-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, KvvBzobnTLtbqhr5WKUmkWYfzvkpIcOJytl8rv54yZOFjQWHnwnqrNYw+fIprsGa ZoQq2V0KfkO3HGE3H51QWw== 0000898080-04-000533.txt : 20041029 0000898080-04-000533.hdr.sgml : 20041029 20041028210349 ACCESSION NUMBER: 0000898080-04-000533 CONFORMED SUBMISSION TYPE: U-1/A PUBLIC DOCUMENT COUNT: 12 FILED AS OF DATE: 20041029 DATE AS OF CHANGE: 20041028 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AGL RESOURCES INC CENTRAL INDEX KEY: 0001004155 STANDARD INDUSTRIAL CLASSIFICATION: NATURAL GAS DISTRIBUTION [4924] IRS NUMBER: 582210952 STATE OF INCORPORATION: GA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: U-1/A SEC ACT: 1935 Act SEC FILE NUMBER: 070-10243 FILM NUMBER: 041104080 BUSINESS ADDRESS: STREET 1: TEN PEACHTREE PLACE CITY: ATLANTA STATE: GA ZIP: 30309 BUSINESS PHONE: 4045844000 MAIL ADDRESS: STREET 1: TEN PEACHTREE PLACE STREET 2: DEPT. 1200 CITY: ATLANTA STATE: GA ZIP: 30309 U-1/A 1 formu1a.txt AMENDMENT NO. 1 TO AGL RESOURCES INC. File No. 70-10243 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 PRE-EFFECTIVE AMENDMENT NO. 1 TO FORM U-1 APPLICATION/DECLARATION UNDER THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935 AGL Resources Inc. NUI Corporation AGL Services Company NUI Utilities, Inc. Atlanta Gas Light Company Virginia Gas Company Chattanooga Gas Company Virginia Gas Distribution Company Virginia Natural Gas, Inc. Virginia Gas Pipeline Company Ten Peachtree Place Virginia Gas Storage Company Suite 1000 NUI Capital Corp. Atlanta, GA 30309 Utility Business Services, Inc. NUI Service, Inc. NUI Energy, Inc. NUI Energy Brokers, Inc. NUI Energy Solutions, Inc. OAS Group, Inc. NUI Sales Management, Inc. TIC Enterprises, LLC NUI Saltville Storage, Inc. NUI Storage, Inc. NUI Richton Storage, Inc. Richton Gas Storage Company, LLC NUI/Caritrade International LLC NUI Hungary, Inc. NUI International, Inc. 550 Route 202-206 Box 760 Bedminster, NJ 07921-0760 (Name of company or companies filing this statement and addresses of principal executive offices) AGL Resources Inc. Ten Peachtree Place Suite 1000 Atlanta, GA 30309 (Name of top registered holding company of each applicant or declarant) Bryan E. Seas Steven D. Overly Vice President and Controller Vice President, Chief Financial Officer, AGL Resources Inc. General Counsel and Secretary Ten Peachtree Place NUI Corporation Suite 1000 550 Route 202-206 Atlanta, GA 30309 Box 760 Bedminster, NJ 07921-0760 (Name and address of agent for service) The Commission is also requested to send copies of any communication in connection with this matter to: William S. Lamb Roshini Thayaparan LeBoeuf, Lamb, Greene & MacRae, L.L.P. LeBoeuf, Lamb, Greene & MacRae, L.L.P. 125 West 55th Street 1875 Connecticut Avenue, NW Suite 1200 New York, NY 10019-5389 Washington, DC 20009 Tel. (212) 424-8170 Tel. (202) 986-8065 Fax (212) 424-8500 Fax (202) 956-3305 2 TABLE OF CONTENTS Item 1. Description of Proposed Transaction....................................5 A. Introduction and General Request.........................................5 B. Description of the Parties...............................................6 1. AGL Resources Inc. and its Subsidiaries............................6 a. AGL Resources Inc...............................................6 b. Utility Subsidiaries............................................6 (i) Atlanta Gas Light Company................................6 (ii) Chattanooga Gas Company.................................6 (iii) Virginia Natural Gas, Inc..............................7 c. Nonutility Subsidiaries.........................................7 2. NUI Corporation....................................................7 a. Utility Subsidiaries............................................7 (i) NUI Utilities, Inc.......................................7 (ii) Virginia Gas Distribution Company.......................8 b. Nonutility Subsidiaries.........................................8 (i) NUI Capital Corp.........................................8 (ii) Virginia Gas Company....................................9 (iii) NUI Saltville Storage, Inc.............................9 (iv) NUI Storage, Inc.......................................10 c. Recent Developments............................................10 C. Description of the Transaction..........................................13 1. The Merger........................................................13 2. Financing the Merger..............................................13 3. Conditions........................................................14 4. Management and Operations Following the Merger....................15 5. Benefits of the Merger............................................16 a. Benefits from AGL Resources' Financial Strength................16 b. Benefits From AGL Resources' Utility Experience................19 D. Financing Authority.....................................................20 E. Affiliate Transactions..................................................20 1. Gas Procurement and Asset Management Arrangement..................20 2. Billing Services..................................................21 3. Construction and Management Services..............................21 F. Tax Allocation Agreement................................................22 G. Rule 16 Exemption.......................................................22 H. Section 3(a)(1) Exemption Request for VGC...............................22 Item 2. Fees, Commissions and Expenses........................................22 Item 3. Applicable Statutory Provisions.......................................22 A. Applicable Provisions...................................................22 B. Legal Analysis..........................................................23 1. Sections 9(a), 10 and 11..........................................23 a. Section 10(b)(1)...............................................23 3 b. Section 10(b)(2)...............................................25 c. Section 10(b)(3)...............................................27 d. Section 10(c)(1)...............................................28 (i) Section 8...............................................28 (ii) Section 11.............................................29 e. Section 10(c)(2)...............................................31 f. Section 10(f)..................................................35 2. Section 3(a)(1) Exemption Request for VGC.........................35 3. Financing Authority...............................................36 a. Subsidiary Debt................................................38 b. Authorization and Operation of the Money Pools.................39 c. Guarantees.....................................................40 d. Hedges.........................................................41 e. Changes in Capital Stock of Wholly-Owned Subsidiaries..........42 f. Payment of Dividends Out of Capital or Unearned Surplus........42 g. Financing Entities.............................................44 h. Intermediate Subsidiaries......................................44 i. Rule 54 Analysis...............................................46 4. Affiliate Transactions............................................46 a. AGL Services...................................................46 5. Rule 16 Exemption.................................................47 6. Retention of Nonutility Subsidiaries..............................47 Item 4. Regulatory Approval...................................................48 A. State Approvals.........................................................49 1. New Jersey........................................................49 2. Florida...........................................................49 3. Maryland..........................................................49 4. Virginia..........................................................49 B. Federal Approvals.......................................................50 1. Hart-Scott-Rodino Antitrust Improvements Act of 1976..............50 2. Communications Act of 1934........................................50 Item 5. Procedure.............................................................50 Item 6. Exhibits and Financial Statements.....................................51 Item 7. Information as to Environmental Effects...............................54 4 PRE-EFFECTIVE AMENDMENT NO. 1 TO APPLICATION/DECLARATION ON FORM U-1 UNDER THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935 This Pre-effective Amendment No. 1 ("Amendment") amends and restates the Application/Declaration on Form U-1 submitted by AGL Resources Inc. ("AGL Resources") and NUI Corporation ("NUI") on August 20, 2004 in SEC File No. 070-10243 ("Application"). Item 1. Description of Proposed Transaction. A. Introduction and General Request In this Application, AGL Resources, a registered public utility holding company under the Public Utility Holding Company Act of 1935, as amended (the "Act"), requests authority under Sections 9, 10 and 11 of the Act to acquire all of the issued and outstanding common stock of NUI, an exempt holding company under Section 3(a)(1) of the Act, and indirectly acquire all of NUI's subsidiary companies./1 The proposed transaction, more fully described below, is referred hereto as the "Merger." AGL Resources, AGL Services Company ("AGL Services"), Atlanta Gas Light Company ("AGLC"), Chattanooga Gas Company ("CGC"), Virginia Natural Gas, Inc. ("VNG"), NUI, and its subsidiaries named herein/2 (collectively, "Applicants") also seek approval under Sections 6(a), 7, 9(a), 10, 11, 12(b), 12(c), 13(b) of the Act and Rules 43, 45, 46, and 54 for NUI and its subsidiaries to engage, after the consummation of the Merger, in the same financing and other transactions authorized by the Commission in the AGL Resources Financing Order/3 and described herein. Applicants further request authorization (a) to retain NUI's Nonutility Subsidiaries (defined below), (b) to reorganize NUI's direct and indirect Nonutility Subsidiaries without the need to seek further Commission authorization, (c) for AGL Resources to acquire NUI's interest in the Saltville Gas Storage Company, LLC pursuant to an exemption under Rule 16, and (d) for NUI Utilities, Inc. ("NUI Utilities") to pay dividends out of capital and unearned surplus in an amount up to their pre-merger retained earnings and post-merger earnings before any deduction for the impairment of goodwill. Finally, Applicants request that the Commission find that Virginia Gas Company ("VGC"), a utility holding company subsidiary of NUI, is entitled to an exemption pursuant to Section 3(a)(1) of the Act. ____________________ 1 A letter from the Commission to NUI dated July 15, 2004 questions NUI's claim of exemption under Section 3(a)(1) and Rule 2. NUI responded to the Commission by letter dated August 4, 2004. NUI's qualification for an exemption under the Act would become moot if NUI became part of the AGL Resources registered holding company system as proposed in this application because NUI would register under the Act upon the consummation of the Merger. 2 NUI Utilities, Inc., Virginia Gas Company, Virginia Gas Distribution Company, Virginia Gas Pipeline Company, Virginia Gas Storage Company, NUI Capital Corp., Utility Business Services, Inc., NUI Service, Inc., NUI Energy Inc., NUI Energy Brokers Inc., NUI Energy Solutions, Inc., OAS Group, Inc., NUI Sales Management, Inc., TIC Enterprises, LLC, NUI, Saltville Storage, Inc., NUI Storage, Inc., NUI Richton Storage, Inc., Richton Gas Storage Company, LLC, NUI/Caritrade International LLC, NUI Hungary, Inc., and NUI International, Inc. (collectively, "NUI Group"). 3 AGL Resources Inc., et al., Holding Co. Act Release No. 27828 (Apr. 1, 2004) ("Financing Order"). 5 B. Description of the Parties 1. AGL Resources Inc. and its Subsidiaries a. AGL Resources Inc. 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; and several directly or indirectly-owned subsidiary companies. AGLC, CGC and VNG serve more than 1.8 million customers in three states. AGL Resources' common stock has a five dollar ($5.00) par value and is listed and traded on the New York Stock Exchange under the symbol "ATG." 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. As of June 30, 2004, AGL Resources, in conjunction with its subsidiaries, employed approximately 1,996 full-time employees. b. Utility Subsidiaries (i) Atlanta Gas Light Company 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 regulates AGLC 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, 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. AGL Rome Holdings, Inc. owned property associated with a former manufactured gas plant in Rome, Georgia, but sold that property in December 2003. (ii) Chattanooga Gas Company CGC is a natural gas local distribution utility with distribution systems and related facilities serving 12 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 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 million. 6 (iii) Virginia Natural Gas, Inc. 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. 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. c. Nonutility Subsidiaries AGL Resources owns several nonutility subsidiaries. The Commission has previously authorized the retention of AGL Resources' nonutility subsidiaries./4 2. NUI Corporation a. Utility Subsidiaries NUI, a New Jersey corporation, has two public utility subsidiary companies, NUI Utilities and Virginia Gas Distribution Company ("VGDC"). Through its subsidiaries, NUI operates natural gas distribution systems and natural gas storage and pipeline businesses. (i) NUI Utilities, Inc. Through its three regulated utility divisions, Elizabethtown Gas Company ("Elizabethtown Gas"), City Gas Company of Florida ("City Gas") and Elkton Gas, NUI Utilities distributes natural gas to approximately 371,000 customers in New Jersey, Florida and Maryland. Each division is subject to regulation by the public service commission in the states where it operates. During the first nine months of fiscal year 2004, 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. 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 ____________________ 4 AGL Resources Inc., et al., Holding Co. Act Release No. 27243 (Oct. 5, 2000). 7 company's operating system provide the company with the flexibility to manage pipeline capacity and supply, thereby optimizing system utilization. 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 that complement its natural gas utility services in those states. The appliance group generated operating revenues of $11.4 million in the first nine months of fiscal year 2004 and had operating margins of $3.2 million in the same period. Presently, NUI Utilities has a capacity management arrangement with Cinergy Marketing & Trading LLC ("CMT"), wherein CMT supplies NUI Utilities with gas at market-based prices and pays NUI Utilities a fixed fee to manage its interstate pipeline assets. Prior to entering into its agreement with CMT, NUI Utilities made off-system sales to non-jurisdictional customers utilizing assets under contract from interstate pipelines. Such assets include interstate pipeline and storage capacity. Off system sales margins retained by NUI Utilities totaled $0.1 million in the first nine months of fiscal year 2004. (ii) Virginia Gas Distribution Company 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./5 VGDC distributes gas to approximately 275 customers in Virginia. During first nine months of fiscal year 2004, VGDC sold approximately 200.785 Mcf of gas, of which 4% were sold to residential customers and 96% to commercial and industrial customers. b. Nonutility Subsidiaries (i) NUI Capital Corp. NUI's nonutility businesses are carried out primarily by NUI Capital Corp. ("NUI Capital") and its subsidiaries./6 NUI Capital's only remaining non-regulated subsidiary with substantial continuing operations is Utility Business Services, Inc. ("UBS"), a billing and customer information systems and services subsidiary. NUI's other non-regulated subsidiaries are winding down their operations. These subsidiaries include: NUI Energy, Inc. ("NUI Energy"), an energy retailer; NUI Energy Brokers, NUI's wholesale energy trading and portfolio management subsidiary;/7 OAS Group, Inc. ("OAS"), the ____________________ 5 VGC's nonutility operations are discussed below. 6 A complete list and description of NUI's nonutility subsidiaries, which discusses the basis for retention for each subsidiary that would be retained, is included as Exhibit J-1. These companies are collectively referred to as "NUI Nonutility Subsidiaries." 7 During January 2004, NUI began to wind down the trading operations of NUI Energy Brokers and discontinued trading operations altogether at NUI Energy Brokers in March 2004, although NUI Energy Brokers continues to manage its prior contractual obligations under a long-term sales agreement in addition to two long-term gas storage and transportation agreements. 8 company's digital mapping operation;/8 and TIC Enterprises, LLC ("TIC"), a sales outsourcing subsidiary that sold wireless and network telephone services. 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. UBS has been profitable in every year since 1995. (ii) Virginia Gas Company 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 (the "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 $6.1 million in the first nine months of fiscal year 2004. (iii) NUI Saltville Storage, Inc. NUI's wholly owned subsidiary, NUI Saltville Storage, Inc. ("NUISS"), is a fifty-percent member of Saltville Gas Storage Company, LLC ("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. ____________________ 8 Effective April 1, 2004, OAS has subcontracted all of its existing services to a third party engineering firm. OAS has notified its customers that upon expiration of their current contracts, their relationship with OAS will terminate. 9 (iv) NUI Storage, Inc. NUI Storage, Inc. ("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, Richton is expected 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. Richton can also serve as a potential storage facility for the various proposed liquefied natural gas projects in the Gulf Coast. It is anticipated that Richton will be subject to FERC regulation. c. Recent Developments Corporate Governance In November 2003, the New Jersey Attorney General's Office ("NJAGO") subpoenaed NUI for certain documents and information related to the practices of NUI Energy Brokers. On June 30, 2004, NUI Energy Brokers entered into an agreement with the NJAGO whereby NUI Energy Brokers pled guilty to a charge of Misconduct by a Corporate Official in the third degree. This plea agreement provides that NUI Energy Brokers must pay a $500,000 fine and must cooperate fully with the NJAGO continuing investigation. NUI is a party to a separate agreement related to NUI Energy Brokers' plea, but NUI did not plead guilty to any crimes. NUI guaranteed NUI Energy Brokers' payment of the fine and agreed to cooperate fully with the NJAGO continuing investigation and to develop, fund and operate community service programs within the Elizabethtown Gas service territory. The plea concludes the investigation by the NJAGO of NUI and its subsidiaries. As a result of NUI and NUI Utilities' credit downgrades during 2003, negative credit rating comments and concerns raised during a routine competitive services audit of NUI Utilities operating division, Elizabethtown Gas, conducted by the NJBPU, in March 2003, the NJBPU ordered a focused audit of NUI, NUI Utilities and Elizabethtown Gas in six key areas: (1) strategic planning; (2) affiliate transactions; (3) financial structure and interaction; (4) accounting and property records; (5) corporate governance; and (6) executive compensation. The NJBPU retained The Liberty Consulting Group ("Liberty") as the auditors for the focused audit. On March 17, 2004, the NJBPU released the final report for the focused audit, which, among other things, cited weaknesses in each of the foregoing six areas. The NJBPU's review of NUI, including matters related to NUI Energy Brokers, concluded with the settlement agreement entered into on April 13, 2004, among NUI, NUI Utilities, Elizabethtown Gas and the NJBPU regarding the issues raised in the focused audit. Under the settlement agreement, 10 NUI Utilities agreed to provide a $28 million refund to Elizabethtown Gas ratepayers and to pay a $2 million penalty to the State of New Jersey over five years./9 In November 2003, the SEC advised NUI that it is conducting an informal inquiry relating to NUI Energy Brokers. On March 1, 2004, the SEC requested NUI produce voluntarily certain documents in furtherance of its informal inquiry. NUI is fully cooperating with the SEC. As indicated below, after the acquisition closes, the NUI Board of Directors and the NUI Utilities Board of Directors will be replaced with directors selected by AGL Resources. The NUI companies would, therefore, benefit from AGL Resources' strong governance processes and procedures. The Board of Directors of AGL Resources currently consists of eleven members: ten independent, outside directors plus Ms. Rosput, AGL Resources' Chairman, President and CEO. The independent members of the Board meet regularly without the presence of management, and they meet with management without the presence of the CEO. These private meetings are intended to ensure that the Board receives the unvarnished version of the facts in every situation. Furthermore, the charters of each of the Board committees clearly establish their respective roles and responsibilities, including the independence of outside auditors and consultants, who are retained by the Board directly. The charters may be found on AGL Resources' website at www.aglresources.com at the section entitled, "Investor Information - Corporate Governance - Highlights." AGL Resources has formed committees of its Board of Directors for risk management and corporate governance, has set clearly established internal rules for delegation of authority, and has implemented a strong set of policies on ethics and honesty for all employees. AGL Resources is also committed to providing the investment community and its regulators with information that is accurate, timely and as transparent as possible. AGL Resources' independent auditors PricewaterhouseCoopers LLP report directly to the Audit Committee. AGL Resources has also adopted a Code of Business Conduct. All employees must confirm annually, in writing, their acceptance of the Code of Business Conduct. AGL Resources also has an insider trading policy, to which all directors and employees, including our key corporate decision makers, must strictly adhere. To foster an environment of compliance, AGL Resources has, for years, maintained a hotline available for employees to anonymously and confidentially report any questionable practices, actions or activities at the company. AGL Resources also surveys its employees in the accounting and control area of the company periodically to ensure that they are satisfied with the control environment and the company's practices. AGL Resources also surveys employees annually for a broad set of reasons, including testing the compliance environment. ____________________ 9 The $28 million will be credited to ratepayers as follows: $7 million in NUI's fiscal year 2004, $6 million in NUI's fiscal year 2005 and $5 million in each of NUI's fiscal years 2006, 2007 and 2008. The $2 million penalty must be paid in $400,000 annual installments in each of NUI's fiscal years 2004 through 2008. The company has the option to make a balloon payment of all outstanding amounts due under the terms of the settlement agreement at any time. In addition, upon the close of a sale of NUI Utilities, any outstanding balance is required to be paid in full by NUI Utilities within a period to be determined by the NJBPU. 11 After the acquisition, a vast majority of NUI's current business processes that impact control over financial reporting will be conformed to the processes used by AGL Resources, which will replace NUI's current control processes. Any processes that are unique to NUI that remain in place after the acquisition will be subject to the corporate governance and entity-level control provisions of AGL Resources. Moreover, since AGL Resources is regulated under PUHCA, the NUI companies will likewise comply with PUHCA requirements following the close of the acquisition. Capital Structure The capital structures of NUI, NUI Utilities and VGDC as of June 30, 2004 are shown in the table below.
- --------------------------------------------------------------------------------------------- NUI (6/30/04) NUI Utilities (6/30/04) - ---------------------------- ------------------------------- -------------------------------- ($MM) % of total cap ($MM) % of total cap - ---------------------------- -------------- ---------------- --------------- ---------------- Long-term debt 199 28.4% 199 39.1% Short-term debt (including current maturities of long-term 294 (1) 42.0% 86 (2) 16.9% debt) Preferred stock Common stock equity 207 29.6% 224 44.0% ============================ ============== ================ =============== ================ Total capitalization $700 100.0% $509 100.0% - ---------------------------------------------------------------------------------------------
(1) Net of $111 million of cash at June 30, 2004. (2) Net of $66 million of cash at June 30, 2004.
- ------------------------------------------- ------------------------------------------------- VGDC (6/30/04) - ------------------------------------------- ------------------------------------------------- ($MM) % of total cap - ------------------------------------------- ------------------------ ------------------------ Long-term debt 0 - Short-term debt (including current (1)(1) 50% maturities of long-term debt) Preferred stock - - Common stock equity (1) 50% =========================================== ======================== ======================== Total capitalization (1) 100.0% - ------------------------------------------- ------------------------ ------------------------
(1) Net of $1 million of cash at June 30, 2004 12 NUI, and NUI Utilities have the following ratings. VGDC has no rated debt. - -------------------------------------------------------------------------------- NUI NUI Utilities - ---------------------------------------- --------------- ----------------------- Caa1 B1 Moody's outlook Developing Developing S&P corporate credit rating -- BB S&P outlook -- CreditWatch with developing implications - -------------------------------------------------------------------------------- C. Description of the Transaction 1. The Merger 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/10 and NUI Corporation, dated as of July 14, 2004 ("Merger Agreement"), pursuant to 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 June 30, 2004, NUI had approximately $604 million in debt and $111 million of cash on its balance sheet, bringing the current net value of the acquisition to $713 million. AGL Resources anticipates that the amount of NUI debt and cash will change prior to the time of closing. 2. Financing the Merger The purchase of NUI shares will be funded primarily through the issuance of AGL Resources common stock at or prior to closing. 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 ratings and its current dividend policy post-acquisition. As a result of the announcement of the acquisition, however, the outlooks on AGL Resources' credit ratings have changed. Moody's recently affirmed AGL Resources' ratings, but changed its rating outlook to negative from stable. Both Standard & Poor's and Fitch changed AGL Resources' credit ratings to "on watch" status with negative outlooks. These rating agencies have indicated their actions are the result of the execution risks in consummating, financing and integrating the NUI acquisition, and concerns regarding issues and risks associated with NUI's business. This placement of AGL Resources on credit "watch" by the major credit rating agencies is ____________________ 10 Cougar Corporation is a wholly owned subsidiary of AGL Resources organized under the laws of New Jersey. It was incorporated on July 14, 2004 solely for the purposes of the Merger and is engaged in no other business. 13 customary, and this action is not expected to result in any adverse ratings actions. AGL Resources can readily finance this acquisition without significant pressure on the balance sheet or on its credit rating. AGL Resources expects to maintain its strong investment-grade rating and its current dividend policy post-acquisition. After the Merger, AGL Resources' ratio of equity to total capitalization will remain well above 30%./11 AGL Resources may elect to finance the cash portion of the purchase price through the issue of common stock at or prior to closing if market conditions are favorable. This approach has been used in other recent acquisitions in the utility industry./12 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. AGL Resources currently is authorized to issue equity and debt securities 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 price. 3. Conditions The transaction is subject to the approval of NUI's shareholders; the Securities and Exchange Commission; the Federal Communications Commission ("FCC"); the state regulatory agencies of New Jersey, Maryland and Virginia; and any necessary approval or the expiration or termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. These approvals are further discussed in Item 4, below. The consummation of the transaction is further 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 the Settlement with the NJAGO) relating to the matters that are the subject of the NJBPU Settlement Order and the Stipulation and Agreement referred to therein, the NJAGO Settlement or the Stier Anderson Report (as those terms are defined in the Merger Agreement, see Exhibit B-1 hereto), 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 nor its subsidiaries shall be the subject of an active investigation with respect to the matters that are the subject of the NJBPU ____________________ 11 See Pro Forma Capitalization Table at Item 3.B.1.c, supra. 12 For example, in Ameren Corporation, Holding Co. Act Release No. 27449 (Oct. 5, 2001) ("Ameren Financing Order"), the Commission authorized Ameren to issue common stock, among other things, as consideration for the equity securities or assets of other companies, provided that such acquisitions were either expressly authorized by separate Commission order or exempt under the Act. Ameren subsequently financed its acquisition of CILCORP Inc. with common stock issued prior to the issuance of the Commission order approving the acquisition. See Ameren Corporation, Holding Co. Act Release No. 27645 (Jan. 29, 2003). Ameren has indicated that it will follow the same approach in its acquisition of Illinois Power. See Ameren Corp. Application on Form U-1/A filed June 25, 2004 (SEC File No. 70-10220). 14 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. 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, 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 such termination. In the event of a termination of the Merger Agreement pursuant to 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. 4. Management and Operations Following the Merger Pursuant to 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./13 Exhibit K-1 sets forth the organizational structure of the combined company after the Merger, simplified to show only major subsidiaries. Upon closing, Craig Matthews, 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 ____________________ 13 While AGL Resources has not made any definitive decisions regarding its corporate structure following the closing, given NUI's exposure to certain post-closing liabilities and obligations, it is desirable to keep NUI's corporate structure in existence for some time following the closing. Consequently, AGL Resources would not be the direct holder of the capital stock of NUI's utility business. 15 resident of significant professional stature and business qualification to the AGL Resources Board. Since the closing the VNG acquisition, AGL Resources has sought to have at least one Virginian business leader on its Board./14 AGL Resources 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 its other utilities. 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. 5. Benefits of the Merger The acquisition will strengthen AGL Resources' position as a preeminent operator of natural gas utility assets in the Eastern United States by incrementally expanding its base of strong urban utility operations. With this acquisition, AGL Resources will expand its geographic footprint along the East Coast, reaching from Florida to New Jersey; and increase its customer base by approximately 20 percent to a total of more than 2.2 million customers. In addition, the acquisition will allow AGL Resources to modernize operations and upgrade service quality to NUI's customers; acquire strategic natural gas storage assets and pipeline connections; and enhance its asset management capabilities. AGL Resources expects to see earnings accretion within the first full year after closing, based on its experience integrating VNG. AGL Resources expects to improve NUI's business to a level on par with AGL Resources' utility subsidiaries for the benefit of all of its stakeholders. The Merger will provide an incremental opportunity for AGL Resources to build on its track record for running utility operations and enhancing shareholder value. a. Benefits from AGL Resources' Financial Strength As an investment-grade company, AGL Resources brings financial strength and resources to the transaction. As of June 30, 2004, AGL Resources had an enterprise value of $3 billion and total operating revenues of $945 million. AGL Resources' Senior Notes are currently rated Baa1/BBB+/A- by Moody's, Standard & Poor's and Fitch, respectively. AGL Resources was one of the few energy companies to receive a credit rating upgrade (by Fitch Ratings) in 2003. Recently, Platts Global Energy named AGL Resources its "2003 Gas Company of the Year." The most significant benefit of the Merger is the increased financial stability for NUI's utilities as a result of AGL Resources' financial strength. That strength will support NUI's utility customer growth and related capital requirements as well as the significant working capital necessary to purchase and deliver natural gas at today's higher commodity prices. A pro forma forecast with ____________________ 14 Henry C. Wolf, Vice Chairman and Chief Financial Officer of Norfolk Southern Corporation, is from Norfolk, Virginia and is currently a director of AGL Resources. 16 selected financial information of NUI, NUI Utilities and VGDC, prepared by AGL Resources, is provided in Confidential Exhibit M-3 hereto. Because of NUI's weakened credit ratings, it must prepay gas commodity and demand charges at a significant cost. In addition, NUI is incurring significant bank fees and high interest rates because of its poor credit ratings. Being a part of an investment grade company will, in the short run, significantly reduce the interest rate at which NUI Utilities currently borrows and will also allow NUI Utilities access to capital in the future at attractive prices, clearly a benefit in the long run. The Merger should reduce the possibility of a liquidity crisis at NUI and NUI Utilities that could be triggered if a payment default or acceleration of indebtedness were to occur under the terms of each company's debt financing. As indicated above, under the terms of the Merger Agreement, AGL Resources would not be obligated to complete the acquisition if either a payment default or acceleration of indebtedness were to occur. AGL Resources will need to refinance much of NUI and NUI Utilities' debt at closing -- an amount that, depending on the date of the closing, could exceed $530 million. This debt includes the approximately $405 million that is currently outstanding under NUI and NUI Utilities' current credit facilities, which terminate at closing; up to $95 million of any additional borrowings that may be outstanding at closing under NUI and NUI Utilities' new credit facilities ("Seasonal Bridge"), which terminate at closing; and up to $30 million payable by NUI Utilities after closing under the Settlement Agreement with the NJBPU./15 AGL Resources intends to finance the repayment of NUI and NUI Utilities' indebtedness at closing by issuing unsecured indebtedness to external creditors and then loaning the proceeds of the issuance to NUI and NUI Utilities through long-term intercompany debt (the "Intercompany Notes")./16 NUI and NUI Utilities will use the funds borrowed under the Intercompany Notes to repay indebtedness to third party lenders under the Credit Agreement and Seasonal Bridge, and under its Settlement Agreement with the NJBPU. AGL Resources anticipates that the principal of the Intercompany Notes will equal the amount that NUI and NUI Utilities require for repayment of indebtedness under these facilities and will otherwise be on no less favorable terms (e.g., weighted average interest rate, maturities, placement costs) than those upon which AGL Resources financed the repayment in the marketplace. AGL Resources expects that the Intercompany Notes will refinance NUI and NUI Utilities' existing indebtedness on terms that are more favorable to NUI and NUI Utilities than those that are currently provided under the Credit Agreement and Seasonal Bridge. A form of Intercompany Note is attached as Exhibit L-2 hereto. The Merger will not jeopardize AGL Resources' financial condition. AGL Resources plans to issue a substantial amount of equity to finance the acquisition and maintain a balanced, post-Merger capital structure. In addition, the NUI and NUI Utilities debt that AGL Resources proposes to refinance will be significantly less costly and, therefore, more supportable by the acquired companies. ____________________ 15 The repayment of NUI's bank loans would eliminate external debt at the NUI level. 16 AGL Resources or its financing subsidiary, AGL Capital Corporation, may issue indebtedness and fund NUI and NUI Utilities by acquiring the Intercompany Notes. 17 NUI Utilities is also one-fourth to one-fifth the current size of AGL Resources, depending on the measure used,/17 so AGL Resources financial structure should not be subjected to unreasonable financial stress as a consequence of the Merger. Lastly, NUI Utilities is fundamentally a sound public utility company that is expected to contribute positively to the earnings of AGL Resources. A memorandum discussing the litigation and government investigations involving NUI is attached as Confidential Exhibit M-2. As part of the due diligence process associated with the Merger, AGL Resources conducted a thorough review of the pending litigation and governmental investigations disclosed by NUI in the Merger Agreement. In general, AGL Resources reviewed the applicable court filings, correspondence and other relevant documents, interviewed NUI's in-house and outside counsel and retained outside counsel to evaluate the potential for liability and the amount of exposure, if any. AGL Resources does not believe that any of the disclosed matters will have a materially adverse impact on its business or assets for several reasons, including the fact that NUI will be maintained as a separate subsidiary of AGL Resources upon the closing of the transaction. As a result, NUI, and not AGL Resources, would be liable for any damages, fines or other payments relating to the pending matters. In addition, NUI maintains various insurance coverages that are applicable to these liabilities. AGLR took into account reasonable estimates of NUI's potential liabilities when it valued NUI for purposes of the merger. Finally, AGL Resources included in the Merger Agreement as closing conditions requirements that (i) NUI will not be subject to any active governmental investigations relating to the matters that are the subject of the New Jersey Attorney General's Office investigation, if such investigation could have a material adverse effect on NUI and (ii) NUI will not be the subject of any further felony criminal indictments with respect to such matters. Moody's recently affirmed AGL Resources' credit rating following the public announcement of the acquisition. Moody's indicated that its negative outlook reflects the execution risks in consummating, financing, and integrating this transaction. Moody's concluded, however, that the terms of the Merger Agreement protect AGL Resources from certain of NUI's outstanding contingencies as they allow AGL Resources to abandon the purchase should NUI be unable to satisfy AGL Resources' concerns with regard to certain matters. Moody's negative outlook (as opposed to a review for possible downgrade) denotes its expectation that the strains in AGL Resources' credit profile brought from this purchase will be temporary and AGL Resources will recover over an 18-24 month time horizon. Moody's affirmed AGL Resources' ratings and noted its expectation that the company's financial resources and financial flexibility should enable AGL Resources to absorb a temporary near-term strain of acquiring a smaller, financially weaker entity. ____________________ 17 In terms of size, NUI's assets are over a quarter that of AGL Resources, its customer base is about a fifth of that of AGL Resources. 18 b. Benefits From AGL Resources' Utility Experience AGL Resources has been operating natural gas local distribution systems for almost 150 years and has a strong track record of well-run utility operations. AGL Resources' business model will produce efficiencies in the delivery of superior service to NUI's customers. Because of its own geographic scope, AGL Resources will be able to integrate all four of NUI's utility distribution areas into its system without disruption, thereby providing a smooth transition for customers in all states where NUI is doing business. Upon closing, AGL Resources will be the largest local distribution company, in terms of number of customers, along the east coast of the United States. This scale allows the company to continue its strategy of investment in modernizing technologies, which improve customer service and provide other benefits for ratepayers. AGL Resources intends to improve NUI's financial condition and to implement operational and infrastructure improvements in NUI's utility operations. AGL Resources' utility businesses use state-of-the-art technology and field-tested best practices to provide superior service. The integration of this technology at NUI should include improvements such as the implementation of compliance tracking systems to track system leaks; use of work management system software and practices for deployment of field work; use of an automated dispatch system to allow field service work to be real-time system generated; upgrades to the customer information system to improve the response of the customer service representatives; and use of workforce planning tools to forecast call volumes to match customer service representation. These systems and adherence to best practices will benefit NUI utility services and enhance service to NUI's customers. AGL Resources is confident that it will be able to improve upon NUI's utility customer service, safety and reliability record over time. Additionally, to improve systems reliability for NUI's utilities, AGL Resources will also seek to accelerate NUI's existing pipeline replacement program which is aimed at replacing bare steel and cast iron pipe. AGL has the engineering construction and design management expertise to manage replacement programs efficiently and effectively. Finally, AGL Resources will initiate the tracking of NUI utilities' operational metrics in order to manage the business by benchmarking these metric across AGL Resources' utilities as well as with other utilities. The Merger will have benefits for AGL Resources' current utility businesses as well. For example, Elizabethtown Gas is located in a region where there is strong base usage and where gas is the preferred energy alternative. NUI is also positioned in the geographic area where AGL Resources conducts wholesale asset management operations. Additionally, the increase to the number of AGL Resources' utility customers means that AGL Resources will be able to allocate its corporate overhead over a larger number of ratepayers. This should lead to better use of pipeline capacity and storage for which NUI Utilities is already contracted but which is not being utilized, thus yielding benefits now and in the future. 19 D. Financing Authority On April 1, 2004, the Commission issued an order authorizing AGL Resources and its utility and nonutility subsidiaries to engage in various financing transactions summarized in Item 3, below./18 The authorization period of the Financing Order extends from April 1, 2004 through March 31, 2007 ("Authorization Period"). As more fully described in Item 3 below, Applicants seek approval pursuant to Sections 6(a), 7, 9(a), 10, 12(b), 12(c), and 13(b) of the Act and Rules 43, 45, 46 and 54 for the NUI Group of companies to, after the consummation of the Merger, undertake any of the transactions in which current subsidiaries of AGL Resources may engage under the Financing Order during the Authorization Period. The NUI Group companies would be subject to the same financing limitations and conditions as set forth in the Financing Order. In particular, Applicants propose to extend to the NUI Group authority concerning: o Utility subsidiary short-term debt o Authorization and operation of the money pools o Guarantees o Hedging o Changes in capital stock of wholly-owned subsidiaries o Financing entities o Restructuring and reorganization o Intermediate subsidiaries o Payment of dividends out of capital and unearned surplus Each of these areas of financing authority is discussed in greater detail in Item 3, below. E. Affiliate Transactions On October 5, 2000, the Commission issued an order which, among other things, approved the formation of a system service company and authorized certain intrasystem transactions.19 NUI proposes that it and its subsidiaries would enter into a services agreement with AGL Services pursuant to the Commission-approved form of services agreement, a copy of which is attached herein as Exhibit L-1. 1. 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 pursuant to arrangements with the respective state commissions with jurisdiction over AGLC, VNG and CGC. Under these arrangements, Sequent provides commodity gas, including related procurement services, and also acts as agent for AGLC, VNG and CGC in ____________________ 18 See Financing Order, supra, note 3. 19 AGL Resources Inc., Holding Co. Act Release No. 27243 (Oct. 5, 2000) ("Intrasystem Transactions Order"). 20 connection with transactions for gas transportation and storage capacity. These transactions are exempt from regulation under Section 13(b) of the Act by virtue of Rules 80 and 81. The rules exempt transactions in natural gas from the definition of goods under the Act and provide that transportation and similar services, the sale of which is normally subject to public regulation are exempted from the provisions of Section 13. Gas transportation and storage services are subject to the regulation of the FERC. Sequent proposes to provide similar services to NUI Utilities and VGDC subject to the approval of the NJBPU and VSCC. The asset management model that Sequent employs provides for revenue sharing between the asset manager and the utility's ratepayers. As noted above, Sequent currently manages the assets of AGLC, VNG and CGC and under these arrangements, Sequent contributed approximately $3 million to customers in the first six months of 2004. 2. Billing Services NUI Utilities currently has an Agreement for Billing Services, dated February 18, 2004, with NUI's Nonutility Subsidiary, 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. UBS charges NUI Utilities market rates for the provision of these services. After closing, AGL Resources is willing 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 will need to seek such authorization before restructuring the contract between UBS and NUI Utilities. AGL Resources therefore requests a temporary exception to the "at cost" provisions of Section 13(b) of the Act and the rules thereunder, for two years, to provide adequate time to restructure this contract. 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. 3. Construction and Management Services Through a wholly owned subsidiary, VGC provides construction and operations management services to SSLLC. VGC's wholly owned subsidiary, Virginia Gas Pipeline Company ("VGPC"), serves as the construction and operations manager to SSLLC, pursuant to an Operating Agreement, dated August 15, 2001. Under the terms of this agreement, SSLLC reimburses VGPC for the costs it incurs to construct, maintain and operate SSLLC's facilities, including VGPC's administration and labor costs. This service arrangement is permitted under Rule 87(b)(1) and is consistent with the cost pricing standard of Rule 90. 21 F. Tax Allocation Agreement On December 23, 2003, the Commission issued a Supplemental Order authorizing AGL Resources' tax allocation agreement./20 AGL Resources proposes to add the NUI Group companies to the existing tax allocation arrangements approved by the Commission for the AGL Resources system. G. Rule 16 Exemption As discussed in Item 3 below, SSLLC seeks to rely on an exemption under Rule 16 from the obligations, duties and liabilities imposed upon it under the Act as a subsidiary or affiliate of a registered holding company. Accordingly, Applicants request that the Commission authorize AGL Resources to acquire NUI's interest in SSLLC under Sections 9(a)(1) and 10. H. Section 3(a)(1) Exemption Request for VGC As discussed in Item 3 below, Applicants also request that the Commission issue an order pursuant to Section 3(a)(1) of the Act providing that VGC, a Virginia corporation with a Virginia utility subsidiary operating solely in Virginia, and each of its subsidiary companies as such, will be exempt from all provisions of the Act, except Section 9(a)(2). Item 2. Fees, Commissions and Expenses. Applicants estimate the fees associated with the completion of the transaction to be as follows (amounts in $ millions): ---------------------------------------------------------------- ($ millions) AGL NUI Total ---------- ------- Resources(1) ---------------------------------------------------------------- Legal 3.3 5.3 8.6 Accounting 0.6 0.2 0.8 Bankers 4.0 10.2 14.2 ---------------------------------------------------------------- Total $7.9 $15.7 23.6 ---------------------------------------------------------------- (1) The amounts shown do not include the costs associated with refinancing NUI's debt or the issuance of equity by AGL Resources. Such costs are subject to the terms of the Financing Order. Item 3. Applicable Statutory Provisions. A. Applicable Provisions Sections 5(b), 6(a), 7, 9(a), 10, 11, 12(b), 12(c), and 13(b) of the Act and Rules 20, 43, 45, 46, and 54 thereunder are considered applicable to the proposed transactions. ____________________ 20 AGL Resources Inc., et al., Holding Co. Act Release No. 27781 (Dec. 23, 2003) ("Tax Allocation Order"). The Commission's Order of October 5, 2000, AGL Resources Inc., et al., Holding Co. Act Release No. 27242 (Oct. 5, 2000) had reserved jurisdiction, pending completion of the record over (among other things) the tax allocation agreement. 22 To the extent that the proposed transactions are considered by the Commission to require authorizations, exemption or approval under any section of the Act or the rules and regulations thereunder other than those set forth above, request for such authorization, exemption or approval is hereby made. B. Legal Analysis 1. Sections 9(a), 10 and 11 Section 9(a)(2) of the Act makes it unlawful, without approval of the Commission under Section 10, "for any person ... to acquire, directly or indirectly, any security of any public utility company, if such person is an affiliate ... of such company and of any other public utility or holding company, or will by virtue of such acquisition become such an affiliate." Under the definition set forth in Section 2(a)(11)(A) of the Act, an "affiliate" of a specified company means "any person that directly or indirectly owns, controls, or holds with power to vote, 5 per centum or more of the outstanding voting securities of such specified company." AGL Resources is the owner of 100% of the voting stock of three public utility companies, AGLC, CGC and VNG. Because AGL Resources will, as a result of the Merger, own more than five percent of the outstanding voting securities of more than one public utility company, AGL Resources must obtain the approval of the Commission for the Merger under Sections 9(a)(2) and 10 of the Act. The statutory standards to be considered by the Commission in determining whether to approve the proposed Merger are set forth in Sections 10(b), 10(c) and 10(f) of the Act. As described below, the Merger complies with all of the applicable provisions of Section 10 of the Act. a. Section 10(b)(1) The Commission may not approve the Merger if it determines, pursuant to Section 10(b)(1), that such acquisition will tend towards interlocking relations or the concentration of control of public-utility companies, of a kind or to an extent detrimental to the public interest or the interest of investors, or consumers. For the reasons given below, there is no basis in this case for the Commission to make either of those negative findings concerning the Merger. By its nature, any merger results in new links between theretofore unrelated companies./21 These links, however, are not the types of interlocking relations targeted by Section 10(b)(1), which _______________ 21 Northeast Utilities, Holding Co. Act Release No. 25221 (Dec. 21, 1990), as modified, Holding Co. Act Release No. 25273 (March 15, 1991), aff'd sub nom. City of Holyoke v. SEC, 972 F.2d 358 (D.C. Cir. 1992) ("interlocking relationships are necessary to integrate [the two merging entities]"). 23 was primarily aimed at preventing business combinations unrelated to operating efficiencies./22 The Merger will not result in an undue concentration of control of public utility companies. Upon closing, Craig Matthews, NUI's current CEO, will leave the company. AGL Resources is evaluating the composition of NUI's senior management 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. After the consummation of the acquisition, each of NUI's and NUI Utilities' Boards of Directors will be comprised of officers of AGL Resources, much like the current boards of AGLC, VNG and CGC. AGL Resources' Board of Directors will also be considering revisions to the charter of its Environmental and Corporate Responsibility Committee to contemplate oversight of the post-acquisition integration of the NUI Utilities and VGDC, with proper recognition of the public interest considerations of the states in which the acquired utilities operate. In addition, it is the practice of AGL Resources' Board of Directors to hold one board meeting a year outside of Georgia and invite public and community officials to meet with board members so that they may hear first-hand how AGL Resources is doing in the local area. AGL Resources 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 its other utilities. 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 intends to work closely with NUI management to develop a framework to address any redundancies that become apparent as AGL Resources integrates NUI's corporate management into AGL Resources' existing management structure. In addition, the Merger will not create a "huge, complex and irrational" system./23 In applying Section 10(b)(1) to utility acquisitions, the Commission must determine whether the acquisition will create "the type of structures and combinations which the Act was specifically directed [to prohibit]."/24 The transaction is not undertaken specifically for the purpose of extending AGL Resources' control over regulated public utilities as such. As indicated above, the acquisition will allow AGL Resources to modernize operations and upgrade service quality to NUI's customers; acquire strategic natural gas storage assets and pipeline connections; and enhance its asset management capabilities. Size: With this acquisition, AGL Resources will expand its geographic reach along the east coast, reaching from Florida to New Jersey, and increase its customer base by approximately 20 percent to a total of more than 2.2 million customers. This is in line with existing holding company systems./25 ___________________ 22 See Section 1(b)(4) of the Act (finding that the public interests of consumers are adversely affected "when the growth and extension of holding companies bears no relation to economy of management and operation or the integration and coordination of related operating properties. . . ."). 23 American Electric Power Co., Holding Co. Act Release No. 20633 (July 21, 1978). 24 Vermont Yankee Nuclear Corp., Holding Co. Act Release No. 15958 (Feb. 6, 1968). 25 For example, NiSource Inc. has 3.3 million gas customers in nine states. See NiSource Inc. Annual Report on Form 10-K for fiscal year ended December 31, 2003, File No. 001-16189, filed Mar. 12, 2004. Xcel Energy Inc. has approximately 1.8 million gas customers in 11 states. See Xcel Energy Inc. Annual Report on Form 10-K for fiscal year ended December 31, 2003, File No. 001-03034, filed Mar. 15, 2004. 24 Efficiencies and economies: As described above, AGL Resources anticipates it will be able to absorb all four of NUI's utility operations into its system without disruption, and it will implement best practices and technology enhancements to provide service in a more efficient and economic manner. AGL Resources expects the Merger to produce efficiencies associated with more economical gas purchasing, information technology initiatives, improved transmission capacity and storage utilization, and general and administrative expense reductions. AGL Resources has analyzed performance metrics at NUI and NUI Utilities and compared them to the performance of AGL Resources and its subsidiaries. Based on this analysis, AGL Resources is confident that the Merger will produce economies and efficiencies. Competitive effects: The Merger does not reduce competition in any relevant market. Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act") and rules thereunder, the Merger may not be consummated until AGL Resources and NUI each have filed Notification and Report Forms with the United States Department of Justice ("DOJ") and Federal Trade Commission ("FTC") describing the effects of the transaction on competition in the relevant market, and the required waiting period has expired. On August 5, 2004, AGL Resources and NUI filed such pre-merger notifications with the DOJ and FTC. Accordingly, unless the DOJ and/or FTC request additional information, the waiting period will expire on or before September 7, 2004. b. Section 10(b)(2) The Commission may not approve the Merger if it determines, pursuant to Section 10(b)(2), that the consideration (including the fees and expenses associated with the transaction) to be paid by AGL Resources is not reasonable or does not bear fair relation to the investment in and the earning capacity of the utility assets underlying the securities being acquired. For the reasons given below, there is no basis in this case for the Commission to make either of these negative findings concerning the consideration being offered by AGL Resources. The process by which AGL Resources and NUI reached agreement on the Merger demonstrates that the requirements of Section 10(b)(2) have been satisfied. The negotiation between NUI and AGL Resources was at arms-length and the consideration agreed to by the parties was the product of a competitive process. In 2003, as a result of the negative impact on NUI resulting from its credit downgrades and adverse business conditions, the NUI Board of Directors established a Special Committee to assess the company's alternatives. After considering a number of strategic alternatives, on September 26, 2003, the Board of Directors of NUI concluded that the sale of the company was in the best interests of its shareholders and other key stakeholders, including its customers, and announced its intention to pursue the sale of the company. Thereafter, NUI began a public auction process. A detailed account of the auction process and related events is available as part of the NUI Corporation Proxy Statement, Exhibit B-2. 25 Once the decision to pursue a sale was made, the NUI Board of Directors engaged Credit Suisse First Boston LLC and Berenson & Company, LLC to act as its financial advisors through the sale process. These advisors issued opinions that the consideration was fair, from a financial point of view, to the holders of NUI's shares./26 A detailed Confidential Information Memorandum by NUI was prepared during November 2003, and initial expressions of interest from potential purchasers were sought in December 2003. Approximately 60 interested parties, both strategic and financial entities, were contacted and approximately half of those parties submitted written expressions of interest. Eight parties were invited into the second round of the sale process. Detailed due diligence was conducted by prospective bidders during the first several months of 2004, and binding bids were submitted on June 2, 2004. Detailed negotiations were conducted with bidders, and ultimately NUI negotiated a definitive agreement with AGL Resources. NUI determined that being purchased by AGL Resources was the best strategic alternative for the company based on the key issues of price, certainty of closing and time required to complete the merger. The final sales price was negotiated by the parties and an agreement and plan of merger was reached between NUI and AGL Resources on July 14, 2004, which agreement is Exhibit B-1 herein. This Commission has previously recognized that, as here, when the agreed consideration for an acquisition is the result of arms-length negotiations between the managements of the companies involved, supported by the opinions of financial advisors, there is persuasive evidence that the requirements of Section 10(b)(2) have been satisfied./27 Further, AGL Resources believes that the fees, commissions and expenses paid or incurred or to be paid or incurred in connection with the Merger, estimated in Item 2 above, are reasonable and fair in light of (1) the size and complexity of the transaction relative to other similar transactions; (2) the context and prolonged process of the auction; (3) the various legal and other issues that faced NUI throughout the auction process; (4) the regulatory processes and consents required for the Merger; and (5) the anticipated benefits of the transaction to the public, investors and consumers. Given the circumstances, the fees, commissions and expenses are consistent with recent precedent, and meet the standards of Section 10(b)(2). Legal fees for both AGL Resources and NUI are expected to comprise 1.2% of the total value of the acquisition (i.e., $691 million). The combined accounting fees are expected to comprise 0.1% of the acquisition value. Lastly, the combined bankers fees are expected to comprise 2.1% of the acquisition value. Although the aggregate fees, commissions and expenses expected to be incurred in connection with the transaction (3.4%) are somewhat higher on a percentage basis than the percentages in other mergers approved by the Commission, the fees, commissions and expenses in this case are within the range of prior cases on an absolute basis ($23.6 million) and are reasonable given the complexity of the transaction and the other factors listed above./28 _________________ 26 These opinions are printed as part of NUI's preliminary proxy statement filed with the SEC Friday, August 13, 2004, and included herein as Exhibit B-2. 27 See Entergy Corporation, et al., Holding Co. Act Release No. 25952 (Dec. 17, 1993), petition for reconsideration denied, Holding Co. Act Release No. 26037 (Apr. 28, 1994). 28 See Unisource Energy Corporation, Holding Co. Act Release No. 27706 (Aug. 1, 2003) (fees, commissions and expenses that were incurred in connection with the transaction totaled approximately $5.6 million or approximately 2.4% of the total consideration to be paid); PEPCO Holdings Inc., Holding Co. Act Release No. 27553 (July 24, 2002) (fees and expenses incurred in connection with the transaction total approximately $45.8 million. This amount represents 2.1% (based on a 26 c. Section 10(b)(3) The Commission may not approve the Merger if it determines, pursuant to Section 10(b)(3), that the acquisition will unduly complicate the capital structure of AGL Resources or will be detrimental to the public interest or the interest of investors or consumers or the proper functioning of such holding-company system. For the reasons given below, there is no basis in this case for the Commission to make either of these negative findings concerning the Merger. The capital structure of AGL Resources after the transaction will not be unduly complicated and will be substantially unchanged from AGL Resources' capital structure prior to the completion of the transaction. The proposed acquisition is of manageable size and hence credit neutral to AGL Resources. NUI will represent approximately 20% of the combined company only. AGL Resources can readily finance this acquisition without significant pressure on its balance sheet or credit rating. The transaction is limited in scope and should strengthen AGL Resources' financial performance in the near term. NUI's current financial difficulties have arisen from issues related to mismanagement of utility assets, including unsuccessfully executed diversification strategies; downgrades in NUI and NUI Utilities' credit ratings; the related high cost debt and gas commodity purchases and subsequent regulatory audits, investigations and in some cases criminal indictments. Regardless of these difficulties, NUI's utility businesses are fundamentally sound. The nonutility businesses that gave rise to NUI's financial difficulties have been wound down and will soon be divested or closed. Further, NUI, and eventually AGL Resources, will continue implementing procedures that will address NUI's prior mismanagement of accounts and controls and internal audit issues. The pro forma capitalization table below further demonstrates that the combination would not result in a complex or unsound capital structure. In this regard, the Commission is principally concerned that there be an adequate level of equity in the top level holding company and each utility in the system./29 As shown in the table below, the combined entity will have in excess of 42% common equity as a percentage of total capitalization, well in excess of the Commission's traditional minimum 30% common equity standard./30 ___________________ purchase price of $2.2 billion) of the value of the consideration to be paid); New Century Energies, Inc., Holding Co. Act Release No. 27212 (Aug. 16, 2000) (fees and expenses of approximately $52 million represented approximately 1.4% of the value of the consideration to be paid); American Elec. Power Co., Inc. and Central and South West Corp., Holding Co. Act Release No. 27186 (June 14, 2000) (fees and expenses of approximately $73 million represented approximately 1.1% of the value of the consideration to be paid); Entergy Corp., Holding Co. Act Release No. 25952 (Dec. 17, 1993) (fees and expenses represented approximately 1.7% of the value of the consideration paid); Northeast Utilities, Holding Co. Act Release No. 25548 (June 3, 1992) (fees and expenses of approximately 2% of the value of the assets to be acquired). 29 To protect investors against unsound and complex capital structures, the SEC also would not favor a transaction that resulted in the creation or maintenance of an outstanding minority interest in a public utility subsidiary company. 30 "Capitalization" for purposes of this test is the sum of short-term debt (including current maturities of long-term debt), long-term debt, preferred stock and common stock equity. 27
