AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON ____________, 2002
Registration No. 333-________
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
NORTHWEST NATURAL GAS COMPANY
(Exact name of registrant as specified in its charter)
OREGON 93-0256722
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
One Pacific Square, 220 N.W. Second Avenue
Portland, Oregon 97209
503-226-4211
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
---------------
RICHARD G. REITEN
Chairman and Chief Executive Officer
One Pacific Square, 220 N.W. Second Avenue
Portland, Oregon 97209
503-226-4211
BRUCE R. DeBOLT JOHN T. HOOD, Esq.
Senior Vice President, Finance, Thelen Reid & Priest LLP
and Chief Financial Officer 40 West 57th Street
One Pacific Square, 220 N.W. Second Avenue New York, New York 10019
Portland, Oregon 97209 212-603-2000
503-226-4211
(Names, addresses, including zip codes, and telephone numbers, including area
codes, of agents for service)
Approximate date of commencement of proposed sale to the public: From time
to time after this Registration Statement becomes effective as determined by
market conditions.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. |_|
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. |X|
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. |_| __________
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_| __________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. |_|
CALCULATION OF REGISTRATION FEE
=========================================================================================================
Title of each Proposed Proposed maximum
class of securities Amount to be maximum offering aggregate Registration
to be registered registered price per unit offering price fee
---------------------------------------------------------------------------------------------------------
DEBT SECURITIES........... $150,000,000 100%(1) $150,000,000(1) $13,800
=========================================================================================================
(1) Inserted solely for the purpose of calculating the registration fee.
The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933, as amended, or until the registration statement
shall become effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.
================================================================================
SUBJECT TO COMPLETION, DATED ___________, 2002
PROSPECTUS
$150,000,000
[GRAPHIC OMITTED]
NORTHWEST NATURAL GAS COMPANY
SECURED MEDIUM-TERM NOTES, SERIES B
(SERIES OF FIRST MORTGAGE BONDS)
AND
UNSECURED MEDIUM-TERM NOTES, SERIES B
Northwest Natural Gas Company (NW Natural) intends to offer from time to
time up to $150,000,000 in principal amount of its secured medium-term notes and
unsecured medium-term notes. The secured medium-term notes will be secured by a
mortgage that constitutes a first mortgage lien on certain gas properties owned
from time to time by NW Natural. The unsecured medium-term notes will consist of
notes or other unsecured evidences of indebtedness. We will refer to the secured
medium-term notes and unsecured medium-term notes in this prospectus
collectively as the Medium-Term Notes.
The Medium-Term Notes will be offered on terms to be decided at the time of
sale. NW Natural will provide specific terms of the Medium-Term Notes, including
their offering prices, interest rates and maturities, in pricing supplements to
this prospectus. The pricing supplements may also add, update or change
information contained in this prospectus. You should read this prospectus and
any pricing supplement carefully before you invest.
The Medium-Term Notes will not be listed on any securities exchange. There
can be no assurance that there will be a secondary market for the Medium-Term
Notes or liquidity on the secondary market if one develops.
NW Natural may offer the Medium-Term Notes directly or through
underwriters, agents or dealers. The pricing supplements will describe the terms
of any particular plan of distribution, including any underwriting arrangements.
The "Plan of Distribution" section on page 13 of this prospectus also provides
more information on this topic.
NW Natural may sell the Medium-Term Notes to the agents as principals for
resale at varying or fixed offering prices or through the agents as agents using
their reasonable best efforts on NW Natural's behalf. Unless otherwise specified
in the pricing supplement, the price to the public for the Medium-Term Notes
will be 100% of the principal amount. If NW Natural sells all of the Medium-Term
Notes, it expects to receive proceeds of between $149,812,500 and $148,875,000
after paying the agents' discounts and commissions of between $187,500 and
$1,125,000 and before deducting expenses payable by NW Natural. NW Natural may
also sell the Medium-Term Notes directly to investors without the assistance of
the agents (whether acting as principal or as agent).
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
_________, 2002
MERRILL LYNCH & CO.
UBS WARBURG
BANC ONE CAPITAL MARKETS, INC.
U.S. BANCORP PIPER JAFFRAY INC.
--------------------------------------------------------------------------------
The information in this prospectus is not complete and may be changed. Northwest
Natural Gas Company may not sell these securities until the registration
statement filed with the Securities and Exchange Commission is effective. This
prospectus is not an offer to sell these securities and it is not soliciting an
offer to buy these securities in any jurisdiction where the offer or sale is not
permitted.
YOU SHOULD RELY ONLY ON THE INFORMATION INCORPORATED BY REFERENCE OR PROVIDED IN
THIS PROSPECTUS. NW NATURAL HAS NOT AUTHORIZED ANYONE ELSE TO PROVIDE YOU WITH
DIFFERENT INFORMATION. NW NATURAL IS NOT MAKING AN OFFER OF THE MEDIUM-TERM
NOTES IN ANY JURISDICTION WHERE THE OFFER IS NOT PERMITTED. YOU SHOULD NOT
ASSUME THAT THE INFORMATION IN THIS PROSPECTUS IS ACCURATE AS OF ANY DATE OTHER
THAN THE DATE ON THE FRONT COVER HEREOF.
TABLE OF CONTENTS
WHERE YOU CAN FIND MORE INFORMATION............................................1
FORWARD-LOOKING STATEMENTS.....................................................1
NW NATURAL.....................................................................1
USE OF PROCEEDS................................................................2
RATIO OF EARNINGS TO FIXED CHARGES.............................................2
BOOK-ENTRY SYSTEM..............................................................2
DESCRIPTION OF THE SECURED NOTES...............................................3
DESCRIPTION OF THE UNSECURED NOTES.............................................9
PLAN OF DISTRIBUTION..........................................................13
EXPERTS.......................................................................15
LEGALITY......................................................................15
WHERE YOU CAN FIND MORE INFORMATION
NW Natural files annual, quarterly and special reports and other
information with the Securities and Exchange Commission (SEC). Reports, proxy
statements and other information filed by NW Natural can be read and copied at
the public reference facilities of the SEC, Room 1024, Judiciary Plaza, 450
Fifth Street, N.W., Washington, D.C. 20549. You can obtain additional
information about the Public Reference Room by calling the SEC at
1-800-SEC-0330.
In addition, the SEC maintains a Web site (http://www.sec.gov) that
contains reports, proxy statements and other information filed electronically by
NW Natural. NW Natural also maintains a Web site (http://www.nwnatural.com).
Information contained on NW Natural's Web site does not constitute part of this
prospectus.
NW Natural's common stock is listed on the New York Stock Exchange under
the symbol "NWN", and information concerning NW Natural can also be inspected at
the office of that exchange located at 20 Broad Street, New York, New York
10005.
The SEC allows NW Natural to "incorporate by reference" the information
that NW Natural files with the SEC, which means that NW Natural may, in this
prospectus, disclose important information to you by referring you to those
documents. The information incorporated by reference is an important part of
this prospectus. NW Natural is incorporating by reference the documents listed
below and any future filings NW Natural makes with the SEC under Sections 13(a),
13(c), 14 or 15(d) of the Securities Exchange Act of 1934, as amended (Exchange
Act), until NW Natural sells all of the Medium-Term Notes described in this
prospectus, and any filings which NW Natural makes with the SEC after the
initial filing date of the registration statement of which this prospectus is a
part and prior to the effective date of such registration statement. Information
that NW Natural files in the future with the SEC will automatically update and
supersede this information.
o NW Natural's Annual Report on Form 10-K for the year ended December
31, 2001.
o NW Natural's Quarterly Reports on Form 10-Q for the quarters ended
March 31 and June 30, 2002.
o NW Natural's Current Reports on Form 8-K filed March 1, 2002 and May
20, 2002.
