Unassociated Document
Filed
by
Great Plains Energy Incorporated
Pursuant
to Rule 425 under the Securities Act of 1933
And
deemed filed pursuant to Rule 14a-12
Under
the
Securities Exchange Act of 1934
Subject
Company: Aquila, Inc.
Commission
File No.: 1-03562
This
filing consists of questions and answers posted by Great Plains Energy
Incorporated on its internal Intranet website on February 7, 2007.
Great
Plains Energy, Black Hills, and Aquila
February
7, 2007
QUESTIONS
& ANSWERS
Announcement
1.
Why is Great Plains Energy acquiring Aquila?
Meeting
the regional demand for low-cost, reliable energy will require a strong regional
electric utility with a solid financial condition, good growth prospects as
well
as collaborative regulatory and community relationships. Based on the strengths
of both companies, the transaction will forge a regional electric utility that
brings those benefits and increased value to shareholders, employees and the
community. In addition, the deal will strengthen Great Plains Energy’s asset
base and lower debt costs associated with investments in Aquila’s infrastructure
and KCP&L’s $1.6 billion Comprehensive Energy Plan, which includes new
generation, environmental upgrades, and energy efficiency programs. This will
allow Great Plains Energy to improve overall energy reliability and
environmental performance in the region while maintaining low-cost energy for
all customers.
2.
Why is Black Hills acquiring Aquila’s Colorado electric utility and its gas
utilities in Colorado, Iowa, Kansas and Nebraska?
Great
Plains Energy’s strategic focus is on operating electric assets in Missouri and
Kansas. Black Hills is involved because Aquila’s gas utilities and Colorado
electric properties better fit its business profile, geographically and
strategically. The acquisition provides a unique opportunity for Black Hills
to
expand its retail utility footprint and to advance its business model of
providing reliable, economical service.
Strategically,
it creates a regional natural gas business that will enable Black Hills to
achieve economies of scale. Black Hills is attracted to the potential vertical
integration in Colorado with the opportunity to build power generation to serve
the growing demand there. Black Hills was impressed by the experienced employee
team in these operations, and the high-level of customer satisfaction they
have
achieved.
3.
Why did Aquila decide to sell?
Since
2002, Aquila has been executing its repositioning strategy - exiting
non-regulated businesses, divesting international utilities and restructuring
contracts. Most recently, the company sold three domestic utility assets in
2006
(with a fourth sale expected to close in the first or second quarter of 2007),
and reduced debt. As the company gained strength, Aquila’s Board and management
determined that a competitive auction process would most likely yield the best
outcome for Aquila shareholders. In May 2006, Aquila engaged financial advisors
to conduct a targeted auction process. In evaluating various alternatives
(including continuing as a stand-alone company), the Aquila Board and management
determined that the Great Plains Energy and Black Hills proposals would maximize
shareholder value and were in the best interest of the company’s
shareholders.
4.
Who approached whom about a potential deal?
After
being approached by Aquila’s financial advisors, Great Plains Energy (working
with Black Hills) submitted a bid as part of Aquila’s sale process.
5.
What are the details of these transactions?
Black
Hills will acquire Aquila utility properties in Colorado, Iowa, Nebraska and
Kansas for $940 million in cash, subject to closing adjustments. Black Hills
will assume liabilities of the acquired utility properties. Immediately
following the Black Hills transaction, Great Plains Energy will acquire 100
percent of the common stock of Aquila, and become the parent of Aquila, which
will continue to own its Missouri-based utilities and its Merchant Services
operations, primarily consisting of the 340-megawatt Crossroads power generating
facility and residual natural gas contracts. The proceeds from the asset sale
to
Black Hills are expected to be used to fund the cash portion of the
consideration to Aquila shareholders and to reduce existing debt at Aquila.
Upon
consummation of the transactions, Aquila shareholders will own approximately
27
percent of Great Plains Energy common stock, which currently is paying an annual
dividend of $1.66 per share.
6.
Once these transactions are finalized, how will the companies be structured?