- ---------------------------------------------------------------------------------------------------------------------------------- AGL Resources (6/30/04) NUI (6/30/04) Adjustments Pro Forma Combined ----------------------- ------------- ----------- ------------------ - ---------------------------------------------------------------------------------------------------------------------------------- % of total ($MM) % of total cap ($MM) % of total cap ($MM) ($MM) capitalization ----- -------------- ----- -------------- ----- ----- -------------- - ----------------------------------------------------------------------------------------------------------------------------------- Long-term 962 44.4% 199 28.4% 295 1,456 50.7% debt Short-term debt (including 9.0% 294 (1) 42.0% (295) 195 6.8% current 195 maturities of long-term debt) Preferred stock Common stock equity 1,011 46.6% 207 29.6% 1,218 42.5% ================================================================================================================================= Total $2,168 100.0% $700 100.0% $ 0 $2,869 100.0% capitalization - ---------------------------------------------------------------------------------------------------------------------------------
(1) Net of $111 million of cash at June 30, 2004. Finally, as set forth more fully in the discussion of the standards of Section 10(c)(2) below and elsewhere in the Application, the Merger will be in the public interest and the interest of investors and consumers, and will not be detrimental to the proper functioning of the resulting holding company system. d. Section 10(c)(1) Section 10(c)(1) requires that the Commission not approve an acquisition of securities or utility assets, or any other interests, which is unlawful under the provisions of Section 8 or is detrimental to the carrying out of the provisions of Section 11. (i) Section 8 Section 8 refers to the requirements of state law as it may relate to ownership or operation by a single company of the utility assets of an electric utility company and a gas utility company serving substantially the same service territory. Since AGL Resources does not own any electric utility facilities and will not acquire such facilities as a result of the Merger, Section 8 is not applicable to the Merger. 28 (ii) Section 11 Section 11(b)(1) generally confines the utility properties of a registered holding company to a "single integrated public-utility system," either gas or electric. An exception to this requirement is provided in Section 11(b)(1)(A) through (C) of the Act./31 In this case, the combined gas properties of the operating subsidiaries of AGL Resources and NUI will constitute a single integrated gas utility system within the meaning of Section 2(a)(29)(B). Further, Section 11(b)(2) of the Act requires that "the corporate structure or continued existence of any company in the holding-company system does not unduly or unnecessarily complicate the structure, or unfairly or inequitably distribute voting power among security holders, of such holding-company system." Section 11(b)(2) also directs regulated companies "to take such action as the Commission shall find necessary in order that such holding company shall cease to be a holding company with respect to each of its subsidiary companies which itself has a subsidiary company which is a holding company," in other words, to eliminate "great-grandfather" holding companies. However, the Commission has in the past recognized the necessity of permitting the continued existence of intermediate holding companies in registered holding company systems in order to achieve economic and tax efficiencies that would not otherwise be achievable in the absence of such arrangements./32 After the consummation of the proposed transaction, AGL Resources will become a "great-grandfather" holding company with respect to VGDC, because there will be three holding companies in its chain of ownership; AGL Resources, NUI and VGC. This structure results from the need to retain the existing structure of the NUI Group companies as separate legal entities post-acquisition until all potential liabilities associated with NUI's pre-acquisition activities have been finally resolved. Particularly, those liabilities that may result from activities uncovered during recent investigations as discussed above. The Commission has permitted the existence of a great-grandfather holding company, for example in Ameren Corp./33 The Commission found in Ameren that the continued ___________________ 31 Section 11(b)(1) states, in relevant part: [T]he Commission shall permit a registered holding company to continue to control one or more additional integrated public-utility systems, if, after notice and opportunity for hearing, it finds that -- (A) Each of such additional systems cannot be operated as an independent system without the loss of substantial economies which can be secured by the retention of control by such holding company of such system; (B) All of such additional systems are located in on estate, or in adjoining States, or in a contiguous foreign country; and (C) The continued combination of such systems under the control of such holding company is not so large (considering the state of the art and the area or region affected) as to impair the advantages of localized management efficient operation, or the effectiveness of regulation. 32 See, e.g., Pepco Holdings Inc. et al., Holding Co. Act Release No. 27553 (July 24, 2002); see also Energy East Corp., et al., Holding Co. Act Release No. 27546 (June 27, 2002). 33 Ameren Corp. et al., Holding Co. Act Release No. 27645 (Jan. 29, 2003). 29 existence of a secondary holding company within the Ameren system would not unduly complicate Ameren's capital structure. Moreover, the Commission noted that there were significant financial disincentives to eliminating the secondary holding company at the time. In that case, to eliminate the secondary holding company as a subsidiary, Ameren would either have to prepay outstanding debt or, alternatively, assume the debt by means of a merger or otherwise. The prepayment alternative would significantly increase the cost of debt. The assumption of the debt would result in undesirable restrictions on future issuances by Ameren. Conversely, leaving the existing debt in place would not negatively affect the capital structure of Ameren's utility subsidiaries or be detrimental to investors. Therefore, the Commission found that Ameren's continued ownership of the secondary holding company did not implicate any of the abuses that Section 11(b)(2) of the Act was intended to prevent. Similarly, in Pepco Holdings Inc.,/34 the Commission found that the continued existence of a secondary holding company within the public utility holding system would not unduly complicate the system capital structure. The Commission had previously approved this structure, finding that temporary authority was appropriate to prevent economic injury to the company, shareholders and consumers because the structure could not be altered without a substantial tax burden. The Merger presents a similar situation where eliminating a holding company level, namely NUI and VGC, prematurely could be detrimental to investors and consumers by exposing AGL Resources to risks and liabilities associated with NUI's operations prior to the Merger, including but not limited to, liabilities and obligations with respect to NUI's plea agreements with the NJAGO; investigations of NUI by the SEC and other state regulators; on-going litigation matters and other post-closing matters. The proposed post-closing corporate structure enables AGL Resources to segregate the liabilities and obligations of the NUI Group companies to those companies and limits any risk or exposure to the rest of its system. In addition, there are tax reasons to maintain the current structure of the NUI group. The elimination of NUI may cause AGL Resources to incur significant adverse tax consequences because the elimination of NUI may either result in: (1) AGL Resources' acquisition being recharacterized in a manner that would result in two levels of tax being imposed on the acquisition instead of one level of tax, or (2) if the acquisition is not recharacterized, AGL Resources permanently losing its cost-based tax basis (and the associated tax benefits) in the NUI stock. The acquisition of the NUI stock is intended to be characterized for U.S. tax purposes as a taxable stock acquisition resulting in one level of tax being imposed on the shareholders of NUI with respect to their sale of the NUI stock and with AGL Resources obtaining a tax basis in the stock of NUI equal to the purchase price paid to the shareholders. If NUI is liquidated or otherwise eliminated as part of AGL Resources' acquisition there is a significant risk the Internal Revenue Service (the "Service") may recharacterize the acquisition as AGL Resources acquiring the assets of NUI (i.e., the stock in NUI's subsidiaries) in a taxable purchase and NUI redeeming the stock held by its shareholders in a taxable redemption. This recharacterization would cause AGL Resources' acquisition to trigger two levels of tax instead of the single level of tax described in the previous paragraph. Due to the nature of AGL Resources' acquisition, AGL ___________________ 34 Pepco Holdings Inc., et al., Holding Co. Act Release No. 27553 (July 24, 2002). 30 Resources would be fully liable for the additional tax described above. The magnitude of this liability could be substantial since it is probable NUI does not have significant tax basis in the stock of certain of its subsidiaries such as NUI Utilities. If the transaction were not recharacterized, the elimination of NUI would result in AGL Resources permanently losing its tax basis in the stock of NUI. Under U.S. tax principles, the post-acquisition elimination of NUI, through a liquidation or merger, would result in AGL Resources acquiring the assets of NUI (i.e., the stock in NUI's subsidiaries) in a tax-free transaction and AGL Resources would succeed to NUI's historic tax basis in such assets. The transaction would also result in AGL Resources' tax basis in the NUI stock being permanently eliminated when the stock of NUI is cancelled. Consequently, the elimination of NUI would result in AGL Resources (and indirectly its shareholders) losing the tax benefits associated with AGL Resources having obtained a cost-based tax basis in the NUI stock. The proposed corporate structure does not implicate the abuses that section 11(b)(2) was designed to address, i.e., the pyramiding of holding company groups with the interposition of one or more holding companies between the ultimate parent holding company and the operating companies, and the issuance, at each level of the structure, of different classes of debt or stock with unequal voting rights./35 Therefore, the Commission should permit the retention of NUI and VGC within the post-acquisition AGL Resources registered holding company system. AGL Resources would commit to reorganizing its corporate structure in order to eliminate the great-grandfather structure as soon as it is reasonably practical to do so. To that end, AGL Resources is considering the combination of VGDC into VNG. Such a restructuring would simplify the corporate structure and eliminate the "great-grandfather" issue because VGC would cease to be a holding company. AGL Resources is evaluating the consents and authorizations that may be required to effect such a restructuring and the tax implications of the transaction. If the restructuring is effected as an asset transfer pursuant to the express authorization of the VSCC, the transaction would be exempt under Section 9(b)(1) of the Act and could be effected without further SEC authorization. AGL Resources believes that it can complete the combination of VGDC and VNG by the end of 2005, subject to the necessary state and other regulatory approvals. e. Section 10(c)(2) Section 10(c)(2) states that the Commission may not approve the acquisition of securities or utility assets of a public utility or holding company unless such acquisition will serve the public interest by tending towards the economical and efficient development of an integrated public utility system. The economic efficiencies produced by the Merger are discussed in Item 1 above. The integrated public utility system resulting from the Merger is discussed below. _________________ 35 Exelon Corp., Holding Co. Act Release No. 27256 (Oct. 19, 2000); KeySpan Corp., Holding Co. Act Release No. 27271 (Nov. 7, 2000). 31 The Merger will tend toward the development of an integrated public utility system. An integrated gas public utility system is defined as "a system of one or more gas utility companies which are so located and related that substantial economies may be effectuated by being operated as a single coordinated system confined in its operations to a single area or region, in one or more states, not so large as to impair (considering the state of the art and the area or region affected) the advantages of localized management, efficient operation, and the effectiveness of regulation: provided, that gas utility companies deriving gas from a common source of supply may be deemed to be included in a single area or region."/36 Operation as a Single Coordinated System As discussed in Item 1 above, the Merger will allow AGL Resources to modernize operations and upgrade service quality to NUI's customers; acquire strategic natural gas storage assets and pipeline connections; and enhance its asset management capabilities. AGL Resources' business model will produce efficiencies in the delivery of service to NUI's customers through the use of coordinated management and technology systems. Further, both AGL Resources and NUI will benefit from coordinated gas purchasing operations. In particular, AGL Resources anticipates it will integrate all four of NUI's utility operations into its system without disruption, thereby providing service in a more efficient and economic manner. As an example of the opportunity to improve economies in the delivery of services, AGL Resources' utilities operating and maintenance metrics show a marked improvement over those currently existing at NUI. AGL Resources' operating and maintenance expense is currently $169 less per customer than that of NUI Utilities. AGL Resources' utilities serve approximately 400 more customers per employee than currently at NUI's utilities. The Merger will provide substantial economic efficiencies associated with more economical gas purchasing, information technology initiatives, transmission capacity and storage utilization, and general and administrative expense reductions. As previously described, AGL Resources' operating subsidiaries and NUI's operating subsidiaries currently manage similar physical properties and contractual assets (gas supply, transportation, and storage contracts of varying types and duration). Each company maintains a professional staff that performs services related to essential portfolio management functions, including portfolio design, portfolio strategy, procurement, storage optimization, price risk management, and contract administration. In AGL Resources' case, the functions of portfolio design, portfolio strategy, pipeline and storage contract service procurement, and price risk management strategy are performed by AGL Services. The functions of asset management, including natural gas commodity procurement and portfolio management, together with the execution of price risk management strategy, are performed by Sequent. AGL Services and Sequent perform the respective contract administration services for the applicable functions that they perform. In NUI's case, the functions of pipeline and storage contract service procurement, portfolio and design planning and dispatch and optimization services are performed by employees at NUI Utilities. Cinergy Marketing and Trading, with whom NUI Utilities currently has an asset management and gas procurement agreement (after the wind down of NUI Energy Brokers), procures gas on behalf of NUI Utilities, assists NUI Utilities with its risk management functions, and provides NUI Utilities' winter peaking services. __________________ 36 PUHCA Section 2(a)(29)(B). 32 After the Merger, the two gas supply departments will be consolidated into AGL Services, which will integrate the overall planning and management of the two companies' respective portfolios of physical and contractual assets. We anticipate that Sequent will also perform the same services for NUI Utilities as those described above that Sequent performs for the other utilities of AGL Resources. Specifically, the NUI Utilities gas supply department will be functionally merged with that of AGL Services. In addition, as discussed above, AGL Services will provide business services to NUI and its utility and nonutility companies 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. Single Area or Region The single area or region requirement is typically demonstrated by showing significant overlap between the gas supply basins, transmission pipelines, storage areas and market hubs used by the public utility companies in the combined group. NUI's gas utility operations are located on the East Coast and bracket the existing gas utility operations of AGL Resources on the north and south. See the map in Exhibit D-1. The map indicates that several pipelines carry gas from the Gulf Coast to the East Coast. All gas utilities in the combined company will, therefore, derive the substantial majority (more than 50%) of the gas used in operations from the Gulf Coast supply basin. The distance between AGL Resources' current utility operations and those of NUI is commensurate with Commission precedent involving other gas utility acquisitions./37 The Commission should not find that "the distance contravenes the policy of the Act against 'scatteration' - -- the ownership of widely dispersed utility properties which do not lend themselves to efficient operation and effective state regulation."/38 As discussed below, the expansion of the AGL Resources system by the acquisition of the NUI system also will not have an adverse effect upon localized management, efficient operation or effective regulation. Common Source of Supply. Historically, in determining whether two gas companies share a "common source of supply," the Commission has looked at whether the two entities purchase significant percentages of their total gas supply from production in one or more common basins, as well as whether they are served by a common pipeline or pipelines./39 Both AGL Resources' current utilities and the utilities added by the NUI acquisition will access primarily Gulf Coast natural gas supplies, with the Appalachian basin as a secondary supply source. The common gas pipelines serving the integrated public utility system would be Transcontinental Gas Pipeline, Dominion Transmission, and Columbia Gas Transmission (serving VNG, as well as Elizabethtown Gas and Elkton) as well as Tennessee Gas Pipeline (serving CGC and Elizabethtown Gas). Some of Elizabethtown Gas' supplies come from Texas Eastern Transmission which does not currently supply AGL Resources' existing ____________________ 37 See e.g., NIPSCO Industries, Inc., Holding Co. Act Release No. 26975 (Feb. 10, 1999) (authorizing acquisition of Massachusetts gas utility by an Indiana combination gas and electric utility holding company); Sempra Energy, Holding Co. Act Release No. 26971 (Feb. 1, 1999). 38 NIPSCO Industries, Inc., Holding Co. Act Release No. 26975 (Feb. 10, 1999). 39 See MCN Corporation, 62 SEC Docket 2379 (Sept. 17, 1996). 33 utilities. City Gas obtains transportation service from Florida Gas Transmission, which does not serve any of AGL Resources' current utilities. The NUI utilities and the utilities in the AGL Resources group also share several common storage contracts. These include Transco GSS, LSS, SS-1, ESS, LGA, and WSS; Columbia Gas Transmission FSS, Tennessee FS-MA, and CNG GSS storage. Applicants expect that both AGL Resources' and NUI's subsidiaries will continue to derive significant percentages of their total gas requirements for the foreseeable future from the same supply basins. Accordingly, there is substantial evidence that AGL Resources' and NUI's gas utility operations share a common source of supply. State of the Art. Any determination of the appropriate size of the "area or region" calls for consideration of the "state of the art" in the gas industry. In NIPSCO Industries, the Commission noted that: The industry continues to evolve, primarily as a result of decontrol of wellhead prices, the continuing development of an integrated national gas transportation network, the emergence of marketers and brokers, and the "unbundling" of the commodity and transportation functions of the interstate pipelines in response to various FERC initiatives. In particular, Order 636 has dramatically altered the way in which local gas distribution companies purchase and transport their required gas supplies. The concept of a "common source of supply" is susceptible of a different understanding today than in 1935, when the "single area or region" was generally defined in terms of the pipeline delivery points (i.e., the city-gate) where system local distribution companies purchased their gas. The ... relevant inquiry today is whether the system utilities purchase substantial quantities of gas produced in the same supply basins, and whether there is sufficient transportation capacity available in the marketplace to assure delivery on an economical and reliable basis./40 As discussed above, the integrated gas utility system will be able to obtain gas from producers and market hubs in the Gulf area and to arrange transportation through many common pipelines. In addition, the combined systems will be able to obtain gas from the Gulf and other supply regions by flexible and efficient means, due to the development of market centers, hubs and pooling points that facilitate transactions between gas buyers and sellers. The interstate pipelines on which AGL Resources and NUI have contracted for transportation service have access to significant supply resources at industry recognized supply pools. These supply pools, (e.g., Transco Station 65, Tennessee Zone 1, Columbia Gulf Onshore) have significant liquidity and most are traded over electronic exchanges (e.g., the Intercontinental Exchange). Because AGL Resources' and NUI's gas utility subsidiaries share access through their respective pipeline transporters to several industry- ________________ 40 Nipsco Industries, Inc., Holding Co. Act Release No. 26975 (Feb. 10, 1999). 34 recognized market and supply-area hubs, they will have the ability to physically coordinate and manage their portfolios of supply, transportation and storage. No Impairment After the Merger, NUI's local retail gas distribution operations will be staffed with management that is responsible for the local utility. From its experience running public utilities, AGL Resources has learned that local employees are vital to maintaining a connection to the local community. AGL Resources is still in the process of reviewing NUI's utility operations to determine the appropriate employee levels in order to continue to ensure that each franchise is operated safely and reliably. As part of this evaluation, AGL Resources will appropriately balance the necessity to improve customer service, support its long term commitment to NUI's employees and contribute to the economic vitality of the service territories. As discussed in Item 4, the Merger also is subject to the review of the state regulatory commissions in New Jersey, Maryland and Virginia. The authorization of these commissions, which AGL Resources expects will be granted, will further evidence that the Merger does not have adverse effects on local regulatory authority. f. Section 10(f) Section 10(f) prohibits the Commission from approving an acquisition unless the Commission is satisfied that the acquisition will be undertaken in compliance with applicable state laws. As explained in Item 4 below, AGL Resources and NUI are in the process of seeking all necessary state regulatory approvals associated with the Merger. Copies of the respective state regulatory applications are included at Exhibits C-1 through C-3. 2. Section 3(a)(1) Exemption Request for VGC Applicants also requests that the Commission issue an order pursuant to Section 3(a)(1) of the Act confirming that VGC, and each of its subsidiary companies as such, will be exempt from all provisions of the Act, except Section 9(a)(2). Section 3(a)(1) provides that the Commission shall exempt a holding company, and every subsidiary thereof as such, from some or all provisions of the Act, unless such exemption would be detrimental to the public interest or the interests of investors and consumers, if: such holding company, and every subsidiary company thereof which is a public-utility company from which such holding company derives, directly or indirectly, any material part of its income, are predominantly intrastate in character and carry on their business substantially in a single State in which such holding company and every such subsidiary company thereof are organized. After the Merger, VGC and each of its public-utility subsidiary companies from which it derives any material part of its income, will remain predominantly intrastate in character and carry on their business substantially in a single state, namely Virginia. 35 VGC and its only utility subsidiary, VGDC, carry on their utility operations exclusively within Virginia where each company is incorporated. Following the Merger, this will remain unchanged. Notably, the VSCC will have the same jurisdiction and authority over all of VGDC's rates, services and operations following the acquisition as it currently has, and its ability to protect ratepayers will not be impaired by virtue of VGC's ownership by an out-of-state holding company. The VSCC will have the ability to protect utility customers of VGDC against any possible detriment that might be associated with the relationship of such companies to AGL Resources. Granting the request for an exemption, therefore, will not be "detrimental to the public interest or interest of investors or consumers." 3. Financing Authority After the closing of the Merger, NUI will register as a holding company under the Act and the NUI Group companies will need financing authorization. Applicants seek authorization pursuant to Sections 6(a), 7, 9(a), 10, 12(b), and 12(c) of the Act and Rules 43, 45, 46 and 54 for the NUI Group companies to, after the consummation of the Merger, undertake any or all of the transactions described herein, which current subsidiaries of AGL Resources were authorized to engage in during the Authorization Period. The NUI Group companies would be subject to the same limitations and conditions as set forth in the Financing Order and described herein. The authorizations requested are described below. Use of proceeds. The proceeds from the sale of securities in financing transactions for which authorization is requested herein will be used for general corporate purposes, including the financing, in part, of the capital expenditures and working capital requirements of the NUI Group, for the acquisition, retirement or redemption of securities previously issued by the NUI Group, and for authorized investments in companies organized in accordance with Rule 58 under the Act, and for other lawful purposes. Financial flexibility. The approval by the Commission of this Application will give the Applicants, after the consummation of the Merger, the same flexibility to respond quickly and efficiently to their financing needs and to changes in market conditions that the AGL Resources group companies enjoy today. That flexibility will allow them to carry on business activities designed to provide benefits to their customers and shareholders. Approval of the financing transactions contemplated herein is consistent with the Financing Order and existing Commission precedent./41 Financing Limitations. Financings by the NUI Group companies will be subject to the following limitations ("Financing Limitations") which are the same as those contemplated in the Financing Order:/42 __________________ 41 See, e.g., Pepco Holdings Inc., Holding Co. Act Release No. 27557 (July 31, 2002); E.ON AG, Holding Co. Act Release No. 27539 (June 14, 2002); First Energy Corp., Holding Co. Act Release No. 27459 (Oct. 29, 2001); Exelon Corp., Holding Co. Act Release No. 27266 (Nov. 2, 2000); Dominion Resources, Inc., Holding Co. Act Release No. 27112 (Dec. 15, 1999); and Conectiv, Inc., Holding Co. Act Release No. 26833 (Feb. 26, 1998). 42 The Commission has previously authorized financing transactions subject to these same general parameters. See SCANA Corporation, Holding Co. Act Release No. 27649 (Feb. 12, 2003). 36 o 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 (a) 500 basis points over the comparable-term U.S. Treasury securities or (b) a gross spread over U.S. Treasuries that is consistent with similar securities of comparable credit quality and maturities issued by other companies./43 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 (a) 500 basis points over the comparable-term London Interbank Offered Rate ("LIBOR") or (b) a gross spread over LIBOR that is consistent with similar securities of comparable credit quality and maturities issued by other companies. o Maturity. The maturity of long-term debt will be between one and 50 years after the issuance thereof. Short-term debt will mature within a year. o Issuance Expenses. The underwriting fees, commissions or other similar remuneration paid in connection with the non-competitive issue, sale or distribution of securities pursuant to this Application 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./44 o Common Equity Ratio. Each of 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. o 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 pursuant to 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 ________________ 43 Substantially similar interest rate provisions have been authorized by the Commission in Energy East Corp., et al., Holding Co. Act Release No. 27643 (Jan. 28, 2003); E.ON AG, Holding Co. Act Release No. 27539 (June 14, 2002); Ameren Corp. et al., Holding Co. Act Release No. 27655 (Feb. 27, 2003). 44 See, e.g., NiSource, Inc., Holding Co. Act Release No. 27789 (December 30, 2003); SCANA Corp., Holding Co. Act Release No. 27649 (Feb. 12, 2003). 37 ("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 pursuant to 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. o Authorization Period. No security will be issued pursuant to the authorization sought herein after the last day of the Authorization Period (March 31, 2007). In particular, Applicants request the following authorizations. a. NUI Financing NUI requests authorization to issue and sell debt and equity securities to AGL Resources and/or its financing subsidiaries (e.g., AGL Capital) as necessary to finance the authorized and permitted businesses of the NUI Group. In particular, NUI requests authorization to issue Intercompany Notes to AGL Resources or a financing subsidiary thereof in connection with the refinancing of NUI's pre-Merger indebtedness. A form of Intercompany Note, containing the applicable terms and conditions is attached as Exhibit L-2. Intercompany Notes would be issued by NUI in an amount at any one time outstanding of up to $285 million. NUI 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 such companies' authorized and permitted businesses in an aggregate amount outstanding during the Authorization Period not to exceed $300 million. b. Subsidiary Debt Applicants request authorization for NUI Utilities and VGDC to (a) enter into, perform, purchase and sell Hedging Instruments; (b) to issue short-term debt consisting of commercial paper, secured or unsecured bank loans and borrowings under the utility money pool ("Utility Money Pool"), at any one time outstanding during the Authorization Period ("Utility Short-Term Debt Limit"), all such securities to be issued pursuant to the Financing Limitations. Applicants also request authorization for NUI Utilities and VGDC to be made party to any AGL Resources' credit facility as back up to commercial paper issued under rule 52 of the Act or under an applicable Commission order. As with AGLC, CGC and VNG, authorization for the issuance of secured short-term debt as requested herein will enable NUI Utilities and VGDC to take advantage of more beneficial financing terms to meet the companies' working capital needs. The issuance of secured short-term debt by NUI Utilities and VGDC would be limited to 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 38 would generally be limited to short-term assets such as the issuer's inventory and/or accounts receivable. In this Application, Applicants request authorization for NUI Utilities and VGDC to issue up to $600 million and $250 million, respectively, of intercompany debt, commercial paper, secured or unsecured bank loans and borrowings under the Utility Money Pool, all with terms of less than a year. This level of short term financing authorization is necessary to assure that NUI Utilities and VGDC have adequate working capital to finance the acquisition of gas supply, particularly in the current high-cost gas market. NUI Utilities also requests authorization to issue Intercompany Notes to AGL Resources or a financing subsidiary thereof in connection with the refinancing of NUI Utilities' pre-Merger indebtedness. A form of Intercompany Note, containing the applicable terms and conditions is attached as Exhibit L-2. Intercompany Notes would be issued by NUI Utilities in an amount at any one time outstanding of up to $275 million, respectively. (The Intercompany Notes issued by NUI Utilities would be for terms longer than one year and accordingly such issuances would not count against the $600 million short-term debt limit stated above.) AGL Resources is evaluating the economics of refinancing an additional amount of debt issued by NUI Utilities in the amount of approximately $200 million. The refinancing of this amount, if consummated, and the post-Merger financing of NUI Utilities with securities other than short-term debt would be conducted on an exempt basis under Rule 52(a) through the sale of securities by NUI Utilities externally to third parties or on an intercompany basis./45 c. Authorization and Operation of the Money Pools Applicants request that NUI Utilities and VGDC be authorized to participate in AGL Resources' existing Utility Money Pool, and be authorized to make unsecured short-term borrowings from the Utility Money Pool, to contribute surplus funds to the Utility Money Pool, and to lend and extend credit to (and acquire promissory notes from) one another through the Utility Money Pool subject to the terms and conditions set forth herein. Specifically, the Utility Money Pool funds are available for short-term loans to the participating companies from time to time from (i) surplus funds in the treasuries of participants and (ii) proceeds received by the 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. NUI Utilities and VGDC would borrow pro rata from each Utility Money Pool participant that invests surplus funds, in the proportion that the total amount invested by the investing participant bears to the total amount then invested in the Utility Money Pool. The interest rate that will be charged to ____________________ 45 Financing by VGDC would generally be subject to the jurisdiction of the VSCC and, except as authorized pursuant to this Application or other Commission rule or order, would be conducted on an exempt basis under Rule 52(a). 39 NUI Utilities and VGDC on borrowings under the Utility Money Pool would be equal to AGL Resources' actual cost of external short-term borrowings and the interest rate paid on loans to the Utility Money Pool would be 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 would be 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. 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 thereunder. Each company receiving a loan through the Utility Money Pool is required to repay the principal amount of the loan, together with all interest accrued thereon, 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. The Nonutility Money Pool is operated on the same terms as the Utility Money Pool. Borrowings by NUI Utilities from the Utility Money Pool would be subject to the $600 million limit stated above, and borrowings by VGDC would be limited to $250 million at any one time outstanding. In addition, to the extent not exempt under Rule 52(b), Applicants request that NUI's Nonutility Subsidiaries be authorized to participate in AGL Resources' existing Nonutility Money Pool, and 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 acquire promissory notes from) one another through the Nonutility Money Pool. AGL Resources and NUI may contribute surplus funds and lend and extend credit to (i) all the utility subsidiaries in the AGL Resources system through the Utility Money Pool and (ii) all the nonutility subsidiaries in the AGL Resources system through the Nonutility Money Pool. AGL Resources and NUI would 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. d. Guarantees Applicants also request authorization for AGL Resources to guarantee the obligations of the NUI Group subject to the limits set forth in the Financing Order. 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 terms and conditions below in the amount of $150 million and $100 40 million, with respect to NUI Utilities and VGDC, and in the amount of $300 million and $75 million with respect to NUI and VGC. 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 NUI Group as may be appropriate to enable the system companies to carry on their respective authorized or permitted businesses. 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 also request authorization for each NUI Group company to 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. e. 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 London Inter-Bank Offer Rate-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. In no case will the notional principal amount of any Hedging Instrument exceed that of the underlying debt instrument and related interest rate exposure. Thus, these companies will not engage in "leveraged" or "speculative" transactions. The underlying interest rate indices of such Hedging Instrument will closely correspond to the underlying interest rate indices of the companies' debt to which such 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-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 41 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. f. 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 by an amount deemed appropriate by AGL Resources or other intermediate parent company subject to certain conditions. Specifically, the authorization is limited to NUI's wholly owned subsidiaries and will not affect the aggregate limits or other financing conditions stated herein. A subsidiary will be able to change the par value, or change between par value and no-par stock, without additional Commission approval. Any such 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 such company 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%. g. Payment of Dividends Out of Capital or Unearned Surplus Applicants request authorization for NUI and the NUI Nonutility Subsidiaries to pay dividends from time to time through the Authorization Period, out of capital and unearned surplus. NUI and the NUI Nonutility Subsidiaries 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 and in addition, 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. This authorization will permit AGL Resources to effectively wind up the NUI nonutility businesses. Without such authorization, liquidation proceeds may be trapped in companies with cash but insufficient retained earnings to pay dividends. As noted below, however, 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 with regard to such relief. The application of the purchase method of accounting to the Merger will cause the reclassification of the retained earnings of NUI Utilities to additional paid-in capital, and give rise to goodwill, the difference between the aggregate fair values of all identifiable tangible and intangible assets, and the total consideration to be paid and the fair values of the liabilities assumed. In accordance with the Commission's Staff Accounting Bulletin No. 54, Topic 5J ("Staff Accounting 42 Bulletin"), the goodwill will be "pushed down" and reflected as additional paid-in-capital in the financial statements of these entities. Goodwill must periodically be examined for impairment and, to the extent impaired, it must be written down. Any write down of goodwill will constitute a non-cash charge to net income and, therefore, decrease current earnings available for dividends and/or retained earnings, the traditional sources of dividend payments, of NUI Utilities. Section 12(c) of the Act and Rule 46 thereunder generally prohibit the payment of dividends out of "capital or unearned surplus" except pursuant to an order of the Commission. The legislative history explains that this provision was intended to "prevent the milking of operating companies in the interest of the controlling holding company groups."/46 In determining whether to permit the payment of dividends out of capital surplus, the Commission considers various factors, including: (i) the asset value of the company in relation to its capitalization, (ii) the company's prior earnings, (iii) the company's current earnings in relation to the proposed dividend, and (iv) the company's projected cash position after payment of a dividend. Further, the payment of the dividend must be "appropriate in the public interest."/47 In support of their request, Applicants assert that each of the standards listed above are satisfied: (i) After the Merger, and giving effect to the pushdown of goodwill, NUI Utilities' common equity as a percentage of total capitalization is estimated to be 45%, substantially in excess of the traditional levels of equity capitalization that the Commission has authorized for other registered holding company systems. (ii) NUI Utilities has a favorable history of prior earnings. (iii) Applicants anticipate that NUI Utilities' cash flow after the Merger will not differ significantly from its cash flow prior thereto and that earnings before any write down of goodwill, therefore, should remain stable after the Merger. (iv) The requested dividend payments are in the public interest. NUI Utilities is in sound financial condition as indicated by its equity ratio discussed above. The expectations of continued strong financial condition and the financial backing of AGL Resources should allow NUI Utilities to continue to provide safe and reliable service and to fund any required capital improvement projects. In addition, the dividend payments are consistent with investor interests because they prevent "trapped" equity in the capital structure of NUI Utilities, permitting adjustments to appropriate levels of debt and equity. 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. Lastly, NUI Utilities would not pay dividends out of capital or _________________ 46 S. Rep. No. 621, 74th Cong., 1st Sess. 3434 (1935) cited in Eastern Utilities Associates, 50 SEC 582, 584 (1991). 47 Eastern Utilities Associates, 50 SEC 582, 583 (1991) citing Commonwealth & So. Corp., 13 SEC 489, 492 (1943). 43 unearned surplus if to do so would cause the equity of such company to decline to less than 30% of total capitalization. Applicants request that the Commission reserve jurisdiction over NUI Utilities' payment of dividends out of capital and unearned surplus in an amount up to the company's pre-merger retained earnings and any amounts attributable to impaired goodwill post-merger on its books pending the completion of the record with regard to such relief. h. Financing Entities Applicants request authorization for NUI and its subsidiaries to organize new corporations, trusts, partnerships or other entities, or to use existing 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 the respective parent of such Financing Entities. To the extent not exempt under Rule 52, Applicants request authorization for the Financing Entities to issue these securities to third parties. Applicants also request authorization for NUI and its subsidiaries to enter into support or expense agreements ("Expense Agreement") with certain Financing Entities to pay the expenses of any such entities subject to certain terms and conditions. In connection with this method of financing, NUI and the subsidiaries may: (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 and the subsidiaries also request authorization to enter into support or expense agreements ("Expense Agreement") with Financing Entities to pay the expenses of any such 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, under Section 13(b) of the Act and Rules 87 and 90 thereunder, to provide such services at a charge not to exceed a market price but only for so long as such Expense Agreement established by the Financing Entity is in place. i. 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 44 of acquiring, holding and/or financing the acquisition of the securities of or other interest in one or more EWGs, FUCOs, Rule 58 Companies, ETCs, or other non-exempt nonutility subsidiaries (as authorized in this proceeding or in a separate proceeding), provided that Intermediate Subsidiaries may also engage in administrative activities ("Administrative Activities") and development activities ("Development Activities"), defined below, relating to these subsidiaries. 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; 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 Nonutility Subsidiaries 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 AGL Resources' "aggregate investment" in these entities, as calculated in accordance with rule 53 or rule 58, as applicable. In addition, 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 Nonutility Subsidiaries, and the activities and functions related to these investments. To effect any consolidation 45 or other reorganization, AGL Resources or NUI may wish to merge or contribute the equity securities of one nonutility subsidiary to another nonutility subsidiary (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 Subsidiaries. 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. AGL Resources also requests that its authorization to make expenditures on Development Activities, as defined above, in an aggregate amount of up to $600 million be extended to include the NUI Nonutility Subsidiaries. The Commission authorized 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. Neither AGL Resources nor any of its subsidiaries presently has an interest in any EWG or FUCO. j. Rule 54 Analysis The proposed financing transactions are subject to Rule 54, which refers to Rule 53. Rule 54 under the Act provides that in determining whether to approve certain transactions other than those involving EWGs or FUCOs, as defined in the Act, the Commission will not consider the effect of the capitalization or earnings of any subsidiary which is an EWG or FUCO if Rule 53(a), (b) and (c) under the Act are satisfied. Neither AGL Resources nor any of its subsidiaries presently has or will have after the consummation of the Merger an interest in any EWG or FUCO and, accordingly, Rule 53 is satisfied. 4. Affiliate Transactions a. AGL Services 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 46 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. AGL Services will provide business services to the NUI Group 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./48 5. 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. Pursuant to Rule 16, SSLLC is entitled to an exemption from the obligations, duties and liabilities imposed upon it under the Act as a subsidiary or affiliate of a registered holding company. SSLLC seeks to rely on such exemption and therefore, 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. 6. Retention of Nonutility Subsidiaries Exhibit J-1 describes AGL Resources' current plans for retaining or divesting each of NUI's other nonutility businesses and discusses the legal basis for retention where applicable. Numerous Nonutility Subsidiaries 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 such 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 authorizing this acquisition. Specifically, AGL Resources intends to maintain the existing services arrangements between UBS and NUI Utilities for as long as two years after the date of the SEC's order granting this Application. During that time, AGL Resources will endeavor to either restructure the existing UBS services agreements with NUI Utilities so that services thereunder may be provided at cost (provided that such 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. 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 _________________ 48 See Intrasystem Transactions Order, supra. 47 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. However, 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, its is expected that the activities of UBS would be folded into NUI Utilities or replaced. The Commission has previously authorized subsidiaries of registered holding companies to offer data processing and other business support services. See Cinergy Corp., Holding Co. Act Release No. 26662 (Feb. 7, 1997) and CP&L Energy, Inc., Holding Co. Act Release No. 27284 (Nov. 27, 2000) (authorizing retention of application services provider that provides, supports and manages a broad range of specialized facilities management software and information systems designed to help businesses and organizations manage and maintain facilities and equipment more efficiently). 7. NUI Reporting 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. Thereafter NUI will join AGL Resources in the filing of a joint Annual Report on Form U5S on or before May 1, 2005 and annually thereafter. NUI requests that the Commission find under Section 5(b) and Rule 20(a)(3) that the joint AGL Resources - NUI Annual Report on Form U5S filed on or before May 1, 2005 may also serve as NUI's Registration Statement on Form U5B, given that both the Annual Report and the Registration Statement would cover NUI's position at the close of the year 2004 and contain substantially equivalent information about NUI's subsidiaries, investments, financings, directors, affiliate transactions, and other matters. It would be duplicative to cause NUI to file a separate Registration Statement on Form U5B within 90 days of the Merger and NUI's registration under the Act, and then cause NUI to provide largely similar information only a few months later in the joint Annual Report on Form U5S. As required by Item 10 of Form U5S, the joint Annual Report on Form U5S would include consolidating financial statements for AGL Resources and each of its subsidiary companies, including NUI and its subsidiaries. In addition, Applicants would commit to provide as a supplement to the Form U5S submission any information required by Form U5B that the Commission staff deems necessary or appropriate for the combined filing./49 Item 4. Regulatory Approval. The federal and state regulatory requirements described below, with the exception of the notice required under Florida law, must be complied with before the Applicants can complete the Merger. The Applicants currently believe that the necessary approvals can be obtained by October 31, 2004. ________________ 49 See Enron Corp., Holding Co. Act Release No. 27809 (March 9, 2004) (finding that a modification to the Commission's reporting requirement on Form U5B was acceptable where applicant's chapter 11 plan disclosure statement contained a substantial portion of the information that is required of a registrant under Form U5B, and where the applicant has undertaken to provide additional information required in Form U5B but not included in the disclosure statement). 48 A. State Approvals 1. New Jersey NUI Utilities' Elizabethtown Gas division is subject to the jurisdiction of the NJBPU as a public utility. The approval of the NJBPU is required before any person may directly or indirectly acquire control of a New Jersey public utility. In considering a request to acquire control of a public utility, the NJBPU evaluates the impact of the acquisition on competition, on the ratepayers affected by the acquisition of control, on the employees of the affected public utility or utilities, and on the provision of safe and adequate utility service at just and reasonable rates. AGL Resources and NUI filed an application on July 30, 2004 seeking the approval of the NJBPU consistent with these requirements. The Applicants have requested approval be granted on an expedited basis, with October 31, 2004 as the target date for approval. 2. Florida NUI Utilities' City Gas division is subject to the jurisdiction of the Florida Public Service Commission ("Florida Commission") as a public utility. Subject to the plenary jurisdiction of the Florida Commission over the operations of NUI, no filing or approval of the merger by the Florida Commission is required by Florida law. However, within ten days of the consummation of the Merger, AGL Resources is required to file a notice with the Florida Commission stating that the tariffs then charged by City Gas of Florida will continue to remain in effect. AGL Resources will make such a filing after consummation of the Merger. 3. Maryland The Maryland Public Service Commission ("Maryland Commission") is granted general authority to supervise and regulate public utilities with operations in the State of Maryland. NUI Utilities' Elkton Gas division has utility operations in the State of Maryland. AGL Resources and NUI have filed an application with the Maryland Commission under the Commission's general authority to determine whether the Merger will have an adverse effect on the relevant Maryland franchises. AGL Resources and NUI filed an application seeking the approval of the Maryland Commission consistent with these requirements on August 20, 2004. 4. Virginia VGDC provides utility service in Virginia and is subject to the jurisdiction of the VSCC as a public service company and a public utility. The VSCC must approve the acquisition of any Virginia public utility and the disposition of any utility assets located in Virginia. The applicants must show that the provision of adequate service at just and reasonable rates will not be threatened or impaired by the Merger. AGL Resources and NUI have filed an application seeking the approvals of the VSCC consistent with these requirements. AGL Resources and NUI filed an application seeking the approval of the VSCC consistent with these requirements on August 10, 2004. 