(As filed on August 27, 2001)
File No. 70-[____]
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM U-1
APPLICATION OR DECLARATION
UNDER THE
PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
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NATIONAL FUEL GAS COMPANY
HORIZON ENERGY DEVELOPMENT, INC.
10 Lafayette Square
Buffalo, New York 14203
(Names of companies filing this statement and
addresses of principal executive offices)
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NATIONAL FUEL GAS COMPANY
(Name of top registered holding company parent)
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Philip C. Ackerman, President
National Fuel Gas Company
10 Lafayette Square
Buffalo, New York 14203
(Name and address of agent for service)
The Commission is requested to send copies of all notices, orders and
communications in connection with this Application or Declaration to:
Ronald J. Tanski, Secretary and Treasurer Michael F. Fitzpatrick, Jr., Esq.
Horizon Energy Development, Inc. Thelen Reid & Priest LLP
10 Lafayette Square 40 West 57th Street
Buffalo, New York 14203 New York, New York 10019
TABLE OF CONTENTS
PAGE
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ITEM 1. DESCRIPTION OF PROPOSED TRANSACTION.................................1
1.1 Background Information..............................................1
1.2 Current Authorization...............................................1
1.3 Summary of Requested Approvals......................................2
1.4 Development Activities..............................................3
1.5 Intermediate Subsidiaries...........................................4
1.6 Sales of Services and Goods Among Horizon and its Subsidiaries......4
1.7 Guarantees..........................................................5
1.8 Loans to Partially Owned Subsidiaries...............................6
1.9 Subsequent Reorganizations and Changes in Capital Stock of
Subsidiaries........................................................6
1.10 Energy Project Services.............................................7
1.11 Payment of Dividends Out of Capital and Unearned Surplus and
Reacquisition of Securities.........................................7
1.12 Certificates of Notification........................................8
ITEM 2. FEES, COMMISSIONS AND EXPENSES......................................9
ITEM 3. APPLICABLE STATUTORY PROVISIONS....................................10
3.1 General............................................................10
3.2 Compliance with Rules 53 and 54....................................10
ITEM 4. REGULATORY APPROVALS...............................................11
ITEM 5. PROCEDURE..........................................................11
ITEM 6. EXHIBITS AND FINANCIAL STATEMENTS..................................11
A. Exhibits...........................................................11
B. Financial Statements...............................................12
ITEM 7. INFORMATION AS TO ENVIRONMENTAL EFFECTS............................12
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ITEM 1. DESCRIPTION OF PROPOSED TRANSACTION.
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1.1 Background Information. National Fuel Gas Company ("National") is
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a registered holding company under the Public Utility Holding Company Act of
1935, as amended (the "Act"). Its wholly-owned gas utility subsidiary, National
Fuel Gas Distribution Corporation ("Distribution"), distributes gas at retail to
approximately 735,000 residential, commercial and industrial customers
(including transportation-only customers) in portions of western New York and
western Pennsylvania. Horizon Energy Development, Inc. ("Horizon"), a
wholly-owned non-utility subsidiary of National, develops and manages
investments in "exempt wholesale generators" ("EWGs"), as defined in Section 32
of the Act, and "foreign utility companies" ("FUCOs"), as defined in Section 33
of the Act, and provides consulting and operations services to third parties in
connection with domestic and foreign energy projects. National and Horizon are
herein sometimes referred to jointly as the "Applicants."
Horizon indirectly holds interests in three different FUCOs, which own or
operate or are developing generating facilities in the Czech Republic. These
include an 84.73% interest in United Energy, a.s. ("UE"), which owns and
operates a 236 MW coal-fired electric generating station. UE in turn owns 70% of
the capital stock of Teplarna Liberec, a.s., which owns and operates a 12 MW
steam powered electric generation facility. Horizon indirectly owns 100% of the
capital stock of Teplarna Kromeriz, a.s., which is developing a 38 MW generating
facility. National also indirectly owns (a) a 50% membership interest in Seneca
Energy II, LLC, an EWG that generates approximately 11 MW of electricity from
methane gas obtained from a landfill located in Waterloo, New York, (b) a 50%
membership interest in Model City Energy, LLC, an EWG that is developing a
facility capable of generating 5.5 MW of electricity from methane gas obtained
from a landfill located in Model City, New York, and (c) a 50% membership in
Energy Systems North East, LLC, an EWG that is capable of generating
approximately 80 MW of electricity from natural gas. Currently, National's
"aggregate investment" in FUCOs and EWGs is approximately $113,500,000, or about
19.44% of National's "consolidated retained earnings," as defined in Rule 53,
for the four quarters ended June 30, 2001 ($583,737,000). In addition to the
foregoing, Horizon is engaged in preliminary development activities in
connection with potential investments in other EWGs and FUCOs.
