UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1995
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OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 1-7727
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CONNECTICUT NATURAL GAS CORPORATION
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(Exact name of registrant as specified in its charter)
Connecticut 06-0383860
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
100 Columbus Boulevard, Hartford, Connecticut 06103
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(Address of principal executive offices) (Zip Code)
(203) 727-3000
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(Registrant's telephone number, including area code)
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(Former name, former address and former fiscal year, if changed since last
report).
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
----- -----
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date (applicable only
to Corporate Issuers). Number of shares of common stock outstanding as of
the close of business on July 25, 1995: 9,931,279.
FINANCIAL STATEMENTS
CONNECTICUT NATURAL GAS CORPORATION
The condensed financial statements included herein have been prepared
by the Company, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations. Although the Company believes that
the disclosures are adequate to make the information presented not
misleading, it is suggested that these condensed financial statements be
read in conjunction with the financial statements and the notes thereto
included in the Company's latest annual report on Form 10-K. In the opinion
of the Company, all adjustments necessary to present fairly the consolidated
financial position of the Connecticut Natural Gas Corporation as of June 30,
1995 and 1994 and the results of its operations and its cash flows for the
three months, nine months and twelve months ended June 30, 1995 and 1994
have been included. The results of operations for such interim periods are
not necessarily indicative of the results for the full year.
"UNAUDITED"
CONNECTICUT NATURAL GAS CORPORATION
CONSOLIDATED BALANCE SHEETS
(Thousands of Dollars)
June 30, Sept. 30, June 30,
ASSETS 1995 1994 1994
------ --------- --------- ---------
Plant and Equipment:
Regulated energy $ 380,001 $ 365,638 $ 354,554
Nonregulated energy 63,636 62,728 62,481
Construction work in progress 2,233 2,762 1,305
--------- --------- ---------
445,870 431,128 418,340
Less-Allowance for depreciation 130,445 119,392 116,478
--------- --------- ---------
315,425 311,736 301,862
--------- --------- ---------
Investments, at equity 5,761 5,147 5,154
--------- --------- ---------
Current Assets:
Cash and cash equivalents 18,003 1,126 1,093
Accounts and notes receivable 30,203 28,393 43,110
Allowance for doubtful accounts (5,604) (4,017) (5,188)
Accrued utility revenue 2,595 3,714 2,668
Inventories 10,973 18,326 15,989
Prepaid expenses 2,209 10,107 2,101
Recoverable purchased gas costs - 3,769 -
--------- --------- ---------
58,379 61,418 59,773
--------- --------- ---------
Deferred Charges and Other Assets:
Unrecovered future taxes 53,018 46,759 53,181
Recoverable transition costs 5,128 6,925 14,903
Other assets 29,919 26,569 25,267
--------- --------- ---------
88,065 80,253 93,351
--------- --------- ---------
$ 467,630 $ 458,554 $ 460,140
========= ========= =========
"UNAUDITED"
CONNECTICUT NATURAL GAS CORPORATION
CONSOLIDATED BALANCE SHEETS (Concluded)
(Thousands of Dollars)
June 30, Sept. 30, June 30,
CAPITALIZATION AND LIABILITIES 1995 1994 1994
------------------------------ --------- --------- ---------
Capitalization:
Common Stock $ 31,045 $ 29,820 $ 29,820
Capital in excess of par value 74,018 66,657 66,700
Retained Earnings 50,577 43,264 49,915
--------- --------- ---------
155,640 139,741 146,435
Unearned compensation -
Restricted stock awards (337) (157) (402)
Treasury stock (103) (103) (103)
--------- --------- ---------
Common stock equity 155,200 139,481 145,930
Preferred stock, not subject to
mandatory redemption 906 909 939
Long-term debt 153,119 154,193 136,497
