<PAGE>   1

                      SECURITIES AND EXCHANGE COMMISSION
                           Washington, D.C.  20549
                                      
                                  FORM 10-K
                                      
                ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
                    OF THE SECURITIES EXCHANGE ACT OF 1934
                                      
                 For The Fiscal Year Ended December 31, 1995
                        Commission File Number 1-3751
                                      
                              NORAM ENERGY CORP.
            (Exact name of registrant as specified in its charter)
                                      
                                   Delaware
           (State or jurisdiction of incorporation or organization)
                                      
                           EMPLOYER IDENTIFICATION
                           (I.R.S. No. 72-0120530)
                                      
                 1600 SMITH, 32nd FLOOR, HOUSTON, TEXAS 77002
                   (Address of principal executive office)
                                      
                                (713) 654-5699
             (Registrant's telephone number, including area code)
                                      
         Securities registered pursuant to Section 12(b) of the Act:

 Title of each class                   Name of Each Exchange on Which Registered
 Common Stock, $.625 par value                     New York Stock Exchange
 Convertible Exchangeable Preferred                New York Stock Exchange
 Stock, Series A, Cumulative, $0.10 par value

      Securities registered pursuant to Section 12(g) of the Act:  None

         Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such report), and (2) has been subject to such
filing requirements for the past 90 days.
Yes  x   No
   -----   -----
         Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K (Section 229.405 of this chapter) is not contained
herein, and will not be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by reference in Part
III of this Form 10-K or any amendment to this Form 10-K. 
                                                          -----
         The aggregate market value of the voting stock held by non-affiliates:
$1,116,001,584 Common Stock, $.625 par value, based upon the closing sales
price on March 15, 1996 as reported on the New York Stock Exchange, using
beneficial ownership of stock rules adopted pursuant to Section 13 of the
Securities Exchange Act of 1934 and excluding stock owned by affiliates.
Indicate the number of shares outstanding of each of the issuer's classes of
Common Stock, as of the latest practicable date: 125,180,609 shares of
Common Stock, $.625 par value, as of March 15, 1996.

                     DOCUMENTS INCORPORATED BY REFERENCE

1.  Portions of the NorAm Energy Corp. Annual Report to Stockholders for the
fiscal year ended December 31, 1995, are incorporated by reference in Parts I,
II and IV herein.

2.  NorAm Energy Corp. definitive Proxy Statement respecting the Annual Meeting
of Stockholders to be held on May 14, 1996, to be filed pursuant to Regulation
14A under the Securities Exchange Act of 1934 (to the extent set forth in Items
10, 11, 12 and 13 of Part III of this report) is incorporated by reference.
The Exhibits included in this report are indexed on pages 30 through 32.
<PAGE>   2

                     NORAM ENERGY CORP. AND SUBSIDIARIES

                                   PART I

ITEM 1.  BUSINESS.

         NorAm Energy Corp. (the "Company") was incorporated in 1928 under the
laws of the State of Delaware and is principally engaged in the distribution
and transmission of natural gas including gathering, marketing and storage of
natural gas. The revenue, operating profit and identifiable assets of the
Company's natural gas segment exceed 90% of the respective totals for the
Company.   Accordingly, the Company is not required to report on a "segment"
basis, although the Company is organized into, and the following business
description focuses on, the five operating units described below.  Previously,
the Company segregated its business activities into "Natural Gas Distribution"
and "Natural Gas Pipeline" when reporting results of operations.  In
recognition of changes within the natural gas industry and the manner in which
the Company manages its portfolio of businesses, the Company has further broken
down its results of operations into (1) Natural Gas Distribution; (2)
Interstate Pipelines; (3) Wholesale Energy Marketing; (4) Retail Energy
Marketing; and (5) Natural Gas Gathering.  The business units now referred to
as Interstate Pipelines, Wholesale Energy Marketing and Natural Gas Gathering
have also been referred to from time to time as the NorAm Trading and
Transportation Group or the Trading and Transportation Group.  The business
unit referred to herein as Retail Energy Marketing includes a number of
activities previously conducted as part of Natural Gas Distribution.  Set forth
below is the Operating Income (Loss) by the five Business Units described above
as well as Corporate.  Following that table is a reconciliation of operating
income reported in accordance with the current organizational breakdown with
operating income reported in accordance with the previous organizational
breakdown.
<PAGE>   3


OPERATING INCOME (LOSS) BY BUSINESS UNIT(1)

<TABLE>
<CAPTION>
 (MILLIONS OF DOLLARS)                        1995                1994                1993
 ---------------------                       -------             -------             -------
 <S>                                         <C>                 <C>                 <C>
 Natural Gas Distribution                    $ 158.0             $ 145.5             $ 160.1

 Interstate Pipelines                          103.8               105.4               100.6

 Wholesale Energy Marketing                      4.2                (3.0)              (22.4)

 Natural Gas Gathering                           8.7                 5.6                 -   (2)

 Retail Energy Marketing                        22.2                18.4                15.1

 Corporate and Other(3)                         (9.6)               (7.0)              (16.9)
                                             -------             -------             -------
     Subtotal                                  287.3               264.9               236.5

 Louisiana Intrastate Gas Corp.(4)               -                   -                   5.6

 Contract Termination Charge(5)                  -                   -                 (34.2)

                                             -----------------------------------------------
      Consolidated                           $ 287.3             $ 264.9             $ 207.9
                                             ===============================================
</TABLE>


(1)      To the extent practicable, prior year results of operations have been
         reclassified to conform to the current business unit presentation,
         although such results are not necessarily indicative of the results
         which would have been achieved had the revised business unit structure
         been in effect during those periods.  In general, transactions among
         business units are recorded at market prices and material affiliate
         transactions within business units have been eliminated.

(2)      Included with "Interstate Pipelines" in 1993.

(3)      Includes amortization of goodwill, see Note 1 of Notes to Consolidated
         Financial Statements included in the Company's 1995 Annual Report to
         Stockholders.

(4)      See "Interstate Pipelines" following.

(5)      In December 1993, the Company completed a comprehensive settlement
         agreement ("the Settlement") with certain subsidiaries of Samson
         Investment Company, terminating or modifying a number of outstanding
         contractual arrangements.  The Settlement resulted in a $34.2 million
         pre-tax charge to earnings, set forth in the Company's Statement of
         Consolidated Income for 1993 as "Contract Termination Charge".





                                      -2-
<PAGE>   4
                   OPERATING INCOME (LOSS) BY BUSINESS UNIT
                       RECONCILIATION TO PREVIOUS FORMAT
                             (MILLIONS OF DOLLARS)

<TABLE>
<CAPTION>
                                 Natural                      Wholesale       Natural        Retail
                                   Gas         Interstate       Energy          Gas          Energy         Corporate
           1995                Distribution     Pipelines      Marketing      Gathering      Marketing       & Other
           ----                ------------     ---------      ---------      ---------      ---------       -------
 <S>                           <C>              <C>            <C>            <C>            <C>           <C>
 PREVIOUS FORMAT               $ 178.0          $ 116.6            -              -                -       $   (7.3)

    Distribution                 (21.5)              -             -              -          $   21.5            -

    Pipeline                        -             (12.8)       $  4.2         $  8.7               -           (0.1)

    Corporate & Other              1.5               -             -              -               0.7          (2.2)
                               -------          -------        ------         ------         --------      --------

 CURRENT REPORTING             $ 158.0          $ 103.8        $  4.2         $  8.7         $   22.2      $   (9.6)
                               =======          =======        ======         ======         ========      ========
                                                                                           Consolidated    $  287.3
                                                                                                           ========
           1994
           ----

 PREVIOUS FORMAT               $ 163.2          $ 108.1            -              -                -       $   (5.3)

    Distribution                 (17.5)              -             -              -          $   17.5            -

    Pipeline                        -              (2.7)       $ (3.0)        $  5.6               -            0.1

    Corporate & Other             (0.2)              -             -              -               0.9          (1.8)
                               -------          -------        ------         ------         --------      --------           
 CURRENT REPORTING             $ 145.5          $ 105.4        $ (3.0)        $  5.6         $   18.4      $   (7.0)
                               =======          =======        ======         ======         ========      ========
                                                                                           Consolidated    $  264.9
                                                                                                           ========

           1993
           ----
 PREVIOUS FORMAT               $ 174.8          $  78.2            -                             -         $  (17.4)

    Distribution                 (15.3)              -             -                         $  15.3             -

    Pipeline                        -              22.4        $(22.4)                          -                -

    Corporate & Other              0.6               -             -                            (0.2)           0.5
                               -------          -------        ------                        -------       --------          
 CURRENT REPORTING             $ 160.1          $ 100.6        $(22.4)                       $  15.1       $  (16.9)
                               =======          =======        ======                        ========      ========
                                                                                                           $  236.5
                                                                Contract Termination Charge                   (34.2)
                                                                Louisiana Intrastate Gas Corporation            5.6 
                                                                            Consolidated                   --------
                                                                                                           $  207.9 
                                                                                                           ======== 

</TABLE>

See the separate discussions for each Business Unit for operating revenue and
throughput information.

         The Company also is evaluating opportunities for international
investment, and the Company's efforts thus far have focused on opportunities
emerging in Latin America due to privatization initiatives currently underway
in a number of countries, as well as broad-based efforts to encourage
international investment.

         Since the Company's December 31, 1992 sale of its oil and gas
exploration and production business, the Company's operations principally have
been rate regulated.  The operations of the Natural Gas Distribution and
Interstate Pipelines business units are subject to rate regulation, while the
operations of Wholesale Energy Marketing, Retail Energy Marketing and Natural
Gas Gathering are not generally subject to direct regulation as to the rates
which may be charged.





                                      -3-
<PAGE>   5

NATURAL GAS DISTRIBUTION.

