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Black Hills and Great Plains close Aquila deal
KANSAS CITY, Mo. (AP) -- Great Plains Energy Inc. said Monday it had completed its $1.7 billion purchase of Aquila Inc., ending more than a year of struggle to acquire its crosstown Kansas City rival.
The purchase also involves Rapid City, S.D.-based Black Hills Corp., which said it bought Aquila's natural gas and electric utilities in Colorado, Iowa, Kansas and Nebraska for $940 million.
Great Plains operates Kansas City Power and Light Co. and will retain Aquila's electric utilities in Missouri and other corporate assets under KCP&L's brand. The move boosts KCP&L's customer total by 300,000 to 800,000.
"Today is an important day for our region," Michael Chesser, Great Plains' chairman and chief executive officer, said in a release. "Our acquisition of Aquila will create significant savings for both Aquila and KCP&L customers."
The company said it expects the combination to save $198 million over five years and $547 million over a decade. It also is retaining about 900 Aquila employees.
For Black Hills, which will rename the Aquila properties Black Hills Energy, the deal increases the company's customer base fivefold to 750,000.
"I remember having my first discussions about this in May 2006, so it's been a long time coming," said Dave Emery, chairman and CEO of Black Hills. "With the lower cost structure (of the combined operations) there should be some opportunities for more savings that can be passed on to customers through less frequent rate increase requests."
Emery said the company will retain 1,050 Aquila utility employees and has hired an additional 200 people to oversee the larger company, including 50 former Aquila corporate employees.
The deal closed only after months of wrangling between the companies and the Missouri Public Service Commission, which was under pressure from consumer advocates, some of Aquila's industrial customers and even its staff to oppose the acquisition.
Critics have warned that customers may end up helping Great Plains recoup some of the cost of buying Aquila, although Missouri regulators said ratepayers wouldn't be liable for $47.2 million in transaction costs.
Kansas regulators also limited the amount Black Hills can charge former Aquila customers, requiring the company to freeze natural gas delivery prices for three years.
Opponents also are concerned the purchase -- coming as KCP&L is in the midst of a building boom, including a new, almost $2 billion power plant near Weston -- could hurt the utility's credit rating, increasing its costs for borrowing money. Great Plains has denied that would happen.
While the Public Service Commission's order went into effect Monday, some of the opponents, including the industrial customers and the Missouri Public Counsel have asked the agency to reconsider the case and put its order on hold.
Stuart Conrad, an attorney for the industrial customers, said he may appeal to circuit court if the commission decides against rehearing the case, but he hoped the commission would at least approve staying its order.
"I don't want to get down the pike where we're in court and ... then they say this is all moot because you can't unscramble eggs," Conrad said. "If they proceed that's their choice and at their risk."
Missouri Public Counsel Lewis Mills, who represents customers before the commission, was out of town and unavailable for comment.
The sale presumably ends the 91-year independent history of Aquila, founded in 1917 as the Green Light and Power Co. and renamed UtiliCorp United Inc. in 1985 as it acquired utilities throughout the Midwest. The company ran into trouble as it racked up debt as part of a buying binge in the 1990s and invested heavily in energy trading, which collapsed following the Enron debacle in 2001.
Great Plains shares were down 37 cents to $25.46 in afternoon trading Monday. Black Hills shares were up 36 cents at $32.29.