*UtiliCorp Wants To Spin Off Aquila
Kansas City Business Journal ) 09/29/2000
By Brian Cookson

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

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

&We really think the value of our company is much higher than the market 
currently values it because it values it as a utility,8 Aquila spokesman Al 
Butkus said.

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

Aquila may be able to attract more interest because it wouldn,t carry the 
image of a traditional utility, Butkus said.

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

&In general, the stock market prefers companies that are clean or pure 
plays,8 Stuebi said.

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

&In most aspects of the energy business, the race for scale is on,8 he said.

Aquila also could increase its value to shareholders by looking for hard 
assets to match its marketing prowess.  Aquila CEO Keith Stamm said the 
company could address this need by building, such as the new electric 
generation plant it is building in Pleasant Hill.  It also could buy 
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 other 
two options open.  Finding a partner with power plants could become easier as 
energy deregulation causes many utilities to look at separating generating 
operations from power sales and distribution.

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

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

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

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

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

&We like to see volatility, and we,re seeing it,8 Stamm said.

Aquila is adding a crew of 35 to 40 people to begin trading bandwidth by the 
end of the year.  It won,t be alone, however, as companies such as Houston,s 
Enron Corp. also are getting into bandwidth trading.
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