KANSAS CITY, Mo., Sept. 21, 2005 — Aquila Inc. announced today it has signed definitive agreements to sell four utility businesses identified for potential sale on March 14, 2005, for a total of $896.7 million. Proceeds from the transactions will be used to reduce debt and other liabilities.
The sale agreements are a move in Aquila’s previously announced repositioning plan. The plan seeks to strengthen Aquila’s balance sheet, improve its credit profile, and position the company to invest in utility infrastructure to provide safe and reliable service to customers as an integrated natural gas and electric utility.
The transactions announced on Sept. 21 include:
* WPS Resources Corporation, a publicly-traded holding company for a number of energy-related subsidiaries based in Green Bay, Wisconsin, will purchase the assets and liabilities of Aquila’s natural gas operations in Michigan and Minnesota for a base purchase price of $269.5 million and $288 million, respectively, plus working capital and subject to net plant adjustments.
* The Empire District Electric Company, a publicly-traded electric utility based in Joplin, Missouri, will purchase the assets and liabilities of Aquila’s natural gas operations in Missouri for a base purchase price of $84 million, plus working capital and subject to net plant adjustments.
* Mid-Kansas Electric Company (MKEC), a coalition of six consumer-owned cooperatives that also own Sunflower Electric Power Corporation, a regional generation and transmission service provider, will purchase the assets and liabilities of Aquila’s electric operations in Kansas for a base purchase price of $255.2 million, plus working capital and subject to net plant adjustments.
Following the completion of these sales, Aquila will operate in five states, with natural gas operations in Kansas, Colorado, Nebraska and Iowa and electric operations in Missouri and Colorado. Of the utilities identified for potential sale on March 14, Aquila will retain ownership of its St. Joseph Light & Power electric operations in Missouri as well as its electric operations in Colorado as part of its ongoing business. Aquila continues to consider the sale of its three merchant peaking plants and Everest Connections, as well as a settlement of its Elwood toll contracts.
“The execution of these agreements marks a major milestone in our program to reposition Aquila, strengthen the company’s financial condition and improve the financial performance of our regulated utility business,” said Richard C. Green, Aquila chairman and CEO. “Upon completion of these sales, Aquila should be stronger financially than it has been in recent years. The proceeds are expected to allow us to significantly reduce our debt, improve our credit profile and put Aquila on a path to reaching an annual EBIT growth rate of 3 percent to 5 percent on our post-divestiture rate base.”
Green said the key elements of Aquila’s strategy remain to:
* Maintain its focus on operating an integrated, multi-state utility.
* Significantly reduce Aquila’s debt levels and strengthen its credit profile.
* Gain access to the capital markets on improved terms, allowing the company to cost-effectively fund investments in its rate base to meet customer needs.
* Continue to improve operational efficiency and lower earnings variability.
* Actively work with regulators and legislators to address rate and fuel cost issues.
Completion of each of these transactions is subject to certain closing conditions, including the non-occurrence of a material adverse event, the approval of relevant state utility commissions, the expiration or early termination of any waiting period under the Hart-Scott-Rodino Antitrust Act, and other closing conditions set forth in each asset purchase agreement. The closing of the Kansas electric operations transaction is also subject to the approval of the Federal Energy Regulatory Commission and the receipt of third-party financing by the acquirer.
Aquila anticipates receiving timely regulatory approvals for these transactions within approximately 12 months.