Aquila Buys Western Hub, Lodi Storage

Hoping to take advantage of future volatility in the California gas and power markets, Aquila Inc. has formed a partnership with ArcLight Energy Partners Fund to purchase Houston-based Western Hub Properties LLC for $220 million. Western Hub is a natural gas storage development company that owns the proposed Lodi Gas Storage facility near Sacramento as well as rights to other potential storage sites near Bakersfield, CA, and San Antonio, TX. The acquisition is subject to the approval of the California Public Utilities Commission.

"In the past year, it's been clearly demonstrated that California's need for more energy is growing," said Aquila CEO Keith Stamm. "Demand for natural gas in this region is expected to increase dramatically as new gas turbine-driven power plants come on line in 2002 and 2003. The natural gas storage facility near Lodi should be an important asset that will help meet the gas needs of the California energy market."

Western Hub CEO Tom Dill said Aquila/ArcLight, "with their financial resources and expertise in storage development operations," will be able to get the Lodi Project ready to provide "much-needed natural gas storage service for this winter."

The Lodi project, which is being built about 35 miles south of Sacramento, will have the high-performance, quick-cycle capabilities needed in today's volatile energy marketplace, Aquila said. It will store 12 Bcf of natural gas and will have an injection rate of 400 MMcf/d and a withdrawal rate of 500 MMcf/d. That will allow the facility to cycle its inventory up to six times a year. By comparison, most existing storage facilities located in California can cycle only one to two times annually. Lodi will be only the second merchant storage facility, behind AEC's Wild Goose Storage, built in the state.

"The Lodi Gas Storage facility is strategically located downstream of significant pipeline bottlenecks," said Aquila COO Ed Mills. "As a result, this facility will allow Aquila to be a strategic player in the California market, providing California customers very valuable services."

Western Hub Properties LLC was owned by its management team and by Haddington Ventures, Haddington Energy Partners, and JPMorgan Partners (formerly Chase Capital Partners).

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