Filed by: NiSource Inc.
Pursuant to Rule 425 under the Securities Act of 1933
Subject Company: Columbia Energy Group
Registration Statement File No: 333-33896
On July 13, 2000, NiSource distributed the "New Direction"
newsletter to its employees. The newsletter included news and
information on NiSource's merger with Columbia. The text of the
newsletter is set forth below.
TEXT OF "NEW DIRECTION" EMPLOYEE NEWSLETTER
JULY 13, 2000
July 13, 2000 Vol. 1 No. 6
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NEW DIRECTION [LOGO]
* * * * * * * * * * * * * * * * * * * * * * *
* INSIDE THIS ISSUE *
* *
* - A Look at the Customer *
* Service Team Pg. 2 *
* *
* - Kentucky, Maine and Indiana *
* Commissions OK Merger Pg. 3 *
* *
* * * * * * * * * * * * * * * * * * * * * * *
PROJECT COMPASS REPORTS ON PHASE ONE
Five Project Compass teams, comprised of more than 90 employees from
21 Columbia and NiSource companies during the last five weeks, have
identified more than 60 opportunities for operating the combined
company. These high-level opportunities stretch far beyond the
approximately $100 million in cost savings that was targeted during
preliminary due diligence, leveraging the continuous improvement
efforts already underway at Columbia and NiSource companies.
Preserving quality customer service and our commitment to
environmental stewardship, promoting customer choice and ensuring the
safety and reliability of the operating systems were the overriding
principles of the teams as they went about their work.
On June 29, leaders from each of the teams presented their ideas to
Integration Committee members Steve Adik, Mike O'Donnell, Jim Abcouwer
NEW DIRECTION Vol. 1 No. 6 PAGE 2
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and Dennis McFarland. Project Compass leaders Mark Wyckoff and Steve
Smith led the discussion. Also attending were distribution and
transmission leaders Cathy Abbott, Pat Mulchay, Bob Skaggs and Jeff
Yundt.
"The teams have done a terrific job in a very short time -- plowing
through reams of data from NiSource and Columbia companies to create a
baseline of budgets, staffing and similarities and differences in
operations," Adik said. "Everyone around the table appreciated the
teams' work and the quality of the opportunities they identified."
As Phase Two begins, these ideas will be more thoroughly developed and
the interdependencies of the various opportunities across the
organizations will be explored in greater detail. Phase Two kicks off
this week and will last approximately eight weeks, or through Sept. 4.
Additional representatives from both companies will be joining Project
Compass. Teams will be working in various locations and potentially
visiting multiple locations to collect data and view operations.
NEALE ANNOUNCES TIMELINE FOR NEW NISOURCE
NiSource CEO Gary Neale said that the first round of leaders for the
new NiSource will be announced by Aug. 1. Neale expects to provide a
high-level view of the organization when he names his direct reports
for the new company. "This is my highest priority," Neale stated.
"Over the next few weeks, I will continue to meet with all the
candidates and refine the organizational structure and individual
roles."
These announcements are the first step in meeting a key objective of
Project Compass' overall success -- that all employees will know their
status, job, boss and role in achieving company strategy by Nov. 1.
2 + 2 = 5!
A LOOK AT THE CUSTOMER SERVICE/SALES AND MARKETING TEAM
"Our team's goal is to ensure that we take advantage of synergies and
leverage opportunities by offering products and services to customers
that complement the energy commodity," explained NiSource's Peg
Landini. "The greatest opportunity we've identified is to leverage the
new NiSource's extensive customer base by capitalizing on the strength
of the local brands."
"We have identified and are currently pursuing good opportunities and
are convinced that our combined capabilities are greater than the sum
of their individual parts," said Columbia's Frank Marx. Landini's and
Marx's comments were made during an interview conducted for NEW
NEW DIRECTION Vol. 1 No. 6 PAGE 3
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DIRECTION with leaders of the Customer Service/Sales and Marketing
Team for Project Compass.
A True Team Effort
------------------
Leveraging the strong asset base of 3.2 million gas-distribution
customers is the focal point for this team of 16 people from across
the NiSource and Columbia companies. The team is organized into three
subteams: Customer Service; Sales & Marketing; and Revenue Cycle.