1.2 Current Authorization. By order dated August 29, 1995 1 (the "1995
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Order"), National and Horizon are authorized to engage in various transactions
through the period ending December 31, 2001, relating to potential investments
in EWGs and FUCOs and related energy consulting activities. Specifically, the
Commission authorized: (i) National to acquire the capital stock of Horizon and
provide additional debt and equity capital to Horizon in an aggregate amount not
to exceed $150 million; (ii) Horizon to invest up to $150 million at any time
outstanding in preliminary development activities relating to investments in,
and financing the acquisition of, EWGs and FUCOs and in preliminary development
activities and administrative activities relating to "qualifying facilities"
under the Public Utility Regulatory Policies Act of 1978, as amended ("PURPA")
(collectively, the "Project Activities"); (iii) the Applicants to organize and
acquire the securities of one or more intermediate subsidiary companies
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1 Holding Co. Act Release No. 26364.
("Intermediate Subsidiaries") formed exclusively for the purpose of acquiring
and holding the securities of one or more EWGs or FUCOs; (iv) Intermediate
Subsidiaries to issue and sell debt and equity securities denominated in either
U.S. or foreign currencies in order to finance investments in EWGs and FUCOs;
(v) the Applicants to issue guarantees and assume liabilities in connection with
investments in EWGs and FUCOs and Intermediate Subsidiaries, subject to the $150
million investment limitation; (vi) any subsidiary company of National to
provide services to EWGs that derive no part of their income, directly or
indirectly, from the generation of electric energy for sale in the Unites
States, or FUCOs; and (vii) the Applicants to provide consulting and operation
services, at market prices, to unaffiliated third parties with respect to
foreign and domestic energy related projects.
Subsequently, by order dated March 20, 1998,2 the Commission authorized
National to engage in a program of external financing and to utilize the
proceeds of such financing to, among other things, make investments, directly or
indirectly in EWGs and FUCOs, subject only to the limitations of Rule 53, and in
"energy-related companies," as defined in Rule 58,3 subject to the limitations
of that rule. The March 20, 1998 order states that such investment authority was
intended to supersede the investment limitation contained in the 1995 Order.
Also subsequent to the date of the 1995 Order, the Commission amended Rules
45(b) and 52, which the Applicants believe now exempt from Sections 6(a), 7 and
12(b), in most cases, the issuance of securities by Horizon and by Intermediate
Subsidiaries and guarantees by these companies of securities of their subsidiary
companies.
1.3 Summary of Requested Approvals. The Applicants are now seeking to
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extend and in certain respects modify the authorizations contained in the 1995
Order for the period through September 30, 2006 ("Authorization Period"). It is
intended that the authorization granted in this proceeding will replace and
supersede the authorizations of the Applicants under the 1995 Order, except with
respect to any transactions that have been carried out in reliance upon the 1995
Order.
Specifically, authority is requested herein for:
(i) Horizon to engage in preliminary development activities ("Development
Activities") relating to investments in EWGs and FUCOs ("Exempt
Subsidiaries"), "energy-related companies" under Rule 58 ("Rule 58
Subsidiaries") and other non-exempt non-utility companies, as may be
authorized in any separate proceeding ("Authorized Subsidiaries");
(ii) National and Horizon to acquire, directly or indirectly, the equity
securities of one or more additional Intermediate Subsidiaries
organized exclusively for the purpose of acquiring, financing, and
holding the securities of one or more existing or future Exempt
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2 Holding Co. Act Release No. 26847.
3 Rule 58, which conditionally exempts acquisitions of companies engaged
in, among other activities, the development, ownership and operation of
"qualifying facilities" and the sale of technical, management, and other similar
kinds of services and expertise developed in the course of utility operations,
was promulgated subsequent to the 1995 Order.
