FERC last Thursday approved a two-step transaction in which Black Hills Corp. would acquire Aquila Inc.'s natural gas utility assets in Colorado, Kansas, Iowa and Nebraska and its electric utility in Colorado, and Great Plains Energy would swallow up Aquila's Missouri-based electric utility.
In approving the companies' May 25 application, the Federal Energy Regulatory Commission found that the merger would not harm competition or materially increase the merged firms' ability to exercise market power. It further said the merger would not enhance the companies' ability to control upstream transmission and natural gas assets to the detriment of competition in downstream wholesale power markets. Nor would the transaction adversely affect wholesale power or transmission rates, the Commission said [EC07-99, EL07-75].
Great Plains Energy plans to acquire Aquila following the completion of Rapid City, SD-based Black Hills Corp.'s acquisition of Aquila's Midwest gas utility and Colorado electric utility assets -- a deal that was approved by Iowa regulators in September (see NGI, Sept. 10). Nebraska regulators last week approved the sale of Aquila gas assets and operations in its state to Black Hills. The transaction involving Black Hills is valued at $940 million in cash and debt assumption.
When that deal is done, Kansas City, MO-based Great Plains Energy, parent of Kansas City Light & Power, intends to acquire what's remaining of Aquila for an estimated $1.6 billion in cash and stock assumption, making Aquila a subsidiary of the company. Great Plains Energy's shareholders approved the acquisition earlier this month (see NGI, Oct. 15). This deal also requires the approval of both Kansas and Missouri regulators.
The dual transactions, predicated on each other's completion, were announced in February (see NGI, Feb. 12). The transactions received antitrust clearance from the Federal Trade Commission in August. Aquila expects to close both deals by the end of February or early March 2008.
The two transactions, upon completion, will significantly increase the size and scope of Great Plains' and Black Hills' operations. Great Plains will be the parent of Aquila and have revenues of more than $3 billion and approximately 800,000 customers. Aquila will continue to own its Missouri-based utilities and its merchant services operations, primarily consisting of the 340 MW Crossroads power generating facility and residual natural gas contracts. By acquiring Aquila's Missouri-based utilities -- Missouri Public Service Co. and St. Joseph Light & Power -- Great Plains will expand its utility service territory around the Kansas City metro area.
The combined Black Hills-Aquila regulated utility and other operations will have approximately 750,000 retail and wholesale customers in 12 states.
Proceeds from the utilities sale to Black Hills will be used to fund the cash portion of Great Plains Energy's acquisition and to reduce existing Aquila debt. Aquila shareholders will own approximately 27% of Great Plains common stock.
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