Independent proxy advisory firm Institutional Shareholder Services (ISS) has recommended that Aquila Inc. shareholders vote for the company’s plan to merge with Great Plains Energy Inc., Aquila announced Thursday.

Great Plains Energy, parent of Kansas City Light & Power, plans to acquire Aquila and its Missouri-based electric utility for an estimated $1.6 billion in cash and stock assumption. Under the merger agreement, Aquila shareholders will receive $1.80 in cash and 0.0856 of a share of Great Plains Energy common stock in exchange for each share of Aquila common stock they hold. Aquila will become a wholly owned subsidiary of Great Plains Energy.

“Receiving this endorsement from ISS is another major milestone in our efforts to close the transaction with Great Plains Energy,” said Aquila CEO Rick Green. “We continue to believe that the merger maximizes shareholder value and provides the best opportunity for our shareholders to hold stock in a growing, investment-grade company that pays a dividend.”

Aquila has scheduled a special meeting of its stockholders to vote on the proposed merger Oct. 9 in Blue Springs, MO; Great Plains’ will hold a special shareholder meeting Oct. 10 in Kansas City, MO.

Great Plains plans to acquire Aquila following the approval of both Kansas and Missouri regulators and the completion of Rapid City, SD-based Black Hills Corp.’s acquisition of Aquila’s natural gas utility assets and operations in that state — a deal which was approved by Iowa regulators earlier this month (see Daily GPI, Sept. 6).

The dual transactions, predicated on each other’s completion, were announced in February (see Daily GPI, Feb. 8). The transactions received antitrust clearance from the Federal Trade Commission in August (see Daily GPI, Aug. 29). Aquila expects to close both deals by the end of February or early March 2008.

When completed, the two transactions 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.

Proceeds from the utilities sale to Black Hills will be used to fund the cash portion of the Great Plains acquisition and to reduce existing Aquila debt. Aquila shareholders will own approximately 27% of Great Plains common stock.

Based in Kansas City, MO, Aquila owns electric power generation and operates electric and natural gas transmission and distribution networks serving approximately 900,000 customers in Colorado, Iowa, Kansas, Missouri and Nebraska. At the beginning of 2007, Aquila’s assets totaled $3.4 billion. Sales for 2006 were $1.4 billion and net income was $23.9 million.

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