         The Company's natural gas distribution business is conducted through
its three divisions, Arkla, Entex and Minnegasco, and their affiliates.
Historically, the Company's Natural Gas Distribution business included
substantially all the activities conducted by these three divisions.  In
recognition of the fact that certain of these activities are not subject to
traditional cost-of-service rate regulation and, as such, have different risk
profiles and return potentials, and in order to concentrate its
similarly-targeted marketing efforts in a single business unit, certain
large-volume marketing activities, including the provision of services to a
number of customers previously reported with "Natural Gas Distribution", have
been aggregated and separately reported as "Retail Energy Marketing".  Thus,
Natural Gas Distribution, as presently constituted consists principally of
natural gas sales to and natural gas transportation for residential, commercial
and a limited number of industrial customers, substantially all of which are
located behind the "city gate" and subject to traditional cost-of-service rate
regulation.

         Arkla provides service in approximately 613 communities in the states
of Arkansas, Louisiana, Oklahoma and Texas.  The largest communities served by
Arkla are the metropolitan areas of Little Rock, Arkansas, and Shreveport,
Louisiana.  In 1995, approximately 73% of Arkla's total throughput was composed
of sales of gas at retail and approximately 27% was attributable to
transportation services.  For the same period, in excess of 95% of Arkla's
supplies were obtained from  NorAm Gas Transmission Company ("NGT") and
Mississippi River Transmission Corporation ("MRT"), or through transportation
agreements with NorAm Energy Services, Inc. ("NES").  In September of 1994,
Arkla and NGT, respectively, completed the sale of its Kansas distribution
properties and certain related pipeline assets of NGT, located in Kansas, to
UtiliCorp United Inc. ("UtiliCorp", an affiliate of Peoples Natural Gas) for
approximately $23 million in cash.  This sale terminated the Company's
distribution operations in Kansas.

         Entex provides service in approximately 502 communities in the states
of Texas, Louisiana and Mississippi.  The largest community served by Entex is
the metropolitan area of Houston, Texas.  In 1995, approximately 95% of Entex's
total throughput was composed of sales of gas at retail and approximately 5%
was attributable to transportation services.  For the same period, Entex's
principal suppliers of gas were Enron Capital & Trade Resources, MidCon Texas
Pipeline Co., Koch Gateway Pipeline Company, and certain affiliates of each
such company.  No other supplier accounted for more than 10% of Entex's
purchases.

         During 1995, Minnegasco provided service in approximately 243
communities in Minnesota.  The largest community served by Minnegasco is
Minneapolis, Minnesota and its suburbs.  In 1995, approximately 92% of
Minnegasco's total throughput was composed of sales of gas at retail and
approximately 8% was attributable to transportation services.  For the same
period, Minnegasco's principal pipeline service providers were Northern Natural
Gas Company, Viking Gas Transmission Company, Minnesota Intrastate Pipeline and
Natural Gas Pipeline Company of America.  For the same period, Minnegasco's
principal suppliers of gas were Pan Alberta Gas, NES, Coastal Gas Marketing and
Western Gas Marketing.  No other supplier of natural gas accounted for more
than 10% of Minnegasco's purchases.  In February 1993, Minnegasco completed the
sale of its Nebraska distribution system to UtiliCorp for





                                      -4-
<PAGE>   6
$75.3 million in cash plus an additional payment of $17.8 million for net
working capital transferred.  In August of 1993, Minnegasco completed the
exchange of its South Dakota distribution properties plus $38 million in cash
for the Minnesota distribution properties of Midwest Gas, a division of Midwest
Power System Inc. ("Midwest").  The UtiliCorp and Midwest transactions
terminated Minnegasco's distribution operations outside of Minnesota.

         The following table summarizes by state the number of communities and
the estimated number of customers served by the Company as of December 31,
1995:

               SERVICE AREA           COMMUNITIES              NUMBER OF
                LOCATIONS                SERVED                CUSTOMERS
               ------------           -----------              ---------

             Texas                        365                  1,203,712

             Minnesota                    243                    626,556

             Arkansas                     383                    425,423

             Louisiana                    179                    262,480

             Mississippi                   91                    118,520

             Oklahoma                      97                    114,794
                                        -----                  ---------
                                        1,358                  2,751,485
                                        =====                  =========





                                      -5-
<PAGE>   7
         The following table summarizes the estimated number of customers
served by each of the divisions as of December 31, 1995 and 1994:



                                                   DECEMBER 31,
                                                   ------------
   CUSTOMERS BY DIVISION                  1995                     1994
   ---------------------                ---------                ---------

   Entex                                1,394,292                1,375,393
   Arkla                                  730,637                  721,185
   Minnegasco                             626,556                  612,254
                                        ---------                ---------

                    Total               2,751,485                2,708,832
                                        =========                =========




         The Company's approximately 54,982 linear miles of gas distribution
mains vary in size from one-half inch to 24 inches.  Generally, in each of the
cities, towns and rural areas it serves, the Company owns the underground gas
mains and service lines, metering and regulating equipment located on
customers' premises, and the district regulating equipment necessary for
pressure maintenance.  With a few exceptions, the measuring stations at which
the Company receives gas from its suppliers are owned, operated and maintained
by others, and the distribution facilities of the Company begin at the
outlet of the measuring equipment.  These facilities include odorizing
equipment usually located on the land owned by suppliers and district regulator
installations, in most cases located on small parcels of land which are leased
or owned by the Company.





                                      -6-
<PAGE>   8
         Consolidated revenue, throughput and customer data of the distribution
divisions are as follows:


NATURAL  GAS  DISTRIBUTION
<TABLE>
<CAPTION>
                                                       YEAR ENDED DECEMBER 31,
                                                    ------------------------------
                                                       (IN MILLIONS OF DOLLARS)
                                         1995                 1994                   1993
                                         ----                 ----                   ----
 <S>                                 <C>                   <C>                    <C>
 OPERATING REVENUES
 ------------------

      Sales                            $ 1,678.6            $ 1,769.9             $ 1,865.7

      Transportation                        19.1                 17.6                  18.7

      Other                                 21.7                 23.1                  22.6
                                       ---------            ---------             ---------
                                                            
          Total                        $ 1,719.4            $ 1,810.6             $ 1,907.0
                                       =========            =========             =========


                                                       YEAR ENDED DECEMBER 31,
                                                    ------------------------------
                                                      (IN BILLIONS OF CUBIC FEET)
                                           1995                 1994                   1993
                                           ----                 ----                   ----
 <S>                                 <C>                   <C>                    <C>
 THROUGHPUT
 ----------
      Sales

           Residential                     183.3                180.0                 193.6

           Commercial                      123.3                119.1                 126.7

           Industrial                       52.4                 53.4                  49.7

      Transportation                        49.4                 44.9                  52.2
                                           -----                -----                 -----

               Total                       408.4                397.4                 422.2
                                           =====                =====                 =====


                                                        YEAR ENDED DECEMBER 31,
                                                    ------------------------------
                                       1995                 1994                   1993
                                       ----                 ----                   ----
 <S>                                 <C>                   <C>                    <C>
 AVERAGE NUMBER OF CUSTOMERS
 ---------------------------
      Residential                    2,495,022            2,458,520             2,433,598

      Commercial                       224,946              222,193               222,523

      Industrial                         2,338                2,462                 2,509
                                     ---------            ---------             ---------

          Total                      2,722,306            2,683,175             2,658,630
                                     =========            =========             =========
</TABLE>





                                      -7-
<PAGE>   9
         In almost all of the communities in which it provides service, the
city or other relevant governmental body has granted the Company a franchise to
serve, and its service is subject to the terms and conditions of the franchise.
In most instances the Company's franchise is not exclusive.  The rates at which
the Company provides service at retail to its residential and commercial
customers are, in all instances, subject to regulation by the relevant state
public service commissions and, in Texas, also by municipalities.  The services
provided by the Company to its industrial customers are largely unregulated in
Texas and Louisiana, and are subject to regulatory supervision of differing
degrees in each of the other states.  See "Regulation."


INTERSTATE PIPELINES.

         The Company's interstate natural gas pipeline business (collectively
referred to as "Pipeline") is conducted principally through NGT and MRT, two
wholly-owned subsidiaries of the Company together with certain subsidiaries and
affiliates.  The Company's natural gas gathering activities subsequent to 1993
and wholesale energy marketing activities for all periods, previously included
with Pipeline, are now separately discussed, see "Wholesale Energy Marketing"
and "Natural Gas Gathering" elsewhere herein.

         In March 1993, the Company transferred assets, liabilities and service
obligations of Arkla Energy Resources, formerly a division of the Company, into
a then newly-formed wholly-owned subsidiary of the Company, now called NGT,
pursuant to an order from the Federal Energy Regulatory Commission ("FERC")
approving the transfer.  As a result of this transfer of assets, liabilities and
service obligations, the FERC now has sole jurisdiction over NGT's interstate
pipeline business, including transportation services and certain of NGT's
transactions with affiliates of the Company, which historically were subject to
both FERC and state regulatory oversight.  See "Regulation."

         On June 30, 1993, the Company completed the sale of its intrastate
pipeline business as conducted by Louisiana Intrastate Gas Corporation and its
subsidiaries, LIG Chemical Company, LIG Liquids Corporation and Tuscaloosa
Pipeline (the "LIG Group"), to a subsidiary of Equitable Resources, Inc.
("Equitable") for $191 million in cash.  The Company agreed to indemnify
Equitable against certain exposures, for which the Company has established
reserves equal to anticipated claims under the indemnity.  The Company acquired
the LIG Group in July of 1989.  The LIG Group operated a natural gas pipeline
system located wholly within Louisiana.

         In February 1996, Pipeline announced a reorganization plan which
resulted in the elimination of a total of approximately 275 positions at NGT
and MRT.  The reorganization plan is intended to allow Pipeline to operate more
efficiently, improving its ability to compete in its market areas.  The Company
expects to record a first-quarter 1996 charge of less than $20 million
associated with the reorganization plan, which amount is expected to be
substantially offset by the associated cost savings during 1996.





