In an effort to diversify its energy services, Aquila Energy,Utilicorp’s energy services subsidiary, recently formed a gas assetacquisition arm called Natural Gas Partners. The new entity willpurchase storage facilities, pipelines and other properties as wellas enter alliances, management deals and partnerships. The unit,which has not yet reached its full work force, is based in KansasCity, MO.

“The creation of Natural Gas Partners signals a more activeasset acquisition role for Aquila Energy,” Al Butkus, an Aquilaspokesman said. “When you think about it, the energy business isall about packaging. People want one company to take care of alltheir energy needs. By buying more pipeline, storage and propertynationwide, we will be able to offer more to customers. This newdivision will operate throughout the nation, but because Aquila’score region is the Midwest, expect to see most of the movement inthat area.”

Aquila Energy, which placed fourth in NGI’s Gas Marketerrankings for the 1Q99 and second in NGI’s Power Marketer rankingsfor the same period, has previously contracted with other suppliersto obtain the gas it marketed. By being more active and buying moreassets, Butkus said Aquila has more flexibility to offer. “If youcontract out capacity, for instance, you cannot turn around andsell that capacity because you don’t own it. Now, if you own thefacility and the capacity in question, you can offer it for saleand expand the amount of services you offer.”

The size of the new division has not been determined yet, but itwill be operated with five to six people selected from bothinternal and external sources.

The creation of the gas acquisition arm comes one year after theformation of Aquila Energy’s electric acquisition subsidiary,Merchant Energy Partners. The electric acquisition division playeda vital role in Aquila’s first quarter purchase of a 500 MWcombined cycle generation plant in Missouri.

The Natural Gas Partners announcement continues the shape-changingof Aquila Energy’s natural gas operations. After Aquila Gas Pipeline’spoor first quarter performance (see DailyGPI, May 4), Utilicorp turned up the pressure to gain full controlof the pipeline through a shareholder buyout. Although Utilicorp wassuccessful, Butkus said ownership has not changed hands yet. “Thatdeal is not final and AQP is still an Aquila subsidiary.”

Also earlier this year, Aquila bought the Texas-based KatyStorage facility. Butkus said the Katy Storage hub and Aquila GasPipeline will continue to operate under their current subsidiaries.”This is just the asset acquisition arm. Natural Gas Partners won’toperate any of the assets it acquires, nor will we consolidateother operations under it.”

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