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Subsidiaries, Rule 58 Subsidiaries, or Authorized Subsidiaries,
provided that Intermediate Subsidiaries may also engage in Development
Activities and provide Project Services (as described below) to other
subsidiaries of Horizon;
(iii) Horizon and any Intermediate Subsidiaries to provide administrative,
operating, technical and management services ("Project Services") and
sell goods to other subsidiary companies of Horizon at fair market
prices, subject to certain limitations;
(iv) Horizon and any Intermediate Subsidiaries to provide guarantees and
other forms of credit support ("Guarantees") with respect to
obligations of any other subsidiary companies of Horizon in an
aggregate principal or nominal amount not to exceed $200 million at
any one time outstanding, in addition to any guarantees that are
exempt pursuant to Rule 45(b) and/or Rule 52;
(v) National, Horizon and any Intermediate Subsidiaries to make loans to
any other less than wholly-owned subsidiary of Horizon at interest
rates and maturities designed to provide a return to the lending
company of not less than its effective cost of capital;
(vi) National and Horizon to reorganize the ownership structure and change
the terms of the authorized stock capitalization of Horizon, any
Intermediate Subsidiary, or any other direct or indirect subsidiary of
Horizon, without further authorization of the Commission, provided
that, if such subsidiary is less than wholly owned, all other
shareholders consent to such change;
(vii) Horizon or any subsidiary of Horizon to provide energy project
consulting services to unaffiliated third parties in both the United
States and foreign countries; and
(viii) Horizon, any Intermediate Subsidiaries and any other subsidiaries of
Horizon to pay dividends out of capital and unearned surplus and/or
acquire, retire or redeem securities issued to associate companies to
the extent allowed under applicable law and the terms of any credit or
security instruments to which they may be parties.
1.4 Development Activities. The Development Activities undertaken by
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Horizon will be limited to due diligence and design review; market studies;
preliminary engineering; site inspection; preparation of bid proposals,
including, in connection therewith, posting of bid bonds; application for
required permits and/or regulatory approvals; acquisition of site options and
options on other necessary rights; negotiation and execution of contractual
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commitments with owners of existing facilities, equipment vendors, construction
firms, power purchasers, thermal "hosts," fuel suppliers and other project
contractors; negotiation of financing commitments with lenders and other
third-party investors; and such other preliminary activities as may be required
in connection with the purchase, acquisition, financing or construction of
facilities or the acquisition of securities of or interests in new businesses.
Any amounts expended by Horizon in connection with the Development Activities
will be included in "aggregate investment" for purposes of Rule 53 at such time
as those Development Activities culminate in an investment in any EWG or FUCO,
but only to the extent that such expenditures were financed by National, either
directly or through guarantees and other forms of credit support provided by
National.
1.5 Intermediate Subsidiaries. National and Horizon propose to
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acquire, directly or indirectly, the securities of one or more Intermediate
Subsidiaries, which would be organized exclusively for the purpose of acquiring,
holding and/or financing the acquisition of the securities of or other interest
in one or more Exempt Subsidiaries, Rule 58 Subsidiaries, or other Authorized
Subsidiaries, provided that Intermediate Subsidiaries may also engage in
Development Activities and sell goods and services to other subsidiaries of
Horizon, as described in Item 1.6, below.
An Intermediate Subsidiary may be organized, among other things, (1) in
order to facilitate the making of bids or proposals to develop or acquire an
interest in any Exempt Subsidiary, Rule 58 Subsidiary, or Authorized Subsidiary;
(2) after the award of such a bid proposal, in order to facilitate closing on
the purchase or financing of such acquired company; (3) at any time subsequent
to the consummation of an acquisition of an interest in any such company in
order, among other things, to effect an adjustment in the respective ownership
interests in such business held by National or Horizon and non-affiliated
investors; (4) to facilitate the sale of ownership interests in one or more
acquired non-utility companies; (5) to comply with applicable laws of foreign
jurisdictions limiting or otherwise relating to the ownership of domestic
companies by foreign nationals; (6) as a part of tax planning in order to limit
National's exposure to U.S. and foreign taxes; (7) to further insulate National
and Distribution from operational or other business risks that may be associated
with investments in non-utility companies; or (8) for other lawful business
purposes.
