HomeMy WebLinkAbout2007-033 Cascade Natural Gas Merger with MDU Resources Group (Franchise) -
ORDINANCE NO 2007 -33
AN ORDINANCE relating to the non - exclusive franchise granted to Cascade
Natural Gas Corporation under City of Yakima Ordinance
No 2005 -51 to construct, operate, and maintain a natural
gas transmission /distribution system /facility(ies) in the City
of Yakima, and providing consent under section 2 13 of that
Ordinance to a merger transaction whereby MDU Resources
Group, Inc. would acquire all of the outstanding stock of
Cascade Natural Gas Corporation, and Cascade Natural Gas
Corporation would become a wholly owned subsidiary of
MDU Resources Group, Inc.
WHEREAS, Cascade Natural Gas Corporation ( "CNG ") is duly authorized to
construct, operate, and maintain a natural gas transmission /distribution
system /facility(ies) in the City of Yakima (the "City "), Washington, for a term of ten
years, pursuant to the terms and conditions of a natural gas system franchise (the
"franchise ") as granted by the City under City of Yakima Ordinance No 2005 -51, and
WHEREAS, CNG has entered into an Agreement and Plan of Merger (the
"merger transaction ") with MDU Resources Group, Inc. ( "MDU Resources "), under which
upon closing of the merger transaction, MDU Resources would acquire all of the
outstanding common stock of Cascade Natural Gas Corporation, and Cascade Natural
Gas Corporation would thereafter become a wholly owned subsidiary of MDU
Resources which will continue to operate as Cascade Natural Gas Corporation, with its
operating headquarters in the State of Washington, and
WHEREAS, as provided for in Section 2 13 of Ordinance No 2005 -51, Cascade
Natural Gas Corporation must request and be given consent by the City if there is any
such change in control, and
WHEREAS, in accordance with section 2.13 of Ordinance No 2005 -51,
Cascade Natural Gas Corporation has requested written consent by the City to the
merger transaction, to the extent that such consent is required under the franchise, in
accordance with the terms, conditions, and requirements of the franchise, and a
consideration of the draft ordinance was on the agenda at the City Council business
meeting on June 19, 2007, and
WHEREAS, closing of the merger transaction is subject to regulatory approval
by the Washington Utilities and Transportation Commission (WUTC), and the
application of the merger transaction was filed by MDU Resources and Cascade Natural
Gas Corporation with the WUTC on November 13, 2006, entitled "In the Matter of the
Joint Application of MDU Resources Group, Inc. and Cascade Natural Gas Corporation
For an Order Authorizing Proposed Transaction ", Docket UG- 061721, and the WUTC
approved the proposed merger transaction in Order 06 on June 27, 2007, and
WHEREAS, the City has reviewed the franchise consent application letter and
accompanying materials and has reviewed the approval of the proposed merger
transaction by the Washington Utilities and Transportation Commission that was entered
in Order 06 on June 27, 2007, and has concluded that the City's consent to the merger
transaction should be given, now, therefore,
BE IT ORDAINED BY THE CITY OF YAKIMA.
SECTION 1 The City hereby consents to and approves the merger transaction
between Cascade Natural Gas Corporation and MDU Resources, to the extent such
consent is required by the terms and conditions of the franchise and applicable law, and
the continuation by Cascade Natural Gas Corporation of all obligations and liabilities
under City of Yakima Ordinance No 2005 -51, known and unknown, subject to
applicable law
SECTION 2 The franchise, as granted by Ordinance No 2005 -51, shall be
amended upon the effective date of this ordinance, as set forth in section 4 of this
ordinance Any terms of City of Yakima Ordinance No 2005 -51 not expressly amended
by this ordinance shall remain in full force and effect.
-2-
e
SECTION 3 Upon the date this ordinance becomes effective, this ordinance
shall have the force of a continuing agreement with Cascade Natural Gas Corporation
and shall not be amended, changed or otherwise altered without the consent of the City
and Cascade Natural Gas Corporation
SECTION 4 This ordinance shall be in full force and effect thirty (30) days after
its passage, approval, and publication as provided by law and by the City Charter
PASSED BY THE CITY COUNCIL, signed and approved this 3rd day of July, 2007
CITY OF YAKIMA CASC A : NATURAL GAS
____...........
CO" ORLTIS
,,,
David Edler, Mayo Its - ' , se ∎2 - Ffr SA- '
Attest:
K/4;'
i t Clerk t • ' 0 E4 r ,i
•ma ° *�.
z
s tiI AJ GI. O
Publication Date 7/6/07 -..,---
Effective Date 8/5/07
State of Washington )
) ss
County of K1 n1( )
1 hereby certify that I know or have satisfactory evidence that
'e l E . MP_wfecc t-rAn is the person who appeared before me, and
said person acknowledged that he /she signed this instrument, and on oath stated that
he /she was authorized to execute the instrument on behalf of Cascade Natural Gas
Corporation, and acknowledged it as the Se 4.1c o r ' t re c tn( of
Cascade Natural Gas Corporation, to be the free and voluntary act of such party for the
uses and purposes mentioned in this instrument.
Dated th 4 day of July, 2007
,n us,, ham, C,
• . Print Name '? rnav C CabroJeS
N•••••••• NOTARY PUBLIC in an &4 or the State of
;.
Washington, residing at Kt N6,
e 014VA My commission expires 0C-7 6, 2010
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[Service Date June 2 2007
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[s 7, 20071
BEFORE THE WASHINGTON STATE
UTILITIES AND TRANSPORTATION COMMISSION
In the Matter of the Joint Application of ) DOCKET UG- 061721
)
MDU RESOURCES GROUP, INC )
AND CASCADE NATURAL GAS ) ORDER 06
CORPORATION )
)
For an Order Authonzing Proposed ) APPROVING AND ADOPTING
Transaction ) STIPULATION, AUTHORIZING
) TRANSACTION
)
Synopsis The Washington Utilities and Transportation Commission approves and
adopts an unopposed Stipulation that proposes by its terms to resolve all issues in this
proceeding The Stipulation includes 36 commitments from the applicants, including
ring fencing provisions to maintain Cascade Natural Gas Corporation 's financial
independence from its new parent corporation and other corporate affiliates The
commitments preserve the Commission's access to information necessary to its
regulatory responsibilities, protect service quality, protect consumers from rate
impacts and preserve low - income programs Taken together, the commitments
address the Commission's concerns in connection with MDU Resources Group, Inc's
proposed acquisition of Cascade Natural Gas Corporation. The Commission, by this
Order, authorizes the proposed transaction.
SUMMARY
PROCEEDINGS• Cascade Natural Gas Corporation (Cascade) and MDU Resources
Group, Inc (MDU Resources) filed a Joint application on November 13, 2006, for an
order authorizing MDU Resources' acquisition of all outstanding common stock of
Cascade The Washington Utilities and Transportation Commission (Commission)
convened a preheanng conference Olympia, Washington on December 6, 2006,
before Administrative Law Judge Dennis J Moss. The Commission, among other
things, adopted an agreed schedule upon which to consider the Joint application.
•
DOCKET UG- 061721 PAGE 2 'V
ORDER 06
2 MDU Resources, Cascade, the Commission's regulatory staff (Commission Staff or
Staff), the Public Counsel Section of the Washington Office of the Attorney General
(Public Counsel), Northwest Industnal Gas Users (NWIGU), the Energy Project, and
Boise Cascade LLC (Boise Cascade) filed a Stipulation on May 9, 2007, and
requested that the Commission approve and adopt its terms in full resolution of the
issues in this proceeding.'
3 PARTY REPRESENTATIVES: James M. Van Nostrand and Laurence Reichman,
Perkins Cole LLP, Portland, Oregon, represent MDU Resources and Cascade
Melinda J Davison, Matthew Perkins and Sarah Yasutake, Portland, Oregon,
represent Weyerhaeuser, Boise Cascade and Longview Fibre John A. Cameron,
Davis Wright Tremaine LLP, Portland, Oregon, represents Cost Management
Services, Inc Edward A. Finklea, Chad M. Stokes and Lindsay R. Kandra, Cable
Huston Benedict Haagensen & Lloyd LLP, Portland, Oregon, represent NWIGU
Ron Roseman, attorney, Seattle, Washington, represents the Energy Project. Simon
ffitch, Assistant Attorney General, Seattle, Washington, represents Public Counsel.
Gregory Trautman, Assistant Attorney General, Olympia, Washington, represents
Commission Staff.
4 COMMISSION DETERMINATIONS• The Commission finds its adoption and
approval of the parties' Stipulation will establish conditions that ensure the proposed
transaction is consistent with the public interest. The Commission concludes it
should approve the Revised Application filed by MDU Resources and Cascade on
March 23, 2007, and authorize MDU Resources' acquisition of Cascade pursuant to
the terms of the Revised Application, subject to the requirements included in the
Stipulation.
The remaining parties to this proceeding, Cost Management Services, Inc., Weyerhaeuser Company and
Longview Fibre, are not signatories to, but do not oppose the Stipulation.
