-----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, R0d+8tTMxGogQh5SdT8yDUM2eCGNgff69r+Dhr2fbBNcp6RajFVgccl6H8dkV1RW xHd89TksIPy/9t5GP+3gRw== 0000898822-97-000587.txt : 19970704 0000898822-97-000587.hdr.sgml : 19970704 ACCESSION NUMBER: 0000898822-97-000587 CONFORMED SUBMISSION TYPE: DEFA14A PUBLIC DOCUMENT COUNT: 1 FILED AS OF DATE: 19970703 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: BROOKLYN UNION GAS CO CENTRAL INDEX KEY: 0000014525 STANDARD INDUSTRIAL CLASSIFICATION: NATURAL GAS DISTRIBUTION [4924] IRS NUMBER: 110584613 STATE OF INCORPORATION: NY FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: DEFA14A SEC ACT: 1934 Act SEC FILE NUMBER: 001-00722 FILM NUMBER: 97636328 BUSINESS ADDRESS: STREET 1: ONE METROTEC CENTER CITY: BROOKLYN STATE: NY ZIP: 11201 BUSINESS PHONE: 7184032000 MAIL ADDRESS: STREET 1: ONE METROTEC CENTER CITY: BROOKLYN STATE: NY ZIP: 11201 DEFA14A 1 SCHEDULE 14A - DEFINITIVE ADDITIONAL MATERIALS SCHEDULE 14A INFORMATION PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934 Filed by the Registrant [X] Filed by a Party other than the Registrant [_] Check the appropriate box: [ ] Preliminary Proxy Statement [_] Confidential, for Use of the [ ] Definitive Proxy Statement Commission Only (as permitted by [X] Definitive Additional Materials Rule 14a-6(e)(2)) [ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12 THE BROOKLYN UNION GAS COMPANY (NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) ------------------------------------------ (NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT) Payment of Filing Fee (Check the appropriate box): [X] No fee required. [ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. (1) Title of each class of securities to which transaction applies. ------------------------------------------------------------------- (2) Aggregate number of securities to which transaction applies: ------------------------------------------------------------------- (3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): ------------------------------------------------------------------- (4) Proposed maximum aggregate value of transactions: ------------------------------------------------------------------- (5) Total fee paid: ------------------------------------------------------------------- [_] Fee paid previously with preliminary materials. [ ] Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of this filing. (1) Amount Previously Paid: ------------------------------------------------------------------- (2) Form, Schedule or Registration Statement No.: ------------------------------------------------------------------- (3) Filing Party: ------------------------------------------------------------------- (4) Date Filed: ------------------------------------------------------------------- BROOKLYN UNION MID-YEAR UPDATE 1997 ANALYST PRESENTATION WEDNESDAY, JUNE 18, 1997 NEW YORK, NY BROOKLYN UNION ONE METROTECH CENTER BROOKLYN, NY 11201-3850 HTTP://WWW.BUG.COM ROBERT B. CATELL CHAIRMAN & CHIEF EXECUTIVE OFFICER CRAIG G. MATTHEWS PRESIDENT & CHIEF OPERATING OFFICER VINCENT D. ENRIGHT SENIOR VICE PRESIDENT & CHIEF FINANCIAL OFFICER JAN C. CHILDRESS VICE PRESIDENT, INVESTOR RELATIONS TEL: 718-403-3382 FAX: 718-852-8221 E-MAIL: ICHILDRE@BUG.COM BROOKLYN UNION [LOGO] LONG-TERM STRATEGIC APPROACH ================================================================= -- Grow core distribution and transportation business -- Build complementary upstream and downstream assets -- Develop strong marketing business -- Pursue mergers & acquisitions BROOKLYN UNION [LOGO] [Graphic of an arrow pointing right with Brooklyn Union on the arrowhead, and an arrow pointing left with LILCO on the arrowhead] HOLDING COMPANY | -------------------------- | | BROOKLYN LONG ISLAND UNION LIGHTING COMPANY BROOKLYN UNION [LOGO] LIPA'S GOALS AND OBJECTIVES ================================================================= -- Achieve and sustain double digit rate savings -- Settle the $1.2 billion Shoreham Property tax and PILOT Litigation ("Shoreham Litigation") and other tax certiorari cases -- Assure system reliability and customer service -- Foster competition -- Promote conservation and demand side management -- Maximize private sector involvement BROOKLYN UNION [LOGO] LILCO RESTRUCTURING ================================================================= HOLDCO / \ / \ BU NEWCO - Gas | - Electric Generation | - Common Facilities | LILCO - Electric Transmission - Electric Distribution - Nine Mile Point 2 (18% Share) - Regulatory Asset - IPP/Power Supply Contracts - Shoreham Litigation and Other Tax Claims BROOKLYN UNION [LOGO] LIPA ACQUISITION OF LILCO ================================================================= HOLDCO / \ / \ Cash Cash BU NEWCO <------ LIPA <------ LIPA ------> | ------> Tax-Exempt LILCO | LIPA Bondholders Stock | Bonds | LILCO BROOKLYN UNION [LOGO] MANAGEMENT SERVICES AGREEMENT ("MSA") ================================================================= Manager: HOLDCO will serve as initial Manager for LIPA's T&D system in accordance with LIPA's policies and procedures Term: 8 years Mandatory Rebid: Contract will be competitively bid after the 5th year Compensation The MSA will include incentive and Performance penalty provisions tied to cost Standards: savings and system performance standards, including reliability, customer service and worker safety BROOKLYN UNION [LOGO] POWER SUPPLY AGREEMENT ("PSA") ================================================================= Amount of Generation: LIPA will contract with NEWCO for all of its existing generation capacity (approximately 3,900 MW) Energy Purchases: LIPA will purchase energy from NEWCO and other sources on least- cost basis Generation Charges: Generation charges will not be increased as a result of the transaction Agreement Term: 15 years Ramp-Down Option: Beginning in year 7, LIPA can reduce by as much as 1,500 MW its capacity commitment according to a mutually agreed upon schedule. If LIPA exercises this option and accepts bids to replace the capacity, NEWCO will be paid a declining percentage of the present value of the remaining capacity charges related to the capacity reduction. BROOKLYN UNION [LOGO] HIGHLIGHTS ================================================================= LIPA Will: -- Acquire Lilco common stock for $2.5 billion ($1.7 billion net) -- Assume $3.6 billion in debt -- Redeem $340 million in preferred stock Merger Provides For Orderly Management Transition Board of New Holding Company Includes: -- Six Brooklyn Union Directors -- Six Lilco Directors -- Three New Outside Directors BROOKLYN UNION [LOGO] REQUIRED APPROVALS ================================================================= Long Island Approve (i) acquisition of LILCO Power Authority: common stock, (ii) MSA, (iii) PSA and (iv) LIPA bond resolution BU and LILCO Approve BU/LILCO combination (Shareholders): Approve sale of LILCO common stock to LIPA (LILCO SHAREHOLDERS ONLY) Public Authorities Approve transaction and LIPA bond Control Board: issue N.Y.S. Comptroller: Approve terms of LIPA bond issue N.Y.S. Public Service Approve (i) BU/LILCO combination, Commission: (ii) funding of interest rate hedge and (iii) split of synergy savings among gas and electric customers and shareholders BROOKLYN UNION [LOGO] REQUIRED APPROVALS ================================================================= Internal Revenue Service: Rulings regarding LIPA's tax-exempt bonds Rulings regarding capital gains related to BU/LILCO sale of LILCO to LIPA Federal Energy Approve (i) PSA rates and contract Regulatory terms and (ii) market power issues Commission: related to transaction Nuclear Regulatory Approve transfer of LILCO's 18% Commission: ownership share of NMP2 to LIPA Securities Ex- BU/LILCO exemption from Public change Commission: Utility Holding Company Act jurisdiction BROOKLYN UNION [LOGO] GAS DISTRIBUTION PROFILE ================================================================= For 1996 Fiscal Year -- 5th largest gas distribution company in U.S. -- Serves Brooklyn, Staten Island and 2/3 of Queens -- 1,126,000 customers (including 1,089,000 residential) -- 142 BCF in firm gas