Investments in Intermediate Subsidiaries may take the form of any
combination of the following: (1) purchases of capital shares, partnership
interests, member interests in limited liability companies, trust certificates
or other forms of equity interests; (2) capital contributions; (3) open account
advances with or without interest; (4) loans; and (5) guarantees issued,
provided or arranged in respect of the securities or other obligations of any
Intermediate Subsidiaries. Funds for any direct or indirect investment in any
Intermediate Subsidiary will be derived from the proceeds of financing by
National, as authorized under the March 20, 1998 order or other future order or
orders, and other available cash resources, including proceeds of securities
sales by Horizon pursuant to Rule 52.
1.6 Sales of Services and Goods Among Horizon and its Subsidiaries.
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The Project Services provided by Horizon or any of its non-utility subsidiaries
to each other will include ongoing personnel, accounting, engineering,
operating, technical, legal, financial, and other support activities necessary
to manage National's investments in Exempt Subsidiaries, Rule 58 Subsidiaries
and other Authorized Subsidiaries. Horizon and its non-utility subsidiaries
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request authorization to provide Project Services, and to sell goods, at fair
market prices determined without regard to cost, and therefore request an
exemption (to the extent that Rule 90(d) does not apply) pursuant to Section
13(b) from the cost standards of Rules 90 and 91 as applicable to such
transactions, in any case in which the company receiving such goods or services
is:
(i) A FUCO or foreign EWG that derives no part of its income, directly or
indirectly, from the generation, transmission, or distribution of electric
energy for sale within the United States;
(ii) An EWG that sells electricity at market-based rates which have been
approved by the Federal Energy Regulatory Commission ("FERC"), provided that the
purchaser of such electricity is not Distribution;
(iii) A "qualifying facility" that sells electricity exclusively (a) at
rates negotiated at arms'-length to one or more industrial or commercial
customers purchasing such electricity for their own use and not for resale,
and/or (ii) to an electric utility company at the purchaser's "avoided cost" as
determined in accordance with the regulations under PURPA;
(iv) A domestic EWG or "qualifying facility" that sells electricity at
rates based upon its cost of service, as approved by FERC or any state public
utility commission having jurisdiction, provided that the purchaser thereof is
not Distribution; or
(v) A Rule 58 Subsidiary or any other Authorized Subsidiary that (a) is
partially-owned, provided that the ultimate purchaser of such goods or services
is not Distribution (or any other entity within the National system whose
activities and operations are primarily related to the provision of goods and
services to Distribution), (b) is engaged solely in the business of developing,
owning, operating and/or providing services or goods to non-utility companies
described in clauses (i) through (iv) immediately above, or (c) does not derive,
directly or indirectly, any material part of its income from sources within the
United States and is not a public-utility company operating within the United
States.4
1.7 Guarantees. Horizon and its non-utility subsidiaries request authority
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to provide guarantees and other forms of credit support to each other
("Guarantees") in an aggregate principal amount not to exceed $200 million
outstanding at any one time, in addition to any guarantees and other forms of
credit support that are exempt pursuant to Rule 45(b) and Rule 52(b), provided
however, that the amount of any Guarantees in respect of obligations of any Rule
58 Subsidiaries shall also be subject to the limitations of Rule 58(a)(1). It is
further proposed that the company providing any such credit support may charge
its associate company a fee for each Guarantee provided on its behalf in an
amount not to exceed the actual cost of the liquidity required to support such
Guarantee (e.g., letter of credit fees, fees associated with back-up credit
facilities, etc.).
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4 The five circumstances in which market based pricing would be allowed are
substantially the same as those approved by the Commission in other cases. See
Entergy Corporation, et al., Holding Co. Act Release No. 27039 (June 22, 1999)
and NiSource Inc., Holding Co. Act Release No. 27265 (Nov. 1, 2000).
