Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: SUNDAY, August 29, 1993 TAG: 9308270006
SECTION: BUSINESS PAGE: F1 EDITION: METRO
SOURCE: DANIEL HOWES STAFF WRITER
DATELINE: LENGTH: Long
Gone is the worry - for weeks hanging like a scimitar above executive heads - that Roanoke City Council might try to acquire the company's assets inside the city, an option sketched out in the 20-year franchise deal between the two.
Gone, too, are the phones that handled some 2,500 calls from concerned customers and Roanoke Valley residents determined to stop any city move on the 110-year-old company.
Could a new, different Roanoke Gas - laid bare by its bruising public battle with city hall - be emerging from its century-old cocoon?
Executives hope so. "We have to become more aggressive, offer more services and get out and buy our own gas," President Frank Farmer said in an interview last week.
The staid culture that has pervaded most utilities since World War II - conservative, dependable, a steady return on investment - is being replaced by a more energetic, service-oriented creed. That's why the company's board of directors last week approved a plan to sell common stock to customers through a plan similar to those that other utilities began a decade ago. Roanoke Gas customers will get a first notice of the plan inserted in September bills with a formal prospectus about a month later.
If Roanoke Gas hopes to be a player in the deregulated natural gas industry, it must grow. And it needs capital - preferably equity, not debt - to finance that growth. The company has nearly 5 million shares of its common stock authorized for sale but only 635,000 shares currently issued. What customers will be asked to buy would come from that shelved inventory of stock. Terms of the purchase, including the minimum amount of money that can be invested and how often such purchases can be made, have not be made final by the company's lawyers and regulators, said Robert Glenn, senior vice president for marketing and strategic planning. The idea, he said, is to create a program that encourages average customers rather than large investors to buy stock.
"We're trying to make it flexible and as available as possible to our small customers. We want to try to open up the ownership of the company," Glenn said.
Roanoke Gas executives want to "position the company as a favorable local utility investment," said Robert Glenn, senior vice president for marketing and strategic planning.
At the same time, Roanoke Gas is hoping it can dilute its image as a closely held company controlled by a few influential families. Indeed, most of the company's 900 stockholders live within a 50-mile radius of Roanoke.
Timing for the change seems perfect.
The customer stock plan is likely to appear just months after local residents sprang to the defense of their apparently beloved gas company, increasing the likelihood that the company may garner some significant equity in the process.
| The city's exploratory bid for the gas company appears to have benefited Roanoke Gas far more than it cost. Company executives think their own public relations campaign, augmented by concentrated media coverage, bolstered the gas company's community image.
All told, the Battle for Roanoke Gas cost the company some $50,000, including advertising, postage, consulting and legal fees. But executives inside the company's Kimball Avenue Northeast offices aren't complaining about the price of the campaign, which culminated last Sunday with the city's dropping the takeover clause from its franchise agreement with Roanoke Gas.
Instead, gas company employees are pleased with their ability to pull together in a crisis. "It's been very much a team-building effort here," Glenn said. "You can't buy that; you can't orchestrate that."
Vernard Pearson, president of Local 3-515 of Oil, Chemical and Atomic Workers International Union, agreed. "We want to preserve Roanoke Gas just as much as they do," he said, explaining that the union's public opposition to a city takeover showed company executives they can count on union support in such disputes.
"I would say there was a lot of cooperation," he said. "We have a fairly decent relationship at all times."
Pearson, however, disputes management contentions that the corporate culture is changing, growing more open and public. "I've been there 22 years, and they have never liked the spotlight," he said. "I don't see them changing that much."
\ Now, company executives are looking at the next 180 days, when they'll have to negotiate a new franchise agreement with city officials.
For 40 years, Roanoke Gas has paid the city nearly $30,000 annually in franchise fees. City officials have signaled their intention to wrest larger payments from the utility. They probably will succeed, key gas company officials said.
"We clearly believe $30,000 is high," Glenn said, "but we understand the city's need for money. We told the city . . . we would not seek a cut in that fee.
"We will be very agreeable to a reasonable increase. We're not going to drive them to the mat on this $30,000 deal. That's not our plan."
Glenn won't say what the plan is. But he did hold out the possibility of a second carrot to mollify city officials desperate for new revenue and new jobs: Because a deregulated natural gas industry likely will increase business opportunities for the sale of liquefied natural gas, Roanoke Gas executives may build a second such plant - one is operating in Botetourt County - in the city.
"Right now, it just represents a market opportunity we need to explore," Glenn said.
A second investment, perhaps proffered during franchise negotiations, could come from the company's agreeing to build in the city a compressed natural gas refueling station for natural-gas-powered automobiles.
Each investment would create new tax revenue, a rare commodity for a shrinking city whose City Council is determined to cut tax rates.
"I want to be creative here," Glenn said. "I want to position Roanoke Gas for growth . . . and attendant with that is helping the city. Any legitimate taxing vehicle is fine with us."
\ ROANOKE GAS\ IN BUSINESS SINCE 1883 History: The company was organized in 1883 and began manufacturing gas by burning coal on Sept. 25, 1893, at a plant on Kimball Avenue. The same day, it received a 25-year franchise from Roanoke City Council. Gas was used primarily in homes and for street illumination.
In 1888 the company sold all its assets and franchise to Roanoke Gas and Water Co., which also acquired the Roanoke Water Works. In 1912, the company and franchise were sold to C.H. Geist and Associates of Philadelphia, which formed Roanoke Gas Light Co. In 1927, the stock was acquired by Central Public Service Corp. and later by Consolidated Electric and Gas Co. In the 1930s, the Roanoke company was managed by Stone and Webster Service Corp.
Roanoke Gas became a public company in 1944, the management agreement with Stone & Webster was canceled, and stock was distributed to 700 stockholders, about half of whom were Roanoke residents. In 1950, the Roanoke Pipe Line Co. was organized to build and operate a 30-mile transmission line from Gala to Roanoke. In 1958, that company was merged into Roanoke Gas.
by CNB