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 a joint press release issued by Great Plains Energy
Incorporated, Aquila, Inc. and Black Hills Corporation on February 7,
2007.
For
Immediate Release
Great
Plains Energy, Aquila, and Black Hills Corporation
Announce
Two Strategic Transactions
Great
Plains Energy to Acquire Aquila’s Missouri Properties for Cash and Stock,
Forging
Strong Regional Electric Utility
Black
Hills Corporation to Acquire Aquila’s Utility Properties in Colorado, Kansas,
Nebraska and Iowa, Broadening Its Regional Presence and Retail Utility
Base
Kansas
City, Mo. and Rapid City, S. Dak.—February 7, 2007—Great
Plains Energy Incorporated (NYSE: GXP) and Aquila, Inc. (NYSE: ILA), both of
Kansas City, Missouri, and Black Hills Corporation (NYSE: BKH), of Rapid City,
South Dakota, today announced that they have entered into definitive agreements
for two separate transactions, under which:
| · |
Great
Plains Energy, the parent of Kansas City Power & Light (KCP&L),
will acquire all the outstanding shares of Aquila and its Missouri-based
electric utility assets for $1.80 in cash plus 0.0856 of a share of
Great
Plains Energy common stock for each share of Aquila common stock in
a
transaction valued at approximately $1.7 billion, or $4.54 per share,
based on Great Plains Energy’s closing stock price on February 6, 2007. In
addition, Great Plains Energy will assume approximately $1 billion
of
Aquila’s net debt. The combination will form a strong regional utility
well-positioned to meet the growing energy needs of the greater Kansas
City area.
|
| · |
Immediately
prior to Great Plains Energy’s acquisition of Aquila, Black Hills will
acquire from Aquila its electric utility in Colorado and its gas utilities
in Colorado, Kansas, Nebraska and Iowa along with the associated
liabilities for a total of $940 million in cash, subject to closing
adjustments, significantly broadening Black Hills’ regional presence and
retail utility base.
|
| · |
Following
closing, Great Plains Energy will be 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 will be used to fund the cash portion
of the
consideration to Aquila shareholders and to reduce existing Aquila
debt.
|
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Release/Page 2
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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.
|
When
completed, the two transactions will increase the size and scope of Great Plains
Energy’s and Black Hills’ operations, and enhance their ability to serve
customers and communities and to build value for their respective shareholders.
After the transactions close, Great Plains Energy will have revenues of over
$3
billion and approximately 800,000 customers. The combined Black Hills/Aquila
regulated utility and other operations will have a total of more than 750,000
retail and wholesale customers in 12 states.
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 will not 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.
The
Great Plains Energy/Aquila Transaction
Under
the
terms of the Great Plains Energy/Aquila transaction, which was approved by
the
Boards of Directors of both companies, Great Plains Energy will acquire Aquila
and its Missouri-based utilities, Missouri Public Service Company and St. Joseph
Light & Power, expanding Great Plains Energy’s utility service territory
around the Kansas City metro area. The Aquila transaction will add about 300,000
electric utility customers to the existing base of about 500,000 customers.
The
combined generating capacity will consist of approximately 5,800
megawatts.
“For
Great Plains Energy, this transaction will forge an exceptionally strong
regional electric utility committed to improving the total living environment
for customers and communities by providing low-cost, reliable, clean energy,”
said Michael J. Chesser, Chairman and Chief Executive Officer of Great Plains
Energy. “Combining Aquila’s many strengths with our own will result in superior
customer service, enhanced reliability, and an even greater investment in
environmental stewardship and energy efficiency. Moreover, our complementary
service territories and generation portfolios provide the opportunity to realize
significant synergies.”
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Transaction
Release/Page 3
Said
Richard C. Green, Chairman, President and Chief Executive Officer of Aquila,
“We
have made tremendous progress since 2002 executing our repositioning strategies.
Having improved our financial condition significantly, we believe this
transaction provides the best overall, long-term value for Aquila shareholders
by accelerating their return on investment. Following the combination, our
utilities will have access to lower-cost capital to fund investments to meet
customer growth projections, environmental upgrades and improvements to utility
infrastructure. In addition, Aquila investors will receive a significant
ownership stake in Great Plains Energy and resulting dividends. We look forward
to working closely with Mike Chesser and members of the Great Plains Energy
team
to get the necessary approvals as quickly as possible.”
