The Kansas Corporation Commission today issued an order rejecting the sale of Westar Energy to Great Plains Energy, citing a failure to meet its merger standards.
"The Joint Application is denied," The 51-page order says. "The Commission finds the proposed transaction
is not in the public interest and rejects Great Plains' application to acquire Westar.
Both Parties have 15 days from the date of electronic service of this Order to petition
The order also said, "Great Plains Energy does not dispute that they will incur a large amount of debt to acquire
Westar. Nor does it dispute it has no written plan to de-leverage. The Joint Application is
deficient. It does not include plans showing which generation plants will be retired early. There
are no examples of reduced spending through procurement savings and no evidence that
customers will see any savings. The Joint Application simply does not give the Commission any
assurances that it will be able to service the newly-incurred debt without raising rates or reducing
services. Therefore, the Commission has no choice but to find the proposed transaction is not in
the public interest. Accordingly, the Commission denies GPE's application to acquire Westar."
The order also says, "While the Joint Applicants argue "the repetition of the same arguments by multiple parties does not make them deserving of more weight, true, reasonable, or supportive of the public interest," the Commission cannot ignore the substantial, competent evidence in opposition to the proposed transaction. As the Joint Applicants admit, of the 28 parties to the Docket, only the Joint Applicants are in favor of the merger. All of the other parties are aligned in opposition to the merger. The Joint Applicants try to discredit the opposition by claiming "most of the intervenors in this case intervened to pursue private individual interests" rather than representing the public interest the Commission is charged to protect. But the Joint Applicants are also pursuing their own interests in advocating for the transaction. As Westar's CEO Mark Ruelle testified, "[i]dentifying risk is not the stopping point for an analysis; it's the starting point for an analysis." The threshold question facing the Commission is how much financial risk can be accepted before the proposed transaction does not serve the public interest. In its detailed review of an extensive record, the Commission found the proposed transaction to be too risky. GPE's market capitalization is only $4.8 billion, yet it proposes to pay Westar a $4.9 billion acquisition premium. The size of the acquisition premium calls into question GPE's ability to service the transaction-incurred debt."