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1.8 Loans to Partially Owned Subsidiaries. The Applicants believe that,
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in almost all cases, the issuance of securities by Horizon and any non-exempt
subsidiaries to finance the activities authorized in this proceeding and to fund
investments that are exempt under Sections 32 and 33 and Rule 58 will be exempt
from Commission authorization pursuant to Rule 52(b). However, in order to be
exempt under Rule 52(b), any note evidencing a borrowing by Horizon or any
subsidiary of Horizon from any associate company must have interest rates and
maturities that are designed to parallel the lending company's effective cost of
capital. It is proposed, however, that in the limited circumstances where the
subsidiary making the borrowing is not wholly owned by Horizon, directly or
indirectly, then National or Horizon or any other non-utility subsidiary of
Horizon, as the case may be, may charge interest rates designed to provide a
return to the lending company of not less than its effective cost of capital.5
However, no such loans will be made to any partially-owned subsidiary if such
subsidiary sells any services or goods to any other associate company in the
National system, other than one that falls within one of the categories of
companies to which goods and services may be sold on a basis other than "at
cost," as described above in Item 1.6. Furthermore, in the event any such loans
are made, the Applicants will include in the next certificate filed pursuant to
Rule 24 in this proceeding substantially the same information as that required
on Form U-6B-2 with respect to such transaction.
1.9 Subsequent Reorganizations and Changes in Capital Stock of
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Subsidiaries. The Applicants request approval to consolidate or otherwise
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reorganize all or any part of Horizon's direct and indirect ownership interests
in its various subsidiaries, and the activities and functions related to such
investments, without further authorization of this Commission. To effect any
such consolidation or other reorganization, Horizon may either contribute the
equity securities of one subsidiary to another subsidiary (including a newly
formed Intermediate Subsidiary) or sell or distribute by dividend (or cause a
subsidiary to sell or distribute by dividend) the equity securities or all or
part of the assets of one subsidiary to another one. To the extent that these
transactions are not otherwise exempt under the Act or Rules thereunder,6 the
Applicants hereby request authorization under the Act to consolidate or
otherwise reorganize under one or more direct or indirect Intermediate
Subsidiaries Horizon's ownership interests in existing and future non-utility
subsidiaries.7 Further, Applicants request authorization for the purchasing
company in any transaction that is structured as a sale of equity securities or
assets to execute and deliver its promissory note evidencing all or a portion of
the consideration given. Each transaction would be carried out in compliance
with all applicable U.S. or foreign laws and accounting requirements, and any
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5 The Commission has granted similar authority to other registered holding
companies. See e.g., Entergy Corporation, et al., Holding Co. Act Release No.
27039 (June 22, 1999); NiSource, Inc., Holding Co. Act Release No. 27265 (Nov.
1, 2000).
6 Sections 12(c), 32(g) and 33(c)(1) and Rules 43(b), 45(b), 46(a) and 58,
as applicable, may exempt many of the transactions described in this paragraph.
7 The Commission has granted similar authority to another holding company.
See Entergy Corporation, et al., Holding Co. Act Release No. 27039 (June 22,
1999), and NiSource Inc., Holding Co. Act Release No. 27265 (Nov. 1, 2000).
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transaction structured as a sale would be carried out for a consideration equal
to the book value of the equity securities being sold.8
In addition, the Applicants request authority to change, at any time and
without the need for further authorization by the Commission, the authorized
number of shares or classes of shares of capital stock or the par value of any
shares of capital stock of Horizon or any subsidiary of Horizon, as deemed
appropriate by National or other parent company, provided that, if any
non-utility subsidiary of Horizon is not wholly owned, the consent of all other
shareholders has been obtained for such change.9 The Applicants state that the
flexibility to adjust the capital structure of Horizon and its subsidiaries is
needed because the portion of Horizon's or any individual subsidiary's aggregate
financing to be effected through the sale of stock to National or to other
persons during the Authorization Period pursuant to Rule 52 and/or pursuant to
an order issued in this proceeding cannot be ascertained at this time. For
example, the proposed sale of capital securities may in some cases exceed the
then authorized capital stock of such the issuing subsidiary, in which case it
would be necessary to amend the charter of such company in order to increase the
number of authorized shares. In addition, Horizon or any subsidiary of Horizon
may wish to engage in a reverse stock split to reduce franchise taxes or for
other corporate purposes.
