Aquila Inc. said Wednesday it signed definitive agreements to sell four utility businesses in Michigan, Minnesota, Missouri and Kansas for a total of $896.7 million, or about $20 million more than estimated in March when it announced its intention to divest the utility assets.
The company said it will retain ownership of the St. Joseph Light & Power electric operations in Missouri as well as its electric operations in Colorado as part of its ongoing business. Those assets were previously expected to be among the utilities sold (see Daily GPI, March 15).
“The execution of these agreements marks a major milestone in our program to reposition Aquila, strengthen the company’s financial condition and improve the financial performance of our regulated utility business,” said CEO Richard C. Green. “Upon completion of these sales, Aquila should be stronger financially than it has been in recent years. The proceeds are expected to allow us to significantly reduce our debt, improve our credit profile and put Aquila on a path to reaching an annual [earnings before interest and taxes] EBIT growth rate of 3% to 5% on our post-divestiture rate base.”
The assets sales include the following utility operations:
Of the utilities identified for sale on March 14, Aquila continues to consider the sale of its three merchant peaking plants and Everest Connections, as well as a settlement of its Elwood toll contracts. Following the sales, Aquila will operate in five states, with gas operations in Kansas, Colorado, Nebraska and Iowa and electric operations in Missouri and Colorado.
Green said the key elements of Aquila’s strategy remain to maintain its focus on operating an integrated, multi-state utility business, as well as significantly reducing its debt and strengthening its credit profile. He said Aquila wants to gain access to the capital markets on improved terms, allowing the company to cost-effectively fund investments in its rate base to meet customer needs. It also wants to improve operational efficiency and lower earnings variability.
Green said Aquila intends to work with regulators and legislators to address rate and fuel cost issues.
Completion of the sales is subject to closing conditions and regulatory approvals but is expected in 12 months. “We maintained a disciplined strategic sales approach that resulted in strong interest from a wide range of potential buyers,” Green added. “This allowed us to select offers from financially sound buyers with strong utility experience and a commitment to customer service and reliability. We are confident that the quality and commitment of these buyers will set the stage for a timely and orderly regulatory review and approval process.”
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