-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, CEP795O0TZtkpJf0l0G11ZzhbbZDiNMIKyxFcoSDsMPYsevhHGfyJ+PH8lW2zpH1 Xjl700MYvGBpFoIH8p/bqA== 0000893220-94-000135.txt : 19940311 0000893220-94-000135.hdr.sgml : 19940311 ACCESSION NUMBER: 0000893220-94-000135 CONFORMED SUBMISSION TYPE: U-1/A PUBLIC DOCUMENT COUNT: 1 FILED AS OF DATE: 19940310 FILER: COMPANY DATA: COMPANY CONFORMED NAME: COLUMBIA GAS SYSTEM INC CENTRAL INDEX KEY: 0000022099 STANDARD INDUSTRIAL CLASSIFICATION: 4923 IRS NUMBER: 131594808 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: U-1/A SEC ACT: 35 SEC FILE NUMBER: 070-08235 FILM NUMBER: 94515293 BUSINESS ADDRESS: STREET 1: 20 MONTCHANIN RD CITY: WILMINGTON STATE: DE ZIP: 19807 BUSINESS PHONE: 3024295000 U-1/A 1 AMENDMENT NO.6 TO FORM U-1 1 File No. 70-8235 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Amendment No. 6 to Form U-1 JOINT APPLICATION-DECLARATION UNDER THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935 THE COLUMBIA GAS SYSTEM, INC. 20 Montchanin Road Wilmington, Delaware 19807 TRISTAR VENTURES CORPORATION 20 Montchanin Road Wilmington, Delaware 19807 ------------------------------------------------------------------ (Name of Company or Companies Filing This Statement and Addresses of the Principal Executive Offices) THE COLUMBIA GAS SYSTEM, INC. ------------------------------------------------------------------ (Name of Top Registered Holding Company Parent of Each Applicant or Declarant) L. J. BAINTER, VICE PRESIDENT Columbia Gas System Service Corporation 20 Montchanin Road Wilmington, Delaware 19807 ----------------------------------------------------------------- (Name and Address of Principal Agent for Service) 2 This Application-Declaration previously filed and amended is hereby further amended by restating paragraphs b) and d) of Item 1(a) as follows and by including the exhibits referenced herein: Item 1. Description of Proposed Transaction. (a) Furnish a reasonably detailed and precise description of the proposed transaction, including a statement of the reasons why it is desired to consummate the transaction and the anticipated effect thereof. If the transaction is part of a general program, describe the program and its relation to the proposed transaction. b) Background (1) Preliminary Statement TVC is currently authorized through December 31, 1994, by Orders dated November 9, 1992 (HCAR No. 35-25672) and September 17, 1992 (HCAR No. 35-25635), in File No. 70-8012, to invest up to $10 million in preliminary development and administrative operations. Under these Orders, approximately $5 million has been expended through the end of 1993. By this Application-Declaration, TVC is seeking to modify and replace the current authorization to effectively provide TVC with $7 million of incremental funding for preliminary development and administrative expenditures. As such, TVC's aggregate funding for 1994 would total $12 million, for which authority is hereby requested. Upon receipt of such authorization, TVC will request a withdrawal of previous authorizations covering such expenditures. The financing authority requested herein is within the scope of Columbia's Bankruptcy authority, and no further Bankruptcy Court approval is required in connection therewith. -2- 3 (2) TVC's Investments Prior to 1990 By Orders dated September 26, 1986 (HCAR No. 35-24199) and November 5, 1986 (HCAR No. 24199-A), in File No. 70- 7276, the Commission authorized, among other things, the organization of TVC as a wholly-owned subsidiary of Columbia for the purpose of making investments in qualifying cogeneration facilities ("QFs") as defined in the Public Utility Regulatory Policies Act of 1978 ("PURPA") and the rules and regulations of the Federal Energy Regulatory Commission. Authorized investments in QFs included the acquisition of stock, participation in partnerships and joint ventures, the making and/or guaranteeing of loans and the entry into other contractual arrangements. By Order dated January 29, 1988 (HCAR No. 35-24569), TVC was authorized to make such investments directly or indirectly, through multiple wholly-owned subsidiaries of TVC (the "TriStar Subsidiaries"). In 1987, as a partner of Cogeneration Partners of America ("CPA"), TVC began to develop small cogeneration projects (three megawatts or less). Between 1987 and 1989, four projects were built, all of which