sales -- $1.4 billion in revenues -- $82 million in net income -- $111 million in capital expenditures BROOKLYN UNION [LOGO] OBJECTIVES 1997-2002 ================================================================= Gas Distribution -- Five percent annual growth in net income -- Produce ROE in top quartile of gas distributors -- Reduce annual capital expenditures by 20 percent -- Achieve $30 million net reduction on O&M -- Shape the process of deregulation of NY state -- Continue to lead NY state utilities in customer satisfaction BROOKLYN UNION [LOGO] FUTURE EARNINGS GROWTH ================================================================= Gas Distribution -- Increase saturation in existing markets -- Develop new markets for gas -- Increase revenue from existing customers -- New York Hub -- Price cap BROOKLYN UNION [LOGO] FUTURE EARNINGS GROWTH ================================================================= Gas Distribution -- Expanded parts protection plan -- Customer Services Guarantees -- Unbundled Services -- Additional Segmentation -- Customized Rates -- Packaging services to marketers, such as capacity, storage, swing service and balancing BROOKLYN UNION [LOGO] DISTRIBUTION BUSINESS TRADITIONAL MARKET SEGMENTS Gross Margins Added From Potential New Sales Saturation Margins 1992-1996 ---------- --------- -------------- Residential 78% $100.1 mil $16.0 mil Multifamily 46% 35.2 mil 11.5 mil Commercial, Industrial, Government 52% 135.1 mil 31.4 mil New Markets -- 113.2 mil 4.0 mil ---------- ---------- Total $383.6 mil $62.9 mil BROOKLYN UNION [LOGO] POTENTIAL LOAD BY CUSTOMER CLASS 136 Billion Cubic Feet [Pie Chart showing that 25% held by Commercial, Industrial and Government, 18% held by Residential, 15% held by Multifamily and 42% held by New Products.] BROOKLYN UNION [LOGO] NEW YORK HUB SHAREHOLDERS BENEFITS ================================================================= Gas Distribution (in $ Millions) [Bar graph showing $0.40 million in gas distribution in 1994, $1.40 million in 1995 and $2.30 million 1996.] BROOKLYN UNION [LOGO] COST SAVINGS TARGETS ================================================================= Gas Distribution (in $ Millions) [Bar graph demonstrating comparisons between 1996 and 2001 targets for cost of gas ($610 million in 1996 and $592 million in 2001), O&M expense ($371 million in 1996 and $345 million in 2001) and capital spending ($111 million in 1996 and $89 million in 2001).] BROOKLYN UNION [LOGO] CUSTOMER SATISFACTION ================================================================= Complaint Rates per 1,000 Customers [Bar graph demonstrating 10 complaints for Central Hudson; 9.6 complaints for Orange & Rockland; 9.5 complaints for Niagra Mohawk; 9.4 complaints for Rochester G&E; 7.5 complaints for National Fuel; 7 complaints for Con Edison; 6.6 complaints for LILCO; 4.9 complaints for NYSEG; 3.5 complaints for Brooklyn Union, in each case, per 1,000 customers.] Source: New York State Public Service Commission for 12-Month Period Ended July 1996. BROOKLYN UNION [LOGO] INCENTIVE MANAGEMENT ================================================================= Gas Distribution -- Increased earnings & sales -- Lower operating & maintenance expense -- Higher customer satisfaction ratings -- Employee excellence BROOKLYN UNION [LOGO] RESULTS OF LOCAL UNBUNDLING ================================================================= 5,100 Customers Elected Transportation - Only 4.6 BCF in Normalized Annual Firm Sales 5% of Normalized Annual Firm Sales BROOKLYN UNION [LOGO] PACKAGING SERVICES TO MARKETERS -- Pipeline Capacity -- Storage -- Daily Swing Service -- Standby Service -- Billing BROOKLYN UNION [LOGO] KEYSPAN ENERGY CORPORATION [LOGO] BROOKLYN UNION [LOGO] KEYSPAN ENERGY MANAGEMENT [LOGO] -------------------------- ENERGY-RELATED SERVICES BROOKLYN UNION [LOGO] KEYSPAN Energy Marketing Group ================================================================= Northeast Market Area Demographics as % of Total U.S. Strategic Alliances ------------------------------- ------------------- Residential Population 