--------- --------- ---------
309,225 294,583 283,366
--------- --------- ---------
Notes Payable Under Revolving Credit
Agreements 1,000 - -
--------- --------- ---------
Current Liabilities:
Current portion of long-term debt 3,886 3,791 4,006
Notes payable and commercial paper - 18,500 20,800
Accounts payable and accrued expenses 37,595 37,906 35,111
Refundable purchased gas costs 8,741 - 10,002
Accrued liabilities 1,864 7,779 3,682
--------- --------- ---------
52,086 67,976 73,601
--------- --------- ---------
Deferred Credits:
Deferred income taxes 41,539 36,916 33,902
Unfunded deferred income taxes 53,018 46,759 55,339
Investment tax credits 3,479 3,644 3,699
Refundable taxes 3,367 3,275 3,943
Accrued transition costs 128 1,925 3,229
Other 3,788 3,476 3,061
--------- --------- ---------
105,319 95,995 103,173
--------- --------- ---------
$ 467,630 $ 458,554 $ 460,140
========= ========= =========
"UNAUDITED"
CONNECTICUT NATURAL GAS CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Thousands of dollars except for per share data)
Three Months Ended
June 30,
-----------------------------
1995 1994
---------- ----------
Operating Revenues $ 50,147 $ 50,003
Less: Cost of Energy 26,191 26,669
State Gross Receipts Tax 1,681 1,851
---------- ----------
Operating Margin 22,275 21,483
---------- ----------
Other Operating Expenses:
Operations & maintenance expenses 13,297 14,031
Depreciation 4,324 4,073
Income taxes 65 (835)
Other taxes 1,799 1,772
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19,485 19,041
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Operating Income 2,790 2,442
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Other Income (Deductions):
Allowance for equity funds used
during construction 13 4
Equity in partnership earnings 298 184
Other income (deductions) 165 (73)
Income Taxes (222) (109)
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254 6
---------- ----------
Interest and Debt Expense 3,669 3,356
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Net Loss (625) (908)
Less-Dividends on Preferred Stock 15 16
---------- ----------
Net Loss Applicable to Common Stock $ (640) $ (924)
========== ==========
Loss Per Average Share of
Common Stock $ (0.06) $ (0.10)
========== ==========
Dividends Per Share of Common Stock $ 0.37 $ 0.37
========== ==========
Average Common Shares Outstanding
During the Period 9,931,279 9,539,078
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"UNAUDITED"
CONNECTICUT NATURAL GAS CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Thousands of dollars except for per share data)
Nine Months Ended
June 30,
-----------------------------
1995 1994
---------- ----------
Operating Revenues $ 232,218 $ 252,708
Less: Cost of Energy 124,647 136,766
State Gross Receipts Tax 9,121 10,326
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Operating Margin 98,450 105,616
---------- ----------
Operating Expenses:
Operations & maintenance expenses 39,146 42,438
Depreciation 12,825 11,438
Income taxes 12,147 15,500
Other taxes 5,507 5,622
---------- ----------
69,625 74,998
---------- ----------
Operating Income 28,825 30,618
---------- ----------
Other Income (Deductions):
Allowance for equity funds used
during construction 76 34
Equity in partnership earnings 832 636
Other deductions (343) (977)
Income Taxes (355) 79
---------- ----------
210 (228)
---------- ----------
Interest and Debt Expense 10,652 9,582
---------- ----------
Net Income 18,383 20,808
Less-Dividends on Preferred Stock 46 49
---------- ----------
Net Income Applicable to Common Stock $ 18,337 $ 20,759
========== ==========
Income Per Average Share of
Common Stock $ 1.85 $ 2.18
========== ==========
Dividends Per Share of Common Stock $ 1.11 $ 1.11
========== ==========
Average Common Shares Outstanding
During the Period 9,925,531 9,539,903
========== ==========
CONNECTICUT NATURAL GAS CORPORATION "UNAUDITED"
CONSOLIDATED STATEMENTS OF INCOME
(Thousands of dollars except for per share data)
Twelve Months Ended
June 30,
-----------------------------
1995 1994
---------- ----------
Operating Revenues $ 270,172 $ 292,830
Less: Cost of Energy 143,428 160,787
