Black Hills 8K to Acquire Aquila Utility Operations | BKH 8 Feb 07

Black Hills Corporation

AGREEMENT TO PURCHASE

Certain Utility and Related Assets of Aquila, Inc.
in Colorado, Kansas, Nebraska and Iowa

F E B R U A R Y 2 0 0 7

T R A N S A C T I O N O V E R V I E W

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Information concerning forward-looking statements

Statements made in this document that are not based on historical facts are forward-looking, may involve risks and uncertainties, and are
intended to be as of the date when made. In connection with the safe harbor provisions of the Private Securities Litigation Reform Act of
1995, Black Hills Corporation, Great Plains Energy and Aquila are providing a number of important factors, risks and uncertainties that could
cause actual results to differ materially for the provided forward-looking information. These include: obtaining shareholder approvals required
for the transactions (Great Plains and Aquila); the timing of, and the conditions imposed by, regulatory approvals required for the
transactions; satisfying the conditions to the closing of the transactions; Great Plains and Black Hills successfully integrating the acquired
Aquila businesses into their respective operations, avoiding problems which may result in either company not operating as effectively and
efficiently as expected; the timing and amount of cost-cutting synergies; unexpected costs or unexpected liabilities, or the effects of purchase
accounting may be different from the companies’ expectations; the actual resulting credit ratings of the companies or their respective
subsidiaries; the effects on the businesses of the companies resulting from uncertainty surrounding the transactions; the effect of future
regulatory or legislative actions on the companies; and other economic, business, and/or competitive factors. Additional factors that may
affect the future results of Black Hills, Great Plains and Aquila are set forth in their most recent quarterly report on Form 10-Q or annual
report on Form 10-K with the Securities and Exchange Commission (“SEC”), which are available at www.blackhillscorporation.com,
www.greatplainsenergy.com, and www.aquila.com respectively. Black Hills, Great Plains and Aquila undertake no obligation to publicly
update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

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         Definitive agreements:
        –         Black Hills Corporation to purchase certain Aquila utility assets in
          Colorado, Kansas, Nebraska and Iowa for $940 million cash, subject to
          working capital adjustments at completion of transaction
          –         Simultaneously, Great Plains Energy will acquire Aquila, Inc. and
          its subsidiaries;
        –         At closing, Great Plains will retain utility operations in Missouri

      Black Hills transaction financing:
          –        A bridge credit facility through a bank syndication;
        –         Permanent financing at closing expected through a combination of
          newly-issued equity, mandatory convertible securities, corporate-level
          debt issuance and internally generated cash resources; and
        –         Based on market conditions, Black Hills intends to issue equity,
          equity linked and debt securities in public or private markets and
          could execute such transaction prior to closing

Deal expected to close in Q1 2008.

      Completion of transaction subject to state regulatory approvals, Federal
        Energy Regulatory Commission (FERC) and Federal Trade Commission
          (Hart-Scott-Rodino) review, plus customary closing conditions.

Expected to be earnings-accretive after one year of temporary and
transitional costs

Cash flow from acquired operations expected to be positive from start.

Definitive agreements signed February 7, 2007

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We are a diversified energy company with our roots in utility operations
dating back to the 1880s. Our strategy is to capitalize on our core strengths:

Strong utility operations with commitment to customer service

Planning, construction and operations of energy assets

Optimization of fuel assets to deliver value to investors and customers

Our search for energy partners led us to evaluate Aquila’s utility operations
in Colorado, Kansas, Nebraska and Iowa:

We share similar demographics, community cultures and business relationships.

The combination of our operations is a logical extension of our business

     Acquiring these operations will make us a financially stronger company with
          a larger, more diversified asset base and more stable and predictable cash flows
        and earnings with opportunity for significant growth in rate base, especially
        in Colorado

Benefits of the deal extend to our customers, communities, investors
and employees

How this deal came about

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We have the strategy, skills, experience and track record to make this deal work:

Strong utility operations with commitment to superior customer service,
reliability, efficiency, and cost control

Strong planning, construction, integration and maintenance of assets

Strong regulatory relationships

Strong record of technical innovation and environmental safety

Strong tradition of corporate social responsibility

Strong commitment to the communities we serve

Merits of acquisition

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Merits of acquisition

The transaction is good for customers, investors and employees:

Customers will benefit from improved economies of scale, operational efficiencies
and integrated business functions

         Investors should benefit from expanded operations, improved cash flow
        and earnings, improved growth potential, improved credit standing and
        improved risk profile

