NEW YORK May 4 Great Plains Energy Inc,
the owner of regulated power utility Kansas City Power & Light,
and Westar Energy Inc said on Thursday they will hold
talks aimed at revising their planned $12.2 billion tie-up to
address regulatory concerns.
A deal for Great Plains to acquire Westar, which would
create a utility covering more than 1.5 million people across
Kansas and Missouri, was announced in May 2016.
Reduced customer demand and the impact of energy efficiency
initiatives have slowed growth for U.S. power utilities and
pressured them to consider mergers and acquisitions to bolster
their earnings outlook.
However, in an April 19 decision, the Kansas Corporation
Commission (KCC) said while it was happy with the strategic
rationale behind the tie-up, it was concerned by financial
aspects of the deal including the amount of debt being used to
In a joint statement on Thursday, Great Plains and Westar
said they had asked KCC to reconsider its order and would engage
in further talks to May 31 aimed at revising the transaction to
address the regulator's issues - while maintaining the benefits
for customers and shareholders.
Among the points to be studied would include KCC's concerns
about the high purchase price and the capital structure of the
new company, as well as staffing levels at Westar's headquarters
in Topeka, Kansas, according to a presentation on Great Plains'
Should Great Plains and Westar agree to a revised deal, the
duo would re-engage with the regulator to get a new review
process started, the statement added.
This would likely take several months, as opposed to the
year it has taken to get this far, according to a source
familiar with the matter.
"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.
To fund the $12.2 billion deal, consisting of an $8.6
billion purchase price and the assumption of Westar debt worth
$3.6 billion, Great Plains had agreed to $8 billion financing
from Goldman Sachs and said it was planning equity and debt
issuance to fund part of the deal.
Should the deal go through, the generation capacity of
Kansas City, Missouri-based Great Plains would increase to
nearly 13,000 megawatts.
Shares of Great Plains were down 1.4 percent in late
afternoon trading, while those of Westar were 0.7 percent lower.
(Reporting by David French; Editing by Paul Simao)