State Gross Receipts Tax 10,658 11,737
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Operating Margin 116,086 120,306
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Operating Expenses:
Operations & maintenance expenses 52,752 54,111
Depreciation 16,894 14,590
Income taxes 10,000 13,171
Other taxes 7,321 7,459
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86,967 89,331
---------- ----------
Operating Income 29,119 30,975
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Other Income (Deductions):
Allowance for equity funds used
during construction 62 10
Equity in partnership earnings 1,064 1,090
Other deductions (373) (1,095)
Income Taxes (547) (248)
---------- ----------
206 (243)
---------- ----------
Interest and Debt Expense 14,047 12,688
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Net Income 15,278 18,044
Less-Dividends on Preferred Stock 63 66
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Net Income Applicable to Common Stock $ 15,215 $ 17,978
========== ==========
Income Per Average Share of
Common Stock $ 1.55 $ 1.88
========== ==========
Dividends Per Share of Common Stock $ 1.48 $ 1.48
========== ==========
Average Common Shares Outstanding
During the Period 9,828,124 9,540,506
========== ==========
"UNAUDITED"
CONNECTICUT NATURAL GAS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Thousands of Dollars)
Three Months Ended
June 30,
----------------------
1995 1994
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Cash Flows from Operations $ 16,691 $ 6,541
-------- --------
Cash Flows from Investing Activities:
Capital expenditures (6,289) (5,802)
Other investing activities (2,023) (1,262)
-------- --------
Net cash used in investing activities (8,312) (7,064)
-------- --------
Cash Flows from Financing Activities:
Dividends paid (3,690) (3,545)
Issuance of common stock - 74
Principal retired on long-term debt (163) (512)
Short-term debt - 4,200
-------- --------
Net cash provided/(used) by
financing activities (3,853) 217
-------- --------
Increase/(Decrease) in Cash and
Cash Equivalents 4,526 (306)
Cash and Cash Equivalents at
Beginning of Period 13,477 1,399
-------- --------
Cash and Cash Equivalents at
End of Period $ 18,003 $ 1,093
======== ========
"UNAUDITED"
CONNECTICUT NATURAL GAS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (Concluded)
(Thousands of Dollars)
Three Months Ended
June 30,
----------------------
1995 1994
---- ----
Schedule Reconciling Earnings to
Cash Flows from Operations:
Income $ (625) $ (908)
-------- --------
Adjustments to reconcile income
to net cash:
Depreciation and amortization 4,502 4,173
Deferred income taxes, net (2,654) (3,744)
Undistributed affiliate earnings (298) (184)
Change in assets and liabilities:
Accounts receivable 20,919 18,759
Accrued utility revenue 8,909 9,908
Inventories (2,302) (8,659)
Unrecovered/(refundable)
purchased gas costs (3,628) (5,857)
Prepaid expenses 1,241 387
Accounts payable and accrued expenses (9,495) (7,448)
Other assets/liabilities 122 114
-------- --------
Total adjustments 17,316 7,449
-------- --------
Cash flows from operations $ 16,691 $ 6,541
======== ========
Supplemental Disclosures of Cash Flow
Information:
Cash Paid During the Period for:
Interest (net of amount capitalized) $ 4,006 $ 4,099
======== ========
Income taxes $ 5,421 $ 5,618
======== ========
"UNAUDITED"
CONNECTICUT NATURAL GAS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Thousands of Dollars)
Nine Months Ended
June 30,
----------------------
1995 1994
---- ----
Cash Flows from Operations $ 57,992 $ 27,656
-------- --------
Cash Flows from Investing Activities:
Capital expenditures (16,216) (14,695)
Other investing activities (3,933) (6,375)
-------- --------
Net cash used in investing activities (20,149) (21,070)
-------- --------
Cash Flows from Financing Activities:
Dividends paid (11,070) (10,637)
Issuance of common stock 8,586 147
Other stock activity, net (3) (715)
Principal retired on long-term debt (979) (2,134)
Short-term debt (17,500) 6,300
-------- --------
Net cash used by
financing activities (20,966) (7,039)
-------- --------
