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Black Hills, Great Plains Close Aquila Merger Deal

Black Hills Corp. and Great Plains Energy Inc. closed their asset purchase and merger of Aquila Inc. last Monday, the companies said. The closing was effective last Monday for legal, accounting and operational purposes.

The three-way deal, which was announced in early 2007 (see NGI, Feb. 12, 2007), includes Black Hills' acquisition of Aquila's electric utility in Colorado and Aquila's four natural gas utilities in Colorado, Iowa, Kansas and Nebraska for $940 million; Great Plains is to pay approximately $1.7 billion in cash and stock and assume $1 billion of Aquila debt for the Missouri operations. The acquired Aquila utilities will operate under the name Black Hills Energy.

"This acquisition is an important milestone in our strategic plan," said Black Hills CEO David R. Emery. "With this transaction, the company is building a platform for growth based on a foundation of stable cash flow, more predictable earnings and increased efficiencies. It complements the company's existing businesses and substantially broadens Black Hills' regional presence and utility operations. The Aquila transaction more than doubles the number of Black Hills employees and increases our utility customer base five-fold."

At the beginning of 2008 Aquila's assets totaled $2.7 billion; sales were $1.475 billion and net loss was $5.4 million.

Earlier this month, Rapid City, SD-based Black Hills completed the sale of seven independent power plants representing nearly 1,000 MW for $840 million in cash to separate Australia- and U.S.-based asset investment firms and said it expected net proceeds from the sale to eliminate the need to issue equity to finance the acquisition of Aquila's electric and gas operations. Black Hills said its Aquila purchase was financed through a $380 million borrowing on its $1 billion acquisition facility and cash proceeds from the power plant sales.

Great Plains has acquired all outstanding shares of Aquila and its Missouri-based electric utility assets for $1.80/share in cash plus 0.0856 of a share of Great Plains common stock for each share of Aquila common stock. In addition, Great Plains Energy has assumed Aquila's net debt remaining after closing. Aquila shareholders own approximately 27% of Great Plains common stock.

Black Hills expects to issue revised earnings guidance for 2008 and initial earnings guidance for 2009 within 60 days. Early in the second quarter of 2008 the company suspended any revisions to previously issued earnings guidance due to uncertainty in the timing of the Aquila transaction closing, which was originally expected in the first quarter of 2008, and the impact of the sale of seven independent power production facilities.

The final regulatory approval needed to complete the Great Plains-Aquila merger was achieved earlier this month when the Missouri Public Service Commission (PSC) approved the purchase of Aquila's Missouri operations by Great Plains and its subsidiary, Kansas City Power & Light Co. (KCPL) (see NGI, July 7). Earlier this year the Kansas Corporation Commission approved the acquisition (see NGI, March 3).

The Aquila deal added about 300,000 electric utility customers to KCPL's existing 505,000 customers.

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