Court: Aquila Can't Spend Sale Proceeds
KANSAS CITY, Mo. -- - A federal judge ruled recently that Aquila Inc. cannot spend $504 million from the recent sale of its Canadian assets.
The ruling by U.S. District Judge Gary Fenner prevents Aquila from using cash from the May sale of assets to Fortis Inc.
Insurance company Chubb Corp., which issued bonds in 1999 and 2000 to insure natural gas delivery contracts purchased from Aquila by municipal utilities in Nebraska, claims the money must be held as collateral on those bonds.
In his ruling, Fenner found that the bond contracts allow Chubb to demand collateral or be discharged for the liability of the gas contracts. But since the gas is being delivered as ordered, Aquila argued, there is no reason for Chubb to insist on collateral.
Aquila said in a release that the ruling ``would not affect its plan to return to financial stability,'' despite a previous court filing in which the company said a delay in accessing the money ``could trigger a domino effect leading to disastrous consequences for Aquila and its stockholders.''
Fenner will consider at a later hearing whether to make the temporary injunction he ordered recently permanent. No date was set for that hearing.
In May, Aquila closed on the $1.08 billion-sale of its Canadian utility operations to Fortis, a Canadian energy company based in Newfoundland. It was the last major asset sale of the company's restructuring process, in which it aimed to exit the volatile energy trading business and return to its roots as a domestic utility.
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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