COLUMBIA TO HALT HIGH COST GAS PURCHASES

Columbia Gas Transmission Corp. has received approval from a federal bankruptcy court in Delaware to reject 4,141 above market price gas purchase contracts it blamed for making its U.S. gas sales rate noncompetitive. Columbia Chairman James P. Holland said termination of the contracts will allow his company to buy gas at market responsive prices. Columbia may later propose more purchase contracts for rejection. Holland stressed that the rejection will not impair Columbia's ability to meet

Sept. 2, 1991

2 min read

Columbia Chairman James P. Holland said termination of the contracts will allow his company to buy gas at market responsive prices. Columbia may later propose more purchase contracts for rejection.

Holland stressed that the rejection will not impair Columbia's ability to meet its supply commitments to customers for the coming winter season.

"In the long term" he said, elimination of high gas costs associated with these noneconomic contracts should make Columbia's gas rate more competitive and enable it to complete effectively in today's energy marketplace. The effect of these reduced gas costs will become increasingly evident to our customers as more and more of the lower cost supplies are included in our gas rates."

Columbia last month asked the court to reject the contracts (OGJ, Aug. 19, p. 32). With court permission it has been paying current market prices for the gas taken since Aug. 1. Columbia Transmission and its Columbia Gas System Inc. parent filed July 31 for protection under Chapter 11 of the bankruptcy laws, identifying the pipeline subsidiary's above market price contracts as the cause of the financial troubles of both companies.

FINANCING

The Delaware court gave final approval for $75 million of debtor in possession financing for Columbia System and $80 million of debtor in possession financing for Columbia Transmission.

A syndicate of banks led by Manufacturers Hanover Bank of New York is providing the financing to each company.

The parent company's financing will be available through Sept. 30, when $275 million of long term debtor in possession financing is expected to be in place. The bankruptcy court will hear Columbia's request for long term financing Sept. 10.

Columbia Transmission's $80 million commitment is likely to be reduced within 6 months with a $25 million letter of credit facility remaining in effect through Aug. 2, 1993, or the date a reorganization plan is approved, whichever occurs first.