49 B. Federal Approvals 1. Hart-Scott-Rodino Antitrust Improvements Act of 1976 Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"), and the rules promulgated thereunder by the FTC, the Merger may not be consummated until AGL Resources and NUI file notifications and provide specified information to the FTC and the Antitrust Division of the DOJ and specified waiting period requirements are satisfied. A review process under the HSR Act is undertaken for the purpose of determining whether a proposed transaction will have an adverse effect on competition in the marketplace in which the companies involved in that transaction currently operate. Since the Merger falls within the scope of the transactions to which the HSR Act is applicable, the companies must file notifications with, and present information to, the DOJ and the FTC so as to provide an opportunity for the DOJ, the FTC and the public to evaluate whether the Merger might have any such anti-competitive effects. Even after the HSR Act waiting period expires or terminates, the FTC or the Antitrust Division of the DOJ may later challenge the Merger on antitrust grounds. If the transaction is not completed within 12 months after the expiration or earlier termination of the initial HSR Act waiting period, the parties would be required to submit new information under the HSR Act and a new waiting period would begin. On August 5, 2004, the parties filed their notification and report forms under the HSR Act with the FTC and the Antitrust Division of the DOJ. 2. Communications Act of 1934 The Communications Act of 1934 prohibits the transfer, assignment or disposal in any manner of any construction permit or station license or any related rights, to any person without approval from the Federal Communications Commission. The Federal Communications Commission will approve a transfer of control if it serves the public convenience, interest and necessity. Applicants will seek the necessary approval from the Federal Communications Commission for the transfer of control of licenses held by NUI and its various subsidiaries. Item 5. Procedure. NUI Utilities may not have sufficient sources of cash or liquidity to finance its gas supply requirements through the 2004-2005 heating season and NUI may need additional cash to fund its operations. NUI Utilities has filed in New Jersey for approval of a secured seasonal facility of at least $75 million to meet its seasonal gas requirement, and an additional $20 million working capital facility at NUI to fund its operations through closing. Additionally, both of NUI and NUI Utilities have extended the terms of their existing credit facilities (with amounts drawn at over $350 million) to November of 2005; these facilities were originally scheduled to terminate in November 2004. The terms of each of these bridge facilities and the extension of the existing facilities are onerous and expensive to NUI's operations. Due in large part to the risk and expense of NUI's current liquidity situation, AGL Resources has requested that each of the state regulatory agencies having jurisdiction over the transaction approve 50 the acquisition of NUI on an expedited basis. The state agencies have acknowledged the desire to approve and have the transaction completed as soon as practicable./50 Therefore, Applicants request that this application also be processed on an expedited basis, with due regard for the risks and expense that delay may have on NUI, NUI Utilities, and its customers. The Commission is thus respectfully requested to publish the requisite notice under Rule 23 with respect to this Application as soon as possible, such notice to specify a date by which comments must be entered and such date being the date when an order of the Commission granting and permitting this Application to become effective may be entered by the Commission. Applicants request that the Commission's order be issued as soon as the rules allow, and that there should not be a 30-day waiting period between issuance of the Commission's order and the date on which the order is to become effective. Applicants hereby waive a recommended decision by a hearing officer or any other responsible officer of the Commission and consent that the Division of Investment Management may assist in the preparation of the Commission's decision and/or order, unless the Division opposes the matters proposed herein. Item 6. Exhibits and Financial Statements. Exhibits A-1 Amended and Restated Articles of Incorporation of AGL Resources Inc., filed with the Securities and Exchange Commission as Exhibit B to Amendment No. 1 to AGL Resources Inc.'s Registration Statement on Form S-4, SEC File No. 33-99826 (incorporated by reference). A-2 Bylaws of AGL Resources Inc., as amended October 29, 2003, filed with the Securities and Exchange Commission as Exhibit 3.2 to the AGL Resources Inc.'s Annual Report on Form 10-K filed on February 6, 2004, SEC File No. 001-14174 (incorporated by reference). A-3 Certificate of Incorporation of Cougar Corporation. A-4 By-laws of Cougar Corporation. A-5 Certificate of Incorporation, Amended and Restated, and Certificate of Amendment of Restated Certificate of Incorporation of NUI Corporation, filed with the Securities and Exchange Commission as Exhibit 3(i) of NUI Corporation's Quarterly Report on Form 10-Q for quarter ended December 31, 2001, SEC File No. 001-16385, dated February 14, 2002 (incorporated by reference). A-6 By-laws of NUI Corporation, as amended and restated, filed with the Securities and Exchange Commission as Exhibit 3(ii) of NUI Corporation's Annual Report on Form 10-K for the year ended September 30, 1997, SEC File No. 8353, dated September 30, 1997 (incorporated by reference). __________________ 50 See Exhibit M-1, NJBPU Press Release dated July 15, 2004, stating that the NJBPU will establish an expedited review schedule and that it expects that the full merger review will take approximately six months instead of the typical 12 month period. 51 B-1 Agreement and Plan of Merger by and among AGL Resources Inc., Cougar Corporation and NUI Corporation, dated July 14, 2004, incorporated by reference to AGL Resources Inc.'s Current Report on Form 8-K, filed on July 15, 2004, SEC File No. 001-14174 (incorporated by reference). B-2 Proxy Statement of NUI Corporation Pursuant to Section 14(a) of the Securities Exchange Act of 1934, incorporated by reference to NUI Corporation's Preliminary Proxy Statement on Form PREM14A filed with the Securities and Exchange Commission on August 13, 2004, SEC File No. 001-16385 (incorporated by reference). C-1 Application to the New Jersey Board of Public Utilities. C-2 Application to the Maryland Public Service Commission. C-3 Application to the Virginia State Corporation Commission. C-4 Order of the New Jersey Board of Public Utilities.* C-5 Order of the Maryland Public Service Commission.* C-6 Order of the Virginia State Corporation Commission.* D-1 Map of the Utility Service Territories of the AGL Resources System and NUI Corporation System. E-1 Opinion of Counsel - AGL Resources Inc.* E-2 Opinion of Counsel - NUI Corporation.* F-1 Past tense opinion of counsel.* G-1 FTC and DOJ filings under Hart-Scott-Rodino. G-2 Application to the Federal Communications Commission. G-3 Order of the Federal Communications Commission.* H-1 AGL Resources Inc.'s 2003 Annual Report on Form 10-K for the fiscal year ended December 31, 2003 filed with the Securities and Exchange Commission on February 6, 2004, SEC File No. 001-14174 (incorporated by reference). H-2 NUI Corporation's 2003 Annual Report on Form 10-K for the fiscal year ended September 30, 2003, filed with the Securities and Exchange Commission on May 13, 2004, SEC File No. 001-16385 (incorporated by reference). H-3 AGL Resources Inc.'s Quarterly Report on Form 10-Q for Period Ended June 30, 2004, filed with the Securities and Exchange Commission on July 29, 2004, SEC File No. 001-14174 (incorporated by reference). 52 H-4 NUI Corporation's Quarterly Report on Form 10-Q for Period Ended June 30, 2004, filed with the Securities and Exchange Commission on August 16, 2004, File No. 001-16385 (incorporated by reference). I-1 Proposed Form of Notice. J-1 Description of NUI Nonutility Subsidiaries. K-1 Post-Transaction Corporate Chart. L-1 Form of Service Agreement (incorporated by reference). L-2 Form of Intercompany Note. M-1 Press Release of the New Jersey Board of Public Utilities, dated July 15, 2004. M-2 Memorandum discussing the litigation and government investigations involving NUI. (confidential treatment requested) M-3 Pro forma forecast with selected financial information of NUI, NUI Utilities and VGDC. (confidential treatment requested) * To be filed by amendment. Financial Statements FS-1 AGL Resources Inc.'s Consolidated Balance Sheet as of December 31, 2003, incorporated by reference to AGL Resources Inc.'s Annual Report on Form 10K, filed on February 6, 2004, SEC File No. 001-14174 (incorporated by reference). FS-2 AGL Resources Inc.'s Consolidated Statement of Income for the year ended December 31, 2003, incorporated by reference to AGL Resources Inc.'s Annual Report on Form 10K, filed on February 6, 2004, SEC File No. 001-14174 (incorporated by reference). FS-3 AGL Resources Inc.'s Consolidated Statements of Common Shareholders' Equity for the year ended December 31, 2003, incorporated by reference to AGL Resources Inc.'s Annual Report on Form 10K, filed on February 6, 2004, SEC File No. 001-14174 (incorporated by reference). FS-4 AGL Resources Inc.'s Consolidated Statement of Cash Flows for the year ended December 31, 2003, incorporated by reference to AGL Resources Inc.'s Annual Report on Form 10K, filed on February 6, 2004, SEC File No. 001-14174 (incorporated by reference). FS-5 Notes to Consolidated Financial Statements, incorporated by reference to AGL Resources Inc.'s Annual Report on Form 10K, filed on February 6, 2004, SEC File No. 001-14174 (incorporated by reference). 53 FS-6 NUI Corporation's Consolidated Balance Sheet for fiscal year ended September 30, 2003, incorporated by reference to NUI Corporation's Annual Report on Form 10K, filed on May 13, 2004, SEC File No. 0001-16385 (incorporated by reference). FS-7 NUI Corporation's Consolidated Statement of Income for fiscal year ended September 30, 2003, incorporated by reference to NUI Corporation's Annual Report on Form 10K, filed on May 13, 2004, SEC File No. 0001-16385 (incorporated by reference). FS-8 NUI Corporation's Consolidated Statement of Shareholders' Equity for fiscal year ended September 30, 2003, incorporated by reference to NUI Corporation's Annual Report on Form 10K, filed on May 13, 2004, SEC File No. 0001-16385 (incorporated by reference). FS-9 NUI Corporation's Consolidated Statement of Cash Flows for fiscal year ended September 30, 2003, incorporated by reference to NUI Corporation's Annual Report on Form 10K, filed on May 13, 2004, SEC File No. 0001-16385 (incorporated by reference). FS-10 Notes to Consolidated Financial Statements for fiscal year ended September 30, 2003, incorporated by reference to NUI Corporation's Annual Report on Form 10K, filed on May 13, 2004, SEC File No. 0001-16385 (incorporated by reference). Item 7. Information as to Environmental Effects. The proposed transactions involve neither a "major federal action" nor "significantly affects the quality of the human environment" as those terms are used in Section 102(2)(C) of the National Environmental Policy Act, 42 U.S.C. Sec. 4321 et seq. No federal agency is preparing an environmental impact statement with respect to this matter. 54 SIGNATURES Pursuant to the requirements of the Public Utility Holding Company Act of 1935, the undersigned companies have duly caused this Pre-effective Amendment No. 1 to be signed on their behalf by the undersigned thereunto duly authorized. AGL Resources Inc. AGL Services Company Atlanta Gas Light Company By: /s/ Richard T. O'Brien ----------------------- Richard T. O'Brien Executive Vice President and Chief Financial Officer Chattanooga Gas Company Virginia Natural Gas, Inc. By: /s/ Kevin P. Madden ------------------- Kevin P. Madden Chairman and Chief Executive Officer. NUI Corporation By: /s/ Steven D. Overly -------------------- Steven D. Overly Vice President, Chief Financial Officer, General Counsel, Treasurer and Secretary NUI Utilities, Inc. By: /s/ M. Patricia Keefe ---------------------- M. Patricia Keefe Vice President, Regulatory Affairs General Counsel and Secretary Virginia Gas Company By: /s/ Steven D. Overly -------------------- Steven D. Overly Vice President and Secretary Virginia Gas Distribution Company By: /s/ Steven D. Overly -------------------- Steven D. Overly Vice President and Secretary 55 Virginia Gas Pipeline Company By: /s/ Steven D. Overly -------------------- Steven D. Overly Vice President and Secretary Virginia Gas Storage Company By: /s/ Steven D. Overly -------------------- Steven D. Overly Vice President and Secretary NUI Capital Corp. By: /s/ Steven D. Overly -------------------- Steven D. Overly Vice President and Secretary Utility Business Services, Inc. By: /s/ Steven D. Overly -------------------- Steven D. Overly Vice President, Treasurer and Secretary NUI Service, Inc. By: /s/ Steven D. Overly -------------------- Steven D. Overly Vice President and Secretary NUI Energy Inc. By: /s/ Steven D. Overly -------------------- Steven D. Overly Vice President NUI Energy Brokers Inc. By: /s/ Steven D. Overly -------------------- Steven D. Overly Vice President, Treasurer and Secretary 56 NUI Energy Solutions, Inc. By: /s/ Steven D. Overly -------------------- Steven D. Overly Vice President OAS Group, Inc. By: /s/ Steven D. Overly -------------------- Steven D. Overly Vice President and Secretary NUI Sales Management, Inc. By: /s/ Steven D. Overly -------------------- Steven D. Overly President, Treasurer and Secretary TIC Enterprises, LLC By: /s/ Steven D. Overly -------------------- Steven D. Overly President and Treasurer NUI Saltville Storage, Inc. By: /s/ Steven D. Overly -------------------- Steven D. Overly Vice President and Secretary NUI Storage, Inc. By: /s/ Steven D. Overly -------------------- Steven D. Overly Vice President and Secretary NUI Richton Storage, Inc. By: /s/ Steven D. Overly -------------------- Steven D. Overly Vice President and Secretary 57 Richton Gas Storage Company, LLC By: /s/ Steven D. Overly -------------------- Steven D. Overly Vice President and Secretary NUI/Caritrade International LLC By: /s/ Steven D. Overly -------------------- Steven D. Overly Vice President and Secretary NUI Hungary, Inc. By: /s/ Steven D. Overly -------------------- Steven D. Overly Vice President and Secretary NUI International, Inc. By: /s/ Steven D. Overly -------------------- Steven D. Overly Managing Director, President, Treasurer and Secretary Date: October 28, 2004 58
EXHIBIT INDEX - ---------------- -------------------------------------------------------------- -------------------------------------- Exhibit No. Exhibit Description - ---------------- -------------------------------------------------------------- -------------------------------------- A-3 Certificate of Incorporation of Cougar Corporation. Filed herewith - ---------------- -------------------------------------------------------------- -------------------------------------- A-4 By-laws of Cougar Corporation. Filed herewith - ---------------- -------------------------------------------------------------- -------------------------------------- C-1 Application to the New Jersey Board of Public Utilities. Filed herewith - ---------------- -------------------------------------------------------------- -------------------------------------- C-2 Application to the Maryland Public Service Commission. Filed herewith - ---------------- -------------------------------------------------------------- -------------------------------------- C-3 Application to the Virginia State Corporation Commission. Filed herewith - ---------------- -------------------------------------------------------------- -------------------------------------- D-1 Map of the Utility Service Territories of the AGL Resources Filed under cover of Form SE. System and NUI Corporation System. - ---------------- -------------------------------------------------------------- -------------------------------------- G-1 FTC and DOJ Filings under Hart-Scott-Rodino. Filed herewith - ---------------- -------------------------------------------------------------- -------------------------------------- G-2 Application to the Federal Communications Commission Filed herewith - ---------------- -------------------------------------------------------------- -------------------------------------- I-1 Proposed Form of Notice. Filed herewith - ---------------- -------------------------------------------------------------- -------------------------------------- J-1 Description of NUI Nonutility Subsidiaries. Filed herewith - ---------------- -------------------------------------------------------------- -------------------------------------- K-1 Post-Transaction Corporate Chart. Filed under cover of Form SE. - ---------------- -------------------------------------------------------------- -------------------------------------- L-1 Form of Service Agreement. Incorporated by reference. - ---------------- -------------------------------------------------------------- -------------------------------------- L-2 Form of Intercompany Note Filed herewith - ---------------- -------------------------------------------------------------- -------------------------------------- M-1 Press Release of the New Jersey Board of Public Utilities, Filed herewith dated July 15, 2004. - ---------------- -------------------------------------------------------------- -------------------------------------- M-2 Memorandum discussing the litigation and government Filed herewith with a request for investigations involving NUI. confidential treatment. - ---------------- -------------------------------------------------------------- -------------------------------------- M-3 Pro forma forecast with selected financial information of Filed herewith with a request for NUI, NUI Utilities and VGDC. confidential treatment. - ---------------- -------------------------------------------------------------- --------------------------------------
59 EX-99.1 2 ex99-1.txt EX A-3 - CERT OF INCORPORATION OF COUGAR CORP CERTIFICATE OF INCORPORATION OF COUGAR CORPORATION Pursuant to the provisions of the New Jersey Business Corporation Act, the undersigned, being a natural person of at least 18 years of age and acting as the incorporator of the corporation hereby being organized thereunder, certifies that: ARTICLE I The name of the company is Cougar Corporation (the "Company"). ARTICLE II The address of its registered office in the State of New Jersey is c/o The Corporation Trust Company, 820 Bear Tavern Road, West Trenton, NJ 08628, and the name of the registered agent at such address is the Corporation Trust Company. ARTICLE III The number of Directors constituting the first Board of Directors of the Company is three (3); and the names and addresses of the persons who are to serve as the initial Directors are as follows: Paula G. Rosput Ten Peachtree Place, Atlanta, GA 30309 Richard T. O'Brien Ten Peachtree Place, Atlanta, GA 30309 Paul R. Shlanta Ten Peachtree Place, Atlanta, GA 30309 ARTICLE IV The nature of the business or purposes to be conducted or promoted by the Company is to engage in any lawful act or activity for which corporations maybe organized under the New Jersey Business Corporation Act. ARTICLE V The total number of shares of stock which the Company shall have authority to issue consists of 1,000 shares of common stock and par value $0.01 per share. Shares of the Company shall not be subject to preemptive rights unless otherwise determined by the Board of Directors pursuant to the authority granted by the provisions of this Article VI. ARTICLE VI The relative rights, preferences and limitations of a share of each class shall be as follows: Common Stock Each holder of common stock shall be entitled upon all matters voted upon by the Shareholders to one vote for each share of common stock standing in such Shareholder's name. ARTICLE VII For the management of the business and for the conduct of the affairs of the Company, and in further definition, limitation, and regulation of the powers of the Company and of its Directors and of its Shareholders or any class thereof, as the case may be, it is further provided: (1) The management of the business and the conduct of the affairs of the Company, including the election of the Chairman of the Board of Directors, if any, the President, the Treasurer, the Secretary, and other principal Officers of the Company, shall be vested in the Board of Directors. (2) The Board of Directors shall have the power to remove Directors for cause and to suspend Directors pending a final determination that cause exists for removal. (3) The Company shall, to the fullest extent permitted by Section 14A:3-5, of the New Jersey Business Corporation Act, as the same may be amended and supplemented, indemnify any and all corporate agents whom it shall have power to indemnify under said section and under any other applicable provision of NJ law from and against any and all of the expenses, liabilities, or other matters referred to in or covered by said Section, and the indemnification provided for herein shall not be deemed exclusive of any other rights to which those indemnified may be entitled under any By-Law, agreement, vote of Shareholders, or otherwise, and shall continue as to a person who has ceased to be a corporate agent and shall inure to the benefit of the heirs, executors, administrators, and personal representatives of such corporate agent. The term "corporate agent" as used herein shall have the meaning attributed to it by Sections 14A:3-5 and 14A:5-21 of the New Jersey Business Corporation Act and by any other applicable provision of law. (4) The personal liability of the Directors of the Company is hereby eliminated to the fullest extent permitted by subsection 14A:2-7(3) of the New Jersey Business Corporation Act, as the same may be amended and supplemented. ARTICLE VIII The name and address of the Incorporator are as follows: Christopher Kaval c/o LeBoeuf, Lamb, Greene & MacRae L.L.P. 125 West 55th Street New York, New York 10019 2 ARTICLE IX The duration of the Company is to be perpetual. Signed on July 14, 2004 ___________________________________ Incorporator, Christopher Kaval EX-99.2 3 ex99-2.txt EX A-4 - BY-LAWS OF COUGAR CORPORATION BY - LAWS OF COUGAR CORPORATION Incorporated under the Laws of the State of New Jersey ARTICLE I OFFICES The address of the initial registered office of the corporation in the State of New Jersey, and the name of the initial registered agent at that address, are set forth in the original Certificate of Incorporation of the Company. The location of the principal office of the Company shall be designated by the Board of Directors. The Board of Directors may change the location of the principal office of the Company and may from time to time designate other offices at such other places, either within or without the State of New Jersey, as the business of the Company may require. ARTICLE II SHAREHOLDERS Section 1. Shareholder Meetings: -------------------- (a) Time: The annual meeting shall be held at the time fixed, from time to time, by the Directors, provided, that the first annual meeting shall be held on a date within thirteen months after the organization of the Company, and each successive annual meeting shall be held on a date within thirteen months after the date of the preceding annual meeting. If for any reason, the Directors shall fail to fix the time for an annual meeting, such meeting shall be held at noon on the first Monday of March. A special meting shall be held on the date fixed by the President or the Board of Directors. (b) Place: Annual meetings and special meetings shall be held at such place, within or without the State of New Jersey, as the Directors may, from time to time, fix. Whenever the Directors shall fail to fix such place, the meeting shall be held at the registered office of the Company in the State of New Jersey. (c) Call: Annual meetings may be called by the Directors or by the President or by any Officer instructed by the Directors to call the meeting, or as otherwise may be required by law. Special meetings may be called in like manner. (d) Notice of Meetings: Written notice of the time, place, and purpose or purposes of every Shareholder's meeting shall be given. The notice of every meeting shall be given, personally or by mail, and, except as otherwise provided by the New Jersey Business Corporation Act, not less than ten (10) nor more than sixty (60) days before the date of the meeting, unless the lapse of the prescribed period of time shall have been waived before or after the taking of any action, to each Shareholder at the address of the Shareholder that appears on the records of the Company. Notice of any adjourned meeting need not be given other than by announcement at the meeting so adjourned, unless otherwise ordered in connection with such adjournment. Such further notice, if any, shall be given as required by law. (e) Waiver of Notice: Notice of a meeting need not be given to any Shareholder who submits a signed waiver of notice before or after the meeting. The attendance of a Shareholder at a meeting without protesting prior to the conclusion of the meeting the lack of notice of such meeting shall constitute waiver of notice by him. (f) Quorum and Adjournment: Any number of Shareholders, together holding at least a majority of the capital stock of the Company issued and outstanding and entitled to vote, present in person or represented by proxy at any meeting called, shall constitute a quorum for all purposes at a meeting of Shareholders except as may otherwise be provided by law. The Shareholders present may continue to do business until adjournment, notwithstanding the withdrawal of enough shareholders to leave less than a quorum. Less than a quorum may adjourn. (g) Voting: Each Shareholder entitled to vote at a meeting of the Shareholders shall be entitled to one vote for each share of stock registered in such Shareholder's name on the books of the Company on the date fixed as the record date for the determination of its Shareholders entitled to vote. In accordance with the New Jersey Business Corporation Act, each Shareholder entitled to vote at a meeting of Shareholders may authorize another person or persons to act for him by proxy, duly appointed by instrument in writing subscribed by such Shareholder. Said proxy shall not be valid for more than eleven (11) months unless a longer time is expressly provided therein. At all meetings of Shareholders all matters shall be determined by a majority vote of the Shareholders entitled to vote thereat present in person or represented by proxy except as otherwise provided by law, the Certificate of Incorporation and these By-Laws. Section 2. Shareholder Action Without Meetings: Subject to any limitations prescribed by the provisions of Sections 14A:5-6 and 14A:5-7, or any other applicable provisions, of the New Jersey Business Corporation Act, and upon compliance with those provisions, any action required or permitted to be taken at a meeting of Shareholders by the provisions of that Act, or by the Certificate of Incorporation or by these By-Laws may be taken without a meeting if all of the Shareholders entitled to vote thereon consent thereto in writing and (except for the annual election of Directors) may also be taken without a meeting, without prior notice, and without a vote, by less than all of the Shareholders who would have been entitled to cast the minimum number of votes which would be necessary to authorize any such action at a meeting at which all Shareholders entitled to vote thereon were present and voting. Whenever any action is taken pursuant to the foregoing provisions, the written consents of the Shareholders consenting thereto or the written report of inspectors appointed to tabulate such consents shall be filed with the minutes of proceedings of Shareholders. 2 ARTICLE III DIRECTORS Section 1. Qualifications: Each Director shall be at least eighteen years of age. A Director need not be a Shareholder, a citizen of the United States, or a resident of the State of New Jersey. Section 2. Duties and Powers: The business and affairs of the Company shall be managed by or under the direction of the Board of Directors, and, unless the vote of a greater number is required by law, the Certificate of Incorporation, or these By-Laws, the vote of the majority of the Directors present at a meeting shall be the act of the Board of Directors in the transaction of business, provided a quorum is present. The Directors may exercise all such powers of the Company and do all such lawful acts and things as they may deem proper and as are consistent with law, the Certificate of Incorporation, and these By-Laws. Section 3. Number: The number of directors of the Company shall not be less than one nor more than twenty-five (25). The first board and subsequent Boards shall consist of three (3) Directors until changed as hereinafter provided. The Directors shall have the power, from time to time, in the interim between annual and special meetings of the Shareholders, to increase or decrease their number within the minimum and maximum number fixed in these By-Laws. Section 4. Election and Term: The first Board of Directors shall hold office until the first annual meeting of Shareholders and until their successors have been elected and qualified. Thereafter, Directors who are elected at an annual meeting of Shareholders, and Directors who are elected in the interim to fill vacancies and newly created directorships, shall hold office until the next succeeding annual meeting of Shareholders and until their successors have been elected and qualified. In the interim between annual meetings of Shareholders or of special meetings of Shareholders called for the election of directors, newly created directorships and any existing vacancies in the Board of Directors, including vacancies resulting from the removal of directors for cause or without cause, may be filled by the affirmative vote of the remaining Directors, although less than a quorum exists or by the sole remaining Director. A Director may resign by written notice to the Company. The resignation shall be effective upon receipt thereof by the Company or at such subsequent time as shall be specified in the notice of resignation. When one or more Directors shall resign from the Board of Directors effective at a future date, a majority of the Directors then in office, including those who have so resigned, shall have the power to fill such vacancy or vacancies, the vote thereon to take effect when such resignation or resignations shall become effective. Section 5. Removal of Directors: Any Director or the entire Board of Directors of the Company may be removed from office with or without cause by the Shareholders. The Board of Directors shall have the power to remove Directors for cause and so suspend Directors pending a final determination that cause exists for removal. 3 Section 6. Board Meetings: (a) Time, Place and Call: Meetings shall be held at such time as the Board shall fix. Meetings shall be held at such place within or without the State of New Jersey as shall be fixed by the Board. No call shall be required for regular meetings for which the time and place have been fixed. Special meetings may be called by or at the direction of the Chairman of the Board, if any, of the President, or of a majority of the Directors then in office. (b) Notice: No notice shall be required for regular meetings for which the time and place have been fixed. Written, oral, or any other mode of notice of the time and place shall be given for special meetings in sufficient time for the convenient assembly of the Directors thereat. The notice of any meeting need not specify the business to be transacted at, or the purpose of, the meeting. (c) Waiver of Notice: Notice of a meeting need not be given to any Director who submits a signed waiver of notice before or after the meeting, nor to any director who attends the meeting without protesting, prior to the conclusion thereof, the lack of notice. (d) Business Transacted: Any business may be transacted and any corporate action may be taken at any meeting of the Board of Directors at which a quorum shall be present, whether such business or proposed action be stated in the notice of such meeting or not, unless special notice of such business or proposed action shall be required by law. (e) Quorum: A majority of the entire Board of Directors then in office shall be necessary to constitute a quorum for the transaction of business. If a quorum is not present at a meeting of the Board of Directors, a majority of the Directors present may adjourn the meeting to such time and place as they may determine without notice other than announcement at the meeting until enough Directors to constitute a quorum shall attend. When a quorum is once present to organize a meeting, it shall not be broken by the subsequent withdrawal of any Directors. (f) Participation by Telephone: Any one or more members of the Board or any committee thereof may participate in a meeting of the Board or such committee by means of a conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other at the same time. Participation by such means shall constitute presence in person at a meeting. Section 7. Committees: The Board of Directors, by resolution adopted by a majority of the entire Board of Directors, may appoint from among its members one or more Directors to constitute an Executive Committee and one or more other committees, each of which, to the extent provided in the resolution appointing it, shall have and may exercise all of the authority of the Board of Directors with the exception of any authority the delegation of which is prohibited by Section 14A:6-9 or other provision of the New Jersey Business Corporation Act. Actions taken at a meeting of any such committee shall be reported to the Board of Directors at its next meeting following such committee meeting; except that, when the meeting of the Board is held within two days after the committee meeting, such report shall, if not made at the first meeting, be made to the Board at its second meeting following such committee meeting. Each Director of 4 a committee shall have one vote at meetings of that committee. The participation of Directors with the majority of the votes of a committee shall constitute a quorum of that committee for the transaction of business. Any action approved by a majority of the votes of the Directors of a committee present at a meeting of that committee at which a quorum is present shall be the act of the committee unless the New Jersey Business Corporation Act requires a greater proportion. Section 8. Action Without a Meeting: Any action required or permitted to be taken at any meeting of the Board or any committee thereof may be taken without a meeting if all members of the Board or such committee, as the case may be, consent in writing to the adoption of a resolution authorizing the action. Such resolutions and the written consents thereto by the members of the Board or a committee shall be filed with the minutes of the proceedings of the Board or such committee as the case may be. Section 9. Compensation: The Board of Directors may establish by resolution reasonable compensation of all Directors for services to the Company as Directors, including a fixed fee, if any, incurred in attending each meeting. Nothing herein contained shall preclude any Director from serving the Company in any other capacity, as an Officer, agent or otherwise, and receiving compensation therefor. ARTICLE IV OFFICERS Section 1. Election: The Directors shall elect a President, a Secretary, and a Treasurer, and may elect a Chairman of the Board, a Vice-Chairman of the Board, one or more Vice-Presidents, Assistant Vice-Presidents, Assistant Secretaries, and Assistant Treasurers, and such other Officers and agents as they shall determine. The President may but need not be a Director. Any two or more offices may be held by the same person but no Officer shall execute, acknowledge, or verify any instrument in more than one capacity if such instrument is required by law to be executed, acknowledged, or verified by two or more Officers. Section 2. Term: Unless otherwise provided in the resolution of election, each Officer shall hold office until the meeting of the Board of Directors following the next annual meeting of Shareholders and until his successor has been elected and qualified. Section 3. Powers and Duties: Officers shall have the powers and duties defined in the resolutions appointing them. Section 4. Removal: Any Officer of the Company may be removed from office, with or without cause, by a vote of a majority of the Board of Directors then in office. The removal of an Officer shall be without prejudice to his contract rights, if any. Election or appointment of an Officer shall not of itself create contract rights. Section 5. Resignation: Any Officer of the Company may resign at any time. Such resignation shall be in writing and shall take effect at the time specified therein, and if no time be specified, at the time of its receipt by the Secretary. The acceptance of a resignation shall not be necessary in order to make it effective, unless so specified therein. 5 ARTICLE V CAPITAL STOCK Section 1. Issue of Certificates of Stock: Certificates of capital stock shall be in such form as may be approved by the Board of Directors. The Board of Directors may also provide that some or all of the shares of any class or series shall be represented by uncertificated shares. Certificated shares shall be signed, either manually or by facsimile signature, by the Chairman of the Board, by the President or a Vice-President, or by the Secretary or an Assistant Secretary, or by the Treasurer or Assistant Treasurer and may be sealed with the corporate seal or a facsimile thereof. In case any Officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon such certificate shall have ceased to be such Officer, transfer agent or registrar before such certificate is issued, it may be issued by the Company with the same effect as if he were such Officer, transfer agent, or registrar at the date of issue. Section 2. Registration and Transfer of Shares: The name of each person owning a share of the capital stock of the Company shall be entered on the books of the Company together with the number of shares held by such person, and the dates of issue of the certificates. Upon compliance with provisions restricting the transferability of shares, if any, the shares of stock of the Company shall be transferable on the books of the Company, by the holders thereof in person, or by their duly authorized attorneys or legal representatives, on surrender and cancellation of certificates, if the shares are certificated, for a like number of shares, accompanied by an assignment of power of transfer endorsed thereon or attached thereto, duly executed, and with such proof of the authenticity of the signature as the Company or its Agents may reasonably require. A record shall be made of each transfer. The Board of Directors may make other and further rules and regulations concerning the transfer and registration of certificates of stock. Section 3. Lost, Destroyed and Mutilated Certificates: The holder of any stock of the Company shall immediately notify the Company of any loss, theft, destruction or mutilation of the certificates thereof. The Company may issue a new certificate for shares in place of any certificate theretofore issued by it, alleged to have been lost, stolen, destroyed, or mutilated, and the Board of Directors may require the owner of any such certificate, or his legal representative, to give the Company a bond sufficient to indemnify the Company against any claim that may be made against it on account of the alleged loss, theft, destruction or mutilation of any such certificate, or the issuance of any such new certificate. ARTICLE VI MISCELLANEOUS PROVISIONS Section 1. Corporate Seal: The corporate seal shall be in such form as approved by the Board of Directors and may be altered at its pleasure. The corporate seal may be used by causing it or a facsimile thereof to be impressed, affixed or otherwise reproduced. 6 Section 2. Books and Records: The Company shall keep books and records of account and minutes of the proceedings of its Shareholders, Board of Directors, and the Executive Committee and other committee or committees, if any. Such books, records and minutes may be kept within or outside the State of New Jersey. The Company shall keep at its principal office, its registered office, or at the office of its transfer agent, a record or records containing the names and addresses of all Shareholders, the number, class, and series of shares held by each, and the dates when they respectively became the owners of record thereof. Any of the foregoing books, minutes, or records may be in written form or in any other form capable of being converted into readable form within a reasonable time. ARTICLE VII AMENDMENTS On and after the date upon which the first Board of Directors shall have adopted the initial corporate By-Laws, which shall be deemed to have been adopted by the Shareholders for the purposes of the New Jersey Business Corporation Act, the power to make, alter, and repeal the ByLaws of the Company may be exercised by the Directors or the Shareholders; provided, that any ByLaws made by the Board of Directors may be altered or repealed and new By-Laws made, by the Shareholders. 7 EX-99.3 4 ex99-3.txt EX C-1 - APPLICATION TO NJ BD OF PUBLIC UTILITIES STATE OF NEW JERSEY BOARD OF PUBLIC UTILITIES __________________________________________ : IN THE MATTER OF THE PETITION OF : NUI UTILITIES, INC. (d/b/a ELIZABETHTOWN : PETITION GAS COMPANY) AND AGL RESOURCES INC. : FOR APPROVAL UNDER N.J.S.A. 48:2-51.1 : AND N.J.S.A. 48:3-10 OF A CHANGE IN : BPU DOCKET NO. GM0407_____ OWNERSHIP AND CONTROL : __________________________________________: TO THE HONORABLE NEW JERSEY BOARD OF PUBLIC UTILITIES: 1. Petitioner, NUI Utilities, Inc. ("Utilities" or "Petitioner"), is a public utility corporation organized under the laws of the State of New Jersey. Utilities is a wholly owned subsidiary of NUI Corporation ("NUI"), an energy company that operates natural gas utilities and businesses involved in natural gas storage and pipeline activities, including Virginia Gas Company.\1 Utilities' divisions include Elizabethtown Gas Company ("ETG") in New Jersey, City Gas Company of Florida and Elkton Gas in Maryland. Together, the NUI utility entities provide natural gas to approximately 371,000 customers located in New Jersey, Florida, Maryland and Virginia. In New Jersey, ETG is engaged in the distribution and sale of natural gas to approximately 265,000 residential, commercial and industrial customers. ETG's service territory consists of portions of Union, Middlesex, Sussex, Hunterdon, Morris, Warren and Mercer counties in central and northern New Jersey. 2. Petitioner, AGL Resources Inc. ("AGLR"), is a corporation organized under the laws of Georgia, and is an Atlanta-based energy services holding company. AGLR is a registered public utility holding company pursuant to the Public Utility Holding Company Act of 1935, as ________________________________ /1 At the time of closing, NUI will have four wholly owned subsidiaries: NUI Utilities, Inc., Virginia Gas Company NUI Capital Corp., and NUI Saltville Storage, Inc. NUI is a holding company and is exempt from registration under the Public Utility Holding Company Act of 1935. amended ("PUHCA"). AGLR's subsidiaries, Atlanta Gas Light Company, Virginia Natural Gas Company and Chattanooga Gas Company, serve more than 1.8 million customers in three states. Additionally, AGLR is engaged in the wholesale energy services business through its indirect wholly owned subsidiary, Sequent Energy Management, and in other retail energy marketing and telecommunications businesses. 3. Communications and correspondence relating to the proceedings herein should be sent to: Stephen B. Genzer, Esq. Mark L. Mucci, Esq. LeBoeuf, Lamb, Greene & MacRae, L.L.P. One Riverfront Plaza Newark, NJ 07102-5490 with copies to Petitioner Utilities at the following address: Mary Patricia Keefe, Esq. Elizabethtown Gas Company One Elizabethtown Plaza P. O. Box 3175 Union, NJ 07083 and copies to Petitioner AGLR at the following address: Elizabeth Wade, Esq. Lee A. Alexander, Esq. AGL Resources Inc. Dickstein Shapiro Morin &Oshinsky LLP Ten Peachtree Place 2101 L Street NW Atlanta, GA 30309 Washington, DC 20037 4. Petitioners respectfully submit this Petition pursuant to N.J.S.A. 48:2-51.1 and 48:3-10 and N.J.A.C. 14:1-5.10 to obtain authorization and approval of an acquisition by AGLR of NUI, the ultimate parent company of ETG, which will result in the change of control of the stock of Utilities. 5. Considered together, NUI and AGLR will form one of the preeminent operators of natural gas utility assets in the Eastern United States. The combined companies will serve 2 approximately 2.2 million utility customers along the East Coast, reaching from New Jersey to Florida. As described in more detail herein, AGLR has an outstanding track record of providing safe and reliable natural gas service, coupled with significant financial resources and operational experience. Recently, Platts Global Energy named AGLR its "2003 Gas Company of the Year." 6. Petitioners respectfully request that approval of the proposed acquisition be granted on an expedited basis, with October 31, 2004 as the target date for approval. Petitioners request that the Board immediately set a procedural schedule, and ask that a Commissioner be authorized to hear the matter directly. Petitioners recognize that the requested approval schedule is very brief, however, Petitioners also believe that the recent events concerning NUI, NUI's and Utilities' overall financial condition, and the recent volatility of natural gas prices (which may put additional pressure on NUI's financial position), warrant prompt approval. As noted throughout this Petition and the supporting testimony, AGLR intends to work on improving NUI's financial condition and to identify and to make operational and infrastructure improvements in Utilities' operations. Moreover, AGLR intends to honor the $28 million customer refund and $2 million penalty to the State of New Jersey agreed to by NUI and Utilities in the April 14, 2004 Settlement Agreement that was approved by the Board. Indeed, after the acquisition closes, AGLR would be willing to discuss with the Board making the entire outstanding amount of the refund immediately available to customers. If the outstanding balance of the $28 million is refunded to customers during this winter heating season, ETG's customers will benefit from lowered gas costs at the time of the year when gas costs are traditionally highest. Thus, approval of the acquisition will benefit ratepayers by ensuring that the refund is made on an expedited basis, rather than the incremental schedule under which ETG is currently 3 required to distribute the refund. All of these proposals are in the best interests of customers, but none of these activities can begin in earnest until the acquisition transaction is approved. I. SUMMARY DESCRIPTION OF THE TRANSACTION -------------------------------------- 7. The Merger Agreement is attached hereto as Exhibit A and should be referenced for a detailed description of the contemplated transaction. In summary, AGLR has agreed to acquire NUI in a reverse triangular merger in which, at closing, a newly created subsidiary of AGLR will merge with and into NUI. At the consummation of the acquisition, NUI will be a wholly owned subsidiary of AGLR. AGLR has agreed to pay $13.70 for each share of common stock of NUI issued and outstanding immediately prior to the effective time of the acquisition - approximately 16 million shares - for an aggregate purchase price of $220 million in cash, plus the assumption of NUI's outstanding debt at closing.\2 At March 31, 2004, on a consolidated basis, 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. AGLR anticipates that NUI's total debt will change prior to closing. 8. After the acquisition, NUI will be a first tier subsidiary of AGLR. Exhibit B sets forth charts of the organizational structures of the companies before and after the acquisition, simplified to show only major subsidiaries. 9. Utilities seeks the Board's authorization to enter into a Services Agreement with AGL Services Company, a subsidiary of AGLR. The Services Agreement, which is attached thereto and discussed in Mr. Richard T. O'Brien's testimony, defines the services that may be ___________________________________ /2 See the Preamble and Article 2 of the Merger Agreement for terms of the Merger and the Purchase Price. 4 provided and the cost allocation methods to be utilized in connection with the provision of those services. 10. After the acquisition closes, the NUI Board of Directors and the Utilities Board of Directors will dissolve and those responsibilities will be assumed by the AGLR Board of Directors. The Board of Directors of AGLR currently consists of eleven members: ten independent, outside directors plus Ms. Rosput, AGLR's Chairman, President and CEO. As explained in the testimony of Ms. Rosput, it is the desire of the AGLR Board to attract a New Jersey resident of significant professional stature and business qualifications to join the AGLR Board. The AGLR Board is also considering revisions to the charter of its Environmental and Corporate Responsibility Committee to contemplate oversight of the post-acquisition integration of Utilities, with proper recognition of the public interest considerations of the states in which Utilities operates. 11. Mr. Craig Matthews, NUI's current CEO will leave the company at the time of closing. Paula G. Rosput, Chairman, President and CEO of AGLR will continue in that capacity. AGLR is committed to providing on-site management of ETG. To that end, AGLR intends to appoint a senior business leader to head ETG who will be located in New Jersey, and who will be responsible for the day-to-day oversight and operations of the New Jersey utility operations. 12. Under the terms of the Merger Agreement, AGLR will effectively acquire NUI for a total consideration of approximately $220 million in cash (based on an estimate of 16 million shares currently outstanding), plus the assumption of NUI's outstanding debt at closing. At March 31, 2004, NUI had approximately $607 million in debt and $136 million of cash on its balance sheet. As noted above, NUI stockholders will receive $13.70 per share in cash. 5 13. The purchase of NUI shares will be funded primarily through the proceeds of the sale of common shares by AGLR at, or prior to, closing. Additionally, as discussed in the testimony of Mr. O'Brien, AGLR will refinance a portion of Utilities' outstanding debt upon closing. To that end, Utilities will shortly file a petition seeking to refinance approximately $225 million of indebtedness.\3 Moreover, as Mr. O'Brien states in his testimony, AGLR expects to maintain its strong investment-grade ratings and its current dividend policy post-acquisition. 14. The proposed transaction is subject to customary closing conditions, including the approval of NUI's shareholders, and the receipt of all necessary regulatory approvals, including the approvals of the Securities and Exchange Commission ("SEC"), the Federal Communications Commission ("FCC"), the New Jersey Board of Public Utilities, the Maryland Public Service Commission, the Virginia State Corporation Commission, any necessary approval or the expiration or termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the absence of any material adverse effect on NUI's business. 15. Petitioners recognize that NUI is a financially distressed company and that any acquirer will be faced with significant risks going forward. Petitioners ask that the Board address these risks by drafting a Final Order of Approval that permits AGLR the flexibility it needs to integrate NUI and ETG into AGLR's family of companies. To that end, Petitioners have included in the Merger Agreement certain conditions which they consider necessary for successful integration and hereby request that the Board expressly include these provisions in ____________________________ /3 Specifically, on November 24, 2003, Utilities executed agreements providing for a Term Loan of $50 million, a $50 million Revolver, and a $50 million Delayed Draw Term Loan (collectively, the "Unsecured Credit Facilities"). Petitioner is presently seeking Board approval of the Unsecured Credit Facilities in Docket No. GF04070720, filed on July 26, 2004. Additionally, in that same docket, Petitioner sought approval of a $75 million senior secured term loan (the "Secured Facility"). The requested approvals are pending at this time. AGLR would seek to refinance these debt obligations at, or just prior to, closing of the acquisition. 6 any Final Order. Those conditions, which are discussed in greater detail in later sections of this Petition, are: (a) ETG will not be required to operate at less than its current authorized tariffs for at least three years from the date of the acquisition closing; (b) after the closing, ETG will be permitted to make a filing with the Board to recover, outside of a normal rate case, certain capital expenditures necessary to improve customer service and safety and distribution system reliability; (c) AGLR's ability to make reasonable changes to ETG, including changes to the existing workforce, will not be restricted, and AGLR will retain all benefits from such changes until the conclusion of ETG's next base rate case; (d) Utilities will be authorized to enter into a three year asset management agreement with a subsidiary of AGLR on terms similar to Utilities' current gas procurement and asset management contract or, in the alternative, to enter into another asset management arrangement; (e) the Board will continue what we understand to be its current policy on rate treatment for costs incurred for the environmental remediation of manufactured gas plants that allows for recovery of prudently incurred costs, including carrying costs, in base rates and/or in the remediation adjustment clause; (f) the Board will not impose conditions that may have the effect of requiring AGLR to conduct business or govern the affairs of AGLR or any of its subsidiaries after the closing in a manner that is adverse to AGLR or any of these subsidiaries;\4 and (g) the Board will absolve AGLR and its subsidiaries at and after the closing from any post-closing liability associated with the circumstances and transactions addressed by the Focused Audit Final Report issued in Docket No. GA03030213, and with the Stier Anderson Report. II. THE PROPOSED TRANSACTION MEETS THE STANDARDS SET FORTH IN APPLICABLE LAW ------------------------------------- ______________________ /4 Adverse conditions shall include, but are not limited to, conditions that are inconsistent with, or in addition to, the conditions, including organizational requirements, currently imposed on AGLR under PUHCA. 7 16. The Board has jurisdiction over the proposed transactions pursuant to N.J.S.A. 48:2-51.1 which requires Board approval prior to the indirect acquisition of ETG by means of a merger of NUI with a newly formed merger subsidiary of AGLR. N.J.S.A. 48:2-51.1 sets forth the applicable legal standard for review as to whether there will be an impact of the acquisition: on competition, on the rates of ratepayers affected by the acquisition of control, on the employees of the affected public utility or utilities, and on the provision of safe and adequate utility service at just and reasonable rates. 17. In addition, jurisdiction may arise under N.J.S.A. 48:3-10, which provides that Board approval is required prior to making a sale or transfer of stock to a corporation that, in conjunction with a previous sale or transfer, would vest control in such corporation of a majority interest in the capital stock of the public utility. In the context of the proposed transaction, there would be no direct transfer of Utilities' stock, all of which is currently owned by NUI and would remain owned by NUI, as a wholly owned subsidiary of AGLR. Nevertheless, approvals are sought under N.J.S.A. 48:3-10 to the extent the Board believes such approvals are necessary in light of the contemplated transfer of NUI stock to AGLR's new merger subsidiary, which will result in AGLR indirectly controlling a majority of the capital stock of Utilities. 18. Completion of the acquisition will serve the public interest in a number of respects, as described in greater detail in the prepared testimony of the witnesses for Petitioners submitted herewith. Most important, completion of the acquisition will remedy the current adverse financial state of NUI, Utilities and ETG, and ensure the continued provision of safe, adequate and proper service at just and reasonable rates for customers in New Jersey. 19. With respect to the specific requirements of N.J.S.A. 48:2-51.1, the combination of NUI and AGLR will not detrimentally affect competition. The companies, considered 8 together, would form a large natural gas distribution organization. The companies would not, however, have any market power that could be used to adversely affect competition in the market for gas distribution services in New Jersey. Most of the assets held by Petitioners are in the form of natural gas utilities, which are still subject to regulation by this Board, other states' regulatory authorities, and the Federal Energy Regulatory Commission. AGLR does not own or have an interest in any other gas utility assets in New Jersey. 20. Consistent with N.J.S.A. 48:2-51.1, the acquisition will not detrimentally affect rates: ETG will continue to provide service at ETG's Board-approved tariff rates. In fact, Petitioners are proposing to maintain retail gas distribution rates at their current tariff levels for a period of at least three years following the closing of the acquisition. As noted above, the Merger Agreement provides that an acceptable order by the Board will not require ETG to operate at less than its current tariff rates for at least three years. In addition, AGLR commits not to propose an increase in ETG's base rates to be effective in the three-year period following the acquisition. Petitioners are confident that the three year period will permit the companies to identify and implement integration strategies aimed at enhancing operational efficiencies. In conjunction with the three year period, AGLR seeks to retain any near term economic benefits as a way to balance the risks AGLR is assuming given the distressed circumstances of NUI and its subsidiaries. Petitioners also seek an order by the Board recognizing what we understand to be the Board's current policy on rate treatment for costs incurred for the environmental remediation of manufactured gas plants that allows for recovery of prudently incurred costs, including carrying costs, in base rates and/or in the remediation adjustment clause. 21. Consistent with N.J.S.A. 48:2-51.1, the effect of the proposed acquisition on the employees of NUI and Utilities is discussed in the testimony of Mr. Madden. Moreover, AGLR 9 has committed to honoring both the specific language and the spirit of all of NUI's bargaining agreements currently in place. Both AGLR and NUI recognize, however, that some changes to the workforce may be necessary in order to implement changes to the business following the acquisition. Accordingly, the Merger Agreement provides, as a condition of the acquisition, that the Board's Order not restrict AGLR's ability to make such changes. 22. Consistent with N.J.S.A. 48:2-51.1, the proposed acquisition will not detrimentally affect customers in terms of customer service and the reliability of the ETG natural gas transmission and distribution systems. AGLR is a company that is committed to providing outstanding customer service to all of its utility customers. AGLR's gas distribution companies utilize state-of-the-art technology to provide outstanding customer service. AGLR maintains a comprehensive utility metric program to continuously monitor important aspects of customer service, safety and reliability. These metrics include customer service and satisfaction (as measured by call response times and customer feedback) as well as safety-related metrics such as leak response times, and operational measures such as capital costs per new meter (essentially, the total cost to hook up a new gas customer). As noted above, AGLR has a strong track record in utility operations and customer service, and intends to continue that tradition in its operations in New Jersey. To effectuate this goal, Petitioners are requesting that, after the closing, ETG would be permitted to make a filing with the Board to recover, outside of a base rate case, certain capital expenditures necessary to improve customer service and safety and distribution system reliability. 23. The requirements of N.J.S.A. 48:3-10 are met. Under section 5.9(a) of the Merger Agreement, AGLR has agreed to provide NUI's employees benefits that, taken as a whole, are substantially equivalent to the benefits that NUI currently provides to those 10 employees for at least one year following the closing of the transaction. AGLR will also assume the obligations or cause NUI to continue to meet obligations to its employees under any employment or union contract. With respect to the NUI pension plan, following the acquisition, under the purchase accounting rules, the amount currently reflected by NUI as a pension asset, which is being amortized as pension expense, will be eliminated. AGLR requests that after closing NUI's pension asset be treated as a regulatory asset. This is essentially a "make-whole" provision for NUI. Under this request, the company would continue to amortize the asset consistent with the amortization period used for the pension asset prior to close. This will ensure that the total ratepayer obligation for the pension period cost is the same pre- and post- acquisition for the outstanding pension asset amount. AGLR has an investment grade rating and an equity market capitalization of approximately $1.9 billion. AGLR also has a pension plan with plan assets of approximately $260 million as of December 31, 2003. These factors should reassure NUI's employees as to the appropriate management of their pension plan assets after closing. 24. As the Board is aware, NUI and Utilities are presently operating under the terms of a Settlement Agreement signed on April 14, 2004 and approved by the Board in a Final Order issued on April 26, 2004. As explained in the testimony of Ms. Rosput and Mr. Madden, AGLR fully intends to honor the payment of any outstanding balance of the $28 million refund to ETG customers, as well as any outstanding balance due on the $2 million penalty payable to the State of New Jersey. The Settlement Agreement is clear on its face that its terms are not binding on any successor to NUI, and AGLR firmly believes that its unwaivering commitment to strict compliance with all applicable laws and regulations makes the Settlement Agreement unnecessary. Therefore, other than the assumption of this obligation, AGLR seeks a finding by 11 the Board that the Settlement Agreement will not place any continuing restrictions on AGLR, NUI or Utilities after the close of the acquisition. III. ADDITIONAL FILING REQUIREMENTS SET FORTH IN N.J.A.C. 14:1-5.14 -------------------------------------------------------------- 25. The information requested in N.J.A.C. 14:1-5.14(a)(1) - (7) is either attached or described in paragraphs herein. Public interest matters (N.J.A.C. 14:1-5.14(a)(10)) are discussed in paragraphs above and in attached testimony. This application is being served on affected municipalities and the public utilities in ETG's service area consistent with N.J.A.C. 14:1-5(a)(12). As previously noted, the proposed transaction requires additional regulatory approvals by agencies in other states and the federal government and, consistent with N.J.A.C. 14:1-5.14(a)(13), Petitioners will comply with the requirements of those other agencies. 