Merger would benefit Kansas and customers, utility CEOs testify

The top executives of Westar Energy and Kansas City Power & Light testified that merging their electric companies offers a one-time opportunity that would benefit company stockholders, customers and the Kansas economy.

Mark Ruelle, chief executive of Westar, testified that the merger “may be the most significant business combination in Kansas history.”

KCP&L’s parent company, Great Plains Energy, is hoping to buy Westar in a cash, stock and debt transaction valued at $12.2 billion.

If approved by state regulators, the deal will create a mammoth electric company with 1.5 million customers and a $14 billion rate base straddling Kansas and Missouri.

In sworn written testimony, Ruelle said combining the companies offers a unique opportunity to improve efficiency, cut costs and help keep electric prices down for years to come.

“This is important for two reasons,” Ruelle testified. “First, the cost of electricity is an input into everything else in the Kansas economy; second, the Kansas economy continues to struggle and could benefit from the energy cost savings unlocked by this transaction.”

Terry Bassham, chief executive officer of Great Plains, testified that “the combination of KCP&L and Westar just makes sense.”

“We are neighbors who operate generating facilities together. We share similar cultures, values and a focus on Kansas, our customers and our region,” Bassham testified.

The executives’ testimony, submitted to the Kansas Corporation Commission late Monday, is in answer to state analysts’ recommendations that the commission reject the proposal as too risky for customers.

In earlier testimony, analysts from the commission staff and the Citizens’ Utility Ratepayer Board they said Great Plains would be paying too much, about $4.8 billion more than the book value of Westar’s assets, or $2.3 billion more than Westar’s stock was worth before the merger was announced.

That “acquisition premium,” plus the $4.4 billion Great Plains plans to borrow to complete the deal, would financially weaken the utilities and could lead to higher borrowing costs and higher electric bills in the future, state analysts testified.

Bassham’s and Ruelle’s testimony refutes those conclusions, saying that the company is committed to recovering the acquisition and debt costs from its shareholders’ profits, customer rates.

Great Plains also projects that combining and streamlining operations would save customers about $2 billion in the first 10 years.

“In other words, customers will receive billions of dollars in savings as a result of the transaction without paying for the acquisition premium or the transaction costs necessary to unlock them,” Bassham testified.

In addition to the CEOs’ testimony, about a dozen other company officials and analysts filed more technical testimony dealing with specific aspects of the transaction.

About two weeks of court-like commission hearings are scheduled to begin in the case Jan. 30.

Commissioners have until April 24 to approve or reject the proposal.

This story was originally published January 10, 2017 at 7:58 AM with the headline "Merger would benefit Kansas and customers, utility CEOs testify."