Kansas City Power & Light (KCP&L) and Westar Energy (NYSE:WR) (the companies) on May 24 said that Great Plains Energy (NYSE:GXP), which serves customers as KCP&L, and Westar have received final regulatory approval from the Kansas Corporation Commission (KCC) and Missouri Public Service Commission to merge.
The stock-for-stock merger of equals creates a holding company of about $15bn equity value, which will be named Evergy, Inc., (NYSE:EVRG), the companies said, adding that Evergy’s principal business will be conducted by the operating companies known today as Westar and KCP&L.
Evergy is a blend of “ever” and “energy,” capturing the history of its predecessors as reliable and enduring energy sources for the communities they serve and its vision to continue into the future, the companies said. For the immediate future, Evergy will continue to serve its customers under the Westar and KCP&L brand names, the companies said, adding that contact information, billing and account information, as well as program enrollment and outage reporting will remain the same for customers of KCP&L and Westar.
The combined company will serve about 1.6 million customers, with a little under 1 million in Kansas and 600,000 in Missouri, the companies said. In addition, the combined company will own, operate and maintain more than 51,000 miles of distribution lines, and 13,000 MW of generation, the companies noted.
With corporate headquarters in Kansas City, Mo., and operational headquarters in Kansas City, Mo., and Topeka, Kan., Evergy will be the parent of Westar Energy and of KCP&L and KCP&L Greater Missouri Operations Company, which were previously part of Great Plains Energy, the companies said.
Together, Evergy will employ about 5,000 employees across Kansas and Missouri, the companies noted, adding that company executives will be located in Topeka, Wichita, and Kansas City, and will continue to be engaged in those communities, as well as throughout the combined service territory.
The companies said that they anticipate a closing date in early June, adding that the utilities have guaranteed more than $100m in customer bill credits, with $29m upfront for Missouri customers, and $75m for Kansas customers over the first five years after the merger closes. The companies also said that once currently pending rate reviews are resolved, they have agreed to fix their base rates for up to five years in Kansas as a result of the merger.
Evergy will meet nearly half of the energy needs for the homes and businesses it serves with energy from zero-emission sources, with nearly one-third to come from renewable energy, the companies said.
As noted in the May 24 KCC order, Westar Energy and Kansas Gas and Electric (together referred to in the order as Westar), Great Plains Energy and KCP&L last August filed an application with the commission seeking approval to merge.
The applicants intend to form a new, publicly traded holding company with a combined equity value of about $14bn, which will operate regulated electric utilities in Kansas and Missouri, the KCC said. Westar and KCP&L would become wholly owned subsidiaries of the new holding company, the KCC said, adding that as proposed, Westar shareholders will own about 52.5% of the combined company, with Great Plains’ shareholders owning the remaining 47.5% of the combined company.
The KCC noted that in March, eight parties entered into a non-unanimous settlement agreement, which has such key terms as:
- Following the merger, the Holdco board will initially be composed of an equal number of directors selected by Westar and Great Plains
- Holdco, KCP&L, and Westar will maintain separate capital structure and separate debt. Holdco’s consolidated debt is not to exceed 65% of total capital, and neither KCP&L nor Westar debt is to exceed 60% of total capital
- Following the merger, Westar retail electric customers will receive one-time bill credits totaling about $23m, and KCP&L Kansas retail electric customers will receive one-time bill credits totaling about $7.5m
- For the period of 2019 through 2022, Westar retail electric customers will receive annual bill credits of about $8.6m, and KCP&L Kansas retail electric customers will receive annual bill credits of about $2.8m
- Following the respective 2018 KCP&L and Westar rate cases, both utilities will experience a five-year base rate moratorium, provided their authorized return on equity (ROE) is at least 9.3%. While the signatories to the settlement agreed to recommend a 9.3% ROE in both of the utilities’ 2018 rate cases, the recommendations are not binding on the KCC
- Transition costs will be limited to $50m on a total combined company basis, and the Kansas jurisdictional portion will be amortized over 10 years
“The commission finds the settlement agreement represents an equitable balancing of the interests of all parties,” the KCC said. “Therefore, in addition to its findings that the merger itself promotes the public interest, the Commission finds the settlement agreement is in the public interest.”
In a separate May 24 statement, the KCC noted that it added one condition, which requires the companies to develop, and submit for KCC approval, an integrated resource plan (IRP) reporting process within three months of the close of the transaction. The implementation of the IRP will ensure the merger maximizes the use of Kansas energy resources, the KCC said.