26. Because the contemplated transaction involves the acquisition of NUI and not Utilities, Utilities will be a surviving entity after the acquisition. ETG's franchises are not being transferred or in any way affected by the proposed acquisition of its ultimate parent company and, thus, there is no franchise cost that would be capitalized on the books of AGLR for amortization as those terms are used in N.J.A.C. 14:1-5.14(a)(8). Moreover, it is AGLR's intention to retain "Elizabethtown Gas Company" as the name of the operating entity in New Jersey. 27. With respect to N.J.A.C. 14:1-5.14(a)(9), as previously noted, Utilities will remain a wholly owned subsidiary of NUI. 28. The proposed acquisition, in and of itself, does not result in any substantive changes in company policies with respect to finances, operations, accounting, rates, depreciation, 12 operating schedules, maintenance and management affecting the public interest as those terms are used in N.J.A.C. 14:1-5.14(a)(11). Utilities, however, seeks authority to enter into a three year gas procurement and asset management arrangement with a subsidiary of AGLR, Sequent Energy Management ("Sequent"), on terms similar to those previously approved by the Board in Docket No. GA03030213 with Cinergy Marketing and Trading, LP. Utilities' current agreement with Cinergy is set to expire in March, 2005. AGLR seeks authority to have an agreement between Sequent and Utilities commence at that time, or earlier. Alternatively, AGLR would consider an asset management agreement ("AMA") with terms modeled on AMAs AGLR employs at its other utilities. The testimony of Mr. Madden provides a more detailed description of key terms contained in those AMAs. Additionally, Utilities seeks authority to participate in a cash pooling arrangement, the Utility Money Pool, which includes other AGLR utility subsidiaries. The Utility Money Pool is operated by an AGLR subsidiary and has been approved by the SEC. Details concerning the Utility Money Pool, and the benefits of participating in the pooling arrangement, are discussed in Mr. O'Brien's testimony. 29. With respect to N.J.A.C. 14:1-5.14(a)(14), the total amount of fees and expenses to be incurred in connection with the acquisition are not quantifiable at the present time. IV. ATTACHMENTS AND PROCEDURAL MATTERS ---------------------------------- 30. Attached hereto are the following Exhibits: Exhibit A The Agreement and Plan of Merger, dated July 14, 2004. Exhibit B Corporate Structures Prior to and After Transaction. Exhibit C Maps of Service Territories. 13 Exhibit D Copies of the Certificates of Incorporation of both NUI and the AGLR merger subsidiary. Exhibit E Copies of audited financial statements for fiscal years 2003 and 2002 for ETG. No pro forma balance sheets and income statements after the acquisition are provided because the merger of the parent company, NUI, will not affect the balance sheets and income statements of ETG. Exhibit F Draft form of public notice. 31. Attached hereto in support of this Petition and on behalf of Petitioners are the testimony and exhibits of the following: Ms. Paula G. Rosput, AGLR's Chairman, President and CEO, presenting the overall policy goals and objectives of the acquisition and the companies going forward; Mr. Craig Matthews, NUI's CEO, presenting an overview of the recent events surrounding NUI and the decision of the Board of Directors of the company to auction NUI; Mr. Kevin P. Madden, AGLR's Executive VP, Distribution and Pipeline Operations, describing the impact of the proposed acquisition on competition, rates, employees and the provision of safe, adequate and proper utility service; and Mr. Richard T. O'Brien, AGLR's Executive VP and CFO, describing the acquisition transaction, AGLR's financial policies, and the prospects for improvements to NUI's financial position. V. CONCLUSION AND REQUESTED APPROVALS ---------------------------------- In conclusion, Petitioners respectfully submit that the change in control of ETG by means of an acquisition of its ultimate parent NUI by AGLR will not have an adverse impact on competition in the natural gas industry, on either ETG's rates or the ability of the Board to regulate those rates, on ETG's obligations to its employees, or on the provision of safe, adequate and proper service at 14 just and reasonable rates. Accordingly, Petitioners respectfully request the approval of the Board under N.J.S.A. 48:2-51.1 and 48:3-10. WHEREFORE, NUI Utilities, Inc. and its operating division Elizabethtown Gas Company, and AGL Resources Inc. request that the Board of Public Utilities: (1) approve the transfer of control of ETG by means of a merger of its ultimate parent, NUI, into and with a subsidiary of AGL Resources Inc.; (2) find that the requirements of N.J.S.A. 48:2-51.1 and 48:3-10 are met; (3) maintain ETG's base rates for gas distribution service at current levels for at least a three year period following the closing of the acquisition; (4) authorize Utilities to execute a gas procurement and asset management agreement with an affiliate, Sequent Energy Management, on terms similar to those approved in BPU Docket No. GA03030213 or, in the alternative, to approve another asset management arrangement; (5) permit ETG to make a filing with the Board to recover, outside of a base rate case, certain capital expenditures necessary to improve customer service and safety and distribution system reliability; (6) permit AGLR to make reasonable changes to ETG, including to the workforce, without restrictions, and permit AGLR to retain all benefits from such changes until the conclusion of ETG's next base rate case; (7) recognize its current policy on rate treatment for costs incurred for the environmental remediation of manufactured gas plants that allows for recovery of prudently incurred costs, including carrying costs, in base rates and/or in the remediation adjustment clause; (8) permit Utilities to participate in a cash pooling arrangement, the Utility Money Pool, with other utility subsidiaries of AGLR; (9) permit Utilities to enter into a Services Agreement with AGL Services Company, a subsidiary of AGLR; (10) not impose conditions that may have the effect of requiring AGLR to conduct business or govern the affairs of AGLR or any of its subsidiaries after closing in a manner that is adverse to AGLR or any of these subsidiaries; (11) after closing, authorize AGLR to treat NUI's 15 pension asset as a regulatory asset; (12) absolve AGLR and its subsidiaries at and after the closing from any post-closing liability associated with the circumstances and transactions addressed by the Focused Audit Final Report issued in Docket No. GA03030213, and with the Stier Anderson Report; (13) retain this matter for hearing and final disposition before the Board; (14) take the above actions within 90 days and otherwise expedite review and consideration of the proposed transactions so that approval may occur on or before October 31, 2004; (15) acknowledge that after the acquisition transaction closes, the April 14, 2004 Settlement Agreement resolving all issues related to the Board's Focused Audit of NUI, Utilities and ETG is not binding on AGLR, NUI or Utilities other than AGLR's assumption of the obligation to pay any outstanding amount of the $28 million customer refund and the $2 million State penalty; 16 (16) with respect to all such authority and approvals, grant them subject to the closing of the transactions contemplated by the Merger Agreement; and (17) grant such other relief as may be reasonable and necessary. Respectfully submitted, DATED: July 30, 2004 By:_____________________________ Stephen B. Genzer, LeBoeuf, Lamb, Greene & MacRae, LLP On behalf of Petitioners, NUI Utilities, Inc. and AGL Resources Inc. 17 Exhibit A --------- AGREEMENT AND PLAN OF MERGER DATED JULY 14, 2004 18 Exhibit B --------- SIMPLIFIED CORPORATE STRUCTURES PRIOR TO AND AFTER TRANSACTION 19 Exhibit C --------- MAPS OF SERVICE TERRITORIES 20 Exhibit D --------- Copies of the Certificates of Incorporation 21 Exhibit E --------- Copies of audited financial statements for fiscal years 2003 and 2002 for Elizabethtown Gas Company 22 Exhibit F --------- Draft form of public notice 23 STATE OF NEW JERSEY BOARD OF PUBLIC UTILITIES IN THE MATTER OF THE PETITION OF NUI UTILITIES, INC. (d/b/a ELIZABETHTOWN GAS COMPANY) AND AGL RESOURCES INC. FOR APPROVAL UNDER N.J.S.A. 48:2-51.1 AND N.J.S.A. 48:3-10 OF A CHANGE IN OWNERSHIP AND CONTROL BPU DOCKET No. GM0407_________ JULY 30, 2004 TESTIMONY OF CRAIG G. MATTHEWS ON BEHALF OF NUI UTILITIES, INC. AND AGL RESOURCES INC. 24 Q. Please state your name and position. A. My name is Craig G. Matthews, and I am President and Chief Executive Officer of NUI Corporation (NUI), the parent company of NUI Utilities, doing business in New Jersey as Elizabethtown Gas Company (ETG). Q. What is the purpose of your testimony? A. The purpose of my testimony is to provide a brief description of the current business, financial, and regulatory status of NUI and ETG, in order to support the application of ETG and AGL Resources Inc. (AGLR) for approval of the change in control of ETG. Q. Please describe your work history with NUI. A. As I will discuss in more detail as I describe the current status of NUI and ETG, I joined NUI in February, 2004, in my current position. I was specifically charged with undertaking the sale of NUI, in accordance with the Board of Directors' earlier decision to sell NUI and consistent with ongoing discussions with the New Jersey Board of Public Utilities (NJBPU). Q. Please provide a brief summary of NUI's current regulatory status. A. On March 20, 2003 the NJBPU directed the initiation of a focused audit of NUI Corporation, its direct subsidiary NUI Utilities and ETG, the local distribution company operating in New Jersey. ETG is a division of NUI Utilities. The NJBPU initiated the focused audit because of credit downgrades of the senior unsecured debt of NUI and NUI Utilities, as well as concerns raised during the NJBPU's competitive services audit of ETG, which substantiated the need for an in-depth review of the financial practices of NUI and its affiliates. The NJBPU hired Liberty Consulting Inc. (Liberty) to conduct the audit. The final Liberty Audit Report (Report) was issued by the NJBPU on March 17, 2004. The Report details Liberty's conclusions regarding the deficiencies and omissions that led to NUI and its utilities' financial troubles and eventual credit downgrades. As a result of the conclusions noted in the Report, the NJBPU ordered, among other things, that ETG discontinue its relationship with NUI Energy Brokers (NUI EB). NUI, NUI Utilities and the NJBPU signed a Stipulation and Settlement, dated April 14, 2004, settling the matters identified by the Liberty Audit. On April 26, 2004, the NJBPU issued a Final Order accepting and adopting that Settlement Agreement. Q. Please summarize the terms of that Final Order. A. Pursuant to the Settlement Agreement and the Final Order, NUI Utilities agreed to refund $28 million plus interest to ETG ratepayers and to pay a $2 million penalty to the State of New Jersey. The Final Order provides that the balance of the refund and penalties will become due after the closing of any proposed sale of NUI. The Settlement Agreement provides that it is a final settlement of the issues addressed in the Liberty Audit. Q. Have there been other New Jersey state government proceedings against NUI? A. Yes. In November, 2003, the New Jersey Attorney General's Office (NJAGO) subpoenaed NUI for certain documents and information related to the practices of NUI 26 EB. On June 29, 2004, NUI EB entered into an agreement with the NJAGO whereby NUI EB pled guilty to a charge of Misconduct by a Corporate Official in the third degree. This plea agreement provides that NUI EB must pay a $500,000 fine and must cooperate fully with the NJAGO continuing investigation. NUI is a party to a separate agreement related to NUI EB's plea, but it did not plead guilty to any crimes. NUI guaranteed NUI EB's payment of the fine and agreed to cooperate fully with the NJAGO continuing investigation and to develop and fund community service programs within the ETG service territory. Q. Please describe the operations of ETG. A. ETG is headquartered in Union, New Jersey, and serves portions of seven counties in central and northwestern New Jersey. ETG's service territories cover approximately 1,300 square miles and a total population of approximately 1.1 million. ETG has approximately 265,000 customers, representing approximately 70% of NUI Utilities' total customers. Q. During this time, what steps were taken to effect a sale of NUI and its subsidiaries? A. In 2003, as a result of the negative impact on NUI resulting from the credit downgrades and adverse business conditions, the NUI Board of Directors established a Special Committee to assess the company's alternatives. After considering a number of strategic alternatives, on September 26, 2003, the Board of Directors of NUI concluded that the sale of the company was in the best interests of its shareholders and other key stakeholders, including its customers, and announced its intention to pursue the sale of 27 the company. Thereafter, NUI began a public auction process. As I have noted above, I joined NUI in February of 2004 and was directed to complete the sale of the company. Q. Please provide a brief description of the auction process used by NUI. A. Once the decision to pursue a sale was made, the NUI Board of Directors engaged Credit Suisse First Boston LLC and Berenson & Company to act as its financial advisors through the sale process. A detailed Confidential Information Memorandum was prepared during November, 2003, and initial expressions of interest from potential purchasers were sought in December, 2003. Approximately 60 interested parties, both strategic and financial entities, were contacted and approximately half of those parties submitted written expressions of interest. Eight parties were invited into the second round of the sale process. Detailed due diligence was conducted by prospective bidders during the first several months of 2004, and binding bids were submitted on June 2, 2004. Detailed negotiations were conducted with bidders, and AGLR was ultimately the winning bidder in the auction. The final sales price was negotiated by the parties. A final sales agreement was reached between NUI and AGLR on July 14, 2004, which agreement is Exhibit A to the Petition filed in this matter. Q. Why is AGLR an attractive acquisition partner for NUI? A. There are a number of factors that make AGLR a good fit as an acquisition partner for NUI. First, as an investment-grade company, AGLR brings financial strength and resources. In 2003, AGLR had an enterprise value of $3 billion and total operating revenues of almost $1 billion. Mr. O'Brien will talk in greater detail about AGLR's plans 28 for strengthening NUI's and ETG's financial structures, and returning the related financing costs to those of an investment grade utility. Second, like NUI, AGLR has been operating natural gas local distribution systems for almost 150 years and will continue to focus on this business. AGLR owns local distribution companies in Georgia, Tennessee and Virginia, and has a strong track record of well-run utility operations. NUI has weathered some significant storms in the last year, but our utility operations, including ETG, are sound. With AGLR's stronger balance sheet, its experience in operating larger gas distribution franchises and its commitment to technology, we expect AGLR to continue to provide, and even in the short-run improve, quality service to our customers. In fact, with investments in infrastructure and state-of-the-art technology that AGLR has in place or is in the process of developing, we expect the quality of our customer service to be further enhanced over time. Third, AGLR maintains a strong commitment to its employees. As part of a much larger organization, employees will have additional opportunities for training and advancement. AGLR also has an outstanding record of involvement in the communities it serves. It plans to increase the level of community involvement of ETG, through an effort to increase the volunteer base and interests of our employees. Lastly, AGLR has strong, collaborative and ongoing relationships with regulators. This philosophy will be important to NUI as it moves beyond recent events. Q. What do you view as the most significant benefits to ETG customers as a result of the acquisition? 29 A. Perhaps the most significant benefit is assured stability primarily as a result of AGLR's financial strength and its ability to support ETG's customer growth and related capital requirements as well as the significant working capital necessary to purchase and deliver natural gas at today's higher commodity prices. As the Board is aware, being part of an investment grade company will, in the short-run, significantly reduce the interest rate at which NUI Utilities currently borrows and will also allow NUI Utilities access to capital in the future at attractive prices, clearly a benefit to customers in the long run. In addition, AGLR has a strong commitment to customer service and quality utility operations, and is willing to invest in the ETG information systems to improve customer service and operations. Q. Why is it important that regulatory approval of the change of control take place on an expedited basis? A. NUI is a natural gas company, and as such the winter heating season is always a challenging period for us. The nature of our core business combined with rising natural gas prices and our current financial situation will make this upcoming heating season particularly challenging. While these may be the dog days of summer, winter is fast approaching and we need to position ourselves to continue to provide quality service to our customers. Because of our weakened credit ratings we are required to prepay gas commodity and demand charges. This is at significant cost. In addition, we are incurring significant bank fees and high interest rates because of our poor credit ratings. To insure that we have sufficient cash to cover all contingencies, we have obtained additional financing which is the subject of a second proceeding currently pending before the 30 NJBPU. Since some of these higher financing costs are being paid by ETG, but are primarily being paid by NUI, additional stress is impacting the cash flow of the parent company. These financing costs will be dramatically reduced as a result of AGLR's plans to restructure the company's financings. But, as mentioned above, that financing is at a cost which is significantly higher than AGLR's financing costs. Approving this transaction on an expedited basis would save that additional expense. Q. Are there any other factors that influenced NUI's decision to request expedited regulatory review? A. An acquisition transaction inevitably involves changes. In my prior position at KeySpan Energy I was involved in two significant acquisitions, so I have first hand experience with the challenge of integrating companies. One of the most significant issues is employee retention during the acquisition approval process. It is important to customers that experienced, qualified employees remain with the company through the approval process. NUI and AGLR want to minimize employee attrition during the coming months, and that is one more reason we are seeking a prompt review of the proposed acquisition. Additionally, the positive aspects of the acquisition I discussed previously cannot begin or be provided until the acquisition is approved. Q. Does this conclude your testimony? A. Yes. 31 STATE OF NEW JERSEY BOARD OF PUBLIC UTILITIES IN THE MATTER OF THE PETITION OF NUI UTILITIES, INC. (d/b/a ELIZABETHTOWN GAS COMPANY) AND AGL RESOURCES INC. FOR APPROVAL UNDER N.J.S.A. 48:2-51.1 AND N.J.S.A. 48:3-10 OF A CHANGE IN OWNERSHIP AND CONTROL BPU DOCKET No. GM0407_________ JULY 30, 2004 TESTIMONY OF RICHARD T. O'BRIEN ON BEHALF OF NUI UTILITIES, INC. AND AGL RESOURCES INC. 32 Q. Please state your name and position. A. My name is Richard T. O'Brien. I am executive vice president and chief financial officer of AGL Resources Inc. (AGLR). In that capacity, I direct finance, strategy and accounting activities for the businesses held by AGLR, as well as investor relations. In addition, I lead AGLR's human resources, information technology and public affairs functions. Q. What is the purpose of your testimony? A. The purpose of my testimony is to describe the transaction under the Merger Agreement, through which NUI Corporation (NUI), including its public utility subsidiary, NUI Utilities, doing business in New Jersey as Elizabethtown Gas Company (ETG), will be acquired by AGLR. I will briefly describe the financial strength of AGLR, its operating businesses and the manner in which AGLR will finance this acquisition. I will discuss the impact of the change in control on NUI's employees and on NUI's existing pension obligations. Finally, I will discuss the request for NUI Utilities to be included in AGLR's cash pooling arrangement, to execute a services agreement with our affiliated service company and to enter into a Gas Procurement and Asset Management Agreement (Asset Management Agreement) with a subsidiary of AGLR. Q. Please describe the form of the proposed acquisition. A. AGLR will acquire NUI in a reverse triangular merger in which, at closing, a newly created subsidiary of AGL Resources will merge with and into NUI. At the consummation of the acquisition, NUI will be a wholly owned subsidiary of AGL Resources. AGL Resources has agreed to pay $13.70 for each share of common stock of NUI issued and outstanding immediately prior to the effective time of the acquisition - approximately 16 million shares - for an aggregate purchase price of $220 million in cash, plus the assumption of NUI's outstanding debt at closing. At March 31st, on a consolidated basis, 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. As discussed below, AGLR anticipates that NUI's debt will change prior to closing. Q. Does AGLR have any special rights to terminate the proposed transaction under the terms of the Merger Agreement? A. Yes. The Merger Agreement gives AGLR certain customary rights to terminate the Merger Agreement under certain circumstances, including, but not limited to, a failure to close the acquisition within 12 months of the date of the agreement; NUI's receipt of a superior proposal from another buyer; or material breach of the terms of the agreement. I will comment in particular on one termination right that AGLR has negotiated relating to the financial condition of NUI. AGLR has the right to terminate the Merger Agreement if NUI does not have necessary interim financing in place by September 30, 2004. AGL Resources' right to terminate the Merger Agreement pursuant to this provision expires on October 15, 2004, or in the event a regulatory approval of such financing is subject to appeal, October 25, 2004. AGLR negotiated this termination right to insure that NUI and, more particularly, NUI Utilities, had the funds necessary to meet its obligations to purchase gas commodity and transportation for the upcoming winter. AGLR did not want to be obligated to complete an acquisition if NUI and NUI Utilities did not demonstrate that they each had sufficient financial liquidity to avoid bankruptcy and to otherwise meet their business obligations. 34 Out of a similar concern, AGLR negotiated a right to terminate the Merger Agreement unilaterally if there shall occur or be continuing any payment default or acceleration of indebtedness under the terms of any of NUI or NUI Utilities' indebtedness. This provision is included in the Merger Agreement as a "warning sign" to AGLR regarding NUI's inability to timely pay its debts, which inability could lead to defaults under its existing debt agreements and cause a liquidity crisis at NUI. AGLR is not obligated to complete the acquisition should those circumstances arise. We believe that the risks associated with NUI and NUI Utilities' liquidity position, including the expense and onerous terms under which NUI and NUI Utilities are currently borrowing, support our request for expedited review and approval of the Petition. Q. Please describe the financial condition of AGLR A. AGLR has an equity market capitalization of approximately $1.9 billion and an enterprise value of about $3 billion, as of June 30, 2004. AGLR is traded on the New York Stock Exchange (ticker: ATG), and the company is solidly positioned to maintain its existing investment-grade credit ratings. AGLR's Senior Notes are currently rated Baa1/BBB+/A- by Moody's, Standard & Poors and Fitch, respectively. As a result of the announcement of our agreement to acquire NUI, however, the outlooks on our credit ratings have changed. Moody's recently affirmed our ratings, but changed its rating outlook to negative from stable. Both Standard & Poor's and Fitch changed our credit ratings to "on watch" status with negative outlooks. These rating agencies have indicated their actions are the result of the execution risks in consummating, financing, and integrating the NUI acquisition, as well as concerns regarding issues and risks associated with NUI's business. 35 Q. Tell us about AGLR's operating segments and AGLR's earnings relative to each of those segments. A AGLR operates its business in three operating segments: Distribution Operations, Energy Investments and Wholesale Services and one non-operating segment Corporate. I will describe our operating segments: Our Distribution Operations includes the results of AGLR's three natural gas utilities, Atlanta Gas Light Company, Chattanooga Gas and Virginia Gas Company. Our Energy Investments segment is comprised almost entirely of the revenues from our interest in a retail gas marketer doing business in Georgia under the trade name "Georgia Natural Gas". As the gas business in Georgia was deregulated in 1997, Georgia Natural Gas (as opposed to ours or any other regulated gas utility) sells gas commodity directly to residential, commercial and industrial customers in Georgia. This segment also includes the revenue of our telecommunications subsidiary. Our Wholesale Services segment includes the results of our non-utility business, Sequent Energy Management (Sequent), which is engaged in natural gas asset management and optimization, producer services and wholesale marketing, and risk management activities. Through agreements approved by each of the utilities state regulatory commissions, Sequent conducts all of the asset management and optimization services for our three gas utilities. As of the end of fiscal year 2003, approximately 95% of AGLR's earnings before interest, taxes, depreciation and amortization (EBITDA) was derived from the distribution and sale of gas to end use customers, as represented by combining the 36 EBITDA from our Distribution Operations and Georgia Natural Gas's portion of the Energy Investments segment. Approximately 5% of 2003 EBITDA was derived from Sequent's business under the Wholesale Services segment. Of the 5% of EBITDA contributed by Sequent's business, approximately one half was derived from Sequent's asset management agreements with our three utilities, after sharing asset management profits with the applicable utility's customers. AGLR's financial results support the company's stated strategy - we own and operate local gas distribution businesses and seek continued growth through operating these assets more efficiently and by adding attractively priced gas assets. I discuss these percentages and businesses to emphasize that while AGLR derives its earnings from regulated and unregulated businesses, AGLR's business is not diversified. We derived substantially all of our earnings from the sale, management and distribution of natural gas. Q. How will AGLR fund the acquisition of NUI? A. The purchase of NUI shares will be funded primarily through the sale of AGLR common stock at or prior to closing. Additionally, AGLR will need to refinance much of NUI and NUI Utilities' debt at closing - an amount that, depending on the date of closing, could exceed $530 million. This debt includes the approximately $405 million that is currently outstanding under NUI and NUI Utilities' current credit facilities, which terminate at closing; up to $95 million of any additional borrowings that may be outstanding at closing under NUI and NUI Utilities' new credit facilities, which terminate at closing; and up to $30 million payable by NUI Utilities after closing under the Settlement Agreement with the Board. AGLR expects to maintain its strong investment-grade 37 ratings and its current dividend policy post-acquisition. AGLR's equity to total capitalization will be above 30% post-acquisition. Q. Please discuss AGLR's commitments with respect to NUI and Utilities' employees after the closing of the acquisition. A. Under section 5.9(a) of the Merger Agreement, AGLR has agreed to provide NUI's employees benefits that, taken as a whole, are substantially equivalent to the benefits that NUI currently provides to those employees for at least one year following the closing of the transaction. AGLR will also assume the obligations or cause NUI to continue to meet obligations to its employees under any employment or union contract. Petitioners anticipate that, following the proposed acquisition, NUI Utilities will continue to perform day-to-day operations through its existing employees. This is further discussed in the testimony of Mr. Kevin Madden. Q. Please discuss AGLR's expectations with respect to NUI's pension plan. A. With respect to the NUI pension plan, following the acquisition, under the purchase accounting rules, the amount currently reflected by NUI as a pension asset, which is being amortized as pension expense, will be eliminated. AGLR requests that after closing NUI's pension asset be treated as a regulatory asset. This is essentially a "make-whole" provision for NUI. Under this request, the company would continue to amortize the asset consistent with the amortization period used for the pension asset prior to close. This will ensure that the total ratepayer obligation for the pension period cost is the same pre- and post-merger for the outstanding pension asset amount. As I mentioned above, AGLR has an investment grade rating and an equity market capitalization of approximately $1.9 billion. AGLR also has a pension plan with plan assets of 38 approximately $260 million as of December 31, 2003. These factors should reassure NUI's employees as to the appropriate management of their pension plan assets after closing. Q. What affect will NUI's Stipulation and Settlement with the NJBPU have on AGL Resources' or NUI's business after the close of the acquisition? AGLR intends to honor the April 14, 2004 Settlement Agreement that was approved in the Board's Final Order issued on April 26, 2004. In particular, Kevin Madden will address in his testimony how AGLR will assume and pay NUI Utilities' obligations with respect to the unpaid amounts of NUI Utilities' $30 million obligation under the Settlement Agreement after the close of the transaction. The Settlement Agreement is clear on its face that its terms are not binding on any successor to NUI's business. Therefore, other than the assumption of this obligation, the Settlement Agreement will not have any effect or place any restriction on AGLR, NUI or NUI Utilities businesses after the close of the acquisition. Q. Please discuss any plans AGLR has with respect to the management of NUI Utilities' assets and gas procurement activities after the acquisition. A. As part of the change in control, NUI Utilities is seeking Board approval to enter into a three year gas procurement and asset management agreement on behalf of ETG with an affiliate of AGLR, Sequent. Sequent provides asset management and other services both to AGLR's other utility companies and to third parties throughout the United States, including customers in the Northeast. Sequent would be willing to execute a gas procurement and asset management agreement on terms similar to those previously 39 approved by the Board in Docket No. GA03030213 with Cinergy Marketing and Trading, LP (Cinergy). Notwithstanding, AGLR and Sequent would also be eager to discuss and propose an alternative asset management arrangement with NUI Utilities. The alternative arrangement would be similar to the asset management agreements under which Sequent currently manages the assets of AGLR's other regulated utilities and is an arrangement that has been reviewed and approved by the state regulatory agencies regulating those operations. Under those other arrangements, Sequent contributed approximately $12 million to customers in 2003. Q. When would this asset management agreement between Sequent and NUI Utilities commence? A. The term of the asset management agreement would commence as of the date of a termination of the Cinergy agreement, in accordance with the terms of that agreement. Q. Please discuss the request to include NUI Utilities in a cash pooling arrangement with other AGLR subsidiaries. A. NUI Utilities will seek authority to participate, on behalf of ETG, in a cash pooling arrangement (Utility Money Pool) administered by AGL Resources' subsidiary, AGL Services Company (AGLSC) on behalf of AGLR and its family of utility companies. AGLSC also administers a completely separate money pool on behalf of AGL Resources' non-utility businesses, and as such, no non-utility businesses participate in the Utility Money Pool. Specifically, NUI Utilities will request authorization to make unsecured short-term borrowings from the Utility 40 Money Pool, to contribute its surplus funds to the Utility Money Pool, and to lend and extend credit to other AGLR utility subsidiaries participating in the Utility Money Pool. AGLR's establishment and maintenance of the Utility Money Pool is authorized under PUHCA and has been approved and is regulated by the Securities and Exchange Commission. Petitioners believe that the cost of borrowings through the Utility Money Pool will generally be more favorable to NUI Utilities, than the comparable cost and expense that would be incurred in connection with any external short-term borrowings that NUI Utilities might otherwise initiate, and the yield to NUI Utilities from NUI Utilities contribution of available funds will generally be higher than the yield NUI Utilities might otherwise receive from short-term investments. Q. Please describe the operation of AGLR's Utility Money Pool. A. Under AGLR's Utility Money Pool Agreement (Attached to my testimony as Exhibit A), funds are available from the following sources for short-term loans to the participating companies from time to time: (1) surplus funds in the treasuries of participants, and (2) proceeds received by the participants from the sale of commercial paper and borrowings from banks ("External Funds"). Funds are made available from such sources in such order as AGLSC, 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 such 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. 41 Each company that is authorized to borrow from the Utility Money Pool (an "Eligible Borrower") will borrow pro rata from each Utility Money Pool participant that invests surplus funds, in the proportion that the total amount invested by such investing participant bears to the total amount then invested in the Utility Money Pool. The interest rate charged to Eligible Borrowers on borrowings under the Utility Money Pool will be equal to AGL Resources' actual cost of external short-term borrowings and the interest rate paid on loans to the Utility Money Pool would be 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 would be 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. 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) would ordinarily be invested in one or more short-term investments, including: (i) obligations issued or guaranteed by the U.S. government and/or its agencies and instrumentalities; (ii) commercial paper; (iii) certificates of deposit; (iv) bankers' acceptances; (v) repurchase agreements; (vi) tax exempt notes; (vii) tax exempt bonds; (viii) tax exempt preferred stock; and (ix) such other investments as are permitted by Section 9(c) of the Act and Rule 40 thereunder. Each Eligible Borrower receiving a loan through the Utility Money Pool would be required to repay the principal amount of such loan, together with all interest accrued 42 thereon, on demand and in any event within one year after the date of such loan. All loans made through the Utility Money Pool may be prepaid by the borrower without premium or penalty and without prior notice. As noted above, this agreement has been approved by the Securities and Exchange Commission (SEC). Q. Please describe the Services Agreement to be entered into on the close of the acquisition. A. Attached as Exhibit B is the standard Services Agreement we anticipate to be executed by NUI Utilities and AGLSC at closing. The Services Agreement and its Exhibits define the services that may be provided by AGLSC, and the cost allocation methods to be utilized in connection with the provision of those services. AGLSC provides services to each of AGLR's operating subsidiaries pursuant to the terms of this standard agreement. Under the provisions of PUHCA, the services provided to NUI Utilities under the Services Agreement are to be provided at AGLSC's cost. The standard Services Agreement which we anticipate to execute has also been approved by the SEC. Q. Does this conclude your testimony? A. Yes. 43 STATE OF NEW JERSEY BOARD OF PUBLIC UTILITIES IN THE MATTER OF THE PETITION OF NUI UTILITIES, INC. (d/b/a ELIZABETHTOWN GAS COMPANY) AND AGL RESOURCES INC. FOR APPROVAL UNDER N.J.S.A. 48:2-51.1 AND N.J.S.A. 48:3-10 OF A CHANGE IN OWNERSHIP AND CONTROL BPU DOCKET No. GM0407_________ JULY 30, 2004 TESTIMONY OF KEVIN P. MADDEN ON BEHALF OF NUI UTILITIES, INC. AND AGL RESOURCES INC. 44 Q. Please state your name and position. A. My name is Kevin P. Madden and I am Executive Vice President for Distribution and Pipeline Operations of AGL Resources Inc. ("AGLR"). I am responsible for all field operations of AGLR's three natural gas utilities - Atlanta Gas Light Company, Chattanooga Gas Company and Virginia Natural Gas, Inc. I am also responsible for strategic policy and management oversight of AGLR's utilities, as well as AGLR's regulatory, engineering construction, and gas operational functions. Q. What is the purpose of your testimony? A. The purpose of my testimony is to discuss the benefits of the proposed acquisition of NUI Corporation ("NUI") and its wholly owned subsidiary NUI Utilities, Inc. ("Utilities") (d/b/a Elizabethtown Gas Company) ("ETG"). My testimony will discuss the impact of the acquisition on competition, rates, employees and overall operations and reliability in order to aid the New Jersey Board of Public Utilities (the "Board") in its consideration of the proposed acquisition pursuant to N.J.S.A. 48:2-51.1. Q. Does the Merger Agreement place any conditions on the acquisition? A. Yes. First, the Agreement and Plan of Merger ("Merger Agreement") provides for financial conditions to the acquisition that are discussed in more detail in Mr. Richard T. O'Brien's testimony. The Merger Agreement also provides for certain Acceptable Order conditions relating to regulatory and rate matters that must be substantially satisfied before the transaction may close. The failure to obtain approval of certain regulatory and rate conditions may be considered a material adverse effect under the Merger Agreement and thus prevent the transaction from closing. These Acceptable Order conditions are listed below: 1. An Acceptable Order will not prevent ETG from operating at rates not lower than its current base tariff rates for the three years following the acquisition. 2. An Acceptable Order will allow ETG to make a filing with the Board to recover, outside of a normal rate case, certain capital expenditures to improve customer service and the safety and reliability of the ETG distribution system. 3. An Acceptable Order will not restrict AGLR's ability to implement changes to ETG's business, including the workforce, and to retain all benefits from such changes, until the conclusion of ETG's next base rate case. 4. An Acceptable Order will authorize ETG to enter into an asset management agreement with an affiliate of AGLR on terms similar to ETG's current asset management arrangement or, in the alternative, to enter into another asset management arrangement. 5. An Acceptable Order will recognize that the Board's current policy on rate treatment for costs incurred for the environmental remediation of manufactured gas plants allows for the recovery of prudently incurred costs, including carrying costs, in base rates and/or in the remediation adjustment clause. 6. An Acceptable Order will absolve AGLR and its subsidiaries after closing from any liability associated with the circumstances and transactions addressed by the Final Report on Focused Audit of NUI, Utilities and ETG in Docket No. GA03030213, presented to the Division of Audits by the Liberty Consulting Group and the Stier Anderson Report. 7. An Acceptable Order will not impose conditions that have the effect of requiring AGLR to conduct business, or govern the affairs of AGLR or any of its subsidiaries after closing, in a manner that is adverse to AGLR or those subsidiaries. The first five of these conditions are discussed in more detail below. The last two conditions are discussed in the testimony of Ms. Paula G. Rosput. STATUTORY STANDARDS Q. What are the statutory standards that the Board must consider when evaluating a request for approval of a change in control? A. N.J.S.A. 48:2-51.1 provides that "[i]n considering a request for approval of an acquisition of control, the board shall evaluate the impact of the acquisition on competition, on the rates of ratepayers affected by the acquisition of control, on the employees of the affected public utility or utilities, and on the provision of safe and adequate utility service at just and reasonable rates." I discuss each of these standards below. Impact on Competition Q. Will the change in control have any impact on competition in the market for gas distribution services in New Jersey? A. No. The acquisition will simply effect a change in ownership of NUI. Because ETG will remain the same entity post-acquisition serving the same market, the proposed acquisition will not have any adverse effect on competition in the market for gas distribution services in New Jersey. AGLR does not own or have an interest in any other gas utility in the state of New Jersey. AGLR's utilities use state-of-the-art technology and field-tested best practices in their drive to provide superior service. We believe that the integration of AGLR's state-of-the-art technology and field-tested best practices into ETG's operations will benefit customers and enhance ETG's ability to serve its customers. Impact on Rates Q. Will the change in control have any impact on ETG's current rates? A. No. ETG will continue to provide service at ETG's Board-approved tariff rates. The acquisition will not detrimentally affect ETG's existing base tariff rates. The Merger Agreement provides that an Acceptable Order by the Board will not require AGLR to operate ETG at base rates less than its current, authorized tariffs for at least three years from the date of closing of the transaction. In addition, AGLR commits not to propose an increase in ETG's base rates to be effective in the three-year period following the acquisition. In effect, this Acceptable Order condition and AGLR's commitment not to propose increased rates in the three-year period following the acquisition will benefit ratepayers by providing rate consistency while still delivering customer service improvements with no increase in base rates. In exchange for its commitment not to raise base rates, the Merger Agreement establishes an Acceptable Order condition that the Board not restrict AGLR's ability to implement reasonable changes at ETG and to retain all benefits of such changes until the conclusion of ETG's next rate case. In assessing the proposed acquisition, AGLR has determined that maintaining rates at current levels for the next three years strikes an appropriate balance between the risks that AGLR faces in acquiring financially-distressed NUI and attendant risks with the ability to capture any benefits that result from the acquisition. Notwithstanding the rate conditions of the acquisition, AGLR fully intends to invest appropriate levels of capital to improve service on ETG. To make these capital investments possible, the Merger Agreement provides that an Acceptable Order will allow ETG to make a filing with the Board to recover, outside of a normal rate case, certain capital expenditures to improve customer service, safety and distribution system reliability. One specific capital investment that AGLR intends to make shortly after the acquisition is to begin upgrading ETG's information technology ("IT") infrastructure, as I discuss below. Q. How will the change in control affect the $28 million credit that Utilities must make to ratepayers pursuant to the Board's Final Order on the Liberty Audit Report? A. AGLR will honor the April 14, 2004 Settlement Agreement that was approved in the Board's Final Order issued on April 26, 2004. The Final Order establishes an incremental refund schedule under which Utilities would refund $28 million plus interest to ratepayers in amounts ranging from $7 million to $5 million over the next five years. The Final Order also provided that, upon the sale of Utilities, all outstanding amounts shall be paid in full by Utilities within a period to be determined by the Board. As provided in the Final Order, after the acquisition closes, AGLR will refund, within a period to be determined by the Board, all outstanding amounts due under the terms of the Settlement Agreement. After the acquisition closes, AGLR would propose to the Board to make the entire outstanding amount available to ratepayers on an expedited basis. AGLR preliminarily estimates that a lump-sum refund of the outstanding balance of the $28 million would result in a credit of approximately $74 on every residential heating customer's monthly bill (individual amounts will vary based on each customer's usage). If this refund were made in January 2005, customers would benefit from significantly lower gas bills at a time of the year when gas costs are traditionally highest. Thus, approval of the acquisition will benefit ratepayers by ensuring that the refund is made on an expedited basis, rather than the incremental schedule under which Utilities is currently required to distribute the refund. Finally, AGLR seeks a finding by the Board that, after the acquisition transaction closes, the non-monetary provisions of the April 14, 2004 Settlement Agreement will give way to a regulatory model more appropriate both to registered companies under the Public Utility Holding Company Act of 1935, as in the case of AGLR, and to companies that have not been associated with the recent NUI experience. I expect to be discussing these issues more fully with the regulators over the course of this proceeding. Q. What has been AGLR's experience with setting rates for its other utilities? A. AGLR prides itself on being able to provide a high level of customer service and safe and reliable distribution service to its customers at stable rates. Virginia Natural Gas, Inc., for example, has operated without a rate increase since 1998 and Atlanta Gas Light Company, AGLR's largest utility, has not increased its base rates since 1993. Q. Are there are any other rate conditions that the Merger Agreement imposes on the acquisition that you would like to discuss? A. Yes. The Merger Agreement provides that an Acceptable Order approving the acquisition will recognize what we understand to be the Board's current policy on rate treatment for costs incurred for the environmental remediation of manufactured gas plants that allows for recovery of prudently incurred costs, including carrying costs, in base rates and/or in the remediation adjustment clause. Impact on Employees Q. Please discuss the impact of the change in control on employees. A. At the corporate level, it is clear that there is some overlap among employees at AGLR, NUI and Utilities, particularly in the "corporate services" area, including accounting, finance, legal, and public relations. AGLR intends to work closely with NUI management to develop a framework to address any redundancies that become apparent as AGLR integrates NUI's corporate management into AGLR's existing management structure. At the utility level, AGLR will honor both the specific language and the spirit of all collective bargaining agreements. From its experience running public utilities in three other states, AGLR has learned that local employees are the heart and soul of a company and are vital to maintaining a connection to the local community. AGLR is still in the process of reviewing ETG's utility operations to determine the appropriate employee levels in order to continue to ensure that the franchise is operated safely and reliably. As part of this evaluation, we will appropriately balance the necessity to improve customer service, support our long term commitment to Utilities' employees and contribute to the economic vitality of the ETG service territory. In recognition of the fact that some changes to the workforce may be necessary in order to implement changes to the business following the acquisition, the Merger Agreement provides, as a condition of the acquisition, that an Acceptable Order will not restrict AGLR's ability to make such changes. Impact on Overall Customer Service, Safety and Reliability Q. Please describe the impact of the change in control on overall customer service and the safety and reliability of ETG's system. A. At the outset, AGLR believes that ETG is currently providing safe and reliable service to its customers. During the transition process, AGLR will integrate its state-of-the-art technology and field-tested best practices into ETG's operations. AGLR is confident that it will be able to improve upon ETG's customer service and safety and reliability record over a period of time. For example, as discussed in more detail below, AGLR will immediately focus its efforts to improve customer service by investing in ETG's IT infrastructure. Q. Please describe AGLR's commitment to customer service. A. AGLR is a company that is committed to providing outstanding customer service to all of its utility customers. AGLR's gas distribution companies utilize state-of-the-art technology to provide outstanding customer service. AGLR maintains a comprehensive utility metric program to continuously monitor important aspects of customer service, safety and reliability. These metrics include customer service and satisfaction (as measured by call response times and customer feedback) as well as safety-related metrics such as leak response times, and operational measures such as capital costs per new meter (essentially, the total cost to hook up a new gas customer). Q. Describe the improvements in customer service that ETG customers could expect following the acquisition. A. Over the past few months, AGLR has learned a great deal about ETG's operations. Based on this knowledge, AGLR has determined that it should be able to improve and expand upon the services that ETG is currently able to provide to its customers. To achieve these improvements and expansions of service, AGLR would like to immediately begin integrating ETG into AGLR's established IT programs and new IT programs that are currently being implemented across all of its utility operations. Q. How would AGLR expect to recover capital expenditures that will be made to improve service on ETG? A. In order to ensure that AGLR will be able to recover capital expenditures that will be made to improve service on ETG, the Merger Agreement provides that an Acceptable Order would allow ETG to make a filing, outside of a normal rate case, to seek to recover expenditures that are made to improve customer service and the safety and reliability of ETG's distribution system. In Georgia, Atlanta Gas Light Company has employed a similar procedure at the Georgia Public Service Commission to establish a pipeline replacement rider that recovers the costs, return and carrying charges associated with a pipeline replacement program. AGLR anticipates that, shortly after the acquisition is approved, ETG would make a filing with the Board to propose a similar mechanism to recover the costs associated with upgrading ETG's IT infrastructure. Q. Please describe the impact of the change in control on the safety and reliability of the ETG system. A. AGLR will apply its utility metrics, state-of-the-art technology and field-tested best practices and will continually monitor and strive to improve the safety and reliability of the ETG system. Q. Are there any other conditions relating to ETG's operations? A. Yes. The Merger Agreement imposes a condition that an Acceptable Order will allow AGLR to contract with its affiliate Sequent Energy Management, L.P. ("Sequent") for service on similar terms as ETG's current gas procurement and asset management contract for a period of three years. Under the asset management agreement currently in place, ETG transferred all of its supply and interstate capacity assets to its asset manager, Cinergy Marketing & Trading, LP. AGLR currently employs asset management programs on all of its utilities. All of the asset management arrangements employed by AGLR's utilities have been approved by the appropriate state public utility commission. In structuring asset management programs, AGLR's first concern is always to establish a program that will benefit the consumer by ensuring reliable service while providing cost savings. To this end, the asset management model that AGLR employs on its utilities provides for revenue sharing between the asset manager and the utilities' ratepayers. Although, as discussed in Mr. O'Brien's testimony, ETG's current asset management arrangements is a departure from AGLR's existing asset management arrangements, in that it employs an up-front payment to ratepayers rather than revenue sharing, AGLR recognizes that the transition process would be simplified if the Board authorized ETG to enter into an asset management arrangement with Sequent similar to the one that is already in place. AGLR also recognizes, however, that alternatives to ETG's existing arrangement may be able to provide even more benefits and value to ETG's ratepayers. Specifically, AGLR believes that the 50/50 revenue sharing model, in which revenues received by the asset manager are shared equally between ratepayers and the asset manager, may be able to provide more benefits and value to ratepayers than ETG's existing arrangement. AGLR would be receptive to discussing with the Board the possibility of implementing an asset management arrangement with 50/50 revenue sharing. Q. What are some of the benefits of asset management arrangements for ETG? A. Asset management arrangements provide a host of benefits to utilities and their customers. The asset management arrangement gives ETG access to more resources with which to serve its customers and provides the asset manager with the opportunity to provide additional flexibility and options to ETG's customers. Moreover, ETG's firm customers benefit from these arrangements whether through sharing or a prepayment mechanism as the net effect is to reduce firm rates from where they would otherwise be set. In addition, these arrangements have enabled LDCs to maximize the value of idle transportation capacity. In turn, this benefits the ratepayers in the form of lower cost natural gas service. The asset managers provide services outside the usual LDC portfolio in a way that makes for more efficient use of the interstate grid and a more efficient commodity market. Almost certainly, these arrangements have resulted in the more efficient use of interstate capacity. Thus, from a regulated standpoint, the ability of AGLR and Sequent to step into the existing asset management arrangement or implement an alternative arrangement will provide additional service reliability and other benefits to ETG's ratepayers. The testimony of Mr. O'Brien sets forth the other benefits of such arrangements from the corporate point of view. Q. Following the acquisition, would the new ETG entity be willing to consider setting performance standards or adopting a consumer report card? A. Yes. After one year of experience operating ETG, AGLR would be willing to consider setting performance standards or adopting a consumer report card. AGLR must be given at least one year to gain practical experience in running the ETG system. In the interim, AGLR will immediately begin to implement its field-tested utility metrics program, discussed earlier, to monitor, assess and ultimately improve ETG's performance in critical customer service and reliability areas. Q. Does this conclude your testimony? A. Yes. STATE OF NEW JERSEY BOARD OF PUBLIC UTILITIES IN THE MATTER OF THE PETITION OF NUI UTILITIES, INC. (d/b/a ELIZABETHTOWN GAS COMPANY) AND AGL RESOURCES INC. FOR APPROVAL UNDER N.J.S.A. 48:2-51.1 AND N.J.S.A. 48:3-10 OF A CHANGE IN OWNERSHIP AND CONTROL BPU DOCKET No. GM0407_________ JULY 30, 2004 TESTIMONY OF PAULA G. ROSPUT ON BEHALF OF NUI UTILITIES, INC. AND AGL RESOURCES INC. Q. Please state your name and position. A. My name is Paula G. Rosput. I am the Chairman, President and Chief Executive Officer of AGL Resources Inc. ("AGLR"). Q. What is the purpose of your testimony? A. The purpose of my testimony is to introduce AGLR and explain AGLR's experience operating gas utilities and AGLR's corporate governance policies. I will also explain the business rationale for AGLR's acquisition of NUI Corporation ("NUI") and its subsidiary NUI Utilities, Inc. ("Utilities") (d/b/a Elizabethtown Gas Company) ("ETG") and provide an overview of how the acquisition will benefit ETG's customers. The direct testimony of Mr. Richard T. O'Brien, Executive Vice President and Chief Financial Officer of AGLR and Mr. Kevin P. Madden, Executive Vice President of Distribution and Pipeline Operations of AGLR set forth in greater detail the operational and financial benefits of the acquisition. I will also describe the structure for the Board of Directors and certain Acceptable Order conditions for which approval is necessary for the acquisition to go forward. Finally, I will discuss the need for expedited approval of the proposed acquisition. OVERVIEW OF AGLR ---------------- Q. Please describe AGLR. A. AGLR was formed in 1996 as a Georgia holding company for the purpose of holding Atlanta Gas Light Company, Chattanooga Gas Company, and various other energy-related subsidiary and affiliate companies. Subsequently, in 2000, simultaneous with its purchase of Virginia Natural Gas, Inc., AGLR became a registered public utility holding company pursuant to the Public Utility Holding Company Act of 1935 ("PUHCA"). Under PUHCA, AGLR's accounting, financial and securities practices are comprehensively regulated by the Securities and Exchange Commission. The company is also subject to regulation by federal agencies such as the Federal Energy Regulatory Commission and the U.S. Department of Transportation, in addition to being comprehensively regulated by the state public utility commissions in Georgia, Virginia and Tennessee. There are no outstanding fines or significant actions pending against the company by any of these agencies. AGLR has an equity market capitalization of approximately $1.9 billion and an enterprise value of nearly $3 billion. AGLR is traded on the New York Stock Exchange (ticker: ATG) and the company is solidly positioned to maintain its investment-grade credit ratings. AGLR was one of the few energy companies to receive a credit rating upgrade (by Fitch Ratings) in 2003. Upon announcement of this transaction, AGLR was placed on credit "watch" by the major credit rating agencies, which is customary, but this action is not expected to result in any adverse ratings actions. Q. Please describe AGLR's corporate governance policies and principles. A. Much has been written in the wake of the Enron debacle about corporate responsibility. But prior to this period, AGLR had taken a number of steps to strengthen its governance processes and procedures, including the formation of Board of Directors' committees for risk management and corporate governance, setting clearly established internal rules for delegation of -2- authority, and implementing a strong set of policies on ethics and honesty for all employees. Since the implementation of new rules by the New York Stock Exchange and the enactment of the Sarbanes-Oxley legislation, much of our governance work has been focused on strict compliance with these regulations. I will discuss some of the details of our compliance below. But equally important is the "tone at the top," aspect of compliance - in other words, what does the leadership of a company say about the company's values and does the leadership act according to what it says? In this vein, we adopted a set of values for our organization. There are four values: honesty, value-seeking, generosity of spirit and operating inside the lines. The last value is one that gives deeper meaning to the role of honesty in our business dealings. This value is intended to capture the idea that we will not engage in any "edgy" behaviors and that we will live well inside of the rules, rather than stretching them for our purposes. To put it simply, we operate for the long-run. We do not engage in - nor will we condone - business activities that take liberty with the regulations and rules under which we are required to operate. Another aspect of these values is manifested in our commitment to providing the investment community