Agreement''), dated August 15, 2001. Under the terms of 
the Operating Agreement, SSLLC reimburses VGPC for the costs it incurs 
to construct, maintain and operate SSLLC's facilities, including VGPC's 
administration and labor costs.
    Applicants request that the Commission exempt these services from 
section 13(b) and the applicable rules in conjunction with Applicant's 
request that SSLLC be exempted under rule 16 (described below).

IV. Tax Allocation Agreement

    By order dated December 23, 2003 (HCAR No. 27781), the Commission 
authorized AGL Resources' tax allocation agreement. AGL Resources 
proposes to add NUI and the NUI Subsidiaries to the existing tax 
allocation arrangements for the AGL Resources system.

V. Rule 16 Exemption

    SSLLC, a 50% joint venture between NUI Saltville Storage and Duke 
Energy Gas Transmission, is developing a natural gas storage facility 
in Saltville, Virginia. SSLLC will not have more than 50% of its voting 
securities controlled by a registered holding company. Applicants 
assert that SSLLC is entitled to an exemption from the obligations, 
duties and liabilities imposed upon it under rule 16 under the Act as a 
subsidiary or affiliate of a registered holding company. Applicants 
request that the Commission authorize AGL Resources to acquire NUI's 
interest in SSLLC under sections 9(a)(1) and 10. The exemption under 
rule 16 will permit SSLLC to continue to operate in accordance with its 
usual practice without the need for additional authorization under the 
Act.
    VGC provides construction and operations management services to 
SSLLC. Applicants request that the Commission exempt these services 
from section 13(b) and the rules thereunder because SSLLC will be 
exempt under rule 16, upon the issuance of the authorization requested 
herein, and, accordingly, will not be treated as a subsidiary of a 
registered holding company under the Act.

VI. Section 3(a)(1) Exemption Request for VGC

    Applicants state that VGC and its only utility subsidiary, VGDC, 
carry on their utility operations exclusively within Virginia where 
each company is incorporated. Applicants state that after the Merger, 
VGC and VGDC, will remain predominantly intrastate in character and 
carry on their business substantially within Virginia. Applicants 
request that the Commission issue an order under section 3(a)(1) of the 
Act providing that VGC and each of its subsidiary companies, will be 
exempt from all provisions of the Act, except section 9(a)(2). VGC will 
remain jurisdictional as a subsidiary of a registered holding company. 
Applicants state that the VSCC will continue to have jurisdiction and 
authority over all of VGDC's rates, services and operations following 
the acquisition.

VII. Financing Authority

    Applicants request authority for NUI and the NUI Subsidiaries, 
after the consummation of the Merger, to engage in the various 
financing transactions described below through March 31, 2007 
(``Authorization Period''). Applicants state that financings by NUI and 
the NUI Subsidiaries will be subject to the following limitations 
(``Financing Limitations''):

A. Financing Limitations

1. Use of Proceeds
    Applicants state that the proceeds from the sale of securities in 
these financing transactions will be used for general corporate 
purposes, including the financing, in part, of the capital expenditures 
and working capital requirements of NUI and its subsidiaries, for the 
acquisition, retirement or redemption of securities previously issued 
by NUI or the NUI Subsidiaries, and for authorized investments in 
companies organized in accordance with rule 58 under the Act, and for 
other lawful purposes.
2. Effective Cost of Money
    The effective cost of money on long-term debt borrowings in 
accordance with authorizations granted under the Application will not 
exceed the greater of (i) 500 basis points over the comparable-term 
U.S. Treasury securities or (ii) a gross spread over U.S. Treasuries 
that is consistent with similar securities of comparable credit quality 
and maturities issued by other companies. The effective cost of money 
on short-term debt borrowings in accordance with the authorizations 
granted in the Application will not exceed the greater of (i) 500 basis 
points over the comparable-term London Interbank Offered Rate 
(``LIBOR'') or (ii) a gross spread over LIBOR that is consistent with 
similar securities of comparable credit quality and maturities issued 
by other companies.