Increase/(Decrease) in Cash and
Cash Equivalents 16,877 (453)
Cash and Cash Equivalents at
Beginning of Period 1,126 1,546
-------- --------
Cash and Cash Equivalents at
End of Period $ 18,003 $ 1,093
======== ========
"UNAUDITED"
CONNECTICUT NATURAL GAS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (Concluded)
(Thousands of Dollars)
Nine Months Ended
June 30,
----------------------
1995 1994
---- ----
Schedule Reconciling Earnings to
Cash Flows from Operations:
Income $ 18,383 $ 20,808
-------- --------
Adjustments to reconcile income
to net cash:
Depreciation and amortization 12,980 11,752
Deferred income taxes, net 4,510 8,405
Undistributed affiliate earnings (832) (636)
Cash distributions received from
investments 168 -
Change in assets and liabilities:
Accounts receivable (223) (16,011)
Accrued utility revenue 1,119 1,964
Inventories 7,353 4,424
Unrecovered/(refundable)
purchased gas costs 12,510 6,244
Prepaid expenses 7,898 1,278
Accounts payable and accrued expenses (6,226) (7,819)
Other assets/liabilities 352 (2,753)
-------- --------
Total adjustments 39,609 6,848
-------- --------
Cash flows from operations $ 57,992 $ 27,656
======== ========
Supplemental Disclosures of Cash Flow
Information:
Cash Paid During the Period for:
Interest (net of amount capitalized) $ 9,760 $ 8,924
======== ========
Income taxes $ 7,667 $ 8,324
======== ========
"UNAUDITED"
CONNECTICUT NATURAL GAS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Thousands of Dollars)
Twelve Months Ended
June 30,
----------------------
1995 1994
---- ----
Cash Flows from Operations $ 55,127 $ 31,834
-------- --------
Cash Flows from Investing Activities:
Capital expenditures (29,380) (26,508)
Other investing activities 552 (14,239)
-------- --------
Net cash used in investing activities (28,828) (40,747)
-------- --------
Cash Flows from Financing Activities:
Dividends paid (14,617) (14,185)
Issuance of common stock 8,577 436
Other stock activity, net (51) (724)
Issuance of long-term debt 20,000 35,100
Principal retired on long-term debt (3,498) (4,624)
Short-term debt (19,800) (7,300)
-------- --------
Net cash provided/(used) by
financing activities (9,389) 8,703
-------- --------
Increase/(Decrease) in Cash and
Cash Equivalents 16,910 (210)
Cash and Cash Equivalents at
Beginning of Period 1,093 1,303
-------- --------
Cash and Cash Equivalents at
End of Period $ 18,003 $ 1,093
======== ========
"UNAUDITED"
CONNECTICUT NATURAL GAS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (Concluded)
(Thousands of Dollars)
Twelve Months Ended
June 30,
----------------------
1995 1994
---- ----
Schedule Reconciling Earnings to
Cash Flows from Operations:
Income $ 15,278 $ 18,044
-------- --------
Adjustments to reconcile income
to net cash:
Depreciation and amortization 17,386 15,007
Deferred income taxes, net 4,643 1,617
Undistributed affiliate earnings (1,064) (1,090)
Cash distributions received from
investments 408 251
Change in assets and liabilities:
Accounts receivable 13,323 (7,382)
Accrued utility revenue 73 618
Inventories 5,016 (2,435)
Unrecovered/(refundable)
purchased gas costs (1,261) (650)
Prepaid expenses (108) (1,088)
Accounts payable and accrued expenses 666 11,725
Other assets/liabilities 767 (2,783)
-------- --------
Total adjustments 39,849 13,790
-------- --------
Cash flows from operations $ 55,127 $ 31,834
======== ========
Supplemental Disclosures of Cash Flow
Information:
Cash Paid During the Period for:
Interest (net of amount capitalized) $ 10,974 $ 10,100
======== ========
Income taxes $ 9,316 $ 8,372
======== ========
"UNAUDITED"
CONNECTICUT NATURAL GAS CORPORATION
NOTES TO FINANCIAL STATEMENTS
June 30, 1995
(Thousands of Dollars)
(1) Investments
In April, 1995 the Board of Directors approved the Company's 33 1/3%
participation in KBC Energy Services of New England (KBC), a joint
venture partnership with Bay State Gas Company and Koch Gas Services
Company. KBC plans to market natural gas supplies and energy
management related services on an unregulated basis to commercial and
industrial end users, primarily in New England. KBC is expected to
begin operations in the coming quarter.
