Avon Energy Partners Holdings: Sale of Aquila Sterling Limited.

Energy Editors/Business Editors

LONDON--(BUSINESS WIRE)--Oct. 21, 2003

Avon Energy Partners Holdings ("AEPH") announces that Aquila, Inc. ("Aquila") (NYSE:ILA) and FirstEnergy Corp. ("FirstEnergy") (together, the "Sellers") have reached a definitive agreement to sell Aquila Sterling Limited ("ASL") to a subsidiary of Powergen UK plc ("Powergen") for GBP 36 million (the "Sale"). ASL through AEPH owns Midlands Electricity plc ("Midlands"), the holding company for Aquila Networks plc, a UK electricity distribution company. Based on net debt as at 30 September 2003 of approximately GBP 484 million (excluding the AEPH bonds), Powergen's offer represents an enterprise value of approximately GBP 1.146 billion for ASL.

Powergen's obligation to acquire ASL is conditional upon a commitment of the holders of the outstanding US Dollar notes and UK Sterling bonds of AEPH (the "Bondholders") to sell their bonds to an affiliate of Powergen for 95.8% of their nominal value (less fees to the advisors of the ad-hoc committee of Bondholders) plus accrued interest to the date of completion (the "Bond Offer"). As at 20 October 2003, these fees are estimated to amount to approximately US$4.5 million to the date of completion, which would be equivalent to approximately 0.4% of the nominal value per bond. Powergen has already received commitments from the holders of approximately half of the outstanding AEPH bonds, to accept the terms of the Bond Offer. The AEPH bonds subject to the Bond Offer are the GBP 360m Variable Coupon Bonds due 2006, the US$250 million Senior Notes due 2007 and the US$250 million Senior Notes due 2008. The Bond Offer may include a tender offer, a scheme of arrangement and an extraordinary resolution of the Bondholders.

The Sale is also conditional upon the following:

-- no material adverse change in the Midlands business;

-- no insolvency event at either of the Sellers or Aquila

Sterling Holdings LLC (the parent company of ASL);

-- approval from the European Commission; and

-- approval from the State Corporation Commission of the State of

Kansas, United States of America.

Close Brothers Corporate Finance Limited ("Close Brothers") is acting as financial adviser and Cadwalder Wickersham & Taft ("Cadwalader") is acting as legal adviser to the ad-hoc committee of Bondholders in connection with Bond Offer. Bondholders should contact Close Brothers (Martin Gudgeon, Tel: [phone]) or Cadwalader (Andrew Wilkinson, Tel: + 44 20 7170 8700) for further information.

This announcement does not constitute, and shall not be relied upon as constituting, investment advice and is not (and is not intended to form the basis of) any offer or solicitation of an offer or an invitation for the sale or purchase of any securities.

This announcement includes forward-looking statements based on information currently available to management. Such statements are subject to certain risks and uncertainties. These statements typically contain, but are not limited to, the terms "anticipate", "potential", "expect", "believe", "estimate" and similar words. Actual results may differ materially due to the speed and nature of increased competition and deregulation in the electric utility industry, economic or weather conditions affecting future sales and margins, changes in markets for energy services, changing energy market prices, legislative and regulatory changes or approvals (including revised environmental requirements), availability and cost of capital, inability to accomplish or realise anticipated benefits of strategic goals and other similar factors. Past performance of the price of a security or of any company or entity cannot be relied on as a guide to future performance.