and our regulators with information that is accurate, timely and as transparent as possible. AGLR believes that financial and operating visibility and transparency are of paramount importance in making an informed investment decision. With that in mind, AGLR will always strive to provide financial information that fairly and accurately reflects the results of our operations and that is consistent with -3- current reporting standards and policies, including U.S. Generally Accepted Accounting Principles (GAAP). AGLR has an independent Board of Directors to oversee the management of the company. We feel strongly that the purpose of the Board of Directors is not just to discharge its legal obligations to oversee the company, but also to advise us on strategic matters. We respect and take its advice, which is drawn from its members' vast business experience, in all major industries of the U. S. economy. I am the only member of our eleven-member Board of Directors who is not an independent, outside director. The ten other members of the Board are independent, outside directors. The independent members of the Board meet regularly without the presence of management, and they meet with management without my presence. These private meetings are intended to ensure that the Board receives the unvarnished version of the facts in every situation. Furthermore, the charters of each of our Board committees clearly establish their respective roles and responsibilities, including the independence of outside auditors and consultants, who are retained by the Board directly. The charters may be found on AGLR's website at www.aglresources.com at the section entitled, "Investor Information - Corporate Governance - Highlights." Q. Does AGLR maintain a policy with respect to the independence of auditors? A. Yes. As mentioned previously, the Board's Audit Committee has implemented policies consistent with the newly-enacted corporate reform -4- laws for auditor independence, and AGLR's independent auditors PricewaterhouseCoopers LLP report directly to the Audit Committee. Q. Are there any other aspects of AGLR's corporate governance policies that you would like to discuss? A. Yes. AGLR has also adopted a Code of Business Conduct. All employees must confirm annually, in writing, their acceptance of the Code of Business Conduct. We also have an insider trading policy, to which all directors and employees, including our key corporate decision makers, must strictly adhere. To foster an environment of compliance, AGLR has, for years, maintained a hotline available for employees to anonymously and confidentially report any questionable practices, actions or activities at the company. We also survey our employees in the accounting and control area of the company periodically to ensure that they are satisfied with the control environment and our practices. We also survey employees annually for a broad set of reasons, but to test our compliance environment is among them. We try very hard to make the atmosphere of the company one where employees know that dishonesty or questionable practices will not be tolerated and where there is a strong sense that management at all levels is committed to what we call "a fair game" for customers, employees, and the public at large. Q. Does AGLR have a preference in its strategy for regulated businesses versus unregulated businesses? A. Yes. AGLR's business philosophy is predicated on the fact that AGLR is principally a regulated business. As Mr. O'Brien's testimony will discuss in -5- more detail, the vast majority of AGLR's income and earnings is produced by AGLR's regulated gas utility businesses. We respect regulation and the role it plays in a capital-intensive business such as gas distribution. Our fundamental strategy is to grow our regulated utility business and modestly enhance the earnings from our utilities through closely related energy and infrastructure businesses. The enhancement we seek is a means by which we can differentiate ourselves as the kind of company that looks for all opportunities to create value for shareholders and customers. We seek "modest" enhancement because it is not our goal to create a "growth engine" through unregulated businesses. Rather, it is a recognition that the companies in the industry who have the best access to capital over long periods of time have earnings that are better than the peer group averages. This acquisition is also consistent with our business principle of being a superior operator of regulated assets. This business model can only be successful over a long period of time if we do two things: (1) provide safe, reliable and reasonably-priced services; and (2) maintain collaborative and constructive regulatory relationships. Every day, we have to earn the right to maintain and grow our franchise - both in the eyes of our customers and the eyes of those public officials responsible for regulating us. Forging collaborative and constructive relationships with regulators in Georgia, Tennessee and Virginia has made all the difference for AGLR over the past few years. We are looking forward to building the same kinds of quality relationships and constructive colloquy with the Commissioners and Staff in -6- New Jersey, as well as Florida and Maryland. Because we are a multi-state company, we need to have cooperative relationships not just with our regulators, but we need regulators to cooperate with one another. To facilitate this cooperation, we create standardized and transparent reporting for all operating and financial aspects of our business. Q. Please describe AGLR's experience running natural gas utility companies. A. AGLR owns and operates natural gas utility operations in Georgia (Atlanta Gas Light Company), Virginia (Virginia Natural Gas, Inc.) and Tennessee (Chattanooga Gas Company). In these three states, AGLR serves nearly 1.9 million natural gas customers. AGLR maintains utility offices and field operations in Georgia, Virginia and Tennessee, plus offices for our related energy and infrastructure businesses in Houston, Texas and Phoenix, Arizona. The company owns more than 35,000 miles of natural gas pipeline, four liquefied natural gas (LNG) facilities and two propane facilities. AGLR is experienced in both mild and cold climates, from Valdosta, Georgia (at the Florida border) to the mountains of Appalachia, and has experience serving both urban and rural areas. AGLR's website is www.aglresources.com; the corporate site contains links to websites for the company's three utilities (www.atlantagaslight.com; www.chattanoogagas.com; and www.virginianaturalgas.com). We are among the largest gas distributors in the country, the single largest operator of LNG peaking facilities, and consistently one of the top quartile operators according to industry metrics. To our knowledge, our pipeline replacement program in Georgia is -7- the largest gas distribution capital improvement program ongoing in the United States today. Q. Please briefly describe each of the gas utility companies owned by AGLR. A. Atlanta Gas Light Company ("AGLC") is Georgia's oldest corporation, having been chartered in 1856. AGLC serves approximately 1,547,834 customers throughout the state of Georgia. AGLC became a "pipes-only" distribution company in 1998 when it elected to open its territory to competition pursuant to the Georgia Natural Gas Competition and Deregulation Act of 1997. Natural gas marketers certificated by the Georgia Public Service Commission now serve customers on AGLC's system. Although marketers' prices are market-based, AGLC's rates for distribution service remain regulated by the Georgia Public Service Commission. In 1988, AGLR acquired Chattanooga Gas Company ("CGC"), which serves 60,113 customers in the Chattanooga and Cleveland Tennessee areas. CGC is regulated by the Tennessee Regulatory Authority. Following the acquisition, AGLR made substantial improvements to the CGC system which had been previously owned by a privately-held industrial company. Since that time, the safety and the reliability of that system has improved markedly from its history. In 2000, AGLR acquired Virginia Natural Gas, Inc. ("VNG"), a public utility serving approximately 253,623 customers in southeastern Virginia. VNG is regulated by the Virginia State Corporation Commission. Customer -8- service and productivity have measurably improved for VNG's customers since then. Q. Has AGLR been successful in integrating VNG into its utility operations? A. Yes. Integration commenced immediately upon closing of the acquisition of VNG, which was completed in approximately five months after announcement. We had our team in place and operated the system on an integrated basis for the first winter heating season and every winter thereafter. We are in the process of constructing a much-needed propane plant as well as refurbishing an existing plant to be ready for the 2004-05 heating season in Virginia. Reliability is paramount for us and we invest where we need to so that customer service is not compromised. Q. Is AGLR active in the communities in which it operates? A. We know that, as employees of a financially healthy public utility, we have an obligation of community service. Our core value of "generosity of spirit" is intended to speak to what we ask of each employee. AGLR is a community leader in every major city in which it operates. In 2003, it was honored in Atlanta as the recipient of the Community Volunteer Impact Award, and in Virginia as the recipient of the Corporate Neighbor Award. Our executives lead by example. Virtually every member of the company's leadership team serves on the board of a major community agency. I led the 2002 United Way campaign in metro Atlanta, and will become the Board Chair of both the United Way and the Georgia Chamber of Commerce in 2005 and 2006, respectively. A number of our employees serve on commissions -9- that support state and city governments. We are active in working on economic development in every state. The Company and its charitable foundation donate approximately one percent of net income to non-profit organizations each year. We have received the feedback from NUI employees and community leaders that this is an area where we can enhance NUI's presence. We intend to embrace NUI's agreement with the New Jersey attorney general to undertake community service with vigor and a seriousness of purpose. THE MERGER ---------- Q. Why is NUI an attractive acquisition candidate? A. AGLR had prior interactions and discussions with NUI on asset management and other business opportunities beginning in 2003. As a result, AGLR has, for some time, been familiar with, and has had a good understanding of, NUI's regulated business. When NUI's Board announced, last September, its intention to sell NUI, AGLR saw an opportunity to purchase good utility assets if we were willing to sort out the entanglements associated with holding company activities. AGLR has had a patient and deliberate growth strategy that centers on identifying opportunities where AGLR will be able to leverage its skills in managing utility operations to create value for shareholders and efficiencies for ratepayers. This generally leads us to seek opportunities in urbanized areas along the footprint of our pipeline holdings - namely from east Texas and the Gulf Coast to New York. AGLR's decision to acquire NUI is the culmination of a lengthy process to -10- identify appropriate strategic opportunities in the regulated sphere. For more than one year, during which time AGLR has carefully studied the company, AGLR's operational due diligence on NUI's utilities has confirmed that NUI's utility operations and assets are essentially sound. However, the relatively small scale of NUI's operations has prevented it from investing is some of the availability technology platforms that can improve customer delivery and efficiency. AGLR firmly believes that the scale of the combined company will serve to allow for rate stability for New Jersey ratepayers. Furthermore, we believe AGLR's business model will produce efficiencies and allow for sufficient capital to deliver superior service to NUI's customers. Because of our own geographic spread, we can absorb all four of NUI's utility operations into our system without disruption, thereby providing a smooth transition for customers in all the states where NUI is doing business. ETG is located in a region where there is strong base usage and where gas is the preferred energy alternative. The addition of ETG will help to balance AGLR's load profile by adding heat-sensitive load. NUI is also positioned in the geographic footprint where AGLR conducts wholesale asset management operations. This circumstance should lead to getting better use out of expensive pipeline capacity and storage for which ETG is already contracted but which is not being utilized by end-use customers, thus yielding benefits now and as load grows in the future. Moreover, the fact that ETG and City Gas of Florida are located in urban service areas, and the fact that ETG is expanding in the northwest part of the -11- state plays to our strengths in operating primarily urban franchises in densely populated areas. Our strategy has been to own and optimize natural gas distribution companies within a well-defined and manageable geography. This strategy allows us to deploy our technology platforms in the areas of automated dispatch and work management to improve operations. Today, customers expect prompt, efficiently-delivered service. Technology will play a greatly enhanced role in upgrading utility service to the commercial standard that society has come to expect from all providers. Upon closing, AGLR will be the largest local distribution company, in terms of number of customers, along the entire East Coast of the United States. This improves our scale and allows us to continue our strategy of investment in modernizing technologies, which produces customer service and other benefits for ratepayers. Q. Please describe some of the ratepayer benefits of the acquisition. A. Under New Jersey law, the Board must consider the acquisition's impact on competition, rates, employees and operations and reliability. Mr. Madden's testimony describes in more detail how the acquisition will benefit ETG's customers in each of these four areas. In short, the acquisition will modernize operations and upgrade service quality to NUI's customers. We believe the acquisition will redound to the benefit of ETG ratepayers in the form of superior quality customer service, including reliability improvements, safety enhancements and operational synergies. -12- Q. Will the acquisition impact AGLR's credit rating? A. We do not anticipate that the acquisition will have a negative impact on AGLR's credit rating. The proposed acquisition is of manageable size and hence credit neutral to AGLR. AGLR can readily finance this acquisition without significant pressure on the balance sheet or on our credit rating. We recognize that our long-term business success depends on investment-grade credit and equity that the market demands. This transaction is limited in scope and should strengthen our financial performance in the near term. Moreover, given the success that AGLR has had in successfully integrating VNG into its utility operations within the first full year after closing, AGLR expects the acquisition of NUI to improve our cash flow generation, which is of interest to credit agencies. Mr. O'Brien will elaborate on the financial aspects of the acquisition in his testimony. Q. Will AGLR appoint an individual who will reside in New Jersey and be responsible for the day-to-day operations of ETG? A. Yes. Mr. Craig G. Matthews, NUI's current CEO, will leave the company at the time of closing. With his departure, AGLR intends to appoint a senior business leader to head ETG who will be located in New Jersey and have responsibility for the day-to-day oversight and operations of the New Jersey utility operations. Q. How will the Board of Directors be structured after the acquisition? A. After the acquisition, the NUI corporate Board of Directors and the Utilities Board of Directors will dissolve and those responsibilities will be assumed by the AGLR Board of Directors. It is the desire of the AGLR Board -13- to attract a New Jersey resident of significant professional stature and business qualification to our Board. We have previously had two Virginia business leaders join our Board following the VNG acquisition, so our practice would continue with the ETG acquisition. We will also be considering revisions to the charter of our Environmental and Corporate Responsibility Committee to contemplate oversight of the post-acquisition integration of Utilities, with proper recognition of the public interest considerations of the states in which the acquired utilities operate. In addition, it is our Board's practice to hold one Board meeting a year outside of Georgia and invite public and community officials to meet with us so that we can hear first-hand how we are doing in the local area. Q. Is the acquisition subject to any special conditions? A. Yes. The acquisition is subject to customary closing conditions, including the receipt of all necessary regulatory approvals from federal and state agencies and commissions, approval of NUI's shareholders, the absence of any material adverse effect on NUI's business and approval or the expiration or termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976. In addition, the Merger Agreement provides that any order by the Board approving the proposed acquisition should also approve certain aspects of the transaction. The Acceptable Order Conditions addressing rate and regulatory issues are described in more detail in the Petition and the testimony of Mr. Madden and a description of the acquisition and the conditions related to financial issues are discussed in the testimony of Mr. O'Brien. The acquisition is also subject to conditions relating to the legal -14- actions and investigations that NUI is facing in New Jersey. An Acceptable Order will absolve AGLR and its subsidiaries after closing from any liability associated with the circumstances and transactions addressed in the Final Report on Focused Audit of NUI, Utilities and ETG in Docket No. GA03030213, presented to the Division of Audits by the Liberty Consulting Group and the Stier Anderson Report. Satisfaction of these conditions is essential if the acquisition is to move forward. Q. Are there any Acceptable Order conditions relating to corporate governance? A. Yes. Given AGLR's commitment to effective corporate governance and the centrality of AGLR's policies to its core values, the Merger Agreement contains an Acceptable Order Condition that any order approving the acquisition will not impose conditions that may have the effect of requiring AGLR to conduct the business or govern the corporate affairs of AGLR or any of its subsidiaries after the closing in a manner that is adverse to AGLR or any of these subsidiaries. Adverse conditions shall include, but not be limited to, conditions that are inconsistent with, or in addition to, the conditions, including organizational requirements, currently imposed on AGLR under PUHCA. Q. Is AGLR requesting expedited approval of the proposed acquisition? A. Yes. We know that due process takes time. Nevertheless, AGLR and NUI are requesting expedited Board approval with a target date for approval of October 31, 2004 due to the unique circumstances of this transaction. In particular, we are asking the Board to consider NUI's liquidity position and -15- the risk that further adverse market conditions could create a material worsening of the company's condition. In the event of a material adverse effect, AGLR is not required to close. Simply put, AGLR wants to take control of the business before anything unexpected can go wrong. We believe that expedited approval will benefit ETG's ratepayers. First, as discussed in more detail in the testimony of Mr. Matthews, expedited approval is needed so that the integration can be accomplished in time for the winter heating season. Among other things, with AGLR's solid finances supporting NUI, the company may, over time, be able to negotiate gas purchases for the winter heating season on more favorable terms, which may very well redound to the benefit of ratepayers in the form of lower purchased gas costs and less legal entanglement and need for further regulatory approvals. Second, as discussed in more detail in Mr. Madden's testimony, following approval of the acquisition, AGLR would propose to the Board to immediately credit to ratepayers the outstanding balance of the $28 million refund that ETG agreed to provide to settle issues relating to the Liberty Audit Report. Last, as discussed in more detail in Mr. O'Brien's testimony, expedited approval is necessary to reduce the possibility of a liquidity crisis at NUI that could be triggered if a payment default or acceleration of indebtedness were to occur under the terms of NUI's financing. Under the terms of the Merger Agreement, AGLR would not be obligated to complete the acquisition if either a payment default or acceleration of indebtedness were to occur. -16- Q. Does this conclude your testimony? A. Yes. -17- EX-99.4 5 ex99-4.txt EX C-2 - APPLICATION TO MARYLAND PSC BEFORE THE PUBLIC SERVICE COMMISSION OF MARYLAND In the Matter of the Joint Application of : : AGL Resources Inc. (AGLR) : and : NUI CORPORATION (NUI) : : For An Order Approving an Agreement : By Which AGLR is Acquiring NUI; : Case No. _________ Authorizing the Transfer of Control of : All of NUI Utilities' Franchises, Assets, Rights and : Authority to Provide Gas Service in Maryland; : and Providing Certain Other Relief : JOINT APPLICATION FOR APPROVAL OF AN AGREEMENT by which AGL RESOURCES INC. is acquiring NUI CORPORATION Carville B. Collins Brian M. Quinn Piper Rudnick, LLP 6225 Smith Avenue Baltimore, Maryland 21209 (410) 580-3000 Attorneys for Joint Applicants, AGL Resources Inc. and NUI Corporation Dated: August 20, 2004 BEFORE THE PUBLIC SERVICE COMMISSION OF MARYLAND In the Matter of the Joint Application of : : AGL Resources Inc. (AGLR) : and : NUI CORPORATION (NUI) : : For An Order Approving an Agreement : By Which AGLR is Acquiring NUI; : Case No. _________ Authorizing the Transfer of Control of : All of NUI Utilities' Franchises, Assets, Rights and : Authority to Provide Gas Service in Maryland; : and Providing Certain Other Relief : JOINT APPLICATION FOR APPROVAL OF AN AGREEMENT by which AGL RESOURCES INC. is acquiring NUI CORPORATION I. INTRODUCTION Pursuant to the Annotated Code of Maryland, Public Utility Companies Article, Section 5-202, AGL Resources Inc. ("AGLR" or "AGL Resources") and NUI Corporation ("NUI"), doing business in the State of Maryland by its wholly owned utility subsidiary, NUI Utilities, Inc. (d/b/a "NUI Elkton Gas" in Maryland), (together, the "Applicants") submit this Joint Application requesting that the Commission: (1) approve an Agreement and Plan of Merger, dated July 14, 2004 (the "Merger Agreement," attached as Exhibit 1), under which a newly created subsidiary of AGLR will be merged with and into NUI, with NUI being the surviving corporation; (2) authorize the transfer of control to AGLR of all of NUI Utilities' franchises, assets, rights, and authority to provide natural gas service in Maryland; and (3) grant any and all other regulatory approvals necessary to authorize the transactions proposed in the Merger Agreement. At the consummation of the acquisition, NUI will be a wholly owned subsidiary of AGLR. The complete names and addresses of the Applicants, and their regulatory counsel to whom copies of correspondence and filings should be directed, are: Elizabeth Wade AGL Resources Inc. Ten Peachtree Place, 15th Floor Atlanta, GA 30309 (404) 583-3160 Mary Patricia Keefe NUI Corporation 550 Route 202-206 P.O. Box 760 Bedminster, NJ 07921--0760 (908) 781-0500 In support of this Joint Application, the Applicants state as follows: II. AGL RESOURCES INC. A. Corporate History AGL Resources (NYSE: ATG) is a leading regional energy services company based in Atlanta, Georgia. AGL Resources business units include utility operations, midstream energy services, telecom infrastructure, and energy investments. AGL Resources is best known for natural gas distribution. In 2003, AGL Resources received one of the highest honors in the energy industry: Platt's Global Energy Awards as "2003 Gas Company of the Year." A certified copy of AGL Resources' Amended and Restated Articles of Incorporation is attached hereto as Exhibit 2. AGL Resources' three natural gas distribution companies -- Atlanta Gas Light Company, Virginia Natural Gas, Inc., and Chattanooga Gas Company -- were all founded in the last century to provide streetlights for their home cities. Formed in 1850, Virginia Natural Gas in Norfolk is the oldest. Organized in 1856, Atlanta Gas Light Company is the oldest corporation in Georgia. Chattanooga Gas, originally known as Mutual Gas Company, was founded immediately after the Civil War. 2 In 1988, Atlanta Gas Light purchased Chattanooga Gas. Atlanta Gas Light formed AGL Resources in 1996 as a public utility holding company. In 1997, the Georgia General Assembly passed the Georgia Natural Gas Competition and Deregulation Act, completely unbundling the state's natural gas market. Retail customers once served by Atlanta Gas Light had the option of selecting one of the certificated natural gas marketers approved to operate in Georgia, or one was assigned to them. Atlanta Gas Light became a "pipes only" natural gas distribution company. In 2000, the company acquired Virginia Natural Gas and AGL Resources became a registered "holding company" under the Public Utility Holding Company Act of 1935, as amended ("PUHCA") and, under PUHCA, is currently subject to regulation as such by the Securities and Exchange Commission ("SEC"). AGL Resources' natural gas distribution services and pipeline operations -- Atlanta Gas Light, Virginia Natural Gas, and Chattanooga Gas -- currently serves 1.8 million customers in one of the fastest growing regions of the United States. AGL Resources also has other non-regulated businesses including: (1) Sequent Energy Management, headquartered in Houston, which focuses on asset management and the wholesale marketing, gathering and transporting of natural gas; and (2) AGL Networks, which owns, designs, constructs and leases underground fiber optic networks. B. AGLR's Current Local Distribution Companies Atlanta Gas Light Company ("AGLC") ---------------------------------- AGLC is a natural gas local distribution utility with distribution systems and related facilities throughout Georgia. AGLC serves approximately 1,547,000 customers throughout Georgia. AGLC became a "pipes-only" distribution company in 1998 when it elected to open its territory to competition pursuant to the Natural Gas Competition and Deregulation Act of 1997, discussed above. Natural gas marketers certificated by the Georgia Public Service Commission now serve customers on AGLC's 3 system. Although marketers' prices are market-based, AGLC's rates for distribution service remain regulated by the Georgia Public Service Commission. Virginia Natural Gas ("VNG") ---------------------------- VNG is a natural gas local distribution utility with distribution systems and related facilities serving the region of southeastern Virginia. It provides natural gas service to approximately 254,000 customers in central and southeastern Virginia including the cities of Virginia Beach, Chesapeake, Norfolk, Suffolk, Williamsburg, Hampton, and Newport News and the counties of James City, New Kent, Charles City, York, and Hanover. 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. Chattanooga Gas Company ("CGC") ------------------------------- CGC is a natural gas local distribution utility with distribution systems and related facilities serving the Chattanooga and Cleveland areas of Tennessee. CGC provides natural gas service to approximately 60,113 customers in Chattanooga and Cleveland, Tennessee and the surrounding Hamilton and Bradley County area. III. NUI CORPORATION A. Corporate History NUI is a public utility holding company exempt from registration under PUHCA. NUI was incorporated in New Jersey on January 29, 1969 as "National Utilities & Industries Corp."; its present name was adopted in March, 1983. NUI is duly incorporated, validly existing and in good standing under the laws of the State of New Jersey and has the corporate power and authority to engage in any lawful act or activity for which corporations may be organized under the New Jersey Business Corporation Act. A certified copy of the Articles of Incorporation of NUI is attached hereto as Exhibit 3. 4 The Elizabethtown Gas Light Company ("ETG") was organized by a special act of the New Jersey legislature in 1855. ETG was incorporated under the laws of New Jersey on December 29, 1922 as Elizabethtown Consolidated Gas Co., as a consolidation of Elizabethtown Gas Light Co., Rahway Gas Light Co., Metuchen Gas Light Co., and Cranford Gas Light Co. ETG's present name was adopted in 1966. In June of 1969, National Utilities and Industries, the holding company, was organized to hold ETG and pursue business diversification. NUI acquired City Gas Company of Florida ("City Gas"), and merged it into ETG, effective July 29, 1988. City Gas began serving customers in Dade County, Florida in 1949 and expanded into Brevard County during the 1960's. Prior to 1988, NUI owned certain non-utility businesses operating in propane distribution, gas marketing, oil and gas exploration and production, gas gathering, specialized data processing services and underground pipe replacement services along with minor real estate and equipment leasing operations. In 1988, NUI spun off these non-utility subsidiaries to its common shareholders by merging the non-utility subsidiaries into one company, KCS Group, Inc. and distributing KCS shares to NUI shareholders on a share-for-share basis. Since 1988, NUI has operated a number of non-regulated businesses, however, NUI has since sold a majority of its non-utility assets. As of fiscal year 2003, NUI's non-regulated businesses included: an energy retailer subsidiary (NUI Energy, Inc.), a wholesale energy portfolio and risk management subsidiary (NUI Energy Brokers, Inc.), a non-facilities based telecommunications services subsidiary (NUI Telecom, Inc.), a billing and customer information systems and services subsidiary (UBS), and a sales outsourcing subsidiary that sold wireless and network telephone services (TIC Enterprises, Inc.). NUI is either in the process of winding down or has wound down and sold each of these businesses with the exception of UBS. 5 In 1994, NUI collapsed the holding company structure and acquired the natural gas operations of Pennsylvania and Southern Gas Company ("P&S") in Pennsylvania and New York (i.e., Valley Cities Gas Service), North Carolina (North Carolina Gas Service) and Maryland (Elkton Gas Service). NUI sold North Carolina Gas Service to Piedmont Energy in September, 2002. NUI sold Valley Cities Gas Service to Valley Energy in November, 2002. In 2001, NUI reorganized as a holding company. The company's regulated gas distribution utility operations became a subsidiary of NUI and were renamed NUI Utilities, Inc. ETG, City Gas, and Elkton Gas are now operating divisions of NUI's wholly owned utility subsidiary, NUI Utilities, Inc. B. NUI's Acquisition of Elkton Gas Service In Case No. 8589, Order No. 70800, this Commission approved the merger of NUI with P&S's Maryland gas utility division, Elkton Gas Service. See, 84 Md. PSC 334 (1993). Pursuant to Order No. 70800, the Commission approved the transfer to NUI of all of Elkton Gas Service's franchises, assets, rights and authority to provide natural gas service in Maryland. Copies of all franchises transferred to NUI pursuant to this Commission's authorization are attached as Exhibit 4. This Joint Application requests the Commission's approval to transfer the control of all of these Maryland franchises from NUI to AGLR. C. NUI's Current Utility Operating Divisions NUI currently controls two public utility subsidiary companies, NUI Utilities, Inc. ("NUI Utilities") and Virginia Gas Distribution Company ("VGDC"). NUI's principal utility subsidiary, NUI Utilities, distributes natural gas to approximately 371,000 customers in New Jersey, Florida and Maryland through three regulated utility divisions, discussed above, ETG, City Gas and NUI Elkton Gas. NUI also owns Virginia Gas Company (also known as NUI Virginia Gas), a holding company for utility and non-utility businesses. VGDC is a wholly owned public utility subsidiary of NUI Virginia 6 Gas and distributes gas to approximately 300 customers in Virginia. Each utility division is subject to regulation by the public service commission in the state in which it operates. NUI Elkton Gas -------------- NUI Elkton Gas serves approximately 5,303 customers in franchised territories comprising approximately 14 square miles in Cecil County, Maryland. The original predecessor of NUI Elkton Gas was incorporated in 1863 (as of 2001, NUI Elkton Gas is an operating division of NUI Utilities). During calendar year 2003, NUI Elkton Gas sold approximately 974,000 Mcf of gas, 30 percent of which was sold to residential customers and 70 percent of which to commercial and industrial customers. Elizabethtown Gas Company ------------------------- ETG serves approximately 260,000 customers in seven counties in eastern and northwestern New Jersey. ETG's territory covers 1300 square miles. Residential customers comprise 92.4 percent of ECG's total customers while commercial customers account for 7.6 percent. NUI Utilities operates nearly three thousand miles of gas main in ETG's service territory. ETG sold or transported 72.7 MMdth of natural gas in calendar year 2003. Industrial customers account for 46.8 percent of volumes, commercial customers utilize 20.1 percent of the volumes and residential customers account for 33.1 percent of volumes. City Gas Company of Florida --------------------------- City Gas is the second largest natural gas utility in Florida. City Gas serves Brevard County, and parts of St. Lucie, Indian River, Palm Beach, Glades, Miami-Dade and Broward counties. City Gas serves approximately 100,000 residential, commercial and industrial customers. It sold or transported approximately 10.7 MMdth of gas in calendar year 2003. Residential customers account for 95 percent of City Gas' customer base. 7 Virginia Gas Distribution Company --------------------------------- VGDC provides gas service to approximately 300 customers in franchised territories within Buchanan and Russell Counties, Virginia. During calendar year 2003, VGDC sold approximately 240,300 Mcf of gas, of which 4 percent was sold to residential customers and 96 percent was sold to commercial and industrial customers. IV. REQUEST FOR ADDITIONAL RELIEF There are certain additional terms that AGLR considers necessary for the Final Order in each state. Specifically, with respect to Maryland, the Petitioners request that the Commission issue an order stating: (1) that it will not pursue any investigation, audit, or other action based upon, or in any way related to, the matters discussed in the Liberty Audit Report and/or the Stier Anderson Report, and (2) agree that all matters pertaining to the Liberty Audit Report and/or the Stier Anderson Report are closed.\1 The Applicants are further requesting that the Commission not impose any conditions that have the effect of requiring AGLR to conduct business, or govern the affairs of AGLR or any of its subsidiaries at closing, in a manner that is adverse to AGLR or those subsidiaries.\2 _______________________________________ /1 NUI, through the law firm Stier Anderson, LLC, has conducted a comprehensive review of whether NUI Elkton Gas participated in certain natural gas purchase transactions covered in either report. NUI is providing the results of this review to the Commission in a separate filing to be made soon after this Joint Application is filed, and NUI will be requesting there that the Commission make certain findings with respect to either report. In its separate filing, NUI will be asking the Commission to issue its findings prior to, or contemporaneously with, the Commission's Order on this Joint Application. /2 Adverse conditions shall include, but are not limited to, conditions that are inconsistent with, or in addition to, the conditions, including organizational requirements, currently imposed on AGLR under PUHCA. As noted earlier, AGLR is a registered holding company under PUHCA and conducts certain business arrangements pursuant to SEC authorizations. 8 V. DESCRIPTION OF THE ACQUISITION A. Overview This Joint Application seeks all of the requisite Commission approvals to enable the Applicants to perform and consummate the transactions described in the Merger Agreement attached as Exhibit 1. Pursuant to 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. At the consummation of the acquisition, NUI will be a wholly owned subsidiary of AGL Resources.\3 AGL Resources has agreed to pay $13.70 for each share of common stock of NUI issued and outstanding immediately prior to the effective time of the acquisition- approximately 16 million shares - for an aggregate purchase price of $220 million in cash, plus the assumption of NUI's outstanding debt at closing. See, the Preamble and Article 2 of the Merger Agreement for terms of the acquisition and purchase price. 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 NUI's debt will change prior to closing. The transaction is subject to customary closing conditions, including the receipt of all necessary regulatory approvals, including the approvals of the SEC, the NJBPU, the Public Service Commission of Maryland, the Virginia State Corporation Commission, NUI's shareholders, any necessary approval or the expiration or termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. See, Section 3.4 of the Merger Agreement for reference as to which consents are "Required Consents"; (see, Section 6.1(d) and 6.2(d) of the Merger Agreement for reference to the ___________________________ /3 While AGL Resources has not made any definitive decisions regarding its corporate structure following the closing, given NUI's exposure to certain post-closing liabilities and obligations, it is most practicable for it to keep NUI in existence for some time following the closing. Consequently, AGL Resources would not be the direct holder of the capital stock of NUI's utility businesses. 9 conditions to closing related to these consents). The transaction is subject to certain additional special conditions, set forth in Section 6.2 of the Merger Agreement. B. Business Plan of AGLR/NUI in Maryland From its experience running public utilities in three other states, AGLR has learned that local employees are the heart and soul of a company and are vital to maintaining a connection to the local community. AGLR is still in the process of reviewing NUI Elkton Gas' operations to determine the appropriate employee levels in order to continue to ensure that the company is operated safely and reliably. As part of this evaluation, AGLR will appropriately balance the necessity to improve customer service, support its long term commitment to NUI Elkton Gas' employees and contribute to the economic vitality of NUI Elkton Gas' service territory. In addition, under section 5.9(a) of the Merger Agreement, AGLR has agreed to provide NUI's employees benefits that, taken as a whole, are substantially equivalent to the benefits that NUI currently provides to those employees for at least one year following the closing of the transaction. AGLR will also assume the obligations or cause NUI to continue to meet obligations to its employees under any employment or union contract. With respect to the NUI pension plan, following the acquisition, under the purchase accounting rules, the amount currently reflected by NUI as a pension asset, which is being amortized as pension expense, will be eliminated. AGLR requests that after closing NUI's pension asset be treated as a regulatory asset. This is essentially a "make-whole" provision for NUI. Under this request, the company would continue to amortize the asset consistent with the amortization period used for the pension asset prior to close. This will ensure that the total ratepayer obligation for the pension period cost is the same pre and post-acquisition for the outstanding pension asset amount. AGLR has an investment grade rating and an equity market capitalization of approximately $1.9 billion. AGLR also has a pension plan with plan assets of approximately $260 million as of December 31, 2003. These 10 factors should reassure NUI's employees as to the appropriate management of their pension plan assets after closing. C. Management and Service After the acquisition, the NUI corporate Board of Directors and the NUI Utilities Board of Directors will dissolve and those responsibilities will be assumed by the AGLR Board of Directors. AGLR will be considering revisions to the charter of its Environmental and Corporate Responsibility Committee to contemplate oversight of the post-acquisition integration of NUI, with proper recognition of the public interest considerations of the states in which the acquired utilities operate. D. No Effect Upon Rates and Service Commission approval of this application will have no effect upon the rates charged by NUI Elkton Gas or upon the service provided to the current gas customers of NUI Elkton Gas. AGLR does not seek any specific rate approval, other than the right to charge those rates currently in effect in the duly filed tariffs of NUI Elkton Gas. Similarly, AGLR does not seek Commission approval to make any particular change in the natural gas service supplied currently to the gas customers of NUI Elkton Gas. AGLR/NUI is ready, willing, and able to assume all of the regulatory responsibilities imposed upon Maryland natural gas utilities. E. Public Interest Reasons Supporting the Acquisition NUI Elkton Gas will become a valued member of the AGLR corporate family, which has a demonstrated record of providing safe, efficient and reliable natural gas service and which has the financial resources and operational experience and commitment needed for NUI Elkton Gas to continue to provide adequate service at just and reasonable rates. In addition, AGLR's gas distribution companies utilize state-of-the-art technology and strive to provide outstanding customer service. AGLR maintains a comprehensive utility metric program to continuously monitor important aspects of 11 customer service, safety and reliability. These metrics include customer service and satisfaction (as measured by call response times and customer feedback) as well as safety-related metrics such as leak response times, and operational measures such as capital costs per new meter (essentially, the total cost to hook up a new gas customer). Over the past few months, AGLR has reviewed NUI Elkton Gas' operations. Based on this knowledge, AGLR has determined that it should be able to improve and expand upon the services that NUI Elkton Gas currently provides to its customers over time. In an effort to enhance customer service and expansions of service, AGLR would like to immediately begin integrating NUI Elkton Gas into AGLR's established information technology ("IT") programs and new IT programs that are currently being implemented across all of its utility operations. In addition, AGLR will apply its state-of-the-art technology and field-tested best practices and will continually monitor and strive to improve the safety and reliability of NUI Elkton Gas' system. F. Financial Condition Information Pursuant to COMAR 20.07.04.01, detailed disclosures of AGLR's and NUI's financial condition are attached hereto as Exhibits 5 and 6, respectively. VI. REQUEST FOR EXPEDITED REVIEW The Applicants respectfully request that the Commission review and act upon this Joint Application in an expedited manner, on or before October 31, 2004, in order to permit a timely closing for this transaction. WHEREFORE, the Applicants respectfully request that the Public Service Commission of Maryland, by its Order: (1) find that the terms of the attached Merger Agreement are consistent with the public interest and public convenience and necessity; (2) authorize upon the consummation of the acquisition: (a) the transfer from NUI to AGLR of control over all of NUI's franchises, assets, rights, and authority to provide natural gas 12 service in Maryland, and (b) the exercise by AGLR of those franchises, assets, rights, and authority to provide natural gas service previously exercised in Maryland by NUI; (3) based on the Commission's review and findings in a separate filing made by NUI of the results of the Liberty Audit Report and/or the Stier Anderson Report, (a) agree not to pursue any investigation, audit, or other action based upon, or in any way relating to, the matters discussed in the Liberty Audit Report and/or the Stier Anderson Report, and (b) agree that all matters pertaining to the Liberty Audit Report and/or the Stier Anderson Report are closed; (4) after closing, authorize AGLR to treat NUI's pension asset as a regulatory asset; (5) not impose any conditions that have the effect of requiring AGLR to conduct business, or govern the affairs of AGLR or any of its subsidiaries after closing, in a manner that is adverse to AGLR, or those subsidiaries; (6) grant all regulatory approvals necessary to authorize the transactions proposed in the attached Merger Agreement; and (7) grant any and all such other relief that the Commission shall deem appropriate. Respectfully submitted, _________________________________ Carville B. Collins Brian M. Quinn PIPER RUDNICK LLP 6225 Smith Avenue Baltimore, Maryland 21209-3600 Telephone: 410.580.3000 Fax: 410.580.3001 Dated: August 20, 2004 Attorneys for Joint Applicants AGL Resources Inc. and NUI Corporation 13 AFFIDAVIT I, Richard T. O'Brien, Executive Vice President and Chief Financial Officer, AGL RESOURCES verify that the information provided in the foregoing Joint Application, as it relates to AGL RESOURCES is true and correct to the best of my knowledge, information and belief, and that I expect AGL RESOURCES to be able to prove same at any required hearing. __________________________________________ Richard T. O'Brien Executive Vice President and Chief Financial Officer AGL RESOURCES STATE OF : : SS COUNTY OF : SWORN AND SUBSCRIBED before me, a duly qualified Notary Public, this ____ day of _______________, 2004. __________________________________________ Notary Public My Commission Expires: ______________________ AFFIDAVIT I, _____________________, Chief Financial Officer, NUI CORPORATION, verify that the information provided in the foregoing Joint Application insofar as it relates to NUI CORPORATION is true and correct to the best of my knowledge, information and belief, and that I expect NUI CORPORATION to be able to prove same at any required hearing. __________________________________________ Chief Financial Officer NUI CORPORATION STATE OF : : SS COUNTY OF : SWORN AND SUBSCRIBED before me, a duly qualified Notary Public, this ____ day of _______________, 2004. __________________________________________ Notary Public My Commission Expires: ______________________ CERTIFICATE OF SERVICE I HEREBY CERTIFY that on August 20, 2004, a copy of the foregoing Joint Application of AGL Resources Inc. and NUI Corporation and supporting exhibits were delivered via first class mail, postage prepaid to: Gregory V. Carmean Executive Director Maryland Public Service Commission William Donald Schaefer Tower 6 Saint Paul Street, 17th Floor Baltimore, Maryland 21202-6806 Catherine M. Dowling, Esquire Staff Counsel Maryland Public Service Commission William Donald Schaefer Tower 6 Saint Paul Street, 17th Floor Baltimore, Maryland 21202-6806 Patricia A. Smith People's Counsel William Donald Schaefer Tower 6 Saint Paul Street, Suite 2102 Baltimore, Maryland 21202 _________________________________ Brian M. Quinn EX-99.5 6 ex99-5.txt EX C-3 - APPLICATION TO VIRGINIA STATE CORP COMM COMMONWEALTH OF VIRGINIA STATE CORPORATION COMMISSION JOINT PETITION AND APPLICATION OF ) ) AGL RESOURCES INC., ) ) and ) CASE NO. PUE-2004-______ ) NUI CORPORATION ) ) For approval of a change of control through ) merger under Chapter 5 of Title 56 of the Code ) of Virginia, request for expedited consideration, ) and for such other relief as may be necessary ) under the law ) JOINT PETITION -------------- AGL Resources Inc. ("AGLR") and NUI Corporation ("NUI") (the "Petitioners" or "Parties") hereby request approval under Chapter 5 of Title 56 of the Code of Virginia (ss. 56-88 et seq.) for a transaction under which AGLR will acquire control of NUI's direct subsidiaries, Virginia Gas Company ("VGC") and NUI Saltville Storage, Inc. ("NUISS") (NUISS is a 50% member of Saltville Gas Storage Company, LLC ("SSLLC")). VGC is the holding company for Virginia Gas Pipeline Company ("VGPC"), Virginia Gas Distribution Company ("VGDC"), and Virginia Gas Storage Company ("VGSC") (collectively "the VGC companies").\1 A completed Transaction Summary in support of this Joint Petition is contained in Exhibit 1. In support of this Joint Petition, AGLR and NUI respectfully state as follows: INTRODUCTION ------------ 1. Subject to certain regulatory approvals and other conditions, AGLR and NUI have entered into an Agreement and Plan of Merger ("Agreement") pursuant to which AGLR will _______________________ /1 In conjunction with this merger application, AGLR, AGL Services and the VGC Companies also will file a Finance Application under Chapters 3 and 4 of Title 56 and an Affiliate Application under Chapter 4. purchase all of the issued and outstanding shares of capital stock of NUI, a New Jersey holding company, and NUI will become a wholly-owned subsidiary of AGLR (the "Transaction"). A copy of the Agreement is contained in Exhibit 2. The Transaction will result in a change of control of NUI's indirect wholly-owned subsidiaries, VGPC, VGDC, and VGSC, as well as NUISS, all of which require the approval of the Virginia State Corporation Commission (the "Commission") under Chapter 5 of Title 56 of the Code of Virginia. The Transaction will neither jeopardize nor impair the VGC companies' and SSLLC's provision of adequate service to the public at just and reasonable rates. To the contrary, these entities will become valued members of the AGLR corporate family, which has a demonstrated record of providing safe, efficient, and reliable natural gas service and which has the corporate and financial resources, operational experience, and commitment needed for the continued successful operation of the VGC companies and SSLLC. THE PARTIES ----------- 2. AGLR is a Georgia general business corporation and a registered holding company subject to regulation by the Securities and Exchange Commission pursuant to the Public Utility Holding Company Act of 1935, as amended ( the "PUHCA Act"). AGLR is a publicly traded company and its common stock trades on the New York Stock Exchange (NYSE: ATG). AGLR's corporate address and telephone number are: AGL Resources Inc. 10 Peachtree Place, NE Atlanta, GA 30309 (404) 584-4000 AGLR has been a registered holding company since 2000, when it acquired Virginia Natural Gas ("VNG"), a natural gas local distribution utility with distribution systems and related facilities 2 serving eight cities in the Hampton Roads region of southeastern Virginia.\2 A copy of AGLR's 2003 Annual Report to Shareholders is attached to this Joint Petition as Exhibit 3, and their financial statements for the past five years are attached as Exhibit 5. 3. NUI is a diversified energy company headquartered in Bedminster, New Jersey. NUI is a holding company and, at closing, will have four wholly-owned subsidiaries - VGC; NUI Utilities, Inc. (NUI Utilities); NUI Capital Corp. (NUI Capital); and NUISS. NUI is primarily engaged in the sale and distribution of natural gas through its local utility companies. NUI is a holding company and is exempt from registration under the PUHCA Act. NUI is a publicly traded company and its common stock trades on the New York Stock Exchange (NYSE: NUI). NUI's corporate address and telephone number are: NUI Corporation 550 Route 202-206 P.O. Box 760 Bedminster, NJ 07921 (908) 781-0500 NUI's local utility operations are carried out by NUI's wholly-owned subsidiaries, VGC and NUI Utilities. Through these subsidiaries, NUI serves approximately 371,000 residential, commercial, and industrial customers in four states along the eastern seaboard of the United States. Residential customers represent approximately 93% of NUI's total customers. A copy of NUI's Annual Report to Shareholders is attached to this Joint Petition as Exhibit 4. 4. VGC is a holding company for utility and non-utility businesses. VGC's three wholly-owned subsidiaries, namely, VGPC, VGDC, and VGSC, are regulated by the Commission. VGDC provides natural gas distribution services to approximately 300 customers in franchised territories located in southwestern Virginia. VGSC operates the Early Grove _______________________ /2 VGC and SSLLC are located in and serve southwestern Virginia and will have no impact on VNG's service to its customers. 3 Storage Field located in Washington and Scott counties of Virginia. VGPC operates a high-deliverability underground natural gas storage field located in Saltville, Virginia, and provides intrastate transportation services from its P-25 pipeline system located in southwestern Virginia. VGPC also serves as the construction and operating manager for SSLLC, discussed below. The financials for each of these companies, as of December, 2003, are attached to this Application as Exhibit 6. 5. NUI's wholly-owned subsidiary, NUISS, is a 50% member of SSLLC. SSLLC is a joint venture with a unit of Duke Energy that is developing a natural gas storage facility in Saltville, Virginia. The facility is expected to have approximately 4.9 Bcf upon completion of its first phase of construction. SSLLC is regulated by this Commission and the Federal Energy Regulatory Commission ("FERC"). OTHER AFFECTED ENTITIES ----------------------- 6. NUI Utilities is comprised of the operations of three utility companies which are operating divisions of NUI Utilities: o Elizabethtown Gas Company ("ETG"). ETG, headquartered in Union, New Jersey, serves seven counties in central and northwestern New Jersey and is regulated by the New Jersey Board of Public Utilities ("NJBPU"). ETG's service territories cover approximately 1,300 square miles and a total population of approximately 1.1 million. ETG has approximately 260,000 customers, representing approximately 72% of NUI Utilities' total customers. o City Gas Company of Florida ("City Gas"). City Gas, headquartered in Hialeah, Florida, serves five counties in south and central Florida and is regulated by the Florida Public Service Commission (FPSC). City Gas' service territories cover approximately 3,000 square miles and a population of 1.7 million. City Gas has approximately 101,000 customers, representing approximately 27% of NUI Utilities' total customers. o Elkton Gas ("Elkton Gas"). Elkton Gas serves one county in Maryland (covering approximately 14 square miles) and is regulated by the Maryland Public Service Commission ("MPSC"). Elkton Gas serves approximately 5,400 customers, representing less than 2% of NUI Utilities' total customers. 4 7. NUI's non-regulated businesses are carried out by NUI Capital and its subsidiaries. Currently, NUI's only remaining non-regulated direct or indirect subsidiary with substantial continuing operations is Utility Business Services, Inc. ("UBS"), a billing and customer information systems and services subsidiary providing services to NUI Utilities and a few unrelated parties. 8. The names, addresses, and telephone numbers of counsel representing the Petitioners and other entities affected by the Transaction are: As to AGLR and its subsidiaries: Elizabeth Wade AGL Resources Inc. Ten Peachtree Place Atlanta GA 30309 (404) 584-3160 (telephone) (404) 584-3714 (facsimile) Edward L. Flippen Anne K. Dailey McGuireWoods LLP 901 East Cary Street Richmond, VA 23219 (804) 775-4380 (telephone) (804) 698-2019 (facsimile) As to NUI and its subsidiaries: Mary Patricia Keefe Vice President, General Counsel and Secretary NUI Utilities P. O. Box 3175 Union, NJ 07083 JoAnne L. Nolte Kiva Bland Pierce The Conrad Firm 1508 W. Main Street Richmond, VA 23220 (804) 359-6062 (telephone) (804) 359-6064 (facsimile) 5 THE TRANSACTION --------------- 9. Pursuant to the Merger Agreement, AGLR has agreed to acquire NUI in a reverse triangular merger in which, at closing, a newly created subsidiary of AGLR will merge with and into NUI. At the consummation of the acquisition, NUI will be a wholly-owned subsidiary of AGLR.\3 AGLR has agreed to pay $13.70 for each share of common stock of NUI issued and outstanding immediately prior to the effective time of the Transaction - approximately 16 million shares - for an aggregate purchase price of $220 million in cash, plus the assumption of NUI's outstanding debt 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. AGLR anticipates that the amount of NUI's debt will change prior to closing. 10. The Transaction is subject to customary closing conditions, including the receipt of all necessary regulatory approvals, including the approvals of the Securities and Exchange Commission ("SEC"), the NJBPU, the MPSC, the Commission, NUI's shareholders, and any necessary approval or the expiration or termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. 11. The consummation of the Transaction also is subject to the following special conditions: (i) NUI shall have received orders approving the Transaction from the above-referenced state utility commissions that contain certain terms specified by AGLR (the terms that are specific to this Commission have been requested below in this application), except as would not have a material adverse effect on NUI, its regulated utility subsidiary, NUI Utilities, or AGLR; (ii) neither NUI nor any of its subsidiaries shall have been indicted or criminally _________________________ /3 While AGLR has not made any definitive decisions regarding its corporate structure following the closing, given NUI's exposure to certain post-closing liabilities and obligations, it is most practicable for it to keep NUI in existence for some time following the closing. Consequently, AGLR would not be the direct holder of the capital stock of NUI's utility businesses. The proposed post-closing corporate structure is depicted in Exhibit 7. 6 charged for a felony criminal offense by any Governmental Entity (with the express exception of NUI and NUI Energy Brokers ("NUI EB") with respect to the matters specified in the New Jersey Attorney General ("NJAG") Settlement) relating to the matters that are the subject of the NJBPU Settlement Order and the Stipulation and Agreement referred to therein, the NJAG Settlement or the Stier Anderson Report (as those terms are defined in the Merger Agreement),\4 and NUI and its subsidiaries shall not have received any notice of non-compliance in any material respect with the NJAG Settlement, and there shall have been no revocation of or material changes to the terms of the NJAG Settlement; (iii) neither NUI nor its subsidiaries shall be the subject of an active investigation with respect to the matters that are the subject of the NJBPU Settlement Order and the Stipulation and Agreement referred to therein, the NJAG 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. 12. AGLR has the right to terminate the Merger Agreement if NUI does not have necessary interim financing in place by September 30, 2004. AGLR's right to terminate the Merger Agreement pursuant to this provision expires on October 15, 2004, or in the event that the period during which a regulatory approval of such financing is subject to appeal is continuing, October 25, 2004. _________________________________ /4 On June 30, 2004, NUI announced that its wholesale energy trading subsidiary, NUI EB, had entered into a plea agreement with the New Jersey State Attorney General's Office relating to certain transactions at NUI EB. Under the plea agreement, NUI EB pleaded guilty to misconduct by a corporate official. NUI EB expects to pay a $500,000 fine in connection with the plea. NUI has entered into a separate agreement with the New Jersey State Attorney General's Office pursuant to which NUI has agreed to develop, fund, and operate certain community service programs. The plea concludes the investigation by the Attorney General's Office of NUI and its subsidiaries. The NJBPU concluded a similar review of NUI and NUI EB in April, with the conclusion of a focused audit of the company that ended with the NJBPU ordering a $28 million refund to customers and a $2 million fine. The final report refers to a report by Stier Anderson, L.L.C., dated April 21, 2004, that was delivered to the Audit Committee of the NUI board of directors. 7 13. Additionally, the Merger Agreement may be terminated by (i) NUI in order for NUI to pursue a superior acquisition proposal, (ii) AGLR 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) either party due to the consummation of the Transaction not occurring by April 13, 2005 (which is subject to a 90 day extension to obtain regulatory approvals), (iv) either party due to the shareholders of NUI failing to approve the Merger Agreement, or (v) AGLR 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 only payable if and when NUI enters into a definitive agreement with respect to an alternative acquisition proposal within 12 months of such termination. In the event of a termination of the Merger Agreement pursuant to the circumstances provided in (i) and (ii), NUI will have to pay AGLR a termination fee of $7.5 million. The Merger Agreement's other customary termination rights do not result in the payment of a termination fee. 14. As mentioned in paragraph 11, there are certain terms that AGLR considers necessary for the Final Order in each state. Specifically, with respect to Virginia, the Petitioners request that the Commission issue an order that recognizes NUI's representation that VGDC, VGSC, VGPC, and SSLLC did not participate in any transactions that were implicated in the Liberty Audit Report and/or the Stier Anderson Report . These reports are more fully discussed in Exhibit 8. Significantly, attached as Exhibit 9 is the affidavit of Mr. Craig Matthews, President and Chief Executive Officer of NUI, confirming that VGDC, VGSC, VGPC, and SSLLC did not participate in any such transactions. As Mr. Matthews states in the affidavit, NUI EB never sold gas to VGDC, VGSC, VGPC or SSLLC, nor has NUI EB participated in any transactions with these companies that were implicated by the Liberty Audit Report and/or the 8 Stier Anderson Report. Although NUI EB executed a separate affiliate agreement with both VGPC and VGSC, respectively, NUI EB never called upon those agreements.