-----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, rQwrt0lNeqNOUPZeShUzw0tjyODGh1VJMoX3s4TQGDh6NnrCls8MY7c3xt//nrrL NyiDU3mxwENozi632JLUnA== 0000950120-95-000005.txt : 19950608 0000950120-95-000005.hdr.sgml : 19950608 ACCESSION NUMBER: 0000950120-95-000005 CONFORMED SUBMISSION TYPE: 424B5 PUBLIC DOCUMENT COUNT: 1 FILED AS OF DATE: 19950127 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: NORTHWEST NATURAL GAS CO CENTRAL INDEX KEY: 0000073020 STANDARD INDUSTRIAL CLASSIFICATION: NATURAL GAS DISTRIBUTION [4924] IRS NUMBER: 930256722 STATE OF INCORPORATION: OR FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 424B5 SEC ACT: 1933 Act SEC FILE NUMBER: 033-53795 FILM NUMBER: 95503399 BUSINESS ADDRESS: STREET 1: 220 NW SECOND AVE CITY: PORTLAND STATE: OR ZIP: 97209 BUSINESS PHONE: 5032264211 424B5 1 PRELIMINARY PROSPECTUS SUPPLEMENT Filed pursuant to Rule 424(b)(5) Registration No. 33-53795 SUBJECT TO COMPLETION, DATED JANUARY 26, 1995 PROSPECTUS SUPPLEMENT --------------------- (To Prospectus dated June 13, 1994) 1,000,000 Shares NORTHWEST NATURAL GAS COMPANY Common Stock ---------------- Northwest Natural Gas Company (the "Company") is offering hereby 1,000,000 shares (the "Shares") of its common stock, par value $3 1/6 per share (the "Common Stock"). The Common Stock is traded on the Nasdaq National Market. Its price and volume data are reported using the symbol "NWNG". The last sale price of the Common Stock as reported by the Nasdaq National Market on January 25, 1995 was $29 1/4 per share. ---------------- THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR BY ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. ========================================================================== UNDERWRITING DISCOUNTS AND PROCEEDS TO PRICE TO PUBLIC COMMISSIONS(1) COMPANY(2) -------------------------------------------------------------------------- Per Share........ $ $ $ -------------------------------------------------------------------------- Total (3)........ $ $ $ ========================================================================== (1) The Company has agreed to indemnify the Underwriters against certain civil liabilities, including liabilities under the Securities Act of 1933, as amended. See "Underwriting". (2) Before deducting expenses payable by the Company, estimated at $150,000. (3) The Company has granted the Underwriters an option, exercisable within 30 days after the date of this Prospectus Supplement, to purchase up to 150,000 additional shares (the "Option Shares") at the Price to Public less Underwriting Discounts and Commissions, for the purpose of covering over-allotments, if any. If all such Option Shares are purchased, the total Price to Public, Underwriting Discounts and Commissions and Proceeds to Company will be increased to $ , $ and $ , respectively. See "Underwriting". ---------------- The shares of Common Stock offered hereby are offered subject to prior sale, when, as and if delivered to and accepted by the Underwriters, and subject to approval of certain legal matters by their counsel and counsel for the Company. The Underwriters reserve the right to withdraw, cancel or modify such offer and to reject orders in whole or in part. It is expected that delivery of the Shares will be made in New York, New York on or about February __, 1995. ---------------- MERRILL LYNCH & CO. SMITH BARNEY INC. A.G. EDWARDS & SONS, INC. ---------------- The date of this Prospectus Supplement is February __, 1995. Information contained herein is subject to completion or amendment. A registration statement relating to these securities has been declared effective by the Securities Exchange Commission pursuant to Rule 415 under the Securities Act of 1933. A final prospectus supplement and the accompanying prospectus shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there by any sale of these securities in any State in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state. IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK OF THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET, IN THE OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS, SELLING GROUP MEMBERS (IF ANY) AND THEIR RESPECTIVE AFFILIATES MAY ENGAGE IN PASSIVE MARKET MAKING TRANSACTIONS IN THE COMMON STOCK ON THE NASDAQ NATIONAL MARKET IN ACCORDANCE WITH RULE 10b-6A UNDER THE SECURITIES EXCHANGE ACT OF 1934. SEE "UNDERWRITING". SUMMARY INFORMATION The following material, which is presented herein solely to furnish limited introductory information regarding the Company, has been selected from or is based upon the detailed information and financial statements incorporated by reference into this Prospectus Supplement and the accompanying Prospectus, is qualified in its entirety by reference thereto, and, therefore, should be read together therewith. THE OFFERING Company............................... Northwest Natural Gas Company Securities offered.................... 1,000,000 shares of Common Stock (excluding up to 150,000 Option Shares) Shares of Common Stock outstanding after offering...................... Approximately 14,500,000 (excluding up to 150,000 Option Shares) Common Stock closing price range, 365-Day High Low, at January 25, 1995.................... $36 1/4 - 28 Nasdaq National Market Symbol......... NWNG Indicated current annual dividend rate................................ $1.76 THE COMPANY Business.............................. A public utility engaged in natural gas distribution Service Area.......................... Western Oregon and southwestern Washington Estimated Population of Service Area................................ Approximately 2,600,000 Customers............................. Approximately 391,600 Average annual growth in number of customers, 1990-94............... 5.2% SELECTED FINANCIAL INFORMATION(1) YEARS ENDED DECEMBER 31, ---------------------------------------------- 1994 1993 1992 1991 1990 ---- ---- ---- ---- ---- (THOUSANDS, EXCEPT PER SHARE AMOUNTS) INCOME STATEMENT DATA: Operating revenues..... $368,261 $358,717 $274,366 $295,938 $296,281 Net operating revenues-- Margin (Revenues less cost of gas).... 205,473 219,884 172,450 185,339 182,226 Income before interest charges............. 80,853 84,850 49,459 43,289 68,686 Net income............. 35,461 37,647 15,775 14,377 30,724 Preferred and preference stock dividends....... 2,983 3,488 2,560 2,593 2,729 Earnings applicable to Common Stock.......... $32,478 $34,159 $13,215 $11,784 $27,995 Average number of common shares outstanding... 13,295 13,074 11,909 11,698 11,522 Earnings per common share................. $2.44 $2.61 $1.11 $1.01 $2.43 Dividends per common share................. $1.76 $1.75 $1.72 $1.69 $1.65 DECEMBER 31, -------------------------------------------- 1994 1993 1992 1991 1990 ---- ---- ---- ---- ---- (THOUSANDS) BALANCE SHEET DATA: Total assets........... $889,304 $849,036 $731,834 $731,494 $687,835 Redeemable preferred stock................. 