[[Page 64340]]

3. Maturity
    The maturity of long-term debt will be between one and 50 years. 
Short-term debt will mature within one year.
4. Issuance Expenses
    The underwriting fees, commissions or other similar remuneration 
paid in connection with the non-competitive issue, sale or distribution 
of securities issued in accordance with this Application 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.
5. Common Equity Ratio
    NUI Utilities and VGDC, on an individual basis, will maintain 
common stock equity of at least 30% of total capitalization as shown in 
its most recent quarterly balance sheet.
6. Investment Grade Ratings
    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 under this Application, 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 AGL Resources 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 in reliance upon the authorization 
granted by the Commission under this Application at any time that the 
conditions set forth in clauses (i) through (iii) above are not 
satisfied. A security issued prior to the consummation of the Merger, 
under the Act or in accordance with any applicable rule, regulation or 
order of the Commission under the Act, would remain validly issued 
notwithstanding a change, subsequent to the issuance, in the rating of 
that security or other securities issued by any company in the AGL 
Resources system.

B. NUI Securities

    NUI requests authorization to issue and sell debt and equity 
securities to AGL Resources and/or AGL Resources' financing 
subsidiaries as necessary to finance the authorized and permitted 
businesses of NUI and the NUI Subsidiaries. In particular, NUI requests 
authorization to issue Intercompany Notes to AGL Resources or AGL 
Resources' financing subsidiaries in connection with the refinancing of 
NUI's pre-Merger indebtedness. A form of Intercompany Note, containing 
the applicable terms and conditions is attached to the Application in 
Exhibit L-2. NUI states that Intercompany Notes would be issued by NUI 
in an amount at any one time outstanding of up to $285 million. NUI 
states that it would not issue debt or equity securities to third-
party, unaffiliated entities post-Merger without seeking subsequent 
Commission authorization. NUI also requests authorization to acquire 
the securities of its direct and indirect subsidiaries and to extend 
credit thereto for purposes of financing these companies' authorized 
and permitted businesses in an aggregate amount outstanding during the 
Authorization Period not to exceed $300 million.

C. NUI Utilities and VGDC Debt Securities

    Applicants request authorization for NUI Utilities and VGDC to 
issue intercompany debt, commercial paper, secured or unsecured bank 
loans and borrowings under the Utility Money Pool (``Utility Short-Term 
Debt''), all with terms of less than a year, in an aggregate amount of 
up to $600 million and $250 million, respectively, during the 
Authorization Period. Applicants state that all Utility Short-Term Debt 
will be subject to the Financing Limitations. Applicants request 
authorization for NUI Utilities and VGDC to issue unsecured and secured 
short-term debt to meet the companies' working capital needs. 
Applicants state that NUI Utilities and VGDC would issue secured short-
term debt only in circumstances when the issuer can expect a savings in 
costs over the issuance of unsecured short-term debt or when unsecured 
credit is unavailable, except at a higher cost than secured short-term 
debt. Applicants anticipate that the collateral offered as security 
would generally be limited to short-term assets such as the issuer's 
inventory and/or accounts receivable.
    If NUI Utilities or VGDC elect to issue commercial paper, either 
under rule 52 of the Act or under an applicable Commission order, NUI 
Utilities and VGDC request authorization to be made a party to any AGL 
Resources' credit facility as back-up to the commercial paper.\5\
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    \5\ Applicants state that financing by VGDC would generally be 
subject to the jurisdiction of the VSCC and, except as authorized 
under this Application or other Commission rule or order, would be 
conducted on an exempt basis under rule 52(a).
---------------------------------------------------------------------------

VIII. NUI Utilities' Intercompany Note

    NUI Utilities requests authorization to issue Intercompany Notes to 
AGL Resources or a financing subsidiary of AGL Resources in connection 
with the refinancing of NUI Utilities pre-Merger indebtedness. 
Applicants state that NUI Utilities would issue Intercompany Notes in 
an amount at any one time outstanding of up to $275 million. Applicants 
request that the Intercompany Notes issued by NUI Utilities be for 
terms longer than one year and accordingly the Intercompany Note would 
not count against the NUI Utilities' Short-Term Debt stated above.

A. Authorization and Operation of the Money Pools

    Applicants request authorization for NUI Utilities and VGDC to 
participate in AGL Resources' Utility Money Pool and to make unsecured 
short-term borrowings from the Utility Money Pool, to contribute 
surplus funds to the Utility Money Pool, lend and extend credit to, and 
acquire promissory notes from, one another through the Utility Money 
Pool subject to the Financing Limiations.
    Specifically, Applicants state that the Utility Money Pool funds 
are available for short-term loans to the Utility Money Pool 
participants from time to time through: (i) Surplus funds in the 
treasuries of participants and (ii) proceeds received by the Utility 
Money Pool participants from the sale of commercial paper and 
borrowings from banks (``External Funds''). Funds are made available 
from sources in the order that AGL Services, as the administrator under 
the Utility Money Pool Agreement, determines would result in a lower 
cost of borrowing compared to the cost that would be incurred by the 
borrowing participants individually in connection with external short-
term borrowings, consistent with the individual borrowing needs and 
financial standing of Utility Money Pool participants that invest funds 
in the Utility Money Pool.
    Each Utility Money Pool borrower (``Utility Borrower'') which 
borrows through the Utility Money Pool will