2 In formal proceedings, such as this case, the Commission's regulatory staff functions as an independent
party with the same nghts, pnvileges, and responsibilities as any other party to the proceeding. There is an
"ex parte wall" separating the Commissioners, the presiding Administrative Law Judge, and the
Commissioners' policy and accounting advisors from all parties, including Staff. RCW 34 05 455
DOCKET UG-061721 PAGE 3
ORDER 06
MEMORANDUM
I. Background and Procedural History
5 MDU Resources and Cascade (Applicants) initiated Docket UG- 061721 by filing on
November 13, 2006, their joint application for an order authonzmg MDU Resources'
acquisition of all outstanding common stock of Cascade. The parties held a technical
workshop on February 20, 2007, followed by a settlement conference on March 5,
2007 On March 23, 2007, Applicants submitted a Revised Application to
incorporate modifications to the structure of the transaction, as agreed during
settlement discussions. The parties held additional settlement conferences and
reached agreement on the principal terms of a full settlement on Apnl 20, 2007
6 On May 9, 2007, MDU Resources, Cascade, Staff, Public Counsel, NWIGU, the
Energy Project, and Boise Cascade, filed their Stipulation. They request that the
Commission approve and adopt the Stipulation as a full resolution of all issues
pending in this proceeding. By a letter filed on May 21, 2007, Weyerhaeuser stated
that it does not intend to sign the Stipulation or become a party to it, but does not
oppose its adoption. The remaining intervenors, CMS and Longview Fibre, stated no
opposition to the Commission's adoption of the Stipulation.
7 The parties filed their narrative in support of the Stipulation on May 11, 2007 The
narrative describes the proposed transaction in detail. According to the parties, the
transaction will be completed in substantially the following manner
a. The transaction will be effected pursuant to a reverse triangular
merger whereby MDU Resources will acquire all of the outstanding
common stock of Cascade for a purchase price of $26 50 per common
share or approximately $305 million in cash through Merger Sub, a
subsidiary of MDU Resources formed specifically to effectuate the
acquisition. At the effective time of the merger, Merger Sub will
cease to exist.
b The corporate organizational structure that MDU Resources
anticipates after closing of the acquisition is set forth in the Post
Acquisition Cascade Organizational Chart included as Attachment 1
•
DOCKET UG- 061721 PAGE 4 0
ORDER 06
to the transaction commitments. Without regard to the possible use
of short term bndge financing (which if used would be repaid at the
time permanent financing is put into place), the following steps
describe the sequence of events MDU Resources anticipates in
establishing Cascade as "nng fenced" in the support of a Non -
Consolidation Opinion which Cascade commits to obtain under one
of the commitments
(i) MDU Resources will either issue new common equity or
utilize other available capital resources to fund approximately
$220 million for the purchase of the existing Cascade stock.
(ii) Debtco, as identified in Attachment 1 and the Stipulation,
will obtain approximately $85 million of additional funds
through debt financing to complete the funding for the
purchase of the Cascade stock. Approximately $165 million of
existing debt at Cascade will remain at Cascade and be
unaffected by the merger
(iii) Approximately $305 million will be transferred to a
paying agent who will pay Cascade's existing shareholders
MDU Resources will make capital contributions to Debtco
Debtco will make capital contributions to Equico, as identified
in Attachment 1 to Appendix A of the Stipulation, such that,
upon the completion of the transaction, Equico will then own
100% of the stock of Cascade and Debtco will own 100% of
the stock of Equico
(iv) Equico's stock will be the asset supporting Debtco's loan
of approximately $85 million. Equico is expected to be
established as a bankruptcy- remote special purpose entity, and
is not expected to have debt.
(v) At least one director of Equico will be an Independent
Director, as described in one of the commitments
c In summary, MDU Resources plans to cause all of the common stock
of Cascade to be owned by Equico, a new Delaware limited liability
company and wholly -owned subsidiary of Debtco, also a Delaware
limited liability company whose stock will be owned by MDU
3 The transaction commitments are included as Appendix A to the Stipulation filed with the Commission on
May 9, 2007
DOCKET LTG-061721 PAGE 5
ORDER 06
Resources. This structure and transactional flow result in the assets,
habihties and equity of Cascade remaining as presently recorded.
8 The Commission conducted a heanng to consider the Stipulation on June 18, 2007
Counsel for MDU Resources and Cascade, and Bruce T Imsdahl, President and CEO
of Montana - Dakota Utilities Co (Montana- Dakota), a division of MDU Resources,
made opening statements. The parties made available to the Commission for
questioning a panel of witnesses including Dave Goodin, who will be Cascade's new
president once the transaction is completed, John F Renner, Executive Vice
President, Finance and Chief Accounting Officer for Montana - Dakota, Jon T Stoltz,
Senior Vice President, Cascade Natural Gas, Ken Elgin for Commission Staff; Steven
Johnson and Glenn Watkins for Public Counsel, and Paula Pyron for NWIGU
II. Settlement Agreement
S 9 The parties recommend under the terms of the Stipulation that the Commission issue
an order approving the transaction, imposing as conditions the 36 commitments set
forth in Appendix A to the Stipulation. The Stipulation, including Appendix A, is
attached to and made a part of this Order by this reference Applicants' commitments
include proposed conditions in the following areas
• Access to relevant information.
• Rate credits and other rate issues.
• Cascade's financial stability
• Ring - fencing provisions.
• Cost allocation and cross - subsidization issues
• Low - income programs
• Quality of service measures
• Commitment implementation issues.
10 The settling parties, arguing that the Commission should find the Stipulation to be in
the public interest, focus their joint testimony on the significant financial protections,
• particularly the nng- fencing provisions, the financial incentive of a $672,000 per year
rate credit commitment for five years, and insulation of customers from transactional
DOCKET UG- 061721 PAGE 6 0
ORDER 06
costs and increased operating costs attributable to the merger Public Counsel adds
service quality reporting commitments to its focus and the Energy Project emphasizes
the several commitments to continue low income assistance and weathenzation
programs.
11 The settlement includes a "most favored state" clause to ensure Washington could
receive the benefit of any additional commitments the companies make in Oregon
where regulatory approval is also required!'
III. Discussion and Decisions
12 The standard under Chapter 80 12 RCW and WAC 480 - 143 -170 for approval of
transactions such as the one proposed here is that the Commission will deny an
application if it determines "the proposed transaction is not consistent with the public
interest. i The Commission described this as a "no harm" standard in its Third
Supplemental Order in Docket UE- 981627, the 1999 proceeding in which the
Commission approved the merger between PacifiCorp and ScottishPower PLC
(ScottishPower case)
13 As we observed in the ScottishPower case, two threshold cntena in considering
whether a merger of this type meets the no harm test are the acquiring company's
financial and managerial fitness to take over the acquired utility's operations,
including its ability to run those operations safely and reliably Mr Renner,
responding to questions from the Bench, stated that MDU Resources, while acquiring
Cascade, is simultaneously involved in other transactions that will result in a cash
infusion sufficient to fund the acquisition in a manner that will be perceived by
analysts as financially neutral. Thus, from the perspective of the financial markets,
the transaction should cause no change in the corporate family's financial condition.
MDU Resources' prefiled testimony includes significant evidence of the company's
financial fitness and also establishes its managenal fitness to run Cascade's
operations safely and reliably 6
4 The Public Utility Commission of Oregon approved a stipulation similar in its terms to the Stipulation
pending before us and authorized the transaction on June 5, 2007, in Order 07 -221
WAC 480 -143 -170
6 Exhibit 5 (Imsdahl Direct) at 5 4 — 8 7, 9 — 20 (managerial fitness), Exhibit 7 (Renner Direct) at 5
— 9:3 (financial fitness); 9 — 11.33, 13 8 — 16, 17 16 — 19:22 (managenal fitness).
• _
DOCKET UG-061721 PAGE 7
ORDER 06
14 The 36 commitments that are part of the Stipulation ensure that the Commission will
have access to information necessary to continue to regulate Cascade. Cascade's
financial statements and other financial books and records will be maintained
separately from the books and records of MDU Resources Furthermore, Cascade
will maintain its own credit rating for the purpose of issuing debt and preferred equity
separate from MDU Resources and its affiliates. Commitment 3 addresses the access
to be provided to books of account, as well as all documents, data, and records of
their affihated interests, which pertain to transactions between Cascade and its
affiliated interests or which are otherwise reasonably calculated to lead to
discoverable information regarding Cascade. The Stipulation confirms that, as
provided under Washington law or regulation, the Commission may audit the
accounting records of MDU Resources and its subsidiaries or divisions that are the
basis for charges to Cascade Applicants agree to notify the Commission in the event
of certain acquisitions by MDU Resources. The Commission will be kept appnsed of
110 written information provided by and to credit rating agencies pertaining to Cascade
Commitment 26 provides for access to corporate minutes that provide relevant
information regarding Cascade's business and associated nsk analysis. Cascade and
MDU Resources agree to provide a copy of any report resulting from an audit or
review undertaken by any regulatory body pertaining to cost allocations and affiliated
transactions involving Cascade and MDU Resources' regulated operations
15 The commitments provide for the measuring and reporting of certain service quality
information to monitor the quality of service provided by Cascade after the
transaction. To ensure service quality, the Stipulation includes measunng and
reporting requirements in Commitment 22 for calendar years 2008 and 2009 These
reports will be provided to the Commission, the parties to this docket and made
available to the public within 90 days following the end of the calendar year The
reports will include significant detail concerning customer complaints and Cascade's
responsiveness to customers in the ordinary course of business. This oversight
program will be reviewed after December 31, 2009, and the Commission will receive
a report recommending whether to continue the program in its proposed, or another,
form.
r
DOCKET UG- 061721 PAGE 8 O
ORDER 06
16 The commitments address cost allocation and cross - subsidization issues to ensure that
Cascade's Washington customers will bear only those costs associated with providing
retail gas distribution services in Washington. Cascade commits to exclude all costs
of the transaction, including acquisition premium and integration costs, from
ratemakmg. Further, if there are costs that Cascade incurs for improved efficiencies
which are proposed for rate case consideration, Cascade commits to provide to the
Commission's satisfaction a demonstration of a net benefit to customers These
commitments, in conjunction with other commitments that cap allocated costs and
provide direct credits to customers, provide adequate assurance that there is no
financial harm to customers from the transaction.