were completely financed by the CPA partners. As the operating environment evolved, it became apparent that for various reasons, including changes in electric utility ratemaking procedures and the inability to leverage returns with project debt financing, these small cogeneration projects would not provide adequate returns on investment. These original four projects have been sold. In 1989, TVC implemented a new strategic plan to develop and construct larger cogeneration projects. It was -3- 4 determined that larger projects would provide higher returns on investment commensurate with the development risks. Pursuant to this business strategy, TVC has made investments as discussed below in the Pedricktown, Binghamton, Rumford and Vineland projects (collectively, the "Projects"). (3) TVC's Investments from 1990 to the Present Exhibit H-3 summarizes TVC's investments in the Projects pursuant to its new strategic business plan. TVC holds a 50% interest in the Pedricktown Project, a natural gas fired 110-megawatt unit with a capital cost of $105 million. It was financed with $5 million of total equity, with the balance being debt financed on a secured, non-recourse basis by a bank group led by The Fuji Bank, Limited, New York Branch. TVC has a one-third interest in the Binghamton Project, a natural gas fired 50-megawatt unit with a capital cost of $63 million. This project was financed with $18 million of total equity, with the balance being debt financed on a secured, non- recourse basis by Mellon Bank, N.A. TVC has a 10% interest in the Rumford Project, an 85-megawatt coal and waste-wood fired cogeneration plant in Rumford, Maine with a capital cost of $182 million. It was financed with $46 million of total equity with the balance being debt financed on a secured, non-recourse basis by a bank group led by Bank of America. TVC has a 50% interest in the Vineland Project, which is scheduled to commence operations in June of 1994. The construction of this natural gas fired 47-megawatt unit, located -4- 5 in Vineland, New Jersey, is currently on schedule and on budget. The Vineland Project has been debt financed on a secured, non- recourse basis, through the issuance of $77 million of tax-exempt municipal bonds. Total equity investment in the Vineland Project is approximately $15 million. The Project's engineering is currently 99% complete and construction is 95.7% complete. As of December 1993, construction work in progress totaled $70.5 million. Collectively, the Projects have a total plant cost of approximately $442 million. Of this amount, TVC has invested approximately $21 million in equity, the balance being financed by $63 million of equity contributions from TVC's partners and $358 million from non-recourse third-party secured debt financings. Because the debt is non-recourse to TVC and Columbia, and TVC participates in the Projects through special purpose subsidiaries, the only financial risk to TVC and Columbia is TVC's equity amounts committed and invested.1 - -------------------- 1 TVC and Dominion Energy, Inc. ("Dominion") had planned to construct a 56-megawatt, gas-fired cogeneration plant at a site on the campus of Georgetown University in Washington, D.C. The Georgetown Project was delayed by numerous, and in many cases redundant, regulatory proceedings. After the project successfully obtained over 20 regulatory approvals, the processing of the building permit for the plant was nevertheless suspended indefinitely on October 13, 1993 by the District of Columbia. Because of this indefinite suspension, TVC and Dominion halted efforts to build the Georgetown project and filed a lawsuit in Federal Court against the District of Columbia seeking $80 million in compensatory and punitive damages. As shown in Exhibit H-4, TVC wrote off its investment in this project. -5- 6 (4) Substantial Income from Projects The three Projects that are currently operating are profitable and the fourth, the Vineland Project, is projected to generate profits when it becomes operational later in 1994. As demonstrated by Exhibit H-4, the Projects (not taking into account other planned future TVC investments) are projected to generate more than $11 million in net income to TVC over the next five years. In 1994, it is projected that TVC's share of the revenues from current Projects will be approximately $4.2 million, generating $1.5 million