Wednesday, April 19, 2017

KCC Rejects Sale Of Westar Energy To Great Plains Energy

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 for reconsideration."

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."


  1. The radio ads for this merger seemed like propaganda -- they had no meat to them if a person used science to break down the radio ad.

    WR emphasizes the number of folks eligible for retirement in the next 5 years. I don't recall this number, but it feels like the "parents" don't feel comfortable handing the "children" the keys to run the car, so they're attempting to sell it off.

    I'd like to know how Great Plains spent $100M on this project -- that's a lot of cash per day for 18M of research. That's nearly $180K per day in expenses for the merger.

    I'd also be curious how the $380M that Great Plains pays to Westar will be used -- for golden parachutes, salaries, general funds, maintaining rates?