15,950 17,041 28,218 29,148 30,102 Long-term debt......... 291,076 272,931 253,766 252,995 215,230 DECEMBER 31, 1994 --------------------------------------- ACTUAL AS ADJUSTED(2) ----------------- ------------------ (THOUSANDS, EXCEPT PERCENTAGES) CAPITALIZATION: Long-term debt.................. $291,076 47.9% $291,076 % Redeemable preferred stock....... 15,950 2.6 15,950 Nonredeemable preference stock.......................... 1,252 .2 1,252 Redeemable preference stock...... 25,000 4.1 25,000 Common Stock equity.............. 274,408 45.2 -------- ---- -------- Total capitalization........ $607,686 100.0% $ 100.0% ======== ===== ======== ===== --------------- (1) The Selected Financial Information for the years ended December 31, 1993, 1992, 1991 and 1990 was derived from audited financial statements. The Selected Financial Information for the year ended December 31, 1994 is unaudited, but includes all adjustments which the management of the Company considers necessary for a fair presentation of its results for the year. (2) As adjusted to reflect the Proceeds to Company from the sale of the Shares, after deducting estimated expenses payable by the Company. Assuming the purchase by the Underwriters of the Option Shares, Common Stock Equity and Total Capitalization, each as adjusted, would be $ and $ , respectively. THE COMPANY The Company, which was incorporated under the laws of Oregon in 1910, distributes natural gas to customers in western Oregon and southwestern Washington, including the Portland metropolitan area. Gas service is provided in 95 cities and neighboring communities in 16 Oregon counties, and in nine cities and neighboring communities in three Washington counties. The Company's service areas have a population of more than 2,600,000, including about 78 percent of the population of the State of Oregon. The Company's executive offices are located at One Pacific Square, 220 N.W. Second Avenue, Portland, Oregon 97209. Its telephone number is 503-226-4211. Oregon Natural Gas Development Corporation, a wholly-owned subsidiary, is engaged in natural gas exploration, development and production in the western United States and Canada. NNG Financial Corporation, another wholly-owned subsidiary, holds financial investments as a limited partner in four solar electric generating systems, four windmill projects and a hydroelectric project, all located in California, and in a low-income housing project in Portland. NNG Financial also arranges short-term financing for the Company's operating subsidiaries. RECENT DEVELOPMENTS The Company reported earnings of $1.29 a share for its fourth quarter ended December 31, 1994, up from earnings of $1.05 a share in the same quarter a year earlier. The Company's consolidated earnings applicable to Common Stock for the fourth quarter were $17,300,000, up 24.7 percent from the fourth quarter of 1993. The Company earned $1.32 a share from utility operations compared to $1.17 a share in the fourth quarter of 1993. Weather in the Company's service territory in the fourth quarter was 2 percent colder than the fourth quarter of 1993 and 4 percent colder than average. The Company's earnings for the full year 1994 were $2.44 a share, the second highest in history. Earnings included $2.08 a share from utility operations and $0.36 a share from subsidiary operations. The utility's results for the year were depressed by the effects of warm weather in the first and second quarters which more than offset the colder than normal weather experienced in the fourth quarter. Weather conditions in the Company's service territory in 1994 were 10 percent warmer than in 1993 and 7 percent warmer than average. Subsidiary results in 1994 included gains equivalent to $0.17 a share from the sale of assets by two subsidiaries that discontinued operations during the year. In 1994, the Company added 19,211 customers, expanding its customer base by 5.2 percent. Customer additions in the residential and commercial markets were 58 percent due to new construction and 42 percent due to conversions from other fuels. USE OF PROCEEDS The net proceeds to be received by the Company from the sale of the Shares and the Option Shares (if the option should be exercised) will be added to the general funds of the Company and used for corporate purposes, primarily to fund, in part, the Company's ongoing utility construction program and to repay short-term debt incurred for such purpose. The Company expects its utility construction and equipment expenditures in 1995 to aggregate $76 million. The Company expects such expenditures for the five-year period, 1995-99, to aggregate between $350 million and $375 million. The capital requirements of its subsidiaries during the same period are expected to be limited to funds internally generated by the subsidiaries. Approximately $21 million of long-term debt matures in 1996 and $26 million in 1997. The Company estimates that 60% or more of the funds required for utility purposes during the 1995-99 period will be internally generated and that the balance, as well as substantially all of the funds required for the repayment of maturing debt, will be funded through short-term borrowings, which will be refinanced periodically through the sale of long- term debt and equity securities, in such amounts and at such times as the Company's cash requirements and market conditions shall determine. Based upon this estimate, the Company expects that, during 1995, its sales of Common Stock will consist of sales of the Shares, the Option Shares (if the option should be exercised) and approximately $6 million of Common Stock expected to be sold through its Dividend Reinvestment and Stock Purchase Plan and various employee plans. DIVIDENDS AND PRICE RANGE Cash dividends on the Common Stock of the Company have been paid each year since 1951. It is the intention of the Board of Directors to continue to pay cash dividends on a quarterly basis. However, future dividends will be dependent upon the Company's earnings, its financial condition and other factors. See "Description of Common Stock" in the accompanying Prospectus for certain restrictions upon the payment of cash dividends. The Company has a Dividend Reinvestment and Stock Purchase Plan pursuant to which registered holders of Common Stock may reinvest all or a portion of their quarterly Common Stock cash dividends in shares of the Company's Common Stock at the applicable market price. Shareholders may also make optional cash purchases of shares of Common Stock in amounts up to $50,000 per calendar year at the applicable market price. The Common Stock is traded on the Nasdaq National Market. Its price and volume data are reported using the symbol "NWNG". The range of closing prices of the Common Stock as published in The Wall Street Journal and dividends paid or declared are shown in the following table for the periods indicated: Closing Prices Quarterly -------------- Dividends High Low --------- ---- --- 1992: First Quarter................ $0.43 $31 $27 1/2 Second Quarter............... $0.43 30 1/2 26 1/2 Third Quarter................ 0.43 33 29 Fourth Quarter............... 0.43 33 3/4 28 1/4 ----- $1.72 ===== 1993: First Quarter................ $0.43 $31 1/2 $28 1/2 Second Quarter............... 0.44 34 30 3/4 Third Quarter................ 0.44 38 34 Fourth Quarter............... 0.44 36 3/4 32 ----- $1.75 ===== 1994: First Quarter................ $0.44 $36 1/2 $33 3/4 Second Quarter............... 0.44 34 3/4 29 3/4 Third Quarter................ 0.44 32 29 Fourth Quarter............... 0.44 32 28 1/2 ----- $1.76 ===== 1995: First Quarter (through January 25, 1995).......... $0.44 $29 1/2 $28 On January 23, 1995 the Company had 12,380 common shareholders of record. UNDERWRITING The Underwriters named below, acting through their Representatives, Merrill Lynch, Pierce, Fenner & Smith Incorporated, Smith Barney Inc. and A.G. Edwards & Sons, Inc. (the "Representatives"), have severally agreed, subject to the terms and conditions of the Underwriting Agreement, dated February ___, 1995 (the "Underwriting Agreement"), to purchase from the Company the number of Shares set forth below opposite their respective names. Number Underwriter of Shares ----------- --------- Merrill Lynch, Pierce, Fenner & Smith Incorporated.............................. Smith Barney Inc...................................... A.G. Edwards & Sons, Inc.............................. ...................................................... ...................................................... ...................................................... ...................................................... ...................................................... ...................................................... ...................................................... ...................................................... ...................................................... ...................................................... ...................................................... ----------- Total............................................ 1,000,000 =========== The Underwriters are committed to purchase all of the above Shares if any are purchased. Under certain circumstances, the commitments of non- defaulting Underwriters may be increased as set forth in the Underwriting Agreement. The Representatives have advised the Company that they propose initially to offer the Shares to the public at the Price to Public set forth on the cover page of this Prospectus Supplement, and to certain dealers at such price less a concession not in excess of $. per share. The Underwriters may allow, and such dealers may reallow, a discount not in excess of $. per share on sales to certain other dealers. After the initial public offering, the public offering price, concession and discount may be changed. The Company has granted the Underwriters an option, exercisable within 30 days after the date of this Prospectus Supplement, to purchase up to 150,000 Option Shares to cover over-allotments, if any, at the Price to Public set forth on the cover page of this Prospectus Supplement less the Underwriting Discounts and Commissions. If the Underwriters exercise this option, each of the Underwriters will have a firm commitment, subject to certain conditions, to purchase approximately the same percentage of the Option Shares as the percentage of the Shares which it has agreed to purchase. In the Underwriting Agreement, the Company has agreed to indemnify the Underwriters against certain civil liabilities, including liabilities under the Securities Act of 1933, as amended (the "Act"). In connection with this offering, certain Underwriters, selling group members (if any) and their respective affiliates who are qualified market makers on the Nasdaq National Market may engage in "passive market making" in the Common Stock on the Nasdaq National Market in accordance with Rule 10b-6A under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Rule 10b-6A permits, upon the satisfaction of certain conditions, underwriters and selling group members participating in a distribution that are also Nasdaq market makers in the security being distributed to engage in limited market making transactions during the period when Rule 10b-6 under the Exchange Act would otherwise prohibit such activity. Rule 10b-6A prohibits underwriters and selling group members engaged in passive market making generally from entering a bid or effecting a purchase at a price that exceeds the highest bid for those securities displayed on Nasdaq by a market maker that is not participating in the distribution. Under Rule 10b-6A, each underwriter or selling group member engaged in passive market making is subject to a daily net purchase limitation equal to 30% of such entity's average daily trading volume during the two full consecutive calendar months immediately preceding the date of filing of the registration statement under the Act pertaining to the security to be distributed. EXPERTS The financial statements and the related financial statement schedules incorporated by reference from the Company's Annual Report on Form 10-K for the year ended December 31, 1993 have been audited by Deloitte & Touche LLP, independent auditors, as stated in their report (which expresses an unqualified opinion and includes an explanatory paragraph referring to the change in method of accounting for income taxes and postretirement benefits for the year ended December 31, 1993), which is incorporated herein by reference, and has been so incorporated in reliance upon the report of such firm given upon their authority as experts in accounting and auditing. With respect to the unaudited interim financial information which is incorporated by reference, Deloitte & Touche LLP has applied limited procedures in accordance with professional standards for a review of such information. However, as stated in their reports included in the Company's Quarterly Reports on Form 10-Q and incorporated by reference herein, they did not audit and they do not express an opinion on that interim financial information. Accordingly, the degree of reliance on their reports on such information should be restricted in light of the limited nature of the review procedures applied. Deloitte & Touche LLP is not subject to the liability provisions of Section 11 of the Act, for their reports on the unaudited interim financial information, because such reports are not "reports" or a "part" of the registration statement prepared or certified by an accountant within the meaning of Sections 7 and 11 of the Act. The statements made as to matters of law and legal conclusions in the documents incorporated in this Prospectus Supplement and the accompanying Prospectus by reference and under "Description of Common Stock" in such Prospectus have been reviewed by Bruce B. Samson, Esquire, Portland, Oregon. Mr. Samson is General Counsel of the Company. These statements and