TERMINATION AGREEMENT

        TERMINATION AGREEMENT, dated as of December 15, 2004 (this “Termination
Agreement”), among Aquila Merchant Services, Inc. (as successor to Aquila Energy
Marketing Company), a Delaware corporation (“AMS”), Aquila, Inc. (formerly known
as UtiliCorp United Inc.), a Delaware corporation (“ILA” and together with AMS,
“Aquila”), St. Paul Fire and Marine Insurance Company (the “Surety”), and the
American Public Energy Agency, a political subdivision of the State of Nebraska
(“APEA”). Capitalized terms used herein and not otherwise defined are used as
defined in the Agreement (as defined below).

W I T N E S S E T H

        WHEREAS, Aquila and APEA entered into that certain Gas Purchase and Sale
Agreement dated as of October 6, 1998 (as amended to date, the “Agreement”)
under which Aquila agreed to supply APEA with fixed quantities of natural gas on
a monthly basis through October, 2010 in exchange for a single advance payment
by APEA;

        WHEREAS, to secure the obligations of Aquila under the Agreement, Aquila
delivered to APEA an Advance Payment Surety Bond, Bond No. 400JY 1330 issued by
the Surety, in the original penal sum of One Hundred Seventy One Million Eight
Hundred Ninety Three Thousand Eight Hundred Sixty Eight and no/100 Dollars
($171,893,868.00) (the “Surety Bond”);

        WHEREAS, by Rider dated October 4, 2002, National Indemnity Company (the
“Co-Surety”), was added as a co-surety on the Surety Bond;

        WHEREAS, each of ILA and APEA have entered into a swap confirmation (the
“ILA Swap” and the “Swap” respectively and collectively, the “Swaps”) with
Canadian Imperial Bank of Commerce (“CIBC”);

        WHEREAS, Aquila has ceased making deliveries of natural gas under the
Agreement beginning November 1, 2004, resulting in a Seller Deficiency Default
as defined in the Agreement;

        WHEREAS, APEA has demanded that Aquila continue deliveries under the
Agreement, and has not acceded to the cessation of deliveries;

        WHEREAS, Aquila has informed APEA that it will not resume deliveries
under the Agreement;

        WHEREAS, by letter dated November 23, 2004 APEA gave notice to Aquila
that a Triggering Event resulting in early termination (the “Early Termination”)
of the Agreement had occurred and designated December 15, 2004 as the
termination date of the Agreement (the “Early Termination Date”).

        WHEREAS, the Parties wish to execute this Termination Agreement to
confirm the amounts to be paid by the Parties in connection with any Early
Termination, and address the procedures to effectuate the Early Termination.

        NOW, THEREFORE, in consideration of the above premises and for other
good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the Parties agree as follows:

1.      Incorporation of Recitals. Each of the Recitals set forth above is
hereby incorporated in this Termination Agreement.

2.     Termination of Agreement. Aquila acknowledges that APEA has sent written
notice to Aquila in the form and at the time provided in Section 4.1 of the
Agreements, and the Parties agree that the Agreement shall terminate
December 15, 2004.

3.     Payments. The Parties agree that the following payments shall be made on
or before Early Termination Date in accordance with the procedures described
below.

  (a) (i)     The Parties agree that the Termination Payment due under the
Agreement on the Early          Termination Date is $139,087,342.

  (ii) APEA will submit a demand for payment to the Surety, as provided in the
Surety Bond, for payment of the Maximum Penal Sum as defined in the Surety Bond
(the “Penal Amount”) on the Early Termination Date. As of December 15, 2004, the
Penal Amount will be $137,051,115.

  (iii) The Surety shall make payment of the Maximum Penal Sum in immediately
available funds on or before 5:00 p.m. (EDT) on the Early Termination Date.

  (iv) Upon receipt of the Maximum Penal Sum, the Surety Bond shall cease to be
of further effect. APEA shall cause the original Surety Bond to be redelivered
to the Surety immediately.

  (v) Aquila shall make a payment of $2,036,227 in immediately available funds
on or before 5:00p.m. (EDT) on the Early Termination Date, representing the
balance of the Termination Payment after giving effect to the payment of the
Maximum Penal Sum by the Surety.

  (b) Aquila shall pay to APEA on the Early Termination Date the amount provided
under Section 5.02 of the Agreement for Seller Deficiency Defaults (the
“Deficiency Payments”).

  (c) APEA will make the swap payments provided for in Section 4(a) hereof on
the Early Termination Date.

  (d) Aquila will pay to APEA the amounts specified as Market Exposure Damages
under the Market Exposure Damages Agreement, dated September 13, 2004 between
APEA and Aquila (the “MED Agreement”).

