Aquila, Inc. (ILA)

Yuck! Aquila (ILA)has been a case study on how not to manage deregulation. It loaded up on domestic, and later overseas, util. and fuel-bearing companies in the nineties, and in the early 2000s started selling them off with a vengeance; or to put it another way, the co. put itself into a perverse "buy high, sell low" situation and got into megadebt.





During this period of de-agglomeration, ILA's stock price declined more than eighty percent from the mid-$40s and has been below an average of five bucks a share since 2004: single digits are rare for any NYSE stock and particularly for a modern American electric utility.





ILA recently retired at par some seven-percent senior notes with a market value of 102 -- all told, Aquila is now $1.44 Billion in debt and if I'm getting accurate statistics, even company officers don't hold much ILA stock anymore.





Unsurprisingly, for the past several years ILA has either lost money or broken even. Depending on how you count and whether it's trailing or leading, the P/E runs from 68 to an absurd many thousands.





In February of 2007 Great Plains energy (GPX) announced plans to "merge" with ILA and ILA's stock promptly declined another twelve percent. For the past several months stock has been trading narrowly in the resulting trough: round about $4.20 a share. Isn't it usually the acquiring corp that declines after the initial merger announcement? The fluctuation of pennies around $4.20 is easily explained by the arbitrage effect of a morbid stock, or if you prefer the spread is much like the "buy/sell" gap on foreign currencies or NASDAQ. (I'm not saying ILA's situatio is the same as those two, just trying to explain ILA's pitiful position.





More recent the Missouri regulators granted ILA a sixteen percent rate hike in most of its central-Missouri service area, and twenty percent in and around St. Joseph. ILA had asked for more than twice as much. What it got is not enough to profit, but enough to leave the impression of a great big middle finger when and if ILA as





Is ILA under a curse? Should it be shorted? It's possible we have a great company with a cruddy stock but at least at the early dereg - wheeler-dealer executive level, ILA has earned its place in the dumps. As I mentioned, the arbitrage has (mostly) been discounted and the upside potential -- none that i know of.





You remember what Peggy Sue's mother advised her? -- "Stay away from it."