TEXT-Moody's release on Aquila, Great Plains

(The following statement was released by the ratings agency)

July 15 - Moody's Investors Service today upgraded Aquila Inc's ("Aquila") senior unsecured rating to Baa2 from Ba3. At the same time, Moody's affirmed all ratings of Great Plains Energy Incorporated (GXP.N) ("Great Plains") and its operating subsidiary Kansas City Power & Light Company ("KCPL"). The rating outlook for all three issuers is negative. The rating action on Aquila concludes the review for possible upgrade initiated on February 7, 2007, following an announcement that Great Plains signed a definitive agreement to acquire all the outstanding shares of Aquila's common stock.

Today's rating actions reflect the closing of the acquisition on July 14, 2008, following an earlier approval by the Missouri Public Service Commission. The upgrade of Aquila reflects the potential for an improved financial profile as part of the larger Great Plains corporate family and, more importantly, an understanding that Great Plains will extend guarantees for all rated debt obligations at Aquila that survive the transaction. Going forward we expect Aquila's Missouri electric utility business will operate under the brand name of KCPL.

Although Great Plains has acquired Aquila, it retains only the Missouri based electric utility business and merchant energy operations. The balance of the company, including the non-Missouri electric and gas utility businesses were immediately sold to Black Hills Corporation ("Black Hills") for approximately $909 million. Great Plains utilized approximately $677 million of this amount to fund the cash portion of the Aquila purchase price; the balance will be used by Aquila to repay short term debt and for general corporate purposes. Taking into account the Black Hills carve out, Great Plains acquired assets that generated approximately $190 million of EBITDA for the LTM period ended March 31, 2008. The transaction is a transforming event for both Aquila and Great Plains as a new significant stand-alone regulated operating subsidiary was created to hold the Aquila assets. Great Plains will guarantee approximately $1.1 billion of existing net debt at Aquila (a/o March 31, 2008).

In upgrading Aquila's rating Moody's recognizes the additional financial and operational benefits to Aquila's risk profile as part of a larger utility family. Additionally, Moody's acknowledges that Great Plains has imminent plans to extend absolute unconditional and irrevocable downstream guarantees to the existing debt of Aquila. As a result, Aquila's senior unsecured rating is in effect a function of the rating of Great Plains. Aquila's rating also reflects the longer-term challenges that will need to be addressed before further upgrades would likely be considered including careful management of the sizeable capital program through 2010 and improvement in credit metrics.

The affirmation of Great Plains ratings with a negative outlook reflects Moody's view that while the Aquila transaction is likely to result in a modest amount of incremental leverage (Aquila's pro-forma debt to EBITDA at March 31, 2008 was approximately 5.8X), the dual challenges of efficiently integrating Aquila's operations and the cash flow pressure associated with the large capital spending programs through 2010 at both Aquila and KCPL, will likely lead to credit metrics that are weak for the rating category. One key metric for Great Plains, consolidated CFO (pre-w/c) to adjusted debt, historically greater than 20%, is likely to fall to the mid-teens percentage range over the next 12-18 months. Moody's also expects all of the rated entities will be free cash flow negative over the next several years due to the current capital spending program, primarily centered around the Iatan I and II generating facilities.

Somewhat offsetting these pressures are the potential benefits to be realized by combining the operations which already have commonly owned facilities and contiguous service areas. We expect that Aquila, and KCPL, will file for several rate increases over the next several years and should benefit from any synergies derived from this transaction until they begin to be shared with ratepayers as new rates go into effect over time.

While KCPL's credit metrics are not expected to be initially affected by the Aquila transaction, the outlook also remains negative due to expected softening in certain key credit metrics, the large capital spending program at the utility, and the increased reliance that Great Plains will have on KCPL for up-streamed cash dividends while it absorbs Aquila. We expect rate increases at KCPL to follow a schedule in line with that of Aquila over the next several years. A critical consideration in the rating going forward are the expectations that assets are successfully integrated into rate base, at Aquila and KCPL, and that Great Plains continues to raise equity in support of the build-out over the next several years.

At this time, Moody's has also affirmed KCPL's P-2 short-term commercial paper rating. KCPL's $600 million commercial paper program is fully backstopped by a $600 million credit facility expiring in May 2011. It has been KCPL's strategy to borrow short-term to meet capital spending needs and refinance with periodic common equity infusions from Great Plains and the issuance of long-term debt. We expect that shortly after closing, Great Plains will also seek to refinance the bank facilities of Aquila.