MUD would buy utilities in Nebraska from Aquila

However, Aquila has said it has no intention of selling the utilities as part of an ongoing effort to reduce and restructure its $2.4 billion in debt.

The question of whether Aquila might sell its Nebraska utilities arose after the Kansas Corporation Commission's staff said in a report released recently that Aquila would have to sell most or all of its utility businesses to boost its debt rating to investment grade.

The Kansas Corporation Commission regulates rates and services of public utilities in Kansas and can instruct the utility companies to achieve a certain debt rating, which could necessitate sales of assets.

Aquila disagrees with the report and plans to file a rebuttal March 31.

"It is full of errors, and because of those errors, the assumptions made in that report are terribly inaccurate," said Al Butkis, an Aquila spokesman.

Tom Wurtz, president of MUD, said his utility would like to expand its natural gas operations in Douglas and Sarpy Counties but has been unable to broker a deal with Aquila for several years.

"There's been something of a turf battle," he said.

Wurtz said he believes any sale of Aquila's Nebraska utilities -- which include those in eastern Nebraska cities such as Lincoln, Columbus and Norfolk -- would be made as a package.

MUD would be interested in buying some or all of the utilities, pending approval by the communities in which they are located, or MUD would be interested in buying the Douglas and Sarpy County utilities from a third-party buyer, Wurtz said.

Aquila has said it will sell as many as six of its 11 utilities, valued at $874 million.

Those plans would not affect Aquila's 190,000 customers in 110 communities in eastern Nebraska, Butkis said.

Aquila plans to use proceeds from the sale to pay off $700 million in debt. Butkis said the company wants to raise its debt rating to obtain better terms for money it borrows to make infrastructure improvements.

Butkis believes those sales would put the company on sound financial footing.

Aquila has posted losses since 2002 and canceled its dividends. Last year, the company lost $292.5 million.