                                      -8-
<PAGE>   10
         NGT owns and operates a natural gas pipeline system located in
portions of Arkansas, Louisiana, Mississippi, Missouri, Kansas, Oklahoma,
Tennessee and Texas.  As described above under "Natural Gas Distribution",
effective September 30, 1994, NGT sold to UtiliCorp certain of its pipeline
assets in Kansas.  At December 31, 1995 the NGT system consisted of
approximately 6,400 miles of transmission lines.  The NGT pipeline system
extends generally in an easterly direction from the Anadarko Basin area of the
Texas Panhandle and western Oklahoma through the Arkoma Basin area of eastern
Oklahoma and Arkansas to the Mississippi River.  Additional pipelines extend
from east Texas to north Louisiana and central Arkansas, and from the mainline
system in Oklahoma and Arkansas to south central Kansas and southwest Missouri.
In its system, NGT operates various compressor facilities related to its gas
transmission business.  NGT's peak day gas handled during the 1995/96 heating
season was approximately 2.40 billion cubic feet ("Bcf").  NGT , on behalf of
various shippers, transports and delivers gas to distributors for resale for
ultimate public consumption, to industrial customers for their own use and
consumption, and to third party pipeline interconnects located in the states of
Arkansas, Kansas, Louisiana, Mississippi, Missouri, Oklahoma, Tennessee and
Texas.  In 1995 NGT's throughput totaled 630.1 million MMBtu.  Approximately
17% of the total throughput was attributable to services provided to  Arkla,
and 17% was attributable to gas marketed by NES to other parties.  No other
customer or supplier accounted for more than 10% of NGT's throughput.

         The MRT system consists of approximately 2,200 miles of pipeline
serving principally the greater St. Louis area in Missouri and Illinois.  This
pipeline system includes the "Main Line System," the "East Line," and the "West
Line." The Main Line System includes three transmission lines extending
approximately 435 miles from Perryville, Louisiana, to the greater St. Louis
area.  The East Line, also a main transmission line, extends approximately 94
miles from southwestern Illinois to St. Louis.  The West Line extends
approximately 140 miles from east Texas to Perryville, Louisiana.  The system
also incudes various other branch, lateral, transmission and gathering lines
and compressor stations.  During 1995, MRT's throughput totaled 395.1 million
MMBtu.  Approximately half of MRT's total 1995 volumes were delivered to its
traditional markets along its system in Missouri, Illinois and Arkansas with
the remaining volumes delivered to off-system customers.  MRT's  peak day
deliveries during the 1995/96 heating season to its traditional market area
customers were approximately one million MMBtu.  MRT's largest customer is
Laclede Gas Company, which serves metropolitan St. Louis and to which MRT
provides service under several long-term firm transportation and storage
agreements and an agency agreement.  The FERC has jurisdiction over MRT with
regard to its interstate pipeline business.  See "Regulation."

         The Company owns and operates seven gas storage fields.  Four storage
fields are associated with NGT's pipeline and have a combined maximum
deliverability of approximately 665 million cubic feet ("mmcf") per day and a
working gas capacity of approximately 22.8 Bcf.  NGT also owns a 1/12 interest
in Koch Gateway Pipeline Company's Bistineau storage field which provides an
additional 100 mmcf per day of deliverability and additional working gas
capacity of 8 Bcf.  The two largest NGT storage fields are located in Oklahoma:
the Ada field - capable of delivering approximately 330 mmcf per day, and the
Chiles Dome field - capable of delivering 265 mmcf per day.  The other NGT
storage fields, Ruston and Collinson, are located near Ruston, La. and
Winfield, Kansas.  However, the Collinson storage field is scheduled for
abandonment in 1996.  Three storage fields are associated with MRT's pipeline
and have a maximum aggregate deliverability of approximately 580 mmcf per





                                      -9-
<PAGE>   11
day and a working gas capacity of approximately 31 Bcf.  Most of MRT's storage
capacity is located in two fields in north central Louisiana, near Ruston.
MRT's other storage field is located at St. Jacob, Illinois off of MRT's East
Line.  During 1995, all of MRT's storage capacity was subscribed on a firm
basis by its customers, who had contracted for the capacity as a result of
MRT's FERC Order 636 restructuring proceeding.

         As stated above, the Company sold the LIG Group to a subsidiary of
Equitable Resources in June, 1993.  As a result, LIG's results of operations
have been excluded from the following data, although this disposition did not
qualify for presentation as "discontinued operations" in the Company's
Consolidated Financial Statements.  LIG's operating income was $5.6 million for
the six months ended June 30, 1993 and total throughput for the same period was
103.4 million MMBtu.

         Consolidated throughput and revenue data for Pipeline is as follows:

<TABLE>
<CAPTION>
                                                        YEAR ENDED DECEMBER 31,
                                                    ------------------------------
                                               1995                1994                1993
                                               ----                ----                ----
 <S>                                          <C>                 <C>                 <C>
 THROUGHPUT (million MMBtu)

      Sales                                     79.5                63.2               115.1

      Transportation                           974.3               831.8               780.1

      FERC Order 636 (1) Elimination           (77.5)              (59.9)              (24.2)
                                              ------              ------              ------

          Total                                976.3               835.1               871.0
                                              ======              ======              ======
 REVENUES (in millions of dollars)

      Sales                                   $100.8              $162.4              $451.3

      Transportation                           245.9               238.2               151.4
                                              ------              ------              ------
           Total                              $346.7              $400.6              $602.7
                                              ======              ======              ======
</TABLE>



(1)      When sold volumes are also transported by Pipeline, the throughput
         statistics will include the same physical volumes in both the sales
         and transportation categories, requiring an elimination to prevent the
         overstatement of actual total throughput.  No elimination is made for
         volumes of 196.6 million MMBtu, 145.8 million MMBtu and 158.2 million
         MMBtu in 1995, 1994 and 1993, respectively, which were transported on
         both the NGT and MRT systems.


         During the 1980s, the Company, as most other pipelines, was compelled
to resolve a number of significant disputes with its suppliers under contracts
which allegedly required the Company to take or, if not taken pay for,
quantities of gas in excess of its available sales markets and/or at prices
generally above the levels required by such markets.  These disputes, generally
referred to as "take-or-pay" claims, have been resolved in a number of ways,
including both buy-out/buy-downs and payments for gas in advance of its
delivery.  In the third quarter of 1989, the Company recorded a pre-tax Special
Charge of $269 million related





                                      -10-
<PAGE>   12
to these claims.  The amount shown as "Gas Purchased in Advance of Delivery" in
the Company's Consolidated Balance Sheet and the component of "Investments and
Other Assets" bearing the same caption (See Note 1 of Notes to Consolidated
Financial Statements included in the Company's 1995 Annual Report to
Stockholders) represents, in substantial part, amounts paid to suppliers in
conjunction with the above referenced settlements.  These prepayments for gas
were made at varying prices but have been reduced to their estimated net
realizable value (which approximates fair value) and, to the extent that the
Company is unable to realize at least this amount through sale of the gas as
delivered over the life of these agreements, its earnings will be adversely
affected, although such impact is not expected to be material.

         In addition, the Company's Consolidated Balance Sheet includes an
accrual representing its estimate of the amount it will be required to pay in
settlement of all remaining claims, including those not yet asserted.  While
the vast majority of such claims have been settled, the Company is committed,
under certain of these settlements, to make additional payments, expects that
other such claims may be asserted and that amounts may be expended in
settlement of such claims.  The Company currently expects that the amount of
such settlements if any, in excess of existing reserves will  not be material.

         The Company is committed under certain agreements to purchase certain
quantities of gas in the future.  At December 31, 1995, the Company had the
following gas take commitments under its agreements which are not variable-
market-based priced:


<TABLE>
<CAPTION>
                                      VOLUME                 VALUE
                                   (MILLIONS OF              ($ IN                 PRICE
                                      MMBTU)               MILLIONS)             ($/MMBTU)
                                   ------------            ---------             ---------
         <S>                          <C>                   <C>                    <C>
             1996                     17.8                  $40.5                  $2.27
             1997                     15.6                   35.4                   2.27
             1998                     12.0                   26.4                   2.19
             1999                      6.2                   14.4                   2.33
         Beyond 1999                   1.0                  $ 3.6                  $3.47
</TABLE>





                                      -11-
<PAGE>   13
         At December 31, 1995, the Company had the following gas take
commitments under its agreements which are variable-market-based priced, valued
using an average spot price over the delivery period of approximately
$2.13/MMBtu:


<TABLE>
<CAPTION>
                                     VOLUME                 VALUE                AVERAGE
                                  (MILLIONS OF              ($ IN                 PRICE
                                     MMBTU)               MILLIONS)             ($/MMBTU)
                                  ------------            ---------              --------
        <S>                           <C>                  <C>                    <C>
            1996                     157.2*                $350.6                 $2.23
            1997                       9.4                   19.5                  2.07
            1998                       5.0                   10.1                  2.04
            1999                       4.3                    9.1                  2.11
        Beyond 1999                    3.7                 $  8.0                 $2.18
</TABLE>

         *       Includes approximately 45.4 million MMBtu of gas subject to 
                 3 - 6 month term purchase agreements at NES which, in general,
                 are matched with sale agreements with similar terms.


         In order to mitigate the risk from market fluctuations in the price of
natural gas and transportation during the terms of these commitments, the
Company enters into futures contracts, swaps and options, (see Notes 1 and 8 of
Notes to Consolidated Financial Statements included in the Company's 1995
Annual Report to Stockholders).     In no case are these derivatives held for
trading purposes.  To the extent that the Company expects that these
commitments will result in losses over the contract term, the Company has
established reserves equal to such expected losses.


WHOLESALE ENERGY MARKETING.

         The Company's marketing of natural gas and risk management services to
natural gas resellers and certain large volume industrial consumers is
principally conducted by NES, together with certain affiliates.  NES,
previously reported as a part of Pipeline, historically has operated primarily
in those states served by the NGT and MRT systems but recently has had
significant sales in various other states as it seeks to extend its activities
throughout North America.  In addition, in recent periods, NES has begun to
market electricity in wholesale markets.