Employees will have increased opportunity for personal and professional growth

The transaction is financially sound:

Solid financial foundation

We’re buying earnings-producing assets only

Strong cash flow and earnings base from stable, risk-managed and
geographically diverse operations

We are committed to maintaining, and expect to maintain, an
investment-grade credit rating

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Rapid
City

Combination at a glance

Utilities will serve
      over 750,000 customers
      in South Dakota, Montana,
      Wyoming, Colorado, Kansas,
      Nebraska and Iowa

Utilities will comprise ~50%
of ~$3 billion in total assets

Wholesale energy operations include
oil and gas production, coal mining,
power generation and energy marketing

Proposed Acquisitions

Utilities in CO, KS,
NE and IA

Black Hills Assets

Utility operations

Power generation

Gas production

Oil production

Coal mine

Energy marketing

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Rapid
City

Assets of combination

Profile of the Combined Company

(Based on recent public information)

Total assets ~ $3 Billion

Regulated customers:
Electric                                                                       197,000  Customers
Gas                                                                            556,000    Customers
   Total regulated customers                                      753,000Customers

Power generation resources:
Regulated, operated                                                         537          MW
Regulated, contracted                                                       398       MW
Regulated, under construction                                            90     MW
Independent power production                                      1,000    MW
   Total generation                                                          2,025          MW

Natural gas and oil reserves ~ 170 BCFE

Coal reserves ~ 290 million tons

Natural gas marketing average
daily physical volume 1.4 million MMBTU

Regulated operations in 7 states

Wholesale energy operations in 12 states

Black Hills Assets

Utility operations

Power generation

Gas production

Oil production

Coal mine

Energy marketing

Acquired Assets

Utilities in CO, KS,
KS, NE and IA

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Utilities of combination

DESCRIPTION OF UTILITIES

Number of Annual
Utility Customers Energy Sales

Black Hills Power 65,000 3.1 million MWH

Cheyenne Light (electric) 39,0000.9 million MWH
Cheyenne Light (gas) 33,0008.1 BCF

Subtotal, existing 137,000 4.0 million MWH
8.1 BCF

Colorado Electric ( ) 93,0002.0 million MWH

Colorado Gas ( ) 68,000 7.1 BCF

Kansas Gas ( ) 108,00022.5 BCF

Nebraska Gas ( ) 198,00018.0 BCF

Iowa Gas ( ) 149,000 27.3 BCF

Subtotal, new 616,000 2.0 million MWH
74.9 BCF

Total, combined 753,000 6.0 million MWH
83.0 BCF

      Seven adjoining states in
      Midwest and Rockies with
      similar demographics and
      business environments

Proximity should permit some
      consolidation of administrative
        functions while retaining
      quality of service

Cheyenne
Light

Rapid City

Black Hills Power

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COLORADO ELECTRIC FACTS
(2005)

Annual sales volume 1,980GWh

Power generation 102MW
Power contracts 285 MW

Customers 93,000

Annual customer growth >3%

Customer mix

Residential

87%

Commercial

12%

Industrial

Fountain

Pueblo

Rocky
Ford

Cañon
City

Colorado

Colorado electric properties

Territory is experiencing strong population
and load growth

   Current RFP seeks 225 MW baseload and
          140 MW intermediate and peaking energy
          supply beginning in 2013

      Potential to construct new coal-fired
          power plant and to utilize our Colorado
          gas-fired plants to serve long-term needs
          and foster off-system sales opportunities

100% fuel and purchased power
pass-through

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COLORADO GAS FACTS
(2005)

Annual sales volume 7Bcf

Customers 68,000

Annual customer growth >3%

Customer mix

Residential

94%

Commercial

Industrial

Colorado

Fountain

Pueblo

Burlington

Castle Rock

Colorado gas properties

Territory experiencing strong
population and customer growth

Proximity to existing Black Hills operations in Colorado

100% fuel pass-through

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KANSAS GAS FACTS
(2005)

Annual sales volume 23Bcf

Customers 108,000

Annual customer growth < 1%

Customer mix

Residential

89%

Commercial

Industrial
2%

Lawrence

Goodland

Wichita

Liberal

Garden
City

Dodge City

Kansas

Kansas gas properties

Stable customer counts

Stable cash flows

Rate case filed in November 2006
seeking $7.3 million increase

100% fuel cost pass-through

Other favorable regulatory treatment:
bad debt pass-through, decoupling and
weather normalization

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NEBRASKA GAS FACTS
(2005)