1.10 Energy Project Services. Horizon, directly or indirectly through any
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subsidiary, requests authority to provide engineering, operating, maintenance,
consulting and other technical support services ("Consulting Services") to
unaffiliated third parties (including foreign governmental bodies) with respect
to energy projects. Such Consulting Services would include technology
assessments, power factor correction and harmonics mitigation analysis, meter
reading and repair, rate schedule design and analysis, environmental services,
engineering services, billing services (including consolidation billing and bill
disaggregation tools), risk management services, communications systems,
information systems/data processing, system planning, strategic planning,
finance, feasibility studies, and other services. Horizon requests authority to
provide such services at market prices in both the United States and foreign
countries.10
1.11 Payment of Dividends Out of Capital and Unearned Surplus and
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Reacquisition of Securities. Horizon also proposes, on behalf of itself and each
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of its current and future non-exempt subsidiaries that such companies be
permitted to pay dividends with respect to the securities of such companies,
from time to time through the Authorization Period, out of capital and unearned
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8 The Commission has authorized other registered holding companies to carry
out future reorganizations of their non-utility businesses without further
approval. See Columbia Energy Group, Inc., Holding Co. Act Release No. 27099
(Nov. 5, 1999).
9 The Commission has granted similar approvals to other registered holding
companies. See Conectiv, Inc., Holding Co. Act Release No. 26833 (Feb. 26,
1998); and NiSource Inc, Holding Co. Act Release No. 27265 (Nov. 1, 2000).
10 The Commission has heretofore authorized non-utility subsidiaries of a
registered holding company to sell similarly-defined technical, consulting and
operating services to customers both within and outside the United States. See
Columbia Energy Group, et al., Holding Co. Act Release No. 26498 (March 25,
1996); and Cinergy Corp., Holding Co. Act Release No. 26662 (February 7, 1997).
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surplus (including revaluation reserve) and/or retire or reacquire any
securities that have been issued to an associate company, to the extent
permitted under applicable corporate law and any applicable credit or security
documents.
Horizon anticipates that there will be situations in which it or one or
more subsidiaries will have unrestricted cash available for distribution in
excess of any such company's current and retained earnings. In such situations,
the declaration and payment of a dividend and/or payments to reacquire its own
securities would have to be charged, in whole or in part, to capital or unearned
surplus. As an example, if Horizon (directly or indirectly through an
Intermediate Subsidiary) purchases all of the stock of an Exempt Subsidiary, and
following such acquisition, the Exempt Subsidiary incurs non-recourse borrowings
some or all of the proceeds of which are distributed to the Intermediate
Subsidiary as a reduction in the amount invested in the Exempt Subsidiary (i.e.,
return of capital), the Intermediate Subsidiary (assuming it has no earnings)
could not, without the Commission's approval, in turn distribute such cash to
Horizon for possible distribution to National.
Similarly, using the same example, if an Intermediate Subsidiary, following
its acquisition of all of the stock of an Exempt Subsidiary, were to sell part
of that stock to a third party for cash, the Intermediate Subsidiary would again
have substantial unrestricted cash available for distribution, but (assuming no
profit on the sale of the stock) would not have current earnings and therefore
could not, without the Commission's approval, declare and pay a dividend to its
parent out of such cash proceeds.
Further, there may be periods during which unrestricted cash available for
distribution by Horizon or any subsidiary of Horizon exceeds current and
retained earnings due to the difference between accelerated depreciation allowed
for tax purposes, which may generate significant amounts of distributable cash,
and depreciation methods required to be used in determining book income.
Finally, even under circumstances in which a subsidiary has sufficient
earnings, and therefore may declare and pay a dividend to its immediate parent,
such immediate parent may have negative retained earnings, even after receipt of
the dividend, due to losses from other operations. In this instance, cash would
be trapped at a subsidiary level where there is no current need for it.
