KCP&L, Westar Energy dismiss concerns from Kansas regulators over proposed merger

Great Plains Energy has fired back against objections raised by Kansas regulators to its planned $12.2 billion acquisition of Westar Energy.

Great Plains, the parent company of Kansas City Power & Light, said blocking the acquisition of the Topeka-based electric utility would have a “chilling effect” on utility consolidation in the state.

Terry Bassham, CEO of KCP&L owner Great Plains, said that would leave Kansas “out of touch with and left behind” other states where utility companies are merging. Great Plains said efficiencies realized from a combined utility could save ratepayers $2 billion over the next 10 years.

Bassham was one of several top executives with Great Plains and Westar to submit testimony Monday in response to regulators who expressed reservations about the aftereffects of the utility combination.

Last year, Great Plains announced its plan to purchase Westar in a deal where it would buy $8.6 billion of Westar’s equity and assume $3.6 billion of its debt. The combined utility would serve 1.5 million customers.

Westar now serves customers in much of eastern Kansas, including the western edge of Johnson County. KCP&L serves most of the rest of the Kansas City area, except for Wyandotte County and Independence, which are served by ratepayer-owned utilities.

In December, staff of the Kansas Corporation Commission recommended denial of the deal, saying Great Plains would take on too much debt and that potential job losses would hurt the Kansas economy.

Great Plains believes that the commission’s staff relied too much in its analysis on consultants who frequently offer skeptical views of utility consolidation.

“We think that really a lot of this is driven by a couple of consultants who make a living going around opposing these acquisitions,” said Chuck Caisley, a spokesman for KCP&L.

Caisley called the Kansas Corporation Commission staff’s objections a “parade of horribles that might happen” when there was no doubt that the proposed deal “will be beneficial for Kansans, period.”

Kevin Bryant, Great Plains’ chief financial officer, testified that financing the Westar acquisition would not affect customers.

“We have proposed firm conditions that serve to insulate customers from any costs or effects of the parent holding company financing,” Bryant said in testimony.

Bryant acknowledged the Great Plains will take on elevated debt levels following the acquisition. The Moody’s credit agency predicted a slight downgrade in the company’s credit rating as a result. But Bryant said Moody’s and Standard & Poor’s will retain Great Plains’ investment-grade rating.

Great Plains also pointed to interest from institutional investors as an affirmation of the acquisition’s soundness. Great Plains last year raised $2 billion in an equity offering in less than a day.

Great Plains and Westar will make their case in meetings before the Kansas Corporation Commission later this month. A decision on the deal is expected in April.

This story was originally published January 10, 2017 at 2:40 PM with the headline "KCP&L, Westar Energy dismiss concerns from Kansas regulators over proposed merger."