Aquila Inc. said Thursday it has exited its investment in the Lodi Gas Storage Project in northern California as part of its continuing effort to pull out of non-core businesses and return to its regulated utility roots.

The Kansas City, MO-based company reported it closed an agreement with partner ArcLight Capital Holdings LLC, an affiliate of ArcLight Energy Partners Fund I LP, that released it from “certain debt and acquisition obligations” related to the storage project. Aquila, through an affiliate, and ArcLight formed a joint venture company in 2001 to purchase Western Hub Properties LLC, the developer of the underground gas storage field.

ArcLight will assume sole ownership of the storage project, said Aquila spokesman Al Butkus. The Aquila-ArcLight partnership purchased Houston-based Western Hub Properties for an estimated $220 million. The cost of developing the Lodi storage field had been pegged at about $80 million.

The transaction “is a further step in implementing Aquila’s strategic decision to transition back to a regulated utility, namely [withdrawing] from those elements of the company’s previous energy merchant strategy that are not consistent with its current business model,” the company said in a press statement.

The Lodi facility, which is located about 35 miles south of Sacramento, has a working gas storage capacity of 12 Bcf and is interconnected to the backbone pipeline system of Pacific Gas and Electric.

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