Great
Plains Energy:
Upon
closing, Aquila will become a wholly owned subsidiary of Great Plains Energy
and
a sister company to KCP&L. Great Plains Energy’s CEO will lead the combined
Great Plains Energy/Aquila operations and there will be no change to Great
Plains Energy’s executive team or Board of Directors as a result of the
transaction. Great Plains Energy’s corporate headquarters will remain in Kansas
City, Missouri.
Black
Hills:
Black
Hills will acquire Aquila’s utility properties in Colorado, Kansas,
Nebraska and Iowa through a wholly owned subsidiary established for that
purpose. Black Hills’ CEO will lead the combined Black Hills/Aquila operations.
Additional support staff will be located at gas support and customer service
operations in Nebraska or at Black Hills’ corporate headquarters in Rapid City,
South Dakota.
Great
Plains Energy and Black Hills will each establish a transition team to make
recommendations on how best to organize their respective combined
organizations.
7.
What will happen to Aquila’s CEO?
Richard
C. Green, Chairman, President, and Chief Executive Officer of Aquila, and his
management team will continue to lead the company until the transactions close.
All three CEOs and their employees will work together to ensure an effective
transition.
8.
Why isn’t there just one buyer?
Great
Plains Energy and Black Hills believe that structuring the transaction with
two
buyers eliminates an element of risk, as Great Plains Energy and Black Hills
will be acquiring assets strategic to their respective operations. It didn’t
make sense strategically for Great Plains Energy to buy some of the properties
because of their location, business model and fit into Great Plains Energy’s
long-term plan. The acquisition provides a unique opportunity for Black Hills
to
expand its utility footprint and to advance its business model of providing
reliable, economical service.
9.
When will these transactions close?
Both
transactions are expected to close in about one year.
10.
What is the process to close these transactions?
Great
Plains Energy’s acquisition is subject to the approval of both Great Plains
Energy and Aquila shareholders; regulatory approvals from the Missouri Public
Service Commission, the Kansas Corporation Commission, and the Federal Energy
Regulatory Commission; Hart-Scott-Rodino antitrust review; as well as other
customary conditions.
Black
Hills’s acquisition is subject to regulatory approvals by the Missouri Public
Service Commission, the Kansas Corporation Commission, the Colorado Public
Utilities Commission, the Nebraska Public Service Commission, the Iowa Utilities
Board, and the Federal Energy Regulatory Commission; Hart-Scott-Rodino antitrust
review; as well as other customary conditions.
In
addition, each of the two transactions is conditioned on the approval and
completion of the other transaction. Both are expected to close in about one
year.
11.
Once these transactions are closed, will the Aquila name be
used?
Great
Plains Energy will not be using the Aquila name for operational or customer
service related purposes. In the transaction, Black Hills acquires the rights
to
the Aquila name. Black Hills is currently evaluating appropriate applications
of
the name after the transaction is completed.
12.
What will be the new footprint of Great Plains Energy?
By
acquiring Aquila’s Missouri Public Service and St. Joseph Light & Power
electric utilities, Great Plains Energy’s service areas will increase to
approximately 800,000 customers in western Missouri and eastern Kansas.
Importantly, it will create a footprint that spans the majority of the KC Metro
area and links KCP&L’s metro areas with its East District. This will enable
efficiencies in terms of improved service, design and maintenance of
infrastructure.
13.
What types of investments are expected to be made to Aquila’s
infrastructure?
Investments
will be made in Aquila that are consistent with the elements of KCP&L’s
Comprehensive Energy Plan - in particular, infrastructure reliability,
environmental upgrades and energy efficiency.
14.
Where will Great Plains Energy (including Aquila assets) be
headquartered?
Great
Plains Energy’s headquarters will remain in downtown Kansas City, Missouri.
All
corporate functions will be moved to the current Great Plains Energy
headquarters. As part of the transition team work, other Aquila facilities
will
be evaluated based on the needs of the new, larger company.
Shareholders
Great
Plains Energy
15.
Why are these transactions in the best interest of Great Plains Energy
shareholders?
The
Great
Plains/Aquila transactions makes great sense for Great Plains Energy
shareholders. Combining with Aquila will enable Great Plains Energy to forge
a
strong regional electric utility.
16.
Is the transaction accretive to Great Plains Energy’s earnings per
share?