conclusions are set forth in reliance upon the opinion of Mr. Samson given upon his authority as an expert. As of January 23, 1995, Mr. Samson owned approximately 3,900 shares of the Company's common stock (including 1,165 shares through the Company's Retirement K Savings Plan) and has been granted options to purchase 8,000 additional shares at a price of $24.875 and 2,000 additional shares at a price of $36.00, the market prices of the shares on the dates of such grants. Mr. Samson's shares, including the underlying shares subject to options granted to him, had a fair market value, as of such date, of approximately $389,200. LEGALITY The legality of the securities offered hereby will be passed upon for the Company by Mr. Samson and by Reid & Priest LLP, New York, New York. Certain legal matters will be passed upon for the Underwriters by Simpson Thacher & Bartlett (a partnership which includes professional corporations), New York, New York. However, all matters of Oregon and Washington law will be passed upon only by Mr. Samson. PROSPECTUS ---------- NORTHWEST NATURAL GAS COMPANY First Mortgage Bonds Common Stock ------------------ Northwest Natural Gas Company (the "Company") intends from time to time to sell of its First Mortgage Bonds (the "New Bonds") and/or Common Stock (the "New Common Stock") (the New Bonds and the New Common Stock being collectively referred to herein as the "Securities") in any combination at an aggregate initial offering price not to exceed $60,000,000. The Securities will be offered at prices and on terms to be determined at the times of sale. For each issue of the New Bonds for which this Prospectus will be delivered, there will be an accompanying Prospectus Supplement that will set forth, with respect to such issue, its series designation, the aggregate principal amount thereof, the terms of the offering, its maturity date or dates, its interest rate or rates, the interest payment dates and the date from which interest will accrue, whether all or any portion will be issued to a designated depositary, its redemption provisions, if any, and any other specific terms. For each issue of the New Common Stock for which this Prospectus will be delivered, there will be an accompanying Prospectus Supplement that will set forth the terms of the offering. The Common Stock is traded in the over-the-counter market. Its price and volume data are reported on the National Association of Securities DealersAutomated Quotation (NASDAQ) National Market System using the symbol "NWNG". The sale of one of the Securities will not be contingent upon the sale of the other. ------------------ THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR BY ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. The Securities may be sold directly by the Company or through agents designated from time to time or through underwriters or dealers. If any agents of the Company or any underwriters are involved in the sale of the Securities in respect of which this Prospectus will be delivered, the names of such agents or underwriters, and the initial price to the public, any applicable commissions or discounts and the net proceeds to the Company, or the means of determining the same, will be set forth in an accompanying Prospectus Supplement. The Company may indemnify agents and underwriters against certain civil liabilities, including liabilities under the Securities Act of 1933, as amended. See "Plan of Distribution". The date of this Prospectus is June 13, 1994. AVAILABLE INFORMATION The Company is subject to the informational requirements of the Securities Exchange Act of 1934, as amended ("Exchange Act"), and, in accordance therewith, files reports and other information with the Securities and Exchange Commission. Reports, proxy statements and other information filed by the Company can be inspected and copied at the public reference facilities of the Commission, Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, as well as at the following regional offices: 7 World Trade Center, 13th Floor, New York, New York 10048, and Northwest Atrium Center, Suite 1400, 500 West Madison Street, Chicago, Illinois 60661-2511. Copies of such material can be obtained from the Public Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE There are hereby incorporated by reference in this Prospectus the following documents heretofore filed with the Securities and Exchange Commission: (1) The Company's Annual Report on Form 10-K for the year ended December 31, 1993. (2) The Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1994. All documents filed by the Company pursuant to Section 13, 14 or 15(d) of the Exchange Act after the date of this Prospectus and prior to the termination of this offering shall be deemed to be incorporated by reference into this Prospectus and to be a part hereof from the date of filing of such documents. Any statement contained in a document incorporated or deemed to be incorporated by reference herein shall be deemed to be modified or superseded, for purposes of this Prospectus, to the extent that a statement contained herein or in any other subsequently filed document which also is or is deemed to be incorporated by reference herein modifies or supersedes such statement. Any statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Prospectus. THE COMPANY HEREBY UNDERTAKES TO PROVIDE, WITHOUT CHARGE, TO EACH PERSON, INCLUDING ANY BENEFICIAL OWNER, TO WHOM A COPY OF THIS PROSPECTUS SHALL HAVE BEEN DELIVERED, UPON WRITTEN OR ORAL REQUEST OF SUCH PERSON, A COPY OF ANY OR ALL OF THE DOCUMENTS WHICH HAVE BEEN OR MAY BE INCORPORATED IN THIS PROSPECTUS BY REFERENCE, OTHER THAN EXHIBITS TO SUCH DOCUMENTS, UNLESS SUCH EXHIBITS SHALL HAVE BEEN SPECIFICALLY INCORPORATED BY REFERENCE INTO SUCH DOCUMENTS. REQUESTS FOR SUCH COPIES SHOULD BE DIRECTED TO NORTHWEST NATURAL GAS COMPANY, SHAREHOLDER SERVICES DEPARTMENT, ONE PACIFIC SQUARE, 220 N.W. SECOND AVENUE, PORTLAND, OREGON 97209, OR BY CALLING THE FOLLOWING NUMBER: 503-226-4211. THE COMPANY The Company, which was incorporated under the laws of Oregon in 1910, distributes natural gas to customers in western Oregon and southwestern Washington, including the Portland metropolitan area. Gas service is provided in 95 cities and neighboring communities in 16 Oregon counties, and in nine cities and neighboring communities in three Washington counties. The Company's service areas have a population of 2,600,000, including about 78 percent of the population of the State of Oregon. The Company's executive offices are located at One Pacific Square, 220 N.W. Second Avenue, Portland, Oregon 97209. Its telephone number is 503-226- 4211. Oregon Natural Development Corporation, a wholly-owned subsidiary, is engaged in natural gas exploration, development and production in the western United States and Canada. NNG Financial Corporation, another wholly-owned subsidiary, holds financial investments as a limited partner in four solar electric generating