Aquila Inc. finally sold after 5-year struggle

Pipeline & Gas Journal, March, 2007

Great Plains Energy Inc. of Kansas City, MO announced plans on Feb. 7 to buy out its crosstown rival, Aquila, Inc., in a $1.7 billion deal, ending the 90-year family-run history of Aquila.

Two separate transactions were actually announced. Great Plains, the parent of Kansas City Power & Light, will acquire all the outstanding shares of Aquila and its Missouri-based electric utility assets for approximately $1.7 billion. Great Plains will also assume approximately $1 billion of Aquila's net debt.

Great Plains will keep Aquila's Missouri electric utility with its 300,000 customers and sell off the rest of Aquila's operations to Black Hills Corp., a South Dakota energy and utility company, for $940 million. This will include an electric utility in Colorado and its gas utilities in Colorado, Kansas, Nebraska and Iowa along with the associated liabilities.

Once the transactions close, Great Plains will have revenues of over $3 billion and approximately 800,000 customers. Great Plains says it expects to save $500 million over the first five years, but just $300 million after expenses.

The combined Black Hills/Aquila regulated utility and other operations will add a total of about 616,000 new utility customers (93,000 electric customers and 523,000 gas customers) to the 137,000 utility customers (104,000 electric customers and 33,000 gas customers) Black Hills currently serves. Other assets included in the Black Hills transaction include a customer service center and centralized natural gas operation in Nebraska.

The sale culminates Aquila's stunning downfall. Once ranked No. 33 in the Fortune 500 list of the nation's largest companies, Aquila was a victim of the energy trading debacle that occurred around the same that Enron Corp. collapsed. Aquila lost billions of dollars in trading and in other unregulated businesses. Richard Green Jr., Aquila's chief executive, will have no role with KCP&L. However, the Kansas City Star reported that he and other senior executives at Aquila will get attractive severance packages.