The
transaction is expected to be modestly dilutive to earnings in 2008 due to
transaction costs with EPS accretion beginning in 2009.
17.
What percentage of Great Plains Energy and Aquila shareholders must approve
the
transaction? Does shareholder approval need more than a majority of shares
voting?
For
Great
Plains Energy, a majority of the shares represented at the shareholders’ meeting
is needed for approval. For Aquila, a majority (more than 50 percent) of shares
outstanding is required for approval.
18.
Is Great Plains Energy planning for additional acquisitions in the
future?
Great
Plains Energy intends to focus in the near term on the successful integration
of
Aquila’s Missouri properties and its execution of KCP&L’s Comprehensive
Energy Plan.
Aquila
19.
What are the implications for Aquila shareholders in receiving Great Plains
Energy stock?
Based
on
Great Plains Energy’s closing stock price on February 6, 2007, this transaction
equates to $4.54 per share. However, since part of the consideration is stock,
and the exchange ratio is fixed the value to shareholders will fluctuate based
on Great Plains Energy’s stock price. By receiving Great Plains Energy stock,
shareholders will have the opportunity to become Great Plains Energy
shareholders and participate in the upside potential of the combined Great
Plains Energy/Aquila. Also, Great Plains Energy currently pays an annual
dividend of $1.66 per share.
Employees
Aquila
20.
How many jobs will be affected by this transaction?
Great
Plains Energy expects to retain most of the employees working for the
Aquila operations it is acquiring. This includes all unionized personnel, whose
employment status is not expected to be affected by the transaction. In forming
a strong regional utility, however, Great Plains Energy does expect some
position reductions, primarily where support service functions overlap. Black
Hills expects to retain all of the employees working for the Aquila
operations it is acquiring. There will be no change to Great Plains
Energy’s or Black Hills’ respective senior management teams or Boards of
Directors as a result of the two transactions. Great Plains Energy’s CEO will
lead the combined Great Plains Energy/Aquila operations and Black Hills’ CEO
will lead the combined Black Hills/Aquila operations.
Great
Plains Energy estimates that between 250 to 350 positions could be affected
over
a five-year period, with the majority of those positions being
affected in the first year following completion of the transaction. It's
important to note, however, that not all of the overlapping positions currently
are filled and that some reductions will be achieved naturally through
attrition, retirement and contract work. Great Plains Energy is committed to
treating employees with respect and keeping employees informed as decisions
are
being made will be a top priority.
Prior
to
closing of the Great Plains Energy transaction, Aquila’s HR policies would apply
to any terminations or retirements, and other related issues.
Black
Hills expects to retain all of the employees working for Aquila operations
it is
acquiring.
21.
What opportunities does this transaction afford Aquila
employees?
Aquila
employees continuing with Great Plains Energy will join a company with a
125-year history in the community, strong brand equity, and Winning Culture
and
will be provided opportunities for personal growth and development. Those
transitioning to Black Hills - that is, all Aquila employees in Colorado,
Kansas, Iowa and Nebraska - will join a diversified energy company with a
strengthened retail utility focus. For the most part, utility operations in
these states will be new for Black Hills and Aquila employees will bring valued
expertise.
22.
How will employees be kept informed during the interim period until the
transactions close?
Great
Plains Energy, Black Hills and Aquila will work together to ensure all employees
receive regular, timely updates on the approval process and integration plans
via regular channels of communications. Equally important, we will ensure that
any updates on job status are communicated as soon as information is available.
Throughout this process, we want communication lines to remain open.
23.
What are the integration plans?
While
organizational information was shared during the negotiation process as allowed
by law and in order for Great Plains Energy and Black Hills to effectively
value
the company and synergy opportunities identified, we have not yet developed
detailed integration plans.
However,
integration teams comprised of Aquila, Great Plains Energy and Black Hills
employees will be formed in the next few weeks. Based on the analysis we’ve
conducted so far, we will start identifying areas that can easily be integrated
into Great Plains Energy’s and Black Hills’s existing structures. Over the next
few months, where appropriate, we also intend to work with employee groups
and
union leaders to gather ideas and input to ensure an effective transition
overall.
24.