(2) Reclassifications
Certain prior year amounts have been reclassified to conform with
current year classifications.
"UNAUDITED"
CONNECTICUT NATURAL GAS CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS
JUNE 30, 1995
(Thousands of Dollars Except Per Share Amounts)
RESULTS OF OPERATIONS
The three months ended June, 1995 loss per share of $(.06) is less than the
$(.10) loss per share recorded in the three months ended June 30, 1994. The
Company earned $1.85 per share in the nine months ended June 30, 1995 as
compared to $2.18 per share earned in the first nine months of fiscal 1994.
Twelve months ended June earnings were $1.55 in fiscal 1995 and $1.88 in
1994. This is the third consecutive reporting period in which the earnings
reported for year-to-date and twelve months ended fiscal 1995 periods are
lower than 1994. Fiscal 1995 earnings have been significantly impacted by
the warmer winter weather and the resulting decline in average use per
customer. Higher interest costs have also added to lower earnings. These
factors were partially offset by lower gas costs and additional firm
customers.
Operating Margin
Gas operating margin, equal to gas revenues less the cost of gas and
Connecticut gross revenues tax, was slightly higher in the third quarter of
1995 and 1994 and lower in 1995 for both the nine and twelve months ended
periods. The following table presents the changes in revenues, gas
operating margin and gas throughput for all periods presented in the
statements of income:
Three Months Ended Nine Months Ended Twelve Months Ended
June 30, June 30, June 30,
1995 1994 1995 1994 1995 1994
-------- -------- -------- -------- -------- --------
Gas Revenues $ 50,147 $ 50,003 $232,218 $252,708 $270,172 $292,830
======== ======== ======== ======== ======== ========
Gas Operating Margin $ 22,275 $ 21,483 $ 98,450 $105,616 $116,086 $120,306
======== ======== ======== ======== ======== ========
Gas Throughput (mmcf)
Firm Sales 3,228 3,017 19,426 22,316 21,371 24,213
Interruptible Sales 1,734 2,026 7,020 7,171 8,311 8,777
Off-System Sales 4,598 3,759 9,523 6,477 12,190 11,108
Transportation
Services 1,923 1,589 5,888 5,331 7,882 7,430
------ ------ ------ ------ ------ ------
Total System
Throughput 11,483 10,391 41,857 41,295 49,754 51,528
====== ====== ====== ====== ====== ======
Lower nine and twelve months ended operating margins are primarily the
result of warmer weather experienced in the Company's service area during
the annual peak heating season, resulting in lower gas volumes sold to firm
customers. Lower sales more than offset the beneficial impacts to operating
margin from an increase in the number of firm customers and higher
interruptible margins resulting from lower gas costs. Higher third quarter
operating margins are primarily the result of higher interruptible margins.
Interruptible margins exceeded the Connecticut Department of Public Utility
Control (DPUC) prescribed target level related to sharing mechanisms for the
measurement period which ended in the first quarter of fiscal 1995, making a
portion of these margins subject to refund to firm customers.
Income Taxes
The change in income taxes reflects higher taxable income between the
comparable three months ended periods and lower taxable income between 1995
and 1994 for the nine and twelve months ended periods. In 1995 the Company
has also recognized increased income tax benefits from allowed deductions of
current and certain prior incurred cost of removal expenses associated with
retirements of plant and equipment, as approved by the Internal Revenue
Service in October, 1994. A benefit to earnings from this item of $.02,
$.10 and $.10 per share, respectively, was recorded in the three, nine and
twelve months ended June 30, 1995.
