Fitch: Aquila Ratings Unchanged Following Asset Sale Announcement

Business Wire, Dec 19, 2005

CHICAGO -- While the recent announcement by Aquila, Inc. (ILA) that it had reached an agreement to sell two Illinois peaking plants to AmerenUE will have no immediate effect on the current ratings or Positive Outlook for the company, it is considered favorable for credit quality. The transaction, valued at approximately $175 million, is expected to close by June 2006, subject to approval by both Kansas regulators and the Federal Energy Regulatory Commission (FERC). The sale of these assets is part of ILA's long-term strategic plan and is consistent with the Positive Rating Outlook.

The peaking facilities include the Goose Creek Energy Facility, a 510 megawatt (MW) simple-cycle power generation facility and the Raccoon Creek Energy Facility, a 340 MW simple-cycle power generation facility. ILA expects to record a pretax impairment charge of approximately $160 million, or approximately $100 million after tax, on the sale. The sale price of $205/KwH exceeded Fitch's plant value estimates. Depending on the timing of the closing, management may use proceeds for working capital needs, restructuring the Elwood toll, or to reduce debt. Existing debt covenants do not require proceeds from nonregulated asset sales to be used for debt redemption.

The Positive Outlook for ILA takes into account Fitch's expectation that the company's consolidated credit measures will improve through 2006 and beyond due to deleveraging using proceeds of utility asset sales; improved cash flow from higher rates and improved fuel and power purchased cost recovery in Missouri; and the disposition of Everest Connections and the Elwood tolling agreement, which are ILA's only remaining nonregulated assets.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.