BRITISH COLU MBIA UTILITIES COM MISSION ORDER NUMBER G-4 3-06 SIXTH FLOOR, 900 HOWE STREET, BOX 250 TELEPHONE: (604) 660-4700 VANCOUVER, B.C. V6Z 2N3 CANADA BC TOLL FREE: 1-800-663-1385 web site: http://www.bcuc.com FACSIMILE: (604) 660-1102 IN THE MATTER OF the Utilities Commission Act, R.S.B.C. 1996, Chapter 473 and An Application by Terasen Gas Inc. and Terasen Gas (Vancouver Island) Inc. For Approval of the Issuance of Common Shares by Terasen Gas (Vancouver Island) Inc. And for Implementation of Capital Structure Changes BEFORE: L.F. Kelsey, Commissioner ) April 7, 2006 O R D E R WHEREAS: A. The Commission by Order No. G-14-06 and accompanying Decision dated March 2, 2006 (“the Decision”) with respect to the allowed return on equity and thickness for Terasen Gas Inc. (“TGI”) and Terasen Gas (Vancouver Island) Inc. (“TGVI”) ordered that the appropriate equity thickness for TGI should be increased from 33 percent to 35 percent and for TGVI it should be increased from 35 percent to 40 percent, effective January 1, 2006; and B. The Decision under section 5.1.3 for TGI and section 5.2 for TGVI required that each company file within 30 days of the Decision a document setting out how and when each company will implement the change to its capital structure in compliance with the ring-fencing conditions approved by the Commission on page 49 of the Kinder Morgan, Inc. (“KMI”) Decision (“KMI Decision”); and C. Commission Order No. G-116-05, accompanying the KMI Decision, approved the acquisition of the common shares of Terasen Inc. by Kinder Morgan, Inc. and 0731297 B.C. Ltd.; and D. Section 7.2.1 of the KMI Decision set out the ring-fencing conditions, which included, under item (1) that each Terasen Utility shall maintain, on a basis consistent with BCUC orders and accounting practices, a percentage of common equity to total capital that is at least as much as that determined by the Commission from time to time for ratemaking purposes; and E. On March 31, 2006 TGI and TGVI filed with the Commission a document to comply with the Decision and KMI Decision directives identified above (“the Application”); and F. The Application explains how TGI and TGVI would implement the change to its capital structures; and G. TGI calculates that the 2006 forecast mid-year rate base of $2,506 million multiplied by the approved common equity percentage of 35 percent results in a required common equity amount of $877.1 million. TGI has determined that its common equity as at December 31, 2005 was $846 million and its earnings for January and February 2006 totalled approximately $37 million. Since the earnings were retained, TGI estimates the . . . 2
BRITISH COLUMBIA UTILITIES COMMISSION ORDER NUMBER G-43-06 2 common equity at the end of February 2006 was $883 million. Accordingly, TGI has achieved the required equity component and does not require additional common equity capital to meet the 35% approved level; and H. TGVI calculates that the 2006 forecast mid-year rate base of $477.6 million multiplied by the approved equity percentage of 40 percent results in a required common equity of $191.0 million for 2006. TGVI has determined that its common equity as at December 31, 2005 was $172.2 million and forecasts that its earnings for January through March 2006 will total approximately $4.3 million. The forecast common equity at the end of March 2006 of approximately $176.5 million results in a shortfall of $14.5 million when compared to the mid-year requirement of $191.0 million; and I. In the Application, TGVI requests approval to issue, upon receipt of payment therefore, 285 common shares in the amount of $14.5 million to Terasen Inc. The common shares issued are each valued at approximately $50,800 per share; and J. Additionally, TGI and TGVI requests confirmation from the Commission that the intended actions laid out in the Application by TGI and TGVI with respect to the implementation of the approved capital structure changes approved by Commission Order No. G-14-06 meet the conditions as set out in sections 5.1.3 and 5.2 of the Decision and meet the ring-fencing conditions set out in section 7.2.1 (1) of the KMI Decision; and K. The Commission has reviewed the Application and is satisfied that approval in principle of the TGVI share issue is warranted and in the public interest. NOW THEREFORE the Commission orders as follows: 1. Pursuant to Section 50(2) of the Utilities Commission Act, the Application by TGVI to issue 285 common shares to Terasen Gas Inc. for a total of $14.5 million is approved, in principle, subject to TGVI filing the final share documents. 2. The Commission confirms that the intended actions laid out in the Application by TGI and TGVI with respect to the implementation of the approved capital structure changes meet the conditions as set out in sections 5.1.3 and 5.2 of the Decision and meet the ring-fencing conditions set out in section 7.2.1 (1) of the KMI Decision. DATED at the City of Vancouver, in the Province of British Columbia, this 11 th day of April 2006. BY ORDER Original signed by L.F. Kelsey Commissioner Orders/TGI_TGVI Capital Structure Changes
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