UtiliCorp proceeds with Aquila IPO

UtiliCorp United Inc. said Thursday it will go forward with an initial public offering of its marketing and trading unit Aquila Inc. pricing the shares between $21-$23 each. The Kansas City-based utility holding company announced its intention to sell a portion of Aquila�s equity to the public in December 2000. UtiliCorp searched for a partner throughout 2000 to marry the trading and marketing skills of Aquila with hard assets of power plants and gas facilities.

April 5, 2001

2 min read

By the OGJ Online Staff

HOUSTON, Apr. 5�UtiliCorp United Inc. said Thursday it will go forward with an initial public offering of its marketing and trading unit Aquila Inc. pricing the shares between $21-$23 each.

The Kansas City-based utility holding company announced its intention to sell a portion of Aquila�s equity to the public in December 2000. UtiliCorp searched for a joint venture partner or merger partner throughout 2000 to marry the trading and marketing skills of Aquila with hard assets of power plants and gas facilities. Unable to come up with a union that valued Aquila appropriately, the parent planned an IPO. Company officials said in December that an IPO would �crystallize� or define the value of Aquila in the market.

The timing for the IPO is still opportune even though the market in general is down and continues to fall, analysts said. Energy stocks continue to be a bright spot.

�It�s a great market environment for merchant gas and power trading companies. The sector has done well in comparison to the rest of the market,� said Andre Meade, analyst with Commerzbank in New York. �Power and gas prices are high and volatile.�

The market loves a volatile commodity like power to trade around. And the future looks good for those companies focusing on those commodities, he said.

�There is a huge need for new power plants and they need to market output and arrange for input gas,� he said. �Even when prices come down for gas, power remains volatile by nature.�

Analysts say the IPO does not preclude an eventual sale of the company or a partnership.

UtiliCorp spokesman Al Butkus said the company is still �actively� pursuing a merger partner for Aquila.

�Our goal is to have 10,000 Mw under our control within 3 years,� said Butkus. Aquila owns 4,100 Mw now.

The initial offering price is expected to bring in between $346.5 million and $379.5 million. UtiliCorp will use the proceeds to pay down debt, improving the balance sheet, and lowering interest costs. That should make up for loss of income to the parent by selling an equity stake of Aquila to the public, CEO Richard Green said in a conference call in December.

Shares of UtiliCorp are trading slightly down on Thursday at $31.70 from Wednesday's close of $32.29. But year over year, the company�s share price has almost doubled. In April of 2000, shares were trading around $17 each.