Kansas City, Mo. – Gas and electric distribution company Aquila Inc. said Monday it has sold its southeast Texas and mid-continent natural gas pipeline systems and natural gas and gas liquids processing assets, plus 50 % ownership in the Oasis pipeline system, to Energy Transfer Co. for approximately $265 million.

At closing, Aquila received approximately $221 million in cash. The balance has been fully funded and will be disbursed upon the resolution of certain contract assignments and other matters, the company said.

A privately owned company based in Dallas, Texas, Energy Transfer owns and operates natural gas gathering, processing, treating, and compression assets in Texas and Louisiana. Its electric power activities include small power generation and patent pending dual-drive compression technology that facilitates large-scale natural gas/electricity arbitrage at the natural gas pipeline level.

Aquila's southeast Texas assets included three natural gas pipeline systems, two processing facilities and eight natural gas treating facilities. The mid-continent assets include Aquila's Elk City natural gas and gas liquids processing plant and its associated gas gathering system, located primarily in western Oklahoma. In addition, the sale also includes Aquila's ownership interests in two joint venture arrangements with assets located in southern Texas and the Permian Basin area of western Texas.

The Oasis pipeline system, which consists of some 600 miles of pipeline, connects the Waha natural gas hub in the Permian Basin of western Texas with the Katy market hub near Houston, Texas. Physical throughput capacity of the pipeline is approximately 1 billion cubic feet of gas per day.

Approximately 175 employees are associated with these assets, a majority of whom will transfer to Energy Transfer Company and its affiliates, said Richard C. Green, Jr., Aquila chairman and CEO.

"This completes a significant step toward executing all of the asset sales on which we have signed agreements, currently totaling $786 million," said Green. "This is also a major step in our corporate repositioning as we reduce the scale and scope of Aquila and return to our roots as a regulated utility and generation company."

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.

Green said Aquila intends to use the proceeds to redeem and retire its existing indebtedness as part of its commitment to improve its credit profile.