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Aquila Energy Forms Gas Asset Acquisition Arm

Aquila Energy Forms Gas Asset Acquisition Arm

In an effort to diversify its energy services, Aquila Energy, Utilicorp's energy services subsidiary, recently formed a gas asset acquisition arm called Natural Gas Partners. The new entity will purchase storage facilities, pipelines and other properties as well as enter alliances, management deals and partnerships. The unit, which has not yet reached its full work force, is based in Kansas City, MO.

"The creation of Natural Gas Partners signals a more active asset acquisition role for Aquila Energy," Al Butkus, an Aquila spokesman said. "When you think about it, the energy business is all about packaging. People want one company to take care of all their energy needs. By buying more pipeline, storage and property nationwide, we will be able to offer more to customers. This new division will operate throughout the nation, but because Aquila's core region is the Midwest, expect to see most of the movement in that area."

Aquila Energy, which placed fourth in NGI's Gas Marketer rankings for the 1Q99 and second in NGI's Power Marketer rankings for the same period, has previously contracted with other suppliers to obtain the gas it marketed. By being more active and buying more assets, Butkus said Aquila has more flexibility to offer. "If you contract out capacity, for instance, you cannot turn around and sell that capacity because you don't own it. Now, if you own the facility and the capacity in question, you can offer it for sale and expand the amount of services you offer."

The size of the new division has not been determined yet, but it will be operated with five to six people selected from both internal and external sources.

The creation of the gas acquisition arm comes one year after the formation of Aquila Energy's electric acquisition subsidiary, Merchant Energy Partners. The electric acquisition division played a vital role in Aquila's first quarter purchase of a 500 MW combined cycle generation plant in Missouri.

The Natural Gas Partners announcement continues the shape-changing of Aquila Energy's natural gas operations. After Aquila Gas Pipeline's poor first quarter performance (see Daily GPI, May 4), Utilicorp turned up the pressure to gain full control of the pipeline through a shareholder buyout. Although Utilicorp was successful, Butkus said ownership has not changed hands yet. "That deal is not final and AQP is still an Aquila subsidiary."

Also earlier this year, Aquila bought the Texas-based Katy Storage facility. Butkus said the Katy Storage hub and Aquila Gas Pipeline will continue to operate under their current subsidiaries. "This is just the asset acquisition arm. Natural Gas Partners won't operate any of the assets it acquires, nor will we consolidate other operations under it."

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