         NES markets gas under daily, baseload and term agreements which
include either market sensitive or fixed pricing provisions.  Fixed priced
sales or purchase contracts are hedged using gas futures contracts or other
derivative financial instruments.  See Notes 1 and 8 of Notes to the Company's
Consolidated Financial Statements included in the Company's 1995 Annual Report
to Stockholders.  NES gas supplies are purchased from others on both a daily
and term basis.  Most gas supplies are purchased based on market sensitive
pricing.  Gas sales for 1995 were approximately 513 million MMBtu of which
approximately 85.2% was to unaffiliated parties.  Customers are located both on
the NGT system and other pipelines.  Gas is transported to customers using both
firm and interruptible transportation.  Sales and services provided by NES are
generally not subject to any form of rate regulation.





                                      -12-
<PAGE>   14
RETAIL ENERGY MARKETING.

         The Company's marketing of natural gas and related services to those
industrial and commercial customers located behind the "city gate" of local gas
distribution companies but not utilizing traditional "bundled" utility service,
as well as certain industrial customers served by third-party pipelines on
which the Company holds capacity, is principally carried out by NorAm Energy
Management, Inc., together with certain affiliates (collectively, "NEM").
Certain of NEM's activities, while not subject to traditional cost-of-service
rate determination, are subject to the jurisdiction of various regulatory
bodies as to the allocation of joint costs between such activities and certain
of the company's regulated activities. This recently-formed business unit
includes a number of activities previously included with Distribution (see
"Natural Gas Distribution" elsewhere herein) and will execute the Company's
plan for serving these markets more coherently and effectively.  NEM had sales
to five chemical facilities, operated by its largest customer and owned by a
total of five customers, which collectively represented approximately 38.3 Bcf
(22.6%), 11.9 Bcf (10.2%) and 7.0 Bcf(8.6%) of NEM's total gas sales volumes of
169.7 Bcf, 116.6 Bcf and 81.7 Bcf in 1995, 1994 and 1993, respectively.


NATURAL GAS GATHERING.

         On February 1, 1995, pursuant to a "spindown" order from the FERC, the
Company transferred the natural gas gathering assets of NGT into the Company's
wholly-owned subsidiary, NorAm Field Services Corp. ("NFS").  These assets
consist principally of approximately 3,500 miles of gathering pipelines which
collect gas from more than 200 separate systems located in major producing
fields in Oklahoma, Louisiana, Arkansas and Texas.  NFS is not generally 
subject to cost-of-service regulation, although the spindown order
required that it offer to continue any pre-existing gathering services
generally under the terms of NGT's tariff, including the applicable stated
maximum gathering rate of $0.1417 per MMBtu for a two-year period (the "Default
Contract"), except to the extent that separate terms and conditions have been
negotiated.  While various parties, including NFS, have appealed certain of the
FERC's findings and the case is pending before the D.C. Circuit Court of
Appeals, if the Default Contract provisions are not reversed in the interim,
NFS will be unable to realize the full market value for certain of its services
until February 1, 1997.  The Company expects that efforts will be made in
certain states to enact legislation to regulate gathering rates and services
but the Company currently expects that any such efforts will be successful only
to the extent of providing for complaint-type proceedings alleging undue
discrimination or similar "light-handed" regulatory approaches.  Natural Gas
Gathering also includes Arkla Chemical Company which performs gas processing,
liquids extraction and marketing activities, generally in conjunction with
certain of NFS's gathering activities.  In the future, the majority of NFS's
gas processing activities will





                                      -13-
<PAGE>   15
be conducted by Waskom Gas Processing Company, a joint venture of NFS and NGC
Corp. (an affiliate of Natural Gas Clearinghouse).


MARKET FACTORS.

         The Company's business is generally affected by a number of market
factors, including competition, seasonality and the general economic climate.
Increasingly, the activities of the Company's Interstate Pipelines, Wholesale
Energy Marketing and Retail Energy Marketing units are most significantly
affected by national trends in these areas.  On the other hand, the results of
the Company's Natural Gas Distribution units continue to be influenced most
significantly by local trends in these factors.

         Historically, competition in the sale and transportation of natural
gas was limited due to the pervasive nature of the regulation of the industry
and the long-term nature of the service obligations assumed by its
participants.  As a result, the Company's results of operations were largely
affected by local factors, including the effects of local regulation.  Over the
past few years, however, regulatory and economic developments have
significantly reduced the influence of such factors, particularly with respect
to the Company's Interstate Pipelines, Wholesale Energy Marketing and Retail
Energy Marketing operations.  At the federal level, regulations governing
natural gas transmission and marketing have been redesigned in order to promote
intense competition between natural gas transporters and marketers.  From an
economic perspective, in recent years the energy industry, including the
natural gas industry, has been characterized by a surplus of product
deliverability (and, in the case of natural gas transportation in certain
locations during certain seasons, a surplus of capacity), which also has
increased the level of competition.

         Currently, the Company generally faces competition in all aspects of
its operations, both from other companies engaged in the natural gas business
and from companies providing other energy products.  This has an effect both on
the quantity of the services sold by the Company and the prices it receives.
At all levels of the industry in which the Company is engaged, competition
generally occurs on the basis of price, the ability to meet individual customer
requirements, access to supplies and markets and reliability.  In the current
environment, the ability of the Company to respond to this competition is tied
directly to its ability to maintain operational flexibility,  achieve low
operating costs and maintain continued access to reliable sources of
competitively priced gas and a broad range of gas markets.

         These developments have had the effect of increasing the number of
competitors and competitive options faced by the Company.  As a consequence,
changes in the market for natural gas and gas transportation services at the
national level increasingly influence the demand and prices paid for the
natural gas and gas transportation services offered by the Company.
Additionally, to the extent that the customers served by those units are
relatively large volume customers using gas to meet industrial or electric
power generation requirements, the Company faces significant competition from
fuel oil, waste products used as a source of fuel for the generation of process
heat or steam, energy conservation products, and, with respect to electric
generation customers, low cost energy available to such customers from other
electric generators.





                                      -14-
<PAGE>   16
         Largely as a result of increasing competition, the Company
discontinued the application of Statement of Financial Accounting Standards No.
71, "Accounting for the Effects of Certain Types of Regulation" 
("SFAS 71") to NGT's transactions and balances in 1992, see Note 1 of 
Notes to Consolidated Financial Statements included in the Company's
1995 Annual Report to Stockholders.  These trends in competition are 
expected to continue, although not necessarily at the same rate as in the past.

         The Company's distribution units also face competition.  As with
customers served by the Company's transmission and marketing units, over the
last few years the Company's small industrial and large commercial customers
served through its distribution units increasingly have been the target of
other companies engaged in the natural gas business seeking to sell gas
directly or transport third-party gas to customers currently served through the
Company's distribution units.  In some cases,  these other companies seek to
provide such service through newly constructed facilities, thereby bypassing
the facilities installed by the Company to serve such customers.  The Company
has met such competition by adopting new programs which, in some instances,
have provided its competitors with access to its sales customers, but through
the use of the Company's facilities.  The Company also faces competition with
respect to such customers from fuel oil, electricity, energy conservation
products, and in certain instances, liquified petroleum gas.

         While with certain limited exceptions, the Company currently is not in
direct competition with any other distributors of natural gas with respect to
its existing small commercial and residential customers, the Company
nevertheless faces significant competition for such customers from electric
utilities and providers of energy conservation products.  Moreover, while the
Company currently holds franchises in almost all of the communities which it
serves, such franchises generally are not by their terms exclusive and
competition has been experienced in certain instances as the Company has sought
to extend service from existing service areas to geographically adjacent areas.

         In addition to competition, the Company's business is also affected at
all levels by the  seasonality of weather and general economic conditions.
Because one of the significant markets for natural gas is use in space heating,
demand for natural gas and gas transportation services is generally seasonal in
nature.  The Company has obtained rate design changes in its regulated
businesses which generally have reduced the sensitivity of the Company's
earnings to changes in natural gas consumption prompted by seasonal weather
patterns.  Additionally, in recent years, the Company's transmission and
marketing units have increased the volume of their off-season sales by
expanding their markets to include additional industrial users of gas,
gas-fired electric generators, and customers seeking gas in the summer to fill
storage.  Even with increased summer demand, however, the price of natural gas
and gas transportation services continues to be seasonal in nature, with prices
generally significantly lower in the summer than in winter.  While the
Company's distribution units also have sought to increase the level of their
off-season sales, the opportunity to do so within their historic service areas
is limited.

         General economic conditions also significantly influence the demand
for gas.  The national demand for gas has increased in recent years and
currently is expected to continue to increase in future years.  This, in turn,
at certain times and in certain market segments has influenced the price for
natural gas and gas transportation services.  However, this increased





                                      -15-
<PAGE>   17
demand for gas is somewhat tied to the overall state of economic activity and
there can be no assurance that current levels of demand will  continue or that,
if they continue, they will  necessarily have a significant effect on the price
of or demand for the Company's products or services.  From the perspective of
the Company's local distribution units, the economic conditions prevailing in
the Company's historic service areas continue to have a significant effect on
the results of their operations.  Unlike the Company's transmission and
marketing units, the local distribution units are not readily able to redirect
their activities to other markets when the demand for gas in their local
service areas declines.  In recent years, the level of economic activity in the
areas served by these units has remained relatively stable.


REGULATION.

         The Company's business operations are significantly affected by
regulation.  This regulation occurs at all levels -- federal, state and local
-- and has the effect, among other things, of:  (i) requiring that the Company
seek and obtain certain approvals before it may undertake certain acts, (ii)
regulating the level of rates which the Company may charge for certain of its
services and products, and (iii) imposing certain conditions on the Company's
conduct of its business.

         The Company is significantly affected by the regulations of the FERC.
FERC Order 636 is currently the subject of an appeal to the U.S. Court of
Appeals, D.C. Circuit.  Until such time as this appeal is resolved, there will
continue to be some uncertainty in the natural gas industry respecting the full
effect of FERC Order 636.