\5 AGLR is requesting that the Commission accept the representations in the affidavit and indicate it will not pursue any investigation, audit, or other action based on that acceptance. In addition, Petitioners are requesting that the Commission not impose any conditions that have the effect of requiring AGLR to conduct business, or govern the affairs of AGLR or any of its subsidiaries at closing, in a manner that is adverse to AGLR or those subsidiaries.\6 15. The Transaction will not impair or jeopardize adequate service at just and reasonable rates to the VGPC, VGDC, VGSC, or SSLLC's customers. VGPC, VGDC, VGSC, and SSLLC will continue to abide by their approved tariffs and fully honor their obligations to customers and to all regulatory authorities. The Transaction will not impair or in any way diminish the financial, technical, or managerial fitness of VGPC, VGSC, VGDC, or SSLLC to provide continuous and adequate natural gas service to their Virginia customers. To the contrary, these entities will become valued members of the AGLR corporate family, which has a demonstrated record of providing safe, efficient, and reliable natural gas service and which has the financial resources, operational experience, and commitment needed for the VGPC, VGDC, VGSC, and SSLLC to continue to provide adequate service at just and reasonable rates. Additionally, the proven management style and strategic vision of AGLR will enhance the VGC companies' and SSLLC's stable and reliable corporate decision-making. For example, Platts Global Energy named AGLR 2003 Gas Company of the Year. ______________________________ /5 The agreements were terminated in PUE-2003-00322 and PUE-2003-00323. /6 Adverse conditions shall include, but are not limited to, conditions that are inconsistent with or in addition to the conditions, including organizational requirements, currently imposed on AGLR under the PUHCA Act. As noted earlier, AGLR is a registered holding company under the PUHCA Act and conducts certain business arrangements pursuant to SEC authorizations. 9 16. The Transaction should have a favorable impact on Virginia. AGLR's gas distribution companies utilize state-of-the-art technology to provide outstanding customer service. AGLR maintains a comprehensive utility metric program to continuously monitor important aspects of customer service, safety, and reliability. These metrics include customer service and satisfaction (as measured by call response times and customer feedback) as well as safety-related metrics, such as leak response times, and operational measures such as capital costs per new meter (essentially, the total cost to hook-up a new gas customer). Over the past few months, AGLR has reviewed the VGC companies' and SSLLC's operations. Based on this knowledge, AGLR has determined that it should be able to improve and expand upon the services that these companies currently provide to their customers over time. To achieve these improvements and expansions of service, AGLR will immediately begin integrating these companies into AGLR's established information technology ("IT") programs and new IT programs that are currently being implemented across all of its utility operations. In addition, AGLR will apply its utility metrics, state-of-the-art technology and field-tested best practices, and will continually monitor and strive to improve the safety and reliability of NUI's system. 17. Regarding impact on employees, from its experience operating public utilities in two other states and Virginia, AGLR has learned that local employees are the heart and soul of a public service company and are vital to maintaining a connection to the local community. AGLR is still in the process of reviewing the VGC companies' and SSLLC's operations to determine the appropriate employee levels in order to continue to ensure that the companies are operated safely and reliably. As part of this evaluation, AGLR will appropriately balance the necessity to improve customer service, support its long-term commitment to the VGC 10 companies' and SSLLC's employees and contribute to the economic vitality of the VGC companies' and SSLLC's service territories. Under section 5.9(a) of the Merger Agreement, AGLR has agreed to provide NUI's employees benefits that, taken as a whole, are substantially equivalent to the benefits that NUI currently provides to those employees for at least one year following the closing of the Transaction. AGLR also will assume the obligations or cause NUI to continue to meet obligations to its employees under any employment or union contract. With respect to the NUI pension plan, following the acquisition, under the purchase accounting rules, the amount currently reflected by NUI as a pension asset, which is being amortized as pension expense, will be eliminated. AGLR requests that after closing, NUI's pension asset be treated as a regulatory asset. This is essentially a "make-whole" provision for NUI. Under this request, AGLR would continue to amortize the asset consistent with the amortization period used for the pension asset prior to closing. This will ensure that the total ratepayer obligation for the pension period cost is the same pre- and post-acquisition for the outstanding pension asset amount. AGLR has an investment grade rating and an equity market capitalization of approximately $1.9 billion. AGLR also has a pension plan with plan assets of approximately $260 million as of December 31, 2003. These factors should reassure NUI's employees as to the appropriate management of their pension plan assets after closing. 18. The timely closing of this Transaction is dependent upon approval of the Transaction by the Commission, and Petitioners seek approval on or before October 31, 2004. Petitioners recognize that the requested approval schedule is expedited; however, Petitioners also believe that the recent events concerning NUI and NUI's overall financial condition warrant prompt approval. AGLR intends to work on improving NUI's financial condition and to identify 11 and to make operational improvements in the VGC companies and SSLLC. None of these activities can begin in earnest until the Transaction is approved. Accordingly, the Petitioners respectfully request that the Commission consider this Joint Application on an expedited basis so that VGPC's, VGSC's, VGDC's, and SSLLC's existing customers may soon enjoy the benefits resulting from AGLR's financial and managerial strength. WHEREFORE, AGLR and NUI respectfully request this Commission to (i) issue an Order approving their Joint Petition and granting all approvals that are required under Chapter 5 of Title 56 of the Code of Virginia and regulations thereunder for the Transaction, (ii) accept NUI's statements regarding the Liberty Audit Report and Stier Anderson report as true, and agree not to pursue any investigation, audit, or other action based on that acceptance, (iii) after closing, authorize AGLR to treat NUI's pension asset as a regulatory asset, and (iv) not impose any conditions that have the effect of requiring AGLR to conduct business, or govern the affairs of AGLR or any of its subsidiaries after closing, in a manner that is adverse to AGLR or those subsidiaries. 12 Respectfully submitted, AGL RESOURCES INC. By __________________________________ Counsel NUI CORPORATION By __________________________________ Counsel Elizabeth Wade AGL Resources Inc. Ten Peachtree Place Atlanta GA 30309 (404) 584-3160 (404) 584-3714 (fax) ewade@aglresources.com Mary Patricia Keefe Vice President, General Counsel and Secretary NUI Utilities One Elizabethtown Plaza P. O. Box 3175 Union, NJ 07083 (908) 289-5000 x-6522 (908) 352-3908 (fax) mkeefe@NUI.com Edward L. Flippen Anne K. Dailey McGuireWoods LLP 901 East Cary Street Richmond, VA 23219 (804) 775-4380 (804) 698-2019 (fax) eflippen@mcguirewoods.com adailey@mcguirewoods.com JoAnne L. Nolte Kiva Bland Pierce The Conrad Firm 1508 W. Main Street Richmond,VA 23220 804.359.6062 Ext. No. 208 Telephone 804.359.6064 Facsimile jnolte@theconradfirm.com kpierce@theconradfirm.com August 9, 2004 13 VERIFICATION ------------ I, _________________________________, _______________________________ of AGL Resources Inc. do solemnly swear that the facts stated in the foregoing petition and all appendices incorporated by reference, insofar as they relate to AGL Resources Inc., and its subsidiaries, are to the best of my knowledge and belief, true and correct and that said statements of fact constitute a complete statement of the matters to which they relate. Subscribed and sworn to before me this _____ day of ____________ 2004. Notary Public My commission expires: VERIFICATION ------------ I, _________________________________, _______________________________ of AGL Resources Inc. do solemnly swear that the facts stated in the foregoing petition and all appendices incorporated by reference, insofar as they relate to AGL Resources Inc., and its subsidiaries, are to the best of my knowledge and belief, true and correct and that said statements of fact constitute a complete statement of the matters to which they relate. Subscribed and sworn to before me this _____ day of ____________ 2004. Notary Public My commission expires: VERIFICATION ------------ I, _________________________________, _______________________________ of NUI Corporation do solemnly swear that the facts stated in the foregoing petition and all appendices incorporated by reference, insofar as they relate to NUI Corporation and its subsidiaries, are to the best of my knowledge and belief, true and correct and that said statements of fact constitute a complete statement of the matters to which they relate. Subscribed and sworn to before me this _____ day of ____________ 2004. Notary Public My commission expires: VERIFICATION ------------ I, _________________________________, _______________________________ of NUI Corporation do solemnly swear that the facts stated in the foregoing petition and all appendices incorporated by reference, insofar as they relate to NUI Corporation and its subsidiaries, are to the best of my knowledge and belief, true and correct and that said statements of fact constitute a complete statement of the matters to which they relate. Subscribed and sworn to before me this _____ day of ____________ 2004. Notary Public My commission expires: EX-99.8 7 ex99-8.txt EX G-1 - FTC, DOJ FILINGS UNDER HART-SCOTT-RODINO TRANSACTION NUMBER ASSIGNED [_] [_] [_] [_] [_] [_] [_] [_] - ------------------------------------------------------------------------------------------ ---------------------------------------- 16 C.F.R. Part 803 - Appendix Approved by OMB NOTIFICATION AND REPORT FORM FOR CERTAIN MERGERS AND ACQUISITIONS 3084-0005 Expires 05/31/04 - ----------------------------------------------------------------------------------------------------------------------------------- THE INFORMATION REQUIRED TO BE SUPPLIED ON THESE ANSWER SHEETS IS SPECIFIED IN THE INSTRUCTIONS > Attach the Affidavit required by ss. 803.5 to this page. - ----------------------------------------------------------------------------------------------------------------------------------- FEE INFORMATION TAXPAYER IDENTIFICATION NUMBER _58-2210952_________________ or SOCIAL SECURITY NUMBER of payer ________________________ AMOUNT PAID $125,000 (acquiring person (and payer if different from acquiring person)) ------------ In cases where your filing fee would be higher if CHECK ATTACHED | | MONEY ORDER ATTACHED | | based on acquisition price or where the acquisition WIRE TRANSFER |X| CONFIRMATION NO. _0805E3B75D4C000289__ price is undetermined to the extent that it may FROM: NAME OF INSTITUTION _Wachovia Bank___________________ straddle a filing fee threshold, attach an explanation NAME OF PAYER (if different from PERSON FILING) __N/A_______ of how you determined the appropriate fee (acquiring persons only). Attachment Number _N/A_ - ----------------------------------------------------------------------------------------------------------------------------------- IS THIS A CORRECTIVE FILING? | | YES |X| NO - ----------------------------------------------------------------------------------------------------------------------------------- IS THIS ACQUISITION SUBJECT TO FOREIGN FILING REQUIREMENTS? | | YES |X| NO If YES, list jurisdictions: _______________________________ - ----------------------------------------------------------------------------------------------------------------------------------- IS THIS ACQUISITION A CASH TENDER OFFER? | | YES |X| NO | BANKRUPTCY? | | YES |X| NO - ----------------------------------------------------------------------------------------------------------------------------------- DO YOU REQUEST EARLY TERMINATION OF THE WAITING PERIOD? (Grants of early termination are published in the Federal Register AND |X| YES | | NO on the FTC web site www.ftc.gov) - ----------------------------------------------------------------------------------------------------------------------------------- ITEM 1 - PERSON FILING AGL Resources Inc. 1(a) NAME and Ten Peachtree Place HEADQUARTERS ADDRESS Atlanta, Georgia 30309 of PERSON FILING - ----------------------------------------------------------------------------------------------------------------------------------- 1(b) PERSON FILING NOTIFICATION IS |X| an acquiring person | | an acquired person | | both - ----------------------------------------------------------------------------------------------------------------------------------- 1(c) PUT AN "X" IN THE APPROPRIATE BOX TO DESCRIBE PERSON FILING NOTIFICATION |X| Corporation | | Partnership | | Other (Specify) _____________________________ - ----------------------------------------------------------------------------------------------------------------------------------- 1(d) DATA FURNISHED BY |X| calendar year | | fiscal year (specify period ) _________ (month/year) to ________ (month/year) - ----------------------------------------------------------------------------------------------------------------------------------- THIS FORM IS REQUIRED BY LAW and must be filed separately by this Form is confidential. It is exempt from disclosure each person which, by reason of a merger, consolidation or under the Freedom of Information Act, and may be made public acquisition, is subject to ss.7A of the Clayton Act, 15 only in an administrative or judicial proceeding, or U.S.C. ss.18a, as added by Section 201 of the disclosed to Congress or to a duly authorized committee or Hart-Scott-Rodino Antitrust Improvements Act of 1976, Pub. subcommittee of Congress. L. No. 94-435, 90 Stat. 1390, and rules promulgated thereunder (hereinafter referred to as "the rules" or by Filing - Complete and return two copies (with one original section number). The statute and rules are set forth in the affidavit and certification and one set of documentary Federal Register at 43 FR 33450; the rules may also be found attachments) of this Notification and Report Form to: at 16 CFR Parts 801-03. Failure to file this Notification Premerger Notification Office, Bureau of Competition, Room and Report Form, and to observe the required waiting period 303, Federal Trade Commission, 600 Pennsylvania Avenue, before consummating the acquisition in accordance with the N.W., Washington, D.C. 20580. Three copies (with one set of applicable provisions of 15 U.S.C. ss.18a and the rules, documentary attachments) should be sent to: Director of subjects any "person," as defined in the rules, or any Operations and Merger Enforcement, Antitrust Division, individuals responsible for noncompliance, to liability for Department of Justice, Patrick Henry Building, 601 D Street, a penalty of not more than $11,000 for each day during which N.W., Room #10013, Washington, D.C. 20530. (For FEDEX such person is in violation of 15 U.S.C. ss.18a. airbills to the Department of Justice, do not use the 20530 zip code; use zip code 20004.) All information and documentary material filed in or with - ----------------------------------------------------------------------------------------------------------------------------------- DISCLOSURE NOTICE - Public reporting burden for this report Under the Paperwork Reduction Act, as amended, an agency may is estimated to vary from 8 to 160 hours per response, with not conduct or sponsor, and a person is not required to an average of 39 hours per response, including time for respond to, a collection of information unless it displays a reviewing instructions, searching existing data sources, currently valid OMB control number. That number is gathering and maintaining the data needed, and completing 3084-0005, which also appears in the upper right-hand corner and reviewing the collection of information. Send comments of the first page of this form. regarding the burden estimate or any other aspect of this report, including suggestions for reducing this burden to: Premerger Notification Office, Office of Information and H-303 Regulatory Affairs, Federal Trade Commission Office of Management and Budget Washington, DC 20503 Washington, DC 20580 - ----------------------------------------------------------------------------------------------------------------------------------- FTC FORM C4 (rev. 07/01/01) 1 of 16 - ----------------------------------------------------------------------------------------------------------------------------------- NAME OF PERSON FILING NOTIFICATION DATE AGL Resources Inc. August 3, 2004 - ----------------------------------------------------------------------------------------------------------------------------------- 1(e) PUT AN X IN THE APPROPRIATE BOX AND GIVE THE NAME AND ADDRESS OF ENTITY FILING NOTIFICATION (if other than ultimate parent entity) - ----------------------------------------------------------------------------------------------------------------------------------- |X| NA | | This report is being filed on behalf of | | This report is being filed on behalf of the ultimate parent entity by a foreign person pursuant to ss. 803.4. another entity within the same person authorized by it to file pursuant to ss. 803.2(a). - ----------------------------------------------------------------------------------------------------------------------------------- NAME OF ENTITY FILING NOTIFICATION ADDRESS N/A - ----------------------------------------------------------------------------------------------------------------------------------- 1(f) NAME AND ADDRESS OF ENTITY MAKING ACQUISITION OR WHOSE ASSETS OR VOTING SECURITIES ARE BEING ACQUIRED IF DIFFERENT FROM THE ULTIMATE PARENT ENTITY IDENTIFIED IN ITEM 1(a) Cougar Corporation c/o AGL Resources Inc. Ten Peachtree Place Atlanta, Georgia 30309 - ----------------------------------------------------------------------------------------------------------------------------------- PERCENT OF VOTING SECURITIES HELD BY EACH ENTITY IDENTIFIED IN ITEM 1(a) One hundred percent (100%) - ----------------------------------------------------------------------------------------------------------------------------------- 1(g) IDENTIFICATION OF PERSON TO CONTACT REGARDING THIS REPORT - ----------------------------------------------------------------------------------------------------------------------------------- NAME OF CONTACT PERSON Christine A. Bergin, Esq. TITLE Counsel FIRM NAME LeBoeuf, Lamb, Greene & MacRae, LLP BUSINESS ADDRESS 125 West 55th Street New York, NY 10019 TELEPHONE NUMBER (212) 424-8138 FAX NUMBER (212) 424-8500 E-MAIL ADDRESS cbergin@llgm.com - ----------------------------------------------------------------------------------------------------------------------------------- (h) IDENTIFICATION OF AN INDIVIDUAL LOCATED IN THE UNITED STATES DESIGNATED FOR THE LIMITED PURPOSE OF RECEIVING NOTICE OF ISSUANCE OF A REQUEST FOR ADDITIONAL INFORMATION OR DOCUMENTS. (See ss. 803.20(b)(2)(iii)) - ----------------------------------------------------------------------------------------------------------------------------------- NAME OF CONTACT PERSON TITLE Not Applicable FIRM NAME BUSINESS ADDRESS TELEPHONE NUMBER FAX NUMBER E-MAIL ADDRESS - ----------------------------------------------------------------------------------------------------------------------------------- ITEM 2 - ----------------------------------------------------------------------------------------------------------------------------------- 2(a) LIST NAMES OF ULTIMATE PARENT ENTITIES OF ALL ACQUIRING LIST NAMES OF ULTIMATE PARENT ENTITIES OF ALL PERSONS ACQUIRED PERSONS AGL Resources Inc. NUI Corporation - ----------------------------------------------------------------------------------------------------------------------------------- 2(b) THIS ACQUISITION IS (put an X in all the boxes that apply) | | an acquisition of assets | | a consolidation (see ss. 801.2) |X| a merger (see ss. 801.2) | | an acquisition of voting securities | | an acquisition subject to ss. 801.2(e) | | a secondary acquisition | | a formation of a joint venture of other corporation (see ss. 801.40) | | an acquisition subject to ss. 801.31 | | an acquisition subject to ss. 801.30 (specify type) | | other (specify) ________________________ - ----------------------------------------------------------------------------------------------------------------------------------- 2(c) INDICATE THE HIGHEST NOTIFICATION THRESHOLD IN ss. 801.1(h) FOR WHICH THIS FORM IS BEING FILED (acquiring person only) | | $50 million | | $100 million | | $500 million | | 25% (see Instructions) |X| 50% - ----------------------------------------------------------------------------------------------------------------------------------- 2(d)(i) VALUE OF VOTING SECURITIES TO BE (ii) PERCENTAGE OF (iii) VALUE OF ASSETS TO BE HELD (iv) AGGREGATE TOTAL HELD AS A RESULT OF THE ACQUISITION VOTING SECURITIES AS A RESULT OF THE ACQUISITION VALUE approximately approximately $220,000,000 100% $ N/A $220,000,000 - ----------------------------------------------------------------------------------------------------------------------------------- FTC FORM C4 (rev. 07/01/01) 2 of 16 - ----------------------------------------------------------------------------------------------------------------------------------- NAME OF PERSON FILING NOTIFICATION DATE AGL Resources Inc. August 3, 2004 - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- 2(e) If aggregate total value in 2(d)(iv) is based in whole or in part on a fair market valuation pursuant to ss. 801.10(c)(3), identify the person or persons responsible for making the valuation (acquiring persons only). N/A - ----------------------------------------------------------------------------------------------------------------------------------- ITEM 3 3(a) DESCRIPTION OF ACQUISITION Acquiring Person Acquiring Entity ---------------- ---------------- AGL Resources Inc. Cougar Corporation Ten Peachtree Place c/o AGL Resources Inc. Atlanta, Georgia 30309 Ten Peachtree Place Atlanta, Georgia 30309 Acquired Person Acquired Entity --------------- --------------- NUI Corporation NUI Corporation 550 Route 202-206 550 Route 202-206 P.O. Box 760 P.O. Box 760 Bedminster, New Jersey 07921-0760 Bedminster, New Jersey 07921-0760 Pursuant to an Agreement and Plan of Merger dated July 14, 2004 between AGL Resources Inc., Cougar Corporation and NUI Corporation, the parties will execute a reverse triangular merger in which a newly formed subsidiary of AGL Resources Inc. will merge with and into NUI Corporation, with NUI Corporation as the surviving corporation. Each share of common stock of NUI Corporation outstanding at the date and time when the Merger shall become effective will be converted into the right to receive $13.70 in cash. Each share of common stock of the newly formed subsidiary of AGL Resources Inc. outstanding at the date and time when the Merger shall become effective will be converted into one share of the surviving corporation. The total value of the voting securities being acquired is approximately $220,000,000. This transaction is contingent upon the satisfaction of conditions stated in the Agreement and Plan of Merger, including the expiration or early termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and the approval of the transaction by the New Jersey Board of Public Utilities, the Florida Public Service Commission, the Maryland Public Service Commission and the Virginia State Corporation Commission. Closing will occur as soon as possible after these conditions are met. - ----------------------------------------------------------------------------------------------------------------------------------- FTC FORM C4 (rev. 07/01/01) 3 of 16 - ----------------------------------------------------------------------------------------------------------------------------------- NAME OF PERSON FILING NOTIFICATION DATE AGL Resources Inc. August 3, 2004 - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- 3(b)(i) ASSETS TO BE ACQUIRED (to be completed only for asset acquisitions) Not Applicable - ----------------------------------------------------------------------------------------------------------------------------------- 3(b)(ii) ASSETS HELD BY ACQUIRING PERSON Not Applicable - ----------------------------------------------------------------------------------------------------------------------------------- 3(c) VOTING SECURITIES TO BE ACQUIRED 3(c)(i) LIST AND DESCRIPTION OF VOTING SECURITIES AND LIST OF NON-VOTING SECURITIES: As a result of the acquisition, AGL Resources Inc. will hold 100% of the common stock, no par value per share, of NUI Corporation. The total value of the transaction is approximately $220,000,000. (See Item 3(a).) 3(c)(ii) TOTAL NUMBER OF SHARES OF EACH CLASS OF SECURITY: See Item 3(c)(i) 3(c)(iii) TOTAL NUMBER OF SHARES OF EACH CLASS OF SECURITY BEING ACQUIRED: See Item 3(c)(i) - ----------------------------------------------------------------------------------------------------------------------------------- FTC FORM C4 (rev. 07/01/01) 4 of 16 - ----------------------------------------------------------------------------------------------------------------------------------- NAME OF PERSON FILING NOTIFICATION DATE AGL Resources Inc. August 3, 2004 - ----------------------------------------------------------------------------------------------------------------------------------- 3(c)(iv) IDENTITY OF PERSONS ACQUIRING SECURITIES: See Item 3(c)(i) 3(c)(v) DOLLAR VALUE OF SECURITIES IN EACH CLASS BEING ACQUIRED: See Item 3(c)(i) 3(c)(vi) TOTAL NUMBER OF EACH CLASS OF SECURITIES TO BE HELD AS A RESULT OF THE ACQUISITION: See Item 3(c)(i) - ----------------------------------------------------------------------------------------------------------------------------------- 3(d) SUBMIT A COPY OF THE MOST RECENT VERSION OF CONTRACT OR AGREEMENT (or letter of intent to merge or acquire) Agreement and Plan of Merger dated July 14, 2004 DO NOT ATTACH THIS DOCUMENT TO THIS PAGE ATTACHMENT OR REFERENCE NUMBER OF CONTRACT OR AGREEMENT 3(d) - ----------------------------------------------------------------------------------------------------------------------------------- FTC FORM C4 (rev. 07/01/01) 5 of 16 - ----------------------------------------------------------------------------------------------------------------------------------- NAME OF PERSON FILING NOTIFICATION DATE AGL Resources Inc. August 3, 2004 - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- ITEM 4 PERSONS FILING NOTIFICATION MAY PROVIDE BELOW AN OPTIONAL INDEX OF DOCUMENTS REQUIRED TO BE SUBMITTED BY ITEM 4 (See Item by Item instructions). THESE DOCUMENTS SHOULD NOT BE ATTACHED TO THIS PAGE. 4(a) DOCUMENTS FILED WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION ATTACHMENT OR REFERENCE NUMBER AGL Resources Inc. Current Report on Form 8-K, filed on July 29, 2004 4(a)(i) AGL Resources Inc. Quarterly Report on Form 10-Q for the period ended June 30, 2004 4(a)(ii) AGL Resources Inc. Current Report on Form 8-K, filed on July 29, 2004 4(a)(iii) AGL Resources Inc. Current Report on Form 8-K, filed on July 15, 2004 4(a)(iv) AGL Resources Inc. Current Report on Form 8-K, filed on April 28, 2004 4(a)(v) AGL Resources Inc. Quarterly Report on Form 10-Q for the period ended March 31, 2004 4(a)(vi) AGL Resources Inc. Current Report on Form 8-K, filed on April 28, 2004 4(a)(vii) AGL Resources Inc. Current Report on Form 8-K, filed on April 28, 2004 4(a)(viii) AGL Resources Inc. Proxy Statement, filed March 5, 2004 4(a)(ix) AGL Resources Inc. Annual Report on Form 10-K for the period ended December 31, 2003 4(a)(x) AGL Resources Inc. Current Report on Form 8-K, filed on January 28, 2004 4(a)(xi) AGL Resources Inc. Current Report on Form 8-K, filed on January 28, 2004 4(a)(xii) AGL Resources Inc. Current Report on Form 8-K, filed on January 15, 2004 4(a)(xiii) - ----------------------------------------------------------------------------------------------------------------------------------- 4(b) ANNUAL REPORTS, ANNUAL AUDIT REPORTS, AND REGULARLY PREPARED BALANCE SHEETS ATTACHMENT OR REFERENCE NUMBER AGL Resources Inc. 2003 Annual Report, dated April 8, 2004 4(b)(i) AGL Resources Inc. Annual Audit Report for the fiscal year ended December 31, 2003 See 4(a)(vii) AGL Resources Inc. Balance Sheet for the quarterly period ended June 30, 2004 See 4(a)(ii) - ----------------------------------------------------------------------------------------------------------------------------------- 4(c) STUDIES, SURVEYS, ANALYSES, AND REPORTS ATTACHMENT OR REFERENCE NUMBER Project Derby Discussion Materials, regarding NUI Business and Acquisition Analysis, dated March 26, 2003 prepared by Bank of America 4(c)(i) Presentation Regarding Likely Acquisition Target, dated April 17, 2003 prepared by members of AGL Resources Inc.'s Acquisition Development Team 4(c)(ii) Confidential Information Memo dated November, 2003 and prepared by Credit Suisse First Boston/Berenson 4(c)(iii) AGL Resources Inc. Affiliate Sequent Energy Management Presentation on Transaction Highlights for Sequent's Business, undated, prepared by AGL Resources Inc. 4(c)(iv) FTC FORM C4 (rev. 07/01/01) 6 of 16 - ----------------------------------------------------------------------------------------------------------------------------------- NAME OF PERSON FILING NOTIFICATION DATE AGL Resources Inc. August 3, 2004 - ----------------------------------------------------------------------------------------------------------------------------------- NUI Corporation Management Presentation on Operations - Energy Asset Management, dated as of January 2004, prepared by NUI Corporation 4(c)(v) NUI Corporation Discussion Materials, Management Presentation dated January, 2004 and prepared by Credit Suisse First Boston/Berenson 4(c)(vi) Discussion Materials for AGL Resources Inc.'s Board of Directors, dated July 13, 2004, prepared by Morgan Stanley 4(c)(vii) AGL Resources Inc. Acquisition of NUI Corporation, presentation to Investors, dated July 15, 2004, prepared by AGL Resources Inc. 4(c)(viii) - ----------------------------------------------------------------------------------------------------------------------------------- FTC FORM C4 (rev. 07/01/01) 7 of 16 - ----------------------------------------------------------------------------------------------------------------------------------- NAME OF PERSON FILING NOTIFICATION DATE AGL Resources Inc. August 3, 2004 - ----------------------------------------------------------------------------------------------------------------------------------- ITEM 5 (See the "References" listed in the General Instructions to the Form. Refer to the North American Industry Classification System-United States, 1997 (1997 NAICS Manual) for the 6-digit (NAICS) industry codes. Refer to the 1997 Numerical List of Manufactured and Mineral Products (EC97M31R-NL) for the 7-digit product class codes and the 10-digit product codes. Report revenues for the 7-digit product class codes and 10-digit product codes using the codes in the columns labeled "Product code." For further information on NAICS-based codes visit the www.census.gov web site.) 5(a) DOLLAR REVENUES BY INDUSTRY 6-DIGIT | | 1997 TOTAL INDUSTRY CODE | DESCRIPTION | DOLLAR REVENUES | | | | 221210 | Natural Gas Distribution | $1,493,915,000 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | - ----------------------------------------------------------------------------------------------------------------------------------- FTC FORM C4 (rev. 07/01/01) 8 of 16 - ----------------------------------------------------------------------------------------------------------------------------------- NAME OF PERSON FILING NOTIFICATION DATE AGL Resources Inc. August 3, 2004 - ----------------------------------------------------------------------------------------------------------------------------------- ITEM 5(b)(i) DOLLAR REVENUES BY MANUFACTURED PRODUCTS 10-DIGIT | | 1997 TOTAL PRODUCT CODE | DESCRIPTION | DOLLAR REVENUES | | | | None | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | - ----------------------------------------------------------------------------------------------------------------------------------- FTC FORM C4 (rev. 07/01/01) 9 of 16 - ----------------------------------------------------------------------------------------------------------------------------------- NAME OF PERSON FILING NOTIFICATION DATE AGL Resources Inc. August 3, 2004 - ----------------------------------------------------------------------------------------------------------------------------------- ITEM 5(b)(ii) PRODUCTS ADDED OR DELETED | | | YEAR | DESCRIPTION (10-DIGIT PRODUCT CODE) | ADD | DELETE| OF | TOTAL DOLLAR | | | CHANGE | REVENUES | | | | None | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | - ----------------------------------------------------------------------------------------------------------------------------------- ITEM 5(b)(iii) DOLLAR REVENUES BY MANUFACTURED PRODUCT CLASS 7-DIGIT | | YEAR PRODUCT CLASS | DESCRIPTION | [_______] | | TOTAL DOLLAR REVENUES | | None | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | (Item 5(b)(iii) continued on page 10) | - ----------------------------------------------------------------------------------------------------------------------------------- FTC FORM C4 (rev. 07/01/01) 10 of 16 - ----------------------------------------------------------------------------------------------------------------------------------- NAME OF PERSON FILING NOTIFICATION DATE AGL Resources Inc. August 3, 2004 - ----------------------------------------------------------------------------------------------------------------------------------- ITEM 5(b)(iii) DOLLAR REVENUES BY MANUFACTURED PRODUCT CLASS - CONTINUED 7-DIGIT | | YEAR PRODUCT CLASS | DESCRIPTION | [_______] | | TOTAL DOLLAR REVENUES | | None | | | | | | | | | | | | | | | | | | | | | | - ------------------------------------------------------------------------------------------------------------------------------------ ITEM 5(c) DOLLAR REVENUES BY NON-MANUFACTURING INDUSTRY 6-DIGIT | | YEAR INDUSTRY CODE | DESCRIPTION | [_2003_] | | TOTAL DOLLAR REVENUES | | 221210 | Natural Gas Distribution | $1,722,138,000 | | 517310 | Telecommunications Reseller | $6,392,000 | | | | | | | | | | | | | | | | | | - ----------------------------------------------------------------------------------------------------------------------------------- FTC FORM C4 (rev. 07/01/01) 11 of 16 - ----------------------------------------------------------------------------------------------------------------------------------- NAME OF PERSON FILING NOTIFICATION DATE AGL Resources Inc. August 3, 2004 - ----------------------------------------------------------------------------------------------------------------------------------- 5(d) COMPLETE ONLY IF ACQUISITION IS IN THE FORMATION OF A JOINT VENTURE OR OTHER CORPORATION - ----------------------------------------------------------------------------------------------------------------------------------- 5(d)(I) NAME AND ADDRESS OF THE JOINT VENTURE OR OTHER CORPORATION N/A - ----------------------------------------------------------------------------------------------------------------------------------- 5(d)(ii) (A) CONTRIBUTIONS THAT EACH PERSON FORMING THE JOINT VENTURE OR OTHER CORPORATION HAS AGREED TO MAKE N/A - ----------------------------------------------------------------------------------------------------------------------------------- (B) DESCRIPTION OF ANY CONTRACTS OR AGREEMENTS N/A - ----------------------------------------------------------------------------------------------------------------------------------- (C) DESCRIPTION OF ANY CREDIT GUARANTEES OR OBLIGATIONS N/A - ----------------------------------------------------------------------------------------------------------------------------------- (D) DESCRIPTION OF CONSIDERATION WHICH EACH PERSON FORMING THE JOINT VENTURE OR OTHER CORPORATION WILL RECEIVE N/A - ----------------------------------------------------------------------------------------------------------------------------------- 5(d)(iii) DESCRIPTION OF THE BUSINESS IN WHICH THE JOINT VENTURE OR OTHER CORPORATION WILL ENGAGE N/A - ----------------------------------------------------------------------------------------------------------------------------------- 5(d)(iv) SOURCE OF DOLLAR REVENUES BY 6-DIGIT INDUSTRY CODE (non-manufacturing) AND BY 7-DIGIT PRODUCT CLASS (manufacturing) N/A - ----------------------------------------------------------------------------------------------------------------------------------- FTC FORM C4 (rev. 07/01/01) 12 of 16 - ----------------------------------------------------------------------------------------------------------------------------------- NAME OF PERSON FILING NOTIFICATION DATE AGL Resources Inc. August 3, 2004 - ----------------------------------------------------------------------------------------------------------------------------------- ITEM 6 6(a) ENTITIES WITHIN PERSON FILING NOTIFICATION AGL Resources Inc. AGL Capital Corporation Ten Peachtree Place 2325-B Renaissance Dr. Atlanta, Georgia 30309 Las Vegas, Nevada 89119 AGL Networks, LLC AGL Services Company 1200 Smith Street, #900 Ten Peachtree Place Houston, TX 77002 Atlanta, Georgia 30309 Atlanta Gas Light Company Chattanooga Gas Company Ten Peachtree Place 2207 Olan Mills Drive Atlanta, Georgia 30309 Chattanooga, TN 37421 Georgia Natural Gas Company SouthStar Energy Services LLC Ten Peachtree Place 817 West Peachtree Street Atlanta, Georgia 30309 Atlanta, Georgia 30308 Sequent Energy Management, LP Virginia Natural Gas, Inc. 1200 Smith Street, #900 5100 East Virginia Beach Blvd. Houston, TX 77002 Norfolk, VA 23502 AGL Investments, Inc. Pivotal Propane of Virginia, Inc. Ten Peachtree Place 1200 Smith Street, #900 Atlanta, Georgia 30309 Houston, TX 77002 - ----------------------------------------------------------------------------------------------------------------------------------- 6(b) SHAREHOLDERS OF PERSON FILING NOTIFICATION Name and Address of Beneficial Shares of Common Stock Percent of Class Owner Beneficially Owned AGL Resources Inc. Retirement 3,863,532(1) 6.0% Savings Plus Plan P.O. Box 4569 Atlanta, Georgia 30302 American Century Investment 4,020,988(2) 6.2% Management, Inc. 4500 Main Street P.O. Box 418210 Kansas City, Missouri 64111 (1) As of December 31, 2003. (2) Based on a Schedule 13G/A dated February 13, 2004, in which American Century Investment Management, Inc. reported that it had sole voting power with respect to 3,958,741 of these shares and sole dispositive power with respect to all 4,020,988 shares. - ----------------------------------------------------------------------------------------------------------------------------------- FTC FORM C4 (rev. 07/01/01) 13 of 16 - ----------------------------------------------------------------------------------------------------------------------------------- NAME OF PERSON FILING NOTIFICATION DATE AGL Resources Inc. August 3, 2004 - ----------------------------------------------------------------------------------------------------------------------------------- 6(c) HOLDINGS OF PERSON FILING NOTIFICATION None - ----------------------------------------------------------------------------------------------------------------------------------- ITEM 7 DOLLAR REVENUES 7(a) 6-DIGIT NAICS CODE AND DESCRIPTION 221210 Natural Gas Distribution - ----------------------------------------------------------------------------------------------------------------------------------- 7(b) NAME OF EACH PERSON WHICH ALSO DERIVED DOLLAR REVENUES NUI Corporation - ----------------------------------------------------------------------------------------------------------------------------------- FTC FORM C4 (rev. 07/01/01) 14 of 16 - ----------------------------------------------------------------------------------------------------------------------------------- NAME OF PERSON FILING NOTIFICATION DATE AGL Resources Inc. August 3, 2004 - ----------------------------------------------------------------------------------------------------------------------------------- 7(c) GEOGRAPHIC MARKET INFORMATION 7(c)(i) N/A 7(c)(ii) 221210 - Georgia, Tennessee, Virginia. Sequent Energy Management, LP manages assets and properties nationwide and conducts its operations in Texas 7(c)(iii) N/A 7(c)(iv) N/A 7(c)(v) N/A 7(c)(vi) N/A - ----------------------------------------------------------------------------------------------------------------------------------- ITEM 8 PRIOR ACQUISITIONS (to be completed by acquiring person only) Not Applicable - ----------------------------------------------------------------------------------------------------------------------------------- FTC FORM C4 (rev. 07/01/01) 15 of 16 - ----------------------------------------------------------------------------------------------------------------------------------- NAME OF PERSON FILING NOTIFICATION DATE AGL Resources Inc. August 3, 2004 - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- CERTIFICATION - ----------------------------------------------------------------------------------------------------------------------------------- This NOTIFICATION AND REPORT FORM, together with any and all appendices and attachments thereto, was prepared and assembled under my supervision in accordance with instructions issued by the Federal Trade Commission. Subject to the recognition that, where so indicated, reasonable estimates have been made because books and records do not provide the required data, the information is, to the best of my knowledge, true, correct, and complete in accordance with the statute and rules. - ----------------------------------------------------------------------------------------------------------------------------------- NAME (Please print or type) | TITLE | Richard T. O'Brien | Executive Vice President and Chief | Financial Officer | | - ----------------------------------------------------------------------------------------------------------------------------------- SIGNATURE | DATE | | August 3, 2004 | - ----------------------------------------------------------------------------------------------------------------------------------- Subscribed and sworn to before me at the City of _______________, State of _______________ this _______________day of _______________, the year __________ Signature __________________________________ My Commission expires __________________________ - ----------------------------------------------------------------------------------------------------------------------------------- [SEAL]
FTC FORM C4 (rev. 07/01/01) 16 of 16 EX-99.9 8 ex99-9.txt EX G-2 APPLICATION TO THE FCC
===================================================================================================================== FCC 603 FCC Wireless Telecommunications Approved by OMB Bureau Application for Assignments of Authorization 3060 - 0800 and Transfers of Control See instructions for public burden estimate ===================================================================================================================== Previewed 09/29/2004 at 12:46PM ======================================================================================== File Number: 0001883172 ===================================================================================================================== ===================================================================================================================== 1) Application Purpose: Transfer of Control ===================================================================================================================== 2a) If this request is for an Amendment or Withdrawal, enter the File Number File Number: of the pending application currently on file with the FCC: ===================================================================================================================== 2b) File numbers of related pending applications currently on file with the FCC: ===================================================================================================================== Type of Transaction ===================================================================================================================== 3a) Is this a pro forma assignment of authorization or transfer of control? No ===================================================================================================================== 3b) If the answer to Item 3a is 'Yes', is this a notification of a pro forma transaction being filed under the Commission's forbearance procedures for telecommunications licenses? ===================================================================================================================== 4) For assignment of authorization only, is this a partition and/or disaggregation? ===================================================================================================================== 5a) Does this filing request a waiver of the Commission rules? If 'Yes', attach an exhibit providing the rule numbers and explaining circumstances. No ===================================================================================================================== 5b) If a feeable waiver request is attached, multiply the number of stations (call signs) times the number of rule Sections and enter the result. ===================================================================================================================== 6) Are attachments being filed with this application? Yes ===================================================================================================================== 7a) Does the transaction that is the subject of this application also involve transfer or assignment of other wireless licenses held by the assignor/transferor or affiliates of the assignor/transferor (e.g., parents, subsidiaries, or commonly controlled entities) that are not included on this form and for which Commission approval is required? Yes ===================================================================================================================== 7b) Does the transaction that is the subject of this application also involve transfer or assignment of non-wireless licenses that are not included on this form and for which Commission approval is required? No ===================================================================================================================== Transaction Information ===================================================================================================================== 8) How will assignment of authorization or transfer of control be accomplished? Sale or other assignment or transfer of stock If required by applicable rule, attach as an exhibit a statement on how control is to be assigned or transferred, along with copies of any pertinent contracts, agreements, instruments, certified copies of Court Orders, etc. ===================================================================================================================== 9) The assignment of authorization or transfer of control of license is: Voluntary ===================================================================================================================== Licensee/Assignor Information ===================================================================================================================== 10) FCC Registration Number (FRN): 0010655132 ===================================================================================================================== 11) First Name (if individual): MI: Last Name: Suffix: ===================================================================================================================== 12) Entity Name (if not an individual): NUI - Elkton Gas ===================================================================================================================== 13) Attention To: Jeanne M. Bratsafolis ===================================================================================================================== 14) P.O. Box: 760 And / Or 15) Street Address: 550 Route 202-206 ===================================================================================================================== 16) City: Bedminster 17) State: NJ 18) Zip Code: 07912-0760 ===================================================================================================================== 19) Telephone Number: (908)719-4248 20) FAX Number: (908)781-1098 ===================================================================================================================== 21) E-Mail Address: ===================================================================================================================== 22) Race, Ethnicity, Gender of Assignor/Licensee (Optional) ===================================================================================================================== Race: American Indian or Alaska Asian: Black or Native Hawaiian or Other White: Native: African-American: Pacific Islander: ===================================================================================================================== Ethnicity: Hispanic or Latino: Not Hispanic or Latino: ===================================================================================================================== Gender: Female: Male: ===================================================================================================================== Transferor Information (for transfers of control only) ===================================================================================================================== 23) FCC Registration Number (FRN): 0011501517 ===================================================================================================================== 24) First Name (if individual): MI: Last Name: Suffix: ===================================================================================================================== 25) Entity Name (if not an individual): NUI Corporation ===================================================================================================================== 26) P.O. Box: 760 And / Or 27) Street Address: 550 Route 202-206 ===================================================================================================================== 28) City: Bedminster 29) State: NJ 30) Zip Code: 07912-0760 ===================================================================================================================== 31) Telephone Number: (908)719-4248 32) FAX Number: (908)781-1098 ===================================================================================================================== 33) E-Mail Address: ===================================================================================================================== Name of Transferor Contact Representative (if other than Transferor) (for transfers of control only) ===================================================================================================================== 34) First Name: Scott MI: S Last Name: Patrick Suffix: Esq ===================================================================================================================== 35) Company Name: Dow, Lohnes & Albertson, pllc ===================================================================================================================== 36) P.O. Box: And / Or 37) Street Address: 1200 New Hampshire Avenue, NW, #800 ===================================================================================================================== 38) City: Washington 39) State: DC 40) Zip Code: 20036 ===================================================================================================================== 41) Telephone Number: (202)776-2000 42) FAX Number: (202)776-2222 ===================================================================================================================== 43) E-Mail Address: spatrick@dlalaw.com ===================================================================================================================== Assignee/Transferee Information ===================================================================================================================== 44) The Assignee is a(n): Corporation ===================================================================================================================== 45) FCC Registration Number (FRN): 0011431368 ===================================================================================================================== 46) First Name (if individual): MI: Last Name: Suffix: ===================================================================================================================== 47) Entity Name (if other than individual): AGL Resources Inc. ===================================================================================================================== 48) Name of Real Party in Interest: 49) TIN: ===================================================================================================================== 50) Attention To: Suzanne Thigpen ===================================================================================================================== 51) P.O. Box: And / Or 52) Street Address: Ten Peachtree Place ===================================================================================================================== 53) City: Atlanta 54) State: 55) Zip Code: 30309 GA ===================================================================================================================== 56) Telephone Number: (404)584-3978 57) FAX Number: ===================================================================================================================== 58) E-Mail Address: sthigpen@aglresources.com ===================================================================================================================== Name of Assignee/Transferee Contact Representative (if other than Assignee/Transferee) ===================================================================================================================== 59) First Name: Roshini MI: S Last Name: Thayaparan Suffix: ===================================================================================================================== 60) Company Name: LeBoeuf, Lamb, Greene & MacRae, L.L.P. ===================================================================================================================== 61) P.O. Box: And / Or 62) Street Address: 1875 Connecticut Avenue, NW Suite 1200 ===================================================================================================================== 63) City: Washington 64) State: DC 65) Zip Code: 20009 ===================================================================================================================== 66) Telephone Number: (202)986-8065 67) FAX Number: (202)956-3305 ===================================================================================================================== 68) E-Mail Address: rthayaparan@llgm.com ===================================================================================================================== Alien Ownership Questions ===================================================================================================================== 69) Is the Assignee or Transferee a foreign government or the representative of any foreign government? No ===================================================================================================================== 70) Is the Assignee or Transferee an alien or the representative of an alien? No ===================================================================================================================== 71) Is the Assignee or Transferee a corporation organized under the laws of any foreign government? No ===================================================================================================================== 72) Is the Assignee or Transferee a corporation of which more than one-fifth of the capital stock is owned of No record or voted by aliens or their representatives or by a foreign government or representative thereof or by any corporation organized under the laws of a foreign country? ===================================================================================================================== 73) Is the Assignee or Transferee directly or indirectly controlled by any other corporation of which more No than one-fourth of the capital stock is owned of record or voted by aliens, their representatives, or by a foreign government or representative thereof, or by any corporation organized under the laws of a foreign country? If 'Yes', attach exhibit explaining nature and extent of alien or foreign ownership or control. ===================================================================================================================== Basic Qualification Questions ===================================================================================================================== 74) Has the Assignee or Transferee or any party to this application had any FCC station authorization, license No or construction permit revoked or had any application for an initial, modification or renewal of FCC station authorization, license, construction permit denied by the Commission? If 'Yes', attach exhibit explaining circumstances. ===================================================================================================================== 75) Has the Assignee or Transferee or any party to this application, or any party directly or indirectly No controlling the Assignee or Transferee, or any party to this application ever been convicted of a felony by any state or federal court? If 'Yes', attach exhibit explaining circumstances. ===================================================================================================================== 76) Has any court finally adjudged the Assignee or Transferee, or any party directly or indirectly controlling No the Assignee or Transferee guilty of unlawfully monopolizing or attempting unlawfully to monopolize radio communication, directly or indirectly, through control of manufacture or sale of radio apparatus, exclusive traffic arrangement, or any other means or unfair methods of competition? If 'Yes', attach exhibit explaining circumstances. ===================================================================================================================== 77) Is the Assignee or Transferee, or any party directly or indirectly controlling the Assignee or Transferee No currently a party in any pending matter referred to in the preceding two items? If 'Yes', attach exhibit explaining circumstances. ===================================================================================================================== 78) Race, Ethnicity, Gender of Assignee/Transferee (Optional) ===================================================================================================================== Race: American Indian or Asian: Black or Native Hawaiian or Other White: Alaska Native: African-American: Pacific Islander: ===================================================================================================================== Ethnicity: Hispanic or Latino: Not Hispanic or Latino: ======================================================= Gender: Female: Male: ===================================================================================================================== Assignor/Transferor Certification Statements ===================================================================================================================== 1) The Assignor or Transferor certifies either (1) that the authorization will not be assigned or that control of the license will not be transferred until the consent of the Federal Communications Commission has been given, or (2) that prior Commission consent is not required because the transaction is subject to streamlined notification procedures for pro forma assignments and transfers by telecommunications carriers. See Memorandum Opinion and Order, 13 FCC Rcd. 6293(1998). ===================================================================================================================== 2) The Assignor or Transferor certifies that all statements made in this application and in the exhibits, attachments, or in documents incorporated by reference are material, are part of this application, and are true, complete, correct, and made in good faith. ===================================================================================================================== 79) Typed or Printed Name of Party Authorized to Sign ===================================================================================================================== First Name: Steven MI: D Last Name: Overly Suffix: ===================================================================================================================== 80) Title: Vice President, CFO & General Counsel ===================================================================================================================== Signature: Steven D Overly 81) Date: 09/24/04 ===================================================================================================================== Assignee/Transferee Certification Statements ===================================================================================================================== 1) The Assignee or Transferee certifies either (1) that the authorization will not be assigned or that control of the license will not be transferred until the consent of the Federal Communications Commission has been given, or (2) that prior Commission consent is not required because the transaction is subject to streamlined notification procedures for pro forma assignments and transfers by telecommunications carriers See Memorandum Opinion and Order, 13 FCC Rcd. 6293 (1998). ===================================================================================================================== 2) The Assignee or Transferee waives any claim to the use of any particular frequency or of the electromagnetic spectrum as against the regulatory power of the United States because of the previous use of the same, whether by license or otherwise, and requests an authorization in accordance with this application. ===================================================================================================================== 3) The Assignee or Transferee certifies that grant of this application would not cause the Assignee or Transferee to be in violation of any pertinent cross-ownership, attribution, or spectrum cap rule.