17 The commitments contain extensive ring - fencing provisions that will protect
Cascade's customers from any adverse impacts associated with Cascade's ownership
by MDU Resources, and include other financial protections such as limitations on
Cascade's ability to declare dividends The ring- fencing provisions will protect
ratepayers from future financial risk, including the risk of MDU Resources'
bankruptcy, upon which subject Cascade expressly commits to obtain a non -
consolidation opinion within three months of closing the transaction. Other
provisions protect ratepayers from the effects of affiliated interest transactions,
require MDU Resources and Cascade to keep separate books, records, and assets, and
require that MDU Resources and Cascade provide the Commission and Staff with
access to these financial records so the Commission can continue to regulate
effectively
18 Apart from protecting against any adverse impacts associated with the transaction, the
commitments also provide tangible, quantifiable benefits to Washington customers in
the form of rate credits. Under Commitment 11, Cascade will provide $672,000 in
annual rate credits that cannot be offset for three years, and which thereafter may be
offset in a general rate case only under certain conditions.
19 Having just initiated two new programs with Cascade — the energy efficiency program
begun in the fall of 2005 and the energy assistance program established as an outcome
9 In addition to dividend restrictions, Applicants agree in Commitment 29 to provide notice to the
Commission when Cascade's dividend payment increases by 10% or more relative to dividends for the
previous quarter
DOCKET UG-061721 PAGE 9
ORDER 06
of the Company's most recent rate case — and being unfamiliar with the practices and
policies of Montana - Dakota Utilities, the Energy Project stated its concerns about the
future of the low - income assistance programs. Commitments 33, 34, and 35 address
these concerns by ensuring that Cascade will continue to work cooperatively with the
Energy Project and the relevant community -based organizations delivering these
programs to provide bill assistance, and improve the delivery of energy efficiency
measures to gas- heated low- income homes
20 In summary, the commitments undertaken here by MDU Resources and Cascade
address comprehensively the range of concerns expressed by the parties to this
proceeding, and the Commission's concerns as indicated in previous cases involving
transactions of this type We are satisfied on the basis of our review of the record that
the proposed transaction, conditioned by the terms of the Stipulation, is consistent
with the public interest, thus meeting the applicable statutory and regulatory standards
for authorization pursuant to chapter 80 12 RCW and WAC 480 - 143 -170
FINDINGS OF FACT
21 Having discussed above in detail the evidence received in this proceeding concerning
all material matters, and having stated findings and conclusions upon issues in dispute
among the parties and the reasons therefore, the Commission now makes and enters
the following summary of those facts, incorporating by reference pertinent portions of
the preceding detailed findings
22 (1) The Washington Utilities and Transportation Commission is an agency of the
State of Washington, vested by statute with authority to regulate rates, rules,
regulations, practices, and accounts of public service companies, including gas
companies.
23 (2) Cascade is a "public service company" and a "gas company" as those terms
are defined in RCW 80 04 010 and used in Title 80 RCW Cascade is engaged
in Washington State in the business of supplying utility services and
commodities to the public for compensation.
110
DOCKET UG- 061721 PAGE 10
ORDER 06
24 (3) MDU Resources' acquisition of Cascade on the terms provided by their
Revised Application, as conditioned by the terms of the Stipulation attached to
and made a part of this Order by pnor reference, including the 36
commitments set forth in Appendix A to the Stipulation, is consistent with the
public interest.
CONCLUSIONS OF LAW
25 Having discussed above all matters material to this decision, and having stated
detailed findings, conclusions, and the reasons therefore, the Commission now makes
the following summary conclusions of law, incorporating by reference pertinent
portions of the preceding detailed conclusions
26 (1) The Washington Utilities and Transportation Commission has junsdiction over
the subject matter of, and parties to, these proceedings
27 (2) MDU Resources' proposed acquisition of Cascade on the terms provided by
their Revised Application, as conditioned by the terms of the Stipulation
attached to and made a part of this Order by pnor reference, including the 36
commitments set forth in Appendix A to the Stipulation, meets the standards
for approval as set forth in Chapter 80 12 RCW and WAC 480 - 143 -170 The
Commission should authorize the proposed transaction.
ORDER
THE COMMISSION ORDERS
28 (1) The parties' Stipulation, filed in this Docket on May 9, 2007, is approved and
adopted in full resolution of the issues pending in this proceeding.
29 (2) MDU Resources' acquisition of Cascade on the terms provided by their
Revised Application, as conditioned by the terms of the Stipulation attached to
and made a part of this Order by pnor reference, including the 36
commitments set forth in Appendix A to the Stipulation, is authorized.
•
DOCKET UG- 061721 PAGE 11
ORDER 06
30 (3) Cascade is authonzed and required to make any compliance filing necessary to
effectuate the terms of this Order
31 (4) The Commission Secretary is authorized to accept by letter, with copies to all
parties to this proceeding, a filing that complies with the requirements of this
Order
32 (5) The Commission retains jurisdiction to effectuate the terms of this Order
Dated at Olympia, Washington, and effective June 27, 2007
WASHINGTON STATE UTILITIES AND TRANSPORTATION COMMISSION
MARK H SIDRAN, Chairman
PATRICK J OSHIE, Commissioner
PHILIP B JONES, Commissioner
NOTICE TO PARTIES This is a Commission Final Order In addition to
judicial review, administrative relief may be available through a petition for
reconsideration, filed within 10 days of the service of this order pursuant to
RCW 34 05 470 and WAC 480 -07 -850, or a petition for rehearing pursuant to
411 RCW 80.04.200 and WAC 480 -07 -870
DOCKET UG061721 PAGE 12
ORDER 06
STIPULATION
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17 BEFORE THE WASHINGTON STATE
18 UTILITIES AND TRANSPORTATION COMMIS SION
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20 In the Matter of the Joint Application of
21 Docket No UG- 061721
®
22 2 MDU RESOURCES GROUP, INC and
CASCADE NATURAL GAS STIPULATION
24
25 CORPORATION
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27 For an Order Authonzing Proposed Transaction
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30 This Stipulation is entered into for the purpose of resolving all issues in this
31 proceeding by and among the parties as set forth below
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34 I. PARTIES
36 1 The initial parties to this Stipulation (the "Stipulation ") are MDU Resources
38 Group, Inc. ( "MDU Resources "), Cascade Natural Gas Corporation ( "Cascade ") (MDU
40 Resources and Cascade are Jointly referred to as "Applicants "), Staff of the Washington
42 Utilities and Transportation Commission ( "Staff'), the Public Counsel Section of the Office
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45 I In formal proceedings such as this, Staff is an independent party The three- member panel of Commissioners
46 is not a party to this Stipulation. The Commissioners must review, consider, and decide whether this
47 Stipulation should be adopted by the Commission.
• STIPULATION— 1 Perkins Coie LLP
62016- 0002/LEGAL13207194 1 1120 N W Couch Street, Tenth Floor
Portland, OR 97209 -4128
Phone: 503 727.2000
Fax. 503 727.2222
1 of the Attorney General ( "Public Counsel "), Northwest Industrial Gas Users ( "NWIGU "),
2
3 the Energy Project, and Boise Cascade LLC (together "the Parties" and individually
4
5 "Party ") This Stipulation will be made available to other parties to this docket, who may
6
7 participate by and filing a copy of this Stipulation.
8
9 II. RECITALS
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11 2 On November 13, 2006, Applicants filed a joint application for an order
12
13 authonzing a proposed transaction (the "Transaction ") whereby MDU Resources would
14
15 acquire all of the outstanding common stock of Cascade and Cascade would thereafter
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17 become a wholly owned subsidiary of MDU Resources. Applicants filed a revised joint
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19 application on March 23, 2007, reflecting a structural change to the Transaction pursuant to
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21 which Cascade would become an indirect wholly owned subsidiary of MDU Resources (the
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23 "Application ").
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25 3 Administrative Law Judge Dennis J Moss convened a preheanng conference
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27 on December 6, 2006, and granted interventions for NWIGU, Weyerhaeuser, Boise Cascade
28
29 Corporation, Longview Fibre, and Cost Management Services, Inc. The Energy Project was
30
31 granted late intervention on March 20, 2007 in Order 03 Public Counsel also made an
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33 appearance in this docket.
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35 4 In accordance with the procedural schedule adopted at the preheanng
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37 conference (Order 01), a technical workshop was held in Olympia on February 20, 2007,
38
39 followed by a settlement conference on March 5, 2007 An additional settlement conference
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41 was held in Olympia on April 5, and telephonic settlement conferences occurred on
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43 March 16, April 12, and April 20, 2007
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STIPULATION— 2 Perkins Coie LLP
62016- 0002/LEGAL13207194 1 1120 N.W Couch Street, Tenth Floor
Portland, OR 97209 -4128
Phone: 503 727.2000
Fax. 503 727.2222
•
1 5 Based on these discussions and related correspondence, the Parties have
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3 reached agreement on proposed commitments that would provide a basis upon which the
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5 Parties could recommend approval of the Transaction in Washington.
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7 6. The Parties wish to present their agreement for the Commission's
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9 consideration. The Parties therefore adopt the following Stipulation, which is entered into
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11 by the Parties voluntarily to resolve matters in dispute among them in the interests of
12
13 expediting the orderly disposition of this proceeding. The Stipulation is bemg filed with the
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15 Commission as a "Multiparty Settlement" pursuant to WAC 480 -07- 730(3).