[[Page 64341]]

borrow pro rata from each Utility Money Pool participant that invests 
surplus funds, in the proportion that the total amount invested by the 
Utility Money Pool participant bears to the total amount then invested 
in the Utility Money Pool. The interest rate charged to Utility 
Borrowers on borrowings under the Utility Money Pool is equal to AGL 
Resources' actual cost of external short-term borrowings and the 
interest rate paid on loans to the Utility Money Pool is a weighted 
average of the interest rate earned on loans made by the Utility Money 
Pool and the return on excess funds earned from the investments 
described below. The interest income and investment income earned on 
loans and investments of surplus funds is allocated among those Utility 
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 Utility Money Pool. Applicants state 
that borrowings through the Utility Money Pool by NUI Utilities would 
be limited to $600 million and borrowings by VGDC would be limited to 
$250 million at any one time outstanding.
    Funds not required by the Utility Money Pool to make loans (with 
the exception of funds required to satisfy the Utility Money Pool's 
liquidity requirements) are ordinarily 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) other 
investments that are permitted by section 9(c) of the Act and rule 40.
    Each Utility Borrower receiving a loan through the Utility Money 
Pool is required to repay the principal amount of the loan, together 
with all interest accrued, on demand and in any event within one year 
after the date of the loan. All loans made through the Utility Money 
Pool may be prepaid by the borrower without premium or penalty and 
without prior notice.
    In the Financing Order, AGL Resources and the AGL Nonutility 
Subsidiaries were granted authorization to operate a nonutility money 
pool (``Nonutility Money Pool''), and the AGL Nonutility Subsidiaries 
were authorized to make unsecured short-term borrowings from the 
Nonutility Money Pool, to contribute surplus funds to the Nonutility 
Money Pool, and to lend and extend credit to, and to acquire promissory 
notes from, one another through the Nonutility Money Pool subject to 
the terms and conditions set forth in the Financing Order. Applicants 
request that, following the Merger, the NUI Nonutilities be authorized 
to participate in the Nonutility Money Pool under the same terms and 
conditions as the AGL Nonutility Subsidiaries.
    AGL Resources and NUI would continue to contribute surplus funds 
and to lend and extend credit to the Utility Money Pool and the 
Nonutility Money Pool. AGL Resources and NUI will not borrow from 
either the Utility Money Pool or the Nonutility Money Pool. AGL 
Services will continue to serve as administrator for both the Utility 
Money Pool and the Nonutility Money Pool and will provide the 
administrative services at cost.

B. Guarantees

    Applicants request authorization for AGL Resources to guarantee the 
obligations of NUI and the NUI Subsidiaries. In addition, Applicants 
request authority for NUI, NUI Utilities, VGC and VGDC to enter into 
guarantees, obtain letters of credit, enter into expense agreements or 
provide credit support with respect to obligations of their 
subsidiaries (``Guarantees'') subject to the Financing Limitations in 
the amount of $150 million and $100 million, with respect to NUI 
Utilities and VGDC, and in the amount of $300 million and $75 million 
with respect to NUI and VGC. These Guarantees may take the form of, 
among others, direct guarantees, reimbursement undertakings under 
letters of credit, ``keep well'' undertakings, agreements to indemnify, 
expense reimbursement agreements, and credit support with respect to 
the obligations of the subsidiary companies as may be appropriate to 
enable the system companies to carry on their respective authorized or 
permitted businesses. Applicants state that any Guarantee that is 
outstanding at the end of the Authorization Period will remain in force 
until it expires or terminates in accordance with its terms. Certain 
Guarantees may be in support of obligations that are not capable of 
exact quantification. In these cases, for purposes of measuring 
compliance with the appropriate Guarantee limit the exposure under a 
Guarantee would be determined by appropriate means, including 
estimation of exposure based on potential payment amounts. Applicants 
request that NUI and the NUI Subsidiaries be charged a fee for any 
Guarantee provided on its behalf that is not greater than the cost, if 
any, incurred by the guarantor in obtaining the liquidity necessary to 
perform the Guarantee for the period of time the Guarantee remains 
outstanding.