Although they are working in subteams, the team members recognized
early on that they needed to work as a coordinated group, since their
areas overlapped. To ensure that the process moved forward in a
complementary fashion, the team agreed to formally meet twice each
week. Each Monday and Thursday, the group meets to discuss the team's
progress and to plan next steps.
In addition, to develop a foundation of teamwork and cooperation, the
team set aside one evening per week for a social event. "The members
of the team really checked their egos at the door. Getting to know
each other as individuals has helped a lot. It's been great,"
concluded Marx.
Customers Drive the Opportunities
---------------------------------
"In the next five to 10 years, the energy marketplace will be
transformed dramatically - this is a key time," said Marx. "With the
scope of the new NiSource, we should be extremely well positioned to
take full advantage of opportunities in the marketplace, especially
distributed generation."
According to Landini, each subteam is identifying opportunities not
only to operate efficiently in the way the new NiSource provides
service to our customers, but also to provide customers with higher
levels of service and more choices. The team views technology as an
enabler, rather than as an end in and of itself. "We need to
understand the customers' needs and preferences and to be able to
serve them through the most cost-effective delivery channel by which
they want to be served. Technology is critical to achieving those
goals," Landini said.
NEW DIRECTION Vol. 1 No. 6 PAGE 4
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One Size Doesn't Fit All
------------------------
When asked whether a one-size-fits-all approach would be recommended
by the team, the leaders were quick to answer, "no." In fact, the
opposite is true. The team believes that customization will need to
occur based on local markets, regulatory factors and the customers'
own preferences.
Choice will continue to be emphasized and will fundamentally lay the
groundwork for the new NiSource's ability to positively affect
customers. Choice gives customers flexibility to make energy decisions
and provides the company with the opportunity to offer a new slate of
products and services.
What's Next?
------------
"In Phase One we identified opportunities that will be further
explored during Phase Two," answered Landini. "We have a solid set of
ideas, but no substantive decisions have been made at this point."
During Phase Two, which begins this week, the teams will add clarity
to the high-level concepts and design, getting into the details so
that the opportunities to provide more and better service to our
customers can become reality.
The chart below provides an overview of each subteam's work during
Phase One:
NEW DIRECTION Vol. 1 No. 6 PAGE 5
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CUSTOMER SERVICE SALES AND MARKETING REVENUE CYCLE
---------------- ------------------- -------------
SCOPE * Call center operations * Sales organization * Meter reading
* Walk-in offices * Marketing organization * Bill printing/distribution
* Economic development * Remittance processing
* Product and service offerings * Credit and collections
* Product delivery
PROCESS * Reviewed current as-is * Reviewed current as-is * Reviewed current as-is
organization organization organization
* Talked with subject-matter * Talked with subject-matter * Talked with subject-matter
experts within and outside the experts within and outside the experts within and outside
utility industry including best utility industry including best the utility industry
practice discussions with call practice discussions with Sales including best practice
centers from a global credit Executives Council discussions with a regional
card company and a financial Bell operating company on
services provider bill generation and
printing
SIMILARITIES * Technology used * Focus on customers * Use much of the same
* Types of issues call centers * Promote choice equipment
deal with * Emphasis on providing/selling * Use same software to
complementary products and generate bill form
services for mass markets * Use same outsource vendor
for some functions
including Checkfree for
electronic bill payment and
presentation, Equifax for
credit scoring and First
Data Corporation for
payment processing
DIFFERENCES * Different billing systems * At NiSource, LDCs place * Some software applications
* Availability of walk-in emphasis on energy-related * Credit and collections
services products and services while at practices
Columbia that focus comes from
non-regulated subsidiaries
* Columbia LDCs focus sales
efforts on throughput
OPPORTUNITIES * More consistent approach to how * Distributed generation and * Leverage size and buying
we deliver service to our other energy-related products power to negotiate price
customers and services with vendors
* Integrated voice response * Sharing knowledge about the * Reduce bad-debt expense
technology and Web-based customer and how to approach
solutions customers to provide them with
what they want
* Combined marketing power and
purchasing strength
NEW DIRECTION Vol. 1 No. 6 PAGE 6
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KENTUCKY, MAINE AND INDIANA COMMISSIONS OK NISOURCE/COLUMBIA MERGER
Regulatory agencies in Kentucky, Maine and Indiana have completed the
necessary actions on the planned merger of the companies. Their
actions bring the total to seven of nine states that have completed
necessary actions on the merger.