systems, four windmill projects and a hydroelectric project, all located in California, and in a low-income housing project in Portland. NNG Financial also arranges short-term financing for the Company's operating subsidiaries. RATIO OF EARNINGS TO FIXED CHARGES The Company has calculated the ratios of earnings to fixed charges pursuant to Item 503 of SEC Regulation S-K as follows: Twelve Months Ended ----------------------------------------------------------- March 31, December 31, --------- -------------------------------------------- 1994 1993 1992 1991 1990 1989 ---- ---- ---- ---- ---- ---- 2.94 3.22 1.81 1.59 2.64 2.75 Earnings consist of net income to which have been added taxes on income and fixed charges. Fixed charges consist of interest on all indebtedness, amortization of debt expense and discount or premium, and the estimated interest portion of rentals charged to income. USE OF PROCEEDS AND FINANCING PROGRAM The net proceeds to be received by the Company from the sale of the Securities will be added to the general funds of the Company and used for corporate purposes, primarily to fund, in part, the Company's ongoing utility construction program and to repay short-term debt incurred for such purpose. The Company expects its utility construction and equipment expenditures in 1994 to aggregate $75 million. The Company expects such expenditures for the five-year period, 1994-98, to aggregate between $325 million and $350 million. The capital requirements of its subsidiaries during the same period are expected to be limited to funds internally generated by the subsidiaries. Approximately $21 million of long-term debt matures in 1996 and $26 million in 1997. The Company estimates that 50% or more of the funds required for utility purposes during the 1994-98 period will be internally generated and that the balance, as well as substantially all of the funds required for the repayment of maturing debt, will be funded through short-term borrowings, which will be refinanced periodically through the sale of long- term debt and equity securities, in such amounts and at such times as the Company's cash requirements and market conditions shall determine. Based upon this estimate, the Company expects that, through the end of 1995, its sales of Common Stock will not exceed $50 million, consisting of not more than $40 million of New Common Stock and approximately $10 million of Common Stock expected to be sold through its Dividend Reinvestment and Stock Purchase Plan and various employee plans. DESCRIPTION OF THE NEW BONDS General: The New Bonds are to be issued under the Company's Mortgage and Deed of Trust, dated as of July 1, 1946, to Bankers Trust Company and R.G. Page (Stanley Burg, successor), as trustees, as supplemented by twenty supplemental indentures and as to be further supplemented by one or more additional supplemental indentures providing for one or more series of the New Bonds, all of which are collectively referred to as the "Mortgage". The statements herein concerning the New Bonds and the Mortgage are merely an outline and do not purport to be complete. They make use of terms defined in the Mortgage and are qualified in their entirety by express reference to the cited Sections and Articles. Reference is made to the Prospectus Supplement for each issue of the New Bonds for the following terms, among others, of the New Bonds offered thereby: (i) the series designation and aggregate principal amount thereof, (ii) the initial public offering price and other terms of their offering, (iii) the date or dates on which they will mature, (iv) the rate or rates per annum at which they will bear interest, (v) the times at which such interest will be payable and the date from which it will accrue, (vi) whether all or any portion thereof will be issued to a designated depositary, (vii) any redemption provisions, and (viii) other specific terms. Form, Exchange and Payment: Unless otherwise indicated in the Prospectus Supplement for an issue of the New Bonds, the New Bonds offered thereby will be issued only in fully registered form in denominations of $1,000 and any multiple thereof. The New Bonds are exchangeable at the office of Bankers Trust Company in New York City, without charge other than taxes or other governmental charges incident thereto. Principal and interest are payable at such office. Provisions for Maintenance of Property: While the Mortgage contains provisions for the maintenance of the Mortgaged and Pledged Property, the Mortgage does not permit redemption of First Mortgage Bonds ("Bonds") pursuant to these provisions. Security: The New Bonds together with all other Bonds now or hereafter issued under the Mortgage will be secured by the Mortgage, which constitutes, in the opinion of Bruce B. Samson, Esq., General Counsel of the Company, a first mortgage lien on all of the gas plants, distribution systems and other materially important physical properties of the Company (except as stated below), subject to (a) leases of minor portions of the Company's property to others for uses which, in the opinion of such Counsel, do not interfere with the Company's business, (b) leases of certain property of the Company not used in its gas utility business or the gas by-product business, (c) excepted encumbrances, and (d) minor defects and encumbrances customarily found in properties of like size and character which, in the opinion of such Counsel, do not impair the use of such properties by the Company. There are excepted from the lien all cash and securities; certain equipment, apparatus, materials or supplies; aircraft, automobiles and other vehicles; receivables, contracts, leases and operating agreements; timber, minerals, mineral rights and royalties; and all natural gas and oil production property. The Mortgage contains provisions subjecting after-acquired property (subject to pre-existing liens) to the lien thereof, subject to limitations in the case of consolidation, merger or sale of substantially all of the Company's assets. (See Mortgage, Art. XVI.) The Mortgage provides that the trustees shall have a lien upon the mortgaged property, prior to that of the Bonds, for the payment of their reasonable compensation and expenses, and for indemnity against certain liabilities. (See Mortgage, Sec. 96.) Issuance of Additional Bonds: Bonds may be issued from time to time on the basis of (1) 60% of property additions, after adjustments to offset retirements; (2) retirement of Bonds or qualified lien bonds; or (3) deposit of cash. With certain exceptions in the case of (2) above, the issuance of Bonds is subject to adjusted net earnings before income taxes for 12 consecutive months out of the preceding 15 months being at least twice the annual interest requirements on all Bonds at the time outstanding, including the additional issue, and all indebtedness of prior rank. Property additions generally include gas, electric, steam or hot water property or gas by-product property acquired