Taking a significant step in its effort to exit the merchant energy business, Aquila Inc. Thursday sold 12 power plants totaling 643 MW to Teton Power Funding, LLC, an affiliate of ArcLight Capital Partners, LLC, for $300.9 million.

The sale is expected to be completed in the first quarter of 2004, and is subject to regulatory and third-party approvals.

The power plant interests are a part of Aquila’s residual energy merchant and trading organization. The plants are located in the states of California, Florida, Georgia, Maine, New York and Washington, as well as Jamaica. Aquila’s three uncontracted peaking power plants are not included in the sale.

Aquila anticipates using the net proceeds from the transaction to reduce liabilities and strengthen its balance sheet. “The completion of this transaction, together with the completion of the recently announced agreements to sell our Canadian and United Kingdom utility businesses, will provide Aquila with the liquidity to meet 2004 debt maturities and allow management to focus more of its attention on the company’s core businesses,” said Keith Stamm, Aquila’s COO.

Since it began its self restructuring last year, Aquila has generated $1.9 billion in asset sales, excluding the new power plant sale. In addition, the company is selling its interests in Midlands Electricity and its Canadian networks, which, when they close, will add cash proceeds of at least $640 million. Aquila’s restructuring will continue through the remainder of this year and all of 2004, according to CEO Richard C. Green.

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