You may request a copy of these documents, at no cost to you, by writing or
calling Shareholder Services, Northwest Natural Gas Company, One Pacific Square,
220 N.W. Second Avenue, Portland, Oregon 97209, telephone 503-226-4211.
FORWARD-LOOKING STATEMENTS
This document does, and the documents incorporated herein by reference may,
contain forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended (Securities Act), and Section 21E of the
Exchange Act. Although NW Natural believes these statements are based on
reasonable assumptions, no assurance can be given that actual results will not
differ from those in the forward-looking statements contained herein and in the
incorporated documents. The forward-looking statements contained herein and in
the incorporated documents may be affected by various uncertainties. For a
discussion of factors which may affect forward-looking statements contained
herein and in the incorporated documents, see NW Natural's most recent Annual
Report on Form 10-K and its most recent Quarterly Report on Form 10-Q.
NW NATURAL
NW Natural is principally engaged in the distribution of natural gas to
customers in western Oregon and southwestern Washington, including the Portland
metropolitan area. NW Natural and its predecessors have supplied gas service to
the public since 1859. NW Natural's executive offices are located at One Pacific
Square, 220 N.W. Second Avenue, Portland, Oregon 97209. Its telephone number is
503-226-4211.
USE OF PROCEEDS
The net proceeds to be received by NW Natural from the sale of the
Medium-Term Notes will be added to the general funds of NW Natural and used for
corporate purposes, primarily to fund, in part, NW Natural's ongoing utility
construction program.
NW Natural expects its utility construction expenditures in 2002 to
aggregate $84 million, and in the five-year period, 2002-2006, to aggregate
between $450 million and $500 million.
It is estimated that 60% of the funds required for utility purposes during
the 2002-2006 period will be internally generated and that the balance, as well
as substantially all of the funds required for the refunding of maturing and
higher-cost debt and preferred and preference stock, will be raised through the
sale of equity and debt securities, including the Medium-Term Notes, in such
amounts and at such times as NW Natural's cash requirements and market
conditions shall determine. Approximately $40 million of debt securities will
mature and $25 million of preference stock will be redeemed in 2002.
RATIO OF EARNINGS TO FIXED CHARGES
The ratios of earnings to fixed charges, calculated according to the rules
set forth under the Securities Act, for the following periods were:
SIX MONTHS ENDED TWELVE MONTHS ENDED
---------------- ------------------------------------------------------
JUNE 30, DECEMBER 31,
---------------- ------------------------------------------------------
2002 2001 2000 1999 1998 1997
---------------- ---------- ---------- ---------- ---------- ----------
3.77 3.14 3.14 3.12 2.20 2.99
Earnings consist of net income to which has been added taxes on income and
fixed charges. Fixed charges consist of interest on all indebtedness,
amortization of debt expense and discount or premium, and the estimated interest
portion of rentals charged to income.
BOOK-ENTRY SYSTEM
The Medium-Term Notes will trade through The Depository Trust Company
("DTC"). The Medium-Term Notes will be represented by a global certificate and
registered in the name of Cede & Co., DTC's nominee.
DTC is a New York clearing corporation and a clearing agency registered
under Section 17A of the Exchange Act. DTC holds securities for its
participants. DTC facilitates settlement of securities transactions among its
participants through electronic computerized book-entry changes in the
participants' accounts. This eliminates the need for physical movement of
securities certificates. The participants include securities brokers and
dealers, banks, trust companies and clearing corporations. DTC is owned by a
number of its participants and by the New York Stock Exchange, Inc., the
American Stock Exchange LLC, and the National Association of Securities Dealers,
Inc. Others who maintain a custodial relationship with a participant can use the
DTC system. The rules that apply to DTC and those using its systems are on file
with the SEC.
Purchases of the Medium-Term Notes within the DTC system must be made
through participants, which will receive a credit for the Medium-Term Notes on
DTC's records. The beneficial ownership interest of each purchaser will be
recorded on the participants' records. Beneficial owners will not receive
written confirmation from DTC of their purchases, but beneficial owners should
receive written confirmations of the transactions, as well as periodic
statements of their holdings, from the participants through which they purchased
the Medium-Term Notes. Beneficial owners will not receive certificates for their
Medium-Term Notes, unless use of the book-entry system for the Medium-Term Notes
is discontinued.
To facilitate subsequent transfers, all Medium-Term Notes deposited by
participants with DTC are registered in the name of DTC's nominee, Cede & Co.
The deposit of the Medium-Term Notes with DTC and their registration in the name
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of Cede & Co. effects no change in beneficial ownership. DTC has no knowledge of
the actual beneficial owners of the Medium-Term Notes. DTC's records reflect
only the identity of the participants to whose accounts such Medium-Term Notes
are credited. These participants may or may not be the beneficial owners.
Participants will remain responsible for keeping account of their holdings on
behalf of their customers.
Conveyance of notices and other communications by DTC to participants, and
by participants to beneficial owners, will be governed by arrangements among
them.
Redemption notices will be sent to DTC. If less than all of the Medium-Term
Notes are being redeemed, DTC's practice is to determine by lot the amount of
Medium-Term Notes of each participant to be redeemed.
Neither DTC nor Cede & Co. will itself consent or vote with respect to
Medium-Term Notes. Under its usual procedures, DTC would mail an omnibus proxy
to NW Natural as soon as possible after the record date. The omnibus proxy
assigns the consenting or voting rights of Cede & Co. to those participants to
whose accounts the Medium-Term Notes are credited on the record date. NW Natural
believes that these arrangements will enable the beneficial owners to exercise
rights equivalent in substance to the rights that can be directly exercised by a
registered holder of the Medium-Term Notes.
Payments of redemption proceeds, principal of, and interest on the
Medium-Term Notes will be made to Cede & Co., or such other nominee as may be
requested by DTC. DTC's practice is to credit participants' accounts on the
relevant payment date in accordance with their respective holdings shown on
DTC's records unless DTC has reason to believe that it will not receive payments
on that payment date. Payments by participants to beneficial owners will be
governed by standing instructions and customary practices. Payments will be the
responsibility of participants and not of DTC, the Corporate Trustee (as defined
below), or NW Natural. Payment of redemption proceeds, principal and interest to
DTC is the responsibility of NW Natural. Disbursement of payments to
participants is the responsibility of DTC, and disbursement of payments to the
beneficial owners is the responsibility of participants.
Except as provided in this prospectus, a beneficial owner will not be
entitled to receive physical delivery of the Medium-Term Notes. Accordingly,
each beneficial owner must rely on the procedures of DTC to exercise any rights
under the Medium-Term Notes.
DTC may discontinue providing its services as securities depository with
respect to the Medium-Term Notes at any time by giving reasonable notice to NW
Natural. In the event no successor securities depository is obtained,
certificates for the Medium-Term Notes will be printed and delivered to the
beneficial owners. If NW Natural decides to discontinue use of the DTC system of
book-entry transfers, certificates for the Medium-Term Notes will be printed and
delivered to the beneficial owners.
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that NW Natural believes to be reliable, but NW
Natural does not take responsibility for the accuracy of this information.
DESCRIPTION OF THE SECURED NOTES
GENERAL
The secured notes, which are a series of NW Natural's First Mortgage Bonds
("Bonds"), are to be issued under NW Natural's Mortgage and Deed of Trust, dated
as of July 1, 1946, to Deutsche Bank Trust Company Americas (formerly known as
Bankers Trust Company)(the "Corporate Trustee") and Stanley Burg (successor to
R.G. Page and J.C. Kennedy), as trustees (together, "Mortgage Trustees"), as
supplemented by twenty supplemental indentures, all of which are collectively
referred to as the "Mortgage".
Material terms of the secured notes are summarized below. The Mortgage was
filed with the SEC and you should read the Mortgage for provisions that may be
important to you. The statements in this "Description of the Secured Notes"
concerning the secured notes and the Mortgage make use of terms defined in the
Mortgage and are qualified in their entirety by express reference to the cited
3
sections and articles. They may be changed with respect to any secured note by
the applicable pricing supplement, which should be read in conjunction with this
description.