4.     Swap Payments and Market Exposure Damages.

  (a) APEA shall pay or cause to be paid $9,300,620 to CIBC in immediately
available funds for amounts owing under the APEA Swap for the months of November
and that part of December through December 15, 2004. Notwithstanding any
provisions in the APEA Swap to the contrary, such payment shall be made to CIBC
on or before 5:00 p.m. (EDT) on the Early Termination Date.

  (b) On or prior to the Early Termination Date, Aquila and APEA will execute
the termination letters issued by CIBC and the Termination Agreement confirming
the closeout terms of the Swaps. APEA will assign to CIBC its right to receive
Market Exposure Damages under the MED Agreement, in lieu of any payment by APEA
upon early termination of the APEA Swap.

  (c) Aquila shall calculate Market Exposure Damages pursuant to the MED
Agreement. Notwithstanding any provisions in the MED Agreement to the contrary,
APEA and Aquila agree that the Market Exposure Calculation Date shall be the
same date as the early termination calculation date for the Swaps, which has
been designated by CIBC as December 15, 2004,and that the amount of the Market
Exposure Damages shall be identical to the early termination amounts under the
Swaps.

5.     Confidentiality; Public Statements.

  (a) No Party nor any of its successors, assigns or subsidiaries or any of
their respective officers, directors, advisors (including financial advisors),
employees, representatives, attorneys or agents shall publicly make, directly or
indirectly, any disparaging or negative statements concerning any other Party or
any of its successors, assigns, subsidiaries or affiliates or any of their
respective Related Parties.

  (b) Except as required by (i) applicable law or rules of any relevant
securities exchange, or (ii) any requirements under federal or state law with
respect to disclosure for the Bonds or other indebtedness incurred by or on
behalf of APEA, or (iii) any requirements under Nebraska public meeting or
public records laws, or (iv) an order of any court or regulatory authority of
competent jurisdiction, no Party may, directly or indirectly, make or cause to
be made any subsequent public announcement or press release or issue any
subsequent public notice regarding the subjects of such press release without
the prior written consent of the other Parties.

6.     Cooperation and Further Assurances. The Parties shall cooperate with each
other to execute such further instruments, documents and agreements and give any
further written assurances as may be reasonably requested by any other Party to
evidence and reflect the transactions contemplated hereby and to carry into
effect the intents and purposes of this Termination Agreement.

7.     Representations and Warranties of APEA. APEA represents as follows:

  (a) Organization. APEA is a political subdivision of the State of Nebraska
organized and existing under the laws of the State of Nebraska and has full
corporate power and authority to carry out the terms of this Termination
Agreement.

  (b) Authorization, etc. APEA has full power and authority to enter into this
Termination Agreement and to perform its obligations under this Termination
Agreement. The execution, delivery and performance by APEA of this Termination
Agreement and the consummation by APEA of the transactions contemplated by this
Termination Agreement have been duly authorized by all requisite corporate
action on the part of APEA.

  (c) Execution. This Termination Agreement has been duly executed and delivered
by APEA and constitutes the legal, valid and binding obligation of APEA,
enforceable against APEA in accordance with its terms, except as limited by laws
affecting the enforcement of creditors’ rights generally or by general equitable
principles.

  (d) Consents. No authorization, approval, consent, or order of, or a
registration or filing with, any court, governmental agency, or other third
party is required on the part of APEA for the execution, delivery, and
performance of this Termination Agreement.

  (e) Conflicts. The execution, delivery and performance of this Termination
Agreement by APEA (i) will not violate any law or regulation applicable to it or
any order, writ or decree of any court or governmental agency by which it or any
of its property is bound, (ii) will not violate any provision of the governing
documents of APEA; and (iii) will not violate or constitute a default under any
material agreement to which it is a party or by which or any of its property is
bound.

8.     Representations and Warranties of AMS and ILA. AMS and ILA, jointly and
severally, represent as follows:

  (a) Organization. AMS is a corporation duly incorporated, validly existing and
in good standing under the laws of the State of Delaware. ILA is a corporation
duly incorporated, validly existing and in good standing under the laws of the
State of Delaware.

  (b) Authorization, etc. Each of AMS and ILA has full power and authority to
execute and deliver this Termination Agreement and to consummate the
transactions contemplated by this Termination Agreement and to perform its
obligations under this Termination Agreement. The execution, delivery and
performance by AMS and ILA of this Termination Agreement and the consummation by
AMS and ILA of the transactions contemplated by this Termination Agreement have
been duly authorized by all requisite corporate action on the part of each of
AMS and ILA and no other corporate proceedings on the part of AMS or ILA are
necessary to authorize this Termination Agreement or to consummate such
transactions.