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17 III. THE POST- ACQUISITION ORGANIZATIONAL STRUCTURE
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19 7 The steps by which the Transaction will be completed are described in the list
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21 of commitments attached hereto as Appendix A. In addition, the corporate organizational
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23 structure that MDU Resources anticipates after closing of the acquisition is set forth in the
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25 Post - Acquisition Cascade Organizational Chart that is Attachment 1 to Appendix A. In
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27 summary, following completion of the transaction, all of the common stock of Cascade will
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29 be owned by the entity identified in Attachment 1 as "Equico," which will be a new
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31 Delaware limited liability company Equico will be a wholly -owned subsidiary of the entity
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33 identified in Attachment 1 as "Debtco," which will also be a new Delaware limited liability
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35 company which will be a wholly owned subsidiary of MDU Resources.
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37 IV. TERMS OF THE STIPULATION
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39 8 Appendix A contains the complete list of commitments that Applicants agree
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41 to make in exchange for the support of the Parties in this proceeding (hereinafter referred to
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43 as "Commitments ") By virtue of executing this Stipulation, the Applicants agree to perform
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45 all of the Commitments set forth in Appendix A according to the provisions of each
46
47 Commitment as set forth therein.
• STIPULATION— 3 Perkins Coie LLP
62016- 0002/LEGAL13207194.1 1120.N.W Couch Street, Tenth Floor
Portland, OR 97209 -4128
Phone: 503 727.2000
Fax. 503 727.2222
1 9 In the process of obtaining approval of the Transaction in other, states, the
2
3 Commitments may be expanded or modified as a result of regulatory decisions or
4
5 settlements. In developing this Stipulation, the Parties considered and agreed upon adoption
6
7 of various commitments from the stipulation entered into by Applicants m the approval
8
9 proceeding in Oregon. The Applicants agree that the Commission shall have an opportunity
10
11 and the authority to consider and adopt in Washington any commitments or conditions to
12
13 which the Applicants agree or with which the Applicants are required to comply in other
14
15 jurisdictions, even if such commitments and conditions are agreed to after the Commission
16
17 enters its order m this docket. To facilitate the Commission's consideration and adoption of
18
19 the commitments and conditions from other junsdictions, the Parties urge the Commission
20
21 to issue an order accepting this Stipulation as soon as practical, but to reserve in such order
22
23 the explicit right to re -open Appendix A to add (without modification of the language
24
25 thereof except such non - substantive changes as are necessary to make the commitment or
26
27 condition applicable to Washington) commitments and conditions accepted or ordered in
28
29 another state jurisdiction. To provide input to the Commission to facilitate a prompt
30
31 decision regarding the desirability or lack of desirability for these out -of -state commitments
32
33 and conditions to be adopted in Washington, the Parties agree to and recommend the
34
35 following process
36
37 • Within five calendar days after a stipulation with new or amended
38
39 commitments is filed by the Applicants with a commission in another state
40
41 junsdiction, Applicants will send a copy of the stipulation and commitments
42
43 to the Parties.
44
45 • Within five calendar days after a commission in another state junsdiction
46
47 issues an order that accepts a stipulation to which Applicants are a party or
STIPULATION— 4 Perkins Coie LLP
62016- 0002/LEGAL13207194 1 1120 N W Couch Street, Tenth Floor
Portland, OR 97209 -4128
Phone: 503 727.2000
Fax: 503 727.2222
•
1 otherwise imposes new or modified commitments or conditions, that order,
2
3 together with all commitments and conditions of any type agreed to by
4
5 Applicants or ordered by the commission in such other state, will be filed
6
7 with the Commission and served on all Parties by the most expeditious means
8
9 practical.
10
11 • Withm ten calendar days after any such order from another state commission
12
13 is filed with this Commission, any Party wishing to do so shall file with the
14
15 Commission its response, including its position as to whether any of the
16
17 covenants, commitments, and conditions from the other junsdiction (without
18
19 modification of the language thereof except such non - substantive changes as
20
21 are.necessary to make the commitment or condition applicable to
. 22
23 Washington) should be adopted in Washington.
24
25 • Within five. calendar days after any such response filing, any Party may file a
26
27 reply with the Commission. The Parties agree to support in their filings (or
28
29 by representation of same by MDU Resources) the issuance by the
30
31 Commission of an order regarding the adoption of such commitments and
32
33 conditions as soon as practical thereafter
34 c
35 • If the last day of any calendar time penod referenced above falls on a
36
37 Saturday, Sunday, or a holiday, the next business day will be considered as
38
39 the last day
40
41 10 MDU Resources and Cascade will promptly disclose to the Parties any
42
43 written commitments, conditions, or covenants made in another state junsdiction (between
44
45 the date of the filing ofthe Stipulation and the receipt of the last state order in a transaction
46
47
• STIPULATION— 5 Perkins Coie LLP
62016 - 0002 /LEGAL13207194 1 1120 N W Couch Street, Tenth Floor
Portland, OR 97209 -4128
Phone: 503 727.2000
Fax. 503 727.2222
1 docket) intended to encourage approval of the Transaction or avoidance of an objection
2
3 thereto
4
5 11 The Parties agree that with the commitments set forth in paragraphs 8
6
7 through 10 above, mcludmg those in Appendix A, the Transaction meets the pubhc interest
8
9 standard under RCW 80 12.020 and WAC 480 - 143 -170 for approval in Washington. The
10
11 Parties therefore agree to support this Stipulation as a settlement of all issues in this
12
13 proceeding and to recommend approval of the Transaction and the Application. The Parties
14
15 encourage the Commission to enter a final Washington approval order by June 5, 2007 The
16
17 Parties understand that this Stipulation is not bindmg on the Commission in ruling on the
18
19 Application.
20
21 12 The Parties agree that this Stipulation represents a compromise in the
22
23 positions of the Parties. As such, conduct, statements, and documents disclosed in the
24
25 negotiation of this Stipulation shall not be admissible as evidence in this or any other
26
27 proceeding. By executing this Stipulation, no Party shall be deemed to have approved,
28
29 admitted, or consented to the facts, principles, methods, or theones employed in arnving at
30
31 the terms of this Stipulation, nor shall any Party be deemed to have agreed that any
32
33 provision of this Stipulation is appropnate for resolving issues in any other proceeding,
34
35 except those proceedings involving the enforcement or implementation of the terms of this
36
37 Stipulation.
38
39 13 Applicants acknowledge that the Commission's approval of the Stipulation,
40
41 the Commitments, or the Joint Application shall not bind the Commission in other
42
43 proceedings with respect to the determination of prudence, just and reasonable character,
44
45 rate or ratemaking treatment, or public interest of services, accounts, costs, investments, any
46
47 particular construction project, expenditures, or actions referenced in these Commitments.
STIPULATION— 6 Perkins Coie LLP
62016- 0002/LEGAL13207194 1 1120 N W Couch Street, Tenth Floor
Portland, OR 97209 -4128
Phone: 503 727.2000
Fax. 503 727.2222
1 14 The Parties shall cooperate in submitting this Stipulation promptly to the
2
3 Commission for acceptance, and shall cooperate in developing a supporting narrative
4
5 statement as required by WAC 480 -07- 740(2). The Parties agree to support the Stipulation
6
7 throughout this proceeding, provide a panel of witnesses to sponsor such Stipulation as well
8
9 as legal representatives to support the Stipulation at a Commission heanng if necessary),
10
11 and recommend that the Commission issue an order adopting the settlements contained
12
13 herein. In the event the Commission rejects this Stipulation or accepts this Stipulation upon
14
15 conditions not contained herein, the provisions of WAC 480 -07- 750(2) shall apply
16
17 15 Subject to Paragraph 16 of this Stipulation, the effective date of this
18
19 Stipulation shall be the date entered below
20
21 16 The obligations of the Applicants under this Stipulation are subject to the
41, 22
23 Commission's approval of the Application in this docket on terms and conditions acceptable
24
25 to the Applicants, in their sole discretion, and the closing of the Transaction.
26
27 This STIPULATION is entered into by each Party as of the date entered below
28
29 DATED May 8, 2007
30
32 MDU Resources Group, Inc. Staff of the Washington Utilities and
33 Transportation Commission
34
35 By By
36
37
38
39
40 Cascade Nat a Gal Corporation Northwest Industrial Gas Users
42 By A dria B
Y By
43 Jon 4 1f. z Paula E. Pyron
44 Sr % esident- Gas Supply & Executive Director
45 Re: ory
46
47
• STIPULATION— 7 Perkins Coie LLP
62016 -0002 /LEGAL13207194.1 1120 N W Couch Street, Tenth Floor
Portland, OR 97209 -4128
Phone: 503 727.2000
Fax. 503 727.2222
1 14 The Parties shall cooperate in submitting this Stipulation promptly to the
2
3 Commission for acceptance, and shall- cooperate in developing a supporting narrative
4
5 statement as required by WAC 480 -07- 740(2). The Parties agree to support the Stipulation
6
7 throughout this proceeding, provide a panel of witnesses to sponsor such Stipulation as well
8
9 as legal representatives to support the Stipulation at a Commission hearing (if necessary),
10
11 and recommend that the Commission issue an order adopting the settlements contained
12
13 herein. In the event the Commission rejects this Stipulation or accepts this Stipulation upon
14
15 conditions not contained herein, the provisions of WAC 480 -07- 750(2) shall apply
16
17 15 Subject to Paragraph 16 of this Stipulation, the effective date of this
18
19 Stipulation shall be the date entered below
20
21 16 The obligations of the Applicants under this Stipulation are subject to the
22
23 Commission's approval of the Application in this docket on terms and conditions acceptable
24
25 to the Applicants, in their sole discretion, and the closing of the Transaction.