C. Hedges

    Applicants request authorization for NUI, NUI Utilities, VGC and 
VGDC to enter into, perform, purchase and sell financial instruments 
intended to manage the volatility of interest rates, including but not 
limited to interest rate swaps, caps, floors, collars and forward 
agreements or any other similar agreements (``Hedging Instruments''). 
Hedging Instruments, in addition to the foregoing sentence, may also 
include the issuance of 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., Federal National Mortgage Association) obligations or LIBOR-
based swap instruments. These companies would employ Hedging 
Instruments as a means of prudently managing the risk associated with 
any of its outstanding debt by, in effect, synthetically: (i) 
Converting variable-rate debt to fixed-rate debt; (ii) converting fixed 
rate debt to variable rate debt; (iii) limiting the impact of changes 
in interest rates resulting from variable-rate debt and (iv) providing 
an option to enter into interest rate swap transactions in future 
periods for planned issuances of debt securities. Applicants state 
that, in no case will the notional principal amount of any Hedging 
Instrument exceed that of the underlying debt instrument and related 
interest rate exposure and these companies will not engage in 
``leveraged'' or ``speculative'' transactions. The underlying interest 
rate indices of the Hedging Instruments will closely correspond to the 
underlying interest rate indices of the companies' debt to which the 
Hedging Instrument relates. Off-exchange Hedging Instruments would be 
entered into only with counterparties whose senior debt ratings are 
investment grade as determined by any one of Standard & Poor's, Moody's 
Investors Service, Inc. or Fitch IBCA, Inc. (``Approved 
Counterparties'').
    In addition, Applicants request authorization for NUI, NUI 
Utilities, VGC and VGDC to enter into Hedging Instruments with respect 
to anticipated debt offerings (``Anticipatory Hedges''), subject to 
certain limitations and restrictions. Anticipatory Hedges would only be 
entered into with Approved Counterparties, and would be used to fix 
and/or limit the interest rate risk associated with any new issuance 
through: (i) A forward sale of exchange-

[[Page 64342]]

traded Hedging Instruments (``Forward Sale''); (ii) the purchase of put 
options on Hedging Instruments (``Put Options Purchase''); (iii) a Put 
Options Purchase in combination with the sale of call options on 
Hedging Instruments (``Zero Cost Collar''); (iv) transactions involving 
the purchase or sale, including short sales, of Hedging Instruments or 
(v) some combination of a Forward Sale, Put Options Purchase, Zero Cost 
Collar and/or other derivative or cash transactions, including, but not 
limited to structured notes, caps and collars appropriate for the 
Anticipatory Hedges.
    Hedging Instruments 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. The companies will determine the optimal structure of each 
Hedging Instrument transaction at the time of execution.

D. Changes in Capital Stock of Wholly-Owned Subsidiaries

    Applicants request authorization to change the terms of the 
authorized capital stock of NUI and any wholly owned subsidiary of NUI 
authorized capital stock by an amount deemed appropriate by AGL 
Resources or other intermediate parent company subject to the following 
conditions. A subsidiary will be able to change the par value, or 
change between par value and no-par stock, without additional 
Commission approval. Any action by NUI Utilities or VGDC 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. In addition, NUI 
Utilities and VGDC will maintain, during the Authorization Period, a 
common equity capitalization of at least 30%.

E. Payment of Dividends Out of Capital or Unearned Surplus

    Applicants request authorization for NUI and the NUI Nonutilities 
to pay dividends from time to time through the Authorization Period, 
out of capital and unearned surplus. Applicants state that NUI and the 
NUI Nonutilities will not declare or pay any dividend out of capital or 
unearned surplus unless it: (i) Has received excess cash as a result of 
the sale of some or all of its assets; (ii) has engaged in a 
restructuring or reorganization and/or (iii) is returning capital to an 
associate company. In addition, NUI or an NUI Nonutility would only 
declare or pay dividends to the extent permitted under applicable 
corporate law and state or national law applicable in the jurisdiction 
where each company is organized, and any applicable financing 
covenants.
    Applicants request that the Commission reserve jurisdiction over 
NUI Utilities' payment of dividends out of capital and unearned surplus 
in an amount up to its pre-merger retained earnings and out of post-
merger earnings without regard to any deductions attributable to the 
impairment of goodwill pending the completion of the record.
    Applicants represent that NUI Utilities will not declare or pay any 
dividend out of capital or unearned surplus in contravention of any law 
restricting the payment of dividends. NUI Utilities also will comply 
with the terms of any credit agreements and indentures that restrict 
the amount and timing of distributions to shareholders. NUI Utilities 
would not pay dividends out of capital or unearned surplus if to do so 
would cause its equity to decline to less than 30% of total 
capitalization.

