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Subject: News: UtiliCorp Plans to Spin Off Aquila Energy
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*UtiliCorp Wants To Spin Off Aquila
Kansas City Business Journal =01) 09/29/2000
By Brian Cookson

UtiliCorp United Inc. wants to parlay the rapid growth of its Aquila Energy=
=20
subsidiary into a piece of a new, larger Aquila.

The Kansas City-based utility has plans to spin off Aquila, possibly=20
retaining ownership of a third of it, selling another third to a partner an=
d=20
offering the remainder in the stock market.  The move could allow Aquila, n=
ow=20
engaged primarily in trading power and natural gas, to gain more hard asset=
s=20
of its own and seek higher valuation from investors.

=01&We really think the value of our company is much higher than the market=
=20
currently values it because it values it as a utility,=018 Aquila spokesman=
 Al=20
Butkus said.

Aquila, which moved its headquarters to Kansas City last year, has been the=
=20
engine behind earnings growth for UtiliCorp.  For the second quarter of thi=
s=20
year, Aquila reported earnings before interest and taxes (EBIT) of $49.5=20
million, up 113 percent from the previous year.  UtiliCorp as a whole had=
=20
EBIT of $103.9 million for the second quarter of 2000.

Aquila may be able to attract more interest because it wouldn=01,t carry th=
e=20
image of a traditional utility, Butkus said.

Richard Stuebi, president of Next Wave Energy, agreed.  The head of the=20
Denver-based electricity consulting firm said Wall Street historically has=
=20
undervalued conglomerates such as UtiliCorp.

=01&In general, the stock market prefers companies that are clean or pure=
=20
plays,=018 Stuebi said.

Aquila=01,s strategy comes as little surprise to Stuebi.  As much success a=
s the=20
company has had, he said he thought Aquila would need to get bigger to=20
compete.

=01&In most aspects of the energy business, the race for scale is on,=018 h=
e said.

Aquila also could increase its value to shareholders by looking for hard=20
assets to match its marketing prowess.  Aquila CEO Keith Stamm said the=20
company could address this need by building, such as the new electric=20
generation plant it is building in Pleasant Hill.  It also could buy=20
generation capacity or take on a partner with electric generation capacity.

Stamm said the company is looking for such a partner but is keeping the oth=
er=20
two options open.  Finding a partner with power plants could become easier =
as=20
energy deregulation causes many utilities to look at separating generating=
=20
operations from power sales and distribution.

Stamm said that Aquila has talked to several companies and that an=20
announcement could come by the end of the year.

The timing of any initial public stock offering would be dependent on the=
=20
results of the search for a partner.

Butkus said UtiliCorp isn=01,t sacrificing its hold on Aquila.  Instead,=20
executives are hoping to own part of an infinitely more valuable company.

Aquila already is moving to enter a new market =01) trading bandwidth, or=
=20
capacity on communications networks.  Stamm said the bandwidth market is=20
potentially several times larger than the energy market because=20
communications networks can be linked by satellite to anywhere in the world=
. =20
Gas pipelines require a physical connection.

Traders in the bandwidth market could include telecom companies or Internet=
=20
providers that either have network capacity to sell or that need to boost=
=20
their capacity.

=01&We like to see volatility, and we=01,re seeing it,=018 Stamm said.

Aquila is adding a crew of 35 to 40 people to begin trading bandwidth by th=
e=20
end of the year.  It won=01,t be alone, however, as companies such as Houst=
on=01,s=20
Enron Corp. also are getting into bandwidth trading.
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