The secured notes will be offered on a continuing basis and each secured
note will mature on such date, not less than nine months or more than 30 years
from its date of issue, as selected by the purchaser and agreed to by NW
Natural.
The pricing supplement relating to each secured note will set forth the
principal amount, interest rate, interest payment dates, record dates, issue
price and agent's commission or discount, original issue and maturity dates,
redemption or repayment provisions, if any, and other material terms of such
secured note.
INTEREST
Unless otherwise specified in the pricing supplement relating to any
secured note, interest on such secured note will be payable semi-annually in
arrears on June 1 and December 1 of each year and at maturity.
Unless otherwise specified in the pricing supplement relating to any
secured note, interest payable on any interest payment date for any secured note
will be paid to the person in whose name such secured note is registered on the
record date with respect to such interest payment date, which shall be the May
15 or November 15 (whether or not a business day), as the case may be,
immediately preceding such interest payment date; provided that, (i) if the
original issue date of any secured note is after a record date and before the
corresponding interest payment date, such secured note shall bear interest from
the original issue date, but payment of interest shall commence on the second
interest payment date following the original issue date, and (ii) interest
payable on the maturity date will be paid to the person to whom the principal
thereof is paid.
Unless otherwise indicated in the applicable pricing supplement, interest
on the secured notes will be computed on the basis of a 360-day year consisting
of twelve 30-day months.
FORM, EXCHANGE AND PAYMENT
The secured notes will be issued in fully registered form in denominations
of $1,000 or any amount in excess thereof that is an integral multiple of
$1,000. The secured notes will be exchangeable at the office of Deutsche Bank
Trust Company Americas in New York City, without charge other than taxes or
other governmental charges incident thereto. Principal, premium, if any, and
interest will be payable at such office. (See Twentieth Supplemental Indenture,
Section 1.01.) However, if the secured notes are held by DTC or its nominee,
owners of beneficial interests in the secured notes will not be entitled to have
any individual secured notes registered in their names, and transfers of
beneficial interests and payments of principal, premium, if any, and interest
will be made as described herein under "Book-Entry System".
REDEMPTION
To the extent, if any, provided in the pricing supplement relating to any
secured note, such secured note will be redeemable, on 30 days' notice, in whole
or in part, at any time on or after the initial redemption date, if any, fixed
at the time of sale and set forth in the applicable pricing supplement. On or
after the initial redemption date, such secured note will be redeemable in whole
or in part, at the option of NW Natural, at a redemption price determined in
accordance with the following paragraph or as described in the related pricing
supplement, plus accrued interest to the redemption date.
Unless otherwise specified in the pricing supplement relating to any
secured note, the redemption price for each secured note subject to redemption
shall, for the twelve-month period commencing on the initial redemption date, be
equal to a certain percentage of the principal amount of such secured note and
thereafter, shall decline for the twelve-month period commencing on each
anniversary of the initial redemption date by a percentage of the principal
amount ("Reduction Percentage") until the redemption price shall be 100% of the
principal amount. The initial redemption date and price and any Reduction
Percentage with respect to each secured note subject to redemption will be fixed
at the time of sale and set forth in the applicable pricing supplement.
4
If so specified in the pricing supplement relating to any secured note, NW
Natural may not, prior to the redemption limitation date, if any, set forth in
such pricing supplement, redeem such secured note as described above as a part
of, or in anticipation of, any refunding operation by the application, directly
or indirectly, of moneys borrowed having an effective interest cost to NW
Natural (calculated in accordance with generally accepted financial practice) of
less than the effective interest cost to NW Natural (similarly calculated) of
such secured note.
If, at the time the notice of redemption shall be given, the redemption
money has not been deposited with the Corporate Trustee, the redemption may be
made subject to the receipt of such money before the redemption date, and such
notice shall be of no effect unless such money is so received.
Unless otherwise indicated in the applicable pricing supplement, the
secured notes will not be subject to any sinking fund.
REPAYMENT AT OPTION OF HOLDER
To the extent, if any, provided in the pricing supplement relating to any
secured note, such secured note will be repayable by NW Natural at the option of
the registered holder thereof on the date specified in such pricing supplement
("Repayment Date"), at a price equal to a percentage of the principal amount of
such secured note specified in such pricing supplement ("Repayment Price"), plus
accrued interest to the date of repayment.
For any secured note to be repaid, NW Natural must receive such secured
note at its office or agency in the Borough of Manhattan, The City of New York
(currently, the office of the Corporate Trustee), within the period ("Election
Period") commencing at the opening of business and ending at the close of
business on the dates specified in the pricing supplement relating to such
secured note (provided that, if the last day of the Election Period shall not be
a business day, the Election Period shall end at the close of business on the
next succeeding business day), together with the form entitled "Option to Elect
Repayment" on the reverse of, or otherwise accompanying, such secured note duly
completed. Any such election so received by NW Natural within such Election
Period shall be irrevocable.
The repayment option may be exercised by the registered holder of a secured
note for less than the entire principal amount of such secured note, provided
that the principal amount to be repaid is equal to $1,000 or an integral
multiple of $1,000. All questions as to the validity, eligibility (including
time of receipt) and acceptance of any secured note for repayment will be
determined by the Corporate Trustee, whose determination will be final and
binding.
So long as DTC or DTC's nominee is the registered holder of the secured
notes, DTC or such nominee will be the only entity that can exercise the
repayment option, and repayment will be made in accordance with DTC's repayment
procedures in effect at the time. See "Book-Entry System." In order to ensure
that DTC or its nominee will timely exercise a repayment option with respect to
a particular beneficial interest in the secured notes, the beneficial owner of
such interest must instruct the broker or other participant through which it
holds such interest to notify DTC of its election to exercise the repayment
option. In addition, the beneficial owner must effect delivery of such interest
at the time such notice of election is given to DTC by causing the broker or
other participant through which it holds such interest to transfer such interest
on DTC's records to the Corporate Trustee. Different firms have different
deadlines for accepting instructions from their customers and, accordingly, each
beneficial owner of secured notes should consult the broker or other participant
through which it holds an interest in the secured notes in order to ascertain
the deadline by which such instruction must be given in order for timely notice
to be delivered to DTC.
PROVISIONS FOR MAINTENANCE OF PROPERTY
While the Mortgage contains provisions for the maintenance of the Mortgaged
and Pledged Property, the Mortgage does not permit redemption of Bonds pursuant
to these provisions.
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SECURITY
The secured notes together with all other Bonds issued or to be issued
under the Mortgage will be secured by the Mortgage, which constitutes a first
mortgage lien on certain gas utility properties owned from time to time by NW
Natural (except as stated below), subject to Excepted Encumbrances, including
minor defects and irregularities customarily found in properties of similar size
and character.
There are excepted from the lien:
(1) cash and securities,
(2) certain equipment, apparatus, materials or supplies,
(3) aircraft, automobiles and other vehicles,
(4) receivables, contracts, leases and operating agreements,
(5) timber, minerals, mineral rights and royalties, and
(6) all Natural Gas and Oil Production Property.
The Mortgage contains provisions that impose the lien of the Mortgage on
property acquired by NW Natural after the date of Mortgage, other than the
excepted property described above and subject to pre-existing liens. However, if
NW Natural consolidates, merges or sells substantially all of its assets to
another corporation, the lien created by the Mortgage will generally not cover
the property of the successor corporation, other than the property it acquires
from NW Natural and improvements, extensions, additions renewals and
replacements of that property. (See Mortgage, Article XVI.)
The Mortgage provides that the Mortgage Trustees shall have a lien upon the
mortgaged property, prior to that of the Bonds, for the payment of their
reasonable compensation and expenses and for indemnity against certain
liabilities. This lien takes priority over the lien securing the Bonds. (See
Mortgage, Section 96.)
