Bay State Gas reports fiscal 1995 earnings.

WESTBOROUGH, Mass.--(BUSINESS WIRE)--Oct. 24, 1995--Bay State Gas Company (NYSE: BGC) today announced $1.71 in earnings per share for the fiscal year ended September 30, 1995, a $0.14 decrease from $1.85 reported one year ago.

The weather, which was 11% warmer than the year earlier, caused a drop in demand for gas heating and a resulting decrease in gas throughput. This reduced revenues by about $7.1 million, or $0.32 in earnings per share, compared to last year. The company was successful in tempering the earnings decline by: adding 6,500 new customers; introducing service-related program enhancements in its expanding Energy Products & Services business, which increased revenues by $2.4 million; and more aggressively managing its operating and maintenance costs. O&M expenses dropped by $4.1 million, or more than 4% this past year.

The company reported a net loss of $0.48 per share for the fiscal fourth quarter, as compared to a net loss of $0.54 for the year-earlier period. This $0.06 per share improvement was primarily due to service-related enhancements and the decline in O&M expenses. Because of the seasonal demand for natural gas heating, gas distribution companies typically incur losses during the quarters ending in June and September.

Board of Directors Elects New Chief Operating Officer

On September 27, Bay State's Board of Directors elected Joel L. Singer as Executive Vice President and Chief Operating Officer, and also elected him to the board. As COO, Singer will be responsible for leading the company to the forefront of the competitive environment that is evolving from deregulation and unbundling of the natural gas and electric utility industries. Singer has had extensive experience in the energy industry, having held management positions at Arthur D. Little, Inc. and the U.S. operating units of Petrofina, S.A. and Exxon Corporation.

"The election of Joel Singer shows Bay State's commitment to executing an aggressive strategy for capitalizing on the dramatic growth opportunities created by utility deregulation and unbundling," said Roger A. Young, President and Chief Executive Officer. "Specifically, we will be expanding the number of energy services we offer, and we will be offering these services to new customers located both within and beyond our current service territories."

Company Announces New Business Structure and Expansion of Energy Service Offerings

"As we look to growing in the less regulated, more competitive environment of the future, it becomes clear that we need to focus on three distinct business segments, each with its own unique set of prospective customers, competitors, and critical success factors," Young said. He described these business segments as:

1. Local Transportation: Providing natural gas transportation service on Bay State's local distribution system in New England. The company's mission in this business segment is to become the lowest-cost, most reliable natural gas transporter in New England.

2. Energy Products & Services: Offering a variety of energy-related products and services to customers both within and outside of current service territories. Bay State's mission in this business segment is to anticipate and provide solutions for customers' total energy needs.

3. Energy Ventures: Investing in energy-related projects that leverage Bay State's core business skills and capabilities. The company's mission in this business segment is to invest prudently in related energy projects, such as interstate pipelines, storage and peaking projects, and cogeneration facilities that leverage Bay State's core business skills and capabilities and generate superior rates of return.

Bay State Forms New Subsidiary, Energy Asset Funding

To support its Energy Products & Services business, Bay State formed a nonregulated subsidiary, Energy Asset Funding, this month. The subsidiary will manage Bay State's water heater and conversion burner assets, which are rented to Massachusetts customers, as well as contracts for the company's FannieMae home energy improvement loan program. In the future, Energy Asset Funding also will finance additional end-use energy equipment for customers. Through a sale and lease-back arrangement with a third-party financing company, additional investment capital will be made available to Bay State.

Company Receives Second Partnership Distribution on MASSPOWER Investment

Bay State received in September a $356,000 partnership distribution from its 17.5% equity interest in MASSPOWER, a 240-megawatt power plant in Springfield, Mass., which increased the company's fiscal 1995 partnership distributions to $859,000. Bay State expects a comparable annual distribution during fiscal 1996. The company's initial $4.2 million investment contributed $296,000 in pre-tax earnings during fiscal 1995, with earnings expected to double next year.

Approval on Rate Redesign Expected Early in Calendar 1996

During fiscal 1995, Bay State filed with Massachusetts regulators for a revenue-neutral redesign of its rate structure. The company expects new gas rates to go into effect in early calendar 1996. The new rate redesign should improve the long-term marketability of regulated natural gas services.

Continued Reductions in Gas Heating Prices Improve Competitive Position

Residential natural gas heating customers within the company's three-state service area will see their heating bills decline by 5% to 9% this winter, primarily due to savings related to gas supply costs. Fiscal 1996 represents the second consecutive year a decrease in gas supply costs significantly lowered customer bills.

Another Service Area Expansion Planned For Fiscal 1996

The company's subsidiary, Northern Utilities, Inc., is negotiating an agreement with the University of New Hampshire to transport natural gas to the Durham, N.H. campus, and hopes to finalize a contract by January 1996. The planned distribution system expansion would extend a total of 11 miles and transport an estimated 350,000 MMBtu of natural gas to the university and deliver an estimated 75,000 MMBtu annually to other area businesses. Northern Utilities will seek regulatory approval to serve Durham and neighboring Madbury, N.H., upon successful completion of negotiations with the university. -0-

Financial Highlights

                                        1995         1994
                             (In thousands except per-share amounts)

Twelve Months

Operating revenues                  $418,118     $463,280
Net income                           $23,128      $24,485
Earnings per average common share      $1.71        $1.85
Avg. number of common shares
 outstanding                          13,342       13,086

Three Months

Operating revenues                   $48,870      $47,020
Net loss                             ($6,435)     ($7,095)
Loss per average common share         ($0.48)      ($0.54)
Avg. number of common shares          13,351       13,246
 outstanding

Bay State Gas Company operates in three distinct, but related energy business segments -- Local Transportation, Energy Products & Services, and Energy Ventures. As New England's largest independent gas distributor, Bay State's Local Transportation business serves 287,000 customers in Massachusetts, New Hampshire, and Maine. The company's Energy Products & Services segment offers energy commodities (such as natural gas, propane, etc.) and related equipment and services. In addition, the company invests in Energy Ventures, which today include MASSPOWER, the Portland Natural Gas Transmission System (PNGTS), Wells LNG, and KBC Energy Services.

CONTACT: Bay State Gas, Westborough

Carol Churchill, [phone]