Aquila and ET Company, Ltd Sign $265 Million Agreement On Sale of Texas/Oklahoma Natural Gas Pipeline and Processing Systems.

Business Editors, Technology Writers

KANSAS CITY, Mo.--(BUSINESS WIRE)--Aug. 19, 2002

Aquila, Inc. (NYSE:ILA) has signed an agreement to sell its Southeast Texas and Mid-Continent natural gas pipeline systems, including natural gas and gas liquids processing assets, and its 50 percent ownership in Oasis Pipe Line Company to ET Company, Ltd (Energy Transfer Company) for $265 million in cash, subject to certain adjustments.

The financing structure for the acquisition will involve a combination of equity, to be provided by an investor group led by Natural Gas Partners (NGP), and debt, to be sourced from one or more financial institutions. The transaction is expected to be completed in 60 to 90 days and is subject to regulatory review under the Hart-Scott-Rodino Act and other pre-closing conditions.

The Aquila pipeline facilities and other assets in this sale, owned and operated by Aquila subsidiary Aquila Gas Pipeline Corporation (AQP), include three natural gas pipeline systems, two processing facilities and eight natural gas treating facilities, all in Southeast Texas. The Mid-Continent assets, located primarily in western Oklahoma, include AQP's Elk City natural gas and gas liquids processing plant and its associated gas gathering system. In addition to these assets, the sale also includes AQP's ownership interests in two joint venture arrangements with assets located in South Texas and the Permian Basin area of West Texas.

The Oasis pipeline system, which consists of some 600 miles of pipeline, connects the Waha natural gas hub in the Permian Basin of West 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 (Bcf/d).

Approximately 175 employees are associated with these assets, a majority of whom are expected to transfer to Energy Transfer Company.

"We look forward to working with Aquila to bring this transaction to closure," said Mackie McCrea, executive vice president of Energy Transfer Company. "All of the parties are committed to this deal."

"With this transaction, we have announced asset sales totaling $483 million," said Robert K. Green, Aquila president and chief executive officer. "We are well on our way to achieving our goal of selling $1 billion in non-strategic assets, a major part of the restructuring we announced just over two months ago."

Aquila is actively working toward the sale of a number of its merchant assets. Last week the company announced the $180 million sale of its Texas gas storage assets to ScottishPower's PacifiCorp Power Marketing, Inc. That sale includes the Katy storage facility near Houston, Texas, and two other gas storage development projects.

Other previously announced sales include the company's 16.58 percent interest in the Lockport Energy facility near Buffalo, New York, for $37.5 million in cash. A short list of bidders has been selected for the sale of New Zealand-based UnitedNetworks, 55.5 percent-owned by Aquila. UnitedNetworks is the largest energy distribution company in New Zealand. Aquila also has announced its intention to sell its 79.9 percent share of Avon Energy Partners Holding Company, the holding company for Midlands Electricity plc, in the United Kingdom, and is in the process of selecting a preferred bidder for its Hole House gas storage facility in the UK.

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

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

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

Energy Transfer Company Ltd. 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.

NGP is a private equity investment firm focused on providing equity capital to the energy industry. Since its inception in 1988, NGP equity funds have had aggregate capital under management of more than $1 billion and have invested in more than 50 companies.

"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995:

The terms "expects," "goals" and similar expressions identify forward-looking statements. 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 statements include: unanticipated events that do not permit us to sell assets as planned; financial market conditions; our ability to execute our strategic plan and maintain our credit rating; the failure to satisfy closing conditions, including the failure to receive regulatory approvals on favorable terms or at all; the failure to reach an agreement for the sale of certain assets on commercially acceptable terms; and other factors discussed in reports Aquila files with the Securities and Exchange Commission (including Aquila's Forms 8-K, 10-Q and 10-K).