in net income to TVC. (5) TVC's Future TVC's future contribution to Columbia and its subsidiaries (the "System") should be greater than its past contributions. The factors supporting this conclusion fall into three main categories. The first factor is that TVC's returns on its current large Projects are attractive, as demonstrated by Exhibit H- 4. Moreover, these returns will increase significantly over the remaining life of the Projects after the Projects' debt is ultimately paid off.2 TVC's goal is to find and develop new projects which will build on the success of its existing Projects. Private power markets should offer significant opportunities for TVC to expand its portfolio. Recent forecasts indicate that 75,000 megawatts of incremental capacity will be needed within the next ten to fifteen years, and private power - -------------------- 2 Each of the Projects has been debt financed over at least a 12 year amortization period. -6- 7 producers are expected to meet 50 percent of that demand. Columbia benefits by having a unit that can seek these attractive unregulated returns. The second factor is that power generation is the largest future incremental market for natural gas, and TVC's expertise in this field should help the System benefit from this opportunity. Increased usage of natural gas to produce electricity is expected to generate incremental utilization and related profits from other System assets. Natural gas' share of U.S. electricity generation is projected to increase from approximately 9.4 percent to 14.0 percent by the year 2000, and then to 16.0 percent by the year 2005. This should result in an increase in natural gas consumption for electricity generation from approximately 2.8 Tcf to 5.0 Tcf (in the year 2000) and then to 6.1 Tcf (by the year 2005). These projections are based on factors such as the comparative prices for natural gas and competing fuels, and the costs of meeting new clean air requirements.3 The third factor is that TVC focuses on and is capable of providing synergistic value to the System through its role as a buyer, transporter, and burner-tip consumer of natural gas. TVC's Projects have facilitated business opportunities for other business segments in the System. By the end of 1994, a total of over 7.5 Bcf of gas purchased from TVC's affiliates will be sold to TVC's Projects with throughput on Columbia's interstate - -------------------- 3 See Energy Information Administration's 1993 Annual Energy Outlook Report. -7- 8 pipeline subsidiary of nearly 11 Bcf. A current estimate of these synergistic benefits on an annual basis is shown for the Binghamton, Pedricktown and Vineland Projects in Exhibit H-5. Such benefits are projected to continue over the remaining lives of these Projects. It is TVC's expectation that similar benefit be realized from TVC's future projects. TVC has the knowledge, skills and capabilities to capture the opportunities inherent in these projections. TVC provides the System with the skills to monitor trends in the electric power industry, identify and pursue power generation opportunities that promote System synergies and enhance the value of corporate assets, and serve as the System's technical expert on this critical market. Furthermore, TVC through its Projects will continue to be a high-volume consumer of natural gas within the System. d) Additional Financing TVC and Columbia propose that from January 1, 1994 through December 31, 1994, TVC issue, and Columbia purchase, shares of TVC common stock, $25 par value, in an aggregate amount up to $12 million for administrative activities of TVC and for investment by TVC in preliminary development of additional QFs and other eligible projects related to electrical power generation, such as Exempt wholesale Generators ("EWGs") and Foreign Utility Companies ("FUCOs"). Preliminary development and administrative activities will be conducted by TVC directly or indirectly through the TriStar Subsidiaries and/or CPA. -8- 9 Preliminary development includes, but is not limited to, the investigation of sites, preliminary engineering and licensing activities, acquiring options and rights (pursuant to Rule 51), contract drafting and negotiating, preparation of proposals and the other activities necessary to identify and analyze investment opportunities and to initiate the commercialization of a project. When TVC