         The changes to the industry brought about by FERC Order 636 also have
affected and will continue to affect the business environment in which the
Company's local distribution units operate in those geographical areas where
gas supplies are delivered on interstate pipelines.  The impact is less
pronounced in the case of Entex, where a significant portion of supplies are
delivered on intrastate pipelines. FERC Order 636 has increased, and in some 
cases likely will continue to increase, the number and diversity of potential
suppliers and products available to meet the supply needs of each unit.  In
addition, the requirement that pipelines "unbundle" their services permits the
Company's distribution units to avoid the purchase -- and, thus, the cost -- of
services which they do not require.  On the other hand, the elimination of the
right of local distribution companies to require service from interstate
pipelines in the absence of a contract will expose local distributors to an
increased risk of supply disruption and the potential for increased review from
some state regulatory agencies.  In addition, the ability of holders of firm
transportation capacity entitlements to assign their capacity rights to other
parties, coupled with the ability of those holders to change the points at
which that capacity is used, likely will increase the competitive pressures
faced by local distributors.  This is because such provisions will expand the
incentives for and capabilities of third parties to build new facilities from
nearby pipelines which bypass the existing facilities of the incumbent local
distributors.

         Under FERC Order 636, the Company's distribution units have incurred
increased costs as a result of the recovery by their pipeline suppliers through
their rates of those pipelines' FERC Order 636-related "transition costs".  In
some cases, the recovery of





                                      -16-
<PAGE>   18
transition costs remains unresolved.  In addition, the ratemaking provisions of
FERC Order 636 have increased the fixed costs incurred by distribution
companies in reserving firm transportation capacity on their pipeline
suppliers.  While the Company's distribution units generally expect to be able
to recover all of these increased costs in their retail rates, the resulting
increases may adversely affect their competitive posture relative to alternate
fuels and suppliers.

         As described below, the Company is involved in several significant
proceedings before the FERC.

         In one such set of proceedings, NGT and MRT appealed the FERC's
approval of NGT's and MRT's proposal to sell approximately 250 MMcf per day of
capacity in certain NGT and MRT facilities to ANR Pipeline Company ("ANR").
The FERC had approved the parties' agreements (the "Agreement") but had also
imposed conditions inconsistent with the Agreement.  In 1995, the parties
renegotiated and resolved their outstanding issues.  The Federal Trade
Commission, which also had to approve the sale, modified its Consent Decree on
April 5, 1995, to delete the requirement that NorAm, through NGT and MRT,
divest certain facilities by sale to ANR.  In accordance with a March 1, 1995
Supplemental Agreement between the parties, effective June 1, 1995, all prior
agreements between the parties were superseded or terminated except for
amendment of and continuation of certain existing transportation arrangements
between the parties.  NGT and MRT subsequently dismissed their appeals and
withdrew their FERC application to consummate the transaction.

         As circumstances warrant, both NGT and MRT regularly seek
authorization from the FERC for changes in their rates.  In August 1994, NGT
filed at the FERC for a $42.5 million annual rate increase, which case was
subsequently accepted for filing with rates that became effective in February
1995 subject to refund.  On January 22, 1996, the FERC affirmed a settlement of
this proceeding making the settlement rates effective February, 1995.  The
settlement did not result in any refund in excess of amounts previously
reserved.

         In February, 1995, MRT filed an application with the FERC to install
new compressors at its Biggers and Tuckerman Compressor Stations, and to
abandon a segment of its Main Line No. 1.  These changes will help modernize
MRT's facilities, and will help MRT meet future, and increasingly stricter, air
emission standards.  MRT received FERC approval for the installation and
abandonment in September, 1995.

         At the state and local level, the primary effect of regulation of the
Company relates to the rates charged by the Company's various distribution
units for the services they provide to their customers.  These services
generally include both gas transportation and gas sale services.  During 1995
Minnegasco and Arkla obtained increases in their local rates from the
appropriate Minnesota and Arkansas regulatory agencies.  Entex engaged in no
major rate initiatives during 1995, although it was granted a total of
approximately $2.3 million in annual rate increases from three of the larger
cities it serves and received increases in several other jurisdictions pursuant
to annual cost-of-service adjustment filings.

         On October 24, 1994 the Minnesota Public Utilities Commission ("MPUC")
issued its order in the rate case filed by Minnegasco in November 1993.  The
order allowed Minnegasco a rate increase of $7.1 million, compared to $22.7
million requested, and $14.6 million allowed





                                      -17-
<PAGE>   19
in interim rates.  In addition, Minnegasco was allowed to reduce its interim
rate refund for unrecovered conservation improvement program ("CIP") costs and
$.3 million of unrecovered prior rate case costs.  To the extent certain
unrecovered CIP costs are used to reduce the interim rate refund, the allowed
revenue may be reduced.  Minnegasco asked for reconsideration on certain issues
in the MPUC's decision.  On April 4, 1995, the MPUC issued an order upholding
its original decision.  In July 1995, Minnegasco issued an interim rate refund
for the amount of interim rates collected in excess of the final rate increase
of $7.1 million, including interest.  Currently Minnegasco has an appeal
pending before the Minnesota Supreme Court of certain portions of the MPUC's
order in its 1993 rate case as well as prior MPUC decisions (1) providing that
a portion of the cost of responding to certain gas leak calls not be allowed in
rates and (2) that Minnegasco's non-regulated appliance sales and service
operations must pay the regulated operations an amount for the use of
Minnegasco's name, image and reputation.

         On August 11, 1995, Minnegasco filed for a $24.3 million annual rate
increase in Minnesota.  In October 1995, the MPUC accepted the filing and
issued an order allowing Minnegasco to collect $17.8 million in interim rates.
Hearings were held before an Administrative Law Judge in January 1996; the
Judge's recommended decision is expected in April.  The MPUC is expected to
issue its final decision in June 1996.

         Also in August 1995, Minnegasco filed a performance-based or incentive
regulation plan for its procurement of natural gas.  The costs of natural gas
have historically been flowed through to customers on a dollar-for-dollar
basis.  Under Minnegasco's plan, it would be able to receive a reward or
penalty of up to $7 million annually based on its performance in procuring
natural gas.  In January 1996, Minnegasco entered into a settlement with two
state agencies which recommends approval of the plan.  The plan is currently
pending review by the MPUC, which is expected to render its decision in the
second quarter of 1996.

         In March 1995, an order was issued by the Arkansas Public Service
Commission (the "APSC") approving a settlement among Arkla, the APSC and
certain of Arkla's customers which provided for (1) an annual rate increase of
approximately $7 million and (2) an agreement by Arkla not to file another rate
application in Arkansas before June 1996.  In December 1995, an APSC order was
issued authorizing implementation of a Weather Normalization Adjustment (the
"WNA") to be effective for a two-year pilot period beginning January 1, 1996.
The WNA provides that, from November to April of each year, Arkla's Arkansas
customer bills will be adjusted by 75% of any variation from normal weather.
Also during 1995, Arkla received annual increases totaling $0.9 million
pursuant to annual cost of service adjustment filings in other jurisdictions.

         In addition to regulation of the Company's distribution rates, state
and local regulatory bodies also issue the franchises and certificates of
public convenience and necessity which govern most services provided by the
Company at retail.

         Regulations at both the federal and state levels also have other
effects on the competitive environment in which the Company operates.
Historically, the regulatory regimes applicable at both the federal and state
level restricted the amount of facilities which could be installed to serve a
given customer. Customarily, these regulations did not allow for the
construction of "duplicate" facilities by a second supplier to a given customer
if the customer





                                      -18-
<PAGE>   20
already was being adequately served by its existing supplier.  Since the
mid-1980's, however, these regulatory restrictions gradually have been eroded
and other companies competing for the sale or transportation of gas to
customers presently served or capable of being served through facilities owned
by the Company have been permitted to use existing facilities owned by others
or to construct new facilities, thereby entirely bypassing the Company's
facilities.  In certain instances, these proposals require the advance approval
of various regulatory bodies before they may be implemented.  In the past,
certain such proposals have been approved and, when approved and implemented,
have resulted in reductions in the level of services provided by the Company to
its customers.  In other situations, proposals to bypass facilities owned by
the Company have not been approved.  The Company is not able at present to
predict either the outcome of any current or future proceedings or the effect,
if any, which they ultimately may have on the Company.

         Certain business activities of the Company in the United States are
subject to existing federal, state and local laws and regulations governing
environmental quality and pollution control.

        On October 24, 1994, the United States Environmental Protection Agency
advised the Company that MRT and a number of other companies have been named
under federal law as potentially responsible parties for a landfill site in
West Memphis, Arkansas and may be required to share in the cost of remediation
of this site. However, considering the information currently known about the
site and the involvement of MRT, the Company does not believe that this matter
will have a material adverse effect on the financial position, results of
operations or cash flows of the Company.

         On December 18, 1995, the Louisiana Department of Environmental
Quality advised the Company, that the Company, through one of its subsidiaries,
and together with several other unaffiliated entities, have been named under
state law as potentially responsible parties with respect to a hazardous
substance site in Shreveport, Louisiana and may be required to share in the
remediation costs, if any, of the site.  However, considering the information
currently known about the site and the involvement of the Company and its
subsidiaries with respect to the site, the Company does not believe that the
matter will have a material adverse effect on the financial position, results
of operations or cash flows of the Company.

         With the acquisition of Diversified Energies, Inc. ("DEI")   in
November 1990, the Company acquired Minnegasco, a natural gas distribution
company headquartered in Minneapolis, Minnesota, which owns or is otherwise
associated with a number of sites where manufactured gas plants ("MGPs")  were
previously operated.

         From the late 1800s to 1960, Minnegasco and its predecessors
manufactured gas at a site in Minnesota, located in Minneapolis near the
Mississippi River (the "Minneapolis Site"), which site is on Minnesota's
Permanent List of Environmental Priorities.  Minnegasco





                                      -19-
<PAGE>   21
is working with the Minnesota Pollution Control Agency to implement an
appropriate response action.  There are six other former MGP sites in Minnesota
in the service territory in which Minnegasco operated at December 31, 1995.  Of
these six sites, Minnegasco believes that two were neither owned nor operated
by Minnegasco, two were owned at one time by Minnegasco but were operated by
others and are currently owned by others, one is presently owned by Minnegasco
but was operated by others and one was operated by Minnegasco for a short
period and is now owned by others.  Minnegasco believes it has no liability
with respect to the sites neither owned nor operated by Minnegasco.