Who will make decisions about integrating Aquila into Great Plains Energy and
Black Hills?
While
it
is premature to discuss specifics now, transition teams with representatives
from the appropriate company will be formed and they will work to achieve an
effective integration. Ultimately, Great Plains Energy and Black Hills will
determine what is needed to effectively run the businesses they are
acquiring.
25.
How will employees find out about opportunities with the new
company?
The
transition teams will outline a process for identifying available positions
and
requirements, and for developing the selection process. Employees will be kept
informed through regular communications and meetings throughout the process.
26.
If my position is eliminated, can I apply for an open position elsewhere within
Great Plains Energy or Black Hills?
Employees
whose positions will be eliminated may apply for any externally posted open
positions.
27.
What will happen to my benefits?
Aquila
intends to continue to manage its benefits
program in the
same
manner
as
it
is
currently managed
until
the close of the sale. Following
the close
of the
sale,
it is
Great Plains Energy and Black Hills’ intention to offer
competitive total benefits.
More
information will be forthcoming from Great Plains Energy and Black Hills’s HR
departments.
28.
What is the effect on Aquila retirees and pension plans?
Existing
pension benefits will be unaffected by the transactions - only the company
name
on the pension check will change. It is expected that retiree medical benefits
will be provided under Great Plains Energy’s or Black Hills’ benefit plans after
the transaction is completed,
subject
to the provisions of those plans. Aquila,
Great Plains Energy and Black
Hills will retain the ability to change these plans and
will
keep retirees informed and provide details throughout the transition process.
29.
If I retire before the transactions close, will my current retirement plan
be
honored?
Yes.
30.
If I continue as a Great Plains Energy employee, what happens with my retirement
benefits?
Retirement
benefits which you have accrued are protected by law. Great Plains Energy will
retain the ability to change retirement benefit plans in the future, but intends
to offer its employees competitive retirement benefits. Great Plains Energy
will
keep employees informed of any changes in its retirement programs.
31.
Will systems be consolidated?
Customer
service and customer operations will be consolidated, as well as some central
support services. A significant part of the synergies for Great Plains Energy
will be realized from combining redundant services and systems after the
transactions close. Black Hills will evaluate the combined systems and determine
what it needs to support the utility businesses it is acquiring.
32.
What will happen to Aquila employees Great Plains Energy or Black Hills wants
to
keep but who are considering leaving?
We
hope
that all employees will see the long-term opportunity these transactions bring
and want to stay part of the combined company. Aquila, Great Plains Energy
and
Black Hills have strong and productive employee cultures and are all known
as
good places to work. Our goal will be to continue strengthening the Great Plains
Energy and Black Hills company cultures based on the ideals of open dialogue,
respect and employee engagement. We encourage all employees to talk openly
with
their supervisors or HR about any questions or concerns so that they make the
best decision for their situation.
33.
Until the transactions are closed, what should Aquila employees
do?
Until
the
transactions close, Aquila, Great Plains Energy and Black Hills will continue
to
operate as separate companies. As a committed team, the best thing all Aquila
employees can do right now is stay focused on performing current job
responsibilities. We will continue to update you as the approval process
progresses. It is critical that everyone maintain high quality service to our
customers and a safe work environment for our colleagues.
34.
How many Aquila union positions will be eliminated?
We
do not
anticipate any current union personnel will be eliminated as a result of these
two transactions. All union contracts will be honored.
35.
What will my benefits be as a Black Hills or Great Plains Energy employee?
Black
Hills and Great Plains Energy focus on market-based compensation and benefits,
and periodically they are reviewed and benchmarked to prevailing conditions.
Black Hills and Great Plains Energy offer a portfolio of benefits that is
similar to Aquila's. While there are some differences between the various
benefit plans, the total value offered is comparable and market
competitive.
36.
Will my job change as a Black Hills employee?
Black
Hills does not anticipate any substantive changes in Aquila’s operations in
Colorado, Kansas, Nebraska and Iowa. However, the transition team may identify
changes in structure and functions that will require some job activities or
assignments to change with time.
37.
Will employees have to relocate?
It
is not
anticipated that there will be many, if any, relocations. Should there be any,
we intend to offer a relocation benefit package.
