Two announcements by Aquila Inc.’s board of directors late Thursday spun the company’s stock to its lowest level in 14 years Friday, ending with a loss of 14% in heavy trading. Shares were off $1.75 and ended the day at $10.50. A year ago, the company — then named UtiliCorp — was trading at $35.55. Investors fled on two announcements: the board is reviewing Aquila’s dividend policy “as a means of addressing concerns relating to its credit ratings”; and the Securities and Exchange Commission (SEC) has issued an “informal” data request on the company’s “round-trip” trades.

Like many of its energy merchant peers, the Kansas City, MO-based company has been working to reassure credit ratings agencies and its investors by slashing budgets, cutting jobs and pursuing asset sales and partners to reduce its debt, and the review of the dividend policy is in keeping with its plan to cut debt.

Regarding the SEC’s informal request, Aquila noted that it had already stated in a previous filing with the Federal Energy Regulatory Commission that all of its trading activity was conducted for legitimate business purposes. In a written statement, the company said it has “repeatedly stated that its trading practices are proper and in full compliance with FERC regulations and standards. None of its trades have been conducted for the purpose of increasing volumes or revenues, impacting market prices, or for any other improper business purposes.”

It said it “intends to cooperate fully with the SEC’s request to voluntarily submit documents pertaining to its trading activity for the period January 2000 through the present.”

Aquila’s board was meeting Thursday for an update regarding management’s progress on “Project BBB+/Baa1,” the company’s initiative to reduce costs and divest non-core assets. For the first time, the board began a review of Aquila’s dividend payout ratio “in light of changes in the current business environment.” Factors that will be considered in the review include increasing capital and liquidity demands, as well as the impact of those demands on the company’s credit ratings, balance sheet, earnings, risk profile and dividend policy.

For the past six weeks, Aquila has focused its efforts on reducing costs and pursuing the sale of non-strategic assets as part of its Project BBB+/Baa1. The company said the program is now also structured to meet Moody’s Investors Service and Standard & Poor’s credit metrics requirements.

“Now that we have greater clarity on what the rating agencies are looking for, we must continue to take the appropriate steps to balance our objectives of maximizing shareholder value while improving our credit ratings,” said CEO Robert K. Green.

To date more than $101 million in cost savings have been identified, and the company has announced plans to sell $500 million to $1 billion in non-strategic assets by the end of 2002 to reduce debt and operating costs. Just days ago, Aquila initiated a sale process for its share of New Zealand-based UnitedNetworks, the largest distribution company in New Zealand. Aquila owns 55% of the company.

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