Westar/Kansas City Power & Light Merger

Kansas. The Kansas Corporation Commission has approved a settlement agreement giving Westar Energy and Great Plains Energy, the parent company of Kansas City Power & Light, approval to perfect a “merger as equals.” The companies intend to form a new, publicly-traded holding company with a combined equity value of approximately $14 billion, which will operate regulated electric utilities in Kansas and Missouri. (The Missouri Public service commission has also recently approved the merger plan—read further.) In addition to conditions agreed to by the parties aimed at protecting ratepayers and the region’s economy, the commission added an additional clause requiring the utility to submit for commission approval an Integrated Resource Plan (IRP). According to the commission, implementation of an IRP will ensure the merger maximizes the use of Kansas energy resources. In addition, the utilities expressed intent to accelerate the retirements of fossil-fuel generation plants, which should result in lower emissions, the commission noted.

Speaking to past attempts by the companies at obtaining approval to merge under a different format, the commission said that unlike Great Plains’s failed attempt to acquire Westar in an earlier docket, the credit rating agencies have recently provided a favorable view of the proposed transaction. According to the commission, the proposed merger would, if approved, result in a Moody’s upgrade of Great Plains’s credit rating from Baa2 to Baa3, and it would affirm the credit ratings of KCP&L and Westar. Standard and Poor would affirm its current ratings for Great Plains and Westar but upgrade its outlook for the both companies from negative to positive. The commission had earlier rejected Great Plains’s attempted acquisition of Westar primarily due to concerns over the considerable financial risks that Great Plains would have undertaken to finance the acquisition. It concluded that the merger of equals presents less risk to customers than the 2016 proposed acquisition. Re Great Plains Energy Incorporated, Docket No. 18-KCPE-095-MER, May 24, 2018 (Kan.S.C.C.)

Missouri. The Missouri Public Service Commission has also approved the merger of Westar Energy and Great Plains Energy, Inc. It determined the merger will benefit shareholders, ratepayers, and the general public. It found that the Merger benefits ratepayers by providing an opportunity to reduce the upward pressure on customers’ rates from increasing costs and flat or declining customer usage. The commission also found that combining the companies will create operational efficiencies, without involuntary staff layoffs, resulting in net savings from the merger over the first five years after closing of approximately $555 million. It also noted that the merger provides upfront customer bill credits, no recovery of transaction costs in rates, and no change in the nature of customers’ interactions with their service provider. Re Great Plains Energy Incorporated, File No. EM-2018-0012, May 24, 2018 (Mo.P.S.C.)