ISSUANCE OF ADDITIONAL BONDS
Bonds may be issued from time to time on the basis of:
(1) 60% of property additions, after adjustments to offset retirements
(See "Modification of the Mortgage-- Issuance of Additional Bonds"
below),
(2) the retirement of Bonds or qualified lien bonds, or
(3) the deposit of cash.
With certain exceptions in the case of (2) above, the issuance of Bonds must
meet an earnings test. The adjusted net earnings before income taxes for 12
consecutive months out of the preceding 15 months must be at least twice the
annual interest requirements on all Bonds at the time outstanding, including the
additional issue, and all indebtedness of prior rank.
Property additions generally include gas, electric, steam or hot water
property or gas by-product property acquired after March 31, 1946, but may not
include securities, airplanes, automobiles or other vehicles, or natural gas
transmission lines or Natural Gas and Oil Production Property. As of June 30,
2002, approximately $334 million of property additions were available for use as
the basis for the issuance of Bonds. As of September 30, 2002, approximately
$148 million of retired Bonds were available for use as the basis for the
issuance of Bonds.
The Mortgage contains certain restrictions upon the issuance of Bonds
against property subject to liens.
6
The secured notes will be issued against property additions and/or retired
Bonds.
(See Mortgage, Sections 4-7, 20-30 and 46, and Third Supplemental
Indenture, Sections 3 and 4.)
RELEASE AND SUBSTITUTION OF PROPERTY
Property may be released on the basis of:
(1) the deposit of cash or, to a limited extent, purchase money mortgages,
(2) property additions, or
(3) the waiver of the right to issue Bonds on the basis of retired Bonds,
in each case without applying any earnings test.
Cash so deposited and cash deposited as the basis for the issuance of additional
Bonds may be withdrawn upon the bases stated in (2) and (3) above without
applying an earnings test. When property released is not funded property,
property additions used to effect the release may again, in certain cases,
become available as credits under the Mortgage, and the waiver of the right to
issue Bonds to effect the release may, in certain cases, cease to be effective
as such a waiver. Similar provisions are in effect as to cash proceeds of such
property. The Mortgage contains special provisions with respect to qualified
lien bonds pledged and the disposition of moneys received on pledged prior lien
bonds. (See Mortgage, Sections 5, 31, 32, 37, 46 to 50, 59 to 61, 100 and 118.)
SATISFACTION AND DISCHARGE OF MORTGAGE
The lien of the Mortgage may be canceled and discharged whenever all
indebtedness secured by the Mortgage has been paid. Bonds, or any portion of the
principal amount thereof, will, prior to the maturity thereof, be deemed to have
been paid for purposes of satisfying the lien of the Mortgage and shall not be
deemed to be outstanding for any other purpose of the Mortgage if there shall
have been deposited with the Corporate Trustee either:
(1) moneys in the necessary amount, or
(2) (a) direct obligations of the government of the United States of
America, or
(b) obligations guaranteed by the government of the United States of
America, or
(c) securities that are backed by obligations of the government of
the United States of America as collateral under an arrangement
by which the interest and principal payments on the collateral
generally flow immediately through to the holder of the security,
which in any case are not subject to redemption prior to maturity by
any one other than the holders, the principal of and the interest on
which when due, and without any regard to reinvestment thereof, shall
be sufficient to pay when due the principal of, premium, if any, and
interest due and to become due on said Bonds or portions thereof on
the redemption date or maturity date thereof, as the case may be. (See
Mortgage, Section 106 and Thirteenth Supplemental Indenture, Section
3.02.)
DEFAULTS AND NOTICE THEREOF
Defaults are:
(1) default in payment of principal,
(2) default for 60 days in payment of interest or of installments of funds
for retirement of Bonds,
7
(3) certain defaults with respect to qualified lien bonds,
(4) certain events in bankruptcy, insolvency or reorganization, and
(5) default for 90 days after notice in the case of a breach of certain
other covenants.
The Mortgage Trustees may withhold notice of default (except in payment of
principal, interest or any fund for the retirement of Bonds) if they think it is
in the interest of the bondholders. (See Mortgage, Sections 65 and 66.)
Holders of 25% of the Bonds may declare the principal and the interest due
on default, but a majority may annul such declaration if such default has been
cured. No holder of Bonds may enforce the lien of the Mortgage without giving
the Mortgage Trustees written notice of a default and unless holders of 25% of
the Bonds have requested the Mortgage Trustees to act and offered them
reasonable opportunity to act and the Mortgage Trustees have failed to act. The
Mortgage Trustees are not required to risk their funds or incur personal
liability if there is reasonable ground for believing that the repayment is not
reasonably assured. Holders of a majority of the Bonds may direct the time,
method and place of conducting any proceedings for any remedy available to the
Mortgage Trustees, or exercising any trust or power conferred upon the Mortgage
Trustees, but the Mortgage Trustees are not required to follow such direction if
not sufficiently indemnified for expenditures. (See Mortgage, Sections 67, 71,
80 and 94.)
EVIDENCE TO BE FURNISHED TO THE MORTGAGE TRUSTEES
Compliance with Mortgage provisions is evidenced by written statements of
NW Natural's officers or persons selected by NW Natural. In certain major
matters the accountant, engineer, appraiser or other expert must be independent.
Various certificates and other papers, including an annual certificate with
reference to compliance with the terms of the Mortgage and absence of defaults,
are required to be filed annually and upon the occurrence of certain events.
(See Mortgage, Sections 38 and 41-46.)
MODIFICATION OF THE MORTGAGE
The rights of the bondholders may be modified with the consent of holders
of 70% of the Bonds and, if less than all series of Bonds are affected, the
consent also of holders of 70% of Bonds of each series affected. NW Natural has
the right, without any consent or other action by holders of any outstanding
series of Bonds, to substitute 66 2/3% for 70%. In general, no modification of
the terms of payment of principal and interest, affecting the lien of the
Mortgage or reducing the percentage required for modification (except as
provided above) will be effective against any bondholder without his consent.
(See Mortgage, Article XIX and Ninth Supplemental Indenture, Section 6.)
NW Natural has the right to amend the Mortgage, without any consent or
other action by holders of any outstanding series of Bonds in the following
respects:
Release and Substitution of Property
To permit the release of property at the lesser of its cost or its fair
value at the time that such property became funded property, rather than at its
fair value at the time of its release; and to facilitate the release of unfunded
property. (See Mortgage, Sections 3, 59 and 60 and Eighteenth Supplemental
Indenture, Section 2.03.)
Issuance of Additional Bonds
To clarify that:
(1) for purposes of determining annual interest requirements, interest on
Bonds or other indebtedness bearing interest at a variable interest
rate shall be computed at the average of the interest rates borne by
such Bonds or other indebtedness during the period of calculation or,
if such Bonds or other indebtedness shall have been issued after such
period or shall be the subject of pending applications, interest shall
be computed at the initial rate borne upon issuance, and
8
(2) no extraordinary items shall be included in operating expenses or
deducted from revenues or other income in calculating adjusted net
earnings (see Mortgage, Section 7); and to revise the basis for the
issuance of additional Bonds from 60% of property additions, after
adjustments to offset retirements, to 70%.
(See Mortgage, Sections 25, 26, 59 and 61 and Eighteenth Supplemental
Indenture, Sections 2.01 and 2.02.)
THE CORPORATE TRUSTEE
Deutsche Bank Trust Company Americas also serves as the Indenture Trustee
under the Indenture under which the unsecured notes are issued.
DESCRIPTION OF THE UNSECURED NOTES
GENERAL
The unsecured notes are to be issued under an Indenture, dated as of June
1, 1991 ("Indenture"), between NW Natural and Deutsche Bank Trust Company
Americas, as trustee ("Indenture Trustee").
Material terms of the unsecured notes are summarized below. The Indenture
was filed with the SEC and you should read the Indenture for provisions that may
be important to you. The statements in this "Description of the Unsecured Notes"
concerning the unsecured notes and the Indenture make use of terms defined in
the Indenture and are qualified in their entirety by express reference to the
cited sections and articles. They may be changed with respect to any unsecured
note by the applicable pricing supplement, which should be read in conjunction
with this description.
