Item 1.01.
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Entry into a Material Definitive Agreement.
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Background
As previously disclosed by NiSource Inc. (“NiSource”), NiSource and Bay State Gas Company d/b/a Columbia Gas of Massachusetts (“CMA”) (together with NiSource, “Seller”) entered into an asset purchase agreement (the “APA”) on February 26, 2020 with Eversource Energy, a Massachusetts voluntary association (“Buyer”), under which Seller agreed to sell to Buyer, with certain additions and exceptions, substantially all of the assets of CMA and related assets (all of the assets being sold to, and liabilities being assumed by, Buyer pursuant to the APA, the “Massachusetts Business”) (the “Transaction”).
The APA provides for various closing conditions, including the receipt of the approval of the Massachusetts Department of Public Utilities (“DPU”) and the final resolution or termination of all pending actions, claims and investigations, lawsuits or other legal or administrative proceedings against CMA and its affiliates under the jurisdiction of the DPU and all future actions, claims and investigations, lawsuits or other legal or administrative proceedings against Seller and its affiliates relating to the Greater Lawrence Incident under the jurisdiction of the DPU, each as determined by NiSource in its reasonable discretion (the “DPU Required Resolution”).
Settlement Agreement
On July 2, 2020, Buyer, Seller and Eversource Gas Company of Massachusetts, a wholly-owned subsidiary of Seller (“EGMA”), filed with the DPU a joint petition for the approval of the Transaction as contemplated by the APA and a proposed multi-year rate plan. The petition includes and seeks approval of a settlement agreement executed on July 2, 2020 (the “Settlement Agreement”) among, Buyer, Seller, EGMA, the Massachusetts Attorney General’s Office (“AGO”), the Massachusetts Department of Energy Resources (“DOER”), and the Low-Income Weatherization and Fuel Assistance Program Network (together with Buyer, Seller, EGMA, AGO and the DOER, the “Settling Parties”). The Settlement Agreement is conditioned on its approval in full by the DPU no later than September 30, 2020. Buyer and Seller seek to obtain the necessary approvals and satisfy all closing conditions by September 30, 2020, to facilitate a closing of the Transaction by November 1, 2020. If the DPU does not approve the Settlement Agreement in its entirety by September 30, 2020, or if, for any reason, the closing of the Transaction does not take place, the Settlement Agreement will be null and void, even if already approved by the DPU. Notwithstanding the foregoing, the Massachusetts Attorney General may, in her sole discretion, or DOER may, in its sole discretion, rescind the Settlement Agreement in its entirety prior to the DPU’s issuance of an order approving the Settlement Agreement; provided that notice of such rescission must be filed, or submitted electronically, in writing with the DPU. The Settling Parties agree that the requested date of September 30, 2020 for the approval of the Settlement Agreement may be extended upon the mutual consent of the Settling Parties and notification of such extension to the DPU.
Set forth below are descriptions of the provisions of the Settlement Agreement related to the DPU Required Resolution. The Settlement Agreement includes other provisions generally related to ratemaking and activities of Buyer and EGMA to occur after the closing of the Transaction and other conditions, as further described in the Settlement Agreement. Therefore, the below summary of the Settlement Agreement does not purport to be complete and is qualified in its entirety by reference to the provisions of the Settlement Agreement, a copy of which is filed as Exhibit 10.1 to this Current Report on Form 8-K and incorporated herein by reference.
Termination of DPU Regulatory Matters. Under the Settlement Agreement, the Settling Parties agree that the terms of the Settlement Agreement achieve the DPU Required Resolution under the APA. Further, under the Settlement Agreement, CMA takes responsibility for the Greater Lawrence Incident and does not
contest facts in the record sufficient to support the DPU’s investigations into pipeline safety and emergency response in DPU 19-140 and 19-141, respectively. If adjudicated, CMA could be subject to the payment of penalties potentially up to the maximum allowed by law.
The Settling Parties also agree that, upon the closing of the Transaction, (1) all pending actions, claims, investigations, lawsuits and proceedings against NiSource, CMA and their affiliates, and all of the respective directors, officers, employees, agents and representatives of NiSource, and CMA and their affiliates (such entities and individuals, collectively referred to as the “Discharged Persons”), under the DPU’s jurisdiction, shall be considered settled, resolved, and terminated; and (2) all future actions, claims, investigations, lawsuits and proceedings, whether known or unknown, against the Discharged Persons, in each case, relating to, arising out of, or in connection with the Greater Lawrence Incident (as defined in the APA), under the jurisdiction of the DPU shall be considered settled, resolved, and terminated. This includes the DPU’s investigations into pipeline safety and emergency response in DPU 19-140 and 19-141, respectively, as well as any other regulatory matters that could have been raised by the DPU relating to, arising out of, or in connection with the Greater Lawrence Incident.
The Settling Parties also agree that, upon the closing of the Transaction, all pending actions, claims, investigations, lawsuits, and proceedings against the Discharged Persons, which are the subject of the Consent Order shall be settled, resolved, and terminated. The “Consent Order” is a consent order the DPU will be issuing in DPU 19-140, including Compliance Actions (as defined in the Consent Order) that correspond to the entirety of cases pending before the DPU. The Settling Parties further agree, upon the closing of the Transaction, that the Consent Order (and the DPU’s associated Compliance Actions) addresses all outstanding pipeline safety compliance investigations, inquiries, or ongoing matters, regardless of whether subject to notices of probable violations (NOPVs) or related to the Greater Lawrence Incident, existing as of the execution date of the Settlement Agreement.
Termination of Massachusetts AGO Matters. Under the Settlement Agreement, the Settling Parties agree that, upon the closing of the Transaction, the Settlement Agreement shall constitute receipt from the AGO of an agreement, settlement, compromise, and consent: (1) to terminate with prejudice all pending actions, claims, lawsuits, investigations, or proceedings under the jurisdiction of the AGO against the Discharged Persons relating, arising out of, or in connection with, the Greater Lawrence Incident; and (2) not to commence on its own behalf any new action, claim, lawsuit, investigation or proceeding against any of the Discharged Persons relating, arising out of, or in connection with, the Greater Lawrence Incident.
Payment in Lieu of Penalties. Under the Settlement Agreement, the Settling Parties agree that, at the closing of the Transaction, NiSource will make a payment in lieu of penalties in full settlement of all of the pending and potential claims, lawsuits, investigations or proceedings settled by and released by the Settlement Agreement in the amount of $56.0 million.
Energy Relief Fund. Under the Settlement Agreement, the Settling Parties agree that the funds derived from the NiSource payment described above will be used to create an “Energy Relief Fund,” comprised of two components, designated as the “Merrimack Valley Renewal Fund” and the “Arrearage Forgiveness Fund,” in each case as further described in the Settlement Agreement. The Merrimack Valley Renewal Fund shall be jointly administered by the AGO and DOER. The Arrearage Forgiveness Fund shall be jointly administered by the AGO and Buyer.
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The Settlement Agreement and the above description of the Settlement Agreement have been included to provide investors and security holders with information regarding the terms of the Settlement Agreement and are not intended to provide any other factual information about the Settling Parties or any of their