19.7% Metricom Electric Sales 14.4% Wickes Inc. LDC Deliveries 17.1% Commercial Gas 21.1% Industrial Gas 15.8% Residential Gas 21.5% [Map of the northeastern United State including the states of Maine, New Hampshire, Vermont, Massachusetts, Rhode Island, Connecticut, New York, Pennsylvania, New Jersey, Delaware and Maryland which shows Keyspan Offices in Old Lyme, CT; Stamford, CT; Jericho, Long Island; and Greenpoint, Brooklyn. Map also indicates Utility Alliances in Atlantic City, NJ.] BROOKLYN UNION [LOGO] INDUSTRY GAS VOLUME USAGE (% OF U.S.) Northeast Market Area Manufacturing 43.5% Restaurants 22.9% Real Estate (Apartments) 37.6% Hotel/Lodging 20.8% Health/Hospitals 22.4% Education/Schools 23.9% BROOKLYN UNION [LOGO] KEYSPAN ENERGY PORTFOLIO OF SERVICE OFFERINGS Markets Services -- Institutional -- Natural Gas -- Large Commercial/ -- Electricity Industrial -- Fuel Oil -- Small Commercial/ Industrial -- Energy Efficiency and Performance Analysis -- Temperature Controlled -- Financing -- Multifamily -- Design & Eng -- Residential -- Construction Mgmt -- Maintenance -- Operations -- Fuel Management BROOKLYN UNION [LOGO] CUSTOMER GROWTH ================================================================= Key Span Energy [Bar graph demonstrating Customer growth from 0 in 1995 to 2,575 in 1996 to 13,000 in June 1997.] BROOKLYN UNION [LOGO] NEW VENTURES ================================================================= -- Key Span Energy Marketing Group (Northeast U.S.) Retail Energy Marketing Energy Management Services Metricom Joint Venture Appliance Services (Fiscal 1998) -- British Gas Joint Venture (Northern Ireland) Gas Transmission Gas Distribution System BROOKLYN UNION [LOGO] ENERGY-RELATED INVESTMENTS (in millions) [Chart indicating increase of Net Income from Operations from slightly under $2 million in 1991 to $2 million in 1992 to close to $6 million in 1993 to close to $10 million in 1994 to close to $13 million in 1995 to close to $15 million in 1996.] BROOKLYN UNION [LOGO] IROQUOIS GAS TRANSMISSION SYSTEM ================================================================= Total Volumes Transported (BCF) [Bar graph indicating Total Volumes Transported equaled 123.0 in 1992; 240.1 in 1993; 264.6 in 1994; 304.6 in 1995; and 312.0 in 1996.] BROOKLYN UNION [LOGO] THE HOUSTON EXPLORATION COMPANY ================================================================= Key Financial Results 12 Months 12 Months Ended 12/96 Ended 12/95 ----------- ----------- Revenue (Millions) $65.9 $41.2 Net Income (Millions) $ 8.6 $(0.3) Cash Flow (Millions) $50.8 $39.4 Earnings Per Share $0.49 $(0.02) Cash Flow Per Share $2.90 $ 2.58 Weighted Average Shares Outstanding (Millions) 23.3 15.3 Average Gas Prices Per MCF 2.00 1.79 BROOKLYN UNION [LOGO] NET INCOME PER SHARE ================================================================= [Bar graph demonstrating Net Income per Share equaled $1.73 in 1993; $1.85 in 1994; $1.90 in 1995; $2.48 in 1996. 1996 number includes Net Gains of $.52.] BROOKLYN UNION [LOGO] KEY FINANCIAL RESULTS ================================================================= 6 Months 6 Months Ended 3/97 Ended 3/96 ---------- ---------- Income Available for Common (Millions) $125.0 $119.0 Earnings Per Share $ 2.50 $ 2.43 Utility $ 2.40 $ 2.37 Energy-Related $ 0.10 $ 0.06 BROOKLYN UNION [LOGO] 5-YEAR RETURN ON EQUITY ================================================================= Gas Distribution [Bar graph demonstrating 12.8% in 1996; 12.3% in 1995; 12.2% in 1994; 12.2% in 1993; and 12.2% in 1992.] BROOKLYN UNION [LOGO] DIVIDENDS PER SHARE ================================================================= [Bar graph demonstrating steady increase of dividends per share from $1.00 in 1985 to close to $1.45 in 1996.] BROOKLYN UNION [LOGO] TOTAL SHAREHOLDER RETURN ================================================================= For Period Ended March 31, 1997 [Bar graph demonstrating 10.6% for 10 year-, 13.4% for five year- and 8.3% for 1 year-period ended March 31, 1997.] BROOKLYN UNION [LOGO] -----END PRIVACY-ENHANCED MESSAGE-----