The Indenture provides that debt securities (including the unsecured notes
and including both interest bearing and original issue discount securities) may
be issued under the Indenture, without limitation as to aggregate principal
amount. (See Indenture, Section 301.) All debt securities issued or to be issued
under the Indenture (including the unsecured notes) are collectively referred to
as the "Indenture Securities".
The Indenture does not limit the amount of other debt, secured or
unsecured, which may be issued by NW Natural.
The unsecured notes will rank equally with all other unsecured and
unsubordinated indebtedness of NW Natural. Substantially all of the gas plants,
distribution systems and other materially important physical properties of NW
Natural are subject to the lien of the Mortgage securing the Bonds. (See
"Description of the Secured Notes--Security" and "-- Issuance of Additional
Bonds", above.)
The unsecured notes will be offered on a continuing basis, and each
unsecured note will mature on such date, not less than nine months nor more than
30 years from its date of issue, as selected by the purchaser and agreed to by
NW Natural.
The pricing supplement relating to any unsecured note will include the
principal amount, interest rate, interest payment dates, regular record dates,
issue price and agent's commission or discount, original issue and maturity
dates, redemption or repayment provisions, if any, and other material terms of
such unsecured note.
INTEREST
Unless otherwise specified in the pricing supplement relating to any
unsecured note, interest on such unsecured note will be payable semi-annually in
arrears on June 1 and December 1 of each year and at maturity.
Unless otherwise specified in the pricing supplement relating to any
unsecured note, interest payable on any interest payment date for any unsecured
note will be paid to the person in whose name such unsecured note is registered
9
on the record date with respect to such interest payment date, which shall be
the May 15 or November 15 (whether or not a business day), as the case may be,
immediately before such interest payment date; provided that, (i) if the
original issue date of any unsecured note is after a record date and before the
corresponding interest payment date, such unsecured note will bear interest from
the original issue date but payment of interest shall commence on the second
interest payment date following the original issue date, and (ii) interest
payable on the maturity date will be paid to the person to whom the principal
thereof is paid.
Unless otherwise indicated in the applicable pricing supplement, interest
on the unsecured notes will be computed on the basis of a 360-day year
consisting of twelve 30-day months. (See Indenture, Section 310).
FORM, EXCHANGE AND PAYMENT
The unsecured notes will be issued in fully registered form in
denominations of $1,000 or any amount in excess thereof that is an integral
multiple of $1,000. The unsecured notes will be exchangeable at the office of
Deutsche Bank Trust Company Americas in New York City, without charge other than
taxes or other governmental charges incident thereto. Principal, premium, if
any, and interest will be payable at such office. Notwithstanding the foregoing,
for so long as the unsecured notes shall be held by DTC or its nominee, owners
of beneficial interests in the unsecured notes will not be entitled to have any
individual unsecured notes registered in their names, and transfers of
beneficial interests and payments of principal, premium, if any, and interest
will be made as described herein under "Book-Entry System".
REDEMPTION
To the extent, if any, provided in the pricing supplement relating to any
unsecured note, such unsecured note will be redeemable, on not less than 30
days' notice, in whole or in part, at any time on or after the initial
redemption date, if any, fixed at the time of sale and set forth in the
applicable pricing supplement. On or after the initial redemption date, such
unsecured note will be redeemable in whole or in part, at the option of NW
Natural, at a redemption price determined in accordance with the following
paragraph or as described in the related pricing supplement, plus accrued
interest to the redemption date.
The redemption price for each unsecured note subject to redemption shall,
for the twelve-month period commencing on the initial redemption date, be equal
to a certain percentage of the principal amount of such unsecured note and,
thereafter, shall decline for the twelve-month period commencing on each
anniversary of the initial redemption date by a percentage of the principal
amount ("Reduction Percentage") until the redemption price shall be 100% of the
principal amount. The initial redemption price and date and any Reduction
Percentage with respect to each unsecured note subject to redemption will be
fixed at the time of sale and set forth in the applicable pricing supplement.
If so specified in the pricing supplement relating to any unsecured note,
NW Natural may not, prior to the redemption limitation date, if any, set forth
in such pricing supplement, redeem such unsecured note as described above as a
part of, or in anticipation of, any refunding operation by the application,
directly or indirectly, of moneys borrowed having an effective interest cost to
NW Natural (calculated in accordance with generally accepted financial practice)
of less than the effective interest cost to NW Natural (similarly calculated) of
such unsecured note.
If, at the time the notice of redemption shall be given, the redemption
money has not been deposited with the Indenture Trustee, the redemption shall be
made subject to the receipt of such money on or before the redemption date, and
such notice shall be of no effect unless such money shall be so received. (See
Indenture, Article Four.)
Unless otherwise indicated in the applicable pricing supplement, the
unsecured notes will not be subject to any sinking fund.
10
REPAYMENT AT OPTION OF HOLDER
To the extent, if any, provided in the pricing supplement relating to any
unsecured note, such unsecured note will be repayable by NW Natural at the
option of the registered holder thereof on the date of repayment specified in
such pricing supplement at a repayment price equal to a percentage of the
principal amount of such unsecured note specified in such pricing supplement,
plus accrued interest to the date of repayment.
For any unsecured note to be repaid, NW Natural must receive such unsecured
note at its office or agency in the Borough of Manhattan, The City of New York
(currently, the office of the Indenture Trustee), within the period ("Election
Period") commencing at the opening of business and ending at the close of
business on the dates specified in the pricing supplement relating to such
unsecured note (provided that, if the last day of the Election Period shall not
be a business day, the Election Period shall end at the close of business on the
next succeeding business day), together with the form entitled "Option to Elect
Repayment" on the reverse of, or otherwise accompanying, such unsecured note
duly completed.
Any such election so received by NW Natural within such Election Period
shall be irrevocable. The repayment option may be exercised by the registered
holder of an unsecured note for less than the entire principal amount of such
unsecured note, provided that the principal amount to be repaid is equal to
$1,000 or an integral multiple of $1,000. All questions as to the validity,
eligibility (including time of receipt) and acceptance of any unsecured note for
repayment will be determined by the Indenture Trustee, whose determination will
be final and binding.
So long as DTC or DTC's nominee is the registered holder of the unsecured
notes, DTC or such nominee will be the only entity that can exercise the
repayment option, and repayment will be made in accordance with DTC's repayment
procedures in effect at the time. See "Book-Entry System." In order to ensure
that DTC or its nominee will timely exercise a repayment option with respect to
a particular beneficial interest in the unsecured notes, the beneficial owner of
such interest must instruct the broker or other participant through which it
holds such interest to notify DTC of its election to exercise the repayment
option. In addition, the beneficial owner of unsecured notes must effect
delivery of such interest at the time such notice of election is given to DTC by
causing the broker or other participant through which it holds such interest to
transfer such interest on DTC's records to the Indenture Trustee. Different
firms have different deadlines for accepting instructions from their customers
and, accordingly, each beneficial owner of unsecured notes should consult the
broker or other participant through which it holds an interest in the unsecured
notes in order to ascertain the deadline by which such instruction must be given
in order for timely notice to be delivered to DTC.
DEFEASANCE
The principal amount of any unsecured notes issued under the Indenture will
be deemed to have been paid for purposes of the Indenture and the entire
indebtedness of NW Natural in respect thereof will be deemed to have been
satisfied and discharged, if there shall have been irrevocably deposited with
the Indenture Trustee, in trust:
(1) money in an amount which will be sufficient, or
(2) in the case of a deposit made prior to the maturity of the unsecured
notes, Government Obligations (as defined below), which do not contain
provisions permitting the redemption or other prepayment thereof at
the option of the issuer thereof, the principal of and the interest on
which when due, without any regard to reinvestment thereof, will
provide moneys which, together with the money, if any, deposited with
or held by the Indenture Trustee, will be sufficient, or
(3) a combination of (1) and (2) which will be sufficient,
to pay when due the principal of and premium, if any, and interest, if any, due
and to become due on the unsecured notes that are outstanding. For this purpose,
Government Obligations include direct obligations of, or obligations
unconditionally guaranteed by, the United States of America entitled to the
benefit of the full faith and credit thereof and certificates, depositary
receipts or other instruments which evidence a direct ownership interest in such
11
obligations or in any specific interest or principal payments due in respect
thereof. (See Indenture, Sections 101, 701.)