Operations and Maintenance Expenses
Operating and maintenance expenses are lower in fiscal 1995 between all
comparable periods. Lower uncollectibles expense recorded in 1995 is
primarily the result of lower customer receivables recorded in the winter
months because of the warmer weather. Environmental cleanup costs,
conservation program expenses and several other expense items are less in
fiscal 1995 because of the absence in 1994 of certain previously deferred
expenses recognized in the first quarter of fiscal 1994 in response to a
rate decision received from the DPUC. Costs related to computer rentals and
maintenance are lower because of renegotiated agreements. Total labor costs
are lower in fiscal 1995, reflecting the impact of an overall ten percent
reduction in the nonunion workforce accomplished during the fourth quarter
of fiscal 1994 through a voluntary early retirement program (VERO) and
attrition. This more than offset the impact of higher employee benefits and
pensions expenses and higher union wages resulting from newly negotiated
labor contracts.
Other Income (Deductions)
Higher interest and dividend income from investments of temporary cash
balances and reduced promotional advertising expenses are the primary
reasons for benefits to earnings from other income in the three, nine and
twelve months ended June, 1995, compared to 1994. Lower income from
merchandise sales and increases in other expenses have somewhat offset the
impact of these benefits in all periods.
Interest and Debt Expense
Higher interest and debt expense recorded throughout fiscal 1995, as
compared to 1994, is the result of additional long-term debt interest,
recognizing the effect of additional issues of medium term notes during the
last quarter of fiscal 1994. In contrast, many factors reduced the need for
short-term borrowings during this time, including lower working capital
requirements due to the warmer weather, refunds received from gas pipeline
companies and retained by the Company to offset future FERC Order 636
transition costs and the proceeds from fourth quarter, 1994 issues of medium
term notes and the first quarter, 1995 issue of Common Stock.
Earnings from Nonregulated Operations
Nonregulated operations contributed earnings of $.03, $.17 and $.31 per
share, respectively, for the quarter, year-to-date and twelve months ended
June 30, 1995, compared to $.05, $.21 and $.34 per share for the three, nine
and twelve months ended June 30, 1994. The reduced contribution to earnings
throughout fiscal 1995 reflects the combined impacts of lower steam and
chilled water customer load, lower winter steam sales, because of warmer
winter weather, and lower spring, 1995 chilled water sales from cooler
spring weather. These are partially offset by higher hot water sales
because of additional customer load and the benefits of lower fuel costs for
the production of steam.
MATERIAL CHANGES IN FINANCIAL CONDITION
Both investing and financing activities were funded by cash flows from
operations during all periods in fiscal 1995, and a significantly higher
level of cash and cash equivalents is on hand at June 30, 1995 when compared
to 1994. Off-season purchases of gas inventories, timed annually in
anticipation of coming needs and expected gas prices, have been postponed to
the fourth quarter in fiscal 1995, delaying this seasonal third quarter use
of working capital in 1995. The cost of gas has also been lower in the
third quarter of fiscal 1995. The proceeds from the October, 1994 issue of
Common Stock were used by the regulated operations to reduce short-term debt
and for working capital in fiscal 1995. These needs would otherwise have
been met by cash from operations or by additional short-term financing. The
warmer winter weather in fiscal 1995 reduced sales and the corresponding
purchased gas requirements, easing this need for cash during the nine and
twelve months ended periods. The Company has received refunds from gas
pipelines during the first six months of fiscal 1995. A portion of these
were retained by the Company to offset FERC 636 transition costs, as allowed
by the DPUC. The remainder are being returned to customers as reductions to
their bills through purchased gas adjustment provisions.
Cash flows from operations were also sufficient to fund both investing and
financing activities during the nine months ended June, 1994. In the three
and twelve months ended June, 1994 cash flows from operations together with
financing activities funded construction and other investing activities. In
fiscal 1994 cash flows were impacted by higher operating margins, the timing
and receipt of cash payments from customers and the amount and timing of
payments of invoices for volumes of gas purchased to serve customers.
