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South Dakota Company to Take Over Aquila

July 14, 2008

By Steve Jordon, Omaha World-Herald, Neb.

Jul. 14–Natural gas payments of 340,000 Nebraska and Iowa customers soon will go to the Black Hills, but the new owner of their local gas systems says no one will see a difference in rates or service.

Also part of a three-way deal involving Aquila Corp., Omaha has gained 50 professional services jobs at 1815 Capitol Ave., including regulatory services, gas supply and engineering, information technology and support functions. Lincoln has added 30 jobs at its call center and dispatching staff.

Former Aquila employees will keep their jobs, with total employment at Black Hills Energy of 475 in Nebraska and 205 in Iowa.

Communities affected by the sale include Council Bluffs, Papillion, La Vista, Ralston, Plattsmouth and part of Bellevue, plus Lincoln, Norfolk, Columbus, Beatrice and York.

Metropolitan Utilities District, which serves Omaha and some other areas, is not affected.

Black Hills Corp. of Rapid City, S.D., is the new owner of Aquila’s former natural gas operations in 110 communities in Nebraska and 140 in Iowa, plus local gas utilities in Kansas and Colorado.

It’s part of a $1.7 billion deal, which took effect Monday. Aquila was purchased by Great Plains Energy, the parent company of Kansas City (Mo.) Power & Light. Great Plains sold then sold its four-state gas operation to Black Hills for $909 million.

The transaction marks the end of Aquila, formerly known as UtiliCorp United Inc. and earlier as Missouri Public Service Co. of Kansas City. A series of missteps pushed the value of its shares from $37 each in 2001 to as low as $1.17.

The purchase gives stockholders $1.80 in cash and the right to about $2.15 worth of Great Plains stock, or about $3.95 total.

Jason Ketchum, Black Hills’ director of investor relations, said Great Plains wanted to focus on its Missouri-Kansas area. Money from the sale to Black Hills also reduces Aquila’s debt.

The purchase expands Black Hills’ reach from 139,000 customers to about 750,000, he said.

Nebraskans and Iowans will receive notices of the ownership change with their next mailings, and eventually the Aquila name will be replaced by Black Hills Energy on buildings, vehicles and gas bills.

Two former Aquila executives now with Black Hills said the 130-employee Capitol Avenue office in Omaha will be the operational headquarters for Black Hills’ gas division, and Lincoln will be the state headquarters for Nebraska.

Steve Pella of Omaha, who headed Nebraska natural gas operations for Aquila, was promoted to vice president of natural gas utilities for Black Hills. His deputy, Dan Mechtenberg of Lincoln, was promoted to head the Nebraska operation.

“We have the same people doing the jobs and providing the services,” Mechtenberg said.

Besides a natural gas utility in Cheyenne, Wyo., Black Hills has focused mostly on electrical service in its region, Pella said. So there’s virtually no overlap in duties with the former Aquila natural gas employees, he said.

The former Aquila offices in Omaha and Lincoln have added staff members in anticipation of the purchase by Black Hills so that service would not be affected by the sale, Pella said. Nearly all the 80 new positions have been filled.

Most of the new jobs are for work once done for Aquila in the Kansas City area.

A pending rate increase request in Iowa will continue its government-review process, Mechtenberg said. There is request pending for Nebraska.

Factors affecting future rates will be the same under the new ownership, he said.

Mechtenberg said Black Hills Corp. has the same culture of focusing on customers and communities as did Aquila. The company expects to support local community projects at the same level, he said.

Pella said Aquila’s financial problems at the corporate level put pressure on shareholders, but the natural gas operations continued making investments in its network and focused on meeting its obligations.

Employees and outside shareholders should expect good things from Black Hills Corp., Pella said. “They’re a financial stable organization with a strong history in the energy business. I think everybody’s excited about that.”

UtiliCorp United came into the Omaha area in 1985 when it bought Peoples Natural Gas Co. from HNG/InterNorth Inc., later Enron Corp.

Enron soon moved its headquarters to Houston, while the Peoples Natural Gas employees remained in the Omaha area.

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