New Issue: Aquila sells $300 million mandatory at 6.75% dividend, up 22%

Nashville, Aug. 19 - Aquila Inc. sold $300 million of three-year non-callable mandatory convertibles in the PIES, or Premium Income Equity Securities, structure at par of 25 with a 6.75% dividend and 22% initial conversion premium via sole bookrunner Lehman Brothers Inc.

The issue was sold at the tight end of price talk for a 6.75% to 7.25% dividend and 18% to 22% initial conversion premium. It priced alongside 40 million shares of common stock.

The Kansas City, Mo.-based electric and gas utility said proceeds would be used to retire its 6.875% and 7% long-term debt and other liabilities as well as strengthen the company's balance sheet.

Terms of the deal are:

Issuer:	Aquila Inc.
Issue:	Mandatory convertible PIES
Bookrunner:	Lehman Brothers Inc.
Joint lead manager:	Credit Suisse First Boston
Amount:	$300 million
Greenshoe:	$45 million
Maturity:	Sept. 15, 2007
Dividend:	6.75%
Price:	Par
Yield:	6.75%
Conversion premium:	22%
Conversion price:	$2.55/$3.11
Conversion ratio:	8.0386/9.8039
Call:	Non-callable
Contingent conversion:	No
Contingent payment:	No
Dividend protection:	Yes, conversion ratio adjustment
Takeover protection:	Right to convert on merger with cash making up 30% or more of payment
Price talk:	6.75-7.25%, up 18-22%
Expected ratings:	Moody's: Caa1
	S&P: CCC+
Pricing date:	Aug. 18, after the close
Settlement date:	Aug. 24
Distribution:	Registered

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