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MEP Pleasant Hill defaults on Aries Power Project construction loans

Aquila says move has no effect on liquidity or debt obligations

KANSAS CITY, Mo., July 7, 2003 — Aquila Inc. announced that MEP Pleasant Hill, LLC, in which Aquila holds a 50 percent interest, was unable to refinance or repay $270 million of construction loans prior to their June 26, 2003, maturity and accordingly has defaulted.

The loan proceeds were used to fund the construction of the Aries Power Project, a combined-cycle, gas-fired power plant located near Pleasant Hill, Mo.

In response to the default, the lenders have drawn on letters of credit totaling $37.5 million pledged by Aquila to support the loan. This action was anticipated. The letters of credit were fully cash collateralized and thus this action does not impact Aquila’s near-term liquidity. Aquila is exploring alternatives to restructure the project.

The project financing is non-recourse to Aquila and as such the default has no impact on Aquila’s other credit arrangements or utility operations. The plant will continue to run according to contractual obligations and market needs. Other operating contracts, including tolling agreements for the power generated by Aries, remain current and are not affected by the default.

Based in Kansas City, Mo., Aquila operates electricity and natural gas distribution networks serving customers in seven states and in Canada, the United Kingdom and Australia. Aquila also owns and operates power generation assets. More information is available at www.aquila.com.