26
27 This STIPULATION is entered into by each Party as of the date entered below
28
29 DATED -
30
31 MDU Resources Group, Inc. Staff of the Washington Utilities and
32
33 Transportation Commission
35 By ` By
36 ry D. Hildestad
37 President & Chief Executive
38 Officer
39
40 Cascade Natural Gas Corporation Northwest Industrial Gas Users
41
42 By B
43 Paula E. Pyron
44 Executive Director
45
46 Public Counsel The Energy Project
47 gY J
STIPULATION— 7 Perkins Coie ter
62016 0002/LEGAL13207194 1 1120 N W Couch Street, Tenth Floor
Portland, OR 97209-4128
Phone: 503 727.2000
Fax: 503 727.2222
III
1 14 The Parties shall cooperate in submitting this Stipulation promptly to the
2
3 Commission for acceptance, and shall cooperate in developing a supporting narrative
4
5 j statement as required by WAC 480 -07- 740(2). The Parties agree to support the Stipulation
6
7 throughout this proceeding, provide a panel of witnesses to sponsor such Stipulation as well
8
9 as legal representatives to support the Stipulation at a Commission hearing (if necessary),
10
11 and recommend that the Commission issue an order adopting the settlements contained
12
13 herein. In the event the Commission rejects this Stipulation or accepts this Stipulation upon
14
15 conditions not contained herein, the provisions of WAC 480-07-750(2) shall apply
16
17 15 Subject to Paragraph 16 of this Stipulation, the effective date of this
18
19 Stipulation shall be the date entered below
20
21 16 The obligations of the Applicants under this Stipulation are subject to the
. 22
23 Commission's approval of the Application in this docket on terms and conditions acceptable
24
25 to the Applicants, in their sole discretion, and the closing of the Transaction.
26
27 This STIPULATION is entered into by each Party as of the date entered below
28
29 DATED
30
31 MDU Resources Group, Inc. Staff of t . • Washin: on Utilities and
32
33 Transp , lion rem ,' 'ssi
34
35 B y By 46/.. ,,i% ` G ./
36 /c'_o `. T 'Iran, .� •
37 Assis • IT 11 ' - y General
38
39
40
41 I Cascade Natural Gas Corporation Northwest Industrial Gas Users
42
43 By B
44 Paula E. Pyron
45 Executive Director
46
47
STIPULATION— 7 Perkins Cole LLP
III 62016 -0002 /LEGAL 13207194.1 1120 N.W Couch Street, Tenth Floor
Portland, OR 97209 -4128
Phone: 503 727.2000
Fax: 503 727.2222
05/08/2007 18 29 FAX 5036360703 PAULA_PYRON 1g 00.8/009
0
1 14 The Parties shall cooperate in submitting this Stipulation promptly to the
2
3 Commission for acceptance, and shall cooperate in developing a supporting narrative
4
5 statement as required by WAC 480 -07- 740(2). The Parties agree to support the Stipulation
6
7 throughout this proceeding, provide a panel of witnesses to sponsor such Stipulation as well
8
9 as legal representatives to support the Stipulation at a Commission hearing (if necessary),
10
1 1 and recommend that the Commission issue an order adopting the settlements contained
12
13 herein. In the event the Commission rejects this Stipulation or accepts this Stipulation upon
14
15 conditions not contained herein, the provisions of WAC 480 - 750(2) shall apply
16
17 I 15 Subject to Paragraph 16 of this Stipulation, the effective date of this
l 8
19 Stipulation shall be the date entered below
20
2i 16. The obligations of the Applicants under this Stipulation are subject to the
22
III
23 Commission's approval of the Application in this docket on terms and conditions acceptable
24
25 to the Apphcants, in their sole discretion, and the closing of the Transaction.
26
27 This STIPULATION is entered into by each Party as of the date entered below
28
29 DATED
30
31 MDU Resources Grou Inc.
32 P+ Staff of the Washington Utilities and
33 Transportation Commission
34
35 B y By
36 Gregory J Trautman,
37 Assistant Attorney Genera]
38
39
40
41 Cascade Natural Gas Corporation Northwest Industrial Gas Users
42
43 By By °Pa Jo!' 7"' `' T.---
44 Paula E. Pyron
45 Executive Director
46
47
STIPULATION— 7 Perkins Coie LuP
62016.0002/LEC3ALI3207194 1 1120 N W Couch Street, Tenth Floor
Portland, OR 97209 -4128
Phone: 503,727.2000
Fax: 503 727.2222
•
1
2 Public Co nsel The Energy Project
3
4 By / ' By
5 e : - th Krebs Ronald L. Roseman
6 ' ssistant Attorney General Attorney at Law
7
8
9 Boise Cascade LLC
10
11 By
12
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15
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S 23
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29
30
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43
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STIPULATION— 8 Perkins Coie LLP
• 62016 0002/LEGAL13207194 I 1120 N W Couch Street, Tenth Floor
Portland, OR 97209 -4128.
Phone: 503 727.2000
Fax: 503 727.2222
FEB -16 -2005 06 47 From RON ROSEMAN 206 568 0138 To Fax Server P 2/2
1
3 Public Counsel The E Proje
4 B
By
5 Judith Krebs Ronald L. Roseman
6 Assistant Attorney General Attorney at Law
7
8
9 Boise Cascade LLC
10
11 lay
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IS
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STIPULATION— 8 Perkins Cnie 1.1.
62016- 11012/1.F.(iA1.117117194 1 1120 N.W Couch Strcct, Tenth Floor
Portland, OR 97209 -41211
Phone: 503 727,2000
Fax. 503 727.2222
•
3 Public Counsel The Energy Project
4
5 By By
Judith Krebs Ronald L. Roseman
6
7 Assistant Attorney General Attorney at Law
8
9 Boise Cascade LLC
10 '
11 By G(
12 M thew W. Per ns
13 Attorney at Law —
14
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• 23
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STIPULATION 8 Perkins Coie LLP
• 62016- 0002/LEGAL13207194.1 1120 N.W Couch Street, Tenth Floor
Portland, OR 97209 -4128
Phone: 503 727.2000
Fax. 503 727.2222
Appendix A
MDU Resources Acquisition of Cascade Natural Gas Corporation
MDU Resources Group, Inc. ( "MDU Resources ") and Cascade Natural Gas
Corporation ( "Cascade ") have filed a joint application with the Washington Utilities and
Transportation Commission for an order authorizing a transaction whereby MDU
Resources would acquire all of the outstanding common stock of Cascade and Cascade
would thereafter become an indirect wholly -owned subsidiary of MDU Resources (the
"Transaction "). The Transaction will be completed in substantially the following manner
The Transaction would be effected pursuant to a reverse triangular merger
whereby MDU Resources will acquire all of the outstanding common stock of
Cascade for a purchase price of $26 50 per common share or approximately
$305 million in cash through Merger Sub, a subsidiary of MDU Resources formed
specifically to effectuate the acquisition. At the effective time of the merger,
Merger Sub will cease to exist.
The corporate organizational structure that MDU Resources anticipates
after closing of the acquisition is set forth in the attached Post Acquisition
Cascade Organizational Chart ( "Attachment 1 "). Without regard to the possible
use of short term bridge financing (which if used would be repaid at the time
permanent financing is put into place), the following steps describe the sequence
• of events MDU Resources anticipates in establishing Cascade as ring fenced in
the support of the Non- Consolidation Opinion addressed in commitment 30
1 MDU Resources will either issue new common equity or utilize
other available capital resources to fund approximately $220 million for the
purchase of the existing Cascade stock.
2 Debtco, as identified in Attachment 1 and the Stipulation, will obtain
approximately $85 million of additional funds through debt financing to complete
the funding for the purchase of the Cascade stock. Approximately $165 million of
existing debt at Cascade will remain at Cascade and be unaffected by the
merger
3 Approximately $305 million will be transferred to a paying agent
who will pay Cascade's existing shareholders. MDU Resources will make capital
contributions to Debtco Debtco will make capital contributions to Equico, as
identified in Attachment 1 and the Stipulation, such that, upon the completion of
the Transaction, Equico will then own 100% of the stock of Cascade and Debtco
will own 100% of the stock of Equico
4 The stock of Equico will be the asset supporting Debtco's loan of
approximately $85 million Equico is expected to be established as a
bankruptcy - remote special purpose entity, and is not expected to have debt.
• 5 At least one director of Equico will be an Independent Director as
described in commitment 7
In summary, MDU Resources plans to cause all of the common stock of
Cascade to be owned by Equico, a new Delaware limited liability company and
wholly -owned subsidiary of Debtco, also a Delaware limited liability company
whose stock will be owned by MDU This structure and transactional flow results
in the assets, liabilities and equity of Cascade remaining as presently recorded
In support of the application, MDU Resources and Cascade make the following
commitments.
1 Cascade will maintain its own accounting documentation, and financial data will
be accessible in Cascade's Washington office Cascade's financial books and
records and state and federal utility regulatory filings and documents will continue
to be maintained in Cascade's Washington office consistent with current practice
and be available to the Commission, upon request.
2 Financial statements and other financial books and records for Cascade shall be
maintained separate from the books and records of MDU Resources. The assets
of Cascade and its subsidiaries will be accounted for separately from the assets
of MDU Resources and its other subsidiaries, divisions and affiliates in
accordance with the Commission's rules governing the System of Accounts. This
condition shall not prevent the maintenance of books and records for Cascade,
MDU Resources or their affiliates on or through a common computer accounting
platform This condition shall also not prevent, for non - Washington regulatory
purposes, the consolidated treatment or reporting of financial statements,
financial results, and other financial books and records of Cascade, MDU
Resources or their subsidiaries and affiliates for financial reporting, tax or other
purposes
3 MDU Resources and Cascade will provide the Commission and Commission
Staff access to all books of account, as well as. all documents, data, and records
of their affiliated interests, which pertain to transactions between Cascade and its
affiliated interests or which are otherwise reasonably calculated to lead to
discoverable information regarding Cascade Upon request and subject to
execution of a confidentiality agreement that incorporates the terms of the
Commission's standard protective order, MDU and Cascade will provide copies
of relevant documents subject to this commitment to Public Counsel and other
consumer parties to this docket.