1.12 Certificates of Notification. The Applicants propose to file
----------------------------
certificates of notification pursuant to Rule 24 that report each of the
transactions carried out in accordance with the terms and conditions of and for
the purposes represented in this Application/Declaration. Such certificates
would be filed within 60 days after the end of each of the first three fiscal
quarters, and 90 days after the end of the last fiscal quarter, in which
transactions occur, commencing with the report for the first full quarter after
the effective date of the order in this proceeding. The Rule 24 certificates
will contain the following information for the reporting period:
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(a) A general description of the Development Activities of Horizon or
any Intermediate Subsidiary during the quarter and of any EWG or FUCO in
which National has acquired, directly or indirectly, an ownership interest
during such quarter;11
(b) Information on any Project Services performed during the quarter,
including the name of the company providing and receiving Project Services,
the type of services provided, and the total charges, broken down by
associate company and indicating whether such charge was at cost or based
on fair market value;
(c) The name, parent company, and amount invested in any new
Intermediate Subsidiary during the quarter;
(d) The amount of any Guarantee issued by Horizon or any non-utility
subsidiary that is not exempt under Ruler 45(b) and/or Rule 52, as
applicable; and
(e) A balance sheet and income statement for Horizon as of the end of
such reporting period.
ITEM 2. FEES, COMMISSIONS AND EXPENSES.
------------------------------
The fees, commissions and expenses incurred or to be incurred in connection
with the transactions proposed herein are estimated at $7,500.
ITEM 3. APPLICABLE STATUTORY PROVISIONS.
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3.1 General. To the extent that Rule 52 would not exempt such
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transactions, Sections 6(a), 7, 9(a), 10 and 12(b) of the Act and Rule 45(a)
thereunder are applicable to any intercompany loan between National, Horizon and
any subsidiary of Horizon. Also, to the extent that they are not exempt under
Rule 52 and/or 45(b), Section 12(b) of the Act and Rule 45(a) are also
applicable to the issuance of any Guarantees by Horizon and any non-exempt
subsidiary of Horizon. Sections 9(a)(1) and 10 of the Act are applicable to the
Development Activities and to the sale of Consulting Services to third parties.
To the extent such transactions are not otherwise exempt under Sections 32 and
33 and Rules 43, 46 and 58, any reorganization of Horizon and its subsidiaries
may be subject to Sections 6(a), 7, 9(a), 10, 12(b), 12(c), and 12(f). Sections
6(a)(2) and 7 of the Act are applicable to any change to the capitalization of
Horizon or any subsidiary of Horizon. Section 12(c) of the Act and Rule 46 are
applicable to the payment of dividends from capital and unearned surplus by
Horizon or any subsidiary and Sections 9(a), 10 and 12(f) of the Act and Rules
42 and 43 thereunder are applicable to the acquisition, retirement or redemption
of any securities issued by Horizon or any subsidiary to an associate company.
Section 13(b) of the Act and Rules 80 - 92 are applicable to the sale of Project
Services and goods by Horizon or any subsidiary to any other subsidiary.
------------------------
11 Investments in and other activities involving any Rule 58 Subsidiaries
of Horizon will be reported in National's quarterly statements on Form U-9C-3.
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3.2 Compliance with Rules 53 and 54. The transactions proposed herein are
-------------------------------
also subject to Rules 53 and 54. Under Rule 53(a), the Commission shall not make
certain specified findings under Sections 7 and 12 in connection with a proposal
by a holding company to issue securities for the purpose of acquiring the
securities of or other interest in an EWG, or to guarantee the securities of an
EWG, if each of the conditions in paragraphs (a)(1) through (a)(4) thereof are
met, provided that none of the conditions specified in paragraphs (b)(1) through
(b)(3) of Rule 53 exists. Rule 54 provides that the Commission shall not
consider the effect of the capitalization or earnings of subsidiaries of a
registered holding company that are EWGs or FUCOs in determining whether to
approve other transactions if Rule 53(a), (b) and (c) are satisfied. These
standards are met.
Rule 53(a)(1): Currently, National's "aggregate investment" in EWGs and
FUCOs is approximately $113,500,000, or approximately 19.44% of National's
"consolidated retained earnings" for the four quarters ended June 30, 2001
($583,737,000).
Rule 53(a)(2): National will maintain books and records enabling it to
identify investments in and earnings from each EWG and FUCO in which it directly
or indirectly acquires and holds an interest. National will cause each domestic
EWG in which it acquires and holds an interest, and each foreign EWG and FUCO
that is a majority-owned subsidiary, to maintain its books and records and
prepare its financial statements in conformity with U.S. generally accepted
accounting principles ("GAAP"). All of such books and records and financial
statements will be made available to the Commission, in English, upon request.