after March 31, 1946, but may not include securities, airplanes, automobiles or other vehicles or natural gas transmission lines or natural gas and oil production property. As of March 31, 1994, approximately $201,300,900 of property additions and $93,000,000 of retired Bonds were available for use as the basis for the issuance of Bonds. The Mortgage contains certain restrictions upon the issuance of Bonds against property subject to liens. The New Bonds will be issued against property additions and retired Bonds. (See Mortgage, Secs. 4-7, 20-30 and 46 and Third Supplemental, Secs. 3 and 4.) Release and Substitution of Property: Property may be released against (1) deposit of cash or, to a limited extent, purchase money mortgages, (2) property additions, or (3) waiver of the right to issue Bonds without applying any earnings test. Cash so deposited and cash deposited against the issuance of additional bonds may be withdrawn upon the bases stated in (2) and (3) above. When property released is not funded property, property additions used to effect the release may again, in certain cases, become available as credits under the Mortgage, and the waiver of the right to issue Bonds to effect the release may, in certain cases, cease to be effective as such a waiver. Similar provisions are in effect as to cash proceeds of such property. The Mortgage contains special provisions with respect to qualified lien bonds pledged and the disposition of moneys received on pledged prior lien bonds. (See Mortgage, Secs. 5, 31, 32, 37, 46 to 50, 59 to 61, 100 and 118.) Defaults and Notice Thereof: Defaults are: default in payment of principal; default for 60 days in payment of interest or of installments of funds for retirement of bonds; certain defaults with respect to qualified lien bonds; certain events in bankruptcy, insolvency or reorganization; and default for 90 days after notice in the case of other covenants. The trustees may withhold notice of default (except in payment of principal, interest or any funds for the retirement of Bonds) if they think it in the interest of the Bondholders. (See Mortgage, Secs. 65 and 66.) Holders of 25% of the Bonds may declare the principal and the interest due on default, but a majority may annul such declaration if such default has been cured. No holder of Bonds may enforce the lien of the Mortgage without giving the trustees written notice of a default and unless holders of 25% of the Bonds have requested the trustees to act and offered them reasonable opportunity to act and the trustees have failed to act. The trustees are not required to risk their funds or incur personal liability if there is reasonable ground for believing that the repayment is not reasonably assured. The holders of a majority of the Bonds may direct the time, method and place of conducting any proceedings for any remedy available to the trustees, or exercising any trust or power conferred upon the trustees but the trustees are not required to follow such direction if not sufficiently indemnified for expenditures. (See Mortgage, Secs. 67, 71, 80 and 94.) Evidence to be Furnished to the Trustees: Compliance with Mortgage provisions is evidenced by written statements of the Company's officers or persons selected by the Company. In certain major matters the accounting, engineer, appraiser or other expert must be independent. Various certificates and other papers, including a certificate with respect to compliance with the terms of the Mortgage and the absence of defaults, are required to be filed annually and upon the occurrence of certain events. (See Mortgage, Secs. 67, 71, 80 and 94.) Modification of the Mortgage: The rights of the Bondholders may be modified with the consent of 70% of the Bonds and, if less than all series of Bonds are affected, the consent also of 70% of Bonds of each series affected. The Company has reserved the right without any consent or other action by holders of any series of Bonds (including the New Bonds), and intends in conjunction with the issuance of the New Bonds, to substitute 66 % for 70%. In general, no modification of the terms of payment of principal and interest, and no modification affecting the lien of the Mortgage or reducing the percentage required for modification is effective against any Bondholder without his consent. (See Mortgage, Art. XIX and Ninth Supplemental, Sec. 6.) The Company has reserved the right to amend the Mortgage, without any consent or other action by holders of the Bonds of the Eighteenth Series or of Bonds of any subsequently created series (including the New Bonds), in the following respects: Release and Substitution of Property. To permit the release of property at the lesser of its cost or its fair value at the time that such property became funded property, rather than at its fair value at the time of its release; and to facilitate the release of unfunded property. (See Mortgage, Secs. 3, 59 and 60 and Eighteenth Supplemental, Sec. 2.03.) Issuance of Additional Bonds. To clarify that (i) for purposes of determining annual interest requirements, interest on Bonds or other indebtedness bearing interest at a variable interest rate shall be computed at the average of the interest rates borne by such Bonds or other indebtedness during the period of calculation, or, if such Bonds or other indebtedness shall have been issued after such period or shall be the subject of pending applications, interest shall be computed at the initial rate borne upon issuance, and (ii) no extraordinary items shall be included in operating expenses or deducted from revenues or other income in calculating adjusted net earnings (See Mortgage, Sec. 7); and to revise the basis for the issuance of additional Bonds from 60% of property additions, after adjustments to offset retirements, to 70%. (See Mortgage, Secs. 25, 26, 59 and 61 and Eighteenth Supplemental, Secs. 2.01 and 2.02.) The Corporate Trustee Bankers Trust Company also serves as the Indenture Trustee under the Indenture under which the Company's Unsecured Medium-Term Notes are issued. DESCRIPTION OF COMMON STOCK The following is a summary of certain rights and privileges of the Common Stock. This summary does not purport to be complete. Reference is made to the Restated Articles of Incorporation and the Bylaws of the Company, filed as exhibits to the Registration Statement, for complete statements. The following statements are qualified in their entirety by such references. Dividends and Liquidation Rights: Except as hereinafter stated, the Common Stock is entitled to receive such dividends as are declared by the Board of Directors and to receive ratably on liquidation any assets which remain after payment of liabilities. The Company's Preferred and Preference Stock are entitled in preference to the Common Stock (1) to cumulative dividends at the annual rate fixed for each series by the Board of Directors, and (2) in voluntary and involuntary liquidation, to the amounts fixed for each