initiates these activities, it is for the purpose of identifying and ultimately securing non-utility electric generation projects that meet rate of return guidelines established by TVC's management for TVC's equity investments. During the identification phase, costs incurred are expensed. Normally, upon the execution of a power purchase agreement with an electric utility company, development costs are capitalized. The development phase typically ceases when the project initiates construction and obtains third-party financing to fund the construction costs. As with the Pedricktown, Binghamton and Vineland projects, TVC will seek to include its development costs as an allowed cost of construction when negotiating a project loan with a third-party lender. If this occurs, the funds used for the cost of development would be returned to TVC when the construction financing is initiated. Administration includes personnel, as well as costs associated with accounting, legal, financial and other services needed to manage TVC's investments directly or indirectly through CPA and/or the TriStar Subsidiaries. TVC projects that it will receive sufficient cash through distributions, interest income and tax refunds to cover its administration costs in 1994. -9- 10 Based on the foregoing, TVC anticipates that all of the $12 million financing authority requested by this Application- Declaration should be available for funding preliminary development activities in 1994, as necessary. TVC will obtain approval of the Commission in one or more separate filing(s) before making an equity investment in QFs or, where appropriate, EWGs and FUCOs beyond preliminary development of jurisdictional projects or TVC will make such commitments pursuant to Rule 51 contingent upon the Commission's approval. Item 6. Exhibits and Financial Statements. (a) Exhibits H-3 TriStar Ventures Corporation Overview of Current Projects H-4 TriStar Ventures Corporation Income Statement for Current Projects for the Year Ended December 31, H-5 Synergistic Benefits of TriStar Projects H-6 Binghamton Cogeneration Limited Partnership Balance Sheet as of December 31, 1993 (unaudited) (Confidential Treatment Requested) H-7 Binghamton Cogeneration Limited Partnership Statement of Income for the twelve months ended December 31, 1993 (unaudited) (Confidential Treatment Requested) H-8 Pedricktown Cogeneration Limited Partnership Balance Sheet as of December 31, 1993 (unaudited) (Confidential Treatment Requested) H-9 Pedricktown Cogeneration Limited Partnership Statement of Income for the twelve months ended December 31, 1993 (unaudited) (Confidential Treatment Requested) -10- 11 H-10 Rumford Cogeneration Company Balance Sheet as of September 30, 1993 (unaudited) (Confidential Treatment Requested) H-11 Rumford Cogeneration Company Statement of Income for the twelve months ended September 30, 1993 (unaudited) (Confidential Treatment Requested) -11- 12 SIGNATURE Pursuant to the requirements of the Public Utility Holding Company Act of 1935, the undersigned companies have duly caused this statement to be signed on their behalf by the undersigned thereunto duly authorized. The signatures of the applicants and of the persons signing on their behalf are restricted to the information contained in this application which is pertinent to the application of the respective companies. THE COLUMBIA GAS SYSTEM, INC. Dated: March 9, 1994 By: /s/ L. J. BAINTER ------------------------- L. J. Bainter Treasurer TRISTAR VENTURES CORPORATION Dated: March 9, 1994 By: /s/ D. P. DETAR -------------------------- D. P. Detar Treasurer 13 EXHIBIT INDEX (a) Exhibits H-3 TriStar Ventures Corporation Overview of Current Projects H-4 TriStar Ventures Corporation Income Statement for Current Projects for the Year Ended December 31, H-5 Synergistic Benefits of TriStar Projects H-6 Binghamton Cogeneration Limited Partnership Balance Sheet as of December 31, 1993 (unaudited) (Confidential Treatment Requested) H-7 Binghamton Cogeneration Limited Partnership Statement of Income for the twelve months ended December 31, 1993 (unaudited) (Confidential Treatment Requested) H-8 Pedricktown Cogeneration Limited Partnership Balance Sheet as of December 31, 1993 (unaudited) (Confidential Treatment Requested) H-9 Pedricktown Cogeneration Limited Partnership Statement of Income for the twelve months ended December 31, 1993 (unaudited) (Confidential Treatment Requested) H-10 Rumford Cogeneration Company Balance Sheet as of September 30, 1993 (unaudited) (Confidential Treatment Requested) H-11 Rumford Cogeneration Company Statement of Income for the twelve months ended September 30, 1993 (unaudited) (Confidential Treatment Requested) 14 EXHIBIT H-3 ----------- TRISTAR VENTURES CORPORATION ---------------------------- AN OVERVIEW OF CURRENT PROJECTS
