Coming closer by the day to reaching its planned $1 billion asset divestiture goal, Aquila, Inc. said Friday that its subsidiary UtiliCorp NZ Ltd. has completed the sale of its 70.2% interest in UnitedNetworks Ltd., a New Zealand-based energy company, to Vector Ltd. for approximately $503 million. Earlier in the week, the Kansas City, MO-based company announced that it had completed its $265 million sale of its Southeast Texas and Mid-Continent natural gas pipeline systems and natural gas and gas liquids processing assets, as well as its 50% stake in the Oasis pipeline system, to Energy Transfer Co.

Under its takeover offer, Vector purchased all shares of UnitedNetworks that were held by UtiliCorp NZ. The takeover offer was conditional upon Aquila’s receipt of bank consents and Vector’s acquisition of the 70.2% stake in UnitedNetworks. Both conditions were satisfied last week, the companies reported. Under New Zealand law, Vector then had seven days to settle its takeover offer in cash, and it funded the acquisition of UtiliCorp NZ interest in UnitedNetworks Thursday in Auckland.

Aquila, whose share of net proceeds from the transaction is estimated to be approximately $362 million, said the funds will be used to retire debt related to its acquisition of UnitedNetworks and other utilities in Australia, Canada and the United Kingdom. The company said it expects to book a fourth quarter gain on the transaction estimated at approximately $28 million. In preparation for the sale to Vector, Aquila last week repurchased the minority stake in UtiliCorp NZ held by its financial partner for approximately $38.5 million, increasing its interest in UnitedNetworks from 55.5% to 70.2%. The sale is the culmination of a bid process announced in June by UnitedNetworks as part of Aquila’s ongoing effort to sell $1 billion or more in assets to strengthen its balance sheet and credit ratings (see NGI, June 24; Sept. 16).

Regarding its pipeline asset sale, Aquila said it received approximately $221 million in cash from the privately held, Dallas-based Energy Transfer Co. at closing. After completing the pipe sale earlier in the week, Aquila CEO Richard C. Green Jr. said “This is also a major step in our corporate repositioning as we reduce the scale and scope of Aquila and return to our roots as a regulated utility and generation company.”

The Southeast Texas assets include three natural gas pipeline systems, two processing facilities and eight natural gas treating facilities. Aquila said the Mid-Continent assets include Aquila’s Elk City natural gas and gas liquids processing plant and its associated gas gathering system, located primarily in western Oklahoma. In addition, the sale also includes Aquila’s ownership interests in two joint venture arrangements with assets located in southern Texas and the Permian Basin area of western Texas.

The 600-mile Oasis pipeline system connects the Waha natural gas hub in the Permian Basin of western Texas with the Katy market hub near Houston. Physical throughput capacity of the pipeline is approximately 1 Bcf/d. Dow Hydrocarbons Inc. owns the other 50% of Oasis.

Aquila said that of the 175 employees that are associated with these assets, a majority will transfer to Energy Transfer Co. and its affiliates.

First announced in August, the Mid-Continent pipe sale was chalked up as part of the company’s $1 billion non-strategic asset divestiture program under then CEO Robert K. Green (see NGI, Sept. 2). Robert K. Green, who led the company’s entry into the energy merchant business, resigned from all of his executive positions as well as the board of directors two weeks ago, turning the position over to his brother.

Aquila said the remaining balance of the purchase price for the pipe assets has been fully funded and will be disbursed upon the resolution of certain contract assignments and other matters. The company reiterated that it intends to use the proceeds from this transaction and other asset sales to redeem and retire its existing indebtedness as part of its commitment to improve its credit profile. Credit Suisse First Boston acted as Aquila’s financial advisor in the transaction.

The Energy Transfer Co. already owns and operates natural gas gathering, processing, treating and compression assets in Texas and Louisiana. It also engages in extensive electric power activities, including small-power generation and patent-pending dual-drive compression technology, which uses large-scale natural gas/electricity arbitrage at the natural gas pipeline level.

“Since beginning our strategic restructuring a few months ago, Aquila has now sold or agreed to sell assets with net proceeds totaling $876.1 million,” said Richard Green. “The transfer of ownership in UnitedNetworks brings the total of completed transactions to about $696 million, or more than two-thirds of our stated goal of $1 billion.”

As of Thursday (Oct. 10), Aquila said it had gained net proceeds from asset sales including:

Green added that asset sales, elimination of costs and management restructuring have been the principal focus of Aquila as it repositions itself as an electric and gas utility and owner of fully contracted generation. “As we continue to press ahead with these important steps, we will now redouble our efforts toward the next phase of our repositioning, the continued exit from the remaining non-core elements of our previous energy merchant strategy,” he said. “This task is essential to addressing the concerns expressed by the market.”

As one of New Zealand’s largest infrastructure companies, UnitedNetworks distributes energy to about 30% of the country’s electricity consumers and more than half of its natural gas consumers. It also owns and manages telecommunications networks in the central business districts of Auckland and Wellington.

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