Rule 53(a)(3): No more than 2% of the employees of Distribution will, at
any one time, directly or indirectly, render services to EWGs and FUCOs.
Rule 53(a)(4): National will submit a copy of the Application or
Declaration in this proceeding and each amendment thereto, and will submit
copies of any Rule 24 certificates required hereunder, as well as a copy of
National's Form U5S, to each of the public service commissions having
jurisdiction over the retail rates of Distribution.
In addition, National states that the provisions of Rule 53(a) are not made
inapplicable to the authorization herein requested by reason of the occurrence
or continuance of any of the circumstances specified in Rule 53(b). Rule 53(c)
is inapplicable by its terms.
ITEM 4. REGULATORY APPROVALS.
--------------------
No state commission, and no federal commission, other than the Commission,
has jurisdiction over the proposed transactions.
ITEM 5. PROCEDURE.
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The Commission is requested to publish a notice under Rule 23 with respect
to the filing of this Application or Declaration as soon as practicable. The
Applicants request that the Commission's Order be issued as soon as the rules
allow, and in any event not later than December 15, 2001, and that there should
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not be a 30-day waiting period between issuance of the Commission's order and
the date on which the order is to become effective. The Applicants hereby waive
a recommended decision by a hearing officer or any other responsible officer of
the Commission and consents that the Division of Investment Management may
assist in the preparation of the Commission's decision and/or order, unless the
Division opposes the matters proposed herein.
ITEM 6. EXHIBITS AND FINANCIAL STATEMENTS.
---------------------------------
A. EXHIBITS.
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A None.
B None.
C None.
D None.
E None.
F Opinion of Counsel. (To be filed by amendment).
G Proposed Form of Federal Register Notice.
B. FINANCIAL STATEMENTS.
--------------------
FS-1 Balance Sheet of National and consolidated subsidiaries, as of
September 30, 2000 (incorporated by reference to the Annual
Report on Form 10-K of National for the fiscal year ended
September 30, 2000) (File No. 1-3880).
FS-2 Statements of Income of National and consolidated subsidiaries
for the twelve months ended September 30, 2000 (incorporated by
reference to the Annual Report on Form 10-K of National for the
fiscal year ended September 30, 2000) (File No. 1-3880).
FS-3 Balance Sheet of National and consolidated subsidiaries, as of
June 30, 2001 (incorporated by reference to the Quarterly Report
on Form 10-Q of National for the nine months ended June 30, 2001)
(File No. 1-3880).
FS-4 Statements of Income of National and consolidated subsidiaries
for the nine months ended June 30, 2001 (incorporated by
reference to the Quarterly Report on Form 10-Q of National for
the nine months ended June 30, 2001) (File No. 1-3880).
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FS-5 Balance Sheet of Horizon and consolidated subsidiaries
(unaudited), as of June 30, 2001 (incorporated by reference to
Certificate Pursuant to Rule 24 filed August 24, 2001 in File No.
70-8649).
FS-6 Income Statement of Horizon and consolidated subsidiaries
(unaudited) for the three months ended June 30, 2001
(incorporated by reference to Certificate Pursuant to Rule 24
filed August 24, 2001 in File No. 70-8649).
ITEM 7. INFORMATION AS TO ENVIRONMENTAL EFFECTS.
---------------------------------------
The matters that are the subject of this Application or Declaration do not
involve a "major federal action" nor do they "significantly affect the quality
of the human environment" as those terms are used in section 102(2)(C) of the
National Environmental Policy Act. The transactions that are proposed herein
will not result in changes in the operation of the Applicants that will have an
impact on the environment. The Applicants are not aware of any federal agency
that has prepared or is preparing an environmental impact statement with respect
to the transactions that are the subject of this Application or Declaration.
SIGNATURES
Pursuant to the requirements of the Public Utility Holding Company Act of
1935, as amended, the undersigned companies have duly caused this Application or
Declaration filed herein to be signed on their behalf by the undersigned
thereunto duly authorized.
NATIONAL FUEL GAS COMPANY
By: /s/ P.C. Ackerman
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Name: P. C. Ackerman
Title: President
HORIZON ENERGY DEVELOPMENT, INC.
By: /s/ P.C. Ackerman
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Name: P.C. Ackerman
Title: President
Date: August 27, 2001
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