38.
How will years of service be addressed?
Aquila
employees joining Great Plains Energy or Black Hills would not lose years of
service for purposes of vesting and vacation accruals. However, employees will
maintain their years of service in the Aquila pension plan and begin to accrue
new benefits under the KCP&L pension plan.
39.
What happens to existing union relationships?
Black
Hills and Great Plains Energy intend to recognize existing union relationships
and to act in accordance with labor laws. Both have strong working relationships
with their union workforces and expect that to continue.
Great
Plains Energy
40.
If I work for Great Plains Energy, will my job change?
The
acquisition of Aquila is expected to provide many employees with opportunities
for growth and development. Integrating new people and properties into Great
Plains Energy’s Winning Culture will take the effort of all Great Plains Energy
employees. While employment status will not be affected by this acquisition,
individual responsibilities and job descriptions may change once the integration
of new people and properties is complete.
41.
Where will the most change occur?
The
areas
of greatest overlap will be central services and corporate functions. As new
people and properties are integrated into Great Plains Energy’s corporate
structure, we will need everyone’s dedication to ensure an effective transition.
Great Plains Energy employees in these areas will be asked to help with this
process as ambassadors for our Winning Culture and dedication to improving
the
total living environment of the communities we serve.
42.
What impact will these transactions have on Great Plains Energy union
personnel?
We
do not
anticipate any reductions in Great Plains Energy union personnel as a result
of
these transactions. However, as people and processes are integrated, roles
and
responsibilities of individual employees may change. At Great Plains Energy,
we
expect that in many cases this acquisition will bring new opportunities for
employees. The relationship between Great Plains Energy and union leaders is
strong, and we look forward to working together over the coming
months.
43.
How will this affect Great Plains Energy’s Winning
Culture?
The
companies share many similar cultural attributes. Our goal, however, will be
to
continue to enhance the ideals of Great Plains Energy’s Winning Culture, which
calls for engaged employees, respect and inspired leadership.
44.
Will the acquisition affect Great Plains Energy’s employee benefits, retirement
or pension plans?
We
are
constantly evaluating our plans to ensure that they remain competitive.
Therefore, our plans as they exist today could change in the future. Great
Plains Energy’s HR department will continue to provide updates on total
compensation and benefits as they do today.
Customers
Aquila
45.
Will Great Plains Energy change Aquila’s existing rates?
Rate
structures for KCP&L and Aquila will be kept separate until closing.
46.
Who should customers talk to for customer service
questions?
Customers
should continue working with their existing utility customer service
organizations until the transactions close. We are committed to a seamless
transition for all of our customers.
Black
Hills
47.
Will Black Hills change rates for existing Aquila gas customers?
Black
Hills will quickly integrate Aquila utility service areas into Black Hills’s
existing model to create efficiencies and help bring low-cost, reliable energy
to all its customers in the region.
48.
Who should customers talk to for customer service
questions?
Customers
should continue working with their existing utility customer service
organization until the transactions close. After the transactions are finalized,
we will provide customer service contact information to all
customers.
Great
Plains Energy
49.
How will this acquisition affect energy prices for KCP&L’s industrial and
residential customers?
Synergies
captured by the acquisition bring benefits to both shareholders and customers,
and are expected to help keep KCP&L’s utility rates low compared to the
national average.
Community
50.
Why is this acquisition good for the states served by Great Plains Energy and
Aquila?
Great
Plains Energy has a reputation for community investment, customer service and
business stability over its 125-year history. The combined company will have
the
assets in place to help our region grow while protecting the quality of life
we
love in the Midwest. The strengths of both companies will result in superior
customer service, reliable energy, and even greater investments in environmental
stewardship.
51.
Will Great Plains Energy and Black Hills support communities currently supported
by Aquila?
Both
companies plan to continue our strong commitments and investments in the
communities we serve. We look forward to building new relationships and further
strengthening existing ones.
Vendors/Suppliers
52.
What does this mean for current contracts?
All
current contracts will be honored.
53.
Will suppliers be consolidated?
It
is
premature to comment on this. Our goal is to identify business synergies without
causing undue harm to long-term partners of Great Plains Energy or
Aquila.
