Great Plains Energy Incorporated (NYSE: GXP) and Westar Energy, Inc. (NYSE: WR) have filed a petition with the Kansas Corporation Commission for more time to consider a merger.
On April 19, 2017, The KCC denied approval of Great Plains Energy’s acquisition of
The new petition for reconsideration requests additional time until May 31, 2017, to allow further discussions
between Great Plains Energy and Westar to determine if a mutually agreeable revised transaction
might be negotiated that resolves the concerns identified by the KCC, while preserving
meaningful benefits for customers and shareholders.
If the companies are able to reach and
announce an agreement, they will immediately engage with the other parties to the proceeding in
order to address their concerns and set a new procedural schedule that allows all parties and the
KCC adequate time to review the matter.
“We continue to firmly believe that combining Great Plains Energy and Westar creates significant
value for customers, employees and communities in Kansas and Missouri as well as for our
shareholders. Since announcing this transaction, we have completed integration planning, and this
work has only reinforced our belief in the value of this combination,” said Terry Bassham,
chairman and chief executive officer of Great Plains Energy “By joining our companies, we
together can establish a leading Midwest energy company that creates benefits for all stakeholders
that neither company could achieve on its own.”
Mark Ruelle, president and chief executive officer of Westar, said, “A combination of these two companies and the efficiencies it would create helps address the
headwinds of rising costs for our customers. We are hopeful we can reach a revised agreement that paves the way for the
completion of our transaction and the realization of its many customer benefits.”
Bassham said, “We have heard the Commission regarding the structure of the transaction, including
its concerns related to purchase price, capital structure, quantifiable and demonstrable customer
benefits, and staffing levels in Westar’s service territory. Given the unique benefits resulting from
our combination, we believe it is appropriate to explore whether there is room to work with Westar
and directly address these areas, while maintaining the shareholder value creation opportunity
inherent in this merger. In any case, we would only pursue a revised agreement if we determined
that it delivered more value than Great Plains was able to achieve on a stand-alone basis.”
Perhaps the biggest concern by the KCC is the amount of debt that Great Plains is taking on to buy Westar Energy in the $12 billion deal. Regulators feared that the entity would be unable to service the debt without raising rates on customers. The KCC saw no value for the customer in the original transaction.
The Kansas Corporation Commission's 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."