If NW Natural deposits with the Indenture Trustee any money and/or
Government Obligations with respect to the unsecured notes, or any portion of
the principal amount thereof, prior to the maturity or redemption of such
unsecured notes or such portion of the principal amount thereof, for the
satisfaction or discharge of the indebtedness of NW Natural in respect to such
unsecured notes or such portion thereof as described in Section 701 of the
Indenture, NW Natural shall deliver to the Indenture Trustee either:
(1) an instrument wherein NW Natural, notwithstanding such satisfaction
and discharge, shall assume the obligation to irrevocably deposit with
the Indenture Trustee such additional sums of money, if any, or
additional Government Obligations, if any, or any combination thereof,
at such time or times, as shall be necessary, together with the money
and/or Government Obligations previously deposited, to pay when due
the principal of and premium, if any, and interest due and to become
due on such unsecured notes or such portions thereof, all in
accordance with and subject to the provisions of said Section 701;
provided, however, that such instrument may state that the obligation
of NW Natural to make additional deposits as described above shall be
subject to the delivery to NW Natural by the Indenture Trustee of a
notice asserting the amount of such deficiency accompanied by an
opinion of an independent public accountant of nationally recognized
standing, selected by the Indenture Trustee, showing the calculation
thereof, or
(2) an opinion of counsel to the effect that the holders of such unsecured
notes, or such portions of the principal amount thereof, will not
recognize income, gain or loss for United States federal income tax
purposes as a result of such satisfaction and discharge and will be
subject to United States federal income tax on the same amounts, at
the same times and in the same manner as if such satisfaction and
discharge had not been effected.
In the event that NW Natural shall elect to deliver to the Indenture
Trustee an instrument as described in clause (1) of the preceding paragraph in
connection with any such deposit of money and/or Government Obligations with the
Indenture Trustee, under current applicable United States federal income tax
regulations, the holders of such unsecured notes, or such portions thereof, will
not recognize income, gain or loss for United States federal income tax purposes
as a result of such satisfaction and discharge and will be subject to United
States federal income tax on the same amounts, at the same times and in the same
manner as if such deposit had not been effected. There can be no assurance that
such United States federal income tax regulations will not change such that, as
a result of such deposit and delivery by NW Natural of such instrument, holders
of unsecured notes may recognize income, gain or loss for United States federal
income tax purposes and may not be subject to United States federal income tax
on the same amounts, at the same times and in the same manner as if such deposit
had not been made.
EVENTS OF DEFAULT AND NOTICE THEREOF
Events of default are:
(1) default for three business days in payment of principal,
(2) default for 60 days in payment of interest,
(3) certain events in bankruptcy, insolvency or reorganization,
(4) default for 90 days after notice in the case of a breach of any other
covenant, and
(5) any other event of default specified with respect to the Indenture
Securities of a particular series.
No event of default with respect to a series of Indenture Securities
necessarily constitutes an event of default with respect to the Indenture
Securities of any other series.
12
The Indenture Trustee may withhold notice of default (except in payment of
principal, interest or any funds for the retirement of Indenture Securities) if
it, in good faith, determines that withholding of such notice is in the interest
of the holders of the Indenture Securities. (See Indenture, Sections 801 and
903.)
Either the Indenture Trustee or the holders of not less than 33% in
principal amount (or such lesser amount as may be provided in the case of
discount Indenture Securities) of the outstanding Indenture Securities of all
defaulted series, considered as one class, may declare the principal and
interest on such series due on default, but NW Natural may annul such default by
effecting its cure and paying overdue interest and principal. No holder of
Indenture Securities may enforce the Indenture without having given the
Indenture Trustee written notice of default, and unless the holders of a
majority of the Indenture Securities of all defaulted series, considered as one
class, shall have requested the Indenture Trustee to act and offered reasonable
indemnity, and for 60 days the Indenture Trustee shall have failed to act. But,
each holder has an absolute right to receive payment of principal and interest
when due and to institute suit for the enforcement of such payment. The
Indenture Trustee is not required to risk its funds or incur any financial
liability if it has reasonable grounds to believe that repayment is not
reasonably assured.
The holders of a majority of the Indenture Securities of all defaulted
series, considered as one class, may direct the time, method and place of
conducting any proceedings for any remedy available to the Indenture Trustee, or
exercising any trust or power conferred on the Indenture Trustee, with respect
to the Indenture Securities of such series, but the Indenture Trustee is not
required to follow such direction if not sufficiently indemnified and the
Indenture Trustee may take any other action it deems proper which is not
inconsistent with such direction. (See Indenture, Sections 802, 807, 808, 812
and 902.)
EVIDENCE TO BE FURNISHED TO THE INDENTURE TRUSTEE
Compliance with Indenture provisions will be evidenced by written
statements of NW Natural's officers. An annual certificate with reference to
compliance with the covenants and conditions of the Indenture and the absence of
defaults is required to be filed with the Indenture Trustee. (See Indenture,
Section 1004.)
MODIFICATION OF THE INDENTURE
The rights of the holders of the Indenture Securities may be modified with
the consent of the holders of a majority of the Indenture Securities of all
series or Tranches, as defined below, affected, considered as one class.
However, certain specified rights of the holders of Indenture Securities may be
modified without the consent of the holders if such modification would not be
deemed to adversely affect their interests in any material respect.
In general, no modification of the terms of payment of principal and
interest, no reduction of the percentage in principal amount of the Indenture
Securities outstanding under such series required to consent to any supplemental
indenture or waiver under the Indenture, no reduction of such percentage
necessary for quorum and voting, and no modification of certain of the
provisions in the Indenture relating to supplemental indentures, waivers of
certain covenants and waivers of past defaults is effective against any holder
of Indenture Securities without the consent of such holder. "Tranche" means a
group of Indenture Securities which are of the same series and have identical
terms except as to principal amount and/or date of issuance. (See Indenture,
Article Twelve.)
THE INDENTURE TRUSTEE
Deutsche Bank Trust Company Americas also serves as the Corporate Trustee
under the Mortgage under which the secured notes are issued.
PLAN OF DISTRIBUTION
The Medium-Term Notes are being offered on a continuing basis for sale by
NW Natural through the agents which have agreed to use their reasonable best
efforts to solicit purchases of the Medium-Term Notes. The initial agents are
Merrill Lynch, Pierce, Fenner & Smith Incorporated, UBS Warburg LLC, Banc One
Capital Markets, Inc. and U.S. Bancorp Piper Jaffray Inc. Should NW Natural
designate other persons to act as agents, the names of such persons will be
disclosed in a pricing supplement. NW Natural will pay each agent a commission
13
which, depending on the maturity of the Medium-Term Notes, will range from .125%
to .750% of the principal amount of any Medium-Term Note sold through such
agent.
NW Natural may also sell Medium-Term Notes to any agent, as principal, at a
discount from the principal amount thereof, and the agent may later resell such
Medium-Term Notes to investors and other purchasers at varying prices related to
prevailing market prices at the time of resale as determined by such agent or,
if so agreed, at a fixed public offering price. In the case of sales to any
agent as principal, such agent may utilize a selling or dealer group in
connection with resales. An agent may sell Medium-Term Notes it has purchased as
principal to any dealer at a discount and, unless otherwise specified in the
applicable pricing supplement, such discount allowed to any dealer will not be
in excess of the discount to be received by such agent from NW Natural.
