Aquila Inc. agreed Monday to sell its electric operations in Kansas and some natural gas businesses in Missouri, Michigan and Minnesota to help shed part of its $1.9 billion debt.
Kansas City, Mo.-based Aquila said that the sales would generate $896.7 million upon closing. The deals, pending regulatory approvals, are expected to close during the next 12 months.
The deals represent the latest moves by Aquila to help shed massive debt racked up by its energy-trading and marketing operations, which shut down in 2002 after such businesses collapsed under the weight of dwindling energy demand, expensive capital investments and Enron Corp.'s monumental implosion.
"After that 'perfect storm,' we have been working to reduce our exposure and reduce that debt," said Al Butkus, an Aquila senior vice president. "We bought pipelines and storage facilities, and built power plants. : We still have some to sell. We're not totally out of it : but this is a very significant step in our repositioning plan. It's a very significant step."
The sales announced Wednesday are part of a plan unveiled in March, under which the utility would consider selling up to six regulated utility operations valued together at $875 million. That plan surfaced as a report for the Kansas Corporation Commission suggested that Aquila might have to sell off all of its unregulated utilities, plus "divest most, if not all, of its domestic utility businesses."
Aquila officials had disputed many of the underlying assumptions of that report, but on Wednesday acknowledged that shedding debt was an essential component of improving the company's standing with customers, investors, lenders and regulators.
Aquila's Kansas electric operations - which serve 69,000 customers in Great Band, Liberal, Dodge City and other areas of central and western Kansas - are being sold to Mid-Kansas Electric Co., a coalition of six consumer-owned cooperatives.
Aquila's natural gas operations in Missouri are being sold to Empire District Electric Co., based in Joplin, Mo.
Two other Aquila subsidiaries - Michigan Gas and Minnesota Gas - are being sold to WPS Resources Corp., a holding company for several energy-related subsidiaries. WPS is based in Green Bay, Wis.
The sales would leave Aquila with operations in five states, including natural gas businesses in Kansas, Colorado, Nebraska and Iowa and an electric operation in Missouri and Colorado.
Aquila's natural gas operations are based in Lawrence, and serve 100,000 customers, including 33,000 in Lawrence.
Larissa Long, a manager in the Lawrence office, said that the proceeds from the sales would be good for the company, and therefore good for customers in Lawrence and elsewhere in the state.
"Our credit rating will be improved, which obviously impacts our ability to access capital markets at good rates, which allows us, in turn, to be able to provide services and upgrade facilities to provide those services," she said.
Aquila shares closed Wednesday at $3.81, down 9 cents on the New York Stock Exchange.
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