  (c) Execution. This Termination Agreement has been duly executed and delivered
by AMS and ILA and constitutes the legal, valid and binding obligation of AMS
and ILA, enforceable against each of them in accordance with its terms, except
as limited by laws affecting the enforcement of creditors’ rights generally or
by general equitable principles.

  (d) Consents. No authorization approval, consent or order of, or a
registration or filing with any court, governmental agency, or other third party
is required on the part of Aquila for the execution, delivery, and performance
of this Termination Agreement.

  (e) Conflicts. The execution, delivery and performance of the Termination
Agreement by Aquila (i) will not violate any law or regulation applicable to it
or any order, writ or decree of any court or governmental agency by which it or
any of its property is bound, (ii) will not violate any provision of the
governing documents of Aquila; and (iii) will not violate or constitute a
default under any material agreement to which it is a party or by which it or
any of its property is bound.

9.     Representations and Warranties of the Surety. The Surety represents as
follows:

  (a) Organization. The Surety is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Minnesota.

  (b) Authorization, etc. The Surety has full power and authority to execute and
deliver this Termination Agreement and to consummate the transactions
contemplated by this Termination Agreement and to perform its obligations under
this Termination Agreement. The execution, delivery and performance by the
Surety of this Termination Agreement and the consummation by the Surety of the
transactions contemplated by this Termination Agreement have been duly
authorized by all requisite corporate action on the part of each of the Surety
and no other corporate proceedings on the part of the Surety are necessary to
authorize this Termination Agreement or to consummate such transactions.

  (c) Execution. This Termination Agreement has been duly executed and delivered
by the Surety and constitutes the legal, valid and binding obligation of the
Surety, enforceable against it in accordance with its terms, except as limited
by laws affecting the enforcement of creditors’ rights generally or by general
equitable principles.

  (d) Consents. No authorization, approval, consent, or order of, or a
registration or filing with, any court, governmental agency, or other third
party is required on the part of the Surety for the execution, delivery, and
performance of this Termination Agreement.

  (e) Conflicts. The execution, delivery and performance of the Termination
Agreement by the Surety (i) will not violate any law or regulation applicable to
it or any order, writ or decree of any court or governmental agency by which it
or any of its property is bound, (ii) will not violate any provision of the
governing documents of the Surety; and (iii) will not violate or constitute a
default under any material agreement to which it is a party or by which it or
any of its property is bound.

10.     Notices. All notices, requests, demands, waivers and other
communications required or permitted to be given under this Termination
Agreement shall be given to the addressees and by the means provided in the
Agreement and Surety Bond, as applicable.

11.     Binding Effect. This Termination Agreement shall be binding upon and
inure to the benefit of the Parties and their respective heirs, successors and
permitted assigns.

12.     Assignment; Successors; Third-Party Beneficiaries.

  (a) This Termination Agreement is not assignable by any Party without the
prior written consent of all of the other Parties and any attempt to assign this
Termination Agreement without such consent shall be void and of no effect.

  (b) This Termination Agreement shall inure to the benefit of, and be binding
upon and enforceable by and against, the successors and permitted assigns of the
respective Parties, whether or not so expressed. Nothing in this Termination
Agreement, expressed or implied, is intended or shall be construed to confer
upon any person other than the Parties hereto and the successors and assigns
permitted by this Section 12(b), any right, remedy or claim under or by reason
of this Termination Agreement.

13.     Amendment; Waivers, etc.

  (a) No amendment, modification or discharge of this Termination Agreement, and
no waiver under this Termination Agreement, shall be valid or binding unless set
forth in writing and duly executed by the Party against whom enforcement of the
amendment, modification, discharge or waiver is sought. Any such waiver shall
constitute a waiver only with respect to the specific matter described in such
writing and shall in no way impair the rights of the Party granting such waiver
in any other respect or at any other time. The waiver by any of the Parties of a
breach of or a default under any of the provisions of this Termination Agreement
or to exercise any right or privilege under this Termination Agreement, shall
not be construed as a waiver of any other breach or default of a similar nature,
or as a waiver of any of such provisions, rights or privileges under this
Termination Agreement.

  (b) The rights and remedies in this Termination Agreement are cumulative and,
except as otherwise expressly provided herein, none is exclusive of any other,
or of any rights or remedies that any Party may otherwise have at law or in
equity.

14.     Severability. If any provision, including any phrase, sentence, clause,
section or subsection, of this Termination Agreement is invalid, inoperative or
unenforceable for any reason, such circumstances shall not have the effect of
rendering such provisions in question invalid, inoperative or unenforceable in
any other case or circumstance, or of rendering any other provision in this
Termination Agreement contained invalid, inoperative, or unenforceable to any
extent whatsoever; provided, however, that if any of the provisions hereof are
determined to be illegal, invalid or unenforceable, the parties shall negotiate
in good faith to modify this Termination Agreement so as to effect the original
intent of the parties to the fullest extent possible.