After the initial public offering of Medium-Term Notes to be resold to
investors and other purchasers, the public offering price (in the case of a
fixed price public offering), concession and discount may be changed.
The Medium-Term Notes also may be sold by NW Natural directly to
purchasers. No commission will be payable to the agents on Medium-Term Notes
sold directly by NW Natural.
NW Natural reserves the right to withdraw, cancel or modify the offer made
hereby without notice and may reject, in whole or in part, offers to purchase
Medium-Term Notes whether placed directly with NW Natural or through one of the
agents. Each agent will have the right, in its discretion reasonably exercised,
to reject any offer to purchase Medium-Term Notes received by it, in whole or in
part.
Payment of the purchase price of the Medium-Term Notes will be required to
be made in immediately available funds in New York City on the date of
settlement.
No Medium-Term Note will have an established trading market when issued.
The Medium-Term Notes will not be listed on any securities exchange. Each of the
agents may from time to time purchase and sell Medium-Term Notes in the
secondary market, but is not obligated to do so. There can be no assurance that
there will be a secondary market for the Medium-Term Notes or liquidity in the
secondary market if one develops. From time to time, each of the agents may make
a market in the Medium-Term Notes.
In connection with certain types of offers and sales of Medium-Term Notes,
SEC rules permit the agents to engage in certain transactions that stabilize the
price of such Medium-Term Notes. Such transactions consist of bids or purchases
for the purpose of pegging, fixing or maintaining the price of the Medium-Term
Notes.
If the agents create a short position in any Medium-Term Notes in
connection with certain types of offers and sales, i.e., if they sell more
Medium-Term Notes than are set forth in the applicable pricing supplement, the
agents may reduce that short position by purchasing Medium-Term Notes in the
open market.
In connection with certain types of offers and sales, the agents may also
impose a penalty bid on certain agents and selling group members. This means
that if the agents purchase Medium-Term Notes in the open market to reduce the
agents' short position or to stabilize the price of the Medium-Term Notes, they
may reclaim the amount of selling concession from the agents and selling group
members who sold these Medium-Term Notes as part of the offering.
In general, purchases of a security for the purpose of stabilization or to
reduce a short position could cause the price of the security to be higher than
it might be in the absence of such purchases. The imposition of a penalty bid
might also have an effect on the price of a security to the extent that it were
to discourage resales of the security.
Neither NW Natural nor any agent makes any representation or prediction as
to the direction or magnitude of any effect that the transactions described
above may have on the price of the Medium-Term Notes. In addition, neither NW
Natural nor any agent makes any representation that the agents will engage in
such transactions or that such transactions, once commenced, will not be
discontinued without notice.
14
The agents may be deemed to be "underwriters" within the meaning of the
Securities Act. NW Natural has agreed to indemnify each of the agents against,
or to make contributions relating to, certain liabilities, including liabilities
under such Act. NW Natural has agreed to reimburse each of the agents for
certain expenses. Each of the agents may engage in transactions with, or perform
services for, NW Natural in the ordinary course of business.
EXPERTS
The financial statements incorporated in this Prospectus by reference to NW
Natural's Annual Report on Form 10-K for the year ended December 31, 2001 have
been so incorporated in reliance on the report of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
The statements made as to matters of law and legal conclusions under
"Description of the Secured Notes--Security" herein have been reviewed (a)
insofar as Oregon law is concerned, by Mark S. Dodson, Esquire, General Counsel
of NW Natural; and (b) insofar as Washington law is concerned, by Stoel Rives
LLP, Portland, Oregon, and have been set forth herein in reliance upon the
opinions of Mr. Dodson and such firm given upon their authority as experts. The
statements made as to matters of law and legal conclusions in the documents
incorporated in this Prospectus by reference pertaining to titles to properties,
franchises and other operating rights of NW Natural, regulations to which NW
Natural is subject and any legal proceedings to which NW Natural is a party,
insofar as Oregon law is concerned, have been reviewed by Mr. Dodson and such
statements are included in such documents and herein in reliance upon the
opinion of Mr. Dodson given upon his authority as an expert. As of September 30,
2002, Mr. Dodson directly and indirectly owned 13,756 shares of NW Natural's
common stock and had been granted options to purchase an additional 23,873
shares.
LEGALITY
The legality of the Medium-Term Notes will be passed upon for NW Natural by
Mr. Dodson and by Thelen Reid & Priest LLP, New York, New York, and for the
agents by Simpson Thacher & Bartlett, New York, New York. Thelen Reid & Priest
LLP and Simpson Thacher & Bartlett may rely upon the opinion of Mr. Dodson as to
certain legal matters arising under Oregon law, and Mr. Dodson, Thelen Reid &
Priest LLP and Simpson Thacher & Bartlett may rely upon the opinion of Stoel
Rives LLP as to certain legal matters arising under Washington law. However, all
matters pertaining to titles, the lien and enforceability of the Mortgage and
franchises, will be passed upon only by Mr. Dodson, who may rely on the opinion
of Stoel Rives LLP as to certain legal matters arising under Washington law.
15
$150,000,000
[GRAPHIC OMITTED]
NORTHWEST NATURAL GAS COMPANY
SECURED MEDIUM-TERM NOTES,
SERIES B
UNSECURED MEDIUM-TERM NOTES,
SERIES B
-------------------
P R O S P E C T U S
-------------------
MERRILL LYNCH & CO.
UBS WARBURG
BANC ONE CAPITAL MARKETS, INC.
U.S. BANCORP PIPER JAFFRAY INC.
________ __, 2002
================================================================================
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION (ESTIMATED, EXCEPT SEC
FILING FEE).
Filing Fee-Securities and Exchange
Commission.................................... $ 13,800
Fees of Trustees, including counsel
and authentication fees....................... 10,000
Legal fees ..................................... 120,000
Accounting fees and expenses ................... 35,000
Rating Agencies' fees .......................... 75,000
Printing and engraving ......................... 10,000
Miscellaneous expense .......................... 6,200
Total expenses ............................... $270,000
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Oregon Business Corporation Act (the "Act") provides, in general, that
a director or officer of a corporation who has been or is threatened to be made
a defendant in a legal proceeding because that person is or was a director or
officer of the corporation:
(1) shall be indemnified by the corporation for all expenses of such
litigation when the director or officer is wholly successful on the merits or
otherwise;
(2) may be indemnified by the corporation for the expenses, judgments,
fines and amounts paid in settlement of such litigation (other than a derivative
lawsuit) if he or she acted in good faith and in a manner reasonably believed to
be in, or at least not opposed to, the best interests of the corporation (and,
in the case of a criminal proceeding, had no reasonable cause to believe the
conduct was unlawful); and
(3) may be indemnified by the corporation for expenses of a derivative
lawsuit (a suit by a shareholder alleging a breach by a director or officer of a
duty owed to the corporation) if he or she acted in good faith and in a manner
reasonably believed to be in, or at least not opposed to, the best interests of
the corporation, provided the director or officer is not adjudged liable to the
corporation.
The Act also authorizes the advancement of litigation expenses to a
director or officer upon receipt of a written affirmation of the director's or
officer's good faith belief that the standard of conduct in Section (2) or (3)
above has been met and an undertaking by such director or officer to repay such
expenses if it is ultimately determined that he or she did not meet that
standard and, therefore, is not entitled to be indemnified. The Act also
provides that the indemnification provided thereunder shall not be deemed
exclusive of any other rights to which those indemnified may be entitled under
any bylaw, agreement, vote of shareholders or disinterested directors or
otherwise.
NW Natural's Bylaws provide that NW Natural shall indemnify directors and
officers to the fullest extent permitted under the Act, thus making mandatory
the discretionary indemnification authorized by the Act.
NW Natural's Restated Articles of Incorporation provide that NW Natural
shall indemnify its officers and directors to the fullest extent permitted by
law, which may be broader than the indemnification authorized by the Act.
