Aquila to Settle Disputes with Natural Gas Insurers

Kansas City, Mo.- based Aquila Inc. will pay $600 million to two insurance companies that had guaranteed delivery of the utility’s prepaid natural gas contracts.

Besides helping resolve a lawsuit that has tied up $500 million in needed cash, the deal helps Aquila exit the merchant energy business.

Company officials said this week that the four contracts covered by the settlement represent 92 percent of Aquila’s prepaid natural gas obligations. The contracts were held by Aquila Merchant Services, which Aquila is closing.

If the settlement is approved by a U.S. District Court judge, the Kansas City-based utility will pay $485 million to Chubb Corp. for contracts it had with Aquila Merchant Services to provide gas to municipal utilities in Nebraska and Mississippi.

Earlier this summer, Chubb got a court order preventing Aquila from using $500 million it received through the sale of its Canadian properties and to put that money in escrow until the ongoing dispute was settled.

Aquila would also pay St. Paul Travelers $115 million as collateral on the natural gas contracts it was covering.

Company officials assured investors Monday that it had enough cash on hand to pay the settlement and cover a $150 million debt payment due later this year.

Aquila, formerly known as UtiliCorp United, operates electricity and natural gas distribution utilities in Colorado, Iowa, Kansas, Michigan, Minnesota, Missouri and Nebraska.

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