The Kentucky Public Service Commission (KPSC) approved the merger on
June 30, subject to the consent of the merging companies and Columbia
Gas of Kentucky (CKY) to certain commitments. Those consents were
submitted to the KPSC July 6. KPSC stated that, as approved, the
merger will have no impact on the base rates for CKY customers, nor
will it create additional costs to them. CKY serves 141,000 natural
gas customers, primarily in central Kentucky.
Terms of the Kentucky approval include:
* maintaining the headquarters of CKY in Lexington;
* continuing economic development efforts and community
contributions at their present levels; and
* tracking merger savings for consideration in CKY's next rate
case, which is to be filed within 18 months of the completion of
the merger.
The Maine Public Utilities Commission (MPUC) approved the merger on
June 30, subject to certain financial and operating conditions
regarding Northern Utilities, Inc., a natural gas distribution unit of
NiSource subsidiary Bay State Gas Company. Northern Utilities serves
24,000 customers in southern Maine communities.
On June 23, the Indiana Utility Regulatory Commission (IURC) stated in
a letter to the U.S. Securities and Exchange Commission (SEC) that the
companies' proposed merger will not alter the IURC's jurisdiction over
the activities of Northern Indiana Public Service Company (NIPSCO).
The IURC said its opinion is based on the understanding that NiSource
will operate NIPSCO as a separate subsidiary. A combination electric
and natural gas distribution subsidiary of NiSource, NIPSCO serves
more than 1 million energy customers in the northern third of Indiana.
Final state-regulatory actions in the two remaining states,
Pennsylvania and Virginia, are expected soon.
NEW DIRECTION Vol. 1 No. 6 PAGE 7
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REGULATORY PROCESS
STATE COMPLETED
-------------------- ------------
Indiana X
Kentucky X
Maine X
Maryland X
Massachusetts X
New Hampshire X
Ohio X
Pennsylvania
Virginia
FERC (1)
SEC (2)
DOJ/FTC (3)
(1) Federal Energy Regulatory Commission
(2) Securities and Exchange Commission
(3) Department of Justice/Federal Trade Commission
The following is included to conform with federal regulations:
This publication contains certain forward-looking statements
within the meaning of the federal securities laws; these
forward-looking statements are subject to various risks and
uncertainties. The factors that could cause actual results to
differ materially from the projections, forecasts, estimates and
expectations discussed herein may include factors that are beyond
the companies' ability to control or estimate precisely, such as
estimates of future market conditions, the behavior of other
market participants and the actions of the federal and state
regulators. Other factors include, but are not limited to,
actions in the financial markets, weather conditions, economic
conditions in the two companies' service territories,
fluctuations in energy-related commodity prices, conversion
activity, other marketing efforts and other uncertainties. Other
risk factors are detailed from time to time in the two companies'
SEC reports. Readers are cautioned not to place undue reliance
on these forward-looking statements, which speak only as of the
date of this release. The companies do not undertake any
NEW DIRECTION Vol. 1 No. 6 PAGE 8
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obligation to publicly release any revisions to these
forward-looking statements to reflect events or circumstances
after the date of these stories.
In addition to other documents filed with the Securities and
Exchange Commission by the two companies, NiSource and the new
holding company have filed a registration statement, which
contains a joint proxy statement/prospectus for NiSource and
Columbia Energy. The final joint proxy statement/prospectus,
dated April 24, 2000, is available and has been distributed to
the companies' shareholders. Investors and security holders are
urged to read the joint proxy statement/prospectus and any other
relevant documents filed with the SEC when they become available
because they will contain important information. Investors and
security holders can receive the joint proxy statement/prospectus
and other documents free of charge at the SEC's web site,
www.sec.gov, from NiSource Investor Relations at 801 East 86th
Avenue, Merrillville, Indiana 46410 or at its web site,
www.nisource.com, or from Columbia Investor Relations at 13880
Dulles Corner Lane, Herndon, Virginia 20171 or at its web site,
www.columbiaenergygroup.com.
____________________
Questions, Comments?
New Direction is published by Project Compass for all
NiSource and Columbia employees. We welcome your comments
and questions.
Give us a call at 877-236-2242 or e-mail us at
newdirection@nisource.com.