4 In accordance with Washington law or regulation, the Commission or its agents
may audit the accounting records of MDU Resources and its subsidiaries or
divisions that are the basis for charges to Cascade. MDU Resources agrees to
cooperate fully with such Commission audits
5 Any diversified holdings and investments (e g , non - utility related business or
foreign utilities) of MDU Resources will not be held by Cascade or a subsidiary of
2
62016- 0002 /LEGAL13166275 7
• Cascade This condition will not prohibit MDU Resources or its affiliates other
than Cascade from holding diversified businesses
6 Cascade will operate as an indirect wholly owned subsidiary of MDU Resources.
Cascade agrees to hold its customers harmless from any business and financial
risk exposures of MDU Resources or its other affiliates including Centennial
Energy Holdings, Inc. (Centennial) The business and financial risk exposure to
Cascade shall be that of a stand -alone regulated utility Cascade will not issue
debt for the acquisition of Cascade's stock by MDU Resources. No credit
facilities at Cascade will contain cross - default provisions with respect to credit
facilities at MDU Resources or Centennial or their respective subsidiaries. No
credit facility signed by Cascade will allow any creditor of MDU Resources,
Centennial or their subsidiaries (other than Cascade and its subsidiaries) to have
recourse against Cascade or its subsidiaries, in the event of bankruptcy of MDU
Resources or Centennial or their subsidiaries (other than Cascade and its
subsidiaries) No credit facilities at MDU Resources or Centennial or their
subsidiaries (other than Cascade and its subsidiaries) will contain cross - default
provisions with respect to credit facilities at Cascade No credit facility signed by
MDU Resources or Centennial or their respective subsidiaries will allow any
creditor of Cascade or its subsidiaries to have recourse against MDU Resources
or Centennial or their subsidiaries (other than Cascade and its subsidiaries)
• 7 At least one director of Equico will be an Independent Director who is not a
member, stockholder, director (except as such Independent Director of Equico),
officer, employee, partner, attorney, creditor, supplier, or customer, other than an
individual consumer, of MDU Resources or its affiliates. The organizational
documents for Equico will not permit Equico, without the unanimous consent of
all its directors including the Independent Director, to merge, liquidate or sell
substantially all of Equico's assets or to consent to the institution of bankruptcy
proceedings or the inclusion of Equico in bankruptcy proceedings
8 Cascade or MDU Resources will notify the Commission subsequent to MDU
Resources' board approval and as soon as practicable following any public
announcement of (1) any acquisition of a regulated or unregulated business
representing 5 percent or more of the capitalization of MDU Resources, or (2) the
change in effective control or acquisition of any material part or all of Cascade by
any other firm, whether by merger, combination, transfer of stock or assets, or
(3) any acquisition of a business with a substantial business presence in
Cascade's service area that has a value in excess of $100 million or requires
notification of the United States Securities and Exchange Commission
9 MDU Resources and Cascade shall comply with all Commission statutes, rules,
and ordering conditions concerning affiliated interests filings This shall include
the Inter - company Administrative Services Agreement (IASA). The IASA will
include the corporate and affiliate cost allocation methodologies described in
3
62016- 0002 /LEGAL1 3166275 7
condition 12 The IASA will be filed with the Commission as soon as P racticable
after the closing of the transaction by which Cascade becomes an indirect
subsidiary of MDU Resources (the "Transaction "). Amendments to the IASA will
also be filed with the Commission. MDU Resources and Cascade agree not to
contest, for ratemaking purposes, the Commission's application of an
asymmetrical pricing standard (reflecting the Commission's choice in setting
rates between the more advantageous (1) of cost, including a reasonable retum,
or (2) of market pricing) for affiliate charges or costs if a readily identifiable
market for the goods, services or assets exists, and if the transaction involves a
cost of more than $100,000 Filings by Cascade with the Commission regarding
transactions with MDU Resources affiliates that involve a cost of more than
$100,000 will include an explanation and a rationale for the purchase method
used if other than a competitive bid process.
10 Cascade commits for Washington regulatory purposes, that commencing with
closing of the Transaction and through December 31, 2012, the allocated shared
corporate costs, as well as its allocated and assigned utility division costs, will not
exceed the costs the Cascade customers would otherwise have paid absent the
acquisition, as adjusted for changes in the Consumer Price Index. Application of
the Consumer Price Index is limited to the instant commitment. Compliance with
this condition shall be determined as follows.
a For purposes of this condition, Cascade's Washington- direct plus
allocated A &G costs will be based on the A &G categories, assumptions,
and values contained in Attachment 2 titled, "900 Accounts. Stretch —
Washington- allocated" using the proforma adjusted 2005 Accounts 901
through 935 labor and non -labor costs, as reflected in Cascade's general
rate case Docket UG- 060256, but excluding Account 904 (uncollectible
accounts) costs and excluding the $800,000 of low- income assistance that
Cascade provides pursuant to the final order in Docket UG- 060256 (the
"2006 Benchmark ") The pro forma adjusted 2006 Benchmark will be set
at $21,642,845 as of December 31, 2006 The benchmark for each
subsequent year shall equal the prior year's benchmark multiplied by the
increase in the Consumer Price Index for All Urban Consumers All Items
Index 1982 -84 =100 (Series CUUR0000SA) in the previous twelve months
Except as provided in Condition 11, Cascade commits that during the
period of this condition, Cascade's A &G costs, excluding Account 904
costs and the low- income assistance that Cascade provides pursuant to
the final order in Docket UG- 060256, for rate making and regulatory
reporting purposes shall be the lesser of its actual 900 Accounts costs,
excluding Account 904 costs and the low- income assistance that Cascade
provides pursuant to the final order in Docket UG- 060256 and including
Commission Basis adjustments as provided in WAC 480 -90 -257, or the
benchmark for the applicable year Cascade will not shift A &G costs to
operational and maintenance accounts (FERC accounts 700 -894), capital
4
62016- 0002 /LEGALI 3166275.7
•
accounts, deferred debit accounts, deferred credit accounts, or other
regulatory accounts that are a basis for ratemaking
-b Cascade may request that the Commission include in the benchmark A &G
costs that are incurred or increased as a direct consequence of a change
in a statute rule, or as a result of an o rder or directive of the
Commission, effective after the date of this condition. The intent of this
condition is to protect Cascade from, unforeseen mandated circumstances
that could increase A &G costs
11 MDU Resources and Cascade further commit that beginning November 1, 2008
and continuing through December 31, 2012, Cascade will provide annual rate
credits of $672,000 to Washington customers distributed on an equal margin
basis unless otherwise ordered by the Commission. The rate credits in this
paragraph will not be off - settable for the first three years, and thereafter will be
fully off - settable, on a prospective basis, by the amount that Cascade
demonstrates to the Commission's satisfaction in any general rate case that the
Washington - allocated A &G expenses included in Cascade's rates are lower than
the benchmark set in condition 10 and have not been shifted to operational and
maintenance accounts (FERC accounts 700 -894), capital accounts, deferred
debit accounts, deferred credit accounts, or other regulatory accounts that are a
basis for ratemaking The rate credits shall be provided as bill credits for each
• month that this condition is in effect, pro -rated based upon estimated volumes
and subject to true -up on an annual basis in a manner to be approved by the
Commission Rate credits shall be excluded from Cascade's regulatory accounts
and shall be paid for out of shareholder funds
12 Any corporate cost allocation used for rate setting, and subsequent changes
thereto, will be submitted to the Commission for review Any proposed cost
allocation methodology for the allocation of corporate and affiliate investments,
expenses, and overheads, required by law or rule to be submitted to the
Commission for review or approval, will comply with the following principles
a For services rendered to Cascade or each cost category subject to
allocation to Cascade by MDU Resources or any of its affiliates, Cascade
must be able to demonstrate that such service or cost category is
necessary to Cascade for the performance of its regulated operations, is
not duplicative of services already being performed within Cascade, and is
reasonable and prudent.
b Cost allocations to Cascade and its subsidiaries will be based on generally
accepted accounting standards, that is, in general, direct costs will be
charged to Cascade and its subsidiaries whenever possible and shared or
indirect costs will be allocated based upon the primary cost - driving factors
• 5
6201 6- 0002/LEGAL l 3166275.7
c. MDU Resources and its divisions will have in place an allocation or 411
reporting system adequate to support the allocation and assignment of
costs of executives and other relevant personnel to Cascade
d An audit trail will be maintained such that all costs subject to allocation can
be specifically identified, particularly with respect to their origin In
addition, the audit trail must be adequately supported Failure to
adequately support any allocated cost may result in denial of its recovery
in rates
e Costs which would have been denied recovery in rates had they been
incurred by Cascade regulated operations will likewise be denied recovery they are allocated directly or indirectly through MDU Resources
Cascade shall include in any rate case filing a determination confirming
this provision or a proposed implementing ratemaking adjustment, if
necessary
13 Cascade's debt and preferred equity will be maintained separate from the
financial securities of MDU Resources and its affiliates. Cascade will maintain its
own corporate credit rating separate from that of MDU Resources and its
affiliates
14 Cascade will exclude all costs of the Transaction, including the acquisition
premium (goodwill) and integration costs, from Cascade's utility accounts for
ratemaking purposes (e g , general rate cases, earnings reviews, PGA filings,
etc.) Within 90 days following completion of the Transaction, Cascade will
provide a preliminary accounting of transaction costs. Further, Cascade will
provide the Commission with a final accounting of these costs within 60 days of
the close of accounting for the Transaction. For purposes of this. condition,
"integration costs" include costs associated with determining how Cascade will
operate effectively as an indirect subsidiary of MDU Resources after the
Transaction closes Integration costs include but are not limited to senior
executive officers costs as a result of employment agreement change of control
provisions Integration costs will not include any costs that Cascade would have
reasonably incurred absent the Transaction or costs incurred to combine
Cascade's operating systems with those of MDU Resources for improved
efficiencies or for other beneficial purposes. Transition costs are costs that are
neither transaction nor integration costs and are incurred to improve efficiencies
For purposes of this condition, transition costs may include by example, but are
not limited to, combined platform and joint software licensing for applications
such as customer information and work management systems. If Cascade
proposes any transition costs for rate case purposes, it must provide to the
Commission's satisfaction a demonstration of the net benefit for customers. This
condition is without effect as to any future determination of whether these costs
6
62016- 0002/LEGAL13166275.7
• have been prudently incurred Cascade commits that it will not seek to defer any
transition costs.