Chesser
said, “Great Plains Energy’s highly collaborative corporate culture, combined
with the strong regulatory and community relationships we have built, will
help
facilitate the timely completion of these transactions and, following
completion, a smooth and seamless integration process. For now, all customers
of
Aquila will continue receiving customer service and billing information directly
from Aquila. We, Aquila and Black Hills are committed to keeping our respective
constituents—customers, community leaders, business partners and employees—fully
informed of our progress in getting these important and exciting transactions
completed.”
Great
Plains Energy expects the transaction to deliver financial and operational
benefits in several areas. Total pre-tax synergies are estimated to reach about
$500 million over a five-year period, with costs to achieve, including
transaction costs, of approximately $185 million.
Operational
synergies over the same five-year period are expected to total about $310
million. These synergies are expected to result from:
| · |
Improved
operational and scale efficiencies enabled by adjacent service areas;
|
| · |
Reduction
in overlapping positions and overhead expenses;
|
| · |
Capturing
the benefits of more efficient procurement;
|
| · |
Integrating
and enhancing information technology; and
|
| · |
Investments
in infrastructure and energy efficiency.
|
Following
the transaction, Aquila's credit rating is anticipated to be investment grade.
The improved credit rating is expected to lower interest costs on a substantial
portion of existing high interest rate debt through rate step-down provisions
while also lowering rates on new debt planned to help fund ongoing capital
investments. Aquila interest rate savings are estimated to be about $190 million
over five years following the closing of the transactions.
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Release/Page 4
The
transaction is expected to be modestly dilutive to Great Plains Energy earnings
in 2008 with EPS accretion beginning in 2009.
Great
Plains expects to fully utilize Aquila’s substantial net operating loss tax
benefits over the next several years following transaction close.
The
Black Hills/Aquila Transaction
Under
the
terms of the Black Hills/Aquila asset purchase/sale agreement, which was
approved by the Board of Directors of both companies, Black Hills will acquire
one regulated electric utility owned by Aquila in Colorado (where Black Hills
currently has various independent power generation, oil and gas, and other
non-regulated operations) and Aquila’s regulated gas utilities in Colorado,
Kansas, Nebraska and Iowa.
The
Black
Hills transaction will add a total of about 616,000 new utility customers
(93,000 electric customers and 523,000 gas customers) to the 137,000 utility
customers (104,000 electric customers and 33,000 gas customers) Black Hills
currently serves. Other assets included in the Black Hills transaction include
a
customer service center and centralized natural gas operation in Nebraska.
David
R.
Emery, Chairman, President, and Chief Executive Officer of Black Hills, said:
“Our acquisition of these utility properties and related assets has great
industrial logic for Black Hills strategically, operationally and financially.
It will significantly enhance our existing footprint in Colorado, enabling
us to
serve retail utility customers and communities in that state and to do so on
an
efficient basis. It will also give us, for the first time, a significant
presence in the three neighboring states of Kansas, Nebraska and Iowa, where
retail utility customers will also benefit from our commitment to superior
customer service, reliability and efficiency.
“Black
Hills’ shareholders should benefit from the transaction as we build a solid
foundation for future growth in earnings per share and increased shareholder
value. We expect the transaction to provide positive cash flow immediately.
We
also expect that, after some earnings dilution in the first post-completion
year
related to transition costs, the transaction will be earnings accretive
beginning in the second full post-completion year. Black Hills employees,
including those who will be joining us from Aquila, will have additional
opportunities for personal and professional growth as we combine our respective,
highly complementary utility and other operations. In short, we believe this
transaction will produce significant long-term benefits for everyone
concerned—investors, customers, communities and employees,” Emery said.
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Black
Hills’ has entered into a binding agreement with a group of lenders including
ABN Amro Bank as administrative agent for a committed acquisition credit
facility to finance the Black Hills/Aquila transaction. Reflecting its prudent
and conservative financial philosophy, Black Hills expects the permanent
financing that will replace this bridge
facility
to be a combination of new equity, mandatory convertible securities, unsecured
debt at the holding company level and internally generated cash resources.
The
contemplated permanent financing is expected to be deemed investment grade
by
credit rating agencies. Some portion of the transaction financing may be
obtained through a public offering or private placement prior to
closing.
Process
and Next Steps
Great
Plains Energy’s acquisition of Aquila 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’ purchase of the Aquila assets is subject to regulatory approvals from 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 completion of
the
other transaction. Both are expected to close in about a year.