Investing Activities
During the third quarter of fiscal 1995 the Company positioned itself to
expand its existing energy management services activities and to build on
its existing energy marketing expertise by establishing two wholly-owned
nonregulated subsidiaries of ENI, ENServe Corporation and ENI Gas Services,
Inc. Although the overall invested amounts, either individually or
together, are not material, these investments make it possible for the
Company to participate in expanded geographic areas and in additional
nonregulated energy markets.
ENI's energy services operating group was formed in 1994 to gather together
ENI's energy system operating and maintenance services offered to district
heating and cooling customers. In the third quarter of 1995 this group was
organized into a new Company, ENServe Corporation. ENServe has purchased
the assets of a Connecticut residential and light commercial heating and air
conditioning contractor and now offers residential, commercial and
industrial energy management services throughout Connecticut.
In April, 1995 the Board of Directors approved the Company's 33 1/3%
participation in KBC Energy Services of New England (KBC), a joint venture
partnership with Bay State Gas Company and Koch Gas Services Company. The
Company has formed ENI Gas Services, Inc. to own its interest in this
partnership, and the Board of Directors has authorized a capital
contribution of up to $1,700. KBC plans to market natural gas supplies and
energy management related services on an unregulated basis to commercial and
industrial end users, primarily in New England. KBC is expected to begin
operations in the coming quarter.
Regulatory Matters
In April, 1995 the Company filed a notice of intent to seek a potential rate
increase of 12.8%, or approximately $33,500, with the DPUC. The Company has
also requested the recovery of certain costs which are currently deferred,
pending the outcome of these proceedings, as directed by the DPUC in its
December, 1993 rate decision. These items include energy assistance costs,
postretirement benefits other than pensions, economic development expenses
and conservation program costs above levels allowed in current rates.
Although management cannot predict the outcome of these proceedings, a
decision is expected to be received and potential new rates to be in effect
during the first quarter of fiscal 1996.
On June 30, 1995 the DPUC issued a decision related to a reopened docket
having to do with regulated propane service provided by natural gas
utilities (LDC) in Connecticut. The purpose of this proceeding was to end
LDCs' rate subsidies to certain propane customers. The Company has 377
customers that are affected by this decision. These customers have been
served under the Company's Gas Roots program since the late 1960's and early
1970's, buying propane at natural gas prices pending the extension of
natural gas distribution mains to their areas.
As a result of this DPUC decision these customers will be given the option
to become natural gas customers, purchase propane from other vendors,
convert to alternate fuels or purchase propane from the Company at natural
gas rates. The Company is obligated to expend up to two thousand dollars
per customer, along with certain other costs related to equipment on
customers' premises, to facilitate the execution of this DPUC decision.
These costs will not be passed on to ratepayers. The Company is in the
process of determining the total estimated expenditures related to this
decision. The implementation of the requirements of this decision is not
expected to have a material adverse effect on the Company's financial
condition or results of operations.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
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(a) Exhibits
10(lxxi) Service Agreement #86006 (Rate Schedule AFT-1), dated
September 1, 1994, between the Company and Algonquin Gas
Transmission Company
10(lxxii) Service Agreement #93005 (Rate Schedule AFT-1), dated
September 1, 1994, between the Company and Algonquin Gas
Transmission Company
10(lxxiii) Service Agreement #9B103 (Rate Schedule AFT-1), dated
September 1, 1994, between the Company and Algonquin Gas
Transmission Company
10(lxxiv) Service Agreement #9W005 (Rate Schedule AFT-1), dated
September 1, 1994, between the Company and Algonquin Gas
Transmission Company
10(lxxv) KBC Energy Services Partnership Agreement, dated June 19,
1995, By and Among Bay State Energy Enterprises, Inc., ENI
Gas Services, Inc., and Koch Energy Alliance Company
27 Financial Data Schedule
99(i) Exhibit Index
(b) No reports on Form 8-K were filed during the quarter ending June 30,
1995.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CONNECTICUT NATURAL GAS CORPORATION
Date 08/01/95 By: S/ Andrew H. Johnson
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(Andrew H. Johnson)
Treasurer and Chief Accounting Officer
(On behalf of the registrant and as
Chief Accounting Officer)