* *If the applicant has sought a waiver of any such rule in connection with this application, it may make this certification subject to the outcome of the waiver request. ===================================================================================================================== 4) The Assignee or Transferee agrees to assume all obligations and abide by all conditions imposed on the Assignor or Transferor under the subject authorization(s), unless the Federal Communications Commission pursuant to a request made herein otherwise allows, except for liability for any act done by, or any right accured by, or any suit or proceeding had or commenced against the Assignor or Transferor prior to this assignment. ===================================================================================================================== 5) The Assignee or Transferee certifies that all statements made in this application and in the exhibits, attachments, or in documents incorporated by reference are material, are part of this application, and are true, complete, correct, and made in good faith. ===================================================================================================================== 6) The Assignee or Transferee certifies that neither it nor any other party to the application is subject to a denial of Federal benefits pursuant to Section 5301 of the Anti-Drug Abuse Act of 1998, 21 U.S.C ss. 862, because of a conviction for possession or distribution of a controlled substance. See Section 1.2002(b) of the rules, 47 CFR ss. 1.2002(b), for the definition of "party to the application" as used in this certification. ===================================================================================================================== 7) The applicant certifies that it either (1) has an updated Form 602 on file with the Commission, (2) is filing an updated Form 602 simultaneously with this application, or (3) is not required to file Form 602 under the Commission's rules. ===================================================================================================================== 82) Typed or Printed Name of Party Authorized to Sign ===================================================================================================================== First Name: Catherine MI: L Last Name: Waters Suffix: ===================================================================================================================== 83) Title: Sr. Vice President Business Technology ===================================================================================================================== Signature: Catherine L Waters 84) Date: 09/24/04 ===================================================================================================================== WILLFUL FALSE STATEMENTS MADE ON THIS FORM OR ANY ATTACHMENTS ARE PUNISHABLE BY FINE AND/OR IMPRISONMENT (U.S. Code, Title 18, Section 1001) AND/OR REVOCATION OF ANY STATION LICENSE OR CONSTRUCTION PERMIT (U.S. Code, Title 47, Section 312(a)(1)), AND/OR FORFEITURE (U.S. Code, Title 47, Section 503). ===================================================================================================================== Authorizations To Be Assigned or Transferred ===================================================================================================================== 87) 88) Path 89) 90) Lower 91) Upper 92) 93) 85) Call 86) Radio Location Number Frequency or Center Frequency Constructed Assigment Sign Service (Number Microwave Number Frequency (MHz) Yes/No Indicator only) (MHz) ===================================================================================================================== WPNR870 Yes ===================================================================================================================== ===================================================================================================================== Approved by OMB FCC Form 603 Schedule for Assignments of Authorization 3060 - 0800 Schedule A and Transfers of Control in Auctioned Services See instructions for public burden estimate ===================================================================================================================== Assignments of Authorization 1) Assignee Eligibility for Installment Payments (for assignments of authorization only) =========================================================================================================== Is the Assignee claiming the same category or a smaller category of eligibility for installment payments as the Assignor (as determined by the applicable rules governing the licenses issued to the Assignor)? =========================================================================================================== If 'Yes', is the Assignee applying for installment payments? =========================================================================================================== 2) Gross Revenues and Total Assets Information (if required) (for assignments of authorization only) Refer to applicable auction rules for method to determine required gross revenues and total assets information ===================================================================================================================== Year 1 Gross Revenues (current) Year 2 Gross Revenues Year 3 Gross Revenues Total Assets: ===================================================================================================================== 3) Certification Statements For Assignees Claiming Eligibility as an Entrepreneur Under the General Rule ===================================================================================================================== Assignee certifies that they are eligible to obtain the licenses for which they apply. ===================================================================================================================== For Assignees Claiming Eligibility as a Publicly Traded Corporation ===================================================================================================================== Assignee certifies that they are eligible to obtain the licenses for which they apply and that they comply with the definition of a Publicly Traded Corporation, as set out in the applicable FCC rules. ===================================================================================================================== For Assignees Claiming Eligibility Using a Control Group Structure ===================================================================================================================== Assignee certifies that they are eligible to obtain the licenses for which they apply. ===================================================================================================================== Assignee certifies that the applicant's sole control group member is a pre-existing entity, if applicable. ===================================================================================================================== For Assignees Claiming Eligibility as a Very Small Business, Very Small Business Consortium, Small Business, or as a Small Business Consortium ===================================================================================================================== Assignee certifies that they are eligible to obtain the licenses for which they apply. ===================================================================================================================== Assignee certifies that the applicant's sole control group member is a pre-existing entity, if applicable. ===================================================================================================================== For Assignees Claiming Eligibility as a Rural Telephone Company ===================================================================================================================== Assignee certifies that they meet the definition of a Rural Telephone Company as set out in the applicable FCC rules, and must disclose all parties to agreement(s) to partition licenses won in this auction. See applicable FCC rules. ===================================================================================================================== Transfers of Control 4) Licensee Eligibility (for transfers of control only) ===================================================================================================================== As a result of transfer of control, must the licensee now claim a larger or higher category of eligibility than was originally declared? No ===================================================================================================================== If 'Yes', the new category of eligibility of the licensee is: Certification Statement for Transferees ===================================================================================================================== Transferee certifies that the answers provided in Item 4 are true and correct. ===================================================================================================================== Attachment List ===================================================================================================================== Attachment Type Date Description Contents ===================================================================================================================== Other 09/24/04 Transferor Exhibits 0179648586223488655763647.pdf ===================================================================================================================== Other 09/24/04 Transferee Exhibit 0179648596223488655763647.pdf =====================================================================================================================
FCC Form 603 Exhibit 1 Page 1 of 1 EXHIBIT 1 Description of Transaction By this application, NUI - Elkton Gas ("Licensee"), licensee of WPNR870 (the "Station"), and NUI Corporation, the ultimate parent corporation, request the Commission's consent to the transfer of control of the Station's license. Licensee is a division of NUI Utilities, Inc., a wholly owned subsidiary of NUI Corporation. NUI Corporation is the proposed transferor. The proposed transferee is AGL Resources Inc. ("AGL"), whose subsidiary Cougar Corporation - created solely for the purposes of this transaction - would be merged with and into NUI Corporation, with NUI Corporation remaining as the surviving corporation following the merger as a wholly owned subsidiary of AGL. The license of the Station will continue to be held by Licensee with AGL as its ultimate parent. NUI Corporation and AGL are concurrently filing with the Commission an application proposing the transfer of other licenses, and all of the licenses involved are listed below. Following Commission consent to the transfer applications and consummation of the transaction, AGL intends to use the Station in the same manner and for the same purposes as before the transfer. Both NUI Corporation and AGL are utility companies, and the Station is incidental to their core business. The transfer proposed herein will not result in any violation of the Communications Act of 1934, as amended, or any other applicable statutory provision. Moreover, the proposed transaction fully complies with all Commission rules and regulations and does not require any waivers pertinent to the transaction. Accordingly, grant of this transfer application would serve the public interest. --------------------------------------------------------------- Call Sign Service Type Licensee --------------------------------------------------------------- KBD722 IG NUI Utilities, Inc. --------------------------------------------------------------- KEB656 IG NUI Utilities, Inc. --------------------------------------------------------------- KJC559 IG NUI Utilities, Inc. --------------------------------------------------------------- KNGS265 IG NUI Utilities, Inc. --------------------------------------------------------------- KOP399 IG NUI Utilities, Inc. --------------------------------------------------------------- WPNR870 IG NUI - Elkton Gas --------------------------------------------------------------- WPRS610 MG NUI Utilities, Inc. --------------------------------------------------------------- WPRS612 MG NUI Utilities, Inc. --------------------------------------------------------------- WPRS613 MG NUI Utilities, Inc. --------------------------------------------------------------- WPRS615 MG NUI Utilities, Inc. --------------------------------------------------------------- WPRS616 MG NUI Utilities, Inc. --------------------------------------------------------------- WPRS617 MG NUI Utilities, Inc. --------------------------------------------------------------- WPRS618 MG NUI Utilities, Inc. --------------------------------------------------------------- WPRT334 MG NUI Utilities, Inc. --------------------------------------------------------------- FCC Form 603 Exhibit 2 Page 1 of 1 EXHIBIT 2 Request For Expedited Processing The parties wish to consummate the transaction proposed in the instant application by the end of October 2004. To the extent necessary for the Commission to process this application in such a time frame, expedited processing is respectfully requested. FCC Form 603 Exhibit 3 Page 1 of 1 EXHIBIT 3 MAS Certification Private Internal Certification Consistent with section 47 C.F.R. ss. 101.1309, AGL Resources Inc. hereby certifies that the Multiple Address Systems (MAS) included on this application will be used for private internal use only and will not be employed to provide service to third parties on a for-hire or for-profit basis.
===================================================================================================================== ======================================================================================== ============================ FCC 603 FCC Wireless Telecommunications Bureau Approved by OMB Application for Assignments of Authorization 3060 - 0800 and Transfers of Control See instructions for public burden estimate ======================================================================================== Previewed 09/29/2004 at 12:39PM ======================================================================================== File Number: 0001881888 ===================================================================================================================== 1) Application Purpose: Transfer of Control ===================================================================================================================== 2a) If this request is for an Amendment or Withdrawal, enter the File Number of File Number: the pending application currently on file with the FCC: ===================================================================================================================== 2b) File numbers of related pending applications currently on file with the FCC: ===================================================================================================================== Type of Transaction ===================================================================================================================== 3a) Is this a pro forma assignment of authorization or transfer of control? No ===================================================================================================================== 3b) If the answer to Item 3a is 'Yes', is this a notification of a pro forma transaction being filed under the Commission's forbearance procedures for telecommunications licenses? ===================================================================================================================== 4) For assignment of authorization only, is this a partition and/or disaggregation? ===================================================================================================================== 5a) Does this filing request a waiver of the Commission rules? If 'Yes', attach an exhibit providing the rule numbers and explaining circumstances. No ===================================================================================================================== 5b) If a feeable waiver request is attached, multiply the number of stations (call signs) times the number of rule Sections and enter the result. ===================================================================================================================== 6) Are attachments being filed with this application? Yes ===================================================================================================================== 7a) Does the transaction that is the subject of this application also involve transfer or assignment of other wireless licenses held by the assignor/transferor or affiliates of the assignor/transferor (e.g., parents, subsidiaries, or commonly controlled entities) that are not included on this form and for which Commission approval is required? Yes ===================================================================================================================== 7b) Does the transaction that is the subject of this application also involve transfer or assignment of non-wireless licenses that are not included on this form and for which Commission approval is required? No ===================================================================================================================== Transaction Information ===================================================================================================================== 8) How will assignment of authorization or transfer of control be accomplished? Sale or other assignment or transfer of stock If required by applicable rule, attach as an exhibit a statement on how control is to be assigned or transferred, along with copies of any pertinent contracts, agreements, instruments, certified copies of Court Orders, etc. ===================================================================================================================== 9) The assignment of authorization or transfer of control of license is: Voluntary ===================================================================================================================== Licensee/Assignor Information ====================================================================================================================== 10) FCC Registration Number (FRN): 0003308145 ====================================================================================================================== 11) First Name (if individual): MI: Last Name: Suffix: ====================================================================================================================== 12) Entity Name (if not an individual): NUI Utilities, Inc. ====================================================================================================================== 13) Attention To: Jeanne M. Bratsafolis ====================================================================================================================== 14) P.O. Box: 760 And / Or 15) Street Address: 550 Route 202-206 ====================================================================================================================== 16) City: Bedminster 17) State: NJ 18) Zip Code: 07912-0760 ====================================================================================================================== 19) Telephone Number: (908)719-4248 20) FAX Number: (908)781-1098 ====================================================================================================================== 21) E-Mail Address: ====================================================================================================================== 22) Race, Ethnicity, Gender of Assignor/Licensee (Optional) ====================================================================================================================== Race: American Indian or Alaska Asian: Black or Native Hawaiian or Other White: Native: African-American: Pacific Islander: ====================================================================================================================== Ethnicity: Hispanic or Latino: Not Hispanic or Latino: ========================================================== Gender: Female: Male: ====================================================================================================================== Transferor Information (for transfers of control only) ===================================================================================================================== 23) FCC Registration Number (FRN): 0011501517 ===================================================================================================================== 24) First Name (if individual): MI: Last Name: Suffix: ===================================================================================================================== 25) Entity Name (if not an individual): NUI Corporation ===================================================================================================================== 26) P.O. Box: 760 And / Or 27) Street Address: 550 Route 202-206 =================================================================================== ================================= 28) City: Bedminster 29) State: NJ 30) Zip Code: 07912-0760 ===================================================================================================================== 31) Telephone Number: (908)719-4248 32) FAX Number: (908)781-1098 ===================================================================================================================== 33) E-Mail Address: ===================================================================================================================== Name of Transferor Contact Representative (if other than Transferor) (for transfers of control only) ===================================================================================================================== 34) First Name: Scott MI: S Last Name: Patrick Suffix: Esq ===================================================================================================================== 35) Company Name: Dow, Lohnes & Albertson, PLLC ===================================================================================================================== 36) P.O. Box: And / Or 37) Street Address: 1200 New Hampshire Avenue, NW, #800 ===================================================================================================================== 38) City: Washington 39) State: DC 40) Zip Code: 20036 ===================================================================================================================== 41) Telephone Number: (202)776-2000 42) FAX Number: (202)776-2222 ===================================================================================================================== 43) E-Mail Address: spatrick@dlalaw.com ===================================================================================================================== Assignee/Transferee Information ===================================================================================================================== 44) The Assignee is a(n): Corporation ===================================================================================================================== 45) FCC Registration Number (FRN): 0011431368 ===================================================================================================================== 46) First Name (if individual): MI: Last Name: Suffix: ===================================================================================================================== 47) Entity Name (if other than individual): AGL Resources Inc. ===================================================================================================================== 48) Name of Real Party in Interest: 49) TIN: ===================================================================================================================== 50) Attention To: Suzanne Thigpen ===================================================================================================================== 51) P.O. Box: And / Or 52) Street Address: Ten Peachtree Place =================================================================================== ================================= 53) City: Atlanta 54) State: GA 55) Zip Code: 30309 ===================================================================================================================== 56) Telephone Number: (404)584-3978 57) FAX Number: ===================================================================================================================== 58) E-Mail Address: sthigpen@aglresources.com ===================================================================================================================== Name of Assignee/Transferee Contact Representative (if other than Assignee/Transferee) ===================================================================================================================== 59) First Name: Roshini MI: S Last Name: Thayaparan Suffix: ===================================================================================================================== 60) Company Name: LeBoeuf, Lamb, Greene & MacRae, L.L.P. ===================================================================================================================== 61) P.O. Box: And / Or 62) Street Address: 1875 Connecticut Avenue, NW Suite 1200 ===================================================================================================================== 63) City: Washington 64) State: DC 65) Zip Code: 20009 ===================================================================================================================== 66) Telephone Number: (202)986-8065 67) FAX Number: (202)956-3305 ===================================================================================================================== 68) E-Mail Address: rthayaparan@llgm.com ===================================================================================================================== Alien Ownership Questions ===================================================================================================================== 69) Is the Assignee or Transferee a foreign government or the representative of any foreign government? No ===================================================================================================================== 70) Is the Assignee or Transferee an alien or the representative of an alien? No ===================================================================================================================== 71) Is the Assignee or Transferee a corporation organized under the laws of any foreign government? No ===================================================================================================================== 72) Is the Assignee or Transferee a corporation of which more than one-fifth of the capital stock is owned of No record or voted by aliens or their representatives or by a foreign government or representative thereof or by any corporation organized under the laws of a foreign country? ===================================================================================================================== 73) Is the Assignee or Transferee directly or indirectly controlled by any other corporation of which more than No one-fourth of the capital stock is owned of record or voted by aliens, their representatives, or by a foreign government or representative thereof, or by any corporation organized under the laws of a foreign country? If 'Yes', attach exhibit explaining nature and extent of alien or foreign ownership or control. ===================================================================================================================== Basic Qualification Questions ===================================================================================================================== 74) Has the Assignee or Transferee or any party to this application had any FCC station authorization, license No or construction permit revoked or had any application for an initial, modification or renewal of FCC station authorization, license, construction permit denied by the Commission? If 'Yes', attach exhibit explaining circumstances. ===================================================================================================================== 75) Has the Assignee or Transferee or any party to this application, or any party directly or indirectly No controlling the Assignee or Transferee, or any party to this application ever been convicted of a felony by any state or federal court? If 'Yes', attach exhibit explaining circumstances. ===================================================================================================================== 76) Has any court finally adjudged the Assignee or Transferee, or any party directly or indirectly controlling No the Assignee or Transferee guilty of unlawfully monopolizing or attempting unlawfully to monopolize radio communication, directly or indirectly, through control of manufacture or sale of radio apparatus, exclusive traffic arrangement, or any other means or unfair methods of competition? If 'Yes', attach exhibit explaining circumstances. ===================================================================================================================== 77) Is the Assignee or Transferee, or any party directly or indirectly controlling the Assignee or Transferee No currently a party in any pending matter referred to in the preceding two items? If 'Yes', attach exhibit explaining circumstances. ===================================================================================================================== 78) Race, Ethnicity, Gender of Assignee/Transferee (Optional) ===================================================================================================================== Race: American Indian or Asian: Black or Native Hawaiian or Other White: Alaska Native: African-American: Pacific Islander: ===================================================================================================================== Ethnicity: Hispanic or Latino: Not Hispanic or Latino: ======================================================= Gender: Female: Male: ===================================================================================================================== Assignor/Transferor Certification Statements ===================================================================================================================== 1) The Assignor or Transferor certifies either (1) that the authorization will not be assigned or that control of the license will not be transferred until the consent of the Federal Communications Commission has been given, or (2) that prior Commission consent is not required because the transaction is subject to streamlined notification procedures for pro forma assignments and transfers by telecommunications carriers. See Memorandum Opinion and Order, 13 FCC Rcd. 6293(1998). ===================================================================================================================== 2) The Assignor or Transferor certifies that all statements made in this application and in the exhibits, attachments, or in documents incorporated by reference are material, are part of this application, and are true, complete, correct, and made in good faith. ===================================================================================================================== 79) Typed or Printed Name of Party Authorized to Sign ===================================================================================================================== First Name: Steven MI: D Last Name: Overly Suffix: ===================================================================================================================== 80) Title: Vice President, CFO & General Counsel ===================================================================================================================== Signature: Steven D Overly 81) Date: 09/24/04 ===================================================================================================================== Assignee/Transferee Certification Statements ===================================================================================================================== 1) The Assignee or Transferee certifies either (1) that the authorization will not be assigned or that control of the license will not be transferred until the consent of the Federal Communications Commission has been given, or (2) that prior Commission consent is not required because the transaction is subject to streamlined notification procedures for pro forma assignments and transfers by telecommunications carriers See Memorandum Opinion and Order, 13 FCC Rcd. 6293 (1998). ===================================================================================================================== 2) The Assignee or Transferee waives any claim to the use of any particular frequency or of the electromagnetic spectrum as against the regulatory power of the United States because of the previous use of the same, whether by license or otherwise, and requests an authorization in accordance with this application. ===================================================================================================================== 3) The Assignee or Transferee certifies that grant of this application would not cause the Assignee or Transferee to be in violation of any pertinent cross-ownership, attribution, or spectrum cap rule.* *If the applicant has sought a waiver of any such rule in connection with this application, it may make this certification subject to the outcome of the waiver request. ===================================================================================================================== 4) The Assignee or Transferee agrees to assume all obligations and abide by all conditions imposed on the Assignor or Transferor under the subject authorization(s), unless the Federal Communications Commission pursuant to a request made herein otherwise allows, except for liability for any act done by, or any right accured by, or any suit or proceeding had or commenced against the Assignor or Transferor prior to this assignment. ===================================================================================================================== 5) The Assignee or Transferee certifies that all statements made in this application and in the exhibits, attachments, or in documents incorporated by reference are material, are part of this application, and are true, complete, correct, and made in good faith. ===================================================================================================================== 6) The Assignee or Transferee certifies that neither it nor any other party to the application is subject to a denial of Federal benefits pursuant to Section 5301 of the Anti-Drug Abuse Act of 1998, 21 U.S.C ss. 862, because of a conviction for possession or distribution of a controlled substance. See Section 1.2002(b) of the rules, 47 CFR ss. 1.2002(b), for the definition of "party to the application" as used in this certification. ===================================================================================================================== 7) The applicant certifies that it either (1) has an updated Form 602 on file with the Commission, (2) is filing an updated Form 602 simultaneously with this application, or (3) is not required to file Form 602 under the Commission's rules. ===================================================================================================================== 82) Typed or Printed Name of Party Authorized to Sign ===================================================================================================================== First Name: Catherine MI: L Last Name: Waters Suffix: ===================================================================================================================== 83) Title: Sr. Vice President Business Technology ===================================================================================================================== Signature: Catherine L Waters 84) Date: 09/24/04 ===================================================================================================================== WILLFUL FALSE STATEMENTS MADE ON THIS FORM OR ANY ATTACHMENTS ARE PUNISHABLE BY FINE AND/OR IMPRISONMENT (U.S. Code, Title 18, Section 1001) AND/OR REVOCATION OF ANY STATION LICENSE OR CONSTRUCTION PERMIT (U.S. Code, Title 47, Section 312(a)(1)), AND/OR FORFEITURE (U.S. Code, Title 47, Section 503). ===================================================================================================================== Authorizations To Be Assigned or Transferred ===================================================================================================================== 87) 88) Path 89) 90) Lower 91) Upper 92) 93) 85) Call 86) Radio Location Number Frequency or Center Frequency Constructed Assigment Sign Service Number (Microwave Number Frequency (MHz) Yes / No Indicator only) (MHz) ===================================================================================================================== KBD722 IG Yes ======================== ============ KEB656 IG Yes ======================== ============ KJC559 IG Yes ======================== ============ KNGS265 IG Yes ======================== ============ KOP399 IG Yes ======================== ============ WPRS610 MG Yes ======================== ============ WPRS612 MG Yes ======================== ============ WPRS613 MG Yes ======================== ============ WPRS615 MG Yes ======================== ============ WPRS616 MG Yes ======================== ============ WPRS617 MG Yes ======================== ============ WPRS618 MG Yes ======================== ============ WPRT334 MG Yes ===================================================================================================================== ===================================================================================================================== Approved by OMB FCC Form 603 Schedule for Assignments of Authorization 3060 - 0800 Schedule A and Transfers of Control in Auctioned Services See instructions for public burden estimate ===================================================================================================================== Assignments of Authorization 1) Assignee Eligibility for Installment Payments (for assignments of authorization only) ===================================================================================================================== Is the Assignee claiming the same category or a smaller category of eligibility for installment payments as the Assignor (as determined by the applicable rules governing the licenses issued to the Assignor)? ===================================================================================================================== If 'Yes', is the Assignee applying for installment payments? ===================================================================================================================== 2) Gross Revenues and Total Assets Information (if required) (for assignments of authorization only) Refer to applicable auction rules for method to determine required gross revenues and total assets information ===================================================================================================================== Year 1 Gross Revenues (current) Year 2 Gross Revenues Year 3 Gross Revenues Total Assets: ===================================================================================================================== 3) Certification Statements For Assignees Claiming Eligibility as an Entrepreneur Under the General Rule ===================================================================================================================== Assignee certifies that they are eligible to obtain the licenses for which they apply. ===================================================================================================================== For Assignees Claiming Eligibility as a Publicly Traded Corporation ===================================================================================================================== Assignee certifies that they are eligible to obtain the licenses for which they apply and that they comply with the definition of a Publicly Traded Corporation, as set out in the applicable FCC rules. ===================================================================================================================== For Assignees Claiming Eligibility Using a Control Group Structure ===================================================================================================================== Assignee certifies that they are eligible to obtain the licenses for which they apply. ===================================================================================================================== Assignee certifies that the applicant's sole control group member is a pre-existing entity, if applicable. ===================================================================================================================== For Assignees Claiming Eligibility as a Very Small Business, Very Small Business Consortium, Small Business, or as a Small Business Consortium ===================================================================================================================== Assignee certifies that they are eligible to obtain the licenses for which they apply. ===================================================================================================================== Assignee certifies that the applicant's sole control group member is a pre-existing entity, if applicable. ===================================================================================================================== For Assignees Claiming Eligibility as a Rural Telephone Company ===================================================================================================================== Assignee certifies that they meet the definition of a Rural Telephone Company as set out in the applicable FCC rules, and must disclose all parties to agreement(s) to partition licenses won in this auction. See applicable FCC rules. ===================================================================================================================== Transfers of Control 4) Licensee Eligibility (for transfers of control only) ===================================================================================================================== As a result of transfer of control, must the licensee now claim a larger or higher category of eligibility than was originally declared? No ===================================================================================================================== If 'Yes', the new category of eligibility of the licensee is: ===================================================================================================================== Certification Statement for Transferees ===================================================================================================================== Transferee certifies that the answers provided in Item 4 are true and correct. ===================================================================================================================== Attachment List ===================================================================================================================== Attachment Type Date Description Contents ===================================================================================================================== Other 09/24/04 Transferor Exhibits 0179648633051493218365648.pdf ===================================================================================================================== Other 09/24/04 Transferee Exhibit 0179648643051493218365648.pdf =====================================================================================================================
FCC Form 603 Exhibit 1 Page 1 of 1 EXHIBIT 1 Description of Transaction By this application, NUI Utilities, Inc. ("Licensee"), licensee of KBD722, KEB656, KJC559, KNGS265, KOP399, WPRS610, WPRS612, WPRS613, WPRS615, WPRS616, WPRS617, WPRS618, and WPRT334 (the "Stations"), and NUI Corporation, parent corporation of Licensee, request the Commission's consent to the transfer of control of the Stations' licenses. Licensee is a wholly owned subsidiary of NUI Corporation, the proposed transferor. The proposed transferee is AGL Resources Inc. ("AGL"), whose subsidiary Cougar Corporation - created solely for the purposes of this transaction - would be merged with and into NUI Corporation, with NUI Corporation remaining as the surviving corporation following the merger as a wholly owned subsidiary of AGL. The licenses of the Stations will continue to be held by Licensee with AGL as its ultimate parent. NUI Corporation and AGL are concurrently filing with the Commission an application proposing the transfer another license, and all of the licenses involved are listed below. Following Commission consent to the transfer applications and consummation of the transaction, AGL intends to use the Stations in the same manner and for the same purposes as before the transfer. Both NUI Corporation and AGL are utility companies, and the Stations are incidental to their core business. The transfer proposed herein will not result in any violation of the Communications Act of 1934, as amended, or any other applicable statutory provision. Moreover, the proposed transaction fully complies with all Commission rules and regulations and does not require any waivers pertinent to the transaction. Accordingly, grant of this transfer application would serve the public interest. --------------------------------------------------------------- Call Sign Service Type Licensee --------------------------------------------------------------- KBD722 IG NUI Utilities, Inc. --------------------------------------------------------------- KEB656 IG NUI Utilities, Inc. --------------------------------------------------------------- KJC559 IG NUI Utilities, Inc. --------------------------------------------------------------- KNGS265 IG NUI Utilities, Inc. --------------------------------------------------------------- KOP399 IG NUI Utilities, Inc. --------------------------------------------------------------- WPNR870 IG NUI - Elkton Gas --------------------------------------------------------------- WPRS610 MG NUI Utilities, Inc. --------------------------------------------------------------- WPRS612 MG NUI Utilities, Inc. --------------------------------------------------------------- WPRS613 MG NUI Utilities, Inc. --------------------------------------------------------------- WPRS615 MG NUI Utilities, Inc. --------------------------------------------------------------- WPRS616 MG NUI Utilities, Inc. --------------------------------------------------------------- WPRS617 MG NUI Utilities, Inc. --------------------------------------------------------------- WPRS618 MG NUI Utilities, Inc. --------------------------------------------------------------- WPRT334 MG NUI Utilities, Inc. --------------------------------------------------------------- FCC Form 603 Exhibit 2 Page 1 of 1 EXHIBIT 2 Request For Expedited Processing The parties wish to consummate the transaction proposed in the instant application by the end of October 2004. To the extent necessary for the Commission to process this application in such a time frame, expedited processing is respectfully requested. FCC Form 603 Exhibit 3 Page 1 of 1 EXHIBIT 3 MAS Certification Private Internal Certification Consistent with section 47 C.F.R. ss. 101.1309, AGL Resources Inc. hereby certifies that the Multiple Address Systems (MAS) included on this application will be used for private internal use only and will not be employed to provide service to third parties on a for-hire or for-profit basis. EX-99.10 9 ex99-10.txt EXHIBIT I-1 - PROPOSED FORM OF NOTICE Exhibit I-1 Proposed Form Of Notice SECURITIES AND EXCHANGE COMMISSION (Release No. 35-_____) Filings under the Public Utility Holding Company Act of 1935, as amended ("Act") ____________, 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 thereunder. All interested persons are referred to the application(s) and/or declaration(s) for complete statements of the proposed transaction(s) summarized below. The application(s) and/or declaration(s) and any amendments thereto is/are available for public inspection through the Commission's Office of Public Reference. Interested persons wishing to comment or request a hearing on the application(s) and/or declaration(s) should submit their views in writing by ____________, 2004 to the Secretary, Securities and Exchange Commission, 450 5th Street, N.W., Washington, D.C. 20549, and serve a copy on the relevant applicant(s) and/or declarant(s) at the address(es) as specified below. Proof of service (by affidavit or, in case of an attorney at law, by certificate) should be filed with the request. Any request for hearing shall identify specifically the issues of fact or law that are disputed. A person who so requests will be notified of any hearing, if ordered, and will receive a copy of any notice or order issued in the matter. After ____________, 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. and NUI Corporation (70-10243) AGL Resources Inc. ("AGL Resources"), a registered public utility holding company under the Act, located at Ten Peachtree Place, Suite 1000, Atlanta, Georgia 30309, requests authority under Sections 9, 10 and 11 of the Act to acquire all of the issued and outstanding common stock of NUI Corporation ("NUI"), an exempt holding company under Section 3(a)(1) of the Act, located at 550 Route 202-206, Box 760, Bedminster, New Jersey 07921-0760, and indirectly acquire the subsidiary companies of NUI. The proposed transaction, more fully described below, is referred hereto as the "Merger." AGL Resources and NUI (collectively, "Applicants") also seek approval under Sections 6(a), 7, 9(a), 10, 11, 12(b), 12(c), 13(b) of the Act and Rules 43, 45, 46, and 54 for NUI and its subsidiaries to engage, after the consummation of the Merger, in the same financing and other transactions authorized by the Commission in the AGL Resources Financing Order./1 Applicants further request authorization (a) to retain NUI's nonutility subsidiaries, (b) to reorganize NUI's direct and indirect nonutility subsidiaries without the need to seek further Commission _____________________________ 1 AGL Resources Inc., et al., Holding Co. Act Release No. 27828 (Apr. 1, 2004) ("Financing Order"). authorization, (c) for AGL Resources to acquire NUI's interest in the Saltville Gas Storage Company, LLC pursuant to an exemption under Rule 16, and (d) for NUI Utilities, Inc. ("NUI Utilities") to pay dividends out of capital and unearned surplus in an amount up to their pre-merger retained earnings and post-merger earnings before any deduction for the impairment of goodwill. Finally, Applicants request that the Commission find that Virginia Gas Company ("VGC"), a utility holding company subsidiary of NUI, is entitled to an exemption pursuant to Section 3(a)(1) of the Act. Parties to the Merger AGL Resources Inc. and its Subsidiaries 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: Atlanta Gas Light Company ("AGLC"), Chattanooga Gas Company ("CGC"), and Virginia Natural Gas, Inc. ("VNG"); and several directly or indirectly-owned subsidiary companies. 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 regulates AGLC with respect to rates, maintenance of accounting records and various other service and safety matters. As of and for the twelve months ended December 31, 2003, AGLC had total assets of $2.45 billion, total operating revenues of $517.6 million and net income of $92.8 million. AGLC owns all of the outstanding stock of AGL Rome Holdings, Inc. AGL Rome Holdings, Inc. owned property associated with a former manufactured gas plant in Rome, Georgia, but sold that property in December 2003. CGC is a natural gas local distribution utility with distribution systems and related facilities serving 12 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 regulates CGC with respect to rates, maintenance of accounting records and various other service and safety matters. As of and for the twelve months ended December 31, 2003, CGC had total assets of $161.8 million, total operating revenues of $89.6 million and net income of $6.0 million. 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. As of and for the twelve months ended December 31, 2003, VNG had total assets of $708.9 million, total operating revenues of $328.7 million and net income of $25.5 million. AGL Resources also owns several nonutility subsidiaries. The Commission has previously authorized the retention of AGL Resources' nonutility subsidiaries./2 NUI Corporation and its Subsidiaries NUI, a New Jersey corporation, has two public utility subsidiary companies, NUI Utilities and Virginia Gas Distribution Company ("VGDC"). Through its subsidiaries, NUI operates natural gas distribution systems and natural gas storage and pipeline businesses. Through its three regulated utility divisions, Elizabethtown Gas Company ("Elizabethtown Gas"), City Gas Company of Florida ("City Gas") and Elkton Gas, NUI Utilities distributes natural gas to approximately 371,000 customers in New Jersey, Florida and Maryland. Each utility subsidiary or division is subject to regulation by the public service commission in the states where it operates. During fiscal year 2003, the operating revenues associated with the provision of distribution services by NUI Utilities was approximately $615.5 million, representing 94% of the total operating revenues of NUI. Of this amount, 73% was generated by utility operations in New Jersey, where approximately 70% of NUI Utilities' customers are located. Total utility gas volumes sold or transported by such utility operations amounted to 81.8 Bcf, of which 86% was sold or transported in New Jersey. These figures do not reflect utility operations which were discontinued in fiscal year 2003 with the sale of NUI's Valley Cities Gas and Waverly Gas. 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. 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 that complement its natural gas utility services in those states. The appliance group generated operating revenues of $15.4 million in fiscal year 2003 and had operating margins of $5.7 million in the same period. Presently, NUI Utilities has a capacity management arrangement with Cinergy Marketing & Trading LLC ("CMT"), wherein CMT supplies NUI Utilities with gas at market-based prices and pays NUI Utilities a fixed fee to manage its interstate pipeline assets. NUI Utilities also makes off-system sales to non-jurisdictional customers utilizing assets under contract from interstate pipelines. Such assets include interstate pipeline and storage capacity. Off system sales margins retained by NUI Utilities totaled $1.3 million in fiscal year 2003. _____________________________ 2 AGL Resources Inc., et al., Holding Co. Act Release No. 27243 (Oct. 5, 2000). 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 300 customers in Virginia. During fiscal year 2003, VGDC sold approximately 240,300 Mcf of gas, of which 4% were sold to residential customers and 96% to commercial and industrial customers. NUI's nonutility businesses are carried out primarily by NUI Capital Corp. ("NUI Capital") and its subsidiaries. NUI Capital's only remaining non-regulated subsidiary with substantial continuing operations is Utility Business Services, Inc. ("UBS"), a billing and customer information systems and services subsidiary. NUI's other non-regulated subsidiaries are winding down their operations. These subsidiaries include: NUI Energy, Inc. ("NUI Energy"), an energy retailer; NUI Energy Brokers, NUI's wholesale energy trading and portfolio management subsidiary;/3 OAS Group, Inc. ("OAS"), the company's digital mapping operation;/4 and TIC Enterprises, LLC ("TIC"), a sales outsourcing subsidiary that sold wireless and network telephone services. 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 twelve months, NUI Utilities has provided approximately 36% of UBS' revenues. UBS has been profitable in every year since 1995. 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 (the "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. NUI's wholly owned subsidiary, NUI Saltville Storage, Inc. ("NUISS"), is a fifty-percent member of Saltville Gas Storage Company, LLC ("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 _____________________________ 3 During January 2004, NUI began to wind down the trading operations of NUI Energy Brokers and discontinued trading operations altogether at NUI Energy Brokers in March 2004, although NUI Energy Brokers continues to manage its prior contractual obligations under a long-term sales agreement in addition to two long-term gas storage and transportation agreements. 4 Effective April 1, 2004, OAS has subcontracted all of its existing services to a third party engineering firm. OAS has notified its customers that upon expiration of their current contracts, their relationship with OAS will terminate. 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. NUI Storage, Inc. ("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, Richton is expected 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. Richton can also serve as a potential storage facility for the various proposed liquefied natural gas projects in the Gulf Coast. It is anticipated that Richton will be subject to FERC regulation. Description of the Merger 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/5 and NUI Corporation, dated as of July 14, 2004 ("Merger Agreement"), pursuant to the which, 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./6 AGL Resources intends to manage and govern NUI and NUI Utilities in the same manner in which it currently manages its other utilities. Pursuant to the Merger Agreement, 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 31st, 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. _____________________________ 5 Cougar Corporation is a wholly owned subsidiary of AGL Resources organized under the laws of New Jersey. It was incorporated on July 14, 2004 solely for the purposes of the Merger and is engaged in no other business. 6 While AGL Resources has not made any definitive decisions regarding its corporate structure following the closing, given NUI's exposure to certain post-closing liabilities and obligations, it is desirable to keep NUI's corporate structure in existence for some time following the closing. Consequently, AGL Resources would not be the direct holder of the capital stock of NUI's utility business. The purchase of NUI shares will be funded primarily through the issuance of AGL Resources common stock at or prior to closing. 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 ratings and its current dividend policy post-acquisition. AGL Resources intends to finance the repayment of NUI and NUI Utilities' indebtedness at closing by issuing unsecured indebtedness to external creditors and then loaning the proceeds of the issuance to NUI and NUI Utilities through long-term intercompany debt (the "Intercompany Notes")./7 NUI and NUI Utilities will use the funds borrowed under the Intercompany Notes to repay indebtedness to third party lenders under the Credit Agreement and Seasonal Bridge, and under its Settlement Agreement with the New Jersey Board of Public Utilities ("NJBPU"). AGL Resources anticipates that the principal of the Intercompany Notes will equal the amount that NUI and NUI Utilities require for repayment of indebtedness under these facilities and will otherwise be on no less favorable terms (e.g., weighted average interest rate, maturities, placement costs) than those upon which AGL Resources financed the repayment in the marketplace. AGL Resources expects that the Intercompany Notes will refinance NUI and NUI Utilities' existing indebtedness on terms that are more favorable to NUI and NUI Utilities than those that are currently provided under the Credit Agreement and Seasonal Bridge. AGL Resources may elect to finance the cash portion of the purchase price through the issue of common stock at or prior to closing if market conditions are favorable. 