Advisors
Credit
Suisse Securities (USA), LLC and Sagent Advisors, Inc. served as financial
advisors and Skadden, Arps, Slate, Meagher & Flom LLP served as legal
advisor to Great Plains Energy with regard to the Great Plains Energy/Aquila
transaction. Credit Suisse Securities (USA), LLC also served as financial
advisor and Morgan Lewis & Bockius LLP served as legal advisor to Black
Hills Corporation with regard to the Black Hills/Aquila transaction. The
Blackstone Group L.P. and Lehman Brothers, Inc. served as financial advisors
to
Aquila management and Evercore Group, Inc. served as financial advisor to the
Aquila Board of Directors. Fried, Frank, Harris, Shriver & Jacobson LLP
served as legal advisor to Aquila with regard to both transactions.
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Analyst
Conference Call/Webcast
Great
Plains Energy, Aquila and Black Hills will host a financial community conference
call on Wednesday, February 7, 2007 at 9:30 a.m. Eastern Time/8:30 a.m. Central
Time to discuss the Great Plains Energy/Aquila and the Black Hills
Corporation/Aquila transactions. For complete instructions on how to actively
participate in the conference call, or to listen to the live audio webcast
or a
replay of the webcast, please refer to the Investor Relations sections at
www.greatplainsenergy.com,
www.aquila.com
or
www.blackhillscorporation.com.
Black
Hills also will host a financial community conference call to discuss the Black
Hills/Aquila transaction in greater detail on Thursday, February 8, 2007 at
10:00 a.m. Eastern Time/9:00 a.m. Central Time/8:00 a.m. Mountain Time. The
dial-in number for the Black Hills call is 1-866-206-5917. For complete
instructions on how to actively participate in the Black Hills conference call,
or to listen to the live audio webcast or a replay of the webcast, please visit
the Investor Relations section at www.blackhillscorporation.com.
Press
Conference
Following
the Analyst Conference Call/Webcast, the CEOs of Great Plains Energy, Aquila,
and Black Hills will host a joint press conference at 11:00 a.m. Eastern
Time/10:00 a.m. Central Time. The press conference will take place at Great
Plains Energy’s headquarters in the board room on the 21st
floor at
1201 Walnut Street, Kansas City, Mo. The dial-in number for those unable to
attend in person is
1-888-688-7428;
passcode is 5291776#. The press conference will not be webcast.
About
Great Plains Energy
Great
Plains Energy, headquartered in Kansas City, Mo., is the holding company for
KCP&L, a leading regulated provider of electricity in the Midwest, and
Strategic Energy, LLC, a competitive electricity supplier. The company's website
is www.greatplainsenergy.com.
About
Aquila
Based
in
Kansas City, Mo., Aquila owns electric power generation and operates electric
and natural gas transmission and distribution networks serving nearly 1 million
customers in Colorado, Iowa, Kansas, Missouri and Nebraska. More information
on
Aquila
is available at www.aquila.com.
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Release/Page 7
About
Black Hills Corporation
Black
Hills is a diversified energy company. Its retail businesses are Black Hills
Power, an electric utility serving western South Dakota, northeastern Wyoming
and southeastern Montana; and Cheyenne Light, Fuel & Power, an electric and
gas distribution utility serving the Cheyenne, Wyoming vicinity. Black Hills
Energy, the wholesale energy business unit, generates electricity, produces
natural gas, oil and coal, and markets energy. The company’s website is
www.blackhillscorp.com.
Great
Plains Energy Contacts:
Investors:
Todd Allen, manager of investor relations, 816-556-2083,
todd.allen@kcpl.com;
Media:
Matt
Tidwell, director of corporate communications, 816-556-2069,
matt.tidwell@kcpl.com
Black
Hills Corporation Contacts:
Investors:
Dale
Jahr, director of investor relations, 605-721-2326,
djahr@bh-corp.com
Media:
Roy
Winnick, Kekst and Company for Black Hills, 212-521-4842,
roy-winnick@kekst.com
Aquila
Contacts:
Investors:
Neala
Hackett, director investor relations, 816-467-3562,
neala.hackett@aquila.com;
Media:
Al
Butkus, vice president media relations, 816-467-3616,
al.butkus@aquila.com
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 Corporation 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 Corporation 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 Corporation 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
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available
at www.greatplainsenergy.com, www.aquila.com and www.blackhillscorporation.com,
respectively. Great Plains Energy, Black Hills Corporation 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 website 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 Aquila
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.
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