F. Financing Entities

    Applicants request authorization for NUI Utilities to organize new 
corporations, trusts, partnerships or other entities (``Financing 
Entities''), or to use existing AGL Resources' Financing Entities that 
will facilitate financings by issuing short-term debt, long-term debt, 
preferred securities, equity securities or other securities to third 
parties and transfer the proceeds of these financings to their 
respective parents.
    Applicants also request authorization for NUI Utilities to: (i) 
Issue debentures or other evidences of indebtedness to Financing 
Entities in return for the proceeds of the financing; (ii) acquire 
voting interests or equity securities issued by the Financing Entities 
to establish ownership of the Financing Entities (the equity portion of 
the entity generally being created through a capital contribution or 
the purchase of equity securities, ranging from one to three percent of 
the capitalization of the Financing Entities) and (iii) guarantee a 
Financing Entity's obligations in connection with a financing 
transaction. Any amounts issued by Financing Entities to a third party 
under this authorization will be included in the overall external 
financing limitation authorized herein for the immediate parent of the 
Financing Entity. However, the underlying intra-system mirror debt and 
parent guarantee shall not be so included. NUI Utilities also requests 
authorization to enter into support or expense agreements (``Expense 
Agreement'') with Financing Entities to pay the expenses of any 
Financing Entity. In cases where it is necessary or desirable to ensure 
legal separation for purposes of isolating a Financing Entity from its 
parent or another subsidiary for bankruptcy purposes, the ratings 
agencies require that any Expense Agreement whereby the parent or 
subsidiary provides services related to the financing to the Financing 
Entity be at a price, not to exceed a market price, consistent with 
similar services for parties with comparable credit quality and terms 
entered into by other companies so that a successor service provider 
could assume the duties of the parent or subsidiary, in the event of 
the bankruptcy of the parent or subsidiary, without interruption or an 
increase of fees. Applicants request authorization for NUI Utilities, 
under section 13(b) of the Act and rules 87 and 90, to provide such 
services at a charge not to exceed a market price but only for so long 
as the Expense Agreement established by the Financing Entity is in 
place.

G. Intermediate Subsidiaries

    Applicants request authorization for NUI to acquire, directly or 
indirectly, the securities of one or more entities (``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 exempt wholesale 
generators, as that term is defined in section 32 of the Act 
(``EWGs''), foreign utility companies as that term is defined in 
section 33 of the Act (``FUCOs''), companies exempt under rule 58 
(``Rule 58 Companies''), exempt telecommunications companies, as that 
term is defined under section 34 of the Act, (``ETCs'') or other non-
exempt nonutility subsidiaries. These Intermediate Subsidiaries may 
also engage in certain administrative activities (``Administrative 
Activities'') and development activities (``Development Activities'').
    Administrative Activities include ongoing personnel, accounting, 
engineering, legal, financial and other support activities necessary to 
manage investments in nonutility subsidiaries. Development Activities 
are 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;

[[Page 64343]]

