The proposed merger of Westar Energy and Great Plains Energy has earned FERC approval, a Westar Energy spokesperson told TransmissionHub on March 2.
“This is an important milestone as we continue to work with our state regulators and other agencies reviewing our application,” the spokesperson said. “Contingent upon necessary approvals, we are on track to complete the merger in the second quarter of this year.”
Applications for the merger are pending before the Missouri Public Service Commission, the Kansas Corporation Commission, the Federal Communications Commission and the Nuclear Regulatory Commission, the spokesperson said.
As noted in the Feb. 28 FERC order, Great Plains Energy and Westar Energy last September submitted an application requesting authorization of the transaction in which the companies would merge to form a new holding company that would operate the present FERC-jurisdictional public utilities and other affiliates of Great Plains Energy and Wester Energy.
FERC said that the companies explained that the amended and restated agreement and plan of merger (merger agreement) among Westar Energy, Great Plains Energy, Monarch Energy Holding (Holdco), and King Energy (Merger Sub) provides the terms and conditions of the proposed transaction.
Great Plains Energy would merge with and into Holdco, with Holdco continuing as the surviving corporation. FERC added that Merger Sub, a wholly owned subsidiary of Holdco, would merger with and into Westar Energy, with Westar Energy continuing as the surviving corporation and a wholly owned subsidiary of Holdco.
Upon consummation of the proposed transaction, Westar Energy and the current direct subsidiaries of Great Plains Energy would become direct subsidiaries of Holdco. FERC added that the subsidiaries of Westar Energy, in turn, would become either wholly owned or partially owned subsidiaries of Holdco, consistent with Westar Energy’s existing ownership interest in each entity prior to consummation of the proposed transaction.
Westar Energy and Great Plains Energy explained that Westar Energy shareholders would exchange each share of Westar Energy common stock for a share in Holdco, and Great Plains Energy would receive a portion of a share of common stock in Holdco for each Great Plains Energy share. FERC added that following the closing of the proposed transaction, Westar Energy shareholders would own about 52.5%, and Great Plains Energy shareholders would own about 47.5% of Holdco.
Discussing the proposed transaction’s effect on vertical competition, for instance, FERC noted that the companies argued that the proposed transaction does not result in any vertical market power concerns, and they explained that they do not own or control interstate natural gas pipeline facilities, gas distribution systems, or any physical coal supplies, nor do they control who may access transportation of coal supplies.
FERC said that it finds that the proposed transaction would not have an adverse effect on vertical competition, adding that the companies have turned over operational control of their transmission facilities to the Southwest Power Pool (SPP), and transmission service is provided under the SPP open access transmission tariff (OATT). Other than certain rail cars, the companies have demonstrated that they do not own or control inputs to electric generation, FERC said.
FERC noted that it also finds that the proposed transaction would not have an adverse effect on horizontal competition.
Regarding rates, FERC said that it finds that the proposed transaction would not have an adverse effect on rates, and that it accepts the companies’ Hold Harmless Commitment, as modified by the companies.
FERC said that it interprets that commitment “to apply to all transaction-related costs, including costs related to consummating the proposed transaction incurred prior to the consummation of the proposed transaction or in the five years after the proposed transaction’s consummation.”
Regarding the proposed transaction’s effect on regulation, FERC said that it finds no evidence that either state or federal regulation would be impaired by the proposed transaction, and that no party alleges that regulation – state or federal – would be impaired by the proposed transaction.
Among other things, FERC said that the companies must inform FERC of any material change in circumstances that departs from the facts or representations that FERC relied upon in authorizing the proposed transaction within 30 days from the date of the material change in circumstances.