15.     Counterparts. This Termination Agreement may be executed in several
counterparts, each of which shall be deemed an original and all of which shall
together constitute one and the same instrument.

16.     Governing Law. THE PROVISIONS OF THIS TERMINATION AGREEMENT AND THE
RELATIONSHIP OF THE PARTIES SHALL BE GOVERNED BY AND INTERPRETED AND ENFORCED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEBRASKA, WITHOUT REGARD TO PRINCIPLES
OF CHOICE OF LAWS, AND THE LAWS OF THE UNITED STATES OF AMERICA. ALL ACTIONS OR
PROCEEDINGS WITH RESPECT TO, ARISING DIRECTLY OR INDIRECTLY IN CONNECTION WITH,
OUT OF, RELATED TO, OR FROM THIS TERMINATION AGREEMENT OR THE SURETY BOND SHALL
BE LITIGATED IN COURTS HAVING SITUS IN NEBRASKA.

17.     Limitation of Damages. FOR BREACH OF ANY PROVISION FOR WHICH AN EXPRESS
REMEDY OR MEASURE OF DAMAGES IS PROVIDED IN THIS TERMINATION AGREEMENT, SUCH
EXPRESS REMEDY OR MEASURE OF DAMAGES SHALL BE THE SOLE AND EXCLUSIVE REMEDY
UNDER THIS TERMINATION AGREEMENT, AND THE OBLIGOR’S LIABILITY SHALL BE LIMITED
AS SET FORTH IN SUCH PROVISION, AND ALL OTHER REMEDIES OR DAMAGES ARE WAIVED. IF
NO REMEDY OR MEASURE OF DAMAGES IS EXPRESSLY PROVIDED IN THIS AGREEMENT, THE
OBLIGOR’S LIABILITY SHALL BE LIMITED TO DIRECT ACTUAL DAMAGES ONLY, AND SUCH
DIRECT ACTUAL DAMAGES SHALL BE THE SOLE AND EXCLUSIVE REMEDY UNDER THIS
AGREEMENT, AND ALL OTHER REMEDIES OR DAMAGES ARE WAIVED. IN NO EVENT SHALL
EITHER PARTY BE LIABLE TO THE OTHER PARTY UNDER ANY PROVISION OF THIS AGREEMENT
FOR CONSEQUENTIAL, INCIDENTAL, PUNITIVE, EXEMPLARY, OR INDIRECT DAMAGES, IN
TORT, CONTRACT, OR OTHERWISE. TO THE EXTENT ANY PAYMENT REQUIRED TO BE MADE
PURSUANT TO ANY PROVISION OF THIS AGREEMENT IS AGREED BY THE PARTIES TO
CONSTITUTE LIQUIDATED DAMAGES, THE PARTIES ACKNOWLEDGE THAT THE DAMAGES ARE
DIFFICULT OR IMPOSSIBLE TO DETERMINE, AND THAT SUCH PAYMENT CONSTITUTES A
REASONABLE APPROXIMATION OF THE AMOUNT OF SUCH DAMAGES.

18.     Certain Defined Terms. As used in this Termination Agreement, the
following terms have the following meanings:

        Bond Resolution: that certain Gas Supply Revenue Bond Resolution of APEA
adopted September 16, 1988, and readopted October 5, 1998.

        Claims and Damages: means with respect to any releasing Party, all
claims, actions, debts, demands, accounts, judgments, rights, equitable relief,
damages, costs, charges, complaints, obligations, promises, agreements,
controversies, expenses, compensation, liability, responsibility, causes of
action or suits of any kind whatsoever, at law or in equity, in tort or
contract, known or unknown, disclosed or undisclosed, past, present or future.

        Party: means any of AMS, ILA, APEA or the Surety.

        Related Party: with respect to any person, its successors, assigns,
subsidiaries and affiliates (together with any present and former officers,
directors, shareholders, advisors (including financial advisors), employees,
representatives, attorneys and agents of each of the foregoing).

        IN WITNESS WHEREOF, the Parties have duly executed this Termination
Agreement as of the date first above written.

AQUILA, INC.

By:   /s/ Leslie J. Parrette, Jr.     Name: Leslie J. Parrette, Jr.     Title:
Senior Vice President    
 

AQUILA MERCHANT SERVICES, INC.

By:   /s/ Brogan Sullivan     Name: Brogan Sullivan     Title: Vice President  
 
 

AMERICAN PUBLIC ENERGY AGENCY

By:   /s/ Roger W. Mock     Name: Roger W. Mock     Title: President/COO    
 

ST.        PAUL FIRE AND MARINE INSURANCE COMPANY

By:   /s/ David M. Sasportas     Name: David M. Sasportas     Title: Vice
President, Surety