         At December 31, 1995, the Company has estimated a range of $20 million
to $177 million for possible remediation of the Minnesota sites.  The low end
of the range was determined using only those sites presently owned or known to
have been operated by the Company, assuming the Company's proposed remediation
methods.  The upper end of the range was determined using the sites once owned
by the Company, whether or not operated by the Company, using more costly
remediation methods.  The cost estimates for the Minneapolis Site are based on
studies of that site.  The remediation costs for other sites are based on
industry average costs for remediation of sites of similar size.  The actual
remediation costs will be dependent upon the number of sites remediated, the
participation of other potentially responsible parties, if any, and the
remediation methods used.

         In its 1993 rate case, Minnegasco was allowed $2.1 million annually to
recover amortization of previously deferred and ongoing clean-up costs.  Any
amounts in excess of $2.1 million annually were deferred for future recovery.
In its 1995 rate case, Minnegasco asked that the annual allowed recovery be
increased to approximately $7 million and that such costs be subject to a
true-up mechanism whereby any over or under recovered amounts, net of certain
insurance recoveries, be deferred until the next rate case.  Such accounting
was implemented effective October 1, 1995 pending final approval in the
existing rate case.  At December 31, 1995 and 1994, the Company had net
deferred expenses of $2.3 million and $0.2 million respectively.  At December
31, 1995 and 1994, the Company had recorded a liability of $45.2 million and
$40.1 million, respectively, to cover the cost of remediation.  The Company
expects that the majority of its accrual as of December 31, 1995 will be
expended within the next five years.  In accordance with the provisions of SFAS
71, a regulatory asset has been recorded equal to the liability accrued.  The
Company believes the difference between any cash expenditure for these costs
and the amounts recovered in rates during any year will not be material to the
Company's overall cash requirements.  The Company is pursuing recovery of its
costs from insurers.

         In addition to the Minnesota MGP sites described above, the Company's
distribution divisions are investigating the possibility that the Company or
predecessor companies may be or may have been associated with other MGP sites
in the service territories of the distribution divisions.  At the present time,
the Company is aware of some plant sites in addition to the Minnesota sites and
is investigating certain other locations.  While the Company's evaluation of
these other MGP sites is in its preliminary stages, it is likely that some
compliance costs will be identified and become subject to reasonable
quantification.  To the extent that such potential costs are quantified, as
with the Minnesota remediation costs for MGP described herein, the Company
expects to provide an appropriate accrual and seek recovery for such
remediation costs through all appropriate means, including regulatory relief.





                                      -20-
<PAGE>   22
         In addition, the Company, as well as other similar firms in the
industry, is investigating the possibility that it may elect or be required to
perform remediation of various sites where meters containing mercury were
disposed of improperly, or where mercury from such meters may have leaked or
been disposed of improperly.  While the Company's evaluation of this issue is
in its preliminary stages, it is likely that compliance costs will be
identified and become subject to reasonable quantification.

         To the extent that potential environmental compliance costs are
quantified within a range, the Company establishes reserves equal to the most
likely level of costs within the range and adjusts such accruals as better
information becomes available.  If  justified by circumstances within the
Company's businesses subject to SFAS 71, corresponding regulatory assets are
set up in anticipation of recovery through the ratemaking process.  At December
31, 1995 and 1994, the Company had recorded a liability of $3.3 million (with a
maximum estimated exposure of approximately $18 million) for environmental
matters in addition to those described above with an offsetting regulatory
asset.

         While the nature of environmental contingencies makes complete
evaluation impracticable, the Company currently is aware of no other
environmental matter which could reasonably be expected to have a material
impact on the results of operations, financial position or cash flows of the
Company.

         Other legislative proposals affecting the industry have been and may
be introduced before the Congress and state legislatures, and the FERC and
various state agencies currently have under consideration various policies and
proposals, in addition to those discussed above, that may affect the natural
gas industry.  It is not possible to predict what actions, if any, the
Congress, the FERC or the states will take on these matters, or the effect any
such legislation, policies, or proposals may have on the activities of the
Company.


MERGERS, ACQUISITIONS AND DISPOSITIONS.

         All levels of the natural gas industry -- transmission and marketing,
distribution, and exploration and production -- have undergone a number of
acquisitions, divestitures and combinations in recent years, and the Company
has been a party to several such transactions, including, as previously
described, the sale of Arkla's Kansas distribution properties and certain of
NGT's Kansas pipeline assets in September 1994, the exchange of Minnegasco's
South Dakota distribution properties in August of 1993, the sale of the LIG
Group in June of 1993 and the sale of Minnegasco's Nebraska distribution
properties in February 1993, and as described more fully below, the sale of the
Company's exploration and production business in December 1992,  the sale of
Dyco Petroleum and the acquisition of The Hunter Company in 1991, its merger
with DEI, the parent company of Minnegasco in 1990, its acquisition of the LIG
Group in 1989 and its merger with Entex in 1988.  The Company reviews possible
transactions from time to time and may engage in other business combinations in
the future that are not specifically described herein.

         On December 31, 1992, the Company completed the sale of the stock of
Arkla Exploration Company ("AEC") to Seagull for approximately $397 million in
cash (including





                                      -21-
<PAGE>   23
$7.3 million removed from AEC just prior to closing).  This sale terminated the
Company's activities in the exploration and production business and,
accordingly in 1992, the Company reclassified the results of operations of AEC
to discontinued operations.

         The Company previously conducted operations in the radio
communications business through E. F. Johnson and the energy measurement
business through EnScan, Inc. ("EnScan") which were acquired in conjunction
with the merger with DEI.  In early 1992, EnScan merged with Itron, Inc.
("Itron") of Spokane, Washington, of which, the Company owned at March 1, 1996,
common stock representing ownership of approximately 12.3% of the combined
enterprise, which is managed by Itron.  In December 1994 and January 1995 the
Company sold a total of 480,000 shares of Itron common stock in a public
offering, resulting in the reduction of the Company's stock ownership
percentage of Itron common stock from 18.5% to the current 12.3%.  Based on
price quotations on the NASDAQ, the market value of the Company's interest at
December 31, 1995 was approximately $50.7 million and had increased to
approximately $65.4 million at March 1, 1996.  While there are other ways in
which the Company can monetize its investment in the Itron shares, in general,
the market for the Itron shares on the NASDAQ is not sufficiently liquid to
allow the company to dispose of a significant portion of its investment in a
single transaction without accepting a significant discount from the quoted
price.  It is currently the Company's intention to dispose of its investment in
the combined enterprise over the next several years at times to be determined
principally by economic factors in the markets available for the sale or
exchange of such interests.  In July 1992, the Company sold the stock of
Johnson for total consideration of approximately $40 million, receiving cash
proceeds of approximately $15 million at closing and retaining an investment
currently valued at approximately $5 million.

         In addition to the EnScan and Johnson transactions described above,
during recent years, the Company has disposed of substantially all of its
non-gas related businesses, including, in late 1992 the sale of the principal
assets of Arkla Products Company, which was originally sold as a part of the
1984 sale of Arkla Industries and conducted operations for the Company in the
gas grill manufacturing business after it was reacquired by the Company due to
Preway Inc.'s default on certain revenue bonds for which the Company was
secondarily liable.  Prior to its merger with the Company in 1988, Entex
similarly disposed of substantially all of its non-gas related assets. For a
further discussion of certain of these matters, see Note 1 of Notes to
Consolidated Financial Statements included in the Company's 1995 Annual Report
to Stockholders incorporated herein by reference.


EMPLOYEES.

         The Company employs approximately 6,703 persons and has retirement
plans for the majority of its employees and maintains contributory group life,
medical, dental and disability insurance plans for its employees as well as
certain other benefit plans for its retirees.





                                      -22-
<PAGE>   24
ITEM 2.  PROPERTIES.

         The Company is of the opinion that it has generally satisfactory title
to the properties owned and used in its businesses, subject to the liens for
current taxes, liens incident to minor encumbrances, and easements and
restrictions which do not materially detract from the value of such property or
the interests therein or the use of such properties in its businesses.  See
"Natural Gas Distribution" and Natural Gas Pipeline".


ITEM 3.  LEGAL PROCEEDINGS.

         On August 6, 1993, the Company, its former subsidiary, Arkla
Exploration Company ("AEC") and Arkoma Production Company, a subsidiary of AEC,
were named as defendants in a lawsuit filed in the Circuit Court of
Independence County, Arkansas.  On September 20, 1994, the Circuit Court
entered an order granting the Company's motion to dismiss.  On October 23,
1995, the Supreme Court of Arkansas affirmed the Circuit Court's order granting
the Company's motion to dismiss.

        On October 24, 1994, the United States Environmental Protection Agency
advised the Company that MRT and a number of other companies have been named
under federal law as potentially responsible parties for a landfill site in
West Memphis, Arkansas and may be required to share in the cost of remediation
of this site. However, considering the information currently known about the
site and the involvement of MRT, the Company does not believe that this matter
will have a material adverse effect on the financial position, results of
operations or cash flows of the Company.

        On December 18, 1995, the Louisiana Department of Environmental Quality
advised the Company, that the Company, through one of its subsidiaries, along
with several other unaffiliated entities have been named under state law as
potentially responsible parties with respect to a hazardous substance site in
Shreveport, Louisiana and may be required to share in the remediation cost of
the site, if any are incurred. However, considering the information currently
known about the site and the involvement of the Company and its subsidiaries
with respect to the site, the Company does not believe that the matter will
have a material adverse effect on the financial position, results of operations
or cash flows of the Company.  