series by the Board of Directors, plus in each case, unpaid accumulated dividends. Dividend Limitations: Should dividends on either the Preferred or the Preference Stock be in arrears, no dividends on the Common Stock may be paid or declared. Except with the consent of the holders of a majority of the Preferred Stock then outstanding, no dividends on the Common Stock or the Preference Stock may be paid or declared unless the Preferred Stock purchase and sinking fund obligations have been met for that year. Future series of the Preferred or the Preference Stock could contain sinking fund, purchase or redemption obligations under which no dividends on the Common Stock may be paid or declared while such obligations are in default. Common Stock dividends also may be restricted by the provisions of future instruments pursuant to which the Company may issue long-term debt. Voting Rights: Except as provided by law or as described below, only the Common Stock has voting rights. Cumulative voting is permitted by the Restated Articles of Incorporation to holders of Common Stock at elections of directors. The Preferred Stock has the special right to elect the smallest number of directors which constitutes at least one-fourth of the total number of directors, or two directors, whichever is greater, if payments of four quarterly dividends or more on any share or shares of Preferred Stock should be in arrears. Classification of the Board of Directors: The Board of Directors of the Company may consist of not less than nine nor more than 13 persons, as determined by the Board, divided into three classes as nearly equal in number as possible. The current number is twelve. One class is elected for a three-year term at each annual meeting of shareholders. Vacancies, including those resulting from an increase in the size of the Board, may be filled by a majority vote of the directors then in office. One or more of the directors may be removed, with or without cause, by the affirmative vote of the holders of not less than two-thirds of the shares entitled to vote thereon; provided, however, that if fewer than all of the directors should be candidates for removal, no one of them shall be removed if the votes cast against such director's removal would be sufficient to elect such director if then cumulatively voted at an election of the class of directors of which such director shall be a part. Except for those persons nominated by the Board, no person shall be eligible for election as a director unless a request from a shareholder entitled to vote in the election of directors that such person be nominated and such person's consent thereto shall be delivered to the Secretary of the Company in advance of the meeting at which such election shall be held. The foregoing provisions may not be amended or repealed except by the affirmative vote of the holders of not less than two-thirds of the shares entitled to vote at an election of directors. The foregoing provisions will not apply to directors, if any, elected by the holders of the Preferred Stock. Transactions with Related Persons: The Company shall not enter into any business transaction with a related person or in which a related person shall have an interest (except proportionately as a shareholder of the Company) without first obtaining both (1) the affirmative vote of the holders of not less than two-thirds of the outstanding shares of the capital stock of the Company not held by such related person, and (2) the determination of a majority of the continuing directors that the cash or fair market value of the property, securities or other consideration to be received per share by the holders, other than such related person, of the shares of each class or series of the capital stock of the Company in such business transaction shall not be less than the highest purchase price paid by such related person in acquiring any of its holdings of shares of the same class or series, unless the continuing directors by a majority vote shall either (a) have expressly approved the acquisition of the shares of the capital stock of the Company that caused such related person to become a related person, or (b) have expressly approved such business transaction. As used in this paragraph: a "business transaction" includes a merger, consolidation, reorganization or recapitalization, a purchase, sale, lease, exchange or mortgage of all or a substantial part (10% or more) of the property of the Company or a related person, an issuance, sale or exchange of securities and a liquidation, spin-off or dissolution; a "related person" includes a person, organization or group thereof owning 10% or more of the capital stock of the Company; "continuing directors" are those whose nominations for directorship shall have been approved by a majority of the directors in office on April 9, 1984 or by a majority of the then continuing directors. The foregoing provisions may not be amended or repealed except by the affirmative vote of the holders of not less than two-thirds of the shares of the capital stock of the Company (other than shares held by related persons). Preemptive Rights: The holders of the Common Stock have no preemptive rights. Other Provisions: The issued and outstanding shares of Common Stock are, and the shares of the New Common Stock, if any, will be, fully paid and nonassessable. Transfer Agent and Registrar: The Company is the transfer agent and registrar for the Common Stock. PLAN OF DISTRIBUTION The Company may sell the Securities in any of three ways: (i) through underwriters or dealers; (ii) directly to a limited number of purchasers or to a single purchaser; or (iii) through agents. Each Prospectus Supplement will set forth the terms of the offering of the Securities offered thereby, including the name or names of any underwriters, the purchase price of such Securities and the proceeds to the Company from such sale, any underwriting discounts and other items constituting underwriters' compensation, any initial public offering price and any discounts or concessions allowed or reallowed or paid to dealers. Any initial public offering price and any discounts or concessions allowed or reallowed or paid to dealers may be changed from time to time. If underwriters are used in the sale, the Securities will be acquired by the underwriters for their own account and may be sold from time to time in one or more transactions, including negotiated transactions, at a fixed public offering price or at varying prices determined at the time of the sale. The Securities may be offered to the public either through underwriting syndicates represented by one or more managing underwriters as may be designated by the Company, or directly by one or more of such firms. The underwriter or underwriters with respect to a particular underwritten offering of Securities will be named in the Prospectus Supplement relating to such offering and, if an underwriting syndicate is used, the managing