Aquila Completes $265 Million Sale of Natural Gas Pipeline and Processing Assets.

Business Editors

KANSAS CITY, Mo.--(BUSINESS WIRE)--Oct. 7, 2002

Aquila, Inc. (NYSE:ILA) has completed the sale of its Southeast Texas and Mid-Continent natural gas pipeline systems and natural gas and gas liquids processing assets, as well as its 50 percent ownership in the Oasis pipeline system, to Energy Transfer Company for approximately $265 million. At closing Aquila received approximately $221 million in cash. The balance of the purchase price has been fully funded and will be disbursed upon the resolution of certain contract assignments and other matters.

The Southeast Texas assets include three natural gas pipeline systems, two processing facilities and eight natural gas treating facilities. The Mid-Continent assets include Aquila's Elk City natural gas and gas liquids processing plant and its associated gas gathering system, located primarily in western Oklahoma. In addition to these assets, the sale also includes Aquila's ownership interests in two joint venture arrangements with assets located in southern Texas and the Permian Basin area of western Texas.

The Oasis pipeline system, which consists of some 600 miles of pipeline, connects the Waha natural gas hub in the Permian Basin of western Texas with the Katy market hub near Houston, Texas. Physical throughput capacity of the pipeline is approximately 1 billion cubic feet of gas per day.

Approximately 175 employees are associated with these assets, a majority of whom will transfer to Energy Transfer Company and its affiliates.

"This completes a significant step toward executing all of the asset sales on which we have signed agreements, currently totaling $786 million," said Richard C. Green, Jr., Aquila chairman, president and chief executive officer. "This is also a major step in our corporate repositioning as we reduce the scale and scope of Aquila and return to our roots as a regulated utility and generation company."

Aquila intends to use the proceeds from this transaction and other asset sales to redeem and retire its existing indebtedness as part of its commitment to improve its credit profile.

Credit Suisse First Boston acted as Aquila's exclusive financial advisor in the Aquila gas asset transaction.

Based in Kansas City, Missouri, Aquila operates electricity and natural gas distribution networks serving customers in seven states and in Canada, the United Kingdom and Australia. The company also owns and operates power generation assets. At June 30, 2002, Aquila had total assets of $11.9 billion. More information is available at www.aquila.com.

Energy Transfer Company is a privately owned company based in Dallas, Texas. Energy Transfer owns and operates natural gas gathering, processing, treating, and compression assets in Texas and Louisiana. The company also engages in extensive electric power activities. This includes small power generation and patent pending dual-drive compression technology that facilitates large-scale natural gas/electricity arbitrage at the natural gas pipeline level.

Forward-Looking Statements

The statement concerning the receipt of sale proceeds in excess of approximately $221 million is a forward-looking statement. Naturally, all forward-looking statements involve risk and uncertainty and actual results or events could be materially different. Although Aquila believes that its expectations are based on reasonable assumptions, it can give no assurance that its goals will be achieved. Important factors that could cause actual results to differ materially from those contemplated by the forward-looking statement include the possibility that payments amounts may be disputed; and the buyer may become entitled to withhold certain payments in satisfaction of any indemnity obligations that arise under the purchase contract.