The company that was blocked by Kansas regulators from buying Westar Energy plans to keep trying, possibly filing a new merger application that would be more consumer-friendly, a spokeswoman said Tuesday.
The first try, a $12.2 billion deal to merge Westar and Kansas City Power & Light, was rejected last month as too risky for the 1.5 million Kansas and Missouri electric customers who would be affected.
On Tuesday, the Kansas Corporation Commission unanimously turned down a request to reconsider that decision, sending an unambiguous message that if the companies still want to try to merge, they’ll have to start over.
After the meeting, a spokeswoman for KCP&L’s parent company, Great Plains Energy, said they are in talks with Westar to do that.
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“We continue to work with Westar in a timely manner to explore the possibility of a revised deal that is materially better than our standalone plan for both shareholders and customers,” said Katie McDonald.
The utilities had asked the KCC to reconsider its rejection of the merger deal to give the companies time to rework it and possibly avoid what could be another 300 days of analysis, testimony and hearings on a new application.
The commission said no to that request, although its order did invite the companies to refile.
“The Commission encourages the parties to continue working together to revise the Transaction to address the Commission’s concerns related to purchase price, capital structure and other issues and welcomes the filing of a new application that can satisfy the merger standards and advance the public interest,” the commission order said.
Mark Ruelle, Westar Energy president and chief executive, said in a statement that if the companies do reach a new agreement, “we agree a new KCC application would be the best route.”
But he said the work on the earlier merger case “could shorten the new schedule to fewer than the 300 days allowable.”
The commission has strongly signaled it won’t approve a merger unless the companies can show it’s a better deal for customers than what they’d get from the two stand-alone utilities.
Had the merger been approved, it would have been among the largest business deals in state history, creating a mammoth power company with a $14 billion in rate base in Kansas and Missouri.
In rejecting the deal, the commission cited the purchase price, which would have brought a multibillion-dollar windfall for Westar stockholders.
Commissioners also expressed concerns that the merged company would be financially weak, potentially forcing rate increases or reductions in service.
Those concerns were shared by David Nickel, consumer counsel for the Citizens’ Utility Ratepayer Board, the state agency representing residential and small-business utility consumers.
He said CURB’s view is that a Westar-KCP&L merger would be a “nice fit” but that consumer interests have to be protected.
The way the original plan was structured, “any misstep by (Great Plains) would have been disastrous for the ratepayers,” he said.
At Tuesday’s meeting, none of the commissioners spoke before voting to reject the request for reconsideration.
KCC attorney Brian Fedotin told them that the request did not meet the legal requirement of asserting there was something unlawful or unreasonable about the decision to reject the merger.
“Instead, by its own admission, the joint applicants’ pleading merely seeks additional time to determine whether it would be possible for them to develop a new proposed transaction,” Fedotin said.
Great Plains and Westar could challenge the commission decision at the Kansas Court of Appeals. But McDonald said they aren’t planning to do that now.
The original deal had substantial support from elected officials, including Gov. Sam Brownback and Wichita Mayor Jeff Longwell.
Supporters said it would be better for Westar to merge with a neighboring utility rather than be acquired by a distant utility with no current ties to Kansas.
Although KCP&L is based in Kansas City, Mo., its customer base straddles the Missouri-Kansas border and it shares power plants with Westar.
But by KCC standards, any merger must benefit the rate-paying consumers, as well as the companies that propose it. To meet that, the deal that was originally proposed would need significant alteration, the commission order said.
“The Commission reiterates its belief that the Joint Applicants are responsible companies that serve their communities well as evidenced by the outpouring of support from community leaders and elected officials,” the order said. “However, to promote the public interest, a proposed transaction must satisfy the merger standards.”