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Bidding Begins on Kansas City, Mo.-Area Telecommunications Firm

Posted on: Friday, 4 November 2005, 15:00 CST

By Mark Davis, The Kansas City Star, Mo.

Nov. 4--KANSAS CITY, Mo. -- Bidding is under way for Everest Connections, the fiber-optic-based Internet, telephone and television service in the Kansas City area, its parent company said Thursday.

Bids should be in by Thanksgiving and a definitive agreement to sell Everest could come early next year, said Richard C. Green, chairman and chief executive officer of Aquila Inc., which owns Everest.

Green made the comments in a conference call with Wall Street analysts Thursday after Aquila announced a $75.7 million loss in its third quarter. The loss equaled 20 cents a share, compared with the $116.4 million loss, or 44 cents a share, reported a year earlier.

In addition to selling Everest, Aquila has signed agreements to sell four of its utility companies for $897 million. It plans to pay off debts with the proceeds. The struggling company has been unwinding its extensive ventures into unregulated businesses in the late 1990s.

Lenexa, Kan.-based Everest expects revenues of $50 million this year, up from $40 million last year, said Phillip Spencer, its president. He said the business generates $10 million a year in free cash, which it uses to expand service.

Everest's fiber-optic lines currently run past 79,000 homes in Shawnee, Kan., Lenexa, Kan., and Overland Park, Kan., and in the Red Bridge, Waldo and Brookside areas of Kansas City. About 34,000 of those homes are connected customers.

Spencer said the customer count in Shawnee and Lenexa covers about half of the homes within reach of the current network. About a third of the homes within the Overland Park and Kansas City service areas are customers, he said.

A sale would allow Everest to expand more quickly if the new owners could provide capital. Aquila has not invested in Everest in more than 2 years.

Aquila's loss in the third quarter stemmed largely from an early conversion of bonds called premium income equity securities or PIES. The conversion will save $23.1 million in interest costs in each of the next two years but cost $82.3 million in charges against earnings during the recently completed third quarter.

Operations of its gas and electric utilities improved from a year ago, the company said.

Favorable weather, new customers and higher rates boosted sales at the electric companies Aquila is not selling by 16 percent to $215.4 million and produced a 22 percent higher gross profit of $125.4 million.

Its gas companies also benefited from weather patterns and rate increases, posting 29 percent higher sales of $81.5 million and 11 percent higher gross profits of $30.2 million.

Aquila said it still needs to restructure two costly tolling agreements, under which it sells natural gas to a power plant and then seeks buyers for the electricity. The agreements have become burdens as gas prices have increased and electricity demand slumped.

Aquila also wants to sell some peak-demand power plants and further reduce its debt load.

Aquila shares closed at $3.48, up 11 cents Thursday, after the earnings news and conference with analysts.

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Copyright (c) 2005, The Kansas City Star, Mo.

Distributed by Knight Ridder/Tribune Business News.

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ILA,

Source: The Kansas City Star (Kansas City, Missouri)

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