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. AGL Resources currently is authorized to issue equity and debt securities 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 price. The transaction is subject to the approval of NUI's shareholders; the Securities and Exchange Commission; the Federal Communications Commission ("FCC"); the state regulatory agencies of New Jersey, Maryland and Virginia; and any necessary approval or the expiration or termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. The consummation of the transaction is further 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 the Settlement with the New Jersey Attorney General's Office ("NJAGO")) relating to the matters that are the subject of the NJBPU Settlement Order and the _____________________________ 7 AGL Resources or its financing subsidiary, AGL Capital Corporation, may issue indebtedness and fund NUI and NUI Utilities by acquiring the Intercompany Notes. Stipulation and Agreement referred to therein, 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 nor its subsidiaries shall be the subject of an active investigation with respect to the matters that are the subject of the NJBPU 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. 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, 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 such termination. In the event of a termination of the Merger Agreement pursuant to 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. Financing Authority After the closing of the Merger, NUI will register as a holding company under the Act and NUI and its subsidiaries will need financing authorization. Applicants seek authorization pursuant to Sections 6(a), 7, 9(a), 10, 12(b), and 12(c) of the Act and Rules 43, 45, 46 and 54 for NUI and its subsidiaries to, after the consummation of the Merger, undertake any or all of the transactions authorized in the Financing Order in which current subsidiaries of AGL Resources may engage during the Authorization Period. NUI and its subsidiaries would be subject to the same limitations and conditions as set forth in the Financing Order. The authorizations requested are described below. Financing Limitations. As provided in the Financing Order, financings by NUI and its subsidiaries will be subject to the following limitations ("Financing Limitations"): o 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 (a) 500 basis points over the comparable-term U.S. Treasury securities or (b) 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 (a) 500 basis points over the comparable-term London Interbank Offered Rate ("LIBOR") or (b) a gross spread over LIBOR that is consistent with similar securities of comparable credit quality and maturities issued by other companies. The dividend rate on any series of preferred stock, preferred securities or equity-linked securities will not exceed the greater of (a) 500 basis points over the yield to maturity of a U.S. Treasury security having a remaining term equal to the term of that series of preferred stock or (b) a rate that is consistent with similar securities of comparable credit quality and maturities issued by other companies./8 o Maturity. The maturity of long-term debt will be between one and 50 years after the issuance thereof. Short-term debt will mature within a year. Preferred securities and equity-linked securities will be redeemed no later than 50 years after the issuance thereof, unless converted into common stock. Preferred stock issued directly by AGL Resources may be perpetual in duration. o Issuance Expenses. The underwriting fees, commissions or other similar remuneration paid in connection with the non-competitive issue, sale or distribution of securities pursuant to this Application 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./9 o Common Equity Ratio. Each utility subsidiary 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. o 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 pursuant to 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 _____________________________ 8 Substantially similar interest rate provisions have been authorized by the Commission in Energy East Corp., et al., Holding Co. Act Release No. 27643 (Jan. 28, 2003); E.ON AG, Holding Co. Act Release No. 27539 (June 14, 2002); Ameren Corp. et al., Holding Co. Act Release No. 27655 (Feb. 27, 2003). 9 See, e.g., NiSource, Inc., Holding Co. Act Release No. 27789 (December 30, 2003); SCANA Corp., Holding Co. Act Release No. 27649 (Feb. 12, 2003). 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 pursuant to 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. o Authorization Period. No security will be issued pursuant to the authorization sought herein after the last day of the Authorization Period (March 31, 2007). In particular, Applicants propose to extend to NUI and its existing subsidiaries authority concerning: Utility Subsidiary Short-Term Debt In the Financing Order, the Commission authorized the utility subsidiaries of AGL Resources to (a) enter into, perform, purchase and sell Hedging Instruments in the same manner as requested by AGL Resources above; (b) to issue short-term debt consisting of commercial paper, secured or unsecured bank loans and borrowings under the utility money pool ("Utility Money Pool"), at any one time outstanding during the Authorization Period ("Utility Short-Term Debt Limit"), all such securities to be issued pursuant to the Financing Limitations. The Commission also authorized the utility subsidiaries to be made party to any AGL Resources' credit facility as back up to commercial paper issued under rule 52 of the Act or under an applicable Commission order. The issuance of secured short-term debt by NUI Utilities and VGDC would be limited to 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. Applicants request authorization for NUI Utilities to issue up to $600 million of intercompany debt, commercial paper, secured or unsecured bank loans and borrowings under the Utility Money Pool, all with terms of less than a year, subject to the terms and conditions set forth in the Financing Order. If a utility subsidiary elects to issue commercial paper, either under Rule 52 of the Act or under an applicable Commission order, each utility subsidiary requests authorization to be made a party to any AGL Resources' credit facility as back-up to the commercial paper. NUI and NUI Utilities also request authorization to issue Intercompany Notes to AGL Resources or a financing subsidiary thereof in connection with the refinancing of NUI and NUI Utilities pre-Merger indebtedness. Intercompany Notes would be issued by NUI and NUI Utilities in an amount at any one time outstanding of up to $285 million and $275 million, respectively. (The Intercompany Notes issued by NUI Utilities would be for terms longer than one year and accordingly such issuances would not count against the $600 million short-term debt limit stated above.) AGL Resources is evaluating the economics of refinancing an additional amount of debt issued by NUI Utilities in the amount of approximately $200 million. The refinancing of this amount, if consummated, and the post-Merger financing of NUI Utilities with securities other than short-term debt would be conducted on an exempt basis under Rule 52(a) through the sale of securities by NUI Utilities externally to third parties or on an intercompany basis. Authorization and Operation of the Money Pools Pursuant to the Financing Order, AGL Resources and its utility subsidiaries are authorized to operate a Utility Money Pool, and the utility subsidiaries are authorized to make unsecured short-term borrowings from the Utility Money Pool, to contribute surplus funds to the Utility Money Pool, and to lend and extend credit to (and acquire promissory notes from) one another through the Utility Money Pool subject to the terms and conditions set forth in the Financing Order. Specifically, the Utility Money Pool funds are available for short-term loans to the participating companies from time to time from (i) surplus funds in the treasuries of participants and (ii) proceeds received by the 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. The utility subsidiaries borrow pro rata from each Utility Money Pool participant that invests surplus funds, in the proportion that the total amount invested by the investing participant bears to the total amount then invested in the Utility Money Pool. The interest rate charged to utility subsidiaries 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. 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 thereunder. Each utility subsidiary receiving a loan through the Utility Money Pool is required to repay the principal amount of the loan, together with all interest accrued thereon, 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. The Nonutility Money Pool is operated on the same terms as the Utility Money Pool. Applicants request that NUI Utilities and VGDC be authorized to participate in the Utility Money Pool under the same terms and conditions as existing utility subsidiaries of AGL Resources. Borrowings by NUI Utilities would be subject to the $600 million limit stated above, and borrowings by VGDC would be limited to $250 million at any one time outstanding. In addition, to the extent not exempt under Rule 52(b), AGL Resources and its nonutility subsidiaries were granted authorization to operate the Nonutility Money Pool, and the 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 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 NUI's nonutility subsidiaries be authorized to participate in the Nonutility Money Pool under the same terms and conditions as existing nonutility subsidiaries of AGL Resources. AGL Resources would continue to contribute surplus funds and to lend and extend credit to (i) the utility subsidiaries through the Utility Money Pool and (ii) the nonutility subsidiaries through the Nonutility Money Pool. AGL Resources does 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. Guarantees In the Financing Order, the Commission authorized AGL Resources and its utility subsidiaries to issue Guarantees with respect to the obligations of their subsidiaries. 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. 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, AGL Resources and the utility subsidiaries will determine the exposure under a Guarantee for purposes of measuring compliance with the appropriate Guarantee limit by appropriate means, including estimation of exposure based on potential payment amounts. The Commission also authorized that each subsidiary 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. Applicants requests authorization for AGL Resources to guarantee the obligations of NUI and its subsidiaries subject to the limits set forth in the Financing Order. 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 terms and conditions of the Financing Order 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. Hedges The Commission has granted authorization for certain of AGL Resources' utility subsidiaries to enter into, perform, purchase and sell financial instruments intended to manage the volatility of interests 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 London Inter-Bank Offer Rate-based swap instruments. These instruments would only be executed subject to certain limitations and restrictions set forth in the Financing Order. Accordingly, Applicants request authorization for NUI Utilities and VGDC to enter into similar Hedging Instruments subject to the terms and conditions of the Financing Order. Changes in Capital Stock of Wholly-Owned Subsidiaries In the Financing Order, the Commission authorized the applicants to change the terms of any wholly owned subsidiary's authorized capital stock capitalization by an amount deemed appropriate by AGL Resources or other intermediate parent company subject to certain conditions. Specifically, the authorization is limited to AGL Resources' wholly owned subsidiaries and will not affect the aggregate limits or other financing conditions contained in the Financing Order. In accordance with the Financing Order, a subsidiary is able to change the par value, or change between par value and no-par stock, without additional Commission approval. Any such action by a utility subsidiary would be subject to and would only be taken upon the receipt of any necessary approvals by the state commission in the state or states where the utility subsidiary is incorporated and doing business. In addition, each of the utility subsidiaries will maintain, during the Authorization Period, a common equity capitalization of at least 30%. Applicants seek the same authority for NUI and its subsidiaries under the same terms and conditions set forth in the Financing Order. Payment of Dividends Out of Capital or Unearned Surplus Pursuant to the Financing Order, nonutility subsidiaries of AGL Resources may pay dividends from time to time through the Authorization Period, out of capital and unearned surplus. A nonutility subsidiary 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 and in addition, 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. Applicants request that the Commission authorize NUI and its nonutility subsidiaries to pay dividends out of capital and unearned surplus subject to the terms and conditions of the Financing Order. This authorization will permit AGL Resources to effectively wind up the NUI nonutility businesses. Without such authorization, liquidation proceeds may be trapped in companies with cash but insufficient retained earnings to pay dividends. As noted below, however, 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 with regard to such relief. The application of the purchase method of accounting to the Merger will cause the reclassification of the retained earnings of NUI Utilities to additional paid-in capital, and give rise to goodwill, the difference between the aggregate fair values of all identifiable tangible and intangible assets, and the total consideration to be paid and the fair values of the liabilities assumed. In accordance with the Commission's Staff Accounting Bulletin No. 54, Topic 5J ("Staff Accounting Bulletin"), the goodwill will be "pushed down" and reflected as additional paid-in-capital in the financial statements of these entities. Goodwill must periodically be examined for impairment and, to the extent impaired, it must be written down. Any write down of goodwill will constitute a non-cash charge to net income and, therefore, decrease current earnings available for dividends and/or retained earnings, the traditional sources of dividend payments, of NUI Utilities. 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. Lastly, NUI Utilities would not pay dividends out of capital or unearned surplus if to do so would cause the equity of such company to decline to less than 30% of total capitalization. Applicants request that the Commission reserve jurisdiction over NUI Utilities' payment of dividends out of capital and unearned surplus in an amount up to the company's pre-merger retained earnings and any amounts attributable to impaired goodwill post-merger on its books. Financing Entities The Financing Order authorized AGL Resources and its subsidiaries to organize new corporations, trusts, partnerships or other entities, or to use existing Financing Entities, such as AGL Capital, 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 AGL Resources or their respective parent subsidiaries. To the extent not exempt under Rule 52, the Financing Entities were granted authorization to issue these securities to third parties. The Commission also granted authorization for AGL Resources and its subsidiaries to enter into support or expense agreements ("Expense Agreement") with certain Financing Entities to pay the expenses of any such entities subject to certain terms and conditions. In connection with this method of financing, AGL Resources and the subsidiaries may: (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. AGL Resources and the subsidiaries also request authorization to enter into support or expense agreements ("Expense Agreement") with Financing Entities to pay the expenses of any such 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. The Financing Order granted authorization, under Section 13(b) of the Act and Rules 87 and 90 thereunder, to provide such services at a charge not to exceed a market price but only for so long as such Expense Agreement established by the Financing Entity is in place. Accordingly, Applicants seek similar authorization for NUI and its subsidiaries to organize such entities and to execute Expense Agreements under the same terms and conditions established in the Financing Order. Intermediate Subsidiaries and Restructuring and Reorganization In the Financing Order, the Commission authorized AGL Resources 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 EWGs, FUCOs, Rule 58 Companies, ETCs, or other non-exempt nonutility subsidiaries (as authorized in this proceeding or in a separate proceeding), provided that Intermediate Subsidiaries may also engage in administrative activities ("Administrative Activities") and development activities ("Development Activities"), defined below, relating to these subsidiaries. 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; 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 AGL Resources 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 AGL Resources' exposure to taxes; (vii) to further insulate AGL Resources and the utility subsidiaries 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 AGL Resources from the Commission; and (iii) other available cash resources, including proceeds of securities sales by nonutility subsidiaries under rule 52. To the extent that AGL Resources 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 AGL Resources' "aggregate investment" in these entities, as calculated in accordance with rule 53 or rule 58, as applicable. In this Application, 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 nonutility subsidiaries, 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 nonutility subsidiary to another nonutility subsidiary (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 subsidiaries. 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. AGL Resources also requests that its authorization to make expenditures on Development Activities, as defined above, in an aggregate amount of up to $600 million be extended to include the NUI nonutility subsidiaries. The Commission authorized 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. Affiliate Transactions On October 5, 2000, the Commission issued an order which, among other things, approved the formation of a system service company and authorized certain intrasystem transactions./10 AGL Services Company ("AGL Services") will provide business services to NUI and its utility and nonutility companies 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. 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 pursuant to arrangements with the respective state commissions with jurisdiction over these public utility subsidiaries. Under these arrangements, Sequent provides commodity gas, including related procurement services, and also acts as agent for the utilities in connection with transactions for gas transportation and _____________________________ 10 AGL Resources Inc., Holding Co. Act Release No. 27243 (Oct. 5, 2000) ("Intrasystem Transactions Order"). storage capacity. These transactions are exempt from regulation under Section 13(b) of the Act by virtue of Rules 80 and 81. The rules exempt transactions in natural gas from the definition of goods under the Act and provide that transportation and similar services, the sale of which is normally subject to public regulation are exempted from the provisions of Section 13. Gas transportation and storage services are subject to the regulation of the FERC. Sequent proposes to provide similar services to NUI Utilities and VGDC subject to the approval of the NJBPU and VSCC. The asset management model that Sequent employs provides for revenue sharing between the asset manager and the utility's ratepayers. As noted above, Sequent currently manages the assets of AGL Resources' public utilities and under these arrangements, Sequent contributed approximately $9.9 million to customers in 2003. Billing Services NUI Utilities currently has an Agreement for Billing Services, dated February 18, 2004, with NUI's nonutility subsidiary, 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. UBS charges NUI Utilities market rates for the provision of these services. After closing, AGL Resources is willing 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 will need to seek such authorization before restructuring the contract between UBS and NUI Utilities. AGL Resources therefore requests a temporary exception to the "at cost" provisions of Section 13(b) of the Act and the rules thereunder, for two years, to provide adequate time to restructure this contract. 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. 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 authorizing this acquisition. Specifically, AGL Resources intends to maintain the existing services arrangements between UBS and NUI Utilities for as long as two years after the date of the SEC's order granting this Application. During that time, AGL Resources will endeavor to either restructure the existing UBS services agreements with NUI Utilities so that services thereunder may be provided at cost (provided that such 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. Construction and Management Services VGC provides construction and operations management services to SSLLC. VGC's wholly owned subsidiary, Virginia Gas Pipeline Company ("VGPC"), serves as the construction and operations manager to SSLLC, pursuant to an Operating Agreement, dated August 15, 2001. Under the terms of this agreement, SSLLC reimburses VGPC for the costs it incurs to construct, maintain and operate SSLLC's facilities, including VGPC's administration and labor costs. This service arrangement is permitted under Rule 87(b)(1) and is consistent with the cost pricing standard of Rule 90. Tax Allocation Agreement On December 23, 2003, the Commission issued a Supplemental Order authorizing AGL Resources' tax allocation agreement./11 AGL Resources proposes to add NUI and its subsidiaries to the existing tax allocation arrangements approved by the Commission for the AGL Resources system. Rule 16 Exemption SSLLC seeks to rely on an exemption under Rule 16 from the obligations, duties and liabilities imposed upon it under the Act as a subsidiary or affiliate of a registered holding company. Accordingly, Applicants request that the Commission authorize AGL Resources to acquire NUI's interest in SSLLC under Sections 9(a)(1) and 10. Section 3(a)(1) Exemption Request for VGC Applicants also requests that the Commission issue an order pursuant to Section 3(a)(1) of the Act confirming that VGC, and each of its subsidiary companies as such, will be exempt from all provisions of the Act, except Section 9(a)(2). Retention of Nonutility Subsidiaries AGL Resources has plans for retaining or divesting each of NUI's other nonutility businesses. Numerous nonutility subsidiaries 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 such companies. For the Commission by the Division of Investment Management, pursuant to delegated authority. _____________________________ 11 AGL Resources Inc., et al., Holding Co. Act Release No. 27781 (Dec. 23, 2003) ("Tax Allocation Order"). The Commission's Order of October 5, 2000, AGL Resources Inc., et al., Holding Co. Act Release No. 27242 (Oct. 5, 2000) had reserved jurisdiction, pending completion of the record over (among other things) the tax allocation agreement. EX-99.11 10 ex99-11.txt EX J-1 - DESCRIPTION OF NUI NONUTILITY SUBS
Exhibit J-1 NUI Non-utility Subsidiary Companies - ------------------- ----------- --------------- --------- ------------------------------------ ------------------------------------- Company State of Subsidiary of % Owned Description and Status Legal Basis for Retention Inc. - ------------------- ----------- --------------- --------- ------------------------------------ ------------------------------------- NUI Capital Corp. Florida NUI 100% Non-utility holding company. Holding company with respect to Corporation permitted utility-related and energy-related activities. See KeySpan Corporation, Holding Co. Release Act No. 27271 (Nov. 7, 2000). - ------------------- ----------- --------------- --------- ------------------------------------ ------------------------------------- NUI/Caritrade Delaware NUI 90% Organized to develop business See Emera Incorporated, Holding Co. International LLC International, opportunities involving natural Release Act No. 27445 (Oct. 1, Inc. gas products, services, technology 2001); KeySpan Corporation, Holding and equipment in Russia, the CIS Co. Release Act No. 27271 (Nov. 7, and NIS countries and Asia which 2000). involve Gazprom. NUI has discontinued operations. After closing, AGL Resources intends to seek to wind down existing business consistent with the terms of existing contractual obligations. AGL Resources may continue the existence of the legal entity as necessary and prudent to shield the AGL Resources group from liability. - ------------------- ----------- --------------- --------- ------------------------------------ ------------------------------------- NUI Energy, Inc. Delaware NUI Capital 100% Organized to market energy services See Rule 58(b)(1)(v). Corp. to retail commercial and industrial customers. NUI has discontinued After closing, AGL Resources intends the operations of NUI Energy, Inc. to cease conducting new business and and has no active customers. NUI will seek to wind down existing - ------------------- ----------- --------------- --------- ------------------------------------ ------------------------------------- 1 - ------------------- ----------- --------------- --------- ------------------------------------ ------------------------------------- Company State of Subsidiary of % Owned Description and Status Legal Basis for Retention Inc. - ------------------- ----------- --------------- --------- ------------------------------------ ------------------------------------- has existing obligations to, and business consistent with the terms claims against, some of its former of existing contractual customers. obligations. AGL Resources may continue the existence of the legal entity as necessary and prudent to shield the AGL Resources group from liability. - ------------------- ----------- --------------- --------- ------------------------------------ ------------------------------------- NUI Energy Delaware NUI Capital 100% Organized to provide wholesale See Rule 58(b)(1)(v). Brokers, Inc. Corp. energy trading and related services to other utilities and After closing, AGL Resources intends energy marketing companies. NUI to cease conducting new business and is currently winding down the will seek to wind down existing operations of NUI Energy Brokers, business consistent with the terms Inc. NUI Energy Brokers, Inc. of existing contractual continues to manage its prior obligations. AGL Resources may contractual obligations under continue the existence of the legal three agreements: a long-term entity as necessary and prudent to sales agreement and two long-term shield the AGL Resources group from gas storage and transportation liability. agreements. The storage and transportation agreements expire in 2023 and the sales agreement expires on December 31, 2007. - ------------------- ----------- --------------- --------- ------------------------------------ ------------------------------------- NUI Energy Delaware NUI Capital 100% Organized to provide energy See Rule 58(b)(1)(i). Solutions, Inc. Corp. management and consulting services to existing and new customers. After closing, AGL Resources intends NUIESI has one active contract. to cease conducting new business and It is not soliciting new customers. will seek to wind down existing - ------------------- ----------- --------------- --------- ------------------------------------ ------------------------------------- 2 - ------------------- ----------- --------------- --------- ------------------------------------ ------------------------------------- Company State of Subsidiary of % Owned Description and Status Legal Basis for Retention Inc. - ------------------- ----------- --------------- --------- ------------------------------------ ------------------------------------- business consistent with the terms of existing contractual obligations. AGL Resources may continue the existence of the legal entity as necessary and prudent to shield the AGL Resources group from liability. - ------------------- ----------- --------------- --------- ------------------------------------ ------------------------------------- NUI Hungary, Inc. Delaware NUI 99% Non-utility holding company See Emera Incorporated, Holding Co. International, organized to develop energy Release Act No. 27445 (Oct. 1, Inc. markets in Hungary. Upon the 2001); KeySpan Corporation, Holding NUI Energy 1% completion of the liquidation of Co. Release Act No. 27271 (Nov. 7, Brokers, Inc. HPMT, it is expected that NUI 2000). Hungary will be wound down. After closing, AGL Resources intends to cease conducting new business and will seek to wind down existing business consistent with the terms of existing contractual obligations. AGL Resources may continue the existence of the legal entity as necessary and prudent to shield the AGL Resources group from liability. - ------------------- ----------- --------------- --------- ------------------------------------ ------------------------------------- HPMT, Kft. Hungary NUI Hungary, 100% A Hungarian limited liability To be divested. Inc. company established to pursue opportunities in the Hungarian After closing, AGL Resources intends energy market. This company is in to cease conducting new business and liquidation. will seek to wind down existing business consistent with the terms of - ------------------- ----------- --------------- --------- ------------------------------------ ------------------------------------- 3 - ------------------- ----------- --------------- --------- ------------------------------------ ------------------------------------- Company State of Subsidiary of % Owned Description and Status Legal Basis for Retention Inc. - ------------------- ----------- --------------- --------- ------------------------------------ ------------------------------------- existing contractual obligations. AGL Resources may continue the existence of the legal entity as necessary and prudent to shield the AGL Resources group from liability. - ------------------- ----------- --------------- --------- ------------------------------------ ------------------------------------- NUI Delaware NUI Capital 100% Non-utility holding company See Emera Incorporated, Holding Co. International, Corp. organized to explore international Release Act No. 27445 (Oct. 1, Inc. business opportunities. 2001); KeySpan Corporation, Holding Upon the completion of the Co. Release Act No. 27271 (Nov. 7, liquidation of HPMT and NUI 2000). Hungary, it is expected that NUI International will be wound down. After closing, AGL Resources intends to cease conducting new business and will seek to wind down existing business consistent with the terms of existing contractual obligations. AGL Resources may continue the existence of the legal entity as necessary and prudent to shield the AGL Resources group from liability. - ------------------- ----------- --------------- --------- ------------------------------------ ------------------------------------- NUI Richton Delaware NUI Storage, 100% Non-utility holding company See Rule 58(b)(2)(i); Gas Related Storage, Inc. Inc. organized as sole member of Activities Act of 1990, Section 2(a). Richton Gas Storage Company, LLC. After closing, AGL Resources intends to cease conducting new business and No active operations. NUI is will seek to wind down existing exploring a sale of assets related business consistent with the terms of - ------------------- ----------- --------------- --------- ------------------------------------ ------------------------------------- 4 - ------------------- ----------- --------------- --------- ------------------------------------ ------------------------------------- Company State of Subsidiary of % Owned Description and Status Legal Basis for Retention Inc. - ------------------- ----------- --------------- --------- ------------------------------------ ------------------------------------- to Richton project. existing contractual obligations. AGL Resources may continue the existence of the legal entity as necessary and prudent to shield the AGL Resources group from liability. - ------------------- ----------- --------------- --------- ------------------------------------ ------------------------------------- Richton Gas Delaware NUI Richton 100% Organized to develop salt dome gas See Rule 58(b)(2)(i); Gas Related Storage Company, Storage, Inc. storage facility. Activities Act of 1990, Section 2(a). LLC No active operations. NUI is After closing, AGL Resources intends exploring a sale of assets related to cease conducting new business and to the Richton project. will seek to wind down existing business consistent with the terms of existing contractual obligations. AGL Resources may continue the existence of the legal entity as necessary and prudent to shield the AGL Resources group from liability. - ------------------- ----------- --------------- --------- ------------------------------------ ------------------------------------- NUI Sales Delaware NUI Capital 100% Non-utility holding company Inactive. See KeySpan Corporation, Management, Inc. Corp. organized to hold NUI Sales Holding Co. Release Act No. 27271 Management, Inc.'s interest in TIC (Nov. 7, 2000). Enterprises, LLC. After closing, AGL Resources intends to cease conducting new business and will seek to wind down existing business consistent with the terms of existing contractual obligations. AGL Resources may continue the - ------------------- ----------- --------------- --------- ------------------------------------ ------------------------------------- 5 - ------------------- ----------- --------------- --------- ------------------------------------ ------------------------------------- Company State of Subsidiary of % Owned Description and Status Legal Basis for Retention Inc. - ------------------- ----------- --------------- --------- ------------------------------------ ------------------------------------- existence of the legal entity as necessary and prudent to shield the AGL Resources group from liability. - ------------------- ----------- --------------- --------- ------------------------------------ ------------------------------------- NUI Saltville Delaware NUI 100% Non-utility holding company See Rule 58(b)(2)(i); Gas Related Storage, Inc. Corporation organized to hold NUI Saltville Activities Act of 1990, Section 2(a). Storage, Inc.'s interest in Saltville Gas Storage Company, LLC. - ------------------- ----------- --------------- --------- ------------------------------------ ------------------------------------- Saltville Gas Delaware NUI Saltville 50% Organized to develop gas storage See Rule 58(b)(2)(i); Gas Related Storage Company, Storage, Inc. facilities and hold NUI's Activities Act of 1990, Section LLC interests in storage development 2(a). Rule 16. projects. - ------------------- ----------- --------------- --------- ------------------------------------ ------------------------------------- NUI Service, Inc. New Jersey NUI Capital 100% Organized to provide appliance See Powergen plc, Holding Co. Act Corp. repair services in Florida. Release No. 27291 (Dec. 6, 2000) (authorizing retention of subsidiary engaged in appliance repair and warranty sales). - ------------------- ----------- --------------- --------- ------------------------------------ ------------------------------------- NUI Storage, Inc. Delaware NUI 100% Organized to develop gas storage See Rule 58(b)(2)(i); Gas Related Corporation facilities. No active operations. Activities Act of 1990, Section 2(a). NUI is exploring a sale of assets related to Richton project. After closing, AGL Resources intends to cease conducting new business and will seek to wind down existing business consistent with the terms of existing contractual obligations. AGL Resources may continue the - ------------------- ----------- --------------- --------- ------------------------------------ ------------------------------------- 6 - ------------------- ----------- --------------- --------- ------------------------------------ ------------------------------------- Company State of Subsidiary of % Owned Description and Status Legal Basis for Retention Inc. - ------------------- ----------- --------------- --------- ------------------------------------ ------------------------------------- existence of the legal entity as necessary and prudent to shield the AGL Resources group from liability. - ------------------- ----------- --------------- --------- ------------------------------------ ------------------------------------- OAS Group, Inc. New Jersey NUI Capital 100% Digital mapping operation of See Rule 58(b)(1)(vii). Corp. customer distribution facilities, originally part of UBS. NUI is After closing, AGL Resources intends currently winding down the to cease conducting new business and operations of OAS Group, Inc. will seek to wind down existing Effective April 1, 2004, OAS has business consistent with the terms subcontracted all of its existing of existing contractual services to a third party obligations. AGL Resources may engineering firm. OAS has continue the existence of the legal notified its customers that upon entity as necessary and prudent to expiration of their current shield the AGL Resources group from contracts, their relationship with liability. OAS will terminate. - ------------------- ----------- --------------- --------- ------------------------------------ ------------------------------------- TIC Enterprises, Delaware NUI Sales 100% Organized to recruit, train, and Inactive. LLC Management, manage sales professionals and Inc. serve as a sales and marketing After closing, AGL Resources intends representative for various to cease conducting new business and businesses. will seek to wind down existing business consistent with the terms of existing contractual obligations. AGL Resources may continue the existence of the legal entity as necessary and prudent to shield the AGL Resources group from liability. - ------------------- ----------- --------------- --------- ------------------------------------ ------------------------------------- 7 - ------------------- ----------- --------------- --------- ------------------------------------ ------------------------------------- Company State of Subsidiary of % Owned Description and Status Legal Basis for Retention Inc. - ------------------- ----------- --------------- --------- ------------------------------------ ------------------------------------- Utility Business New Jersey NUI Capital 100% Organized to provide billing and See Item 3.B.6 of Application; See Services, Inc. Corp. customer information systems and also Cinergy Corp., Holding Co. Act services to investor-owned and Release No. 26662 (Feb. 7, 1997) and municipal utilities and third CP&L Energy, Inc., Holding Co. Act party energy providers. The New Release No. 27284 (Nov. 27, 2000) Jersey Board of Public Utilities (authorizing retention of approved a three year service application services provider that agreement for UBS to provide provides, supports and manages a billing services to the utility. broad range of specialized facilities management software and information systems designed to help businesses and organizations manage and maintain facilities and equipment more efficiently.). - ------------------- ----------- --------------- --------- ------------------------------------ ------------------------------------- Virginia Gas Delaware NUI 100% Holding-company that directly or See Item 3.B.1(d)(ii) and Item 3.B.2 Company Corporation through its subsidiaries provides of Application; Holding company with pipeline operation, natural gas respect to permitted utility and storage, marketing and energy-related activities. distribution services; natural gas exploration, production and well operations. - ------------------- ----------- --------------- --------- ------------------------------------ ------------------------------------- Virginia Gas Virginia Virginia Gas 100% Organized to own a salt cavern See Rule 58(b)(2)(i); Gas Related Pipeline Company Company natural gas storage facility in Activities Act of 1990, Section 2(a). Saltville, VA. In addition, this company is the manager of the Saltville Gas Storage Company, LLC. - ------------------- ----------- --------------- --------- ------------------------------------ ------------------------------------- Virginia Gas Virginia Virginia Gas 100% Organized to own a depleted See Rule 58(b)(2)(i); Gas Related Storage Company Company reservoir storage facility in Activities Act of 1990, Section 2(a). Early Grove, VA. - ------------------- ----------- --------------- --------- ------------------------------------ -------------------------------------
8 EX-99.12 11 ex99-12.txt EX L-2 - FORM OF INTERCOMPANY NOTE Exhibit L-2 PROMISSORY NOTE $_________________ September 1, 2004 Principal Adjusted Annually Atlanta, Georgia FOR VALUE RECEIVED, the undersigned, _____________, a _______________ (hereinafter referred to as "Maker"), located at Ten Peachtree Place, Atlanta, Georgia 30309, hereby unconditionally promises to pay to the order of AGL RESOURCES INC., a Georgia corporation (hereinafter referred to as `Payee"; Payee and any subsequent holder hereof being hereinafter referred to as "Holder"), on the Maturity Date (as hereinafter defined), without grace or set-off, at the office of Payee at Ten Peachtree Place, Atlanta, Georgia 30309, or such other place as Holder may designate to Maker in writing from time to time, the initial principal amount of __________________________________________ DOLLARS ($___________.00), which amount shall be adjusted annually as described in Section 1.02 below, together with interest thereon, as described herein, from the date hereof, in lawful money of the United States of America, which shall, at the time of payment, be legal tender in payment of all debts and dues, public and private, all upon the terms and conditions specified below. ARTICLE I PAYMENT TERMS AND CONDITIONS 1.01 Accrual and Calculation of Interest. Commencing the date hereof up to and through the date on which all principal and interest hereunder is paid in full, and subject to Section 1.04, interest shall accrue at an initial interest rate of _____% per annum, which rate is to be recalculated on a quarterly basis based upon the weighted-average costs and expense of borrowing the then-outstanding long-term debt of both AGL Capital Corporation and AGL Resources Inc., affiliated companies of the Maker. Notwithstanding the foregoing, interest to be computed on this Note shall be consistent with the provisions of the Public Utility Holding Company Act of 1935, as amended, and Section 52(a) in particular. 1.02 Payment of Principal and Interest on the Maturity Date. The entire outstanding balance of the principal amount evidenced by this promissory note (this "Note"), shall be the initial principal amount stated above and shall be adjusted annually in order for Maker to conform with the requirements as to its capital structure as provided in [regulatory order, if any]. The principal amount, together with all accrued but unpaid interest thereon, shall be due and payable in full by Maker on _____________ (the "Maturity Date"). All payments and prepayments under this Note shall first be applied to the extent thereof to all accrued but unpaid interest on the outstanding principal balance, then to costs and expenses incurred by Holder in seeking enforcement of this Note, including reasonable attorneys' fees, with the remainder, if any, to be applied to the outstanding principal due. 1.03 Prepayment. The principal amount evidenced by this Note may be prepaid in whole or in part at any time and from time to time without the payment of any premium or penalty. All prepayments in whole or in part of principal on this Note shall include interest accrued but unpaid through the date of prepayment on the principal amount being prepaid. Exhibit L-2 1.04 Security and Subordination. This Note is an unsecured promissory note. Notwithstanding any provision contained herein to the contrary, the principal indebtedness evidenced by this Note shall be subordinated and junior in right of payment to, and only to, any and all obligations of Maker in respect of indebtedness for borrowed money, whether such obligations are direct or indirect, absolute or contingent, due or to become due, presently outstanding or hereafter created, and any and all renewals of such obligations, by operation of law or otherwise, unless the instrument creating or evidencing any such obligation expressly provides that the obligation created or evidenced thereby is not senior in right of payment to this Note. Nothing contained in this paragraph shall impair, as between the Maker and the Payee, the obligation of the Maker, which is unconditional and absolute, to pay to said Payee the principal amount of this Note and any interest in accordance with the terms hereof, subject only to the rights of certain holder(s) of indebtedness of the Maker as described herein. 1.05 Default and Event of Default. It is hereby expressly agreed that should Maker fail to pay to Holder promptly when the same shall become due (whether at scheduled maturity, upon acceleration or otherwise) any principal, interest or other payment obligation as stipulated herein, or should Maker breach any other warranty, representation, covenant, term or condition of this Note, then a "Default" shall exist hereunder. It is further expressly agreed that the following events shall constitute an "Event of Default" hereunder: (a) the occurrence of a Default which is not cured by Maker within seven (7) days after written notice of such Default is provided by Holder to Maker; (b) the filing by Maker of a voluntary petition for relief under Title 11 of the United States Code, as amended (the "United States Bankruptcy Code"), or a voluntary petition or answer seeking reorganization, arrangement or readjustments of debts, or any other relief under the United States Bankruptcy Code or any other insolvency act or law, state, federal or other governmental, now or hereafter existing, or any agreement by Maker indicating consent to, or approval or acquiescence in, any such petition or proceeding; (c) the application by Maker for, or the consent or acquiescence of Maker in the appointment of, a receiver or trustee for all or a substantial part of its property; (d) the making by Maker of a general assignment for the benefit of creditors; .(e) the inability of Maker, or the admission of Maker in writing of its inability, to pay its debts as they mature; (f) the filing of an involuntary petition against Maker seeking reorganization, arrangement or readjustment of its debts or for any other relief under the United States Bankruptcy Code or any other insolvency act or law, state, federal or other governmental, now or hereafter existing, or the involuntary appointment of a receiver or trustee of Maker for all or a substantial part of its property or assets, or the issuance of a warrant of attachment or execution of similar process against a substantial part of the property of Maker and the continuance of such for thirty (30) days undismissed or undischarged; (g) the dissolution of Maker (whether voluntarily or otherwise) or the merger, consolidation or reorganization of Maker as to which Maker is not the surviving entity without the prior written consent of Holder, which consent may be arbitrarily withheld; (h) the sale or agreement to sell substantially all of its assets; or (i) the entry of a judgment against Maker which will have a material and adverse effect on Maker's ability to pay all amounts due or to become due and the performance of all obligations of Maker under this Note and all extensions, renewals and amendments to any of the foregoing (collectively, the "Obligations") which is not satisfied or payment thereof secured by a bond, letter of credit or similar collateral acceptable to Holder, in Holder's sole discretion, within thirty (30) days after the rendition thereof. 2 Exhibit L-2 Commencing on the date of any Default (whether or not an Event of Default has occurred) or any Event of Default hereunder, regardless of whether or not there has been an acceleration of the indebtedness evidenced hereby, interest shall accrue on the outstanding principal balance of this Note at the interest rate that would be in effect hereunder absent such Default or Event of Default and, in addition thereto, a default charge shall accrue at the rate of two percent (2%) per annum on the daily outstanding principal balance of this Note, such default charge being due and payable together with and in the same manner as interest as hereinabove provided, except that, if not sooner due and payable, all such interest and default charges shall be paid at the time of and as a condition precedent to the curing of any such Default should this Note or Holder, at its sole option, allow such Default to be cured. Upon the occurrence of any Event of Default hereunder (other than an Event of Default described in clause (b), (c), (d), (e) or (f) of the definition thereof), any and all of the indebtedness evidenced by this Note (including the principal and all unpaid interest accrued thereon) may be immediately declared due and payable and thereupon shall become immediately due and payable in full, and Holder shall have all of the rights and remedies described herein and may exercise any or all of such remedies in its sole discretion. Upon the occurrence of an Event of Default described in clause (b), (c), (d), (e) or (f) of the definition thereof, any and all of the indebtedness evidenced by this Note (including the principal and all unpaid interest accrued thereon), without demand or notice of any kind, shall immediately become due and payable in full, and Holder shall have all of the rights and remedies described herein and may exercise any or all of such remedies in its sole discretion. Further, Maker hereby agrees to pay all reasonable and actual out-of-pocket costs and expenses, including reasonable attorneys' fees, incurred by Holder following an Event of Default in the collection of the indebtedness evidenced by this Note or in enforcing any of the rights, powers, remedies and privileges of Holder hereunder, whether prior to the commencement of judicial proceedings and/or thereafter at the trial and/or appellate level and/or in pre- and post-judgment or bankruptcy proceedings. ARTICLE II REPRESENTATIONS AND WARRANTIES 2.01 Representations and Warranties. Maker represents and warrants to Holder that the execution and delivery by Maker of this Note and the performance by Maker hereunder (a) are within Maker's corporate power; (b) have been duly authorized by all necessary or proper corporate action; (c) are not in contravention of any provision of Maker's charter or bylaws; (d) will not violate any law or regulation, or any order or decree of any court or governmental authority; (e) will not conflict with or result in the breach or termination of, constitute a default under or accelerate any performance required by, any indenture, mortgage, deed of trust, lease, agreement or other instrument to which Maker is a party or by which Maker or any of its property is bound; (f) do not require the consent, approval, authorization of or filing or registration with any governmental authority or any other person other than those which will have been duly obtained or made prior to the date hereof and which are in full force and effect; and (g) will not result in the creation or imposition of any lien upon any of the property of Maker. Maker further represents and warrants to Holder that this Note has been duly executed and delivered by Maker and constitutes the legal, valid and binding obligation of Maker, enforceable against Maker in accordance with its terms. 3 Exhibit L-2 ARTICLE III GENERAL TERMS AND CONDITIONS 3.01 No Waiver by Holder; Amendment. No delay, indulgence, departure, extension of time for payment, acceptance of a partial or past due installment, failure to accelerate by reason of an Event of Default or any other act or omission by Holder with respect to Maker shall: (a) release, discharge, modify, change or otherwise affect the original liability of any party hereunder; (b) be construed as a novation or reinstatement of the indebtedness evidenced hereby, or be construed as a waiver of any right of acceleration or the right of Holder to insist upon strict compliance with the terms hereof; or (c) preclude Holder from exercising any right, privilege or power granted herein or by law. Maker hereby expressly waives the benefit of any statute or rule of law or equity, whether now or hereafter provided, which would produce a result contrary to or in conflict with the foregoing. No right, power or remedy conferred upon or reserved to Holder herein is intended to be exclusive of any other right, power or remedy, but each and every such right, power or remedy shall be cumulative and concurrent and shall be in addition to any other right, power or remedy given thereunder or now or hereafter existing. None of the terms or provisions of this Note may be waived, altered, modified or amended except as Holder and Maker may consent thereto in writing, and then only to the extent and for the period of time expressly stated therein. 3.02 Waivers by Maker. Presentment for payment, demand, protest and notice of demand, protest, nonpayment, dishonor, acceleration and intent to accelerate and all other notices are hereby waived by Maker, who further waives and renounces, to the fullest extent permitted by law, all rights to the benefits of any statute of limitations and any moratorium, reinstatement, marshalling, forbearance, valuation, stay, extension, redemption, appraisement, exemption and homestead now or hereafter provided by the Constitution and laws of the United States of America and of each state thereof, as to itself against the enforcement and collection of the obligations evidenced by this Note. 3.03 Unconditional Payment. Maker is and shall be obligated to pay principal, interest and any other amounts which shall become payable hereunder absolutely and unconditionally and without any abatement, postponement, diminution or deduction and without any reduction for counterclaim or setoff. In the event that at any time any payment received by Holder hereunder shall be deemed by a court of competent jurisdiction to have been a voidable preference or fraudulent conveyance under any bankruptcy, insolvency or other debtor relief law, then the obligation to make such payment shall survive any cancellation or satisfaction of this Note or return thereof to Maker and shall not be discharged or satisfied with any prior payment thereof or cancellation of the Note, but shall remain a valid and binding obligation enforceable in accordance with the terms and provisions hereof, and such payment shall be immediately due and payable upon demand. This Section 3.03 shall survive any cancellation or satisfaction of this Note or return of this Note to Maker. 3.04 Reservation of Rights. Nothing in this Note shall be deemed to limit the right of Holder to (a) exercise self-help remedies such as (but not limited to) setoff, or (b) foreclose against any real or personal property collateral, or (c) obtain from a court provisional or 4 ancillary remedies such as (but not limited to) injunctive relief, writ of possession or the appointment of a receiver. 3.05 Governing Law. This Note shall be governed by and construed in accordance with the laws of the State of Georgia, without regard to principles of conflict of law. 3.06 Compliance with Law. It is the intention of the parties hereto to comply with all applicable usury laws. Accordingly, it is agreed that notwithstanding any provisions to the contrary in this Note, or in any other documents securing payment hereof or otherwise relating hereto, in no event shall this Note or such other documents require the payment or permit the collection of interest in excess of the maximum amount permitted by such laws. If any such excess of interest is contracted for, charged or received under this Note, or under the terms of any other documents securing payment hereof or otherwise relating hereto, or in the event the maturity of the indebtedness evidenced hereby is accelerated in whole or in part, or in the event that all or part of the principal or interest of this Note shall be prepaid, so that under any of such circumstances the amount of interest contracted for, charged or received under this Note shall exceed the maximum amount of interest permitted by applicable usury laws, then in any such event, (a) the provisions of this Section 3.06 shall govern or control, (b)neither Maker nor any other person or entity now or hereafter liable for the payment of this Note shall be obligated to pay the amount of such interest to the extent that it is in excess of the maximum amount of interest permitted by applicable usury laws, (c) any such excess which may have been collected shall be either applied as a credit against the then unpaid principal amount hereof or refunded to Maker, at Holder's option, and (d) the effective rate of interest for the Note shall be automatically reduced to the maximum lawful rate allowed for this Note under the applicable usury jurisdiction thereof. 3.07 Successors and Permitted Assigns. This Note shall inure to the benefit of and be binding upon the parties hereto and their respective heirs, executors, administrators, legal representatives, successors, successors-in-title and permitted assigns, subject to the restrictions on transfer contained herein. As used herein, "Maker" and "Holder" shall be deemed to include their respective heirs, executors, legal representatives, successors, successors-in-title and permitted assigns, whether by voluntary action of the parties or by operation of law. 3.08 Severability. The unenforceability or invalidity of any provision of this Note shall not affect the enforceability or validity of any other provision herein. 3.09 Time of Essence. Time is of the essence to all terms and provisions set forth in this Note. 3.10 Notices. All notices to Maker or to Holder shall be given in writing by hand delivery or by first class registered United States mail, postage prepaid, and sent to their respective addresses set forth above, or to such other address as either may specify to the other by due notice. 3.11 Interpretation. All headings used herein are used for convenience only and shall not be used to construe or interpret this Note. (Signatures begin on following page) 5 Exhibit L-2 IN WITNESS WHEREOF, Maker has executed this Note under seal on the date first above written. MAKER: ----------------------------------------------- By: ------------------------------------------- Name: Title: Attest: --------------------------------------- Name: ---------------------------------- Title: --------------------------------- (CORPORATE SEAL) 6 EX-99.13 12 ex99-13.txt EX M-1 - PRESS RELEASE NJ BPU 7/14/04 Press Release: Release: PR#51-04 Release date: 7/15/04 Contact: Eric Hartsfield Phone: 973-648-2014 Contact: Tracy Munford Phone: 973-648-2595 BPU Says Sale of NUI is the next Critical Step in Recovery Process State Regulatory Agency Says Sale of Utility Will Benefit Elizabethtown Customers NEWARK, NJ - July 15, 2004 - Officials of the New Jersey Board of Public Utilities said today's announcement by AGL Resources of Atlanta to acquire NUI is the next critical step in the recovery process established by the Board as part of its comprehensive focused audit of NUI. NUI's Board of Directors approved the merger agreement and the companies will file a joint petition with the BPU seeking regulatory approval under New Jersey's "Merger" Statute. The BPU looks forward to carefully reviewing the joint petition and determining the impact of the proposed acquisition on the customers and employees of Elizabethtown Gas as well as any impacts on rates, service quality and competition in New Jersey. The Board notes that AGL Resources and its regulated subsidiaries are all investment grade companies, and that AGL Resources' acquisition program to date has been focused primarily on the acquisition of regulated natural gas distribution utilities. The Board will be looking for a strong commitment from AGL to restore the financial integrity of Elizabethtown Gas and improve the operational efficiency of the New Jersey utility. On September 26, 2003, the Board of Directors of NUI Corp announced their decision to sell the company. The Board of Public Utilities immediately initiated the monitoring of that sale process to assure that the long-term interests of the ratepayers of Elizabethtown Gas were fully protected. On April 14, 2004, NUI agreed to accept the results of the Board's focused Audit of NUI and return $28 million refund to Elizabethtown ratepayers. The Board approved an initial payment of over $7 million in refunds for Elizabethtown Gas customers on July 7 with a credit to appear with the September 2004 billing. Subsequently NUI entered into a settlement with the New Jersey Attorney General's Criminal Justice Division to resolve alleged criminal violation at NUI Energy Brokers, their trading company. The resolution of those regulatory and legal issues was a key step in positioning NUI for acquisition. The Board will establish an expedited schedule to review the proposed acquisition to assure a timely decision and continue its active protection of Elizabethtown Gas customers. The full merger review should take approximately six months instead of the historical average of 12 months. Any need to modify the refund schedule will be addressed in the merger review. The New Jersey Board of Public Utilities (NJBPU) is a state agency and regulatory authority mandated to ensure safe, adequate, and proper utility services at reasonable rates for New Jersey customers. Critical services regulated by the BPU include natural gas, electricity, water, wastewater, telecommunications and cable television. The Board has general oversight responsibility for monitoring utility service, responding to consumer complaints, and investigating utility accidents. To find out more about the Board of Public Utilities, visit our web site at www.bpu.state. nj.us. -----END PRIVACY-ENHANCED MESSAGE-----