HELENA -- A nonprofit corporation made up of five Montana cities voted unanimously Thursday to offer $2 billion, including assumption of $825 million in debt, to buy NorthWestern Corp.'s electricity transmission and distribution utility in Montana, South Dakota and Nebraska.

The directors of Montana Public Power Inc. proposed buying the common stock of NorthWestern Energy for $32.50 a share or for about $1.18 billion, plus assume the company's $825 million in debt. NorthWestern's stock closed Friday at $31.52 a share, up $2.66 or 9.22 percent over the previous day.

Participating in Montana Public Power are the cities of Bozeman, Great Falls, Helena and Missoula and the consolidated government of Butte-Silver Bow. Under the plan, if the Montana group succeeds in buying NorthWestern, it would sell the 20 percent of non-Montana assets to the South Dakota Power Co., a similar public power group there.

NorthWestern's board of directors reviewed the Montana cities' informal proposal last week and declared it to be not in the best interests of the company or its shareholders, the Sioux Falls, S.D., utility said in a press release. Over the past several years, the company has rejected other offers to buy NorthWestern, including Montana Public Power's May 2004 offer to buy the utility's Montana property for $1.26 billion.

If NorthWestern receives a formal proposal -- and the cities on Friday laid the groundwork for that to happen -- the utility's board of directors will review the offer as its fiduciary responsibilities require.

Mike Hanson, NorthWestern's president and chief executive officer, said the company has taken steps over the past three years to stabilize its finances by focusing on its electric and gas operations and substantially reduce its debt.

"Our long-term commitment remains to be a reliable and affordable provider of energy services to our 617,000 customers in Montana, South Dakota and Nebraska, while providing a competitive return to our shareholders," Hanson said.

It's that very concern about reliability and stability that spurred the leaders of the Montana cities to form Montana Public Power 18 months ago. They believe they could run the utility better than NorthWestern has.

Cities suffered when NorthWestern didn't file its property taxes on time, Kadas said, although it now pays its taxes on time. NorthWestern also canceled a five-year contract to supply energy to Montana cities and school boards.

"Bringing NorthWestern's utility operations under local control is necessary to ensure that our communities will have the highest quality utility services at reasonable prices," Kadas said in a press release distributed to the financial wire services. The directors and their financial advisers and attorneys said it's possible for Montana Public Power to take over the utility by Dec. 31, if NorthWestern agrees to sell.

In an interview afterward, Kadas put it more bluntly, "We're concerned about a lot of the monkey business that's occurred over the last 10 years."

The cities have pledged to retain NorthWestern employees, spend more on neglected maintenance and not raise utility transmission and distribution rates that are part of consumers' power bills. That pledge, however, doesn't extend to the cost of electricity supply, which must be bought on the open market since the breakup of Montana Power by whatever entity owns the utility.

"I think it's absolutely necessary that the operation of this utility system in the state of Montana be placed back in the hands of Montana," said Bob McCarthy, Butte-Silver Bow county attorney. "I don't need to describe to anyone the horrendous implications that attached to the breakup of Montana Power Co. and the collapse of Touch America."

A representative of the South Dakota Power Co., Yankton Mayor Curt Bernard, said no longer are NorthWestern shareholders local investors who put their family savings into the company. Instead, he said, NorthWestern is now owned by "an anonymous group of stockholders."

"We want that stability and we want our friends and neighbors who work at NorthWestern to help build our company," Bernard said.

NorthWestern spokesman Roger Schrum said the company's finances are improving, with its costs of borrowing money dropping and its financial ratings better. He disputed the $825 million debt figure cited by Montana Public Power, saying that figure is a year old.

Schrum said the company is making an $80 million investment in capital expenditures this year, with $60 million of it targeted for Montana. The company has added 40 field workers, he said, with 90 percent of them in Montana.

Kadas later assessed Montana Public Power's chances of completing the deal as "very good." NorthWestern's largest shareholders are institutional investors and hedge funds, he said.

"Hedge funds are not generally known for their interest in long-term conservative investments," Kadas said. Montana Public Power said its $32.50 per share offer represents a 17 percent premium over NorthWestern's stock price on April 28 before the cities' offer to buy the utility was made public. The offer is 22.4 times NorthWestern's projected earnings for share for 2005, Montana Public Power said.

Citigroup Global Markets would provide the financing for the proposed deal.