MEGAWATTS ASSET VALUE ($MILLION) PROJECT TOTAL TVC TOTAL TVC - ------- ----- --- ----- ------ Pedricktown . . . . . . . 110 55 105 52.5 Binghamton . . . . . . . 50 17 63 21.0 Vineland . . . . . . . . 47 24 92 46.0 Rumford . . . . . . . . . 85 9 182 18.7 ----- --- ----- ------ TOTAL . . . . . . . . . . 292 105 $442 $138.2 ===== === ===== ======
DEBT* ($MILLION) EQUITY -------- ------ $MILLIONS PROVIDERS TOTAL TVC --------- ---------------------- ----- ----- 100 Fuji Bank/ Others 5 2.5 45 Mellon Bank 18 6.0 77 Tax Exempt Municipal Bond Holders 15 7.0 136 Bank of America/Others 46 4.6 -------- ----- ----- $358 $84 $20.6 ======== ===== ===== -------- $358 ========
* All debt is third-party non-recourse secured project financing. 15 EXHIBIT H-4 ----------- TRISTAR VENTURES CORPORATION ---------------------------- INCOME STATEMENT - Current Projects Only For the Year Ended December 31, $000
1992 1993 1994 1995 ===== ====== ===== ===== REVENUES: Income from Current Projects 6,680 6,337 4,219 5,924 ----- ------ ----- ----- Total Income From Partherships 6,680 6,337 4,219 5,924 OPERATING EXPENSES: Net Labor and Benefits 435 493 780 816 All Other Operating Expenses 1,259 1,101 872 867 Georgetown Write-Off 1,820 4,701 0 0 ----- ------- ----- ----- Total Operating Expenses 3,514 6,295 1,652 1,683 INCOME BEFORE INCOME TAXES; OTHER INCOME AND INTEREST EXPENSE 3,166 42 2,567 4,241 TOTAL OTHER INCOME 683 510 322 50 ----- ------- ----- ----- INCOME BEFORE TAXES & INTEREST 3,849 552 2,889 4,291 INCOME TAXES 447 (527) 1,358 1,802 INTEREST EXPENSE 2,870 2,510 0 0 ----- ------- ----- ----- NET INCOME 532 (1,431) 1,531 2,489 ===== ======= ===== =====
Seven Year 1996 1997 1998 Total ===== ===== ===== ====== REVENUES: Income from Current Projects 5,727 6,347 7,063 42,297 ----- ----- ----- ------ Total Income From Partherships 5,727 6,347 7,063 42,297 OPERATING EXPENSES: Net Labor and Benefits 876 927 982 5,309 All Other Operating Expenses 807 853 902 6,661 Georgetown Write-Off 0 0 0 6,521 ----- ----- ----- ------ Total Operating Expenses 1,683 1,780 1,884 18,491 INCOME BEFORE INCOME TAXES; OTHER INCOME AND INTEREST EXPENSE 4,044 4,567 5,179 23,806 TOTAL OTHER INCOME 50 50 50 1,715 ----- ----- ----- ------ INCOME BEFORE TAXES & INTEREST 4,094 4,617 5,229 25,521 INCOME TAXES 1,719 1,939 2,196 8,934 INTEREST EXPENSE 0 0 0 5,380 ----- ----- ----- ------ NET INCOME 2,375 2,678 3,033 11,207 ===== ===== ===== ======
16 EXHIBIT H-5 ----------- SYNERGISTIC BENEFITS OF TRISTAR PROJECTS
CNR1 Long-Term CES2 Spot TCO3 Gas Project Gas Sales Gas Sales Transported ------- -------------- --------- ----------- Pedricktown 1.75 Bcf 1.0 Bcf 4.80 Bcf Binghamton 4.38 Bcf -- 4.38 Bcf Vineland -- 0.5 Bcf 1.75 Bcf TOTAL: 6.13 Bcf 1.5 Bcf 10.93 Bcf
------------------------------- 1 Columbia Natural Resources, Inc., a Columbia oil and gas exploration and production subsidiary. 2 Columbia Energy Services Corporation, Columbia's gas marketing subsidiary. 3 Columbia Gas Transmission Corporation, a Columbia interstate pipeline subsidiary. 17 EXHIBIT H-6 BINGHAMTON COGENERATION LIMITED PARTNERSHIP BALANCE SHEET As of December 31, 1993 Unaudited (CONFIDENTIAL TREATMENT REQUESTED) 18 EXHIBIT H-7 BINGHAMTON COGENERATION LIMITED PARTNERSHIP STATEMENT OF INCOME Twelve Months Ended December 31, 1993 Unaudited (CONFIDENTIAL TREATMENT REQUESTED) 19 EXHIBIT H-8 PEDRICKTOWN COGENERATION LIMITED PARTNERSHIP BALANCE SHEET As of December 31, 1993 Unaudited (CONFIDENTIAL TREATMENT REQUESTED) 20 EXHIBIT H-9 PEDRICKTOWN COGENERATION LIMITED PARTNERSHIP STATEMENT OF INCOME Twelve Months Ended December 31, 1993 Unaudited (CONFIDENTIAL TREATMENT REQUESTED) 21 EXHIBIT H-10 RUMFORD COGENERATION COMPANY BALANCE SHEET As of September 30, 1993 Unaudited (CONFIDENTIAL TREATMENT REQUESTED) 22 EXHIBIT H-11 RUMFORD COGENERATION COMPANY STATEMENT OF INCOME Nine Months Ended September 30, 1993 Unaudited (CONFIDENTIAL TREATMENT REQUESTED) -----END PRIVACY-ENHANCED MESSAGE-----