Aquila Inc. sells four subsidiaries

KANSAS CITY, Mo. -- Electric and natural gas utility Aquila Inc. said Wednesday it had sold four of its subsidiaries for $896.7 million, a substantial step in its efforts to rebuild the company and pay off debt.

Aquila ran into trouble after Enron Corp. went bankrupt over improper accounting.

The Kansas City-based company said it had sold natural gas operations in Michigan, Minnesota and Missouri and its electric operation in Kansas to three other energy companies.

"We've been rebuilding ever since we exited the energy trading business," said Al Butkus, a company spokesman. "This is a very significant step in that rebuilding program."

Aquila was one of several energy traders that ran into trouble after Enron Corp., the industry pioneer, went bankrupt over improper accounting. Aquila closed most of its energy trading arm in 2002 and returned to its roots as a domestic natural gas and electric utility.

Butkus said the sale, subject to regulatory approval, was not expected to be completed for about a year and consumers should expect a seamless transition.

"We're selling these properties to three other well-respected, well-run utilities," he said.

Aquila subsidiaries Michigan Gas and Minnesota Gas are being sold to Green Bay, Wis.-based WPS Resources Corp., a publicly traded holding company for a number of energy-related subsidiaries.

The Missouri natural gas operations are to go to Joplin, Mo.-based Empire District Electric Co., and the Kansas electric operations go to Mid-Kansas Electric Company, a coalition of six consumer-owned cooperatives.

The sale was not a complete surprise, but the price tag was larger than originally thought. Aquila said in March it was looking to sell the operations included in Wednesday's transaction and several others for a total of $875 million, less than the price of the scaled-back sale.

The company will retain ownership of its St. Joseph Light & Power electric operations in Missouri and its electric operations in Colorado. Aquila said it's continuing to look for a buyer for its three merchant peaking plants and Everest Connections.

Aquila is a fourth-generation family operation that serves more than 1.3 million customers in Kansas, Colorado, Missouri, Nebraska, Michigan, Minnesota and Iowa. After the sale, it will operate in five states.

In recent years, Aquila has repeatedly sold assets to pay off massive debt. Its second-quarter losses this year were an improvement, $27.2 million versus $43.3 million during the same period in 2004.

Brian Russo, an analyst with BroadWall Capital said he was optimistic about Aquila's announcement. "My initial interpretation of the transactions announced is positive," he said.

Shares of Aquila closed down 9 cents at $3.81 in trading Wednesday on the New York Stock Exchange, before the announcement was made. Shares have traded in a 52-week range of $3.79 to $3.95.