NW Natural's shareholders have approved and NW Natural has entered into
indemnity agreements with its directors and officers which provide for indemnity
to the fullest extent permitted by law and also alter or clarify the statutory
indemnity in the following respects:
(1) prompt advancement of litigation expenses is provided if the director
or officer makes the required affirmation and undertaking;
(2) the director or officer is permitted to enforce the indemnity
obligation in court and the burden is on NW Natural to prove that the director
or officer is not entitled to indemnification;
II-1
(3) indemnity is explicitly provided for judgments and settlements in
derivative actions;
(4) prompt indemnification is provided unless a determination is made that
the director or officer is not entitled to indemnification; and
(5) partial indemnification is permitted if the director or officer is not
entitled to full indemnification.
NW Natural maintains in effect a policy of insurance providing for
reimbursement to NW Natural of payments made to directors and officers as
indemnity for damages, judgments, settlements, costs and expenses incurred by
them which NW Natural may be required or permitted to make according to
applicable law, common or statutory, or under provisions of its Restated
Articles of Incorporation, Bylaws or agreements effective under such laws.
ITEM 16. LIST OF EXHIBITS.
Reference is made to the Exhibit Index on page II-6 hereof.
ITEM 17. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933 (the Securities Act);
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or decrease in volume of
securities offered (if the total dollar value of securities offered would not
exceed that which was registered) and any deviation from the low or high and of
the estimated maximum offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than 20 percent change in the
maximum aggregate offering price set forth in the "Calculation of Registration
Fee" table in the effective Registration Statement; and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement;
provided, however, that paragraphs (a)(1)(i) and (ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the
Commission by the registrant pursuant to Sections 13 or 15(d) of the Exchange
Act that are incorporated by reference in the registration statement;
(2) That, for the purpose of determining any liability under the Securities
Act, each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof;
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering; and
(4) That, for purposes of determining any liability under the Securities
Act, each filing of the registrant's annual report pursuant to Sections 13(a) or
15(d) of the Exchange Act that is incorporated by reference in the registration
statement shall be deemed to be a new registration statement relating to the
securities offered herein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(b) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
registrant pursuant to the provisions described under Item 15 above, or
otherwise, the registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
II-2
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
II-3
POWER OF ATTORNEY
Each director and/or officer of the registrant whose signature appears
hereinafter hereby appoints Richard G. Reiten, Bruce R. DeBolt and John T. Hood,
the Agents for Service named in this registration statement, and each of them
severally, as his attorney-in-fact to sign in his name and behalf, in any and
all capacities stated below, and to file with the Securities and Exchange
Commission any and all amendments, including post-effective amendments, to this
registration statement, and the registrant hereby also appoints each such Agent
for Service as its attorney-in-fact with like authority to sign and file any
such amendments in its name and behalf.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Portland, and State of Oregon, on the 4th day of
October, 2002.
NORTHWEST NATURAL GAS COMPANY
By: /s/ Richard G. Reiten
-----------------------------------
Richard G. Reiten
Chairman and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this registration
statement has been signed below by the following persons in the capacities and
on the date indicated.
Signature Title Date
--------- ----- ----
/s/ Richard G. Reiten Principal Executive Officer, October 4, 2002
------------------------------- and Director
Richard G. Reiten,
Chairman and Chief Executive Officer
/s/ Bruce R. DeBolt Principal Financial Officer October 4, 2002
-------------------------------
Bruce R. DeBolt
Senior Vice President, Finance,
and Chief Financial Officer
/s/ Stephen P. Feltz Principal Accounting Officer October 4, 2002
-------------------------------
Stephen P. Feltz,
Treasurer and Controller
/s/ John D. Carter Director ) October 4, 2002
------------------------------- )
John D. Carter )
)
/s/ Thomas E. Dewey, Jr. Director ) October 4, 2002
------------------------------- )
Thomas E. Dewey, Jr. )
)
/s/ C. Scott Gibson Director ) October 4, 2002
------------------------------- )
C. Scott Gibson )
)
/s/ Tod R. Hamachek Director ) October 4, 2002
------------------------------- )
Tod R. Hamachek )
)
/s/ Wayne D. Kuni Director ) October 4, 2002
------------------------------- )
Wayne D. Kuni )
)
/s/ Randall C. Pape Director ) October 4, 2002
------------------------------- )
Randall C. Pape )
)
/s/ Robert L. Ridgley Director ) October 4, 2002
------------------------------- )
Robert L. Ridgley )
)
II-4
/s/ Dwight A. Sangrey Director ) October 4, 2002
------------------------------- )
Dwight A. Sangrey )
)
/s/ Melody C. Teppola Director ) October 4, 2002
------------------------------- )
Melody C. Teppola )
)
/s/ Russell F. Tromley Director ) October 4, 2002
------------------------------- )
Russell F. Tromley )
)
/s/ Richard L. Woolworth Director ) October 4, 2002
------------------------------- )
Richard L. Woolworth )
)
II-5
INDEX TO EXHIBITS
Exhibit
-------
1 - Form of Distribution Agreement.
4(a)* - Copy of Mortgage and Deed of Trust, dated as of July 1, 1946, to
Bankers Trust Company (now Deutsche Bank Trust Company Americas)
and R.G. Page (to whom Stanley Burg is now successor), Trustees
(filed as Exhibit 7(j) in File No. 2-6494), together with
Indentures supplemental thereto Nos. 1 through 14, dated,
respectively, as of June 1, 1949, March 1, 1954, April 1, 1956,
February 1, 1959, July 1, 1961, January 1, 1964, March 1, 1966,
December 1, 1969, April 1, 1971, January 1, 1975, December 1,
1975, July 1, 1981, June 1, 1985, and November 1, 1985 (filed as
Exhibit 4(d) in File No. 33-1929); No. 15, dated as of July 1,
1986 (filed as Exhibit (4)(c) in File No. 33-24168); Nos. 16, 17
and 18, dated, respectively, as of November 1, 1988, October 1,
1989 and July 1, 1990 (filed as Exhibit (4)(c) in File No.
33-40482); No. 19, dated as of June 1, 1991 (filed as Exhibit
4(c) in File No. 33-64014; and No. 20, dated as of June 1, 1993
(filed as Exhibit 4(c) in File No. 33-53795).
4(b)* - Form of secured note (filed as Exhibit 4(b) in File No.
333-64777).
4(c)* - Copy of Indenture, dated as of June 1, 1991, to Bankers Trust
Company (now Deutsche Bank Trust Company Americas), Trustee,
relating to the unsecured notes (filed as Exhibit 4(e) in File
No. 33-64014).
4(d)* - Copy of Officers' Certificate, dated as of June 18, 1993,
establishing series of unsecured notes and Form of Instructions
for both secured and unsecured notes (filed as Exhibit 4(f) to
Form 10-K for the year ended December 31, 1993).
4(e)* - Form of Officers' Certificate, together with form of fixed rate
unsecured note, supplementing the Officers' Certificate, dated as
of June 18, 1993 (filed as Exhibit 4(e) in File No. 333-64777) .
5(a) - Opinion of Mark S. Dodson, Esquire.
5(b) - Opinion of Thelen Reid & Priest LLP.
12* - Computation of Ratio of Earnings to Fixed Charges (filed as
Exhibit 12 to Form 10-Q for the quarter ended June 30, 2002).
23(a) - Consent of PricewaterhouseCoopers LLP.
23(b) - Consent of Stoel Rives LLP.
23(c) - The consents of Mark S. Dodson, Esquire, and of Thelen Reid &
Priest LLP are included in their opinions filed, respectively, as
Exhibits 5(a) and 5(b)
24 - Power of Attorney (see page II-4).
25(a) - Statement of Eligibility of the Corporate Trustee on Form T-1.
25(b) - Statement of Eligibility of Stanley Burg on Form T-2.
25(c) - Statement of Eligibility of the Indenture Trustee on Form T-1.
----------
* Incorporated herein by reference as indicated.
II-6