NiSource Puts CNR On The Block

Operation Has 247 Employees In West Virginia

George Hohmann
Daily Mail Business Editor

Friday October 11, 2002

NiSource Inc. announced today it intends to sell Columbia Natural Resources Inc., the company's natural gas exploration and production business based in Charleston.

Columbia Natural Resources has 247 employees in West Virginia. The company said 104 of them are based in the City Center West office tower on Pennsylvania Avenue.

The decision to sell Columbia Natural Resources is part of NiSource's business strategy of focusing on its core, regulated assets and strengthening its balance sheet by reducing debt, the company said.

"CNR, our U.S. exploration and production arm, is valued by the marketplace for its good assets and great people," said Gary Neale, NiSource chairman, president and chief executive officer. "We're making this decision to better position NiSource in today's volatile stock market environment and to complement our future equity offering as we continue to focus on strengthening our balance sheet.

"Balancing our credit rating requirements with our shareholders' expectations also remains a key priority," Neale said. "This action enhances our ability to achieve both goals."

CNR has interest in more than 8,000 wells in the eastern United States. A Canadian affiliate has holdings in New Brunswick and Ontario, NiSource said.

NiSource said it has chosen Credit Suisse First Boston to act on its behalf in the transaction. NiSource spokeswoman Kris Falzone said the company hopes to sell CNR by year-end, "if we find the right buyer. It certainly is not a fire sale. We believe there will be interested parties because CNR is an excellent asset with good people."

Columbia Natural Resources could be a good fit for several companies, including Dominion, which already has extensive gas exploration and production assets in West Virginia. A Dominion spokesman declined to comment.

The business also might attract a suitor from the western United States looking to establish a base near major eastern markets.

NiSource has not set a target sales price for the business, Falzone said.

Employees were told this morning of NiSource's decision to sell CNR, she said. Neale, NiSource Chief Operating Officer Sam Miller and CNR President Steve Warnick met with employees in Charleston, she said.

NiSource is undergoing a company-wide reorganization and downsizing. Earlier this month, the company told all of its employees — including workers at CNR and Columbia Gas Transmission — that they would know their job status by Oct. 15.

"The restructuring of NiSource is not related to the decision to sell CNR," Falzone said.

Employees were told this morning that the realignment of CNR is essentially complete, she said. "So employees, as part of the meeting this morning, were told we do not anticipate any further actions at this time as far as the reorganization affecting CNR specifically." The reorganization process at CNR was essentially completed earlier this week, she said.

CNR has a total of 395 employees. Of that total, 150 are represented by the Paper, Allied-Industrial, Chemical and Energy International Union, Falzone said. Ninety of the union workers are in West Virginia and 60 are in Kentucky, she said.

Charlie Armstead, president of Local 5-628, said the possible sale of Columbia Natural Resources has been a "hot rumor" ever since NiSource bought Columbia Gas.

"They're desperate for money," he said of NiSource. "They didn't have the money to buy the company when they bought it."

Consequently, NiSource's announcement that it will sell CNR isn't a surprise to the union.

If the company finds a buyer, the main impact on the union is that it will have another company to negotiate future contracts with, he said. The sale shouldn't cause a restructuring of the locals.

The five-year contract signed in September includes a clause that requires anyone who buys CNR to accept the current contract. "A lot of times companies don't like to go along with them too well, but that should protect (the workers)," Armstead said.

During an interview just before NiSource's annual meeting in Charleston last year, Neale praised CNR, calling it "a key core asset of this corporation, going forward."

Falzone said, "The decision was made just this week to seek a buyer for the exploration and production assets.

"It's something that's been considered for some time now," she said.

NiSource has been laden with debt since it acquired Columbia Energy Group on Nov. 1, 2000. The deal, valued at $6 billion, transformed NiSource from primarily being an electric company to primarily being a natural gas company. The company has been paying down debt since the deal was completed. Falzone said that as of June 30, NiSource has $1.7 billion in short-term debt and $5.9 billion in long-term debt.

Wall Street has hammered energy companies in the wake of the Enron bankruptcy. NiSource stock trades on the New York Stock Exchange under the symbol, "NI." The market reacted favorably to today's news. The stock was trading at $16.55 a share late this morning, up 4.28 percent from this morning's opening.

The stock's 52-week high is $24.99, reached May 24. The stock hit a 52-week low of $14.51 on Wednesday. News of NiSource's plan for CNR caught the attention of state and local leaders.

Amy Shuler Goodwin, Gov. Bob Wise's press secretary, said Wise hopes that the sale of CNR will be only a temporary adjustment and that the new owner will be locally based. She said the state wants to work with the new owner to preserve jobs in West Virginia.

Charlie Loeb, an at-large Charleston city councilman, said, "Any time one of your major employers is up for sale, that's a concern for the city." Loeb, a member of the Finance Committee, said this morning, "You hope you get the kind of owners we've seen with Dow and BB&T.

"Those kind of corporate citizens are important to the life of the community."

Writers Brian Bowling, Jim Wallace, Kris Wise and Josh Hafenbrack contributed to this story.

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