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Second Time’s the Charm: Westar Energy and Great Plains Energy Receive State Approval for Merger

Late last month, the Missouri Public Service Commission (MPSC) and Kansas Corporation Commission (KCC) approved the $15 billion stock-for-stock merger of Missouri-based Westar Energy and Kansas-based Great Plains Energy, parent company of Kansas City Power and Light (KCP&L). As a condition of the merger, these two companies will operate under a new holding company that will be named Evergy, Inc. The approvals of the KCC and MPSC were the two final hurdles to the deal as FERC approved the merger earlier this year and the shareholders of each company voted in favor of the combination in November 2017.

These approvals conclude a multi-year effort to combine these neighboring utilities. In 2017, the KCC unanimously rejected a proposed $12.2 billion acquisition of Westar Energy by Great Plains Energy. The primary reasons provided for this rejection included the potential financial risks to rate payers for the estimated $4.9 billion premium Great Plains Energy was willing to pay for the acquisition, the lack of an independent board of directors for Westar, and a perceived lack of safeguards to project Westar customers.

Key Details

  • Key components of the merger include:
    • One-time bill credits of approximately $23 million for Westar retail electric customers and $7.5 million for KCP&L retail electric customers
    • Annual bill credits of approximately $8.6 million for Westar retail electric customers and approximately $2.8 million for KCP&L retail electric customers between 2019 and 2022
    • Upon resolution of ongoing KCP&L and Westar rate cases, there will be a five-year base rate moratorium, provided authorized ROE for each company is 9.3% or greater
    • Evergy, KCP&L, and Westar must maintain separate capital structures. Evergy is to maintain a consolidated debt level that does not exceed 65 percent of total consolidated capitalization, while KCP&L and Westar are to maintain debt levels that do not exceed 60 percent
  • Evergy’s two operating subsidiaries KCP&L and Westar Energy will serve approximately 1.6 million customers across Kansas and Missouri on a combined basis (1 million in Kansas and 600,000 in Missouri)
  • Upon deal closure, Westar shareholders will own 52.5 percent of the new company and Great Plains shareholders will own the remaining 47.5 percent

More Information

This report is part of ScottMadden’s Regulatory Minute series. To view all featured Regulatory Minutes, please click here.

Additional Contributing Author: Rizwan Aslam

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