Annual sales volume 18Bcf

Customers 198,000

Annual customer growth < 1%

Customer mix

Residential

90%

Commercial

Industrial – 3%

Nebraska gas properties

Stable customer counts

Attractive regulatory environment

Lincoln is also home to regional
customer service center

Omaha is headquarters for regional
gas operations center

Rate case filed in November 2006
seeking $16.3 million increase

100% fuel cost pass-through

Other favorable regulatory treatment:
bad debt pass-through and decoupling

York

Beatrice

Nebraska

Lincoln

Norfolk

Omaha

Blair

Columbus

Bellevue

Wayne

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IOWA GAS FACTS
(2005)

Annual sales volume 27Bcf

Customers 149,000

Annual customer growth < 1%

Customer mix

Residential

89%

Commercial

10%

Industrial
1%

Iowa gas properties

Stable customer counts and cash flows

100% fuel cost pass-through

  Other favorable regulatory treatment:
        bad debt pass-through, decoupling and
        weather normalization

Newton

West Des Moines

Spencer

Council
Bluffs

Forest City

Decorah

Dubuque

Dennison

Webster City

Iowa

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Strategic rationale

Significant scale and scope expansion for Black Hills from utilities and
operations to be acquired

Acquisition represents about 93,000 electric and 523,000 gas customers

Operational efficiency with new resources and larger customer base

Opportunity to advance Black Hills’ relationship-based business approach and
reputation for superior customer service and satisfaction

Opportunity to benefit from workforce innovation, adaptability and
business practices

Lower overall business risk

Expanded utility operations provide more stable cash flows with
more predictable capital needs

Diversifies regulatory and geographic exposure with opportunity to build
upon Black Hills’ successful regulatory relationship-based approach

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Financial rationale

More stable and predictable financial results

Earnings per share break-even expected after a year of transitional costs following transaction, with
EPS accretion beginning in second full year

Positive cash flows from operations expected immediately

We are acquiring earnings-producing assets only, with stable service territories
in Kansas, Nebraska and Iowa, and with higher growth in Colorado

Constructive regulatory environments; gas cost pass-throughs;
weather-normalization mechanisms

Longer-term upside earnings potential from customer growth and possible power generation
construction and integration in Colorado

Our intention will be to mirror our strategy at Cheyenne Light, where
we will be integrating generation as a rate-base asset later this year

Current Aquila RFP seeks 225 MW baseload and 140MW intermediate
and peaking energy supply beginning in 2013, and increasing to
290 MW /190 MW, respectively, by 2022

Potential to construct new coal-fired power plant and to utilize our three
existing Colorado gas-fired plants to serve long-term needs

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Financing the acquisition

Initial bridge financing

Commitment for bridge credit facility obtained from bank syndicate, including
ABN AMRO, Credit Suisse, BMO Capital Markets, and Union Bank of CA

Targeted permanent financing

Equity contribution through stock offering;

Mandatory convertible securities offering;

Unsecured corporate debt;

Internally generated cash resources

May fund certain amounts prior to closing based on market conditions.

Logic of financing strategy

Balanced combination of financing sources retains investment-grade
corporate credit rating while

Accelerating accretive cash flow and earnings per share results.

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Summary

A sound transaction – strategically, operationally and financially

Attractive, stable, geographically diverse assets with stable or
growing customer bases

Balanced financing strategy with access to capital markets at reasonable rates

Accretive to EPS after one year of transition costs

Improvement in overall corporate risk profile

Expansion of retail footprint and addition of rate-base assets assure
stable, predictable cash flows and earnings

         Low integration risk:
        – Experience with retail operations and customer care
        – Familiarity with demographics and business environments of new states
        – Commitment to relationship-based regulatory processes

Upside potential with vertical integration of electric properties

We are expert planners, builders and operators of power plants

We understand transmission systems and regulatory processes in region

We are committed to remaining an investment-grade Company as we grow
to serve more customers and communities and to build more value for
investors in responsible, safe and environmentally conscious ways.

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INVESTOR RELATIONS

Mark T. Thies, Executive Vice President & CFO

Dale Jahr, Director of Investor Relations
625 Ninth Street Rapid City, SD 57701

605 721 2326 djahr@bh-corp.com

Please visit our web site for
up-to-date investor news
and information:

www.blackhillscorporation.com

Click on “Investor Relations”
and follow instructions to review,
download or print press releases,
SEC documents, recent presentations,
annual report and other publications.

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Black Hills (BKH) 8-KBlack Hills Corporation to Acquire Aquila Utility Operations