Despite large increases in both operating income and income fromcontinuing operations, Columbia Energy Group’s 1999 bottom lineregressed from 1998, as a hostile takeover bid from NiSourcecombined with severe losses caused by Columbia’s marketingoperations to undermine the company’s overall performance.

Net income fell from $269.2 million in 1998 to $249.2 million in1999. “1999 was an eventful year as we continued to reposition forthe future,” said Oliver Richard III, CEO of Columbia Energy Group.”We made some hard decisions regarding the direction of Columbia’smarketing business…”

While other parts of the company were flourishing, the energymarketing operation was foundering. Energy marketing, whichconsists of the retail marketing, propane and petroleum operations,reported an operating loss of $54.5 million or $40.9 milliongreater than the operating loss in 1998. Approximately $33 millionof the increased loss was attributable to retail marketingoperations, and was primarily due to higher operating costs and thewrite-down of certain software and uncollectible accounts. Lossesstemming from retail marketing totaled $39.9 million in 1999.

Discontinued operations include the wholesale and trading andmajor accounts businesses of Columbia Energy Services and reflectedan after-tax loss of $105.8 million or $1.28/share, compared to anafter-tax loss of $31.1 million, or $0.37/share in 1998.

Columbia has not stood pat and watched its marketing operationscrumble. In November, the company sold its wholesale marketing outfit(see Daily GPI, Nov. 24). On the retailside, the company has canceled its joint venture with Metromedia. Thatventure was formed in October (see Daily GPI, Oct. 21).

Richard noted that the NiSource situation is ongoing. TheIndiana-based company has extended its merger proposal to Columbiauntil next month. Columbia and its financial advisors receivedpreliminary indications of interest from numerous companies, andhave invited a number of these companies – including NiSource -into a second round of the process.

Positive aspects were also abundant. Income from continuingoperations increased 18% from $300.3 million in 1998 to $355million in 1999. On a diluted basis, this was $4.29 per share in1999, versus $3.58 in 1998. Overall operating income jumped aswell, growing from $581.3 million in 1998 to $648.4 million in1999.

For the fourth quarter, Columbia reported income from continuingoperations of $155.3 million, or $1.89/share on a diluted basis,for the fourth quarter of 1999, up $47 million, or $0.60/share over1998. Fourth quarter 1999 production of 11.7 Bcf rose 1.3 Bcf, or13 percent, while prices received for natural gas productionaveraged $3.14 per Mcf, up 51 cents per Mcf from the 1998 period.

The core of Columbia’s operations – transmission and storage,distribution and exploration and production operations – completedthree straight years of improved annual results, Richard said.Transmission and storage reported operating income of $350.1million, up $24 million over 1998. Exploration and production’soperating income of $44.2 million rose $7 million over 1998, andDistribution’s operating income of $254.6 million was up $28.8million, primarily due to weather-related improvements.

“Our regulated businesses had several significant achievementsin 1999,” said Richard. “These included: Columbia Gas Transmissioncompleted the final phase of its largest ever market expansionproject, adding about 500,000 Mcf/d of firm transportation service.Moreover the transmission and storage, and distribution segmentscontinued to develop innovative programs aimed at improvingefficiencies while minimizing costs..”

Unregulated businesses also continued to grow as acquisitionsand expanded drilling not only sparked a 21% increase in provenreserves to 966 Bcfe, but also caused a 19% climb in the E&Psegment’s operating income. Gas production of 45.8 Bcf was up 6.7Bcf over 1998, while natural gas prices averaged $2.66/Mcf for 1999compared to $2.91/Mcf in 1998.

Also on the unregulated side, Columbia tripled its propaneoperations, began building the first leg of its fiber opticsnetwork and gained full ownership of the Cove Point LNG terminal.Columbia Electric contributed as well, increasing power generationcapacity under construction and development to approximately 3,550MW.

“We continue to consider a variety of possible transactions,including a merger, reorganization or the disposition of a materialamount of stock or assets,” the Columbia chairman said. “At thisstage, we cannot comment on the expected timing of any decision orthe names of the second round participants. We will make allnecessary public disclosures in a timely fashion.”

©Copyright 2000 Intelligence Press Inc. All rights reserved. Thepreceding news report may not be republished or redistributed, inwhole or in part, in any form, without prior written consent ofIntelligence Press, Inc.