ROANOKE GAS COMPANY ANNOUNCES NEGOTIATIONS TO RENEW NATURAL GAS SERVICE FRANCHISE IN ROANOKE, VA.
ROANOKE, Va., Aug. 13 /PRNewswire/ -- Roanoke Gas Company is currently engaged in negotiations with Roanoke city officials on a company proposal to renew the company's franchise to provide natural gas service in the city. On Aug. 4, 1992, the company formally requested the city to begin negotiations on renewal of the current 20-year franchise, which was set to expire a year later on Aug. 30, 1993. Following additional correspondence between the city and the company, the city hired a Connecticut consulting firm to advise them on franchise issues. On July 23, 1993, the city administration met with company officials for the first time and presented a report entitled "A Feasibility of Public Acquisition of The Roanoke Gas Company." The report as prepared by the Columbia Group, Inc. of Ridgefield, Conn., recommends that the city of Roanoke purchase the assets of the company located within the city, as well as certain assets outside the city integral to the provision of natural gas services and for the city to begin operations of a municipal natural gas utility. At the time of the meeting, city officials informed the company of their potential desire to acquire the assets of the company in the city and requested that the company agree to a short extension to the existing franchise to allow the city time to work out the details of the proposed acquisition without loss of the acquisition option that expires on Aug. 30, 1993, unless mutually extended by the company and the city. On July 30, 1993, with the approval of its board of directors, the company informed the city of its decision not to agree to a short franchise extension intended to provide the city the additional time desired to effect acquisition plans and renewed its original request to begin negotiations on a long-term franchise. The company also informed the city of what are considered to be numerous flaws in the consultant's report leading to the acquisition recommendation. On Aug. 9, 1993, the company provided the city with a professional review of the acquisition feasibility study as prepared by Stone & Webster Management Consultants, Inc., the largest public utility consulting firm of its kind in the nation. The report from Stone & Webster concludes that the city's study "is fraught with misstatements, oversimplifications and uncertainties." Based on comments from various city officials, the company anticipates that the city may petition the State Corporation Commission on or before Aug. 30 to determine the "fair value" of the assets of the company located in the streets and alleys of the city. The petition to the commission is required by the current franchise agreement if the city intends to exercise its option to acquire the company assets. A petition to the commission by the city begins the potential acquisition process, but does not commit the city to acquire the assets. The company is making public disclosure of this information in order to provide interested parties current information on a situation that could have a material impact on the financial condition and operations of the company. The total cost of utility plant located in the city approximates $19.4 million and represents approximately 45 percent of the company's total assets at Dec. 31, 1992. Further, it is estimated that 40 percent of operating revenues at Dec. 31, 1992, related to the assets located within the city. While the company believes an attempted piecemeal acquisition of a portion of the assets of a fully integrated Valley-wide public utility would not be in the best interest of its stockholders, bondholders, customers and employees, the decision to initiate acquisition proceedings rests with the City Council and its appointed officials. The company also provides natural gas service to the city of Salem, the town of Vinton and the counties of Roanoke, Botetourt and parts of Montgomery with the Roanoke Gas Company distribution system. Additionally, the company provides natural gas service to Bluefield, W.Va., and Bluefield, Va., as well as propane services to much of southwestern Virginia and southern West Virginia. The company will strive to ensure that any potential acquisition actions by the city does not adversely impact the company's other service areas and operations. The company believes that use of limited public sector resources to acquire the assets of an investor owned and operated enterprise is not an appropriate local government action and is contrary to the general movement toward privatization occurring around the world. To attempt such municipalization or socialization of an investor owned natural gas distribution company at the height of the efforts of the Federal Energy Regulatory Commission and Congress to deregulate the natural gas industry appears out of step with the reality of economic, social and public policy trends. Additionally, the attempt to break up an existing consolidated gas distribution system into a fragmented utility in a Valley not known for inter-jurisdictional cooperation appears contrary to Valley needs. -0- 08/13/93 CONTACT: John W. Lambert Jr. of John Lambert Associates, 703-982-1010, for Roanoke Gas Company CO: ROANOKE GAS COMPANY IN: UTI ST: VA
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