underwriter or underwriters will be set forth on the cover page of such Prospectus Supplement. Unless otherwise set forth in a Prospectus Supplement, the obligations of the underwriters to purchase the Securities offered thereby will be subject to certain conditions precedent, and the underwriters will be obligated to purchase all such Securities if any are purchased. Securities may be sold directly by the Company or through agents designated by the Company from time to time. Each Prospectus Supplement will set forth the name of any agent involved in the offer or sale of the Securities in respect of which such Prospectus Supplement is delivered as well as any commissions payable by the Company to such agent. Unless otherwise indicated in such Prospectus Supplement, any such agent will be acting on a best efforts basis for the period of its appointment. If so indicated in a Prospectus Supplement, the Company will authorize agents, underwriters or dealers to solicit offers by certain specified institutions to purchase the Securities offered thereby from the Company at the public offering price set forth in such Prospectus Supplement pursuant to delayed delivery contracts providing for payment and delivery on a specified date in the future. Such contracts will be subject to those conditions set forth in such Prospectus Supplement, which will set forth the commission payable for solicitation of such contracts. Agents and underwriters may be entitled under agreements entered into with the Company to indemnification by the Company against certain civil liabilities, including liabilities under the Securities Act of 1933, as amended. EXPERTS The financial statements and the financial statement schedules of Northwest Natural Gas Company incorporated in this Prospectus by reference from the Company's Annual Report on Form 10-K, have been audited by Deloitte & Touche, independent auditors, as stated in their report, which is incorporated herein by reference, and have been so incorporated in reliance upon the report of such firm, given upon their authority as experts in accounting and auditing. With respect to the unaudited interim financial information which is incorporated herein by reference, Deloitte & Touche has applied limited procedures in accordance with professional standards for a review of such information. However, as stated in their reports included in the Company's Quarterly Reports on Form 10-Q and incorporated by reference herein, they did not audit and they do not express an opinion on that interim financial information. Accordingly, the degree of reliance on their reports on such information should be restricted in light of the limited nature of the review procedures applied. Deloitte & Touche is not subject to the liability provisions of Section 11 of the Securities Act of 1933, as amended, for their reports on the unaudited interim financial information because such reports are not "reports" or a "part" of the registration statement prepared or certified by an accountant within the meaning of Sections 7 and 11 of the Act. The statements made as to matters of law and legal conclusions in the documents incorporated in this Prospectus by reference and under "Description of the New Bonds" and "Description of Common Stock" herein and, if any, in the accompanying Prospectus Supplement have been reviewed by Bruce B. Samson, Esquire, Portland, Oregon. Mr. Samson is General Counsel of the Company. These statements and conclusions are set forth in reliance upon the opinion of Mr. Samson given upon his authority as an expert. As of March 31, 1994, Mr. Samson owned approximately 2,802 shares of the Company's common stock (including 1,009 shares through the Company's Retirement K Savings Plan) and has been granted options to purchase 8,000 additional shares at a price of $24.875 and 2,000 additional shares at a price of $36.00, the market prices of the shares on the dates of such grants. Mr. Samson's shares, including the underlying shares subject to options granted to him, have a current fair market value of approximately $412,865. LEGALITY The legality of the Securities will be passed upon for the Company by Mr. Samson and by Reid & Priest, New York, New York. Certain legal matters will be passed upon for the Underwriters by Simpson Thacher & Bartlett (a partnership which includes professional corporations), New York, New York. However, all matters pertaining to titles, the lien and enforceability of the Mortgage, franchises and all other matters of Oregon and Washington law will be passed upon only by Mr. Samson. =========================================================================== NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS IN CONNECTION WITH THE OFFER CONTAINED IN THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE UNDERWRITERS. NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE AS OF WHICH INFORMATION IS GIVEN IN THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS. THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS DO NOT CONSTITUTE AN OFFER OR SOLICITATION BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. TABLE OF CONTENTS Prospectus Suplement PAGE ---- Summary Information................................................ S-2 Selected Financial Information..................................... S-3 The Company........................................................ S-4 Use of Proceeds.................................................... S-4 Dividends and Price Range.......................................... S-5 Underwriting....................................................... S-6 Experts............................................................ S-7 Legality........................................................... S-7 Prospectus Available Information.............................................. 2 Incorporation of Certain Documents by Reference.................... 2 The Company........................................................ 2 Ratio of Earnings to Fixed Charges................................. 3 Use of Proceeds and Financing Program.............................. 3 Description of the New Bonds....................................... 3 Description of Common Stock........................................ 5 Plan of Distribution............................................... 7 Experts............................................................ 7 Legality........................................................... 8 ========================================================================== ========================================================================== 1,000,000 SHARES NORTHWEST NATURAL GAS COMPANY COMMON STOCK ----------------------------------------- P R O S P E C T U S S U P P L E M E N T ----------------------------------------- MERRILL LYNCH & CO. SMITH BARNEY INC. A.G. EDWARDS & SONS, INC. FEBRUARY __, 1995 ========================================================================== -----END PRIVACY-ENHANCED MESSAGE-----