REGULATION S-K, ITEM 401(b). EXECUTIVE OFFICERS OF THE COMPANY

         The following table sets forth certain information concerning the
"executive officers" of the Company (as defined by the Securities and Exchange
Commission) as of March 15, 1996:





                                      -23-
<PAGE>   25


<TABLE>
<CAPTION>
                                                                                BUSINESS EXPERIENCE DURING
                   NAME                          AGE                                   PAST 5 YEARS
                   ----                          ---                                   ------------
           <S>                                   <C>                      <C>
           Rollie B. Bohall                      49                       Senior Vice President and Chief
                                                                          Operating Officer of NorAm Energy
                                                                          Management, Inc., 3/95 to present,
                                                                          Chairman of the Board and President of
                                                                          Entex Gas Marketing Company,
                                                                          subsidiary of NorAm Energy Corp.


           Michael B. Bracy                      54                       Executive Vice President and Principal
                                                                          Financial Officer of the Company,
                                                                          10/91 to present,
                                                                          Chief Executive Officer, Arkla
                                                                          Pipeline Group and Executive Vice
                                                                          President of the Company from at least
                                                                          1/90 to 10/91



           Michael A. Creel                      42                       Vice President and Treasurer of the
                                                                          Company from 10/23/95 to present,
                                                                          Assistant Treasurer of Corporate
                                                                          Finance of Enron



           Dale C. Earwood                       40                       President of NorAm Field Services
                                                                          Corp., 10/93 to present,
                                                                          Vice President of Arkla Energy
                                                                          Resources Company, 4/94 to 1/95,
                                                                          Senior Vice President & General
                                                                          Counsel, Arkla Pipeline Group, from at
                                                                          least 1/90 to 4/94



           W. Craig Elias                        47                       President and Chief Operating Officer
                                                                          of NorAm Energy Services, Inc., 4/95
                                                                          to present, Executive Vice President
                                                                          of Marketing and Gas Supply at Coastal
                                                                          Gas Marketing


           Jack W. Ellis, II                     42                       Vice President and Controller of the
                                                                          Company, 12/89 to present
</TABLE>





                                      -24-
<PAGE>   26


<TABLE>
<CAPTION>
                                                                                BUSINESS EXPERIENCE DURING
                   NAME                          AGE                                   PAST 5 YEARS
                   ----                          ---                                   ------------
           <S>                                   <C>                      <C>
           Hubert Gentry, Jr.                    64                       Senior Vice President and General
                                                                          Counsel of the Company, 8/90 to
                                                                          present
                                                                          Secretary of the Company, 7/92 to
                                                                          present
                                                                          Executive Vice President and General
                                                                          Counsel - Entex from at least 1/90 to
                                                                          8/90



           T. Milton Honea                       63                       President of the Company, 10/93 to
                                                                          present,
                                                                          Chairman of the Board and Chief
                                                                          Executive Officer of the Company,
                                                                          12/92 to present,
                                                                          Vice Chairman of the Board, 7/92 to
                                                                          12/92,
                                                                          Executive Vice President of the
                                                                          Company, 10/91 to 7/92,
                                                                          President and Chief Operating Officer-
                                                                          Arkansas Louisiana Gas Company from at
                                                                          least 1/90 to 10/91


           Robert N. Jones                       43                       President and Chief Operating Officer
                                                                          of Entex, 1/95 to present
                                                                          Executive Vice President of Entex,
                                                                          4/94 to 1/95
                                                                          Vice President &  Manager of Houston
                                                                          Division, 3/92 to 4/94
                                                                          Vice President & Manager of
                                                                          Mississippi Division, from at least
                                                                          1/90 to 3/92


           William A. Kellstrom                  54                       Senior Vice President, Corporate
                                                                          Business Development, 7/95 to present,
                                                                          President of NorAm Energy Services,
                                                                          Inc., 9/92 to 7/95
                                                                          President of Tenaska Marketing
                                                                          Ventures from at least 1/90 to 9/92
</TABLE>





                                      -25-
<PAGE>   27
<TABLE>
<CAPTION>
                   NAME                          AGE                            BUSINESS EXPERIENCE DURING
                   ----                          ---                                                      
                                                                                       PAST 5 YEARS
                                                                                       ------------
           <S>                                   <C>                      <C>
           Michael H. Means                      47                       President and Chief Operating
                                                                          Officer, Arkansas Louisiana Gas
                                                                          Company, 10/91 to present, Vice
                                                                          President Arkansas Division, Arkansas
                                                                          Louisiana Gas Company from at least
                                                                          1/90 to 10/91


           Charles M. Oglesby                    43                       President of NorAm Trading and
                                                                          Transportation Group, Inc., 3/95 to
                                                                          present, Vice President of Coastal
                                                                          Corporation and President and chief
                                                                          Executive Officer of Coastal Gas
                                                                          Services Company



           Gary N. Petersen                      43                       President and Chief Operating Officer
                                                                          of Minnegasco 9/91 to present,
                                                                          Executive Vice President and Chief
                                                                          Operating Officer of Minnegasco,
                                                                          Senior Vice President of DEI and
                                                                          Executive Vice President and Chief
                                                                          Operating Officer of Minnegasco, Inc.,
                                                                          Vice President, Gas Supply and
                                                                          Regulatory Administration - Minnegasco
                                                                          from at least 1/90 to 9/91



           Rick L. Spurlock                      50                       Senior Vice President, Human Resources
                                                                          and Administrative Services of the
                                                                          Company, 12/90 to present
                                                                          Vice President, Corporate Human
                                                                          Resources of the Company from at least
                                                                          1/90 to 12/90
</TABLE>





                                      -26-
<PAGE>   28

                                    PART II


ITEM 5.  MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS

         The information required hereunder applicable to market, number of
security holders and dividend history is shown on page  53  of the 1995 Annual
Report to Stockholders, which information is incorporated herein by reference.


ITEM 6.  SELECTED FINANCIAL DATA

         The selected financial data required hereunder is included on page  34
of the 1995 Annual Report to Stockholders, which data is incorporated herein by
reference.  For information, if any, concerning accounting changes, business
combinations or dispositions of business operations that materially affect the
comparability of the information reflected in selected financial data, see
Notes to Consolidated Financial Statements on pages  58  through  70  of the
1995 Annual Report to Stockholders, which information is incorporated herein by
reference.


ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS

         The required information is included on pages  34  through  53  of the
1995 Annual Report to Stockholders, which pages are incorporated herein by
reference.


ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

         The following consolidated financial statements of the Company and
auditor's reports are set forth on pages  54 through  71  of the 1995 Annual
Report to Stockholders, which pages are incorporated herein by reference.

         Statement of Consolidated Income for the years ended December 31,
1995, 1994, and 1993.

         Consolidated Balance Sheet as of December 31, 1995 and 1994.

         Statement of Consolidated Stockholders' Equity for the years ended
December 31, 1995, 1994 and 1993.

         Statement of Consolidated Cash Flows for the years ended December 31,
1995, 1994 and 1993.





                                      -27-
<PAGE>   29
         Notes to Consolidated Financial Statements.

         Report of Independent Accountants.


         The required supplementary data concerning quarterly results of
operations is set forth on page  72  of the 1995 Annual Report to Stockholders,
which page is incorporated herein by reference.



ITEM 9.  CHANGES IN AND DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURES
         None.


                                    PART III


ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT

         The information appearing under the caption "Election of Directors And
Beneficial Ownership of Common Stock For Officers and Directors" set forth in
the Company's definitive proxy statement, for the Annual Meeting of
Stockholders to be held on May 14, 1996, to be filed pursuant to Regulation 14A
under the Securities Exchange Act of 1934 (the "1934 Act") is incorporated
herein by reference.  See also "Regulation S-K, Item 401(b)" appearing in Part
I of this Annual Report.


ITEM 11.  EXECUTIVE COMPENSATION

         The information appearing under the caption "Executive Compensation"
set forth in the Company's definitive proxy statement for the Annual Meeting of
Stockholders to be held on May 14, 1996, to be filed pursuant to Regulation 14A
under the 1934 Act is incorporated herein by reference.





                                      -28-
<PAGE>   30

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         The information appearing under the captions "Voting" and "Election of
Directors And Beneficial Ownership of Common Stock For Officers and Directors"
set forth in the Company's definitive proxy statement for the Annual Meeting of
Stockholders to be held on May 14, 1996 to be filed pursuant to Regulation 14A
under the 1934 Act is incorporated herein by reference.


ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         The information appearing under the captions "Compensation Committee
Interlocks and Insider Participation" and "Executive Compensation" set forth in
the Company's definitive proxy statement for the Annual Meeting of Stockholders
to be held on May 14, 1996 to be filed pursuant to Regulation 14A under the
1934 Act is incorporated herein by reference.


                                    PART IV


ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K


(a)(1) FINANCIAL STATEMENTS

Included under Item 8 are the following financial statements:

Statement of Consolidated Income for the years ended December 31, 1995, 1994
and 1993.

Consolidated Balance Sheet as of December 31, 1995 and 1994.

Statement of Consolidated Stockholders' Equity for the years ended December 31,
1995, 1994 and 1993.

Statement of Consolidated Cash Flows for the years ended December 31, 1995,
1994 and 1993.

Notes to Consolidated Financial Statements.

Report of Independent Accountants.





                                      -29-
<PAGE>   31

(a)(2) FINANCIAL STATEMENT SCHEDULES                          Page  
                                                              ----

Report of Independent Accountants                             33
Schedule II - Valuation and Qualifying          
          Accounts                                            34
                                                

All other schedules for which provision is made in applicable regulations of
the Securities and Exchange Commission have been omitted because the
information is disclosed in the Consolidated Financial Statements or because
such schedules are not required or are not applicable.


(b)(3)  EXHIBITS

*        (Asterisk indicates exhibits incorporated by reference herein).
Pursuant to Item 601(b)(4)(iii), the Company agrees to furnish to the
Commission upon request a copy of any instrument with respect to long-term debt
not exceeding 10 percent of the total assets of the Company and its
subsidiaries on a consolidated basis.