15 MDU Resources and Cascade will provide the Commission and Commission
Staff,. upon .request, with unrestricted access to all written information provided by
and to credit rating agencies that pertains to Cascade Upon request and subject
to execution of a confidentiality agreement that incorporates the terms of the
Commission's standard protective order, MDU Resources and Cascade will
provide Public Counsel and other consumer parties to this docket with access to
written information provided by and to credit rating agencies that pertains to
Cascade.
16 MDU Resources and Cascade commit that neither Cascade nor its subsidiaries
will, without the approval of the Commission, make loans to MDU Resources or
its respective subsidiaries, or assume any obligation or liability as guarantor,
endorser, surety or otherwise for MDU Resources or its respective subsidiaries;
provided that this condition will not prevent Cascade, to the extent allowed by
law, from making loans or transferring funds to a subsidiary of Cascade or
assuming any obligation or liability on behalf of a subsidiary of Cascade MDU
Resources and Cascade will not pledge any of the assets of the business of
Cascade as backing for any securities which MDU Resources or its respective
subsidiaries, but excluding Cascade and its subsidiaries, may issue.
• 17 Cascade will not advocate for a higher cost of debt ore equity qu ty capital as compared
to what Cascade's cost of debt or equity capital would have been, absent MDU
Resources' ownership
18 Nothing in these acquisition conditions shall be interpreted as a waiver of
Cascade's or MDU Resources' rights to request confidential treatment for
information that is the subject of any conditions
19 Nothing in these acquisition conditions shall be interpreted to limit the
Commission's authority under its statutes and rules.
20 The parties urge the following process for administering and enforcing the
commitments, unless another process is provided by statute, Commission
regulations or an approved Cascade tariff The Commission should give
Cascade and MDU Resources written notification of any violation by either
company of the commitments made in this application. If such failure is
corrected within ten (10) business days for failure to file a report, or five (5)
business days for other violations, the Commission should take no action The
Commission shall have the authority to determine if the corrective action has
satisfied or corrected the violation Cascade or MDU Resources may request, for
cause, an extension of these time periods If Cascade or MDU Resources fails
to correct such violations within the specified time frames, as modified by any
1111 7
62016- 0002 /LEGAL 13166275 7
Commission - approved extensions, the Commission ma. seek to compel Y p
compliance with the commitment and assess penalties for violation of a
Commission order, against either Cascade or MDU Resources, as allowed under
state laws and regulations. The Commission may seek penalties only against
MDU Resources for violations by only MDU Resources and only against
Cascade for violations by only Cascade, but may seek penalties against both
MDU Resources and Cascade when both have violated a commitment or
condition
21 MDU Resources and Cascade commit to maintaining Cascade's provision of
sales and distribution services to all classes of customers in a safe, reliable and
prudent manner in conformity with its tariffs and obligations as a natural gas
utility understate laws including but not limited to maintaining sufficient physical
plant, gas supply and staffing levels to meet the needs of customers in its service
territory in each state in which it operates
22 To ensure service quality,. Cascade commits to measuring and reporting certain
information regarding customer service quality for calendar years 2008 and 2009
The reports shall include the following information, which will be provided to the
Commission within 90 days following the end of the calendar year, provided to
the parties to this docket, and made available for public inspection on Cascade's
website The calculations for reporting will be based on calendar year
a Cascade will separately report the number of customer complaints
(i) received by Cascade and (ii) filed with the Commission
b Cascade will report the average time from a customer call to the
arrival of field technicians in response to a gas emergency
c. Cascade will report the number of missed customer appointments.
A customer appointment is defined as a mutually agreed appointment time
between a customer and Cascade for service to be provided either when the
customer needs to be present or when the customer need not be present. A
missed customer appointment occurs when Cascade fails to keep a customer
appointment.
d Cascade will separately report the percentage of customer
disconnects due to non - payment for (i) residential customers (schedule 503) and
(ii) commercial customers (schedule 504)
e For calendar year 2007, Cascade will report the percentage of calls
answered live within sixty (60) seconds by its customer call center For calendar
year 2008, Cascade will report the percentage of calls answered live within fifty
(50) seconds by its customer call center For calendar year 2009, Cascade will
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62016- 0002/LEGAL13166275 7
•
report the percentage of calls answered live within forty (40) seconds by its
customer call center
Following December 31, 2009, Cascade will meet with Commission Staff, Public
Counsel and .other interested parties in a collaborative process to recommend to
the Commission whether Cascade should continue to report this information,
whether Cascade should report other information, and whether any further action
is required to ensure Cascade's customer service quality
23 Within twelve months of the closing of the Transaction and annually thereafter
through December 31, 2012, Cascade will file a report with the Commission and
Commission Staff regarding the implementation of the Conditions. The report
will, at a minimum, provide a description of the performance of each of the
Conditions that have quantifiable results If any Condition is not being met,
relative to the specific terms of the Condition, the report shall provide proposed
corrective measures and target dates for completion of such measures. From
the report filed with the. Commission and Commission Staff, Cascade will make
publicly available at the Commission, as well as provide to parties to this
proceeding, non - confidential portions of the report. Upon request and subject to
execution of a confidentiality agreement that incorporates the terms of the
Commission's standard protective order, MDU and Cascade will provide
confidential portions of the report to Public Counsel and other consumer parties
• to this docket.
24 The premium paid by MDU Resources for Cascade (Goodwill or Acquisition
Premium) will be excluded from the utility accounts of Cascade Further, MDU
Resources and Cascade commit that they will not propose rate recovery of the
Acquisition Premium in Washington rates or include the Acquisition Premium in
Cascade's Washington results of operations unless this condition is modified by
the Commission to allow for the recovery of the Acquisition Premium for reasons
based on proposals by parties other than Cascade or MDU Resources
25 Cascade and /or the MDU Resources Foundation will maintain at least Cascade's
current level of charitable contributions in Oregon and Washington Some of
those contributions may be made directly by Cascade in support of local
organizations In addition, qualified tax - exempt 501(c)(3) entities will be eligible
to apply for grants from MDU Resources Foundation
26 MDU Resources and Cascade will provide the Commission and Commission
Staff access to those portions of corporate minutes including Board of Directors'
minutes, all committee and subcommittee minutes, along with any related reports
and source documents that may lead to relevant information regarding
Cascade's business and associated risk analysis. Upon request and subject to
execution of a confidentiality agreement that incorporates the terms of the
Commission's standard protective order, MDU and Cascade will provide copies
• 9
62016- 0002/LEGAL13166275 7
of relevant documents subject to this commitment that pertain to Cascade to 410
subject p
Public Counsel and other consumer parties to this docket.
27 Cascade will not declare or make any dividend to MDU Resources or any other
entity that owns or holds an equity interest in Cascade, unless, on the date of
such dividend, either
a at the time and as a result of such dividend, Cascade's Interest Coverage
Ratio is equal to or greater than 3 1, or
b at such time, Cascade's unsecured debt rating is at least investment
grade (BBB- or its then equivalent with Standard & Poor's Ratings Group
and Baa3 or its then equivalent with Moody's Investors Service, Inc)
"Interest Coverage Ratio" means, with respect to Cascade on any Measurement
Date, the ratio of (i) the aggregate amount of EBITDA of Cascade for the four
fiscal quarters for which financial information in respect thereof is available
immediately prior to such Measurement Date to (ii) the aggregate Interest
Expense during such four fiscal quarters.
28 a Cascade will not make any dividends that will. reduce Cascade's common
equity capital below 38% of Cascade's Total Adjusted Capital without
Commission approval, subject to the exception stated herein For the purposes
of calculating a common equity capital for this commitment, Cascade's Total
Adjusted Capital is defined as common equity, preferred equity, long -term debt,
short-term debt and capitalized lease obligations If Cascade's common equity
capital is below 38 %, but above 35% of Cascade's Total Adjusted Capital,
Cascade may make a dividend upon notice to the Commission Cascade may
use this exception only once each calendar year If Cascade uses this
exception, it shall make a presentation to the Commission regarding the financial
health of Cascade including Cascade's plans to increase the percentage of
common equity capital Cascade shall also provide written reports to the
Commission regarding the financial health of Cascade and progress on
Cascade's plans to increase the percentage of common equity capital for four
quarters following Cascade's use of this exception, unless this requirement is
waived by the Commission
b Cascade will not make any dividends that will reduce Cascade's common
equity capital below.35% of Cascade's Total Adjusted Consolidated Capital
(using a purchased accounting approach) without Commission approval
Cascade's Total Adjusted Consolidated Capital is defined as the common equity,
preferred equity, long -term debt, short-term debt and capitalized lease
obligations of both Cascade and Cascade's intermediate holding companies
viewed on a consolidated basis The use of a consolidated basis of both
10
62016- 0002 /LEGAL13166275 7
• Cascade and Cascade's intermediate holding companies for the determination
of Cascade's Total Adjusted Consolidated Capital is for the purposes of
this commitment only
29 Through December 31, 2016, Cascade will provide notice to the Commission,
and to other parties to this Docket upon request, when the dividend payment
increases by 10% or more than Cascade's paid dividends for the previous
quarter
30 Within three months of closing of the transaction, Cascade commits to obtain a
non - consolidation opinion, subject to customary limitations and qualifications,
concluding that if the ring- fencing around Cascade is maintained, a bankruptcy
court, on its own or upon proper request of a party in interest, in a case under the
United States Bankruptcy Code commenced against MDU Resources, would not
order the substantive consolidation of the assets and liabilities of Cascade with
those of MDU Resources. Cascade commits to promptly file such opinion with
the Commission If the ring- fencing provisions of this agreement are insufficient
to obtain a non - consolidation opinion, MDU Resources and Cascade agree to
promptly undertake the following actions
a Notify the Commission of this inability to obtain a non - consolidation
opinion.
