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Aquila exits Lodi gas storage project

KANSAS CITY, Mo., Oct. 31, 2002 — Aquila Inc. announced Thursday that it has closed an agreement with ArcLight Capital Holdings LLC, an affiliate of ArcLight Energy Partners Fund I, L.P., that affects Aquila’s exiting the Lodi Gas Storage Project in California.

The agreement is one more step in the company’s current program to reduce its non-core asset exposure.

Through an affiliate, Aquila owned a 50% interest in WHP Acquisition Company, LLC, a company jointly established with an affiliate of ArcLight in 2001 to purchase Western Hub Properties, L.L.C., the developer of the Lodi Gas Storage Project. The project is about 35 miles south of Sacramento, has working gas storage capacity of 12 billion cubic feet and is interconnected to the PG&E backbone gas pipeline. In connection with the transaction, Aquila was released from certain debt and acquisition obligations relating to the Lodi Gas Storage Project.

Aquila’s exit from its investment in the Lodi Gas Storage Project is a further step in implementing Aquila’s strategic decision to transition back to a regulated utility, namely the exit from those elements of the company’s previous energy merchant strategy that are not consistent with its current business model. Aquila will continue to focus on the restructuring of its remaining gas storage investment and tolling arrangements.

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.