<TABLE>
 <S>     <C>
  *3.1   Restated Certificate of NorAm Energy Corp., dated May 11, 1994 as amended, incorporated herein by
         reference to Exhibit 4.1 to the Company's Registration Statement on Form S-3 (33-52853).

  *3.2   By-Laws of NorAm Energy Corp., dated May 11, 1994, incorporated herein by reference to Exhibit 4.2 to
         the Company's Registration Statement on Form S-8 (33-54241).

  *4.1   Indenture, dated as of December 1, 1986, between the Company and Citibank, N.A., as Trustee,
         incorporated herein by reference to Exhibit 4.14 to the Company's Annual Report on Form 10-K for the
         year 1986.

  *4.2   Indenture, dated as of March 1, 1987, between the Company and The Chase Manhattan Bank, N.A., as
         Trustee, authorizing 6% Convertible Subordinated Debentures Due 2012, incorporated herein by reference
         to Exhibit 4.20 to the Company's Registration Statement on Form S-3 (Registration No. 33-14586).

  *4.3   Indenture, dated as of April 15, 1990, between the Company and Citibank, N.A., as Trustee, incorporated
         herein by reference to Exhibit 4.1 of the Company's Registration Statement on Form S-3 filed on May 1,
         1990 (Registration No. 33-23375)

 *10.1   Copy of Deferred Compensation Agreement incorporated herein by reference to Exhibit 10.2 to the
         Company's Annual Report on Form 10-K for the year 1988.
</TABLE>





                                      -30-
<PAGE>   32
<TABLE>
 <S>     <C>
 *10.2   Copy of Deferred Stock Appreciation Agreement incorporated herein by reference to Exhibit 10.3 to the
         Company's Annual Report on Form 10-K for the year 1988.

 *10.3   Executive Supplemental Medical Plan (Page 13 of Proxy Statement, Annual Meeting of Stockholders, May
         12, 1987, and incorporated herein by reference).

 *10.4   1982 Nonqualified Stock Option Plan with Appreciation Rights (Form S-8, Registration No. 2-84830, dated
         July 1, 1983, and incorporated herein by reference).

 *10.5   Nonqualified Executive Disability Income Plan incorporated herein by reference to Exhibit 10.6 to the
         Company's Annual Report on Form 10-K for the year 1988.

 *10.6   Nonqualified Unfunded Executive Supplemental Income Retirement Plan incorporated herein by reference to
         the Company's Annual Report on Form 10-K for the year 1988.

 *10.7   Unfunded Nonqualified Retirement Income Plan incorporated herein by reference to Exhibit 10.10 to the
         Company's Form 10-K for the year 1985.

 *10.8   Annual Incentive Award Plan incorporated herein by reference as maintained in the files of the
         Commission, File No. 1-3751.

 *10.9   Long-Term Incentive Compensation Plan (Form S-8, Registration No. 33-10806, dated December 12, 1986,
         and incorporated herein by reference).

 *10.10  Service Agreement, by and between Mississippi River Transmission Corporation and Laclede Gas Company,
         dated August 22, 1989 incorporated herein by reference to Exhibit 10.20 to the Company's Annual Report
         on Form 10-K for the year 1989.

 *10.11  Agreement and Plan of Merger, dated as of July 30, 1990, between NorAm Energy Corp.,  Diversified
         Energies, Inc. and Minnegasco, Inc., incorporated by reference to Exhibit A to the Company's
         Registration Statement on Form S-4 (Reg. No. 33-27428).

 *10.14  Incentive Equity Plan, incorporated herein by reference to Appendix B of Proxy Statement, Annual
         Meeting of Stockholders May 10, 1994.

 *10.15  Non-Employee Director Restricted Stock Plan, incorporated here by reference to Appendix D of Proxy
         Statement, Annual meeting of Stockholders May 10, 1994.

  12     Computation of Ratio of Earnings to Fixed Charges.
</TABLE>





                                      -31-
<PAGE>   33
<TABLE>
 <S>    <C>
 13     The portions of the Annual Report to Stockholders for the year ended December 31, 1995 incorporated by
        reference into this Form 10-K.

 21     Subsidiaries of the Company.

 23     Consent of Coopers & Lybrand L.L.P.

 24     Powers of Attorney from each Director of NorAm Energy Corp. whose signature is affixed to this  Form
        10-K.

 27     Financial Data Schedule
</TABLE>



(b) REPORTS ON FORM 8-K FILED DURING THE LAST QUARTER OF THE PERIOD COVERED BY 
    THIS REPORT


    Report on Form 8-K, dated November 2, 1995 - Third Quarter Earnings Release





                                      -32-
<PAGE>   34


                       REPORT OF INDEPENDENT ACCOUNTANTS




Board of Directors and Stockholders
NorAm Energy Corp.:

Our report on the consolidated financial statements of NorAm Energy Corp. and
Subsidiaries has been incorporated by reference in this Form 10-K from page 71
of the 1995 Annual Report to Stockholders of NorAm Energy Corp. and
Subsidiaries.  In connection with our audits of such consolidated financial
statements, we have also audited the related financial statement schedule
listed in the index on page 30 of this Form 10-K.

In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information required to be
included therein.



                                                   COOPERS & LYBRAND L.L.P.


Houston, Texas
March 25, 1996





                                      -33-
<PAGE>   35
                              NORAM ENERGY CORP.
          SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
                          (In thousands of dollars) 
<TABLE>
<CAPTION>
==========================================================================================================
                 COLUMN A                       COLUMN B           COLUMN C          COLUMN D    COLUMN E   
----------------------------------------------------------------------------------------------------------
                                                                   Additions
                                                            ----------------------   
                                               Balances at  Charged to  Charged to              Balance at
                                                Beginning   Costs and     Other                    End    
              Description                       of Period   Expenses     Accounts   Deductions  of Period
----------------------------------------------------------------------------------------------------------
<S>                                             <C>         <C>         <C>         <C>         <C>
Reserves which are deducted in the balance
  sheet from assets to which they apply:
(a) Allowance for Doubtful Accounts
    Receivable
      Year ended December 31, 1995 . . . . . . . $12,604     $10,315     $  (470)    $11,332     $11,117
      Year ended December 31, 1994 . . . . . . . $11,296     $11,957     $ 1,771     $12,420     $12,604
      Year ended December 31, 1993 . . . . . . . $12,003     $10,393     $   744     $11,844     $11,296 

(b) Deferred Tax Asset Valuation Allowance  
      Year ended December 31, 1995 . . . . . . . $ 5,974     $   214           -           -     $ 6,188
      Year ended December 31, 1994 . . . . . . . $10,023     $     -           -     $ 4,049     $ 5,974
      Year ended December 31, 1993 . . . . . . . $ 9,997     $    26           -     $     -     $10,023

</TABLE>           





                                      -34-
<PAGE>   36
                                   SIGNATURES

         Pursuant to the requirements of Section 13 and 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.


                                      NORAM ENERGY CORP.
                                      (Registrant)

                                      By /s/ T. Milton Honea                    
                                         -----------------------------------

                                        (T. Milton Honea)
                                        Chairman of the Board, President
                                        and Chief Executive Officer


                                      By /s/ Michael B. Bracy                   
                                         -----------------------------------

                                        (Michael B. Bracy)
                                        Executive Vice President
                                        (Principal Financial Officer)


                                      By /s/ Jack W. Ellis, II             
                                         --------------------------------------

                                        (Jack W. Ellis, II)
                                        Vice President and
                                        Corporate Controller
                                        (Principal Accounting Officer)

Date:  March 29, 1996

         Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.

<TABLE>
<CAPTION>
      Signature                               Title              Date
      ---------                               -----              ----
<S>                                          <C>                 <C>
/s/ T. MILTON  HONEA                         Director            March 29, 1996
-------------------------                                                      
   (T. Milton Honea)                                       
                                                        
/s/ MICHAEL  B. BRACY                        Director   
-------------------------                               
   (Michael B. Bracy)                                      
</TABLE>                                                
                                                        
                                                        
                                                        


                                      -35-
<PAGE>   37
<TABLE>                                                    
<S>                                          <C>                 <C>
 JOE E. CHENOWETH*                           Director      
-------------------------                                  
(Joe E. Chenoweth)                                         
                                                           
 O. HOLCOMBE CROSSWELL*                      Director      
-------------------------                                  
(O. Holcombe Crosswell)                                    
                                                           
 WALTER A. DeROECK*                          Director      
-------------------------                                  
(Walter A. DeRoeck)                                        
                                                           
 MICKEY P. FORET*                            Director      
-------------------------                                  
(Mickey P. Foret)                                          
                                                           
 JOHN P. GOVER*                              Director      
-------------------------                                  
(John P. Gover)                                            
                                                           
 JOSEPH M. GRANT*                            Director      
-------------------------                                  
(Joseph M. Grant)                                          
                                                           
 ROBERT C. HANNA*                            Director      
-------------------------                                  
(Robert C. Hanna)                                          
                                                           
 W. JEFFREY HART*                            Director      
-------------------------                                  
(W. Jeffrey Hart)                                          
                                
 MYRA JONES*                                 Director
-------------------------                            
(Myra Jones)                    
                                
 LARRY C. WALLACE*                           Director
-------------------------                            
(Larry C. Wallace)              
                                
                                
                                
*By  /s/ T. MILTON  HONEA                                         March 29, 1996
    ------------------------                                                   
        (T. Milton Honea                                     
        Attorney-in-Fact)                                    

</TABLE>                                




                                      -36-

<PAGE>   38

                             EXHIBIT  INDEX

 12     Computation of Ratio of Earnings to Fixed Charges.

 13     The portions of the Annual Report to Stockholders for the year ended 
          December 31, 1995 incorporated by reference into this Form 10-K.

 21     Subsidiaries of the Company.

 23     Consent of Coopers & Lybrand L.L.P.

 24     Powers of Attorney from each Director of NorAm Energy Corp. whose 
          signature is affixed to this Form 10-K.

 27     Financial Data Schedule