B R I T I S H C O L U M B I A U T I L I T I E S C O M M IS S I O N O R D E R N U M B E R G-28-96 SIXTH FLOOR, 900 HOWE STREET, BOX 250 TELEPHONE: (604) 660-4700 VANCOUVER, B.C. V6Z 2N3 BC TOLL FREE: 1-800-663-1385 CANADA a FACSIMILE: (604) 660-1102 IN THE MATTER OF the Utilities Commission Act, S.B.C. 1980, c. 60, as amended and An Application by Centra Gas British Columbia Inc. for Approval of a Risk Management Strategy BEFORE: M.K. Jaccard, Chairperson; and ) L.R. Barr, Deputy Chairperson ) March 15, 1996 O R D E R WHEREAS: A. Commission Order No. G-105-95 provided conditional approval of an application jointly filed by Centra Gas British Columbia Inc.Ê("Centra Gas") and Pacific Coast Energy Corporation ("PCEC") (Òthe CompaniesÓ) to issue common equity and debt for the purposes of financing the existing rate base and ongoing capital expenditures of both Companies and to grant security, including security over common shares, in conjunction with such financing; and B. The Companies underwent a reorganization as part of a new agreement with the Province of British Columbia, identified as the Vancouver Island Natural Gas Pipeline Agreement (Òthe New AgreementÓ), which restructured the terms under which natural gas service is provided to customers on Vancouver Island and the Sunshine Coast. The reorganization resulted in Centra Gas transferring its Vancouver Island and Sunshine Coast assets to PCEC and PCEC being renamed Centra Gas British Columbia Inc.; and C. In accordance with the New Agreement and Order No. G-105-95 Centra Gas refinanced the combined operations and issued debt totaling $208 million with interest at a floating rate; and D. On March 8, 1996 Centra Gas applied to the Commission, pursuant to Section 57 of the Utilities Commission Act (Òthe ActÓ), for approval to implement a risk management strategy for rate base financing (Òthe ApplicationÓ); and . . . /2
B R I T IS H C O L U M B I A U T I L IT I E S C O M M IS S I O N O R D ER N U M B E R G-28-96 2 E. In its risk management strategy Centra Gas intends to use interest rate swaps to fix the interest cost of a majority of its floating rate debt. Centra Gas proposes to fix the cost of debt of $35 million for 5 years, $60 million for 7 years and $95 million for 8 years. Centra Gas anticipates that the weighted average cost of debt after executing the swaps should be about 8.25 percent; and F. The Commission has reviewed the Application and supporting material and finds that approval of the risk management strategy is necessary and in the public interest. NOW THEREFORE the Commission orders as follows: 1. The Commission approves in principle for Centra Gas, pursuant to SectionÊ57 of the Act, the risk management strategy as applied for in the March 8, 1996 Application. 2. Centra Gas is to apply to the Commission, prior to placement of an interest rate swap, for approval of a range of interest rates or a maximum interest rate resulting from the interest rate swap. 3. Following the placement of the interest rate swap Centra Gas is to provide the Commission with the final pricing information. DATED at the City of Vancouver, in the Province of British Columbia, this ÊÊÊÊÊ19thÊÊÊÊÊÊday of March, 1996. BY ORDER Original signed by: Lorna R. Barr Deputy Chairperson Orders/CG-Risk Mgmt Strategy
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