66960--3/1/2007--AQUILA_

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{financial, litigation, operation}

{cost, contract, operation}

{cost, operation, labor}

{cost, regulation, environmental}

{competitive, industry, competition}

{operation, natural, condition}

{capital, credit, financial}

{stock, price, share}

{regulation, change, law}

Our strategic repositioning plan depends on our ability to raise adequate proceeds from the Kansas electric asset sale and retire a sufficient amount of debt and other long-term liabilities with the net sale proceeds. We must sustain the reduced level of corporate costs. We may continue to incur losses in our Merchant Services business. Our non-investment grade credit ratings have an adverse effect on our liquidity and borrowing costs. Our ability to further reposition our Company as a regulated utility could be restricted by the terms of our finance agreements and our regulatory orders. Our utility operations are subject to risks associated with higher fuel and purchased power prices, and we may not be able to recover costs of fuel and purchased power. Regulatory commissions may refuse to approve some or all of the utility rate increases we may request in the future. Our operating results can be adversely affected by milder weather. Our utility business is subject to complex government regulations and changes in these regulations or in their implementation may affect the costs of operating our businesses, which may negatively impact our results of operations. The outcome of legal proceedings cannot be predicted. An adverse finding could have a material adverse effect on our financial condition. We have several matters pending before the Internal Revenue Service, the negative outcome of which could materially impact our financial condition. Risks Relating to the Merger The Merger and asset sales may not be completed, which could adversely affect our business operations and stock price. We will be subject to business uncertainties and contractual restrictions while the Merger is pending that could adversely affect our business. We will incur significant costs in connection with the Merger and associated asset sales.

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66960--3/1/2007--AQUILA__INC