negotiation and execution of contractual commitments with owners of 
existing facilities, equipment vendors, construction firms, and other 
project contractors; negotiation of financing commitments with lenders 
and other third-party investors; and other preliminary activities that 
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.
    An Intermediate Subsidiary may be organized, among other things: 
(i) To facilitate the making of bids or proposals to develop or acquire 
an interest in any EWG, FUCO, Rule 58 Company, ETC or other nonutility 
subsidiary; (ii) after the award of such a bid proposal, to facilitate 
closing on the purchase or financing of an acquired company; (iii) at 
any time subsequent to the consummation of an acquisition of an 
interest in any such company to, among other things, effect an 
adjustment in the respective ownership interests in such business held 
by NUI and non-affiliated investors; (iv) to facilitate the sale of 
ownership interests in one or more acquired non-utility companies; (v) 
to comply with applicable laws of foreign jurisdictions limiting or 
otherwise relating to the ownership of domestic companies by foreign 
nationals; (vi) as a part of tax planning in order to limit NUI's 
exposure to taxes; (vii) to further insulate NUI, NUI Utilities and 
VGDC from operational or other business risks that may be associated 
with investments in non-utility companies or (viii) for other lawful 
business purposes.
    Investments in Intermediate Subsidiaries may take the form of any 
combination of the following: (i) Purchases of capital shares, 
partnership interests, member interests in limited liability companies, 
trust certificates or other forms of equity interests; (ii) capital 
contributions; (iii) open account advances with or without interest; 
(iv) loans and (v) 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: (i) Financings authorized 
in this proceeding; (ii) any appropriate future debt or equity 
securities issuance authorization obtained by NUI from the Commission 
and (iii) other available cash resources, including proceeds of 
securities sales by the NUI Nonutilities under rule 52. To the extent 
that NUI provides funds or Guarantees directly or indirectly to an 
Intermediate Subsidiary that are used for the purpose of making an 
investment in any EWG, FUCO or Rule 58 Company, the amount of the funds 
or Guarantees are included in NUI's ``aggregate investment'' in these 
entities, as calculated in accordance with rule 53 or rule 58, as 
applicable.
    AGL Resources requests that its authorization, in the Financing 
Order, to make expenditures on Development Activities, as defined 
above, in an aggregate amount of up to $600 million be extended to 
include the NUI Nonutilities.\6\
    Neither AGL Resources nor any of its subsidiaries presently has an 
interest in any EWG or FUCO.

IX. Reorganization

    AGL Resources and NUI request authorization to consolidate or 
otherwise reorganize all or any part of its direct and indirect 
ownership interests in the NUI Nonutilities, and the activities and 
functions related to these investments. To effect any consolidation or 
other reorganization, AGL Resources or NUI may wish to merge or 
contribute the equity securities of one NUI Nonutility to another NUI 
Nonutility (including a newly formed Intermediate Subsidiary) or sell 
(or cause a nonutility subsidiary to sell) the equity securities or all 
or part of the assets of one nonutility subsidiary to another one. To 
the extent that these transactions are not otherwise exempt under the 
Act or rules thereunder, AGL Resources and NUI request authorization to 
consolidate or otherwise reorganize under one or more direct or 
indirect Intermediate Subsidiaries, their ownership interests in 
existing and future NUI Nonutility. These transactions may take the 
form of a nonutility subsidiary selling, contributing, or transferring 
the equity securities of a subsidiary or all or part of a subsidiary's 
assets as a dividend to an Intermediate Subsidiary or to another 
nonutility subsidiary, and the acquisition, directly or indirectly, of 
the equity securities or assets of the subsidiary, either by purchase 
or by receipt of a dividend. The purchasing nonutility 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 laws and accounting requirements.

X. Retention of Nonutility Subsidiaries

    Applicants state that Exhibit J-1 to the Application describes AGL 
Resources' current plans for retaining or divesting each of the NUI 
Nonutilities and discusses the legal basis for retention where 
applicable. Applicants state that numerous NUI Nonutilities referenced 
in Exhibit J-1 will be wound down, liquidated or dissolved. AGL 
Resources will endeavor to exit these investments as soon as is 
prudent, giving due regard for the need to insulate the rest of the AGL 
Resources group from any liabilities or obligations that may be 
associated with these companies.
    In addition, AGL Resources seeks authorization to retain UBS and 
for UBS to continue to provide services to NUI Utilities under its 
current arrangement for no less than two years after the date of the 
order in this matter. During that time, AGL Resources will endeavor to 
either restructure the existing UBS services agreements with NUI 
Utilities so that these services may be provided at cost (provided that 
the modification is practicable given UBS' other contractual 
arrangements), or would otherwise endeavor to consolidate the 
applicable portions of UBS's current operations into NUI Utilities.

    For the Commission, by the Division of Investment Management, 
pursuant to delegated authority.
J. Lynn Taylor,
Assistant Secretary.
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    \6\ The Commission authorized AGL Resources to follow a 
``revolving fund'' concept for permitted expenditures on Development 
Activities. Thus, to the extent a nonutility subsidiary in respect 
of which expenditures for Development Activities were made 
subsequently becomes an EWG, FUCO or Rule 58 Company, 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 the entity under rule 53 or 58, as 
applicable.
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 [FR Doc. E4-3004 Filed 11-3-04; 8:45 am]
BILLING CODE 8010-01-P