• b Propose and implement, upon consultation with Commission Staff and
parties to this stipulation and Commission approval, such ring- fencing
provisions that are sufficient to obtain such a non - consolidation opinion
c. Obtain a non - consolidation opinion
31 The. Applicants agree that the Commission shall have an opportunity and the
authority to consider and adopt in Washington any commitments or conditions to
which the Applicants agree or with which the Applicants are required to comply in
other jurisdictions, even if such commitments and conditions are agreed to after
the Commission enters its order in this docket provided, however, that any
financial commitments, or commitments having a financial impact, shall be
proportionate to Cascade's corresponding business function in Washington in
relation to its corresponding total company business function To facilitate the
Commission's consideration and adoption of the commitments and conditions
from other jurisdictions, the Parties urge the Commission to issue an order
accepting this Stipulation as soon as practical, but to reserve in such order the
explicit right to re -open to add commitments and conditions accepted or ordered
in another state jurisdiction
• 11
62016- 0002/LEGAL 1 3166275.7
32. Cascade commits that Cascade will continue its current gas procurement
practices except to the extent Cascade notifies and justifies to the Commission in
writing of any proposed change in gas procurement practices.
33 Cascade will continue to fund the Washington Energy Assistance Fund as per
paragraph 14 of the Settlement Agreement approved by the Commission's Final
Order 05 in Docket UG- 060256 and will explore with the implementing agencies
methods to improve the program effectiveness and funding level as is shown to
be justified
34 Cascade will pay the low income agencies for the installation of the approved
energy efficiency measures in their low- income conservation program up to the
full avoided cost provided that Cascade is authorized to defer the program costs
associated with its low- income weatherization program to a sub - account of
Account 186 and to amortize the costs through a temporary technical adjustment
at the time of the Company's applicable Purchase Gas Adjustment filings Any
such measures shall be consistent with any Conservation and Low - Income
Weatherization Plan approved by the Commission
35 Cascade will meet annually with the community action agencies implementing
the energy efficiency program to review program accomplishments, measure
funding levels, and explore ways to improve program effectiveness The
meeting(s) will be held so that program adjustments can be filed with the utility's
conservation program filing
36 In the event that any regulatory body undertakes an audit or review of cost
allocations and affiliated transactions involving Cascade and MDU Resources
regulated operations, Cascade or MDU Resources will provide to the
Commission and Commission Staff a copy of any report available to MDU
Resources or Cascade resulting from such audit or review Upon request and
subject to execution of a confidentiality agreement that incorporates the terms of
the Commission's standard protective order, MDU and Cascade will provide
copies of relevant documents subject to this commitment to Public Counsel and
other consumer parties to this docket.
12
6201 6- 0002/LEGAL13166275 7
Attachment 1
•
MDU Resources Group, Inc.
Post - Acquisition Cascade Organizational Chart
MDU Resources
Group, Inc.
Issue MDUR $2 M
Equity \1
Transfer to
Debtco
Debtco 4 $85 M Third Party Lender
Sub of MDUR Issue Debt to Debtco
$305 M Transfer
Transfer Equico Cash to
Debt & Equity Proceeds Paying Agent
to Equico Equico Paying
Sub of Debtco _ $305 IN` Agent
Paying Agent
pays Cascade
$305 M Shareholders
• of record as of
Cascade acquisition date
Cascade. assets Cascade Natural Shareholders
remain at Book Value Gas Corporation
as of acquisition date Sub of Equico
Note: Merger Sub is only a temporary subsidiary created solely to effect the reverse triangular
merger and as such is not reflected on the organizational chart,
•
Attachment 2
CASCADE NATURAL GAS
900 ACCOUNTS STRETCH
Washington - Allocated
WASHINGTON A &G EXPENSE BENCHMARK
2006 CALENDAR YEAR
Washington 1/
Customer Accounting $ 3,874,200 00
Remove Acct. 904 from Customer Accounting (775,414.00)
Customer Service 1,189,336 00
Sales 441,711.00
A &G 17,713,012.00
Total Proforma Results $22,442,845
Less Low - Income Assistance (800,000.00)
Baseline @ 12 -31 -06 $21,642,845
Limit Baseline CPI A &G
2007 CPI Est. = $21,642,845 3.50% $22,400,345
2008 CPI Est. = $22,400,345 3.50% $23,184,357
1/ From settlement in Docket No UG- 060256, general rate case, including proforma adjustments
•
CERTIFICATE OF SERVICE
I. hereby certify that I have this day served this STIPULATION, in Docket
UG- 061721, by causing a copy to be sent by electronic mail and U.S mail to
John Cameron Melinda Davison
Davis Wright Tremame LLP Davison Van Cleve, P C.
Suite 2300 333 SW Taylor, Suite 400
1300 SW Fifth Avenue Portland, OR 97204
Portland, OR 97201 mid @dvclaw.com
johncameron @dwt.com
Edward A. Finklea Judy Krebs
Chad M. Stokes Public Counsel Section
Cable Huston Benedict Office of Attorney General
Haagensen & Lloyd LLP Suite 2000
Suite 2000 800 Fifth Avenue
1001 SW Fifth Avenue Seattle, WA 98104
Portland, OR 97204 judyk @atg.wa.gov
• efinklea @chbh.com
cstokes @chbh.com
Greg Trautman Ronald L. Roseman
Assistant Attorney General 2011 14th Avenue East
1400 S Evergreen Park Dr SW Seattle, WA 98112
P 0 Box 40128 ronaldroseman@comcast.net
Olympia, WA 98504
gtrautma@vvutc.wa.gov
•
CERTIFICATE OF SERVICE - 1
62016- 0002/LEGAL13110754.1
A
Robert B Sheppard
30 Glacier Key
Bellevue, WA 98006
Dated this 9th day of May, 2007
PERKINS COTE LLP
By
James M. Van Nostrand, WSBA #15897
Lawrence H. Reichman, OSB #86083
Attorneys for MDU Resources Group, Inc. and
Cascade Natural Gas Corporation
CERTIFICATE OF SERVICE - 2
62016 -0002 /LEGAL13110754.1
•
BUSINESS OF THE CITY COUNCIL
YAKIMA, WASHINGTON
AGENDA STATEMENT
Item No (1
For Meeting of July 3. 2007
ITEM TITLE Consideration of an Ordinance relating to the non - exclusive franchise granted
to Cascade Natural Gas Corporation under City of Yakima Ordinance No
2005 -51 to construct, operate, and maintain a natural gas
transmission /distribution system /facility(ies) in the City of Yakima and providing
consent under section 2 13 of that Ordinance to a merger transaction whereby
MDU Resources Group, Inc would acquire all of the outstanding stock of
Cascade Natural Gas Corporation, and Cascade Natural Gas Corporation
would become a wholly owned subsidiary of MDU Resources Group, Inc
SUBMITTED BY Legal Department
O
CONTACT PERSON/TELEPHONE Helen A. Harvey, Senior Assistant City Attorney 575 -6030
SUMMARY EXPLANATION On September 20, 2005, the City Council adopted Ordinance No
2005 -51 granting a non - exclusive franchise to Cascade Natural Gas Corporation ( "Cascade ") to
construct, operate, and maintain a natural gas transmission /distribution system /facility(ies) in the
City of Yakima The voters approved the franchise Ordinance on the November 8, 2005 general
ballot. Cascade recently entered into an Agreement and Plan of Merger (the merger
transaction ") with MDU Resources Group, Inc ( "MDU Resources "), under which upon closing of
the merger transaction, MDU Resources would acquire all of the outstanding common stock of
Cascade and Cascade would thereafter become a wholly owned subsidiary of MDU Resources
which will continue to operate as Cascade Natural Gas Corporation, with its operating
headquarters in the State of Washington The closing of the merger transaction was subject to
regulatory approval by the Washington Utilities and Transportation Commission ( "WUTC "), and
the WUTC approved the merger transaction on June 27, 2007, iri WUTC Docket UG- 061721 in
Order 06 As provided for in Section 2 13 of Ordinance No 2005 -51 Cascade has requested
that the City give written consent to the merger transaction If the City provides consent to the
merger transaction, then upon. closing of the merger transaction, there will be a continuation by
Cascade of all obligations and liabilities under Ordinance No 2005 -51 The attached ordinance
provides the City's consent to the merger transaction between Cascade and MDU Resources
Resolution Ordinance X Other (specify)
1
Contract Mail to (name & address) Mail Ordinance to Daniel E. Meredith, Sr. Director,
Safety & Engineering, Cascade Natural Gas Corporation, 222 Fairview Avenue North, Seattle,
WA 98109 Phone (206) 381 -6720
Funding Source
APPROVAL FOR SUBMITTAL �Q - City Manager
STAFF RECOMMENDATION Pass ordinance
BOARD /COMMISSION RECOMMENDATION N/A
COUNCIL ACTION