Information
Concerning Forward-Looking Statements
Statements
made in this document that are not based on historical facts are
forward-looking, may involve risks and uncertainties, and are intended to be
as
of the date when made. In connection with the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995, Great Plains Energy, Aquila
and Black Hills are providing a number of important factors, risks and
uncertainties that could cause actual results to differ materially for the
provided forward-looking information. These include: obtaining shareholder
approvals required for the transactions; the timing of, and the conditions
imposed by, regulatory approvals required for the transactions; satisfying
the
conditions to the closing of the transactions; Great Plains Energy and Black
Hills successfully integrating the acquired Aquila businesses into their
respective operations, avoiding problems which may result in either company
not
operating as effectively and efficiently as expected; the timing and amount
of
cost-cutting synergies; unexpected costs or unexpected liabilities, or the
effects of purchase accounting may be different from the companies’
expectations; the actual resulting credit ratings of the companies or their
respective subsidiaries; the effects on the businesses of the companies
resulting from uncertainty surrounding the transactions; the effect of future
regulatory or legislative actions on the companies; and other economic,
business, and/or competitive factors. Additional factors that may affect the
future results of Great Plains Energy, Aquila and Black Hills are set forth
in
their most recent quarterly report on Form 10-Q or annual report on Form 10-K
with the Securities and Exchange Commission ("SEC"), which are available at
www.greatplainsenergy.com, www.aquila.com and www.blackhillscorporation.com,
respectively. Great Plains Energy, Black Hills and Aquila undertake no
obligation to publicly update or revise any forward-looking statements, whether
as a result of new information, future events or otherwise.
Additional
Information and Where to Find It
In
connection with the acquisition of Aquila by Great Plains Energy, Great Plains
Energy intends to file with the SEC a registration statement on Form S-4,
containing a joint proxy statement/prospectus and other relevant materials.
The
final joint proxy statement/prospectus will be mailed to the stockholders of
Great Plains Energy and Aquila. INVESTORS AND SECURITY HOLDERS OF GREAT PLAINS
ENERGY AND AQUILA ARE URGED TO READ THE JOINT PROXY STATEMENT/PROSPECTUS AND
THE
OTHER RELEVANT MATERIALS WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN
IMPORTANT INFORMATION ABOUT GREAT PLAINS ENERGY, AQUILA AND THE ACQUISITION.
The
registration statement and joint proxy statement/prospectus and other relevant
materials (when they become available), and any other documents filed by Great
Plains Energy or Aquila with the SEC, may be obtained free of charge at the
SEC’s web site at www.sec.gov. In addition, investors and security holders may
obtain free copies of the documents (when they are available) filed with the
SEC
by Great Plains Energy by directing a request to: Great Plains Energy, 1201
Walnut, Kansas City, MO, 64106, Attn: Investor Relations. Investors and security
holders may obtain free copies of the documents filed with the SEC by contacting
Aquila, 20 West Ninth Street, Kansas City, MO, 64105, Attn: Investor
Relations.
Participants
in Proxy Solicitation
Great
Plains Energy, Aquila and their respective executive officers and directors
may
be deemed to be participants in the solicitation of proxies relating to the
proposed transaction. Information about the executive officers and directors
of
Great Plains Energy and their ownership of Great Plains Energy common stock
is
set forth in Great Plains Energy’s Annual Report on Form 10-K for the year ended
December 31, 2005, which was filed with the SEC on March 8, 2006, and the proxy
statement for Great Plains Energy’s 2006 Annual Meeting of Stockholders, which
was filed with the SEC on March 20, 2006. Information regarding Aquila’s
directors and executive officers and their ownership of Aquila common stock
is
set forth in Aquila’s Annual Report on Form 10-K for the year ended December 31,
2005, which was filed with the SEC on March 7, 2006, and the proxy statement
for
Aquila’s 2006 Annual Meeting of Stockholders, which was filed with the SEC on
March 24, 2006. Investors and security holders may obtain more detailed
information regarding the direct and indirect interests of Great Plains Energy,
Aquila and their respective executive officers and directors in the proposed
transaction by reading the joint proxy statement/prospectus regarding the
proposed transaction when it becomes available.
